ANNUAL REPORT ANNUAL PADICO HOLDING Palestine Development and Investment, Ltd. REPORT Foreign, limited, public shareholding limited Liability Company, registered in the Republic of Liberia Under the Liberian Business Law of 1977

Years of success Contents

About PADICO HOLDING 6 FUTURE VISION 40

42 PADICO HOLDING: 8 Social Responsibility Twenty-three years of investment in Palestine

Financial Performance in 2017 48 Board of Directors 10

Key Financial Indicators 54 Shareholder 15

Performance of PADICO HOLDING share 56 The Chairman Message 18

Auditors’ Report and Consolidated 58 Performance Summary of Investment 20 Financial Statements About PADICO HOLDING Our Values and Mission Our Strategy PADICO HOLDING believes in the importance of PADICO HOLDING is committed to developing its role and contribution in building the Palestinian the Palestinian economy through a group of PADICO HOLDING Company was established in 1993 as a foreign limited liability economy. It has several leading companies that subsidiaries and affiliates that invest in key sectors holding company registered in Liberia at the initiative of prominent Palestinian and contribute to the economic development of Palestine constant with the company’s overall strategy, Arab businesspersons with the aim of contributing to the building and development by implementing investment projects in various including real estate, communications, tourism, of the Palestinian economy by establishing development projects in vital economic economic sectors, creating jobs and launching industry, agriculture, the environment and financial creative economic initiatives in partnership with services. PADICO HOLDING’s ability to generate sectors. public sector institutions. Moreover, attracting local profits depends mainly on the performance of its and international investors and encouraging them subsidiaries and affiliates. PADICO HOLDING’s The company’s capital is 250 million shares with a nominal value of one US dollar per to invest in Palestine. strategy to diversify investment in several sectors share, and its shares have been traded on the Palestine Exchange since 1997. and geographical areas has enabled it to become PADICO HOLDING is committed to its ethical and a leading investment and development company The number of shareholders in the company has gradually increased from 710 in 1998 societal role towards the company’s society and in Palestine. PADICO HOLDING is unique in to about 7394 in 2017. PADICO shareholders include investors from North Africa, and local community. It is an international company nature compared to other Palestinian companies with a set of values, principles, standards of the Middle East including Palestine and Jordan. and international companies; its board members governance and best management practices. As a have international expertise in various economic national company, PADICO HOLDING commits to sectors. The company is characterized by its ability a group of strategies and ethics in all practices and to enter into large-scale investment projects with activities. It also aims to improve the internal working a guaranteed return. The diversified investment environment, adopt responsible investment projects strategy has provided an opportunity for increased and continue to commit to supporting community returns over the past years despite the difficult and development initiatives and projects. circumstances, which have made it a model for investment in Palestine. Our Advantage

PADICO HOLDING is a leading investment company with a long-term development orientation. The company has demonstrated its ability to enter into large-scale, promising and promising investment projects over the past years. Its members have international expertise in various sectors of the economy and entrepreneurship, contributing to the enhancement of its vision and direction and the development of a flexible strategy based on diversification of investment to ensure accumulated returns that support both sustainable and active development objectives. In spite of all challenges, the prudent plans of the board of directors have contributed to maintaining the investment orientation of the company. PADICO HOLDING is strategy based on investment diversification. This has enabled the company to achieve continuous returns over the past years despite difficult circumstances.

7 PADICO HOLDING Twenty-three years of investment in Palestine

At the beginning of every year, PADICO HOLDING proudly grasps the opportunity to celebrate the previous year’s remarkable achievements which would not have been possible without the invaluable faith and sincere admiration of our stakeholder and the trust which they have instilled in us. As we embark on a third decade of PADICO, two decade, we renew our gratitude and commitment to a leading and pioneer company striving for a bright and better future for our country and our people. Serving as a deep cornerstone and key factor in building national economy in the future State of Palestine and in contributing to shape a future oriented towards decent life, several job opportunities and full citizenship.

Years of success

9 Board of Directors

Munib R. Masri Nidal M. Sukhtian Ammar A. Aker Kameel A. Saad Edeen Chairman Vice Chairman Board Member Board Member

Sabih T. Masri Bashar F. Masri Jamal S. Hourani Yazid A. Mufti Board Member Board Member Board Member Board Member

Nabil G. Sarraf Zahi W. Khouri Omar A. Bitar Iyad N. “Darwish Hajji” Board Member Board Member Board Member Board Member

ANNUAL REPORT | PADICO HOLDING 11 Governance Board of Directors’ Committees PADICO HOLDING governance is considered an integral part of its management principles. It is a strategic necessity to ensure that the company is moving in the right direction, anticipating future The Board of Directors has established the following committees: horizons, optimizing the use of resources, and distributing the functions and powers among the board members and the Board of Directors and the executive management. It is a fundamental The Executive Committee, The Audit Committee, principle that ensures the company’s compliance with international standards, including a sound members of the committee: members of the committee: working environment, a code of conduct that controls the working environment, and regulates the company’s relationship with its external environment, which is a social extension. PADICO HOLDING’s Bashar F. Masri (chairman) Yazid A. Mufti (chairman) restructuring of investments has contributed to the promotion of best practices and good governance, Nabil G. Sarraf Kameel A. Saad Edeen and in improving the efficiency and effectiveness of the systems in which it operates. Ammar A. Aker Ziad M. Turk The company is committed to periodical publishes of its quarterly and annual financial reports. In addition to quarterly and annual disclosures, and press releases which highlights its latest events such as social responsibility programs, sustainability programs and environmental protection. The Company is also committed to issuing annual reports in accordance with the requirements of the Legal Advisors: Capital Market Authority of Palestine and the Palestinian Stock Exchange. Sanad Law Group association with Eversheds – International

In 2012, PADICO HOLDING completed a study conducted by the International Finance Corporation Haytham Al Zubi – Palestine (IFC), and the investment arm of the World Bank Group, to develop the governance principles of PADICO HOLDING. This aims to enhance its compliance with international standards and regulations and to benefit from international experience in the areas of governance. The study included a External Auditors: Main Banks: comprehensive review of the company’s governance and transparency, and recommendations for its Ernst & Young Arab Bank | Cairo Amman Bank development. PADICO HOLDING currently relies on the recommendations of the study as a reference for strengthening the principles of corporate governance and best practices within the company. Including the role of the board of directors in terms of structure, functions and competencies, the relationship with shareholders and the community, or the standards of periodic reports and disclosures, Executive Management: in addition to standards that meet the environmental requirements of the company’s projects.

Ziad M. Al Turk Secretary General The Role of the Board of Directors and its Committees and Mechanism Nihad T. Kamal Secretary of the Executive Council

Amjad Y. Hassoun Chief of Financial Management The Functions of the Board of Directors Nimer Abdel Wahed Real Estate Consultant The Board of Directors of PADICO HOLDING consists of thirteen members. Its functions to follow up the progress of the company’s business, strategy and future plans. It also aims to review the Saeed Y. Dwikat Chief Development Officer political and economic conditions and variables that affect the next phase, in addition to approving budgets, financial and investment regulations and policies and approving the financial statements. Jihad A. Zammari Internal Audit Manager The company is committed to the principles of governance by making decisions by majority. The minimum number of members of the Board of Directors is 100,000 shares, and neither the Chairman Rasha K. Metwalli Administrative Manager nor the members of the Board of Directors have executive positions either in the Company or in its subsidiaries. Over the past few years, the Board of Directors has formed a number of internal Samer M. Safadi committees, including standing committees, and temporary committees with specific tasks and Head of Shareholders Management Unit mandates linked to a timetable. During the year 2017, the Board held a total of six formal meetings, several meetings and special workshops to discuss the company’s affairs. Ziad Y. Tafesh Head of Technical Support Unit

ANNUAL REPORT | PADICO HOLDING 13 Sustainability and Responsible Investments Shareholder PADICO HOLDING is committed to carrying out its business in accordance with the principles of sustainability and transparency. It works to disseminate these principles to society through its responsible investments in energy and the environment and through its community commitment. Shareholders Structure This has enhanced the consistency of practical practices that the company has applied in its various At the end of 2017, PADICO HOLDINGS had 7394 shareholders, distributed as follows: activities with human rights standards, workers’ rights, the environment, and the application of good

practice in business and the ethics of the profession. Number of Shareholders Type of Shareholders Number of Shares Shareholders equity ratio

Investor Relations and Communication with Shareholders Individuals 7,289 99,314,067 39.73% PADICO HOLDING, demonstrates keenness through the Shareholders Affairs Unit and the Companies 105 150,685,933 60.27% Sustainability and Investor Relations Department to maintain proactive and effective communication and coordination with all investors and shareholders. It tries to keep them abreast of all the details Total 7,394 250,000,000 100.00% that help them understand the future prospects of their investments and recognize the company’s achievements and activities.

The company also employs various means of communication, including telephone calls, corporate website, e-mail address, annual report, quarterly newsletters, media, and social networks Jordan

Rest of World PADICO HOLDING will hold its annual general assembly meeting between April and May. The

meeting will be a platform for discussing the company’s status, results of operations and plans. Individuals %20.15 The items on the agenda will also be discussed, including the approval of the financial statements %26.09 for the financial year ended, the Board of Directors’ accounts and approval of dividend distribution %39.73 recommendation. The company sends an invitation to its shareholders to attend the meeting one month in advance by sending invitations by mail and through the advertisement in local newspapers %60.27 and On the company’s website. %53.76 Companies Financial Disclosures PADICO HOLDING discloses its financial statements through its quarterly reports, the annual Palestine report, and during the meetings of its General Assembly. Financial data presented to the Palestine Capital Market Authority (PCMA) and the Palestine Exchange (PEX) pursuant to the regulations Nationality of Shareholders in force in Palestine. Financial statements and reports are regularly posted to PADICO’s website; Shareholders Structure when necessary, financial statements are disclosed in a press conference.

Number of Nationality of Shareholders Number of Shares Shareholders equity ratio Internal Auditing Shareholders

PADICO HOLDING emphasizes the importance of internal auditing. The Internal Audit Department Palestine 6,579 134,411,635 53.76% which has full autonomy, reports directly to the audit committee of PADICO HOLDING Board of Jordan 612 50,362,879 20.15% Directors. International standards applied for audits of financial reports of PADICO HOLDING and all its subsidiaries. The relationship of the Internal Audit Department with the affiliate and subsidiary Rest of World 203 65,225,486 26.09% companies regulated by resolutions early approved by the Board of Directors and the Internal Audit Charter. Total 7,394 250,000,000 100.00%

ANNUAL REPORT | PADICO HOLDING 15 Shareholders Capital ratio

Paltel Group %16.91

Sabih Masri Group %12.63

Saraj for Investment Funds Group %12.57

Massar International Funds Group %8.63

Munib Masri Group %5.25

Nidal Sukhtian Group %2.23

Sideeq Abu Sido %1.33

Abdula Mohsen Hassan Qattan %1.17

National Beverages Company %1.08

Maha Mousa Mustafa Abdul Fatah %1.03

Sheikh Mohammad bin Hamad Al-Thani and relevant entities %1.02

Arab Bank %1.00

General Social Security Corporation %0.96

Palestine Investment &Development %0.86

Al-Sa’eed Company Limited %0.74

Saudi Olayan Investment Company %0.72

Nabel Emel Ibrahim Hadad %0.65

Adel Sa’eed Ibrahim Al-Qassem %0.58

Dubai National Investment Company %0.56

Riyad Tawfiq Al-Sadeq %0.56

The National Bank %0.52

Arab Jordan Investment Bank %0.52

Ibrahim Emel Ibrahim Hadad %0.49

Etihad Bank – Jordan %0.48

ANNUAL REPORT | PADICO HOLDING 17 Dear Shareholders, to control the administrative expenses and costs, and carry out the necessary restructuring to meet the difficult stage and conditions. in order to promote the company and support the Palestinian We are pleased to share with you PADICO economy. Change was not easy, but to strengthen our principles and expertise in PADICO HOLDING, HOLDING Annual Report for 2017 to review this change has come to reduce the damage and moving forward. We are confident that we have together the company’s business history and not returned any step back, but rather the motivation for the catalyst to advance and flick and investments in the past year, and to keep up start with determination again. However, this change does not prevent us from emphasizing our with the challenges and achievements that have appreciation for the efforts made over the years to prosper and advance the company. come despite many political and economic uncertainties that we witnessed that year. That By the end of 2017, consolidated revenues totaled USD 142.20 million, consolidated assets of USD would not have been possible without your 841.19 million and consolidated liabilities of USD 321.17 million will be collected. Nevertheless, the confidence and faith in PADICO HOLDING as a Company continued to grow in operating profit in 2017. It increased from 34 million dollars and quality investment destination, and a solid pillar grew by 4% compared to the previous year. However, the provisions made by the subsidiaries, of the Palestinian economy. It has been a leading especially Palestine Real Estate Investment Company (PRICO), significantly and temporarily affected icon of the private sector to invest in Palestine the financial performance of the group in 2017. The total provisions amounted to about USD 14.1 for over two decades of time, confirming million, including provisions for doubtful debts and provisions for impairment of certain assets and that Palestine is the land of opportunities. It real estate projects, financial investments and other assets, net profit attributable to shareholders also confirms the investment of economic decreased to USD 6.79 million in 2017 from about USD 19.01 million in 2016. Although the year and political dimensions of humanitarian and 2017 has seen a clear and uneven improvement in the profitability of other subsidiaries and affiliates installation. In addition to polarizing the world’s Palestine Industrial Investment Company and its subsidiaries and affiliates. Industrial profits grew by view of these creative opportunities, which 14% to reach USD 7.76 million. The year 2017 saw an improvement in the performance of Jericho we have created the first of our faith and our Gate and Nakheel Company. Are growing from one fiscal year to the next with the development of commitment to invest in Palestine second and their operations. In addition, the improvement witnessed by the companies operating in the tourism always. sector, which have been able to achieve operating profits in 2017 and thus significantly reduce losses compared with the year 2016 and previous years. The political events that surrounded Palestine in 2017 have left great negative effects on Dear Shareholders, the economic sector in general, and on the PADICO HOLDING seeks to focus on improving the performance of operations in all of the companies performance of companies in particular which and projects it invests in and its subsidiaries. It does that through increasing efficiency of different are led by PADICO HOLDING. The occupation operations and production centers by rationalizing administrative expenses, controlling operating continues to put obstacles before the private expenses, enhancing revenues and diversifying their sources. PADICO HOLDING will focus on three sector along with the public sector expenditure. main parts which are, the real estate sector, industrial cities and alternative energy, these three will These expenses exceed the limited capabilities be given greater attention to projects and companies operating in vital sectors. These investments The Chairman of the Palestinian economy, and the decline in will be a major lever for profits in the near future, medium and long term, by expanding their base foreign aid, while acknowledging the progress through entering projects and theough new and optimized use of the assets in addition to potential made in the reform of public finances in terms Message projects. of increasing revenues and rationalization of spending. These steps still need more work to PADICO HOLDING’s strategy in the coming phase is based on strengthening the fundamentals strengthen them to reach the limits of economic of resilience and attracting foreign and internal investment to focus on youth. We focused on the capabilities and the requirements of providing a development of marginalized groups and education, leading to a comprehensive socio-economic decent level of services to citizens. development. Dear Shareholders,

In the past year, PADICO HOLDING witnessed a number of changes in accordance with the Yours respectfully, Board of Directors’ decision in July 2016. It aims to unify the policies of the group companies, and Munib Rasheed Al Masri Chairman

ANNUAL REPORT | PADICO HOLDING 19 Summary of Investment Performance

Performance Summary Investment sectors

The total direct investments of PADICO HOLDING at the end of 2017 amounted to USD 583.4 million, of Investment distributed over a number of economic sectors. The figure below shows the relative distribution of these sectors at the end of 2017.

Infrastructure sector The financial and services sector accounts Industrial Estates Sector for 68% of total direct investments, Tourism Sector mainly through investment in Palestinian %1 telecommunications companies. This sector %8 %7 Real Estate is the least affected by political and economic Sector volatility. %15 Investment in real estate development comes second place after the financial and services

sector. PADICO HOLDING’s investments in Financial this sector constitute 15% of the total direct and Services Sector investments through the contribution of %68 Palestine Real Estate Investment Company (PRICO) mainly, Jericho Gate and Rabia Quds project.

Investments in the tourism sector accounted for 8% of the company’s total investment through the contribution of JEDICO, which is the tourism investment arm of PADICO HOLDING.

In terms of investments in the industrial and agricultural sectors, it accounts for 7% of PADICO HOLDING’s total direct investments. The infrastructure and environment sector accounts for 1% of PADICO HOLDING’s total direct investments. PADICO HOLDING assumes that the importance of increasing investments in these sectors as part of its plan for the coming years.

21 Classification of investments for financial reporting purposes Investment Performance

The direct investments are classified into three main groups for financial reporting purposes, which are the subsidiaries, affiliates, and other companies. The following table shows the distribution of PADICO HOLDING’s direct investment portfolio based on its accounting classification as at the end Financial and Services Sector of 2017: PADICO HOLDING’s investments in the financial and services sector amounted about USD 399.2 Distribution of direct investments by accounting classification million or 68% of PADICO’s total investments by the end of 2017. Below is a summary of the most important companies operating in the financial and services sector, Million Dollar and important achievements during the year of 2017:

Subsidiaries 187.4 Paltel Group:

Affiliates 380.4 Paltel Group was always considered the leading company of the telecommunications sector in Palestine. Paltel Group started its operations in 1997 as a public shareholding company in order Others 15.6 to provide telecommunications and internet services in Palestine through the establishment and development of the necessary infrastructure. Therefore, it become the largest operator in Palestine Total: 583.4 and the largest company by market value for the total market capitalization of the Palestine Stock Exchange to reach 21.8% at the end of 2017. Paltel Group have the following companies of its own: Subsidiaries are those companies in which PADICO HOLDING holds more than 50% of its capital or voting rights, as it is empowered to develop its financial and operating strategies and policies. PADICO’s shareholding is usually between 20% and 50%, while in other companies which are not represented by PADICO to exercise significant influence in their financial and operating policies, PADICO’s holding percentage is usually less than 20% of its share.

