Damas International Limited

Damas International Limited (a company limited by shares incorporated in the Dubai International Financial Centre) Offer of 270,583,370 Shares (not including Shares subject to the Over-allotment Option (as defined below))

270,583,370 ordinary shares with a nominal value of US$1.00 each (the “Shares”) of Damas International Limited (the “Issuer”), a company limited by shares incorporated in the Dubai International Financial Centre (the “DIFC”), are initially being offered in this initial public offering (the “Offer”). The Issuer owns directly and beneficially 100% of Damas LLC, a limited liability company organised under the laws of the United Arab Emirates (the “UAE”). Of the 270,583,370 Shares being offered in the Offer, the Issuer is issuing 233,845,546 Shares, and 36,737,824 Shares are being offered for sale by Amwal Al Khaleej Commercial Investment Co. (the “Selling Shareholder”). See “The Selling and Principal Shareholders”. The Issuer will not receive any proceeds from the sale of the Shares by the Selling Shareholder. The Shares are being offered outside the United States of America in offshore transactions in reliance upon Regulation S (“Regulation S”) under the U.S. Securities Act of 1933, as amended (the “U.S. Securities Act”) and outside of Japan, Canada and Australia. Shares are also being offered in the DIFC only as an “exempt offer” pursuant to, and as defined in, the Offered Securities Rules of the Dubai Financial Services Authority (the “DFSA”) (the “Exempt Offer”). Prior to the Offer, there has been no public market for the Shares. Application has been made for the Shares to be admitted to the Official List of Securities of the Dubai International Financial Exchange (the “DIFX”) and to be listed on the DIFX under the symbol “DAMAS” (the “DIFX Admission”). There will not be any conditional dealings in the Shares prior to the DIFX Admission. It is expected that the DIFX Admission will become effective and that dealings in the Shares will commence on the DIFX on or about 8 July 2008 (the “Listing Date”). Payment for and delivery of the Shares is expected to be made through the book entry facilities of the Central Securities Depositary operated by the DIFX on or about 8 July 2008 (the “Closing Date”). Investing in the Shares involves certain risks. See “Risk Factors”. Offer Price: US$1.00 per Share The Issuer has granted to the Joint Global Coordinators (as defined below) an option to subscribe for, within 30 days from the Listing Date, up to an additional 40,587,506 Shares at the Offer Price, representing up to 15% of the total number of Shares in the Offer, solely to cover over-allotments or short positions resulting from stabilisation transactions, if any, in the Offer (the “Over- allotment Option”). If the Over-allotment Option is exercised in full, the Offer will amount to 311,170,876 Shares. See “Underwriting — Over-allotment Option”. The Shares are offered by the Underwriters (as defined below) when, as and if delivered to, and accepted by, the Underwriters and subject to their right to reject orders in whole or in part. Payment of, and delivery of, the Shares is expected to be made on the settlement date, which is expected to be on or about the Closing Date, through the book-entry facilities of the Central Securities Depositary operated by the DIFX. The DIFX takes no responsibility for the contents of this prospectus (“Prospectus”), makes no representations as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon any part of the contents hereof. DFSA Exempt Offer Statement: This Prospectus relates to an Exempt Offer in accordance with the Offered Securities Rules of the DFSA. It is intended for distribution only to persons of a type specified in those rules. It must not be delivered to, or relied on by, any other person. The DFSA has no responsibility for reviewing or verifying any documents in connection with Exempt Offers. The DFSA has not approved this Prospectus or taken steps to verify the information set out in it and has no responsibility for it. The securities to which this Prospectus relates may be illiquid and/or subject to restrictions on their resale. Prospective purchasers of the securities offered should conduct their own due diligence on the securities. If you do not understand the contents of this Prospectus, you should consult an authorised financial advisor. The Shares have not been and will not be registered under the U.S. Securities Act or with any securities regulatory authority of any state or other jurisdiction of the United States and may not be offered, sold or delivered within the United States or to or for the account or benefit of U.S. persons (as defined in Regulation S) except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the U.S. Securities Act. See “Underwriting — Selling Restrictions”.

Joint Global Coordinators, Joint Bookrunners, Joint Institutional Lead Managers and Underwriters

Credit Suisse HSBC

The date of this Prospectus is 2 July 2008.

TABLE OF CONTENTS

NOTICE TO INVESTORS ...... ii STABILISATION ...... iii NOTICE TO UK INVESTORS ...... iii NOTICE TO EUROPEAN ECONOMIC AREA INVESTORS ...... iii NOTICE TO INVESTORS IN THE DIFC AND THE UAE ...... iv NOTICE TO INVESTORS IN SAUDI ARABIA ...... iv NOTICE TO PERSONS IN AUSTRALIA, CANADA AND JAPAN ...... iv NOTICE TO U.S. PERSONS...... iv ENFORCEMENT OF FOREIGN JUDGMENTS ...... iv FORWARD-LOOKING STATEMENTS ...... v CERTAIN DEFINED TERMS ...... v PRESENTATION OF CERTAIN FINANCIAL AND OTHER INFORMATION ...... vi PRESENTATION OF MARKET, MARKET SHARE AND INDUSTRY DATA ...... vii SUMMARY ...... 1 SUMMARY OF THE OFFER ...... 4 SUMMARY CONSOLIDATED FINANCIAL INFORMATION...... 7 RISK FACTORS ...... 10 USE OF PROCEEDS ...... 19 DILUTION ...... 20 DIVIDENDS AND DIVIDEND POLICY...... 21 EXCHANGE RATE INFORMATION ...... 22 CAPITALISATION ...... 23 SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA ...... 24 OPERATING AND FINANCIAL REVIEW ...... 27 INDUSTRY OVERVIEW ...... 43 BUSINESS ...... 47 MANAGEMENT...... 65 RELATED PARTY TRANSACTIONS ...... 71 THE SELLING AND PRINCIPAL SHAREHOLDERS...... 72 DESCRIPTION OF SHARE CAPITAL ...... 73 TRUST ARRANGEMENT ...... 82 CLEARANCE AND SETTLEMENT ...... 84 OVERVIEW OF THE UAE ...... 85 TAXATION ...... 88 UNDERWRITING ...... 89 LEGAL MATTERS ...... 93 INDEPENDENT AUDITORS ...... 94 GENERAL INFORMATION ...... 95 INDEX TO FINANCIAL STATEMENTS...... F-1 NOTICE TO INVESTORS

This Prospectus constitutes an Exempt Offer statement for the purposes of Rule 3.2 of the Offered Securities Rules of the DFSA. This Prospectus is not a prospectus for the purposes of Section 12(a)(2) or any other provision of, or rule under, the U.S. Securities Act.

To the best of the knowledge and belief of the Issuer’s directors, whose names appear under “Management” (the “Directors”), this Prospectus complies with the Markets Law 2004 of the DIFC and the Offered Securities Rules of the DFSA, and the Directors accept responsibility, jointly and severally, for the information contained in this Prospectus and believe that there are no other facts the omission of which would make this Prospectus or any statement herein misleading or deceptive. The DFSA has no responsibility for reviewing or verifying any documents in connection with Exempt Offers. The DFSA has not approved this Prospectus or taken steps to verify the information set out in it and has no responsibility for it.

The Issuer accepts responsibility for the information contained in this Prospectus, and having taken all reasonable care to ensure that such is the case, the information contained in this Prospectus is, to the best of the Issuer’s knowledge, in accordance with the facts and contains no omissions likely to affect its import.

In making an investment decision, prospective investors must rely upon their own examination of the Issuer and the Group (as defined below) and the terms of the Offer set out in this Prospectus, including the merits and risks involved. Prospective investors should exclusively rely on the information contained in this Prospectus. None of the Issuer, or Credit Suisse Securities (Europe) Ltd or HSBC Bank plc (together, the “Joint Global Coordinators”or the “Underwriters”) has authorised anyone to provide prospective investors with information different from that contained in this Prospectus. The Joint Global Coordinators make no representation or warranty, express or implied, as to the accuracy or completeness of the information contained in this Prospectus, and nothing contained in this Prospectus is, or shall be relied upon as, a promise or representation by the Joint Global Coordinators or their respective affiliates or advisors. The Joint Global Coordinators are acting for the Issuer in relation to the Offer and for no one else and will not be responsible to anyone other than the Issuer for providing the protections afforded to their respective clients or for providing advice in relation to the Offer or the contents of this Prospectus or any transaction, arrangement or matter referred to herein. You agree to the foregoing by accepting delivery of this Prospectus. The information contained in this Prospectus is accurate only as at the date of this Prospectus, regardless of the time of delivery of this Prospectus or of any sale of the Shares.

The Offer may be withdrawn at any time, and the Joint Global Coordinators reserve the right to reject any offer to purchase the Shares, in whole or in part, and to sell to any prospective investor less than the full amount of the Shares sought by such investor.

The distribution of this Prospectus and the offering and sale of the Shares is restricted by law in certain jurisdictions, and this Prospectus does not constitute, and may not be used in connection with, any offer or solicitation in any such jurisdiction or to any person to whom it is unlawful to make such offer or solicitation. No action has been, or will be, taken in any jurisdiction by the Issuer or the Joint Global Coordinators that would permit a public offering of the Shares, or possession or distribution of a prospectus in any jurisdiction where action for that purpose would be required.

Persons into whose possession this Prospectus may come are required by the Issuer and the Joint Global Coordinators to inform themselves about, and to observe the restrictions contained in, this Prospectus. Neither the Issuer nor any of the Joint Global Coordinators accepts any responsibility for any violation by any person, whether or not it is a prospective subscriber or purchaser of the Shares, of any of these restrictions.

Neither the Issuer nor any of the Joint Global Coordinators nor any of their respective representatives, make any representation to any offeree or purchaser of the Shares offered hereby regarding the legality of an investment by such offeree or purchaser under appropriate legal investment or similar laws. Each investor should consult with its own advisors as to the legal, tax, business, financial and other relevant implications of the purchase of the Shares.

This Prospectus has been prepared by the Issuer in connection with the Offer solely for the purpose of enabling a prospective investor to consider the purchase of the Shares. Reproduction and distribution of this Prospectus or disclosure or use of the information contained herein for any purpose other than considering an investment in the Shares is prohibited.

ii STABILISATION

IN ORDER TO FACILITATE THE OFFER, CREDIT SUISSE SECURITIES (EUROPE) LTD (THE “STABILISATION MANAGER”), MAY ENGAGE IN TRANSACTIONS THAT STABILISE, SUPPORT, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SHARES IN ACCORDANCE WITH THE PRICE STABILISATION MODULE OF THE DFSA RULEBOOK. ANY SUCH STABILISATION MAY BE CONDUCTED ON THE DIFX, IN THE OPEN MARKET OR IN OVER-THE-COUNTER TRANSACTIONS, EACH IN ACCORDANCE WITH THE RELEVANT RULES. SPECIFICALLY, THE STABILISATION MANAGER OR PERSONS ACTING ON ITS BEHALF, MAY SELL MORE SHARES THAN ARE REQUIRED TO BE PURCHASED, CREATING A SHORT POSITION. A SHORT SALE IS COVERED IF THE SHORT POSITION IS NO GREATER THAN THE NUMBER OF SHARES AVAILABLE FOR PURCHASE UNDER THE OVER-ALLOTMENT OPTION. THE STABILISATION MANAGER CAN CLOSE OUT A COVERED SHORT SALE BY EXERCISING THE OVER-ALLOTMENT OPTION OR PURCHASING SHARES IN THE OPEN MARKET. IN DETERMINING THE SOURCE OF THE SHARES TO CLOSE OUTA COVERED SHORT SALE, THE STABILISATION MANAGER WILL CONSIDER, AMONG OTHER THINGS, THE OPEN MARKET PRICE OF THE SHARES COMPARED TO THE PRICE AVAILABLE UNDER THE OVER- ALLOTMENT OPTION.

AS AN ADDITIONAL MEANS OF FACILITATING THE OFFER, THE STABILISATION MANAGER, OR ITS AGENT, MAY BID FOR, AND PURCHASE, SHARES IN THE OPEN MARKET TO STABILISE THE PRICE OF THE SHARES FOR A PERIOD COMMENCING ON THE LISTING DATE AND ENDING 30 DAYS THEREAFTER. SUCH STABILISATION, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME WITHOUT PRIOR NOTICE.

THE JOINT GLOBAL COORDINATORS HAVE ADVISED THE ISSUER THAT THE JOINT GLOBAL COORDINATORS (INCLUDING THEIR AFFILIATED ENTITIES) PRESENTLY INTEND, FOLLOWING THE STABILISATION PERIOD, TO TRADE ACTIVELY IN THE SHARES AS PERMITTED BY APPLICABLE LAWS AND REGULATIONS. NEITHER THE JOINT GLOBAL COORDINATORS NORTHEIR AFFILIATED ENTITIES ARE REQUIRED TO ENGAGE IN THESE ACTIVITIES, AND MAY END ANY OF THESE ACTIVITIES AT ANY TIME. ACCORDINGLY, NO ASSURANCE CAN BE GIVEN AS TO THE LIQUIDITY OF, OR TRADING MARKETS FOR, THE SHARES. SEE “UNDERWRITING — STABILISATION”.

NOTICE TO UK INVESTORS

This Prospectus is being distributed only to and is directed only at (i) persons who are outside the United Kingdom; (ii) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the “Order”); or (iii) high net worth entities falling within Article 49(2)(a)-(d) of the Order (all such persons in (ii) and (iii) being referred to as “relevant persons”). The Shares are available only to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire the Shares will be engaged in only with, relevant persons. Any person who is within the United Kingdom and not a relevant person should not act or rely on this Prospectus or any of its contents.

NOTICE TO EUROPEAN ECONOMIC AREA INVESTORS

This Prospectus and the Offer are only addressed to, and directed at, persons in member states of the European Economic Area that are “qualified investors” within the meaning of Article 2(i)(e) of the Prospectus Directive (2003/71/EC (the “Prospectus Directive”)). Any person in any member state of the European Economic Area (the “EEA”) other than the United Kingdom who is not such a qualified investor should not act or rely on this Prospectus or any of its contents.

This Prospectus has been prepared on the basis that all offerings of the Shares will be made pursuant to an exemption under the Prospectus Directive, as implemented in member states of the EEA, from the requirement to produce a prospectus for offerings of Shares. Accordingly, any person making or intending to make any offering within the EEA of the Shares which are the subject of the Offer should only do so in circumstances in which no obligation arises for the Issuer or any of the Joint Global Coordinators to produce a prospectus for such offering. Neither the Issuer nor any of the Joint Global Coordinators have authorised or do authorise the making of any offering of the Shares through any financial intermediary, other than offerings made by the Joint Global Coordinators, which constitute the final placement of the Shares contemplated in this Prospectus.

iii NOTICE TO INVESTORS IN THE DIFC AND THE UAE

The Shares may not be, are not, and will not be sold, subscribed for, transferred or delivered, directly or indirectly, to any person in the DIFC who is not a client within the meaning of the Conduct Business Module of the Rules of the DFSA or a qualified investor within the meaning of the Offered Securities Rules of the DFSA.

The Shares may not be, have not been and are not being sold, subscribed for, transferred or delivered in the UAE other than in compliance with the laws of the UAE governing the sale, subscription for, transfer and delivery of securities.

NOTICE TO INVESTORS IN SAUDI ARABIA

No action has been or will be taken in the Kingdom of Saudi Arabia that would permit a public offering or private placement of the Shares in the Kingdom of Saudi Arabia, or possession or distribution of any offering materials in the Kingdom of Saudi Arabia in relation thereto. The Shares may only be offered and sold in the Kingdom of Saudi Arabia in accordance with Part 5 (Exempt Offers) of the Offers of Securities Regulations dated 20/8/1425 H (corresponding to 4/10/2004) (as amended) (the “Regulations”) and, in accordance with Article 16(a)(3) of the Regulations, the Shares will be offered to no more than 60 offerees in the Kingdom of Saudi Arabia with each such offeree paying an amount not less than Saudi Riyals one million or its equivalent. Prospective investors are informed that Article 19 of the Regulations places restrictions on secondary market activity with respect to the Shares. Any resale or other transfer, or attempted resale or other transfer, made other than in compliance with the above stated restrictions shall not be recognised by the Issuer.

NOTICE TO PERSONS IN AUSTRALIA, CANADA AND JAPAN

This Prospectus does not constitute an offer to sell, or the solicitation of an offer to subscribe for or buy, the Shares in any jurisdiction in which such offer or solicitation is unlawful and is not for distribution in or into Australia, Canada or Japan. In particular, the Shares offered under this Prospectus have not been and will not be registered under the applicable securities laws of Australia, Canada or Japan and, subject to certain exceptions, may not be offered or sold directly, or indirectly, in or into Australia, Canada or Japan, or to any person or legal entity resident in Australia, Canada or Japan.

NOTICE TO U.S. PERSONS

The Shares have not been and will not be registered under the U.S. Securities Act and may not be offered or sold within the United States of America.

ENFORCEMENT OF FOREIGN JUDGMENTS

The Issuer is incorporated in, and under the laws issued by, the DIFC, with its headquarters in the Emirate of Dubai in the UAE. A substantial portion of the Issuer’s assets are located in a number of jurisdictions outside the United Kingdom and the European Union. In addition, certain members of the Issuer’s board of directors (the “Board of Directors” or the “Board”) and senior management (“Senior Managers” and, together with the Board, “Management”) reside in Dubai and all or a portion of their personal assets may be located in the UAE and/or other jurisdictions outside the United Kingdom and the European Union. As a result, prospective investors may have difficulties effecting service of process in the United Kingdom or the European Union upon the Issuer or members of Management in connection with any lawsuits related to the Shares, including actions arising under the laws of the United Kingdom or the European Union. In the absence of any bilateral treaty for the reciprocal enforcement of foreign judgments, UAE law sets out a procedure whereby the judiciary of the UAE is able to ratify judgments, orders or awards of other jurisdictions. Such judgments, orders or awards which are ratified by the UAE court may be enforced within the UAE in the manner prescribed by the Civil Procedure Code of the UAE. Investors may have difficulties in enforcing judgments of English or courts of European Union member states (“Member States”) against the Issuer or members of Management in the courts of the DIFC because the mechanism for enforcement of foreign judgments by the DIFC courts is as yet untested. Investors may also have difficulties in enforcing judgments of the DIFC courts and arbitration awards ratified by the DIFC courts against the Issuer or members of Management in jurisdictions outside the DIFC because the mechanism for enforcement of judgments and awards issued by the DIFC courts in jurisdictions outside the DIFC is as yet untested.

iv FORWARD-LOOKING STATEMENTS

This Prospectus includes forward-looking statements. The words “anticipate”, “believe”, “expect”, “plan”, “intend”, “targets”, “aims”, “estimate”, “project”, “will”, “would”, “may”, “could”, “continue” and similar expressions are intended to identify forward-looking statements. All statements other than statements of historical fact included in this Prospectus, including, without limitation, those regarding the Issuer’s or the Group’s financial position, business strategy, management plans and objectives for future operations, are forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause actual results, performance or achievements, or industry results, to be materially different from those expressed or implied therein. These forward-looking statements are based on numerous assumptions regarding present and future business strategies and the environment in which Management expects to operate in the future. Important factors that could cause actual results, performance or achievements to differ materially from those in the forward-looking statements include, among other factors referenced in this Prospectus:

• economic slowdown affecting disposable consumer income in the markets in which the Group operates;

• greater than anticipated expenses to implement the Group’s strategy, including for acquisitions and new store openings;

• difficulties in obtaining sites for new stores at commercially viable or optimal terms;

• unanticipated increases or fluctuations in the prices of raw materials for the products sold by the Group;

• unexpected difficulties with suppliers of raw materials and finished products, including unfavourable terms, which could result in the termination of key supply relationships or delivery of substandard quality products; and

• political or legislative instability in the markets in which the Group operates, in particular the Middle East and India.

Forward-looking statements speak only as of the date of this Prospectus and Management expressly disclaims any obligation or undertaking to publicly update or revise any forward-looking statements in this Prospectus to reflect any change in expectations or any change in events, conditions or circumstances on which these forward-looking statements are based. Given the uncertainties of forward-looking statements, there can be no assurance that projected results or events will be achieved. Accordingly, prospective investors should not place undue reliance on the forward-looking statements contained in this Prospectus and are strongly advised to read the following sections of this Prospectus: “Summary”, “Risk Factors”, “Use of Proceeds”, “Operating and Financial Review” and “Industry Overview”.

CERTAIN DEFINED TERMS

In this Prospectus, unless otherwise specified or the context otherwise requires references to the “Issuer” are to Damas International Limited, a company limited by shares incorporated in the DIFC, with Registration Number 0038 issued on 14 April 2005; references to the “Company” are to Damas LLC; and references to the “Group” are: (a) for periods prior to the 2008 Corporate Reorganisation (as defined below), to the Company together with its consolidated subsidiaries, as well as their predecessor companies or entities, as applicable, and also includes, as the context may require, unconsolidated jointly controlled entities and associates of the Company and/or of its subsidiaries, and (b) for periods subsequent to the 2008 Corporate Reorganisation, the Issuer and its consolidated subsidiaries (including, for the avoidance of doubt, the Company), together with its consolidated subsidiaries, as well as their predecessor companies or entities, as applicable, and also includes, as the context may require, unconsolidated jointly controlled entities and associates of the Issuer and/or of its subsidiaries.

References herein to the “Principal Shareholders” are to the shareholders listed under “The Selling and Principal Shareholders” (including the Selling Shareholder); references to the “Founding Shareholders” are to Tawfique, Tamjid and Tawhid Abdullah, collectively; references to “Credit Suisse” are to Credit Suisse Securities (Europe) Limited and to “HSBC” are to HSBC Bank plc; references to “US$”, and “U.S. dollars” are to the currency of the United States, references to “Dirham” and “AED” are to UAE dirham, references to “£”, “Pounds Sterling” and “Sterling” are to the currency of the United Kingdom, and references to “E”or“Euro” are to the single currency introduced at the start of the third stage of the European Economic and Monetary Union pursuant to the Treaty establishing the European Community, as amended; and references to “GCC” are to the Gulf Cooperation Council.

v PRESENTATION OF CERTAIN FINANCIAL AND OTHER INFORMATION This Prospectus includes the audited consolidated financial results as at and for the years ended 31 December 2005, 2006 and 2007 (respectively, the “2005 Financial Statements”, the “2006 Financial Statements” and the “2007 Financial Statements” and, collectively, the “Annual Financial Statements”) of Damas LLC and its subsidiaries, rather than those of the Issuer, and the unaudited interim consolidated financial results as at 31 March 2008 and for the three months ended 31 March 2008 and the unaudited interim income statement for the three months ended 31 March 2007 of the Company and its subsidiaries (the “Interim Financial Statements” and, together with the Annual Financial Statements, the “Financial Statements”). Prior to the 2008 Corporate Reorganisation, the Issuer had no operations and consequently did not produce any financial statements. Pursuant to the 2008 Corporate Reorganisation (as defined below), the Issuer became the parent company of the Company and its subsidiaries. Management has determined that both the Company and the Issuer have been held under common control (as defined by International Financial Reporting Standard 3 (Business Combinations)) both before and after the 2008 Corporate Reorganisation and therefore propose to adopt the pooling of interest method of accounting for the 2008 Corporate Reorganisation. Management views the post-reorganisation group as a continuation of the existing business; accordingly, the Issuer in its initial set of financial statements following the 2008 Corporate Reorganisation will present the Company’s consolidated figures as comparatives. Management believes that the Financial Statements are a meaningful measure of the Group’s historical financial condition and results of operations. Accordingly, references to the “Group” in the financial information for the years ended 31 December 2005, 2006 and 2007 and the three months ended 31 March 2008 and 2007 mean the Company and its subsidiaries. In making an investment decision, investors must rely upon examination of the Group and the financial and other information included elsewhere in this Prospectus, including the Financial Statements and the accompanying Notes, prepared in accordance with IFRS, and should consult their own professional advisors for an understanding of the impact that future additions to, or amendments of, IFRS principles may have on the Group’s results of operations and/or financial condition and on the comparability of prior periods.

Business Segmentation Prior to the year ended 31 December 2007, the management of the Company had determined that neither primary (or business) segmentation nor secondary (or geographic) segmentation was meaningful or necessary under IAS 14. Beginning with the year ended 31 December 2007, the management of the Company determined that primary (or business) segmentation and, with the growing share of non-UAE sales, secondary (or geographic) segmentation were appropriate and meaningful for its internal reporting purposes, and consequently the 2007 Financial Statements reflect such segmentation, whereas neither the 2006 Financial Statements nor the 2005 Financial Statements include such segmentation. However, the 2006 Financial Statements contain a presentation of “Sales” by product category, which differs from the business segmentation in the 2007 Financial Statements, whereas no such presentation was included in the 2005 Financial Statement due to Management’s assessment at that time that such presentation was neither meaningful nor necessary.

Classification Differences Due to certain reclassifications in the 2007 Financial Statements of income statement, statement of cash flows items, and balance sheet items from classifications in the 2006 Financial Statements and in the 2005 Financial Statements, there is variability in the line item presentation in the 2005 Financial Statements, the 2006 Financial Statements and the 2007 Financial Statements. While certain of these reclassifications in so far as they pertain to income statement and cash flow data are noted in the notes to the tabular presentation included in the sections titled “Summary Consolidated Financial Information”, “Selected Historical Consolidated Financial Data”, “Operating and Financial Review — Results of Operations” and “Operating and Financial Review — Liquidity and Capital Resources — Cash flows”, investors must rely upon examination of the Group’s financial and other information included elsewhere in this Prospectus, including the Financial Statements and the accompanying Notes, prepared in accordance with IFRS, and discriminate between the changes in classifications from period to period.

Change in Accounting Policy for Sales and Cost of Sales During 2006, the Group changed its accounting policy for revenue recognition on sales of crafted gold jewellery and bullion. In the 2005 Financial Statements, revenue on the sales of crafted gold jewellery and gold bullion included the gold cost component and in the case of the crafted gold jewellery also included the making charges. The 2006 Financial Statements, however, recognise revenue in respect of sales of: (i) crafted gold jewellery only to the extent of the making charges on the jewellery sold (i.e. for any piece of crafted gold jewellery sold the sales recognised are net of the price of the gold in the product sold), and (ii) gold bullion only to the extent of the price difference

vi between the cost of purchase and the sales price. During 2007, the Group reverted to the accounting policy in respect of these items that was in place in 2005. See Note 2.5 of the 2006 Financial Statements and Note 2 of the 2007 Financial Statements.

EBITDA This Prospectus contains EBITDA and Adjusted EBITDA figures. EBITDA and Adjusted EBITDA are not measurements of operating performance under IFRS and should not be considered by prospective investors as an alternative to (a) operating income or net income or as measures of the Company’s operating performance, (b) net cash flows from operating, investing and financing activities or as measures of the Company’s ability to meet its cash needs, or (c) any other measures of performance under IFRS. EBITDA and Adjusted EBITDA may not be indicative of the Company’s historical operating results, nor are they meant to be an indication of future results. Management believes that EBITDA and Adjusted EBITDA are measures of the Group’s operating performance because they assist in comparing performance on a consistent basis between companies without regard to amortisation and depreciation accounting methods and non-recurring economic effects, which can vary significantly depending on accounting methods applied. Other companies may not calculate EBITDA on a consistent basis with the Group’s presentation of EBITDA and therefore EBITDA may not be comparable to measures used by other companies under the same or a similar name. Additionally, due to the factors mentioned above, this presentation of Adjusted EBITDA is not homogeneous with those applied by other companies. Accordingly, no undue reliance should be placed on the EBITDA and Adjusted EBITDA data contained in this Prospectus.

Independent Accountants The Financial Statements and accompanying Notes included in this Prospectus have been prepared in accordance with IFRS and audited in accordance with International Auditing Standards. KPMG were the auditors of the Company for the years ended 31 December 2005 and 2006, and Ernst & Young were the auditors for the year ended 31 December 2007.

Rounding Adjustments Certain financial data in this Prospectus have been rounded. Consequently, figures shown for the same category presented in different tables may vary slightly, and figures shown as totals in certain tables may not be an arithmetic aggregation of the figures which precede them.

Operating Data Following the Offer, for commercial reasons, the Group does not intend to continue to provide operating data regarding its activities with the same level of specificity as that set forth in this Prospectus.

PRESENTATION OF MARKET, MARKET SHARE AND INDUSTRY DATA The Group operates in an industry in which it is difficult to obtain precise industry data and market share information. Management defines the Group’s industry and market to be the gold and integrated jewellery retailing and manufacturing industry. The market and competitive position data used in this Prospectus and in particular the “Industry Overview” has been obtained from various public sources of information, including a report prepared in 2006 by the Gems and Jewellery Export Promotion Council of India and KPMG titled “The global gems and jewellery industry” (the “KPMG Report”), a report published by Mintel International Group Ltd. in July 2006 entitled “Luxury Goods Retailing — Global, Retail Intelligence” (the “Mintel Report”), the Diamond Quarterly Review published on 24 January 2008 by National Bank Financial, a Canadian securities broker (the “Diamond Quarterly Review”), data from the World Gold Council (the “WGC”) including a report entitled “Gold Demand Trend — Full year and fourth quarter 2007” published in February 2008 (the “WGC Report”) and from the Dubai Gold & Jewellery Group (“DG&JG”), including a report prepared in conjunction with ACNielsen entitled “Dubai Gold & Jewellery Industry Survey” dated 28 March 2006 (the “DG&JG Report”), and the following websites: www.signetgroupplc.com, www.dtc.com and www.idexonline.com. All World Gold Council data for 2007 are identified as provisional in the WGC Report. This Prospectus does not incorporate any information contained in such reports or websites that is not otherwise contained in this Prospectus, and any information extracted from such sources is subject to the qualifications contained herein. This information has been accurately reproduced so far as Management is aware, but there has been no independent verification, and there can be no assurance, of its truth or accuracy.

vii This Prospectus also contains a certain amount of information on the Group’s prospects and trends, based on market analyses and evaluations made by Management, among other things. There can be no assurance that these prospects will be realised or confirmed, as there could be unforeseeable events and other risk factors, or changes in market conditions in the Group’s industry. The estimates of the Group’s ranking contained in this Prospectus have been made by Management based on its knowledge of the industry in the regions where the Group operates. There can be no assurance that these estimates can be confirmed and maintained.

viii SUMMARY This summary is qualified in its entirety by, and should be read as an introduction to and in conjunction with, the more detailed information appearing elsewhere in this Prospectus. This summary may not contain all of the information a prospective investor should consider before deciding to invest in the Shares. Any such decision should be based on a consideration of this Prospectus as a whole, which prospective investors should read carefully, including the Financial Statements and related Notes.

Business Overview The Group is an international integrated jewellery and watch retailer operating in 18 countries with 438 stores as at 31 December 2007, and the leading jewellery and watch retailer in the Middle East, based on number of stores. This retail network includes stores primarily in the Middle East and in South Asia, Europe and North Africa. The Group’s retail stores offer the Group’s own branded products as well as products sold under leading global and regional luxury brands, in three main distinctive store formats, each of which is tailored to a specific type of customer: • Les Exclusives stores, which cater to high net worth customers; • Semi-Exclusives stores, which cater principally to upper-middle income consumers such as tourists and expatriate professionals and office workers; and • Damas 22K stores, which cater mostly to middle income and working class immigrant populations, primarily of South Asian origin. The Group also has watch stores, monobrand stores, Damas Kids for children and parents, duty-free shops, a point of sale in the Saks Fifth Avenue department store in Dubai and other individually branded small stores. The monobrand stores include Tiffany & Co.», Paspaley», Graff», Parmigiani», Stefan Hafner», Links of London», Roberto Coin», Roberta Porrati» and Folli Follie». In addition to its retail business, the Group sells loose diamonds and gold and diamond jewellery on a wholesale basis. The Group also makes corporate sales to business clients throughout the Middle East. See “Business — Wholesale Operations” and “Business — Corporate Sales”. The Group also manufactures gold and diamond jewellery in its own manufacturing facilities. The Group’s manufacturing capabilities encompass the entire manufacturing cycle — from design to manufacturing and branding. The Group manufactures a portion of the own branded and unbranded jewellery sold in its stores, either directly through its own facilities or indirectly through shared facilities. See “Business — Manufacturing and Quality Control Processes — Manufacturing”. For the year ended 31 December 2007, the Group had revenues of AED 3,538.1 million, EBITDA of AED 251.3 million, Adjusted EBITDA of AED 293.6 million and net profit of AED 209.1 million. As at 31 December 2007, the Group had total assets of AED 5,072.1 million and 1,820 full-time employees in the UAE and 2,862 employees worldwide. For the three-month period ended 31 March 2008, the Group had revenues of AED 1,115.1 million, EBITDA of AED 106.7 million, Adjusted EBITDA of AED 118.9 million and net profit of AED 69.7 million. As at 31 March 2008, the Group had total assets of AED 5,066.3 million and 1,932 full-time employees in the UAE and 3,026 employees worldwide.

Competitive Strengths Management believes that the following strengths distinguish the Group’s business from that of its competitors and have enabled the strong growth of the Group. Leading brand in the Group’s core market with high visibility in the Middle East. Damas is one of the most highly recognised jewellery brands in the Middle East. Management believes that the Group’s brand recognition, supported by the Group’s marketing efforts and customer service, encourages customer loyalty in its core market and, uniquely among jewellery retailers operating in the Middle East, among customers who travel to, from and within the wider Middle East region. Moreover, Management believes that the strength of the Group’s brand recognition has enabled it to become a partner of choice for many international jewellery businesses seeking product placement opportunities in the GCC, including Tiffany & Co.» and Paspaley» and the department store Saks Fifth Avenue. The Group holds exclusive retail rights for Graff» in the UAE through a joint venture with Bin Hendi Enterprises, a Dubai-based distributor of consumer goods. When selecting partners for investments opportunities, the Group seeks companies with similarly strong track records, including those with manufacturing capabilities and high-end retailers with well recognised brands. See “Business — Retail Operations — Brands and Products — Monobrands”. Unique business model enabling it to appeal to multiple customer segments. The Group is unique in the Middle East in having a multiple-format store model appealing to distinct customer segments based on a mix of income and

1 national characteristics. The location, presentation, brand selection and products offered within each store format are designed to appeal to specific consumer segments of various nationalities and socio-economic backgrounds. These customer segmentations are further reinforced by the Group’s sales-driven advertising and promotional campaigns, which are tailored to the particular customer segments served by each of its store formats. For instance, television advertisements with certain celebrities are used which would appeal to the youth segment, and trunk shows staged by high-end luxury brands are targeted at high income customers. Leading jewellery distribution network in the Middle East. The Group is the leading jewellery retailer in the UAE, in terms of the number of stores, and has a strong presence in the GCC and the Middle East (including stores in Oman, Bahrain, Jordan, Lebanon, Egypt, Kuwait, Qatar and Saudi Arabia), with plans to further expand operations into North Africa, South Asia and Europe. Management believes that the size of the Group’s operations enable it to achieve economies of scale and cost benefits, such as in negotiating contract terms with suppliers. Management believes that the Group’s strong presence in the GCC has also enabled it to develop and maintain beneficial relationships within the jewellery industry and to raise its profile among customers, suppliers and competitors. Vertically integrated operations resulting in operational advantages. The Group’s operations integrate procurement, manufacturing, wholesale and retail sales, which provide the Group with many competitive advantages, including the ability to: • adjust its manufacturing and product range to meet shifts in raw materials prices, such as for gold and diamonds, and to meet changes in consumer preferences; • obtain pricing and other contractual advantages from suppliers due to high purchase volumes from wholesale operations; • exercise greater control of the quality of the Group’s raw materials as well as its manufactured products in order to maintain low inventory write-offs and customer exchanges; • gather and maintain market intelligence on manufacturing costs that inform negotiations with suppliers of semi- and fully manufactured products; and • secure additional revenues from repairs and other post-sale services to customers. Experienced management team. The Group’s policies and strategy are led by an experienced management team with significant industry experience and knowledge that have driven the strong growth the Group has experienced in recent years. This team has been successful in determining and implementing measures to achieve the Group’s objectives, including consistent growth of revenues and operations. In addition, the Board includes a strong combination of executive as well as independent members who bring significant business experience to the Group. The Group’s subsidiaries, jointly controlled entities and associate companies operate as professionally managed, independent units under the supervision of their respective senior managers, who have on average been with the company for over 10 years and have significant experience in the jewellery industry. See “Business — Competitive Strengths.”

Strategy The Group’s primary strategic objective is to continue to develop its position as a leading Middle East-based integrated jewellery and watch retailer and jewellery manufacturer whilst expanding its presence in new markets. Management intends to achieve this by implementing the following strategic initiatives. Expand the Group’s store network to increase sales volumes, gain market share and achieve economies of scale. Management aims to expand the Group’s store network, particularly in the GCC and North Africa, South Asia and Europe. The purpose of this planned expansion is not only to increase sales volumes, but also to enable the Group to consolidate its position as a leading jewellery retailer, laying the groundwork for increasing market share in the countries in which it operates and strengthening its bargaining position with suppliers. In order to leverage the opportunities provided by regional economic growth in the GCC and India and the growing demand for luxury products as personal income rises, Management aims to expand the Group’s store network principally in the GCC. The Group expects to open over 100 stores in 2008, including 24 that had already been opened as at 31 March 2008, the largest number of which will be in the Semi-Exclusives format. In India, the Group opened 10 stores in 2007 and intends to open eight stores in 2008. The Group’s subsidiary-owned store portfolio has grown from 59 stores with sales of AED 1,195 million in 2000 to 318 stores with sales of AED 3,538.1 million in 2007. The Group has formed a partnership with Gemplus Jewellery India Limited, a subsidiary of Indian diamond jewellery manufacturer and retailer Gintanjali Group, to promote the D’damas brand, which is a leading jewellery brand in India. The Group also intends to expand its Damas Watches and Time Art stores from 19 to 100 stores in the next several years across the Middle East and South Asia. The Group plans to open additional retail stores in Egypt, and to expand its wholesale operations for distribution to other retailers in Turkey.

2 Increase sales densities. Management intends to take a number of measures designed to increase in-store sales. These include: Increasing and optimising in-store traffic. Management plans to continue to invest in advertising campaigns, particularly at hub airports in the Middle East, and to continue to evaluate the positioning of its stores in order to optimise their foot-fall, thereby increasing sales-per-square-metre of retail space. To this end, in 2006 the Group had the highest media spend in the retail industry in the GCC. Capitalising on its flexible business model to achieve greater sales. Management intends to continue to actively adapt the mix of stores and product ranges to respond swiftly to shifting consumer preferences. For example, with the increase in consumer purchasing power in the UAE in recent years, the demand for higher end jewellery has increased, and the Group has adapted to this by increasing the proportion of the Les Exclusives stores relative to the total store and product range. Continuing implementation of initiatives to increase profit margins. The Group intends to enhance its current profit margins through the following means. • Increasing and improving the Group’s manufacturing capabilities. In order to enable the Group to gain further control of costs and to continue to modify its product range to optimise profit margins, Management intends to make further investments in the Group’s manufacturing capabilities in the UAE, India, Egypt and China, increasing their manufacturing capacity and the quality of manufacturing. The Group is also planning to form a strategic partnership with a DTC sightholder (as defined below), in order to secure the supply of certified diamonds. • Enhancing and developing the Group’s own brands. Management intends to strategically develop certain of the Group’s own brands in order to achieve greater margins from those products. To that end, Management is expanding the Group’s in-house design team and plans to support the development of its own brands through targeted marketing initiatives, including promotions, public relations campaigns and in-store merchandising targeted to specific market needs. One of the most effective advertising campaigns so far has been for the Group’s brand Farfasha, which is targeted at regional youth and promoted by a popular Lebanese singer Nancy Ajram. • Actively adapting the Group’s product ranges to match shifting consumer preferences. Management intends to continue to strategically adapt its product offerings based on evolving raw materials and end product prices, manufacturing costs and consumer preferences. For example, since in recent years diamond jewellery has produced higher profit margins than other types of jewellery, and consumer demand for diamond jewellery has also increased at the expense of demand for gold jewellery, Management intends to further increase diamond sales as a proportion of the overall product range. This is expected to include such initiatives as the introduction of a range of diamond bangles, a unique product with competitive pricing targeted to South Asian customers. • Leveraging the Group’s growth to obtain favourable supply terms. Management believes that the Group’s growth will provide a platform for building stronger relationships with its suppliers, and that this will enable the Group to negotiate more favourable terms with such suppliers. Measured growth through selective acquisitions, investments and alliances. Management intends to continue to evaluate opportunities for strategic acquisitions, investments and alliances with a view, among other reasons, to: (i) expanding the Group’s manufacturing capabilities; (ii) acquiring new brands and retail chains that are complementary to the Group’s existing brand portfolio; or (iii) enabling the Group to enter new markets in cases where a local partner may be required. See “Business — Strategy”.

Group Structure and Corporate Reorganisation The Issuer is the holding company of the Group and is incorporated under the laws of the DIFC. The current structure of the Group is the result of a reorganisation in 2008, whereby the Issuer was incorporated and the Company (formerly parent company of the pre-reorganisation group) became its subsidiary. See “Business — Group Structure and Corporate Reorganisation”.

Directors, Senior Managers and Principal Shareholders The current members of the Issuer’s Board of Directors are the Founding Shareholders. Upon listing, the Directors will be the Founding Shareholders, Mohamed Alabbar, H.E. Aamer Abdul Jalil Mohammed Al Fahim, Dr Gaetano Cavalieri, John Harper, Abdullah Nasser al Mansoori, Dr Maryam Matar, Essam Abdulkadir Al Muhaidib and Ammar A. Alkhudairy. Messrs Tawfique, Tawhid and Tamjid Abdullah own 22.9%, 24.2% and 22.9%, respectively, of the Issuer’s share capital immediately prior to completion of the Offer. After the Offer, assuming full exercise of the Over-allotment Option, these interests will be reduced to 16.7%, 17.6% and 16.7%, respectively. See “Management” and “The Selling and Principal Shareholders”.

3 SUMMARY OF THE OFFER

The following is a brief summary of certain terms of the Offer. It may not contain all of the information that is important to a prospective investor and should be read in conjunction with the more detailed information appearing elsewhere in this Prospectus. For additional information regarding the Shares and the Offer, see, respectively, “Description of Share Capital” and “Underwriting”. Issuer ...... Damas International Limited. Selling Shareholder ...... Amwal Al Khaleej Commercial Investment Co. The Offer ...... 270,583,370 Shares are being offered in the Offer (before the exercise, if any, of the Over-allotment Option) outside the United States in reliance on Regulation S under the U.S. Securities Act, outside of Japan, Canada and Australia, and to qualified investors in certain European Union Member States. Shares are being offered in the DIFC only as an Exempt Offer pursuant to the Offered Securities Rules of the DFSA. If the Over-allotment Option is exercised in full, the Offer will amount to 311,170,876 Shares. Shares ...... Conditional upon, and effective from, the DIFX Admission, the Issuer’s share capital will consist of 1,009,189,535 ordinary shares, each with a nominal value of US$1.00, which are fully paid, issued and outstanding and three Deferred Shares (as defined below), each with a nominal value of US$0.37, which are fully paid, issued and outstanding assuming full exercise of the Over-allotment Option. The Shares and the Deferred Shares are the only classes of shares that the Issuer has issued. See “Description of Share Capital”. Offer Price...... TheOfferPrice for the Shares is US$1.00 per Share. Over-allotment Option...... TheIssuer has granted to the Joint Global Coordinators an option to subscribe for, within 30 days from the Listing Date, up to an additional 40,587,506 Shares at the Offer Price, representing up to 15% of the total number of Shares in the Offer, solely to cover over-allotments or short positions resulting from stabilisation transactions, if any, in the Offer. See “Underwriting — Over-allotment Option”. Joint Global Coordinators, Joint Institutional Lead Managers, Joint Bookrunners and Underwriters ...... Credit Suisse Securities (Europe) Limited and HSBC Bank plc. Dividends ...... Although there can be no guarantee that the Issuer will declare any dividends in the future, if it does, the Shares offered hereby (including the Over-allotment Shares, if any) will be entitled to any dividends declared and paid if the relevant record date is on or after the Closing Date (or the closing date of the Over-allotment Option, as applicable). See “Dividends and Dividend Policy” and “Description of Share Capital — Articles of Association and Companies Law — Dividends”. Use of Proceeds ...... The gross proceeds to the Issuer of the Offer are expected to be approximately US$233.8 million (US$274.4 million assuming exercise in full of the Over-allotment Option), before the deduction of commissions and other fees and expenses payable by the Issuer in connection with the Offer. See “Underwriting”. The Issuer intends to use the net proceeds of the Offer to fund its store network expansion, make further investments in its manufacturing platform, repay indebtedness, fund its ordinary working capital requirements, and for general corporate purposes. See “Use of Proceeds” and “Business”.

4 The Issuer will not receive any proceeds from the sale of the Shares by the Selling Shareholder in the Offer (including pursuant to the Over- allotment Option, if exercised), which will be paid solely to the Selling Shareholder. See “The Selling and Principal Shareholders”. Lock-Up...... Pursuant to the terms of an underwriting agreement amongst the Issuer, the Selling Shareholder and the Joint Global Coordinators (the “Underwriting Agreement”), and pursuant to lock-up letters executed by the Principal Shareholders (the “Lock-up Letters”), the Issuer (for a period of 180 days after the Listing Date) and the Selling Shareholder and the Principal Shareholders (each for a period of one year after the Listing Date) have contractually agreed, save for the sale of the Shares by the Selling Shareholder in the Offer (including pursuant to the Over-allotment Option, if exercised), not to: (i) offer, sell, contract to sell, pledge, charge, grant options over or otherwise dispose of, directly or indirectly, any of the Issuer’s shares or securities convertible or exchangeable into or exercisable for any of the Issuer’s shares; or (ii) enter into any swap or any other agreement or any transaction that transfers, in whole or in part, directly or indirectly, any of the economic consequences of ownership of any shares nor to mandate any third party to do so, or announce the intention to do so (each, a “Disposal”) without the prior written consent of the Joint Global Coordinators, which consent shall not be unreasonably withheld, or make an announcement relating thereto. See “Underwriting — Lock-up Agreements”. Restrictions on Purchases and Transfers of Shares ...... TheShares are subject to certain restrictions on their purchase, resale and transfer under the applicable securities laws of certain jurisdictions. See “Underwriting — Selling Restrictions”. The Issuer is also subject to a UAE law under which 51% of its Shares must be held by UAE nationals or UAE entities that are themselves wholly owned by UAE nationals. The infringement of this UAE law could result in transactions in the Shares being deemed void, or the Shares being delisted or suspended from trading on the DIFX, which would decrease liquidity of the Shares. See “Risk Factors — Risks relating to laws of the DIFC and the GCC — The Issuer is subject to a law under which 51% of its Shares must be held by UAE persons”. Taxation ...... Foradiscussion of certain tax considerations relevant to an investment in the Shares, see “Taxation”. Risk Factors...... Aninvestment in the Shares involves certain risks, including, among others, risks relating to: (i) the Group’s business and the industry in which it operates, such as expense and failure of the Group’s expansion strategy, sensitivity to macroeconomic factors affecting consumer spending, competition in securing and maintaining sites for retail stores, competition from other market participants, higher raw material costs, decreased levels of tourism, rapid and unpredictable changes in consumer demand, inability to control associates, jointly controlled entities and undertakings, impairment of the reputation of the Group’s brands, dependence on key management personnel, seasonality of sales, reliance on third-party suppliers, security risks or theft or damage to the Group’s products, certain provisions in the Group’s credit facilities that could result in demand for repayment and the recent controversy associated with “conflict” diamonds; (ii) the geographic markets in which the Group operates, such as political, economic and social instability in the Middle East; (iii) currency- related risks; (iv) the Offer and the Shares, such as control by the

5 Founding Shareholders following the Offer, risks of low liquidity and high volatility due to the lack of a prior market for the Shares and transfer restrictions, risks of overhang of Shares following expiry of the period of lock-up, risks relating to lack of Management experience in running a public company; and (v) the laws, and the newly established and largely untested nature, of the DIFC and the DIFX, and such associated risks as the potential difficulty for investors to enforce judgments against the Issuer or Management, less protection for investors than in other jurisdictions, application of the UAE law restricting ownership in the Issuer’s share capital to UAE persons and the potential inability of non-UAE persons to exercise pre-emptive rights with respect to the Shares. Prior to making an investment decision, investors should consider carefully the matters discussed below. See “Risk Factors”. Listing and Trading ...... Application has been made for the Shares to be admitted to the Official List of Securities of the DIFX and to be listed on the DIFX under the symbol “DAMAS”. Prior to the Offer, there has not been any public market for the Shares. There will not be any conditional dealings in the Shares prior to the DIFX Admission. It is expected that the DIFX Admission will become effective on the DIFX on or about the Listing Date. Payment and Settlement ...... Payment for, and delivery of, the Shares is expected to be made from and to the accounts of purchasers through the book-entry facilities of the Central Securities Depositary (the “CSD”) operated by the DIFX. Trading of the Shares is expected to take place through the trading system of the DIFX. Shares may be held either in accounts opened with the CSD by the holders thereof or through custodian omnibus accounts, with ownership of the Shares to be evidenced by the holdings in such accounts. Clearing and settlement of trades on the DIFX by brokers or custodians may be performed only through members of the DIFX that are authorised clearing members (the “Clearing Members”). Each Clearing Member must hold a securities account with the CSD and a cash account with a designated settlement bank for settlement purposes. Similarly, a custodian needs to hold an omnibus account with the CSD and a cash account with a settlement bank for settlement of off-exchange trades. Settlement of securities trading on the DIFX is governed by the DIFX Business Rules. See “Clearance and Settlement”. Listing Date ...... Onorabout 8 July 2008. Closing Date ...... Onorabout 8 July 2008. General Information ...... Thesecurity identification numbers of the Shares offered hereby are as follows: Shares ISIN: AEDFXA0Q3724. Shares Common Code: 037271373. DIFX Share Trading Symbol: DAMAS.

6 SUMMARY CONSOLIDATED FINANCIAL INFORMATION The following tables set forth summary consolidated financial information relating to the Company and its subsidiaries, rather than those of the Issuer, as at and for the years ended 31 December 2005, 2006 and 2007 and as at and for the three months ended 31 March 2007 and as at and for the three months ended 31 March 2008. Prior to the 2008 Corporate Reorganisation (as defined below), the Issuer had no operations and consequently did not produce any financial statements. Pursuant to the 2008 Corporate Reorganisation, the Issuer became the parent company of the Company and its subsidiaries. Management has determined that both the Company and the Issuer were and will be held under common control (as defined by International Financial Reporting Standard 3 (Business Combinations)) both before and after the 2008 Corporate Reorganisation and therefore proposes to adopt the pooling of interest method of accounting for the 2008 Corporate Reorganisation. Management views the post- reorganisation group as a continuation of the existing business. Accordingly, the Issuer in its initial set of financial statements following the 2008 Corporate Reorganisation will present the Company’s consolidated figures as comparatives. Management believes that the Financial Statements are a meaningful measure of the Group’s historical financial condition and results of operations. This summary information is derived from, and should be read in conjunction with, the Financial Statements, including the accompanying Notes, prepared in accordance with IFRS, which are included elsewhere in this Prospectus. The following information should also be read in conjunction with “Operating and Financial Review”. See “Business — Group Structure and Corporate Reorganisation”. To facilitate comparability, income statement and cash flow data for the year ended 31 December 2006 below have been extracted from the comparative columns in the 2007 Financial Statements due to the reclassification and restatement of certain items for the year ended 31 December 2006 in the 2007 Financial Statements, and certain adjustments have been made herein to the income statement and statement of cash flows data for the year ended 31 December 2005 included in the 2005 Financial Statements in order to facilitate comparability across periods. These reclassifications, restatements and adjustments have been noted in the sections “Presentation of Certain Financial and Other Information” and in the footnotes to the tables in “Summary Consolidated Financial Information” and “Selected Historical Consolidated Financial Data” and in the tables included herein where applicable.

7 Income Statement Data The table below shows selected income statement data for the Group for the periods indicated. For the three months For the years ended 31 December ended 31 March 2005 2006 2007 2007 2008 (unaudited) (in millions of AED) Sales: Gold jewellery ...... 1,468.0(1) 1,642.2(6) 2,149.2 486.5 721.0 Gold bullion ...... 485.6(1) 1,462.8 257.5 160.4 16.7 Diamond jewellery ...... 420.7(1) 681.0(7) 934.4 228.2 290.3 Others (watches, pearls, etc) ...... 320.3(1) 255.8(7) 197.0 46.4 87.1 Total sales ...... 2,694.6(2) 4,041.8(8)(9) 3,538.1 921.4 1,115.1 Cost of sales ...... (2,300.6) (3,560.3)(8) (2,910.2) (785.3) (891.6) Gross profit ...... 394.0(2) 481.5(9) 628.0 136.1 223.5 General administration, selling and distribution expenses ...... (263.2) (338.4) (416.9) (96.4) (127.3) Finance cost ...... (37.9) (72.4)(10) (107.6) (24.3) (45.9) Finance income ...... 11.8(3) 29.2(11) 33.8 10.4 9.7 Income from associates and jointly controlled entities ...... 14.7(4) 39.1 42.3 10.9 12.3 Income on disposal of associates ...... — 75.3 — — — Other income (loss) ...... 14.8(5) 17.5(12) 29.5 2.7 (2.5) Profit for the year/period ...... 134.2 231.8 209.1 39.4 69.7 Profit attributable to minority interest ...... 1.4 2.6 5.1 0.7 1.3 Profit attributable to shareholders ...... 132.8 229.3 204.1 38.7 68.4

(1) Unaudited figures because the 2005 Financial Statements do not provide sales by product type. (2) The “Sales” and “Gross profit” figures here differ from the corresponding figures as found in the 2005 Financial Statements by AED 4.9 million due to the reclassification herein of profit sharing for sales by third parties of gold jewellery obtained from the Company on consignment as “Other income” for consistency of presentation with the 2007 Financial Statements. (3) This consists of the “Interest on fixed deposits” figure from Note 21 of the 2005 Financial Statements. (4) In the 2005 Financial Statements, this figure is included under “Other income”, and represents the sum of income from associates and jointly controlled entities, as shown in Note 21 thereof. (5) “Other income” from the 2005 Financial Statements is adjusted herein by subtracting AED 14.7 million of income from associates and jointly controlled entities and AED 11.8 million from interest on fixed deposits, and by adding AED 4.9 million of income from profit sharing from consignment sales. (6) The 2006 figure in the 2006 Financial Statements was restated in the 2007 Financial Statements as a result of the reclassification of AED 9.8 million in respect of income from profit sharing consignment sales, which is included in “Other Income” in the 2007 Financial Statements. (7) In the 2006 Financial Statements, “Diamond jewellery” and “Others” is aggregated under “Diamond jewellery and others”. (8) In the 2006 Financial Statements, “Sales” and “Cost of sales” were presented on a net basis, excluding the revenue and cost, respectively, related to the gold element of the transactions. In 2007 the Company changed its accounting policy to reflect the gold price in its revenue and cost of sales to more accurately reflect the economic substance of the transactions. Accordingly, the 2006 figures for sales and cost of sales have been restated here for consistency with the presentation in the 2007 Financial Statements. (9) The “Sales” and “Gross profit” differ from the corresponding figures as found in the 2006 Financial Statements by AED 9.8 million due to the reclassification herein of such an amount as “Other income” for consistency of presentation with the 2007 Financial Statements. (10) This consists exclusively of interest on bank borrowings, as shown in Note 24 of the 2006 Financial Statements. (11) This figure is extracted from the “Interest income on fixed deposits” figure in Note 24 of the 2006 Financial Statements, which, in the 2006 Financial Statements was netted against bank borrowings so as to obtain the “Finance Costs (net)” line item represented in the 2006 Financial Statements. (12) “Other income” from the 2006 Financial Statements is adjusted here by adding AED 9.8 million of profit sharing from consignment sales.

8 Balance Sheet Data The following table* sets forth selected balance sheet data for the Group as at the dates indicated.

As at 31 December As at 31 March 2005 2006 2007 2008 (unaudited) (in millions of AED) Assets Non-current assets ...... 840.6 1,155.6 1,503.5 1,522.9 Current assets ...... 2,016.5 2,993.0 3,568.6 3,543.4 Total assets...... 2,857.1 4,148.6 5,072.1 5,066.3

Liabilities Current liabilities ...... 989.5 2,067.2 1,836.0 1,896.0 Non-current liabilities ...... 290.8 357.7 1,376.3 1,252.2 Total liabilities ...... 1,280.3 2,424.9 3,212.2 3,148.2 Total equity attributable to shareholders ...... 1,565.6 1,698.3 1,808.6 1,881.1 Minority interest ...... 11.2 25.4 51.3 37.0 Total equity ...... 1,576.8 1,723.7 1,859.8 1,918.1 Total liabilities and equity ...... 2,857.1 4,148.6 5,072.1 5,066.3

* The data in this table as at 31 December 2005, 2006 and 2007 have been extracted from the 2005 Financial Statements, the 2006 Financial Statements and the 2007 Financial Statements, respectively, without adjustment. Due to reclassifications and restatements from period to period in the Financial Statements, the data in this table are not directly comparable from period to period.

Cash Flow Data The following table* sets forth a summary of the Group’s net cash flows for the periods indicated. For the three For the years ended months ended 31 December 31 March 2005 2006 2007 2008 (in millions of AED) Net cash provided by / (used in) operating activities ...... (19.2) 196.3 (257.8) (292.2) Net cash provided by / (used in) investing activities ...... (85.8) (471.1) (238.6) (16.5) Net cash provided by / (used in) financing activities ...... 447.4 16.8 980.0 120.6 Net increase / (decrease) in cash and cash equivalents ...... 342.4 (258.0) 483.6 (188.1)

9 RISK FACTORS An investment in the Shares involves a number of risks. Prospective investors should carefully consider the following information about these risks, together with the other information contained in this Prospectus, before investing in the Shares. Any of the risks described below, or additional risks not currently known or that Management deems immaterial, could have a significant or material adverse effect on the business, financial condition or results of operations of the Issuer and the Group and could result in a corresponding decline in the market price of the Shares. Investors could lose all or a substantial part of their investment. This Prospectus also contains forward-looking statements that involve risks and uncertainties. Actual results could differ materially from those anticipated in such forward-looking statements as a result of certain factors, including the risks described below and elsewhere in this Prospectus. See “Forward-Looking Statements”.

Risks relating to the Group’s business and the industry in which it operates The Group’s strategy of expansion through selective acquisitions and new store openings could involve significant expense and may not achieve expected returns. The Group intends to selectively pursue acquisitions of businesses with manufacturing capabilities or well- recognised brands that Management perceives to be complementary to the Group’s current portfolio. The Group also intends to open new stores in order to expand into certain geographic markets, including in North Africa, South Asia and Europe. These plans may require significant and unanticipated levels of investment for which financing may not be available, or may only be available at costly or commercially unfavourable terms, and may divert managerial resources away from existing operations, whilst presenting new operating challenges, in particular in markets where the Group may have less experience and less market knowledge than in the UAE. In addition, completed acquisitions may not be successfully integrated with the Group’s business or profitably operated. Accordingly, the Group may not achieve anticipated sales or profits, or may incur costs beyond its budget in connection with this strategy, which could have a material adverse effect on the business, financial condition and results of operations of the Group. See “Business — Strategy — Expanding the Group’s store network to increase sales volumes, gain market share and achieve economies of scale” and “Business — Strategy — Measured growth through selective acquisitions, investments and alliances”.

The Group’s business is sensitive to macroeconomic factors affecting consumer spending, including an economic slowdown in the GCC and other geographic areas in which it operates. Because luxury products, including diamonds and fine jewellery, are discretionary purchases for consumers, the volume and monetary value of such purchases depend to a significant extent on a number of factors relating to discretionary consumer spending, including macroeconomic conditions (and perceptions of such conditions) affecting disposable consumer income, such as employment levels, wages and salaries, interest rates and the cost of credit in the global economy and the regional and local markets where the Group operates. Thus, an economic downturn, or even a slowdown, in the UAE, the GCC or the other countries in which the Group operates or globally, could have a material adverse effect on the business, financial condition and results of operations of the Group.

The Group faces growing competition in securing and maintaining sites for its retail stores. The majority of properties in the Group’s store portfolio are held through lease agreements. The Group’s strategy involves expanding its store portfolio through the opening of new stores, which necessitates the identification of suitable locations, taking into account the positioning and visibility of the space as well as the characteristics of nearby businesses and the demographics of the area. The Group may not be successful in finding new locations or in renewing current leases, and even if it is successful in doing so, may not be able to secure or renew the applicable lease agreements on terms that are commercially viable or optimal. See “Business — Strategy — Expanding the Group’s store network to increase sales volumes, gain market share and achieve economies of scale”, “Business — Store Deployment and Development” and “Business — Property”.

The Group may face increased levels of competition in the markets in which it operates. The Group currently faces competition from a variety of regional and international jewellery retailers and wholesale jewellery chains that are able to target each customer segment of the Group’s three store formats. The Group may face competition from new entrants into the markets in which it is already established, including independent retailers and chain stores with internationally recognised products. The Group will also have to compete with established retailers operating in new markets into which the Group plans to expand. Such increased competition

10 could have a material adverse effect on the business, financial condition and results of operations of the Group. See “Industry Overview — Competition”.

The Group could face higher costs of gold, diamonds and other gem stones used for the products it sells. The Group’s raw material costs are affected by the market prices of gold and precious and semi-precious gem stones, including diamonds, used in the jewellery sold in its retail stores, which may be influenced by various factors outside the Group’s control, including changes in global supply and demand, political instability in exporting countries and inflation. To the extent the Group passes on increased raw material costs to consumers in the form of price increases for the products sold in its retail stores, demand for such products may decrease, resulting in lower sales volumes, which could have a material adverse effect on the business, financial condition and results of operations of the Group. See “Operating and Financial Review — Factors Affecting the Group’s Results of Operations and Financial Condition — Prices of gold and rough diamonds, and other raw materials”.

As a significant portion of the Group’s sales are made to tourists, the Group’s profits are sensitive to decreased levels of tourism, or stagnation in the tourism industry, in the markets where the Group operates. The Group relies on the tourism industry in Dubai and on purchases from customers who travel to, from and within the GCC and the wider Middle East region to support sales, in particular in its Semi-Exclusives stores. The tourism industry is affected by global economic trends, currency exchange rates, terrorism scares, threats of war and other unforeseeable factors. Any significant decline in the tourism industry in the markets in which the Group operates could decrease the Group’s sales volumes, which could have a material adverse effect on the business, financial condition and results of operations of the Group.

Demand for certain of the Group’s products is subject to rapid and unpredictable changes in trends and consumer preferences, which may be difficult and/or costly to satisfy. The jewellery industry, as for most luxury products, is subject to rapid and unpredictable changes in trends and consumer preferences. The Group’s success depends significantly on its ability to anticipate, identify and respond to such changes in demand, and there can be no assurance that the Group’s current or new stock will do so. The Group may also have to make significant investments in the development and marketing of new products or the establishment of new relationships with international jewellery businesses in order to satisfy changes in consumer demand, and there is no guarantee that such investments will achieve the expected increases in sales. Failure to respond to changing consumer preferences could decrease demand for the products sold by the Group and result in excess inventories and merchandise markdowns, which could have a material adverse effect on the business, financial condition and results of operations of the Group.

A number of the Group’s activities are managed by jointly controlled entities, associations and fiduciary arrangements and the Group does not have sole control of such companies. A number of the Group’s activities, including a significant part of its international operations, are conducted through jointly controlled entities, associated companies and undertakings legally owned by partners, affiliates and/or employees, who could take action that is not in accordance with the Group’s policies and objectives where the Group does not fully control such investments or fiduciary arrangements. Such joint venture partners, associates and affiliates may have economic, business or legal interests or goals that are inconsistent with the Group’s, may become bankrupt, may refuse to make additional investments that the Group deems necessary or desirable, or may prove otherwise unwilling or unable to fulfil their obligations under the relevant joint venture or association agreements or other fiduciary arrangements. As to the Group’s Indian investments, certain individuals who hold beneficial title on behalf of the Group to shares pursuant to foreign ownership restrictions may fail to uphold their obligations under the agreements governing such arrangements. In addition, there is a risk that joint venture partners and other associates could become competitors of the Group, which in combination or individually in the future, could represent a threat to the Group’s expansion plans or market share growth. Accordingly, such jointly controlled entities, associations and fiduciary arrangements entail certain risks that could have a material adverse effect on the business, financial condition and results of operations of the Group. See “Business — Jointly Controlled Entities and Associates”.

The success of the Group’s business depends on the reputation of its brands, which could be impaired by the activities of third parties. The success of the Group’s business depends on the reputation of its brands, which is influenced by a variety of factors, including but not limited to, the quality, style and design of the Group’s own branded products, the image

11 and global awareness of its brands, its advertising, public relations and marketing campaigns and its general corporate profile. The Group’s competitors and other third parties could use brand names that are similar to the Group’s to market products of an inferior or substandard quality, which could result in confusion for potential customers, impairment of the value of the Group’s brands and lost sales. Any such reputational damage could have a material adverse effect on the business, financial condition and results of operations of the Group. See “Business — Strategy — Continuing implementation of initiatives to increase profit margins — Enhancing and developing the Group’s own brands”.

The Group depends upon the contributions of certain key individuals. The Group’s success depends in part on the contribution of certain individuals in key positions, such as the Issuer’s Managing Director, Deputy Managing Director, Chief Financial Officer and Chief Investment Officer, as well as its ability to attract and retain qualified personnel. If any of these key individuals were to leave the Group, it could be difficult to promptly find suitable replacements with comparable skills and experience, which could have a material adverse effect on the business, financial condition and results of operations of the Group. See “Business — Competitive Strengths — Experienced management team” and “Management”.

The Group’s sales are subject to seasonal fluctuations, with higher volumes occurring during the first and fourth quarters of the year. The Group’s sales have historically exhibited certain seasonal fluctuations, reflecting higher sales volumes during the first and fourth quarters of the year due to peak purchases on such occasions as Diwali, Eid, Christmas, Valentine’s Day and Mother’s Day. The Group stocks certain inventory and manages expenditures for such costs as advertising and personnel to account for this seasonality, whilst the Group’s fixed costs such as lease rentals, employee salaries, store operating costs and logistics-related expenses, which form a significant portion of operating costs, are relatively constant throughout the year. Consequently, lower than expected net sales during any first or fourth quarter or more pronounced seasonal variations in sales in the future could have a disproportionate impact on the Group’s operating results for the year, or could strain the Group’s resources and impair cash flows. The Group’s interim results for the first and fourth quarters are not necessarily indicative of the results that may be expected for any other interim period, nor are they indicative of the Group’s results for a full year. Any failure by the Group to accurately foresee and prepare for such seasonal fluctuations could have a material adverse effect on the business, financial condition and results of operations of the Group. The Group relies on certain third-party suppliers of raw materials and finished jewellery and watches, which could impose unfavourable terms, deliver products of substandard quality or be difficult to replace. The Group’s purchases of diamonds and other gemstones and finished jewellery and watches from certain key, third-party suppliers entails certain risks, including that such suppliers might not renew current contracts, might impose unreasonable terms on their supply arrangements, or might terminate such contracts prior to expiry, and the Group might not be able to find suitable replacements for such suppliers in a timely manner or at all. The Group is also required to expend significant time and resources to monitor the product quality and manufacturing processes of these suppliers, whose products may be defective or of substandard quality or purity, or may not be delivered within the agreed time frame. Any such difficulties with suppliers could have a material adverse effect on the business, financial condition and results of operations of the Group. See “Business — Sourcing and Suppliers”.

The Group faces security risks presented by potential theft or damage to products before or after being stocked in its retail stores. There may be instances of theft of or damage to valuable inventory whilst in the Group’s possession and prior to being stocked in the Group’s retail stores. As at the date of this Prospectus, the Group’s insurance policies cover losses due to theft, fire, breakage or damage caused by other casualties for a total coverage amount of AED 3 billion per year. The Group also has in place certain inventory monitoring and security measures, including the tagging of each jewellery item that is sold in the retail network with a barcode readable by an inventory tracking system, as well as in-store CCTVand intrusion and breakage alarms. The Group incurs significant costs in implementing such inventory management and security systems. See “Business — Insurance” and “Business — Security — Inventory Management”. In the past, there have been instances of theft, including an armed robbery in April 2007 of the Group’s Graff» store in which jewellery worth approximately AED 14 million was stolen. The Group’s insurance has fully covered such instances of thefts of and damage to its products, and the Group’s insurance premiums have not been materially increased as a result. However, if such losses are not fully covered in the future, if the Group’s security measures prove inadequate, or if such instances of theft of or damage to valuable inventory cause harm to the Group’s

12 reputation, this could have a material adverse effect on the business, financial condition and results of operations of the Group.

There is variability in the line item presentation of the Financial Statements. Prior to the Offer and the Listing, the Company has been a privately-held company and its Financial Statements were therefore prepared for statutory and management purposes rather than with a view to consistency of presentation for public shareholders. In this context, Management has historically exercised significant judgement, within the requirements of IFRS, as to the appropriateness of presentation of certain line items in its income statements, statements of cash flows and balance sheets from one accounting period to the next. Moreover, certain IFRS have changed during the periods covered by the Financial Statements (as noted in the Notes thereto) and in the year 2007 the Company changed, consistent with its alternation policy, its external auditors from KPMG to Ernst & Young. Consequently, there is variability in the line item presentation in the 2005 Financial Statements, the 2006 Financial Statements and the 2007 Financial Statements. Investors should therefore not assume that items bearing the same name in the 2005 Financial Statements, the 2006 Financial Statements and the 2007 Financial Statements have the same meaning in every case across periods, but should read the Financial Statements in their entirety, including the Notes thereto, in order to understand these differences.

Recent controversy associated with “conflict” diamonds could reduce demand for certain of the Group’s products. Recent media and public attention has focused on “conflict” or “blood” diamonds, which are mined under exploitative conditions in war-torn regions of Africa and sales of which tend to fund terrorism, violence and other unlawful activities. The Group’s policy is not to purchase conflict diamonds and, to this end, it sources all of its certified diamonds from suppliers that provide “conflict-free” certifications, such as “sightholders” authorised by the rough diamond distribution arm of the De Beers Group, the Diamond Trading Company (“DTC”), which sorts, values and sells a significant quantity of the world’s rough diamonds. However, there can be no guarantee that these procedures are fail-proof. Challenges to the “conflict-free” status of diamonds sold by the Group could result in negative publicity, which could have a material adverse effect on the business, financial condition and results of operations of the Group. See “Business — Sourcing and Suppliers — Gemstones”.

Certain of the Group’s credit facilities have customary change of control provisions, which may be triggered by the Offer, or have expired. Certain of the Group’s credit facilities have customary change of control provisions, which may be triggered by the Offer, and certain of the Group’s credit facilities have either expired or otherwise gone past their renewal dates. Whilst Management currently believes, based on its historically good relations with the Group’s creditors, that it is unlikely that creditors will enforce these change of control of provisions if triggered by the Offer or demand immediate repayment of amounts under past due facilities, if these provisions were enforced or demand for repayment were made, the Group may be required to, inter alia: (i) divert cash resources from its operations or investment plans; (ii) enter into financing arrangements on less favourable terms; (iii) dispose of material assets; or (iv) seek alternative arrangements to finance its current operations. If the Group faces the financing problems described above or other similar problems, it could have a material adverse effect on the business, financial condition and results of operations of the Group.

Risks relating to the geographic markets where the Group operates The Group’s results of operations are, and will continue to be, affected in general by political, economic and social developments in or affecting the GCC and other markets in which the Group operates. Because the Group’s business relies heavily on its presence and sales in the GCC and other emerging market areas such as India and Turkey, future armed conflicts or political instability in these areas could negatively impact the Group’s operations. While in recent years the GCC and India have enjoyed relative political stability, there can be no assurance that such stability will continue. In addition, current challenges in Turkey to the legitimacy of the ruling party could have an effect on economic prospects there. The economies of the GCC, India and Turkey, like those of many emerging markets, have been characterised by significant government investment or involvement and extensive regulation of market conditions, including foreign investment, foreign trade and financial services. There can be no assurance that economic growth or performance in these regions where the Group does business can or will be sustained. Any slowdown or decline, or implementation of restrictive fiscal or monetary policies or regulations or new legal interpretations of existing regulations (including the introduction of taxation in such tax free jurisdictions as Dubai and Bahrain, changes in interest rates or exchange

13 controls) in such regions could have a material adverse effect on the business, financial condition and results of operations of the Group.

The Group is subject to currency-related risks.

The Group’s reporting currency is the Dirham. The Group encounters currency exchange risk to the extent it incurs operating expenses, obtains financing or makes sales of products in a currency other than the Dirham. In addition, Group companies incorporated and operating in various jurisdictions outside the UAE conduct operations in various currencies other than the Dirham and have earnings primarily in currencies other than the Dirham. The results of these operations are reported in the relevant non-UAE currencies and converted into Dirhams at applicable exchange rates for inclusion in the Group’s consolidated financial statements. Whilst the Group may consider entering into transactions to hedge the risk of exchange rate fluctuations in the future, it has not done so in the past. Accordingly, fluctuations in such exchange rates could have a material adverse effect on business, financial condition and results of operations of the Group.

Risks relating to the Offer and the Shares

After the Offer, the Founding Shareholders will continue to own a sufficient interest in the Issuer’s share capital to exercise significant influence over its and the Group’s management and operations.

As at the date of this Prospectus, the Issuer is controlled by the Founding Shareholders, who together hold 70% of its share capital. Following the Offer and assuming exercise in full of the Over-allotment Option, these shareholders are expected to hold at least 51% of the Issuer’s share capital, a majority over other individual shareholders, which will enable them to exercise control over the management and operations of the Issuer and the Group and over the Issuer’s shareholders’ meetings, such as in relation to the payment of dividends and the appointment of the majority of the Directors to the Issuer’s Board. There can be no assurance that the interests of the Founding Shareholders will coincide with the interests of purchasers of the Shares. See “The Selling and Principal Shareholders” and “Description of Share Capital”.

There are risks connected with the liquidity of the Shares, including uncertainty as to whether an active market for trading will develop or be sustained and the potential for high volatility of their market price. As at the date hereof, there is no public market for the Shares. Following the Offer and the Admission, the Shares will be traded on the DIFX.

Whilst investors will be able to sell their Shares on the open market, subject to applicable UAE restrictions, there can be no assurance as to the liquidity of any trading in the Shares or that an active market for the Shares will develop or be sustained. The DIFX is a relatively new market and is substantially smaller in terms of trade size and volume than more established securities markets. Trading liquidity on the DIFX is limited, which may contribute to increased volatility of securities on the DIFX. Currently, 13 companies have their shares or other equity securities admitted to trading on the exchange. The total trading volume for 2006, 2007 and first quarter of 2008 was US$26.3 million, US$1.45 billion and US$609.2 million, respectively. As at 31 March 2008, the market capitalisation of equity securities listed on the DIFX was approximately US$28.1 billion. The DIFX competes with other Middle East securities exchanges and, to the extent that it is unable to compete effectively, the level of liquidity may decrease. Brokerage commissions and other transactions costs on the DIFX are also generally higher than those in Western European countries. There can be no assurance as to the level of liquidity that the DIFX will develop. See “Overview of the UAE — The Emirate of Dubai — DIFC” and the DIFX’s website, www.difx.ae, for more information regarding the DIFX.

None of the Issuer, the Selling Shareholder or the Joint Global Coordinators have independently verified the information contained on DIFX’s website and there can be no assurance as to the accuracy or completeness of such information. The information contained on DIFX’s website is not incorporated by reference into, or otherwise included in, this Prospectus. In addition, the market price of the Shares could be subject to fluctuations, which could be significant and fall below the Offer Price, and could create problems for liquidating any investment in the Shares. Such price fluctuations could be caused by a number of factors including market, economic or political conditions which may be outside the Group’s control, which could impair the value of an investment in the Shares. Such factors could generally decrease the liquidity and increase the volatility of the price of the Shares and impair the ability of a holder of the Shares to dispose of them in the amount and at the price and time such holder wishes to do so.

14 There are certain risks relating to possible sales of the Shares following the temporary lock-up period. In connection with the Offer, the Issuer (for a period of 180 days after the Listing Date) and the Selling Shareholder and the Principal Shareholders (each for a period of one year after the Listing Date) have contractually agreed, save for the sale of the Shares by the Selling Shareholder in the Offer (including pursuant to the Over-allotment Option, if exercised), not to: (i) offer, sell, contract to sell, pledge, charge, grant options over or otherwise dispose of, directly or indirectly, any of the Issuer’s shares or securities convertible or exchangeable into or exercisable for any of the Issuer’s shares; or (ii) enter into any swap or any other agreement or any transaction that transfers, in whole or in part, directly or indirectly, any of the economic consequences of ownership of any shares nor to mandate any third party to do so, or announce the intention to do so (each, a “Disposal”) without the prior written consent of the Joint Global Coordinators, which consent shall not be unreasonably withheld, or make an announcement relating thereto. However, once the lock-up period is over, there can be no guarantee that the Selling Shareholder or the Principal Shareholders will not sell the Shares that they continue to hold, including to other UAE/GCC nationals in order to comply with applicable DIFC and UAE laws. Disposal of these Shares by the Selling Shareholder and the Principal Shareholders could have a negative impact on the price of the Shares on the DIFX. See “Underwriting — Lock-up Agreements”.

Liquidity, and therefore the price at which the Shares may be resold, may be materially adversely affected by restrictions on transfer of the Shares under applicable U.S. securities laws. The Shares have not been, and will not be, registered under, and the Issuer is not obligated to, has not agreed to, or has otherwise undertaken to, register the Shares under, the U.S. Securities Act or with any securities regulatory authority of any state or other jurisdiction of the United States or any other jurisdiction outside the DIFC. The Shares may not be offered or sold in the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the U.S. Securities Act. These restrictions apply to resales and other transfers of the Shares, which may adversely affect liquidity of the Shares and the price at which they may be resold. See “Notice to Investors” and “Underwriting — Selling Restrictions — United States”.

