Damas International Limited and its Subsidiaries Dubai

Transcription

Damas International Limited and its Subsidiaries
Dubai – United Arab Emirates
Reports and consolidated financial statements
For the year ended 31 March 2011
Board of Directors
Ibrahim Belselah (Executive Chairman)
Anan Fakhreddin (Chief Executive Officer)
Abdullah Al Mazroei (Non-Executive Independent Director)
Abbas Ameeri (Non-Executive Independent Director)
Ehsan Abbas (Non-Executive Independent Director)
Nicholas Hegarty (Non-Executive Independent Director)
Simon Copleston (Non-Executive Independent Director)
Tariq Ali (Non-Executive Independent Director)
T.N. Pratap (Non-Executive Non-Independent Director)
Auditors
Deloitte & Touche (M.E.)
Registered Office
Address
Office No. 36, Level 3
Gate Village Building 4
The Gate Village
P. O. Box 113355
Dubai, UAE
Reports and consolidated financial statements
Table of Contents
Pages
Chairman’s statement
1
CEO’s statement
2
Management discussion and analysis
Report on Corporate governance
3-5
6 - 26
Independent auditor’s report
27 - 28
Consolidated statement of financial position
29 - 30
Consolidated income statement
31
Consolidated statement of comprehensive income
32
Consolidated statement of changes in equity
33
Consolidated statement of cash flows
34 & 35
Notes to the consolidated financial statements
36 - 116
Chairman’s statement
The year 2010-11 was one of the most eventful years in Damas’ 104-year history. Within a timeframe
of only twelve months, Damas International Limited and its subsidiaries (the “Group”) has
implemented progressive reforms that have been instrumental in the company’s ability to post positive
financial results this period. It has also been one year since the new Board of Directors was appointed;
playing an important role in the major changes undertaken within the Group.
The highlight of the past year was the progress made to finalize the financial restructuring. I would like
to thank the banks and financial institutions for their support during this period.
Another achievement has been the company’s ongoing efforts towards implementation of world class
corporate governance standards. A large number of codes, processes and polices have been introduced,
designed to enhance transparency and best practices. The establishment of five Board Committees,
which make recommendations to the Board in their respective areas, have improved process excellence
and helped streamline procedures. The Group is also ensuring full compliance with the Enforceable
Undertakings and the technical requirements of the Dubai Financial Services Authority.
Throughout the past period, Damas has also strengthened its reputation and stature as the regional
jewellery trendsetter and market leader. In fact, the Group was recently recognized as one of the United
Arab Emirates’ “high fliers” during a special awards ceremony held in Dubai, which was organized by
the UAE Ministry of Foreign Trade. Damas is one of the selected Emirati companies commended in a
special edition book, titled: “Highfliers of the UAE”, for outstanding efforts in enhancing the country’s
standing in the international economic arena and raising the value of the country’s products and brand
name abroad. At the same time, Damas is also benefiting from the economic growth witnessed within
the Emirates after the global turbulence of the past two years, as increased tourism and spending power
is stimulating more demand for beautiful gold, jewellery and watches.
These factors and ongoing reforms have enabled Damas to achieve AED 2.95 billion in sales this
financial year. This is a success story in itself. Nevertheless, looking forward, there is still a lot more to
be done. We need to continually fill the gaps in the market, take advantage of opportunities as they
arise, and maximize value for all shareholders and stakeholders. I am confident that this is all possible,
especially when the intent, efforts and adherence to industry best practices exists.
I would like to thank the Board of Directors for its vision and guidance, and also the management for
their leadership during this eventful year. A special thanks also to our loyal and skilled employees who
are the Group’s greatest asset.
Ibrahim Belselah
Executive Chairman
1
CEO’s statement
The year 2010 -11 has been a challenging period, as the region’s business environment, particularly the
jewellery industry, has been characterized by increasing commodity prices and tough competition. It is
therefore encouraging to see that Damas has achieved positive financial results, with AED 2.95 billion
in sales this year.
The management focus of the past financial year has been on stabilizing the business. In line with this,
the signing of the Facility Agreement and the subsequent financial restructuring was a key
achievement, as it involved many months of negotiations with a total of 25 local and international
banks. This agreement will act as a key mile stone in Damas’ journey towards creating sustainable
value for all its stake holders.
At the same time, maximizing sales was another key focus point, primarily achieved by ensuring that
Damas stores stocked the right product mix. Ongoing retail promotions and the launch of new
consumer campaigns also ensured regular inventory turnover, with the Group achieving the highest
sales in its history for the Akshaya Tritiya campaign and the Dhanteras Day during Diwali. A total of
95 promotions were executed on a Pan Arab level during this period, with more than 100 new product
designs introduced. On a regional level, the Group reengineered its presence in key markets in order to
arrive at the best retail formula, beginning with the acquisitions in Kuwait and Saudi Arabia in early
2011. Saudi Arabia as a market holds a lot of promise and efforts are underway to build a strong
platform for long term growth in that market.
To drive the sales, efforts have been made to retain the best talent in the industry, via the introduction
of employee-friendly benefits such as optimized working hours, improved health care policies, and
objective performance evaluations. A new streamlined organizational structure is in place and the
management team has been strengthened considerably to ensure effective coordination between all
markets and functions. This has resulted in better internal coordination and information flow, thereby
enhancing the effectiveness. Business process mapping and subsequent re-engineering was also
completed, to improve effectiveness within and between departments.
In order to enhance working capital efficiency, cost cutting was achieved by focusing on only the
Group’s core retail operations, minimizing the role of business units outside of this scope. In addition,
selected underperforming retail outlets were closed, and inventory levels were optimized across all
stores.
At the same time, a taskforce was also created to focus on financial recoveries for the Group. As a part
of the financial restructuring, the Cascade Agreement was also finalized, which is designed to
maximize recoveries for all lenders, including the Group and its shareholders. It is the company’s
objective to take all steps to ensure full recoveries from The Abdullah Brothers. A risk management
department was also created to assist in integrating risk management within the overall strategy
development process moving forward.
These combined initiatives have enabled the Group to increase its market share and achieve gross
profits of AED 635.58 million and gross margins of 21.53% during this period. These figures are also
noteworthy considering that, despite fewer stores and less inventory than previous years, the company
could still improve its sales performance.
We are confident that these factors, along with Damas’ integration of best practices, offer a sustainable
growth trajectory for the Group and its shareholders.
I would like to thank all Damas employees for their efforts during this period.
Anan Fakhreddin
CEO
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MANAGEMENT DISCUSSION & ANALYSIS
Financial year 2010-11 was primarily a period of financial restructuring, streamlining of operations as
well as repositioning of the Group’s presence in several overseas markets.
Subsequent to negotiating a Standstill Agreement with its bank lenders on the entire bank borrowings in
the previous year, the Group was able to achieve a successful restructuring of its entire bank borrowing on
11 May 2011 amounting to AED 3.04 billion. This momentous achievement enabled the Group’s
operations to be stabilised in a period that has continued to witness extreme volatility in the price of Gold
which touched a record high of US$ 1,620/Oz on 25 July.
The Group registered a net profit of AED 53.28 million during the financial year ended 31 March 2011,
as compared to a net loss of AED 1.91billion recorded for the year ended 31st March 2010.
Income Statement
The total revenue earned by the Group during the financial year 2010-11 was AED 2.95 billion, as
compared AED 3.30 billion, achieved in the year 2009-10. Despite 10.6% reduction in the total revenue
earned during the year over the previous year, the Group has recorded an increase in the gross profit on
account of improved margins. As a result, the Gross Profit for the year ended 31 March 2011 was AED
635.6 million, an increase of 12.5% over the previous year. At 31st March 2011, the Group had 325 stores
as compared to 432 stores on 31 March 2010.
During the financial year 2010-11, the Group had undertaken to streamline its operations which resulted
in store performance review, headcount reduction as well as realignment of the back office activities.
While the store performance review resulted in closure of certain unprofitable outlets, it enabled the
Group to focus on the stores which have potential to deliver higher returns.
Owing to various measures undertaken, a reduction of 14.2% was achieved in the total operating expenses
as compared to the previous year. While reduction in the personnel cost was offset by the redundancy
payments made to the staff, other operating expenses comprising of rent, administrative expenses,
advertising and marketing promotion and depreciation have all been reduced over the previous year
comparative. The total operating costs for the year ended 31 March 2011 amounted to AED 436.63
million as against AED 508.57 million in the previous year.
The Group witnessed an increase of 1.2% in finance costs during the year as against the previous year.
This was mainly on account of the dollarization of certain gold loans, which were bearing low interest, in
comparison with dollarised term loans.
The income earned from fixed deposits has decreased by 61% in the current year as several banks applied
fixed deposits held by the Group, against the facilities that resulted in the decrease in the fixed deposits
and a consequential reduction in the finance income.
During the year, the Group’s presence across the various regions was reviewed leading to a decision to
exit from some of ventures. The exit settlements agreed with the venture partners resulted in recognition
of a loss of AED 55.33 million, of which AED 39.98 million related to discounting loss accounted for the
settlement period extending beyond one year from the date of agreement to exit. The discounting loss will
be unwound as and when the scheduled payments would be received per the exit agreements.
The Group has registered a reduction in the impairment losses over the previous year comparative by
AED 735.09 million. During the year, the Group recorded AED 14.10 million as additional impairment
on investment properties held by it. As the Group entered into settlement agreements with certain parties,
which were classified as receivables, it resulted in an impairment loss of AED 13.92 million while
permanent diminution in the value of available-for-sale investments resulted in recording an impairment
loss of AED 5.10 million. During the year under review, exit from various equity accounted investments
resulted in recording settlement loss, which was further increased by the discounting loss recorded owing
to the extended collection of settlement amounts over a period extending beyond one year. Furthermore,
impairment of certain equity accounted investments which were classified as long term loans also resulted
in recording a loss of AED 8.15 million during the year under review. During the year, an additional
impairment of AED 14.25 million was also recorded against certain other receivables.
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MANAGEMENT DISCUSSION & ANALYSIS (continued)
During the year under review, the Group recorded an allowance of AED 0.81 million with respect to
certain doubtful receivables as against the allowance of AED 572.14 million recorded for the previous
year comparative.
Other income for the year ended 31 March 2011 amounted to AED 113.48 million mainly due to
recoveries from certain doubtful receivables as well as of inventories given to customers. Further a gain
of AED 28.87 million was recorded owing to disposal of Group’s interest in certain equity accounted
investments.
Statement of Financial Position
The statement of financial position footing of the Group at 31March 2011 was AED 3.69 billion, a
reduction of 8.7% over 31st March 2010 of AED 4.04 billion which is mainly due to exit from certain
ventures during the year under review.
At 31 March 2011, property, plant and equipment reduced by 34.5% over the previous year to be at AED
115.89 million, mainly due to divestment of stake in certain subsidiaries in the UAE and overseas regions.
The depreciation, disposal and acquisition combined with write off of certain fixed assets further reduced
the property plant and equipment over the previous year. On 31 March 2010 property, plant and
equipment was AED 176.98 million.
At 31 March 2011, the Group owned investment properties mainly comprising of properties located at the
DMCC and residential units located in Sharjah, which increased by 6.6% over the previous year to be at
AED 147.11 million. The increase in investment properties was the result of recording of an asset that the
Group acquired towards part settlement of one of its receivable. During the year under review outstanding
payments were made in respect of a plot of land at DMCC, which further increased the investment
properties owned by the Group. To confirm the value of investment properties held by the Group at 31st
March 2011, an independent real estate consulting firm was engaged for valuation which resulted in
recording an impairment loss of AED 14.10 million towards diminution in the value of investment