ANNUAL REPORT | PADICO HOLDING 23 Palestine Telecommunications Company (Paltel) For more than 20 years, Paltel has enriched the lives of its customers through innovative communications The Palestine Exchange (PEX) and entertainment solutions by leaving a footprints for a better tomorrow. Paltel has been consistently “The 20th anniversary of the commencement of trading on PEX” was the most prominent title of providing innovative, reliable, and high-quality fixed line and Internet services coupled with professional the events of 2017, where February 18, 2017 marked the passage of 20th year of the first trading technical support and outstanding customer care. Today, Paltel`s mission is to deliver state-of-the-art session which began in 1997. During which the stock market paths and successes brought to the solutions for its customers locally and internationally. refineries of international and regional stock exchanges with its small size and comparatively short period. PEX has maintained its consistent and accelerated approach towards internal development Palestine Cellular Communications Ltd. (JAWWAL) and the development of regional best practices. JAWWAL seeks to remain at the top of the leading companies in the Palestinian market that provide The first half of 2017 witnessed the announcement of the introduction of the electronic subscription mobile communication services, efficiently and reliably to all its subscribers, overcoming all difficulties system developed internally in cooperation with the Palestinian Capital Market Authority (PCMA) by and obstacles. Moreover, it has the largest role in bringing everyone together by reuniting and running PEX, in line with the strategic directions of the exchange to improve the level of services offered to their businesses, and continuing to grow together alongside the growth of the national economy. investors in the securities sector. The system was linked directly to the database of the exchange’s depository and transfer center. This ensures the standardization, validity and quality of the data for the In the year 2017, JAWWAL increased its visibility through various media and e-advertising and succeeded shareholders in the company, as well as reduces the percentage of errors in subscriber data, speeds in leading the social networking sites in Palestine according to various statistics and reports. It also up and facilitates the subscription process. provided various services to facilitate its subscribers through the mobile application of “my account”. In the year 2017, it continued to sponsor Palestinian sport in its various forms. It continued to sponsor In addition to the development of the existing programs, PEX also announced the launch of the the national football team, handball, basketball and volleyball, as well as sponsoring many Palestinian upgraded version of the electronic disclosure system “EFSAH”, which was launched in 2015. The sports activities in partnership with the various sports federations. Internationally, JAWWAL has signed development carries a qualitative leap towards the provision of data to interested investors in both agreements to provide international roaming services with more than 436 operators in more than Arabic and English languages, developments and practices in the world of financial markets. In addition 170 countries. JAWWAL confidently faced the challenge of the other operator in Gaza to prove that to giving the opportunity to the largest segment of investors, especially foreigners to see the financial it is the network of millions and the strongest in Palestine. JAWWAL launched the first experience of performance of listed companies. PEX recently launched another version developed in a manner that 3G services, overcoming all the obstacles and difficult conditions imposed by the arbitrary policies of allows the disclosure of non-financial data also. occupation against our people and our Palestinian economy. What will make this year a detailed year in the history of PEX is to contract with NASDAQ OMX to purchase the main trading systems of the stock exchange “System Extreme” which is characterized Hadara Technology Investment Co. (Hadara) by high efficiency and speed in processing transactions. On the other hand, the data showed a number of positive indicators, through the results of 2017 Hadara is looking forward to continuing its new brand strategy with the slogan “Hadara A New World”. and the performance of listed companies. In addition, work is underway for internal restructuring The slogan is in line with its vision of providing the latest technology, high quality, and keeping abreast of and development of the electronic structure in the framework of the completion of all transactions the new technologies and communications. It seeks to achieve that through the provision of after-sales and tasks. Also, it is conducting studies and research to develop new financial instruments. (EBRD) service, content, entertainment and diverse applications and products. has recently asked to prepare a “gap analysis” study that will lead to a road map and a strategic plan In the year 2017, Hadara continued its leading role in the internet services sector in Palestine by investing capable of addressing the overall problems of the securities sector. in new products to ensure the enrichment of the Palestinian market with flexible, fast and secure services. In the same year, Hadara worked to provide its customers with its services and products in order to provide an easier life for its individual customers. The services were distinguished by keeping pace with the technological development. It has also met the needs of Palestinian institutions and companies by providing the most distinctive and diversified services designed to facilitate the business sector and businesses wherever they are.

Reach for Communications Services Co. (Reach) Reach is the first, and largest Palestinian contact center for outsource telecommunications. Reach was established in 2009, and it is a Paltel Group subsidiary, offering the highest quality performance-driven services, through multi-communication channels.

Reach handles 45,000 calls per day using Cisco IPCC Technology system, allocated across 260 seats. Its multi-lingual agents are able to receive and make calls around the world, and are experts in a variety of industries.

ANNUAL REPORT | PADICO HOLDING 25 Real Estate Sector

Through a contribution to Palestine Real Estate Investment Company (PRICO), the investment arm in the real estate sector of PADICO HOLDING, and through the contribution of Jericho Gate and the Rabiyat Al Quds, PADICO HOLDING’s total investment in the real estate sector amounted to USD 89.6 million, representing 15% of PADICO’s total investments by the end of 2017.

Palestine Real Estate Investment Company (PRICO) During the years 2015-2017, PRICO worked and invested in renewable energy sector. It implemented many projects in Palestine and abroad in the same field. The company has developed its expertise in this field within a short period until it became one of the first companies working in alternative energy and infrastructure.

Renewable energy and Infrastructure projects During the year 2017, PRICO carried out many studies in the field of solar energy, water treatment and other studies, all with the aim of building a Palestinian society and a national economy for alternative energy. Its projects include: • producing electricity through solar energy project in PIEDCO in Gaza Strip • Sewage Treatment Project in Jenin • producing electric power through the production of solar energy project in the resort of Blue Beach in Gaza

Partnership with the public sector: PRICO now manages several projects with partnership with the public sector in Palestine and abroad, including:

• Awqaf Building • Al-Bireh Central Station • Scouts Building

• Park Plaza project – Jordan

Residential and commercial projects: PRICO is currently developing the administrative and logistic aspects of its existing residential projects. It has invested in this sector over the past years and focused on completing the engineering and architectural projects. Now it is seeking to develop and manage the general concept of residential complexes. Such as: • Al-Ghadeer suburb • Al-Masayef Project • PRICO House 2

ANNUAL REPORT | PADICO HOLDING 27 Jericho Gate for Real Estate Investment Company Rabiyat Al-Quds Project

The two largest private sector companies, PADICO HOLDING and PALTEL Group, own Jericho Gate Rabiyat Al-Quds project is primarily a housing project, standing out by its innovative design. It has an Company. It started the construction and development of a fully integrated residential neighborhood integrated neighborhood that includes green areas that allows residents to live in a community that comprising residential villas for recreational leisure in the city of Jericho on an area of 3033 square encourages them to socialize while preserving the privacy of the population by providing complete kilometers in the area classified “A” each piece of land owned with“Tabu”. The project is located on independence of each building. The project also provides a recreational environment for children the southern entrance of the city, which is the oldest in the world and the lowest spot on the planet. to enable parents to monitor and follow their children while playing in green, wooded and fully The project seeks to embody a qualitative leap in the Palestinian lifestyle into a full-life lifestyle. The protected spaces for children. project will create more than 5,000 jobs for youth, women and entrepreneurs, whether by creating The first objective of the project is to reach the largest number of residents of the Jerusalemite entrepreneurial jobs or new jobs. This will contribute positively in improving the lives of Palestinians. identity, since they suffer greatly from the acute shortage of licensed apartments that comply with The project will include more than1500 residential tourist villas, several hotels, tourist facilities, the conditions and specifications determined by the Municipality of Jerusalem. The other targeted shopping malls, recreational water parks, a racetrack for cars, as well as cultural and educational groups are Palestinian citizens at home who work in or want to invest in Jerusalem. centers such as the museum and the tourist academy. It will also include Conference venues, Rabiyat Al-Quds Real Estate is a promising real estate project executed by PADICO Holding in Beit schools, higher education institutions, agricultural research institute and many cultural facilities. Safafa area in the south of Jerusalem. The project includes the construction of 22 residential buildings. The company has completed an important part of the infrastructure networks for the first phase, and During the year 2016, PADICO HOLDING has completed its efforts to obtain all necessary licenses work is on process to complete all the infrastructure works and networks for the first phase during and approvals from all the relevant departments in the Municipality of Jerusalem for the development the next year so that the residents can begin their lives in the villas that developers started to build of Jerusalem Rabiyat Al-Quds project. The approvals received included land, apartments, water, within this stage. electricity, licenses for disabilities facilities, firefighter station, road construction and others.

In addition to the villas that five developers started on an area of about 85 dunums, in residential area After the company obtained all the necessary licenses for the ten buildings comprising the first in the first phase, the company started preparing for the construction of 24 villas of five models to phase of the project, it has the option of raising the percentage of construction to increase the be built in the first quarter of this year 2018. They will be like the project model in terms of style and number of existing apartments from 82 to 96 apartments maximum. The new land classification will quality and lifestyle. The company will start marketing and selling these villas in the coming period. include commercial classification (offices, coffee shops, supermarkets) and residential classification. This will increase the number of licensed apartments.

ANNUAL REPORT | PADICO HOLDING 29 Industrial Estates Sector:

Among the important sectors in which PRICO is engaged in the investment and development of the industrial sector, it considered the need of the market to find effective solutions to the problems faced by the industrial sector, and implemented many projects that affect the Palestinian economy in terms of industry.

Jericho industrial agricultural city (JAIP) JAIP was established in 2012 in cooperation with the Palestinian National Authority and with the support of the Japanese government. It is the first of its kind as a multisectorial agricultural industrial city with investment incentives offering companies and investors in the agricultural industrial sector spaces and integrated storage solutions. Particularly, after achieving the objectives of the strategic plan that was established in early 2012 by JAIP that included preparing the land of the first phase of the establishment, processing of all infrastructure works, providing the bulk of services to investors and developing the system of partnership with donors and related parties. Therefore, at the current stage, JAIP seeks to build plans and strategy for the implementation of the second phase it project, which has an area of about 485 dunums.

In 2017, JAIP worked on the construction of twelve industrial buildings through signing several agreements with several construction companies. In addition, 2017 included a plan for the completion of the first phase of JAIP, which is still under construction, from the completion of industrial buildings and space services, which includes the completion of electricity services to these lands, the installation of four additional electrical transformers. In order to equip the room of the power station and the fire and fire system in addition to the control and control system. Palestine Company for the Establishment and Management of Industrial Zones (PIEDCO) As the plans and requirements for the first part of the second phase of JAIP have started, many investors have entered the project to start the establishment of new factories and investments. The project has PIEDCO is the first industrial zone in Palestine. It is considered one of the most important also set up regulations and policies for working within the project area and it issued a special instruction cultural aspects in terms of environmental and development in terms of its main role in ending booklet to organize the work within the region for all its customers. the problems of violating establishments within the residential communities on the one hand The future strategy is to open the field of investment to all sectors with focusing on long-term investors and realizing the possibility of establishing small and medium enterprises, which are the and promising industries in Palestine. It will also focus on increasing and developing the level of services arteries of large industries on the other hand. provided by JAIP to customers and investors and will raise the efficiency of its service operations to meet In 2017, PIEDCO has made many achievements, including the establishment of hangars with the needs and requirements of the national and international markets. This aims to promote attracting foreign strategic investors both from experience and knowledge or industries and expand cooperation an area of 3105 square meters, the construction facility spaces were 6000 square meters and joint work with preferential concessions with the outside world to support the development and for Coca-Cola Company, and many other projects have initiated from the development and development of JAIP and raise the level of national industrial product and definition, according to the maintenance of the sewage plant to the development and maintenance of Well No. 3. The interests of the Palestinian industrial sector. achievements of the year crowded with the signing of the renewable energy agreement.

In addition, many delegations visited PIEDCO to find out this advanced achievement and discuss ways of cooperation and enhancement on the one hand and ways of investment and development on the other hand. A delegation from the World Bank visited PIEDCO more than once over the past year, the Belgian Development Agency, the European Union, the Minister of National Economy and a delegation from the Palestinian Capital Authority.

ANNUAL REPORT | PADICO HOLDING 31 Infrastructure sector Tourism Sector

PADICO HOLDING paid a particular importunacy to the infrastructure sector and the PADICO HOLDING’s total investments in the tourism sector amounted to USD 44.4 million, environment, as the investments of PADICO HOLDING mounted USD 8.1 million, and or 8% of PADICO’s total investments at the end of 2017, through Jerusalem Development & accounting for 1% of the total investment PADICO Holding at the end of 2017. Investment Ltd (PADICO Tourism).

Jerusalem Development & Investment Ltd (PADICO Tourism)– JEDICO Solar Power Project in PIEDCO in Gaza Strip PADICO is a holding company that manages JEDICO. Following the restructuring of PADICO During the year 2017, PRICO signed HOLDING’s, JEDICO included the following investments under the company’s investment a financing agreement with the World portfolio: Palestine Tourism Investment Company, Jerusalem Tourism Investment Company, Bank Group and the institutions involved and Executive Club. in the implementation of the project of producing electricity from solar energy with JEDICO operates a number of five-star hotels including: Jacir Palace Hotel in Bethlehem, Al- a production capacity of about 7 MW and Mashtal Hotel in Gaza and St. George Hotel in Jerusalem. In addition to a number of service which can be increased up to 10 MW in projects as a business executive club in Ramallah. the future. All contracts and agreements to start the project are completed. Technical Palestine Tourism Investment Company - Jacir Palace Hotel – Bethlehem and financial studies to meet the needs of Jacir Palace Hotel is an important entity in the tourism industry that is considered a historic investors within PIEDCO, which aimed to landmark that offers the highest level of services. The hotel works periodically to increase sales stop the power outages from factories in the through offers to address all types of customers for all facilities, and by working to present industrial zone of Gaza are done. the ideal image of the hotel, whether through the service of the community or by providing all possible requests from customer’s services or celebrations.

Jacir Palace Hotel in Bethlehem awarded the International Hotel of the Year award by the Solar Power Project in Gaza (Blue Beach Resort) World Luxury Hotels Award of 2017 at the awards ceremony held in Switzerland. The investment in electric power project of solar energy by connecting a system that works on the operation of the system and the continuation of its work in the power outages automatic work belted system of electric generators to continue system in the storage of solar energy and convert it to stream without interruption. The system provides the resort with electricity in the event of interruption of the electricity company the surplus transferred to the public company, the project estimated power with a productivity of 467 kW.

Sewage Treatment Project in Jenin The wastewater treatment project in Jenin aims to strengthen and expand the existing wastewater treatment plant by establishing a triple treatment unit to improve water quality and increase the processing capacity for water recycling for agricultural use.

In 2017, the first phase of the project was completed. It consisted of measurements, monitoring and design preparation for the new expansion. Through 2018, the new treatment system will be installed and the capacity of the plant will be increased.

ANNUAL REPORT | PADICO HOLDING 33 Jerusalem Tourism Investment Company - St. George Hotel - Jerusalem Al-Mashtal Tourism Investment Company - Al-Mashtal Hotel - Gaza

St. George Hotel is strategically located in East Jerusalem. Late King Hussein Bin Talal opened The tourism sector witnessed a significant decline in Gaza Strip during 2017 due to the the hotel in 1965 and then it was reopened after major renovations in 2012. The hotel consists continued closure of the borders and the cut of electricity power. Domestic tourism in Gaza of 130 modernly equipped rooms while maintaining its oriental character for welcoming tourists also declined due to the closure and the high prices and discounts on salaries of public sector and pilgrims from the whole world the hotel have meeting rooms, new conference and event employees. center. In addition to the hotel’s kitchen, which serves local and international dishes. The The company has been able to achieve operational revenues for the first time since the start of hotel’s fifth floor pool has charming views of the historic city of Jerusalem. the operation. As it have been able to achieve signs of reconciliation and the entry of Wataniya Mobile to work in Gaza market to achieve excellent revenues, which means that the hotel can The St. George Hotel was chosen as the best city hotel for the fourth year in a row, which continue to achieve good results once a major economic or political event. was announced by the Global Hotel Awards Organization and based on a vote by the hotel’s customers and guests. The ceremony held in Switzerland on 2 December 2017. Al-Mashtal Hotel is the only hotel classified as a five star hotel in Gaza Strip. It has 222 guest rooms and suites, a large banquet hall, six business halls for businesses, institutions and civil organizations, a large swimming pool, cafes and restaurants.

Executive Club

As part of the restructuring process of PADICO Holding, is the investment portfolio to improve the performance of the Group investments, the Executive Club, managed by the first specialized leisure company since the beginning of November, has suspended the restaurant business, and transformed the club into health and sports club.

The club also announced a special program for members of all types of fitness classes. A sports program for children aged 4-12 also was announced. The program includes four sport programs: swimming, training, gymnastics and yoga.

As part of the club’s identity changes, a new club name has been adopted to reflect the new identity “EC Health Club & SPA” and it was promoted through social networks, correspondence, advertising campaigns and media.

ANNUAL REPORT | PADICO HOLDING 35 Industrial and Agricultural Sector National Carton Industry Company

The National Carton Industry Company was established in 1993. The company produces Since its establishment, PADICO HOLDING paid a special attention to the industrial and carton boxes in various shapes and sizes. It markets its products in the local Palestinian agricultural sector. Investments in this sector amounted to USD 42.0 million or 7% of total market. It is the first Palestinian company to obtain a license in the cardboard industry. The investments at the end of 2017. company has the highest market share in the cardboard industry in Palestine and possess Palestine Industrial Investment Company – PIIC many elements that enable it to improve its performance continuously and always looking for new investment opportunities in the packaging industry as this industry characterized by PIIC was founded in 1995 by PADICO HOLDING to represent its investment arm in the industrial renewal and rapid development and permanent. and productive sectors. The company’s activities are concentrated in the establishment and management of productive and industrial companies in the sectors of livestock, light, medium Al Pinar General Trading Company and heavy industries. At the beginning of 2016, PIIC acquired the shares of Al-Pinar General Trading Company, PIIC has four subsidiaries: specialized in the dairy industry, which was established in Ramallah in 1999. During 2016 and • Palestine Poultry Company “Aziza”- PPC 2017, the company achieved remarkable growth in all performance indicators operating and • National Carton Industry Company financial operations, where revenues increased by 15% and 10%, respectively, and achieved a qualitative leap in net income during the two years followed the acquisition. • Palestine Plastic Industries Company • Al Pinar General Trading Company The company started to implement the company’s development plan and its products. Funds begin to finance the company’s development plan, which includes the establishment of a new PIIC also has significant stakes in The Golden Wheat Mills Company and The Vegetable Oil Industries Company (VOIC). sophisticated plant to become one of the most important dairy companies in Palestine.

