ARABTEC HOLDING Name of the Firm: Arabtec Holding (PJSC) Year-end: 2012 Main operating activities: construction of high-rise

towers, residential villas, contracting related subsidiaries, joint ventures both in UAE and Overseas Auditors Name and Audit Firm: Ashraf Abu-Sharkh, Ernst & Young GICS Industry Group: Real Estate Directors report:
The directors report of the company has been a blend of neutral attitude and an optimistic approach towards its future. They have realized that there has been a decrease in the net profit from the last year and have devised a good contingency plan to resolve this issue. The main operating activities are the same from last year and this year they are focusing on going global by exploring their opportunities in selective fast-growing markets and using its strengths in commercial and residential projects to their advantage. This sectorial diversification will ensure that their risk from local competitors decreases and it also shows that they done their homework very well because they want to expand their construction activities in the field of oil, gas, power and infrastructure. Also they have decided that there are not going to be any dividends for its shareholders in order to prevent the companys net cash position. There is a slight chance that this might restrict the prospective investors to invest in this company because first of all its net profits have been on a declining trend since 2010 and now the company is trying to save up on its net cash available. This sends out a wrong message about the efficiency of companys functions.

Recommended Dividend: NIL Corporate Governance Report:

Accounting policies
The financial statements have been consolidated in accordance with the IFRS and follow the historical cost based approach except for availablefor-sale financial assets that have been recorded at fair value. The major difference between the historical and current cost approach is that in historical you record the asset in the acquisition price whereas in current you record it in the market value.

The depreciation policy used for plant and equipment is straight-line method. The useful lives and the method of depreciation of property, plant and equipment are reviewed at the end of every financial year and adjusted if appropriate. Revenue is recognized to the extent that it is probable that economic benefits will flow to the Group and the revenue can be reliably measured, regardless of when the payment is made, thus following the accrual principle. Revenue is measured at the fair value of the consideration received or receivable, taking in to account contractually defined terms of payment excluding discount, rebates, customer returns and other sales tax or duty. In case of the sale of goods, revenue is realized when the rewards of ownership and the risk has been transferred to the buyer and also when revenue from the transaction can be reliably measured. Policy on major business activities: Inventories are stated at the lower of cost and net realizable value. Cost comprises of direct materials and also those costs that have been incurred in bringing the inventories in the current location and condition. The purchase cost of raw materials, consumables and trading goods are evaluated on a weighted cost basis. For the manufacturing work-inprogress and finished goods the cost of direct materials and labor plus attributable overheads are evaluated.

Income Statement and Statement of Changes in Equity

Gross profit 2012- AED 575599000 2011- AED 548241000 EBIT 2012- AED 231,264,000 2011- AED 300,068,000 Net profit before tax 2012- AED 189733000 2011- AED 263532000 When you compare the EBITS of both the years, 2011 is clearly better by around AED 68,600,000. Though the companies net investment income and operational activities were better in 2012 by more than AED 75,026,000 and AED 27,358,000 respectively the increase in the general and administrative expenses and the decrease in operating incomes and other incomes led to the decrease in the EBITs. The main concern of our group regarding the decline was the provision for doubtful doubts that have been written back to AED 9.261.000 because this means that they have not been receiving their payments from the parties. Equity 2011- AED 3,294,130,000 2012- AED 3,345,345,000 Strengths: the most basic advantage any company should have is their efficiency in its operating activities and this company has been very good with it. Their income from investments have been very impressive that shows the decision making efficiency with the top level management as they gained a lot from the disposal of Sukuk. The company has also earned a considerable amount from the interest on trade receivables. Weakness: though their operating activities i.e. their basics are good the end profit has not been up to the mark. Their general and administrative expenses have been on a continuous rise and their other incomes have declined considerably compared to the last year. The shareholders may be a little unhappy because their earnings per share have declined from the last year and the profit available to them has also decreased. This also

discourages other prospective investors to invest in this company. The income has also declined from the last year that means that their aim to increase their rate of growth will suffer a setback.

Balance Sheet:
Current Assets: 2011- AED 6,182,599,000 2012- AED 6,487,047,000 Trade and other receivables have been the current assets that have the highest value in both the years. Non current asset: 2011- AED 2,539,092,000 2012- AED 2,464,621,000 Property, plant and equipment were the non-current asset with the greatest value for both the years Total Assets- 2011- AED 8,721,691,000 and 2012- AED 8,951,668,000 The main factors causing the difference in total assets of both the years are the increase in current assets when compared to the last year. Though the non current assets have declined from the previous year, this offset has been compensated by the increase in Current Assets. The major factors that have boosted the current assets are the cash and cash equivalents and the trade and other receivables. The trade and other receivables have been boosted by the contract work undertaken during this year and also the amount due from the customers for the following. The bank balances and cash of the company in hand have also increased. Current Liabilities: 2011- AED 5,153,422,000 2012- AED 5,148,489,000 Non current Liabilities: 2011-AED 274,139,000 2012- AED 457,834,000 Retained Earnings: 2011- AED 1,107,072,000 2012- AED 1,067,903,000 The main factors causing the difference in total liabilities for both the years are the increase in equity and non-current liabilities. The bank borrowings have increased substantially in the form of overdraft facilities and the noncurrent retentions payable that has led to the increase in non-current liabilities and the rise in the share capital also led to the difference in total liabilities.

Cash Flow Statement:

The net cash flow from the operating activities in the year 2012 was AED 216,671,000 and they did not generate any cash from investing activities. The cash was used up instead to an extent of AED 250,470,000. The net cash flow is differing from its net profit because cash flow statement only deals with cash-related transactions whereas net profit takes into account cash as well as non-cash activities. The basic way of calculating both these things is one of the main reasons.

Ratios:

2012 Current ratio 1.25:1

2011 1.19:1

Liquid ratio Absolute cash ratio Debtors days Return on equity Gross profit margin ratio Net profit ratio Return on Assets Debt to equity ratio Interest coverage ratios Debt coverage ratios

1.22:1 0.20:1 326 5.67% 10.17% 3.32% 2.61% 1.67times 5.56times 2.11times

1.13:1 0.18:1 364.28 8% 11.14% 5.35% 3.44% 1.64times 8.76times 0.54times