properties. In addition, the depreciation charge for the year on investment properties amounting to AED
2.71 million.
The net reduction of AED 9 million in the balance of intangible assets at 31 March 2011, over the
previous year comparative of AED 38.10 million, reflects the amortisation of key money during the year
amounting to AED 9.67 million, which was partially offset by an increase of AED 0.67 million due to
opening of new retail outlets. At 31 March 2011 the intangible assets balance was AED 29.07 million.
At 31 March 2011, Group investments in equity accounted entities amounted to AED 90.59 million, as
compared to AED 261.11 million at 31 March 2010. This reduction of AED 170.53 million was mainly
owing to settlements signed by the Group with various venture partners towards exit from several
ventures in Egypt, Lebanon and the UAE amounting to AED 84.30 million. Further dividends amounting
to AED 33.20 million were received from ventures in Qatar, Bahrain and the UAE during the year. Owing
to the decision to exit from certain ventures, the Group has discontinued equity accounting the results of
some of its equity accounted investments amounting to AED 65.88 million. The Group’s share of income
from other equity accounted investments amounts to AED 3.53 million.
At 31March 2011, other financial assets mainly comprised of receivables in respect of settlement
agreements entered into by the Group during the year under review; available-for-sale investments and
unrealized gains on revaluation of forward contracts. The increase of 160% in the balance outstanding at
31 March 2011, over the previous year comparative mainly relates to the reclassification of certain
receivables from ventures, where exit agreements have been finalised with the venture partners. The
increase in the unrealised profit on revaluation of the outstanding gold forward contracts on 31 March
2011, over the previous year comparative, amounted to AED 4.18 million owing to increase in the price
of gold. During the year under review, the Group realised funds from its held to maturity investment.
At 31 March 2011, the inventory owned by the Group comprised of gold jewellery and related making
charges, diamond jewellery, pearl jewellery, watches and other precious and semi-precious stones
amounting to AED 1,472.75 million which was 7.5% higher than AED 1,373.03 million at 31 March
2010.
4
MANAGEMENT DISCUSSION & ANALYSIS (continued)
While the replenishment of inventory during the year under review was lower than the previous year, the
increase in inventory holding was mainly owing to fixing of certain gold loans during the year. The
increase was partially offset by decrease in the inventory levels relating to exit from certain subsidiaries
during the year under review.
At 31 March 2011, trade receivables and prepayments amounting to AED 264.35 million comprised of
trade receivables, dues from credit card companies, prepayments, advances and other receivables. The
increase of AED 79.73 million, over the previous year comparative, mainly relates to increase in other
receivables including other advances and receivables in respect of the settlement agreements entered
during the year under review with associated companies and subsidiaries, while recoveries of balances
during the year reduced the balance outstanding by AED 28.87 million.
The reduction in cash and bank balance at 31 March 2011 to AED 421.19 million as compared to AED
755.21 million on 31 March 2010 was mainly owing to repayment of revolving facilities during the year
amounting to AED 382.28 million. During the year, this reduction was partially offset by the collections
from recoveries of outstanding debts and receivables.
The Group monitors overdraft facilities extended to it by the banks as an integral part of its cash
management process forming part of its cash and cash equivalents. The increase in the overdraft facilities
of the Group at 31 March 2011, over the previous year comparative, by AED 590.76 million has mainly
caused the decrease in cash and cash equivalents at 31 March 2011, over the previous year comparative.
Owing to fixing of certain gold loans by bullion banks during the year under review, there has been an
increase in the inventory balances which led to negative cash flow from operations, despite a positive
cash flow of AED 265.94 million from operating activities before working capital changes.
The decrease in the outstanding balance of non-controlling interests during the year by AED 9.77 million
as at 31 March 2011, over the previous year comparative, mainly comprised of the minority interest
relating to entities disposed of during the year under review.
The total interest bearing borrowings on 31 March 2011 amounted to AED 2,416.86 million, as compared
to AED 2,101.49 million, and the balances outstanding have been classified as non-current and current
liability, based on their respective maturity profile. The balance outstanding mainly comprises of
overdrafts; term loans; trust receipts; and local bills discounting. During the year, the interest bearing
borrowings increased due to conversion of non-funded facilities into currency loans by banks. However
this increase was partially offset by the reduction of bank borrowings by AED 382.28 million due to
deposit of operational funds with banks.
At 31 March 2011, the trade payables and accruals of AED 210.84 million reduced significantly over the
previous year comparative owing to decrease in the provision for purchase of gold by AED 439.42
million. At 31 March 2011, the Group had its own net gold inventory and hence no provision for
purchases was needed.
At 31 March 2011, the margin money collected from trade receivables against unfixed gold transactions
amounted to AED 2.78 million, marking a reduction of AED 2.67 million over the previous year
comparative as during the course of the year, the Group has taken measures to reduce the unfixed gold
transactions to minimum levels. At 31 March 2011, balance due to related parties had reduced by AED
2.55 million over the previous year comparative to be at AED 3.50 million due to decrease in the balances
payable to related parties.
At 31 March 2011, the total Shareholders Equity has increased by AED 40.95 million over the previous
year comparative to be at AED 1.0 billion. This increase is owing to the profit registered during the year.
The underlying strength of the Group has enabled it to overcome significant operational, financial and
market challenges during the year under review and build a sustainable platform to deliver positive
returns to all stakeholders going forward. Whilst the future is expected to provide more challenges, the
continuing strong core business performance has provided the Group with the confidence that it has the
ability to withstand stringent tests overcome these challenges.
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Report on Corporate Governance
About Damas
Overview
The Group is an international integrated jewellery and watch retailer operating in 12 countries with
325 stores, and the leading jewellery and watch retailer in the Middle East, based on number of stores.
The Group’s network of retail outlets includes subsidiaries predominantly in the Middle East, jointly
controlled entities and associates in various countries. The Group’s stores offer the Group’s own
branded products as well as products sold under leading global and regional luxury brands.
The Group sells jewellery and watches through three main distinctive store formats, each of which is
tailored to a specific type of customer.
· Les Exclusives stores, which cater to high net worth consumers through products that include some
of the world’s most exclusive luxury brands, for jewellery and watches, and some of the Group’s
own brands;
· Semi-Exclusives stores, which cater principally to upper-middle income consumers such as tourists
and expatriate professionals and office workers, through products that include well known
international jewellery brands of wider appeal, in addition to regional brands and the Group’s own
labels; and
· Damas 22K stores which cater mostly to middle income and working class immigrant populations,
primarily of South Asian origin, and primarily offer jewellery under the Group’s own brands and
regional brands.
In addition to the three principal store formats, the Group has other stores, such as watch stores and
Mono-brand stores. These include:
· Watch stores, which include Damas Watches and Time Art stores offering internationally branded
watches in the medium price range; and
· Mono-brand stores, each dedicated to a single international brand, located throughout the UAE,
including Tiffany & Co, Paspaley, Graff, Parmigiani, Links of London, Roberto Coin and Folli
Follie.
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Corporate Governance
The Company is registered in the Dubai International Financial Centre (DIFC). During the financial
year ended 31 March 2011, the Company aimed to comply, in all material respects, with the corporate
governance requirements applicable to it. In addition, the Company continues to aim towards
introducing best practice standards so far as its corporate governance practices and policies are
concerned.
GOVERNING BODY
The Company has a Board of Directors (the “Board”) which leads and controls the Company, headed
by the Chairman who is responsible for the leadership of the Board. The Board is comprised of nine
directors out of which six directors are independent non-executive directors; one director is nonexecutive non-independent and two executive directors. The office of Chairman of the Board is
different from the office of the Chief Executive Officer of the Company. The Chairman of the Board is
an executive director.
The Board, through the guidance of its Corporate Governance Committee, has made efforts during the
financial year to improve its effectiveness. The Board considers that the composition of the Board of
Directors is balanced and that the Board, in aggregate, is sufficiently qualified and experienced.
BRIEF PROFILE OF THE DIRECTORS
Ibrahim Belselah
Chairman, Board of Directors
Ibrahim Belselah serves as the executive Chairman of the Board. Mr. Belselah also serves on the
boards of Damas LLC, Damas Jewellery LLC, Damas Jewellery DMCC, Al Wasel DMCC and Damas
Saudi Arabia Company Ltd. A member of the Board of Directors of a range of leading regional firms,
including DIFC Investments, Arabtec Holding and others. Mr. Belselah currently serves as a senior
advisor to the Rothschild Group and a consultant to Trafigura Beheer, one of the world’s largest
independent commodities trading companies. Previously, he served as Managing Director at DIFC
Real Estate and Head of the Arbitration Centre at the DIFC. Earlier, Mr. Belselah held the position of
Chief Executive Officer at Reem Investments in Abu Dhabi. Among his career highlights was his
service in 2003 as Lead Counsel for the Government of the United Arab Emirates for the Annual
Meetings of the World Bank Group and International Monetary Fund, when those meetings were held
in Dubai. Additionally, he led the issuance of the UAE’s first Government bond and served as a key
team member of the Dubai e-Government Initiative. Mr. Belselah earlier served for nearly two decades
as Director of Finance and Contracts at Dubai Municipality. He earned his MBA and Masters in
Industrial Engineering from the University of New Haven in the United States.
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Anan Fakhreddin
Member, Board of Directors and Chief Executive Officer
Anan Fakhreddin is an executive member of the Board of Directors and the CEO of Damas
International Limited. Mr. Fakhreddin also serves on the boards of Damas LLC, Damas Jewellery
LLC, Damas Jewellery DMCC, Al Wasel DMCC and Damas Saudi Arabia Company Ltd. Mr.
Fakhreddin served as the Dubai-based Managing Director for Middle East and Turkey, at the World
Gold Council. Previously Anan worked with Diamond Trading Company (a De Beers group company)
for nine years in the GCC. Mr. Fakhreddin started his career with American Express International and
held the position of Regional Manager in Saudi Arabia. He holds a BA in Business Administration
from Yarmouk University in Jordan.
Abdulla Fadhel Ahmed Almazroei
Member, Board of Directors
Abdulla Fadhel Ahmed Almazroei is an independent, non-executive member of the Board of Directors
of Damas International Limited. Mr. Almazroei also serves on the boards of Damas LLC, Damas
Jewellery LLC and Damas Saudi Arabia Company Ltd. The owner of a range of diversified businesses
involved in construction, travel and tourism and commodities, Mr. Al Mazroei previously served for
more than 25 years as the Secretary General of the Dubai Municipal Council, Dubai Municipality. He
is a member of the Board of Directors of the Mohammed Bin Rashid Housing Establishment. Mr.
Almazroei graduated from the School of Petroleum Engineering at Tulsa University in the United
States.
8
Abbas G. Ameeri
Abbas G. Ameeri is an independent, non-executive member of the Board of Directors of Damas
International Limited. Mr. Ameeri currently serves as independent advisor to various banks and family
businesses. Mr. Ameeri served as Managing Director, Merchant Banking, at Gulf International Bank,
which is headquartered in the Kingdom of Bahrain. Since joining GIB in 1982, he has held a range of
increasingly senior positions at the bank, including that of Managing Director, Head of Banking,
following earlier service in the bank’s Relationship Management and Credit Administration/Analysis
Divisions. Mr. Ameeri has also served on a number of boards, like Securities and Investment
Company in Bahrain, United Arab Chemical Carrier Company (shipping company in Dubai), Al
Masha’ari in Dubai, GIB Investments in Bahrain. Currently, Mr. Ameeri also serves on the Board of
Polyacryl, a petrochemical company in Iran. Mr. Ameeri holds a degree in Electrical Engineering from
the University of Derby in the United Kingdom and is a graduate of Citi Bank Credit & Marketing
program.
Ehsan Abbas
Ehsan Abbas is an independent, non-executive member of the Board of Directors of Damas
International Limited. As Chief Operating Officer of Omniyat Holdings and Chief Executive Officer
of Omniyat Investment Management Company, Mr. Abbas sets strategy and objectives across the
Dubai-based group. Previously, he led the retail, corporate and investment banking strategy at National
Bank of Umm Al Quwain (NBQ). Mr. Abbas also holds the position of Region Head & EVP – Dubai
& Northern Emirates – at ADIB. In addition to earlier serving as Chief Executive of an entrepreneurial