Palestine Poultry Company “Aziza”- PPC It was established by Palestine Industrial Investment Company in 1997. Palestine Poultry Company AZIZA became one of the largest projects in livestock sector in Palestine. The company’s main activities The Vegetable Oil Industries Company (VOIC) revolve around manufacturing feeds, breeding broiler chicken, producing and selling hatching eggs and The Vegetable Oils Industries Company (VOICE) was established in 1953, and it is one of the oldest founding slaughterhouse of poultry. operating companies in Palestine. It produces vegetable oil products from non-hydrogenated palm AZIZA skilful policy builds upon improving performance, developing projects, raising production capacity oil, refined corn oil, soybean oil and sunflower oil that comply with international quality standards. In in line with the increasing demand and growing markets. The company also realizes the importance addition to meeting the needs of the local Palestinian market, the company exports to other Arab of preserving communication channels to achieve high customer satisfaction, throughout all stages of countries, where it has developed a favorable reputation. The company’s investments have done work, even after the sale. well. It owns 25% of the capital of the Palestinian Beverages Company, a Coca Cola producer. According to preliminary financial statements for 2017, the company’s sales increased by 2% compared During the year 2017, the company achieved a good growth in its performance indicators with sales to 2016, reaching JOD 35.08 million compared to JOD 34.31 million. The net profit after tax for the of JOD 5.75 million compared to JOD 5.25 million for 2016. Its net profit after tax amounted to period was JOD 3.18 million for the year 2017 compared to JOD 3.23 million for the year 2016. JOD6.84 million compared to JOD 5.61 million for the year 2016 and a growth of 22%.

ANNUAL REPORT | PADICO HOLDING 37 Nakheel Palestine Company

Since its establishment in 2010, Nakheel Palestine has always strived to advance on all levels. The year 2017 witnessed several developments. The company signed a financing agreement with the PROPARCO, amounted of US 10 million public partnership. As a result, the company expanded its farms by purchasing Sultan Fresh Fruits Company, increasing the number of farms owned by the company from six to eight farms and bringing the number of palm trees cultivated to about 42,000 palm trees on an area of 3400 dunums. The company has also increased its storage capacity as its frozen warehouses can reach about 3,000 tons of dates. The season of 2017 witnessed an increase in production by more than 50% from the season before, where the production volume in the current season amounted to about 1500 tons compared to about 600 tons in the 2016 season.The GA of shareholders of Nakheel Palestine has increased its capital to USD 15 million, also increased the number of employees in the company in 2017 up to 71 permanent staff and 500 seasonal workers in the company’s farms and packinghouse. The company has developed its brand names and expanded the range of packages for its products in terms of design and shape in line with the demand in the local and international markets. Nakheel Palestine products are still reaching all international markets. The number of 15 markets including Turkey, Indonesia, Malaysia, Qatar, New Zealand, Italy, Norway, Austria, Lebanon, Russia and Japan. In 2017, it also gained access to new markets, including France, Sweden and Argentina. The Golden Wheat Mills Company Golden Wheat Mills Company was established in 1995. With its equipment and buildings, which imported from Switzerland in their entirety, the company is among the most advanced in the Middle East region in terms of equipment and buildings. The production capacity of the company stands at 450 tons per day and it acquired the Palestinian Quality certificate as the first Palestinian mills company in 2010. The company also produces flour in all its forms in addition to other products such as semolina and bran. The company is currently investigating opportunities to produce other products such as corn flour, pasta and biscuits. Flour is the key component for manufacturing and marketing these products. The company has achieved remarkable growth in its performance in 2017. The company’s preliminary financial statements for the year 2017 indicate that the company’s sales amounted to JOD 10.75 million, realizing a significant growth in its net after tax income to reach JOD 1.48 million compared to a net income of JOD 0.03 million For the year 2016.

Jordan Vegetable Oil Industries Company. Ltd Jordan Vegetable Oil Industries Company is specialized in the production of plant fat, 100% of non-hydrogenated palm oil, refined corn oil, soybean oil and sunflower oil. It was established in 1953 as a public shareholding company with a capital of JOD 500,000, the company was raised to JOD 3 million in 1998 and subsequently increased to JOD 4 millions.

ANNUAL REPORT | PADICO HOLDING 39 The following is the general framework of PADICO HOLDING plans over the next few years: • Focusing on improving the operations performance in all companies and projects invested by PADICO HOLDINGs and its subsidiaries through increasing efficiency in all operations and production areas by rationalizing administrative expenses, controlling operating expenses, enhancing revenues and diversifying sources. • Paying greater attention to projects and companies operating in vital sectors currently invested by PADICO HOLDING Group, especially the real estate sector, industrial cities and alternative green energy. These investments will be a major FUTURE lever for profits in the near future, medium and long term by expanding the base of these investments by entering new projects and optimizing the assets and potential of existing projects. • Focusing its efforts on investments that continue to burden the group’s annual VISION profits, especially those of the tourism sector, and turn them from losing companies into profitable companies in the medium term. • Investing in new development projects in promising sectors and focus on infrastructure project and alternative energy sectors. • Continuing to reduce PADICO HOLDING’s debt from year to year to be limited to the medium term loan.

ANNUAL REPORT | PADICO HOLDING 41 Social Responsibility PADICO HOLDING demonstrated the utmost commitment to social responsibility towards main segments of the society such as youth and women among the other less privileged and disadvantaged segments and important sectors such as education and culture. This comes In recognition of the importance of PADICO HOLDNG role in supporting economic development in Palestine, and the need of the Palestinian society to develop and sponsor small projects and creative initiatives. PADICO HOLDING has been incorporating a well-developed concept of systematic social responsibility with a sustainable development dimension as value system and a principled approach. Overall, realizing the dynamic promising potential of this responsibility will fortify the pillars of the Palestinian society, mainly the younger generation tasked with building the Palestinian economy and paving the way for a better future. Inspired by this unique vision since its inception, PADICO HOLDING has been committed to implement and support outstanding community programs that have made it one of the leading Palestinian national institutions in the field. Over the last 23 years, PADICO HOLDING has been keen to develop, enrich and diversify its community programs, including economic, social, educational, technical, cultural and entrepreneurship sectors. Our Company manifested special interest in the youth who has the potential for any real renaissance.

ANNUAL REPORT | PADICO HOLDING 43 leadership, youth and arts. Accordingly, PADICO various educational activities. PADICO HOLDING community- HOLDING is capable of achieving long-term Second: Entrepreneurship and PADICO HOLDING has diversified its activities Creativity based strategies share four viability that will benefit wide segments of the in the field of education in 2017, and continues major characteristics: community and foster a better future for our to provide its annual direct support to university PADICO HOLDING believes that the promotion of homeland. students through its special scholarship entrepreneurial spirit and self-initiative culture is program, which aims to help students in need one of the most important factors in supporting First: conducting preemptive study the Palestinian economy and overcoming Fourth: Partnership and to cover tuition fees for their various programs of status-quo of the community many of the obstacles, facing the Palestinian institutionalization of community at local universities. Hundreds of students in Ahead to launch any community initiative, work Palestine has been part of this program since its graduate when tries to join the working market, PADICO HOLDING seeks to explore the especially since the Palestinian have a lot of PADICO HOLDING corporate social responsibility launch. PADICO HOLDING has also supported community status to set priorities and sectors creative potential and optimism, youth, and high programs are basically characterized by the late Rashid Khalil Erekat Foundation to help of much need for support and development. educational attainment, which need attention institutional community partnership which opens students complete their undergraduate studies As well as, adapting community programs and support and employ proper development the doors wide for exchanging experiences, at Palestinian universities. PADICO HOLDING based on observation. employment. Hence the company’s attention in consultations and sharing ideas; and making has supported the program over the past several years. In the same direction, PADICO this field. One of the most prominent strategic the utmost benefit from the experiences programs supported by the company in this Second: sustainability and the HOLDING has allocated a sum of money of specialized institutions. Most likely, their framework is the program (Tamiz). strategic approach community contributions institutionalized and an to the International Institute of International Scholarship Program in various countries. Tamiz is a strategic program initiated by PADICO PADICO HOLDING community-based integrated joint effort that achieves a sustainable HOLDING in late 2012 in partnership with initiatives are principled as long-term strategies social impact is developed. Recalling back, In the educational context, as part of PADICO’s Sharek Youth Forum and the International Youth and methodologies, alike many PADICO PADICO HOLDING consciously realizes the commitment to empower the most vulnerable Foundation. It aims to facilitate the integration ongoing initiatives. The company has adopted deficiencies of the individual work, both at the segments of the community, especially those of Palestinian graduates into the working market this approach out of thoughtful evaluation of level of lack of experience - in a particular area, who face difficult circumstances that hinder by exposing them to the greatest qualitative the minimal tangible impact and benefit of the or in practice. PADICO HOLDING has woven their proper involvement in society and play their experience of exposure. In order to enrich temporary individual community activities on a wide and deep network of relationship; it natural and active role in various fields. In 2017, the content of the program and ensure its the developmental process or community level. launched several joint initiatives with partners PADICO HOLDING supported and sponsored design to suit the exact needs of the market, Tangible well-grounded development in any in official institutions, private and community SOS Palestine, a leading global organization PADICO HOLDING held several workshops area can be only achieved through long-term sectors as well as international institutions. working in more than 130 countries, which aims and brainstorming sessions in its preparatory projects, to allow the process of development to empower children. PADICO HOLDING was meetings, and consulted local experts from become self-sustaining. That short and long the sponsor of the Education for a Better Future Palestinian universities as well as international term societal attitudes have always shown that During the year 2017, PADICO program, which covers the cost of education experts to identify the most important obstacles random short term developmental projects Holding maintained the diversity for more than 270 children and young adults facing Palestinian graduates. The company always have temporary effects. As a result, of its social responsibility family care. It is the foundation of the village of concluded that the Palestinian graduate suffers wide sectors of the community deprived from activities and divided into the children in its villages scattered in the cities of from a very difficult integration into the labor sustainable effects. Bethlehem and Rafah. following tracks and sectors: market due to the large gap between the It also continued to support the activities and university academic track and the requirements educational programs of INJAZ Palestine, Third: deliberate development of working market, which are constantly changing First: The Education Sector: an independent Palestinian organization run assistance for vital influential at an accelerated pace. sectors PADICO HOLDING believes that education and sponsored by a number of Palestinian companies. It aims to promote economic PADICO HOLDING has also supported Massarak PADICO HOLDING is committed to provide is the cornerstone of achieving the desired opportunities among the Palestinian youth Program, which is interested in enabling graduate deliberate development assistance to vital development goals. Whether by supporting by providing a series of practical economic students to create jobs, from job requirements sectors at the core of the developmental educational funds, providing scholarships, courses in schools and universities, carried out and skills to basic writing and interviewing skills. process, mainly education, economy, culture, networking with universities and sponsoring by volunteers from the sector the private. The program does not stop at this point, but it

ANNUAL REPORT | PADICO HOLDING 45 is also engaged in networking with Palestinian as part of an annual program of visits to the memory to recall the history of the Palestinian PADICO Holding has also supported the “Ata’ institutions and companies in order to create university students in Palestine, in order to cause so that it remains alive and effectively in -3ata2- Palestine Charity Association” which training opportunities for new graduates in familiarize themselves with the Palestinian the face of attempts to raise awareness of the aims to build an economically prosperous order to gain practical experience, face and political, economic and social realities. Where Palestinian people. Palestinian society that is equitable in terms of discuss working place more widely. In addition, more than one hundred students learn about PADICO HOLDING is the most important of its the distribution of resources to its various groups, PADICO HOLDING is a registered company in the Palestinian economic reality, including the kind in the cultural field. It is the International especially marginalized ones, in order to create a Massarak Program that train trainees from the investment opportunities available, and what Youth Cinema Festival, the night of “Nawa”, and healthy cultural and social environment. Through program. Palestine possesses of the capabilities and many festivals such as the Fourth International the rehabilitation of Palestinian children and the PADICO HOLDING has supported Gaza Sky potentials and energies of economic quality. Youth Cinema Festival and Oud Rumman assistance of their families. Their activities varied Geeks as the fastest growing incubator in Gaza. In addition to identify the most important Festival. PADICO HOLDING also sponsored from cultural activities in the West Bank and The organization initially started to provide challenges and obstacles that hinder the the screening of graduation films for students Gaza Strip. electricity and high-speed internet to the youth growth of the Palestinian economy and prevent of the Department of Information, all of which the natural development to take its regional and in the same failed to allow them to learn more seemed promising and meaningful. Seventh: Sport and reduce the amount of barriers they face international economy Active and productive, This year, PADICO HOLDING sponsored the on a daily basis and to offer new business and actively contributes to economic and Sixth: Marginalized Groups: sport sector because of its importance. Inspired opportunities to revive the economy. Today, humanitarian growth across the region. The Activities and support methods for children by its sponsorship of the Palestinian federation Gaza Sky Geeks is trying to establish the first students also briefed on PADICO HOLDING as a have diversified in 2017. PADICO HOLDING it also sponsored the Chess Federation. The programming academy, facilitating the training pioneering investment experience representing have collaborated with Farah, a non-profit Federation is keen to take care of young talents of young Gazans at international companies the role of the Palestinian private sector in the organization for children with cancer, to bring and encourages young players to play this game in the European Union and the United States construction and development process. back the smileon the faces of these children. and increase the number of players and clubs of America, and securing the programming A full day of events arranged through PADICO practice for this game at the chess union. The education program for girls in high school. Fifth: The Culture Sector HOLDING, in which a number of PADICO Federation is also keen to participate in the World PADICO HOLDING believes that cultural HOLDING employees volunteered to be Championships, Asian and Arab, and the Union Third: The Economy Sector work is the most important tool of intellectual supportive of children and their families. The through its multiple participation to get the first As part of PADICO HOLDING’s keenness to enlightenment, which contributes to the activity was held in Rawabi City. and advanced centers in many tournaments. stimulate active exporters and initiators to open promotion of public awareness of society. new markets and put in place international Culture is an integral component of national products that put the Palestinian product on identity. It plays a key role in preserving the the international map, PADICO HOLDING has national memory from erosion and preserving sponsored the Palestinian Masdar 2017 award the Palestinian self from lost. Globalized ceremony organized by the PalTrade. The award cultural globalization, which is characterized by is part of the effort to attract many public and information overload that threatens the cultural private sectors for export development. The identity of societies beyond all geographical award targets various sectors, namely stone barriers. and marble, agricultural production, services, PADICO HOLDING has seen the support of information technology, and tourism. culture as a vital task that directly integrated with the sustainable development it seeks Fourth: Networking and Opening to promote. Based on this vision of the Up To International Institutions development process, PADICO HOLDING has especially supported cultural activities and PADICO HOLDING has hosted a delegation of events that promote the awareness of the students from the Harvard Business School, Palestinian cause and stimulate the collective

ANNUAL REPORT | PADICO HOLDING 47 PADICO HOLDING’s profit arttibuted to the equity holders of the parent amoutned to USD 6.79 million in 2017 compared to USD 19.01 million in 2016. The provisions temporary made by subsidiaries, especially Palestine Real Estate Investment Company (PRICO), significantly affected the Group’s financial performance in 2017. These provisions totaled USD 14.1 million including provisions allowances for doubtful accounts of USD 7.5 Financial million, provisions for impairment of ready for sale properties and projects in progress of USD 4.2 million and other provisions of USD 2.4 million as a part of the restructuring process carried out by PADICO HOLDING and some of its subsidiaries, based on Padico Holding’s board of directors guidance, and its resolution dated 24/7/2017 on standardizing the policies of the group companies and cutting off operating and general Performance in 2017 administrative costs and to undertake the necessary restructuring to meet the circumstances and improve the group and its financial performance. Operating profit before provisions grew by 4.3% to USD 34.19 million in 2017 compared to USD 32.78 million in 2016. Despite being affected by PADICO’s share of the of associates results of operations, it decline by 11.1% from USD 38.11 million to USD 33.89 million. It is worth noting that the consolidated results for 2017 have been negatively imapcted for once by the restructuring costs of some of the group’s companies, which mainly aims to increase the operating efficiency of the subsidiaries and optimize the use of resources and assets, which will reflected positively on the consolidated financial performance and the profitability of group companies starting in 2018. On the other hand, year 2017 witnessed a clear improvement in the profitability of other subsidiaries and affiliates such as Palestine Industrial Investment Company (PIIC) and its subsidiaries and affiliates. PIIC profits grew by 14% to USD 7.76 million. Year 2017 also witnessed improvment in the performance of Jericho Gate Real Estate Investment Company and Nakheel Palestine for Agricultural Investment. These two companies have started to generate operating profits, which is expected to grow gradually in the next years with the development in their operations. In addition, improvement witnessed by the subsidiaries companies operating in the tourism sector, which have been able to generate operating profits in 2017 and thus significantly reduce losses compared to 2016 and previous years.

Consolidated Revenues

Consolidated revenues increased by 7.8% to reach USD 142.20 million in 2017 compared with USD 131.93 million in 2016, driven by an increase by 17.3% in operating income of subsidiaries, growing from USD 92.30 million to USD 108.28 million. Compared to a decline by 11.1% in the share of PADICO HOLDING’s share of associates results of opperation this decline is due to the decline in profits of the Palestinian Telecommunications Company (PALTEL Group) from USD 112.91 million in 2016 to USD 99.47 million in 2017, the performance of the PALTEL GROUP was affected by the renewal of the licenses of PALTEL and JAWWAL at the end of the year 2016. This resulted in a higher amortization expenses of the license, in addition to the termination of the partial tax exemption (50%) for JAWWAL starting of 2017, and the termination of the partial tax exemption (50%) for Paltel.