Because, prior to the Offer, the Issuer has operated as a private company, Management has limited experience complying with public company obligations, and fulfilling these obligations will be expensive and time consuming and may divert Management’s attention from the day-to-day operation of the Group’s businesses. Whilst certain of the Management have experience running a public company, the Issuer has operated historically as a privately-owned company and, accordingly, Management has limited experience in the management of a publicly- traded company or in compliance with the increasingly complex laws applicable to public companies. In particular, the significant regulatory oversight and disclosure and reporting obligations that will be imposed on the Issuer under the Listing Rules of the DIFX, as well as the Offered Securities Rules of the DIFC, are likely to require substantial attention from Management and may divert its attention away from the day-to-day management of the Group’s businesses, which could materially and adversely impact the Group’s business operations. Similarly, corporate governance obligations, including with respect to the development and implementation of appropriate corporate governance policies, and concurrent service on the Board of Directors and possibly multiple board committees will impose additional burdens on the Directors. In addition, as a public company, the Issuer will incur significant legal, accounting and other expenses that it did not incur as a private company. The Issuer will also incur costs associated with its public company reporting requirements, and it is expected that being a public company will make it more expensive to hire and insure Directors. The Issuer may be required to accept reduced insurance policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. Further, the Issuer may need to hire additional accounting, financial and compliance staff with appropriate public company experience and technical accounting knowledge. The amount of additional costs the Issuer may incur, or the timing of such costs, cannot currently be accurately predicted or estimated and could have a material adverse effect on the business, financial condition and results of operations of the Group.

Risks relating to laws of the DIFC and the GCC The Issuer is incorporated in the DIFC, and it may be difficult for investors in the Shares to enforce judgments against the Issuer, or its Directors and Senior Managers. The Issuer is a company limited by shares incorporated in, and under the laws issued by, the DIFC, with its headquarters in the Emirate of Dubai in the UAE. A substantial portion of its assets are located in a number of jurisdictions outside the United Kingdom and the European Union. In addition, certain of its Management reside in

15 Dubai, and all or a portion of their personal assets may be located in the UAE and/or other jurisdictions outside the United Kingdom. As such, it may be difficult or impossible to effect service of process within countries outside the UAE upon the Issuer or those persons, or to recover on judgments of courts outside the UAE against the Issuer or such Directors or Senior Managers, including judgments predicated upon civil liability provisions of laws of jurisdictions outside the UAE. Investors in the Shares outside the UAE should not expect to have recourse to the courts of the Emirate of Dubai (other than the courts of the DIFC) or to the federal courts of the UAE, because the laws of jurisdictions outside the UAE have no extraterritorial application under DIFC law and do not have force of law in the DIFC. The Issuer has been advised by its counsel that it is currently unclear as to whether the courts of the DIFC would enforce judgments of non-UAE courts obtained in actions against the Issuer or its Directors or Senior Managers, or original actions brought in the DIFC against the Issuer or such persons predicated solely upon non-UAE laws. The grounds upon which DIFC courts may decline to enforce the judgments of non-UAE courts, absent an applicable treaty, are unclear as they remain untested. Some remedies available under non-UAE laws may not be allowed in the DIFC courts as contrary to public policy in the DIFC. Because judgments of non-UAE courts are not automatically enforceable in the DIFC, it may be difficult for an investor in Shares to recover against the Issuer based upon such judgments. In addition, an investor may also have difficulties in enforcing judgments of DIFC courts and arbitration awards ratified by DIFC courts against the Issuer or its Directors or Senior Managers in jurisdictions outside the DIFC because the mechanism for enforcement of judgments and awards issued by the DIFC courts is as yet untested.

Disclosure obligations, financial controls and corporate governance requirements and protection for shareholders or investors in publicly-traded companies incorporated in the DIFC may be less extensive than in other jurisdictions. The Issuer’s corporate affairs are governed by DIFC Law No. 3 of 2006 (the “Companies Law”), and the rights of holders of the Shares, and the responsibilities of members of the Board of Directors, under this law are different in certain respects from those applicable to corporations organised in the United Kingdom, Member States of the European Union and other jurisdictions. In particular, because regulations concerning reporting requirements and auditing standards of DIFC companies may be less extensive than those applicable to companies incorporated in other jurisdictions such as the United Kingdom and Member States of the European Union, there is generally less information available about the Issuer and other DIFC companies than is regularly published by or about listed companies in such other jurisdictions. Similarly, legal protections against such practices as market manipulation and insider trading are less developed in the DIFC because DIFC is a newly-established jurisdiction and, consequently, securities laws and regulations in the DIFC generally are not as comprehensive, and have not received as much judicial or regulatory interpretation or review, as those in the United Kingdom, Member States of the European Union and other countries with established securities markets. As a result of these factors, investors may have greater difficulties in protecting their interests as holders of the Shares than shareholders of UK or European corporations. See “Enforcement of Foreign Judgments”.

The Issuer is subject to a law under which 51% of its Shares must be held by UAE persons. Pursuant to Federal Implementation Regulation No. 28 of 2007 of UAE Federal Law No. 8 of 2004 regarding Financial Free Zones (the “Implementing Regulation” and such law, “Law No. 8”) and UAE Federal Law No. 8 of 1984 regarding Commercial Companies, as amended (the “UAE Companies Law”), at least 51% of the issued share capital of companies incorporated in the UAE must be held at all times by UAE nationals or UAE entities that are themselves wholly owned by UAE nationals (each a “UAE person”). In order for the Issuer to be treated as a national company under the laws of the UAE and to enable it to establish subsidiaries and branches in the UAE and own companies, or shares in companies, operating in the UAE, the Issuer has given an irrevocable undertaking to the DIFC Registrar of Companies to comply with all the laws and regulations of the UAE and the DIFC relating to such ownership, including Law No. 8. Failure to comply with this undertaking may subject the Issuer to sanctions by the DIFC authorities, including delisting or suspension from trading of the Shares on the DIFX. Infringement of Law No. 8 could also result in transfers or exchanges of the Shares being deemed void or voidable, including those in a series of transactions subsequent to any such breach. The Issuer has incorporated certain mechanisms in its Articles of Association that seek to maintain compliance with this 51% UAE ownership requirement and that may result in shareholders who are non-UAE persons being required to sell their Shares. These mechanisms provide that in the event the Issuer becomes aware that non-UAE persons own more than 49% of its issued share capital, the Issuer (or a person authorised by it) will send a notification to the most recent non-UAE persons that the Issuer (or such authorised person) reasonably consider to have acquired

16 Shares since its non-UAE owned share capital exceeded 49% of its total issued share capital. The notification will inform the relevant shareholders that they must sell to a UAE person, within seven days (or such longer period as the Issuer considers reasonable), such number of Shares as will enable the Issuer to regain compliance with the share ownership requirements of the UAE Companies Law and Law No. 8. In addition, if the Issuer (or a person authorised by it) is not satisfied that this notice has been complied with within such seven-day (or, if applicable, longer) period, the Issuer (or a person authorised by it) may dispose, or procure the disposal, of the relevant non- UAE owned Shares to a UAE person. Moreover, the rights and privileges, including voting rights, attaching to the non-UAE owned Shares subject to a disposal notice will be suspended and not capable of being exercised. In spite of these mechanisms, there can be no guarantee of continuous compliance with Law No. 8 (in particular during interim periods between the receipt of information regarding the Issuer’s shareholders), or of the adequacy or accuracy of such checks in determining beneficial ownership of the Shares. The Issuer does not have the ability to control trading in its Shares or to verify on a real-time basis the nationality of those persons owning Shares. In the event that these provisions of the Articles of Association of the Issuer are triggered, these measures would likely decrease demand for the Shares. In addition, those measures could also decrease the liquidity and increase the volatility of the Shares, which in turn could impair the ability of a holder of Shares to sell any Shares in the amount and at the price and time such holder wishes to do so, if at all, or result in a material adverse effect on the price of the Shares. These limitations could also effectively prevent the takeover of the Issuer by non-UAE persons, through which the shareholders of the Issuer might receive a premium for their Shares, and limit the ability of non-UAE persons to effect control over the Issuer. Furthermore, these limitations could adversely impact the Issuer’s ability to attract future investors and may restrict its future acquisition structures and generally impair its ability to offer shares as consideration in relation to such acquisition.

The majority ownership interests of the Group’s GCC operations are held through a trust arrangement, and the Issuer cannot assure the investors that the trust arrangement is enforceable under DIFC law, or legally permitted under the laws of the UAE or the laws of any other GCC countries. For the year ended 31 December 2007, 1.3% of the Group’s net assets, 12.7% of the Group’s revenue and 2.9% of the Group’s profit were attributable to the operations of the Group’s subsidiaries located in the GCC. These subsidiaries, in addition to the Group’s jointly controlled entities and associates in the region, are subject to certain minimum national ownership requirements, which, depending on the country, can require that up to 51% of outstanding shares be beneficially owned either by nationals of that country or by GCC nationals (the “Minimum National Ownership Requirements”). As a result of the Offering, the GCC shareholding of the Issuer will be diluted to as low as 51%. This would in turn dilute the shareholding of certain of the Group’s subsidiaries, jointly controlled entities and associates, and would trigger violations of certain Minimum National Ownership Requirements. See “Trust Arrangement”. In order to prevent these violations, the Issuer has implemented a trust arrangement whereby a special purpose vehicle (“SPV” or the “Trustee”) holds for the benefit of the Issuer a percentage of shares in certain of the Company’s subsidiaries, jointly controlled entities and associates incorporated in the GCC (the “GCC Entities”) that is sufficient to prevent the breach of the Minimum National Ownership Requirements. This SPVis incorporated in the UAE and is wholly-owned by the Founding Shareholders, who are UAE nationals. As a result of this trust arrangement, a sufficient percentage of the outstanding share capital of the GCC subsidiaries, jointly controlled entities and associates is owned indirectly by the Issuer in order to comply with the Minimum National Ownership Requirements, while the remaining interest is owned directly by the Company or Damas Jewellery LLC. See “Trust Arrangement”. Although the Issuer has been advised by counsel that the legal concepts of trust and beneficial ownership are recognised under DIFC law, which governs the trust arrangement, the Issuer is not aware of any court cases in the DIFC in relation to the recognition and enforcement of trust arrangements such as the Issuer’s. Accordingly, there can be no assurance that a court would enforce the trust arrangement as the Issuer expects, if at all, and there is a risk that a DIFC court may elect not to enforce any or all of the provisions of the trust arrangement and ownership structure because it determines that such provision or provisions violate public policy, morals or law in the DIFC or the UAE. Furthermore, although foreign-owned companies formed in the GCC commonly use trust or nominee arrangements to achieve similar effects to the one that the Issuer has adopted, and the Issuer is not aware of such arrangements having been unilaterally challenged by the Government of the UAE, any Emirate thereof or of the GCC, it is also possible that the structure could be challenged before a UAE court or a court of a GCC country, which could decide that the trust arrangement and ownership structure violated public policy, morals or law in the UAE or a given GCC country.

17 In addition, UAE Federal Law No. 17 of 2004 Regarding Commercial Concealment (the “Concealment Law”) provides that it is not permissible to allow a non-UAE national, whether by using the name of another individual or through any other method, to practice any economic or professional activity that is not permissible for him to practice in accordance with the law and decrees of the UAE. The Federal Government publicly announced in 2007 that enforcement of the Concealment Law has been suspended until 2009 and may be extended for a further period. However, the Company does not know if, or when, the suspension may be lifted or whether an alternative to the Concealment Law will be adopted. Because the future of the Concealment Law is unknown, there is no certainty as to the approach that UAE courts may take in relation to trust arrangements such as the Issuer’s if it or other similar legislation becomes effective. Similarly, the Anti-Harbouring Law of Saudi Arabia (issued by virtue of Royal Decree No. 22 Dated 4/5/1425H, as amended) (the “Anti-harbouring Law”) stipulates that non-Saudi nationals (whether a natural person or a corporate entity) may not invest or engage in any activity that they are not licensed to conduct according to the Foreign Investment Law or other laws and instructions. The harbourer is deemed to be the person who enables the non-Saudi national to invest or to undertake any activity by the use of the name, licence or commercial registration of such person, or in any other way. According to Article 3 of the Implementing Regulations of the Anti-harbouring Law, it constitutes a harbouring offence if the non-Saudi national invests in or undertakes an economic activity using the name of a Saudi national or a foreign investment. This includes the arrangements where a foreign investor uses the name of a Saudi national in order to circumvent the maximum ownership percentage permissible for foreign investors in the respective business activity. There is currently no moratorium applicable to this law. There could be a number of adverse implications for the Issuer if the trust arrangement and ownership structure were to be successfully challenged, including the revocation of the operating licences of the companies in the relevant jurisdiction, the Issuer having to dismantle the trust arrangement and adopt an alternative operating structure that could be disadvantageous to its business and operations, the imposition of fines or the liquidation of one or more of the GCC operations. The imposition of one or more of such penalties could have a material adverse effect on the Group’s business, financial condition and results of operations. In addition, if the fact that the trust arrangement or ownership structure was being challenged was made public, it could have an adverse effect on the trading price of the Shares.

Non-UAE persons may not be able to exercise pre-emptive rights with respect to their Shares. Under the restrictions of the UAE Companies Law, the Implementing Regulation and the Issuer’s Articles of Association as described above, non-UAE persons may not own more than 49% of its issued share capital. Consequently, in the event the Issuer increases its share capital, existing holders of Shares who are non-UAE persons may not be able to exercise any pre-emptive rights with respect to their Shares to the extent that such exercise would result in more than 49% of the Issuer’s share capital being held by non-UAE persons. Accordingly, there can be no assurance that all shareholders will be entitled to fully exercise their pre-emptive rights if such exercise would result in the violation of applicable laws or regulations. See “Description of Share Capital — Articles of Association and Companies Law — Non-application of Pre-emption Rights”.

18 USE OF PROCEEDS The gross proceeds to the Issuer of the Offer are expected to be approximately US$233.8 million (US$274.4 million assuming exercise in full of the Over-allotment Option) before deduction of commissions and other fees and expenses payable by the Issuer in connection with the Offer of approximately US$10.4 million. See “Underwriting”. The Issuer intends to use the net proceeds of the Offer to fund its store network expansion, make further investments in its manufacturing platform, repay indebtedness, fund its ordinary working capital requirements, and for general corporate purposes. The Issuer will not receive any proceeds from the sale of the Shares by the Selling Shareholder in the Offer, (including pursuant to the Over-allotment Option, if exercised), which will be paid solely to the Selling Shareholder. See “The Selling and Principal Shareholders”.

19 DILUTION Upon completion of the Offer and assuming that all Shares are issued, the amount and percentage of the immediate dilution of the Issuer’s Shares will be as shown in the following table. After the Offer Before the Offer Assuming no exercise of the Over-allotment Assuming exercise in full of Option the Over-allotment Option Existing Shares (issued and outstanding) ...... 734,756,483 100% 734,756,483 76% 734,756,483 73% New Shares ...... — 0% 233,845,546 24% 274,433,052 27% Total ...... 734,756,483 100% 968,602,029 100% 1,009,189,535 100%

For information relating to dilution of the interests of the Selling Shareholder and the Principal Shareholders as a result of the Offer, see “The Selling and Principal Shareholders”.

20 DIVIDENDS AND DIVIDEND POLICY The following is a summary of certain information concerning dividends, if any, payable by the Issuer and certain provisions of the Issuer’s constitutional documents and applicable DIFC law in effect as at the date of this Prospectus. This summary does not purport to be complete and is qualified in its entirety by reference to the Issuer’s constitutional documents and applicable laws and regulations, as the case may be. Under DIFC law and the Issuer’s constitutional documents, the payment of dividends is subject to the recommendation of the Board of Directors and approval by the Issuer’s shareholders. See “Description of Share Capital — Articles of Association and Companies Law — Dividends”. In each of 2005 and 2006, the Company paid dividends of AED 1.6 million and AED 99.5 million, respectively. The declaration of dividends is entirely discretionary and generally in line with market practice. Any future dividend payments by the Issuer will depend upon a number of factors, including but not limited to, the Group’s operational performance, financial results, financial condition and prospects, as well as cash and liquidity requirements (including capital expenditure and investment plans), the market situation, legal regulatory and contractual restrictions, tax and such other factors as the Board of Directors may deem relevant at the time. Although there can be no guarantee that the Issuer will declare any dividends in the future, if it does, the Shares offered hereby (including the Over-allotment Shares, if any) will be entitled to any dividends declared and paid if the relevant record date is on or after the Closing Date (or the closing date of the Over-allotment Option, as applicable).

21 EXCHANGE RATE INFORMATION The Group’s functional and reporting currency for the Financial Statements is UAE Dirhams. Since 1997, the UAE Dirham has been pegged to the U.S. dollar at a rate equal to AED 3.6725 = US$1.00 or US$0.272294 = AED 1. Fluctuations in the exchange rates between certain currencies may affect the Group’s business. See “Risk Factors — Risks relating to the geographic markets where the Group operates — The Group is subject to currency-related risks”.

22 CAPITALISATION The table below sets out the consolidated capitalisation of the Company as at 31 March 2008 on an actual basis and as adjusted to give effect to the receipt of the estimated net proceeds from the Offer payable to the Company through the issuance and subscription of Shares at the Offer Price of US$1.00 per Share, after the deduction of commissions and other estimated fees and expenses payable in connection with the Offer. Prospective investors should read the following table in conjunction with “Use of Proceeds”, “Operating and Financial Review” and the Financial Statements included elsewhere in this Prospectus. As at 31 March 2008 As adjusted, As adjusted, assuming no assuming full exercise of the exercise of the Over-allotment Over-allotment Actual Option Option (in millions of AED) Cash and cash equivalents ...... (111) (932) (1,081) Short-term debt(1) ...... 1,151 1,151 1,151 Long-term debt(2) ...... 1,102 1,102 1,102 Total financial indebtedness...... 2,142 1,321 1,172 Shareholders’ equity ...... 1,881 2,702 2,851 Total capitalisation(3) ...... 2,983 3,804 3,953

(1) Includes margin from trade receivables against unfixed gold. (2) Includes employees’ end of service benefits. (3) Capitalisation represents long-term debt (excluding current portion), retained earnings plus shareholders’ equity.

23 SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA

The following tables set forth consolidated financial information relating to the Company and its subsidiaries, rather than those of the Issuer, as at and for the years ended 31 December 2005, 2006 and 2007 and as at and for the three months ended 31 March 2007 and 2008. Prior to the 2008 Corporate Reorganisation (as defined below), the Issuer had no operations and consequently did not produce any financial statements. Pursuant to the 2008 Corporate Reorganisation, the Issuer became the parent company of the Company and its subsidiaries. Management has determined that both the Company and the Issuer were and will be under common control (as defined by International Financial Reporting Standard 3 (Business Combinations)) both before and after the 2008 Corporate Reorganisation and therefore proposes to adopt the pooling of interest method of accounting for the 2008 Corporate Reorganisation. Management views the post-reorganisation group as a continuation of the existing business. Accordingly, the Issuer in its initial set of financial statements following the 2008 Corporate Reorganisation will present the Company’s consolidated figures as comparatives. Management believes that the Financial Statements are a meaningful measure of the Group’s historical financial condition and results of operations. This following information is derived from, and should be read in conjunction with, the Financial Statements, including the accompanying Notes, prepared in accordance with IFRS, which are included elsewhere in this Prospectus. See “Presentation of Certain Financial and Other Information”, “Risk Factors”, “Capitalisation”, “Operating and Financial Review” and “Business — Group Structure and Corporate Reorganisation”.

To facilitate comparability, income statement and cash flow data below for the year ended 31 December 2006 have been extracted from the comparative columns in the 2007 Financial Statements due to the reclassification and restatement of certain items for the year ended 31 December 2006 in the 2007 Financial Statements, and certain adjustments have been made herein to the income statement and statement of cash flows data for the year ended 31 December 2005 included in the 2005 Financial Statements in order to facilitate comparability across periods. These reclassifications, restatements and adjustments have been noted in the sections “Presentation of Certain Financial and Other Information” and in the footnotes to the tables in “Summary Consolidated Financial Information” and “Selected Historical Consolidated Financial Data” and in the tables included herein where applicable.

Income Statement Data

The table below shows selected income statement data for the Group for the periods indicated.

For the years ended For the three months 31 December ended 31 March 2005 2006 2007 2007 2008 (unaudited) (in millions of AED) Sales: Gold jewellery ...... 1,468.0(1) 1,642.2(6) 2,149.2 486.5 721.0 Gold bullion ...... 485.6(1) 1,462.8 257.5 160.4 16.7 Diamond jewellery ...... 420.7(1) 681.0(7) 934.4 228.2 290.3 Others (watches, pearls, etc) ...... 320.3(1) 255.8(7) 197.0 46.4 87.1 Total sales ...... 2,694.6(2) 4,041.8(8)(9) 3,538.1 921.4 1,115.1 Cost of sales ...... (2,300.6) (3,560.3)(8) (2,910.2) (785.3) (891.6) Gross profit ...... 394.0(2) 481.5(9) 628.0 136.1 223.5 General administration, selling and distribution expenses ...... (263.2) (338.4) (416.9) (96.4) (127.3) Finance cost ...... (37.9) (72.4)(10) (107.6) (24.3) (45.9) Finance income ...... 11.8(3) 29.2(11) 33.8 10.4 9.7 Income from associates and jointly controlled entities ...... 14.7(4) 39.1 42.3 10.9 12.3 Income on disposal of associates ...... — 75.3 — — — Other income (loss) ...... 14.8(5) 17.5(12) 29.5 2.7 (2.5) Profit for the year/period ...... 134.2 231.8 209.1 39.4 69.7 Profit attributable to minority interest ...... 1.4 2.6 5.1 0.7 1.3 Profit attributable to shareholders ...... 132.8 229.3 204.1 38.7 68.4

(1) Unaudited figures because the 2005 Financial Statements do not provide sales by product type.

24 (2) The “Sales” and “Gross profit” figures here differ from the corresponding figures as found in the 2005 Financial Statements by AED 4.9 million due to the reclassification herein of profit sharing for sales by third parties of gold jewellery obtained from the Company on consignment as “Other income” for consistency of presentation with the 2007 Financial Statements. (3) This consists of the “Interest on fixed deposits” figure from Note 21 of the 2005 Financial Statements. (4) In the 2005 Financial Statements, this figure is included under “Other income”, and represents the sum of income from associates and jointly controlled entities, as shown in Note 21 thereof. (5) “Other income” from the 2005 Financial Statements is adjusted herein by subtracting AED 14.7 million of income from associates and jointly controlled entities and AED 11.8 million from interest on fixed deposits, and by adding AED 4.9 million of income from profit sharing from consignment sales. (6) The 2006 figure in the 2006 Financial Statements was restated in the 2007 Financial Statements as a result of the reclassification of AED 9.8 million in respect of income from profit sharing consignment sales, which is included in “Other Income” in the 2007 Financial Statements. (7) In the 2006 Financial Statements, “Diamond jewellery” and “Others” is aggregated under “Diamond jewellery and others”. (8) In the 2006 Financial Statements, “Sales” and “Cost of sales” were presented on a net basis, excluding the revenue and cost, respectively, related to the gold element of the transactions. In 2007 the Company changed its accounting policy to reflect the gold price in its revenue and cost of sales to more accurately reflect the economic substance of the transactions. Accordingly, the 2006 figures for sales and cost of sales have been restated here for consistency with the presentation in the 2007 Financial Statements. (9) The “Sales” and “Gross profit” differ from the corresponding figures as found in the 2006 Financial Statements by AED 9.8 million due to the reclassification herein of such an amount as “Other income” for consistency of presentation with the 2007 Financial Statements. (10) This consists exclusively of interest on bank borrowings, as shown in Note 24 of the 2006 Financial Statements. (11) This figure is extracted from the “Interest income on fixed deposits” figure in Note 24 of the 2006 Financial Statements, which in the 2006 Financial Statements was netted against bank borrowings so as to obtain the “Finance Costs (net)” line item represented in the 2006 Financial Statements. (12) “Other income” from the 2006 Financial Statements is adjusted here by adding AED 9.8 million of profit sharing from consignment sales.

Balance Sheet Data The following table* sets forth selected balance sheet data for the Group as at the dates indicated. As at 31 December As at 31 March 2005 2006 2007 2008 (unaudited) (in millions of AED) Assets Non-current assets ...... 840.6 1,155.6 1,503.5 1,522.9 Current assets ...... 2,016.5 2,993.0 3,568.6 3,543.4 Total assets...... 2,857.1 4,148.6 5,072.1 5,066.3

25 Cash Flow Data The following table* sets forth a summary of the Group’s net cash flows for the periods indicated. For the three months ended For the years ended 31 December 31 March 2005 2006 2007 2008 (in millions of AED) Net cash provided by / (used in) operating activities ...... (19.2) 196.3 (257.8) (292.2) Net cash provided by / (used in) investing activities ...... (85.8) (471.1) (238.6) (16.5) Net cash provided by / (used in) financing activities ...... 447.4 16.8 980.0 120.6 Net increase / (decrease) in cash and cash equivalents ...... 342.4 (258.0) 483.6 (188.1)

Other Financial Data The following table sets forth EBITDA and Adjusted EBITDA (as defined and calculated herein) for the periods indicated. For the three months ended For the years ended 31 December 31 March 2005 2006 2007 2007 2008 (unaudited) (in millions of AED) Gross profit ...... 394.0(1) 481.5(4) 628.0 136.1 223.5 General administration, selling and distribution expenses ...... (263.2) (338.4) (416.9) (96.4) (127.3) Depreciation and amortisation ...... 18.6 23.7 40.2 8.3 10.5 EBITDA(2) ...... 149.4 166.8 251.3 48.0 106.7 Income from JCE’s and associates ...... 14.7(3) 39.1 42.3 10.9 12.3 Adjusted EBITDA(2)...... 164.1 205.9 293.6 58.9 119.0

(1) “Gross profit” here differs from the corresponding figure as found in the 2005 Financial Statements by AED 4.9 million due to the reclassification herein of profit sharing for sales on consignment as “Other income” for consistency of presentation with the 2007 Financial Statements. (2) EBITDA and Adjusted EBITDA are not measurements of operating performance under IFRS and should not be considered by prospective investors as an alternative to (a) operating income or net income or as measures of the Company’s operating performance, (b) net cash flows from operating, investing and financing activities or as measures of the Company’s ability to meet its cash needs, or (c) any other measures of performance under IFRS. EBITDA and Adjusted EBITDA may not be indicative of the Company’s historical operating results, nor are they meant to be an indication of future results. Management believes that EBITDA and Adjusted EBITDA are measures of the Group’s operating performance because they assist in comparing performance on a consistent basis between companies without regard to amortisation and depreciation accounting methods and non-recurring economic effects, which can vary significantly depending on accounting methods applied. Other companies may not calculate EBITDA on a consistent basis with the Group’s presentation of EBITDA and therefore EBITDA may not be comparable to measures used by other companies under the same or a similar name. Additionally, due to the factors mentioned above, this presentation of Adjusted EBITDA is not homogeneous with those applied by other companies. Accordingly, no undue reliance should be placed on the EBITDA and Adjusted EBITDA data contained in this Prospectus. (3) In the 2005 Financial Statements, this figure is included under “Other income”, and represents the sum of income from associates and jointly controlled entities, as shown in Note 21 thereof. (4) “Gross profit” here differs from the corresponding figure as found in the 2006 Financial Statements by AED 9.8 million due to the reclassification herein of profit sharing for sales on consignment as “Other income” for consistency of presentation with the 2007 Financial Statements.

26 OPERATING AND FINANCIAL REVIEW The following discussion and analysis discusses the historical consolidated financial results as at and for the years ended 31 December 2005, 2006 and 2007 and as at and for the three months ended 31 March 2007 and 2008 of the Company and its subsidiaries, rather than those of the Issuer. Prior to the 2008 Corporate Reorganisation (as defined below), the Issuer had no operations and consequently did not produce any financial statements. Pursuant to the 2008 Corporate Reorganisation, the Issuer became the parent company of the Company and its subsidiaries. Management has determined that both the Company and the Issuer were and will be held under common control (as defined by International Financial Reporting Standard 3 (Business Combinations)) both before and after the 2008 Corporate Reorganisation and therefore proposes to adopt the pooling of interest method of accounting for the 2008 Corporate Reorganisation. Management views the post-reorganisation group as a continuation of the existing business. Accordingly, the Issuer in its initial set of financial statements following the 2008 Corporate Reorganisation will present the Company’s consolidated figures as comparatives. Management believes that the Financial Statements are a meaningful measure of the Group’s historical financial condition and results of operations. Potential investors should read the following discussion and analysis in conjunction with the Financial Statements and the accompanying Notes that are included elsewhere in this Prospectus. Some of the information in the discussion and analysis set forth below and elsewhere in this Prospectus includes forward-looking statements that involve risks and uncertainties. See “Forward-Looking Statements” and “Risk Factors” for a discussion of important factors that could cause actual results to differ materially from the results described in the forward-looking statements contained in this Prospectus. To facilitate comparability, income statement and cash flow data for the year ended 31 December 2006 below have been extracted from the comparative columns in the 2007 Financial Statements due to the reclassification and restatement of certain items for the year ended 31 December 2006 in the 2007 Financial Statements, and certain adjustments have been made herein to the income statement and statement of cash flows data for the year ended 31 December 2005 included in the 2005 Financial Statements in order to facilitate comparability across periods. These reclassifications, restatements and adjustments have been noted in the sections “Presentation of Certain Financial and Other Information” and in the footnotes to the tables in “Summary Consolidated Financial Information” and “Selected Historical Consolidated Financial Data” and in the tables included herein where applicable.

27 and 2,862 worldwide. For the three-month period ended 31 March 2008, the Group had revenues of AED 1,115.1 million, EBITDA of AED 106.7 million, Adjusted EBITDA of AED 118.9 million and net profit of AED 69.7 million. As at 31 March 2008, the Group had total assets of AED 5,066.3 million and 1,932 full-time employees in the UAE and 3,026 employees worldwide. For definitions of EBITDA and Adjusted EBITDA, see “Selected Financial Historical Consolidated Data — Other Financial Data”.

Factors Affecting the Group’s Results of Operations and Financial Condition The Group’s results of operations have been, and are expected to continue to be, affected by a number of key factors, including the following. Prices of gold and rough diamonds, and other raw materials. The Group’s results of operations are affected by changes in the prices of gold, rough diamonds and other raw materials such as silver and gems. In particular, gold prices, which have risen on a year-on-year basis in the last three years, from an average annual price per ounce (based on daily quotes) of US$444.47 in the year 2005, to US$603.92 in 2006, and US$695.39 in 2007, according to the World Gold Council. Gold prices affect the Group’s results in a number of ways. For example, on the one hand, increases in the price of gold tend to have a positive effect on gross sales, as the Group is normally able to pass these price increases to its customers. On the other hand, significant increases could have a negative effect on demand for gold products for certain segments, with some substitution effects to the benefit of diamond products. See “Industry Overview — Principal Product Segments Relevant to the Issuer — Gold”. General economic conditions in the GCC and the other countries in which the Group operates. The Group’s sales are directly affected by general economic conditions in the GCC, India and the other countries in which the Group operates. Over the periods discussed herein, the countries of the GCC and other countries in which the Group has operations have experienced year-on-year economic growth. For example, the aggregate average annual growth of GDP per capita in the GCC in the period from 1 January 2005 to 31 December 2007 was 2.24%. (Source: The Economist Intelligence Unit.) As jewellery products are discretionary luxury items, the rapid economic growth in these countries has contributed to an increase in demand for the Group’s products, both in terms of sales volumes and average product prices. Conversely, economic deceleration in these countries could have a negative effect on the Group’s sales volumes and product prices, all other things being equal. Store network expansion. The Group has expanded its store network on a year-on-year basis during the periods discussed herein, growing it from 150 Group-controlled stores as at 1 January 2005, to 219 stores as at 31 December 2005, 266 stores as at 31 December 2006 and 438 stores as at 31 December 2007. The store network expansion has been a major factor in the overall sales volume growth in the periods discussed herein, and also in growth in income from jointly controlled entities and associates. Investments in the store network expansion have also contributed to year-on-year increases in depreciation expenses as the Group’s depreciable asset base grows. The Group plans to continue to invest in its network expansion, at least in the medium term. The Group expects to open over 100 stores in 2008, including 24 that had already been opened as at 31 March 2008. In India, 16 stores of jointly controlled entities and associates opened in 2007 and 8 stores are expected to be opened in 2008. Sales mix. Changes in the Group’s sales mix have also had and are likely to continue to have an impact on the Group’s financial condition and results of operations, and in particular the contribution to overall sales of each product type has an effect on gross profit, as each product type is driven by differing margin factors as a result of the effects of their raw material content. Over the periods discussed herein, diamond jewellery has provided the greatest margins, followed by other products (such as watches), then crafted gold jewellery and, lastly, gold bullion with no or only a negligible margin. These margin differentials are largely driven by the continued rise in gold prices during the periods discussed herein. Since 2007, Management has engaged in a policy of increasing sales of non-gold products relative to gold bullion and crafted gold products, and phasing out gold bullion sales.

28 The following table sets forth the contribution of each product type to overall sales and the gross margin by product type for the periods presented. For the three For the years ended months ended 31 December 31 March 2005 2006 2007 2007 2008 (unaudited) (%) Sales contribution Gold jewellery ...... 54.5 40.6 60.7 52.8 64.7 Gold bullion ...... 18.0 36.2 7.3 17.4 1.5 Diamond jewellery...... 15.6 16.9 26.4 24.8 26.0 Others (watches, pearls, etc)...... 11.9 6.3 5.6 5.0 7.8 Total ...... 100.0 100.0 100.0 100.0 100.0 Gross margin(1) Gold jewellery ...... 8.1 8.7 8.3 6.7 8.2 Gold bullion ...... 0.0 0.0 0.0 0.0 0.0 Diamond jewellery...... 53.9 42.5 41.4 38.8 47.5 Others (watches, pearls, etc)...... 15.2 19.2 32.0 31.0 29.9 Total gross margin excluding gold bullion ...... 17.8 18.7 19.1 17.7 20.3 Total gross margin ...... 14.6 11.9 17.7 14.8 20.0

(1) Gross profit as a percentage of sales. In 2006 the Group increased its exposure to the gold bullion market, as it decided to buy large quantities of scrap metal containing gold, with a negative effect on the Group’s overall gross margins during that year. In 2007 the Group reduced its gold bullion trading activities, which contributed to an improvement in the Group’s overall gross margin in 2007 compared with 2006. Vertical integration. During the periods discussed herein, the Group has pursued its strategy to achieve the integration of procurement, manufacturing, wholesale and retail sales. With the increase in the scale of its operations, the Group has achieved economies of scale on a year-to-year basis, with per unit reductions in cost of sales as adjusted for raw material increases (principally gold price increases), including overall reductions in production costs. During 2007, the Group established a manufacturing facility in the Dubai Multi-Commodities Centre (“DMCC”), which is a designated free zone providing tax and duty-free status to companies established within it. This facility, which is operated by the Group’s subsidiary Emirates Jewellery Manufacturing Company, added significant capacity to the Group’s manufacturing base for high-end jewellery products. Management expects this facility to contribute to margin improvement and to promote economies of scale, with a favourable impact on results for 2008, and to provide the Group with the ability to export products to other GCC countries duty free. Certain transactions. During 2006 the Group sold its interests in Rivoli Enterprises LLC and Al Khaleej Watch Company for AED 100.0 million, resulting in a net gain of AED 75.3 million reflected in the income statement line item “Income on disposal of associates”. Conversely, no significant disposals were made (and thus no income or loss was recorded) in the years 2005 or 2007. In 2006, the Group recognised AED 12.72 million of income from Metamorph Real Estate WLL (“Metamorph”) representing the Group’s share of income from a one-time lease payment received by Metamorph from a third party (the “Metamorph Lease Income”). In a year-to-year comparison, the recognition of this income in 2006 had the effect of inflating the growth in income from jointly controlled entities and associates in 2006 relative to 2005, and of decreasing the growth in income from jointly controlled entities and associates in 2007 relative to 2006 that would be associated with the part of the planned expansion of the store network attributable to entering into joint ventures and arrangements with associates.

Explanation of Certain Income Statement Line Items Sales. Sales are comprised of revenues (net of credit card commissions) from the Group’s sales (on a retail and wholesale basis) of: • gold jewellery; • gold bullion; • diamond jewellery, which includes diamonds and products primarily made from these; and

29 • sales of other jewellery, which includes pearls, silver, precious stones other than diamonds, products made from these, and watches. The 2005 Financial Statements do not have sales by product type presentations due to Management’s assessment that such presentation at that time was neither meaningful nor necessary. Moreover, in the 2006 Financial Statements, “Diamond jewellery” and “Others” are aggregated under the line item “Diamond jewellery and others”, together with AED 1.7 million of mark-up formerly attributed to crafted gold jewellery and re-allocated to diamond jewellery within this line item. In the 2005 Financial Statements and 2006 Financial Statements, profit sharing for sales by third parties of gold jewellery obtained from the Company on consignment is included in the subline item for “Sales of gold jewellery”, whilst in the 2007 Financial Statements this profit sharing income is included in “Other Income”. Therefore, the “sales from gold jewellery” shown and discussed herein for the year ended 31 December 2005 and for the year end 31 December 2006 are adjusted figures based on the corresponding figures in the 2005 Financial Statements and the 2006 Financial Statements, respectively, minus AED 4.9 million for the 2005 figure and AED 9.8 million for the 2006 figure, in relation to income from profit sharing, which has been included under “Other income”. In the 2006 Financial Statements, sales and cost of sales were presented on a net basis, excluding the revenue and cost, respectively, related to the gold element of the transactions. In 2007 the Company changed its accounting policy to reflect the gold price in its revenue and cost of sales, in order to reflect the economic substance of the transactions more accurately. Accordingly, the 2006 figures have been restated here for consistency with the presentation in the 2007 Financial Statements. Cost of sales. Cost of sales includes the cost of raw materials, including gold, diamonds and other precious stones, pearls, silver and other precious metals; manufacturing costs, customs duties and freight costs and other costs directly allocable to the Group’s products; and the purchase price of directly procured, finished products such as watches and certain internationally branded jewellery items. As explained above, in the 2006 Financial Statements, cost of sales did not include the cost of gold related to the sales made, although it has been included in the line item for purposes of the discussion and analysis in order to provide comparability across periods. Gross profit. Gross profit is equal to sales less cost of sales. General administration, selling and distribution expenses. These expenses consist of personnel expenses, administrative expenses, rent expenses, costs for sales promotion and marketing expenses, depreciation, amortisation of intangible assets, provisions for slow moving inventory, provisions for slow moving inventory, and provisions for bad and doubtful debts. Finance cost. Finance cost consists of interest on term and gold loans, interest on overdrafts, bank charges and loss on fair valuation of interest rate swaps. In 2006, the Group included interest income on bank borrowings in the line item titled “Finance cost (net)”. The figure presented and discussed herein for finance cost for the year ended 31 December 2006 is therefore an adjusted figure. Finance income. Finance income consists of interest income from fixed deposits. In 2006, the Group netted finance income from interest on bank borrowings. As such, finance income earned in 2006 is represented within the “Finance Cost (net)” line item in the 2006 Financial Statements. In 2005, the Group accounted for finance income in the “Other income” line item of the 2005 Financial Statements. The figures presented and discussed herein for finance income for the years ended 31 December 2005 and 2006 are therefore adjusted figures. Income from associates and jointly controlled entities. This line item consists of the Group’s share of net profit of unconsolidated associates and jointly controlled entities, which is accounted for under the equity method. In 2005, the Group included this income in the line item titled “Other income”. The figure presented and discussed herein under this line item for the year ended 31 December 2005 is therefore an adjusted figure. Income on disposal of associates. Income on disposal of associates consists of the one-time disposal during 2006 of Rivoli Enterprises LLC and Al Khaleej Watch Company for an amount of AED 100 million, resulting in a net gain of AED 75.3 million. Other income. Other income consists of miscellaneous income such as income from shares and securities, net foreign currency exchange gain/loss, and other miscellaneous income, which in 2007 included a AED 12.5 million gain from the revaluation of equity investments. “Other income” from the 2005 Financial Statements is adjusted herein by subtracting AED 14.7 million of income from associates and jointly controlled entities, subtracting AED 11.8 million from interest on fixed deposits, and by adding AED 4.9 million of income on profit sharing from consignment sales. “Other income” from the 2006 Financial Statements is adjusted herein by adding AED 9.8 million of the profit sharing from consignment sales.

30 Profit. Profit consists of gross profit (less general administration, selling and distribution expenses and finance costs) plus income from associates and jointly controlled entities, income on disposal of associates and other income.

Critical Accounting Policies Management uses certain critical accounting policies and estimates to make judgements in the application of IFRS that have significant effects on the amounts included in the Financial Statements and the Notes thereto. These accounting estimates could differ from the related actual results because of the uncertainty influencing the assumptions on which they are based. Such judgements and estimates that have a significant risk of material adjustment in the next year primarily include the following: Impairment of accounts receivable. An estimate of the collectible amount of trade accounts receivable is made when collection of the full amount is no longer probable. For individually significant amounts, this estimation is performed on an individual basis. Amounts which are not individually significant, but which are past due, are assessed collectively and a provision applied according to the length of time past due, based on historical recovery rates. As at 31 December 2007, gross trade accounts receivable were AED 353.7 million, compared to AED 376.4 million as at 31 December 2006, and the provision for doubtful debts was AED 12.6 million, compared to AED 12.7 million as at 31 December 2006. Any difference between the amounts actually collected in future periods and the amounts expected will be recognised in the income statement. Impairment of inventories. Inventories are held at the lower of cost and net realisable value. When inventories become old or obsolete, an estimate is made of their net realisable value. For individually significant amounts, this estimation is performed on an individual basis. Amounts that are not individually significant, but which are old or obsolete, are assessed collectively and a provision applied according to the inventory type and the degree of ageing or obsolescence, based on historical selling prices. As at 31 December 2007, gross inventory was AED 1,452.1 million, compared to AED 1,245.4 million as at 31 December 2006. The provision for aged and obsolete inventories was AED 28.4 million as at 31 December 2007, compared to AED 20.1 million as at 31 December 2006. Impairment of non-financial assets. The Group assesses whether there are any indicators of impairment for all non-financial assets at each reporting date. Goodwill is tested for impairment annually and at other times when such indicators exist. Other non-financial assets are tested for impairment when there are indicators that the carrying amounts may not be recoverable. When value in use calculations are undertaken, management must estimate the expected future cash flows from the asset or cash-generating unit and choose a suitable discount rate in order to calculate the present value of those cash flows. See Note 10 of the 2007 Financial Statements.

Trends and recent developments The principal trend in the periods presented herein has been period-to-period growth in overall sales, led mainly by increases in sales of gold jewellery, with the exception of the decrease in overall sales in the year ended 31 December 2007 relative to the year ended 31 December 2006, which was mainly driven by the ongoing phase-out of the gold bullion operations due to the small or non-existent margins of this product. While the growth in overall sales and sales of gold jewellery in particular has been driven in part by the rise in gold prices over the periods presented, this growth in sales has also been driven by the Group’s like-for-like sales growth and ongoing expansion, as more fully described below. Net of the effects of gold bullion sales, gross margins have increased on a period-to-period basis. Except for the decrease in gross margins experienced in the year ended 31 December 2006 relative to the year ended 31 December 2005, which was mainly attributable to the temporary increase in gold bullion activity during 2006, gross margins have also generally improved over the periods presented, due largely to the economies of scale achieved by the Group as a result of its expansion and investment in its manufacturing capabilities, and, also by the changes in product mix toward products with higher-than-average charges, as more fully described below. Net of the effects of gold bullion sales, gross margins have increased on a period-to-period basis. Management has no reason to believe that its sales and gross margins will not continue to grow over the next twelve months broadly in keeping with past trends. Since 31 March 2008, its expansion in stores and in manufacturing capabilities, for example, has generally been in line with expectations for the year, and no event has occurred affecting the Group since such date that would have a material adverse effect on its business, financial condition, or results of operations.

31 Results of Operations The following table shows selected income statement data for the Group for the periods indicated. For the three months For the years ended 31 December ended 31 March 2005 2006 2007 2007 2008 (unaudited) (in millions of AED) Sales Gold jewellery ...... 1,468.0(1) 1,642.2(6) 2,149.2 486.5 721.0 Gold bullion ...... 485.6(1) 1,462.8 257.5 160.4 16.7 Diamond jewellery ...... 420.7(1) 681.0(7) 934.4 228.2 290.3 Others (watches, pearls, etc) ...... 320.3(1) 255.8(7) 197.0 46.4 87.1 Total sales ...... 2,694.6(2) 4,041.8(8)(9) 3,538.1 921.4 1,115.1 Cost of sales ...... (2,300.6) (3,560.3)(8) (2,910.2) (785.3) (891.6) Gross profit ...... 394.0(2) 481.5(9) 628.0 136.1 223.5 General administration, selling and distribution expenses ...... (263.2) (338.4) (416.9) (96.4) (127.3) Finance cost ...... (37.9) (72.4)(10) (107.6) (24.3) (45.9) Finance income ...... 11.8(3) 29.2(11) 33.8 10.4 9.7 Income from associates and jointly controlled entities ...... 14.7(4) 39.1 42.3 10.9 12.3 Income on disposal of associates ...... — 75.3 — — — Other income (loss) ...... 14.8(5) 17.5(12) 29.5 2.7 (2.5) Profit for the year/period ...... 134.2 231.8 209.1 39.4 69.7 Profit attributable to minority interest ...... 1.4 2.6 5.1 0.7 1.3 Profit attributable to shareholders ...... 132.8 229.3 204.1 38.7 68.4

(1) Unaudited figures because the 2005 Financial Statements do not provide sales by product type. (2) The “Sales” and “Gross profit” figures here differ from the corresponding figures as found in the 2005 Financial Statements by AED 4.9 million due to the reclassification herein of profit sharing for sales by third parties of gold jewellery obtained from the Company on consignment as “Other income” for consistency of presentation with the 2007 Financial Statements. (3) This consists of the “Interest on fixed deposits” figure from Note 21 of the 2005 Financial Statements. (4) In the 2005 Financial Statements, this figure is included under “Other income”, and represents the sum of income from associates and jointly controlled entities, as shown in Note 21 thereof. (5) “Other income” from the 2005 Financial Statements is adjusted herein by subtracting AED 14.7 million of income from associates and jointly controlled entities and AED 11.8 million from interest on fixed deposits, and by adding AED 4.9 million of income from profit sharing from consignment sales. (6) The 2006 figure in the 2006 Financial Statements was restated in the 2007 Financial Statements as a result of the reclassification of AED 9.8 million in respect of income from profit sharing consignment sales, which is included in “Other Income” in the 2007 Financial Statements. (7) In the 2006 Financial Statements, “Diamond jewellery” and “Others” is aggregated under “Diamond jewellery and others”. (8) In the 2006 Financial Statements, “Sales” and “Cost of sales” were presented on a net basis, excluding the revenue and cost, respectively, related to the gold element of the transactions. In 2007 the Company changed its accounting policy to reflect the gold price in its revenue and cost of sales to more accurately reflect the economic substance of the transactions. Accordingly, the 2006 figures for sales and cost of sales have been restated here for consistency with the presentation in the 2007 Financial Statements. (9) The “Sales” and “Gross profit” differ from the corresponding figures as found in the 2006 Financial Statements by AED 9.8 million due to the reclassification herein of such an amount as “Other income” for consistency of presentation with the 2007 Financial Statements. (10) This consists exclusively of interest on bank borrowings, as shown in Note 24 of the 2006 Financial Statements. (11) This figure is extracted from the “Interest income on fixed deposits” figure in Note 24 of the 2006 Financial Statements, which in the 2006 Financial Statements was netted against bank borrowings so as to obtain the “Finance Costs (net)” line item represented in the 2006 Financial Statements. (12) “Other income” from the 2006 Financial Statements is adjusted here by adding AED 9.8 million of profit sharing from consignment sales.

Three months ended 31 March 2008 compared to three months ended 31 March 2007 Sales Sales increased by AED 193.7 million, or 21.0%, to AED 1,115.1 million in the three months ended 31 March 2008 from AED 921.4 million for the same period in 2007. The increase was due primarily to the increase in sales of gold jewellery, diamond jewellery and others, partially offset by the decrease in gold bullion sales. Sales of gold jewellery increased by AED 234.4 million, or 48.2%, to AED 721.0 million for the three months ended 31 March 2008 from AED 486.5 million for the same period in 2007. The increase was due primarily to rising gold prices and an approximately 6% increase in gold volumes.

32 Sales of gold bullion decreased by AED 143.7 million, or 89.6%, to AED 16.7 million for the three months ended 31 March 2008 from AED 160.4 million for the same period in 2007. The decrease was due primarily to the ongoing effects of Management’s decision during 2007 to reduce its gold bullion operations. Sales of diamond jewellery increased by AED 62.1 million, or 27.2%, to AED 290.3 million for the three months ended 31 March 2008 from AED 228.2 million for the same period in 2007. The increase was due primarily to the increase in sales volume resulting from the ongoing store expansion and the continued effects of Management’s policy to increase sales of non-gold products relative to the overall sales product mix. Sales of other jewellery increased by AED 40.7 million, or 87.7%, to AED 87.1 million for the three months ended 31 March 2008 from AED 46.4 million for the same period in 2007. The increase was principally due to an increase in sales of watches evidencing the effects of the growing operations of the Time Art stores, which opened at the end of 2006.

Cost of sales Cost of sales increased by AED 106.3 million, or 13.5%, to AED 891.6 million in the three months ended 31 March 2008 from AED 785.3 million for the same period in 2007. The increase was due primarily to the increase in sales volumes of gold jewellery, diamond jewellery and others, and to rising gold prices, partially offset by the decrease in gold bullion sales volumes.

Gross profit Gross profit increased by AED 87.6 million, or 64.4%, to AED 223.5 million in the three months ended 31 March 2008 from AED 136.1 million for the same period in 2007. Gross margin increased to 20.0% in the three months ended 31 March 2008 from 14.8% in the same period in 2007 principally as a result of the greater proportion of diamond product sales to the overall product mix. Net of gold bullion, gross margin increased to 20.3% in the three months ended 31 March 2008 from 17.7% in the same period in 2007, as a result of the improvement of gross margins across all product types, with the exception of “Other products”, which contributed only 7.8% and 5.0% to overall sales in the three months ended 31 March 2008 and 2007, respectively.

General administration, selling and distribution expenses General administration, selling and distribution expenses increased by AED 30.9 million, or 32.1%, to AED 127.3 million in the three months ended 31 March 2008 from AED 96.4 million for the same period in 2007. Of this increase, AED 18.1 million was contributed by an increase in personnel expenses due to the increased headcount as a result of the Group’s continued expansion, rising wages, and the implementation of a profit-linked employee incentive programme in 2007; AED 9.0 million was contributed by an increase in administrative expenses, AED 3.1 million was contributed by an increase in rent as a result of the ongoing expansion.

Finance cost Finance cost increased by AED 21.6 million, or 88.9%, to AED 45.9 million in the three months ended 31 March 2008 from AED 24.3 million for the same period in 2007, principally an increase in interest on loans principally as a result of increased borrowings, including funds borrowed under the 2007 Syndicated Facility (as defined below) to fund the store expansion and refinance existing indebtedness.

Finance income Finance income decreased by AED 0.7 million, or 6.7%, to AED 9.7 million in the three months ended 31 March 2008 from AED 10.4 million for the same period in 2007. The decrease was due primarily to a decrease in fixed deposits.

Income from associates and jointly controlled entities Income from associates and jointly controlled entities increased by AED 1.4 million, or 12.8%, to AED 12.3 million in the three months ended 31 March 2008 from AED 10.9 million for the same period in 2007. The increase was due primarily to the commencement of operations by a jointly controlled entity and an associate in Dubai and Egypt, respectively, during 2007.

Income on disposal of associates Income on disposal of associates was nil in both periods.

33 Other income/(loss) Other income decreased by AED 5.2 million, or 192.6%, to a loss of AED 2.5 million in the three months ended 31 March 2008 from income of AED 2.7 million for the same period in 2007. The decrease was due primarily to losses on fair valuation of investments.

Profit Profit for the period increased by AED 30.3 million, or 76.9%, to AED 69.7 million in the three months ended 31 March 2008 from AED 39.4 million for the same period in 2007.

Year ended 31 December 2007 compared to year ended 31 December 2006 Sales Sales decreased by AED 503.8 million, or 12.5%, to AED 3,538.1 million in the year ended 31 December 2007 from AED 4,041.8 million for the same period in 2006. The decrease was due primarily to a decrease in sales of gold bullion and other jewellery, partially offset by an increase in sales of gold jewellery and diamond jewellery. Sales of gold jewellery increased by AED 507.0 million, or 30.9%, to AED 2,149.2 million in the year ended 31 December 2007 from AED 1,642.2 million for the same period in 2006. The increase was due primarily to the 15.2% increase in annual average gold prices and the increase in sales volumes due to a general increase in sales at the Group’s existing stores as well as the ongoing expansion of the Group’s store network. Sales of gold bullion decreased by AED 1,205.3 million, or 82.4%, to AED 257.5 million in the year ended 31 December 2007 from AED 1,462.8 million for the same period in 2006. The decrease was due primarily to Management’s decision to reduce its exposure to the gold bullion market due to decreasing margins as a result of the increase in gold prices. Sales of diamond jewellery increased by AED 253.4 million, or 37.2%, to AED 934.4 million in the year ended 31 December 2007 from AED 681.0 million for the same period in 2006. The increase was due primarily to the increase in the overall sales volume and an increase in the price of these products principally as a result of increasing diamond prices. Sales of other jewellery decreased by AED 58.8 million, or 23.0%, to AED 197.0 million in the year ended 31 December 2007 from AED 255.8 million for the same period in 2006. The decrease was due primarily to a decrease in sales of loose gems, partially offset by increases in sales of watches and pearls. The decrease in sales of loose gems is due to a change in the Group’s policy in 2007 whereby the Group made gems available to third party manufacturers on consignment, whereas in 2006 the Group sold the gems to them.

Cost of sales Cost of sales decreased by AED 650.1 million, or 18.3%, to AED 2,910.2 million in the year ended 31 December 2007 from AED 3,560.3 million in the same period in 2006. The decrease was due primarily to the decrease in sales volumes of gold bullion partially offset by the increase in sales volume of gold jewellery and diamond jewellery and the increase in gold prices and those of other raw materials.

Gross profit Gross profit increased by AED 146.5 million, or 30.4%, to AED 628.0 million in the year ended 31 December 2007 from AED 481.5 million in the same period in 2006. Gross margin increased to 17.7% in 2007 from 11.9% in 2006 principally as a result of Management’s decision to reduce gold bullion trading activities, and also to economies of scale achieved due to the Group’s continued growth and the benefits of vertical integration. Net of gold bullion, gross margin increased to 19.1% in 2007 from 18.7% in 2006 as a result of the greater proportion of diamond product sales to the overall product mix.

General administration, selling and distribution expenses General administration, selling and distribution expenses increased by AED 78.5 million, or 23.2%, to AED 416.9 million in the year ended 31 December 2007 from AED 338.4 million in the same period in 2006. Of this increase, AED 40.0 million was contributed by an increase in personnel expenses due to the increased headcount as a result of the Group’s continued expansion, rising wages and the implementation of a profit-linked employee incentive programme in 2007; AED 15.7 million was contributed by an increase in rent as a result of the ongoing expansion; AED 11.1 million was contributed by an increase in depreciation expenses as a result of the

34 growing depreciable base and an investment in 2007 in IT infrastructure; AED 2.7 million was contributed by an increase in administrative expenses; and the remainder was contributed by increases in amortisation and provisions and selling expenses.

Finance cost Finance cost increased by AED 35.2 million, or 48.6%, to AED 107.6 million for the year ended 31 December 2007 from AED 72.4 million for the same period in 2006, of which AED 25.6 million represented an increase in interest on loans principally as a result of increased borrowings, including funds borrowed under the 2007 Syndicated Facility (as defined below) to fund the store expansion and refinance existing indebtedness, and also includes AED 7.3 million of loss on fair valuation of interest rate swaps in 2007 whilst there was no comparable item in 2006.

Finance income Finance income increased by AED 4.6 million, or 15.8% to AED 33.8 million for the year ended 31 December 2007 from AED 29.2 million for the same period in 2006 and is attributable to an increase of fixed deposits.

Income from associates and jointly controlled entities Income from associates and jointly controlled entities increased by AED 3.2 million, or 8.2%, to AED 42.3 million for the year ended 31 December 2007 from AED 39.1 million for the same period in 2006. But for the one-time effect of the Metamorph Lease Income in 2006, the increase in income from associates and jointly controlled entities would have been AED 15.8 million, or 60.0%. The increase, adjusted for the Metamorph Lease Income, was due principally to the commencement of operations by a jointly controlled entity and an associate in Dubai and Egypt, respectively, during 2007.

Income on disposal of associates The Group recognised income on disposal of associates during 2006 upon the one-time disposal during 2006 of Rivoli Enterprises LLC and Al Khaleej Watch Company for AED 100.0 million, resulting in a net gain of AED 75.3 million.

Other income Other income increased by AED 12.1 million, or 69.1%, to AED 29.5 million in the year ended 31 December 2007 from AED 17.5 million for the same period in 2006. Of this increase, AED 12.5 million was contributed by a gain recognised upon revaluation of securities and gains realised upon the sale of such securities, AED 3.0 million was contributed by an increase in miscellaneous income, and other income was partially offset by an AED 3.7 million decrease on income from consignment ventures.

Profit As a result of the above, profit decreased by AED 22.8 million, or 9.8%, to AED 209.1 million for the year ended 31 December 2007 from AED 231.9 million for the year ended December 2006.

Year ended 31 December 2006 compared to year ended 31 December 2005 Sales Sales increased by AED 1,347.2 million, or 50.0%, to AED 4,041.8 million in the year ended 31 December 2006 from AED 2,694.6 million for the same period in 2005. The increase was due primarily to an increase in sales of gold bullion, diamond jewellery and gold jewellery, partially offset by a decrease in sales of other jewellery. Sales of gold jewellery increased by AED 174.2 million, or 11.9%, to AED 1,642.2 million for the year ended 31 December 2006 from AED 1,468.0 million for the same period in 2005. The increase was due primarily to rising gold prices partially offset by a decrease in sales volumes for these products principally resulting from the effects of product substitution also as a result of the significant rise in gold prices in 2006 relative to 2005. Sales of gold bullion increased by AED 977.2 million, or 201.2%, to AED 1,462.8 million for the year ended 31 December 2006 from AED 485.6 million for the same period in 2005. The increase was due primarily to Management’s decision during 2006 to purchase scrap gold in large volumes for resale. Sales of diamond jewellery increased by AED 260.3 million, or 61.9%, to AED 681.0 million in the year ended 31 December 2006 from AED 420.7 million for the same period in 2005. The increase was due primarily to the

35 increase in sales volume resulting from the ongoing store expansion and the effects of product substitution as a result of rising gold prices. Sales of other jewellery decreased by AED 64.5 million, or 20.1%, to AED 255.8 million in the year ended 31 December 2006 from AED 320.3 million for the same period in 2005. The decrease was principally due to a decrease in sales of loose gems, partially offset by increases in sales of watches and pearls. The decrease in sales of loose gems was due to the Group’s decision to increase the share of loose gems provided to third-party manufacturers on a consignment basis relative to loose gems sold to them.

Cost of sales Cost of sales increased by AED 1,259.7 million, or 54.8%, to AED 3,560.3 million in the year ended 31 December 2006 from AED 2,300.6 million in the same period in 2005. The increase was due primarily to an increase in sales volumes of gold bullion and diamond jewellery and rising gold prices, partially offset by the decrease in gold jewellery sales volumes.

Gross profit Gross profit increased by AED 87.5 million, or 22.2%, to AED 481.5 million for the year ended 31 December 2006 from AED 394.0 million for the same period in 2005. Gross margin decreased to 11.9% in 2006 from 14.6% in 2005 principally as a result of the change in product mix, with gold bullion representing a higher proportion of the overall sales in 2006 relative to 2005, partially offset by an increase in the margins for gold jewellery in 2006 relative to 2005. Net of gold bullion, gross margin increased to 18.7% in 2006 from 17.8% in 2005 as a result of the greater proportion of diamond product sales to the overall product mix.

General administration, selling and distribution expenses General administration, selling and distribution expenses increased by AED 75.2 million, or 28.6%, to AED 338.4 million for the year ended 31 December 2006 from AED 263.2 million for the same period in 2005. Of this increase, AED 22.6 million was contributed by an increase in personnel expenses due to the increased headcount as a result of the Group’s continued expansion and rising wages broadly consistent with inflation, AED 20.6 million was contributed by an increase in advertisement and marketing expenses principally as a result of the launch of several major brands in 2006, and the remainder was contributed by increases in rent, depreciation and other expenses.

Finance cost Finance cost increased by AED 34.5 million, or 91.0 %, to AED 72.4 million for the year ended 31 December 2006 from AED 37.9 million for the same period in 2005. During 2006, the Group’s outstanding indebtedness was higher than in 2005.

Finance income Finance income increased by AED 17.4 million or 147.4%, to AED 29.2 million for the year ended 31 December 2006 from AED 11.8 million for the same period in 2005. The increase is attributable to an increase in fixed deposits.

Income from associates and jointly controlled entities Income from associates and jointly controlled entities increased by AED 24.4 million, or 166.0%, to AED 39.1 million for the year ended 31 December 2006 from AED 14.7 million for the same period in 2005. But for the one-time effect of the Metamorph Lease Income in 2006, the increase in income from associates and jointly controlled entities would have been AED 11.8 million, or 80.0%. The increase, adjusted for the Metamorph Lease Income, was due principally to the contribution to income from new investments in Al Manara in the UAE and Al Zain Trading Co WLL in Bahrain.

36 Other income Other income increased by AED 2.7 million, or 18.2%, to AED 17.5 million in the year ended 31 December 2006 from AED 14.8 million for the same period in 2005. This is attributable mainly to the reclassification of income on consignment ventures from “Gold Jewellery Income” to “Other income”. Income on consignment ventures increased by AED 4.9 million, to AED 9.8 million in the year ended 31 December 2006 from AED 4.9 million in the year ended 31 December 2005. This increase is partially offset by a AED 2.2 million decrease in miscellaneous income, foreign currency and exchange gains, and income from shares and securities, which cumulatively were only partially offset by an increase in discount and commission.

Profit As a result of the above, profit increased by AED 97.7 million, or 72.8%, to AED 231.9 million in the year ended 31 December 2006 from AED 134.2 million for the same period in 2005.

Liquidity and Capital Resources The Group has historically financed its liquidity requirements, including its ongoing operating expenses and capital expenditure requirements, from internally generated cash as well as funds borrowed under credit facilities and, to a lesser extent, funds raised through capital increases. Management expects the Group to continue to finance its liquidity requirements from the same liquidity sources, as well as from the proceeds of the Offer. Management believes that the Group has sufficient working capital for at least the next 12 months.

Cash flows The following data, analysis and discussion is based on cash flow data in relation to cash flows for the year ended 31 December 2006 and has been extracted from the 2007 Financial Statements for comparability purposes. The table below sets forth a summary of the Group’s net cash flows for the periods indicated. For the three For the years ended months ended 31 December 31 March 2006 2007 2008 (unaudited) (in millions of AED) Net cash provided by/(used in) operating activities ...... 372.2(1) (257.8) (292.2) Net cash provided by/(used in) investing activities ...... (253.6)(2) (238.6) (16.5) Net cash provided by/(used in) financing activities ...... (364.0)(3) 980.0 120.6 Net increase/(decrease) in cash and cash equivalents...... (245.4) 483.6 (188.1)

(1) Net cash provided by operating activities in the year ended 31 December 2006 has been restated to AED 372.2 million in the 2007 Financial Statements from AED 196.3 million in the 2006 Financial Statements due to: • the reclassification of AED (204.2) million of the line item “Change in margin with banks” treated as an operating cash flow in the 2006 Financial Statements whereas in the 2007 Financial Statements this was treated as a financing cash flow and included in the “Fixed deposits placed under lien” • an adjustment of AED (9.2) million to the restated cash flows in the 2007 Financial Statements, reflecting: “Provisions for employees’ end of service benefits” (AED 1.4 million), “Unrealised gain on revaluation of forward contracts” (AED (10.9) million) and “Loss on sale of available for sale investments” (AED 0.3 million) • an adjustment of AED 10.5 million in the “Change in prepayments” and AED (6.1) million in the “Change in trade payables and other liabilities” • the reclassification of AED 29.2 million to a cash flow from investing activities from a cash flow from operating activities • the exclusion of AED 4.7 million in finance costs related to gold loans from the interest paid (which only includes interest on financial debt) in the 2007 Financial Statements, resulting in a AED 4.7 million increase in the adjusted cash flow. (2) Net cash used in investing activities in the year ended 31 December 2006 has been restated to AED (253.6) million in the 2007 Financial Statements from AED (471.1) million in the 2006 Financial Statements, due to: • the reclassification of AED (206.7) million of the line item “Net deposits placed” from investing cash flow to a financing cash flow — included in the “Fixed deposits placed under lien” of AED (410.9) million in the 2007 Financial Statements — resulting in an upward adjustment by AED 206.7 million of the restated cash flow compared to the 2006 Financial Statements • the inclusion of “Dividends received” of AED 9.5 million in the restated cash flows in the 2007 Financial Statements • an AED 1.4 million increase in “Net movement from investments” in the 2007 Financial Statements. (3) Net cash from (used in) financing activities in the year ended 31 December 2006 was restated to AED (364.0) million in the 2007 Financial Statements from AED 16.8 million in the 2006 Financial Statements due to: • the reclassification of the line items “Change in margin with banks” (AED 204.2 million) and “Net deposits placed” (AED 206.7 million) treated as operating and financing cash flows, respectively, in the 2006 Financial Statements and as a financing cash flow in the 2007 Financial Statements and included in the line item“Fixed deposits placed under lien”, resulting in a decrease of AED 410.9 million of the restated cash flow

37 • the reclassification of AED 28.6 million interest income on fixed deposits as a financing cash flow in the 2007 Financial Statements from an operating cash flow in the 2006 Financial Statements • the inclusion of AED 12.5 million in net movement in trust receipts in cash flows from financing activities in the year ended 31 December 2006 in the 2007 Financial Statements, which was part of cash and cash equivalents in the 2006 Financial Statements. Net cash flow from operating activities. Operating activities for the three months ended 31 March 2008 used net cash of AED 292.2 million. In the three months ended 31 March 2008, the Group reported profit of AED 69.7 million. The Group had net negative changes in working capital of AED 394.7 million. The net negative changes in working capital resulted from a decrease in trade payables and other liabilities of AED 224.2 million reflecting principally a decrease in liabilities made for gold purchases due to the ongoing reduction in the gold bullion activities of the Group, an increase in inventories of AED 18.0 million, an increase in accounts receivables of AED 82.7 million, a decrease in due to related parties of AED 42.9 million, a decrease in margin received from wholesale gold customers of AED 17.1 million, and an increase in due from related parties of AED 11.1 million. The Group also paid interest on borrowed funds of AED 45.2 million. Operating activities for the year ended 31 December 2007 used net cash of AED 257.8 million. In 2007, the Group reported profit of AED 209.1 million, compared to AED 231.9 million in 2006. The Group had AED 268.7 million in operating profit before working capital changes, and net negative changes in working capital of AED 424.4 million. The net negative changes in working capital in 2007 resulted from a decrease in trade payables and other liabilities of AED 511.7 million reflecting principally a decrease in liabilities made for gold purchases due to a reduction in the gold bullion activities of the Group in 2007 relative to 2006, and an increase in inventory of AED 286.9 million, partially offset by an increase of AED 183.6 million in the margin received from wholesale gold customers, and a decrease of AED 152.4 million in margin paid for gold purchases. Operating activities for the year ended 31 December 2006 generated net cash of AED 372.2 million. In 2006, the Group had AED 182.4 million in operating profit as adjusted for non-cash items and extraordinary items before working capital changes, and net positive changes to working capital of AED 257.5 million. The net positive changes in working capital in 2006 resulted primarily from an AED 863.9 million increase in trade payables and other liabilities resulting from the increased gold bullion activities of the Group in 2006, which was only partially offset by an increase of AED 228.8 million in inventories, an increase of AED 144.7 million in trade receivables and an increase of AED 143.4 million in margin to trade payables against unfixed gold. Net cash flow from investing activities. Investing activities for the three months ended 31 March 2008 used net cash of AED 16.5 million. This was due principally to investments in the acquisition of property, plant and equipment of AED 26.8 million, purchases of investments of AED 3.5 million, and investments in subsidiaries of AED 0.6 million, partially offset by dividends received of AED 5.3 million and proceeds from the sale of investments held to maturity of AED 11.0 million. Investing activities for the year ended 31 December 2007 used net cash of AED 238.6 million. This net use of cash resulted principally from AED 97.5 million of cash used to purchase securities, mainly shares in Burani Designer Holding NV registered in the name of related parties and held for the benefit of the Group, AED 84.7 million of cash used for the acquisition of property, plant and equipment, and AED 41.6 million used to purchase available-for-sale investments. Investing activities for the year ended 31 December 2006 used net cash of AED 253.6 million. This net use of cash resulted principally from AED 112.0 million of cash used in the acquisition of joint ventures and associates, AED 85.9 million of cash used in advances against investments, and AED 70.2 million of cash used for the acquisition of property. Net cash flow from financing activities. Financing activities for the three months ended 31 March 2008 provided net cash of AED 120.6 million. This was due principally to cash withdrawn from fixed deposit under liens of AED 173.4 million, a net increase in liabilities to banks in respect of moneys paid by banks to suppliers on the Group’s behalf (under “trust receipts”) of AED 49.5 million, funds borrowed under a term loan of AED 16.1 million, and interest received on fixed deposits of AED 9.2 million. These cash inflows were partially offset by AED 107.7 million of funds used to repay amounts outstanding under term loans, shareholder drawings of AED 10.5 million and a net movement in minority interest of AED 15.2 million. Financing activities for the year ended 31 December 2007 generated net cash of AED 980.0 million. In 2007, the Group increased its long-term indebtedness by AED 1,872.7 million, which was partially offset by term loans repaid of AED 611.3 million and fixed deposits under lien of AED 132.8 million. Financing activities for the year ended 31 December 2006 used net cash of AED 364.0 million. The net use of cash resulted primarily from an increase of fixed deposits under lien of AED 410.9 million due principally to increased margins on gold loans related to increased gold bullion activity, the repayment of debt equal to AED 163.2 million

38 and the payment of a dividend of AED 99.5 million, partially offset by borrowed funds equal to AED 310.2 million under loan term facilities and funds of AED 29.2 million received in relation to interest on fixed deposits, AED 12.5 million received from trust receipts, AED 6.5 million received from local bills discounted with banks, and AED 9.8 million from a loan to related parties.

Capital Resources

As at 31 March 2008, the Group’s total outstanding indebtedness amounted to AED 3,148.3 million, including borrowings in Dirhams of AED 865.1 million, in U.S. dollars of US$287.9 million, and in Euros of A9.3 million. Of the total outstanding amount, AED 150.0 million represents amounts outstanding under a long-term shareholders’ loan and AED 1,991.9 million represents amounts outstanding under credit facilities with leading international and regional banks. Of the Group’s outstanding indebtedness as at 31 March 2008, approximately 90.0% was subject to a floating interest rate and approximately 10.0% was subject to a fixed interest rate. The Group’s aggregate effective annual interest rate as at 31 March 2008 was 1.2%, compared to 4.2% and 3.7% as at 31 December 2006 and 2007, respectively.

Credit Facilities

In January 2008, the Company and Gulf International Bank (“GIB”) entered into an agreement amending and restating a two-and-a-half year uncommitted working capital facility agreement originally dated February 2006. Pursuant to both agreements, GIB agreed to provide facilities aggregating US$35 million including a dollar sub-limit of US$8 million for short term loans.

In November 2007, the Company entered into a facility agreement with HSBC (the “HSBC Facility”) pursuant to which HSBC agreed to increase the maximum aggregate amount of facilities previously provided to the Company to AED 1,151.6 million, subject to review in June 2008. The HSBC Facility includes overdraft facilities, gold loan facilities, term loans facilities, a gold hedging facility, an interest rate swap facility, a financial guarantee line facility and an import line facility.

In October 2007, the Company and Calyon entered into a credit facility agreement pursuant to which Calyon agreed to extend working capital, trade finance and foreign exchange risk hedging facilities to the Company up to an aggregate principal amount outstanding at any time of AED 193.6 million, or its equivalent in other freely-traded currencies.

In October 2007, the Company entered into a credit facilities agreement with Mashreqbank pursuant to which Mashreqbank agreed to provide the Company with facilities for financing the Company’s working capital requirements totalling AED 268.5 million.

In September 2007, the Company entered into a credit facilities agreement with United Arab Bank (“UAB”) pursuant to which UAB agreed to extend the Company facilities totalling AED 125.0 million. The facilities all expire in September 2008 except for the medium term loan facility, which expires in June 2014.

In September 2007, the Company entered into a credit facility agreement with Standard Chartered Bank pursuant to which Standard Chartered agreed to provide the Company with facilities totalling AED 646.0 million.

In August 2007, the Company entered into a credit facility agreement with Emirates Bank pursuant to which Emirates Bank agreed to provide facilities up to an aggregate of AED 371.2 million.

In August 2007, ABN Amro renewed and increased a credit facilities agreement originally provided under an August 2004 agreement to US$14.9 million plus AED 51.5 million.

In July 2007, the Company entered into a four-year credit facility agreement arranged by BNP Paribas and Gulf International Bank (the “2007 Syndicated Facility”), pursuant to which several financial institutions agreed to extend loans to the Company in an aggregate amount of US$255.0 million.

In April 2007, the Company entered into a one-year credit facility agreement pursuant to which Barclay’s agreed to extend facilities to the Company up to an aggregate amount of AED 179.0 million, including an overdraft facility, general banking facilities and a short term loan.

In December 2007, the Company entered into an eight-month credit facilities agreement with Union National Bank (“UNB”) pursuant to which UNB agreed to provide the Company with a standby letter of credit facility, a trust receipt facility and a medium term loan facility aggregating AED 110.0 million.

39 In March 2007, the Company entered into a one-year facility agreement with the National Bank of Dubai (“NBD”) pursuant to which NBD agreed to provide the Company with overdraft, term loan and stand-by letter of credit facilities totalling AED 170.0 million. In November 2006, Damas entered into a nine-month credit facility agreement with First Gulf Bank (“First Gulf”) pursuant to which First Gulf agreed to provide a standby letter of credit facility to the Company for up to AED 200.0 million with a term of one year. In June 2006, the Company entered into a revolving credit facility with the Bank of Nova Scotia (“BNS”), pursuant to which BNS agreed to provide the Company with a line of credit under which the Company can borrow amounts not to exceed the lesser of (i) 125,000 fine troy ounces of gold and (ii) gold with a value of US$97,000,000. In April 2006, the Company entered into a one-year credit facility agreement with Lloyds TSB Bank plc (“Lloyds”) pursuant to which Lloyds agreed to extend facilities to provide letters of credit, finance the Company’s working capital requirements and provide a medium term loan for the Company’s expansion plans for up to an aggregate amount outstanding at any time of AED 65.0 million. In March 2006, the Company entered into a one-year credit facility agreement with BNP Paribas increasing previously-provided facilities to an aggregate of AED 127.5 million. A substantial majority of the above facilities are secured by fixed deposits and investments held to maturity under liens with banks and pledged inventories, assignments of receivables and insurance policies of the Group. In addition, the Principal Shareholders have provided personal guarantees for a substantial majority of this indebtedness, and several Group subsidiaries have provided guarantees. Certain of the Group’s existing credit facilities entitle the lenders to demand full and immediate repayment at any time. However, Management believes, based on its historically good relations with the Group’s creditors, that it is unlikely that the Group’s lenders will make such a demand. Certain of the Group’s existing credit facilities also contain provisions whereby the lenders are able to demand full and immediate repayment of the loans upon the occurrence of a change of control in which the Principal Shareholders would cease to directly or indirectly control the Company. In addition, certain of the Group’s existing credit facilities have expired or otherwise gone past their review dates. Management believes that, consistent with past experience, these credit facilities will be renewed and is continuing to access the credit facilities that have expired or otherwise gone past their review dates.

Shareholder Loans In December 2004, the Founding Shareholders lent, on a subordinated basis to certain of the Group’s bank loans, to the Company funds in the amount of AED 150.0 million in order to finance the Group’s working capital requirements. The loan is interest free, unsecured and does not have a fixed repayment date. The Founding Shareholders have provided an undertaking that the amount of the loan will not be called upon for repayment within 12 months of 31 December 2007.

Contingencies and Commitments; Gold loans The Group has certain contingencies, including letters of credit, corporate guarantees, bank guarantees, certain contractual commitments with associated companies, capital commitments principally in relation to the refurbishment of stores and operating leases. The following table sets forth these commitments and contingencies as at 31 December 2007. Total Amount (in millions of AED) Letters of credit ...... 4.2 Corporate guarantees...... 54.0 Other bank guarantees...... 19.8 Stand-by letters of credit ...... 1,398.5 Capital commitments ...... 39.5 Operating lease commitments(1) ...... 68.2

(1) The Group’s operating leases consist mostly of leases for stores, warehouses and factory facilities, with terms of one to five years and a renewal option upon expiry. Rental payments due under these leases are usually pegged to market rentals. Gold loans. The Group in the normal course of business borrows gold and crafted jewellery, buys gold to convert into jewellery and delivers gold and crafted jewellery to its customers on a wholesale basis, all at unfixed prices. This jewellery is further used as stock in trade and is sold to various customers on a fixed or unfixed basis. These

40 “gold loans” or unfixed gold transactions are covered by cash collateral or letters of credit, but the Group does not recognise the related liability or receivable until the price is fixed (except for when it sells gold, for which it recognises a liability equal to the market value); settlement occurs by redelivery of gold or cash. As gold is not included within the definition of a financial instrument, these “gold loans” are not recognised on the balance sheet; instead, the Group receives margins against gold unfixed with trade receivables (which is separately presented as a currently liability) and pays margins against gold unfixed from trade payables and against gold unfixed from banks (which is presented separately as a current asset). As at 31 December 2007, these gold loans amounted to AED 1,711.7 million.

Capital Expenditures The Group’s aggregate capital expenditures in the years ended 31 December 2005, 2006 and 2007 were AED 81.1 million, AED 87.1 million, and AED 106.3 million, respectively. Cash used for capital expenditures consists primarily of: expenditures on property, plant and equipment such as furniture and fixtures for new and existing stores; land and buildings and ITequipment; on distribution rights and on brand acquisitions, among others. The Group has budgeted approximately AED 73.9 million and AED 67.5 million of capital expenditures in 2008 and 2009, respectively, principally in connection with the rollout of new stores and refurbishments.