venture, Mr. Abbas served for 12 years with Citibank/Saudi American Bank in Saudi Arabia and the
United Arab Emirates. He was also the Area Director for First Gulf Bank responsible for Dubai &
Northern Emirates and also the UAE Head of First Gulf Bank’s Restructuring Unit. He earned his MA
in International Relations and BA in Business Administration in the United States.
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Nicholas C. Hegarty
Nicholas C. Hegarty is an independent, non-executive member of the Board of Directors of Damas
International Limited. Mr. Hegarty currently serves as a senior advisor and consultant to a number of
GCC, European and Eastern European entities. Previously, he served as the Chief Financial Officer at
the Investment Corporation of Dubai (“ICD”), one of Dubai’s Sovereign Wealth Funds, with assets in
excess of US$ 100 billion and ownership interests in Emirates Airlines, Dubal, Emirates NBD, Borse
Dubai, ENOC, EMAAR and Dubai Islamic Bank. Prior to ICD, Mr. Hegarty served as the Managing
Director and Head of MENA Investment Banking at Deutsche Bank in Dubai, following service at
Barclays Capital in the United Arab Emirates, as the CEO and Head of Investment Banking, and
various positions with ABN AMRO Bank, in the United Kingdom, the Netherlands, Russia, The
United States and Brazil. Mr. Hegarty holds an MBA from the Erasmus School of Management and
the Wharton School of Business, as well as a post-graduate diploma in Marketing Management from
the College of Marketing, Dublin, Ireland, and a BA (Honours) from University College Dublin.
Simon Copleston
Simon Copleston is an independent, non-executive member of the Board of Directors of Damas
International Limited. Mr. Copleston currently serves as Board Secretary and General Counsel at Abu
Dhabi Commercial Bank, following his service at the Abu Dhabi Investment Authority. With over 12
years of experience in corporate finance, banking, finance, governance and corporate law, he has made
a significant contribution to the success of Abu Dhabi Commerical Bank’s status as a regional leader
in corporate governance. A solicitor of the Courts of England & Wales, Mr. Copleston began his
professional career as a solicitor in the City of London.
10
Tariq L. Ali
Tariq L. Ali is an independent, non-executive member of the Board of Directors of Damas
International Limited. Mr. Ali currently serves as Partner and Managing Director at Gulf Banking
Consultants, an international consulting firm dedicated to the financial services sector, with a focus on
the Middle East and emerging markets. Previously, he served as Group Head, Corporate Finance, at
National Commercial Bank in Saudi Arabia, following service at Citibank/Saudi American Bank,
where he held the position of Division Head for Structured Finance and Islamic Banking. Earlier, Mr.
Ali served at Citicorp in New York, Hong Kong and Manama. He holds an MBA in
Finance/Marketing from West Texas A&M University in the United States and a BA in Economics
from the University of the Punjab in Pakistan.
TN Pratap
TN Pratap is an independent executive and non-executive member of the Board of Directors of Damas
International Limited. The Founder and Managing Director of a boutique management consulting
practice based in Dubai, Mr. Pratap currently advises clients on market entry and development strategy
in India and the Gulf Cooperation Council states. Previously, Mr. Pratap served as Chief Operating
Officer at Damas, where he oversaw business development activities across the Group. Earlier, he
served for a decade as Chief Executive Officer at Bin Hendi Enterprises, following his tenure as
General Manager at American Eastern Dubai. Mr. Pratap holds an MBA with a major in Marketing
and Behavioural Sciences and a BA in Pharmacy Studies. Mr. Pratap is also a member of MENSA
International.
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ROLE OF THE BOARD
The Board of Directors is the Group’s principal decision-making forum. It has the overall
responsibility for leading and supervising the Group and is accountable to shareholders for delivering
sustainable shareholder value through its guidance and supervision of the Group’s business. The Board
sets the strategies and policies of the Group. It monitors performance of the Group’s business, guides
and supervises its management.
Decisions of the Board are made by majority vote of those present (in person or by proxy) at the
meeting.
During the financial year, the Board adopted a rolling agenda to ensure that each of its responsibilities
is satisfied on a periodic basis. In addition to the rolling agenda items, the Board also considers other
agenda items on an ‘as required’ basis.
MATTERS RESERVED FOR THE BOARD
x
Strategy and management – setting the Group’s long term objectives and commercial strategy,
and monitoring management in the light of the Group’s strategy, objectives, business plans and
budgets and ensuring that any necessary corrective action is taken.
x
Structure and capital – approving changes relating to capital structure, corporate structure and
management and control structures.
x
Financial reporting and controls – approving annual financial statements and the annual report,
interim results, make recommendations to shareholders for appointment, re-appointment and
removal of external auditor following recommendation of Audit & Compliance Committee.
x
Internal controls and risk management– setting and ensuring maintenance of a sound system of
internal control and risk management.
x
Major contracts – approving major capital investments and projects, by reason of materiality, and
all acquisitions and disposals of other legal entities, joint ventures, strategic alliances, partnerships
and the like made by or involving the Group.
x
Board membership and other appointments - changes to the structure, size and composition of
the Board, following recommendations from the Nomination, Remuneration & HR Committee,
succession planning for the Board and senior management, appointments to boards of subsidiaries.
x
Chief Executive Officer – annual performance evaluation of the CEO.
x
Remuneration - determining the remuneration policy for the directors, company secretary and
other senior executives having regard to recommendations from the Nomination, Remuneration
and HR Committee, creation and approval of share incentive plans.
x
Delegation of authority – monitoring matters delegated to Board Committees and management.
x
Corporate governance - review of the Group’s overall corporate governance arrangements.
12
APPOINTMENT, TERM OF SERVICE, RETIREMENT AND RE-ELECTION
The Board has approved a formal and transparent procedure for the selection and appointment of new
directors. Any candidate for appointment as a director must first be considered and approved by the
Nomination, Remuneration & HR Committee. Amongst other things, the Nomination, Remuneration
& HR Committee will consider the skills, experience, expertise and personal qualities that will best
complement board effectiveness and the time commitment required by a director to effectively
discharge his or her duties to the Company.
Once elected as a board member of the Company, the term is for an initial period of three (3) years
liable to retire by rotation, and any re-appointment to the Board shall be in accordance with the
Company’s Articles of Association.
MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors of the Company met twenty four times during the financial year 2010-11. The
Company strives, as far as practicable, to provide the Directors detailed agenda and supporting
documents well in advance of the board meetings so that the Board can take well informed decisions in
the best interest of the Company.
The following table sets out the number of meetings of the Board during the financial year 2010-11
together with the details of attendance:
13
Date of the meeting
21 April 2010
26 April 2010
03 May 2010
10 May 2010
17 May 2010
24 May 2010
07 June 2010
28 June 2010
12 July 2010
27 July 2010
09 Aug 2010
19 Sep 2010
29 Sep 2010
01 Nov 2010
10 Nov 2010
28 Nov 2010
07 Dec 2010
15 Dec 2010
24 Jan 2011
30 Jan 2011
10 Feb 2011
13 Feb 2011
13 March 2011
27 March 2011
Mr Ibrahim
Belselah
P
P
P
P
P
P
P
P
P
P
A
P
P
P
P
P
P
A
P
P
P
P
P
P
Mr Anan
Fakhreddin
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
Mr Abdullah
Al Mazroei
P
P
P
P
P
P
P
P
P
P
P
A
P
A
P
P
A
P
P
A
P
P
A
P
Mr Abbas
Ameeri
P
P
P
A
A
A
P
A
P
A
P
P
P
P
A
P
A
P
P
P
P
P
A
P
Board of Directors
Mr Ehsan
Mr Nicholas
Abbas
Hegarty
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
A
P
P
P
P
P
P
A
P
P
P
P
P
A
P
P
P
P
P
P
P
P
P
A
P
P
P
P
P
P
P
P
Mr Simon
Copleston
P
P
P
P
P
A
P
P
P
A
P
P
P
P
P
P
P
A
P
P
P
P
P
P
Mr Tariq Ali
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
A
P
A
P
P
P
P
Mr T.N.
Pratap
P
P
P
A
P
P
A
P
P
P
P
A
P
P
P
P
A
P
P
P
P
P
P
P
P = Present, A= Absent
14
DIRECTORS’ REMUNERATION
Remuneration policy
Directors‟ remuneration is set annually by the Board. Any proposals for changes are considered by the
Nomination, Remuneration & HR Committee prior to obtaining Board approval.
The Directors‟ fees paid during the financial year were:
Director
Mr. Ibrahim Belselah
Mr. Anan Fakhreddin
Mr. Abdullah Al Mazroei
Mr. Abbas Ameeri
Mr. Ehsan Abbas
Mr. Nicholas Hegarty
Mr. Simon Copleston
Mr. Tariq Ali
Mr. T.N. Pratap
Fixed Remuneration
(AED)
3, 253, 750
1, 965, 300
475, 000
475, 000
712, 500
712, 500
475, 000
475, 000
712, 500
Note: Since the new Board came into existence on 19 April 2010, certain members of the previous
board were eligible for remuneration during the period 1 April 2010 to 18 April 2010. The
remuneration paid to such members for this period totalled to AED 249,284 of which Mr. Tamjid
Abdullah received AED 126,667; Mr. Tawfique Abdullah received AED 95,000; Mr. John Harper
received AED 14,795 and Mr. Gaetano received AED 12,822.
Employees remuneration
The Group‟s human resources policies aim to ensure that its staffing requirements are met through the
recruitment and development of talented individuals, implementation of training programmes,
performance appraisals and reward systems. The Group also has an annual performance appraisal
conducted for all staff, and any increments are paid on the basis of individual performances. The Group
also pays sales staff incentives for achieving sales targets.
DIRECTORS’ INTERESTS IN THE COMPANY’S SHARES
As at 31 March 2011, none of the Directors‟ held any shares in the Company.
BOARD COMMITTEES
The Board has established five Board Committees to ensure that the Board carries out its functions and
provides effective oversight and leadership:
1.
2.
3.
4.
5.
The Audit & Compliance Committee
The Corporate Governance Committee
The Nomination, Remuneration & HR Committee
The Risk Committee
The Executive Committee
The roles and delegated authorities of these Committees are set out in their terms of reference, copies
of which are available at http://www.damasjewel.com/investorrelations.aspx.
15
AUDIT & COMPLIANCE COMMITTEE
The Board of Directors has constituted the Audit & Compliance Committee with the following
members:
1.
2.
3.
Mr. Simon Copleston
Mr. Tariq Ali
Mr. Nicholas Hegarty serves as the Chairman of the Committee.
The primary responsibilities and functions of the Audit & Compliance Committee, amongst other
things, are:
•
To monitor the integrity of the financial statements of the Company and its subsidiaries (“Group”)
including its annual and half-yearly reports, interim management statements, preliminary results
announcements and any other formal announcement relating to its financial performance,
reviewing all significant financial reporting issues and judgements which they contain.
•
To scrutinise and keep under review the effectiveness of the Group‟s financial controls and other
internal controls and risk management systems and processes (to include those relating to
compliance with all applicable law and regulation) to ensure that they are robust and have been
appropriately developed, implemented and maintained so that financial, compliance and other
risks are identified, assessed, mitigated and controlled.
•
To take all necessary and appropriate steps to reflect that the Group‟s Internal Audit function
reports to the Committee including reviewing all reports prepared by Internal Audit and adopting
a process which allows the Head of Internal Audit unrestricted access to any member of the
Committee.
•
To monitor and review the effectiveness of the Group‟s Internal Audit function in the context of
the Group‟s overall risk management system and maximizing efficiencies through co-operation
with the External Auditors.
•
To consider and make recommendations to the Board, in relation to the appointment, reappointment, engagement terms and removal of the Group‟s external auditor. The Committee
shall oversee the selection process for new auditors and if an auditor resigns the Committee shall
investigate the issues leading to this and decide whether any action is required.
•
To oversee the relationship with the external auditor including (but not limited to) approval of
their remuneration, approval of their terms of engagement, assessing annually their independence
and objectivity taking into account relevant professional and regulatory requirements and the
relationship with the auditor as a whole, reviewing and approving the annual audit plan and
ensuring that it is consistent with the scope of the audit engagement and reviewing the findings of
the audit with the external auditor.
•
To review the Group‟s arrangements for its employees to raise concerns, in confidence, about
possible wrongdoing in financial reporting or other matters. The Committee shall ensure that
these arrangements allow proportionate and independent investigation of such matters and
appropriate follow up action.
The Audit & Compliance Committee‟s terms of reference are available at
www.damasjewel.com/investorrelations.aspx
16
The following table sets out the number of meetings of the Audit & Compliance Committee during the
financial year 2010-11 together with the details of attendance:
Date of the meeting
25 May 2010
08 June 2010
23 July 2010
29 Sep 2010
25 Nov 2010
17 Jan 2011
27 March 2011
Mr Nicholas
Hegarty
P
P
P
P
P
P
P
Directors
Mr Simon
Copleston
P
P
P
P
P
P
P
Mr Tariq Ali
P
P
P
P
P
P
P
Statement from the Chairman of the Audit & Compliance Committee
Dear Shareholders,
Activities of the Board Audit & Compliance Committee in the 2010/11 financial year
During the financial year, the Committee met 7 times, during which the Committee focused, amongst
other things, on the following matters:








Overseeing the financial reporting and disclosure process
Monitoring internal controls
Approving the internal audit plan
Overseeing the activities and performance of the internal audit function
Appointment of a consultant to restructure the finance department, including preparation of
relevant policies and procedures for the finance department
Reviewing audit issues raised by the external auditor and management‟s responses
Monitoring the choice of accounting policies, principles and judgments
Reporting regularly to the Board of Directors
The Committee also met separately with the external auditor and internal auditor in the absence of the
Company‟s management.
The Committee considers that progress was made during the financial year and is committed to
continue working on improving the audit functions and internal controls within the organization.
Yours faithfully,
Nicholas C. Hegarty
CORPORATE GOVERNANCE COMMITTEE
The Board of Directors has constituted the Corporate Governance Committee with the following members:
1. Mr. Simon Copleston
2. Mr. Tariq Ali
3. Mr. Abbas Ameeri
Mr. Simon Copleston serves as the Chairman of the Committee.
17
The primary responsibilities and functions of the Corporate Governance Committee, amongst other things, are:
•
To rigorously oversee the adoption by the Company of appropriate, applicable corporate governance
standards, measured against the higher of DFSA and its related regulations and international best practice.
•
To monitor developments in corporate governance law, regulation and best practice within DFSA, the
UAE and internationally and report to the Board with recommendations on new or evolving corporate
governance practices that the Company should adopt.
•
The Committee, with the Company Secretary, will assist (in conjunction with the Nomination Committee),
all Board Committees to conduct their annual self-assessment.
•
The Committee will review and approve all information published by the Company in relation to its
corporate governance, including relevant sections in the Annual Report and on its web site.
The Corporate Governance Committee‟s terms of reference are available at
The following table sets out the number of meetings of the Corporate Governance Committee during the
financial year 2010-11 together with the details of attendance:
Date of the meeting
20 May 2010
01 July 2010
25 Aug 2010
14 Oct 2010
10 Feb2011
P = Present
Mr. Simon
Copleston
P
P
P
P
P
Directors
Mr Tariq Ali
P
P
P
P
P
Mr. Abbas
Ameeri
P
P
P
P
P
Statement from the Chairman of the Corporate Governance Committee
Dear Shareholders,
Activities of the Board Corporate Governance Committee in the 2010/2011 financial year
The Committee met 5 times during the financial year. As a preliminary step, the Committee developed
and approved an action plan, which aims to implement best practices in corporate governance in the
Company over a three year period. The Committee also focused, amongst other things, on:




improving Board effectiveness (which included the establishment of appropriate Board committees,
improvement of Board room policies and practices, a Board evaluation conducted at the end of the
financial year, and development of an annual schedule),
adoption of standard governance policies and procedures,
transparency in corporate governance issues (including the establishment of a website at
www.damasjewel.com/investorrelations.aspx), and
ensuring management focus on implementing and improving internals control and internal audit
functions.
Whilst the Committee considers that positive progress was made during the financial year, a significant
amount of work remains to be completed to achieve the goals set out in the action plan. The Board will
continue to work on implementation of governance best practices during the forthcoming financial year.
Yours faithfully,
Simon Copleston
18
NOMINATION, REMUNERATION & HR COMMITTEE
The Board of Directors has constituted the Nomination, Remuneration & HR Committee with the following
members:
1.
2.
3.
4.
Mr. Ehsan Abbas
Mr. Abbas Ameeri
Mr. Tariq Ali
Mr. T.N. Pratap *
Mr. Ehsan Abbas serves as the Chairman of the Committee.
The primary responsibilities and functions of the Nomination, Remuneration & HR Committee, amongst other
things, are:

To determine and agree with the Board the framework or broad policy for the remuneration of the
Company‟s chief executive, chairman, the executive directors, the non-executive directors, the Company
secretary and such other members of the executive management as it is designated to consider. No
director or manager shall be involved in any decisions as to their own remuneration.

To approve the design of, and determine targets for, any performance related pay schemes operated by
the Company and approve the total annual payments made under such schemes.

Within the terms of the agreed policy and in consultation with the chairman and/or chief executive as
appropriate, determine the total individual remuneration package of each executive and non-executive
director and other senior executives including bonuses, incentive payments and share options or other
share awards.

To regularly review the structure, size and composition (including the skills, knowledge and experience)
required of the Board compared to its current position and make recommendations to the Board with
regard to any changes.

To give full consideration to succession planning for directors and other senior executives in the course
of its work, taking into account the challenges and opportunities facing the Group, and what skills and
expertise are therefore needed on the Board and in the Group and make consequential recommendations
to the Board.

To keep under review the leadership needs of the organisation, both executive and non-executive, with a
view to ensuring the continued ability of the organisation to compete effectively in the marketplace.

To make recommendations to the Board concerning (a) formulating plans for succession for both
executive and non-executive directors in particular for the key roles of chairman and chief executive, (b)
membership of the Audit & Compliance committee in consultation with the chairman of that committee,
(c) the re-appointment of any non-executive director at the conclusion of their specified term of office
having given due regard to their performance and ability to continue to contribute to the Board in the
light of the knowledge, skills and experience required; (d) the re-election by shareholders of any director
under the „retirement by rotation‟ provisions in the Company‟s articles of association having due regard
to their performance and ability to continue to contribute to the Board in the light of the knowledge,
skills and experience required; (e) any matters relating to the continuation in office of any director at any
time including the suspension or termination of service of an executive director as an employee of the
Company subject to the provisions of the law and their service contract (f) the appointment of any
director to executive or other office or position of profit within the Company.
19
A formal and transparent procedure for the selection and appointment of directors has been approved by the
Board and provides clear guidelines to be followed by the Nomination, Remuneration & HR Committee for
board appointments.
The Nomination, Remuneration & HR Committee‟s terms of reference are available at
The following table sets out the number of meetings of the Nomination, Remuneration & HR Committee
during the financial year 2010-11 together with the details of attendance:
Directors
Date of the meeting
04 May 2010
19 May 2010
07 July 2010
11 Aug 2010
14 Oct 2010
28 Nov 2010
07 Dec 2010
15 Dec 2010
30 Dec 2010
10 Jan 2011
10 Feb 2011
28 Feb 2011
Mr Ehsan
Abbas
P
P
P
P
P
P
P
P
P
P
P
P
Mr Abbas
Ameeri
P
A
A
P
P
P
A
P
P
P
P
P
Mr T.N. Pratap *
P
Mr Tariq Ali
P
P
P
P
P
P
A
A
P
P
P
* The Committee was re-constituted at the Board meeting held on 17 May 2010, wherein
Mr. T. N. Pratap was replaced by Mr. Tariq Ali being an independent non-executive director.
Statement from the Chairman of the Nomination, Remuneration & HR Committee
Dear Shareholders,
Activities of the Board Nomination, Remuneration & HR Committee in the 2010/11 financial
year

Selection and appointment of senior management

Organizational structure and reporting lines

Development, application and review of human resources and training policies

Remuneration policies for management and incentive plans

Discussed performance assessment of senior management
The Committee, during the financial year, focused on hiring appropriately qualified and experienced
individuals to the senior management team. The Committee also focused that the remuneration and
incentive rewards are designed to be performance based, to align with interests of all stakeholders, in
line with best practice standards and to ensure effective recruitment, retention and development of
staff. The Committee continues to employ its efforts on building the depth of the senior management
strength within the organization.
Yours faithfully,
Ehsan Abbas
20
RISK COMMITTEE
The Board of Directors has constituted the Risk Committee with the following members:
1. Mr. Nicholas Hegarty
2. Mr. Abdullah Al Mazroei
3. Mr. Anan Fakhreddin
Mr. Nicholas Hegarty serves as the Chairman of the Committee.
The primary responsibilities and functions of the Risk Committee, amongst other things, are:

To rigorously assess proposals made by executive management on the Group‟s systems and
processes for identifying, assessing and managing risk relating to the Group, including, but not
restricted to business risk, market risk, external risk such as geo-political risk, reputational risk,
regulatory risk, banking risk etc, for the purpose of ensuring that the proposals are adequate,
appropriate, proportionate and complete.

To rigorously review, challenge and approve reports from executive management on current and
anticipated risks for the Group, the likelihood of the risk occurring, the appropriateness of the
Group‟s mitigating actions, the adequacy of monitoring by the Group and aptness of the
timeframes.

To promote a strong risk culture within the Group and receive regular reports from executive
management on how this has been achieved. Such reports will highlight the risk aspects of
breaches of the Code of Conduct and findings made by Internal and external Audit.

To approve all statements made by the Group on the Group‟s risk management policies and
processes.
The Risk Committee‟s terms of reference are available at www.damasjewel.com/investorrelations.aspx
The following table sets out the number of meetings of the Risk Committee during the financial year
2010-11 together with the details of attendance:
Mr. Nicholas
Date of the meeting
Hegarty
03 June 2010
P
08 July 2010
P
25 Oct 2010
P
20 Feb2011
P
Directors
Mr. Abdullah
Al Mazroie
P
A
P
P
Mr. Anan
Fakhreddin
P
P
A
A
21
Statement from the Chairman of the Risk Committee
Dear Shareholders,
Activities of the Board Risk Committee in the 2010/11 financial year

Examined the actual risks and the control deficiencies in the organization

Exercised oversight of management‟s responsibilities, and reviewed the risk profile of the
organization to ensure that risk exposure conformed to the risk appetite

Monitored the effectiveness of risk management functions throughout the organization

Monitored the independence of risk management functions throughout the organization

Reviewed issues raised by Internal Audit which might impact the risk management framework.
Whilst the Committee considers that progress was made during the financial year, a considerable
amount of work is yet to be done to ensure the existence of a pervasive risk awareness culture
throughout the organization. The Committee aims to continue working on this front in the forthcoming
financial year.
Yours faithfully,
Nicholas C. Hegarty
EXECUTIVE COMMITTEE
The Board of Directors has constituted the Executive Committee with the following members:
1.
2.
3.
4.
Mr. Ibrahim Belselah
Mr. Ehsan Abbas
Mr. T.N. Pratap
Mr. Ibrahim Belselah serves as the Chairman of the Executive Committee.
The primary responsibilities and functions of the Executive Committee, amongst other things, are:

To recommend to the Board the optimum organization structure for the efficient management and
operation of the Group.

To evaluate the Group‟s strategic options, before recommending to the Board the optimum strategy
for the Group including priorities, business plans and annual targets.

To rigorously review the draft budget for the Group and each business line and operating division
before recommending to the Board the budget for the Group, each business line and operating
division together with recommended key performance indicators.

To monitor performance against budget analysing the financial performance of the Group, business
lines and operating divisions. The Committee will promptly notify the Board if the Committee has
reason to suspect that the budget will not be met, together with recommendation on what remedial
steps may be necessary.

To oversee recovery by the Group of all assets to which the Group has a reasonable claim but the
Committee will obtain Board approval before it may sanction the Group to resolve any claim.

To assess the Group‟s current and future involvement with joint ventures, agencies and associates
and make recommendations to the Board in relation thereto.