Ta b l e ( 1 ) : C o n s o l i d a t e d r e v e n u e s USD Million

Item 2017 2016 % Change

Operating income of subsidiaries 108.28 92.30 17.3

Company's share associates’ results of 33.89 38.11 )11.1( the operation

Gain (loss) from financial assets )0.03( 0.76 )104.4( portfolio

Gain from sale of investment properties 0.07 0.76 )91.1(

Total consolidated revenues 142.20 131.93 7.8

49 Ta b l e ( 3 ) : D i s t r i b u t i o n o f a s s e t s a n d i n v e s t m e n t s Consolidated Expenses USD Million

% of % of Consolidated expenses increased by 9.1% from USD 111.62 million in 2016 to USD 121.80 Item 2017 2016 % Change total total million in 2017, This increase was mainly attributed to subsidiaries operating expenses which increased by 11.7% to reach USD 78.77 million for the current year compared to USD 70.54 Cash and financial assets at fair 24.71 2.9 42.00 5.0 )41.2( million for the last year. This increase was compined by greater increase of 17.3% in operating value through profit or loss income, as mentioned before. Accounts receivables and other current assets 60.45 7.2 51.79 6.1 16.7 T a b l e ( 2 ) : C o n s o l i d a t e d E x p e n s e s USD Million Inventories, ready for sale properties, Item 2017 2016 % Change and biological assets 31.73 3.8 36.01 4.3 )11.9(

Financial assets at fair value through Operating expenses 78.77 70.54 11.7 31.38 3.7 24.55 2.9 27.8 other comprehensive income General, Administrative, Sales and 19.17 19.00 0.9 Marketing expenses Investment properties 94.98 11.3 102.40 12.2 )7.2(

Financing costs 13.79 12.47 10.6 Investment in associates 400.19 47.6 397.27 47.2 0.7

Depreciation and amortization 10.08 9.61 4.8 Property, plant and equipment,

Total consolidated expenses 121.80 111.62 9.1 projects in progress, and intangible 197.75 23.5 188.17 22.3 5.1 assets

Consolidated General and Administrative expenses increased slightly by 0.9% from USD Total assets 841.19 100.0 842.18 100.0 )0.1( 19.00 million in 2016 to USD 19.17 million in 2017. Which includes sales and marketing expenses in subsidiaries and include administrative and general expenses in new operating projects. It also decreased by 41.2% includes administrative costs associated with restructuring process carried by PADICO HOLDING Cash and financial assets at fair value through the profit orloss from USD 42.00 million at the end of 2016 to USD 24.71 million at the end of 2017. and its subsidiaries in 2017. Accounts receivables and other current assets increased by 16.7% from USD 51.79 million at the end of increased by 10.6% from USD 12.47 million to USD 13.79 Consolidated financing costs 2016 to USD 60.45 million at the end of 2017, the increase is due to the increase in receivables of million due to an increase by 5.4% in the consolidated debt rate from USD 235.46 million in 2016 the subsidiaries, especially Jericho Gate and PIIC. to USD 248.14 million in 2017. Depreciation and amortization expenses amounted to USD 10.08 decreased by 11.9% from USD million in 2017 compared to USD 9.61 million in 2016, it slightly increased by 4.8%. Inventories, ready for sale properties, and biological assets 36.01 million at the end of 2016 to USD 31.73 million at the end of 2017, mainly representing ready real estate products at PRICO and inventory at the PIIC and Nakheel. Financial assets at fair Summary of Consolidated Financial Position value through other comprehensive income increased by 27.8% from USD 24.55 million at the end of 2016 to USD 31.38 million at the end of 2017. This increase was mainly due to the purchase of the Arab Bank shares by PIIC in 2017. Consolidated Assets Investments properties declined by 7.2% from USD 102.40 million at the end of 2016 to USD Consolidated assets amounted to USD 841.19 million in 2017, of which 12.6% are current 94.98 million at the end of 2017, this decline is mainly due to sale part of PRICOs land portfolio. assets and 87.4% are non-current assets. The following table shows the allocation of the Group’s They includes all property investments of PADICO HOLDING and its subsidiaries, mainly PRICO assets and investments at the end of 2017 compared to the end of 2016. and Jericho gate. The value of these investments appears at its historical cost on the consolidated financial statements, in which unrealized gains from the valuation of these assets are not reflected in the income and equity statements, according to the accounting policy which is adopting by PADICO HOLDING.

ANNUAL REPORT | PADICO HOLDING 51 The following table illustrates the distribution of consolidated debt at the end of 2017 and 2016 increased by Investments in associates among PADICO HOLDING and group companies. 0.7% to reach USD 400.19 million by the Fixed assets and Current assets other assets end of 2017. PADICO HOLDING’s share of Table (4): Consolidated debt for PADICO HOLDING and group companies associates results of operation amounted Financial assets at USD Million fair value through USD 33.89 million during 2017. Cash %13 other comprehensive income Company 2017 2016 % Change dividends received from the associates %4 during the same year amounted of USD %25 24.50 million, in addition to other changes Investments PADICO HOLDING 166.49 180.36 )7.7( in the equity of the associate companies, %11 properties including eliminating intercompany PRICO 31.96 43.21 )26.0( accounts with the associate companies.

Property, plant and equipment, %47 PIIC 23.88 7.34 225.3 projects in progress, and intangible assets increased from USD 188.17 JEDICO 12.56 13.95 )9.9( million at the end of 2016 to USD 197.75 Investment in million at the end of 2017 by 5.1%. This associates Nakheel Palestine 12.78 3.76 239.9 increase was mainly due to the increase in property, plant and equipment at Nakheel Consolidated assets and Total Debt 247.66 248.62 )0.39( investments distribution Palestine following the acquisition of 2017 Sultan farms, which completed during the Other liabilities constitute 22.9% of total liabilities, which amounted to USD 73.51 million at the end first half of 2017. of 2017. Most of these accounts are trade payables related to subsidiaries operations. The rest represents provisions allowances and other liabilities, including dividends payable, provisions for income tax and provision for employees’ indemnity.

Consolidated Liabilities

Equity Equity attributable Total consolidated liabilities amounted to Other to equity holders of Liabilities USD 321.17 million at the end of 2017 liabilities Bonds Equity attributable to equity holders of the parent compared to USD 305.16 million at the parent amounted to USD 420.96 million at end of 2016, an increase of USD 16.01 %23 the end of 2017. Equity attributable to equity million of 5.2%. This increase was mainly holders of the parent consists of paid-in %37 due to higher accounts payable and other capital with the amount of USD 250 million, 321.17 accounts particularly in PRICO, Nakheel and retained earnings of USD 162.83 million, 420.96 and PIIC. in addition to reserves and other items, which Total debt (bonds, bank loans and credit amounted to USD 8.13 million. Accordingly, %40 facilities) forms 77.1% of total consolidated the book value per share reached around USD liabilities. Debt level remained almost the 1.69 at the end of 2017, which exceeds the 99.06 same as it was at USD 247.66 million at share’s market price by 12.4% (USD 1.50 per the end of 2017. Total consolidated debt Loans share). Non-controlling interests amounted to Non-controlling represents 29.4% and 47.6% of total USD 99.06 million at the end of 2017, which interest consolidated assets and consolidated Consolidated forms 19.0% of total equity that amounted equity, respectively. liabilities distribution 2017 USD 520.01 million compared to USD 537.02 Liabilities and Equity million at the end of 2016, as shown in the distribution

table below. USD Million

ANNUAL REPORT | PADICO HOLDING 53 Table (5): Equity USD Million USD Million

% of % of Key Items of Consolidated Item 2017 2016 % Change total total statement of financial position and 2017 2016 % Change indicators

Paid-in Capital 250.00 48.1 250.00 46.6 - Total assets 841.19 842.18 )0.1(

Reserves and Other Items 8.13 1.6 14.61 2.7 )44.4( Loans and credit facilities 321.17 305.16 5.2

Retained Earnings 162.83 31.3 172.09 32.0 )5.4( Total equity 520.01 537.02 )3.2(

Equity attributable to equity 420.96 81.0 436.70 81.3 )3.6( Short and long term borrowing 247.66 248.62 )0.4( holders of parent Debt to equity 47.63 46.30 2.9 Non-controlling interest 99.06 19.0 100.32 18.7 )1.3( Debt to total assets 29.44 29.52 )0.3( Total Equity 520.01 100 537.02 100 )3.2( Current ratio 1.15 1.29 )10.9(

Key Financial Indicators Compensation of Key Management personnel and Board of Directors The compensation for the Board of Directors of PADICO HOLDING and its subsidiaries amounted to

USD Million USD 479 thousand in 2017; USD 180 thousand of this amount was allocated to PADICO HOLDING’s board of directors. The salaries and benefits of the top management of PADICO HOLDING and its Key Items of Consolidated Income 2017 2016 % Change subsidiaries amounted to USD 4,035 thousand; USD 1,403 thousand of this amount was allocated Statement and Indicators to the upper management of PADICO HOLDING.

Total consolidated revenues 142.20 131.93 7.8

Subsidiaries’ operating income 108.28 92.30 17.3

PADICO HOLDING’s share of associates’ 33.89 38.11 )11.1( results of operation

Profit before provisions and income tax 34.19 32.78 4.3

Profit attributable to equity holders of the 6.79 19.01 )64.3( parent company

Consolidated profit 4.96 18.91 )73.7(

EPS (cents) 2.72 7.61 )64.3(

ROE average 0.94% 3.50% )73.2(

ROA average 0.59% 2.27% )74.1(

ANNUAL REPORT | PADICO HOLDING 55 Performance of PADICO HOLDING’s share Indicator 2017 2016 % Change The trading volume of PADICO HOLDING’s share increased to reach 79.48 million share in 2017, with an increase of 85.7% compared to 2016, the trading value of PADICO HOLDING’s share reach Paid-in capital (million shares) 250.00 250.00 - to USD 111.70 million. The turnover increased from 17.12% in 2016 to 31.79% in 2017. PADICO HOLDING’s share closed at USD 1.50 at the end of 2017. Year-end Book value per share (USD) 1.69 1.75 )3.6(

P/B 0.89 0.66 34.1 1.6 Closing price (USD) 1.50 1.16 29.3

1.4 P E 55.13 15.23 261.9

USD Trading volume (million shares) 79.48 42.81 85.7 1.2 Trading value (USD million) 111.70 49.59 125.2

Turnover ratio 31.79 17.12 85.7 1.0 52 week high (USD) 1.64 1.23 33.3

52 week low (USD) 1.01 1.05 )3.8( 2-Jan-2017 29-Jun-2017 29-Mar-2017 28-Sep-2017 31-Dec-2017

ANNUAL REPORT | PADICO HOLDING 57 Palestine Development and Investment Limited (PADICO HOLDING) Consolidated Financial Statements December 31, 2017

59 ANNUAL REPORT | PADICO HOLDING 61 ANNUAL REPORT | PADICO HOLDING 63 PALESTINE DEVELOPMENT AND INVESTMENT LIMITED (PADICO)

Palestine Development and Investment Limited (PADICO) CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at December 31, 2017 (U.S. $ 000’s) 2017 2016 Notes U.S. $ U.S. $ Assets Non-current assets Property, plant and equipment 6 154,247 140,667 Intangible assets 7 33,591 31,380 Investment properties 8 94,977 102,395 Projects in progress 9 9,915 16,126 Investment in associates 10 400,187 397,269 Financial assets at fair value through other comprehensive income 11 31,381 24,549 Long term accounts receivable 13 11,113 10,541 735,411 722,927 Current assets Inventories and ready for sale properties 12 31,729 36,007 Accounts receivable and other current assets 13 49,340 41,244 Financial assets at fair value through profit or loss 14 5,209 11,132 Cash and short-term deposits 15 19,497 30,866 105,775 119,249 Total assets 841,186 842,176

Equity and liabilities Equity Paid-in share capital 16 250,000 250,000 Share premium 16,932 16,932 Treasury shares 17 (361) (361) Statutory reserve 18 31,934 30,417 Voluntarily reserve 18 1,594 1,594 Fair value reserve 11 (46,443) (34,804) Foreign currency translation reserve 4,470 827 Retained earnings 162,829 172,092 Equity attributable to equity holders of the parent 420,955 436,697 Non-controlling interests 5 99,057 100,321 Total equity 520,012 537,018

Non -current liabilities Long-term loans and borrowings 20 89,644 82,392 Debt bonds 21 120,000 120,000 Provision for employees’ indemnity 22 6,452 7,426 Other non-current liabilities 23 13,281 3,231 229,377 213,049 Current liabilities Credit facilities and short-term loans and borrowings 20 38,019 46,229 Accounts and notes payable 24 20,116 15,827 Other current liabilities 25 32,631 28,879 Provision for income tax 26 1,031 1,174 91,797 92,109 Total liabilities 321,174 305,158 Total equity and liabilities 841,186 842,176

The attached notes 1 to 41 form part of these consolidated financial statements

The attached notes 1 to 41 form part of 1these consolidated financial statements

ANNUAL REPORT | PADICO HOLDING 65 PALESTINE DEVELOPMENT AND INVESTMENT LIMITED (PADICO) PALESTINE DEVELOPMENT AND INVESTMENT LIMITED (PADICO)

Plestine evelopment nd nvestment imited P) alestie eeloet a estet iite ) CONSOLIDATED INCOME STATEMENT CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME or te er nded eemer 31 2017 or the ear e eceer 31, 2017 $ 000’s) .S. $ 000’s)

2017 2016 2017 2016 otes $ $ .S. $ .S. $ Revenues pertin inome 27 108,276 9230 Profit for the year 4,964 18,909 Share of associates’ results of opertions 10 33889 3811 Other comprehensive income items osses) ins from finnil ssets portfolio 28 )33( 77 tes ot to e reclassifie to cosoliate icoe in from sle of investment properties 8 67 7 stateet i suseuet erios 142,199 131930 et loss of fiacial assets at fair alue throuh Expenses other corehesie icoe 7,111) 8,412) Share of associates’ other comprehensive income pertin epenses 29 )78,767( 7038) ites 8,009) 4,474) enerl nd dministrtive epenses 30 )19,165( 18996) 15,120) 12,886) inne osts )13,787( 1269) tes to e reclassifie to cosoliate icoe epreition nd mortition 31 )10,078( 961) stateet i suseuet erios 20,02 20313 orei currec traslatio iffereces 5,440 391

Share of associates’ other comprehensive income ter epenses nd provisions net 32 1132) 608) ites 771 13 Profit before income tax 6,270 1970 6,211 404 nome t epense 26 )1,306( 796)

Profit for the year 4,964 18909 Total other comprehensive income items for the year 8,909) 12,482) ttritle to Net comprehensive income for the year 3,945) 6,427 ity olders of te prent 6,792 19009

onontrollin interests )1,828( 100)

4,964 18909

Basic and diluted earnings per share attributable to ttriutale to equity holders of the parent 33 0.027 0076 uit holers of the aret 3,250) 6,369

ocotrolli iterests 695) 58

3,945) 6,427

The attached notes 1 to 41 form part of these consolidated financial statements The attached notes 1 to 41 form part of these consolidated financial statements e tted notes 1 to 1 form prt of tese onsolidted finnil sttements 2 he attache otes 1 to 41 for art of these cosoliate fiacial stateets ANNUAL REPORT | PADICO HOLDING 3 67

)

0 PALESTINE DEVELOPMENT AND INVESTMENT LIMITED (PADICO)

it 0) ) ) ) ota 0 $ e ) ) 0 00 0

s s ()

0 ) 00)

) ) ) CONSOLIDATED STATEMENT OF CASH FLOWS 0 on $ 00 00 00 interests

controin 0

(U.S. $ 000’s)

0 0 0)

00 s U.S. $ U.S. $ 00) ) 0) ) ota $ 0 Operating Activities

0 0

Adjustments for:

0) ) ) 00 00 00 ) ) 0 0 $ earnins etaine Share of associates’ results of operations () ()

(sss) s ss ()

ss

00 00 s s s () () 0 $ (sss) s s () orein reserve crrenc transation

s 0

s s

$ Change in working capital: reserve 0) ) ) ) ) 0) 0) 0) air vae

s sss (0) ()

s s s 0 0

i sss ss s s $ reserve ontar s ()

s (0)

e to e eit hoers of the parent

s s () ()

Net cash from operating activities 0 0 ttrita $

reserve Investing Activities tattor

form part of these consoiate financia statements statements financia consoiate these of part form

sss s

() (0)

ss sss () 0 ) ) ) ) s (0) () $ shares reasr

S

s s sss 0

s s 0 () s ss () (0) hare $ premim Purchase of subsidiary’s shares () ()

0 0 s ss

s

he attache notes to notes he attache Net cash (used in) from investing activities () share share 0000 0000 0000 0000 $ capita aiin Financing Activities s s s (0) ()

s s s () ()

s 0

for the ear for the ear 6 s s () , 2016 reserve

ss () ()

s 0

controin interests controin interests

Net cash used in financing activities () () n (Decrease) Increase in cash and cash equivalents () PALESTINE DEVELOPMENT AND INVESTMENT LIMITED (PADICO) PALESTINE s s 0

ssiiaries note ) ssiiaries note ) s s s 0

aestine eveopment an nvestment imite ) imite an nvestment eveopment aestine EQUITY IN OF CHANGES STATEMENT CONSOLIDATED ecemer ne ear the or $ 000’s) (U.S. 2017 JanuaryBalanceat 1, 2017 rofitthe ear for ther comprehensive income items et comprehensive income ransferre to stattor istrite cash iviens note ) istrite cash iviens from hane in no Balance at December 31, 2017 2016 JanuaryBalanceat 1, 201 rofitthe ear for ther comprehensive income items et comprehensive income ransferre to stattor reserve istrite cash iviens note ) istrite cash iviens from reasr shares hane in non Balance at December 31 Cash and cash equivalents, end of year 0

The attached notes 1 to 41 form part of these consolidated financial statements The attached notes 1 to 41 form part of these consolidated financial statements

s s s ss ANNUAL REPORT | PADICO HOLDING 69

PALESTINE DEVELOPMENT AND INVESTMENT LIMITED (PADICO)