Quantitative and Qualitative Disclosures about Market and Other Risks The Group is exposed to various market risks, including adverse changes in commodity prices (such as the price of gold and other precious metals), liquidity risks, credit risks, currency risks, and interest rate risks. Market risks are the potential losses arising from adverse changes in market rates and direct and material prices. The Board of Directors reviews and agrees policies for managing each of these risks, which are summarised below.

Liquidity Risk The Group limits its liquidity risk by ensuring bank facilities and funds from shareholders are available. The Group’s terms for retail sales require amounts to be paid on delivery of jewellery and for wholesale sales within 30 to 180 days of the date of sale except sales to consignment debtors, high net worth individuals, sales on approval basis etc. The following table sets out the Group’s long-term and short-term borrowings, including bank loans and liabilities under finance leases, as at 31 December 2007. Payment due by period Less than 6to12 1to5 More than 6 months months years 5 years Total (in millions of AED) Accounts payables(1) ...... 486.3 5.5 — — 491.8 Bank overdrafts ...... 100.3 — — — 100.3 Trust receipts ...... 44.1 — — — 44.1 Local bills discounted(2) ...... 19.7 — — — 19.7 Term loans ...... 216.9 280.9 1,204.4 5.2 1,707.4 Total ...... 867.3 286.4 1,204.4 5.2 2,363.3

(1) Excluding customer deposits of AED 15.2 million. (2) Post-dated cheques from customers and discounted with banks.

Commodity Price Risk The Group is exposed to commodity price risks through its purchase of various raw materials, such as gold and other precious metals. The prices of gold and other precious metals fluctuate. The Group has more than one supplier in each of its manufacturing regions. The Group enters into derivative financial instruments for risk management purposes, including forward purchase and sale contracts for gold. These financial instruments are individually negotiated with various financial institutions. The fair value of these contracts as at 31 December 2007 was AED 656.9 million for forward purchase contracts and AED 117.9 million for forward sales contracts.

Credit Risk The Group seeks to limit its credit risk with respect to customers by setting credit limits for individual customers and monitoring outstanding receivables. The Group sells its products to a large number of customers comprising the

41 Group’s customer base. Its five largest customers account for 13.7% of outstanding accounts receivable at 31 December 2007, compared to 15.6% at 31 December 2006. With respect to credit risk arising from the other financial assets of the Group, including cash and cash equivalents, investments and derivative instruments with positive values, the Group’s exposure to credit risk arises from default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments.

Currency Risk As a result of investment operations in Europe, the Group’s balance sheet can be impacted significantly by movements in AED/Euro exchange rates. There is no other significant exchange rate risk as substantially all of the financial assets and financial liabilities are denominated in UAE Dirhams or U.S. dollars to which the UAE Dirham is, as at the date of this Prospectus, pegged. Foreign currency exposures to currencies other than U.S. dollars are monitored and managed centrally by the Group by obtaining forward exchange covers. The Group accounts for gains and losses in the income statement arising from the utilisation of these forward exchange covers. There are no outstanding forward currency contracts as at 31 December 2007. Management estimates that a 5.0% increase in the value of the Euro relative to the UAE Dirham would have increased the Group’s profit before tax for the year ended 31 December 2007 by approximately AED 3.9 million, or 1.9% and a 5.0% decrease in the value of the Euro relative to the UAE Dirham would have decreased the Group’s profit before tax for the year ended 31 December 2007 by approximately AED 3.9 million, or 1.9%.

Interest Rate Risk The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s long-term debt obligations with floating interest rates. The Group’s policy is to manage its interest cost using a mix of fixed and variable rate debts. The Group’s policy is to keep between 40% and 60% of its borrowings at fixed rates of interest. To manage this, the Group enters into interest rate swaps, in which the Group agrees to exchange, at specified intervals, the difference between fixed and variable rate interest amounts calculated by reference to an agreed upon notional principal amount. These swaps are designated to hedge underlying debt obligations. At 31 December 2007, after taking into account the effect of interest rate swaps, approximately 49% of the Group’s borrowings were at a fixed rate of interest, compared to 50% at 31 December 2006. Management estimates that a 10.0% increase in the effective interest rate would have had a negative effect on the Group’s net profit before tax for the year ended 31 December 2007 of approximately AED 2.6 million, or 1.2%, and a 10.0% decrease in the in the effective interest rate would have had a positive effect on the Group’s net profit for the year ended 31 December 2007 by approximately AED 2.6 million, or 1.2%.

42 INDUSTRY OVERVIEW The market data in this section is based on data publicly available, including the KPMG Report, the Mintel Report, the Diamond Quarterly Review, data from the WGC including the WGC Report and from the Dubai Gold & Jewellery Group, including the DG&JG Report, and the following websites: www.signetgroupplc.com, www.dtc.com and www.idexonline.com. This Prospectus does not incorporate any information contained in such reports or websites that is not otherwise contained in this Prospectus, and any information extracted from such sources is subject to the qualifications contained herein. There can be no guarantee of the accuracy or completeness of the information extracted from any of these sources, and such information has not been independently verified. Some of the information is also derived from Management’s analysis and estimates. Any statements of information regarding future trends should not be taken as a representation that such future trends will actually occur. Given that actual results may be materially different from those expected, expressed or implied by the market data, undue reliance should not be placed thereon. See “Presentation of Market, Market Share and Industry Data” and “Forward-Looking Statements”.

The Global Gems and Jewellery Industry The global gems and jewellery industry, which includes the trading of diamonds, pearls and coloured gems (rough or cut and polished) and other ornamental products made from these materials and metals such as platinum, palladium and stainless steel, set with these stones primarily for personal use, was estimated to have a value of approximately US$146 billion in total retail sales in the year ended 31 December 2005 (the latest publicly available data known to Management). Diamond jewellery is the largest market segment of the global jewellery market, accounting for over 47% of the value of the industry in the year ended 31 December 2005, closely followed by plain gold jewellery at approximately 42% of total retail sales. The global gems and jewellery industry is estimated to have grown at an average compound annual growth rate (“CAGR”) of 5.2% from 2000 to 2005, fuelled by growth in demand due to increased consumer confidence and economic conditions, as well as seasonal events such as certain holidays. (Source: KPMG Report.)

The Middle East Gems and Jewellery Market Approximately 8.9% of the world’s total sales of gems and jewellery were made in the Middle East in 2005. (Source: KPMG Report.) A significant portion of sales in the Middle East is made in souks (public markets) that specialise in gems and jewellery, including the Gold Souk in Deira, Dubai, and many gold souks in Kuwait and the Gold City of Bahrain. Souks for the jewellery and gold trade provide consumers with access to numerous retailers and assortments of products with reliable standards of quality, as well as frequent discount and buy-back schemes. Souks also provide retailers with advanced infrastructure, reliable security and proximity to major shopping areas, as well as the ability to market their products throughout the year and during special events.

43 Gems and Jewellery Value Chain The gems and jewellery value chain involves exploration, mining, sorting, cutting and polishing, jewellery manufacturing and retailing. Maximum value is added at the two ends of the value chain, with intermediate parts of the chain adding relatively low value. Diamond cutting and polishing contributes 29%, whereas jewellery manufacturing contributes 32% to the value in the final product. (Source: KPMG Report.)

The global gems and jewellery value chain (2005)

USD billion 0 20 40 60 80 100 120 140 160

Diamond rough production 12.7

Diamond mine sales 0.5

Diamond rough trade 1.7

CPD output 4.4

Polished diamond inventory (2.4)

Polished diamond trade 0.7 Polished diamond at 17.6 wholesale prices Precious metals 40.6 Jewellery 20.6 fabrication/wholesale Jewellery retail 67.2

World jewellery sales 146

Source: KPMG Report The mining and exploration stages of the diamond jewellery supply chain show a significant level of concentration, with a small number of diamond mining companies supplying a substantial portion of the world’s diamond mining output. As the rough diamond distribution arm of the De Beers family of companies, DTC sorts, values and sells around half of the world’s rough diamonds. The manufacturing of diamond jewellery involves multiple intermediaries for up to two years before the product is sold to the end consumer. The fragmentation of the jewellery supply chain is most pronounced at the retail level. In Dubai, there are four times more stand-alone retail outlets than chains; however, per branch, chain stores have 10 times greater average annual turnover than stand-alone outlets. (Source: DG&JG.)

Principal Product Segments Relevant to the Issuer Gold In the year ended 31 December 2007, global demand for gold increased to a record US$79 billion, due to a steady annual increase in overall identifiable gold tonnage demand by 4% from 2006 and gold prices breaking above their historical record of US$850 per ounce. (Source: WGC.) Sales of plain gold jewellery have shown a marked increase of approximately 5.5% CAGR from 2000 to 2005, reflecting the approximately 13% CAGR for gold prices during the period, whilst trends in demand also show a shift away from gold to diamond jewellery and other precious metals such as platinum and palladium. (Source: KPMG Report.) Dubai is one of the largest gold trading centres in the world, importing an annual average of 300 tonnes of gold and having 600 shops, the densest concentration in the world, with the world’s highest per capita gold consumption at 34 grams annually. Approximately 90% of Dubai’s jewellery market is plain gold jewellery, and the remaining 10% is gem set. Dubai is a unique market for jewellery because tourists account for more sales, at 52% of total sales volumes, than residents, who account for 43% of the total. (Source: DG&JG Report.) The UAE has one of the largest per capita rates of gold jewellery consumption in the world, at approximately 19 grams per person per year, compared to 4.9 for Saudi Arabia, 2.5 for Turkey, 0.9 for the United States, 0.8 for the United Kingdom and 0.5 for India. (Source: WGC.)

Global Gold Jewellery Demand Global gold jewellery demand increased by 6% from 2006 to 2007 from approximately 2,283 to 2,426 tonnes but decreased in the fourth quarter of 2007 by 17% compared to the fourth quarter of 2006, due in part to rising and volatile market prices for gold. The levels of demand varied across different countries, depending on economic factors, price volatility for gold and exchange rate fluctuations. (Source: WGC Report.)

44 Middle East Gold Jewellery Demand The Middle East is one of the world’s largest markets for gold jewellery and together with Asia accounts for approximately two-thirds of the world’s jewellery demand. Gold jewellery in the Middle East is usually sold by weight at a price varying daily in line with the international gold price and with a relatively small mark-up over the international price and, consequently, demand is more strongly affected by gold price volatility as compared to other geographic regions. Steady and gradual gold price rises may enhance the investment aspect of a gold jewellery purchase and, accordingly, have not had a negative impact on gold jewellery demand in this market. (Source: WGC: Gold Demand Trend — Full year and fourth quarter 2007 (Feb 2008)). In the Middle East, gold jewellery demand increased by 11% from 2006 to 2007 from approximately 269 to 328 tonnes but showed sensitivity to price volatility, increasing during the first three quarters of 2007 by an average of 16% above year-earlier levels and decreasing by 5% in the fourth quarter of 2007 as compared to the fourth quarter of 2006 in light of greater price volatility. The Middle East reduction in the fourth quarter of 2007 represents a smaller decrease than the global average. UAE demand for gold jewellery amounted to approximately 99.8 tonnes in 2007, of which the Group’s share was estimated at approximately 21 tonnes or 21%. (Source: WGC and Management estimates.)

Diamonds There are approximately 200,000 diamond jewellery retail outlets worldwide. Globally, 45% of jewellery is sold in the United States of America, 33% in Asia and 11% in Europe. (Source: www.dtc.com.) Global sales of diamond jewellery in the year ended 2005 (the latest publicly available data known to Management) were estimated at approximately US$69 billion, showing a CAGR of approximately 5% from 2000 to 2005. Demand for diamond jewellery is fuelled by economic growth in the principal purchasing markets and the aggressive marketing efforts of large diamond companies. (Source: KPMG Report.)

Global Diamond Jewellery Demand Global diamond jewellery sales in 2005 were estimated at US$69 billion. The market for diamond jewellery has indicated a CAGR of approximately 5% from 2000 to 2005. Polished diamond prices have been supported by the steady increase of rough diamond prices, which have been sustained by strong global demand due to economic growth in diamond jewellery consuming nations and aggressive marketing by large diamond companies. The cost of diamonds has increased mainly for the larger carats (over 3) due to demand factors, including increased consumer spending (in particular in the United States and Asia), and a general shortage in the global supply of rough diamonds, and as retailers report that consumers are requesting larger and better quality diamonds. (Sources: KPMG Report and www.idexonline.com as at October 2007.)

Middle East Diamond Jewellery Demand The GCC diamond market is estimated to be worth US$5.1 billion and is currently ranked fourth in the world. The UAE market share in terms of polished diamond consumption amounts to US$300 million, and the GCC market is growing at a rate of approximately 3-5% annually. The diamond jewellery market in Dubai has grown by approximately 20% in the last few years. The diamond jewellery market in the Middle East was estimated in 2005 to account for 8.9% of global jewellery consumption and showed decreased demand from 2004 to 2006, going from sales of A1,412 million in 2004, to sales of 1,337 million in 2005 and sales of A1,263 million in 2006. (Sources: KPMG Report, DG&JG and www.signetgroupplc.com.)

Coloured Gemstones The market for coloured gemstones includes “precious” stones such as emeralds, sapphires and rubies, and “semi- precious” stones such as tourmaline, peridot and amethyst (these being general categorisations, as the definitions of “precious” and “semi-precious” can change over time and vary across different cultures). Sales of all jewellery that cannot be categorised as diamond or gold, i.e. coloured gemstone and pearl and silver jewellery, accounted for approximately 5% of global retail jewellery sales in the year ended 31 December 2005. (Source: KPMG Report.)

Internationally Branded Watches and Jewellery In recent years, many leading luxury watch brands have increased their rate of new product development in order to maintain consumers’ interest levels and encourage collecting and multiple purchases. There has also been a focus

45 on product differentiation using new features and designs, and an increasing number of monobrand boutique openings by leading retailers, which often have the aim of raising the brand profile and reputation. Advertising campaigns for internationally branded jewellery and watches are increasingly focused on celebrities and other high profile individuals. (Source: Mintel Report.) Many international brands, in order to minimise the risk and level of required investment, are preferring to enter emerging markets, such as India, through established channels such as duty-free outlets or in department store concessions (whilst testing and adapting to the local market) or through joint ventures or franchises with already established market participants.

Competition The retail jewellery market in the regions in which the Group operates is highly fragmented and presents significant challenges to new entrants. Among the most important of these barriers to entry are the difficulty of securing retail store locations, competition from the visibility of numerous other retailers and the necessity of achieving customer recognition of a brand name. Management believes that the primary competitive factors affecting the Group’s operations are brand strength (reputation for reliability and trust), marketing, pricing, product variety, quality of sales personnel and service and convenience and visibility of store locations. The Group analyses its competitors according to the number of stores they operate, as well as their customer base, estimated sales, product types, marketing activities and estimated foot fall. The Group’s primary competition is presented by regional retail and wholesale jewellery chains that sell to customers targeted by each of the Group’s store formats. To a lesser extent, the Group also faces competition from a number of small, local family-owned businesses. The Group considers the following companies to be its primary competitors: • UAE based jewellery chains, such as Pure Gold, Joy Alukkas and Al-Futtaim; • international high-end jewellery businesses, such as Cartier», Bulgari» and David Morris»; and • traditional regional goldsmith’s businesses, such as L’azurde and Al-Romaizan from Saudi Arabia.

Key Competitors by Store Format The Group’s principal competitors in the Les Exclusives category are Bulgari», Al Anwar and Dhamani. The Group’s key competitors in the Semi-Exclusives category are Samra, Jawaher Ctr (watches), Al Romaizan (gold), Pure Gold, Rivoli and Marhaba. In the Damas 22K category, the Group’s principal competitors are Sky Jewellery, Atlas Jewellery, Joy Alukkas and Ajanta. The jewellery market in the UAE is highly fragmented. Management estimates that the Group operates more than three times as many watch and jewellery stores in the UAE than its nearest competitor, Rivoli, followed by Pure Gold, Al-Futtaim, Joy Alukkas and Atlas Jewellery, none of whom individually owns more than 10% of the market based on the number of stores.

46 BUSINESS

Overview The Group is an international integrated jewellery and watch retailer operating in 18 countries with 438 stores as at 31 December 2007, and the leading jewellery and watch retailer in the Middle East, based on number of stores. As at 31 December 2007, the Group’s network of retail outlets included 318 operated through subsidiaries predominantly in the Middle East, India and Italy, 57 operated through jointly controlled entities and 63 operated through associates in countries across the Middle East, Europe, North Africa and other regions. The Group’s stores offer the Group’s own branded products as well as products sold under leading global and regional luxury brands. The Group sells jewellery and watches through three main distinctive store formats, each of which is tailored to a specific type of customer. As at 31 December 2007, these included: • Les Exclusives stores, 54 in total, which cater to high net worth consumers through products that include some of the world’s most exclusive luxury brands, for jewellery and watches, and some of the Group’s own brands; • Semi-Exclusives stores, 199 in total, which cater principally to upper-middle income consumers such as tourists and expatriate professionals and office workers, through products that include well known international jewellery brands of wider appeal, in addition to regional brands and the Group’s own labels; and • Damas 22K stores, 97 in total, which cater mostly to middle income and working class immigrant populations, primarily of South Asian origin, and primarily offer jewellery under the Group’s own brands and regional brands. In addition to the three principal store formats, the Group has other stores, such as watch stores and monobrand stores, as well as Damas Kids for children and parents, duty-free shops, a point of sale in the Saks Fifth Avenue department store at Bur Juman shopping centre in Dubai and other individually branded small stores such as Taif Jewellers, Marhaba Jewellery and Farhan Jewellers. As at 31 December 2007, these included: • watch stores, which include two Damas Watches and 17 Time Art stores offering internationally branded watches in the medium price range; and • 24 monobrand stores, each dedicated to a single international brand, located throughout the UAE, including Tiffany & Co.», Paspaley», Graff», Parmigiani», Stefan Hafner», Links of London», Roberto Coin», Roberta Porrati» and Folli Follie». The Group also sells loose diamonds and gold and diamond jewellery on a wholesale basis to other jewellery retailers, including those in other Middle Eastern countries, Europe and India, as well as individual business owners and small family-owned local jewellers. The Group has plans to expand its wholesale operations to include watch sales. The Group sources gold bullion primarily from bullion banks, finished unbranded jewellery mainly from suppliers in the UAE and direct overseas suppliers in Italy, India, Singapore, Saudi Arabia and Bahrain, and internationally branded jewellery from large international jewellery businesses. The Group also makes corporate sales to business clients throughout the Middle East. See “— Wholesale Operations” and “— Corporate Sales”. The Group’s manufacturing capabilities encompass the entire manufacturing cycle — from design to manufacturing and branding. The Group manufactures a portion of the own branded and unbranded jewellery sold in its stores, either directly through its own facilities or indirectly through shared facilities. The Group’s manufacturing platform consists of (i) nine manufacturing facilities operated by the Group, including workshops in Abu Dhabi, Ras Al Khaimah, Dubai and Sharjah, and (ii) seven manufacturing facilities operated by jointly controlled entities and affiliates, of which there is one in the UAE, two in Lebanon and one in each of Hong Kong, India, Italy and Thailand. Five additional manufacturing facilities are currently planned, including facilities in the UAE, Egypt and India. See “— Manufacturing and Quality Control Processes — Manufacturing”. For the year ended 31 December 2007, the Group had revenues of AED 3,538.1 million, EBITDA of AED 251.3 million, Adjusted EBITDA of AED 293.6 million and net profit of AED 209.1 million. As at 31 December 2007, the Group had total assets of AED 5,072.1 million and 1,820 full-time employees in the UAE and 2,862 worldwide. For the three-month period ended 31 March 2008, the Group had revenues of AED 1,115.1 million, EBITDA of AED 106.7 million, Adjusted EBITDA of AED 118.9 million and net profit of AED 69.7 million. As at 31 March 2008, the Group had total assets of AED 5,066.3 million and 1,932 full-time employees in the UAE and over 3,000 employees worldwide. See “Operating and Financial Review”. For definitions of EBITDA and Adjusted EBITDA, see “Selected Financial Historical Consolidated Data — Other Financial Data”.

47 Group Structure and Corporate Reorganisation The Issuer is the holding company of the Group and is incorporated under the laws of the DIFC. The following diagramme illustrates the Group’s corporate structure, including the Issuer and its consolidated subsidiaries.

Damas International Ltd. (DIFC) 100%(1)

Damas LLC (UAE)

100%(12) 100% 100%(2) Damas Jewellery LLC Damas Jewellery DMCC Soir Jewellery Pvt Ltd

100%(2) Damas Gold Fields Jewellery Pvt Ltd Mukund Jewellery LLC (70%)(3) Ocean Jewellery LLC (65%)(4) Dhanak Jewellery LLC (60%)(5) Armaan Jewellery LLC (60%)(6) Al Mana Damas International LLC (51%)(7) (2) Diminico Damas Diamond Manufacturing DMCC (52.5%) (8) Ayodha Jewellery LLC (100%) Time Art Watches & Optics Trading LLC (100%)(9) Al Nahrain Jewellers Factory LLC (51%)(10) Gem Universe LLC (70%)(2) Damas Company WLL (100%)(2) Damas & Al Ghannam Jewellery Co WLL (90%) Islanders Damas Pvt Ltd (75%) Tawheed & Mukasem Jewellery (50%)(2) Damas Holdings Inc (100%) Damas Jewellery SAL (96.66%)(2) Damas Jewellery Company (60%) Damas Jewellery Pvt Ltd (100%)(2) Damas Hong Kong Ltd (100%) Damas (Thailand) Company Ltd (100%)(2) Damas Southall Ltd (100%)(2) Damas Dis Ticaret A.S. (99%)(2) Damas UK Ltd (100%)(2) DIT Group S.p.A. (87.23%)(2) Stefan Hafner (NY Inc. (85%)(11)

(1) A single share (and less than 1.00% of the total shares) in this company is held by the Trustee for the beneficial interest of the Issuer. (2) Includes beneficially owned shares. For details regarding the beneficial shareholding of these companies, see Note 32 of the 2007 Financial Statements. (3) 32% of the shares in this company is held by the Trustee for the beneficial interest of the Issuer. (4) 37% of the shares in this company is held by the Trustee for the beneficial interest of the Issuer. (5) 42% of the shares in this company is held by the Trustee for the beneficial interest of the Issuer. (6) 42% of the shares in this company is held by the Trustee for the beneficial interest of the Issuer. (7) 51% of the shares in this company is held by the Trustee for the beneficial interest of the Issuer. (8) A single share (and less than 1.00% of the total shares) in this company is held by the Trustee for the beneficial interest of the Issuer. (9) A single share (and less than 1.00% of the total shares) in this company is held by the Trustee for the beneficial interest of the Issuer. (10) 51% of the shares in this company is held by the Trustee for the beneficial interest of the Issuer. (11) DIT Group S.p.A. owns 85% of the common shares and 100% of the preferred shares of Stefan Hafner (NY) Inc. (12) A single share (and less than 1.00% of the total shares) in this company is held by the Trustee for the beneficial interest of the Issuer. For a description of jointly controlled entities and associates, see “— Jointly Controlled Entities and Associates”. The companies formerly constituting the group of companies controlled by the Founding Shareholders and trading under the name “Damas”» underwent a corporate reorganisation in the second quarter of 2008, whereby: • the Company, the former parent company of the Group, became the subsidiary of the Issuer, which was incorporated under the laws of the DIFC, through the exchange of shares of the Issuer for shares held by the Founding Shareholders and minority shareholders in the Company (the “Share Swap”). The Share Swap was effected primarily in order to establish the Issuer as the parent company of the Group in preparation for a listing of the Issuer’s shares on the DIFX; and • the legal ownership of a portion of the shares held directly or indirectly by the Company in certain of its consolidated subsidiaries and jointly controlled entities and associates incorporated in the UAE and the GCC was transferred or is in the process of being transferred to a special purpose vehicle (the “Ownership Transfer” and, together with the Share Swap, the “2008 Corporate Reorganisation”). The Ownership Transfer was

48 effected in order to comply with the Minimum National Ownership Requirements of certain GCC countries (including the UAE) that require that nationals of those countries or other GCC nationals (as the case may be) be the legal owners of certain stated percentages of the outstanding share capital of companies incorporated within their jurisdiction (with the UAE, Qatar, Saudi Arabia and Kuwait having the highest national ownership percentage requirement of 51%). For a description of the trust arrangement pursuant to which the Issuer and the Company propose to meet the Minimum National Ownership Requirements, see “Trust Arrangement”.

History The Group has its origins in the activities of Mr Mohammed Tawfique Abdullah, the grandfather of the Founding Shareholders. Mr Abdullah began designing, crafting and selling gold jewellery to retailers in Syria in the early 1900s. In 1955, the family business moved to the UAE when Mr Tawfique Abdullah’s son, Mr Mohammed Taher Abdullah, moved to Dubai and opened a goldsmith’s shop under the name Al Abdullah Jewellery Traders LLC (“AAJT”). The first retail outlet of AAJT was opened in 1959 and the gold wholesale operations began in 1970. In the late 1970s, Mr Taher Abdullah and his three sons, Tawfique, Tamjid and Tawhid, first developed the Damas brand in order to promote and market AAJT’s products. By the end of 1985, the Group had expanded into several retail stores, and in 1988 the Group launched its first branded jewellery line under the Harmony brand. In the 1990s, the Group adopted an early version of its current marketing and merchandising strategy to develop its brands and products based on customer segmentation according to demographic profile, including its current three- store format. By 2000, the Group had established retail operations in Qatar, Bahrain, Oman and Jordan. In 2002, the Group expanded its operations to Kuwait and Saudi Arabia, and by 2004, the Group had expanded to Egypt, Libya, Sudan, Italy and India. In 2005, the share capital of the Company was increased from AED 900 million to AED 1,421 million through a private placement of shares in order to finance the Group’s expansion plans. As a result of the private placement and a subsequent shareholder restructure, the Founding Shareholders’ interests were reduced from 100% to 60.03% and currently stand at 70%, and a Saudi-based and several UAE-based investors acquired severally an aggregate interest in the Group which currently amounts to 30% (the “Minority Shareholders”). See “The Selling and Principal Shareholders”. In the second quarter of 2008, the Group’s corporate reorganisation, whereby the Issuer became the parent company of the Group through the Share Swap, resulted in the interests of the Minority Shareholders and the Founding Shareholders being held at the Issuer level. See “— Group Structure and Corporate Reorganisation”. Damas’ key operational milestones are as follows. 1907 — Goldsmith operations began in Syria by Mr Mohammed Tawfique Abdullah, grandfather of the three current Directors. 1959 — First retail outlet branded as Damas opened by Mr Mohammed Taher Abdullah in Dubai. 1970 — Damas began wholesale gold operations in Dubai. 1985 — Damas retail stores started selling international brands. 1988 — Damas began the launch of its own brands. 1995 — Damas established the Diamond Division to manage the sourcing of loose stones and finished jewellery. 2000 — Damas’ business was expanded to countries including Qatar, Oman, Lebanon, Kuwait, Bahrain and the United States through investment in jointly controlled entities. The first Les Exclusives boutique was opened in the UAE. 2004 — Damas purchased Stefan Hafner», a high-end Italian jewellery business. 2005 — Damas raised AED 521 million through a private placement. Damas’ operations further expanded into Saudi Arabia, Jordan, Egypt, Libya, Sudan, Italy, India and Japan through investment in jointly controlled entities and associates. 2006 — Damas established a 30,000 sq. m. manufacturing unit in the Dubai Multi Commodities Centre. 2007 — The Group’s network of retail stores controlled by direct and indirect subsidiaries and jointly controlled entities reached 438 stores across four continents and 18 countries.

49 Competitive Strengths

Management believes that the following strengths distinguish the Group’s business from that of its competitors and have enabled the strong growth of the Group.

Leading brand in the Group’s core market with high visibility in the Middle East. Damas is one of the most highly recognised jewellery brands in the Middle East. Management believes that the Group’s brand recognition, supported by the Group’s marketing efforts and customer service, encourages customer loyalty in its core market and, uniquely among jewellery retailers operating in the Middle East, among customers who travel to, from and within the wider Middle East region. Moreover, Management believes that the strength of the Group’s brand recognition has enabled it to become a partner of choice for many international jewellery businesses seeking product placement opportunities in the GCC, including Tiffany & Co.» and Paspaley» and the department store Saks Fifth Avenue. The Group holds exclusive retail rights for Graff» in the UAE through a joint venture with Bin Hendi Enterprises, a Dubai-based distributor of consumer goods. When selecting partners for investments opportunities, the Group seeks companies with similarly strong track records, including those with manufacturing capabilities and high-end retailers with well recognised brands. See “—Retail Operations — Brands and Products — Monobrands”.

Unique business model enabling it to appeal to multiple customer segments. The Group is unique in the Middle East in having a multiple format store model appealing to distinct customer segments based on a mix of income and national characteristics. The location, presentation, brand selection and products offered within each store format are designed to appeal to specific consumer segments of various nationalities and socio-economic backgrounds. These customer segmentations are further reinforced by the Group’s sales-driven advertising and promotional campaigns, which are tailored to the particular customer segments served by each of its store formats. For instance, television advertisements with certain celebrities are used which would appeal to the youth segment, and trunk shows staged by high-end luxury brands are targeted at high income customers.

Leading jewellery distribution network in the Middle East. The Group is the leading jewellery retailer in the UAE, in terms of the number of stores, and has a strong presence in the GCC and the Middle East (including stores in Oman, Bahrain, Jordan, Lebanon, Egypt, Kuwait, Qatar and Saudi Arabia), with plans to further expand operations into North Africa, South Asia and Europe. Management believes that the size of the Group’s operations enable it to achieve economies of scale and cost benefits, such as in negotiating contract terms with suppliers. Management believes that the Group’s strong presence in the GCC has also enabled it to develop and maintain beneficial relationships within the jewellery industry and to raise its profile among customers, suppliers and competitors.

Vertically integrated operations resulting in operational advantages. The Group’s operations integrate procurement, manufacturing, wholesale and retail sales, which provide the Group with many competitive advantages, including the ability to:

• adjust its manufacturing and product range to meet shifts in raw materials prices, such as for gold and diamonds, and to meet changes in consumer preferences;

• obtain pricing and other contractual advantages from suppliers due to high purchase volumes from wholesale operations;

• exercise greater control of the quality of the Group’s raw materials as well as its manufactured products in order to maintain low inventory write-offs and customer exchanges;

• gather and maintain market intelligence on manufacturing costs that inform negotiations with suppliers of semi- and fully manufactured products; and

• secure additional revenues from repairs and other post-sale services to customers.

Experienced management team. The Group’s policies and strategy are led by an experienced management team with significant industry experience and knowledge that have driven the strong growth the Group has experienced in recent years. This team has been successful in determining and implementing measures to achieve the Group’s objectives, including consistent growth of revenues and operations. In addition, the Board includes a strong combination of executive as well as independent members who bring significant business experience to the Group. The Group’s subsidiaries, jointly controlled entities and associate companies operate as professionally managed, independent units under the supervision of their respective senior managers, who have on average been with the company for over 10 years and have significant experience in the jewellery industry.

50 Strategy

The Group’s primary strategic objective is to continue to develop its position as a leading Middle East-based integrated jewellery and watch retailer and jewellery manufacturer whilst expanding its presence in new markets. Management intends to achieve this by implementing the following strategic initiatives.

Expanding the Group’s store network to increase sales volumes, gain market share and achieve economies of scale. Management aims to expand the Group’s store network, particularly in the GCC and North Africa, South Asia and Europe. The purpose of this planned expansion is not only to increase sales volumes, but also to enable the Group to consolidate its position as a leading jewellery retailer, laying the groundwork for increasing market share in the countries in which it operates and strengthening its bargaining position with suppliers. In order to leverage the opportunities provided by regional economic growth in the GCC and India and the growing demand for luxury products as personal income rises, Management aims to expand the Group’s store network principally in the GCC. The Group expects to open over 100 stores in 2008, including 24 that had already been opened as at 31 March 2008, the largest number of which will be in the Semi-Exclusives format. In India, the Group opened 10 stores in 2007 and intends to open eight stores in 2008. The Group’s subsidiary-owned store portfolio has grown from 59 stores with sales of AED 1,195 million in 2000 to 318 stores with sales of AED 3,538.1 million in 2007. The Group has formed a partnership with Gemplus Jewellery India Limited, a subsidiary of Indian diamond jewellery manufacturer and retailer Gintanjali Group, to promote the D’damas brand, which is a leading jewellery brand in India. The Group also intends to expand its Damas Watches and Time Art stores from 19 to 100 stores in the next several years across the Middle East and South Asia. The Group plans to open additional retail stores in Egypt, and to expand its wholesale operations for distribution to other retailers in Turkey.

Increasing sales densities. Management intends to take a number of measures designed to increase in-store sales. These include:

• Increasing and optimising in-store traffic. Management plans to continue to invest in advertising campaigns, particularly at hub airports in the Middle East, and to continue to evaluate the positioning of its stores in order to optimise their foot-fall, thereby increasing sales-per-square-metre of retail space. To this end, in 2006 the Group had the highest media spend in the retail industry in the GCC.

• Capitalising on its flexible business model to achieve greater sales. Management intends to continue to actively adapt the mix of stores and product ranges to respond swiftly to shifting consumer preferences. For example, with the increase in consumer purchasing power in the UAE in recent years, the demand for higher end jewellery has increased, and the Group has adapted to this by increasing the proportion of the Les Exclusives stores relative to the total store and product range.

Continuing implementation of initiatives to increase profit margins. The Group intends to enhance its current profit margins through the following means.

• Increasing and improving the Group’s manufacturing capabilities. In order to enable the Group to gain further control of costs and to continue to modify its product range to optimise profit margins, Management intends to make further investments in the Group’s manufacturing capabilities in the UAE, India, Egypt and China, increasing their manufacturing capacity and the quality of manufacturing. The Group is also planning to form a strategic partnership with a DTC sightholder, in order to secure the supply of certified diamonds.

• Enhancing and developing the Group’s own brands. Management intends to strategically develop certain of the Group’s own brands in order to achieve greater margins from those products. To that end, Management is expanding the Group’s in-house design team and plans to support the development of its own brands through targeted marketing initiatives, including promotions, public relations campaigns and in-store merchandising targeted to specific market needs. One of the most effective advertising campaigns so far has been for the Group’s brand Farfasha, which is targeted at regional youth and promoted by a popular Lebanese singer Nancy Ajram.

• Actively adapting the Group’s product ranges to match shifting consumer preferences. Management intends to continue to strategically adapt its product offerings based on evolving raw materials and end product prices, manufacturing costs and consumer preferences. For example, since in recent years diamond jewellery has produced higher profit margins than other types of jewellery, and consumer demand for diamond jewellery has also increased at the expense of demand for gold jewellery, Management intends to further increase diamond sales as a proportion of the overall product range. This is expected to include such initiatives as the introduction of a range of diamond bangles, a unique product with competitive pricing targeted to South Asian customers.

51 • Leveraging the Group’s growth to obtain favourable supply terms. Management believes that the Group’s growth will provide a platform for building stronger relationships with its suppliers, and that this will enable the Group to negotiate more favourable terms with such suppliers. Measured growth through selective acquisitions, investments and alliances. Management intends to continue to evaluate opportunities for strategic acquisitions, investments and alliances with a view, among other reasons, to: (i) expanding the Group’s manufacturing capabilities; (ii) acquiring new brands and retail chains that are complementary to the Group’s existing brand portfolio; or (iii) enabling the Group to enter new markets in cases where a local partner may be required.

Operational Overview The Group sells jewellery that it designs and manufactures and other products purchased from third parties. Its distribution network includes retail, wholesale and corporate sales channels. The following diagramme illustrates this process:

Retail Subsidiaries - UAE (181 stores) - Overseas (137 Manufacturing stores) Sourcing - Subsidiaries - Gold - JCEs and - Diamonds associates Retail JCEs and - Pearls Wholesale - Watches Associates (7 sites) - UAE (31 stores) - Overseas (89 stores)

Third Parties

Retail Operations Unique Retail Model and Store Formats The Group’s retail model is unique among jewellery retailers in the Middle East, combining retail store format, brand selection, product type and marketing to create distinct store concepts that are specifically suited to three different customer segments of particular income levels, nationalities and purchasing preferences. The selection of the Group’s own brands, international brands and unbranded jewellery for each store format aligns with the same customer characteristics that drive the selection of the store format and the location of the stores for each particular format is chosen based on the likely traffic of each customer segment. As at 31 December 2007, the Group had 438 stores, of which 318 stores were operated by the Group’s own subsidiaries, 57 by jointly controlled entities and 63 through associates. The Group’s three store formats are as follows. • Les Exclusives stores, first appearing in Dubai’s premier architectural feature, the Burj Al Arab, in 2000, cater to high net worth customers of all nationalities, aged 25 to 60, by offering products that include some of the world’s most exclusive luxury brands, such as Parmigiani», Piaget» and Ulysse Nardin» for watches and Graff», Carrera y Carrera» and Roberto Coin» for jewellery. These stores also include private jewellery labels such as Jawaher and the Group’s own watch label Varotti. Les Exclusives stores provide a product mix that can be characterised generally as 5% gold jewellery, 70% diamond jewellery and 25% watches and are usually located in exclusive hotels and resorts, financial centres, and shopping centres and malls in affluent residential areas. The stores are characterised by highly personalised sales service with individualised attention and have seating areas and private rooms, where the customer can enjoy an exclusive, luxury shopping experience. Private sales appointments are frequently arranged, with collections often taken to the palaces and yachts of royal family members. The average floor area for each store is 89 sq. m. and the prices for products in the core inventory range from US$1,000 to US$200,000. Average monthly sales per store are approximately US$200,000. As at 31 December 2007, the Group had 54 Les Exclusives Stores operating in seven countries. For stores that opened in the UAE before 1 January 2007, the average net sales per square meter and gross profit per square meter of these stores was AED 125,400 and AED 31,700, respectively, for the year ended 31 December 2007. • Semi-Exclusives stores cater principally to upper-middle income customers, including tourists and expatriate professionals and office workers, aged 25 to 60, through products that include well known international brands,

52 such as Frederique Constant», Jacques Lemans», Claude Bernard», Fortis» and Rotary» for watches and Annamaria Cammilli», Love Diamonds», Gemtique», Laurentia» and Marco Bicego» for jewellery, as well as some of the Group’s own label brands such as Al Manthourah, Farasha and Farfasha. These stores provide a product mix that can be characterised generally as 50% gold jewellery, 44% diamond jewellery and 6% watches. Most of these stores are located in shopping centres, hotels and similar high-volume, high-transit venues and may or may not have seating areas for customers to inspect the merchandise. The average floor area for each store is 77 sq. m. and the prices range of each product in the core inventory range from US$300 to US$100,000. Semi-Exclusives stores generally have lower sales volumes than the other store formats. Average monthly sales per store are approximately US$125,000. As at 31 December 2007, the Group had 199 Semi-Exclusives stores operating in 10 countries. For stores that opened in the UAE before 1 January 2007, the average net sales per square meter and gross profit per square meter of these stores was AED 80,200 and AED 18,200, respectively, for the year ended 31 December 2007.

• Damas 22K stores cater primarily to middle income and working class populations, aged 25 to 65, and in particular South Asian customers. These stores mainly offer the Group’s in-house jewellery brands, such as Ananya and Legacy, and regional brands such as Nakshatra as well as unbranded jewellery, and provide a product mix that can be characterised generally as 60% gold and 40% diamond jewellery. Damas 22K stores are usually located at shopping outlets, hypermarkets and cooperatives, and have displays of large quantities of jewellery in the windows to attract customers and maximise the use of space through a showroom type of design and standing counters, without seating areas. The average floor area for each store is 94 sq. m. and the price range of each product in the core inventory ranges from US$100 to US$10,000. Due to the generally higher sales volumes and the larger floor space than the Group’s other store formats, average monthly sales per store are approximately US$350,000. The Group currently has 80 Damas 22K stores operating in six countries. For stores that opened in the UAE before 1 January 2007, the average net sales per square meter and gross profit per square meter of the Damas 22K stores was AED 203,900 and AED 20,600, respectively, for the year ended 31 December 2007.

In addition to the three principal store formats, the Group also operates watch stores, “monobrand” stores, stores targeted at children, sales points in Saks Fifth Avenue, duty-free shops and stores of other regional jewellers.

• Watch stores include two Damas Watches and 17 Time Art stores, which offer the Group’s own branded and internationally branded watches in the medium price range (from AED 50 to AED 1,000) in dedicated shops and kiosks.

• Monobrand stores. The Group operates brand-oriented monobrand stores, which carry a single international brand, throughout the UAE. These include Tiffany & Co.», Paspaley», Graff», Parmigiani», Stefan Hafner», Links of London», Roberto Coin», Roberta Porrati» and Folli Follie». These stores are generally established through franchising agreements that provide for distribution, licensing and retailing of the products with these international brands, some of which are on an exclusive basis. The layout for monobrand stores is in accordance with the specific requirements set forth by the particular international brands they stock. Monobrand stores still represent a small percentage of the Group’s overall sales revenues. See “— Brands and Products — Monobrands”.

• Damas Kids. Through its two Damas Kids stores located in shopping centres in Dubai, the Group markets gold and diamond jewellery for children, ranging from infants to toddlers and pre-teens, as well as related accessories for mothers, such as baby rattles and picture frames.

• Saks Fifth Avenue. The Group owns an approximate one-third interest in the Saks Fifth Avenue department store in the Bur Juman shopping centre in Dubai, where it operates a Les Exclusives boutique and a Paspaley» monobrand store. The other joint venture partners are three leading regional investment houses. The arrangements in relation to this joint venture include exclusive rights to sell jewellery in the Saks Fifth Avenue department store in Bur Juman, and exclusive rights to operate all Saks Fifth Avenue stores in the GCC (excluding Saudi Arabia).

• Duty-free. The Group had six duty-free stores as at 31 December 2007, including two in the UAE, two in India and one in each of Hong Kong and Pakistan. The Group plans to open one additional duty-free shop in India.

• Stores of other jewellers. The Group also operates stores of other jewellery businesses, including Taif Jewellers, Marhaba Jewellery and Farhan Jewellers.

53 Brands and Products Over 100 brands of jewellery and watches are sold in the Group’s retail store network, including under its own labels and those of internationally recognised brands. The Group’s own labels are well-recognised in the regions in which the Group operates. Of the brands that the Group owns, 32 are for jewellery and one is for watches (Varotti). Of the international brands, 44 are international jewellery brands, 29 are international luxury watch brands and 14 are mid- range international watch brands. The Group sources internationally branded jewellery and positions it along with its own brands within the Group’s retail stores. The Group’s arrangements for selling jewellery of international brands in its retail and monobrand stores generally involve franchising agreements that provide for licensing and distribution of the products, which may in some instances grant the Group exclusive rights to sell a particular product in a certain geographic region. Such agreements may also require the international brand to supply its own packaging and visual display materials, as well as provide assistance with the marketing budget for advertising its products.

The Group’s Brands The Group generally sells higher volumes of its own branded jewellery than of the international brands. The Group creates and develops its own brands and takes the initiative to launch new trends and styles in response to customer demand. Some of these brands showcase designs that are researched through customer focus group interactions, sneak previews and private viewing functions. The Group’s brands are allocated across the Group’s three store formats to respond to each format’s target customer needs and budget. The Group’s Jawaher, Damas Solitaire, Riwaya and Damas Cut (based on the Group’s 77-faceted diamond cut design) brands are sold in its Les Exclusives boutiques. Semi-Exclusives stores offer the Group’s Farfasha, Dibla, Aya, Al Manthourah, Romance, Damas Solitaire, Boudoor and Fior brands. Among the brands offered in Damas 22K stores are those that are aimed at, inter alia, South Asian customers, such as Harmony, Legacy, Fior and Diamond Leela. The Group also has a range of bridal jewellery, including diamond and 22 karat sets and solitaire rings.

International Jewellery and Watch Brands The Group selects its international jewellery and watch brands to ensure that the product selection for its stores is a function of the consumer characteristics that each store format seeks to target, relying in part on research on consumer needs. This involves: (i) researching the history of the brand; (ii) researching the brand’s worldwide development; (iii) reviewing the brand’s profile; and (iv) determining whether the brand will fit with the goals and customer targets for the selected store formats. The Group usually develops a three-year business plan for sales of a watch brand. For more information on the sourcing process for internationally branded jewellery and watches sold in the Group’s stores, see “— Sourcing and Suppliers — Jewellery and Watches”. The Group’s Les Exclusives stores stock many of the world’s best known luxury jewellery and watch brands, including Fabergé» jewellery and watches, Mikimoto» pearl jewellery, jewellery by La Nouvelle Bague», Pasquale Bruni», Baraka» and Gucci» and watches by Piaget», Chaumet», Ulysse Nardin», Vacheron Constantin» and Chanel». The Group’s Semi-Exclusives stores offer a range of internationally recognised brands that appeal to middle to upper income consumers, such as Gemtique», Laurentia», Baraka, Love Diamond», Roberto Coin» and Sauro» for jewellery, and watches by Nautica», Paco Rabanne», Pierre Cardin», Rotary», GoGirl!» and Fossil». Damas 22K stores offer exclusively the Group’s own branded and unbranded jewellery, and international watch brands such as Claude Bernard» and GoGirl!». The Group’s Damas Watches and Time Art stores offer watches from such leading global brands as Seiko», Casio», Citizen», Titan», Guess», Guy Laroche», Nautica», Rotary» and Fossil». GoGirl!» watches are offered in the Group’s Damas 22K as well as Damas Watches and Time Art stores and appeal to teenaged and pre-teen consumers of middle income levels, with trend setting styles in fashion and sports watches ranging in price from AED 250 to AED 500.

Monobrands The Group also distributes the jewellery of several prestigious global brands in monobrand stores in the UAE, including Graff», Tiffany & Co.», Carrera y Carrera», Parmigiani», Stefan Hafner», Roberta Porrati», Paspaley», Roberto Coin», Folli Follie» and Links of London». Management believes that the Group’s strong brand presence in

54 the region is one of its most attractive features for luxury brand owners. See “— Competitive Strengths — Leading brand in the Group’s core market with high visibility in the Middle East”. • The Group is the exclusive distributor of Graff» jewellery in the UAE. Graff» jewellery is hand manufactured and set with large, one-off precious jewels and diamonds, and is targeted to the wealthiest consumers, with average sales prices of AED 30,000 to AED 6 million. • The Group operates six Tiffany & Co.» stores in Dubai and Abu Dhabi, and plans to open an additional store in late 2008. The Group is the exclusive distributor of Tiffany & Co.» products in Dubai. • Carrera y Carrera» jewellery is sold pursuant to informal arrangements in the Group’s Les Exclusives boutiques throughout the UAE and in one monobrand store at Mall of the Emirates in Dubai. This Spanish brand is targeted to high net worth customers with items having an average sales price of AED 15,000. Carrera y Carrera» jewellery is handcrafted in gold and set with diamonds and other precious stones, in ornate styles inspired by nature, including animal and floral motifs. • Parmigiani» men’s and women’s watches are sold pursuant to informal arrangements in the Group’s Les Exclusives boutiques and in one monobrand store in the luxury Wafi City Mall. This brand has an average sales price of AED 25,000 and appeals to high net worth customers, offering a variety of styles from automatic and manual winding and quartz movements, with high technology features such as tourbillon and minute repeaters. • The Group’s purchases of Stefan Hafner» and Roberta Porrati» have enabled it to open these high-end Italian jewellery stores, in addition to offering these jewellery brands in its Les Exclusives boutiques. • Through its joint venture with Paspaley Pearling Company, the Group operates three Paspaley» stores in the UAE (one in Abu Dhabi and two in Dubai). Paspaley» pearls are known as one of the must luxurious and exclusive brands, and are targeted to high net worth customers. • Roberto Coin» jewellery is sold in the Group’s Les Exclusives boutiques, selected Semi-Exclusives stores and in one monobrand store in Dubai, which was opened in July 2007 as the world’s first dedicated boutique for this brand, in the exclusive Wafi City Mall. Roberto Coin» jewellery has an average sales price of AED 10,000 and is targeted to the wealthy, fashion-conscious consumer, with pieces in white, yellow and rose gold in unique designs studded with many diamonds. • The Group operates three, and plans in 2008 to open one additional, Folli Follie» stores. Folli Follie» offers fashionable and stylish jewellery to middle income consumers pursuant to informal arrangements. • The Group operates one, and plans in 2008 to open four additional, Links of London» stores.

Unbranded Jewellery In addition to the Group’s own brands and international branded jewellery, the Group carries a wide range of unbranded gold and diamond jewellery. The Group’s unbranded gold jewellery includes a large variety of 18, 21, 22 and 24 karat gold pieces sold through the retail network and manufactured by the Group or procured from direct overseas suppliers. The majority of unbranded jewellery sold in the Group’s retail stores is manufactured by the Group or its jointly controlled entities or affiliates, with what Management considers to be exclusive designs and high quality craftsmanship. See “— Manufacturing and Quality Control Processes — Manufacturing”. The remaining portion is procured from international suppliers in Italy, India, Singapore, Saudi Arabia and Bahrain. Suppliers of unbranded jewellery generally approach the Group at its Dubai headquarters by showing their samples. See “— Sourcing and Suppliers — Jewellery and Watches”.

Advertising and Marketing Management aims to maintain the Group’s position as a leading jewellery retailer in the Middle East and further expand the Group’s strong presence in the GCC and other international markets in which it operates by planning, designing and implementing targeted advertising and marketing campaigns. The Group’s marketing efforts focus on advertising and promotions.

Advertising The Group’s principal advertising efforts are focused within the UAE, with approximately one-fifth of advertising being directed to promoting the Group’s stores in other Middle East countries. The Group’s advertising (and percentage of total advertising budget) includes print (50%), billboards (35%), radio (10%) and television (5%).

55 The Group’s advertising is tailored to reach certain target customer segments. For instance, many of the Group’s print advertisements appear in glossy and lifestyle magazines targeted to high net worth customers, as well as English and Arabic language newspapers (the latter being capable of reaching a wider, pan-Arab audience outside the GCC) and Open Skies, the monthly in-flight magazine of Dubai-based airline Emirates, printed in English and Arabic. Outdoor advertising is focused on prime locations throughout the UAE and the GCC. The Group’s advertising of international brands sold in its stores is organised in partnership with these brands, which generally provide partial funding (usually 50%) and have approval rights with respect to format and content. The Group also employs outside public relations and marketing agencies to produce a certain number of press releases and promotions each month and occasionally to conduct market research studies.

Promotional Campaigns Instead of relying on end-of-season sales or advertised in-store discounts, the Group’s promotional campaigns tend to focus on promotional events such as season-led promotions, loyalty cards, mall promotions, bank and credit card tie-ups, partnerships with hospitality and travel businesses, fashion shows, brand weeks, trunk shows and jewellery exhibitions. These marketing efforts are generally focused either on the Group’s own labels or the brands of international jewellers. Marketing of the Group’s Brands. Season driven promotions are focused on holidays and traditional gift-giving days, such as Valentine’s Day, Mother’s Day, Diwali, Christmas and the Ramadan/Eid holidays. These include special offers such as gifts with purchases, prize draws, discount vouchers and tie-ups with other products or retailers to promote the Group’s products, and the introduction of a dedicated piece (generally a pendant) in order to attract locals as well as expatriates. These dedicated pieces are mass manufactured and sold at competitive prices, yielding low margins but high sales volumes. • Bank, credit card and loyalty card tie-ups offer exclusive promotional discounts or purchase credits for customers of certain partners (such as banks or credit card retailers). • Mall tie-ups generally occur on the anniversary of a shopping mall or during the Dubai Shopping Festival (an annual event after New Year’s Day) and involve partnering with tourist agencies to organise bus transportation to souks and other shopping areas, while providing discounts to shoppers. Marketing of International Brands. The Group develops brand awareness by partnering with exclusive international jewellery brands such as Tiffany & Co.» and Paspaley» for product placement and regional distribution. International brands may employ a variety of promotional activities to attract customers, including trunk shows and brand weeks, and have certain requirements as to the format and staging of such events. Due in part to the efforts of the Group’s Marketing Department, the launch of the Sampatti jewellery collection was named “Best Brand Launch of the Gulf” at the Gulf Marketing Review Awards 2006. The Group’s advertising and marketing expenditure for the year ended 31 December 2007 was AED 87.3 million.

Customer Service and Support A key element of the Group’s retail sales strategy is its ability to provide a high level of customer services and support. The Group provides intensive training to the sales team and support staff. The Group’s commitment to customers is reflected in both the high service levels provided by its highly trained sales and customer service team and its product upgrade and exchange policies. The Group has a distinctive merchandise returns policy, which typically permits customers to re-sell to the Group goods purchased from the Group at a minimum discount to the initial purchase price, and the Group generally allows the exchange of goods within 30 days of purchase for other products. The Group also provides customers with a complete watch service facility to repair most types of watches, and these repairs, if outside the original warranty period, are guaranteed for six months. The Group also provides customers with written certifications of their diamonds. One of the Group’s main priorities is to provide, on a timely basis, the personalised customer service that jewellery customers require. In order to provide this service most effectively, the Customer Service Department has three specialised teams: the Inbound Team, Outbound Team and the Complaint Management Team. The Inbound Team is responsible for responding to customer inquiries, maintaining customer accounts and providing customers with the Group’s guidelines and procedures. The Outbound Team manages the customer service database, conducts promotional campaigns with outbound calls and gathers brand and promotion information from within the Group. The Complaint Management Team is responsible for responding to all incoming complaints regarding product quality and services within set time frames. For product complaints, the Complaint Management Team breaks down the analysis according to the type of product (diamond and gold jewellery, watches or pearl jewellery).

56 The Group has recently (in April 2008) implemented a new customer relationship management software to collect and store data about customer preferences in order to more effectively target the Group’s marketing and promotional campaigns, in particular as conducted by the Outbound Team. This data is expected to include analyses of customers, suppliers, partners and internal processes.

Wholesale Operations The Group’s wholesale activities include the sale of gold jewellery, loose and certified diamonds, coloured gemstones, diamond jewellery and gold bullion. Its wholesale customers are typically serviced out of the Group’s headquarters in the Gold Souk in Dubai. Of the gold jewellery wholesale sales, approximately 53% are made to stores owned or operated by the Group, whilst the remaining 47% are made to third parties. These third party wholesale purchasers consist primarily of other jewellery retailers of varying sizes, from overseas locations including other countries in the Middle East, Europe and India, as well as individual business owners and small family-owned local jewellers.

Wholesale Gold The Group’s purchases of gold bullion are made from bullion banks on fixed and unfixed price bases against gold loan credit facilities and are primarily used to pay large international suppliers for finished jewellery. See “— Sourcing and Suppliers — Gold and Gold Jewellery”.

Wholesale Gem Stones Approximately 10% of the Group’s total purchases of gem stones consist of loose stones that it sells to third-party suppliers of finished jewellery (both unbranded and, to a lesser extent branded) and branded watches. The majority of these are diamonds. See “— Sourcing and Suppliers — Gemstones”. The Group intends to increase its sales of wholesale diamonds in order to capitalise on the higher margins these sales generally afford as compared to other areas of the Group’s business. As part of this initiative, the Group is considering the establishment of a new diamond trading division, which would be dedicated to the sale of loose and certified diamonds and coloured stones to the Group’s retail Store Managers and international buyers. The Group also plans to form a strategic alliance with a DTC sightholder. See “— Strategy — Continuing implementation of initiatives to increase profit margins — Actively adapting the Group’s product ranges to match shifting consumer preferences”.

Wholesale Distribution Third party wholesale customers consist of jewellery retailers of many different sizes, from overseas locations including other countries in the Middle East, Europe and India, as well as individual business owners and small family-owned local jewellers. Whilst approximately 90% of the Group’s wholesale purchases are collected by the purchaser at the Group’s headquarters, the Group will on rare occasions deliver its wholesale products, generally by air freight to overseas buyers. Except in certain rare cases, the Group does not arrange delivery to wholesale customers within the UAE.

Corporate Sales In addition to retail and wholesale distribution channels, the Group also makes corporate sales to business clients throughout the Middle East. Corporate sales contributed to 0.5% of sales for the year ending 31 December 2007. The Group’s corporate customers usually purchase for business gifts, employee service and achievement recognition awards, customer incentives and other purposes, but not for purposes of re-sale. The Group established the Corporate Sales Division in August 2005 primarily to target sales opportunities presented by organisations within the UAE, to centralise all “repeat and bulk order” sales to corporate customers, to ensure the continuity and professionalism of sales and after-sales services and to ensure the quality and diversity of corporate products. The Group offers a broad range of corporate jewellery and accessories (including trophies and writing instruments), to corporate sales clients operating in a wide range of industries.

Sourcing and Suppliers The Group sources raw materials, such as gold, gemstones (including primarily diamonds) and pearls, as well as semi-finished jewellery and finished jewellery and watches.

57 Gold and Gold Jewellery Gold accounts for almost all of the Group’s precious metal purchases, with a very small amount comprised of platinum and silver. The Group borrows, on an unfixed price basis, gold bullion from banks and gold jewellery from third party suppliers located primarily in Malaysia as well as the UAE, Italy, Indonesia and Saudi Arabia. When the Group makes a sale of gold jewellery, the price per gram is fixed at the international spot price of gold. The Group then settles its gold loans with the bullion banks or with jewellery suppliers at the price per gram at which such sales were made. The Group’s profit on the sale consists only of commission charges or the costs of manufacturing, rather than from variations in the market price of gold. This pricing mechanism appeals to customers who seek value for money in their purchases of gold jewellery and provides an effective hedge for the Group’s retail stores against losses from fluctuations in the market price of gold.

Gemstones The Group’s purchases of gemstones include diamonds and coloured stones such as rubies, emeralds, sapphires, citrine, amethyst, blue topaz and peridot. At least one fourth of the Group’s gemstone purchases are precious coloured stones from suppliers in Dubai, Bangkok, Jaipur (India), New York and the United Kingdom. Approximately 90% of the Group’s total purchases of gemstones are used in the Group’s manufacturing of jewellery or sold as unset gemstones in the Group’s retail shops (usually diamonds, which can be made into solitaires at retail customers’ orders). Approximately three-quarters of the Group’s total gemstone purchases consist of diamonds. Purchases of loose diamonds are sourced from local and overseas traders, the majority of which are DTC sightholders in Belgium, and a small minority of which are dealers of diamonds sourced from Russian mines. The Group purchases almost all of its diamonds already cut and polished, and a small percentage (approximately 5%) in rough form, which are cut and polished by the Group or by third-party manufacturers. The supply and price of rough (uncut and unpolished) diamonds have been, and continue to be, significantly influenced by a limited number of companies, in particular the DTC. DTC sightholders comprise approximately 100 distributors of diamonds, and are selected and certified by the DTC based on a number of factors, including their minimum purchase amounts, reliability and diamond expertise. As a result, the prices at which the DTC sells rough diamonds to its sightholders significantly influence the prices charged by the Group’s suppliers. The Group requires all suppliers of certified diamonds to represent that the diamonds are “conflict-free”.

Pearls The Group’s Pearl Department purchases pearls that are either used by the Group or resold to third-party manufacturers. Pearls are sourced primarily from China and Japan and include freshwater, Japanese Akoya, South Sea and Tahitian varieties. Pearls are classified according to standardised international criteria based on shape, size and colour (matching for sets and strands), surface appearance and blemishes, lustre and nacre layer (the coating). The prices of pearls are a function of supply and demand and are affected by the quality and productivity of pearl cultivation activities. Suppliers typically deliver the pearls to the Group’s headquarters in Dubai. Pearls are sold by the Group under the brands of large international jewellers, including Mikimoto», Utopia» and Paspaley», as well as under the Group’s brand, Kiku. For Kiku, the Group purchases finished and semi-finished pearl jewellery, meaning that loose pearls are purchased, set, drilled and mounted on a piece which may already contain a diamond or other type of setting, or strung together with other pearls to create a necklace.

Jewellery and Watches The Group sources finished jewellery from over 100 suppliers in various countries, but primarily from large direct overseas suppliers in Italy, India, Singapore, Saudi Arabia and Bahrain. The Group’s unbranded jewellery suppliers are from Italy, India, Singapore, Saudi Arabia and Bahrain and do not have regular supply arrangements with the Group; rather, such suppliers show their items at the Group’s Dubai headquarters to Product Managers. The Group’s own watch brand Varotti is manufactured by an Italian watchmaker, which coordinates the assembly of the watches in Switzerland and delivers the watches to the Group’s headquarters in Dubai. Internationally branded products, including watches, sold in the Group’s retail stores are purchased from, or distributed pursuant to agreements with, large global brands (except for the Group’s own brand of watches, Varotti). The Group chooses which of these products to order based on the perceived suitability for its customers and

58 achieves cost efficiencies in its arrangements with such suppliers by purchasing on a cost-plus basis and in large quantities.

International Jewellery and Watch Brands For the procurement of internationally branded jewellery, the Group’s Brand Managers attend international jewellery exhibitions as well as watch conventions, where they approach certain brands perceived as responsive to the demands of the Group’s customer base (based on price and the characteristics of the jewellery) and according to plans for expansion of the Group’s business. International companies also approach the Group requesting that their brands be distributed. The Group selects international brands on a category basis in order to align with particular store format. The Group’s international watch brands are sourced exclusively from well known European watch manufacturers.

Manufacturing and Quality Control Processes The Group designs, manufactures and distributes its products using an integrated manufacturing process that is generally shared by all companies within the Group. This process is characterised by careful supervision and control over all stages of the jewellery production chain, whilst remaining flexible, efficient and responsive to consumer demands. The Group also manufactures jewellery products that are then supplied to third-party retailers. The manufacturing process begins with design and continues with market research and development, in order to ensure the product’s responsiveness to current customer and market trends.

Product Development and Design Market research is the preliminary step in designing and developing the Group’s products. The Group identifies potential new products that are likely to have strong market appeal in line with the Group’s strategy through various sources, including customer focus groups, local students from the Group’s training courses in jewellery manufacturing and branding, international trade shows and fairs, and market research. These activities enable the Group to identify specific customer preferences in relation to certain products and play an essential role in the product development process on a Group-wide basis. On the basis of such market research, the Group begins designing and developing specific products in accordance with scheduled promotions for its brands. The first phase of design and development involves the creation of a series of product drawings using a dedicated computer software program to support its design process. Once the product drawings have been approved, the manufacturing process begins, and is followed by the product launch.

Manufacturing The Group manufactures a portion of the own branded and the unbranded jewellery sold in its stores, through its own manufacturing platform, which consists of: (i) nine manufacturing facilities operated by the Group, including workshops in Abu Dhabi, Ras Al Khaimah, Dubai and Sharjah; and (ii) seven manufacturing facilities operated by jointly controlled entities and affiliates, of which there is one in the UAE, two in Lebanon and one in each of Hong Kong, India, Italy and Thailand. The Group uses three types of manufacturing processes: (i) a hand-made process, which involves designing the piece, making a model by hand in gold, setting and polishing; (ii) a machine-assisted process, which involves the design of the piece, creating a master mould, wax injection into the mould, casting, filing, setting and polishing; and (iii) a machine-made process, which involves producing a wire or strip from molten gold, weaving or forming the molten metal with a specialist machine, cooling, polishing and finishing individual pieces. As at 30 April 2008, the Group had nine factories employing 114 craftsmen. The Group’s wholly owned manufacturing facilities, which together produce more than 828,500 grams of jewellery per year, are in the UAE. The Group established a rough diamond polishing facility in Mumbai, India in 2006, with capacity to manufacture at least 25% of its total polished diamond requirements, which supplies the Group’s retail stores.

Planned Expansion of the DMCC Facility The Group intends to invest approximately AED 53 million in expansion of its manufacturing and distribution capabilities, principally in investments on its DMCC Facility. The Group’s 10,498 sq. m. (113,000 sq. ft.) DMCC facility, which currently has workshops and design centres housing approximately 120 employees over two floors, is planned to be expanded and upgraded by the end of 2008 in order to support the Group’s retail expansion plans. Following such expansion and upgrade, this facility is expected to have capacity for approximately 500 employees

59 and to manufacture 200 kilograms of products per month for regional and export use, and to have advanced technology for diamond cutting, including for the Damas Cut 77-faceted diamond (previously manufactured by a third-party diamond cutter in Russia).

Quality Control

The Group places particular emphasis on monitoring the quality of the products it sells before each product is distributed and, to this end, checks all jewellery and watches, as well as raw materials used in its manufacturing processes, against stringent quality standards. Generally, jewellery is hallmarked, and the Group has historically supported government testing of gold and diamond quality while assisting in the development of an international diamond laboratory promoted by the DMCC, which is established for certifying diamonds. The Group’s quality control standards have also been used in training the employees of several international brands. Quality control checklists include the following criteria, among others: (i) the aesthetic and consistent appearance of the products; (ii) the Group’s logos and engravings; and (iii) compliance with technical specifications, such as sizes and clasps.

Pieces that do not pass quality control are returned or repaired, depending on the complexity of the piece (more complex pieces are typically returned to the supplier) and the character of the piece (damages to precious stones cannot be repaired without reducing the size of the stone). When pieces are repaired by the Group, the supplier is typically invoiced for the cost of the repairs.

Logistics

The Group’s logistics are managed centrally from the Group’s headquarters by the Group’s Logistics Division. The logistics procedures vary primarily according to whether they relate to sales or purchases.

Sales. Almost all of the Group’s wholesale purchasers collect their orders at the Group’s headquarters.

Purchases. Suppliers of raw materials and finished jewellery and watches generally arrange for the delivery of their products to the Group’s headquarters in Dubai. The Logistics Division then delivers products that pass quality control to the Group’s retail stores. If a product purchased by the Group does not pass quality control, the Logistics Division returns the product to the supplier, either for a refund or exchange. See “— Sourcing and Suppliers” and “— Manufacturing and Quality Control Processes”.

Shipping. When shipping the products from the Group’s headquarters to the Group’s retail stores or, in certain rare circumstances to third party customers, the Logistics Division follows standardised shipment and delivery procedures. The Group’s insurance policies require that at least two employees must accompany shipments of over AED 3,750,000. Upon delivery at the retail stores, products are scanned into the MS Navision system. See “— Insurance” and “— Security”.

Store Deployment and Development

As at 31 December 2007, the Group operated a total of 438 stores in 18 countries. In the UAE, the regional economic and construction booms have led to an abundance of opportunities for the Group to expand into additional retail and manufacturing space. The Group has over 100 planned store openings currently scheduled for 2008, 24 of which were already achieved in the first three months of 2008, and is planning to close the U.S. store.

Site Selection

The recent growth in the economies of GCC countries has created opportunities for new store locations in newly developed residential areas, commercial areas and shopping malls. The Group evaluates these potential opportunities through a focused approach to site selection for the development of new store locations. This involves a two-pronged approach by the Group’s Sales and Projects Teams: (i) actively seeking store sites to promote identified business strategies, such as expansion into a market to promote brand recognition; and (ii) evaluating new opportunities for store sites presented by the creation of new retail space or the closing of jewellery stores in areas with good business prospects. Most of the UAE’s real estate developers have relationships with the Group and consequently contact the Group when space becomes available. The Group’s Projects Team analyses the individual economics of a proposed site, including the neighbourhood, market conditions and customer traffic, as well as the demographics of the residents and what other establishments, such as hotels, colleges and businesses, serve the area. These factors and the status of the other tenants determine what store format the Group will open at the site and what size it will be.

60 Store Locations The following table sets forth the number of the Group’s directly operated stores and those operated by jointly controlled entities and associates by location as at 31 December 2007. Number of stores as at 31 December 2007 Operated by jointly controlled entities Country Operated by the Group and associates Total UAE...... 181 31 212 Oman...... 27 0 27 Saudi Arabia ...... 0 25 25 Kuwait ...... 22 6 28 Italy ...... 21 0 21 India ...... 16 2 18 Bahrain ...... 16 14 30 Qatar ...... 0 16 16 Egypt ...... 14 15 29 Jordan ...... 9 0 9 Turkey ...... 1 5 6 Pakistan ...... 0 2 2 Lebanon ...... 5 0 5 UK...... 2 0 2 Maldives ...... 1 4 5 Thailand...... 1 0 1 United States ...... 1 0 1 Hong Kong ...... 1 0 1 Total ...... 318 120 438

Store Management The Group’s stores usually operate under the direction of a Store Manager who manages all store-level operations, including sales and most personnel-related matters. Store Managers of larger stores are assisted by a team that often includes an Assistant Store Manager and a team of Area Sales Managers, who are responsible for between 10 and 12 stores determined on the basis of store operating hours, anticipated sales volumes and store format. For additional information about the Group’s retail stores, see “— Property”.

Jointly Controlled Entities and Associates The Group evaluates potential investment opportunities and manages the operations and reporting of the Group’s investments. The Group currently has a number of jointly controlled entities and associates, which primarily consist of jewellery and watch manufacturers and high-end, recognised brands. Generally, before an investment is made, the Group prepares a feasibility report (with the assistance of outside consultants for larger investments) and assesses the requirements for the planned investment. The Group prepares three plans: (i) a framework business model; (ii) a phased project plan for implementation of the business plan; and (iii) a promotional development plan which determines the most appropriate merchandising, marketing and appointment of key management personnel. Investment agreements are negotiated, reviewed and finalised by the Group’s in-house legal team and sometimes with the assistance of external counsel (depending on the size of the investment). Jointly controlled entities. The Group has also invested in 12 jointly controlled entities in which the Group maintains some management control. As at 31 December 2007, these included Al Manara (Juliet) with five stores in the UAE, Time Centre LLC with one watch store in the UAE, Damas Saudi Arabia Company Ltd. with 25 stores in Saudi Arabia, Damas Toomban Pvt Ltd. with one store in Pakistan, Premium Investments International LLC with two stores in Dubai, Paspaley Pearl Jewellery LLC with three luxury pearl jewellery stores in Dubai, Roberto Coin Middle East LLC with one monobrand store in Dubai and Al Zain Trading Co. WLL with 12 stores in Bahrain, as well as Trading House Kristall DMCC, D-Damas Jewellery (India) Private Ltd, Deepu Jewellers DMCC and Flamingo Jewellery (India) Pvt. Since 2003, the Group has also held an investment in a jointly controlled entity in India with Gemplus Jewellery India Limited, a subsidiary of leading jewellery retailer Gitanjali Group for the brand D’damas, which primarily sells gold and diamond jewellery and offers an on-line shopping facility. Associates. Most of the Group’s investments are in associates, which amount to 12 investments in companies in which the Group does not maintain management control. As at 31 December 2007, these included Damas and

61 Chalco General Trading Co. LLC with nine stores in the UAE, Style Avenue Middle East FZCO in which the Group has an indirect 31% interest and which is exclusively licensed to operate Saks Fifth Avenue in the GCC (except for Saudi Arabia), Daiso (Japan) Value Stores LLC with eight stores in the UAE, Damas Mucevherat ‘II Ve T’ AS with five stores in Turkey, LTC International Qatar LLC with one store in Qatar, Al Mana Jewellery Co — Damas WLL with 15 stores in Qatar, Islanders Maldives Pvt Ltd. with four stores in the Maldives, LTC International General Trading Co. with five stores in Kuwait, Premium Investment Kuwait with one store in Kuwait, Felopateer Palace with 11 stores in Egypt, Glamour with four stores in Egypt and Daiso Trading with two stores in Bahrain.

Employees As at 31 December 2007, the Group had 1,820 employees in the UAE and 2,862 worldwide and as at 31 March 2008, the Group had 1,932 employees in the UAE and 3,026 worldwide. All of the UAE based employees are full- time, and receive all benefits conferred by the local laws of the jurisdictions in which they are employed. None of the Group’s employees are represented by a union. The following table sets forth the number of employees in the UAE by functional category as at 31 December 2007. Functional Category Number of employees Sales (Retail) ...... 993 Management and Administration(1) ...... 347 Manufacturing...... 336 Sales (Wholesale) ...... 144 Total ...... 1,820

(1) Includes management personnel and support function employees. The Group provides regular training programmes for its employees, often with the assistance of external consultants. Training sessions are planned using a yearly training planner, which sets forth the training schedules for product knowledge topics and other skill development modules. The Training and Development Department has developed a training manual entitled “Jewellery Fundamentals”, which is designed to inform all the retail stores and employees about products sold by the Group and other related information. The Group also conducts training in customer service, team building, leadership, quality improvement, managerial effectiveness, performance management, time management, communication and presentation skills, security and vigilance. In order to promote an improved retention, the Group has initiated several programmes. An example of one of these programmes is the store-specific profit incentive programme, in which store managers are given a percentage of profits over a stipulated benchmark. The Group provides benefits to employees as required by applicable local law. In the UAE, employees earning less than US$3,000 per month are eligible for an interest-free personal loan from the Group for expenses such as housing. For employees earning more than US$3,000 per month, the Group assists the employees by arranging for bank loans. In addition, as required under UAE law, employees in the UAE receive health cards, pensions and annual round trip air tickets to their point of origin.

Insurance The Group has purchased several standard insurance policies in order to manage risks from losses from potentially harmful events, including: (i) a jeweller’s block policy (covering theft, fire, breakage, robbery, larceny, damage to jewellery and transportation and handling of currency); (ii) a fidelity guarantee policy (covering losses from employee misconduct); (iii) property all risk policy; (iv) a third-party liability policy; (v) a group, life and personal accident insurance policy; and (vi) a vehicle insurance policy. These policies cover the Group’s stocks and inventory in 11 countries in the Middle East and Africa, including Bahrain, Egypt, Jordan, Saudi Arabia, Kuwait, Lebanon, Libya, Oman, Qatar, Sudan and the UAE. The Group is in the process of obtaining a “key man” insurance policy and a business interruption insurance policy. Management believes that the Group’s insurance coverage is in line with industry standards in the markets in which the Group operates.

Property The Group’s entire store portfolio is held through property leases. Lease terms tend to vary by country but usually contain industry standard terms, such as provisions for the Group to bear the costs of repairs and insurance for the leased facilities, and provisions detailing payment requirements for rent, utilities and services charges. Lease contracts for high street and souk locations are usually for initial terms of one year, which are usually automatically

62 renewable. Stores located in shopping malls and hotels are usually leased for three to five year terms. The Group is protected against sharp increases in rents within the UAE since the UAE government has introduced a 7% cap on rent increases, which is expected to be reduced to 5% over the next two years. The Group leases properties in 18 countries, most of which are used as retail and manufacturing space, including the UAE, Oman, the United States, Bahrain, the Maldives, Italy, Jordan, Lebanon, Egypt, India, Thailand, Kuwait, Qatar, Turkey, the United Kingdom, Pakistan, Saudi Arabia and Hong Kong. For the year ended 31 December 2007, the Group made an aggregate of AED 62.5 million in rental payments under such lease agreements. The Group owns its head office in the Gold Souk in Deira, Dubai and certain of its manufacturing sites in the UAE. See “— Manufacturing and Quality Control Processes — Manufacturing”.

Intellectual Property The Group has registered the trademark “Damas”» in nearly 60 countries, including all GCC countries. The Group is in the process of applying for registration of all of its designs and brands with the UAE Ministry of Economy. Once the designs and brands have been registered in the UAE, the Group intends to apply to register the brands internationally. Concurrently, the Group is also in the process of applying for patents for five or six designs that require a unique manufacturing process. An example of such a design is a unique cut of diamond branded as the 77-faceted Damas Cut, recently developed to maximise cost-effectiveness and achieve greater brilliance of the stone.

Information Technology and Systems The Group’s principal IT requirements consist of software and hardware and physical infrastructure to support the accounting and financial control functions of the Group and the management of customer relations, inventory tracking, human resources, and internal communication and data management. The Group uses MS Navision to support its point of sales functions, for inventory tracking and for other retail sales- related functions. See “— Security — Inventory Management” below. Sofscript is used to support the product and corporate finance functions. HR Net is used to support human resources functions, including payroll. Business Objects is used for business intelligence and reporting. The Group also uses the MS Office platform for internal communications and general business office applications. Advent Net Service Desk is used for the internal help desk, and Nod32 is used for anti-virus protection. The Group’s regional (usually country specific) server hubs transmit sales and other financial and management data on a daily basis from individual store terminals to a central data centre in Dubai via ADSL or ISDM leased lines. This network is protected by a firewall to prevent hacking and other means of outside interference, and the central data centre is equipped with reserve power, FM 200 fire suppression systems and biometric access control. All daily sales data are backed up on a daily basis and placed in off-site storage. The network of retail stores and administrative offices are supported by an IT help desk.

Security Inventory Management The Group individually barcodes each item that is sold in its retail stores to allow inventory tracking by its Navision system, which transmits this information to the Group’s headquarters, where it is reconciled with the accounts on a daily basis. The Group also performs physical inventory checks at approximately 30-to 60-day intervals. Store Managers additionally perform their own inventories on a more frequent basis, as they are held financially responsible by the Group for the security of their store’s inventory. In-transit security. Goods in transit within the UAE are closely tracked and are subject to strict security procedures. The movement of all CVIT vans is monitored by a tracking system, and the vans are required to change their routes regularly. All goods transported by the CVIT team are sealed in packaging that carry tracking numbers and require the signature of designated individuals and ultimately recipients at the retail stores, who must confirm the receipt of the goods and scan the items into the Navision system within a designated period of time. Store security. Each of the Group’s stores is equipped with closed-circuit television surveillance, linked to a DVR or other video recording device, an intrusion alarm and a glass breakage alarm. Additional security measures are in place as required under local law, such as, for example, the leased lines to the police headquarters required under UAE law. These security systems are monitored by tri-monthly security audits. The Group was the first Dubai retailer to replace the VHS security recording system with a DVR system and plans to be the first to install a central security monitoring system which will enable the security department at the head office to view live feed from

63 in-store cameras and will enable direct monitoring of customers and sales personnel. It will also be set up so as to monitor the movement of each individual piece of jewellery. Training. The security office provides security training and guidelines to all employees, including special on-site security training for Store Managers.