To take any other necessary steps or actions in connection with the Group if requested to do so by
the Board.
22
The Executive Committee‟s terms of reference are available at
The following table sets out the number of meetings of the Executive Committee during the financial
year 2010-11 together with the details of attendance:
Date of the meeting
29 April 2010
05 May 2010
12 May 2010
18 May 2010
26 May 2010
02 June 2010
09 June 2010
21 Sep 2010
20 Oct 2010
24 Nov 2010
12 Jan 2011
09 Feb 2011
Mr.
Ibrahim
Belselah
A
P
P
P
P
P
P
P
P
P
P
P
Directors
Mr. Ehsan
Mr.
Abbas
Nicholas
Hegarty
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
A
P
P
A
P
P
Mr. T.N.
Pratap
P
P
P
P
P
P
P
P
P
P
P
P
Statement from the Chairman of the Executive Committee
Dear Shareholders,
Activities of the Board Executive Committee in the 2010/11 financial year

Restructuring of the Group‟s debt

Execution of the Group‟s agreed strategy

Execution of the Group‟s agreed business objectives
The Committee considers that progress was made during the financial year.
Yours faithfully,
Ibrahim Belselah
Note: The Board of Directors has decided to dissolve the Executive Committee vide the resolution
adopted at the Board meeting held on 26 July 2011.
23
CONFLICT OF INTEREST
The Board maintains awareness of the other commitments of its Directors and senior management.
During the year written declarations are obtained from each of the Board members and senior
management with respect to conflicts of interest, and as a result of such submissions, the Board is
satisfied that the other commitments of the Directors and senior management do not conflict with their
duties.
PERFORMANCE EVALUATIONS
An effective Board is crucial to the success of the organization. To assess the performance of the
Board, the Board undergoes a performance evaluation annually.
The 2010 performance evaluation process was led by the Chairman, supported by the Company
Secretary.
The Company‟s policy is to facilitate this externally every other year. The process of performance
evaluations will be a combination of confidential interviews and questionnaire. In the event the Board
decides to conduct interviews, these will be carried out by an external facilitator.
Any necessary changes identified by the 2010 performance evaluation will be implemented during
2011-12.
INTERNAL CONTROLS
Internal control is the process designed to ensure reliable financial reporting, effective and efficient
operations, and compliance with applicable laws and regulations. Safeguarding assets against theft and
unauthorized use, acquisition, or disposal is also part of internal control.
The Board is responsible for maintaining a sound system of internal control and has established a
control framework within which the Group operates. The Audit & Compliance Committee, on a regular
basis, reviews the effectiveness of the internal controls system.
Control activities are closely monitored across the Group by the internal audit function, working
independently of the management. Internal audit assesses whether the controls are properly designed,
implemented and working effectively, and makes recommendations on how to improve them. In
addition, the risk management and compliance functions also monitor control activities on an ongoing
basis.
The system of internal control is reviewed, revised and improved by management on an ongoing basis
with the aim of identifying risks and managing them efficiently, effectively and economically.
The Audit & Compliance Committee reviews audit reports periodically and ensures that management
addresses and resolves weaknesses identified, mitigates risks identified, implements the policies and
procedures effectively and safeguards the Group‟s and its shareholders‟ interest.
All internal control systems, no matter how well designed, have inherent limitations. Because of those
inherent limitations, internal controls may not prevent or detect all risks. Accordingly it can therefore
only provide reasonable but not absolute assurance of effectiveness. The process and system of internal
control are subject to continuous improvement.
24
AUDIT ARRANGEMENTS
The external auditor is appointed annually. Deloitte & Touche Middle East were appointed as
independent external auditors of the Company with effect from the conclusion of the Annual General
Meeting held on 30 September 2010 and will continue in that capacity until the conclusion of the next
Annual General Meeting.
The Board‟s Audit & Compliance Committee has included measures to ensure the ongoing
independence of the Group‟s external auditors by introducing a policy on engagement of external
auditors. The policy includes provisions whereby the person within the external auditor who has the
primary responsibility for the Group‟s audit:

Will be rotated after a period of 5 years; and

Will not be allowed to subsequently participate in Damas International‟s audit until a further period
of 2 years.
AUDITORS FEES
The audit fees paid to the Group Auditors (excluding reimbursement of out of pocket expenses) are as
mentioned below. This does not include the fees paid to auditors of the subsidiaries.
Year
Group Auditor
Audit Fees for mid-year Audit
Audit Fees for annual Audit
Total
Fees for non-audit work*
2010-11
Deloitte &
Touche (M.E)
AED
100,000
1,100,000
1,200,000
40,500
2009-10
Ernst &
Young
AED
340,000
1,000,000
1,340,000
20,300
* The non-audit work includes the revenue certification for certain stores as required under the
tenancy agreements with the landlords.
COMMUNICATIONS/RELATIONS WITH SHAREHOLDERS
The Company regularly disseminates relevant information, both financial and non financial, to the
shareholders through appropriate means including market announcements through CANDI (the market
dissemination medium managed by NASDAQ Dubai).
The Company published its annual report and consolidated annual financial statements for the year
ending 31 March 2010 on 29 July 2010. It also published its interim financial statements on 29
November 2010.
GENERAL MEETINGS
The Company held its Annual General Meeting on 30 September 2010 wherein all the Directors were
re-appointed by the shareholders of the Company.
The Company held an Extra-ordinary General Meeting on 19 April 2010 wherein the current Board of
Directors was appointed.
25
LISTING INFORMATION
8 July, 2008
Date of Listing
Dubai
(Formerly
Dubai
Stock Exchange where Company’s shares NASDAQ
International Financial Exchange)
are listed
DAMAS
Trade symbol
AEDFXAOQ3724
ISIN
NASDAQ Dubai Limited (formerly Dubai
Registrar
International Financial Exchange Limited)
Paid up to date
Status of Listing fees
SHARE HOLDING PATTERN AS ON 31 MARCH 2011
Category of Shareholders
Tawhid Mohammad Taher Abdullah Almohtadi
Mohammad Tawfique Mohd Taher Abdullah Almohtadi
Mohammad Tamjid Mohammad Taher Abdullah Almohtadi
Abdulla Nasser AlMansouri
CITIBANK NA UAE - PLEDGED ACCOUNT
NASDAQ Dubai Guardian Ltd. As bare nominee of CSD
Account Holders
Total
Number of
Shares held
10,685,023
1,500,820
2,500,820
36,313,335
500,000,000
438,228,011
% of shares
held
1.08
0.15
0.25
3.67
50.55
44.30
989,228,009
100.00
ARTICLES OF ASSOCIATION
The Company‟s articles of association are available on the Company website at
INVESTOR RELATIONS
The investors may contact the following official for information and/or grievances.
Mr. Ashish Kumar
Company Secretary
Damas DMCC, Jumeirah Lake Towers
P. O. Box 1522
Dubai, UAE
Tel: 04 4459031
Fax: 04 4270399
Email: [email protected]
DIRECTORS’ RESPONSIBILITIES IN RESPECT OF THE PREPARATION OF THE
ACCOUNTS
The statement should be read in conjunction with the statement of Auditors‟ responsibilities included in
the report of the independent Auditors and is made with a view to distinguishing the respective
responsibilities of the Directors and of the Auditors in relation to the accounts. The Directors are
required to prepare accounts for each financial year which gives a true and fair view of the state of
affairs of the Company and the Group as at the end of the financial year and of the profit and loss of the
financial year. In preparing the accounts, the Directors are required to select appropriate accounting
policies and then apply them consistently, making judgments and estimates that are reasonable and
prudent and state whether all accounting standards which they consider to be applicable have been
followed, subject to any material departures disclosed and explained in the financial statements. The
Directors also use a going concern basis in preparing the accounts unless this is inappropriate.
26
Consolidated statement of financial position
As at 31 March 2011
ASSETS
Non-current assets
Property, plant and equipment
Investment properties
Goodwill
Intangible assets
Investments accounted for using the equity method
Other non-current financial assets
Long term loans to related parties
Due from related parties
Notes
2011
AED’000
2010
AED’000
16
17
18
19
20
21
25
25
115,885
147,115
539,654
29,066
90,586
238,107
55,524
154,631
──────
1,370,568
──────
176,979
138,071
539,654
38,065
261,114
71,983
45,131
306,800
──────
1,577,797
──────
22
1,472,751
264,351
421,187
162,720
4,352
──────
2,325,361
──────
3,695,929
══════
1,373,031
466
184,626
755,214
128,460
21,236
──────
2,463,033
──────
4,040,830
══════
Total non-current assets
Current assets
Inventories
Margin to trade payables against unfixed gold
Trade receivables and prepayments
Bank balances and cash
Other current financial assets
Total current assets
Total assets
23
24
25
21
29
Consolidated statement of financial position (continued)
As at 31 March 2011
EQUITY AND LIABILITIES
Equity
Share capital
Statutory reserve
Currency translation reserve
Accumulated losses
Equity transaction costs
Merger reserve
Notes
2011
AED’000
2010
AED’000
27
28
28
3,633,932
99,193
2,029
(1,450,610)
(7,006)
(1,278,128)
──────
999,410
3,712
──────
1,003,122
──────
3,633,932
99,112
2,152
(1,500,693)
(7,006)
(1,278,128)
──────
949,369
12,800
──────
962,169
──────
29
30
32
31
7,136
32,599
23,470
──────
63,205
──────
5,815
150,000
22,959
──────
178,774
──────
29
32
2,409,724
213,639
2,780
3,459
──────
2,629,602
──────
2,692,807
──────
2,095,671
792,766
5,446
6,004
──────
2,899,887
──────
3,078,661
──────
3,695,929
══════
4,040,830
══════
28
Attributable to equity holders of the parent company
Non-controlling interests
Total Equity
Non-current liabilities
Interest bearing loans and borrowings
Long term loans from the Abdullah Brothers
Trade payables and accruals
Provision for employees’ end of service benefits
Total non-current liabilities
Current liabilities
Margin from trade receivables against unfixed gold
Due to related parties
Total current liabilities
Total liabilities
Total equity and liabilities
25
The accompanying notes form an integral part of these consolidated financial statements.
The consolidated financial statements on pages 29 to 116 were approved and signed on behalf of the
Board of Directors on 28 July 2011 by:
Executive Chairman
Chief Executive Officer
30
Consolidated income statement
Notes
2011
AED’000
2010
AED’000
2,952,540
(2,316,964)
──────
635,576
3,303,059
(2,738,258)
──────
564,801
8
9
10
11
6
12
13
14
21
(434,582)
(161,678)
10,927
3,532
(55,335)
(55,784)
(814)
-
(508,573)
(159,799)
27,994
(23,698)
(790,598)
(572,138)
(79,590)
(311,511)
21
15
113,479
──────
55,321
(2,045)
──────
53,276
(8,297)
46,871
──────
(1,814,538)
──────
(1,814,538)
7
──────
53,276
══════
(94,680)
──────
(1,909,218)
══════
50,724
2,552
──────
53,276
══════
(1,909,720)
502
──────
(1,909,218)
══════
Continuing operations
Revenue
Cost of sales
Gross profit
General, administrative, selling and distribution expenses
Finance costs
Finance income
Share of results of equity accounted investments
Loss on disposal of subsidiaries
Impairment losses
Allowance for receivables and inventories
Loss on settlement of bank liabilities
Allowance for doubtful loan
Loss on fair value of investments carried at
fair value through profit or loss (FVTPL)
Other income
Profit/(loss) from continuing operations
Less: Income tax
Profit /(loss) before tax from continuing operations
Discontinued operations
Loss from discontinued operations
Profit/(loss) for the year
Attributable to:
Equity holders of the Company
Earnings per share
- Basic and diluted earnings/(loss) per share AED
34
0.05
══════
(1.93)
══════
Earnings per share from continuing operations
- Basic and diluted earnings/(loss) per share AED
34
0.05
══════
(1.84)
══════
31
Consolidated statement of comprehensive income
2011
AED’000
Other comprehensive loss
Exchange difference on translation of foreign operations
Other comprehensive loss for the year
Total comprehensive income/(loss) for the year
Total comprehensive income/(loss) attributable to:
Equity holders of the Company
2010
AED’000
53,276
(1,909,218)
(123)
──────
(123)
──────
53,153
══════
(727)
──────
(727)
──────
(1,909,945)
══════
50,601
2,552
──────
53,153
══════
(1,910,447)
502
──────
(1,909,945)
══════
32
Consolidated statement of changes in equity
At 1 April 2009
(Loss)/profit for the year
Total comprehensive loss
Transfer to statutory reserve
Withdrawals during the year
At 31 March 2010
Profit for the year
Total comprehensive income
Merger
reserve
AED’000
Attributable
to equity
holders’ of
the Parent
Company
AED’000
Noncontrolling
interests
AED’000
Total
AED’000
(7,006)
──────
-
(1,278,128)
──────
-
2,859,816
──────
(1,909,720)
23,751
──────
502
2,883,567
──────
(1,909,218)
──────
-
──────
-
(727)
──────
(1,910,447)
──────
502
(727)
──────
(1,909,945)
Issued and
paid up
share
capital
AED’000
Statutory
reserve
AED’000
Currency
translation
reserve
AED’000
Retained
earnings
AED’000
Equity
transaction
costs
AED’000
3,633,932
──────
-
99,064
──────
-
2,879
──────
-
409,075
──────
(1,909,720)
──────
-
──────
-
(727)
──────
(727)
──────
(1,909,720)
──────
3,633,932
──────
-
48
──────
99,112
──────
-
──────
2,152
(123)
──────
(123)
(48)
──────
(1,500,693)
50,724
──────
50,724
──────
(7,006)
──────
-
──────
(1,278,128)
──────
-
──────
949,369
50,724
(123)
──────
50,601
Transfer to statutory reserve
-
641
-
(641)
-
-
-
Relating to disposed subsidiaries
-
(560)
-
-
-
-
(560)
Withdrawals during the year
At 31 March 2011
──────
3,633,932
══════
──────
99,193
══════
──────
2,029
══════
──────
(1,450,610)
══════
──────
(7,006)
══════
──────
(1,278,128)
══════
──────
999,410
══════
(11,453)
──────
12,800
2,552
──────
2,552
-
(11,453)
──────
962,169
53,276
(123)
──────
53,153
-
(9,772)
(10,332)
(1,868)
──────
3,712
══════
(1,868)
──────
1,003,122
══════
The accompanying notes form an integral part of these consolidated financial statements
33
Consolidated statement of cash flows
2011
AED’000
2010
AED‟000
55,321
──────
55,321
55,335
(1,814,538)
(94,680)
──────
(1,909,218)
-
6,676
161,678
(10,927)
(3,532)
55,784
814
-
24,588
7,818
17,051
161,677
(27,994)
23,698
790,598
572,138
79,590
15
15
15
(17,132)
(28,865)
(200)
(7,980)
(8,304)
(2,354)
15
15
15
15
15
15
15
15
(24,386)
(9,253)
(19,910)
(1,926)
35,338
272
162
9,865
(4,352)
5,175
──────
265,937
(633,201)
(29,790)
(65,302)
466
(76,791)
4,563
(2,666)
──────
(536,784)
(170,480)
(3,973)
──────
(711,237)
──────
(544)
(1,416)
(100)
(1,058)
47,072
6,748
65
14,527
311,511
(177)
8,297
6,050
──────
112,283
(811,981)
22,001
12,260
(27)
(77,146)
(21,728)
(25,602)
──────
(789,940)
(167,943)
(3,718)
──────
(961,601)
──────
Notes
Cash flows from operating activities
Profit/(loss) before tax from continuing operations
Profit/(loss) before tax from discontinued operations
Loss on disposal of subsidiaries
Impairment loss on goodwill and intangible assets related to
discontinued operations
Impairment loss on net assets of subsidiaries
Advances/bad debts written off
Finance costs
Finance income
Share of (profit)/losses of equity accounted investments
Impairment losses
Gain on disposal of investments designated as fair value through
profit or loss (FVTPL)
Provisions/liabilities no longer required written back
Gain on disposal of equity accounted entities
Gain on operating lease received against closed shops
Reversal of impairment loss on long term loans and
dues from related parties
Reversal of impairment on trade receivables
Reversal of impairment allowance on inventories loaned to customers
Reversal of allowance on slow and non-moving inventories
Dividend income from FVTPL investments
Dividend income from available for sale investments
Gain on sale of available for sale investments
Income from held to maturity investments
Depreciation
Write off relating to property, plant and equipment
Loss on disposal of property, plant and equipment
Amortisation of intangible assets
Allowance for doubtful loan
Unrealised gain on revaluation of forward contracts
Loss on fair valuation of FVTPL investments
Provision for employees‟ end of service benefits
Operating cash flow before changes in operating assets and liabilities
Increase in inventories
(Increase)/decrease in trade receivables and prepayments
(Increase)/decrease in amounts due from related parties
Decrease/(increase) in margin to trade payables against unfixed gold
Decrease in trade payables and accruals
Increase/(decrease) in amounts due to related parties
Decrease in margin from trade receivables against unfixed gold
Cash used in operations
Interest paid
Employees‟ end of service benefits paid
Net cash used in operating activities
6
7
7
8
10
11
12
13
14
16
19
21
21
21
31
34
Consolidated statement of cash flows (continued)
Notes
Cash flows from investing activities
Purchase of property, plant and equipment
Additions to investment properties
Purchase of held to maturity investments
Dividends received from equity accounted investments
Proceeds from disposal of FVTPL investments
Derecognition of cash and cash equivalents relating to
discontinued operations
Proceeds from disposal of property, plant and equipment
Dividends received from available for sale investments
Operating lease premium received against closed shops
Additions to intangible assets
Proceeds from disposal of investments in equity accounted entities
Purchase of available for sale investments
Proceeds from disposals of available for sale investments
Proceeds from disposals of held to maturity investments
Dividends received from FVTPL investments
Net foreign exchange differences
16