3. Accounting Policies Palestine eelopent and nestent iited (P) 3.1 Basis of preparation NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS eceber 0 . 1. Corporate Information .. Palestine eelopent and nestent iited (P) as incorporated on ctober except when otherwise indicated, are rounded to the nearest thousand (U.S. $ 000’s). under the iberian ff Shore usiness orporation ct in onroia iberia. P shares are publicly traded in Palestine Securities chane. n eceber 00 P as reistered in Palestine as a forein copany under reistration o. (0). . he ain obecties of P are to deelop and encourae inestent in arious sectors includin industrial real estate touris housin and aricultural serices and to proide technical and consultancy serices throuh the establishent of copanies oint entures 3.2 Basis of consolidation and associations ith other copanies. 1 2017. he consolidated financial stateents of P as at eceber 0 ere authoried for issuance in accordance ith a resolution of the oard of irectors on arch 0. .. 2. Consolidated Financial Statements . he consolidated financial stateents coprise the financial stateents of Palestine . eelopent and nestent iited (P) and its subsidiaries as at eceber 0. Ps onership in its subsidiaries subscribed capital as as follos . nership ountry ctiity type of oriin 0 0

Palestine eal state nestent opany (P) eal estate Palestine 75.71 74.49 ericho ate for eal state nestent () eal estate Palestine 50 50 ’s voting rights and potential voting rights for trade and inestent copany eal estate ordan 00 00 Palestine ndustrial nestent opany (P) ndustrial Palestine 56.72 56.72 he Palestinian aste ecyclin opany (adeer) ndustrial Palestine 100 100 . Palestine Securities chane opany (PS) inancial aret Palestine 74.72 74.72 erusale eelopent and nestent opany td. . () ouris ritain 00 00 Palestine eelopent and nestent opany Priate . Shareholdin nestent Palestine 00 00 nestent aan nternational nestent opany ordan 100 100 . Palestine eneral radin opany td. nestent Palestine 100 100 Palestine opany for the ransfer of echnoloy td. nestent Palestine 100 100 . Palestine opany for annin and Pacain td. nestent Palestine 100 100 Palestine opany for asic heical Products td. nestent Palestine 100 100 nestent . P Serices opany Palestine 100 100 he financial year of the subsidiaries is the sae as the financial year of the copany and . here necessary the copany aes adustents to alin the policies of the subsidiaries . ith the accountin policies of the copany. 7

ANNUAL REPORT | PADICO HOLDING 71

3.3 Changes in accounting policies (b) Impairment he accounting policies adopted in the preparation o the consolidated inancial stateents IFRS 9 introduces an updated model for credit loss measurement the epected credit losses are consistent with those o the previous inancial ear, except or the ollowing aended on all of its financial assets including loans granted det securities at amortied cost or at fair standards eective as at anuar , 0. he adoption o these new and aended alue through other comprehensie income he epected credit loss model ill replace standards did not have an eect on the consolidated inancial perorance or position o the current “Incurred Losses” model as per IAS 39. . IFRS 9 reuires I to record epected credit losses on all of its det securities and trade receiales either on a month or lifetime asis I ill appl the simplified approach endents to S Stateent o ash lows isclosure nitiative and record lifetime epected losses on all trade receiales

he aendents reuire entities to provide disclosure o changes in their liailities arising he assessment is ased on currentl aailale information and ma e suect to changes ro inancing activities, including oth changes arising ro cash lows and noncash arising from further reasonale and supporting information eing made aailale to the changes (such as oreign exchange gains or losses). ompan hen it adopts IFRS 9 in

endents to S ncoe axes ecognition o eerred ax ssets or Unrecognied (c) Hedge accounting osses edge accounting under IFRS 9 ill hae no effect on PADICO’s financial position and he aendents clari that an entit needs to consider whether tax law restricts the sources performance as I does not currentl hold financial instruments for hedging purposes o taxale proits against which it a ae deductions on the reversal o that deductile teporar dierences and soe other liited aendents. IFRS 7 Financial Instruments – Amendments on Disclosure IFRS as amended to include more ualitatie and uantitatie discolsures to accomedate Issued but not yet effective IFRS 9 reuirements such as classifications impairment and hedge accounting

he ollowing standards and aendents have een issued ut are not et andator, and IFRS 15 Revenue from Contracts with Customers have not een adopted . hese standards are those that reasonal IFRS specifies the accounting treatment for all reenues arising from contracts ith expects to have an ipact on disclosures, consolidated inancial position or perorance customers It applies to all entities that enter into contracts to proide goods or serices to when applied at a uture date. intends to adopt these standards when the ecoe their customers unless the contracts are in the scope of other IFRSs such as IS eases eective. IFRS supersedes the folloing standards and interpretations IFRS 9 Financial Instruments (Implemented IFRS 9) IS onstruction ontracts n ul 0, the S issued the inal version o S inancial nstruents that replaces S inancial nstruents ecognition and easureent and all previous versions o S IS Reenue . S rings together all three aspects o the accounting or inancial instruents IFRI ustomer oalt rograms classiication and easureent, ipairent and hedge accounting. S is eective or annual periods eginning on or ater anuar 0, with earl application peritted. IFRI greements for the onstruction of Real state xcept or hedge accounting, retrospective application is reuired however, the entities are IFRI ransfers of ssets from ustomers and exepted ro restating their coparative inoration. has ipleented the irst phase of IFRS 9 on financial instruments’ recognition and easureents during 0.ss SI Reenue—arter ransactions Inoling dertising Serices plans to adopt the reaining stages o the new standard on the reuired eective date and will not restate coparative inoration. S will aect the easureent and he standard is effectie for annual periods eginning on or after anuar recording o credit losses. urrentl I is conducting an impact assessment for IFRS his assessment is ased on currentl aailale information and ma e suect to changes arising from further elow is a suar o S ipact on the consolidated inancial position, perorance or reasonale and supporting information eing made aailale to I in hen it disclosures o the consoldated inancial stateents o , when applied adopts IFRS

(a) Classification and measurement does not expect a signiicant ipact on its inancial position or euit on appling the classiication and easureent reuireents o S as its alread ipleented the irst phase of IFRS 9 on financial instruments’ recognition and easureents during 0.

9

ANNUAL REPORT | PADICO HOLDING 73

he Interpretation addresses the accounting for income taes when ta treatments involve he IAS ssued amendments to IS Shareased Pament that address three man areas uncertainty that affects the application of IAS 12 and does not apply to taes or levies outside the eects o estn condtons on the measurement o a cashsettled shareased pament the scope of IAS 12 nor does it specifically include reuirements relating to fees and transacton the classcaton o a shareased pament transacton th net settlement penalties associated with uncertain ta treatments. An entity must determine whether to eatures or thholdn ta olatons and accountn here a modcaton to the terms consider each uncertain ta treatment separately or together with one or more other and condtons o a shareased pament transacton chanes ts classcaton rom cash uncertain ta treatments. settled to eut settled. he interpretation is effective for annual reporting periods beginning on or after January 1 nttes ma appl the amendments prospectel and are eecte or annual perods 201 but certain transition reliefs are available ennn on or ater anuar th earl applcaton permtted. .

IFRS (16) “Leases” was issued by the IASB in January 2016. IFRS (16) sets out the principles The preparation of PADICO’s consolidated financial statements requires management to make or the reconton measurement presentaton and dsclosure o leases. udgments estimates and assumptions that affect the reported amounts of revenues Lessor accountn under IS s sustantall smlar to the accountn reurements o epenses assets and liabilities and the disclosure of contingent liabilities at the reporting the lessor under IAS . Lessors ll contnue to class all leases usn the same date. owever uncertainty about these assumptions and estimates could result in outcomes classcaton prncple as n IAS and dstnush eteen to tpes o leases operatn that could reuire a material adustment to the carrying amount of the asset or liability and nance leases here each s treated derentl. affected in the future.

IS reures the lessee to recone the assets and the laltes or all leases eceedn ther notes that reflect the degree of riss that AI is subect to include months perod ecept or those o a lo alue. It reures the lessee to recone the rht - Ris anagement bectives and olicies (note ) ouse o the asset representn the reconton o the leased assets and a lalt to mae lease paments. - apital anagement (note )

IS s eecte or annual perods ennn on or ater anuar 9 th earl he ey areas involving a higher degree of udgment or compleity are described below adopton permtted. Impairment of nonfinancial assets Impairment eists when the carrying value of an asset or cash generating unit eceeds its he amendments clar hen an entt should transer propert ncludn propert under recoverable amount which is the higher of its fair value less costs to sell and its value in use. constructon or deelopment nto or out o nestment propert. he amendments state that he fair value less costs to sell calculation is based on available data from binding sales a chane n use occurs hen the propert meets or ceases to meet the denton o transactions in an arm’s length transaction of similar assets or observable market prices less nestment propert and there s edence o the chane n use. A mere chane n incremental costs for disposing of the asset. he value in use calculation is based on a management’s intentions for the use of a property does not provide evidence of a change in discounted cash flow model. use. rovision for doubtful accounts notes receivable and loans nttes should appl the amendments prospectel and eecte or annual perods PADICO’s subsidiaries provide services to a broad base of clients using certain credit terms, ennn on or ater anuar . while AI grants loans to some associates. Estimates, based on PADICO’s and its subsidiaries’ historical eperience are used in determining the level of debts that AI and its subsidiaries believe will not be collected. he nterpretaton clares that n determnn the spot echane rate to use on ntal reconton o the related asset epense or ncome or part o t on the dereconton o a Impairment of inventories nonmonetar asset or nonmonetar lalt relatn to adance consderaton the date o PADICO’s subsidiaries estimate the net realizable value of their inventories at the date of the the transacton s the date on hch an entt ntall recones the nonmonetar asset or consolidated financial statements based on their past eperience and adust the carrying nonmonetar lalt arsn rom the adance consderaton. nttes ma appl the amounts if needed. amendments on a ull retrospecte or prospecte ass. he ne nterpretaton ll e eecte or annual perods ennn on or ater anuar Impairment of ready for sale property . PADICO’s subsidiaries estimate the net realizable value of their properties available for sale at the date of the consolidated financial statements based on their past eperience and adust the carrying amounts if needed.

11

ANNUAL REPORT | PADICO HOLDING 75

Taes PADICO and its subsidiaries establish provisions, based on reasonable estimates, for possible consequences of audits b the ta authorities of the respective countries in hich it operates. The amount of such provisions is based on various factors, such as eperience of previous ta audits and differing interpretations of ta regulations b the taable entit and the responsible ta authorit. air value of financial instruments here the fair value of financial assets and financial liabilities recorded in the consolidated statement of financial position cannot be derived from active markets, the are determined using valuation techniques including the discounted cash flos model. The inputs to these models are taken from observable markets here possible, but here this is not feasible, a degree of udgment is required in establishing fair values. The udgments include considerations of inputs such as liquidit risk, credit risk and market volatilit. Changes in assumptions about these factors could affect the reported fair value of financial instruments. seful lives of tangible and intangible assets PADICOs management reassesses the useful lives of tangible and intangible assets, and adusts it, if applicable, at each financial ear end. Investment Properties PADICOs management relies on real estate eperts to reassess investment properties. Impairment of goodill The determination hether goodill is impaired requires an estimation of the “value in use” of the cashgenerating units to hich the goodill is allocated. uch estimation requires management to make an estimate of the epected future cash flos from the cashgenerating unit and also to choose a suitable discount rate in order to calculate the present value of those cash flos.

evenues are recognized to the etent that it is probable that the economic benefits ill flo to PADICO and its subsidiaries and the revenue can be reliabl measured. evenue is measured at the fair value of the consideration received, ecluding discounts, rebates, and Revenues from rooms’ services are recognized when the outcome of the transaction ca sales taes. The folloing specific recognition criteria must also be met before revenue is recognised ale of goods evenue from the sale of goods is recognised hen the significant risks and reards of onership of the goods have passed to the buer. eases Operating lease contracts are those that retain all the significant risks and benefits of onership to the lessor. All costs and epenses paid are added to the leased assets book value and are recognised as rent revenue during the leasing period.

ANNUAL REPORT | PADICO HOLDING 77

resents assets and iaiities in statement of financia osition ased on currentnon roert ant and euiment are stated at cost net of accumuated dereciation andor current cassification n asset as current when it is accumuated imairment osses if an uch cost incudes the cost of reacing art of the roert ant and euiment and orrowing costs for ongterm construction roects if the  ected to e reaized or intended to e sod or consumed in norma oerating cce recognition criteria are met other reair and maintenance costs are recognised in the  ed rimari for the urose of trading consoidated income statement as incurred and is not dereciated ereciation is cacuated on a straight ine asis over the estimated usefu ives of the assets as foows  ected to e reaized within tweve months after the reorting eriod

 ash and cash euivaent uness restricted from eing echanged or used to sette a sefu ives iaiit for at east tweve months after the reorting eriod ears other assets are cassified as noncurrent uidings and constructions achiner and euiment iaiit is current when urniture and ffice euiment otor vehices 7  t is eected to e setted in norma oerating cce omuters 5  t is hed rimari for the urose of trading easehod imrovements 7 rrigation sstems and and rearation  t is due to e setted within tweve months after the reorting eriod ruitfu am trees  here is no unconditiona right to defer the settement of the iaiit for at east tweve months after the reorting eriod n item of roert ant and euiment and an significant art initia recognised is cassifies a other iaiities as noncurrent derecognised uon disosa or when no future economic enefits are eected from its use or disosa n gain or oss arising on derecognition of the asset cacuated as the difference etween the net disosa roceeds and the carring amount of the asset is incuded in the inance costs direct attriutae to the acuisition construction or roduction of an asset consoidated income statement when the asset is derecognised that necessari taes a sustantia eriod of time to get read for its intended use or sae are The assets’ residual values, useful lives and methods of depreciation are reviewed at each caitaized as art of the cost of the resective assets other finance costs are eensed in financia ear end and adusted rosective if aroriate the eriod the occur inance costs consist of interest and other costs that an entit incurs in connection with the orrowing of funds measures financia instruments and nonfinancia assets such as investments roerties at fair vaue at each consoidated financia statements date aso discoses and its susidiaries rovide for income taes in accordance with the aestinian and the fair vaue of the hed to maturit financia assets in the notes to the consoidated financia ordanian ncome a aws and which reuires recognizing the temorar statements which incude the foowing differences at the date of financia statements etween the ta ases of assets and iaiities - and their carring amounts for financia reorting uroses as deferred taes iscosure of evauations estimates and assumtions note - eferred ta is rovided on temorar differences at the consoidated statement of financia iscosure of fair vaue measurement hierarch for assets note osition etween the ta ases of assets and the iaiities and their carring amounts for - nvestment roerties note financia reorting uroses eferred income ta assets and iaiities are measured at the air vaue is the rice that woud e received to se assets or aid to transfer iaiities in an ta rates that are eected to a in the ear when the asset is reaized or the iaiit is order transaction etween maret articiants at the measurement date he fair vaue setted ased on ta rates and ta aws that have een enacted or sustantive enacted at measurement is ased on the resumtion that the transaction to se the asset or transfer the consoidated statement of financia osition date the iaiit taes ace either ncome ta eense reresents the accrued income ta which is cacuated ased on taae income aae income ma differ from accounting income as the ater incudes nontaae income or nondeductie eenses uch income or eenses ma e taae or deductie in the foowing ears iaiit he rincia or the most advantageous maret must e accessie to

ANNUAL REPORT | PADICO HOLDING 79

The fair value of an asset or a liailit is measured usin the assumptions that maret participants would use when pricin the asset or liailit, assumin that maret participants Proects in progress comprise costs incurred on incomplete proects, which include design act in their economic est interest cost, construction, direct wages, cost of land and portion of the indirect costs and finance costs. After completion, all projects’ costs are capitalied and transferred to property, plant uses valuation techniues that are appropriate in the circumstances and for which and equipment, ready for sale properties or investment properties depends on the sufficient data are availale to measure fair value, maimiin the use of relevant oservale management directions. inputs and minimiin the use of unoservale inputs he carrying values of proects in progress are reviewed for impairment when events or ll assets and liailities for which fair value is measured or disclosed in the financial changes in circumstances indicate that the carrying value may not be recoverable. If any such statements are cateoried within the fair value hierarch, descried as follows indication exists and where the carrying values exceed the estimated recoverable amount, the evel — uoted maret prices in active marets proects are written down to their recoverable amount. evel — aluation techniues for which the lowest level input that is sinificant to the fair value measurement is directl or indirectl oservale evel — aluation techniues for which the lowest level input that is sinificant to the Intangible assets acquired separately are measured on initial recognition at cost. he cost of fair value measurement is unoservale intangible assets acquired in a business combination is its fair value as at the date of acquisition. ollowing initial recognition, intangible assets are carried at cost less any ternal appraisers are involved for valuation of sinificant assets such as investment accumulated amortiation and any accumulated impairment losses. Internally generated properties decides, after discussions with the eternal appraisers, which valuation intangible assets, excluding capitalied development costs, are not capitalied and techniues and inputs to use for each case expenditure is reflected in the consolidated income statement. or the purpose of fair value disclosures, has determined classes of assets and he useful lives of intangible assets are assessed as either finite or infinite. liailities on the asis of the nature, characteristics and riss of the asset or liailit and the level of the fair value hierarch as eplained aove Intangible assets with finite lives are amortied over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. he amortiation period and the amortiation method for an intangible asset with a finite useful The compan reconies a liailit to mae cash distriutions to euit holders of the parent life are reviewed at least at each financial year end. Changes in the expected useful life or the when the distriution is authoried eneral asseml correspondin amount is expected pattern of consumption of future economic benefits embodied in the asset is reconied directl in euit accounted for by changing the amortiation period or method, as appropriate, and are treated as changes in accounting estimates. he amortiation expense on intangible assets with finite lives is recognised in the consolidated income statement. usiness cominations are accounted for usin the acuisition method The cost of an Intangible assets with indefinite useful lives are not amortied, but are tested for impairment acuisition is measured as the areate of the consideration transferred, measured at annually, either individually or at the cash generating unit level. he assessment of indefinite acuisition date fair value and the amount of an noncontrollin interest in the acuiree or life is reviewed annually to determine whether the indefinite life continues to be supportable. each usiness comination, measures the noncontrollin interest in the acuiree at If not, the change in useful life from indefinite to finite is made on a prospective basis. fair value cuisition costs incurred are epensed ains or losses arising from derecognition of an intangible asset are measured as the hen acuires a usiness, it assesses the financial assets and liailities assumed for difference between the net disposal proceeds and the carrying amount of the asset and are appropriate classification and desination in accordance with the contractual terms, economic recognised in the consolidated income statement when the asset is derecognised. circumstances and pertinent conditions as at the acuisition date Intangible assets are amortied using the straight line method over the useful lives as follows f the usiness comination is achieved in staes, the acuisition date fair value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair value as at the Investment seful acuisition date throuh the consolidated statement of income period lives years years oodwill is initiall measured at cost ein the ecess of the consideration transferred over he right to use Alireh central station PADICO’s net identifiable assets acquired and liabilities assumed. If this consideration is lower he right to use ourist bus station – ethlehem than the fair value of the net assets of the susidiar acuired, the difference is reconied as he right to lease the industrial one income in the consolidated income statement he right to lease coast land – Chalet proect fter initial reconition, oodwill is measured at cost less an accumulated impairment losses he right to lease the industrial and agricultural one – ericho or the purpose of impairment testin, oodwill acuired in a usiness comination is, from easing right Awqaf Commerical Complex the acquisition date, allocated to each of PADICO’s cash generating units that are expected to enefit from the comination, irrespective of whether other assets or liailities of the acuiree are assined to those units