Legal Proceedings As at 31 December 2007, there was a case under arbitration against the Issuer’s Italian subsidiary, DIT group S.p.A. (formerly Stefan Hafner S.p.A.) (“DIT”). The Group had acquired the business of Stefan Hafner S.p.A. from the previous owner, Mr Stefan Hafner, who subsequently commenced arbitration proceedings against DIT claiming an additional consideration of AED 41.94 million (Euro 7.75 million). DIT has rejected this claim and filed a counter- claim against Mr Stefan Hafner for AED 8.7 million (Euro 1.6 million) representing losses on the non-recovery of outstanding receivables assumed from Mr Stefan Hafner and certain expenses it incurred on behalf of Mr Stefan Hafner. The final hearing of the arbitration proceedings took place on 8 January 2008 and a decision is tentatively expected for October 2008. Although there can be no assurance as to the outcome of the arbitration proceedings, Management believes that the price paid for the purchase was fair and mutually agreed between the parties and deems the counter-claim of AED 8.7 million against Mr Stefan Hafner to have merit. Based on the above and Management’s assessment of the likelihood of an adverse decision, no provision has been made against this claim in the 2007 Financial Statements. See Note 23 to the 2007 Financial Statements. In addition to the above, the Group is involved from time to time in legal actions and regulatory investigations, most of which arise in the ordinary course of its business. During the 12 months preceding the date of this Prospectus, the Group has not been involved in a governmental, legal or arbitration proceeding (including any such proceeding, pending or threatened, of which Management is aware) that Management believes is likely to have, or has had, a significant effect on the financial position or profitability of the Group. There can be no certainty, however, that adverse developments including court decisions in relation to the claims and proceedings (pending or threatened) described above would not have a material averse effect on the Group’s results of operations or financial condition.

64 MANAGEMENT The following is a summary of certain information regarding the Issuer’s Management, certain provisions of the Issuer’s constitutional documents and certain provisions of DIFC corporate governance law. This summary is qualified in its entirety by reference to such documents and DIFC law and does not purport to be complete.

Board of Directors Pursuant to the Issuer’s Articles of Association (the “Articles”), the Board of Directors is composed of not fewer than two Directors. As at the date hereof, the Board of Directors is composed of three Directors. On 1 June 2008, the shareholders of the Issuer approved the expansion of the Board to a total of 11 Directors, conditional, and with prospective effect, upon completion of the Offer and the DIFX Admission. The following table sets forth the names, dates of last election and expiry of the term of the members of the Board of Directors who will be in place immediately upon DIFX Admission. Office Name Date of Last Election Expiration of Term Chairman(1)(3) ...... Tawfique Abdullah 18 June 2008 1 June 2009 Managing Director(3) ...... Tawhid Abdullah 18 June 2008 1 June 2009 Deputy Managing Director(3) . . . Tamjid Abdullah 18 June 2008 1 June 2009 Director(1) ...... Mohamed Alabbar 1 June 2008(4) 1 June 2010 Director ...... H.E. Aamer Abdul Jalil 1 June 2008(4) 1 June 2010 Mohammed Al Fahim Director(1)(2) ...... DrGaetano Cavalieri 1 June 2008(4) 1 June 2010 Director(1)(2) ...... John Harper 1 June 2008(4) 1 June 2011 Director(1) ...... Abdullah Nasser al Mansoori 1 June 2008(4) 1 June 2011 Director(1)(2) ...... DrMaryam Matar 1 June 2008(4) 1 June 2011 Director(1)(2) ...... MrEssam Abdulkadir 1 June 2008(4) 1 June 2012 Al Muhaidib Director(1)(2) ...... MrAmmar A. Alkhudairy 1 June 2008(4) 1 June 2012

(1) Non-Executive Director. (2) “Independent Director,” as such term is defined in the Offered Securities Rules of the DFSA Rulebook, Appendix 4 at A4.3.2. (3) Current Board member of the Issuer. (4) Appointment conditional on the DIFX Admission. Certain biographical information relating to the members of the current Board of Directors is set forth below. Tawfique Abdullah has served as Director of the Issuer since 14 April 2005. He has also served as Chairman of the Board of the Company since 1980 and is responsible for monitoring Group strategies and mentoring the executive committee. Mr Abdullah is also a qualified gemmologist and goldsmith. Mr Abdullah currently holds professional and active memberships with various reputable organisations such as the Dubai Gold & Jewellery Group, the World Diamond Council and the World Federation of Jewellery. Mr Abdullah has also served as Chief Executive Officer of the Dubai Metals and Commodities Centre and has been bestowed with the title of “Knighthood of Belgium”. In addition to his directorships of the Company and Damas Jewellery LLC, Mr Abdullah is currently a member of the boards of several of the Group’s subsidiaries, associates and jointly controlled entities, and the boards of: (i) Damascus Jewellery LLC; (ii) Gold Master Décor LLC; and (iii) Red Mark Studio LLC. He also serves as Vice Chairman of the Dubai Multi Commodities Centre. Tawhid Abdullah has served as Director of the Issuer since 14 April 2005. He has also served as Managing Director of the Company for over 10 years and is responsible for finance and corporate functions as well as marketing and the gold wholesale business. Mr Abdullah, who has been instrumental in expanding the Company’s retail network and enhancing the “Damas” brand for over 25 years, is also a qualified gemmologist. He has held various senior positions at jewellery companies, including Managing Director of Dubai Gold & Jewellery Group. Mr Abdullah was awarded “Best Entrepreneurial Mentor” by the Mohammad Bin Rashid Awards for young business leaders in June 2007. In addition to his directorships of the Company and Damas Jewellery LLC, Mr Abdullah is currently a member of the boards of several of the Group’s subsidiaries, associates and jointly controlled entities, in addition to the boards of: (i) Rivoli Enterprises LLC; (ii) The Jewellery Store DMCC; (iii) Dubai Gold & Jewellery Group; and (iv) Dubai Autism Group. Tamjid Abdullah has served as Director of the Issuer since 14 April 2005. He has also served as Deputy Managing Director of the Company for over 10 years and is responsible for the diamond division as well as the retail network. He has been instrumental in establishing the quality control and customer service departments of Damas Jewellery

65 LLC. Mr Abdullah is also a qualified gemmologist. For over three decades, Mr Abdullah has been recognised with numerous awards for jewellery design and craftsmanship including the De Beers Millennium Award for the Best Jewellery piece in 2000 and in 2004. He is also responsible for the Company’s private jewellery brands such as Boudoor, Romance, Hayati and Jawaher. In addition to his directorships of the Company and Damas Jewellery LLC, Mr Tamjid Abdullah is currently a member of the boards of several of the Group’s subsidiaries, associates and jointly controlled entities, and the boards of Damascus Jewellery LLC and The Jewellery Store DMCC. Messrs Tawfique, Tawhid and Tamjid Abdullah are brothers. Mohamed Alabbar has served as Director of the Issuer since June 2008. He has also served as Director of the Company since July 2005. Mr Alabbar is a graduate in Finance and Business Administration from Seattle University in the U.S. and was awarded an honorary doctoral degree in humanities from Seattle University in recognition of his notable achievements in business, economic development and public service in Dubai and throughout the Middle East region. Also in recognition of his achievements, FDI magazine, published by the Financial Times Group, recently named Mr Alabbar “Middle East Personality of the Year”. Mr Alabbar was ranked second in Arabian Business’ March 2007 list of the 100 Most Influential Arabs in the World, and Fortune magazine named Mr Alabbar among the top 30 in power positions globally in their December 2007 issue. In addition to his directorship of the Company, Mr Alabbar is the founding member and Chairman of Emaar Properties PJSC. He is also the Director General of the Dubai Department of Economic Development and a member of the Dubai Executive Council. Mr Alabbar serves on the board of directors of the Investment Corporation of Dubai, the investment arm of the Government of Dubai, and is a board member of Noor Investment Group, an affiliate of Dubai Group, the leading diversified financial company of Dubai Holding. H.E. Aamer Abdul Jalil Mohammed Al Fahim has served as Director of the Issuer since June 2008. H.E. Al Fahim is a member of the executive committee of Damas LLC. H.E. Al Fahim is also the executive director of the Al Fahim Group and serves as a member of the UAE Federal National Council. H.E. Al Fahim is the chairman of Aradi Properties P.J.S.C. and serves as a director on the following boards: the Abu Dhabi Chamber of Commerce & Industry; Abu Dhabi Commercial Bank; Al Wathba Insurance Company; Al Qudra Holdings; Al Safwa Islamic Financial Services; and International Investment Bank (Bahrain). H.E. Al Fahim obtained a Master of Business Administration (Banking and Finance) from the University of Hull. Abdulla Nasser Al Mansoori has served as Director of the Issuer since June 2008. Mr Al Mansoori obtained a B.Sc. with honours in Electrical Engineering from Swansea University in Wales in 1974. Mr Al Mansoori is a member of the Abu Dhabi Executive Council and serves on the board of directors of Al Mansoori Specialized Engineering, Al Nasser Industrial Enterprises and Bank Alfalah Limited. John Harper has served as Director of the Issuer since June 2008. Mr Harper has over 41 years of experience in the banking industry, having worked for HSBC Bank plc (“HSBC”) in various positions. When Mr Harper retired from HSBC at the end of 2006, he was Global Co-Head of the Retail Sector, Corporate, Investment Banking and Markets. He worked in the retail banking sector at HSBC for eight years, prior to which he served as Head of Property and Construction, Corporate Finance Director of the Oil and Energy Group, Manager of the Crocker Integration Project, Manager of Syndicated Loans in Hong Kong, and various other positions with HSBC in Bermuda, Beirut and Bahrain. Mr Harper became an Associate of the Chartered Institute of Bankers in 1969. He also currently serves as Trustee and Treasurer of HSBC Bank (UK) Pensioners’ Association Benevolent Fund and as Governor and Chairman of the Premises and Finance Committee of Eastbury Farm JMI School in Northwood, England. Dr Gaetano Cavalieri has served as Director of the Issuer since June 2008. Dr Cavalieri has over 37 years of experience in the jewellery business, having served as President of his family jewellery company since 1972 and as President of the Italian Gold and Jewellery Wholesaler Federation since 1993. He also currently serves as Chief Financial Officer of the World Diamond Council. He has also served as a consultant to the Huadu Authority District People’s Government of Guangzhou and the China Chamber of Commerce for Precious Metals and Gemstones, and has served as a member of the Advisory Board of the Italian Institute of Foreign Trade and Commerce since 2001. Dr Cavalieri received his Ph.D. in Economics and Economic Policy from Catania University in 1979, and his master’s degree in Multi-criteria Decision Theory from Catania University and in Business Administration, Finance and International Marketing from Rotterdam University in 1986. Dr Cavalieri has received several industry awards, including the “Most Advanced Jewellery Marketing Project” from the Japanese Ministry of Industry, “The Best Programme to Penetrate the German Jewellery Market” award from the German Ministry of Commerce, and the “Youngest Foreign Managing Director” award from the Australian Ministry of Foreign Trade. Dr Cavalieri also serves on the board of the Italian General Trade Confederation and Mondimpresa S.c.r.l. Dr Maryam Matar has served as Director since June 2008. Dr Matar has over 10 years’ experience in the field of Health and Social Development. She is the founder and Executive Director of the UAE Genetic Disease Association

66 (since 2005), and the founder and Executive Director of the UAE Down Syndrome Association (since 2006). Dr Matar also served as Executive Director of the Dubai Social Development Strategic Plan 2015, and was the Executive Team Leader for the Ministry of Health Strategy 2008-2012. From 2006 to 2008, Dr Matar served as Undersecretary to the Minister of Health for Public Health and Primary Health Care. Dr Matar obtained a bachelor’s degree in Medicine and Surgery from the Dubai Medical College in 1998. In recognition of her achievements, Dr Matar received the “Sheikh Rashid Award for Education Excellence” from the Dubai Faculty of Medicine in 1999, the “Dubai Quality Award for Best Employee” from the Dubai Department of Health in 2003, the “Best Community Project Award” from the Sheikh Mohammed Bin Rashid Leadership Programme in 2004 and the “Emirate Business Women Award for Professional Excellence” from the Dubai Quality Group in 2005. Mr Essam Abdulkadir Al Muhaidib has served as Director of the Issuer since June 2008. Mr Al Muhaidib is the Group Managing Director of A.K. Al Muhaidib and Sons Group, one of the major conglomerates in Saudi Arabia. Mr Al Muhaidib, who holds a bachelor’s degree in Statistics from King Saud University in Saudi Arabia, is also on the board of directors of several companies in the areas of banking and insurance, retail, construction and real estate, including Emmar Middle East, United Sugar Company (THIMAR), Amwal Al Khaleej and Middle East Paper Company. Mr Al Muhaidib is also on the board of several educational and charitable organisations. Mr Ammar A. Alkhudairy has served as Director of the Issuer since June 2008. Mr Alkhudairy has over 20 years of management experience, principally in the fields of merchant, investment and corporate banking and venture capital. Mr Alkhudairy is a founding partner of Amwal Al Khaleej Commercial Investment Company in Saudi Arabia, and currently serves as its Managing Director. Prior to his position with Amwal Al Khaleej, Mr Alkhudairy served as Regional Manager of Banque Saudi Fransi from October 2001 to September 2004. Before his position with Banque Saudi Fransi, Mr Alkhudairy served as Manager of the Riyadh Corporate Bank for United Saudi Bank from April 1995 to May 1999, and Vice President and Chief Operating Officer of Tawteen Trading Company, a venture capital firm in Saudi Arabia, from January 1992 to March 1995. Before working with Tawteen Trading Company, Mr. Alkhudairy held the position of Assistant Manager in the Equity Investment Department of the Riyad Bank and High Commission for Development of Riyadh. Mr Alkhudairy received his master’s degree in Engineering Administration from George Washington University in Washington, D.C. in 1984, and his B.Sc. in Civil Engineering from George Washington University in 1983. The business address of each of the Directors is the Issuer’s registered address: c/o Damas International Limited, Level 3, Suite 57-58 Gold Centre Building, PO Box 1522, Dubai, UAE.

Senior Management In addition to the executive management on the Board, the management of the Company is conducted by Senior Managers, who are considered relevant to establishing that the Company has the appropriate expertise and experience for the management of its business. The following table sets forth the names and dates of appointment of the current Senior Managers of the Group. Office Name Date of appointment Chief Financial Officer ...... Parthasarathi Dutta 3 September 2006 Chief Operating Officer ...... Tharuvai Pratap 15 November 2007 Chief Investment Officer...... Sankaranarayanan Natarajan 26 May 1994 General Counsel ...... Ghandy Abuhawash 20 November 2007 Chief Internal Auditor ...... Venugopal Padmakumar 10 May 1999 Deputy General Manager for Sales ...... RajSahai 24 May 1997 Certain biographical information relating to the current Senior Managers is set forth below. Parthasarathi Dutta has served as Chief Financial Officer of the Group since 2006 and is responsible for finance, IT, management information systems, business processing and re-engineering and central purchasing, reporting to the Managing Director and to the Board of Directors. Mr Dutta received his bachelor of science degree with honours from Bombay University in 1976 and is a qualified chartered accountant with over 28 years of experience in various industries, including manufacturing, distribution, retail and projects. He has worked extensively in the Middle East, Far East and Europe and has served as the financial head of major multinationals. Mr Dutta served as Director of Business Control and Head of Procurement and Contracting at Ericsson from 2005 until 2006. Prior to joining Ericsson Mr Dutta worked for over a decade as Associate Vice President for Corporate Finance and Affairs of Jumbo Electronics a major retailer and distributor of electronic, communications and IT products in the Middle East, where he spearheaded the Company’s international growth. Prior to 1995, Mr Dutta held various positions as finance manager for companies based in India and the Middle East.

67 Tharuvai Pratap has served as Chief Operating Officer of the Group since 2007 and is responsible for the Group’s operations. Prior to joining the Group, Mr Pratap held various senior positions, including nine years as a CEO in retail at the Bin Hendi Group and eight years in fast moving consumer goods as a Sales Manager/General Manager at American Eastern Dubai from 1992 to 1997. Prior to his position at American Easter Dubai, Mr Pratap served as Manager of Ebin Rushed Pharmacy in Muscat, Oman from 1982 to 1992 and as Marketing Manager of Spencer’s in Madras, India from 1980 to 1982. He obtained an MBAwith a concentration in marketing and behavioural sciences from IIM, Calcutta in 1978 and a bachelor’s degree in Pharmacy with honours from BITS, Pilani in 1974. He is a member of MENSA International. Sankaranarayanan Natarajan has served as Chief Investment Officer of the Group since 2005 and is responsible for identifying, analysing and monitoring the Group’s investments. Prior to joining the Group, Mr Natarajan was a practicing chartered accountant at his own firm in Madras, India from 1989 to 1994. He received his chartered accountant certification from the Institute of Chartered Accountants of India in 1989 and a B.Sc. in Physics from Madras University in 1983. Prior to his current position, Mr Natarajan was head of the finance department of the Company. Ghandy Abuhawash has served as General Counsel of the Company since 2007 and is responsible for overseeing and advising on Group legal matters. Prior to joining the Group, Mr Abuhawash was Legal Advisor to Al-Sulaihat Investment Company from 2005 to 2007, Legal Advisor to General Marketing and Advertising Services Est. from 2001 to 2005 and an in-house lawyer with Commercial Quotation Company (Jordan) from 2000 to 2001. He holds a bachelor’s degree in Law from Jerash University in 1999 and obtained a High Diploma in International Sales Contracts (CIF) from Arabic Legal University in Cairo in 2001 and a master’s degree in International Commercial Law from Arabic Legal University in Cairo in 2003. Venugopal Padmakumar has served as Chief Internal Auditor of the Company since May 1999 and is responsible for monitoring internal controls, including compliance with international accounting standards, reviewing accounting records for statutory audits and reporting to the Board of Directors. Prior to joining the Group, Mr Padmakumar was Branch Manager with Vijaya Bank in 1998, before which time he was a practicing chartered accountant with RGN Price & Co. in India from 1994 to 1998. Mr Padmakumar obtained a diploma in Data Information Technology from Lakhotia Computers in Cochin, India and a Bachelor’s of Commerce in Cost Accounting from MG University in Cochin, India. Raj Sahai has served as Deputy General Manager for Sales of the Company since January 2007 and is responsible for managing the sales operations of the Group’s UAE shops as well as heading the customer service department and the sales support functions. Prior to joining the Group, he worked in retail sales at both Beautiful Diamonds Retail Venture in Mumbai, India and Royal Jewels in the British West Indies. Mr Sahai has also worked in corporate sales at Hertz Rent a Car in Mumbai, India and in the operations department of UPS in Mumbai, India. Mr Sahai obtained a bachelor’s degree of Commerce in Business Management from Smt.MMK College of Commerce and Economics in Mumbai, India in 1992. He is also currently pursuing his post-graduate diploma in business administration with a focus in marketing management, which he expects to receive in August 2008. Mr Sahai is also a certified polished diamond grader and has completed a sales management course at IIM in Calcutta. He has been awarded a DSES award for best customer service, a Retail Star award and a City Star Award from Tiffany & Co. Each of the Senior Managers can be contacted at the Issuer’s registered office: c/o Damas International Limited, Level 3, Suite 57-58 Gold Centre Building, PO Box 1522 Dubai, UAE.

Compensation For the year ended 31 December 2007, the aggregate compensation (including contingent or deferred compensation) paid by Group companies to Directors and Senior Managers was AED 720,000 and AED 1.6 million, respectively. Damas Jewellery LLC has service contracts with all members of Management except the Directors, who do not receive service contracts. The Management service contracts are standardised, varying only with regard to compensation. All Management service contracts are of unlimited duration, can be terminated by either party with three months’ notice, and provide for benefits such as medical insurance, sick leave, vacation and end-of-service payments as required under the UAE labour law.

Bonus and Incentive/Stock Option Plans The Issuer does not currently have any equity, share-based incentive plans for Management. However, the Issuer does have a “profit-linked partnership system”, pursuant to which the Deputy General Manager for Sales receives short-term incentives based on predetermined sales targets. From time to time, the Issuer may make grants of the shares to the Directors, Senior Managers and/or other employees as part of their compensation or otherwise.

68 Members of the Board of Directors and employees do not currently directly or indirectly hold any stock options for the Issuer’s shares.

Reputation and Conflicts of Interest Within the period of five years preceding the date of this Prospectus, none of the Directors or any of the Senior Managers: • has had any convictions in relation to fraudulent offences; • has held an executive function in the form of a senior manager or a member of the administrative, management or supervisory bodies, of any company or partnership at the time of any bankruptcy; or • has been subject to any official public incrimination and/or sanction by any statutory or regulatory authority (including any designated professional body) or has been disqualified by a court from acting as a member of the administrative, management or supervisory bodies of an entity or from acting in the management or conduct of the affairs of any entity. Management is not aware of any potential conflicts of interest between the duties owed by the Directors or Senior Managers to the Issuer and their private interests or other duties.

Corporate Governance The corporate governance requirements of the DFSA are prescribed in Appendix 4 (Corporate Governance and Directors’ Dealings) of the Offered Securities Rules and will apply to the Issuer following the DIFX Admission. Upon DIFX Admission, the Issuer must comply with the corporate governance requirements of the DFSA. The requirements include, among others: • at least one-third of the Board must be comprised of non-executive Directors, and at least two of whom must be independent; • an audit committee must be established, and at least two independent non-executive Directors must be appointed to that committee; • a sound internal controls system must be implemented to safeguard shareholders’ investment in the Issuer’s assets; • a general meeting of shareholders must meet at least once every 12 months; • an annual report must be filed with the DFSA, which must include a statement on how the Issuer is complying with the corporate governance requirements; and • Directors must not deal in securities of, or investments related to, the Issuer when in possession of undisclosed material information, during a period of one month preceding the announcement of annual results or the publication of the half-yearly report, or otherwise unless given written clearance to deal. The Board has established an Audit Committee, a Remuneration Committee and a Nomination Committee, with formally delegated duties and responsibilities and with written terms of reference. From time to time, separate committees may be set up by the Board of Directors to consider specific issues when the need arises. All committees perform their duties on behalf of the Board, which is responsible for constituting, assigning, co- opting and fixing the terms of service for the committee members, which function may be delegated by the Board of Directors to the Nomination Committee.

Audit Committee The Audit Committee is charged with assisting the Board in discharging its responsibilities with regard to financial reporting, external and internal audits and controls, including reviewing the Issuer’s financial statements, reviewing and monitoring the extent of the non-audit work undertaken by external auditors, advising on the appointment of external auditors and reviewing the effectiveness of the Issuer’s internal audit activities, internal controls and risk management systems. In addition, the Audit Committee is required to prepare an annual report to the Board that sets out its findings on the above, including recommendations for the selection of the external auditor, results of its risk management, internal compliance and controls systems review and a summary of any complaints managed in the past year. The ultimate responsibility for reviewing and approving the accounts and the half-yearly reports remains with the Board. The Audit Committee shall meet formally at least three times a year and otherwise as required. Upon DIFX Admission, the Audit Committee will be comprised of at least three members, two of whom are

69 independent non-executive Directors (namely Mr Harper and Mr Cavalieri). The Chairman of the Audit Committee will be Mr Cavalieri. The Audit Committee will at all times include at least two independent, non-executive Directors.

Remuneration Committee The Remuneration Committee assists the Board in determining its responsibilities in relation to remuneration, including making recommendations to the Board on the Issuer’s policy on remuneration, executive options, share grants and determining the individual remuneration and benefits package for each of the non-executive Directors, executive Directors and senior management. The Remuneration Committee also reviews human resources policies for employees who are below general manager level at least once every three years. No committee member is allowed to participate in any discussion or decision regarding his/her own remuneration and the chief executive officer is not to be present when the Remuneration Committee discusses issues relating to his remuneration. The Remuneration Committee may approve remuneration for members of the senior management. All other recommendations must be referred to the Board for approval. The duties and activities of the Remuneration Committee during the year will be disclosed in the Issuer’s annual report and accounts. Upon DIFX Admission, the Remuneration Committee will be comprised of at least three members. The composition of the Remuneration Committee will be comprised of independent non-executive Directors, including Mr Harper and Mr Cavalieri. The Remuneration Committee will meet formally at least once a year and otherwise as requested by the Chairman of the Remuneration Committee.

Nomination Committee The Nomination Committee assists the Board in discharging its responsibilities relating to the composition of the Board, the performance of Directors, the induction of new Directors, the appointment of committee members and succession planning for senior management. The Nomination Committee is responsible for determining the appropriate skills and characteristics required of the Directors. In particular, the Nomination Committee assists in: (i) identifying individuals qualified to become members of the Board; (ii) recommending individuals to be considered for election at the next annual general meeting of the Issuer or to fill vacancies; (iii) preparing a description of the role and capabilities required for a particular appointment; and (iv) developing and recommending to the Board appropriate corporate governance guidelines. The Nomination Committee also undertakes annual reviews in light of the current composition of the Board and assesses various attributes of each Board member, including the value of their contributions to the business community, leadership, character, judgement, expertise, independence and competence. The duties and activities of the Nomination Committee during the year will be disclosed in the Issuer’s annual report and accounts. Upon DIFX Admission, the Nomination Committee will be comprised of at least three members. The members of the Nomination Committee will at all times include at least one independent non-executive Director. The Nomination Committee will meet formally at least once a year and otherwise as requested by the Chairman of the Nomination Committee. For additional information on corporate governance provisions relating to the Board, see “Description of Share Capital — Articles of Association and Companies Law — Provisions of the Articles Relating to the Board”.

70 RELATED PARTY TRANSACTIONS The Issuer and other members of the Group have historically and will continue to enter into transactions with certain shareholders, jointly controlled entities and associates, as well as intra-group transactions. There have not been formal procedures for independent assessments of the terms of such transactions.

Loans from Shareholders In December 2004, the Founding Shareholders collectively lent the Company a total of AED 150 million in order to finance the Group’s working capital requirements. The loan is interest free and unsecured and does not have a fixed repayment date. While this loan has been considered repayable on demand, the shareholders have provided an undertaking to the Company and several of its creditors that the amount of the loan will not be called for repayment within 12 months of 31 December 2007. See Notes 16, 20 and 21 to the 2007 Financial Statements.

Loans to Shareholders These amounts represent the periodic drawings, where necessary, by the Founding Shareholders against their subordinated long term loan to the Company of AED 150.0 million. These balances are secured against the subordinated long term shareholders’ loan to the company of AED 150.0 million and future dividends. Whilst these loans have been considered repayable on demand, they are interest free and have no fixed repayment date. See Note 16 to the 2007 Financial Statements.

Shareholder Guarantees The Founding Shareholders have issued unconditional, continuing, joint and several guarantees on behalf of the Company in favour of certain lenders. See “Operating and Financial Review — Liquidity and Capital Resources” and Note 20 of the 2007 Financial Statements. The Founding Shareholders have also issued irrevocable guarantees to the Company in respect of certain amounts due to the Group from third parties (both cash and in gold). The Founding Shareholders have also issued irrevocable guarantees to the Company in respect of certain amounts due to the Group from third parties (both cash and bullion).

Intra-group Guarantees The Company and Damas Real Estate have guaranteed the obligations of the Company in respect of certain of its loan agreements. See “Operating and Financial Review — Liquidity and Capital Resources — Capital Resources”.

Jointly Controlled Entities and Associates Loans The Group has made loans to certain jointly controlled entities and associates on an interest-free, unsecured basis without fixed terms of repayment. However, the Directors of the Issuer have provided an undertaking that these amounts would not be called for repayment for a period of 12 months from the balance sheet date. As at 31 December 2007, the total outstanding amount of these loans amounted to AED 111.7 million. See “Operating and Financial Review — Liquidity and Capital Resources” and Note 16 of the 2007 Financial Statements.

Purchases and Sales of Jewellery and Watches The Issuer and its consolidated subsidiaries also sell and purchase jewellery and watches from jointly controlled entitles and associates from time to time. These transactions are carried out in the ordinary course of the Group’s business and on arm’s-length terms commercially favourable to the Issuer. They are accounted for as related party transactions because the revenues and expenses of these jointly controlled entities and associates are not eliminated upon consolidation.

Beneficial Ownership Prior to the 2008 Corporate Reorganisation, certain of the Company’s interests in its consolidated subsidiaries and jointly controlled entities and associates were held indirectly through the Founding Shareholders beneficially for the Company. Pursuant to the 2008 Corporate Reorganisation, these interests have been transferred or are in the process of being transferred to the SPV, which holds those interests on behalf of the Company. In addition, the Company, the former parent company of the Group, became a subsidiary of the Issuer, through the exchange of shares of the Issuer for shares held by the Founding Shareholders and minority shareholders of the Company. See “Trust Arrangement” and “Business — Group Structure and Corporate Reorganisation”.

71 THE SELLING AND PRINCIPAL SHAREHOLDERS The following table sets forth beneficial ownership of, and interests in, the Shares, of the Selling Shareholder and the Principal Shareholders immediately prior to and following the Offer, in the event of full placement of Shares and assuming no exercise, and exercise in full, of the Over-allotment Option. % of issued share capital after the Offer assuming no assuming exercise % of issued of exercise of the in full of the Number of Shares share capital prior Over-allotment Over-allotment Shareholder owned to the Offer Option Option Mr Tawfique Abdullah(1) ...... 168,500,820(4) 22.9%(4) 17.4% 16.7% Mr Tawhid Abdullah(2) ...... 177,685,023(4) 24.2%(4) 18.3% 17.6% Mr Tamjid Abdullah(3) ...... 168,500,820(4) 22.9%(4) 17.4% 16.7% Amwal Al Khaleej Commercial Investment Co...... 147,867,665(4) 20.1%(4) 11.5% 11.0% Al Fahim Group...... 35,888,820 4.9% 3.7% 3.6% Abdullah Nasser Hawaileel al Mansoori ...... 36,313,335 4.9% 3.7% 3.6% Public Holding ...... 0 0% 27.9% 30.8% Total ...... 734,756,483 100% 100% 100%

(1) Currently serves as Chairman of the Board of the Company. (2) Currently serves as a Director and Chief Executive Officer of the Company. (3) Currently serves as a Director and Chief Operating Officer of the Company. (4) The stated number of shares gives effect to the Shareholder Transfer, as described below. Following the Offer, each of the Shares held by the Principal Shareholders will have the same voting rights attached to it as a Share held by any other holder. On 17 June 2008, Amwal Al Khaleej Commercial Investment Co. agreed with the Founding Shareholders to immediately transfer 7,347,565 shares of the Issuer at the Offer Price to each of Tawfique and Tamjid Abdullah and 7,347,564 shares of the Issuer at the Offer Price to Tawhid Abdullah, which is payable after the transfer upon or soon after the determination of the Offer Price, representing a total of 22,042,694 shares of the Issuer and nearly 3% of the share capital of the Issuer prior to the issuance by the Issuer of new Shares in the Offer (the “Shareholder Transfer”). Immediately upon completion of the Offer, the Founding Shareholders will maintain control of the Issuer. See “Risk Factors — Risks relating to the Offer and the Shares — After the Offer, the Founding Shareholders will continue to own a sufficient interest in the Issuer’s share capital to exercise significant influence over its and the Group’s management and operations”. Other than the Founding Shareholders as described above, Management is not aware of any shareholder that, immediately after the DIFX Admission, directly or indirectly, jointly or severally, will own or be able to exercise control over the Issuer.

Principal Shareholders’ Obligations in connection with the Offer The Principal Shareholders have entered into Lock-up Letters in connection with the Offer. For additional information, see “Underwriting — Lock-up Agreements”.

72 DESCRIPTION OF SHARE CAPITAL The following is a summary of certain information concerning the Issuer’s shares and provisions of its constitutional documents and certain requirements of applicable laws and regulations in effect as at the date hereof. This summary does not purport to be complete and is qualified in its entirety by reference to such documents or applicable laws and regulations, as the case may be.

General The Issuer was incorporated on 14 April 2005 with an initial share capital of US$817.11 divided into three shares with a nominal value of US$272.37 each, of which one share was issued to each of Mohammed Tawfique Mohammed Taher Abdullah Almohtadi, Tawhid Mohammed Taher Abdullah Almohtadi and Mohammed Tamjid Mohammed Taher Abdullah Almohtadi as the initial subscribers. In connection with the 2008 Corporate Reorganisation, with effect from 28 May 2008, the shareholders of the Issuer resolved to (i) sub-divide each of the then outstanding ordinary shares of the Issuer into 272 ordinary shares of the Issuer with a nominal value of US$1.00 each and one deferred share with a nominal value of US$0.37, resulting in a total share capital of the Issuer consisting of US$817.11 represented by 816 ordinary shares and three deferred shares with a nominal value of US$0.37 each (the “Deferred Shares”) and (ii) increase the share capital of the Issuer to US$100,001.1 by the issue of 99,184 new ordinary shares with a nominal value of US$1.00 each. The Deferred Shares carry no entitlement to receive notices or attend ordinary or extraordinary general meetings of the Issuer, or to receive dividends or other distributions or returns of capital except the repayment of US$0.37 only. The Deferred Shares rank behind the Issuer’s ordinary shares and upon wind-up or liquidation of the Issuer holders of Deferred Shares will only be entitled to recovery of capital or other owed distributions to the extent that holders of ordinary shares have recovered their paid-up capital in full. A portion of the new ordinary shares was issued to shareholders of the Company that were not at the time also shareholders of the Issuer in order to mirror the shareholding structure of the Issuer with that of the Company in preparation for, and to facilitate, the Share Swap. Effective 8 June 2008, the shareholders of the Issuer resolved to increase the share capital by 734,656,483 ordinary shares of the Issuer with a nominal value of US$1.00 each and to issue such shares pro rata to the then-existing shareholders of the Company in exchange for their shares in the Company. Upon completion of the Share Swap, the issued and paid-up capital of the Issuer amounted to US$734,756,484.11. See “Business — Group Structure and Corporate Reorganisation”. On 1 June 2008, the shareholders of the Issuer authorised the share capital increase in connection with the Offer, approved the application to be made to the DIFX for Admission of the entire share capital, and approved the Offer, subject to agreement by the Board of Directors on the number of ordinary shares of the Issuer to be issued in the Offer, provided, however, that the ordinary shares of the Issuer will have a nominal value of US$1.00 each. On 2 July 2008, the Board of Directors determined, under delegated authority from the Shareholders, to approve the creation of 274,433,052 ordinary shares of the Issuer with a nominal value of US$1.00 each, to be issued in connection with, and conditional upon, the Offer, and including 40,587,506 shares of the Issuer to be issued, if any, upon and subject to the exercise of the Over-allotment Option, and approved the Offer, resulting in a total number of ordinary shares of the Issuer outstanding immediately upon completion of the Offer, and assuming exercise of the Over-allotment Option, of 1,009,189,535 with a nominal value of US$1.00 each.

Articles of Association and Companies Law The following is a summary of certain provisions of the Articles and the Companies Law concerning the rights of holders of the Issuer’s ordinary shares, with which the Shares will rank pari passu in all respects when unconditionally allotted and fully paid. The following summary does not pertain to the Deferred Shares. In the following description of the rights attaching to the Issuer’s shares, a holder of shares and a shareholder is, in both cases, the person registered in the Issuer’s register of shareholders as the holder of the relevant shares. On 28 May 2008 the shareholders approved the amended Articles by resolution to register the shares issued in the Share Swap. On 1 June 2008, the Shareholders of the Issuer authorised the share capital increase in connection with the Offer, approved the application to be made to the DIFX for Admission of the entire share capital and approved the Offer, subject to agreement by the Board of Directors on the number of shares of the Issuer to be issued in the Offer, provided, however, that the shares of the Issuer will have nominal value of US$1.00 each. On 2 July 2008, the Board of Directors determined, under delegated authority from the Shareholders, to approve the creation of 274,433,052 ordinary shares of the Issuer with a nominal value of US$1.00 each, to be issued in connection with, and conditional upon, the Offer, and including 40,587,506 shares of the Issuer to be issued, if any,

73 upon and subject to the exercise of the Option and approved the Offer, resulting in a total number of ordinary shares of the Issuer outstanding immediately upon completion of the Offer, and assuming exercise of the Over-allotment Option, of 1,009,189,535 with a nominal value of US$1.00 each.

Minimum UAE Ownership Requirement Pursuant to provisions of Article 22 of the UAE Companies Law and the provisions of the Implementing Regulation, at least 51% of the issued share capital of the Issuer must be owned at all times by UAE persons. Whilst the Issuer is currently in compliance with these provisions, there is a possibility that new legislation will be introduced in the future which will allow nationals of any GCC country or entities organised under the laws of any GCC country and which are themselves wholly owned by nationals of GCC countries to own more than 49% of the Issuer’s share capital. See “— Disclosure of Interests and Power of the Issuer to Investigate Interests in Shares”. The Issuer is required to issue an announcement to the public, through the Company Announcement Platform manual system (CAP) and the Company Announcement Platform automatic system (CANDI) of the DIFX, on each occasion that (based on information the Issuer has received from the registrar) it becomes aware that the percentage of the share capital which is owned by non-UAE persons reaches the following thresholds: 40%, 45%, 46%, 47%, 48% and 48.5%.

Share Capital All of the Issuer’s shares rank in all respects equally with other shares of the same class. The rights attaching to any class of shares may only be varied or abrogated with the written consent of the holders of two-thirds of the shares by value of that class, or by ordinary resolution at a separate meeting of the holders of the issued shares of that class. Pursuant to the Companies Law, any alteration of a provision in the Articles for the variation of the rights of a class of shares, or the insertion of any such provision into the Articles is itself to be treated as a variation of those rights. Subject to the Companies Law and to the rights attached to any existing shares, new shares may be issued with or carry such rights or restrictions as the Issuer may by ordinary resolution determine. The Issuer may issue and allot, or convert existing non-redeemable shares (whether issued or not) into, redeemable shares at the option of the Issuer or the shareholder. All shares must be fully paid when allotted, and the Issuer may not take a lien over any of its shares. The Companies Law provides that the Issuer may purchase its own shares (including any redeemable shares), if approved in advance by an ordinary resolution of the Issuer (on which the holders of the shares to be purchased are not entitled to vote). Share Certificates Subject to the Companies Law, the DIFC Dematerialised Investments Regulations and to any other applicable laws and regulations and the facilities and requirements of any relevant system concerned, the Directors have the authority to implement any arrangements as they may, in their absolute discretion, see fit in relation to the evidencing of title to, and transfer of, uncertificated shares. Unless otherwise determined by the Directors or permitted by the Companies Law, the DIFC Dematerialised Investments Regulations or other applicable laws and regulations, no person shall be entitled to receive a certificate in respect of any share for so long as the title of the share is evidenced otherwise than by a certificate and for so long as any transfers of that share may be made otherwise than by a written instrument. Subject to the Companies Law, the DIFC Dematerialised Investments Regulations and to any other applicable laws and regulations and the facilities and requirements of any relevant system concerned: • the Directors may in their absolute discretion convert certificated shares into uncertificated shares and vice versa, in such manner as they may think fit, subject (in both cases) to the approval of the majority of the holders of the relevant shares; • the Issuer shall enter on the register of members the number of shares held in uncertificated form and in certificated form, and holdings in certificated form and uncertificated from shall be treated as separate holdings; and • a class of shares is not to be treated as two classes by virtue of the fact that such class comprises both certificated shares and uncertificated shares or as a result of a provision of the Articles, the Companies Law or any other applicable law or regulation which applies only in respect of certificated or uncertificated shares. Every person whose name is entered on the register of members as a holder of certificated shares is entitled, without charge, to receive within 14 days of allotment or lodgement with the Issuer of a transfer to him of those shares, one

74 certificate for all the certificated shares of a class registered in his name (or several certificates each for one or more of his shares upon payment of US$10 for every certificate after the first, or such lesser sum as the Directors shall from time to time determine) or, in the case of certificated shares of more than one class being registered in his name, to a separate certificate for each class of shares. Where a shareholder transfers part of his shares comprised in a certificate he is entitled, without charge, to one certificate for the balance of certificated shares retained by him. Where a certificate is worn out or defaced, the Board may require the certificate to be delivered to it and payment of any exceptional out-of-pocket expenses incurred by the Issuer before issuing a replacement and cancelling the original. If a certificate is lost or destroyed, the Board may cancel it and issue a replacement certificate on such terms as to provision of evidence and indemnity and to payment of any exceptional out-of-pocket expenses incurred by the Issuer in the investigation of that evidence and the preparation of that indemnity as the Board may decide.

Untraced Shareholders The Issuer may sell the share of a shareholder or of a person entitled by transmission at the best price reasonably obtainable at the time of sale, if: • during a period of not less than seven years before the date of publication of the advertisements referred to below (or, if published on two different dates, the first date) (the “relevant period”) at least three cash dividends (whether interim or final) have become payable in respect of the share and no dividend during that period has been claimed; • throughout the relevant period, no cheque, warrant or money order payable on the share has been cashed, and the Issuer has not at any time during the relevant period received any communication from the holder of, or person entitled by transmission to, the share; • on expiry of the relevant period, the Issuer has given notice of its intention to sell the share by advertisement in a national newspaper in the UAE and in a newspaper circulating in the area of the address of the holder of, or person entitled by transmission to, the share shown in the register; • the Issuer has not during a further period of three months after the date of such advertisements and before the exercise of the power of sale, received a communication from the holder of, or person entitled by transmission to, the share; and • if the shares are admitted to the Official List of Securities of the DIFX or dealt in on the DIFX, the Issuer has given notice to the DIFX of its intention to sell such shares. The Issuer shall be indebted to the shareholder, or other person entitled by transmission to the share, for the net proceeds of sale and shall carry any amount received on sale to a separate account. No trust shall be created in respect of the debt, and such net proceeds may be employed in the business of the Issuer or invested as the Board may see fit.

Changes in Share Capital The Issuer may by special resolution: • increase its share capital by creating new shares; • consolidate and divide all or any of its shares (whether allotted or not) into shares representing a larger value than its existing shares; • sub-divide all or any of its shares into shares of a smaller amount; and • cancel shares which, at the date of the passing of the resolution to cancel them, have not been taken or agreed to be taken by any person and diminish the amount of its share capital by the amount of the shares so cancelled. Any fractions of shares resulting from a consolidation and division or sub-division of shares may be dealt with by the Board on behalf of the shareholders as it thinks fit. The Issuer may, in accordance with the Companies Law, reduce its share capital in any way and on such terms as it may decide.

Pre-emption Rights The Articles contain provisions granting pre-emption rights to holders of “ordinary shares” (meaning shares other than those shares giving rights only up to a specified amount of dividend and capital in a distribution), entitling them to be offered any equity securities proposed to be issued by the Issuer in proportion to their existing shareholdings.

75 For this purpose, “equity securities” means ordinary shares or rights to subscribe for, or convert securities into, ordinary shares. These pre-emption provisions do not apply: • to allotments of equity securities which are to be paid (wholly or partly) otherwise than in cash; • to the allotment of equity securities that would, apart from any renunciation or assignment of the right to their allotment, be held under an employees’ share scheme; and • in relation to the allotment of bonus shares. Any equity securities which the Issuer has offered to a holder of ordinary shares may be allotted to him, or to anyone in whose favour he has renounced his right to their allotment, without contravening these provisions. Any offer made under these provisions may be in hard copy or electronic form and must state a period of not less than 21 days during which it may be accepted and may not be withdrawn before the end of such period.

Non-application of Pre-emption Rights The pre-emption rights summarised above may also be disapplied in whole or modified as the Directors determine, provided the Directors are authorised to do so by special resolution, which shall not be proposed unless recommended by the Directors and a notice is circulated to shareholders with a Directors’ statement setting out reasons for making such recommendation, the amount to be paid to the Issuer in respect of such allotment and the Directors’ justification of such amount. Due to the restrictions on share ownership imposed by Law No. 8, in the event the Issuer increases its share capital, existing holders of Shares who are non-UAE persons may not be able to exercise any pre-emptive rights with respect to their Shares to the extent that such exercise would result in more than 49% of the Issuer’s share capital being held by non-UAE persons. See “Risk Factors — Risks relating to the laws of the DIFC and the GCC — Non-UAE persons may not be able to exercise pre-emptive rights with respect to their Shares”. Dividends Subject to the provisions of the Companies Law, the Issuer may by ordinary resolution declare dividends in accordance with the respective rights and interests of the shareholders, but no dividend shall exceed the amount recommended by the Directors. The Issuer may declare a dividend or resolve to make a distribution at any time if the Board has resolved, on reasonable grounds, that the Issuer will, immediately after the dividend is paid or the distribution is made, be able to pay its debts as they become due in the normal course of business. The Issuer may pay a dividend or make a distribution at any time if: • the dividend has been declared or the distribution has been resolved to be made as set out above; • the dividend will be paid, or the distribution will be made, out of profits and/or surplus of the Issuer as shown in the accounts of the Issuer prepared as at the end of the last financial year or, in the case of an interim dividend or distribution, at the end of such period as is sufficient to enable the directors to form a reasonable view as to the amount of the profits and/or surplus from which the dividend will be paid or the distribution will be made; and • the Board has resolved immediately prior to the payment of the dividend or the making of the distribution, on reasonable grounds, that the Issuer will, immediately after the dividend is paid or the distribution is made, be able to pay its debts as they become due in the normal course of business and at no time between the date of the resolution of the Board declaring the dividend or distribution and the date of the resolution immediately prior to the payment did the Board consider that the Issuer would not, after the dividend has been paid or the distribution has been made, be able to pay its debts as they become due in the normal course of business. Subject to the provisions of the Companies Law, the Board may declare and pay such interim dividends as appears to it to be justified by the profits of the Issuer available for distribution. If the share capital is divided into different classes, no interim dividend shall be paid on shares carrying deferred or non-preferred rights if, at the time of payment, any preferential dividend is in arrears. The Board may, with the prior authority of an ordinary resolution of the Issuer, direct that payment of a dividend may be satisfied wholly or partly by the distribution of specific assets and, in particular, of paid up shares or the debentures of another company.

76 A dividend unclaimed by a shareholder for a period of seven years from the date it was declared or became due for payment is forfeited and ceases to remain owing to the shareholder by the Issuer. For more information relating to dividends, see “Dividends and Dividend Policy”. Transfer of Shares A shareholder may transfer all or any of his certificated shares by instrument of transfer in writing in any usual form or in any other form approved by the Board, and the instrument shall be executed by or on behalf of the transferor. All transfers of uncertificated shares are to be made in accordance with, and be subject to, the provisions of the DIFC Dematerialised Securities Regulations, the facilities and requirements of any relevant system and in accordance with any arrangements made by the Directors pursuant to the Articles. In exceptional circumstances approved by the DIFX, the Board may refuse to register a transfer of certificated shares, as long as such refusal would not disturb the market in those shares. The Board may also refuse to register any transfer of a share in certificated form unless it: • is only in respect of only one class of shares; • is in favour of a single transferee or not more than four joint transferees; and • is delivered for registration to the registered office of the Issuer or such other place as the Board may decide, accompanied by the certificate for the shares to which it relates and such other evidence as the Board may reasonably require to prove the title of the transferor or person renouncing and the due execution by him of the transfer, and if the transfer is executed by some other person on his behalf, the authority of that person to do so. The registration of transfers may be suspended at such times and for such periods (not exceeding 30 days in any year) as the Board may decide in its discretion and either generally or in respect of a particular class of shares as determined by it. Except where required by the Companies Law, the Issuer may not charge any fee for registering the transfer of a share. The Issuer may retain any instrument of transfer which is registered.

Disclosure of Interests and Power of the Issuer to Investigate Interests in Shares In accordance with Rules 9.2.2 and 9.2.3 of the Offered Securities Rules of the DFSA, any person owning or beneficially owing shares carrying more than 5% of the voting power of the Issuer’s share capital, including the Depositary, must file a report with the Issuer and the DFSA and thereafter file a further report with the Issuer and the DFSA with respect to each increase or decrease in its holding that exceeds one full percentage point from the level reported by such person in its previous report. The Issuer may give written notice to a person, whom it knows or has reasonable cause to believe to be, or in the previous three years to have been, holding an interest in the Issuer’s shares, requiring him to confirm or deny such interest and to give such further information as may be requested. If it shall come to the notice of the Directors that a shareholder has not complied with his notification obligation pursuant to the Offered Securities Rules of the DFSA or if the person on whom notice is served fails within 14 days to supply to the Issuer the information thereby requested, unless the Board otherwise decides, the shareholder is no longer entitled in respect of the default shares to be present at general meetings or to vote on any question, or to be counted for purposes of determining a quorum. Where the default shares represent 0.25% in nominal value of the issued shares of the relevant class, the Issuer may also: (i) suspend payment of dividends that would have been payable in respect of the shares in relation to which the default has occurred; (ii) treat any election made by the defaulting shareholder to receive shares instead of cash as ineffective; and (iii) in certain circumstances, refuse to register a transfer of shares held by the defaulting shareholder.

Relevant Shares In order to facilitate compliance with Law No. 8, the Board may (or may authorise any person to), at any time, by notice in writing, require any shareholder or any person appearing to be interested or appearing to have been interested in shares to show to the satisfaction of the Board (or such authorised person) that the shares in question are not Relevant Shares (as defined below). Any person who receives such notice may, within seven days (or such longer period as the Board may consider reasonable), make representations to the Board as to why such shares should not be treated as Relevant Shares. “Relevant Shares” means shares which are held by persons who are not either: (i) nationals of the UAE; or (ii) entities organised under the laws of the UAE and which are themselves wholly owned by nationals of the UAE (“Non-UAE Shareholders”).

77 The Board shall maintain a register of the Non-UAE Shareholders and the Relevant Shares. The particulars in the register shall comprise, in addition to the nature and number of the Relevant Shares, of the name of each Non-UAE Shareholder, the name of any non-UAE national interested or who appears to the Board to be interested in such shares and such information as has been supplied to the Board pursuant to any disclosure notices served pursuant to the above or such information as the Board considers appropriate. The Board shall remove from the register of Non- UAE Shareholders particulars of any share if it has received a declaration by the holder of such share (together with such evidence as the Board may require) that satisfies the Board that such share is no longer a Relevant Share.

Required Disposals

The Board may (or may authorise any person to), at any time after it becomes aware of the occurrence of a breach (a “Relevant Breach”) of the requirement under applicable laws of the DIFC and/or the UAE that at least 51% (or such other minimum percentage as is required from time to time under applicable laws of the DIFC and/or the UAE) of the shares are held by a person who is neither a national of the UAE nor is an entity organised under the laws of the UAE which is itself wholly owned by nationals of the UAE (a “UAE Shareholder”), serve written notice (a “Transfer Notice”) on any Non-UAE Shareholder whose acquisition of relevant shares the Board (or such authorised person) reasonably considers acquired Relevant Shares after the occurrence of the Relevant Breach and, if the Board (or such authorised person) so chooses, to any other person appearing to be interested in such shares, requiring the disposal within seven days (or such longer period as the Board considers reasonable) to a person who is or will, after such disposal, be a UAE Shareholder of some or all of the Relevant Shares or interests therein held by him. The Board may extend the period during which any such notice is to be complied with or may withdraw the notice if it appears to it that the shares are not longer Relevant Shares or in any other circumstance the Board sees fit.

If the Board (or any person authorised by it) is not satisfied that the Transfer Notice referred to above has been complied with within seven days after the giving of the Transfer Notice (or such longer period as the Board considers reasonable), the Board (or such authorised person) may, so far as it is able, dispose, or procure the disposal, of the Relevant Shares or interests therein to a person who is, or will, after such disposal be a UAE shareholder. The timing, manner and terms of such disposal (including the price at which such disposal is made) shall be such as the Board (or such authorised person) determines to be reasonably obtainable having considered all circumstances based on the advice its bankers, brokers or other persons the Board (or such authorised person) considers appropriate to consult. The Board (or such authorised persons) shall give notice of such disposal to those persons to whom such notice was served.

In the case of a purchase of Relevant Shares by the Issuer to effect a disposal of Relevant Shares or interests therein, the price for the Relevant Shares paid shall not be less than the best price reasonably obtainable for a sale of such shares in the market at the time of such purchase as determined by the Board based on the advice of its bankers, brokers or other persons the Board considers appropriate to consult.

To give effect to any disposal of Relevant Shares or interest therein, the Board may authorise in writing any person to execute any instrument of transfer on behalf of any shareholder and/or convert any share from uncertificated form to certificated form and to enter the name of the transferee in the register of shareholders of the Issuer notwithstanding the absence of any share certificate. The proceeds of the disposal shall be received by or on behalf of the Issuer whose receipt shall be good discharge for the purchase money and shall be paid (without interest thereon and after deduction of expenses incurred by the Board) to the former holder upon surrender for cancellation of the certificate in respect of the shares. On and after the date of service of a Transfer Notice, and until registration of a transfer of the Relevant Shares to which it relates, the rights and privileges attaching to such Relevant Shares shall be suspended and not capable of exercise.

General Meetings

The Issuer must hold an annual general meeting every year. Such meetings shall be convened by the Board at such time and in such a place as it sees fit, provided that there must not be a gap of more than 15 months between one annual general meeting and the next and not more than six months shall elapse between the end of the Issuer’s financial year and its next annual general meeting. All general meetings of the Issuer other than annual general meetings are called extraordinary general meetings.

At least 21 clear days’ notice must be given of a general meeting. The quorum for a general meeting is two shareholders present in person or by proxy and entitled to vote.

78 Voting Rights At a general meeting, every shareholder present in person or by proxy has on a show of hands one vote, and every shareholder present in person or by proxy has on a poll vote one vote for every share of which he is the holder. In the case of joint holders of a share, the vote of the senior shareholder who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the vote or votes of the other joint holder or holders, and seniority is determined by the order in which the names of the holders stand in the register. An instrument appointing a proxy shall be in writing in any usual form (or in another form approved by the Board) executed under the hand of the appointor or his duly constituted attorney or, if the appointor is a company, under its seal or under the hand of its duly authorised officer or attorney or other person authorised to sign.

Proceeding at General Meetings The Chairman of the Board or, in his absence, the Vice Chairman, shall preside as chairman at a general meeting. If there is no Chairman or Vice Chairman, or if at a meeting neither is present and willing and able to act within five minutes after the time fixed for the start of the meeting, the Directors present shall select one of their number to be Chairman. If only one Director is present and willing and able to act, he shall be Chairman. In default, the members present in person and entitled to vote shall choose one of their number to be Chairman. At a general meeting, a resolution put to the vote of the meeting shall be decided on a show of hands unless (before or on the declaration of the result of the show of hands) a poll is properly demanded by: • the Chairman of the meeting; • not less than five shareholders present in person or by proxy and entitled to vote; or • a shareholder or shareholders present in person or by proxy representing in aggregate not less than 5% of the total voting rights of all the shareholders having the right to vote at the meeting. The demand for a poll may be withdrawn but only with the consent of the Chairman. A demand withdrawn in this way validates the result of a show of hands declared immediately before the demand was made. If a poll is demanded before the declaration of the result of a show of hands and the demand is duly withdrawn, the meeting shall continue as if the demand had not been made. In the case of an equality of votes whether on a show of hands or on a poll, the Chairman of the meeting at which the show of hands takes place or at which the poll is demanded shall be entitled to a casting vote in addition to any vote to which he is entitled as a shareholder.

Provisions of the Articles Relating to the Board Powers and Duties of the Board Subject to the Companies Law and the Articles and to directions given by special resolution of the Issuer, the business and affairs of the Issuer shall be managed by the Board, which may exercise all the powers of the Issuer whether relating to the management of the business or not, including, among other things, entering into or executing any contracts for indebtedness or for any other legitimate business purpose on behalf of the Issuer. The Board may delegate to a Director holding executive office or to a committee consisting of one or more persons (whether a member or members of the Board or not) any of its powers, authorities and discretions for such time and on such terms and conditions as it thinks fit.

Appointment and Retirement of Directors The Issuer may by ordinary resolution appoint a person who is willing to act to be a Director, either to fill a vacancy or as an addition to the Board, subject to the total number of Directors not exceeding any maximum number decided by the Issuer by ordinary resolution. The Board may appoint a person who is willing to act as a Director to fill a vacancy created by the death, resignation or removal of a Director. A Director appointed in this way may hold office only until the dissolution of the next annual general meeting after his appointment unless he is reappointed during that meeting. He is not taken into account in determining the number of Directors who are to retire by rotation at the meeting. At each annual general meeting, one-third of the Directors who are subject to retirement by rotation or, if their number is not three or a multiple of three, the number nearest to but not less than one-third, shall retire from office,

79 provided that if there are fewer than three Directors who are subject to retirement by rotation, one shall retire from office. A retiring Director shall be eligible for reappointment. The Directors to retire by rotation at an annual general meeting shall include, so far as necessary to obtain the number required, first, a Director who wishes to retire and not offer himself for reappointment, and, second, those Directors who have been longest in office since their last appointment or reappointment. As between two or more who have been in office an equal length of time, the Director to retire shall, in default of agreement between them, be determined by lot.

Directors’ Interests A Director shall declare the nature of his interest in any contract, arrangement, transaction or proposal with the Issuer at the first opportunity at a meeting of the Board after he knows that he is or has become interested or by writing to the Directors as required by the Companies Law. Except in particular circumstances, a Director may not vote on or be counted in the quorum in relation to a resolution of the Board or of a committee of the Board concerning a contract, arrangement, transaction or proposal to which the Issuer is, or is to be, a party and in which he has an interest which is, to his knowledge, a material interest (otherwise than by virtue of his interest in shares or debentures or other securities of, or otherwise in or through, the Issuer). A Director shall not vote or be counted in the quorum at a meeting of the Directors or committee meeting in respect of any resolution concerning his own appointment as the holder of any office or place of profit with the Issuer or any other company in which the Issuer is interested. Where proposals are under consideration concerning the appointment of two or more Directors to any such office or place of profit, those proposals shall be divided and considered in relation to each Director separately, and each of the Directors concerned (if not otherwise barred from voting under the Articles) shall be entitled to vote and be counted in the quorum in respect of each resolution except that concerning his own appointment.

Directors’ Remuneration The salary or other remuneration of a Director appointed to hold employment or executive office in accordance with the Articles may be a fixed sum of money, or wholly or partly governed by business done or profits made, or as otherwise decided by the Board, and may be in addition to, or instead of, a fee payable to him for his services as Director pursuant to the Articles. Unless otherwise decided by the Issuer by ordinary resolution, the Issuer shall pay to the Directors (but not alternate Directors) for their services as Directors such amount of aggregate fees as the Board decides. The aggregate fees shall be divided among the Directors in such proportions as the Board decides or, if no decision is made, equally. A fee payable to a Director for his services as Director is distinct from any salary, remuneration or other amount payable to him pursuant to other provisions of the Articles or otherwise and accrues from day to day. A Director who, at the request of the Board, goes or resides abroad, makes a special journey or performs a special service on behalf of the Issuer may be paid such reasonable additional remuneration (whether by way of salary, percentage of profits or otherwise) and expenses as the Board may decide. A Director is entitled to be repaid all reasonable travelling, hotel and other expenses properly incurred by him in the performance of his duties as Director including, without limitation, expenses incurred in attending meetings of the Board or of committees of the Board or general meetings or separate meetings of the holders of a class of shares or debentures.

Indemnity of Directors and Officers Subject to certain exceptions, to the extent permitted by the Companies Law and without prejudice to any indemnity to which he may otherwise be entitled, the Issuer shall indemnify and shall keep indemnified out of the assets of the Issuer every person who is or was a Director or other officer of the Issuer (other than any person (whether or not an officer of the Issuer) engaged by the Issuer as auditor) against all costs, charges, losses and liabilities incurred by him (whether in connection with any negligence, default, breach of duty or breach of trust by him or otherwise) in relation to the Issuer or its affairs.

Distributions on Liquidation to Shareholders On a voluntary winding up of the Issuer, the liquidator may, on obtaining any sanction required by law, divide among the shareholders in kind the whole or any part of the assets of the Issuer, whether or not the assets consist of property of one kind or of different kinds, and vest the whole or any part of the assets in trustees upon such trusts for

80 the benefit of the shareholders as he, with such sanction, shall determine. For this purpose, the liquidator may set the value he deems fair on a class or classes of property, and may determine on the basis of that valuation and in accordance with the then existing rights of shareholders how the division is to be carried out between shareholders or classes of shareholders. The liquidator may not, however, distribute to a shareholder without his consent an asset to which there is attached a liability or potential liability for the owner.

Form of Notices and Communications Unless the Articles expressly require otherwise, any notice, document or information to be sent or supplied by the Issuer to shareholders (including forms of appointment of a proxy and copies of the Issuer’s annual accounts) may be sent or supplied in hard copy form, in electronic form (for example, by email or facsimile) or by means of the Issuer’s website. Any notice shall be in writing. The Issuer may give any notice to a shareholder either personally or by sending it by post in a prepaid envelope addressed to the shareholder at his registered address or by leaving it at that address. In the case of joint holders of a share, all notices shall be given to the joint holder whose name stands first in the register of shareholders in respect of the joint holding and notice so given shall be sufficient notice to all the joint holders. A person present, either in person or by proxy, at any meeting shall be deemed to have received notice of the meeting. Every person who becomes entitled to a share of the Issuer shall be bound by any notice in respect of that share. Proof that an envelope containing a notice was properly addressed, prepaid and posted is conclusive evidence that the notice was given 48 hours after it was posted. A notice shall be deemed to be given at the expiry of 48 hours after the envelope containing it was posted. A notice may be given by the Issuer to the persons entitled to a share in consequence of the death or bankruptcy of a shareholder by sending or delivering it, at the address, supplied for that purpose by the persons claiming to be so entitled. Until such an address has been supplied, a notice may be given in any manner in which it might have been given if the death or bankruptcy had not occurred.

81 TRUST ARRANGEMENT The UAE and certain other GCC countries where subsidiaries, jointly controlled entities and associates of the Issuer are incorporated impose Minimum National Ownership Requirements on companies incorporated within their jurisdiction. For example, UAE law generally requires that companies with non-GCC ownership be at least 51% owned by UAE nationals. Similar requirements exist under the laws of other GCC countries in which subsidiaries, jointly controlled entities and associates of the Issuer are incorporated. Prior to the Offer, the Issuer was wholly owned by the Principal Shareholders, who are all GCC nationals or GCC entities owned by GCC nationals. Following the Offer, the shareholding of these Principal Shareholders in the Issuer will be diluted to as low as 51% of the outstanding share capital. As a result of this dilution, certain GCC subsidiaries, jointly controlled entities and associates of the Group, would, absent the existence of any other arrangements, be in violation of the Minimum National Ownership Requirements. In order to maintain compliance with these Minimum National Ownership Requirements, the Issuer has created a special purpose company (the “SPV” or the “Trustee”) to which it has transferred, or is in the process of transferring, a percentage of shares in certain of the Company’s subsidiaries, jointly controlled entities and associates incorporated in the GCC (the “GCC Entities”) that is sufficient to prevent the breach of the several Minimum National Ownership Requirements (the “Subject Shares”). The SPV, organised under the laws of the UAE solely for the purpose of holding these shares, is 100%-owned by the Founding Shareholders, who are UAE nationals. The SPV has entered into a trust deed effective 16 June 2008 pursuant to which it has agreed to hold the Subject Shares in trust for the benefit of the Issuer (the “Trust Deed”). The Trust Deed provides that: • the Issuer has the sole right to control and manage the Subject Shares; • the Trustee has no rights to appoint and replace directors in any of the GCC Entities, except as directed by the Issuer, and the Issuer has the sole power to appoint the managers of the Trustee; • all Subject Shares are held by the Trustee in trust for the benefit of the Issuer and the Trustee shall not exercise any voting rights, sell, transfer, charge, encumber or otherwise deal in any of the Subject Shares unless the Issuer expressly directs or approves such action; • the Issuer has a contractual right to receive its share of all dividends that are declared by the GCC Entities in respect of the Subject Shares; • the right to wind up the trust structure and require the return of the Subject Shares is in the Issuer’s sole discretion; • the Trust Deed is governed by DIFC law; and • the courts of the DIFC shall have exclusive jurisdiction to adjudicate on any issues that arise with respect to the trust structure. The Issuer believes that a significant number of foreign-owned companies operating in the GCC generally, and in Dubai in particular, are using arrangements such as the Issuer’s to address the Minimum National Ownership Requirements described above. Further, the Issuer believes that these structures have been central to fostering the significant level of foreign private investment in the region in recent years. To date, the Issuer is not aware of any instance where the government of any of the GCC countries has unilaterally challenged these trust or nominee arrangements as being contrary to local law. Whilst the Issuer believes that: (i) the trust arrangement it has adopted is consistent with market practice in the GCC, and in some respects provides additional protection beyond that which is customarily seen, and (ii) that the terms of these arrangements should help to minimise any risks associated with the ownership structure, there can be no assurance that this will be the case. In addition, the Concealment Law of the UAE provides that it is not permissible to allow a non-UAE national, whether by using the name of another individual or through any other method, to practice any economic or professional activity that is not permissible for him to practice in accordance with the law and decrees of the UAE. The UAE federal government publicly announced in 2007 that enforcement of the Concealment Law has been suspended until 2009 and may be extended for a further period. However, the Issuer does not know if, or when, the suspension may be lifted or whether an alternative to the Concealment Law will be adopted. Because the future of the Concealment Law is unknown, there is no certainty as to the approach that UAE courts may take in relation to trust arrangements such as the Issuer’s if it or other similar legislation becomes effective. Similarly, the Anti-harbouring Law of Saudi Arabia stipulates that non-Saudi nationals (whether a natural person or a corporate entity) may not invest or engage in any activity that they are not licensed to conduct according to the

82 Foreign Investment Law or other laws and instructions. The harbourer is deemed to be the person who enables the non-Saudi national to invest or to undertake any activity by the use of the name, licence or commercial registration of such person, or in any other way. According to Article 3 of the Implementing Regulations of the Law, it constitutes a harbouring offence if the non-Saudi national invests in or undertakes an economic activity using the name of a Saudi national or a foreign investment. This includes the arrangements where a foreign investor uses the name of a Saudi national in order to circumvent the maximum ownership percentage permissible for foreign investors in the respective business activity. There is currently no moratorium applicable to this law. For a discussion of the risks associated with the trust arrangement, see “Risk Factors — Risks relating to the laws of the DIFC and the GCC — The majority ownership interests of the Group’s GCC operations are held through a trust arrangement, and the Issuer cannot assure the investors that the trust arrangement is enforceable under DIFC law, or legally permitted under the laws of the UAE or the laws of any other GCC countries”.

83 CLEARANCE AND SETTLEMENT

Central Securities Depositary Trading of the Shares is expected to take place through the trading system of the DIFX. Shares may be held either in accounts opened with the CSD by the holders thereof or through custodian omnibus accounts, with ownership of the Shares to be evidenced by the holdings in such accounts. Clearing and settlement of trades on the DIFX by brokers or custodians may be performed only through members of the DIFX that are Clearing Members. Each Clearing Member must hold a securities account with the CSD and a cash account with a designated settlement bank for settlement purposes. Similarly, a custodian needs to hold an omnibus account with the CSD and a cash account with a settlement bank for settlement of off-exchange trades. Settlement of securities trading on the DIFX is governed by the DIFX Business Rules.

84 OVERVIEW OF THE UAE

Introduction The UAE is a federation of seven emirates made up of Abu Dhabi, Dubai, Sharjah, Ajman, Umm Al Quwain, Fujairah and Ras Al Khaimah. The UAE has one of the most liberal business environments in the Middle East, focused around economic liberalisation and promoting the role of the private sector. There are currently no corporate taxes in most business sectors, other than oil-producing companies and foreign banks, no personal taxes and no exchange controls on the remittance of profits or repatriation of capital. Additionally, the UAE enjoys low tariffs and there are virtually no restrictions on foreign trade.

Legal System There are three primary sources or types of law in the UAE: federal laws and decrees; local laws; and Shari’a (Islamic law). The secondary source of law is trade custom or practice. In the absence of federal legislation on areas specifically reserved to federal authority, the ruler or local government of each emirate will apply his or its own rules, regulations and practices. As is its right under the Constitution, Dubai has elected to maintain its own court system, separate from that of the federation, and the courts of Dubai have sole jurisdiction to hear cases brought in Dubai. Although both federal and Dubai courts have a similar three-tier structure (Court of First Instance, Court of Appeal and Court of Cassation/Supreme Court), Dubai has retained complete autonomy over its courts in all matters, including the appointment of judges. In accordance with the Constitution, however, Dubai courts will first apply federal law where this exists and, in its absence, the laws of Dubai. The Issuer is incorporated in the DIFC, which is a newly established jurisdiction with its own civil and commercial laws applicable to it and other companies domiciled in the DIFC. As such the DIFC will have jurisdiction on matters which fall within the laws of the DIFC. DIFC Law No. 12 of 2004 states that judgments, awards or orders made by the DIFC Court will be enforced by the Dubai courts (provided the judgment, award or order is final and “appropriate” for enforcement). Dubai courts have no jurisdiction to review the merit of a DIFC judgment. See “Risk Factors — Risks relating to the laws of the DIFC and the GCC — The Issuer is incorporated in the DIFC, and it may be difficult for investors in the Shares to enforce judgments against the Issuer, or its Directors and Senior Managers”.

Economy The UAE has the second largest economy in the GCC after Saudi Arabia. The UAE economy has seen strong performance in recent years, having experienced real GDP growth of 8.2%, 9.4% and 7.7% in 2005, 2006 and 2007, respectively, with growth in the non-oil sector significantly outpacing growth in the oil and gas sector. Although it has one of the most diversified economies in the GCC, the UAE’s wealth remains largely based on oil and gas, which accounted for approximately 46% of all exports and approximately 75% of the UAE Government’s revenues in 2006. The UAE has approximately 10% of proven global oil reserves. The expansion in the UAE’s economy has been supported by an outward-orientated development strategy, a favourable business climate and sustained high oil prices. In addition to record oil prices, major contributions to GDP growth have come from the manufacturing, construction, finance and insurance, transportation, storage and communications sectors.

The Emirate of Dubai Dubai is, after the emirate of Abu Dhabi, the largest emirate in the UAE, and is situated on the west coast of the UAE in the southwestern part of the Arabian Gulf. It covers an area of 3,885 square kilometres and lies approximately at longitude 55 degrees east and latitude 25 degrees north. Except for a tiny enclave in the Hajar Mountains at Hatta, the emirate of Dubai comprises one contiguous block of territory. The population of Dubai was estimated at 1,300,000 in 2006. Approximately 75% of the population is estimated to be non-UAE nationals, mainly drawn from South Asia, Europe and other Arab countries. Approximately 75% of the population is estimated to be male and 25% female, reflecting the large male expatriate workforce.

History Dubai started as a pearl and fishing village sometime in the first half of the eighteenth century. From the 1850s until the formation of the UAE in 1971, the British were the dominant influence in the region, and each emirate entered into a separate treaty with Great Britain. The emirates were then collectively known as the Trucial States or Sheikdoms and the area was generally known as the Trucial Coast. The Sheikdoms were each led by a sheikh, who usually belonged to the most influential tribe in that area.

85 The growth of Dubai began in the early part of the nineteenth century when members of the Bani Yas tribe, led by Sheikh Maktoum Bin Butti, left Abu Dhabi, and migrated north to found an independent Sheikhdom in the area now known as Dubai. During the nineteenth century, Dubai, split by a 14 kilometre long creek, which led into a natural harbour, established itself as a flourishing centre for the import and re-export of merchandise (the entrepôt trade). Another important economic activity at that time was pearling. Offshore from Dubai and Abu Dhabi, the waters were rich with pearl beds. However, the Great Depression of the 1930s and the emergence of artificial pearls in 1929 dented Dubai’s prosperity. To counter the loss of economic activity from the decline in pearling Dubai encouraged traders from India and Iran to establish their business in Dubai. Traders, attracted by Dubai’s liberal policies, especially its lower taxes on foreigners compared to its neighbours, made it their base and Dubai quickly established itself as a leading centre for trade in gold bullion, textiles and consumer durables. In the 1930s and 1940s, oil was discovered in Kuwait, Qatar and Saudi Arabia — adding to that already found in Bahrain, Iran and Iraq. In 1958, oil was found off the shore of Abu Dhabi and, in 1966, oil was first discovered by the Dubai Petroleum Company at Fateh, which lies 92 kilometres off the coast of Dubai. As the primary regional trading hub, Dubai was well placed to capitalise on the upturn in Middle East business activity that came with oil exports.

The Economy of Dubai Dubai’s strategic position at the crossroads between the East and West has helped establish it as a leading trading and services hub between the Far East and Europe. Dubai’s economy is more diversified than that of Abu Dhabi and it is one of the most important commercial centres in the Middle East, with growing banking, tourism and real estate sectors. However, with only a fraction of the fossil fuel reserves of Abu Dhabi, it has gradually reduced its dependency on oil and gas revenues. The Government of Dubai continues to invest heavily in the infrastructure of the emirate and its economic development. Much of the infrastructure that has been created in recent years, both public and private, is aimed at reinforcing Dubai’s strategic position at the East-West crossroads. Dubai has focused on developing itself as a centre for tourism, trade and commerce in order to diversify its economy away from oil. The emirate has successfully pioneered the use of free zones to spur economic activity and attract companies to its shores. These free zones offer 100% ownership to non-nationals, and serve as an attractive location for companies seeking to serve the growing markets of the Middle East, South Asia and Central Asia. Some free zones currently operating in Dubai include the Jebel Ali Free Zone, the Technology Electronic Commerce and Media Free Zone (TECOM) and the DIFC. The DIFC is a financial free zone, aimed at attracting international commercial banks, investment banks, insurance companies and other financial institutions. TECOM consists of Dubai Internet City, Dubai Media City and Knowledge Village and aims to attract global companies that serve the technology, media and training industry. TECOM’s tenants include prestigious international and regional IT and media companies such as Microsoft, IBM, Reuters, CNN, CNBC, and MBC, among others. The Jebel Ali Free Zone Authority was established in 1980 with the specific purpose of facilitating investment in manufacturing and distribution businesses. Currently, around 6,000 companies are registered with JAFZA, including over 160 Fortune Global 500 companies. Other free zones include the Dubai Multi Commodities Centre, the Airport Free Zone, Dubai Healthcare City and Dubai Silicon Oasis. Upcoming free zones include Dubai Logistics City, Dubai Aid City, Dubai Biotech Free Zone, in addition to a number of others. For more information on the DIFC, see “— DIFC”.

The Government of Dubai All powers of government in Dubai are vested in the Ruler. The various departments and other arms of the Government and their respective executives operate under the powers and responsibilities specifically delegated to them from time to time by the Ruler. Laws of Dubai are passed by Decree of the Ruler. The present Ruler is H.H. General Sheikh Mohammed bin Rashid Al Maktoum. In Dubai, there are various local governing bodies charged with regulating and administering local law and policy, including the Dubai Department of Economic Development, Dubai Municipality and the Department of Civil Aviation.

86 DIFC The DIFC is a financial free zone with its own civil and commercial laws established in 2004 in the emirate of Dubai. The DIFC has been granted authority to self-legislate in civil and commercial areas. Companies operating in the DIFC are subject to the Companies Law. Financial services in the DIFC are governed by the DIFC Regulatory Law No. 1 of 2004, which also governs the operation of the DFSA, a financially and administratively independent body created by Law No. (9) of 2004 issued by the Ruler of Dubai on September 13, 2004 (the “DIFC Law”) that acts as the independent financial regulator in the DIFC. Legislation, rules and regulations governing companies incorporated in the DIFC and financial activities in the DIFC are available on the websites of the DIFC and the DFSA at www.difc.ae and www.dfsa.ae, respectively. None of the Joint Global Coordinators, the Issuer, the Selling Shareholder nor the Principal Shareholders have independently verified the information contained on these websites and the Issuer can provide no assurance as to the accuracy or completeness of such information and do not incorporate the information contained on these websites into, or otherwise include in, this Prospectus.

DIFX The DIFX is a securities exchange located in the DIFC. The DIFX commenced operations on September 26, 2005. The DIFX was incorporated as a limited liability company under the Companies Law on September 29, 2004 and is a wholly owned subsidiary of the DIFC Authority, a financially and administratively independent body created by the DIFC Law. Currently, 13 companies have their shares or other equity securities admitted to trading on the exchange. The total trading volume for 2006, 2007 and first quarter of 2008 was US$26.3 million, US$1.45 billion and US$609.2 million, respectively. As at 31 March 2008, the market capitalisation of equity securities listed on the DIFX was approximately US$28.1 billion. To date, the DIFX has adopted two sets of rules: the Business Rules and the Listing Rules. The Business Rules govern membership of the DIFX, including eligibility requirements for financial institutions, categories of membership, rights and obligations of members and the process for membership applications. The Business Rules also govern procedures, responsibilities and fees regarding clearing and settlement of securities traded on the DIFX. The Listing Rules govern the listing of equity, debt and other securities on the DIFX, covering such areas as eligibility of issuers for listing, the listing application process, continuing obligations following a listing and sanctions for non-compliance with the Listing Rules. The Business Rules and the Listing Rules are available on the website of the DIFX at www.difx.ae. None of the Joint Global Coordinators, the Issuer, the Selling Shareholder or the Principal Shareholders have independently verified the information contained on DIFX’s website and the Issuer can provide no assurance as to the accuracy or completeness of such information. The information contained on DIFX’s website is not incorporated by reference into, or otherwise included in, this Prospectus. The DIFX is governed by its board of directors, comprised of seven non-executive directors and three standing committees: the audit and risk management committee, the market oversight committee and the nomination and remuneration committee, all of which have formal charters. The market oversight committee is responsible for the independent oversight of the Markets Authority function which includes the Listing Authority, compliance, surveillance and enforcement departments. It also supervises the regulatory functions carried out by other areas of DIFX. The audit and risk management committee is responsible for the independent and objective oversight of legal and regulatory compliance, governance issues, internal control and risk management, financial reporting, external and internal auditors and financial controls. The nomination and remuneration committee is responsible for recommending new members to the board, succession planning for the board and senior management, performance evaluation of the board and key executives and determining remuneration of directors and senior managers and employee benefit structures.

87 TAXATION The following summary of material DIFC tax consequences of ownership of Shares is of a general nature and based upon laws, regulations, decrees, rulings, double taxation conventions, agreements and arrangements, administrative practice and judicial decisions in effect as at the date of this Prospectus. Legislative, judicial or administrative changes or interpretations may, however, be forthcoming that could alter or modify the statements and conclusions set forth in this Prospectus. Any such changes or interpretations may be retroactive and could affect the tax consequences to holders of the Shares. The following is intended only as a general guide and is not intended to be, nor should it be considered, legal or tax advice to any particular holder of Shares. It is not intended to address all tax aspects that may be relevant to a holder of Shares. Accordingly, potential investors should satisfy themselves as to the overall tax consequences in their own particular circumstances of their acquisition, ownership and disposal of Shares, including any pending or proposed changes in relevant tax laws as at the date of this Prospectus and any actual changes in relevant tax laws after such date, by consulting their own tax advisors in all relevant jurisdictions.

Dubai International Financial Centre No taxes currently apply to the Group or to the holders of the Shares in the DIFC, including dividend tax, capital gains tax, stamp duty or other tax. As a company domiciled in the DIFC, the Issuer is subject to a zero rate of corporate income tax for 50 years beginning from 13 September 2004, including the income tax relating to the Group’s business operations in the DIFC. This zero tax rate also applies to transfers of assets, profits or salaries in any currency to any party outside the DIFC for 50 years beginning from 13 September 2004.

88 UNDERWRITING

Description of the Distribution In connection with the Offer, the Issuer, the Selling Shareholder and the Joint Global Coordinators entered into the Underwriting Agreement on 2 July 2008. Subject to the satisfaction of certain conditions set out in the Underwriting Agreement, each Underwriter has agreed, severally but not jointly, to procure purchasers for, or failing which, to purchase, at the Offer Price, the number of Shares set out opposite its name as indicated below. Underwriters Number of Shares Credit Suisse Securities (Europe) Limited(1) ...... 135,291,685 HSBC Bank plc(2) ...... 135,291,685 Total...... 270,583,370

(1) The offices of Credit Suisse Securities (Europe) Limited in London are located at One Cabot Square, London E14 4QJ, United Kingdom. (2) The offices of HSBC Bank plc are located at 8 Canada Square, London E14 5HQ, United Kingdom. In the Underwriting Agreement, the Issuer and the Selling Shareholder have made certain representations and warranties and agreed to indemnify the several Underwriters against certain liabilities. The Underwriting Agreement provides that the obligations of the Joint Global Coordinators are subject to certain conditions precedent that are typical for an agreement of this nature. These conditions include, among others, the accuracy of the representations and warranties and the application for the DIFX Admission having been approved on or prior to the Closing Date. In addition, the Joint Global Coordinators may terminate the Underwriting Agreement prior to the Closing Date in certain specified circumstances that are typical for an agreement of this nature. These include the occurrence of certain material changes in the Issuer and/or its subsidiaries’ condition, financial or otherwise, or in their earnings, business affairs or business prospects and certain changes in financial, political or economic conditions (as more fully set out in the Underwriting Agreement). If any of the conditions are not satisfied (or waived, where capable of being waived) by, or the Underwriting Agreement is terminated prior to, the Closing Date, then the Offer will lapse. Any funds collected will be promptly returned to investors.

Over-allotment Option The Issuer has granted to the Joint Global Coordinators an option to subscribe for within 30 days from the Listing Date, up to an additional 40,587,506 Shares at the Offer Price, representing up to 15% of the total number of Shares in the Offer, solely to cover over-allotments or short positions resulting from stabilisation transactions, if any, in the Offer. If the Over-allotment Option is exercised in full, the Offer will amount to 311,170,876 Shares.

Commissions and Costs in Respect of the Offer The Issuer and the Selling Shareholder (in respect of the Shares issued or sold by them, as the case may be) will pay to the Underwriters a commission of 2.00% of the total gross proceeds in respect of the Offer and the Over-allotment Option (if any). This commission consists of an underwriting fee, a management fee and a selling fee. The Issuer may also pay, at its own discretion, an incentive fee of up to 0.75% of the total gross proceeds of the Offer. The Issuer will also reimburse the Joint Global Coordinators certain of their costs and expenses incurred in connection with the Offer.

Lock-up Agreements Pursuant to the terms of the Underwriting Agreement and to the Lock-up Letters executed by the Principal Shareholders on 2 July 2008, the Issuer (for a period of 180 days after the Listing Date) and the Selling Shareholder and the Principal Shareholders (for a period of one year after the Listing Date) have contractually agreed, save for the sale of the Shares by the Selling Shareholder in the Offer (including pursuant to the Over-allotment Option, if exercised), not to (i) offer, sell, contract to sell, pledge, charge, grant options over or otherwise dispose of, directly or indirectly, any of the Issuer’s shares or securities convertible or exchangeable into or exercisable for any of the Issuer’s shares or (ii) enter into any swap or any other agreement or any transaction that transfers, in whole or in part, directly or indirectly, any of the economic consequences of ownership of any shares or to mandate any third party to do so, or announce the intention to do so (each, a “Disposal”) without the prior written consent of the Joint Global Coordinators, which consent shall not be unreasonably withheld, or make an announcement relating thereto. Pursuant to a requirement of the DIFX, the Issuer has undertaken to make a public announcement through the CANDI system of the DIFX at least 14 days prior to the expiry of the Lock-up Agreements and the Lock-up Letters.

89 Pricing of the Offer Prior to this Offer, there has been no public market for the Shares. The Offer Price has been determined by negotiations between the Joint Global Coordinators, the Selling Shareholder and the Issuer. Among the factors considered in determining the Offer Price following the bookbuilding process were the Issuer’s future prospects and the prospects of the industry in general, the Issuer’s revenues, net profit and certain other financial operating information with respect to the Issuer in recent periods, and the financial ratios, market prices of securities and certain financial and operating information of companies engaged in activities similar to those conducted by the Issuer. This pricing methodology differs significantly from that used in certain other initial public offerings for Middle East companies, many of which are marketed on a fixed price basis or are priced at nominal value. Consequently, the performance of the price of the Shares in the secondary market is likely to be substantially different from that in other Middle East initial public offerings.

Stabilisation In order to facilitate the Offer, the Stabilisation Manager may engage in transactions that stabilise, support, maintain or otherwise affect the price of the Shares in accordance with the Price Stabilisation Module of the DFSA Rulebook. Any such stabilisation may be conducted on the DIFX, in the open market or in over-the-counter transactions, each in accordance with the relevant rules. Specifically, the Stabilisation Manager, on behalf of the Joint Global Coordinators, or persons acting on its behalf, may sell more Shares than are required to be purchased, creating a short position. A short sale is covered if the short position is no greater than the number of Shares available for purchase under the Over-allotment Option. The Stabilisation Manager can close out a covered short sale by exercising the Over-allotment Option on behalf of the Joint Global Coordinators or purchasing Shares in the open market. In determining the source of the Shares to close out a covered short sale, the Stabilisation Manager will consider, among other things, the open market price of the Shares compared to the price available under the Over- allotment Option. As an additional means of facilitating the Offer, the Stabilisation Manager, or its agent, may bid for, and purchase, Shares in the open market to stabilise the price of the Shares for a period commencing on the Listing Date and ending 30 days thereafter. Such stabilisation, if commenced, may be discontinued at any time without prior notice. The Joint Global Coordinators have advised the Issuer that the Joint Global Coordinators (including their affiliated entities) presently intend, following the stabilisation period, to trade actively in the Shares as permitted by applicable laws and regulations. Neither the Joint Global Coordinators nor their affiliated entities are required to engage in these activities, and may end any of these activities at any time. Accordingly, no assurance can be given as to the liquidity of, or trading markets for, the Shares.

Allocation The Offer comprises an offering of Shares to institutional investors outside the United States in reliance upon Regulation S and an offering in the DIFC as an Exempt Offer pursuant to the Offered Securities Rules of the DFSA. The allocation of Shares between prospective investors will be determined by the Joint Global Coordinators, the Selling Shareholder and the Issuer. Factors that were taken into account by the Joint Global Coordinators, the Selling Shareholder and the Issuer when determining the allocations between prospective investors in the event of over-subscription included participation in the marketing process for the Offer, holding behaviour in previous offerings, holdings in similar companies, pre- funding of indication of interest and other factors that the Issuer, the Joint Global Coordinators and the Selling Shareholder deemed relevant.

Unconditional Dealings There will be no conditional dealings in the Shares prior to the DIFX Admission. Unconditional dealings in the Shares on DIFX are expected to commence upon the listing of the Shares on DIFX. The dates and times may be changed.

Other Relationships Subject to the terms and conditions of the Underwriting Agreement, each of the Underwriters and any affiliate, acting as an investor for its own account, in connection with the Offer, may take up Shares and in that capacity may retain, purchase or sell for its own account such Shares and any related investments and may offer or sell such Shares

90 or other investments otherwise than in connection with the Offer. Accordingly, references in this Prospectus to the Shares being offered or placed should be read as including any offering or placement of Shares to the Underwriters and any affiliate acting as an investor for its own account. None of the Underwriters intend to disclose the extent of any such investment or transactions otherwise than to the Issuer and the Selling Shareholder and in accordance with any legal or regulatory obligation to do so. The Underwriters and their respective affiliates have, from time to time, performed, and may in the future perform, various financial advisory, investment and commercial banking and other services for the Issuer or for its affiliates or Selling Shareholder, for which they received or will receive fees and expenses. In particular, one of the Joint Global Coordinators, HSBC, has engaged in lending activities with the Group in the ordinary course of business. In November 2007, the Company entered into the HSBC Facility (as defined and further described under the heading “Operating and Financial Review — Liquidity and Capital Resources — Credit Facilities”) pursuant to which HSBC agreed to increase the maximum aggregate amount of facilities previously provided to the Company to AED 1,151.6 million, subject to review in June 2008. As a result of this, HSBC has a potential conflict of interest.

Selling Restrictions United States Each of the Joint Global Coordinators has agreed that the Shares have not been, and will not be, registered under the U.S. Securities Act, and may not be offered or sold within the United States, except pursuant to an exemption from the registration requirements of the U.S. Securities Act. The Shares will be offered to investors outside the United States in accordance with Regulation S. Each purchaser of the Shares outside of the United States pursuant to Regulation S, by its acceptance of delivery of this Prospectus and the Shares, will be deemed to have represented, agreed and acknowledged as follows. • The purchaser is, or at the time the Shares are purchased will be, the beneficial owner of such Shares and: (i) is, and the person, if any, for whose account it is acquiring the Shares is, outside the United States; (ii) is not an affiliate of the Issuer or a person acting on behalf of such an affiliate; and (iii) is not in the business of buying or selling securities or, if it is in such business, it did not acquire such Shares from the Issuer or an affiliate thereof in the initial distribution of the Shares. • The purchaser is aware that such Shares: (i) have not been, and will not be, registered under the U.S. Securities Act or with any securities regulatory authority of any state or other jurisdiction within the United States; and (ii) are being sold in accordance with Rule 903 or 904 of Regulation S and is purchasing such Shares in an “offshore transaction” in reliance on Regulation S. • The purchaser acknowledges that the Issuer, the Selling Shareholder, the Joint Global Coordinators and the Underwriters and their respective affiliates will rely upon the truth and accuracy of the acknowledgements, representations and agreements in the foregoing paragraphs.

EEA The Joint Global Coordinators have each severally represented and agreed that in relation to each Member State of the EEAwhich has implemented the Prospectus Directive (each, a “Relevant Member State”), that it has not made and will not make an offer of Shares to the public in that Relevant Member State, except that an offer to the public in that Relevant Member State of the Shares may be made at any time under the following exemptions under the Prospectus Directive, if they have been implemented in that Relevant Member State: • to legal entities which are authorised or regulated to operate in the financial markets or, if not so authorised or regulated, whose corporate purpose is solely to invest in securities; • to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total balance sheet of more than A43,000,000; and (3) an annual net turnover of more than A50,000,000, as shown in its last annual or consolidated accounts; • to fewer than 100 natural or legal persons (other than qualified investors as defined in the Prospectus Directive) subject to obtaining the prior consent of the Joint Global Coordinators for any such offer; or • in any other circumstances falling within Article 3(2) of the Prospectus Directive, in each case provided that no such offer of Shares shall result in a requirement for the publication by the Issuer or any Underwriter of a prospectus pursuant to Article 3 of the Prospectus Directive.

91 For the purposes of this provision, the expression an “offer of any Shares to the public” in relation to any Shares in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer of any Shares to be offered so as to enable an investor to decide to purchase any Shares, as the same may be varied in that Relevant Member State by any measure implementing the Prospectus Directive in that Relevant Member State and the expression “Prospectus Directive” means Directive 2003/71/EC and includes any relevant implementing measure in each Relevant Member State.

United Kingdom

The Joint Global Coordinators have each severally represented and agreed that: (i) it has only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of section 21 of the FSMA) received by them in connection with the issue or sale of any Shares in circumstances in which section 21(1) of the FSMA does not apply to the Issuer; and (ii) it has complied and will comply with all applicable provisions of the FSMAwith respect to anything done by them in relation to the Shares in, from or otherwise involving the United Kingdom.

DIFC

The Shares may not be, are not and will not be sold, subscribed for, transferred or delivered, directly or indirectly, to any person in the DIFC who is not a client within the meaning of the Conduct of Business Module of the Rules of the DFSA or a qualified investor within the meaning of the Offered Securities Rules of the DFSA.

UAE

Saudi Arabia

No action has been or will be taken in the Kingdom of Saudi Arabia that would permit a public offering or private placement of the Issuer’s Shares in the Kingdom of Saudi Arabia, or possession or distribution of any offering materials in the Kingdom of Saudi Arabia in relation thereto. The Shares may only be offered and sold in the Kingdom of Saudi Arabia in accordance with Part 5 (Exempt Offers) of the Offers of Securities Regulations dated 20/8/1425H (corresponding to 4/10/2004) (as amended) (the “Regulations”) and, in accordance with Article 16(a)(3) of the Regulations, the Shares will be offered to no more than 60 offerees in the Kingdom of Saudi Arabia with each such offeree paying an amount not less than one million Saudi Riyals or its equivalent. Prospective investors are informed that Article 19 of the Regulations places restrictions on secondary market activity with respect to the Shares. Any resale or other transfer, or attempted resale or other transfer, made other than in compliance with the above stated restrictions shall not be recognised by the Issuer.

General

Neither the Issuer nor the Joint Global Coordinators nor any person acting on their behalf, have taken or will take any action in any jurisdiction that would permit a public offering of the Shares, or the possession, circulation or distribution of this Prospectus or any other material relating to the Offer, or the Shares, in any jurisdiction where action for such purpose is required. Accordingly, the Shares may not be offered or sold, directly or indirectly, nor may this Prospectus or any other offering material or advertisement in connection with the Shares be distributed or published, in or from any country or jurisdiction except under circumstances that will result in compliance with any applicable rules and regulations of any such country or jurisdiction.

No dealer, salesperson or other person has been authorised to give any information or to make any representation not contained in this Prospectus, and, if given or made, such information or representation must not be relied upon as having been authorised by the Issuer or any of the Joint Global Coordinators. This Prospectus does not constitute an offer to sell or the solicitation of an offer to buy any securities other than the securities to which it relates or an offer to sell or the solicitation of an offer to buy such securities in any circumstances in which such offer or solicitation is unlawful. Neither the delivery of this Prospectus nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the Issuer’s affairs since the date hereof or that the information contained in this Prospectus is correct as of a date after its date.

92 LEGAL MATTERS Certain matters governed by DIFC law and English law will be passed on for the Issuer by Dewey & LeBoeuf LLP, DIFC and English counsel to the Issuer. Certain matters governed by UAE and DIFC law will be passed on for the Issuer by Al Tamimi & Company, special UAE and DIFC counsel to the Issuer. Certain matters governed by DIFC law and English law will be passed on for the Joint Global Coordinators and the Underwriters by Linklaters LLP, DIFC and English counsel to the Joint Global Coordinators and the Underwriters.

93 INDEPENDENT AUDITORS The 2005 Financial Statements and the 2006 Financial Statements included in this Prospectus have been audited by KPMG, independent auditors, as stated in their report appearing herein. Their registered business address is Level 32, Emirates Towers, Sheikh Zayed Road, PO Box 3800, Dubai, United Arab Emirates. The 2007 Financial Statements been included in this Prospectus have been audited by Ernst & Young, independent auditors, as stated in their report appearing herein. Their registered business address is 28th Floor, Al Attar Business Tower, Sheikh Zayed Road, PO Box 9267, Dubai, United Arab Emirates.

94 GENERAL INFORMATION 1. The Issuer is incorporated under the Companies Law under the name Damas International Limited as a company limited by shares in the DIFC with Registration Number 0038. Its principal executive and registered offices are at Level 3, Suite 57-58 Gold Centre Building, PO Box 1522, Dubai, UAE, and its telephone number is +971 226 6262. The Issuer’s website address is www.damasjewel.com. The content of that website is not incorporated into, and does not form part of, this Prospectus. 2. The Selling Shareholder is incorporated under the laws of the Kingdom of Saudi Arabia as a limited liability company with registered offices at P.O. Box 59115, Riyadh 11525, Kingdom of Saudi Arabia. 3. The Shares are in registered, book entry form. The increase in share capital for the Shares was authorised by vote of the Issuer’s shareholders on 1 June 2008, and the issue of the Shares was authorised by the Board of Directors at a meeting held on 1 June 2008. 4. Each Share has a nominal value of US$1.00. The Shares are governed by the laws of the DIFC. Purchasers of Shares will not be required to pay any expenses incurred in connection with the Offer. 5. There has been no significant change in the financial position of the Group or the trading position of the Issuer since 31 March 2008, the date of publication of the latest interim accounts. 6. Each of the Underwriting Agreement and the Trust Deed (not being contracts entered into in the ordinary course of business) has been entered into by the Issuer and contains provisions under which the Issuer has an obligation or entitlement which is, or may be, material to the Group as at the date of this Prospectus. For information on the Underwriting Agreement, see “Underwriting — Description of the Distribution”. For information on the Trust Deed, see “Trust Arrangement”. 7. Copies of the following documents are available for inspection at the offices of the Issuer, Level 3, Suite 57-58 Gold Centre Building, Dubai, UAE, during customary business hours on any weekday (public holidays excepted) until the later of 14 days from the date of this Prospectus and the DIFX Admission: • the Issuer’s Articles of Association; • the unaudited interim consolidated financial statements of the Group as at and for the three months ended 31 March 2008 and for the three months ended 31 March 2007 and review report thereon; and • the audited consolidated financial statements of the Company and its consolidated subsidiaries for the years ended 31 December 2005, 2006 and 2007 and auditor’s reports thereon. 8. Copies of the following documents will be available for inspection on the DIFX’s website, www.difx.ae: • this Prospectus; • the Issuer’s constitutional documents; • a list of Connected Persons; • the application for the Shares to be admitted to the Official List of Securities of the DIFX; • following pricing and allocation having been determined, a schedule showing the indicative distribution of Shares among the shareholders immediately upon DIFX Admission becoming effective; and • any other such documents as may be required by the DFSA. 9. No Shares will be distributed under this Prospectus later than 12 months from the date hereof.

95 (This page intentionally left blank) INDEX TO FINANCIAL STATEMENTS PAGE Interim Unaudited Consolidated Financial Statements as at and for the three months ended 31 March 2008 and for the three months ended 31 March 2007 Review Report of Independent Auditors...... F-3 Interim Unaudited Consolidated Income Statements for the three months ended 31 March 2008 and 2007 ...... F-4 Interim Unaudited Consolidated Balance Sheet as at 31 March 2008 ...... F-5 Interim Unaudited Consolidated Statement of Cash Flows for the three months ended 31 March 2008 ...... F-6 Interim Unaudited Consolidated Statement of Changes in Equity for the three months ended 31 March 2008 ...... F-7 Notes to the Unaudited Consolidated Financial Statements as at and for the three months ended 31 March 2008 and 2007...... F-8 Consolidated Financial Statements as at and for the year ended 31 December 2007 Report of Independent Auditors...... F-15-16 Consolidated Income Statement for the year ended 31 December 2007 ...... F-17 Consolidated Balance Sheet as at 31 December 2007 ...... F-18 Consolidated Statement of Cash Flows for the year ended 31 December 2007...... F-19 Consolidated Statement of Changes in Equity for the year ended 31 December 2007 ...... F-20 Notes to the Consolidated Financial Statements for the year ended 31 December 2007 ...... F-21 Consolidated Financial Statements as at and for the year ended 31 December 2006 Report of Independent Auditors...... F-67 Consolidated Balance Sheet as at 31 December 2006 ...... F-68 Consolidated Income Statement for the year ended 31 December 2006 ...... F-69 Consolidated Statement of Cash Flows for the year ended 31 December 2006...... F-70 Consolidated Statement of Changes in Equity for the year ended 31 December 2006 ...... F-71 Notes to the Consolidated Financial Statements for the year ended 31 December 2006 ...... F-72 Consolidated Financial Statements as at and for the year ended 31 December 2005 Report of Independent Auditors...... F-108 Consolidated Balance Sheet as at 31 December 2005 ...... F-109 Consolidated Income Statement for the year ended 31 December 2005 ...... F-110 Consolidated Statement of Cash Flows for the year ended 31 December 2005...... F-111 Consolidated Statement of Changes in Equity for the year ended 31 December 2005 ...... F-112 Notes to the Consolidated Financial Statements for the year ended 31 December 2005 ...... F-113

F-1 Damas LLC and its Subsidiaries

Unaudited interim condensed consolidated financial statements

31 March 2008

Contents Page Interim Unaudited Consolidated Financial Statements as at and for the three months ended 31 March 2008 and for the three months ended 31 March 2007 Review Report of Independent Auditors ...... F-3 Interim Unaudited Consolidated Income Statements for the three months ended 31 March 2008 and 2007...... F-4 Interim Unaudited Consolidated Balance Sheet as at 31 March 2008 ...... F-5 Interim Unaudited Consolidated Statement of Cash Flows for the three months ended 31 March 2008. . . F-6 Interim Unaudited Consolidated Statement of Changes in Equity for the three months ended 31 March 2008...... F-7 Notes to the Unaudited Consolidated Financial Statements as at and for the three months ended 31 March 2008 and 2007 ...... F-8

F-2 P.O. Box 9267 28th Floor - Al Attar Business Tower Sheikh Zayed Road Dubai, United Arab Emirates Tel: +971 4 332 4000 Fax: +971 4 332 4004 [email protected] www.ey.com/me

REPORT ON THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS TO THE SHAREHOLDERS OF DAMAS LLC

Report on the Financial Statements

We have reviewed the accompanying interim condensed consolidated financial statements of Damas LLC (“the Company”) and its subsidiaries, associates and joint ventures (collectively referred to as “the Group”), which comprise the interim consolidated balance sheet as at 31 March 2008, and the interim consolidated income statement, consolidated cash flow statement and consolidated statement of changes in equity for the three months period then ended, and a summary of significant accounting policies and other explanatory notes.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these interim condensed consolidated financial statements in accordance with International Financial Reporting Standard IAS 34 Interim Financial Reporting (‘IAS 34’).

Auditor’s Responsibility

Our responsibility is to express a conclusion on these interim condensed consolidated financial statements based on our review.

Scope of review

We conducted our review in accordance with international standard on review Engagement 2410, “Review of Interim Financial Information Performed by the Independent Auditor of the Entity”. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing. Consequently, it does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Qualification

The Group has not presented comparative figures in the cash flow statement and statement of changes in equity in respect of the three month period ended 31 March 2007 as required by IAS 34. The Group did not prepare quarterly consolidated accounts for that period and accordingly the information required to be disclosed is not available.

Conclusion

Based on our review, except for the effect on the financial statements of the matter referred to in the preceding paragraph, nothing has come to our attention that causes us to believe that the accompanying interim condensed consolidated financial statements are not prepared, in all material respects, in accordance with IAS 34.

/s/ ERNST &YOUNG

04 June 2008 Dubai

F-3 Damas LLC and its Subsidiaries

INTERIM CONSOLIDATED INCOME STATEMENT Period ended 31 March 2008 (Unaudited)

31 March 31 March Note 2008 2007 AED’ 000 AED’ 000 Revenue...... 1,115,051 921,418 Cost of sales ...... (891,555) (785,275) Gross profit ...... 223,496 136,143 General administration, selling and distribution expenses ...... (127,314) (96,403) Finance costs ...... (45,923) (24,297) Finance income ...... 9,735 10,418 Share of results of associates and jointly controlled entities ...... 12,260 10,867 Other (expenses)/ income ...... (2,550) 2,708 Profit for the period ...... 69,704 39,436 Attributable to: Shareholders of the company ...... 68,407 38,748 Minority interest ...... 1,297 688 69,704 39,436 Basic and diluted earnings per share (EPS) in AED...... 4 48.14 27.27

The attached explanatory notes 1 to 7 form part of these interim condensed consolidated financial statements.

F-4 Damas LLC and its Subsidiaries

INTERIM CONSOLIDATED BALANCE SHEET At 31 March 2008 (Unaudited)

31 Mar 2008 31 Dec 2007 AED’ 000 AED’ 000 Audited ASSETS Non current assets Property, plant and equipment ...... 242,365 218,888 Goodwill ...... 559,593 558,510 Intangible assets ...... 55,836 56,223 Investments accounted for using the equity method ...... 384,045 376,798 Other financial assets ...... 169,395 181,351 Long term loans to related parties ...... 111,701 111,701 1,522,935 1,503,471 Current assets Inventories ...... 1,594,120 1,497,704 Margin to trade payables against unfixed gold ...... 8,140 9,339 Accounts receivable and prepayments...... 573,192 510,477 Bank balances and cash ...... 1,159,784 1,364,479 Due from related parties ...... 116,693 105,581 Shareholders’ current accounts ...... 91,471 81,008 3,543,400 3,568,588 TOTAL ASSETS ...... 5,066,335 5,072,059 EQUITY AND LIABILITIES Equity Share capital ...... 1,421,000 1,421,000 Statutory reserve ...... 72,564 72,564 Currency translation reserve ...... 10,072 5,923 Retained earnings ...... 377,474 309,067 Attributable to shareholders of the Company ...... 1,881,110 1,808,554 Minority interest ...... 36,971 51,264 Total equity ...... 1,918,081 1,859,818 Non-current liabilities Bank borrowings ...... 1,083,954 1,209,591 Long term loans from shareholders...... 150,000 150,000 Employees’ end of service benefits...... 18,260 16,672 1,252,214 1,376,263 Current liabilities Bank borrowings ...... 907,979 661,912 Accounts payable and accruals ...... 692,381 818,444 Margin from trade receivables against unfixed gold...... 243,297 260,379 Due to related parties...... 52,383 95,243 1,896,040 1,835,978 Total liabilities ...... 3,148,254 3,212,241 TOTAL EQUITY AND LIABILITIES...... 5,066,335 5,072,059

On behalf of the Board of Directors Mr. Tawhid Abdulla Managing Director

/s/ Mr. Tawhid Abdulla

The attached explanatory notes 1 to 7 form part of these interim condensed consolidated financial statements.

F-5 Damas LLC and its Subsidiaries

INTERIM CONSOLIDATED CASH FLOW STATEMENT Three month period ended 31 March 2008 (Unaudited)

Note 31 Mar 2008 AED’ 000 Unaudited OPERATING ACTIVITIES Profit before tax ...... 69,704 Adjustments for: Depreciation ...... 8,210 Intangible assets amortised...... 2,297 Provision for inventories ...... 2,855 Provision for employees’ end of service benefits (net) ...... 1,587 Finance income ...... (9,735) Finance cost ...... 45,923 Share of results of associates and jointly controlled entities...... (12,260) Unrealized loss on revaluation of forward contracts ...... 34,715 Loss on fair valuation of investments designated as fair value through profit or loss . . . 4,715 Dividend on investments designated as fair value through profit or loss ...... (289) 147,722 Working capital changes: Inventories ...... (17,977) Accounts receivables and prepayments ...... (82,737) Margin to trade payables against unfixed gold ...... 1,198 Due from related parties ...... (11,112) Due to related parties ...... (42,860) Trade payables and other liabilities ...... (224,177) Margin from trade receivables against unfixed gold ...... (17,081) Cash used in operations...... (247,024) Interest paid ...... (45,151) Net cash used in operating activities ...... (292,175) INVESTING ACTIVITIES Purchase of property, plant and equipment ...... (26,813) Additions to intangibles...... (1,910) Acquisition of subsidiaries, net of cash acquired...... 5 (622) Purchase of investments designated as fair value through profit and loss account ...... (3,488) Proceeds from disposal of investments held to maturity ...... 11,019 Dividends received ...... 5,288 Net cash used in investing activities ...... (16,526) FINANCING ACTIVITIES Term loans availed during the period ...... 16,117 Term loans repaid during the period...... (107,723) Net movement in trust receipts ...... 49,473 Net movement in local bills discounting...... 5,687 Interest on fixed deposit ...... 9,222 Fixed deposits under lien...... 173,425 Shareholders drawings...... (10,463) Net movement in minority interest ...... (15,184) Net cash from financing activities ...... 120,554 DECREASE IN CASH AND CASH EQUIVALENTS...... (188,147) Cash and cash equivalents at the beginning of the period ...... 299,121 Cash and cash equivalents at the end of the period ...... 110,974

The attached explanatory notes 1 to 7 form part of these interim condensed consolidated financial statements.

F-6 Damas LLC and its Subsidiaries

INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Period ended 31 March 2008 (Unaudited)

Attributable to share holders of the Company Currency Total share Share Statutory translation Retained holders Minority Total capital reserve reserve earnings equity interest equity AED’000 AED’000 AED’000 AED’000 AED’000 AED’000 AED’000 At 1 January 2008 ...... 1,421,000 72,564 5,923 309,067 1,808,554 51,264 1,859,818 Currency translation adjustment ...... — — 4,149 — 4,149 — 4,149 Total income and expense for the year recognised directly in equity...... — — 4,149 — 4,149 — 4,149 Profit for the period ...... — — — 68,407 68,407 1,297 69,704 Total income and expense for the period ...... — — 4,149 68,407 72,556 1,297 73,853 Minority interest acquired on business combination ..... — — — — — 890 890 Other movements, net...... — — — — — (16,480) (16,480) At 31 March 2008 (Unaudited) ...... 1,421,000 72,564 10,072 377,474 1,881,110 36,971 1,918,081

The attached explanatory notes 1 to 7 form part of these interim condensed consolidated financial statements.

F-7 Damas LLC and its Subsidiaries

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Period ended 31 March 2008 (Unaudited)

1 ACTIVITIES Damas LLC (“the Company”) is a Limited Liability Company registered in Dubai, United Arab Emirates (“UAE”) established on April 14, 1994 as per commercial registration certificate no. 41717 issued by the Department of Economic Development. The Company’s registered office is at P.O. Box 1522, 3rd Floor, New Gold Center, Suite No. 57/58, Deira, Dubai, UAE. The Group is primarily involved in the business of trading in gold and gold jewellery, diamond jewellery, pearls, watches, silver and precious stones on wholesale and retail basis. The interim condensed consolidated financial statements of the Company as at 31 March 2008 comprise the Company and the subsidiaries (together referred to as the “Group”) and the Group’s interest in associates and jointly controlled entities. The following shareholders have contributed to the capital and share profit and losses in the given ratios as at 31 March 2008: %of Number of Holding Shares Mr. Tawfique Abdulla ...... UAENational 21.933% 311,666 Mr. Tawhid Abdulla ...... UAENational 23.183% 329,429 Mr. Tamjid Abdulla ...... UAENational 21.933% 311,666 Amwal Al Khaleej Commercial Investment Company...... KSACompany 23.125% 328,602 Al Fahim Group of Companies ...... UAECompany 4.884% 69,408 Abdulla Nasser Hawaileel Al Mansouri ...... UAENational 4.942% 70,229

2 SIGNIFICANT ACCOUNTING POLICIES Basis of preparation The interim condensed consolidated financial statements for the three months ended 31 March 2008 have been prepared in accordance with IAS 34 Interim Financial Reporting. The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group’s annual financial statements as at 31 December 2007.

Significant accounting policies The accounting polices adopted in the preparation of the interim condensed consolidated financial statements are consistent with those used in the preparation of the Group’s annual financial statements for the year ended 31 December 2007, except for the adoption of new Standards and Interpretations noted below: • IFRIC 11 IFRS 2 — Group and Treasury Share Transactions This interpretation requires arrangements whereby an employee is granted rights to an entity’s equity instruments, to be accounted for as an equity-settled scheme, even if the entity buys the instruments from another party, or the shareholders provide the equity instruments needed. The adoption of this Interpretation did not have any effect on the financial position or performance of the Group. • IFRIC 14 IAS 19 — The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction This Interpretation provides guidance on how to assess the limit on the amount of surplus in a defined benefit scheme that can be recognised as an asset under IAS 19 Employee Benefits. The adoption of this Interpretation did not have any effect on the financial position or performance of the Group. Certain new standards, amendments to and interpretations of existing standards have been published and are mandatory for the Group’s accounting periods beginning on or after 1 January 2009 or later periods but which the Group has not early adopted. Those that are applicable to the group are as follows: 1. IFRS 2 ‘Amendments to IFRS 2 — Vesting Conditions and Cancellations’ is required to be applied to periods beginning on or after 1 January 2009. This amendment clarifies the definition of non-vesting

F-8 Damas LLC and its Subsidiaries

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Period ended 31 March 2008 (Unaudited) — (Continued)

conditions and prescribes accounting treatment of an award that is cancelled because a non-vesting condition is not satisfied. This amendment will have no significant impact on the Group’s financial statements. 2. IFRS 8 ‘Operating Segments’ introduces the management approach to segment reporting. IFRS 8, which becomes mandatory for the Group’s 2009 financial information, will require the disclosure of segment information based on the internal reports regularly reviewed by the Group’s Chief Operating Decision Maker in order to assess each segment’s performance and allocate resources to them. Management is analysing the approach to be used in the segment information under IFRS 8. 3. Revisions to IAS 23 ‘Borrowing costs’ have removed the option of immediately recognising as an expense borrowing costs that relate to assets that take a substantial period of time to get ready for use or sale. An entity is, therefore, required to capitalise borrowing costs as part of the cost of such assets. The revised standard applies to borrowing costs relating to qualifying assets for which the commencement date for capitalisation is on or after 1 January 2009. This will have no impact on the Group as its accounting policy in this regard requires capitalization of borrowing costs. 4. IAS 32 Financial Instruments: Presentation and IAS 1 Presentation of Financial Statements — Puttable Financial Instruments and Obligations Arising on Liquidation introduces disclosure and allows limited scope exception for puttable financial instruments to be classified as equity if they fulfil a number of specified criteria. The revised standard is applicable for periods beginning on or after 1 January 2009. This revision will have no impact on the Group’s financial statements.

3 SEGMENT INFORMATION The Group’s operations are organised into four business segments: Gold bullion, gold jewellery (wholesale and retail), diamond jewellery (wholesale and retail) and silver, pearls, watches, precious stones and others (wholesale and retail) categorised as others. The Group accounts for inter-segment sales as if the sales were to third parties, that is, at current market prices. The Group evaluates the performance of its segments and allocates resources to them based on this evaluation.

F-9 Damas LLC and its Subsidiaries

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Period ended 31 March 2008 (Unaudited) — (Continued)

Business segments

The following tables present revenue and profit information relating to the Group’s business segments for three months ended 31 March 2008 and 2007. Included within the corporate, consolidation and eliminations columns are certain balances, which due to their nature, are not allocated to segments.

3 Months ended 31 March 2008 (Unaudited)

Unallocated Gold Gold Diamond and Consolidation Particulars bullion jewellery jewellery Others Corporate adjustments Total Amount in AED’000 External sales ...... 16,664 721,017 290,322 87,048 — — 1,115,051 Internal sales ...... — 468,626 169,528 39,278 — (677,432) — Total revenue...... 16,664 1,189,643 459,850 126,326 — (677,432) 1,115,051 Segment results ...... — 59,476 137,952 26,068 — — 223,496 Cash expenses ...... — (94) (19,637) (2,473) (91,265) — (113,469) Non cash expenses ..... — (96) (3,205) (744) (9,800) — (13,845) Profit before finance income/costs...... — 59,286 115,110 22,851 (101,065) — 96,182 Finance costs ...... — (5,311) — — (40,612) — (45,923) Finance income...... — — — — 9,735 — 9,735 Operational profit ..... — 53,975 115,110 22,851 (131,942) — 59,994 Income from investments accounted for using equity method ...... — 820 2,450 5,139 3,851 — 12,260 Other expenses ...... — — — — (2,550) — (2,550) Profit for the year ..... — 54,795 117,560 27,990 (130,641) — 69,704

3 Months ended 31 March 2007 (Unaudited)

Unallocated Gold Gold Diamond and Consolidation Particulars bullion jewellery jewellery Others Corporate adjustments Total Amount in AED’000 External sales ...... 160,366 486,488 228,196 46,368 — — 921,418 Internal sales ...... — 228,808 88,066 23,433 — (340,307) — Total revenue ...... 160,366 715,296 316,262 69,801 — (340,307) 921,418 Segment results ...... — 33,079 88,542 14,522 — — 136,143 Cash expense- ...... (264) (15,457) (1,381) (69,301) — (86,403) Non cash expenses ...... — (85) (3,360) (1,213) (5,342) — (10,000) Profit before finance income/costs ...... — 32,730 69,725 11,928 (74,643) — 39,740 Finance costs ...... — (3,815) — — (20,482) — (24,297) Finance income ...... — — — — 10,418 — 10,418 Operational profit ...... — 28,915 69,725 11,928 (84,707) — 25,861 Income from investments accounted for using equity method ...... — 844 1,166 4,671 4,186 — 10,867 Other income ...... — — — — 2,708 — 2,708 Profit for the year...... — 29,759 70,891 16,599 (77,813) — 39,436

F-10 Damas LLC and its Subsidiaries

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Period ended 31 March 2008 (Unaudited) — (Continued)

4 EARNING PER SHARE (EPS)

Basic earnings per share is calculated by dividing profit for the year attributable to equity holders of the parent by the weighted average number of ordinary shares outstanding during the period.

Diluted earnings per share is calculated by dividing the profit by the weighted average number of ordinary shares outstanding during the period plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares. There were no potentially dilutive shares as at 31 March.

Three months ended 31 March 2008 2007 Earnings: Profit for the period — AED ’000 ...... 68,407 38,748 Shares: Weighted average number of shares outstanding for calculating basic EPS ...... 1,421,000 1,421,000 Basic and diluted earning per share AED ...... 48.14 27.27

5 ACQUISITION/ DISPOSAL OF SUBSIDIARIES

Acquisition of Glamour LLC

On 3 January 2008 the Group acquired a 60% interest in Glamour LLC, for a purchase consideration of AED 1,335,000. Glamour LLC is a jewellery retailer in Egypt.

The acquisition had the following effect on the Group’s assets and liabilities on acquisition date.

Fair Recognised Pre-acquisition value values on carrying amount adjustments acquisition AED ’000 AED ’000 AED ’000 Property plant and equipment ...... 4,874 — 4,874 Inventories ...... 18,774 — 18,774 Trade receivables ...... 546 — 546 Cash and cash equivalents ...... 713 — 713 Trade and other payables ...... (7,292) — (7,292) Due to related parties ...... (15,390) — (15,390) Net identifiable assets and liabilities ...... 2,225 — 2,225 Net assets acquired (60%) ...... 1,335 Goodwill on acquisition ...... — Consideration paid, satisfied in cash ...... (A) 1,335 Cash acquired (100%) ...... (B) 713 Net cash out flow ...... (A-B) 622

The values of assets and liabilities recognised on acquisition are their fair values.

6 RELATED PARTY TRANSACTIONS

Related parties represent subsidiaries, associates, joint ventures, major shareholders, directors and key management personnel of the Group, and entities controlled, jointly controlled or significantly influenced by such parties. The sales to and purchases from related parties are made at normal market prices. Pricing policies and terms of these transactions are approved by the Group’s management.

F-11 Damas LLC and its Subsidiaries

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Period ended 31 March 2008 (Unaudited) — (Continued)

Significant transactions with related parties during the three months ended 31 March 2008 and 2007 are as follows: 2008 Expenses paid on behalf Fees for services Transfer of Sales Purchases of related parties rendered investments Amount in AED’000 Jointly controlled entities and associated companies ...... 51,543 23,284 — 544 — Total ...... 51,543 23,284 — 554 —

2007 Expenses paid on behalf Fees for services Transfer of Sales Purchases of related parties rendered investments Amount in AED’000 Jointly controlled entities and associated companies ...... 33,473 34,320 — 515 — Total ...... 33,473 34,320 — 515 —

7 CONTINGENCIES AND COMMITMENTS Contingencies At 31 March 2008, stand-by-letters of credit provided by banks in favour of suppliers of gold, who have lent unfixed gold amounted to AED 1,567,083,000. Letters of credit, and other bank guarantees as at 31 March 2008 amounted to AED 28,841,000. Corporate guarantees given by the Company towards bank borrowings of associates and jointly controlled entities as at 31 March 2008 amounted to AED 54,023,000.

Legal case Outstanding legal cases against the Group as at 31 March 2008 include a case under arbitration relating to its subsidiary in Italy, DIT group SPA (formerly Stefan Hafner SPA) (“the subsidiary”), the facts of which have been elaborated in the annual accounts as at 31 December 2007. During the three months period ended 31 March 2008, there have been no significant developments in the case and the next hearing is expected to happen by September 2008.

Capital commitments At 31 March 2008, the Group had capital commitments of AED 27,511,000 primarily relating to the upcoming building facilities for use by the Group

F-12 Damas LLC and its Subsidiaries

Financial Statements

31 December 2007

F-13 Damas LLC and its Subsidiaries

Consolidated financial statements

31 December 2007

Contents Page Independent auditors’ report ...... F-15-16 Consolidated income statement ...... F-17 Consolidated balance sheet ...... F-18 Consolidated cash flow statement ...... F-19 Consolidated statement of changes in equity ...... F-20 Notes to the consolidated financial statements ...... F-21

F-14 P.O. Box 9267 28th Floor - Al Attar Business Tower Sheikh Zayed Road Dubai, United Arab Emirates Tel: +971 4 332 4000 Fax: +971 4 332 4004 [email protected] www.ey.com/me

INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS OF DAMAS LLC Report on the Financial Statements We have audited the accompanying consolidated financial statements of Damas LLC {“the Company”) and its subsidiaries, associates and joint ventures (collectively referred to as “the Group”), which comprise the consolidated balance sheet as at 31 December 2007, and the consolidated income statement, consolidated cash flow statement and consolidated statement of changes in equity for the year then ended, and a summary of significant accounting policies and other explanatory notes. The consolidated financial statements of the Group as of 31 December 2006 were audited by another auditor whose report dated 24 May 2007, expressed an unqualified opinion on those statements, as originally stated.

Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with international Financial Reporting Standards and the applicable provisions of the articles of association of Damas LLC and the UAE Commercial Companies Law of 1984 (as amended). This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material mis statement, whether due to fraud or error; selecting and applying appropriate accounting policies: and making accounting estimates that are reasonable in the circumstances.

Auditor’s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing, Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate for the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Group as at 31 December 2007, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards.

F-15 Report on Other Legal and Regulatory Requirements We also confirm that, in our opinion, the consolidated financial statements include in all material respects, the applicable requirements of the UAE Commercial Companies Law of 1984 (as amended) and the articles of association of the Company; proper books of account have been kept by the Company; an inventory was duly carried out and the contents of the report of the Directors relating to these financial statements are consistent with the books of account. We have obtained all the information and explanations which we required for the purpose of our audit and, to the best of our knowledge and belief, no violations of the UAE Commercial Companies Law of 1984 {as amended) or of the articles of association of the Company have occurred during the year which would have had a material effect on the business of the Company or on its financial position.

/s/ ERNST &YOUNG

17 May 2008 Dubai

F-16 Damas LLC and its Subsidiaries

CONSOLIDATED INCOME STATEMENT Year ended 31 December 2007

Notes 2007 2006 AED’ 000 AED’ 000 (restated) Revenue ...... 3,538,141 4,041,862 Cost of sales ...... (2,910,173) (3,560,322) Gross profit ...... 627,968 481,540 General administration, selling and distribution expenses ...... 5 (416,856) (338,362) Finance costs ...... 6 (107,620) (72,416) Finance income...... 33,830 29,210 Share of results of associates and jointly controlled entities ...... 7 42,261 39,133 Income on disposal of associates ...... — 75,338 Other income ...... 8 29,543 17,475 Profit for the year ...... 209,126 231,918 Attributable to: Shareholders of the company ...... 204,051 229,339 Minority interest ...... 5,075 2,579 209,126 231,918 Basic and diluted earnings per share (EPS) in AED ...... 24 143.60 161.39

The attached notes 1 to 33 form part of these consolidated financial statements.

F-17 Damas LLC and its Subsidiaries

CONSOLIDATED BALANCE SHEET Year ended 31 December 2007

Notes 2007 2006 AED’ 000 AED’ 000 ASSETS Non current assets Property, plant and equipment ...... 9 218,888 169,380 Goodwill ...... 10 558,510 551,144 Intangible assets ...... 11 56,223 38,161 Investments accounted for using the equity method...... 12(a) 376,798 231,440 Other financial assets...... 12(b) 181,351 123,449 Long term loans to related parties ...... 16 111,701 51,515 1,503,471 1,165,089 Current assets Inventories ...... 13 1,497,704 1,225,390 Margin to trade payables against unfixed gold ...... 13 9,339 161,782 Accounts receivable and prepayments...... 14 510,477 594,910 Bank balances and cash ...... 15 1,364,479 864,769 Due from related parties ...... 16 105,581 62,639 Shareholders’ current accounts ...... 17 81,008 74,032 3,568,588 2,983,522 TOTAL ASSETS ...... 5,072,059 4,148,611 EQUITY AND LIABILITIES Equity Share capital ...... 18 1,421,000 1,421,000 Statutory reserve ...... 19 72,564 52,240 Currency translation reserve ...... 19 5,923 (766) Retained earnings ...... 309,067 224,735 Revaluation reserve ...... — 1,119 Attributable to shareholders of the Company ...... 1,808,554 1,698,328 Minority interest ...... 51,264 25,369 Total equity ...... 1,859,818 1,723,697 Non-current liabilities Bank borrowings ...... 20 1,209,591 207,720 Long term loans from shareholders ...... 21 150,000 150,000 Employees’ end of service benefits ...... 16,672 12,747 1,376,263 370,467 Current liabilities Bank borrowings ...... 20 661,912 543,394 Accounts payable and accruals ...... 22 818,444 1,350,611 Margin from trade receivables against unfixed gold ...... 13 260,379 76,777 Due to related parties...... 16 95,243 83,665 1,835,978 2,054,447 Total liabilities ...... 3,212,241 2,424,914 TOTAL EQUITY AND LIABILITIES...... 5,072,059 4,148,611

On behalf of the Board of Directors Mr. Tawhid Abdulla Managing Director

The attached notes 1 to 33 form part of these consolidated financial statements.

F-18 Damas LLC and its Subsidiaries

CONSOLIDATED CASH FLOW STATEMENT Year ended 31 December 2007

Note 2007 2006 AED’ 000 AED’ 000 OPERATING ACTIVITIES Profit before tax ...... 209,126 231,918 Adjustments for: Depreciation ...... 9 31,408 20,314 Intangible assets amortised ...... 11 8,772 3,347 Provision for inventories ...... 5 8,332 7,135 Provision for employees’ end of service benefits (net) ...... 3,925 1,428 Finance income ...... (33,830) (29,210) Finance cost ...... 100,349 72,416 Profit on disposal of investment in associate ...... — (75,338) (Profit)/loss on disposal of property, plant and equipment ...... (95) 88 Share of results of associates and jointly controlled entities ...... 7 (42,261) (39,133) Unrealized gain on revaluation of forward contracts ...... (1,881) (10,904) Gain on fair valuation of investments designated as fair value through profit or loss . . . (12,459) — Gain on disposal of investments designated as fair value through profit or loss ...... (2,307) — (Profit)/loss on sale of available for sale investments ...... (390) 307 268,689 182,368 Working capital changes: Inventories ...... (286,882) (228,804) Accounts receivables and prepayments ...... 78,141 (144,697) Margin to trade payables against unfixed gold...... 152,443 (143,379) Due from related parties ...... (51,636) (27,727) Due to related parties ...... 11,573 52,407 Trade payables and other liabilities ...... (511,685) 863,883 Margin from trade receivables against unfixed gold ...... 183,602 (114,105) Cash (used in) from operations ...... (155,755) 439,946 Interest paid ...... (102,010) (67,759) Net cash (used in) from operating activities ...... (257,765) 372,187 INVESTING ACTIVITIES Purchase of property, plant and equipment ...... (84,708) (70,155) Additions to intangibles ...... (21,604) (16,945) Proceeds from disposal of property, plant and equipment ...... 262 462 Proceeds from disposal of investment in an associate...... 918 25,000 Acquisition of subsidiaries, net of cash acquired ...... (4,093) (9,126) Changes in the status of subsidiaries ...... 4,839 — Interest in joint ventures and associates acquired during the year ...... (12,749) (112,032) Proceeds from disposal of available for sale investments ...... 2,348 6,072 Purchase of available for sale investments ...... (41,615) — Purchase of investments designated as fair value through profit and loss account ...... (97,474) (614) Proceeds from disposal of investments designated as fair value through profit and loss account...... 7,586 — Advance against investments ...... 12(b) — (85,864) Dividends received ...... 4,228 9,524 Net foreign exchange differences ...... 3,466 87 Net cash used in investing activities ...... (238,596) (253,591) FINANCING ACTIVITIES Term loans availed during the year ...... 1,872,688 310,160 Term loans repaid during the year ...... (611,268) (163,169) Net movement in trust receipts ...... (14,114) 12,525 Net movement in local bills discounting ...... (5,733) 6,507 Interest on fixed deposit...... 32,629 28,613 Fixed deposits placed under lien ...... (132,836) (410,862) Shareholders drawings ...... (64,209) (123,708) Dividend paid ...... (42,237) (39,750) Net movement in minority interest ...... 8,433 5,925 Net movement in long term loan to related parties ...... (63,381) 9,762 Net cash from (used in) financing activities ...... 979,972 (363,997) INCREASE/ (DECREASE) IN CASH AND CASH EQUIVALENTS ...... 483,611 (245,401) Cash and cash equivalents at the beginning of the year ...... (184,490) 60,911 Cash and cash equivalents at the end of the year...... 15 299,121 (184,490)

The attached notes 1 to 33 form part of these consolidated financial statements.

F-19 Damas LLC and its Subsidiaries

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Year ended 31 December 2007

Attributable to share holders of the Company Currency Total share Share Statutory translation Retained Revaluation holders Minority Total capital reserve reserve earnings reserve equity interest equity AED’000 AED’000 AED’000 AED’000 AED’000 AED’000 AED’000 AED’000 At 1 January 2007 ...... 1,421,000 52,240 (766) 224,735 1,119 1,698,328 25,369 1,723,697 Currency translation adjustment . . . — — 6,878 — — 6,878 — 6,878 Fair value adjustment on business combination ...... — 75 5 — — 80 — 80 Change in status to associate ..... — — (194) — (1,119) (1,313) — (1,313) Total income and expense for the year recognised directly in equity ...... — 75 6,689 — (1,119) 5,645 — 5,645 Profit for the year ...... — — — 204,051 — 204,051 5,075 209,126 Total income and expense for the year ...... — 75 6,689 204,051 (1,119) 209,696 5,075 214,771 Transfer to statutory reserve ...... — 20,249 — (20,249) — — — — Minority interest acquired on business combination ...... — — — — — — 327 327 Other movements, net ...... — — — — — — 20,493 20,493 Dividend for the year 2006 ...... — — — (99,470) — (99,470) — (99,470) At 31 December 2007...... 1,421,000 72,564 5,923 309,067 — 1,808,554 51,264 1,859,818 At 1 January 2006 ...... 1,421,000 28,735 (2,540) 118,371 — 1,565,566 11,212 1,576,778 Currency translation adjustment . . . — — 1,774 — — 1,774 — 1,774 Fair value adjustments on business combination ...... — — — — 1,539 1,539 — 1,539 Adjustments for fair value realised on sale of inventory ...... — — — — (420) (420) (476) (896) Total income and expense for the year recognised directly in equity ...... — — 1,774 — 1,119 2,893 (476) 2,417 Profit for the year ...... — — — 229,339 — 229,339 2,579 231,918 Total income and expense for the year ...... — — 1,774 229,339 1,119 232,232 2,103 234,335 Transfer to statutory reserve ...... — 23,505 — (23,505) — — — — Minority interest acquired on business acquisitions ...... — — — — — — 5,959 5,959 Other movements, net ...... — — — — — — 6,095 6,095 Dividend for the year 2005 ...... — — — (99,470) — (99,470) — (99,470) At 31 December 2006 ...... 1,421,000 52,240 (766) 224,735 1,119 1,698,328 25,369 1,723,697

The attached notes 1 to 33 form part of these consolidated financial statements.

F-20 Damas LLC and its Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS At 31 December 2007

1 ACTIVITIES Damas LLC (“the Company”) is a Limited Liability Company registered in Dubai, United Arab Emirates (“UAE”) established on April 14, 1994 as per commercial registration certificate no. 41717 issued by the Department of Economic Development. The Company’s registered office is at P.O. Box 1522, 3rd Floor, New Gold Center, Suite No. 57/58, Deira, Dubai, UAE. The Group is primarily involved in the business of trading in gold and gold jewellery, diamond jewellery, pearls, watches, silver and precious stones on wholesale and retail basis. The consolidated financial statements of the Company as at 31 December 2007 comprise the Company and the subsidiaries (together referred to as the “Group”) and the Group’s interest in associates and jointly controlled entities. The following shareholders have contributed to the capital and share profit and losses in the given ratios as at 31 December 2007: %of Number of Holding Shares Mr. Tawfique Abdulla ...... UAENational 21.933% 311,666 Mr. Tawhid Abdulla ...... UAENational 23.183% 329,429 Mr. Tamjid Abdulla ...... UAENational 21.933% 311,666 Amwal Al Khaleej Commercial Investment Company...... KSACompany 23.125% 328,602 Al Fahim Group of Companies ...... UAECompany 4.884% 69,408 Abdulla Nasser Hawaileel Al Mansouri ...... UAENational 4.942% 70,229

2 SIGNIFICANT ACCOUNTING POLICIES Basis of preparation The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards. The consolidated financial statements have been presented in United Arab Emirates Dirhams (“AED”), rounded to the nearest thousand (“AED ’000) except where otherwise stated. The consolidated financial statements are prepared under the historical cost convention modified to include the measurement at fair value of: • Derivative financial instruments; • Financial instruments at fair value through profit or loss; • Available for sale financial assets.

Changes in accounting policies The accounting polices adopted are consistent with those used in the preparation of the financial statements for the period ended 31 December 2006, except as follows:

Restatement of revenue and cost of sales During 2007 the Company has changed its accounting policy with respect to revenue by including the value of gold sold in its revenue and cost of sales line in order for revenue and cost of sales to better reflect the economic substance of it sales transactions. Both revenue and cost of sales for the year ended 31 December 2006 were increased by AED 2,832 million for the purposes of the comparatives in these financial statements.

New accounting standards and interpretations The Group has adopted the following new and amended IFRS and IFRIC interpretations during the year. Adoption of these revised standards and interpretations did not have any effect on the financial performance or position of the Group. They did however give rise to following additional disclosures: • IFRS 7 Financial Instruments: Disclosures • IAS 1 Amendment — Presentation of Financial Statements

F-21 Damas LLC and its Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued) At 31 December 2007

• IFRIC 8 Scope of IFRS 2 Share Based Payments • IFRIC 9 Reassessment of Embedded Derivatives • IFRIC 10 Interim Financial Reporting and Impairment The principal effects of these changes are as follows:

IFRS 7 Financial Instruments: Disclosures This standard requires disclosures that enable users of the financial statements to evaluate the significance of the Group’s financial instruments and the nature and extent of risks arising from those financial instruments. These new disclosures are shown in notes 14 and 27.

IAS 1 Presentation of Financial Statements This amendment requires the Group to make new disclosures to enable users of the financial statements to evaluate the Group’s objectives, policies and processes for managing capital. These new disclosures are shown in note 27.

IFRIC 8 Scope of IFRS 2 Share Based Payments This interpretation requires IFRS 2 to be applied to any arrangements in which the entity cannot identify specifically some or all of the goods received, in particular where equity instruments are issued for consideration which appears to be less than fair value. As equity instruments are only issued to employees in accordance with the employee share scheme, the interpretation had no impact on the financial position or performance of the Group.

IFRIC 9 Reassessment of Embedded Derivatives IFRIC 9 states that the date to assess the existence of an embedded derivative is the date that an entity first becomes a party to the contract, with reassessment only if there is a change to the contract that significantly modifies the cash flows. As the Group has no embedded derivative requiring separation from the host contract, the interpretation had no impact on the financial position or performance of the Group.

IFRIC 10 Interim Financial Reporting and Impairment The Group adopted IFRIC Interpretation 10 as of 1 January 2007, which requires that an entity must not reverse an impairment loss recognized in a previous interim period in respect of goodwill or an investment in either an equity instrument or a financial asset carried at cost. As the Group had no impairment losses previously reversed, the interpretation had no impact on the financial position or performance of the Group. Certain new standards, amendments to and interpretations of existing standards have been published and are mandatory for the Group’s accounting periods beginning on or after 1 January 2008 or later periods but which the Group has not early adopted. Those that are applicable to the group are as follows: 1. IAS 1 ‘Presentation of Financial Statements (Revised)’ effective for annual periods beginning on or after 1 January 2009 has been revised to enhance the usefulness of information presented in the financial statements. Management is considering the approach to meeting this requirement. 2. IFRS 2 ‘Amendments to IFRS 2 — Vesting Conditions and Cancellations’ is required to be applied to periods beginning on or after 1 January 2009. This amendment clarifies the definition of non-vesting conditions and prescribes accounting treatment of an award that is cancelled because a non-vesting condition is not satisfied. This amendment will have no significant impact on the Group’s financial statements. 3. IFRS 3 ‘Business Combinations (Revised)’ and the amended version of IAS 27 ‘Consolidated and Separate Financial Statements’, effective for annual periods beginning on or after 1 July 2009, have been enhanced to, amongst other reasons, specify the accounting treatments for acquisition costs, contingent consideration, pre- existing relationships and reacquired rights. The revised standards include detailed guidance in respect of step acquisitions and partial disposals of subsidiaries and associates as well as in respect of allocation of income to non-controlling interests. Further, an option has been added to IFRS 3 to permit an entity to recognise 100 per

F-22 Damas LLC and its Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued) At 31 December 2007

cent of the goodwill of an acquired entity, not just the acquiring entity’s portion of the goodwill. The impact of this standard on the Group is not expected to be significant. 4. IFRS 8 ‘Operating Segments’ introduces the management approach to segment reporting. IFRS 8, which becomes mandatory for the Group’s 2009 financial information, will require the disclosure of segment information based on the internal reports regularly reviewed by the Group’s Chief Operating Decision Maker in order to assess each segment’s performance and allocate resources to them. Management is analysing the approach to be used in the segment information under IFRS 8. 5. IFRIC 14 — IAS 19 ‘The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction’ clarifies when refunds or reductions in future contributions in relation to defined benefit assets should be regarded as available and provides guidance on the impact of minimum funding requirements (MFR) on such assets. It also addresses when an MFR might give rise to a liability. IFRIC 14 will become mandatory for the Group’s 2008 financial information, with retrospective application required. This will have no significant impact on the Group’s financial statements. 6. Revisions to IAS 23 ‘Borrowing costs’ have removed the option of immediately recognising as an expense borrowing costs that relate to assets that take a substantial period of time to get ready for use or sale. An entity is, therefore, required to capitalise borrowing costs as part of the cost of such assets. The revised standard applies to borrowing costs relating to qualifying assets for which the commencement date for capitalisation is on or after 1 January 2009. This will have no impact on the Group as its accounting policy in this regard requires capitalization of borrowing costs. 7. IFRIC 11, IFRS 2 ‘Group and Treasury Share Transactions’ effective for annual periods beginning on or after 1 March 2007 provides specific guidance on applying IFRS 2. It addresses share based payments involving an entity choosing or being required to buy its own equity instruments (treasury shares) to settle a share based payment obligation and the situation when the parent grants rights to its equity instruments to employees of its subsidiaries (both of which should be treated as equity-settled). In addition it addresses the situation when a subsidiary grants rights to equity instruments of its parent to its employees (which should be treated as cash settled). The Directors anticipate that the initial adoption of this standard will have no significant impact on the Group.

Basis of consolidation Subsidiaries The financial statements incorporate the financial statements of the Company and each of its controlled subsidiaries. The financial statements of subsidiaries are prepared for the same reporting year as the Company and where necessary, adjustments are made to the financial statements of the Group’s subsidiaries to bring their accounting policies into line with those of the Group. The Group’s investments in certain subsidiaries are held by certain directors and related parties for the beneficial interest of the Group. Subsidiaries are consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the group. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities. All intra-group balances and transactions, including unrealised profits, have been eliminated on consolidation. Minority interests in subsidiaries consolidated by the group are disclosed separately from the group’s equity and income statement. Losses attributable to minority interests in excess of the minority’s interest in the net assets of the subsidiary are adjusted against the interest of the group unless there is a binding obligation on the part of the minority to contribute additional investment in the subsidiary. Refer to note 32 for details of subsidiaries.

Associates and jointly controlled entities (equity accounted investments) The Group’s investment in its associates and jointly controlled entities is accounted for using the equity method of accounting. An associate is an entity in which the Group has significant influence and which is neither a subsidiary

F-23 Damas LLC and its Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued) At 31 December 2007 nor a joint venture. A jointly controlled entity is one, whereby the venturers have a contractual arrangement that establishes joint control over the economic activities of the entity. Investments in associates and jointly controlled entities are carried in the balance sheet at cost, plus post-acquisition changes in the Group’s share of net assets of the associate or the jointly controlled entity, less any impairment in value. The income statement reflects the Group’s share of the results of its associates and jointly controlled entities. The Group’s investment in certain associates and jointly controlled entities is held by certain Directors and related parties for the beneficial interest of the Group. Details of the Group’s associated companies and jointly controlled entities are given in note 33.

Foreign currencies The Company’s functional and presentational currency is United Arab Emirates Dirhams. In the accounts of individual group companies, transactions in currencies other than a Company’s functional currency are recorded at the prevailing rate of exchange at the date of the transaction. At the year end, monetary assets and liabilities denominated in foreign currencies are retranslated at the rates of exchange prevailing at the balance sheet date. Non- monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the rate of exchange as at the dates of the initial transactions. Non-monetary assets and liabilities measured at fair value in a foreign currency are translated using the rate of exchange at the date the fair value was determined. All foreign exchange gains and losses are taken to the income statement with the exception of exchange differences arising on monetary assets and liabilities that form part of the Group’s net investment in subsidiaries. These are taken directly to equity until the disposal of the net investment at which time they are recognised in the income statement. The balance sheets of overseas subsidiaries are translated in to AED using the closing rate method, whereby assets and liabilities are translated at the rates of exchange prevailing at the balance sheet date. The income statements of overseas subsidiaries and joint ventures are translated at average exchange rates for the year. Exchange differences arising on the retranslation of net assets are taken directly to a separate component of equity. On the disposal of a foreign entity, accumulated exchange differences are recognised in the income statement as a component of the gain or loss on disposal.

Investments and other financial assets Financial assets within the scope of IAS 39 are classified as financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, or available-for-sale financial assets, as appropriate. When financial assets are recognised initially, they are measured at fair value, plus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs. The Group determines the classification of its financial assets on initial recognition and, where allowed and appropriate, re-evaluates this designation at each financial year end.

Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss includes financial assets held for trading and financial assets designated upon initial recognition as at fair value through profit or loss. Financial assets are classified as held for trading if they are acquired for the purpose of selling in the near term. Gains or losses on investments held for trading are recognised in profit or loss.

Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement loans and receivables are carried at amortised cost using the effective interest method less any allowance for impairment. Gains and losses are recognised in profit or loss when the loans and receivables are derecognised or impaired, as well as through the amortisation process.

F-24 Damas LLC and its Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued) At 31 December 2007

Held-to-maturity investments Non-derivative financial assets with fixed or determinable payments and fixed maturities are classified as held-to-maturity when the Group has the positive intention and ability to hold to maturity. After initial measurement held-to-maturity investments are measured at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the investments are derecognised or impaired, as well as through the amortisation process.

Available-for-sale financial investments Available-for-sale financial assets are those non-derivative financial assets that are designated as available-for-sale or are not classified in any of the three preceding categories. After initial measurement, available-for-sale financial assets are measured at fair value with unrealised gains or losses recognised directly in equity until the investment is derecognised or determined to be impaired at which time the cumulative gain or loss previously recorded in equity is recognised in profit or loss.

Fair value The fair value of investments that are actively traded in organised financial markets is determined by reference to quoted market bid prices at the close of business on the balance sheet date. For investments where there is no active market, fair value is determined using valuation techniques. Such techniques include using recent arm’s length market transactions; reference to the current market value of another instrument which is substantially the same; discounted cash flow analysis or other valuation models.

Amortised cost Held-to-maturity investments and loans and receivables are measured at amortised cost. This is computed using the effective interest method less any allowance for impairment. The calculation takes into account any premium or discount on acquisition and includes transaction costs and fees that are an integral part of the effective interest rate.

Derivative financial instruments The Group holds derivative financial instruments to hedge its gold price risks and interest rate risk exposures. All derivative financial instruments are recognised initially at cost; attributable transaction costs are recognised in profit or loss when incurred. Subsequent to initial recognition derivative financial instruments are stated at fair value. Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative. The fair values of gold futures and interest rate swap contracts are determined by reference to market values for similar instruments. Any gains or losses arising from changes in fair value on derivatives during the year that do not qualify for hedge accounting are taken directly to profit or loss. For the purposes of hedge accounting, hedges are classified as: • fair value hedges when hedging the exposure to changes in the fair value of a recognised asset or liability; or • cash flow hedges when hedging exposure to variability in cash flows that is either attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction. The Group formally designates and documents the relationship between the hedging instrument and the hedged item at the inception of the transaction, as well as its risk management objectives and strategy for undertaking various hedge transactions. The documentation also includes identification of the hedging instrument, the hedged item or transaction, the nature of risk being hedged and how the group will assess the hedging instrument’s effectiveness in offsetting the exposure to changes in the hedged item’s fair value or cash flows attributable to the hedged risk. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in the hedging transactions are highly effective in offsetting changes in fair values or cash flows of the hedged items.

F-25 Damas LLC and its Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued) At 31 December 2007

The treatment of gains and losses arising from revaluing derivatives designated as hedging instruments depends on the nature of hedging relationship, as follows:

Fair value hedges For fair value hedges, the carrying amount of the hedged item is adjusted for gains and losses attributable to the risk being hedged; the derivative is remeasured at fair value and gains and losses from both are taken to the income statement. For hedged items carried at amortised cost, the adjustment is amortised through the income statement such that it is fully amortised by maturity. The Group discontinues fair value hedge accounting if the hedging instrument expires or is sold, terminated or exercised, the hedge no longer meets the criteria for hedge accounting or the group revokes the designation.

Cash flow hedges For cash flow hedges, the effective portion of the gain or loss on the hedging instrument is recognised directly in equity, while the ineffective portion is recognised in the income statement. Amounts taken to equity are transferred to the income statement when the hedged transaction affects the income statement. If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation as a hedge is revoked, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement.

Impairment of financial assets The Group assesses at each balance sheet date whether a financial asset or group of financial assets is impaired.

Assets carried at amortised cost If there is objective evidence that an impairment loss on assets carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate (ie the effective interest rate computed at initial recognition). The carrying amount of the asset is reduced through use of an allowance account. The amount of the loss shall be recognised in the income statement. 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, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date. Any subsequent reversal of an impairment loss is recognised in the income statement. In relation to trade receivables, a provision for impairment is made when there is objective evidence (such as the probability of insolvency or significant financial difficulties of the debtor) that the Group will not be able to collect all of the amounts due under the original terms of the invoice. The carrying amount of the receivable is reduced through use of an allowance account. Impaired debts are derecognised when they are assessed as uncollectible.

Available-for-sale financial investments If an available-for-sale asset is impaired, an amount comprising the difference between its cost (net of any principal payment and amortisation) and its current fair value, less any impairment loss previously recognised in the income statement, is transferred from equity to profit or loss. Reversals in respect of equity instruments classified as available-for-sale are not recognised in profit or loss. Reversals of impairment losses on debt instruments are reversed through profit or loss, if the increase in fair value of the instrument can be objectively related to an event occurring after the impairment loss was recognised in profit or loss.

F-26 Damas LLC and its Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued) At 31 December 2007

Financial liabilities Interest bearing loans and borrowings All loans and borrowings are initially recognised at fair value less directly attributable transaction costs, and have not been designated ‘as at fair value through profit or loss’. After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the amortisation process.

Property, plant and equipment Property, plant and equipment is stated at cost less accumulated depreciation and any impairment in value. Land and capital work in progress are not depreciated. Depreciation is calculated on a straight line basis over the estimated useful lives of the assets as follows: Building ...... over20to25years Vehicles ...... over4years Furniture and fixtures ...... over4years Office equipment ...... over3to4years Machinery and accessories ...... over4years Assets costing less than AED 5,000 are depreciated fully in the year of purchase. In respect of additions made during the year, full year’s depreciation is charged for all assets purchased in the first half of the year and half year’s depreciation is charged for all additions made in the second half of the year. The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets are written down to their recoverable amount, being the higher of their fair value less costs to sell and their value in use. Expenditure incurred to replace a component of an item of property, plant and equipment that is accounted for separately is capitalised and the carrying amount of the component that is replaced is written off. Other subsequent expenditure is capitalised only when it increases future economic benefits of the related item of property, plant and equipment. All other expenditure is recognised in the income statement as the expense is incurred.

Business combinations and goodwill Business combinations are accounted for using the purchase method. Goodwill is initially measured at cost being the excess of the cost of the business combination over the Group’s share in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash generating units that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash-generating unit retained.

Stepped acquisition When an acquisition is completed by a series of successive transactions, each significant transaction is considered individually for the purpose of determination of fair value of the identifiable assets, liabilities and contingent liabilities acquired and hence for the goodwill associated with the acquisition.

F-27 Damas LLC and its Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued) At 31 December 2007

The fair values of the identifiable assets and liabilities acquired can vary at the date of each transaction. When a transaction results in taking control over the entity, the interest previously held in the entity is revalued on the basis of fair values of the identifiable assets and liabilities at that date. The contra posting for this revaluation is recorded directly in shareholders equity under revaluation reserve.

Intangible assets Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life is reviewed at least at each financial year end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in profit or loss in the expense category consistent with the function of the intangible asset. Intangible assets with indefinite useful lives are tested for impairment annually either individually or at the cash generating unit level. Such intangibles are not amortised. The useful life of an intangible asset with an indefinite life is reviewed annually to determine whether indefinite life assessment continues to be supportable. If not, the change in the useful life assessment from indefinite to finite is made on a prospective basis. Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in profit or loss when the asset is derecognised.

Operating lease premium Operating lease premium, included in intangible assets, represents the amount paid as premium to obtain key locations on rent. Such amounts are initially recognised at cost and in subsequent years these are stated at cost less accumulated amortisation and impairment losses, if any. Amortisation is charged to the income statement on a straight-line basis over the estimated useful life of intangible assets. Amortisation of these intangible assets is carried out over a period of 10 years from the date of initial recognition.

Distribution rights Distribution rights are being amortised over a period of 5 years which represents the period over which the Group has contractually agreed the distribution rights with the principal.

Brand acquisition cost Brand acquisition cost are amortised over a period of 15 years and relates to amount paid by the Group for purchase of rights to manufacture and distribute a brand of jewellery.

Impairment of non-financial assets The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. 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

F-28 Damas LLC and its Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued) At 31 December 2007 asset. In determining fair value less costs to sell, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded subsidiaries or other available fair value indicators. For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the Group makes an estimate of recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the income statement unless the asset is carried at revalued amount, in which case the reversal is treated as a revaluation increase.

Goodwill The Group assesses whether there are any indicators that goodwill is impaired at each reporting date. Goodwill is tested for impairment, annually and when circumstances indicate that the carrying value may be impaired. Impairment is determined for goodwill by assessing the recoverable amount of the cash-generating units, to which the goodwill relates. Where the recoverable amount of the cash-generating units is less than their carrying amount an impairment loss is recognised. Impairment losses relating to goodwill cannot be reversed in future periods. The Group performs its annual impairment test of goodwill as at 31 December.

Intangible assets Intangible assets with indefinite useful lives are tested for impairment annually as of 31 December either individually or at the cash generating unit level, as appropriate.

Investment in associates and joint ventures After application of the equity method, the Group determines whether it is necessary to recognise an additional impairment loss of the Group’s investment in its associates and joint ventures. The Group determines at each balance sheet date whether there is any objective evidence that the investment is impaired. If this is the case the Group calculates the amount of impairment as being the difference between the fair value of the associate or joint venture and the acquisition cost and recognises the amount in the income statement.

Inventories The cost of diamond jewellery, pearl jewellery and watches is determined based on specific identification method. The cost of gold owned by the Group is determined on the basis of 12 months average purchase price. The making charges related to inventory of own and unfixed gold jewellery is included in year-end inventories. Inventories are stated at the lower of cost and net realizable value. Costs are those expenses incurred in bringing each product to its present location and condition. Net realisable value is based on estimated selling price less any further costs expected to be incurred on completion and disposal.

Accounts receivable Accounts receivable are stated at original invoice amount less a provision for any uncollectible amounts. An estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written off when there is no possibility of recovery.

Cash and cash equivalents For the purpose of the cash flow statement, cash and cash equivalents consist of cash in hand, bank balances, and short-term deposits with an original maturity of three months or less, net of outstanding bank overdrafts.

F-29 Damas LLC and its Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued) At 31 December 2007

Accounts payable and accruals Liabilities are recognised for amounts to be paid in the future for goods or services received, whether billed by the supplier or not.

Provisions Provisions are recognised when the Group has an obligation (legal or constructive) arising from a past event, and the costs to settle the obligation are both probable and able to be reliably measured.

Employees’ end of service benefits The Group provides end of service benefits to its expatriate employees. The entitlement to these benefits is based upon the employees’ final salary and length of service, subject to the completion of a minimum service period. The provision has been calculated in accordance with the provisions of the UAE Federal Labour Law. Employees of subsidiaries, associates and joint ventures operating outside UAE are provided with benefits as per their relevant labour laws. The expected costs of these benefits are accrued over the period of employment.

Leases Finance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against income. Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset or the lease term. Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. Operating lease payments are recognised as an expense in the income statement on a straight-line basis over the lease term.

Revenue recognition Sale of goods Revenue from sales of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer and the amount of revenue can be measured reliably.

Interest income Interest revenue is recognised as the interest accrues using the effective interest method, under which the rate used exactly discounts the estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset.

Dividends Revenue is recognised when the Group’s right to receive the payment is established.

3 SEGMENT INFORMATION The Group’s operations are organised into four business segments: Gold bullion, gold jewellery (wholesale and retail), diamond jewellery (wholesale and retail) and silver, pearls, watches, precious stones and others (wholesale and retail) categorised as others. The accounting policies of the segments are the same as those described in note 2 above. The Group accounts for inter-segment sales as if the sales were to third parties, that is, at current market prices. The Group evaluates the performance of its segments and allocates resources to them based on this evaluation.

F-30 Damas LLC and its Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued) At 31 December 2007

The Group’s secondary segment reporting format is geographical. Geographical segments are based on the location of the group’s assets. Sales to external customers disclosed in geographical segments are based on the geographical location of its customers.

Business segments The following tables present revenue and profit information and certain asset and liability information relating to the Group’s business segments for the years ended 31 December 2007 and 2006. Included within the corporate, consolidation and eliminations columns are certain balances, which due to their nature, are not allocated to segments.

Year ended 31 December 2007 Unallocated Gold Gold Diamond and Consolidation Particulars bullion jewellery jewellery Others Corporate adjustments Total Amount in AED’000 External sales ...... 257,533 2,149,245 934,410 196,953 — — 3,538,141 Internal sales...... — 1,349,178 381,897 95,476 — (1,826,551) — Total revenue ...... 257,533 3,498,423 1,316,307 292,429 — (1,826,551) 3,538,141 Segment results ...... — 178,255 386,713 63,000 — — 627,968 Unallocated corporate costs Cash Expenses ...... — (905) (72,222) (7,332) (286,182) — (366,641) Non Cash expenses ...... — (381) (13,870) (5,304) (30,660) — (50,215) Profit before finance income/costs ...... — 176,969 300,621 50,364 (316,842) — 211,112 Finance costs ...... — (14,470) — — (93,150) — (107,620) Finance income ...... — — — — 33,830 — 33,830 Operational profit ...... — 162,499 300,621 50,364 (376,162) — 137,322 Income from investments accounted for using equity method ...... — 6,142 4,041 14,057 18,021 — 42,261 Other income ...... — — — — 29,543 — 29,543 Profit for the year ...... — 168,641 304,662 64,421 (328,598) — 209,126

F-31 Damas LLC and its Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued) At 31 December 2007

Year ended 31 December 2006

Unallocated Gold Gold Diamond and Consolidation Particulars bullion jewellery jewellery Others Corporate adjustments Total Amount in AED ’000 External sales ...... 1,462,779 1,642,229 681,034 255,820 — — 4,041,862 Internal sales ...... — 818,719 365,210 59,176 — (1,243,105) — Total revenue ...... 1,462,779 2,460,948 1,046,244 314,996 — (1,243,105) 4,041,862 Segment results ...... — 143,155 289,287 49,098 — — 481,540 Unallocated corporate costs Cash Expenses ...... — (118) (55,047) (4,622) (247,708) — (307,495) Non Cash expenses..... — (9,917) (4,139) (16,811) — (30,867) Profit before finance income /costs ...... — 143,037 224,323 40,337 (264,519) — 143,178 Finance costs ...... — (8,875) — — (63,541) — (72,416) Finance income ...... — — — — 29,210 — 29,210 Operational profit ...... — 134,162 224,323 40,337 (298,850) — 99,972 Income from investment accounted for using equity method...... — — 5,305 5,463 28,365 — 39,133 Other income ...... — — — — 92,813 — 92,813 Profit for the year ..... — 134,162 229,628 45,800 (177,672) — 231,918

Geographical segments

The following tables present revenue, assets and capital expenditure by geographical segments for the years ended 31 December 2007 and 2006.