ANNUAL REPORT | PADICO HOLDING 81

nestment properties are classifie as follo PADICO’s investment in its associates is acconte for sin te eit meto. An associate is an entit in ic A as sinificant inflence. inificant inflence is te poer to nestment properties tat incle lans an ilins offices an stores tat ept for participate in te financial an operational polic ecisions of te inestee t not control rental an capital appreciation, rater tan to e se for te siness actiities nor to oer tose policies. resell it in te orinar corse of siness. ner te eit meto, te inestment in te associates is carrie in te consoliate nentor propert tat acire or ein constrcte for sale in te orinar corse of siness ic primar incles resiential real estate tat constrcte to e sol efore statement of financial position at cost plus post acquisition changes in PADICO’s share of net or at te completion of constrction. assets of te associates. ooill relatin to te associates is incle in te carrin amont of te inestment an is neiter amortise nor iniiall teste for impairment.

e consoliate income statement an te consoliate statement of compreensie income nestment properties are measre at cost less accmlate epreciation an an reflect te sare of te reslts of operations of te associates. nrealise ains an losses impairment in ale. epreciation is calclate on a strait line asis oer te estimate resltin from transactions eteen A an te associate or joint entre are eliminate to te etent of te interest in te associate or joint entre. sefl lies of inestment properties. an is not epreciate. e carrin ale of inestment properties is reiee for impairment en eents or e financial statements of te associates are prepare for te same reportin perio as canes in circmstances inicate tat te carrin ale ma not e recoerale. f an sc A. ere necessar, ajstments are mae to rin te accontin policies in line it tose of A. inication eists an ere te carrin ales ecee te estimate recoerale amont, inestment properties are ritten on to teir recoerale amont, ein te ier of teir After application of te eit meto, A etermines eter it is necessar to fair ale less costs to sell an teir ale in se. reconise an additional impairment loss on PADICO’s investment in its associates. PADICO nestment properties are ereconise en eiter te ae een ispose of or en te etermines at eac reportin ate eter tere is an ojectie eience tat te inestment propert is permanentl itran from se an no ftre economic enefit is inestment in te associate is impaire. f tis is te case A calclates te amont of epecte from its isposal. e ifference eteen te net isposal procees an te carrin impairment as te ifference eteen te recoerale amont of te associate an its carrin ale an reconises te amont in te consoliate income statement. amont of te asset is reconise in te consoliate income statement in te perio of ereconition. pon loss of sinificant inflence oer te associates, A measres an reconises an

ransfers are mae to or from inestment propert onl en tere is a cane in se. or a retainin inestment at its fair ale. An ifference eteen te carrin amont of te transfer from inestment propert to oner occpie propert, te eeme cost for associates pon loss of sinificant inflence an te fair ale of te retainin inestment an sseent accontin is te carrin ale at te ate of cane in se. f oner occpie procees from isposal is reconise in te consoliate income statement. propert ecomes an inestment propert, A acconts for sc propert in accorance it te polic state ner propert, plant an eipment p to te ate of cane in se. All financial assets are reconise an ereconise on trae ate en te prcase or sale of a financial asset is ner a contract ose terms reire elier of te financial asset nentories are ale at te loer of cost or net realiale ale. itin te timeframe estalise te maret concerne. inancial assets are initiall measre at fair ale, pls transaction costs, ecept for tose financial assets classifie as osts incrre in rinin eac proct to its present location an conitions are acconte at fair ale tro profit or loss , ic are initiall measre at fair ale. for as follos All reconise financial assets are sseentl measre in teir entiret at eiter amortise - a materials prcase cost on eite aerae cost asis cost or fair ale. - inise oos an or in proress cost of irect materials an laor an a proportion inancial assets at amortise cost an te effectie interest meto of manfactrin oereas ase on normal operatin capacit et instrments are measre at amortise cost if ot of te folloin conitions are met - ea for sale properties costs incle constrction costs, researc, esin, finance costs an lan in aition to inirect costs - e asset is el itin a siness moel ose ojectie is to ol assets in orer to collect contractal cas flos an et realiale ale is te estimate sellin price in te orinar corse of siness, less estimate costs of completion an te estimate costs necessar to mae te sale. - e contractal terms of te instrment ie rise on specifie ates to cas flos tat are solel paments of principal an interest on te principal amont otstanin. atre an immatre ioloical assets oltr ranc are state at costs less an impairment losses, as teir fair ale cannot e measre relial. et instrments meetin tese criteria are measre initiall at fair ale pls transaction costs ecept if te are esinate as at – see elo. e are sseentl measre at amortise cost sin te effectie interest meto less an impairment, it interest reene reconise on an effectie iel asis.

ANNUAL REPORT | PADICO HOLDING 83

usequent to initial recognition PADICO is required to reclassif det instruments from mairment of financial assets at amortised cost amortised cost to P if the oective of the usiness model changes so that the amortised inancial assets that are measured at amortised cost includin receiables and notes cost criteria are no longer met. receiable are assessed for indicators of imairment at the date of the financial statements he effective interest rate is the interest rate used to discount future cash flos over the life inancial assets are considered to be imaired when there is obectie eidence that as a of the det instrument or less in certain cases in order to equal the carring value at initial result of one or more eents that occurred after the initial reconition of the financial asset recognition. the estimated future cash flows of the financial asset hae been affected PADICO ma irrevocal elect at initial recognition to classif a det instrument that meets ereconition of financial assets the amortised cost criteria aove as at P if that designation eliminates or significantl dereconises a financial asset onl when the contractual rihts to the cash flows from reduces an accounting mismatch had the financial asset een measured at amortised cost. the asset eire or when it transfers the financial asset and substantiall all the riss and rewards of ownershi of the asset to another entit f neither transfers nor retains inancial assets at P substantiall all the riss and rewards of ownershi and continues to control the transferred Det instrument financial assets that do not meet the amortised cost criteria or that meet the asset reconises its retained interest in the asset and an associated liabilit for criteria ut PADICO has chosen to designate as at P at initial recognition are measured amounts it ma hae to a f retains substantiall all the riss and rewards of at P. PADICO has not designated a det instrument financial asset as at P. ownershi of a transferred financial asset continues to reconise the financial asset usequent to initial recognition PADICO is required to reclassif det instruments from and also reconises a collateralised borrowin for the roceeds receied P to amortised cost if the oective of the usiness model changes so that the amortised cost criteria starts to be met and the instrument’s contractual cash flows meet the amortised cost criteria. eclassification of det instruments designated as at P at initial recognition t initial reconition loans borrowins are reconied at fair alue net of directl is not permitted. attributable transaction costs fter initial reconition interest bearin loans and borrowins are subseuentl measured at amortised cost usin the effectie interest rate method Investments in equit instruments are classified as at P unless PADICO designates an investment that is not held for trading as at fair value through other comprehensive income mortised cost is calculated b tain into account an discount or remium on acuisition OCI at initial recognition. and fee or costs that are an interal art of the ffectie nterest ate he amortisation is included in finance cost in the consolidated income statement inancial assets at P are measured at fair value ith an gains or losses arising on remeasurement recognised in the consolidated statement of income. Dividends income on investments in equit instruments at P is recognised in the fter the initial reconition at fair alue debt bonds are subseuentl measured at amortied consolidated statement of income hen PADICO’s right to receive the dividends is cost usin the effectie interest rate method ll costs incurred b for issuin the estalished. bonds are amortied oer a eriod of fie ears

inancial assets at OCI At initial recognition PADICO maes an irrevocale election on an instrumentinstrument iabilities are reconised for amounts to be aid in the future for oods or serices receied asis to designate investments in equit instruments as at OCI. Designation at OCI is whether billed b the sulier or not not permitted if the equit investment is held for trading. quit instruments at OCI are initiall measured at fair value plus transaction costs. usequentl the are measured at fair value ith gains and losses arising from changes in otes receiable are stated at oriinal inoice amount less a roision for an uncollectible fair value recognised in other comprehensive income and accumulated in the fair value amounts n estimate for doubtful debts is made when collection of the full amount is no reserve. here the asset is disposed of the cumulative gain or loss previousl accumulated in loner robable the fair value reserve is not reclassified to the consolidated income statement ut is ccounts receiable are stated at oriinal inoice amount less a roision for an reclassified to retained earnings. uncollectible amounts n estimate for doubtful debts is made when collection of the full Dividends on these investments in equit instruments are recognised in the consolidated amount is no loner robable ad debts are written off when there is no ossibilit of statement of income hen PADICO’s right to receive the dividends is estalished unless the recoer dividends clearl represent a recover of part of the cost of the investment. or the urose of the consolidated statement of cash flows cash and cash euialents consist of cash on hand ban balances and short-term deosits with an oriinal maturit of three months or less net of restricted ban deosits

ANNUAL REPORT | PADICO HOLDING 85

ransactions and balances inancial assets and financial liabilities are offset and the net amount is reorted in the Transactions in foreign currencies are initially recorded by PADICO’s subsidiaries at their consolidated statement of financial osition if and onl if there is a currentl enforceable respectie functional currency rates preailin at the date of the transaction. leal riht to offset the reconised amounts and there is an intention to settle on a net basis onetary assets and liabilities denominated in forein currencies are retranslated at the or to realise the assets and settle the liabilities simultaneousl functional currency spot rate of echane rulin at the reportin date. All differences are taen to the consolidated income statement with the eception for financial assets desinated as at OCI were any forein echane differences are reconised in other comprehensie he determination of whether an arranement is or contains a lease is based on the income. substance of the arranement at incetion date whether fulfillment of the arranement is deendent on the use of a secific asset or assets or the arranement cones a riht to use PADICO subsidiaries the asset he assets and liabilities of PADICO’s subsidiaries with functional currency other than .. are translated into .. at the rate of echane preailin at the reportin date and their as a lessee income statements at the weihted aerae echane rates for the year. he echane inance leases which transfer to substantiall all the riss and benefits incidental to differences arisin on the translation are reconised in other comprehensie income. ownershi of the leased item are caitalised at the commencement of the lease at the fair alue of the leased roert or if lower at the resent alue of the minimum lease aments ease aments are aortioned between finance chares and reduction of the lease liabilit asic earnins per share is calculated by diidin profit for the year attributable to ordinary so as to achiee a constant rate of interest on the remainin balance of the liabilit inance euity holders of the parent by the weihted aerae number of ordinary shares outstandin chares are reconised in the consolidated income statement durin the year.

eased assets are dereciated oer the useful life of the asset oweer if there is no Diluted earnins per share is calculated by diidin the profit attributable to ordinary euity reasonable certaint that obtain ownershi b the end of the lease term the asset is holders of the parent by the weihted aerae number of ordinary shares outstandin durin dereciated oer the shorter of the estimated useful life of the asset and the lease term the year plus the weihted aerae number of ordinary shares that would be issued on the eratin lease contracts are those contracts that retain all the sinificant riss and rewards conersion of all the dilutie potential ordinary shares into ordinary shares. of ownershi to the lessor eratin lease aments are reconised as an eense in the consolidated income statement on a straiht line basis oer the lease term On arch aheel Palestine a subsidiary of adweer acuired of ultan as a lessor resh ruits Company td. ultan which amounted to shares for an amount of eases where does not transfer substantiall all the riss and benefits of ownershi .. settled with postdated checs with a present alue of .. of the asset are classified as oeratin leases nitial direct costs incurred in neotiatin an as at the date of the acuisition. he lonterm alue of postdated checs amounted to . oeratin lease are added to the carrin amount of the leased asset and reconised oer the as at December . As a result of the acuisition aheel Palestine ained lease term on the same bases as rental income ontinent rents are reconised as reenue in control oer ultan throuh acuirin all the otin rihts and accordinly the financial the eriod in which the are earned statements of ultan were consolidated with the consolidated financial statements of aheel Palestine. aheel Palestine share of net loss from ultan from the date of acuisition and until December amounted to .. . roisions are reconised when and its subsidiaries hae an obliation leal or constructie arisin from a ast eent and the costs to settle the obliation are both robable and can be reliabl measured

reasur shares are stated at cost n ains or losses resultin from reissuin of these shares are reconised in the consolidated statement of chanes in euit

consolidated financial statements are resented in which is also the arent company’s functional currency. PADICO’s subsidiaries determine their own functional currenc tems included in the financial statements of each entit are measured usin subsidiaries’ functional currency.

ANNUAL REPORT | PADICO HOLDING 87

The acuisition rice distribution is initially deterined in the acuisition and ill be PIIC recorded the business combination of PINAR’s assets and liabilities at fair value. After coleted ithin one year fro the date of the acuisition in accordance ith the standards completing the purchase price allocation in accordance with International inancial The fair alue of Sultan’s assets and liabilities is as follows: eporting Standard 3, intangible assets were recognied and recorded, the entire amount of which is attributed to PINAR’s Trademark. U.S. $ 000’s air alues at the date of the acuisition inancial information of subsidiaries that have material noncontrolling interests are provided below: Proerty lant and euient 10,992

Accounts receiables and other current assets 485 Cash and shortter deosits 3 11,480 Country of incorporation 2017 201 Accounts ayables and other current liabilities 271 Provision for employees’ indemnity 59 Palestine eal state Investment Company Palestine 24.29 25.51 330 Palestine Industrial Investment Company Palestine 43.28 43.28 et Assets at fair alue 11,150 Palestine Securities change Company Palestine 25.28 25.28 Sultan’s acuisition cost 11,150 ericho ate for eal state Investment Palestine 50 50

During PIIC a subsidiary of PADICO acuired illion shares in Al Pinar eneral 2017 201 Trading Coany PIA hich reresents onershi of As a result PIIC gained U.S 000’s control oer PIA’s financial and operating policies and accordingly PIA’s financial Palestine eal state Investment Company 17,348 21,827 stateents ere consolidated with PIIC’s consolidated financial statements fro the date of Palestine Industrial Investment Company 33,08 29,294 acuisition Palestine Securities change Company 2,215 2,154

elo are the fair alue of PIA assets and liabilities at the date of acuisition ericho ate for eal state Investment 24,019 23,779

000’s air alue at the Palestine eal state Investment Company 4,44 1,228 date of Palestine Industrial Investment Company 3,439 3,08 acuisition Palestine Securities change Company 70 59 Proerty lant and euient ericho ate for eal state Investment 240 280 Inentory

Accounts receiable Cash and cash euialent Palestine eal state Investment Company 333 1 Palestine Industrial Investment Company 1,584 9 Accounts ayable Palestine Securities change Company 9 39 Proision for incoe ta Other ayables Proision for eloyees’ indemnity Palestine eal state Investment Company 300 1,012 Palestine Industrial Investment Company 14 airs alue for net assets Acuisition cost Intangible assets resulting fro acuisition

25

ANNUAL REPORT | PADICO HOLDING 89

The summaried financial information of these subsidiaries are rovided below. This information is based on amounts before intercoman eliminations. 000’s s s s s s s s s s . 000’s s Palestine Palestine Palestine ericho ate s 0 Real state Industrial ecurities for Real ss Investment Investment chane state s oman oman oman Investment s urrent assets 0 ss 00 Noncurrent assets 0 0 ss urrent liabilities 0 0 s Noncurrent liabilities 0 0 0 0 s 0 0 Attributable to non controllin interests in PAI 0 0 0 0 00 . 000’s ss Palestine Palestine Palestine ericho ate 0 0 Real state Industrial ecurities for Real

Investment Investment chane state oman oman oman Investment urrent assets 0 0 000’s Noncurrent assets 0 0 0 s s s urrent liabilities 00 s s s Noncurrent liabilities 0 0 s s s 0 s Attributable to non controllin interests in s 0 PAI ss 0 s s 0 0 ss 00 ss s 0 s 0 0 0 0 ss 0 0

ANNUAL REPORT | PADICO HOLDING 91

0 0 0 0 s 0 000’s

s s s

s s s 0 0

s s s s s 0

s 0 0

s s 0 0 0 0

s 0 0

s s sss

ss s ss

s s

s 0

s s s

s

000’s

s s s 0 0

s s s ss 0

s s s 00 00

s

s

U.S. $ 000’s U.S. $

s 00 00 0 0 0 s

s s 0 00

s s 0

0

s s 0

s s

s

0 0 s s 0 0 s s

0 sss sss

s 0 0

0 0 0 0 0 0 s s s

000 000 s 00 00

term loan agreements, PADICO’s subsidiaries PADICO’s agreements, loan term

s s

0 s ss ss s s 0 0 ss s s 0 s s sss s sss s 0

ANNUAL REPORT | PADICO HOLDING 93

, ,0 , , U.S. $ 000’s ,0 ,0 otal as

, 0, 0, igt o use

easing bus

oodill rademar rigts stations otal 0 Palm rees ,0 , , alane at anuar , 0 , , , ,0 ,