Year ended 31 December 2007

Consolidation adjustments Particulars UAE GCC countries Others and eliminations Total Amount in AED ’000 Segment revenue ...... 4,745,070 338,542 281,080 (1,826,551) 3,538,141 Carrying amount of segment assets .... 4,772,378 25,346 274,335 — 5,072,059 Capital expenditure Property, plant and equipments ...... 41,176 12,036 37,331 — 90,543 Intangibles ...... 10,643 13,968 4,908 — 29,519

Year ended 31 December 2006

Consolidation adjustments Particulars UAE GCC countries Others and eliminations Total Amount in AED ’000 Segment revenue ...... 4,936,138 160,922 187,907 (1,243,105) 4,041,862 Carrying amount of segment assets .... 3,982,678 9,488 156,446 — 4,148,611 Capital expenditure Property, plant and equipments ...... 41,385 2,756 35,075 — 79,216 Intangibles ...... 14,219 862 4,957 — 20,038

F-32 Damas LLC and its Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued) At 31 December 2007

4 ACQUISITION/ DISPOSAL OF SUBSIDIARIES 2007 Acquisitions/ disposals: i. Acquisition of Damas & Al Ghannam Jewellery, Co. WLL On 1 January, 2007 the Group acquired further 40% shares in Damas & Al Ghanam Jewellery, in addition to the 50% shares already held by the Group, for a purchase consideration of AED 7 million. Damas & Al Ghannam Jewellery, Co. WLL is a jewellery retailer in Kuwait. The acquisition had the following effect on the Group’s assets and liabilities on acquisition date. Fair Recognised Pre-acquisition value values on carrying amount adjustments acquisition AED ’000 AED ’000 AED ’000 Property plant and equipment ...... 5,835 — 5,835 Intangible assets ...... 7,915 — 7,915 Inventories ...... 9,765 — 9,765 Trade receivables ...... 362 — 362 Prepayments and other receivables ...... 7,975 — 7,975 Cash and cash equivalents ...... 2,907 — 2,907 Bank borrowings ...... (2,500) — (2,500) Trade and other payables ...... (32,665) — (32,665) Net identifiable assets and liabilities ...... (406) — (406) Net assets acquired (40%) ...... (162) Goodwill on acquisition ...... 7,162 Consideration paid, satisfied in cash ...... (A) 7,000 Cash acquired (100%) ...... (B) 2,907 Net cash out flow ...... (A-B) 4,093

The values of assets and liabilities recognised on acquisition are their estimated fair values. ii. Disposal of Damas Europe SPA and Dria SRL As on 1 January 2007, the Group had restructured its investment in its subsidiaries Damas Europe SPA and Dria SRL by merging their operations with Adriano Facco SPA. As a result of the restructuring, the shareholding of the Group in Damas Europe SPA has decreased from 66% to 36.7% making the resulting entity an associate. The above restructuring did not impact the results for the year of the Group.

2006 Acquisitions: i. Acquisition of Damas Europe SPA On 6 October, 2006 the Group acquired further 36% shares in Damas Europe SPA, in addition to the 30% shares already held by the Group, for a purchase consideration of AED 4.67 million. The acquisition had the following effect on the Group’s assets and liabilities on acquisition date.

F-33 Damas LLC and its Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued) At 31 December 2007

Fair Recognised Pre-acquisition value values on carrying amount adjustments acquisition AED ’000 AED ’000 AED ’000 Property plant and equipment ...... 8,807 — 8,807 Intangible assets ...... 3,093 — 3,093 Inventories ...... 10,261 5,131 15,392 Trade receivables ...... 9 — 9 Prepayments and other receivables ...... 2,917 — 2,917 Cash and cash equivalents ...... 128 — 128 Bank borrowings ...... (7,075) — (7,075) Loans from shareholders...... (2,133) — (2,133) Trade and other payables ...... (12,945) — (12,945) Net identifiable assets and liabilities ...... 3,062 5,131 8,193 Net assets acquired (36%) ...... 2,949 Goodwill on acquisition ...... 1,718 Consideration paid, satisfied in cash ...... (A) 4,667 Cash acquired (100%) ...... (B) 128 Net cash out flow ...... (A-B) 4,539

The values of assets and liabilities recognised on acquisition are their estimated fair values. ii. Acquisition of Dria srl

On 6 October, 2006 the Group acquired 70% shares in Dria srl for a purchase consideration of AED 0.88 million.

The acquisition had the following effect on the Group’s assets and liabilities on acquisition date.

Fair Recognised Pre-acquisition value values on carrying amount adjustments acquisition AED ’000 AED ’000 AED ’000 Property plant and equipment...... 254 — 254 Investments ...... 458 — 458 Inventories ...... 5,863 322 6,185 Trade receivables...... 10,652 — 10,652 Prepayments and other receivables ...... 469 — 469 Cash and cash equivalents ...... (3,709) — (3,709) Bank borrowings ...... (610) — (610) Loans from shareholders ...... (905) — (905) Trade and other payables ...... (12,343) — (12,343) Net identifiable assets and liabilities...... 129 322 451 Net assets acquired (70%) ...... 316 Goodwill on acquisition ...... 562 Consideration paid, satisfied in cash ...... (A) 878 Overdraft acquired (100%)...... (B) 3,709 Net cash out flow ...... (A+B) 4,587

The values of assets, liabilities and contingent liabilities recognised on acquisition are their estimated fair values

Goodwill recognised on the acquisition of the above entities is mainly attributable to the skills and expertise of the acquired business work force and the synergies expected to be achieved from integrating the entities into the Group’s existing business.

F-34 Damas LLC and its Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued) At 31 December 2007

5 GENERAL ADMINISTRATION, SELLING AND DISTRIBUTION EXPENSES

Included in general administration, selling and distribution expenses:

2007 2006 AED ’000 AED ’000 Personnel expenses...... 137,864 97,841 Advertising, sales promotion/marketing and selling expenses ...... 87,273 86,539 Administrative expenses ...... 79,028 76,291 Rent ...... 62,476 46,824 Depreciation (refer note 9) ...... 31,408 20,314 Amortisation of intangible assets (refer note 11) ...... 8,772 3,347 Provision for slow moving inventory ...... 8,332 7,135 Bad debts written off ...... 1,703 71 416,856 338,362

6 FINANCE COSTS

2007 2006 AED ’000 AED ’000 Term loan interest ...... 51,940 26,382 Gold loan interest...... 14,470 8,875 Overdraft interest ...... 11,397 16,532 Other bank charges...... 22,542 20,627 Loss on fair valuation of interest rate swaps ...... 7,271 — 107,620 72,416

7 INCOME FROM JOINTLY CONTROLLED ENTITIES AND ASSOCIATES

2007 2006 AED ’000 AED ’000 Share of income from jointly controlled entities (refer note 12(a)) ...... 22,797 12,837 Share of income from associates * and ** (refer note 12 (a)) ...... 19,464 26,296 42,261 39,133

* Income from associates includes Nil (2006: AED 12.72 million) of income from Metamorph Real Estate WLL, Kuwait. Refer note 12 (a) (2).

** Income from associates is net of provision of AED 3.2 million (2006: Nil) made for losses incurred by an associate in excess of contributed capital. For balance sheet presentation purposes the same has been presented as a provision against long term dues from this associate.

8 OTHER INCOME

2007 2006 AED ’000 AED ’000 Gain on fair valuation of investments designated as fair value through profit or loss .... 12,459 — Income on consignment ventures ...... 6,162 9,825 Miscellaneous income ...... 10,922 7,650 29,543 17,475

F-35 Damas LLC and its Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued) At 31 December 2007

9 PROPERTY, PLANT AND EQUIPMENT Furniture Machinery Capital Land and and Office and work-in- buildings Vehicles fixtures equipment accessories progress Total AED ’000 AED ’000 AED ’000 AED ’000 AED ’000 AED ’000 AED ’000 Cost At 1 January 2007 ..... 46,068 8,854 87,119 14,261 14,351 74,962 245,615 Acquisition of a subsidiary (refer note 4) ...... — — 5,835 — — — 5,835 Additions ...... 10,549 1,364 42,080 4,353 6,321 20,041 84,708 Transfers ...... 49,679 — 447 214 (203) (50,137) — Disposals ...... (43) (594) (2,311) — (287) — (3,235) Disposal of a subsidiary (refer note 4) ...... — (21) (9,987) (808) (5) — (10,821) Currency translation . . . 416 2 310 154 147 41 1,070 At 31 December 2007 . . 106,669 9,605 123,493 18,174 20,324 44,907 323,172 Depreciation At 1 January 2007 ..... 2,024 7,257 51,405 7,421 8,128 — 76,235 Charge for the year .... 2,755 1,150 17,606 4,234 5,663 — 31,408 Transfers ...... — — — 192 (192) — — Disposals ...... (43) (557) (2,267) — (201) — (3,068) Disposal of a subsidiary ...... — (1) (696) (121) (2) — (820) Currency translation . . . 19 2 98 79 331 — 529 At 31 December 2007 . . 4,755 7,851 66,146 11,805 13,727 — 104,284 Net book value At 31 December 2007 . . 101,914 1,754 57,347 6,369 6,597 44,907 218,888

Land and building amounting to AED 13 million (cost) (2006: AED 14.58 million) is held in the name of directors/ their relatives for the beneficial interest of the Group. Capital work-in-progress amounting to AED 6.71 million (cost) (2006: AED 6.71 million) is held in the name of Oriental Int. Co. for Gold and Jewellery Trade, a related party for the beneficial interest of the Group. Capital work in progress mainly includes cost of construction work related to ALMAS Tower 53A (office building) amounting to AED 6.45 million, ALMAS Tower 54A (office building) amounting to AED 6.41 million, AU Tower (office building) amounting to AED 7.26 million, Emirates hills first (office buildings) amounting to AED 5.6 million and Umm Uthaina South, Jordan (commercial shop) amounting to AED 8.2 million. Property, plant and equipment amounting to AED 28 million (cost) (2006: AED 22.58 million) is mortgaged with banks against loans obtained by the Group. Also refer note 20.

F-36 Damas LLC and its Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued) At 31 December 2007

Furniture Machinery Capital Land and and Office and work-in- buildings Vehicles fixtures equipment accessories progress Total AED ’000 AED ’000 AED ’000 AED ’000 AED ’000 AED ’000 AED ’000 Cost At 1 January 2006 ..... 28,157 9,236 59,295 10,254 8,520 51,945 167,407 Acquisition of subsidiaries ...... — 21 8,216 819 5 — 9,061 Other additions ...... 9,805 366 20,128 5,031 4,901 29,924 70,155 Transfers ...... 6,941 — 1,378 (1,865) 487 (6,941) — Disposals ...... — (771) (2,027) (39) (137) — (2,974) Currency translation . . . 1,165 2 129 61 575 34 1,966 At 31 December 2006 . . 46,068 8,854 87,119 14,261 14,351 74,962 245,615 Depreciation At 1 January 2006 ..... 895 6,698 41,193 4,753 4,289 — 57,828 Charge for the year .... 1,109 1,166 11,468 3,288 3,283 — 20,314 Transfers ...... — (10) 414 (625) 221 — — Disposals ...... — (597) (1,732) (26) (69) — (2,424) Currency translation . . . 20 — 62 31 404 — 517 At 31 December 2006 . . 2,024 7,257 51,405 7,421 8,128 — 76,235 Net book value At 31 December 2006 . . 44,044 1,597 35,714 6,840 6,223 74,962 169,380

10 GOODWILL 2007 2006 AED’ 000 AED’ 000 Cost: As at 1 January ...... 551,144 548,626 Additions during the year (refer note 4(i)) ...... 7,162 2,280 Currency translation reserve ...... 2,484 238 Goodwill related to subsidiaries disposed (refer note 4(ii)) ...... (2,280) — Net book value as at 31 December ...... 558,510 551,144

Impairment test for goodwill The balance at the year end represents goodwill on the acquisition of Damas Jewellery LLC; DIT Group, Italy (formerly Stefan Hafner SPA, Italy) and Damas & Al Ghannam Jewellery Co. WLL. Annual impairment testing for goodwill is carried by management at 31 December. The impairment test is based on a “value in use” calculation. These calculations have used cash flow projections based on actual operating results and future expected performance. Cash flow projections beyond five years are projected using a 4% growth rate. The growth rate is considered appropriate considering the nature of the industry and the general growth in the economic activity witnessed in the region where these entities operate. A discount rate of 8% has been used in discounting the cash flows projected.

F-37 Damas LLC and its Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued) At 31 December 2007

11 INTANGIBLE ASSETS 2007 2006 AED’ 000 AED’ 000 Cost: As at 1 January ...... 53,819 33,781 Operating lease premium additions during the year ...... 17,536 2,490 Acquisition of a subsidiary (refer note 4(i)) ...... 7,915 3,093 Distribution rights acquired...... — 11,025 Brand acquisition cost paid during the year ...... 4,068 3,430 Disposal of subsidiaries ...... (2,685) — As at 31 December...... 80,653 53,819 Amortisation and impairment: As at 1 January ...... 15,658 12,311 Amortisation ...... 8,772 3,347 As at 31 December...... 24,430 15,658 Net book value: As at 31 December...... 56,223 38,161

12(a) INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD 2007 2006 AED’ 000 AED’ 000 Investments in jointly controlled entities (refer note 1 below)...... 204,929 154,798 Investments in associates (refer note 2 below) ...... 171,869 76,642 Balance at 31 December ...... 376,798 231,440

Note 1: The movement in investments in jointly controlled entities is as follows: 2007 2006 AED’ 000 AED’ 000 Balance as at 1 January ...... 154,798 20,681 Investments made during the year ...... 27,334 126,280 Dividend received during the year...... — (5,000) Share of profit recognised during the year (refer note 7) ...... 22,797 12,837 Balance as at 31 December...... 204,929 154,798

Summary financial information on jointly controlled entities — 100 percent

F-38 Damas LLC and its Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued) At 31 December 2007

2007 Names of jointly controlled entities Assets Liabilities Equity* Revenue Profit/(loss) (AED’000) Premium Investments International LLC ...... 100,651 40,849 59,802 33,773 7,998 Paspaley Pearl Jewellery LLC...... 23,405 22,913 492 12,120 607 Trading House Kristall DMCC ...... 3,807 2,810 997 4,073 260 D’Damas Jewellery (India) Pvt. Ltd...... 85,695 67,820 17,875 54,998 1,346 Al Manara ...... 148,054 23,589 124,465 93,704 13,923 Al Zain Trading Co. WLL ...... 163,431 86,460 76,971 79,146 8,975 Time Center LLC...... 36,393 31,737 4,656 37,410 3,431 Damas Toomban Pvt. Ltd ...... 8,023 6,650 1,373 3,572 1,154 Damas Saudi Arabia Company Ltd...... 117,061 7,520 109,541 107,018 (110) Deepu Jewellery DMCC ...... 272,115 230,027 42,088 539,809 12,285 Roberto Coin Middle East LLC ...... 11,529 11,466 63 1,380 (237) Flamingo Jewellery India Pvt Ltd ...... 3,817 3,733 84 717 (200) 2006 Names of jointly controlled entities Assets Liabilities Equity* Revenue Profit/(loss) (AED’000) Premium Investments International LLC...... 70,405 36,842 33,563 34,457 10,630 Paspaley Pearl Jewellery LLC ...... 17,610 17,726 (116) 7,690 (441) Damas & Al Ghannam Jewellery Co. WLL ...... 63,332 64,081 (749) 78,679 (1,374) Trading House Kristall DMCC...... 2,004 1,257 747 2,844 77 D’Damas Jewellery (India) Pvt. Ltd...... 82,209 64,750 17,459 40,280 957 Al Manara...... 133,939 23,397 110,542 71,951 10,542 Al Zain Trading Co. WLL ...... 141,027 36,842 104,185 42,006 4,721 Time Center LLC ...... 19,731 18,506 1,225 8,042 925 Damas Toomban Pvt. Ltd ...... 2,704 2,701 3 — — Damas Saudi Arabia Company Ltd...... 70,936 45,545 25,391 11,445 (413)

* Equity includes retained earnings/(accumulated losses) Refer to note 33.1 for details of jointly controlled entities.

Details of new investments made in 2007 Deepu Jewellery DMCC During the year, the Group acquired a 51 % shareholding in Deepu Jewelers DMCC (although the profit sharing is 50-50). Deepu Jewelers DMCC is involved in the business of manufacture and distribution of gold and diamond jewellery. The acquisition of the Group’s interest in the entity was formalized on 10 April 2007 with the signing and registration of the Memorandum and Articles of the entity. During the year, the Group has recognised AED 6.14 million as its share of income from this entity.

Roberto Coin Middle East LLC: During the year the Group invested 50% in Roberto Coin Middle East LLC, a jointly controlled entity. This entity commenced its operations in the month of July 2007 by opening its first ‘Roberto Coin’ branded jewellery boutique at Wafi Mall, Dubai. During the year, the Group has recognised a loss of AED 0.118 million as its share of loss from this entity.

Flamingo Jewellery India Pvt Ltd: During the year the Group invested 51% in Flamingo Jewellery India Pvt. Ltd., a jointly controlled entity. This entity is into setting up of duty free shops in various locations in India. During the year the Group has absorbed a loss of AED 0.1 million as its share in loss of this entity.

F-39 Damas LLC and its Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued) At 31 December 2007

Note 2: The movement of investment in associates is as follows: 2007 2006 AED’ 000 AED’ 000 Balance at 1 January ...... 76,642 57,432 Investments made during the year ...... 71,279 22,849 Change in status to associate ...... 7,342 — Disposed of during the year ...... (918) (24,662) Change in status to subsidiary...... — (749) Dividend received ...... (5,135) (4,524) Share of profit recognised during the year (refer note 7) ...... 19,464 26,296 Share of losses of an associate in excess of contributed capital netted against long term loans ...... 3,195 — Balance at 31 December ...... 171,869 76,642

Summary financial information on associates — 100 percent 2007 Names of associates Assets Liabilities Equity* Revenue Profit/(Loss) (AED’000) Damas & Chalco General Trading Co LLC ...... 38,169 33,397 4,772 14,908 (333) Damas Mucevherat ...... 31,677 20,047 11,630 46,276 739 Carati Jewellery S.A.L** ...... — — — — — Style Avenue Middle East FZ Company ...... 86,982 38,065 48,917 137,799 12,493 Daiso Japan Value Stores LLC ...... 11,706 8,161 3,545 25,560 3,420 LTC International General Trading Co...... 14,823 29,268 (14,445) 32,165 (9,128) LTC International Qatar LLC ...... 21,409 21,263 146 51,584 9,950 Daiso Trading ...... 3,705 528 3,177 4,938 790 DPG Diamonds DMCC ...... 604 367 237 — — Al Mana Jewellery Co. — Damas WLL ...... 22,533 15,036 7,497 141,276 10,540 Al Baraka Jewellery ...... 10,082 4,398 5,684 20,711 471 Himo LLC ...... 17,550 261 17,289 6,077 3,704 Lucci 2 SARL ...... 10,020 4,005 6,015 6,292 1,762 The Jewellery Stores DMCC ...... 41,540 7,081 34,459 4,539 (4,424) Metamorph Real Estate WLL ** ...... — — — — — Tanya collections limited ...... 39,848 27,309 12,539 27,144 (1,894) Emirates Jewellery Manufacturing Company ...... 4,002 3,702 300 — — Islanders Maldives Pvt Ltd...... 18,487 12,376 6,111 37,668 1,816 Felopateer Palace...... 97,061 67,785 29,275 94,681 16,034 Crescendo Jewellery Design Ltd ...... 30,163 21,434 8,729 58,350 4,181 Damas Europe SPA ...... 84,362 61,046 23,316 62,201 (9,688)

F-40 Damas LLC and its Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued) At 31 December 2007

2007 Names of associates Assets Liabilities Equity* Revenue Profit/(Loss) (AED’000) Damas & Chalco General Trading Co LLC ...... 14,109 8,944 5,165 11,206 251 Damas Mucevherat ...... 20,394 19,564 830 25,107 242 Carati Jewellery S.A.L** ...... — — — — — Style Avenue Middle East FZ Company ...... 85,059 48,636 36,423 104,298 6,268 Daiso Japan Value Stores LLC ...... 9,790 5,289 4,501 20,368 1,502 LTC International General Trading Co...... 24,849 28,736 (3,887) 31,400 (4,523) LTC International Qatar LLC ...... 17,571 9,803 7,768 38,857 5,938 Daiso Trading...... 2,635 524 2,111 3,934 742 DPG Diamonds DMCC...... 2,437 2,200 237 1,018 (71) Al Mana Jewellery Co. — Damas WLL ...... 19,926 16,159 3,767 111,701 6,759 Al Baraka Jewellery ...... 12,881 7,672 5,209 19,185 473 Himo LLC ...... 5,749 812 4,937 4,010 3,800 Lucci 2 SARL ...... 8,142 3,863 4,279 7,196 2,831 The Jewellery Stores DMCC ...... 36,165 9,620 26,545 1,463 (1,360) Metamorph Real Estate WLL *** ...... 54,427 7,985 46,442 50,856 42,411 Premium Investments, Kuwait ...... 1,079 1,856 (777) 575 (1,409) Refer to note 33.2 for details of associates

Details of new investments made in 2007 Tanya Collections Ltd During the year the Group has acquired 49 % of Tanya Collections Ltd, Bangkok whose main activity is diamond jewellery manufacturing. The Group recognised AED 0.928 million as its share of loss from this entity, for the period ended 31 December 2007.

Emirates Jewellery Manufacturing Company The Group has entered into an agreement with Emaar Industries & Investments PJSC and a new limited liability company in UAE has been formed with the Group acquiring a 48 % interest. This entity would be engaged in the manufacture of gold and diamond jewellery and has commenced operations after the balance sheet date.

Islanders Maldives Pvt Ltd The Group has entered into an agreement with Islanders Maldives to invest 50% in the capital of the company which is involved in the business of selling Luxury Brands — Watches, Cameras, Dive Gears, Sunglass, Travel Luggage and Electronics products in Male International Airport — Duty Free and Evince Outlet in Male’ Downtown. For the year 2007 the group has recognized AED 0.90 million as its share of profit from this entity.

Felopateer Palace During the year the Group has invested 45% in the share capital of Felopateer Palace, an Egyptian company engaged in the business of trading in watches. During the year the group has recognized AED 7.22 million as its share in profit of this entity.

Crescendo Jewellery Design Ltd During the year the Group has acquired 27 % of Crescendo Jewellery Design Ltd, Hong Kong whose main activity is diamond jewellery manufacturing. The Group recognised AED 1.1 million as its share of loss from this entity, for the period ended 31 December 2007.

F-41 Damas LLC and its Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued) At 31 December 2007

Damas Europe SPA: During the year the Group restructured its investment in a subsidiary Damas Europe SPA by merging its operations with Adriano Facco SPA. As a result of this restructuring the shareholding of the Group decreased from 66% to 36.7% thus making the entity an associate. (Please refer to note 4(ii))

* Equity includes retained earnings/ (accumulated losses). ** For the years 2007 and 2006, the Group was not been able to obtain any financial information with respect to these associates. The Directors of the Company have confirmed that the absence of financial information regarding this associate does not have a material impact on the financial statements of the Group. *** During the year 2006 the Group acquired a 30% investment in Metamorph Real Estate WLL (“Metamorph”) which was established in conjunction with other investors to develop a shopping & entertainment centre in Kuwait. During the year 2006, the Group recognised AED 12.72 million as its share of profit from the associate. The total income of the associate, in 2006, included AED 50.8 million earned from the assignment to a third party, in May 2006, of portion of leasehold interest in land acquired by the associate on a long term lease (lease for 20 years). The one time premium of AED 50.8 million was settled to the associate and the third party has agreed to take over all the rights and obligations of Metamorph under the original lease. However, Metamorph’s agreement with the third party provides for the transfer of the leasehold interest to be only effective on the approval of the assignment by the original owner of the land and a department of the Kuwait government. These approvals are outstanding at the balance sheet date. The Directors of Damas LLC have confirmed that on the basis of this understanding between the parties involved the necessary approvals for the assignment will be forthcoming and with the collection of the amount of the consideration, the transaction has been finalised and any uncertainty in respect of the collectability of the revenue removed. Accordingly, they have confirmed the inclusion of the above income in the financial statements of the Group in 2006. The Directors have also provided an indemnity to the Company to make good any loss to the Company if the necessary approvals are not obtained.

12(b) OTHER FINANCIAL ASSETS 2007 2006 AED’ 000 AED’ 000 Investments available for sale (refer note 1 below) ...... 46,865 7,140 Investment designated as fair value through profit or loss (refer note 1 and note 2 below) ...... 115,754 11,713 Investments held to maturity (refer note 20) ...... 18,732 18,732 Advance against investment ...... — 85,864 Balance at 31 December ...... 181,351 123,449

Note 1: As at 31 December, these investments are held by a related party who has confirmed holding the same for the beneficial interest of the Group.

Note 2: Investments designated as fair value through profit or loss represents shares in quoted equity securities.

F-42 Damas LLC and its Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued) At 31 December 2007

13 INVENTORIES 2007 2006 AED’ 000 AED’ 000 Cost of inventory on hand (net of consignment inventory) (gold and gold jewellery, diamonds, pearls, watches, silver and other precious stones) ...... 2,440,194 1,728,212 Gold unfixed with trade receivables ...... 553,609 257,502 Gold unfixed with jointly controlled entities/associated companies ...... 127,330 146,794 Provision for gold purchases (refer note 22) ...... 261,232 821,082 Gold (unfixed) received on loan from Banks (refer note 23) ...... (1,771,697) (1,499,107) Gold unfixed from trade payables ...... (56,476) (167,046) Gold unfixed from joint venturer’s contribution, net ...... (28,104) (41,995) 1,526,088 1,245,442 Less: Provision for slow moving/ obsolete inventories...... (28,384) (20,052) Net inventories ...... 1,497,704 1,225,390

Notes: In few cases, inventories are hypothecated to the banks against the borrowing facilities obtained by the Group (refer note 20). Included in the inventory above is the making charges related to own and unfixed jewellery amounting to AED 129 million (2006: AED 91 million) The Group in the normal course of business borrows and buys gold on an unfixed basis which it converts into gold jewellery or trades as bullion. This jewellery and bullion is further used as stock in trade and is sold to various customers on a fixed or unfixed basis. The Group enters into forward purchases and forward sales to minimize the price risk which it is being exposed. Revaluation of open forward contracts at fair market value as at 31 December 2007 has resulted in an unrealised gain of AED 21.08 million (2006: AED 19.2 million ) (refer notes 14 and 25). This revaluation gain is grouped in prepayments and other receivables under current assets in the balance sheet. The Group monitors these forward contracts as part of its own/book stock as follows: 2007 2006 AED’ 000 AED’ 000 Net inventory (as above) ...... 1,497,704 1,225,390 Provision for gold purchases...... (261,232) (821,082) Forward purchases (at cost) (note 25) ...... 634,605 1,023,113 Forward sales (at cost) (note 25)...... (116,686) (40,484) Economic position of Group’s inventory ...... 1,754,391 1,386,937

The Group has received margins against gold unfixed with trade receivables, which has been separately presented as a current liability. The Group has paid margins against gold unfixed from trade payables and banks which have been disclosed separately as margin to trade payables against unfixed gold and bank balances and cash respectively. The Group provides gold on an unfixed basis to customers against cash margin. As at 31 December 2007 the value of such gold at the spot rate was in excess of cash margin held by AED 196 million. The Executive Directors are confident that no loss will arise from these transactions and have provided irrevocable personal guarantees against the credit risk associated with AED 108 million of this amount.

F-43 Damas LLC and its Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued) At 31 December 2007

14 ACCOUNTS RECEIVABLE AND PREPAYMENTS 2007 2006 AED’ 000 AED’ 000 Trade receivables ...... 353,705 376,390 Provision for doubtful debts ...... (12,641) (12,700) 341,064 363,690 Dues from credit card companies ...... 7,837 19,174 Prepaid expenses ...... 28,055 28,431 Advances and other receivables (note 1 below) ...... 103,895 159,722 Deposits...... 8,545 4,693 Unrealised gain on revaluation of forward contracts (note 25) ...... 21,081 19,200 510,477 594,910

In few cases, trade receivables are hypothecated to banks against the borrowing facilities (refer note 20). As at 31 December 2007, trade receivables at nominal value of AED 12.6 million (2006: AED 12.7 million) were impaired. Movements in the allowance for impairment of receivables were as follows: 2007 2006 AED’000 AED’000 At 1 January ...... 12,700 13,459 Charge for the year ...... — 373 Amounts written off ...... — (1,132) Changes due to exchange rate fluctuations ...... (59) — At 31 December...... 12,641 12,700

As at 31 December, the ageing of unimpaired trade receivables is as follows: Past due but not impaired G30 30-180 H180 Total days days days AED’000 AED’000 AED’000 AED’000 2007 ...... 341,064 158,933 73,146 108,985 2006 ...... 363,690 220,530 77,300 65,860 Unimpaired receivables are expected, on the basis of past experience, to be fully recoverable. Included in unimpaired receivables are debts amounting to AED 64.2 million due from particular consignment debtors and AED 26.1 million due from certain high net worth and important customers who are otherwise familiar and acquainted with the executive directors. Recoveries of these balances are secured by personal guarantees of the executive directors. Note 1: Includes advances to suppliers amounting to AED 48.8 million (2006: AED 29.41 million). The 2006 balance of advances and other receivables included an amount of AED 75 million (which was secured by bank guarantee) receivable on the disposal of investment in associate.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued) At 31 December 2007

15 CASH AND CASH EQUIVALENTS Cash and cash equivalents in the statement of cash flows consist of the following balance sheet amounts: 2007 2006 AED’ 000 AED’ 000 Fixed deposits and margins with banks...... 1,250,575 837,381 Bank balances and cash ...... 113,904 27,388 Total bank balances and cash ...... 1,364,479 864,769 Less: Bank overdraft ...... (100,328) (217,065) Fixed deposits and margins under lien ...... (811,749) (829,980) Long term fixed deposits ...... (153,281) (2,214) Cash and cash equivalents ...... 299,121 (184,490)

Fixed deposits carry interest rates from 4% to 5.7% depending on the tenure and maturity of deposits (2006: from 4% to 5.3%).

16 RELATED PARTY BALANCES AND TRANSACTIONS Related parties represent subsidiaries, associates, joint ventures, major shareholders, directors and key management personnel of the Group, and entities controlled, jointly controlled or significantly influenced by such parties. The sales to and purchases from related parties are made at normal market prices. Pricing policies and terms of these transactions are approved by the Group’s management. Significant transactions with related parties are as follows: 2007 Expenses Fees for Transfer of paid on behalf services investments Sales Purchases of related parties rendered (note 17) Amount in AED’000 Jointly controlled entities and associated companies...... 168,004 82,583 — 2,227 — Major shareholders ...... —— — —— Total ...... 168,004 82,583 — 2,227 —

2006 Expenses Fees for Transfer of paid on behalf services investments Sales Purchases of related parties rendered (note 17) Amount in AED’000 Jointly controlled entities and associated companies...... 223,762 49,558 1,003 — — Major shareholders ...... — — — — 11,099 Total ...... 223,762 49,558 1,003 — 11,099

F-45 Damas LLC and its Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued) At 31 December 2007

Balances with related parties included in the balance sheet are as follows: 2007 2006 Long Due from Due to Long Due from Due to term related related term related related loans parties parties loans parties parties AED ’000 AED ’000 AED ’000 AED ’000 AED ’000 AED ’000 Jointly controlled entities and associate companies ...... 114,896 105,581 95,243 51,515 62,639 83,665 Less: Provision for additional losses of an associate in excess of contributed capital...... (3,195) — — ——— 111,701 105,581 95,243 51,515 62,639 83,665

Long term loans to related parties (associates and jointly controlled entities) represent loans which are interest free, unsecured and have no fixed terms of repayment and it is not clear when repayments will take place. Accordingly, these loans have been considered to be repayable on demand. The Directors of the Company have provided an undertaking that these amounts will not be called upon for repayment within a period of twelve months from the balance sheet date and therefore classified as long term.

Compensation of key management personnel The remuneration of directors and other members of key management during the year was as follows: 2007 2006 AED’ 000 AED’ 000 Short-term benefits ...... 720 720 720 720

Outstanding balances at the year-end arise in the normal course of business. For the year ended 31 December 2007, the Group has recorded an impairment of AED 3.2 million (2006: Nil) on amounts owed by related parties.

17 SHAREHOLDERS’ CURRENT ACCOUNTS 2007 2006 AED’ 000 AED’ 000 Balance at 1 January ...... 74,032 21,143 Dividend ...... (57,233) (59,720) Transfer of investments * ...... — (11,099) Net drawings during the year ...... 64,209 123,708 Balance as at 31 December...... 81,008 74,032

* Transferred as at 31 December 2006, no such transfers in 2007.

18 SHARE CAPITAL 2007 2006 AED’ 000 AED’ 000 Authorised, issued and paid up capital: 1,421,000 shares of AED 1,000 each ...... 1,421,000 1,421,000

19 RESERVES Statutory reserve In accordance with the Articles of Association of entities in the Group and UAE Company law, 10% of the net profit for the year of the individual entities in the Group to whom this Law is applicable is transferred to statutory reserve

F-46 Damas LLC and its Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued) At 31 December 2007 which is non-distributable. Such transfer may be discontinued when the reserve equals 50% of the respective paid up share capital of the individual entities.

Currency translation reserve

The currency translation reserve represents all the foreign exchange differences arising from the translation of the financial statements of foreign subsidiaries of the Group.

20 BANK BORROWINGS

2007 2006 AED’ 000 AED’ 000 Current Bank overdrafts ...... 100,328 217,065 Trust receipts ...... 44,144 58,258 Short term loan ...... 497,780 242,678 Local bills discounting ...... 19,660 25,393 661,912 543,394 Non current Long-term loan ...... 1,209,591 207,720 Total ...... 1,871,503 751,114

Bank borrowings are secured as under: -

I. Partly secured against fixed deposits amounting to AED 811 million and investments held to maturity amounting to AED 18 million (refer notes 12 & 15). II. Hypothecation of inventories and receivables on pari pasu basis with a few banks (refer notes 13 & 14). III. Assignment of insurance policy on pari pasu basis. IV. Unconditional, continuing, joint and several guarantees of Mr. Tawfique Abdulla, Mr. Tawhid Abdulla and Mr. Tamjid Abdulla on behalf of the Group. V. Mortgage of the properties, plant and equipments amounting to AED 28 million (refer note 9). VI. Subordination of shareholders’ long term loan (refer note 21). VII. Corporate cross guarantees from Group companies. VIII. Promissory note given to banks.

The above mentioned borrowings are subject to certain financial related covenants which are specified in each individual loan agreement. One of the key covenants imposed by the syndication banks is that the Group must maintain a tangible net worth of not less than AED 1,250 million at any time.

21 LONG TERM LOANS FROM SHAREHOLDERS

2007 2006 AED’ 000 AED’ 000 Balance as at 31 December...... 150,000 150,000

This represents long term loans from Mr. Tawfique Abdulla, Mr. Tawhid Abdulla and Mr. Tamjid Abdulla to the Company. This loan is interest free, unsecured and does not have a fixed repayment date. This loan is considered repayable on demand. However, the shareholders have provided an undertaking that the amount of the loan will not be called upon for repayment within twelve months from the balance sheet date. These loans are subordinated to banks against borrowings (note 20).

F-47 Damas LLC and its Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued) At 31 December 2007

22 ACCOUNTS PAYABLE AND ACCRUALS

2007 2006 AED’ 000 AED’ 000 Trade payables ...... 507,037 488,383 Accruals and provisions ...... 311,407 862,228 818,444 1,350,611

Accruals and provisions include an amount of AED 261 million (2006: AED 821 million) with respect to provisions for gold purchases. The Company has entered into forward contracts to cover its positions arising from these purchases (refer note 13).

23 CONTINGENCIES AND COMMITMENTS

2007 2006 AED’ 000 AED’ 000 Letters of credit ...... 4,150 2,387 Corporate guarantees ...... 54,023 44,857 Other bank guarantees ...... 19,818 14,300 Stand-by letters of credit (refer note below) ...... 1,398,495 905,712 Commitments Towards investment in associate companies...... — 79,004 Capital commitments ...... 39,514 11,807 Operating lease commitments Future minimum lease payments: Within one year ...... 41,044 22,560 After one year but not more than five years ...... 23,234 16,271 More than five years...... 3,946 — Total operating lease expenditure contracted for at the balance sheet date ...... 68,224 38,831

The stand-by letters of credit are provided by banks in favour of the suppliers of gold who have lent unfixed gold and which is deducted from the total inventory on hand in note 13 under the head “Gold (unfixed) received on loan from banks”.

Legal case Outstanding legal cases against the Group as at 31 December 2007 include a case under arbitration relating to its subsidiary in Italy, DIT group SPA (formerly Stefan Hafner SPA) (“the subsidiary”). In the earlier years, the Group acquired the business of Stefan Hafner SPA from the previous owner, Mr. Stefan Hafner for an agreed consideration. Subsequently, Mr. Stefan Hafner commenced arbitration proceedings against the subsidiary where he claimed to have not been paid a fair price for the sale of his business and claimed an additional consideration of AED 41.94 million (Euro 7.75 million). The subsidiary has rejected this claim and filed a counter claim against Mr. Stefan Hafner claiming an amount of AED 8.7 million (Euro 1.6 million) representing losses suffered by the subsidiary on the non recovery of outstanding receivables taken over from Mr. Stefan Hafner and certain expenses incurred by the subsidiary on behalf of Mr. Stefan Hafner. The arbitration panel appointed experts to look into the details of the case and submit their report and the final hearing of the arbitration proceedings took place on 8 January 2008. The group legal counsel has confirmed they don’t forsee any liabilities arising as a result of these proceedings however, the outcome of the arbitration proceedings are not predictable. The management have represented that the price paid for the purchase of the business was a fair price and was mutually agreed between the parties. Management are also confident of the collectability of the amount of AED 8.7 million from Mr. Stefan Hafner and hold assets as security against this debt (this amount is currently recorded under advances and other receivables — refer note 14). Management is confident of defending the case and consider their arguments to be strong and possibility of any loss to be incurred by the

F-48 Damas LLC and its Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued) At 31 December 2007

Group not probable. Accordingly, no provision has been made against this claim in these consolidated financial statements.

24 EARNING PER SHARE (EPS) Basic earnings per share is calculated by dividing profit for the year attributable to equity holders of the parent by the weighted average number of ordinary shares outstanding during the year. Diluted earnings per share is calculated by dividing the profit by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares. There were no potentially dilutive shares as at 31 December 2007. 2007 2006 Earnings: Profit for the year — AED ’000 ...... 204,051 229,339 Shares: Weighted average number of shares outstanding for calculating basic EPS ...... 1,421,000 1,421,000 Basic and diluted earning per share AED ...... 143.60 161.39

25 FORWARD GOLD CONTRACTS Open position — December 2007 Cost Fair value Revaluation Between Less than 3 months 3 months to 1 year Total Total Gain/ (Loss) AED’000 AED’000 AED’000 AED’000 AED’000 Forward purchases ...... 634,605 — 634,605 656,903 22,298 Forward sales ...... 116,686 — 116,686 117,903 (1,217) 21,081

These forward contracts are measured at fair value as at 31 December 2007 which resulted in the recognition of income in the income statement and a corresponding asset amounting to AED 21 million (refer note 14).

Open position — December 2006 Cost Fair value Revaluation Between Less than 3 months 3 months to 1 year Total Total Gain/ (Loss) AED’000 AED’000 AED’000 AED’000 AED’000 Forward purchases ...... 1,023,113 — 1,023,113 1,044,535 21,422 Forward sales...... 40,484 — 40,484 42,707 (2,223) 19,199

These forward contracts are measured at fair value as at 31 December 2006 which resulted in the recognition of income in the income statement and a corresponding asset amounting to AED 19.2 million (note 14)

26 KEY SOURCES OF ESTIMATION UNCERTAINTY The preparation of the Group’s financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the reporting date. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected in the future.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued) At 31 December 2007

The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:

Impairment of accounts receivable An estimate of the collectible amount of trade accounts receivable is made when collection of the full amount is no longer probable. For individually significant amounts, this estimation is performed on an individual basis. Amounts which are not individually significant, but which are past due, are assessed collectively and a provision applied according to the length of time past due, based on historical recovery rates. At the balance sheet date, gross trade accounts receivable were AED 353.7 million (2006: AED 376.40 million), and the provision for doubtful debts was AED 12.6 million (2006: AED 12.7 million). Any difference between the amounts actually collected in future periods and the amounts expected will be recognised in the income statement.

Impairment of inventories Inventories are held at the lower of cost and net realisable value. When inventories become old or obsolete, an estimate is made of their net realisable value. For individually significant amounts this estimation is performed on an individual basis. Amounts which are not individually significant, but which are old or obsolete, are assessed collectively and a provision applied according to the inventory type and the degree of ageing or obsolescence, based on historical selling prices. At the balance sheet date, gross inventory was AED 1,526.1 million (2006: AED 1,245.4 million) with provision required for aged and obsolete inventories of AED 28.4 million (2006: AED 20.1 million).

Impairment of non-financial assets The Group assesses whether there are any indicators of impairment for all non-financial assets at each reporting date. Goodwill is tested for impairment annually and at other times when such indicators exist. Other non-financial assets are tested for impairment when there are indicators that the carrying amounts may not be recoverable. When value in use calculations are undertaken, management must estimate the expected future cash flows from the asset or cash-generating unit and choose a suitable discount rate in order to calculate the present value of those cash flows. For details of the projections refer note 10.

27 RISK MANAGEMENT The Group’s principal financial liabilities, other than derivatives, comprise bank borrowings, trade payables and other liabilities, margin from trade receivable against unfixed gold, long term loans from shareholders and dues to related parties. The main purpose of these financial liabilities is to raise finance for the Group’s operations. The Group has various financial assets such investments, cash in hand, bank current accounts, bank fixed deposit accounts, bank margin accounts, due from related parties, trade receivables, other receivables, shareholders’ current accounts and margin to trade payable against unfixed gold, which arise directly from its operations. The Group also enters into derivative transactions, primarily forward gold contracts and interest rate swaps The purpose is to hedge its gold price and interest rate risks. The main risks arising from the Group’s financial instruments are interest rate risk, credit risk, liquidity risk and foreign currency risk. The Board of Directors review and agree policies for managing each of these risks which are summarised below.

Interest rate risk The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s long-term debt obligations with floating interest rates. To manage this, the Group enters into interest rate swaps, in which the Group agrees to exchange, at specified intervals, the difference between fixed and variable rate interest amounts calculated by reference to an agreed upon notional principal amount. These swaps are designated to hedge underlying debt obligations.

F-50 Damas LLC and its Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued) At 31 December 2007

Interest rate risk table The following table demonstrates the sensitivity of the income statement to reasonably possible changes in interest rates, with all other variables held constant. There is no impact on the Group’s equity. Increase/ decrease Effect on in basis profit for the points year AED ’000 2007 ...... +10 (2,607) Ϫ10 2,607 2006 ...... +10 (1,635) Ϫ10 1,635

Credit risk The Group seeks to limit its credit risk with respect to customers by setting credit limits for individual customers and monitoring outstanding receivables. The Group sells its products to a large number of customers comprising the Group’s customer base. No single customer accounts for more than 10% of the total outstanding for the year ended 31 December 2007. With respect to credit risk arising from the other financial assets of the Group, including cash and cash equivalents, investments and derivative instruments with positive values, the Group’s exposure to credit risk arises from default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments.

Liquidity risk The Group limits its liquidity risk by ensuring bank facilities and funds from shareholders are available. The Group’s terms for retail sales require amounts to be paid on delivery of jewellery and for wholesale sales within 30 to 180 days of the date of sale except on sales to consignment debtors, high net worth individuals and sales on approval basis. The table below summarises the maturities of the Group’s undiscounted financial liabilities at 31 December 2007, based on contractual payment dates and current market interest rates.

Year ended 31 December 2007 Less than 6to12 1to5 6 months months years H5 years Total AED’000 AED’000 AED’000 AED’000 AED’000 Trade payables (excluding customer deposits AED 15.2 million) ...... 486,330 5,509 — — 491,839 Bank overdraft...... 100,328 — — — 100,328 Trust Receipts ...... 44,144 — — — 44,144 Local Bills Discounted...... 19,660 — — — 19,660 Term loan ...... 216,863 280,917 1,204,361 5,230 1,707,371 Total ...... 867,325 286,426 1,204,361 5,230 2,363,342

F-51 Damas LLC and its Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued) At 31 December 2007

Year ended 31 December 2006

Less than 6to12 1to5 6 months months years H5 years Total AED’000 AED’000 AED’000 AED’000 AED’000 Trade payables (Excluding customer deposits AED 7.2 million) ...... 474,705 6,493 — — 481,198 Bank overdraft ...... 217,065 — — — 217,065 Trust Receipts ...... 58,258 — — — 58,258 Local Bills discounted ...... 25,393 — — — 25,393 Term loan ...... 147,957 94,721 198,770 8,950 450,398 Total ...... 923,378 101,214 198,770 8,950 1,232,312

Foreign currency risk

As a result of investment operations in Europe, the Group’s balance sheet can be impacted significantly by movements in the AED/Euro exchange rates.

There is no other significant exchange rate risk as substantially all of the financial assets and financial liabilities are denominated in UAE Dirhams or USD to which the UAE Dirham is pegged. Foreign currency exposures to currencies other than USD are monitored and managed centrally by the Group by obtaining forward exchange covers. The Group accounts for gains and losses in the income statement arising from the utilisation of these forward exchange covers. There are no outstanding forward currency contracts as at 31 December 2007.

The table below indicates the Group’s foreign currency exposure at 31 December, as a result of its monetary assets and liabilities. The analysis calculates the effect of a reasonably possible movement of the AED currency rate against the Euro, with all other variables held constant, on the income statement (due to the fair value of currency sensitive monetary assets and liabilities).

Increase/ Effect on decrease profit in Euro rate before tax to the AED AED’000 2007...... +5% 3,940 Ϫ5% (3,940) 2006...... +5% 988 Ϫ5% (988)

Capital management

The primary objective of the Group’s capital management is to ensure that it maintains healthy capital ratios in order to support its business and maximise shareholder value.

The Group manages its capital structure and makes adjustments to it in light of changes in business conditions. No changes were made in the objectives, policies or processes during the years ended 31 December 2007 and 31 December 2006. Equity comprises share capital, retained earnings and other reserves and is measured at AED 1,808.6 million as at 31 December 2007 (2006: AED 1,698.3 million).

28 DIVIDENDS PAID

During the year, dividends of AED 70 per share totalling AED 99.5 million relating to 2006 were declared and paid (2006: AED 70 per share totalling AED 99.5 million relating to 2005).

29 FAIR VALUES OF FINANCIAL INSTRUMENTS

Financial instruments comprise of financial assets, financial liabilities and derivatives.

F-52 Damas LLC and its Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued) At 31 December 2007

Financial assets consist of cash and bank balances, due from related parties and receivables. Financial liabilities consist of bank overdrafts, term loans, due to related parties, and payables. Derivatives consist of forward gold contracts and interest rate swaps. The fair values of financial instruments, with the exception of certain available-for-sale investments carried at cost, are not materially different from their carrying values.

30 RESTATEMENT OF COMPARATIVES The following restatements have been made in order to improve the quality of information presented:- 1) Certain investments have been reclassified from bank balances and cash to investments held to maturity included under other financial assets. Comparative amounts totaling to AED 16.5 million have been reclassified accordingly. 2) For the purpose of cash flow statement, trust receipts have been reclassified from cash and cash equivalents to bank borrowings. Comparative amount of AED 58.3 million has been reclassified accordingly. 3) End of service benefits payable to employees has been reclassified from other current liabilities to non- current liabilities. Comparative amount of AED 12.7 million thousand has been reclassified accordingly. 4) Interest income has been reclassified from ‘finance costs (net)’ to ‘finance income’ disclosed on the face of income statement. Comparative amounts totaling to AED 29.2 million have been reclassified accordingly. 5) Investment in associates and jointly controlled entities, which are accounted for under the equity method have been reclassified from investments and presented separately on the face of the balance sheet as investment accounted for using the equity method. Comparative amounts totaling to AED 231.4 million have been reclassified accordingly. 6) Income earned from consignment ventures have been reclassified from sales to other income. Comparative amounts totaling AED 9.8 million have been reclassified accordingly. 7) Receivables from consignment ventures have been reclassified from long term loans to related parties to other receivables. Comparative amounts totaling AED 7 million have been reclassified accordingly. 8) Due from consignment ventures has been reclassified from due from related parties to trade receivables. Comparative amounts totaling to AED 13.6 million have been reclassified accordingly.

31 EVENTS AFTER THE BALANCE SHEET DATE Subsequent to the year end. the group has entered in to a memorandum of understanding to divest its investment in Carati Jewellery SAL. The agreement is expected to be finalised in the second quarter of 2008.

32 ENTITIES INCLUDED IN THE CONSOLIDATED FINANCIAL STATEMENTS These consolidated financial statements represent a line-by-line consolidation of operating results and financial position of the Company and its subsidiaries as set out below.

F-53 Damas LLC and its Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued) At 31 December 2007

Name of the Company Country of incorporation 1. Damas Jewellery LLC ...... UAE 2. Mukund Jewellery LLC ...... UAE 3. Ocean Jewellery LLC ...... UAE 4. Dhanak Jewellery LLC ...... UAE 5. Armaan Jewellery LLC...... UAE 6. Al Mana Damas International LLC ...... UAE 7. Gem Universe LLC ...... Oman 8. Universe Jewellers Limited ...... USA 9. Damas Company WLL ...... Kingdom of Bahrain 10. Islanders Demas Pvt. Ltd...... Maldives 11. DIT group SPA (formerly stefen hafner SPA) ...... Italy 12. Stefan Hafner (NY) Inc ...... USA 13. Tawhid & Muktasem Jewellery ...... Jordan 14. Damas Jewellery SAL ...... Lebanon 15. Damas Jewellery Company ...... Egypt 16. Diminco Damas Diamond Manufacturing DMCC ...... UAE 17. Demas Jewellery Pvt. Ltd...... India 18. Soir Jewellery Pvt. Ltd...... India 19. Damas Gold Fields Jewellery Private Limited ...... India 20. Damas Hong Kong Ltd...... Hong Kong 21. Damas Thailand Co. Ltd...... Thailand 22. Royal Jewellers Inc...... USA 23. 7816 3rd Avenue LLC ...... USA 24. Damas Jewellery DMCC...... UAE 25. Ayodhya Jewellers LLC ...... UAE 26. Damas & Al ghannam jewellery Co WLL ...... Kuwait 27. Time art watches and optics trading LLC ...... UAE 28. Damas Southall Limited ...... UK 29. Damas Dis Ticarat A.S ...... Turkey 30. Damas Uk Ltd ...... UK 31. Al Nahrain Jewellers Factory LLC ...... UAE

32.1 Damas Jewellery LLC — Dubai

Damas Jewellery LLC — Dubai is a limited liability Company established on December 20, 1993 as per the commercial registration certificate no. 41342 issued by the Department Of Economic Development, Dubai.

The following shareholders have contributed to the share capital of the Damas Jewellery LLC — Dubai and share profits and losses in the following ratios:

Damas LLC ...... UAECompany 99.998% 49,999 shares Mr. Tawhid Abdulla ...... UAENational 0.002% 1 share

The share capital of Damas Jewellery LLC — Dubai is AED 50,000,000/- divided into 50,000 shares of AED 1,000/- each. Mr. Tawhid Abdulla holds one share for the beneficial interest of the Company.

32.2 Mukund Jewellery LLC — Dubai

Mukund Jewellery LLC — Dubai is a limited liability company registered on July 18, 1979 — as per commercial registration certificate no. 47915 issued by the Department Of Economic Development — Dubai. Mukund Jewellery LLC — Dubai had been acquired by the Group on August 27, 1999.

F-54 Damas LLC and its Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued) At 31 December 2007

The following shareholders have contributed to the share capital of the Mukund Jewellery LLC - Dubai and share profits and losses in the following ratios: Damas Jewellery LLC ...... UAECompany 70% 210 shares Mr. Amratlal Vallabhdas ...... Indian National 20% 60 shares Mr. Chetan Amratlal Vaya ...... Indian National 10% 30 shares The share capital of Mukund Jewellery LLC — Dubai is AED 300,000/- divided into 300 shares of AED 1,000/- each.

32.3 Ocean Jewellery LLC — Dubai Ocean Jewellery LLC — Dubai is a limited liability company registered on August 2, 1992 — as per commercial registration certificate no. 40500 issued by the Department Of Economic Development — Dubai. Ocean Jewellery LLC — Dubai had been acquired by the Group on 6 July, 1996. The following shareholders have contributed to the share capital of the Ocean Jewellery LLC — Dubai and share profits and losses in the following ratios: Damas Jewellery LLC ...... UAECompany 65.00% 195 shares Mrs. Sagar Kalavati Jayantilal ...... Indian National 6.33% 19 shares Mr. Praveenkumar Jayantilal ...... Indian National 12.67% 38 shares Mr. Prakash Jayantilal...... Indian National 8.00% 24 shares Mr. Mayur Jayantilal...... Indian National 8.00% 24 shares The share capital of Ocean Jewellery LLC — Dubai is AED 300,000/- divided into 300 shares of AED 1,000/- each.

32.4 Dhanak Jewellery LLC — Dubai Dhanak Jewellery LLC — Dubai is a limited liability company registered on January 1, 1964 — as per commercial registration certificate no. 47490 issued by the Department Of Economic Development — Dubai. Dhanak Jewellery LLC — Dubai was acquired by the Group on 7 August, 2001. The following shareholders have contributed to the share capital of the Dhanak Jewellery LLC — Dubai and share profits and losses in the following ratios: Damas Jewellery LLC ...... UAECompany 60% 180 shares Mr. Chandrakant Girdhar Dhanak ...... Indian National 40% 120 shares The share capital of Dhanak Jewellery LLC — Dubai is AED 300,000/- divided into 300 shares of AED 1,000/- each.

Dhanak Gold Smith — Dubai Dhanak Gold Smith — Dubai is registered as a Service Agent from July 21, 1997 — as per commercial registration certificate no. 500072 issued by the Department of Economic Development — Dubai having following shareholders. Mr. Tawhid Abdulla ...... UAENational Mr. Chandrakant Girdhar Dhanak...... Indian National Mr. Paresh C. Dhanak ...... Indian National As per a separate Memorandum of Understanding between Mr. Tawhid Abdulla, Mr. Chandrakant Girdhar Dhanak, Mr. Paresh C. Dhanak, with effect from January 1, 2003 the operating results and the share capital will be shared in the following ratio: Mr. Tawhid Abdulla ...... 60% Jointly with: Mr. Chandrakant Girdhar Dhanak and Mr. Paresh C. Dhanak ...... 40%

F-55 Damas LLC and its Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued) At 31 December 2007

Mr. Tawhid Abdulla holds 60% of the shares for the beneficial interest of Damas Jewellery LLC through a separate memorandum of understanding.

32.5 Armaan Jewellery LLC — Dubai Armaan Jewellery LLC — Dubai is a limited liability company registered as per commercial registration certificate no. 239943 issued by the Department Of Economic Development — Dubai. The following shareholders have contributed to the share capital of the Armaan Jewellery LLC — Dubai and share profits and losses in the following ratios: Damas Jewellery LLC ...... UAECompany 60% 180 shares Mr. Dinesh Dhanak ...... Indian National 14% 42 shares Mr. Prakash Chandra Dhanak ...... Indian National 13% 39 shares Mr. Sanjay Kumar Dhanak ...... Indian National 13% 39 shares The share capital of Armaan Jewellery LLC — Dubai is AED 300,000/- divided into 300 shares of AED 1,000/- each.

32.6 Al Mana Damas International LLC — Dubai Al Mana Damas International LLC — Dubai is limited liability company established on April 21, 2002 as per the commercial registration certificate no. 59128 issued by the Department Of Economic Development, Dubai. The following shareholders have contributed to the share capital of the Al Mana Damas International LLC — Dubai and share profits and losses in the following ratios: Mr. Tawfique Abdulla ...... UAENational 17% 51 shares Mr. Tawhid Abdulla ...... UAENational 17% 51 shares Mr. Tamjid Abdulla ...... UAENational 17% 51 shares Mr. Hisham Saleh H. Al Mana ...... Qatari National 16.33% 49 shares Mr. Kamal Saleh H. Al Mana ...... Qatari National 16.33% 49 shares Mr. Wissam Saleh H. Al Mana ...... Qatari National 16.34% 49 shares The share capital of Al Mana Damas International LLC — Dubai is AED 300,000/- divided into 300 shares of AED 1,000/- each. Mr. Tawfique Abdulla, Mr. Tawhid Abdulla and Mr. Tamjid Abdulla hold shares for the beneficial interest of Damas Jewellery LLC.

32.7 Gem Universe LLC — Oman Gem Universe LLC — Oman is a Limited Liability Company registered on March 19, 2002 as per commercial registration certificate no. 1/12279/7 issued by the Ministry of Trade & Industry — Muscat. The following shareholders have contributed to the share capital of the Gem Universe LLC — Oman: Damas Jewellery LLC ...... UAECompany 70% 105,000 shares Mr. Mohd. Bin Omer Abdul Rehman ...... Oman National 30% 45,000 shares However, through a separate memorandum of understanding, the shareholders hold the share capital of Gem Universe LLC — Oman and share the profits and losses in the following ratios: Damas Jewellery LLC ...... UAECompany 60% 90,000 shares Mr. Mohd. Bin Omer Abdul Rehman ...... Oman National 30% 45,000 shares Mr. P.N. Bhandarkar ...... Indian National 10% 15,000 shares The share capital of Gem Universe LLC — Oman is Omani Riyals 150,000 divided into 150,000 shares of Omani Riyals 1/- each. Mr. Mohd. Bin Omer Abdul Rehman has represented that he holds shares for the beneficial interest of Damas Jewelley LLC.

F-56 Damas LLC and its Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued) At 31 December 2007

32.8 Universe Jewellers Limited — USA Universe Jewellers Ltd — New York — USA is a limited company incorporated in state of New York — USA as per certificate dated March 30, 1999 issued as per the Provisions of the Business Corporation Law of the State of New York. The following shareholders have contributed to the share capital of Universe Jewellers Ltd — New York — USA and share profits and losses in the following ratios: Mr. Tamjid Abdulla ...... UAENational 1% 2 shares Damas Jewellery LLC ...... UAECompany 99% 198 shares The share capital of Universe Jewellers Ltd — New York — USA is divided into 200 shares with no par value. Mr. Tamjid Abdulla holds shares for the beneficial interest of Damas Jewellery LLC through a separate memorandum of understanding.

32.9 Damas Company WLL — Bahrain Damas Company WLL — Bahrain is a limited liability company incorporated in Kingdom of Bahrain as per certificate no. 40554 dated April 29, 1998 issued by Ministry of Commerce — Kingdom of Bahrain. The following shareholders have contributed to the share capital of the Damas Company WLL — Bahrain and share profits and losses in the following ratios: Mr. Mohd. Tamjid Abdulla ...... UAENational 0.10% 1 shares Damas Jewellery LLC ...... UAECompany 99.90% 999 shares The share capital of Damas Company WLL — Bahrain is Bahraini Dinar 100,000 divided into 1,000 shares Bahraini Dinar 100/- each. Mr. Mohd. Tamjid Abdulla holds one share for beneficial interest of Damas Jewellery LLC through a separate memorandum of understanding.

32.10 Islanders Demas Pvt. Ltd. — Maldives Islanders Demas Pvt. Ltd. — Maldives is a private limited company incorporated in Republic of Maldives as per certificate no. C-36/2002 dated January 31, 2002 issued by Ministry of Trade and Industries — Republic of Maldives. The following shareholders have contributed to the share capital of Islanders Demas Pvt. Ltd. — Maldives and share profits and losses in the following ratios: Damas Jewellery LLC ...... UAECompany 75% 7,500 shares Mr. Abdul Rasheed ...... Maldivian National 12.50% 1,250 shares Mr. Hussein Waheed ...... Maldivian National 12.50% 1,250 shares The share capital of Islanders Demas Pvt. Ltd. — Maldives is Maldivian Rufiyaa 10,000 divided into 10,000 shares of Maldivian Rufiyaa 1/- each.

32.11 DIT Group SPA (formerly Stefan Hafner SPA — Italy) DIT group SPA — Italy is a private limited company incorporated in Italy as per company registration no. 222300 — Alessandria bearing VAT no. 03175200249 dated August 5, 2004 issued by Ministry of Finance — Italy. The following shareholders have contributed to the share capital of DIT group SPA — Italy and share profits and losses in the following ratios: Damas Jewellery LLC ...... UAECompany 71.58% 9,950,000 shares Demas Holding INC ...... BVICompany 15.65% 2,175,000 shares LI.PRO.FIN. B.V ...... Netherland Company 12.77% 1,775,000 shares

F-57 Damas LLC and its Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued) At 31 December 2007

The share capital of DIT Group SPA — Italy is Euro 13,900,000 includes 5,000,000 issued shares of Euro 1/- each and share application for 8,900,000 shares of Euro 1/- each. Demas Holding Inc holds shares in Stefan Hafner SPA for the beneficial interest of Damas Jewellery LLC. The name of the entity has been changed from Stefan Hafner SPA to DIT Group SPA in the current year.

32.12 Stefan Hafner (NY) Inc — USA Stefan Hafner (NY) Inc — USA is a private limited company incorporated in the State of New York, USA vide Registration number 041124000891 dated November 24, 2004 and amendment of the certificate of incorporation was made vide registration no. 050823000756 dated August 23, 2005. The following shareholders have contributed to the share capital of Stefan Hafner (NY) Inc — USA and share profits and losses in the following ratios: Common stock DIT group SPA ...... Italian Company 85% 85 shares Ms. Peggy Grosz ...... USNational 15% 15 shares The Common stock capital of Stefan Hafner (NY) Inc — USA is US$ 50,000 divided into 100 shares of US$500 each. Preferred stock DIT group SPA ...... Italian Company 100% 400 shares The Preferred stock capital of the Stefan Hafner (NY) Inc — USA is US$ 400,000 divided into 400 shares of US$1,000 each.

32.13 Tawhid & Muktasem Jewellery — Jordan Tawhid & Muktasem Jewellery, Jordan is registered under no. 58086 on January 7, 2001 in the Hashemite Kingdom of Jordan. The following shareholders have contributed to the share capital of the Tawhid & Muktasem Jewellery, Jordan in the following ratios, however the profit sharing ratios for each shop is governed by a separate memorandum of understanding: Mr. Tawhid Abdulla ...... UAENational 50% JD 50,000 Mr. Al Muktasem Mohammes ...... Jordanian National 50% JD 50,000 Bakheet Al Shayab The share capital of Tawhid & Muktasem Jewellery, Jordan is JD 100,000. Mr. Tawhid Abdulla holds shares for the beneficial interest of Damas Jewellery LLC through a separate memorandum of understanding.

32.14 Damas Jewellery SAL — Lebanon Damas Jewellery SAL, Lebanon was registered on November 5, 2003 in Lebanon Mount commercial register under No. 2002149 C.R. in accordance with Articles 26, 49 and 98 of the Law of Commerce of the Ministry of Justice in the Republic of Lebanon. The following shareholders have contributed to the share capital of Damas Jewellery SAL, Lebanon and share profits and losses in the following ratios: Mr. Tawhid Abdulla ...... UAEnational 96.66% 290 shares Mr. Joseph Hana Himo ...... Lebanese national 1.67% 5 shares Mr. Bashir Hana Himo ...... Lebanese national 1.67% 5 shares The share capital of Damas Jewellery SAL, Lebanon has been set at Lebanese Lira (LL) 30 million divided into 300 shares with a nominal value of LL 100,000 each. Mr. Tawhid Abdulla holds shares for the beneficial interest of Damas Jewellery LLC through a separate memorandum of understanding.

F-58 Damas LLC and its Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued) At 31 December 2007

32.15 Damas Jewellery Company — Egypt Damas Jewellery Company, Egypt is an Egyptian Joint stock company headquartered in the city of Cairo and registered in the Cairo commercial register 1871 dated November, 14 1998. The purpose for which the Company has been established is to trade in gold, precious stones, semi-precious stones, silver, watches, gifts and exports. The shareholding of the entity has been revised in 2006 with the following shareholders contributing to the share capital of Damas Jewellery Company, Egypt and sharing the profits and losses in the following ratios: Damas Jewellery LLC ...... UAECompany 60% 108,000 shares Mr. Mohd Sayed Mohd Omar ...... Egyptian national 9.50% 17,100 shares Ms. Nourhan Mohd Sayed Mohd Omar ...... Egyptian national 9.50% 17,100 shares Ms. Reem Mohd Sayed Mohd Omar ...... Egyptian national 9.50% 17,100 shares Ms. Mai Mohd Sayed Mohd Omar ...... Egyptian national 9.50% 17,100 shares Mr. Maha Mahmoud Ahmed Musa ...... Egyptian national 2% 3,600 shares The authorized capital is fixed at Egyptian Pound (EP) 900,000,000. The issued capital of Damas Jewellery Company, Egypt is EP 90,000,000 divided into 180,000 shares, the value of each share is EP 500 and all of them are cash shares. The earlier shareholding of Damas Jewellery Company, Egypt was as under: Mr. Tawhid Abdulla ...... UAENational 55% 275 shares Mr. Mohd Sayed Mohd Omar ...... Egyptian national 40% 200 shares Mr. Maha Mahmoud Ahmed Musa ...... Egyptian national 5% 25 shares

32.16 Diminco Damas Diamond Manufacturing DMCC Diminco Damas Diamond Manufacturing DMCC is a company incorporated in the Emirate of Dubai as per license no. 30063 dated May 22, 2004. The following shareholders have contributed to the share capital of Diminco Damas Diamond Manufacturing DMCC and share the profits and losses in the following ratios: Digico Holding Ltd...... Hong Kong Company 47.50% 95 shares Damas Jewellery LLC ...... UAECompany 52.50% 105 shares The share capital of Diminco Damas Diamond Manufacturing DMCC is AED 200,000 divided into 200 equity shares of AED 1,000 each par value.

32.17 Demas Jewellery Pvt. Ltd. — India Demas Jewellery Pvt. Ltd. — India is a company incorporated in the State of Karnataka in India on February 6, 2006. The following shareholders have contributed to the share capital of Demas Jewellery Pvt. Ltd. — India and share the profits and losses in the following ratios: Mr. Mukund Vaya...... Indian National 7% 5,000 shares Mr. Chetan Vaya...... Indian National 93% 66,500 shares The authorized capital is fixed at Indian Rupees (INR) 1,000,000. The issued capital of the Demas Jewellery Pvt. Ltd. — India is INR 715,000 divided into 71,500 shares, the value of each share is INR 10 and all of them are cash shares. Mr. Mukund Vaya and Mr. Chetan Vaya hold the above shares for beneficial interest of Damas Jewellery LLC through separate memorandum of understanding.

32.18 Soir Jewellery Pvt. Ltd. — India Soir Jewellery Pvt. Ltd. — India is a Company incorporated in the State of Maharashtra in India on March 28, 2006.

F-59 Damas LLC and its Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued) At 31 December 2007

The following shareholders have contributed to the share capital of Soir Jewellery Pvt. Ltd. — India and share the profits and losses in the following ratios:

Damas LLC ...... UAECompany 99.99% 1,994,640 shares Mr. Tamjid Abdulla ...... UAENational 00.01% 100 share

The authorized capital is fixed at INR 20,000,000. The issued capital of Soir Jewellery Pvt. Ltd. — India is INR 19,947,400 divided into 1,994,740 shares, the value of each share is INR 10 and all of them are cash shares.

Mr. Tamjid Abdulla holds the above shares for beneficial interest of Damas LLC as per a separate memorandum of understanding.

32.19 Damas Gold Fields Jewellery Pvt. Ltd. — India

Damas Gold Fields Jewellery Pvt. Ltd. — India is a company incorporated in the State of Maharashtra in India on May 26, 2006.

The following shareholders have contributed to the share capital of Damas Gold Fields Jewellery Pvt. Ltd. — India and share the profits and losses in the following ratios:

Soir Jewellery Private Limited ...... Indian Company 99.99% 9,999 shares Mr. John Joy ...... Indian National 00.01% 1 share

The authorized capital is fixed at INR 500,000. The issued capital of Damas Gold Fields Jewellery Pvt. Ltd. — India is INR 100,000 divided into 10,000 shares, the value of each share is INR 10 and all of them are cash shares.

Mr. John Joy holds one share for the beneficial interest of Soir Jewellery Pvt. Ltd. as per a separate memorandum of understanding.

32.20 Damas Hong Kong Limited — Hongkong

Damas Hong Kong Limited — Hongkong is a company incorporated in Hong Kong as per license no. 1034325 dated March 28, 2006. Damas Jewellery LLC holds 100% of the equity of the company.

The share capital of Damas Hong Kong Limited — Hongkong is Hong Kong Dollar 1,000 divided into 100 equity shares of Hong Kong Dollar 10 each par value.

32.21 Damas (Thailand) Co. Ltd. — Thailand

Damas (Thailand) Co. Ltd — Thailand is a company incorporated in Bangkok as on March 14, 2003. The following shareholders have contributed to the share capital of the Damas (Thailand) Co. Ltd - Thailand and share profits and losses in the following ratios:

Nithi Takviriyanun ...... Thai National 50.95% 5,095 shares Panitta Saengchai ...... Thai National 0.01% 1 shares Pokepiboon Aon-Eiam ...... Thai National 0.01% 1 shares Preeyawan Luesuwanthad ...... Thai National 0.01% 1 shares Srisamorn Kooyingrat ...... Thai National 0.01% 1 shares Onruedee Mitcharoenthavorn ...... Thai National 0.01% 1 shares Damas Jewellery LLC ...... UAECompany 49.00% 4,900 shares

The share capital of Damas (Thailand) Co. Ltd — Thailand is Thailand Bhat 1,000,000 divided into 10,000 equity shares of Thailand Bhat 100 each par value.

The above share holders are holding shares for the beneficial interest of Damas Jewellery LLC through a separate Memorandum of Understanding.

F-60 Damas LLC and its Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued) At 31 December 2007

32.22 Royal Jewellers Inc. — USA Royal Jewellers Inc. — New York — USA is a limited company incorporated in State of New York — USA as per certificate dated March 30, 1999 issued as per the Provisions of the Business Corporation Law of the State of New York. The following shareholders have contributed to the share capital of Royal Jewellers Inc. — New York — USA and share profits and losses in the following ratios: Mr. Tamjid Abdulla ...... UAENational 1% 2 shares Damas Jewellery LLC ...... UAECompany 99% 198 shares The share capital of Royal Jewellers Inc. — New York — USA is divided into 200 shares with no par value. Mr. Tamjid Abdulla holds shares for the beneficial interest of Damas Jewellery LLC through a separate memorandum of understanding.

32.23 7816 3rd Avenue LLC — USA 7816 3rd Avenue LLC — New York — USA is a limited liability company incorporated in State of New York — USA as per certificate dated June 9, 2005 issued as per the Provisions of the Limited Liability Company Law of the State of New York. The following shareholders have contributed to the share capital of 7816 3rd Avenue LLC —New York — USA and share profits and losses in the following ratios: Royal Jewellers Inc ...... USACompany 1% 1 units Damas Jewellery LLC ...... UAECompany 99% 99 units The share capital of 7816 3rd Avenue LLC — New York — USA is divided into 100 units with no par value.

32.24 Damas Jewellery DMCC — Dubai Damas Jewellery DMCC — Dubai is a limited liability company registered on February 6, 2006 — as per commercial registration certificate no. 30411 issued by the Dubai Multi Commodity Centre — Dubai. The following shareholders have contributed to the share capital of Damas Jewellery DMCC — Dubai and share profits and losses in the following ratios: Damas LLC...... UAECompany 100% 36 shares The share capital of Damas Jewellery DMCC — Dubai is AED 3,600,000/- divided into 36 shares of AED 100,000/- each.

32.25 Ayodhya Jewellers LLC — Dubai Ayodhya Jewellers LLC — Dubai is a limited liability company registered on December 28, 1994 — as per commercial registration certificate no. 105327/94 issued by the Department Of Economic Development — Dubai. The following shareholders have contributed to the share capital of Ayodhya Jewellers LLC — Dubai and share profits and losses in the following ratios: Mr. Tawhid Abdulla ...... UAENational 99% 297 shares Mr. Tawfique Abdulla ...... UAENational 1% 3 shares The share capital of Ayodhya Jewellers LLC — Dubai is AED 300,000/- divided into 300 shares of AED 1,000/- each. Mr. Tawfique Abdulla and Mr. Tawhid Abdulla hold shares for the beneficial interest of Damas Jewellery LLC.

32.26 Damas & Al Ghannam jewellery Co WLL, Kuwait Damas & Al Ghannam jewellery Co WLL Kuwait is a limited liability company registered on July 21, 2003 — as per commercial registration certificate no. 95245 issued by the Ministry of Commerce & Industry — Kuwait.

F-61 Damas LLC and its Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued) At 31 December 2007

The following shareholders have contributed to the share capital of Damas & Al Ghannam jewellery Co WLL, Kuwait and share profits and losses in the following ratios: Damas Jewellery LLC ...... UAECompany 90% 90 shares Kapico Group Holding Company Co...... Kuwaiti National 10% 10 shares The share capital of Damas & Al Ghannam Jewellery Co WLL, Kuwait is KD 250,000/- divided into 100 shares of KD 2,500/- each.

32.27 Time art watches and optics trading LLC UAE Time art watches and optics trading LLC, UAE is a limited liability company registered on June 18, 2007 — as per commercial registration certificate no. 596870 issued by the Department of Economic Development — Dubai. The following shareholders have contributed to the share capital of Time art watches and optics trading LLC and share profits and losses in the following ratios: Mr. Tawfique Abdulla ...... UAENational 33% 99 shares Mr. Tamjid Abdulla...... UAENational 34% 102 shares Mr. Tawhid Abdulla ...... UAENational 33% 99 shares The share capital of Time art watches and optics trading LLC, UAE is AED 300,000/- divided into 300 shares of AED 1,000/- each. Mr. Tawfique Abdulla, Mr. Tamjid Abdulla and Mr. Tawhid Abdulla holds shares for the beneficial interest of Damas Jewellery LLC.

32.28 Damas Southall Limited UK Damas Southhall Limited UK is a private limited company incorporated under the Companies Act 1985 on August 14, 2006 — vide certificate of incorporation no. 5905292 issued by the Registrar of companies for England and Wales. The following shareholders have contributed to the share capital of Damas Southhall Limited UK and share profits and losses in the following ratios: Damas Jewellery LLC ...... UAECompany 99% 99 shares Mr. Tawhid Abdulla ...... UAENational 1% 1 shares The share capital of Damas Southhall Limited UK is GBP100/- divided into 100 shares of GBP 1/- each. Mr. Tawhid Abdulla holds one share for the beneficial interest of Damas Jewellery LLC.

32.29 Damas Dis Ticarat A.S Turkey Damas Dis Ticarat A.S. (Damas Foreign Trade Stock Company) is a stock company registered in accordance with Turkish Commercial Code on July 16, 2007 — vide certificate of incorporation no. 632885 issued by the Trade Registry Office, Istanbul. The following shareholders have contributed to the share capital of Damas Southhall Limited UK and share profits and losses in the following ratios: Mr. Tawfique Abdulla ...... UAENational 1% 400 shares Mr. Tamjid Abdulla ...... UAENational 1% 400 shares Mr. Tawhid Abdulla ...... UAENational 1% 400 shares Damas Jewellery LLC ...... UAECompany 96% 38,400 shares Mr. Mehmet Gokce Atuk ...... Turkish National 0.5% 200 shares Mr. Mehmet Bulent Atuk ...... Turkish national 0.5% 200 shares The share capital of Damas Dis Ticarat A.S. is YTL (New Turkish Lira) 4,000,000/- divided into 40,000 shares of YTL 100/- each. Mr. Tawfique Abdulla, Mr. Tamjid Abdulla and Mr. Tawhid Abdulla hold the shares for the beneficial interest of Damas Jewellery LLC.

F-62 Damas LLC and its Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued) At 31 December 2007

32.30 Damas Uk Ltd UK

Damas UK Limited UK is a private limited company incorporated under the Companies Act 1985 on June 21, 2006 — vide certificate of incorporation no. 5852897 issued by the Registrar of companies for England and Wales.

The following shareholders have contributed to the share capital of Damas UK Limited UK and share profits and losses in the following ratios:

Damas Jewellery LLC ...... UAECompany 99% 99 shares Mr. Tawhid Abdulla ...... UAENational 1% 1 shares

The share capital of Damas UK Limited UK is GBP100/- divided into 100 shares of GBP 1/- each. Mr. Tawhid Abdulla holds one share for the beneficial interest of Damas Jewellery LLC.

32.31 Al Nahrain Jewellers Factory LLC, UAE

Al Nahrain Jewellers Factory LLC is a limited liability company registered on October 29, 2007 — as per commercial registration certificate no. 553721 issued by the Economic Development Department — Sharjah.

The following shareholders have contributed to the share capital of Al Nahrain Jewellers Factory and share profits and losses in the following ratios:

Damas Jewellery LLC ...... UAECompany 51% 153 shares Mr. Chimanlal Bhoot Sagar ...... UAENational 25% 25 shares Mr. Hareshkumar Bhoota Sagar ...... UAENational 24% 24 shares

The share capital of Al Nahrain Jewellers Factory LLC — Dubai is AED 300,000/- divided into 300 shares of AED 1,000/- each.

33 INVESTMENTS IN EQUITY ACCOUNTED ENTITIES

33.1 Investments in jointly controlled entities

The Group also holds investments in the following jointly controlled entities as at 31 December 2007:

Country of Ownership Name of the company incorporation interest Premium Investments International LLC (note 1 below)...... UAE 50% Paspaley Pearl Jewellery LLC (notes 1 & 6 below) ...... UAE 51% Trading House Kristall DMCC (note 2 below)...... UAE 50% D’Damas Jewellery (India) Private Ltd. (note 1 and 3 below) ...... India 49% Al Zain Trading Co WLL (note 1 below) ...... Bahrain 50% Al Manara (notes 1 and 3 below) ...... UAE 49% Time Center LLC (note 1 below) ...... UAE 50% Damas Toomban Pvt. Ltd (notes 1, 4 and 5 below) ...... Pakistan 50% Damas Saudi Arabia Company Ltd. (notes 1 and 3 below) ...... KSA 49% Deepu Jewellery DMCC (note 1 and 3 below) * ...... UAE 51% Flamingo Jewellery India Pvt Ltd (note 1 and 3 below)* ...... India 51% Roberto Coin Middle East LLC (notes 1 & 6 below) * ...... UAE 51%

* new investments made during the year 1. The shares are held in the name of Damas Jewellery LLC. 2. The shares are held in the name of Damas LLC. 3. The investment is considered to be an investment in jointly controlled entity since the Company has joint control over the financial and operating policies of these companies. 4. Mr. Tawhid Abdulla holds shares in this entity for the beneficial interest of Damas Jewellery LLC. 5. Mr. Tamjid Abdulla holds shares in this entity for the beneficial interest of Damas Jewellery LLC. 6. Damas share in profit is 50%

F-63 Damas LLC and its Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued) At 31 December 2007

33.2 Investments in associates The Group also holds investments in the following associates as at 31 December 2007: Country of Ownership Name of the company incorporation interest Damas & Chalco General Trading Co LLC (note 4 below) ...... UAE 51% Damas Mucevherat (notes 1, 2, 3, 4 & 5 below) ...... Turkey 51% Carati Jewellery SAL (note 1 below) ...... Lebanon 49% Style Avenue Middle East FZ Company ...... UAE 31% Daiso (Japan) Value Stores LLC (note 4 & 5 below) ...... UAE 51% LTC International General Trading Co. (note 1 below) ...... Kuwait 35% LTC International Qatar LLC (notes 1 & 4 below) ...... Qatar 50% Daiso Trading (note 1 below) ...... Bahrain 35% DPG Diamonds DMCC (note 1 below) ...... UAE 33.33% Al Mana Jewellery Co. — Damas WLL (note 1 below)...... Qatar 49% Al Baraka Jewellery WLL (note 1 below) ...... Bahrain 33.33% Himo LLC (notes 1 & 4 below) ...... Lebanon 50% Lucci 2 SARL (notes 1 & 4 below) ...... Lebanon 50% The Jewellery Stores DMCC (note 1 below) ...... UAE 27% Metamorph Real Estate WLL (note 1 below) ...... Kuwait 30% Tanya Collections Ltd (note 6 below)* ...... Bangkok 49% Emirates Jewellery Manufacturing Company (note 7 below)* ...... UAE 48% Islanders Maldives Pvt Ltd (notes 4 below)* ...... Maldives 50% Felopateer Palace (note 6 below)* ...... Egypt 45% Crescendo Jewellery Design Ltd * ...... Hongkong 27% Damas Europe SPA** ...... Italy 36.7%

* New investments made during the current year. ** This entity was a subsidiary in 2006 and due to the restructuring explained in note 12 this entity has during the current year become an associate. 1. Mr. Tawhid Abdulla holds shares in these entities for the beneficial interest of Damas Jewellery LLC. 2. Mr. Tamjid Abdulla holds shares in these entities for the beneficial interest of Damas Jewellery LLC. 3. Mr. Tawfique Abdulla holds shares in these entities for the beneficial interest of Damas Jewellery LLC. 4. The investment is considered to be an investment in associate since the Company does not have control over the financial and operating policies of these Companies. 5. Damas share in profit is 50% 6. The shares are held in the name of Damas Jewellery LLC. 7. The shares are held in the name of Damas LLC.

F-64 Damas LLC and its subsidiaries P. O. Box 1522, Dubai — United Arab Emirates

Consolidated Financial Statements

For the year ended 31st December 2006

F-65 Damas LLC and its subsidiaries

Consolidated financial statements 31 December 2006

Contents Page Independent auditors’ report ...... F-67 Consolidated balance sheet ...... F-68 Consolidated income statement ...... F-69 Consolidated statement of cash flows ...... F-70 Consolidated statement of changes in equity ...... F-71 Notes to the consolidated financial statements ...... F-72

F-66 P O Box 3800 Telephone +971 (4) 4030 300 Level 32Fax+971 (4) 3301 515 Emirates Towers Website www.ee-kpmg.com Sheikh Zayed Road Dubai United Arab Emirates

Independent auditors’ report The Shareholders Damas LLC

Report on the consolidated financial statements We have audited the accompanying consolidated financial statements of Damas LLC (“the Company”) and its subsidiaries (collectively referred to as “the Group”), which comprise the consolidated balance sheet as at 31 December 2006, and the consolidated income statement, the consolidated statement of changes in equity and the consolidated cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes.

Management’s responsibility for the financial statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of the financial statements that are free from material misstatements, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditors’ responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with relevant ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting principles used and reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Group as at 31 December 2006, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards and comply, where appropriate, with the relevant Articles of the Company and the UAE Federal Law No. 8 of 1984 (as amended).

Report on other legal and regulatory requirements As required by the Federal Law No. 8 of 1984 (as amended), we further confirm that we have obtained all information and explanations necessary for our audit, that proper financial records have been kept by the Group, that a physical count of inventories was carried out by management in accordance with established principles, and the contents of the Directors’ report which relate to these consolidated financial statements are in agreement with the Group’s financial records. We are not aware of any violation of the above mentioned Law and the Articles of Association having occurred during the year ended 31 December 2006, which may have had a material adverse effect on the business of the Company or its financial position.

/s/ KPMG

F-67 Damas LLC and its subsidiaries

Consolidated balance sheet at 31 December 2006

Note 2006 2005 AED’ 000 AED’ 000 Non current assets Property, plant and equipment ...... 6 169,380 109,579 Goodwill ...... 7 551,144 548,626 Intangible assets ...... 8 38,161 21,470 Investments ...... 9 338,361 130,475 Long term loan to related parties...... 14 58,515 68,277 Current assets Inventories ...... 10 1,225,390 983,040 Trade receivables ...... 11 369,212 213,827 Prepayments and other receivables ...... 12 205,046 115,186 Margin to trade payables against unfixed gold ...... 161,782 18,403 Margin with banks ...... 382,483 178,300 Cash and bank balances ...... 13 498,814 400,264 Due from related parties ...... 14 76,291 48,564 Shareholders’ current accounts ...... 17 74,032 21,143 2,993,050 1,978,727 Current liabilities Bank borrowings ...... 15a 543,394 299,306 Trade payables and other liabilities ...... 16 1,363,358 468,102 Margin from trade receivables against unfixed gold ...... 76,777 190,882 Due to related parties ...... 14 83,665 31,258 2,067,194 989,548 Net current assets ...... 925,856 989,179 Non-current liabilities Bank borrowings ...... 15b 207,720 140,828 Long term loan from shareholders ...... 20 150,000 150,000 Net assets ...... 1,723,697 1,576,778 Represented by: Share capital...... 18 1,421,000 1,421,000 Statutory reserve...... 19 52,240 28,735 Currency translation reserve ...... 19 (766) (2,540) Revaluation reserve...... 1,119 — Retained earnings ...... 224,735 118,371 Total equity attributable to shareholders of the Company ...... 1,698,328 1,565,566 Minority interest ...... 25,369 11,212 Total equity ...... 1,723,697 1,576,778

The notes on pages 11 to 52 are an integral part of these consolidated financial statements. These consolidated financial statements were approved on . For and on behalf of the Board of Directors Managing Director The independent auditors’ report is set out on page 5.

F-68 Damas LLC and its subsidiaries

Consolidated income statement for the year ended 31 December 2006

Note 2006 2005 AED’ 000 AED’ 000 Restated * Crafted gold jewellery ...... 1,650,347 1,472,895 Gold bullion ...... 1,462,780 485,604 Diamond jewellery, pearl, watches and other ...... 938,560 741,009 Gross sales volume ...... 3 4,051,687 2,699,508 Revenue generated from Crafted gold jewellery & bullion ...... 281,066 272,762 Diamond jewellery, pearl, watches and others ...... 938,560 741,009 1,219,626 1,013,771 Cost of sales...... (728,261) (614,888) Gross margin ...... 491,365 398,883 General administration, selling and distribution expenses ...... 21 (338,362) (263,187) Finance cost (net) ...... 24 (43,206) (26,058) 109,797 109,638 Income from associates and jointly control entities ...... 22 39,133 14,668 Income on disposal of associates ...... 9(2) 75,338 — Other income ...... 23 7,650 9,868 Net profit for the year ...... 231,918 134,174 Attributable to: Shareholders of the Company ...... 229,339 132,763 Minority interest ...... 2,579 1,411 Net profit for the year ...... 231,918 134,174 Earning Per Share (EPS) in AED ...... 28 161.39 110.92

* See change in accounting policy — note 2.5 Notes on pages 11 to 52 are an integral part of these consolidated financial statements. The independent auditors’ report is set out on page 5.

F-69 Damas LLC and its subsidiaries

Consolidated statement of cash flows for the year ended 31 December 2006

2006 2005 AED’ 000 AED’ 000 I. Operating activities Net profit for the year before minority interest ...... 231,918 134,174 Adjustments: Depreciation ...... 20,314 15,733 Intangible assets amortized...... 3,347 2,899 Provision for doubtful debts ...... — 3,559 Provision for inventories ...... 7,135 5,203 Finance cost (net) ...... 43,206 26,058 Profit on disposal of investment in associate ...... (75,338) — Loss/ (profit) on disposal of property, plant & equipment ...... 88 (80) Income from investments in associates and jointly controlled entities...... (39,133) (14,668) Operating profit before working capital changes ...... 191,537 172,878 Change in inventories ...... (228,804) (144,416) Change in trade receivables ...... (144,724) (3,944) Change in prepayments and other receivables ...... (11,474) (93,810) Change in margin with banks ...... (204,183) (36,605) Change in margin to trade payables against unfixed gold ...... (143,379) 7,552 Change in due from related parties ...... (27,727) (8,204) Change in due to related parties ...... 52,407 29,846 Change in trade payables and other liabilities ...... 869,968 28,266 Change in margin from trade receivables against unfixed gold...... (114,105) 67,143 Cash flows from operations ...... 239,516 18,706 Finance cost (net) ...... (43,206) (26,058) Net cash from / (used in) operating activities ...... 196,310 (7,352) II. Investing activities Acquisition of property, plant & equipment ...... (70,155) (73,024) Payments for operating lease premium ...... (2,490) (8,036) Acquisition of distribution rights ...... (11,025) — Payments for purchase of brand ...... (3,430) — Payments towards goodwill ...... — (6,132) Proceeds from sale of property, plant and equipment...... 462 159 Proceeds from sale of investment in associates ...... 25,000 — Acquisition of subsidiaries, net of cash acquired ...... (9,126) — Net movement in investments...... (232,839) (26,487) Fixed deposits placed...... (206,679) (236,398) Income from investments in associates and jointly controlled entities...... 39,133 14,668 Net cash used in investing activities ...... (471,149) (335,250) III. Financing activities Net movement in current bank borrowings ...... 94,291 21,945 Net movement in non current bank borrowings ...... 59,207 (89,585) Net movement in share holders’ current accounts ...... (52,889) 37,584 Share capital introduced ...... — 521,000 Dividend paid ...... (99,470) (1,634) Net movement in minority interest ...... 5,925 6,801 Net movement in long term loan to related parties ...... 9,762 (48,735) Net cash from financing activities ...... 16,826 447,376 Net (decrease)/ increase in cash and cash equivalents ...... (258,013) 104,774 Cash and cash equivalents at the beginning of the year ...... 15,178 (87,056) Effect of exchange rate fluctuations on cash held ...... 87 (2,540) Cash and cash equivalents at the end of the year (note 25) ...... (242,748) 15,178

Notes on pages 11 to 52 are an integral part of these consolidated financial statements.

The independent auditors’ report is set out on page 5.

F-70 Damas LLC and its subsidiaries

Consolidated statement of changes in equity for the year ended 31 December 2006

Total Currency share Share Statutory translation Retained Revaluation holders Minority Total capital reserve reserve earnings reserve equity interest equity AED’000 AED’000 AED’000 AED’000 AED’000 AED’000 AED’000 AED’000 At 1 January 2005 ...... 900,000 14,343 — 1,634 — 915,977 3,000 918,977 Net profit for the period ...... — — — 132,763 — 132,763 1,411 134,174 Transfer to statutory reserve . . . — 14,392 — (14,392) — — — — Share capital issued ...... 521,000 — — — — 521,000 — 521,000 Net other movements in minority account ...... — — — — — — 6,801 6,801 Currency translation adjustment...... — — (2,540) — — (2,540) — (2,540) Dividend for the year 2004 . . . . — — — (1,634) — (1,634) — (1,634) At 31 December 2005 ...... 1,421,000 28,735 (2,540) 118,371 — 1,565,566 11,212 1,576,778 At 1 January 2006 ...... 1,421,000 28,735 (2,540) 118,371 — 1,565,566 11,212 1,576,778 Net profit for the period ...... — — — 229,339 — 229,339 2,579 231,918 Transfer to statutory reserve . . . — 23,505 — (23,505) — — — — Minority interest acquired on business acquisitions...... — — — — — — 5,959 5,959 Net other movements in minority account ...... — — — — — — 6,095 6,095 Currency translation adjustment...... — — 1,774 — — 1,774 — 1,774 Fair value adjustments on business combination ...... — — — — 1,539 1,539 — 1,539 Adjustments for fair value realised on sale of inventory...... — — — — (420) (420) (476) (896) Dividend for the year 2005 . . . . — — — (99,470) — (99,470) — (99,470) At 31 December 2006 ...... 1,421,000 52,240 (766) 224,735 1,119 1,698,328 25,369 1,723,697

Notes on pages 11 to 52 are an integral part of these consolidated financial statements. The independent auditors’ report is set out on page 5.

F-71 Damas LLC and its subsidiaries

Notes (forming part of the consolidated financial statements)

1. Reporting entity Damas LLC (“the Company”) is a limited liability company domiciled in the United Arab Emirates (“UAE”) established on April 14, 1994 as per commercial registration certificate no. 41717 issued by the Department of Economic Development — Dubai. The address of the Company’s registered office is P.O. Box 1522, 3rd Floor, New Gold Center, Suit No. 57/58, Deira, Dubai, UAE. The consolidated financial statements of the Company as at and for the year ended 31 December 2006 comprise the Company and the subsidiaries (together referred to as the “Group”) and the Group’s interest in associates and jointly controlled entities. The Group primarily is involved in the business of trading in gold and gold jewellery, diamond jewellery, pearls, watches, silver and precious stones on wholesale and retail basis. The following shareholders have contributed to the capital and share profit and losses in the given ratios as at 31 December 2006: %of Number of Holding Shares Mr. Tawfique Abdulla ...... UAENational 18.763% 266,620 Mr. Tawhid Abdulla ...... UAENational 20.013% 284,383 Mr. Tamjid Abdulla ...... UAENational 18.763% 266,620 Amwal Al Khaleej Commercial — Investment Company ...... KSACompany 23.125% 328,602 Shuaa Capital PSC ...... UAECompany 9.510% 135,138 Al Fahim Group of Companies ...... UAECompany 4.884% 69,408 Abdulla Nasser Hawaileel Al Mansouri ...... UAENational 4.942% 70,229

2. Basis of preparation 2.1 Statement of compliance The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) and the requirements of the UAE Federal Law No. 8 of 1984 (as amended).

2.2 Basis of measurement These consolidated financial statements have been prepared under the historical cost convention except for the following: • Derivative financial instruments are measured at fair value; • Financial instruments at fair value through profit or loss are measured at fair value; and • Available for sale financial assets are measured at fair value. The methods used to measure fair values are discussed further in note 4.

2.3 Functional and presentation currency These consolidated financial statements are presented in UAE Dirhams (“AED”), which is the Company’s functional currency. All financial information presented in AED has been rounded to the nearest thousand.

2.4 Use of estimates and judgments The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and associated assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised and in any future periods affected. Judgments made by the management in the application of IFRS that have significant effect on the financial statements and estimates with a significant risk of material adjustment in the next period are discussed in note 29.

F-72 Damas LLC and its subsidiaries

Notes — (Continued)

2.5 Change in accounting policy (on revenue recognition on crafted gold jewellery and bullion sales) During the current year, the Group has changed its accounting policy for revenue recognition on sales of crafted gold jewellery and bullion. Previously, revenue on the sales of crafted gold jewellery and bullion included the cost of gold component and in the case of crafted gold jewellery also included the making charges. The Directors’ have now resolved to only recognize revenue in the case of sales of crafted gold jewellery to the extent of the making charges on the jewellery sold and in the case bullion sales to only recognize the price differential between the cost of purchase and the sales price of the gold as revenue. International Accounting Standard (“IAS”) 8 — Accounting Policies, Changes in Accounting Estimates and Errors requires that a change in accounting policy should be made if the change results in the financial statements providing more relevant information about the effects of transactions. As the Group in the normal course of its business, does not assume any price risk on the gold component of the crafted gold jewellery and bullion sales, the Directors’ are of the view that this revised accounting treatment results in the financial statements providing more relevant and appropriate information about the financial performance of the Group. As a result, the change in the accounting policy for revenue recognition has been applied retrospectively to conform to the requirements of International Accounting Standard (“IAS”) 8 — Accounting Policies, Changes in Accounting Estimates and Errors. If the Group had followed its earlier policy, the Group’s revenues and cost of sales for the year ended 31 December 2005 and for the year ended 31 December 2006 would have been higher by AED 1.7 billion and AED 2.8 billion, respectively. However, the above change in the accounting policy has no impact on the net profits and the retained earnings of the Group.

3. Significant accounting policies Except as described in note 2.5, the accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements, and have been applied consistently by Group entities.

Basis of consolidation Subsidiaries Subsidiaries are those enterprises which are controlled by the Group. Control exists when the Group has the power, to govern the financial and operating policies of an enterprise so as to obtain benefits from its activities. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Any gains or losses on increase/decrease in minority interest in subsidiaries without a change in control is recognized as a component of equity. The Group’s investment in certain subsidiaries is held by certain Directors and related parties for the beneficial interest of the Group. Refer note 34 for details of subsidiaries.

Associates and jointly controlled entities (equity accounted investments) Associates are those enterprises in which the Group has significant influence, but not control, over the financial and operating policies. Jointly controlled entities are those enterprises over whose activities the Group has joint control, established by contractual agreement and requiring unanimous consent for strategic, financial and operating decisions. Associates and jointly controlled entities are accounted for using the equity method (equity accounted investees). The consolidated financial statements includes the Group’s share of the income and expenses of the equity accounted investees, after adjustments to align the accounting policies with those of the Group, from the date that significant influence or joint control commences until the date that significant influence or joint control ceases. When the Group’s share of losses exceeds its interest in an equity accounted investee, the carrying amount of that interest is reduced to nil and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the investee. When an investment accounted for using the equity method is sold, the difference between the proceeds from the disposal and the carrying amount of the investment (including the carrying amount of any related goodwill) is

F-73 Damas LLC and its subsidiaries

Notes — (Continued) recognized in profit or loss as a gain or loss on disposal. The Group’s investment in certain jointly control entities and associates is held by certain Directors and related parties for the beneficial interest of the Group.

Details of the Group’s associated companies and jointly controlled entities are given in note 35.

Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealized gains arising from intra-group transactions are eliminated in preparing these consolidated financial statements. Unrealized gains arising from transactions with equity accounted investees are eliminated against the investment to the extent of the Group’s interest in the investee. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment.

Foreign currencies

Foreign currency transactions

Transactions in foreign currencies are translated to the respective functional currencies of Group entities at the exchange rates at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. Non monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Foreign currency differences arising on retranslation are recognized in profit or loss, except for differences arising on the retranslation of monetary items that form part of the Company’s net investment in a foreign operation. Foreign exchange differences arising from monetary items that in substance form part of the net investment in foreign operation are recognized directly in the equity.

Foreign operations

The assets and liabilities of foreign operations are translated into AED at the exchange rate ruling at the balance sheet date, except share capital, which is converted at historical rate. The revenue and expenses of foreign operations are translated into AED at the average exchange rates for current period. Foreign exchange differences arising on translation are recognized directly as a separate component of equity.

Financial instruments

Non derivative financial instruments

Non derivative financial instruments comprise investments, trade receivables, prepayments and other receivables, margin to trade payables against unfixed gold, margin with banks, cash and cash equivalents, due from related parties, loans and borrowings, trade and other payables, margin from trade receivables against unfixed gold and due to related parties.

Non derivative financial instruments are recognized initially at fair value plus, for instruments not at fair value through profit or loss, any directly attributable transaction costs, except as described below. Subsequent to initial recognition non- derivative financial instruments are measured as described below.

A financial instrument is recognized if the Group becomes a party to the contractual provisions of the instrument. Financial assets are derecognized if the Group’s contractual rights to the cash flows from the financial assets expire or if the Group transfers the financial asset to another party without retaining control or substantially all risks and rewards of the asset. Financial liabilities are derecognized if the Group’s obligations specified in the contract expire or are discharged or cancelled.

Cash and cash equivalents comprise cash balances, bank current and call accounts and bank deposits with an original maturity of less than three months. Bank overdrafts and trust receipts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the statement of cash flows. Fixed deposit that are under lien are not included as part of cash and cash equivalents.

F-74 Damas LLC and its subsidiaries

Notes — (Continued)

Held to maturity investments If the Group has the positive intent and ability to hold debt securities to maturity, then they are classified as held to maturity. Held to maturity investments are measured at amortized cost using the effective interest method, less any impairment losses.

Available for sale financial assets The Group’s investment in equity securities are classified as available for sale financial assets. Subsequent to initial recognition they are measured at fair value and changes therein, other than impairment losses, are recognized directly in equity. When an investment is derecognized the cumulative gain or loss in equity is transferred to profit or loss. The fair value of financial instruments is based on the quoted market price at the balance sheet date, except that any instrument that does not have a quoted market price in an active market and whose fair value can not be measured reliably is stated at cost less provision against impairment.

Investments at fair value through profit or loss An instrument is classified as fair value through profit or loss if it is held for trading or is designated as such upon initial recognition. Financial instruments are designated as fair value through profit or loss if the Group manages such investment and makes purchase and sales decisions based on their fair value. Upon initial recognition, attributable transaction costs are recognized in profit or loss when incurred. Financial instruments at fair value through profit or loss are measured at fair value, and changes there in are recognized in profit or loss.

Other Other non derivative financial instruments are measured at amortized cost using the effective interest method, less any impairment losses.

Derivative financial instruments The Group holds derivative financial instruments to hedge its gold price risk and interest rate risk exposures. All derivative financial instruments are recognized initially at cost; attributable transaction costs are recognized in profit or loss when incurred. Subsequent to initial recognition derivative financial instruments are stated at fair value. The gain or loss on re-measurement to fair value is recognized immediately in the income statement.

Property, plant and equipment Recognition and measurement Items of property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the asset to a working condition for its intended use. When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

Subsequent costs The cost of replacing part of an item of property, plant and equipment is recognized in the carrying amount of the item if it is probable that the future economic benefits embodied with in the part will flow to the Group and its cost can be measured reliably. The cost of day-to-day servicing of property, plant and equipment are recognized in profit and loss as incurred.

Depreciation Depreciation is recognized in profit and loss on a straight-line basis over the estimated useful life of each part of an item of property, plant & equipment. Land is not depreciated.

F-75 Damas LLC and its subsidiaries

Notes — (Continued)

The estimated useful lives are as follows: Life (years) Building ...... 20 Vehicles...... 4 Furniture and fixtures ...... 4 Office equipment ...... 3-4 Machinery and accessories ...... 4 The depreciation method and useful lives, as well as residual values, are reassessed annually.

Intangible assets Goodwill Goodwill arises on the acquisition of subsidiaries, associates and joint ventures. Goodwill represents the excess of cost of the acquisition over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the acquiree. When the excess is negative (negative goodwill), it is recognized immediately in profit or loss. Goodwill is measured at cost less accumulated impairment losses. In respect of equity accounted investees, the carrying amount of goodwill is included in the carrying amount of the investment.

Operating lease premium Operating lease premium represents the amount paid as premium to obtain key locations on rent. Such amounts are initially recognized at cost and in subsequent years these are stated at cost less accumulated amortization and impairment losses, if any. Amortization is charged to the income statement on a straight-line basis over the estimated useful life of intangible assets. Amortization of these intangible assets is carried out over a period of 10 years from the date of initial recognition.

Other intangible assets Other intangible assets represents amount paid for acquisition of distribution rights and acquisition of jewellery brands. Other intangible assets are measured at cost less accumulated amortization and impairment losses, if any. Amortization is recognized on a straight line basis over the useful life of the intangible assets. Distribution rights are being amortized over a period of 5 years which represents the period over which the Group has contractually agreed the distribution rights with the principal. Brand cost is being amortized over a period of 15 years.

Business combination Stepped acquisition When an acquisition is completed by a series of successive transactions, each significant transaction is considered individually for the purpose of determination of fair value of the identifiable assets, liabilities and contingent liabilities acquired and hence for the goodwill associated with the acquisition. The fair values of the identifiable assets and liabilities acquired can vary at the date of each transaction. When a transaction results in taking control over the entity, the interest previously held in the entity are revalued on the basis of fair values of the identifiable assets and liabilities at that date. The contra posting for this revaluation is recorded directly in shareholders equity under revaluation reserve.

Inventories Inventories are stated at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of the business, less the estimated costs of completion and selling expenses. The cost of gold is determined on the basis of 12 months average purchase price. The cost of making charges on physical inventory of gold jewellery is determined at average cost. The cost of diamond jewellery, pearl jewellery and watches is determined based on specific identification method.

F-76 Damas LLC and its subsidiaries

Notes — (Continued)

Staff terminal benefits

The provision for staff terminal benefits included under payables and other liabilities is based on the liability that would arise if the employment of all the staff were terminated at the balance sheet date. The provision has been calculated in accordance with the provisions of the UAE Federal Labour Law. Employees of subsidiaries operating outside UAE are provided with benefits as per their relevant labour laws.

Impairment

Financial assets

A financial asset is considered impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset.

An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the original effective interest rate. An impairment loss in respect of an available-for-sale financial asset is calculated by reference to its current fair value.

Individually significant financial assets are tested for impairment on individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics.

All impairment losses are recognized in profit or loss. Any cumulative loss in respect of an available for sale financial assets recognized previously in equity is transferred to income statement.

Non financial assets

The carrying amounts of the Group’s non-financial assets, other than inventories, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated. For goodwill and intangible assets that have indefinite lives or that are not yet available for use, recoverable amount is estimated at each reporting date.

An impairment loss is recognized if the carrying amount of an asset or its cash generating unit exceeds its recoverable amount. A cash generating unit is the smallest identifiable asset group that generate cash flows that largely are independent from other assets and groups.

Impairment losses are recognized in profit or loss.

The recoverable amount of an asset or cash generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, estimated future cash flows are discounted to their present value using pre-tax discount rate that reflects current market assessment of the time value of money and the risks specific to the asset.

Provisions

A provision is recognized in the balance sheet when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions for gold purchases are carried at the market value of gold at the balance sheet date.

Revenue recognition

Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of returns and allowances, trade discounts and volume rebates. Revenue is recognized when the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, and there is no continuing management involvement with the goods.

F-77 Damas LLC and its subsidiaries

Notes — (Continued)

Revenue from crafted gold jewellery and bullion (including scrap) sales (physical transaction ten tola bars and kg bars) (also refer note 2.5)

Revenue from the sale of crafted gold jewellery consists of the value of making charges. Revenue from making charge is recognized on the delivery of the jewellery to the customer.

Revenue from the sale of bullion (including scrap) consists of the price difference between the cost of purchase and sale price. Bullion revenue is recognized when the sale price is fixed, at which point the significant risks & rewards of ownership are passed on to the customer.

Revenue for the sale of crafted gold jewellery and bullion includes the gain or loss on the revaluation of mark to market of the forward contracts outstanding at year end.

Revenue from diamond jewellery, pearls, watches, silver and other precious stone sales

Revenue from the sale of these goods is recognized in the income statement when the significant risks and rewards of ownership have been transferred to the buyer.

Gross sales volume

Gross sales volume represents the invoiced value of crafted gold jewellery, bullion (including scrap), diamond jewellery, pearl jewellery, watches, making charges, precious stones and others (refer note 2.5 — Change in accounting policy on revenue recognition on crafted gold jewellery and bullion sales).

Operating lease payments

Leases in terms of which the Group does not assume substantially all the risks and rewards of ownership are classified as operating lease. Payments made under operating leases are recognized in the income statement on a straight- line basis over the term of the lease. Lease incentives received are recognized in the income statement as an integral part of the total lease payments made.

Gold loans and unfixed gold transactions

In the normal course of its business, the Group borrows gold and crafted jewellery where the price of the gold or the gold component in the crafted jewellery is not fixed when delivery is taken. Similarly, the Group delivers gold and crafted jewellery to its wholesale customers on unfixed basis. These gold loans and unfixed gold transaction are covered by cash collaterals or letters of credit. The Group does not recognize a liability or a receivable for the value of gold until the price is fixed, at which point the significant risk and reward of ownership are transferred. These gold loans or unfixed gold transaction are settled either by redelivery of gold or by cash upon mutual agreement between the counter parties, when the price is fixed. Further, when the Group sells gold for which corresponding purchase is not fixed, a liability is recognized equal to the market value of this gold.

Finance income and expenses

Finance income comprises interest income on funds invested. Interest income is recognized as it accrues, using the effective interest method.

Finance expenses comprise interest expenses on borrowings. All borrowing costs are recognized in profit or loss using the effective interest method.

Earnings per share

The Group presents basic earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary share holders of the Company by the weighted average number of ordinary shares outstanding during the year.

F-78 Damas LLC and its subsidiaries

Notes — (Continued)

New Standards and interpretations not yet adopted A number of new standards, amendments to standards and interpretations are not yet effective for the year ended 31 December 2006, and have not been applied in preparing these consolidated financial statements with particular relevance to the Group are: IFRS 7 Financial instruments: Disclosure and amendments to IAS 1’Presentation of financial statements: Capital disclosures require extensive disclosures about the significance of financial instruments for an entity’s financial position and performance, and qualitative and quantitative disclosures on the nature and extend of risks. IFRS 7 and amended IAS 1, which become mandatory for the Group’s 2007 financial statements, will require extensive additional disclosures with respect to Group’s financial instruments and share capital.

4. Determination of fair values A number of the Group’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and or disclosure purposes based on the following methods. Where applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.

Property plant and equipment The fair value of property plant and equipment recognized as a result of a business acquisition is based on market values. The market value of property is the estimated amount for which a property could be exchanged on the date of valuation between a willing buyer and a willing seller in an arms length transaction. Where the carrying value of such property, plant and equipment is not materially different from the fair value, fair value is deemed to equate to the carrying value.

Intangible assets The fair value of intangible assets is based on the discounted cash flows expected to be derived from the use and eventual sale of the assets.

Inventory The fair value of inventory acquired on business acquisition is determined based on its estimated selling price in the ordinary course of business less the estimated costs of completion and sale, and a reasonable profit margin based on the effort required to complete and sell the inventory.

Investments in equity and debt securities The fair value of financial asset at fair value through profit or loss, held to maturity investments and available for sale financial assets is determined by reference to their quoted bid price at the reporting date.

Trade and other receivables The fair value of trade and other receivables is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date.

Derivatives The fair value of forward exchange contracts is estimated to be the difference between the contractual forward price and the current forward price for the residual maturity of the contract using a risk free interest rate. The fair value of interest rate swaps is based on broker quotes.

Non derivative financial liabilities Fair value, which is determined for disclosure purposes, is calculated based on the present value of the future principal and interest cash flows, discounted at the market rate of interest at the reporting date.

F-79 Damas LLC and its subsidiaries

Notes — (Continued)

5. Acquisition of subsidiaries i. Acquisition of Damas Europe SPA On 6 October, 2006 the Group acquired further 36% shares in Damas Europe SPA, in addition to the 30% shares already held by the Group, for a purchase consideration of AED 4.67 million. Damas Europe SPA is a Jewellery retailer in Italy. In the three months to 31 December, 2006 the subsidiary contributed loss of AED 1.39 million to the consolidated results of the Group. If the acquisition had occurred on 1 January, 2006 management estimates that consolidated revenue of the Group would have been AED 1,241 million and consolidated profit for the year would have been AED 228 million. The acquisition had the following effect on the Group’s assets and liabilities on acquisition date. Pre- Fair Recognized acquisition value values on carrying amount adjustments acquisition AED ’000 AED ’000 AED ’000 Property plant and equipment ...... 8,807 — 8,807 Intangible assets...... 3,093 — 3,093 Inventories ...... 10,261 5,131 15,392 Trade receivables ...... 9 — 9 Prepayments and other receivables ...... 2,917 — 2,917 Cash and cash equivalents ...... 128 — 128 Bank borrowings ...... (7,075) — (7,075) Loans from shareholders ...... (2,133) — (2,133) Trade and other payables ...... (12,945) — (12,945) Net identifiable assets and liabilities ...... 3,062 5,131 8,193 Net assets acquired (36%) ...... 2,949 Goodwill on acquisition ...... 1,718 Consideration paid, satisfied in cash ...... (A) 4,667 Cash acquired (100%) ...... (B) 128 Net cash out flow ...... (A-B) 4,539

The values of assets and liabilities recognized on acquisition are their estimated fair values (see note 4 for methods used in determining fair values). Also refer notes 6, 7 and 8. ii. Acquisition of Dria srl On 6 October, 2006 the Group acquired 70% shares in Dria srl for a purchase consideration of AED 0.88 million. Dria srl is manufacturer and distributor of gold and diamond jewellery in Italy. In the three months to 31 December 2006 the subsidiary contributed profits of AED 0.35 million. If the acquisition had occurred on 1 January 2006, management estimates that consolidated revenues of the Group would have been AED 1,251 million and consolidated profit for the year would have been AED 232 million.

F-80 Damas LLC and its subsidiaries

Notes — (Continued)

The acquisition had the following effect on the Group’s assets and liabilities on acquisition date. Pre- Fair Recognized acquisition value values on carrying amount adjustments acquisition AED ’000 AED ’000 AED ’000 Property plant and equipment ...... 254 — 254 Investments ...... 458 — 458 Inventories ...... 5,863 322 6,185 Trade receivables...... 10,652 — 10,652 Prepayments and other receivables ...... 469 — 469 Cash and cash equivalents ...... (3,709) — (3,709) Bank borrowings ...... (610) — (610) Loans from shareholders ...... (905) — (905) Trade and other payables ...... (12,343) — (12,343) Net identifiable assets and liabilities ...... 129 322 451 Net assets acquired (70%) ...... 316 Goodwill on acquisition...... 562 Consideration paid, satisfied in cash...... (A) 878 Overdraft acquired (100%) ...... (B) 3,709 Net cash out flow ...... (A+B) 4,587

The values of assets, liabilities and contingent liabilities recognized on acquisition are their estimated fair values (see note 4 for methods used in determining fair values). Also refer notes 6 and 7. Goodwill recognized on the acquisition of the above entities is mainly attributable to the skills and expertise of the acquired business work force and the synergies expected to be achieved from integrating the entities into the Group’s existing business.

F-81 Damas LLC and its subsidiaries

Notes — (Continued)

6. Property, plant and equipment Furniture Machinery Capital Land & and Office and work-in- Cost building Vehicles fixtures equipment accessories progress Total AED’ 000 AED’ 000 AED’ 000 AED’ 000 AED’ 000 AED’ 000 AED’ 000 At 1 January 2005 ...... 13,705 8,492 50,740 7,384 2,693 12,861 95,875 Additions...... 14,452 1,189 11,788 2,728 4,042 39,084 73,283 Transfers ...... — — (1,963) 178 1,785 — — Disposals ...... — (445) (907) (36) — — (1,388) Currency translation ...... — — (363) — — — (363) At 31 December 2005 ...... 28,157 9,236 59,295 10,254 8,520 51,945 167,407 At 1 January 2006 ...... 28,157 9,236 59,295 10,254 8,520 51,945 167,407 Acquisitions through business acquisitions (refer note 5) . . . . . — 21 8,216 819 5 — 9,061 Other additions ...... 9,805 366 20,128 5,031 4,901 29,924 70,155 Transfer...... 6,941 — 1,378 (1,865) 487 (6,941) — Disposals ...... — (771) (2,027) (39) (137) — (2,974) Currency translation ...... 1,165 2 129 61 575 34 1,966 At 31 December 2006 ...... 46,068 8,854 87,119 14,261 14,351 74,962 245,615 Depreciation At 1 January 2005 ...... 387 5,835 32,614 2,721 1,951 — 43,508 Charge for the year ...... 516 1,308 9,450 2,044 2,415 — 15,733 Transfers ...... — — (16) 5 11 — — Disposals ...... — (445) (851) (13) — — (1,309) Currency translation ...... (8) — (4) (4) (88) — (104) At 31 December 2005 ...... 895 6,698 41,193 4,753 4,289 — 57,828 At 1 January 2006 ...... 895 6,698 41,193 4,753 4,289 — 57,828 Charge for the year ...... 1,109 1,166 11,468 3,288 3,283 — 20,314 Transfer...... — (10) 414 (625) 221 — — Disposals ...... — (597) (1,732) (26) (69) — (2,424) Currency translation ...... 20 — 62 31 404 — 517 At 31 December 2006 ...... 2,024 7,257 51,405 7,421 8,128 — 76,235 Net book value At 31 December 2006 ...... 44,044 1,597 35,714 6,840 6,223 74,962 169,380 At 31 December 2005 ...... 27,262 2,538 18,102 5,501 4,231 51,945 109,579

Land & building amounting to AED 14.58 million (cost) (31 December 2005: AED 13.59 million) is held in the name of directors/their relatives for the beneficial interest of the Group. Capital work-in-progress amounting to AED 6.71 million (cost) (31 December 2005: NIL) is held in the name of Oriental Int. Co. for Gold, Jewellery Trade, a related party for the beneficial interest of the Group. Capital work in progress mainly includes cost of construction work for the factory at Dubai Multi Commodities Centre (“DMCC”) amounting to AED 42.36 million, ALMAS Tower 53A (office building) for AED 6.45 million, ALMAS Tower 54A (office building) for AED 6.41 million, AU Tower (office building) for AED 7.26 million. Property, plant and equipment amounting to AED 22.58 million (cost) (31 December 2005: AED 12.07 million) is mortgaged to banks against loans obtained by the Group. Also refer note 15.

F-82 Damas LLC and its subsidiaries

Notes — (Continued)

7. Goodwill 2006 2005 AED’ 000 AED’ 000 As at 1 January ...... 548,626 542,494 Additions during the year (refer note 5) ...... 2,280 6,132 Currency translation reserve ...... 238 — As at 31 December...... 551,144 548,626

Impairment test for goodwill The above represents goodwill on the acquisition of Damas Jewellery LLC; Stefan Hafner SPA, Italy; Damas Europe, SPA and Dria srl. Annual impairment testing for goodwill is carried by management at 31 December. The impairment test is based on the “value in use” calculation. These calculations have used cash flow projections based on actual operating results and future expected performance. Cash flow projections beyond five years are projected using a 4% growth rate. The growth rate is considered appropriate considering the nature of the industry and the general growth in the economic activity witnessed in the region where these entities operate. A discount rate of 8% has been used in discounting the cash flows projected.

8. Intangible assets 2006 2005 AED’ 000 AED’ 000 As at 1 January ...... 21,470 16,333 Operating lease premium additions during the year ...... 2,490 8,036 Acquisition under business acquisition (refer note 5) ...... 3,093 — Distribution rights acquired during the year ...... 11,025 — Brand acquisition cost paid during the year* ...... 3,430 — Amortization ...... (3,347) (2,899) As at 31 December...... 38,161 21,470

* Brand acquisition cost relates to amount paid by the Group for purchase of rights to manufacture and distribute a brand of jewellery.

9. Investments 2006 2005 AED’ 000 AED’ 000 Investments in jointly controlled entities ...... 154,798 20,681 (refer note 1 below) Investments in associates (refer note 2 below) ...... 76,642 57,432 Investments available for sale ...... 7,140 12,376 Investment designated as fair value through profit or loss (refer note 3 below) ...... 11,713 — Investments held to maturity (refer note 15) ...... 2,204 2,204 Advance against Investment (refer note 4 below) ...... 85,864 37,782 Balance at 31 December ...... 338,361 130,475

F-83 Damas LLC and its subsidiaries

Notes — (Continued)

Note 1:

The movement in investments in jointly controlled entities is as follows:

2006 2005 AED’ 000 AED’ 000 Balance as at 1 January ...... 20,681 8,849 Investments made during the year ...... 126,280 7,043 Dividend received during the year...... (5,000) — Share of profit recognized during the year (refer note 22) ...... 12,837 4,789 Balance as at 31 December...... 154,798 20,681 Summary financial information on jointly controlled entities — 100 percent

Name of jointly controlled entity Assets Liabilities Equity* Revenue Profit/(loss) (AED’000) Premium Investments International LLC...... 70,405 36,842 33,563 34,457 10,630 Paspaley Pearl Jewellery LLC ...... 17,610 17,726 (116) 7,690 (441) Damas & Al Ghannam Jewellery Co. WLL ...... 63,332 64,081 (749) 78,679 (1,374) Trading House Kristall DMCC...... 2,004 1,257 747 2,844 77 D’Damas Jewellery (India) Pvt. Ltd...... 82,209 64,750 17,459 40,280 957 Al Manara...... 133,939 23,397 110,542 71,951 10,542 Al Zain Trading Co. WLL ...... 141,027 36,842 104,185 42,006 4,721 Time Center LLC ...... 19,731 18,506 1,225 8,042 925 Damas Toomban Pvt. Ltd ...... 2,704 2,701 3 — — Damas Saudi Arabia Company Ltd...... 70,936 45,545 25,391 11,445 (413)

* Equity includes retained earnings/(accumulated losses)

Refer to note 35.1 for details of jointly controlled entities.

Al Manara

During the year, the Group has entered into an agreement to acquire a 49% investment in Al Manara, a jointly controlled operation. During the current year the Group has accounted for an amount of AED 5.17 million as its share of profits from the jointly controlled operation.

Al Zain Trading Company WLL

During the year the Group has acquired a 50% investment in Al Zain Trading Company WLL, a jointly controlled entity. Since acquiring the interest the Group has accounted AED 2.36 million as its share of income from the entity.

Time Center LLC

During the year the Group has subscribed to a 50% stake in Time Center LLC, a jointly controlled entity. Since its inception, the Group has accounted AED 0.46 million as its share of income from the entity.

Damas Toomban Pvt. Ltd

During the year the Group has invested 50% in Damas Toomban Pvt. Ltd., a jointly controlled entity. This jointly controlled entity has not commenced significant operations till the balance sheet date.

Damas Saudi Arabia Company Ltd.

During the year the Group has invested 49% in Damas Saudi Arabia Company Ltd., a jointly controlled entity. Since acquiring the interest the Group has accounted AED 0.2 million as its share of loss from the entity.

F-84 Damas LLC and its subsidiaries

Notes — (Continued)

Note 2:

The movement of investment in associates is as follows:

2006 2005 AED’ 000 AED’ 000 Balance at 1 January ...... 57,432 38,947 Investments made during the year* ...... 22,849 12,770 Disposed off during the year** ...... (24,662) — Change in status to subsidiary*** ...... (749) — Dividend received ...... (4,524) (4,164) Share of profit recognized during the year (refer note 22) ...... 26,296 9,879 Balance at 31 December ...... 76,642 57,432

* Investments made during the year include an amount of AED 18.75 million in respect of investment in Metamorph Real Estate WLL, Kuwait. ** This includes investments in Rivoli Enterprises LLC and Al Khaleej Watch Company disposed off for an amount of AED 100 million, resulting in a net gain of AED 75.34 million on disposal of the investment. *** During the year the Group has acquired a further 36 % interest in Damas Europe SPA which has resulted in change in its status to a subsidiary. Please refer to notes 5(i) and 34 (26) for details.

Summary financial information on associates — 100 percent

Name of associate Assets Liabilities Equity* Revenue Profit/(Loss) (AED’000) Damas & Chalco General Trading Co LLC ...... 14,109 8,944 5,165 11,206 251 Damas Mucevherat ...... 20,394 19,564 830 25,107 242 Carati Jewellery S.A.L** ...... — — — — — Style Avenue Middle East FZ Company ...... 85,059 48,636 36,423 104,298 6,268 Daiso Japan Value Stores LLC ...... 9,790 5,289 4,501 20,368 1,502 LTC International General Trading Co...... 24,849 28,736 (3,887) 31,400 (4,523) LTC International Qatar LLC ...... 17,571 9,803 7,768 38,857 5,938 Daiso Trading...... 2,635 524 2,111 3,934 742 DPG Diamonds DMCC...... 2,437 2,200 237 1,018 (71) Al Mana Jewellery Co. — Damas WLL ...... 19,926 16,159 3,767 111,701 6,759 Al Baraka Jewellery ...... 12,881 7,672 5,209 19,185 473 Himo LLC ...... 5,749 812 4,937 4,010 3,800 Lucci 2 SARL ...... 8,142 3,863 4,279 7,196 2,831 The Jewellery Stores DMCC ...... 36,165 9,620 26,545 1,463 (1,360) Metamorph Real Estate WLL*** ...... 54,427 7,985 46,442 50,856 42,411 Premium Investments, Kuwait ...... 1,079 1,856 (777) 575 (1,409)

* Equity includes retained earnings/ (accumulated losses). ** For the current year, the Group has not been able to obtain any financial information with respect to this associate. The Directors’ of the Company have confirmed that the absence of financial information regarding this associate does not have a material impact on the financial statements of the Group. *** During the current year the Group acquired a 30% investment in Metamorph Real Estate WLL (“Metamorph”) which was established in conjunction with other investors to develop a shopping & entertainment centre in Kuwait. During the current year, the Group has recognized AED 12.72 million as its share of profit from the associate. The total income of the associate includes AED 50.8 million earned from the assignment of portion of leasehold interest in land acquired by the associate on a long term lease (lease for 20 years) earlier in the year and assigned to a third party in May 2006. The one time premium of AED 50.8 million was settled to the associate and the third party has agreed to take over all the rights and obligations of Metamorph under the original lease. However, Metamorph’s agreement with the third party provides for the transfer of the leasehold interest to be only effective on the approval of the assignment by the original owner of the land and a department of the Kuwait government. These approvals are outstanding at the balance sheet date.

The Directors of the Damas LLC have confirmed that on the basis of this understanding between the parties involved the necessary approvals for the assignment will be forthcoming and with the collection of the amount of the consideration, the transaction has been finalized and any uncertainty in respect of the collectability of the revenue removed. Accordingly, they have confirmed the inclusion of the above income in the financial statements of

F-85 Damas LLC and its subsidiaries

Notes — (Continued) the Group for the current year. The Directors have also provided an indemnity to the Company to make good any loss to the Company if the necessary approvals are not obtained. Refer to note 35.2 for details of associates.

Note 3: Investments designated as fair value through profit or loss

Investments designated as fair value through profit or loss represents shares in quoted equity securities amounting to AED 11.1 million which have been transferred by the Managing Director and shareholder of the Company, to the Company at their respective fair values. As at 31 December 2006, these investments are held by the related party for the beneficial interest for the Company. Also refer notes 14 and 17.

Note 4: Advance against investments Advance against investments represents advance of AED 74.5 million paid by the Group to acquire joint control of Deepu Jewellers, DMCC, a company registered in UAE and an advance of AED 11.36 million to acquire an interest in Felopateer Palace S.A., an entity registered in Egypt. Deepu Jewellers, DMCC is involved in the jewellery business and Felopateer Palace S.A. is involved in the watch business. As these investments were not formalised as at 31 December 2006, these amounts have been classified as advances against investments. Refer notes 27 and 33.

10. Inventories

2006 2005 AED’ 000 AED’ 000 Cost of inventory on hand (net of consignment inventory) (gold and gold jewellery, diamonds, pearls, watches, silver and other precious stones) ...... 1,728,212 1,438,142 Gold unfixed with trade receivables...... 257,502 315,177 Gold unfixed with jointly controlled entities/ associated companies ...... 146,794 77,688 Provision for gold purchases (refer note 16)...... 821,082 — Gold unfixed from joint venturer’s contribution ...... (41,995) (18,243) Gold (unfixed) received on loan from Banks (refer note 27) ...... (1,499,107) (738,070) Gold unfixed from trade payables ...... (167,046) (78,737) 1,245,442 995,957 Less: Provision for inventories ...... (20,052) (12,917) Net inventories ...... 1,225,390 983,040

Inventories are hypothecated against the bank borrowings facilities obtained from various banks by the Group (refer note 15).

Note: Inventories are stated at the lower of cost and net realizable value. The average cost adopted for valuation of gold component is at US$ 610.30 per oz. as compared to opening stock valued at US$ 452.92 per oz. and as against the market value of US$ 636.50 per oz. as on 31 December 2006. The Group in the normal course of business borrows and buys gold on an unfixed basis which it converts into gold jewellery or trades as bullion. This jewellery and bullion is further used as stock in trade and is sold to various customers on a fixed or unfixed basis. The Group enters into forward purchases and forward sales to minimize the price risk which it is being exposed. The Group has a policy of accounting these forward contracts as purchases/sales on the date of the transaction at contract value (notional rate), resulting in these having an impact on the Group’s own/book stock. As per the requirements of IAS 39 these forward contracts are not accounted for at contract value (notional rate) at the balance sheet date but are instead included at fair market value in the balance sheet. The reversal of the said forward contracts from the books has resulted in a loss of AED 10.88 million and revaluation at fair market value has resulted in a unrealized gain of AED 19.2 million (refer notes 12 and 30).

F-86 Damas LLC and its subsidiaries

Notes — (Continued)

The above results are grouped under revenue before arriving at the gross margin of the Group. This revaluation gain is grouped in prepayments and other receivables under current assets in the balance sheet. The Group monitors these forward contracts as part of its own/book stock as follows: 2006 2005 AED’ 000 AED’ 000 Net inventory (as above) ...... 1,225,390 983,040 Provision for gold purchases...... (821,082) — Forward purchases ...... 1,023,113 156,808 Forward sales...... (40,484) (76,421) Economic position of Group’s inventory ...... 1,386,937 1,063,427

11. Trade receivables 2006 2005 AED’ 000 AED’ 000 Trade receivables ...... 362,738 221,587 Due from credit card companies ...... 19,174 5,699 Sub total ...... 381,912 227,286 Provision for doubtful debts ...... (12,700) (13,459) 369,212 213,827

Trade receivables are hypothecated against the borrowing facilities obtained from various banks (refer note 15).

12. Prepayments and other receivables 2006 2005 AED’ 000 AED’ 000 Prepaid expenses ...... 28,431 15,781 Advances and other receivables*...... 152,722 88,860 Deposits...... 4,693 2,250 Unrealized gain on revaluation of forward contracts ...... 19,200 8,295 (refer notes 10 & 30) 205,046 115,186

* Includes advance to suppliers amounting AED 29.41 million (AED 27.35 million in 2005). Advances and other receivables include an amount of AED 75 million (which is secured by bank guarantee) receivable on the disposal of investment in associate. Refer note 9(2).

13. Cash and bank balances 2006 2005 AED’ 000 AED’ 000 Cash on hand ...... 8,681 4,224 Balance with banks in: Current accounts ...... 18,707 7,346 Fixed deposits ...... 471,426 388,694 498,814 400,264

Fixed deposits amounting to AED 464.03 million (31 December 2005: AED 259.56 million) are held under lien against bank borrowings (refer note 15).

F-87 Damas LLC and its subsidiaries

Notes — (Continued)

14. Related party transactions The Group in the normal course of business enters into transactions with other business enterprises that fall within the definition of a related party contained in International Accounting Standard No. 24. These transactions are entered at terms agreed with the management of the respective related parties. The significant related party transactions during the year were as follows: 2006 2005 AED’ 000 AED’ 000 Expenses paid on behalf of a related party ...... 1,003 699 Sale of jewellery and watches ...... 223,762 127,708 Purchase of jewellery and watches ...... 49,558 24,653 Transfer of investments (refer notes 9.3 and 17) ...... 11,099 —

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Company, directly or indirectly including any directors, executives or otherwise, of the Company. Compensation paid or payable to key management personnel are as follows: 2006 2005 AED’ 000 AED’ 000 Salary & other short term employee benefits ...... 720 720

The significant related party balances at the year-end are as follows: 2006 2005 AED’ 000 AED’ 000 Due from related parties ...... 76,291 48,564 Due to related parties ...... 83,665 31,258 Long term loans to related parties ...... 58,515 68,277

15. Bank borrowings 2006 2005 AED’ 000 AED’ 000 a. Current liability Bank overdrafts ...... 217,065 79,793 Trust receipts ...... 58,258 45,733 Short term loan...... 242,678 154,894 Local bills discounting ...... 25,393 18,886 543,394 299,306 b. Non current liability Long-term loan...... 207,720 140,828 Total (a)+(b) ...... 751,114 440,134

Bank borrowings are secured as under: - I. Partly secured against fixed deposits amounting to AED 464.03 million and Investments held to maturity amounting to AED 2.2 million under lien with banks (refer notes 9 & 13).

F-88 Damas LLC and its subsidiaries

Notes — (Continued)

II. Hypothecation of inventories, assignment of receivables and insurance policies of the Group on pari passu basis with all banks (refer notes 10 & 11). III. Unconditional, continuing, joint and several guarantees of Mr. Tawfique Abdulla, Mr. Tawhid Abdulla and Mr. Tamjid Abdulla on behalf of the Company. IV. Mortgage of the properties, plant and equipments amounting to AED 22.58 million (refer note 6). V. Subordination of shareholders’ long term loan (refer note 20). VI. Corporate cross guarantee from Group companies. The above mentioned borrowings are subject to certain financial related covenants which are specified in each individual loan agreement.

16. Trade payables and other liabilities 2006 2005 AED’ 000 AED’ 000 Trade payables ...... 478,828 415,919 Post dated cheques issued...... 9,555 20,161 Accruals & provisions ...... 862,228 20,703 Staff terminal benefits ...... 12,747 11,319 1,363,358 468,102

Accruals & provisions include an amount of AED 821 million with respect to provisions for gold purchases. The Company has entered into forward contracts to cover its positions arising from this sale (refer note 10).

17. Shareholders’ current accounts 2006 2005 AED’ 000 AED’ 000 Balance at 1 January ...... 21,143 58,727 Dividend for the year 2004 ...... — (1,634) Dividend for the year 2005 ...... (59,720) — Transfer of investments (refer notes 9(3) and 14) * ...... (11,099) — Net drawings during the year ...... 123,708 (35,950) Balance as at 31 December...... 74,032 21,143

* Transferred as at 31 December 2006.

18. Share capital 2006 2005 AED’ 000 AED’ 000 Authorized capital: 1,421,000 shares of AED 1,000 each ...... 1,421,000 1,421,000 Issued and paid up: 1,421,000 shares AED 1,000 each (521,000 shares issued in 2005) ...... 1,421,000 1,421,000 1,421,000 1,421,000

19. Reserves Statutory reserve In accordance with the Articles of Association of entities in the Group and Article 255 of UAE Federal Law No. 8 of 1984 (as amended), 10% of the net profit for the year of the individual entities in the Group to whom this Law is

F-89 Damas LLC and its subsidiaries

Notes — (Continued) applicable is transferred to statutory reserve which is non-distributable. Such transfer may be discontinued when the reserve equals 50% of the respective paid up share capital of the individual entities.

Currency translation reserve

The currency translation reserve represents all the foreign exchange differences arising from the translation of the financial statements of foreign subsidiaries of the Group.

20. Long term loan from shareholders

2006 2005 AED’ 000 AED’ 000 Balance as at 31 December...... 150,000 150,000

This represents long term loan from Mr. Tawfique Abdulla, Mr. Tawhid Abdulla and Mr. Tamjid Abdulla to the Company. This loan is interest free, unsecured and does not have a fixed repayment date. Accordingly, this loan has been considered repayable on demand. However, the shareholders have provided an undertaking that the amount of the loan will not be called upon for repayment within twelve months from the balance sheet date. Refer note 15.

21. General administration, selling and distribution expenses

2006 2005 AED’ 000 AED’ 000 This includes: Personnel expenses...... 97,841 75,255 Rent ...... 46,824 37,881 Advertisement ...... 40,827 36,717 Sales promotion/marketing and selling expenses ...... 45,712 29,275 Provision for slow moving inventory ...... 7,135 5,203 Provision for bad and doubtful debts ...... — 3,559 Depreciation (refer note 6) ...... 20,314 15,733 Amortization of intangible assets (refer note 8) ...... 3,347 2,899

22. Income from jointly controlled entities and associates

2006 2005 AED’ 000 AED’ 000 Share of income from jointly controlled entities (refer note 9) ...... 12,837 4,789 Share of income from associates* (refer note 9) ...... 26,296 9,879 39,133 14,668

* Income from associates includes AED 12.72 million of income from Metamorph Real Estate WLL, Kuwait. Refer note 9 (2).

23. Other income

2006 2005 AED’ 000 AED’ 000 Income from shares & securities ...... — 2,699 Foreign currency exchange gain ...... — 2,066 Discount and commission ...... 3,051 — Miscellaneous income ...... 4,599 5,103 7,650 9,868

F-90 Damas LLC and its subsidiaries

Notes — (Continued)

24. Finance cost (net) 2006 2005 AED’ 000 AED’ 000 Interest on bank borrowings ...... 72,416 37,857 Interest income from fixed deposit ...... (29,210) (11,799) 43,206 26,058

25. Cash and cash equivalents 2006 2005 AED’ 000 AED’ 000 Cash on hand ...... 8,681 4,224 Bank balance in current accounts ...... 18,707 7,346 Fixed deposit with maturities less than three month ...... 5,187 129,134 Bank overdrafts ...... (217,065) (79,793) Trust receipts...... (58,258) (45,733) (242,748) 15,178

26. Operating lease Non-cancellable operating lease rentals payable as at 31 December is as follows: 2006 2005 AED’ 000 AED’ 000 Less than one year ...... 22,560 13,239 One to five years ...... 16,271 1,949 38,831 15,188

The Group leases retail outlets, warehouses and factory facilities under operating leases. The leases typically run for an initial period of one to five years, with an option to renew the lease after that date. Lease payments are usually increased to reflect market rentals.

27. Contingencies and commitments 2006 2005 AED’ 000 AED’ 000 Letters of credit ...... 2,387 13,591 Corporate guarantees ...... 44,857 26,147 Other bank guarantees ...... 14,300 9,048 Stand-by letters of credit (refer note below) ...... 905,712 367,037

2006 2005 AED’ 000 AED’ 000 Commitments Towards investment in associate companies ...... 79,004 76,068 Capital commitments ...... 11,807 —

The stand-by letters of credit are provided by banks in favour of the suppliers of gold who have lent unfixed gold and which is deducted from the total inventory on hand in note 10 under the head “Gold (unfixed) received on loan from banks”.

Legal case Outstanding legal cases against the Group as at 31 December 2006 include a case under arbitration relating to its subsidiary in Italy, Stefan Hafner SPA (“the subsidiary”). In the earlier years, the Group acquired the business of Stefan Hafner SPA from the previous owner, Mr. Stefan Hafner for an agreed consideration. Subsequently,

F-91 Damas LLC and its subsidiaries

Notes — (Continued)

Mr. Stefan Hafner commenced arbitration proceedings against the subsidiary where he claimed to have not been paid a fair price for the sale of his business and claimed an additional consideration of AED 26.2 million (Euro 5.35 million). The subsidiary has rejected this claim and filed a counter claim against Mr. Stefan Hafner claiming an amount of AED 7.7 million (Euro 1.5 million) representing losses suffered by the subsidiary on the non recovery of outstanding receivables taken over from Mr. Stefan Hafner and certain expenses incurred by the subsidiary on behalf of Mr. Stefan Hafner. The arbitration panel has appointed experts to look into the details of the case and submit their report. Subsequent to the year end, the experts have submitted their findings to the arbitration panel which would be discussed in the next hearing of the panel, which is expected to take place in June 2007. Management have represented that the price paid for the purchase of the business was a fair price and was mutually agreed between the parties. Management are also confident of the collectability of the amount of AED 7.7 million from Mr. Stefan Hafner (this amount is currently recorded under other receivables — refer note 12). Management is confident of defending the case and consider their arguments to be strong and possibility of any loss to be incurred by the Group not probable. Accordingly, no provision has been made against this claim in these consolidated financial statements.

28. Earning per share (EPS) The calculation of basic earnings per share at 31 December 2006 and 31 December 2005 was based on the profit attributable to equity shareholders of AED 229.34 million (31 December 2005: AED 132.76 million) and a weighted average number of equity shares outstanding of 1,421 thousand (31 December 2005: 1197 thousand). 2006 2005 Earning available to equity shareholders (AED’ 000) ...... 229,339 132,763 Weighted averages no. of equivalent equity shares as on 31 December...... 1,421,000 1,196,900 Basic Earning Per Share in AED (for the year ended 31 December) ...... 161.39 110.92

29. Accounting estimates and judgments The Group makes estimates and assumptions that affect the reported amounts of assets and liabilities within the next financial year. Estimates and judgments are continually evaluated and are based on historical experience and other factors including expectations of future events that are believed to be reasonable under the circumstances.

Key sources of estimation uncertainty Impairment of intangibles and other assets Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. The impairment test is based on the “value in use” calculation. These calculations have used cash flow projections based on actual operating results and future expected performance. For details of the projections refer note 7. Furthermore, other intangibles and other assets such as property, plant and equipment are tested for impairment whenever there is an indication of impairment. Testing for impairment of these assets requires management to estimate the recoverable amount of the cash generating unit.

Provision for bad and doubtful receivables Provision for bad and doubtful receivables is calculated on the specific identification of receivables which require provision to be created. Provision is made for receivable balances, which based on the information available with management, are considered to be uncollectible. The above provisioning policy is based on historical experience and is believed to be reasonable under the circumstances.

Provision for slow moving inventory The Group reviews its inventory to assess loss on account of slow moving inventory on a regular basis. In determining whether provision for slow moving inventory should be recorded in the consolidated income statement, the Group makes judgments as to whether there is any observable data indicating that there are future adverse factors affecting the salability of the product and the net realisable value for such product. Accordingly, provision

F-92 Damas LLC and its subsidiaries

Notes — (Continued) for impairment is made where the net realisable value is less than cost based on best estimates by the management. The provision for slow moving inventory is based on its ageing and past movement.

Identifiable assets and liabilities taken over on acquisition of subsidiaries

The Group separately recognizes assets and liabilities on the acquisition of a subsidiary when it is probable that the associated economic benefits will flow to the acquirer or when, in the case of liability, it is probable that an outflow of economic resources will be required to settle the obligation and the fair value of the asset or liability can be measured reliably. Intangible assets and contingent liabilities are separately recognized when they meet the criteria for recognition set out in IFRS 3.

Other estimates and judgments

Management of the Group also exercises significant judgments in estimating the residual value and useful lives of items of property, plant and equipment and intangible assets. Should these estimates vary, the income statement and balance sheet in the following years would be impacted.

30. Forward Gold contracts

Open position — December 2006

Cost Fair Value Revaluation Between Less than 3 months 3 months to 1 year Total Total Gain/(Loss) AED’000 AED’000 AED’000 AED’000 AED’000 Forward purchases ...... 1,023,113 — 1,023,113 1,044,535 21,422 Forward sales ...... 40,484 — 40,484 42,707 (2,223)

Open position — December 2005

Cost Fair Value Revaluation Between Less than 3 months 3 months to 1 year Total Total Gain/(Loss) AED’000 AED’000 AED’000 AED’000 AED’000 Forward purchases ...... 111,921 44,887 156,808 174,502 17,694 Forward sales ...... 76,421 — 76,421 85,821 (9,400)

These forward contracts are measured at fair value as at 31 December 2005 which resulted in the recognition of income in the income statement and a corresponding asset amounting to AED 8.3 million.

31. Financial instruments

Financial assets of the Group include investments, cash in hand, bank current accounts, bank fixed deposit accounts, bank margin accounts, due from related parties, trade receivables, other receivables, shareholders’ current account and margin to trade payable against unfixed gold. Financial liabilities include bank borrowings, trade payables and other liabilities, margin from trade receivable against unfixed gold, long term loans from shareholders and due to related parties. Accounting policy of financial assets and liabilities are stated in note 3.

Fair values

The fair values of the Group’s financial assets and liabilities approximate their carrying values.

F-93 Damas LLC and its subsidiaries

Notes — (Continued)

Credit risk

Financial assets which potentially expose the Group to credit risk comprise mainly of bank current accounts, bank fixed deposit accounts, bank margin accounts, due from related parties, trade receivables and margin to trade payables against unfixed gold.

Credit risk with respect to investments in associate companies is limited as all the operations of investee business are significantly influenced by the Group. The investment in shares and securities are in funds managed by a financial institution of good standing and in quoted equity securities.

The Group’s bank current accounts and bank fixed deposit accounts are placed with financial institutions of high credit rating.

Credit risk with respect to trade receivables is diversified due to the large number of customers comprising the Group’s customer base. As at 31 December 2006, 30% of total trade receivables are concentrated in UAE, 14% in the other GCC countries, 13% in African countries, 13% in Asian countries, 20% in Europe and USA and the balance 10% are large number of miscellaneous trade receivables which are concentrated mainly in the Arab countries.

Due from related parties are considered recoverable.

There is no credit risk with respect to margin to trade payable against unfixed gold as this margin is paid after the receipt of gold on unfixed basis.

Interest rate risk

The Group’s fixed bank deposits are at prevailing market interest rates. Interest rates on the Group’s borrowings from banks are as per prevailing market conditions. The Group’s investment in variable rate borrowings are exposed to a risk of change in interest rates. Interest rate swaps denominated in United States Dollars (“USD”), have been entered into to achieve an appropriate mix of fixed and floating rate exposures within the Group. At 31 December 2006, the Group had interest rate swaps with a notional contract value of USD 45 million. The fair values of interest rate swap contracts at the balance sheet date were AED 1.13 million. Hedge accounting is not applied to interest rate swaps. No interest is due on long term loan from the shareholders.

Price risk

The Group enters into derivative financial instruments for risk management purposes. Derivative financial instruments used by the Group are forward purchase/sale contracts of gold. These financial instruments are individually negotiated with various financial institutions. Refer to note 30 for details of forward purchase/sale contracts of gold.

Foreign exchange risk

There is no significant exchange rate risk as substantially all of the financial assets and financial liabilities are denominated in UAE Dirhams or USD to which the UAE Dirham is pegged. Foreign currency exposures to currencies other than USD are monitored and managed centrally by the Group by obtaining forward exchange covers. The Group accounts for gains and losses in the income statement arising from the utilization of these forward exchange covers. There are no outstanding forward currency contracts as at 31 December 2006.

Foreign currency (other than USD) financial liabilities outstanding at 31 December 2006 were as follows:

2006 2005 AED’ 000 AED’ 000 Foreign currency financial liabilities ...... 40,600 43,788 As a % on trade payables ...... 8.5% 10.5%

F-94 Damas LLC and its subsidiaries

Notes — (Continued)

32. Comparatives The comparative figures of previous year have been reclassified wherever necessary in the consolidated financial statements so as to make them comparable to current year figures. Comparative have also been restated to account for the change in accounting policy on revenue recognition (refer note 2.5).

33. Subsequent events Subsequent to the balance sheet date, the Group has made the following investments:

Investment in Damas and Al Ghanam Jewellery Co. WLL On 1 January 2007, the Group has acquired an additional 40% shareholding in the above entity. With this additional shareholding, the entity has now become a subsidiary of the Group from its status as jointly controlled entity at 31 December 2006.

Deepu Jewellers DMCC The Group has acquired a 51% shareholding in Deepu Jewellers DMCC. Deepu Jewellers DMCC is involved in the business of manufacture and distribution of gold and diamond jewellery. The acquisition of the Group’s interest in this entity was formalized on 10 April 2007 with the signing and registration of the Memorandum and Articles of the entity. The Company’s investment in the entity amounts to AED 74.5 million. Refer note 9(4).

Emirates Jewellery Manufacturing Company LLC The Group has entered into an agreement with a Emaar Industries & Investments PJSC for the formation of a new limited liability company in the UAE to be jointly controlled by the Group and the Emaar. This entity would be involved in the manufacture of gold and diamond jewellery.

34. Entities included in the consolidated financial statements These consolidated financial statements represent a line-by-line consolidation of operating results and financial position of the Company and its subsidiaries as set out below.

F-95 Damas LLC and its subsidiaries

Notes — (Continued)

Name of the company Country of incorporation 1. Damas Jewellery LLC...... UAE 2. Mukund Jewellery LLC ...... UAE 3. Ocean Jewellery LLC ...... UAE 4. Dhanak Jewellery LLC ...... UAE 5. Armaan Jewellery LLC ...... UAE 6. Al Mana Damas International LLC ...... UAE 7. Gem Universe LLC...... Oman 8. Universe Jewellers Limited ...... USA 9. Damas Company WLL ...... Kingdom of Bahrain 10. Islanders Demas Pvt. Ltd...... Maldives 11. Stefan Hafner SPA ...... Italy 12. Stefan Hafner (NY) Inc ...... USA 13. Tawhid & Muktasem Jewellery ...... Jordan 14. Damas Jewellery SAL ...... Lebanon 15. Damas Jewellery Company ...... Egypt 16. Diminco Damas Diamond Manufacturing DMCC...... UAE 17. Demas Jewellery Pvt. Ltd...... India 18. Soir Jewellery Pvt. Ltd...... India 19. Damas Gold Fields Jewellery Private Limited ...... India 20. Damas Hong Kong Ltd...... Hong Kong 21. Damas Thailand Co. Ltd...... Thailand 22. Royal Jewellers Inc...... USA 23. 7816 3rd Avenue LLC ...... USA 24. Damas Jewellery DMCC ...... UAE 25. Ayodhya Jewellers LLC ...... UAE 26. Damas Europe SPA...... Italy 27. Dria srl ...... Italy 28.Rpsrl...... Italy

34.1 Damas Jewellery LLC — Dubai

The following shareholders have contributed to the share capital of the Damas Jewellery LLC — Dubai and share profits and losses in the following ratios:

Damas LLC ...... UAECompany 99.998% 49,999 shares Mr. Tawhid Abdulla ...... UAENational 0.002% 1 share

The share capital of the Damas Jewellery LLC — Dubai is AED 50,000,000/- divided into 50,000 shares of AED 1,000/- each. Mr. Tawhid Abdulla holds shares for the beneficial interest of the Company.

34.2 Mukund Jewellery LLC — Dubai

Mukund Jewellery LLC — Dubai is a limited liability company registered on July 18, 1979 — as per commercial registration certificate no. 47915 issued by the Department Of Economic Development — Dubai. The Mukund Jewellery LLC — Dubai had been acquired by the Group on August 27, 1999.

The following shareholders have contributed to the share capital of the Mukund Jewellery LLC — Dubai and share profits and losses in the following ratios:

Damas Jewellery LLC ...... UAECompany 70% 210 shares Mr. Amratlal Vallabhdas ...... Indian National 20% 60 shares Mr. Chetan Amratlal Vaya ...... Indian National 10% 30 shares

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Notes — (Continued)

The share capital of the Mukund Jewellery LLC — Dubai is AED 300,000/- divided into 300 shares of AED 1,000/- each.

34.3 Ocean Jewellery LLC — Dubai Ocean Jewellery LLC — Dubai is a limited liability company registered on August 2, 1992 — as per commercial registration certificate no. 40500 issued by the Department Of Economic Development — Dubai. The Ocean Jewellery LLC — Dubai had been acquired by the Group on July 06, 1996. The following shareholders have contributed to the share capital of the Ocean Jewellery LLC — Dubai and share profits and losses in the following ratios: Damas Jewellery LLC ...... UAECompany 65.00% 195 shares Mrs. Sagar Kalavati Jayantilal ...... Indian National 6.33% 19 shares Mr. Praveenkumar Jayantilal ...... Indian National 12.67% 38 shares Mr. Prakash Jayantilal...... Indian National 8.00% 24 shares Mr. Mayur Jayantilal...... Indian National 8.00% 24 shares The share capital of the Ocean Jewellery LLC — Dubai is AED 300,000/- divided into 300 shares of AED 1,000/- each.

34.4 Dhanak Jewellery LLC — Dubai Dhanak Jewellery LLC — Dubai is a limited liability company registered on January 1, 1964 — as per commercial registration certificate no. 47490 issued by the Department Of Economic Development — Dubai. The Dhanak Jewellery LLC — Dubai was acquired by the Group on August 7, 2001. The following shareholders have contributed to the share capital of the Dhanak Jewellery LLC — Dubai and share profits and losses in the following ratios: Damas Jewellery LLC ...... UAECompany 60% 180 shares Mr. Chandrakant Girdhar Dhanak ...... Indian National 40% 120 shares The share capital of the Dhanak Jewellery LLC — Dubai is AED 300,000/- divided into 300 shares of AED 1,000/- each.

34.5 Armaan Jewellery LLC — Dubai Armaan Jewellery LLC — Dubai is a limited liability company registered as per commercial registration certificate no. 239943 issued by the Department Of Economic Development — Dubai.

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Notes — (Continued)

The following shareholders have contributed to the share capital of the Armaan Jewellery LLC — Dubai and share profits and losses in the following ratios:

Damas Jewellery LLC ...... UAECompany 60% 180 shares Mr. Dinesh Dhanak ...... Indian National 14% 42 shares Mr. Prakash Chandra Dhanak ...... Indian National 13% 39 shares Mr. Sanjay Kumar Dhanak ...... Indian National 13% 39 shares

The share capital of the Armaan Jewellery LLC — Dubai is AED 300,000/- divided into 300 shares of AED 1,000/- each.

34.6 Al Mana Damas International LLC — Dubai

Al Mana Damas International LLC — Dubai is limited liability company established on April 21, 2002 as per the commercial registration certificate no. 59128 issued by the Department Of Economic Development, Dubai.

The following shareholders have contributed to the share capital of the Al Mana Damas International LLC — Dubai and share profits and losses in the following ratios:

Mr. Tawfique Abdulla ...... UAENational 17% 51 shares Mr. Tawhid Abdulla ...... UAENational 17% 51 shares Mr. Tamjid Abdulla ...... UAENational 17% 51 shares Mr. Hisham Saleh H. Al Mana ...... Qatari National 16.33% 49 shares Mr. Kamal Saleh H. Al Mana ...... Qatari National 16.33% 49 shares Mr. Wissam Saleh H. Al Mana ...... Qatari National 16.34% 49 shares

The share capital of the Al Mana Damas International LLC — Dubai is AED 300,000/- divided into 300 shares of AED 1,000/- each. Mr.Tawfique Abdulla, Mr. Tawhid Abdulla and Mr.Tamjid Abdulla hold shares for the beneficial interest of Damas Jewellery LLC.

34.7 Gem Universe LLC — Oman

Gem Universe LLC — Oman is a Limited Liability Company registered on March 19, 2002 as per commercial registration certificate no. 1/12279/7 issued by the Ministry of Trade & Industry — Muscat.

The following shareholders have contributed to the share capital of the Gem Universe LLC — Oman:

Damas Jewellery LLC ...... UAECompany 70% 105,000 shares Mr. Mohd. Bin Omer Abdul Rehman ...... Oman National 30% 45,000 shares

However, through a separate memorandum of understanding, the shareholders hold the share capital of Gem Universe LLC — Oman and share the profits and losses in the following ratios:

Damas Jewellery LLC ...... UAECompany 60% 90,000 shares Mr. Mohd. Bin Omer Abdul Rehman ...... Oman National 30% 45,000 shares Mr. P.N. Bhandarkar ...... Indian National 10% 15,000 shares

The share capital of the Gem Universe LLC — Oman is Omani Riyals 150,000 divided into 150,000 shares of Omani Riyals 1/- each.

Mr. Mohd. Bin Omer Abdul Rehman has represented that he holds shares for the beneficial interest of Damas Jewelley LLC.

34.8 Universe Jewellers Limited — USA

Universe Jewellers Ltd — New York — USA is a limited company incorporated in state of New York — USA as per certificate dated March 30, 1999 issued as per the Provisions of the Business Corporation Law of the State of New York.

F-98 Damas LLC and its subsidiaries

Notes — (Continued)

The following shareholders have contributed to the share capital of Universe Jewellers Ltd — New York — USA and share profits and losses in the following ratios: Mr. Tamjid Abdulla ...... UAENational 1% 2 shares Damas Jewellery LLC ...... UAECompany 99% 198 shares The share capital of the Universe Jewellers Ltd — New York — USA is divided into 200 shares with no par value. Mr. Tamjid Abdulla holds shares for the beneficial interest of Damas Jewellery LLC through a separate memorandum of understanding.

34.9 Damas Company WLL — Bahrain Damas Company WLL — Bahrain is a limited liability company incorporated in Kingdom of Bahrain as per certificate no. 40554 dated April 29, 1998 issued by Ministry of Commerce — Kingdom of Bahrain. The following shareholders have contributed to the share capital of the Damas Company WLL — Bahrain and share profits and losses in the following ratios: Mr. Mohd. Tamjid Abdulla ...... UAENational 0.10% 1 shares Damas Jewellery LLC ...... UAECompany 99.90% 999 shares The share capital of the Damas Company WLL — Bahrain is Bahraini Dinar 100,000 divided into 1,000 shares Bahraini Dinar 100/- each. Mr. Mohd. Tamjid Abdulla holds shares for beneficial interest of Damas Jewellery LLC through a separate memorandum of understanding.

34.10 Islanders Demas Pvt. Ltd. — Maldives Islanders Demas Pvt. Ltd. — Maldives is a private limited company incorporated in Republic of Maldives as per certificate no. C-36/2002 dated January 31, 2002 issued by Ministry of Trade and Industries — Republic of Maldives. The following shareholders have contributed to the share capital of Islanders Demas Pvt. Ltd. — Maldives and share profits and losses in the following ratios: Damas Jewellery LLC ...... UAECompany 75% 7,500 shares Mr. Abdul Rasheed ...... Maldivian National 12.50% 1,250 shares Mr. Hussein Waheed ...... Maldivian National 12.50% 1,250 shares The share capital of the Islanders Demas Pvt. Ltd. — Maldives is Maldivian Rufiyaa 10,000 divided into 10,000 shares of Maldivian Rufiyaa 1/- each.

34.11 Stefan Hafner SPA — Italy Stefan Hafner SPA — Italy is a private limited company incorporated in Italy as per company registration no. 222300 — Alessandria bearing VAT no. 03175200249 dated August 5, 2004 issued by Ministry of Finance — Italy. The following shareholders have contributed to the share capital of Stefan Hafner SPA — Italy and share profits and losses in the following ratios: Damas Jewellery LLC ...... UAECompany 49.0% 2,450,000 shares Demas Holding INC ...... BVICompany 43.5% 2,175,000 shares GIFCoSRL...... Italian Company 7.5% 375,000 shares The share capital of the Stefan Hafner SPA — Italy is Euro 5,000,000 divided into 5,000,000 shares of Euro 1/- each. Demas Holding Inc holds shares in Stefan Hafner SPA for the beneficial interest of Damas Jewellery LLC.

F-99 Damas LLC and its subsidiaries

Notes — (Continued)

34.12 Stefan Hafner (NY) Inc — USA Stefan Hafner (NY) Inc — USA is a private limited company incorporated in the State of New York, USA vide Registration number 041124000891 dated November 24, 2004 and amendment of the certificate of incorporation was made vide registration no. 050823000756 dated August 23, 2005. The following shareholders have contributed to the share capital of Stefan Hafner (NY) Inc — USA and share profits and losses in the following ratios: Common stock Stefan Hafner SPA ...... Italian Company 85% 85 shares Ms. Peggy Grosz ...... USNational 15% 15 shares The Common stock capital of the Stefan Hafner (NY) Inc — USA is US$50,000 divided into 100 shares of US$500 each. Preferred stock Stefan Hafner SPA...... Italian Company 100% 400 shares The Preferred stock capital of the Stefan Hafner (NY) Inc — USA is US$400,000 divided into 400 shares of US$1,000 each.