Additions 0 0

ranserred rom roets in

rogress ote ,0 ,0 ,0 , ,0 alane at Deember , 0 , , , ,0 , land land

Irrigation rearation sstems and sstems and

teir assoiated roerties assoiated teir

alane at anuar , 0 , ,0 , Amortiation or te ear ,0 ,0 , , , ,

, , alane at Deember , 0 , ,0 ,

easeold

imroements

At Deember , 0 , , , ,0 ,

0 At Deember , 0 , , , ,0 ,0 , , ,00 ,

Comuters

U.S. $ 000’s U.S. $ is item reresents goodill rom urase o sares o Palestine Seurities ange a 0 0

,0 , , , , subsidiar o PADICO and te sares o Palestine Coman or te stablisment and otor otor eiles

anagement o Industrial ones PDCO aa a subsidiar o PADICO resulting rom te

0

dierene beteen te urase ost and te Comans sare o te net air alue o te 0 assets and liabilities at te date o urase. , , ,

, , urniture urniture

and Oieand euiment

is item reresents intangible assets tat ere reognied and reorded ater omleting

, ,0 ,0 te urase rie alloation o Al Pinar usiness ombination, te entire amount o i is iment and ,0 , , , ,0

attributed to PINAR’s Trademark (note 4). ainer eu

, ,0 , In 0, PICO a subsidiar signed an inestment agreement it te inistr o , ,0 , , , and ndoments and eligious Aairs or te urose o establising a ommerial omle and

uildings beneiting rom it or a eriod o ears beginning on une , 0 and ending on a , onstrutions

0. During te ear, te oman omleted te onstrution and roessing o te

ommerial omle it an amount US $,0,000 , tereore it as relassiied to

intangible assets leasing rigts. is roet is amortied oer a eriod o ears. ands , , , During te ear 0, AIP a subsidiar o PICO omleted te onstrution and

term loan agreements, PADICO’s subsidiaries, mortgaged lands and real estates and lands and and real estates mortgaged subsidiaries, PADICO’s agreements, term loan roessing o art o te irst ase o te agriultural industrial it roet in erio and

tereore it as transerred to intangible assets aount leasing rigts. e roet is amortied oer a eriod o ears it an amount o US $ ,,000.

iar ote

ased on long on ased Dereiation 0. , Deember as at $ ,,000 U.S. to amounted assets te o alue e boo bans. loal to ollateral 0. , at Deember as trees alm to alloated as ,000 $ U.S. o amount or an

0 roets in rogress ote subsid translation dierenes , 0 0 or te ear roert, and lant euiment translation dierenes , 0 0

alane at anuar , Additions ranserred rom Disosals Auisition o oreign urren alane at Deember alane at anuar , Dereiation arge Disosals Imairment o oreign urren alane at Deember DeemberAt ,

ANNUAL REPORT | PADICO HOLDING 95

n Noember PRI (a subsdar) sned a ease ontrat t te Paestnan Natona Autort to rent a ee o and or a erod o 4 ears or toursm nestment or the purpose o impairment testing, the carring alue o the goodwill acuired through uroses. urn te ear 0 te oman ometed te onstruton o te roet (ue usiness cominations is allocated to the cash generating unit which is the reportale bea ote) and transerred t to easn rts. Te roet ost s amorted oer te segment o the susidiar. remann term o te ease eres on tober 0 044. he recoerale amount o the susidiar has een determined ased on the air alue o the Ts tem aso nudes te osts nurred b Pedoaa or te rt to ease te ndustra asset less cost to sell. he air alue less cost to sell was determined ased on ealuations one n aa rom te Paestnan Natona Autort. Te ost o easn te ndustra area s perormed licensed appraisers. These evaluations didn’t result in any indication of amorted oer 0 ears rom anuar . impairment.

e assumptions used in the calculation o the alue in use he calculations o the alue in use or the real estate segment are most sensitie to the urn 000 PRI ( a subsdar o PAI) ometed te onstruton and u oeraton discount rate used and growth rate used to etrapolate cash lows eond the udget period o bot A re entra us Staton and eteem Tourst us staton. Under te terms o concession agreements with Al Bireh and Bethlehem Municipalities’, PRICO naned te onstrutons on a bass o ud erate and Transer (T) on and oned b te iscount rate relects managements estimates o usinessrelated riss, taing into account munates n return PRI oud ae te rt to oerate te A re and eteem the time alue as well as the riss speciic to assets not included in the cash low estimates. statons or 4 (nudn to ears o mementaton) and ears ( etended to to he calculation o the discount rate is ased on actors related to PAICO and the usiness addtona ears) resete. At te end o te onesson erod PRI oud transer te sector and is deried rom the weighted aerage cost o capital. he calculation o the weighted aerage cost o capital is ased on the cost o lending and the cost o capital. he statons nudn a rts to te munates. Tese statons nude bus and ar arkn cost o capital is calculated ased on the epected return on inestment and the calculation o as e as a oman o stores oes and esure ates. Intanbe assets reresent te the orrowing cost is ased on the interest earing orrowings o PAICO to which PAICO rt to are ees or ub seres roded under te terms o te onesson committed to repa. he riss to the segment are included with eta transactions separatel. areements. urn te ear PRI transerred eteem staton to eteem munat Beta transactions are ealuated annuall using aailale maret inormation. A preta ater te end o te nestment erod n Ar 0. discount rate o 17.12 was used or cash lows.

ood aured trou busness ombnatons as been aoated to as eneratn unts Growth rates are based on the value of the business segment’s operations after the explicit are aso te reortabe busness sements o PAI or marment testn as udget period. In determining appropriate growth rates, regard has een gien to the oos competitie orces that are epected to preail ater the eplicit udget period. he growth rate applied to cash low proections is 3 or periods eceeding 7 ears. U.S. $ 000’s 0 0 ith regard to the assessment to the “alue in use” o all usiness segments, management eliees that no reasonale possile change in an o the aoe e assumptions would cause nana market sement 1,445 44 the carring alue o the usiness segments to materiall eceed its alue in use. Rea estate sement 2,071 0

Industra sement 3,888 7,404 404 his segment represents the goodwill resulting from purchasing Pinar’s shares. or the purposes o impairment testing, the goodwill is allocated on the cash generating unit Mil and dairy production) that presents part of Padico’s business segments. Te reoerabe amount o te nana market sement as been determned based on te he recoerale amount o mil and dair production has een determined ased on the aue n use auaton usn te dsounted as o metod based on nana budets "alue in use" in accordance with the proected cash lows coering a ieear period through aroed b senor manaement oern a eear erod. Te reta dsount rate uture inancial udgets approed Management. he preta discount rate o 17.1 was aed to as o roetons s . as os beond te ear erod are etraoated applied to cash lows during the net ie ears. Cash lows eond the 5 ear period are usn a rot rate. etrapolated using a 2.7 growth rate.

33

ANNUAL REPORT | PADICO HOLDING 97

ey assumptions used in the calculation of the value in use ollowing is the movement on the investment properties

The calculations of the value in use for the industrial segment are most sensitive to the U.S. $ 000’s discount rate used and growth rate used to extrapolate cash flows beyond the budget period 2017 2016 alance, beginning of the ear 102, ,7 dditions 1,11 7,71 Discount rate reflects management’s estimate of the risks specific to each business segment ransferred from inventor and read for sale properties 1,107 ,0 with regard to the time value as well as the riss related to assets that are not included in Sales ,2 2, future cash flows proections. The discount rate calculation is based on factors related to the mortiation 712 27 company and business segments and is derived from the weighted average cost of capital. alance, end of ear ,77 102, The weighted average cost of capital calculation is based on borrowing and capital costs. The cost of capital is calculated based on the expected return on investment and the borrowing cost is calculated based on the interest bearing borrowings of P that P is committed to repay. egment specific riss are recognied by using beta transactions U.S. $ 000’s separately. eta transactions are evaluated based on available maret data. 2017 2016

alance, beginning of the ear 16,126 20,7 dditions ,21 10,72 Growth rates are based on the value of the business segment’s operations after the explicit Sales 7,117 budget period. n determining appropriate growth rates regard has been given to the Disposals 100 6 competitive forces that are expected to prevail after the explicit budget period. ransferred to inventor and read for sale properties 7,66 ransferred to intangible assets ote 7 ,011 ,7 With regard to the assessment to the “value in use” of all business segments, management ransferred to propert, plant and euipment ote 6 1,6 1,70 believes that no reasonable possible change in any of the above ey assumptions would cause oreign currenc 6 the carrying value of the business segments to materially exceed its recoverable amount. alance, end of ear ,1 16,126

ollowing are the proects in progress as at December 1, 2017 and 2016 nvestments properties as at ecember and includes the following U.S. $ 000’s U.S. $ 000’s ost 2017 2016 roect ame he ompan 2017 2016 ands

uildings lSharafat proect for trade and nvestment ompan ,60 11,26 waf building proect alestine eal state nvestment ompan 2,7 ericho proect to develop The fair value of the lands and buildings as at ecember amounted to .. the industrial and and as at ecember amounted to .. . The carrying agricultural one ericho gro ndustrial ark 1, 1,006 value of investment properties which were mortgaged for the benefit of bans as collateral ows arms proect alestine oultr ompan 1,670 67 against loans to P is approximately .. ote ). ndustrial hanger housing uring the years and Padico sold part of its investment properties which resulted expansion proect ational arton ndustr compan 2 26 in a gain of an amount of .. and .. respectively. Gain is recognied new factor and in the consolidated income statement. headuarters proect l inar General rading 1,60 12 ther proects ther companies ,1 16,126

he proects cost are expected to reach a total of U.S. $ ,0,000 and the proects are expected to be completed in 2 to ears.

ANNUAL REPORT | PADICO HOLDING 99

1

,00 33, s ss ss sss s s otal 316, 3,032 2,30 12,0 00,1 31,21 111,6 13,1 0,663

U.S. $ 000’s 1,13,

s

0 0 0 0

s s s s s . .

ss s s . . 0 1 ,6 ,11 2,21 Other 2,23 3,2 s s s . . 0 0 1,3 11,233 20,23

s s .00 .00 s s

s s s .0 .0

s s s 0.00 0.00 0

.00 .00 32 0 1 s s 3,1 6,10 ,2 1, 1,1 ,3 Oil Oil

s s .00 .00 1,01 ordan ordan Industry Industry

00 Company egetable

 s ss sss

s. ss s 0 10 0 6 1 0 U.S. $ U.S. $ s. 000’s U.S. $ ,31 3,630 2,06 inestment associate in inestment ills ills ,10

13,21 1,10 22,61 16,6 heat olden olden

 Although PADICO’s ownership percentage in some associates is less than 20%, Company

s presentation in these associates’ board of directors that can influence the

s s s. ss s

s ss s s sss. 1

 s s sss U.S. $ 000 s ,210 1,0 ,6 3,161 Oil Oil 1,6 3 ,3 3,332 1,200 1,60 1,01

0. 1,2 Company Industries Industries egetable  ss s

23, 2016 to amortize company’s losses in partners’ accounts which resulted in

s s .

ss s s s 1 US $ . ,16 ,3 30,36 21,33 ,03 20,662 12,300 3,62 6,2 cations cations 130,01 30,06

1,06, Palestine Palestine Company elecommuni

ts of ts

t of inestment

s share of foreign currency currency of foreign share s

current Asset current iability current

Operations Income Comprehensie differences translation s Associates’ on Asset Current on iability Current uity Parent to attributable uity oodwill mbedded amoun Carrying eenues of esults Operations PADICO’s Share of Resul of Share PADICO’s Other of share PADICO’s PADICO The following tables summarize the financial information related to PADICO’s to related information financial the summarize tables The following

ANNUAL REPORT | PADICO HOLDING 101

iacia Assets at ai ae o te oeesie coe

U.S. $000’s 0 0 Total uote eutes 0 0 0 idated idated 0 uote eutes 0 00

0

s ollo s the oeet o the far alue resere 0

U.S. $000’s 0 0 Other 00 0

0 0

alae e of ear 0

et losses far alue of faal assets at far alue throuh

other orehese oe 0 et losses fro sale of faal assets trasferre retl to

Oil Oil retae ears 0 ordan ordan Industr Industr Coman egetable alae e of ear 0

etoies a ea o ae oeties

U.S. $000’s 0 0 ills ills 000’s

0 0 0 0 heat olden olden Coman a a rea for sale roertes 0 0

U.S. $ U.S. ee ll es oultr ates a ar routs 0 0

Ra aterals 0

ecee ecee oloal assets – ature 0

oloal assets – ature a rou 00 Arab Arab 000 otels 0

Coman Carto sheets a as 0

Oeratoal oos for hotels

Plast sto Sur

00 0 Oil Oil 0 0 Coman Industries Industries egetable I aorae to soe loas areeets se PRICO art of the rea for sale

roertes of Al haeer Al asaef a PRICO ouse roets ere ortae he

arr aout of roertes ortae aoute to s S as at

Deeer 0

0 0 0 0 cations cations Palestine Palestine Coman

Telecommuni

tateet o o tateet Asset

Share of Other Other of Share

’s of s share foreign g amount of inestment g amount

current current iabilit current Oerations Income Comrehensie translation currenc differences consol the in a in loss resulted which Coman otels Arab in inestment full its sold a subsidiar edico ear the During 000. $ of U.S. amount an for statements financial s Associates’ ositio iacia on Asset Current on iabilit Current uit Parent to attributable uit oodwill mbedded Carrin o ests a eees eatios Reenues of Results Oerations PADICO’s Share of Results of Results of Share PADICO’s PADICO PADICO

ANNUAL REPORT | PADICO HOLDING 103

Accots eceiae a te et Assets as a ot e eosits U.S. $000’s U.S. $ 000’s 0 0 0 0 s 0 s s s 0 s ss s 0 0 0

s ss ss s s 0 ss sss ss s 00 s ss. s s ss U.S. $ s . ss 0 0 s ss s s s .. s ss s s s U.S. $ 0000 U.S. $ 000 s s 0 s s s s s sss s 0 0 0 . s s 00 0 s 0 s s s s s s s s s 0 U.S. $ 000’s s s s 0 0 U.S. $ 00000 s 0 U.S. $ 000 s s s s 0 0. ss s 0

s 0 0 ss s 0 s s s s s s s 0 0 0 U.S. $ 000’s s s ss 0 ai-i ae aita 0 s s s s s 0 0 s s 0 0 0 00 U.S. $ 000’s 0 0 ’s s s s 00000 00000 s. s s s s s. Ss 0000 0000 s s s s s s s s s s s ss s s . s s U.S. $ .

iacia assets at ai ae o oit o oss eas aes s ss sss s s s s s ss s s ss s s s U.S. $ 000’s ss s sss. 0 0 s s esees ss s S s 0 s s U.S. $ 000 U.S. $ 0000 s 0 0 s. PADICO’s Bys s s s s s s 0 s .

0

ANNUAL REPORT | PADICO HOLDING 105

s’ Articles of Association and the Companies’ PRICO’s (a subsidiary) General Assembly decided in its meeting held on May 8, 2016, a cash Ps 0 s dividend distribution of D 0.05 per share, which amounted to U.S. $ 4,46,531. Non sy s . s s s ss. controlling interest’s share of the dividends was U.S. $ 1,146,750.

y s ote oas eit aciities a saic iaci y s U.S. $ 000 s D 0 0. s U.S. $000’s s s s ss. 2017 2016 ong term loans from bans and financial institutions 107,375 108,076 istite as iies ong term loans from related parties 1,855 2,167 Overdraft accounts 8,30 8,841 PADICO’s General Assembly decid s y 0 s s Murabaha and Istusna’a’ contracts 10,124 ,537 s U.S. $ 0.05 s s y 0 U.S. $ 00000. s s 127,663 128,621 Credit facilities, Islamic financing and current portion of long term ss U.S. $ 000 s s s loans (38,01) (46,22) PADICO’s subsidiaries that own shares in PADICO’s capital. 8,644 82,32 PADICO’s General Assembly decided in its meeting held on May 17, 2016, a cash dividends s U.S. $ 0.05 s s y 0 oans, credit facilities and Islamic financing maturities are as follows U.S. $ 00000. s s U.S. $000’s ss U.S. $ 000 s s s Mature in 2018 38,01 PADICO’s subsidiaries that own shares in PADICO’s capital. Mature in 201 23,066 Mature in 2020 1,683 as iies o ssiiaies i Mature in 2021 21,507 PIIC’s ssy Assy s y 0 s Mature in 2022 ,017 s D 0.0 s s s y 0 Matures later 16,371 U.S. $ 00. controlling interest’s sha s s U.S. $ 127,663 000. Palestine Poultry Company’s ssy PIIC Assy s  PADICO and its subsidiaries signed several long term loan agreements with local and y 0 s s D 0. s regional bans in U.S. Dollars and ordanian Dinars. hese loans are subect to a variable U.S. $ 00. controlling interest’s share of the dividends was U.S. $ 000. interest rates between 1 and 5.5 in addition to IO, and to a fied interest rate between 3 and 7. hese loans are to be settled within a seven year period. he C Isy Cy’s ssy PIIC Assy s balance of outstanding loans amounted to U.S. $ 107,375,000 and U.S. $ 108,076,000 A 0 s s U.S $ 0.0 s as at December 31, 2017 and 2016 respectively. ss s y 0 U.S. $ 00000. interest’s s s s U.S. $ 000.  During the year and past years, DICO’s subsidiaries (a subsidiary) signed loan agreements with some shareholders to cover their financial needs for an amount of U.S. as iies o ssiiaies i $ 1,855,000 as at December 31, 2017. hese loans are subect to an annual interest PIIC’s (a subsidiary) General Assembly decided in its meeting held on May 4, 2016, a cash rate between 5 and 7.5 and are settled in uarterly installments. s D 0.0 s s s y 0 U.S. $ 00. controlling interest’s share s s U.S. $  overdraft accounts and credit facilities from local and 000. regional bans in U.S. Dollars and Israeli Sheel with a total ceiling of U.S. $ 11,140,000 Palestine Poultry Company’s (a subsidiary of PIIC) General Assembly decided in its meeting as at December 31, 2017. he total balance used of these credit facilities reached a total y 0 s s D 0. s ss of U.S. $ 8,30,000 as at December 31, 2017. hese facilities are subect to interest s y 0 U.S. $ 000. controlling interest’s rates between 4 and 6.5. s s s U.S. $ 000. National Carton Industry Company’s (a subsidiary of PIIC) General Assembly decided in its A 0 s s U.S. $ 0.0 s ss s y 0 U.S. $ 00000. interest’s share of the dividends was U.S. $ 228,000 as at December 31, 2016.