34.13 Tawhid & Muktasem Jewellery — Jordan Tawhid & Muktasem Jewellery, Jordan is registered under no. 58086 on January 7, 2001 in the Hashemite Kingdom of Jordan. The following shareholders have contributed to the share capital of the Tawhid & Muktasem Jewellery, Jordan in the following ratios, however the profit sharing ratios for each shop is governed by a separate memorandum of understanding: Mr. Tawhid Abdulla ...... UAENational 50% JD 50,000 Mr. Al Muktasem Mohammes ...... Jordanian National 50% JD 50,000 Bakheet Al Shayab The share capital of the Tawhid & Muktasem Jewellery, Jordan is JD 100,000. Mr. Tawhid Abdulla holds shares for the beneficial interest of Damas Jewellery LLC through a separate memorandum of understanding.

34.14 Damas Jewellery SAL — Lebanon Damas Jewellery SAL, Lebanon was registered on November 5, 2003 in Lebanon Mount commercial register under No. 2002149 C.R. in accordance with Articles 26, 49 and 98 of the Law of Commerce of the Ministry of Justice in the Republic of Lebanon. The following shareholders have contributed to the share capital of Damas Jewellery SAL, Lebanon and share profits and losses in the following ratios: Mr. Tawhid Abdulla ...... UAEnational 96.66% 290 shares Mr. Joseph Hana Himo ...... Lebanese national 1.67% 5 shares Mr. Bashir Hana Himo ...... Lebanese national 1.67% 5 shares The share capital of the Damas Jewellery SAL, Lebanon has been set at Lebanese Lira (LL) 30 million divided into 300 shares with a nominal value of LL 100,000 each. Mr. Tawhid Abdulla holds shares for the beneficial interest of Damas Jewellery LLC through a separate memorandum of understanding.

34.15 Damas Jewellery Company — Egypt Damas Jewellery Company, Egypt is an Egyptian Joint stock company headquartered in the city of Cairo and registered in the Cairo commercial register 1871 dated November, 14 1998. The purpose for which the Company has been established is to trade in gold, precious stones, semi-precious stones, silver, watches, gifts and exports.

F-100 Damas LLC and its subsidiaries

Notes — (Continued)

The shareholding of the entity has been revised in 2006 with the following shareholders contributing to the share capital of Damas Jewellery Company, Egypt and sharing the profits and losses in the following ratios: Damas Jewellery LLC ...... UAECompany 60% 108,000 shares Mr. Mohd Sayed Mohd Omar ...... Egyptian national 9.50% 17,100 shares Ms. Nourhan Mohd Sayed Mohd Omar ...... Egyptian national 9.50% 17,100 shares Ms. Reem Mohd Sayed Mohd Omar ...... Egyptian national 9.50% 17,100 shares Ms. Mai Mohd Sayed Mohd Omar ...... Egyptian national 9.50% 17,100 shares Mr. Maha Mahmoud Ahmed Musa ...... Egyptian national 2% 3,600 shares The authorized capital is fixed at Egyptian Pound (EP) 900,000,000. The issued capital of Damas Jewellery Company, Egypt is EP 90,000,000 divided into 180,000 shares, the value of each share is EP 500 and all of them are cash shares. The earlier shareholding of Damas Jewellery Company, Egypt was as under: Mr. Tawhid Abdulla ...... UAENational 55% 275 shares Mr. Mohd Sayed Mohd Omar ...... Egyptian national 40% 200 shares Mr. Maha Mahmoud Ahmed Musa ...... Egyptian national 5% 25 shares

34.16 Diminco Damas Diamond Manufacturing DMCC Diminco Damas Diamond Manufacturing DMCC is a company incorporated in the Emirate of Dubai as per license no. 30063 dated May 22, 2004. The following shareholders have contributed to the share capital of Diminco Damas Diamond Manufacturing DMCC and share the profits and losses in the following ratios: Digico Holding Ltd...... Hong Kong Company 47.50% 95 shares Damas Jewellery LLC ...... UAECompany 52.50% 105 shares The share capital of the Diminco Damas Diamond Manufacturing DMCC is AED 200,000 divided into 200 equity shares of AED 1,000 each par value.

34.17 Demas Jewellery Pvt. Ltd. — India Demas Jewellery Pvt. Ltd. — India is a company incorporated in the State of Karnataka in India on February 6, 2006. The following shareholders have contributed to the share capital of Demas Jewellery Pvt. Ltd. — India and share the profits and losses in the following ratios: Mr. Mukund Vaya...... Indian National 7% 5,000 shares Mr. Chetan Vaya...... Indian National 93% 66,500 shares The authorized capital is fixed at Indian Rupees (INR) 1,000,000. The issued capital of the Demas Jewellery Pvt. Ltd. — India is INR 715,000 divided into 71,500 shares, the value of each share is INR 10 and all of them are cash shares. Mr. Mukund Vaya and Mr. Chetan Vaya hold the above shares for beneficial interest of Damas Jewellery LLC through separate memorandum of understanding.

34.18 Soir Jewellery Pvt. Ltd. — India Soir Jewellery Pvt. Ltd. — India is a Company incorporated in the State of Maharashtra in India on March 28, 2006. The following shareholders have contributed to the share capital of Soir Jewellery Pvt. Ltd. — India and share the profits and losses in the following ratios: Damas LLC ...... UAECompany 99.99% 1,994,640 shares Mr. Tamjid Abdulla ...... UAENational 00.01% 100 share

F-101 Damas LLC and its subsidiaries

Notes — (Continued)

The authorized capital is fixed at INR 20,000,000. The issued capital of the Soir Jewellery Pvt. Ltd. — India is INR 19,947,400 divided into 1,994,740 shares, the value of each share is INR 10 and all of them are cash shares. Mr. Tamjid Abdulla holds the above shares for beneficial interest of Damas LLC as per a separate memorandum of understanding.

34.19 Damas Gold Fields Jewellery Pvt. Ltd. — India Damas Gold Fields Jewellery Pvt. Ltd. — India is a company incorporated in the State of Maharashtra in India on May 26, 2006. The following shareholders have contributed to the share capital of Damas Gold Fields Jewellery Pvt. Ltd. — India and share the profits and losses in the following ratios: Soir Jewellery Private Limited ...... Indian Company 99.99% 9,999 shares Mr. John Joy ...... Indian National 00.01% 1 share The authorized capital is fixed at INR 500,000. The issued capital of the Damas Gold Fields Jewellery Pvt. Ltd. — India is INR 100,000 divided into 10,000 shares, the value of each share is INR 10 and all of them are cash shares. Mr. John Joy holds the above shares for the beneficial interest of Soir Jewellery Pvt. Ltd. as per a separate memorandum of understanding.

34.20 Damas Hong Kong Limited — Hongkong Damas Hong Kong Limited — Hongkong is a company incorporated in Hong Kong as per license no. 1034325 dated March 28, 2006. Damas Jewellery LLC holds 100% of the equity of the company. The share capital of the Damas Hong Kong Limited — Hongkong is Hong Kong Dollar 1,000 divided into 100 equity shares of Hong Kong Dollar 10 each par value.

34.21 Damas (Thailand) Co. Ltd. — Thailand Damas (Thailand) Co. Ltd — Thailand is a company incorporated in Bangkok as on March 14, 2003. The following shareholders have contributed to the share capital of the Damas (Thailand) Co. Ltd — Thailand and share profits and losses in the following ratios: Nithi Takviriyanun ...... Thai National 50.95% 5,095 shares Panitta Saengchai ...... Thai National 0.01% 1 shares Pokepiboon Aon-Eiam ...... Thai National 0.01% 1 shares Preeyawan Luesuwanthad ...... Thai National 0.01% 1 shares Srisamorn Kooyingrat ...... Thai National 0.01% 1 shares Onruedee Mitcharoenthavorn ...... Thai National 0.01% 1 shares Damas Jewellery LLC ...... UAECompany 49.00% 4,900 shares The share capital of the Damas (Thailand) Co. Ltd — Thailand is Thailand Bhat 1,000,000 divided into 10,000 equity shares of Thailand Bhat 100 each par value. The above share holders are holding shares for the beneficial interest of Damas Jewellery LLC through a separate Memorandum of Understanding.

34.22 Royal Jewellers Inc. — USA Royal Jewellers Inc. — New York — USA is a limited company incorporated in State of New York — USA as per certificate dated March 30, 1999 issued as per the Provisions of the Business Corporation Law of the State of New York. The following shareholders have contributed to the share capital of Royal Jewellers Inc. — New York — USA and share profits and losses in the following ratios: Mr. Tamjid Abdulla ...... UAENational 1% 2 shares Damas Jewellery LLC ...... UAECompany 99% 198 shares

F-102 Damas LLC and its subsidiaries

Notes — (Continued)

The share capital of the Royal Jewellers Inc. — New York — USA is divided into 200 shares with no par value. Mr. Tamjid Abdulla holds shares for the beneficial interest of Damas Jewellery LLC through a separate memorandum of understanding.

34.23 7816 3rd Avenue LLC — USA 7816 3rd Avenue LLC — New York — USA is a limited liability company incorporated in State of New York — USA as per certificate dated June 9, 2005 issued as per the Provisions of the Limited Liability Company Law of the State of New York. The following shareholders have contributed to the share capital of 7816 3rd Avenue LLC — New York — USA and share profits and losses in the following ratios: Royal Jewellers Inc ...... USACompany 1% 1 units Damas Jewellery LLC ...... UAECompany 99% 99 units The share capital of the 7816 3rd Avenue LLC — New York — USA is divided into 100 units with no par value.

34.24 Damas Jewellery DMCC — Dubai Damas Jewellery DMCC — Dubai is a limited liability company registered on February 6, 2006 — as per commercial registration certificate no. 30411 issued by the Dubai Multi Commodity Centre — Dubai. The following shareholders have contributed to the share capital of Damas Jewellery DMCC — Dubai and share profits and losses in the following ratios: Damas LLC...... UAECompany 100% 36 shares The share capital of the Damas Jewellery DMCC — Dubai is AED 3,600,000/- divided into 36 shares of AED 100,000/- each.

34.25 Ayodhya Jewellers LLC — Dubai Ayodhya Jewellers LLC — Dubai is a limited liability company registered on December 28, 1994 — as per commercial registration certificate no. 105327/94 issued by the Department Of Economic Development — Dubai. The following shareholders have contributed to the share capital of Ayodhya Jewellers LLC — Dubai and share profits and losses in the following ratios: Mr. Tawhid Abdulla ...... UAENational 99% 297 shares Mr. Tawfique Abdulla ...... UAENational 1% 3 shares The share capital of the Ayodhya Jewellers LLC — Dubai is AED 300,000/- divided into 300 shares of AED 1,000/- each. Mr. Tawfique Abdulla and Mr. Tawhid Abdulla holds shares for the beneficial interest of Damas Jewellery LLC.

34.26 Damas Europe SPA — Italy Damas Europe SPA is a private limited company incorporated in Italy as per company registration no. 297727 — Vicenza, bearing VAT no. 03083320246 dated June 19, 2003 issued by Ministry of Finance — Italy. The following shareholders have contributed to the share capital of the company and share profits and losses in the following ratios: Damas LLC...... U.A.E. Company 30% 600,000 Shares Damas Jewellery LLC ...... U.A.E. Company 36% 720,000 Shares Mr. Massimo Facco ...... Italian National 22% 440,000 Shares Mr. Mauro Facco ...... Italian National 4% 80,000 Shares Ms. Monica Facco ...... Italian National 4% 80,000 Shares Mr. Marc Hebrard ...... French National 4% 80,000 Shares The share capital of the company is Euro 2,000,000 divided into 2,000,000 shares of Euro 1/- each.

F-103 Damas LLC and its subsidiaries

Notes — (Continued)

Also refer note 5(i).

34.27 Dria srl — Italy

Dria srl is a private limited company incorporated in Italy as per company registration no. 269020 — Vicenza, bearing VAT no. 02713680243 dated December 16, 1998 issued by Ministry of Finance — Italy.

The following shareholders have contributed to the share capital of the company and share profits and losses in the following ratios:

Damas Jewellery LLC ...... U.A.E. Company 70% 36,400 Shares Mr. Massimo Facco ...... Italian National 30% 15,600 Shares

The share capital of the company is Euro 52,000.

Also refer note 5(ii).

34.28 R.P. srl — Italy

R.P. srl is a private limited company incorporated in Italy as per company registration no. 227487 — Alessandria, bearing VAT no. 02112990060 dated February 15, 2006 issued by Ministry of Finance — Italy.

The following shareholders have contributed to the share capital of the company and share profits and losses in the following ratios:

Svir SPA ...... Italian Company 92.5% 9,250 shares Mrs. Ilaria Furlotti ...... Italian National 7.5% 750 shares

The share capital of the company is Euro 10,000.

Svir SPA holds shares in R.P. srl for the beneficial interest of Stefan Hafner SPA.

35 Investments in equity accounted investments

35.1 Investments in jointly controlled entities

The Group also holds investments in the following jointly controlled entities as at 31 December 2006:

Country of Ownership Name of the company incorporation Interest Premium Investments International LLC (note 1 below)...... UAE 50% Paspaley Pearl Jewellery LLC (notes 1 and 3 below) ...... UAE 51% Damas & Al Ghannam Jewellery Co. WLL (note 1 below) ...... Kuwait 50% Trading House Kristall DMCC (note 2 below)...... UAE 50% D’Damas Jewellery (India) Private Ltd. (note 1 below) ...... India 50% Al Zain Trading Co WLL (note 1 below) ...... Bahrain 50% Al Manara (notes 1 and 3 below) ...... UAE 49% Time Center LLC (note 1 below) ...... UAE 50% Damas Toomban Pvt. Ltd (notes 1, 4 and 5 below) ...... Pakistan 50% Damas Saudi Arabia Company Ltd. (notes 1 and 3 below) ...... KSA 49%

1. The shares are held in the name of Damas Jewellery LLC. 2. The shares are held in the name of Damas LLC. 3. The investment is considered to be an investment in jointly controlled entity since the Company has joint control over the financial and operating policies of these Companies. 4. Mr. Tawhid Abdulla holds shares in these entities for the beneficial interest of Damas Jewellery LLC. 5. Mr. Tamjid Abdulla holds shares in these entities for the beneficial interest of Damas Jewellery LLC.

F-104 Damas LLC and its subsidiaries

Notes — (Continued)

35.2 Investments in associates The Group also holds investments in the following associates as at 31 December 2006: Country of Ownership Name of the company incorporation Interest Damas & Chalco General Trading Co LLC (notes 1 & 4 below) ...... UAE 51% Damas Mucevherat (notes 1, 2, 3 & 4 below) ...... Turkey 51% Carati Jewellery SAL (note 1 below) ...... Lebanon 49% Style Avenue Middle East FZ Company ...... UAE 33.50% Daiso (Japan) Value Stores LLC (note 4 below) ...... UAE 51% LTC International General Trading Co. (note 1 below) ...... Kuwait 35% LTC International Qatar LLC (notes 1 & 4 below) ...... Qatar 50% Daiso Trading (note 2 below) ...... Bahrain 35% DPG Diamonds DMCC (note 1 below) ...... UAE 33.33% Al Mana Jewellery Co. — Damas WLL ...... Qatar 49% Al Baraka Jewellery WLL ...... Bahrain 33.33% Himo LLC (notes 1 & 4 below) ...... Lebanon 50% Lucci 2 SARL (notes 1 & 4 below) ...... Lebanon 50% The Jewellery Stores DMCC (note 1 below) ...... UAE 27% Metamorph Real Estate WLL (note 1 below) ...... Kuwait 30% Premium Investments Kuwait (company under formation) ...... Kuwait 40% Metamorph Real Estate WLL and Premium Investments are new investments made during the current year.

1. Mr. Tawhid Abdulla holds shares in these entities for the beneficial interest of Damas Jewellery LLC. 2. Mr. Tamjid Abdulla holds shares in these entities for the beneficial interest of Damas Jewellery LLC. 3. Mr. Tawfique Abdulla holds shares in these entities for the beneficial interest of Damas Jewellery LLC. 4. The investment is considered to be an investment in associate since the Company does not have control over the financial and operating policies of these Companies.

F-105 Damas LLC and its subsidiaries P. O. Box 1522, Dubai — United Arab Emirates

Consolidated Financial Statements

For the year ended 31 December 2005

F-106 Damas LLC Group of Companies

Contents Page Report of the Auditors ...... F-108 Consolidated Balance Sheet ...... F-109 Consolidated Income Statement ...... F-110 Consolidated Cash Flow Statement ...... F-111 Consolidated Statement of Changes in Equity ...... F-112 Schedules & Notes to Accounts ...... F-113

F-107 Damas LLC Group of Companies

P O Box 3800 Telephone +971 (4) 4030 300 Level 32Fax+971 (4) 3301 515 Emirates Towers Website www.ee-kpmg.com Sheikh Zayed Road Dubai United Arab Emirates The Shareholders Damas LLC

Report of the Auditors We have audited the accompanying consolidated balance sheet of Damas LLC (“the Company”) and its subsidiaries as set out in note 3 (collectively referred to as “the Group”) as of 31 December 2005 and the related consolidated statements of income, cash flows and changes in equity for the year then ended.

Respective responsibilities of the Group’s Management and Auditors These consolidated financial statements are the responsibility of the Group’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

Basis of opinion We conducted our audit in accordance with International Standards on Auditing. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material mis-statement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Group as of 31 December 2005 and the results of its operations and its cash flows for the year then ended in accordance with International Financial Reporting Standards and comply where appropriate, with the Articles of Association and the UAE Federal Law No. 8 of 1984 (as amended).

Other matters As required by the UAE Federal Law No. 8 of 1984 (as amended), we further confirm that we have obtained all information and explanations necessary for our audit, that proper financial records have been kept by the Group, a physical count of the inventories was carried out by the management in accordance with established principles and the content of the Directors’ report which relates to these consolidated financial statements is in agreement with the Group’s financial records. We are not aware of any violation of the above-mentioned Law and the Articles of Association having occurred during the year ended 31 December 2005, which may have had a material adverse effect on the business of the Group or its financial position.

/s/ KPMG

F-108 Damas LLC Group of Companies

Consolidated Balance Sheet As at 31 December 2005

Note 2005 2004 AED 000 AED 000 Non current assets Property, plant and equipment ...... 5 109,579 52,367 Intangible assets ...... 6 21,470 16,333 Goodwill ...... 7 548,626 542,494 Investments ...... 8 92,693 66,206 Long term loan to related parties...... 13 68,277 19,542 Current assets Inventories ...... 9 983,040 843,827 Trade receivables ...... 10 213,827 213,442 Prepayments and other receivables ...... 11 152,968 59,158 Margin to trade payables against unfixed gold ...... 18,403 25,955 Margin with banks ...... 178,300 141,695 Cash and bank balances ...... 12 400,264 35,623 Due from related parties ...... 13 48,564 40,360 Shareholders’ current accounts ...... 16 21,143 58,727 2,016,509 1,418,787 Current liabilities Bank borrowings ...... 14a 299,306 251,352 Trade payables and other liabilities ...... 15 468,102 439,836 Margin from trade receivables against unfixed gold ...... 190,882 123,739 Due to related parties ...... 13 31,258 1,412 989,548 816,339 Net current assets ...... 1,026,961 602,448 Non-current liabilities Bank borrowings ...... 14b (140,828) (230,413) Long term loan from shareholders ...... 19 (150,000) (150,000) Net assets ...... 1,576,778 918,977 Represented by: Share capital...... 17 1,421,000 900,000 Statutory reserve...... 18 28,735 14,343 Currency Translation Reserve ...... (2,540) — Retained earnings ...... 118,371 1,634 1,565,566 915,977 Minority interest ...... 26 11,212 3,000 1,576,778 918,977

The notes on pages 20 to 48 form part of these consolidated financial statements.

We approve these consolidated financial statements and confirm that we are responsible for them, including selecting the accounting policies and making the judgements underlying them. We confirm also that we have made available all the relevant accounting records and information for their compilation. These consolidated financial statements were approved on 15 March 2006.

The report of the Auditors is set out on page 14.

For and on behalf of the Board of Directors

/s/ Mr. Tawhid Abdulla Managing Director

F-109 Damas LLC Group of Companies

Consolidated Income Statement For the year ended 31 December 2005 Notes 2005 2004 AED 000 AED 000 Sales ...... 2,699,508 2,207,235 Cost of sales ...... (2,300,625) (1,931,282) Gross Margin ...... 398,883 275,953 General administration, selling and distribution expenses ...... 20 (263,187) (170,226) Finance cost ...... 22 (37,857) (28,347) 97,839 77,380 Other income ...... 21 36,335 15,753 Net profit before minority interest ...... 134,174 93,133 Minority interest ...... 26 (1,411) (1,286) Net Profit for the year ...... 132,763 91,847

Notes on pages 20 to 48 form a part of these Consolidated Financial Statements. The Report of the Auditors is set out on page 14.

F-110 Damas LLC Group of Companies

Consolidated Statement of Cash Flows For the year ended 31 December 2005 2005 2004 AED 000 AED 000 I. Cash flow from operating activities Net profit for the year before minority interest ...... 134,174 93,133 Adjustments: Depreciation ...... 15,733 11,098 Intangible assets amortized...... 2,899 2,188 Provision for doubtful debts ...... 3,559 900 Provision for inventories ...... 5,203 4,539 Interest income ...... (11,799) (2,469) Interest expense ...... 37,857 28,347 Profit on disposal of property, plant & equipment ...... (80) (117) Income from investments in associates and Jointly controlled entities ...... (14,668) (7,839) Operating profit before working capital changes...... 172,878 129,780 Increase in inventories ...... (144,416) (266,567) Increase in trade receivables...... (3,944) (50,619) Increase in prepayments and other receivables ...... (93,810) (734) Increase in margin with banks against unfixed gold...... (36,605) (4,809) Decrease in margin to trade payables against unfixed gold ...... 7,552 102,142 (Increase)/ decrease in due from related parties...... (8,204) (69,130) Increase in due to related parties ...... 29,846 1,412 Increase in trade payables ...... 28,266 116,880 Increase/(Decrease) in margin from trade receivables against unfixed gold ...... 67,143 (2,944) Cash flow from operations...... 18,706 (44,589) Interest expense ...... (37,857) (28,347) Net cash flows from operating activities ...... (19,151) (72,936) II. Cash flow from investing activities Acquisition of property, plant & equipment ...... (73,024) (35,502) Payment towards intangible assets ...... (8,036) (384) Payment towards goodwill ...... (6,132) (10,000) Proceeds from sale of property, plant & equipment ...... 159 324 Investments made ...... (26,487) (25,090) Fixed deposits liquidated/(placed) ...... 1,226 (3,935) Interest received ...... 11,799 2,469 Income from investments in associates and Jointly controlled entities ...... 14,668 7,839 Net cash flow from investing activities...... (85,827) (64,279) III. Cash flow from financing activities Increase in current bank borrowings ...... 21,945 26,732 (Decrease)/Increase in non current bank borrowings ...... (89,585) 155,536 Net movement in share holders current accounts’ ...... 37,584 (9,391) Share capital introduced ...... 521,000 — Dividend paid ...... (1,634) — Net movement in minority interest ...... 6,801 (15,187) Net movement in long term loan to related parties ...... (48,735) (19,542) Net cash flows from financing activities...... 447,376 138,148 Net increase in cash and cash equivalents ...... 342,398 933 Effect of exchange rate fluctuations ...... (2,540) — Cash and cash equivalents at the beginning of the year ...... (77,683) (78,616) Cash and cash equivalents at the end of the year (note 23)* ...... 262,175 (77,683)

* Includes fixed deposits under lien amounting to AED 259.56 million (2004: AED 23.16 million). Notes on pages 20 to 48 form a part of these Consolidated Financial Statements. The Report of the Auditors is set out on page 14.

F-111 Damas LLC Group of Companies

Consolidated Statement of Changes In Equity For the year ended 31 December 2005 Currency Share Statutory Translation Retained Capital Reserve Reserve Earnings Total AED 000 AED 000 AED 000 AED 000 AED 000 Balance as at 1 January 2004 ...... 900,000 4,130 — 12,060 916,190 Dividend distributions 2003 ...... — — — (12,060) (12,060) Net profit for the year ...... — — — 91,847 91,847 Transfer to statutory reserve ...... — 10,213 — (10,213) — Dividend for the year 2004 ...... — — — (80,000) (80,000) Balance as at 31 December 2004 ...... 900,000 14,343 — 1,634 915,977 Net profit for the year ...... — — — 132,763 132,763 Transfer to statutory reserve ...... — 14,392 — (14,392) — Share capital introduced...... 521,000 — — — 521,000 Currency translation reserve ...... — — (2,540) — (2,540) Dividend for the year 2004 ...... — — — (1,634) (1,634) Balance as at 31 December 2005 ...... 1,421,000 28,735 (2,540) 118,371 1,565,566

Notes on pages 20 to 48 form a part of these Consolidated Financial Statements. The Report of the Auditors is set out on page 14.

F-112 Damas LLC Group of Companies

Notes

(Forming part of the consolidated financial statements)

1. Legal status

Damas LLC is a limited liability company (“the Company”) formerly known as “Al Abdulla Jewellery Traders LLC” established on April 14, 1994 as per commercial registration certificate no. 41717 issued by the Department of Economic Development — Dubai. These consolidated financial statements comprise the financial position and results of operations and cash flows of the Company, its subsidiaries and its fellow subsidiaries (collectively referred to as “the Group”) and the Group’s interest in associates and jointly controlled entities.

The following shareholders are contributing to the capital and sharing profit and losses in the given ratios as at the year end:

Mr. Mohd. Tawfique Abdulla ...... U.A.E. National 20.013% 284,383 Shares Mr. Tawhid Abdulla ...... U.A.E. National 20.013% 284,383 Shares Mr. Mohd. Tamjid Abdulla ...... U.A.E. National 20.013% 284,383 Shares Amwal Al Khaleej Commercial Investment Company...... KSACompany 23.126% 328,602 Shares Shuaa Capital PSC ...... UAECompany 9.510% 135,138 Shares Al Fahim Group of Companies ...... UAECompany 4.884% 69,408 Shares Abdulla Nasser Hawaileel Al Mansouri ...... UAENational 2.441% 34,703 Shares

2. Business activities

Damas LLC and its subsidiaries collectively referred to as “the Group” carries on the business of trading in gold and gold jewellery, diamond jewellery, pearls, watches, silver and precious stones on wholesale and retail basis. The Group has operations in 9 countries and employs 1,506 people (2004: 1,190) through 164 retail locations, 9 workshops, 3 wholesale divisions and 1 manufacturing division.

3. Basis of preparation

These Consolidated Financial statements have been presented in UAE Dirhams (“AED”), rounded to the nearest thousand. Further, these consolidated financial statements have been prepared under the historical cost convention except for investments available for sale which are stated at their fair values.

The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized 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.

Judgments made by the management in the application of IFRS that have significant effect on the financial statements and estimates with a significant risk of material adjustment in the next year are discussed in note 27.

3.1. Entities included in the Consolidated Financial Statements

The Consolidated Financial Statements comprise of the financial position and the results of operations and cash flows of the Company, its subsidiaries and its fellow subsidiaries (collectively referred to as “the Group”) and the Group’s investment in jointly controlled entities and associates, along with other legal entities where the share of company is held on beneficial interest and has been consolidated on a line-by-line basis.

F-113 Damas LLC Group of Companies

Notes — (Continued) These Consolidated Financial Statements represent a line-by-line consolidation of the audited financial statements of the company, its subsidiaries and its fellow subsidiaries, as set out below.

Name of the Company Country of Incorporation 1. Damas Jewellery L.L.C...... -U.A.E., Dubai 2. Mukund Jewellery L.L.C...... -U.A.E., Dubai 3. Ocean Jewellery L.L.C...... -U.A.E., Dubai 4. Dhanak Jewellery L.L.C...... -U.A.E., Dubai 5. Armaan Jewellery L.L.C ...... -U.A.E., Dubai 6. Al Mana Damas International WLL...... -U.A.E., Dubai 7. Gem Universe L.L.C...... -Oman 8. Universe Jewellers ...... -NewYork, USA 9. Damas Company W.L.L...... -Kingdom of Bahrain 10. Islanders Demas Pvt. Ltd...... -Maldives 11. Stefan Hafner SPA ...... -Italy 12. Stefan Hafner (NY) Inc ...... -NewYork, USA 13. Tawhid & Muktasem Jewellery ...... -Jordan 14. Damas Jewellery S.A.L ...... -Lebanon 15. Damas Jewellery Company ...... -Egypt 16. Diminco Damas Diamond Manufacturing DMCC ...... -U.A.E, Dubai

3.1.1. Damas Jewellery L.L.C. — Dubai

Damas Jewellery L.L.C. — Dubai is limited liability company established on December 20, 1993 as per the commercial registration certificate no. 41342 issued by the Department Of Economic Development, Dubai.

The following shareholders have contributed to the share capital of the company and share of profits and losses in the following ratios:

Damas LLC ...... U.A.E. Company 99.998% 49,999 Shares Mr. Tawhid Abdulla ...... U.A.E. National 0.002% 1 Shares

The share capital of the company is AED 50,000,000/- divided into 50,000 shares of AED 1,000/- each. Mr. Tawhid Abdulla holds shares for the beneficial interest of the Company.

3.1.2. Mukund Jewellery L.L.C. — Dubai

Mukund Jewellery L.L.C. — Dubai is a limited liability company registered on July 18, 1979 — as per commercial registration certificate no. 47915 issued by the Department Of Economic Development — Dubai. The company had been acquired by the Group on 27.08.1999.

The following shareholders have contributed to the share capital of the company and share of profits and losses in the following ratios:

Damas Jewellery LLC ...... U.A.E. Company 70% 210 Shares Mr. Amratlal Vallabhdas...... Indian National 20% 60 Shares Mr. Chetan Amratlal Vaya ...... Indian National 10% 30 Shares

The share capital of the company is AED 300,000/- divided into 300 shares of AED 1,000/- each.

3.1.3. Ocean Jewellery L.L.C. — Dubai

Ocean Jewellery L.L.C. — Dubai is a limited liability company registered on August 2, 1992 — as per commercial registration certificate no. 40500 issued by the Department Of Economic Development — Dubai. The company had been acquired by the Group on 06.07.1996.

F-114 Damas LLC Group of Companies

Notes — (Continued) The following shareholders have contributed to the share capital of the company and share of profits and losses in the following ratios: Damas Jewellery LLC ...... U.A.E. Company 65.000% 195 Shares Mrs. Sagar Kalavati Jayantilal ...... Indian National 6.335% 19 Shares Mr. Praveenkumar Jayantilal ...... Indian National 12.665% 38 Shares Mr. Prakash Jayantilal ...... Indian National 8.000% 24 Shares Mr. Mayur Jayantilal ...... Indian National 8.000% 24 Shares The share capital of the company is AED 300,000/- divided into 300 shares of AED 1,000/- each.

3.1.4. Dhanak Jewellery L.L.C. — Dubai Dhanak Jewellery L.L.C. is a limited liability company registered on January 1, 1964 — as per commercial registration certificate no. 47490 issued by the Department Of Economic Development — Dubai. The company had been acquired by the Group on 07.08.2001. The following shareholders have contributed to the share capital of the company and share of profits and losses in the following ratios: Damas Jewellery LLC ...... U.A.E. Company 60% 180 Shares Mr. Chandrakant Girdhar Dhanak ...... Indian National 40% 120 Shares The share capital of the company is AED 300,000/- divided into 300 shares of AED 1,000/- each.

Dhanak Gold Smith — Dubai Dhanak Gold Smith — Dubai is registered as a Service Agent from July 21, 1997 — as per commercial registration certificate no. 500072 issued by the Department of Economic Development — Dubai having following shareholders. Mr. Tawhid Mohd Taher Abdulla ...... U.A.E. National Mr. Chandrakant Girdhar Dhanak ...... Indian National Mr. Paresh C. Dhanak...... Indian National As per a separate Memorandum of Understanding between Mr. Tawhid Mohd Taher Abdulla, Mr. Chandrakant Girdhar Dhanak, Mr. Paresh C. Dhanak that with effect from January 1, 2003 the operating results and the share capital will be shared in the following ratio: Mr. Tawhid Mohd Taher Abdulla...... 60% Jointly with: ...... 40% Mr. Chandrakant Girdhar Dhanak Mr. Paresh C. Dhanak Mr. Tawhid Abdulla holds 60% of the shares as a beneficial holder of Damas Jewellery LLC through a separate memorandum of understanding.

3.1.5 Armaan Jewellery LLC — Dubai Armaan Jewellery L.L.C. is a limited liability company registered as per commercial registration certificate no. 239943 issued by the Department Of Economic Development — Dubai. The following shareholders have contributed to the share capital of the company and share of profits and losses in the following ratios: Mr. Tawhid Abdulla...... U.A.E. National 51% 153 Shares Mr. Dinesh Dhanak ...... Indian national 49% 147 Shares The share capital of the company is AED 300,000/- divided into 300 shares of AED 1,000/- each. However, through a separate memorandum of understanding Mr. Tawhid Abdulla holds 60% of the shares as a beneficial holder of Damas Jewellery LLC.

F-115 Damas LLC Group of Companies

Notes — (Continued) 3.1.6. Al Mana Damas International, WLL — Dubai Al Mana Damas International LLC — Dubai is limited liability company established on April 21, 2002 as per the commercial registration certificate no. 59128 issued by the Department Of Economic Development, Dubai. The following shareholders have contributed to the share capital of the company and share of profits and losses in the following ratios: Mr. Mohd. Tawfique Abdulla...... U.A.E. National 17% 51 Shares Mr. Tawhid Abdulla ...... U.A.E. National 17% 51 Shares Mr. Mohd. Tamjid Abdulla ...... U.A.E. National 17% 51 Shares Mr. Hisham Saleh H. Al Mana ...... Qatar National 16.333% 49 Shares Mr. Kamal Saleh H. Al Mana ...... Qatar National 16.333% 49 Shares Mr. Wissam Saleh H. Al Mana ...... Qatar National 16.333% 49 Shares The share capital of the company is AED 300,000/- divided into 300 shares of AED 1,000/- each. Mr. Mohd. Tawfique Abdulla, Mr. Tawhid Abdulla and Mr. Mohd. Tamjid Abdulla hold shares for the beneficial interest of Damas Jewellery LLC.

3.1.7. Gem Universe L.L.C. — Oman Gem Universe LLC — Al Damas is a Limited Liability Company registered on March 27, 2002 as per commercial registration certificate no. 1/12279/7 issued by the Ministry of Trade & Industry — Muscat. The following shareholders have contributed to the share capital of the company: Mr. Tawhid Abdulla ...... U.A.E. National 70% 105,000 Shares Mr. Mohd. Bin Omer Abdul Rehman ...... Oman National 30% 45,000 Shares However, through a separate memorandum of understanding the shareholders hold the share capital of the company and share the profits and losses in the following ratios: Mr. Tawhid Abdulla ...... U.A.E. National 60% 90,000 Shares Mr. Mohd. Bin Omer Abdul Rehman ...... Oman National 30% 45,000 Shares Mr. P.N. Bhandarkar ...... Indian National 10% 15,000 Shares The share capital of the company is Omani Riyals 150,000 divided into 150,000 shares of Omani Riyals 1/- each. Mr. Tawhid Abdulla holds shares as a beneficial holder of Damas Jewellery LLC through a separate memorandum of understanding. Also Mr. Mohd. Bin Omer Abdul Rehman has represented that he holds shares for the beneficial interest of Mr. Tawhid Abdulla, who in turn holds the shares for the beneficial interest of Damas Jewellery LLC.

3.1.8. Universe Jewellers — New York — USA Universe Jewellers Ltd — New York — USA is a limited company incorporated in state of New York — USA as per certificate dated March 30, 1999 issued as per the Provisions of the Business Corporation Law of the State of New York. The following shareholders have contributed to the share capital of the company and share of profits and losses in the following ratios: Mr. Tawhid Abdulla ...... U.A.E. National 50% 100 Shares Damas Jewellery L.L.C...... U.A.E. Company 50% 100 Shares The share capital of the company is divided into 200 shares with no par value. Mr. Tawhid Abdulla holds shares as a beneficial holder of Damas Jewellery LLC through a separate memorandum of understanding.

3.1.9. Damas Company W.L.L. — Bahrain Damas Company W.L.L. — Bahrain is a limited liability company incorporated in State of Bahrain as per certificate no. 40554 dated April 29, 1998 issued by Ministry of Commerce — State of Bahrain.

F-116 Damas LLC Group of Companies

Notes — (Continued) The following shareholders have contributed to the share capital of the company and share of profits and losses in the following ratios: Mr. Mohd. Tamjid Abdulla...... U.A.E. National 51% 510 Shares Damas Jewellery L.L.C...... UAECompany 49% 490 Shares The share capital of the company is Bahraini Dinar 100,000 divided into 1,000 shares of Bahraini Dinar 100/- each. Mr. Mohd. Tamjid Abdulla holds shares as a beneficial holder of Damas Jewellery LLC through a separate memorandum of understanding.

3.1.10. Islanders Demas Pvt. Ltd. — Maldives Islanders Demas Pvt. Ltd. is a private limited company incorporated in Republic of Maldives as per certificate no. C-36/2002 dated January 31, 2002 issued by Ministry of Trade and Industries — Republic of Maldives. The following shareholders have contributed to the share capital of the company and share of profits and losses in the following ratios: Mr. Tawhid Abdulla...... U.A.E. National 75.00% 7,500 Shares Mr. Abdul Rasheed ...... Maldivian National 12.50% 1,250 Shares Mr. Hussein Waheed ...... Maldivian National 12.50% 1,250 Shares The share capital of the company is Maldivian Rufiyaa 10,000 divided into 10,000 shares of Maldivian Rufiyaa 1/- each. Mr. Tawhid Abdulla holds shares as a beneficial holder of Damas Jewellery LLC through a separate memorandum of understanding.

3.1.11. Stefan Hafner SPA — Italy Stefan Hafner SPA is a private limited company incorporated in Italy as per company registration no. 222300 — Alessandria bearing VAT no. 03175200249 by dated August 5, 2004 issued by Ministry of Finance — Italy. The following shareholders have contributed to the share capital of the company and share of profits and losses in the following ratios: Damas Jewellery LLC ...... U.A.E. Company 49% 2,450,000 Shares Demas Holding INC...... BVICompany 43.5% 2,175,000 Shares GIFCoSRL...... Italian Company 7.5% 375,000 Shares The share capital of the company is Euro 5,000,000 divided into 5,000,000 shares of Euro 1/- each. Demas Holding Inc holds shares in Stefan Hafner SPA for the beneficial interest of Damas Jewellery LLC.

3.1.12 Stefan Hafner (NY) Inc — USA Stefan Hafner (NY) Inc is a private limited company incorporated company in the State of New York, USA vide Registration number 041124000891 dated 24th November 2004. The following shareholders have contributed to the share capital of the company and share of profits and losses in the following ratios: Common stock Stefan Hafner SPA ...... Italian Company 85% 85 Shares Ms. Peggy Grosz ...... USNational 15% 15 Shares The Common stock capital of the company is US$ 50,000 divided into 100 shares of US$ 500 each. Preferred stock Stefan Hafner SPA ...... Italian Company 100% 400 Shares The Preferred stock capital of the company is US$ 400,000 divided into 400 shares of US$ 1,000 each.

F-117 Damas LLC Group of Companies

Notes — (Continued) 3.1.13. Tawheed & Muktasem Jewellery, Jordan Tawheed & Mutasem Jewellery is registered under no. 58086 on 7/1/2001 in the Hashemite Kingdom of Jordan. The following shareholders have contributed to the share capital of the company in the following ratios, however the profit sharing ratios for each shop is governed by a separate memorandum of understanding: Mr. Tawhid Abdulla ...... U.A.E. National 50% JD 50,000 Mr. Al Mutasem Mohammes ...... Jordanian National 50% JD 50,000 Bakheet Al Shayab The share capital of the company is JD 100,000. Mr. Tawhid Abdulla holds shares as a beneficial holder of Damas Jewellery L.L.C. through a separate memorandum of understanding.

3.1.14. Damas Jewellery S.A.L, Lebanon Damas Jewellery S.A.L, Lebanon was registered on 5th, November 2003 in Lebanon Mount commercial register under No. 2002149 C.R. in accordance with Articles 26, 49 and 98 of the Law of Commerce of the Ministry of Justice in the Republic of Lebanon. The following shareholders have contributed to the share capital of the company and share of profits and losses in the following ratios: Mr. Tawhid Abdulla ...... UAEnational 95% 285 Shares Mr. Alber Khalil Yousef Faris...... Lebanese national 3.33% 10 Shares Mr. Jomana Khalil Faris ...... Lebanese national 1.67% 5 Shares The share capital of the Company has been set at Lebanese Lira (LL) 30 million divided into 300 shares with a nominal value of LL 100,000 each. Mr. Tawhid Abdulla holds shares as a beneficial holder of Damas Jewellery L.L.C. through a separate memorandum of understanding.

3.1.15. Damas Jewellery Company, Egypt Damas Jewellery Company is an Egyptian Joint stock company headquartered in the city of Cairo and registered in the Cairo commercial register 1871 dated 14th, November, 1998. The purpose for which the company has been established is to trade in gold, precious stones, semi — precious stones, silver, watches, gifts and exports. The following shareholders have contributed to the share capital of the company and share in the profits and losses in the following ratios: Mr. Tawhid Abdulla...... UAENational 55% 275 Shares Mr. Mohd Sayed Mohd Omar ...... Egyptian national 40% 200 Shares Mr. Maha Mahmoud Ahmed Musa...... Egyptian national 5% 25 Shares The authorized capital is fixed at EP 2,500,000. The company’s issued capital is EP 250,000 divided into 500 shares, the value of each share is EP 500 and all of them are cash shares. Mr. Tawhid Abdulla holds shares as a beneficial holder of Damas Jewellery L.L.C. through a separate memorandum of understanding.

Diminco Damas Diamond Manufacturing DMCC Diminco Damas Diamond Manufacturing DMCC is a company incorporated in the Emirates of Dubai as per license no. 30063 dated May 22, 2004. The following shareholders have contributed to the share capital of the company and share in the profits and losses in the following ratios: Digico Holding Ltd ...... HongKong Company 47.50% 95 Shares Damas Jewellery L.L.C...... UAECompany 52.50% 105 Shares The share capital of the company is AED 200,000 divided into 200 equity shares of AED 1,000 each par value.

F-118 Damas LLC Group of Companies

Notes — (Continued) 3.2. Investments in jointly controlled entities

The group also holds investments in jointly controlled entities as set out below:

Name of the company Country of incorporation Ownership Interest Premium Investments International LLC (Note 1 below) ...... UAE 50% Paspaley Pearl Jewellery (Note 1& 3 below) ...... UAE 50% Damas & Al Ghannam Jewellery Co. WLL (Note 1 below) ...... Kuwait 50% Trading House Kristall DMCC (Note 2 below)...... UAE 50% D’Damas Jewellery (India) Private Ltd. (Note 1 below) ...... India 50%

Paspaley Pearl Jewellery and Trading House Kristall are new investments made during the current year.

1. The shares are held in the name of Damas Jewellery LLC.

2. The shares are held in the name of Damas LLC.

3. The company is in the process of completing its legal formalities for incorporation. However, the operations of the Company are being carried out in the personal name of Mr Tawhid Abdulla.

3.3. Investments in Associates

The group also holds investments in Associates as set out below:

Name of the Company Country of Incorporation Ownership Interest Damas & Chalco General Trading Co LLC (Note 1 & 4 below). . . UAE 51% Damas Europe SPA ...... Italy 30% Damas Mucevherat (Note 1, 2, 3, 4 & 5 below)...... Turkey 51% Carati Jewellery S.A.L (Note 1 below) ...... Lebanon 49% Style Avenue Middle East FZ Company ...... UAE 33.5% Daiso (Japan) Value Stores LLC (Note 4 below) ...... UAE 51% LTC International General Trading Co. (note 1 below)...... Kuwait 35% LTC International Qatar LLC (Note 1 & 4 below) ...... Qatar 50% Daiso Trading (Note 2 below) ...... Bahrain 35% Rivoli Enterprises LLC ...... UAE 30% Al Khaleej Watch Company ...... UAE 30% DPG Diamonds DMCC (Note 1 below)...... UAE 33.33% Al Mana Jewellery Co. — Damas WLL ...... Qatar 49% Al Baraka Jewellery (Note 1 below) ...... Bahrain 33.33% Himo Jewellery (Note 1 & 4 below) ...... UAE 50% Lucci Jewellery (Note 1 & 4 below) ...... UAE 50% The Jewellery stores DMCC (Note 1 below) ...... UAE 27%

Daiso Trading, Damas Mucevherat, DPG Diamonds DMCC, Himo Jewellery, Lucci Jewellery and The Jewellery stores DMCC are new investments made during current year

1. Mr. Tawhid Abdulla holds shares in these entities for the beneficial interest of Damas jewellery LLC.

2. Mr. Tamjid Abdulla holds shares in these entities for the beneficial interest of Damas Jewellery LLC.

3. Mr. Tawfique Abdulla holds shares in these entities for the beneficial interest of Damas Jewellery LLC.

4. The investment is considered to be an investment in associate since the company does not have control over the financial and operating policies of these companies.

5. The company is in the process of completing its legal formalities for incorporation. However, the operations of the Company are being carried out in the name of the erstwhile company “IPEK Dekorasayan A.S.”.

F-119 Damas LLC Group of Companies

Notes — (Continued) 3.4. Investments held to maturity: Investments held to maturity represents investments in secured Target Growth Fund and these investments are placed with high credit rating banks. These investments are held lien with banks against Bank borrowings (refer note 14).

4. Significant Accounting policies 4.1 Statement of compliance These Consolidated Financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and interpretations adopted by the International Accounting Standards Board and the requirements of the UAE Federal Law No. 8 of 1984 (as amended) The following accounting policies, which comply with IFRS, have been applied consistently in dealing with items which are considered material in relation to the Group’s Consolidated Financial Statements

4.2 Property, plant and equipment Items of property, plant and equipment are stated at cost less accumulated depreciation and impairment losses, if any (refer accounting policy on impairment). Depreciation on property, plant and equipment is charged to the income statement on a straight — line basis over the estimated useful life of each part of an item of property, plant & equipment. Land is not depreciated. The estimated useful lives are as follows: Life (years) Building ...... 20 Vehicle ...... 4 Furniture and fixture ...... 4 Office equipment ...... 3&4 Machinery and accessories ...... 4 The depreciation method and useful lives, as well as residual values, are reassessed annually.

4.3 Intangible assets This represents the amount paid as premium to obtain key locations. Such amounts are initially recognized at cost and in subsequent years these are stated at cost less accumulated amortisation and impairment losses. Amortization is charged to the income statement on a straight-line basis over the estimated useful life of intangible assets. Amortisation of these intangible assets is carried out over a period of 10 years from the date of initial recognition.

4.4 Goodwill Goodwill represents the difference between the cost of an acquisition and the fair value of the Group’s share of net assets of the subsidiary acquired. In the previous year, the Group had adopted IFRS 3 under the early adoption clause and goodwill was stated at initial cost and is being tested for impairment at each balance sheet date.

4.5 Investments 4.5.1. Investments in subsidiaries Subsidiaries are those enterprises which are controlled by the Company. Control exists when the Company owns, directly or indirectly, more than 50% of the equity capital and has the power, directly or indirectly, to govern the financial and operating policies of an enterprise so as to obtain benefits from its activities. The results of operations and total assets and liabilities of subsidiary companies are included in the consolidated financial statements on a line-by-line basis and the interest of minority shareholders, if any, in the results and net assets of subsidiaries is stated separately. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Details of the Group’s subsidiaries are shown in note 3.1

F-120 Damas LLC Group of Companies

Notes — (Continued) 4.5.2. Investments in associate companies Associates are those enterprises in which the Group has significant influence, but not control, over the financial and operating policies. These consolidated financial statements include the Group’s share of the total recognised gains and losses of associates on equity method of accounting, from the date that significant influence commences until the date that significant influence ceases. When the Group’s shares of losses exceeds the carrying amount of the associates, the carrying amount is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive obligations or made payments in respect of the associate. Details of the Group’s associated companies are shown in note no. 3.3

4.5.3. Investments in jointly controlled entities Jointly controlled entities are those enterprises over whose activities the Group has joint control and ownership, established by contractual agreement. These consolidated financial statements include the Group’s proportionate share of the total recognized gains and losses of jointly controlled entities on equity method of accounting, from the date that joint control commences until the date that joint control ceases. Details of the Group’s jointly controlled entities are shown in note 3.2

4.5.4. Trading investments and available-for-sale Financial instruments are measured initially at cost, including transaction costs. Subsequent to their initial recognition all available-for-sale assets are measured at fair value. The fair value of financial instruments is based on their quoted market price at the balance sheet date, except that any instrument that does not have a quoted market price in an active market and whose fair value can not be measured reliably is stated at cost less provision against permanent impairment. The revised IFRS 39 — “Financial instruments: Recognition and Measurement, applicable from 1 January 2005, has introduced a new classification ’fair value through profit and loss’ under which financial assets can be classified and carried at fair value with changes in fair value being recognised in the income statement. The new classification includes financial assets held for trading and those designated at fair value on initial recognition. The adoption of this revised IFRS has no impact on the retained earnings as at 31 December 2005.

4.5.5. Transactions eliminated on consolidation Material intra-group balances and transactions, and any unrealized gains arising from intra-group transactions are eliminated in preparing these consolidated financial statements. Unrealized gains arising from transactions with associates and jointly controlled entities are eliminated wherever practicable, to the extent of the Group’s interest in the enterprise. Unrealized gains arising from transactions with associates are eliminated against the investment in the associate. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment.

4.6 Inventories 4.6.1 Inventories are stated at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of the business, less the estimated costs of completion and selling expenses. 4.6.2 The cost of gold is determined on the basis of 12 months average purchase price. 4.6.3 The cost of making charges on physical inventory of gold jewellery is determined at average cost. 4.6.4 The cost of diamond jewellery, pearl jewellery and watches is determined based on specific identification method.

4.7 Trade and other receivables Trade and other receivables are stated at amortised cost less impairment losses, if any.

F-121 Damas LLC Group of Companies

Notes — (Continued) 4.8 Staff terminal benefits The provision for staff terminal benefits included under payables and accruals is based on the liability that would arise if the employment of all the staff were terminated at the balance sheet date. The provision has been calculated in accordance with the provisions of the UAE Federal Labour Law. Employees of subsidiaries operating in the other countries are provided with benefits as per their relevant labour laws.

4.9 Foreign currencies 4.9.1 Foreign currency transactions Transactions denominated in foreign currencies are translated to AED at the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated to AED at the exchange rates ruling at the balance sheet date. Non-monetary assets and liabilities denominated in foreign currencies, which are stated at historical cost, are translated to AED at the exchange rates ruling on the date of the transaction. Realized and unrealized exchange gains and losses have been dealt within the income statement.

4.9.2 Financial statements of foreign operations The assets and liabilities of foreign operations are translated into AED at the exchange rate ruling at the Balance sheet date, except share capital, which is converted at historical rate. The revenue and expenses of foreign operations are translated into AED at the average exchange rates for the year. Foreign exchange differences arising on translation are recognized directly in a separate component of equity.

4.10 Revenue recognition Business activities of the Group comprise the following categories of revenue: -Gold jewellery and bullion sales (physical transactions of ten tola bars and kg bars) -Diamond jewellery, pearls, watches, silver and other precious stones sales

4.10.1 Gold jewellery and bullion sales (physical transactions of ten tola bars and kg bars) Revenue from the sale of gold jewellery consists of the value of gold and the making charges. Revenue from making charges is recognized at the time of sale whether it is sold on a fixed or on an unfixed basis. Revenue from gold and bullion sales is recognized at the time when its price is fixed.

4.10.2 Diamond jewellery, pearls, watches, silver and other precious stone sales Revenue from the sale of these goods is recognized in the income statement when the significant risks and rewards of ownership have been transferred to the buyer.

4.11 Operating lease payments Payments made under operating leases are recognized in the income statement on a straight- line basis over the term of the lease. Lease incentives received are recognized in the income statement as an integral part of the total lease payments made.

4.12 Cash and cash equivalents Cash and cash equivalents comprises of cash on hand, bank current and call accounts and bank deposit with a original maturity of less than three months. For the purpose of statement of cash flows, bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents.

4.13 Impairment The carrying amounts of the Group’s assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated. An impairment loss is recognized whenever the carrying amount of an asset or its cash generating unit exceeds its recoverable amount. Impairment losses, if any, are recognized in the income statement.

F-122 Damas LLC Group of Companies

Notes — (Continued) 4.14 Provisions A provision is recognized in the balance sheet when the Group has a present obligation (legal or constructive) as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

4.15 Trade payables and other liabilities Trade payables and other liabilities are stated at amortised cost. Liabilities are recognized for amounts to be paid for goods or services received, whether or not billed to the Group.

4.16 Derivative financial instruments The Group uses derivative financial instruments to manage its exposure to gold price risk and currency exchange rate risk. All derivative financial instruments are recognized initially at cost. Subsequent to initial recognition derivative financial instruments are stated at fair value. The gain or loss on re-measurement to fair value is recognized immediately in the income statement.

4.17 Gold loans Gold is not included within the definition of a financial instrument and therefore gold loans are not recognised on the Balance sheet, as referred to in note 9 to the consolidated financial statements.

4.18 Borrowing costs Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalized as part of the cost of that asset. Capitalization of borrowing costs ceases when substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are completed. Other borrowing costs are recognized as expenses in the period in which they are incurred.

F-123 Damas LLC Group of Companies

Notes — (Continued) 5. Property, plant and equipment

MACHINERY & LAND & FURNITURE OFFICE ACCESSORIES CAPITAL BUILDING VEHICLES & FIXTURES EQUIPMT. PROGRESS WORK IN TOTAL AED’ 000 AED’ 000 AED’ 000 AED’ 000 AED’ 000 AED’ 000 AED’ 000 Cost Balance as at 1.1.2004 ..... 10,438 15,603 45,773 2,564 2,338 — 76,716 Additions during the year. . . 7,358 1,898 8,208 4,820 357 12,861 35,502 Transfers ...... (4,091) (8,500) — — — — (12,591) Disposals...... — (509) (3,241) — (2) — (3,752) As at 31.12.2004 ...... 13,705 8,492 50,740 7,384 2,693 12,861 95,875 Balance as at 1.1.2005 ..... 13,705 8,492 50,740 7,384 2,693 12,861 95,875 Additions during the year. . . 14,452 1,189 11,788 2,728 4,042 39,084 73,283 Transfer ...... — — (1,963) 178 1,785 — — Disposals...... — (445) (907) (36) — — (1,388) Currency translation...... — — (363) — — — (363) As at 31.12.2005 ...... 28,157 9,236 59,295 10,254 8,520 51,945 167,407 Depreciation Balance as at 1.1.2004 ..... 2,209 6,495 27,593 1,815 1,610 — 39,722 For the year...... 195 1,489 8,165 906 343 — 11,098 Transfers ...... (2,017) (1,750) — — — — (3,767) Disposals...... — (399) (3,144) — (2) — (3,545) As at 31.12.2004 ...... 387 5,835 32,614 2,721 1,951 — 43,508 Balance as at 1.1.2005 ..... 387 5,835 32,614 2,721 1,951 — 43,508 For the year...... 516 1,308 9,450 2,044 2,415 — 15,733 Transfer ...... — — (16) 5 11 — — Disposals...... (445) (851) (13) — — (1,309) Currency translation...... (8) — (4) (4) (88) — (104) As at 31.12.2005 ...... 895 6,698 41,193 4,753 4,289 — 57,828 Net book value As at 31.12.2005 ...... 27,262 2,538 18,102 5,501 4,231 51,945 109,579 As at 31.12.2004 ...... 13,318 2,657 18,126 4,663 742 12,861 52,367

Land & Building amounting to AED 13.59 million (cost) (2004: AED 8.82 million) is held in the name of directors/ their relatives for the beneficial interest of the Group.

Capital work in progress includes cost of construction work for the factory at DMCC amounting to AED 31.88 million, ALMAS Tower 53A (office building) for AED 4.31 million, ALMAS Tower 54A (office building) for AED 4.29 million, AU Towers (office building) for AED 5.20 million and Al Daghaya (Office building) for AED 2.87 million.

Property, plant & equipment amounting to AED 12.07 million (Cost) (2004: AED 10.14 million) is mortgaged to banks against loans obtained by a related party (refer note 14).

6. Intangible assets

2005 2004 AED’000 AED’000 Intangible assets as at 1 January ...... 16,333 18,137 Additions during the year ...... 8,036 384 Amortization ...... (2,899) (2,188) Intangible assets as at 31 December ...... 21,470 16,333

F-124 Damas LLC Group of Companies

Notes — (Continued) 7. Goodwill 2005 2004 AED’000 AED’000 Goodwill as at 1 January ...... 542,494 532,494 Value of acquisition ...... 6,132 10,000 Goodwill as at 31 December ...... 548,626 542,494

In accordance with IFRS 3, as at 31 December 2005, the Directors of the Company have reviewed the goodwill for impairment and have confirmed that the fair value of the underlying assets and liabilities of Damas Jewellery LLC and Stefan Hafner SPA, Italy, approximate the carrying value of the goodwill at the year-end. Based on the review of the Directors of the Company no impairment of Goodwill has been done in the current year.

8. Investments 2005 2004 AED’000 AED’000 Investments in jointly controlled entities ...... 20,681 8,849 (refer note 1 below) Investments in associates ...... 57,432 38,947 (refer note 2 below) Investments available for sale ...... 12,376 11,706 Investments held to maturity ...... 2,204 6,704 92,693 66,206

Note 1: The movement in investments in jointly controlled entities is as follows: 2005 2004 AED’000 AED’000 Balance as at 1 January ...... 8,849 881 Investments made during the year ...... 7,043 514 Share of profit recognized during the year (refer note 21) ...... 4,789 7,454 Balance as at 31 December ...... 20,681 8,849

Summary financial information on jointly controlled entities — 100 percent In thousands of Dirhams Assets Liabilities Equity* Revenue Profit/(Loss) Premium Investments International LLC ...... 52,729 20,925 31,804 31,530 11,524 Paspaley Pearl Jewellery ...... 18,849 18,524 325 1,113 25 Damas & Al Ghannam Jewellery Co. WLL ...... 29,120 28,152 968 65,042 846 Trading House Kristall DMCC ...... 2,882 2,015 867 7,346 467 D’Damas Jewellery (India) Private Ltd...... 59,011 51,503 7,508 37,654 (3,265)

* Equity includes retained earnings/(accumulated losses) Refer to note 3.2 for details of jointly controlled entities.

F-125 Damas LLC Group of Companies

Notes — (Continued) Note 2:

The movement of investment in associates is as follows:

2005 2004 AED’000 AED’000 Balance as at 1 January ...... 38,947 32,195 Investments made during the year ...... 12,770 14,004 Dividend received ...... (4,164) — Disposed off during the year...... — (7,637) Share of profit recognized during the year (refer note 21) ...... 9,879 385 Balance as at 31 December ...... 57,432 38,947

Summary financial information on associates — 100 percent

In thousands of Dirhams Assets Liabilities Equity* Revenue Profit/(Loss) Damas & Chalco General Trading Co LLC...... 13,923 11,056 2,867 7,746 (133) Damas Europe SPA ...... 25,360 19,310 6,050 18,125 (2,809) Damas Mucevherat ...... 11,870 11,512 358 17,643 358 Carati Jewellery S.A.L ...... 20,066 16,184 3,882 10,155 1,113 Style Avenue Middle East FZ Company ...... 71,306 41,271 30,035 81,527 3,512 Daiso Japan Value Stores LLC ...... 7,816 6,208 1,609 14,931 (179) LTC International General Trading Co...... 14,772 19,115 (4,342) 22,244 (3,757) LTC International Qatar LLC ...... 19,602 17,582 2,019 35,099 1,716 Daiso Trading ...... 1,752 363 1,390 3,086 420 Rivoli Enterprises LLC ...... 98,785 67,362 31,424 96,312 14,346 Al Khaleej Watch Company ...... 7,861 4,328 3,533 13,150 1,173 DPG Diamonds DMCC ...... 2,170 1,862 308 1,573 8 Al Mana Jewellery Co. — Damas WLL ...... 21,438 16,473 4,965 80,174 4,511 Al Baraka Jewellery ...... 9,206 4,421 4,785 15,899 615 Himo Jewellery ...... 2,284 1,148 1,136 1,051 401 Lucci Jewellery ...... 4,037 2,061 1,976 8,387 1,828 The Jewellery stores DMCC...... 27,991 — 27,991 304 (710)

* Equity includes retained earnings/(accumulated losses)

Refer to note 3.3 for details of associates.

9. Inventories

2005 2004 AED’000 AED’000 Cost of inventory on hand (gold and gold jewellery, diamonds, pearls, watches, silver and other precious stones) ...... 1,372,742 982,600 Gold unfixed with trade receivables ...... 315,177 232,871 Gold unfixed on consignments ...... 65,400 55,480 Gold unfixed with jointly controlled entities/ associated companies ...... 77,688 41,347 Gold unfixed from joint venturer’s contribution ...... (18,243) (22,547) Gold (unfixed) received on loan from Banks ...... (738,070) (352,920) Gold unfixed from trade payables ...... (78,737) (85,290) 995,957 851,541 Less: Provision for inventories ...... (12,917) (7,714) Net inventories ...... 983,040 843,827

Inventories are hypothecated against the bank borrowings facilities obtained from various banks (refer note 14)

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Notes — (Continued) Note: 1. Inventories are stated at the lower of cost and net realisable value. The average cost adopted for valuation is at US$ 452.92 per oz. as compared to opening stock valued at US$ 412.75 per oz. and as against the market value of US$ 517.75 per oz. as on December 31, 2005. The variation in price in the closing inventory as compared to the opening inventory price has resulted in a net gain of AED 6.4 million. 2. The Group in the normal course of business borrows and buys gold on an unfixed basis which it converts into gold jewellery. This jewellery is further used as stock in trade and is sold to various customers on a fixed or unfixed basis. The Group enters into forward purchases and forward sales to minimize the price risk it is being exposed to on unfixed sales/purchases. The Group has a policy of accounting these forward contracts as purchases /sales on the date of the transaction at notional value, resulting in these having an impact on the Group’s own/book stock. As per the requirements of IAS 39 these forward contracts are not accounted for at notional value but are instead included at fair market value in the balance sheet. The reversal of the said forward contracts from the books has resulted in a profit of AED 4.61 million and revaluation at fair market value has resulted in a unrealised gain of AED 8.30 million. The above results are grouped under the cost of sales before arriving at the gross profit of the group. This revaluation gain is grouped in prepayments and other receivables under the current assets in the balance sheet. The Group monitors these forward contracts as part of its own/book stock as follows: 2005 2004 AED’000 AED’000 Net inventory (as above) ...... 983,040 843,827 Add: forward purchases ...... 156,808 141,097 Less: forward sales ...... (76,421) (134,408) Economic position of Group’s inventory ...... 1,063,427 850,516

10. Trade receivables 2005 2004 AED’000 AED’000 Trade receivables...... 221,587 216,423 Due from credit card companies ...... 5,699 6,919 Sub total ...... 227,286 223,342 Provision for doubtful debts ...... (13,459) (9,900) 213,827 213,442

Trade receivables are hypothecated against the bank borrowings facilities obtained from various banks (refer note 14)

11. Prepayments and other receivables 2005 2004 AED’000 AED’000 Prepaid expenses ...... 15,781 7,760 Advances* ...... 88,860 42,459 Deposits ...... 2,250 1,119 Advance against investments** ...... 37,782 — Unrealized gain on revaluation of derivatives ...... 8,295 7,820 152,968 59,158

* Includes advance to suppliers amounting to AED 27.35 million. ** The balance includes AED 37.5 million advance payment made against investments in a watch division of AL Manara, a company incorporated in Abu Dhabi.

F-127 Damas LLC Group of Companies

Notes — (Continued) 12. Cash and bank balances 2005 2004 AED’000 AED’000 Cash on hand...... 4,224 6,094 Balance with banks in: Current accounts ...... 7,346 6,367 Fixed Deposits...... 388,694 23,162 400,264 35,623

Fixed deposits amounting to AED 259.56 million (2004: AED 23.16 million) are held under lien against bank borrowings (refer note 14).

13. Related party transactions The Group in the normal course of business enters into transactions with other business enterprises that fall within the definition of a related party contained in International Accounting Standard No. 24. The Group believes that the terms of such transactions are not significantly different from those that could have been obtained from third parties. The significant related party transactions during the year were as follows: 2005 2004 AED’000 AED’000 Finance cost charged to related party* ...... — 2,792 Expenses paid on behalf of a related party ...... 699 939 Sale of jewellery and watches ...... 127,708 66,016 Purchase of jewellery and watches ...... 24,653 12,523

* The operations of the related party have been transferred during the year, hence there is no finance cost charged during the year. Related parties include directors and executive officers. Key management personnel are those persons having authority and responsibility for planning directing and controlling the activities of the company, directly or indirectly including any directors, executives or otherwise, of the company. Compensation to key management personnel are as follows: - Salary & other short term employee benefits...... 720 720 - Provision towards employee terminal benefits ...... — —

The significant related party balances at the year-end were as follows: 2005 2004 AED’000 AED’000 Due from related parties ...... 48,564 40,360 Due to related parties ...... 31,258 1,412 Long term loans to related parties ...... 68,277 19,542

Long term loans to related parties represent loans which are interest free, unsecured and without fixed terms of payments. The management has provided an undertaking that these amounts will not be called upon for repayment in a manner jeopardizing the interests of third party creditors or materially affecting the net assets positions of the Group.

F-128 Damas LLC Group of Companies

Notes — (Continued) 14. Bank borrowings 2005 2004 AED’000 AED’000 a. Current liability Bank overdrafts ...... 79,793 46,950 Trust receipts ...... 45,733 52,567 Short term loan ...... 154,894 132,839 Local bills discounting ...... 18,886 18,996 299,306 251,352 b. Non current liability Long-term loan ...... 140,828 230,413 440,134 481,765

Bank borrowings are secured as under: - I. Partly secured against fixed deposits amounting to AED 259.56 million and Investments held to maturity amounting to AED 2.2 million under lien with banks. II. Hypothecation of inventories, assignment of receivables and insurance policies of the Group on pari passu basis with all banks. III. Unconditional, continuing, joint and several guarantees of Mr. Tawfique Abdulla, Mr. Tawhid Abdulla and Mr. Tamjid Abdulla on behalf of the company IV. Subordination of shareholders’ long term loan. V. Corporate cross guarantee from Group companies.

15. Trade payables and other liabilities 2005 2004 AED’000 AED’000 Trade payables ...... 415,919 397,563 Post dated cheque issued ...... 20,161 13,933 Accruals ...... 20,703 21,437 Staff terminal benefits ...... 11,319 6,903 468,102 439,836

16. Shareholders’ current accounts 2005 2004 AED’000 AED’000 Balance as at 1 January ...... 58,727 (22) Dividend for the year 2003 ...... — (12,060) Dividend for the year 2004 ...... (1,634) (80,000) Transfer to long term loan ...... — 8,200 Transferred from a related party ...... — 62,197 Net (deductions)/ additions during the year ...... (35,950) 80,412 Balance as at 31 December...... 21,143 58,727

F-129 Damas LLC Group of Companies

Notes — (Continued) 17. Share capital 2005 2004 AED’000 AED’000 Authorized capital: 1,421,000 shares (2004: 900,000 shares) of AED 1,000 each ...... 1,421,000 900,000 Issued and paid up: 900,000 shares (900,000 shares in 2004) of AED 1,000 each ...... 900,000 900,000 Add: Further issue of 521,000 shares of AED 1,000 each...... 521,000 — 1,421000 900,000

In the current year the Company has increased its share capital through private placement.

18. Statutory reserve In accordance with the Articles of Association of entities in the Group and Article 255 of UAE Federal Law No. 8 of 1984 (as amended), 10% of the net profit for the year of the individual entities in the Group has been transferred to statutory reserve which is non-distributable. Such transfer may be discontinued when the reserve equals 50% of the respective paid up share capital of the individual entities. During the current year, AED 14 million (2004: AED 10 million) has been transferred to the legal reserve by the Group.

19. Shareholders’ long term loan 2005 2004 AED’000 AED’000 Balance as at 1 January ...... 150,000 141,800 Transfer from shareholders’ current accounts ...... — 8,200 Balance as at 31 December ...... 150,000 150,000

This represents a long term loan from shareholders, which is interest free, unsecured and without fixed terms of payments. The shareholders have provided an undertaking that the amount will not be withdrawn in a manner jeopardizing the interests of third party creditors or materially affecting the net assets position of the Group.

20. General administration, selling and distribution expenses 2005 2004 AED’000 AED’000 This include: Personnel expenses...... 75,255 51,592 Rent ...... 37,881 30,338 Advertisement ...... 36,717 18,179 Sales promotion/ marketing/ exhibition and selling ...... 29,275 20,780 Provision or slow moving inventory ...... 5,203 4,539 Provision for bad and doubtful debts...... 3,559 900 Depreciation ...... 15,733 11,098 Amortisation of intangible assets ...... 2,899 2,188

F-130 Damas LLC Group of Companies

Notes — (Continued) 21. Other income 2005 2004 AED’000 AED’000 Share of income from jointly controlled entities (refer note 8) ...... 4,789 7,454 Share of income from associates (refer note 8) ...... 9,879 385 Income from shares & securities ...... 2,699 1,537 Interest on fixed deposits ...... 11,799 2,469 Foreign currency exchange gain ...... 2,066 — Miscellaneous income ...... 5,103 3,908 36,335 15,753

22. Finance cost 2005 2004 AED’000 AED’000 Interest on bank borrowings ...... 37,857 31,139 Interest recharged to related parties...... — (2,792) 37,857 28,347

23. Cash and cash equivalents 2005 2004 AED’000 AED’000 Cash on hand...... 4,224 6,094 Bank balance in current accounts ...... 7,346 6,367 Fixed Deposits with an original maturity of three months or less** ...... 376,131 9,373 Bank overdraft...... (79,793) (46,950) Trust receipts ...... (45,733) (52,567) 262,175 (77,683)

** Fixed deposits amounting to AED 259.56 million (2004: AED 23.16 million) are held under lien against bank borrowings (refer note 14).

24. Operating lease Leases as lessee 2005 2004 AED’000 AED’000 Non-cancellable operating lease rentals payable as at 31 December is as follows: Less than one year ...... 13,239 12,082 One to five years ...... 1,949 942 15,188 13,024

The Group leases a number of warehouse and factory facilities and retail outlets under operating lease. The leases typically run for an initial period of one to five years, with an option to renew the lease after that date. Lease payments are usually increased to reflect market rentals. None of the leases includes contingent rentals.

F-131 Damas LLC Group of Companies

Notes — (Continued) 25. Contingencies and commitments

2005 2004 AED’000 AED’000 Letter of credits...... 13,591 5,001 Corporate guarantee...... 26,147 7,547 Corporate guarantee to Damas Real Estate LLC ...... — 22,000 Other bank guarantees ...... 9,048 2,748 Stand-by letter of credits ...... 367,037 237,318 Commitments Towards investment in associate companies ...... 76,068 25,077

The stand-by letter of credits are provided by banks in favour of the suppliers of gold who have lent unfix gold and which is deducted from the total inventory on hand in note 9 under the head “Gold received on loan from banks”.

26 Minority interest The movement during the year is as follows:

2005 2004 AED’000 AED’000 Balance at 1 January ...... 3,000 16,901 Add: Additions during the year...... 204 347 Net movement in minority shareholders’ current account ...... 5,879 (1,298) Add: Minority’s share in the profit ...... 1,411 1,286 Less: Movement due to entities consolidated in prior year ...... — (14,236) Currency translation reserve ...... 718 — Minority interest as at 31 December ...... 11,212 3,000

27 Accounting estimates and judgements Management discussed with the Board of Directors (including Executive Directors) the development, selection and disclosure of the Company’s critical accounting policies and estimates and the application of these policies and estimates.

Key sources of estimation uncertainty Judgments made by the management in the application of IFRSs that have significant effect on the financial statements and estimates with a significant risk of material adjustment in the next year mainly comprise of residual value and useful lives of items of property, plant and equipment, carrying value of Goodwill and intangible assets, provision for doubtful debts and slow moving inventory.

28. Forward contracts 28.1 Forward Gold contracts Open position — 2005

Cost Less than Between 3 Fair Value Revaluation 3 Months Months to 1 Year Total Total Gain/(Loss) AED’000 AED’000 AED’000 AED’000 AED’000 Forward purchases ...... 111,921 44,887 156,808 174,502 17,694 Forward sales ...... 76,421 — 76,421 85,821 (9,400) These forward contracts are measured at fair value as at 31 December 2005 which resulted in the recognition of income in the income statement and a corresponding asset amounting to AED 8.30 million.

F-132 Damas LLC Group of Companies

Notes — (Continued) Open position — 2004 Cost Less than Between 3 Fair Value Revaluation 3 Months Months to 1 Year Total Total Gain/(Loss) AED’ 000 AED’ 000 AED’ 000 AED’ 000 AED’ 000 Forward purchases ...... 53,074 88,023 141,097 147,696 6,599 Forward sales ...... 134,408 — 134,408 133,188 1,220 These forward contracts are measured at fair value as at 31 December 2004 which resulted in the recognition of income in the income statement and a corresponding asset amounting to AED 7.82 Million.

29. Proposed dividend Subsequent to the balance sheet date a distribution/dividend amounting to AED 99,470K has been proposed by the Board of Directors.

30. Financial instruments Financial assets of the Group include investments, cash, bank current accounts, bank fixed deposit accounts, bank margin accounts, due from related parties, trade receivables and margin to trade payable against unfixed gold. Financial liabilities include bank borrowings, trade payable and margin from trade receivable against unfixed gold.

I. Fair values The fair values of the Group’s financial assets and liabilities approximate to their carrying values.

II. Credit risk Financial assets which potentially expose the Group to credit risk are comprised mainly of investments, bank current accounts, bank fixed deposit accounts, bank margin accounts, due from related parties, trade receivables and margin to trade payables against unfixed gold. Credit risk with respect to investments in associate companies is limited as all the operations of investment business are significantly influenced by the Group. The investment in shares and securities are in funds managed by a financial institution of good standing. The Group’s bank current accounts and bank fixed deposit accounts are placed with financial institutions of high credit rating. Credit risk with respect to trade receivables is diversified due to the large number of customers comprising of the Group’s customer base. As at 31 December 2005, 50 % of total trade receivables are concentrated in U.A.E, 20 % in the other GCC countries, 6 % in African countries, 5 % in Asian countries, 4% in Egypt, 3 % in Europe and USA and the balance 12 % are large number of miscellaneous trade receivables which are concentrated mainly in the Arab countries. There is no credit risk with respect to margin to trade payable against unfixed gold as this margin is paid after the receipt of gold on unfixed basis.

III. Interest rate risk The Group’s fixed bank deposits are at prevailing market interest rates. Interest rates on the Group’s borrowings from banks are as per prevailing market conditions. No interest is due on long term loan from the shareholders.

IV. Price Risk The Group enters into derivative financial instruments for risk management purposes. Derivative financial instruments used by the Group are forward purchase/sale contracts of gold. These financial instruments are individually negotiated with various financial institutions. These forward contracts are a commitment to either purchase or sell gold at a specified future date for a specified price and may be settled in cash or by another financial asset.

F-133 Damas LLC Group of Companies

Notes — (Continued) V. Foreign exchange risk There is no significant exchange rate risk as substantially all of the financial assets and financial liabilities are denominated in U.A.E. Dirhams or U.S. Dollars to which the Dirham is pegged. Foreign currency is monitored and managed centrally by the Company by obtaining forward exchange covers. The group accounts for gains and losses in the income statement arising from the utilization of these forward exchange covers. Foreign currency (other than US Dollars) financial liabilities outstanding at 31 December 2005 were as follows: 2005 2004 AED’ 000 AED’ 000 Foreign currency financial liabilities ...... 43,788 26,361 As a % on trade payables ...... 10.5% 6.6%

31. Previous year figures The previous year figures have been reclassified wherever necessary in the Consolidated Financial statements so as to make them comparable to current year figures.

F-134 (This page intentionally left blank) (This page intentionally left blank) THE ISSUER Damas International Limited Level 3, Suite 57-58 Gold Centre Building PO Box 1522 Dubai United Arab Emirates JOINT GLOBAL COORDINATORS

Credit Suisse Securities (Europe) Limited HSBC Bank plc One Cabot Square 8 Canada Square London E14 4QJ London E14 5HQ United Kingdom United Kingdom The Gate, 9th Floor East Level 4, Precinct Building, Unit 5 Dubai International Financial Centre The Gate District PO Box 33660 PO Box 506553 Dubai Dubai United Arab Emirates United Arab Emirates

LEGAL ADVISORS TO THE ISSUER AND THE SELLING SHAREHOLDER

As to the laws of England and Wales and the DIFC As to the laws of the UAE and the DIFC Dewey & LeBoeuf LLP Al Tamimi & Company Suites 102-104, Level 1 6th floor, Building 4 East The Gate Village Building 4 Dubai International Financial Centre Dubai International Financial Centre Sheikh Zayed Road PO Box 506675 PO Box 9275 Dubai Dubai United Arab Emirates United Arab Emirates

LEGAL ADVISORS TO THE JOINT GLOBAL COORDINATORS AND THE UNDERWRITERS As to the laws of England and Wales and the DIFC

Linklaters LLP Linklaters Suite 4, Third Floor Studio Legale Associato Gate Precinct Building 3 Via Santa Margherita 3 Dubai International Financial Centre 20121 Milan PO Box 506516 Italy Dubai United Arab Emirates

AUDITORS TO THE ISSUER

Ernst & Young KPMG (2007 to present) (2005 and 2006) 28th Floor, Al Attar Business Tower Level 32 Sheikh Zayed Road Emirates Towers PO Box 9267 Sheikh Zayed Road Dubai PO Box 3800 United Arab Emirates Dubai United Arab Emirates O U58808