43

ANNUAL REPORT | PADICO HOLDING 107

 uring the year and ast years, PAICO was granted Murabaha financing from bans and oisio o mployees’ eit local financial institutions with a total ceiling amounting to U.S. $ 5,000,000 as at U.S. $000’s ecember 1, 017. hese Murabaha agreements are subect to an annual rofit margin 201 201 of 5. In addition, PRICO signed an Istusna’a agreement during 2014 with one of the local alance, eginning of the year ,42 , bans for an amount of U.S $ Million subect to an annual fied rofit margin of 4.5. Additions during the year 1,2 1, he installments are aid after the comletion of the rearation hase and the assage Acuisition of a susidiary (note 4) 4 of an additional grace eriod for the roect. Transferred to accrued employee payale (22) Payments during the year (2,22) (1,422)  uring the year, aheel (a subsidiary of adweer) signed Murabaha agreement with a Foreign currency 2 local financing institution with a fied annual rofit margin ranging from to 5. he alance, end of year ,42 ,42 installments are aid during a eriod of 6 years starting from 017. he total balance used of these facilities reached a total of U.S. $ 10,14,000 and U.S. $ ,57,000 as at Provision is made for employees end of service indemnities in accordance with the aor ecember 1, 017 and 016, resectively. aw in force in Palestine and the ompanys Personnel egulations.

 On Aril 4, 017, aheel Palestine (a subsidiary of adweer) signed a financing agreement with the French Agency “Financial Institution Working for the Private Sector It is expected that the Palestinian Social Security aw will e applied during 201, wherey and Sustainable Development” (Proparco) for an amount of U.S. $ 10,000,000 to finance the employer is reuired to settle the provision for employees indemnity for periods prior to the purchase of AlSultan Fresh Fruit’s shares (Note 4). The annual interest rate is six the effective date of the aw. months IOR lus 4.4 and will be aid in 15 semiannual installments starting from une 15, 00. An amount of U.S. $ ,000,000 was granted on Aril , 017 while the te ocet iaiities rest of the amount will be granted during 01. U.S. $000’s 201 201  uring the year and revious years, PIIC and its subsidiaries signed loan agreements with Deferred rent revenues ,011 2,42 local and regional bans in U.S. ollars and Israeli Sheels at variable interest rates ong term postdated checks ,4 ranging from .75 to 5.5 in addition to IOR rates 4 and 5. hese loans were Deferred grants revenues 4 0 obtained for the urose of financing the investment activities and financing needs of 1,21 ,21 these comanies. hese loans are also reayable under monthly, uarterly and semi annual installments Accots a otes aae  hese loans and facilities were received by mortgaging assets with a boo value of U.S.$ U.S. $000’s 0,014,000, a chec guarantee of U.S. $ 1.6 Million and cash margins for an amount of 201 201 U.S.$ 07,000 as at ecember 1, 017 . Trade payales 11, ,1 utstanding checks ,4 , et os 20,11 1,2 uring August 016, PAICO issued 40 debt bonds with a nominal amount of U.S. $ 500,000. he bonds were underwritten in full with a fied annual interest rate of 5 te et iaiities for the first 6 months, and an annual interest rate of lus si months IOR for the U.S. $000’s remaining 4 months with a minimum of 5. he interest is to be aid at the end of each si 201 201 months starting ebruary 15, 017 and the bonds rincile is to be aid in one installment Accrued cash dividends ,41 ,01 after five years from the issuing date of August 01. hese debt bonds were issued to reay Deferred revenues , 4, the amount of the revious debt bonds of U.S. $ 5 Million that matured on Setember 15, Accrued interests and expenses , ,42 016 as well as finance Padico’s future projects and activities. Accordingly, PAICO Due to related parties 2,11 2, mortgaged shares in subsidiaries and associates, total boo value of the mortgaged shares Contractors’ retentions 1,1 amounted to U.S. $ 07,456, as at the date of the consolidated financial standards. egal Provision 4 142 acation Provision 2 20 mployees Provident Fund 1 4 ther liailities and provisions ,4 , 2,1 2,

44 4

ANNUAL REPORT | PADICO HOLDING 109

oso o ome pe peses U.S. $000’s U.S. $000’s 0 0 0 0 aance einnin o te ear ost of ills es poultry dates and dairy produts 0 itions rin te ear 0 peration ost of hotels restaurants and tourist failities cisition o a ssiiar note ost of properties sold a rens aents rin te ear ost fro sale of land and developent rihts aance en o ear 0 ost of arton sheets and ans onstrution ontrats osts 0

e roision for the year represents subsidiaries’ provision for their results o oerations or ost of plasti bottles and pipes sold te ear 0. e ssiiaries are orin on reacin a ina ta setteent it te ther operatin epenses 0 incoe ta atorit on teir rests o oerations or seera taae ears. C reace 0 a ina ta setteent it te ta atorit or its rests o oerations or te ears ro 00 to 0. eel mse peses U.S. $000’s pe ome 0 0 U.S. $000’s Salaries and related benefits 0 0 0 Sellin advertisin and publi relations epenses 0 Saes o is es otr ates an air rocts 000 ent and eneral servies eratin reenes ro otes restarants an torist aciities 00 onsultany and professional fees 0 eenes o roerties so 0 Board of directors’ fees and epenses eenes ro sae o an an eeoent rits ravel and transportation 0 0 Saes o carton seets an cans Subsriptions fees and lienses 0 ent reene 0 0 onations and sponsorships Secrities ecane ees an coissions nsuranes Cars an sses arin reenes 0 elephone fa and ourier Saes o astic ottes an ies onferenes eetins and hospitality 0 ters Stationery and printins 0 0 thers osses s om l sses oolo U.S. $000’s epeo moo 0 0 U.S. $000’s istrite iiens incoe Cane in air ae o inancia assets at air ae tro roit 0 0 or oss roperty plant and euipent ain ro sae o inancia assets tro roit or oss 0 nvestent properties ntanible assets 0 0 0 epreiation alloated pal trees

00

ANNUAL REPORT | PADICO HOLDING 111

e peses osos e Baaces ith reated parties icded i the cosoidated stateet of fiacia positio are U.S. $000’s as foos

0 0 U.S. $000’s roisio for dotf dets 0 atre of eatioship 0 0 airet of read for sae roerties ad roects i roress osole seme o l airet of iestet i associate poso les roisio for ea case ai o sae of roert at ad eiet Accots receivabe ad other crret Associates ad sister eferred reees recoied assets copaies 00 oss fro caceatio of cotracts 0 Associates ad sister airet of roert at ad eiet Other crret iabiities copaies oss of sae of estet Accred cash divideds Sharehoders 0 ecoer of ecessar roisios Accred epeses Sharehoders ad ters 00 ebers of the Board of 0 Directors 0 Bas ebers of the

oas ad credit faciities Board of Directors o ter oas aor Sharehoders s le s e e U.S. $000’s Bas ebers of the Debt Bods Board of Directors 000 000 0 0 rofit for te ear attritae to eit oders of (U.S. $ 000’s) 00 rasactios ith reated parties icded i the cosoidated icoe stateet are as eited aerae for sscried caita dri te ear Sares foos 000’s) 0000 0000 U.S. $000’s atre of eatioship ess reasr sares (shares 000’s) 0 0 0 0 Bas ebers of the 0 0 Board of Directors ad Basic ad dited earis er share (U.S. $ 000’s) 0.0 0.0 iace costs aor Sharehoders iace costs Associate Copay ey aaeet persoe ad Board of ele y sos Directors’ compensations: eated arties rereset associates aor sareoders Board of irectors eers ad Saaries ad reated epeses 0 0 e aaeet ersoe of ad etities cotroed oit cotroed or Board of Directors’ fees ad epeses siificat ifeced sc arties. rici oicies ad ters of tese trasactios are approved by PADICO’s Board of Directors.

ANNUAL REPORT | PADICO HOLDING 113

le eseme les o l smes e fooin tae proides te fair ae measrement hierarchy of PADICO’s assets and Set out below is a comparison by class of the carrying amounts and fair values of PADICO’s iaiities. ooin are antitatie discosres fair ae measrement ierarc for assets financia instrents carried in the consoidated financia stateents as at Deceer and iaiities as at Decemer 0: 0 and 0

le eseme s oted U.S. $000’s rices in Sinificant Sinificant y mo le actie oserae noserae 0 0 0 0 marets inpts inpts l sses ota ee ee ee Acconts receiae and other crrent Date of aation U.S. $000’s assets 0 0 l sses mese inancia assets at fair ae throh le rofit or oss 0 0 inancia assets at fair ae Cash and shortter deosits 0 0 tro oter inancia assets at fair ae throh compreensie income note : other corehensie incoe oted Decemer 0 0 0 oted 0 0 Unoted Decemer 0 0 Unoted 0 00 0 00

inancia assets at fair ae tro profit or oss note : Decemer 0 0 0 l lles l sses o Det onds 0000 0000 0000 0000 le s slose oans and credit faciities nestment properties note Decemer 0 0 0 Acconts and notes ayae 0 0 Other financia iaiities ooin are antitatie discosres fair ae measrement ierarc for assets as at Decemer 0: le eseme s he fair ae of the financia assets and iaiities are incded at the aont at hich the oted rices in Sinificant Sinificant instrent cod e echaned in a crrent transaction eteen iin arties other than in actie oserae noserae a forced or iidation sae. marets inpts inpts ota ee ee ee  he fair aes of acconts receiae ecet for on ter acconts receiae cash Date of aation U.S. $000’s and short ter deosits acconts and notes ayae other financia iaiities and credit l sses mese faciities aroiate their carryin aonts arey de to the shortter atrities of le these instrents. inancia assets at fair ae tro oter compreensie  he fair ae of on ter acconts receiae is estiated y discontin ftre cash income note : fos sin rates crrenty aaiae for receiaes and credit faciities on siiar ters. oted Decemer 0 Unoted Decemer 0 00  air ae of financia assets at fair ae throh rofit or oss and financia assets at fair ae throh other corehensie incoe that are actiey traded in actie financia inancia assets at fair ae tro profit or oss note : Decemer 0 arets is deterined y reference to oted rices at the date of the consoidated financia stateents. l sses o le s slose  he fair aes of noted financia assets at fair ae throh other corehensie nestment properties note Decemer 0 0 0 incoe ere deterined sin aroriate aation technies.

 he fair ae of oans and det onds is estiated y discontin ftre cash fos sin rates crrenty aaiae for det on siiar ters.

0

ANNUAL REPORT | PADICO HOLDING 115

ith respect to credit risk arising from other financial assets inclding cash and short term s eme deposits acconts receiable and other crrent assets PADICO and its subsidiaries’ eposre inancial liabilities of PADICO and its subsidiaries comprise long and short term loans and to credit risk arises from defalt of the conterparty with a maimm eposre eal to the borrowings debt bonds credit facilities accounts payable notes payable and other financial carrying amont of these financial assets. liabilities. he main purpose of these financial liabilities is to raise finance for operations of PADICO and its subsidiaries. In addition PADICO and its subsidiaries have various financial y s assets such as accounts receivable cash and shortterm deposits financial assets at fair value through other comprehensive income and financial assets at fair value through profit PADICO and its sbsidiaries limit its liidity risk by ensring credit facilities are aailable and or loss which arise directly from PADICOs operations. monitoring the collections of acconts and others receiable.

he main riss arising from PADICOs financial instruments are interest rate ris credit ris he table below smmaries the matrity profile of PADICOs ndisconted consolidated liuidity ris euity price ris and foreign currency ris. PADICOs oard of Directors reviews financial liabilities as at December 0 and 0 based on their matrity. and approves policies for managing these riss which are summaried below U.S. $000’s On ess than to to ore than ees e s demand month months years years otal PADICOs eposure to the ris of changes in interest rates relates primarily to PADICOs loans eeme and borrowings debt bonds credit facilities and short-term deposits with floating interest oans credit facilities and debt rates. bonds 0 00 Acconts payable and notes he following table demonstrates the sensitivity of PADICOs consolidated income statement payable and other crrent to reasonably possible changes in interest rates with all other variables held constant. he liabilities 0 00 effect of decreases in the interest rate is epected to be eual and opposite to the effect of 0 0 the increase shown eeme Increase in ffect interest on profit oans credit facilities and debt rate before ta bonds 0 0 basis Acconts payable and notes points U.S. $000’s payable and other crrent Currency liabilities 0 0 U.S .$ 0 0

Increase in ffect y pe s interest on profit he following table demonstrates the sensitiity of the consolidated income statement and rate before ta consolidated statement of comprehensie income to reasonably possible changes in eity basis prices with all other ariables held constant. he effect of decreases in eity prices is points U.S. $000’s epected to be eal and opposite to the effect of the increases shown Currency U.S. $000’s U.S .$ 0 Increase in ffect on eity price consolidated income ffect e s statement on eity PADICO’s subsidiaries have a broad client base. he credit ris associated with the accounts Shares listed in Palestine Secrities change 0 receivable is widely distributed among a large number of individual customers. PADICO’s Shares listed in Amman Stock change 0 subsidiaries are currently managing its credit riss by receiving collaterals from some Inestment portfolios 0 customers and monitoring the accounts receivable collections in coordination with the legal Shares not listed in financial markets 0 0 consultants. he maimum eposure of the accounts receivables to the credit ris is the Shares listed in other markets 0 carrying amount as disclosed in note . In addition PADICO and its subsidiaries sell the maority of their ready for sale properties in several installments maturing in several years. PADICO’s real estate companies limit the credit risks by not transferring the ownership of the sold properties to customers unless all notes and accounts receivables are collected.

ANNUAL REPORT | PADICO HOLDING 117

U.S. $000’s ommmes oe les et n Inrease in nsidated et – s s sss sss euit rie ine stateent n euit sss ss U.S. $ 00 U.S. $ s 0 0 s. Sares isted in Paestine Seurities ane 0 0 Sares isted in Aan St ane 0 – s s ss s s Inestent rtis 0 s s s s Sares nt isted in inania arets 0 0 s s s s s Sares isted in ter arets 0 ss s ss. s s s U.S. $ oe ey s . s s s s s e in tabe denstrates te sensitiit te nsidated ine stateent t a s s ss s s. reasnab ssibe ane in te U.S. $ eane rate it a ter ariabes ed nstant. – s s s s s e rdanian Dinar OD is ined t U.S. $ terere n eet resutin r te suppliers in relation to PADICO’s s sss s U.S. $ utuatins in OD rate is eeted n te nsidated ine stateent. e eet 0 s s ss. s derease in rein urren eane rate is eeted t be eua and site t eet ss s inrease sn be s ss. – been several lawsuits against PADICO’s subsidiaries U.S. $ Inrease in et n Inrease in et n within the normal course of business. PADICO’s management and e Israei nsidated ter nsidated See t ine urrenies ine ss ss s s ss s U.S. $ stateent t U.S. $ stateent ss. U.S. $000’s U.S. $000’s – s sss ss s s sss. s ss U.S.$ 0 00 0 s s.

– s s s s s U.S.$ 0 0 U.S. $000’s

0 0 pl meme e riar betie PADICOs aita anaeent is t ensure tat it aintains eat s aita ratis in rder t surt its business and aiie sareder aue. s PADICO anaes its aita struture and aes adustents t it in it anes in 0 0 business nditins. anes ere ade in te beties iies r resses durin te t ears ended Deeber 0 and 0.

Caita rises sare aita sare reiu ter reseres retained earnins and nn ntrin interest it a tta U.S. $ 00000 as at Deeber 0 and U.S. $ 0000 as at Deeber 0.

oeo o s eop e PADICO and its subsidiaries are arrin ar art teir atiities in Paestine. e itia and eni destabiiatin in te area inreases te ris arrin ut business and ud aderse aet errane.

ANNUAL REPORT | PADICO HOLDING 119

nd

siness 0 00 S S 00 U.S. $ U.S. Consolidated

Consolidated

S S minations 0 U.S. $ U.S. li 00

liminations

tourism securities marets in in marets securities tourism 0 0

S S sector ourism 00 00 0 0 U.S. $ U.S. sector ourism

S S sector market 0 Securities U.S. $ U.S. sector maret

Securities

and

0

0 S S sector U.S. $ U.S. sector agricultural

Industrial and Industrial and agricultural ere reclassified to correspond ith the classifications of the of the classifications the ith correspond to reclassified ere

Industrial

real estate industrial and agricultural and industrial real estate

eal 0 0 eal S S estate sector U.S. $ U.S. estate sector

are 00

0

0 00 0 0 S S sector

U.S. $ U.S. sector 0 0 0 Inestment Investment

. .

rations

es

ompe

segment revenuessegment segment reenuessegment eme epo eme

eeme eees ternal revenues Inter otal revenues e omo Depreciation and amortiation inance cost Profit loss before income ta Capital ependitures Share of associates’ of results ope sses lles Assets iabilities Investment in associate companies eme epo oe eeme eees ternal reenues Inter otal reenues e omo Depreciation and amortiation inance cost Profit loss before income ta Capital ependitures Share of associates’ of results operations sses lles Assets iabilities Inestment in associate companies of balances statements financial of consolidated the Some December ended year for statements financial consolidated

PADICO’s reporting segments as PADICO's risks and rates of return are affected predominantly by differences in the products a products the in differences by predominantly affected are of rates return and risks as PADICO's segments reporting PADICO’s segments subsidiaries its and PADICO provided. services sector investment to the addition bu PADICOs regarding information liabilit and asset certain and information profit and revenue presents table he following segments

ANNUAL REPORT | PADICO HOLDING 121 Ramallah Phone:+970 2 294 8222 Fax: +970 2 294 8223 P.O :1708 Ramallah, Palestine

Regional Office (Amman) Phone:+962 6 464 7837 Fax:+962 6 463 0451 P.O 6181 Amman 11118, Jordan www.padico.com