19
21
Net cash from investing activities
Cash flows from financing activities
Term loans availed during the year
Term loans repaid during the year
Term loans converted into overdrafts during the year
Net movement in trust receipts
Net movement in local bills discounting
Interest on fixed deposits
Movement in fixed deposits placed under lien
Net movement in Abdullah Brothers‟ current account
Net movement in non-controlling interests
Net movement in long term loan to related parties
Net cash from financing activities
Decrease in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
24
2011
AED’000
2010
AED‟000
(12,214)
(2,845)
33,230
-
(34,647)
(20,000)
46,186
24,538
8,337
1,354
242
(676)
25,248
(435)
──────
52,241
──────
6,222
4,718
1,416
2,354
(627)
(1,000)
478
1,000
545
(7,864)
──────
23,319
──────
244,463
(4,445)
(497,400)
(18,000)
11,865
375,980
2,169
678
(2,571)
──────
110,193
──────
(548,803)
684,633
(348,306)
(83,479)
10,305
19,450
215,516
(236,301)
(11,453)
(11,454)
──────
238,911
──────
(699,371)
(327,720)
──────
(876,523)
══════
371,651
──────
(327,720)
══════
The accompanying notes form an integral part of these consolidated financial statements
35
Notes to the consolidated financial statements
1
General information
Damas International Limited (“the Company”) is a company limited by shares and incorporated in the
Dubai International Financial Centre (the “DIFC”) on April 14, 2005 as per certificate of incorporation
no. 0038 issued by the Registrar of Companies, DIFC. The Company and its subsidiaries referred to in
Note 35 constitute the Group („the Group‟).
The Company's registered office is at P.O. Box 113355, office no: 36, building no 4, level 3, the Gate
Village DIFC, Dubai, UAE.
The Group is primarily involved in the business of trading in gold and gold jewellery, diamond jewellery,
pearls, watches, silver and precious stones on a wholesale and retail basis.
On 8 June, 2008 Damas LLC, the former parent company of the Group controlled by the Founding
Shareholders and trading under the name “Damas”, underwent a corporate reorganisation, whereby
Damas LLC became a subsidiary of the Company through the exchange of shares of the Company for
shares held by the Founding Shareholders and non-controlling shareholders in the Company (the “Share
Swap”). The Share Swap was effected primarily in order to establish the Company as the parent company
of the Group in preparation for a listing of the Company‟s shares on the Dubai International Financial
Exchange (“DIFX”), which is now known as NASDAQ Dubai.
The Company made an initial public offer of 233,845,546 shares of USD 1 each to the public with a green
shoe option of 20,625,980 shares of USD 1 each; The Company was listed on the DIFX with effect from
8 July 2008.
2
Application of new and revised standards
2.1 New and revised IFRS affecting amounts reported in the current year (and/or prior years)
The following new and revised IFRS have been applied in the current year and have affected the amounts
reported in these consolidated financial statements. Details of other new and revised IFRSs applied in
these consolidated financial statements that have had no material effect on the consolidated financial
statements are set out in section 2.2 below.
IFRIC 18 Transfers of Assets from
Customers
2.2
The Interpretation addresses the accounting by recipients for
transfers of property, plant and equipment from „customers‟
and concludes that when the item of property, plant and
equipment transferred meets the definition of an asset from
the perspective of the recipient, the recipient should recognize
the asset at its fair value on the date of the transfer, with the
credit being recognized as revenue in accordance with IAS 18
Revenue.
New and revised IFRSs applied with no material effect on the consolidated financial statements
The following new and revised IFRSs have been adopted in these consolidated financial statements. The
application of these new and revised IFRSs has not had any material impact on the amounts reported for
the current and prior years but may affect the accounting for future transactions or arrangements.
New and revised IFRSs
Summary of requirement
Amendments to IFRS 2 Sharebased Payment – Group Cashsettled Share-based Payment
Transactions
The amendments clarify the scope of IFRS 2, as well as the
accounting for group cash-settled share-based payment transactions
in the separate (or individual) financial statements of an entity
receiving the goods or services when another group entity or
shareholder has the obligation to settle the award.
36
Notes to the consolidated financial statements (continued)
2
Application of new and revised standards (continued)
2.2
New and revised IFRSs applied with no material effect on the consolidated financial statements
(continued)
Summary of requirement
Amendments to IFRS 5 Noncurrent Assets Held for Sale and
Discontinued Operations (as part
of Improvements to IFRSs issued in
2008)
The amendments clarify that all the assets and liabilities of a
subsidiary should be classified as held for sale when the Group is
committed to a sale plan involving loss of control of that subsidiary,
regardless of whether the Group will retain a non-controlling
interest in the subsidiary after the sale.
Amendment to IFRS 3 (revised)
Comprehensive revision on applying the acquisition method.
Business Combinations and
consequential amendments to IAS
27 (revised) Consolidated and
Separate Financial Statements, IAS
28 (revised) Investments in
Associates and IAS 31 (revised)
Interests in Joint Ventures
Amendments to IAS 1 Presentation The amendments to IAS 1 clarify that the potential settlement of a
of Financial Statements (as part of liability by the issue of equity is not relevant to its classification as
Improvements to IFRSs issued in current or non-current.
2009)
This amendment had no effect on the amounts reported in prior
years because the Group has not previously issued instruments of
this nature.
Amendments to IAS 7 Statement of The amendments to IAS 7 specify that only expenditures that result
Cash
Flows
(as
part
of in a recognised asset in the statement of financial position can be
Improvements to IFRSs issued in classified as investing activities in the statement of cash flows.
2009)
Amendments to IAS 39 Financial
Instruments: Recognition and
Measurement – Eligible Hedged
Items
The amendments provide clarification on two aspects of hedge
accounting: identifying inflation as a hedged risk or portion, and
hedging with options.
Improvements to IFRSs issued in Except for the amendments to IFRS 5, IAS 1 and IAS 7 described
2009
earlier in section 2.2, the application of Improvements to IFRSs
issued in 2009 has not had any material effect on amounts reported
in the consolidated financial statements
IFRIC 17 Distributions of Non-cash The Interpretation provides guidance on the appropriate accounting
Assets to Owners
treatment when an entity distributes assets other than cash as
dividends to its shareholders.
37
2
2.3
Application of new and revised standards (continued)
New and revised IFRSs in issue but not yet effective
The Group has not early applied the following new and revised IFRSs that have been issued but are not
yet effective:
Effective for annual periods
beginning on or after
Amendments to IFRS 1 relating to Replacement of 'fixed dates' for
certain exceptions with 'the date of transition to IFRSs'
1 July 2011
Amendments to IFRS 1 relating to Additional exemption for
entities ceasing to suffer from severe hyperinflation
1 July 2011
Amendments to IFRS 7 Financial Instruments: Disclosures,
relating to Disclosures on Transfers of Financial Assets
1 July 2011
IFRS 9 Financial Instruments: Classification and Measurement
IFRS 10 Consolidated Financial Statements
IFRS 11 Joint Arrangements
IFRS 12 Disclosures of Interests in Other Entities
IFRS 13 Fair Value Measurement
Amendments to IAS 12 Income Taxes - Limited scope amendment
(recovery of underlying assets)
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 January 2012
IAS 24 Related Party Disclosures - revised definition of related
parties
1 January 2011
Amendments to IFRIC 14 relating to Prepayments of a Minimum
Funding Requirement
1 January 2011
IFRIC 19 Extinguishing Financial Liabilities with Equity
Instruments
1 July 2010
Improvements to IFRSs issued in May 2010 covering amendments
to IFRS 1, IFRS 3, IFRS 7, IAS 1, IAS 27, IAS 34 and IFRIC 13
1 January 2011, except
IFRS 3 and IAS 27 which are
effective 1 July 2010
The management anticipates that all of the above Standards and Interpretations will be adopted by the
Group from their effective dates. The management are still in the process of evaluating the impact of
adoptions of these new standards and interpretations on the Group‟s consolidated financial statements.
38
3
Significant accounting policies
3.1
Statement of compliance
The consolidated financial statements have been prepared in accordance with International Financial
Reporting Standards (IFRS).
3.2
Basis of preparation
The consolidated financial statements have been prepared on the historical cost basis except for the
revaluation of certain financial instruments. Historical cost is generally based on the fair value of the
consideration given in exchange for assets.
The principal accounting policies are set out below.
3.3
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities
(including special purpose entities) controlled by the Company (its subsidiaries). Control is achieved
where the Company has the power to govern the financial and operating policies of an entity so as to
obtain benefits from its activities.
Details of the Company‟s subsidiaries at 31 March 2011 are disclosed in Note 39.
The results of subsidiaries acquired or disposed of during the year are included in the consolidated income
statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring their
accounting policies into line with those used by other members of the Group.
All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.
Non-controlling interests in the net assets (excluding goodwill) of consolidated subsidiaries are identified
separately from the Group‟s equity therein. The interests of non-controlling shareholders may be initially
measured either at fair value or at the non-controlling interests‟ proportionate share of the fair value of the
acquiree‟s identifiable net assets. The choice of measurement basis is made on an acquisition-byacquisition basis. Subsequent to acquisition, the carrying amount of non-controlling interests is the
amount of those interests at initial recognition plus the non-controlling interests‟ share of subsequent
changes in equity. Total comprehensive income is attributed to non-controlling interests even if this
results in the non-controlling interests having a deficit balance.
Changes in the Group‟s interests in subsidiaries that do not result in a loss of control are accounted for as
equity transactions. The carrying amounts of the Group‟s interests and the non-controlling interests are
adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the
amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or
received is recognised directly in equity and attributed to owners of the Company.
When the Group loses control of a subsidiary, the profit or loss on disposal is calculated as the difference
between (i) the aggregate of the fair value of the consideration received and the fair value of any retained
interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the
subsidiary and any non-controlling interests.
39
3
Significant accounting policies (continued)
3.4
Business combinations
Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred
in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date
fair values of the assets transferred by the Group, liabilities incurred by the Group to the former owners
of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree.
Acquisition-related costs are generally recognised in the consolidated income statement as incurred.
At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their
fair value at the acquisition date, except that:
•
deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are
recognised and measured in accordance with IAS 12 Income Taxes and IAS 19 Employee Benefits
respectively;
•
liabilities or equity instruments related to share-based payment arrangements of the acquiree or
share-based payment arrangements of the Group entered into to replace share-based payment
arrangements of the acquiree are measured in accordance with IFRS 2 Share-based Payment at the
acquisition date; and
•
assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Non-current
Assets Held for Sale and Discontinued Operations are measured in accordance with that Standard.
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any noncontrolling interests in the acquiree, and the fair value of the acquirer's previously held equity interest in the
acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the
liabilities assumed. If, after reassessment, the net of the acquisition-date amounts of the identifiable
assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any
non-controlling interests in the acquiree and the fair value of the acquirer's previously held interest in the
acquiree (if any), the excess is recognised immediately in the consolidated income statement as a bargain
purchase gain.
Non-controlling interests that are present ownership interests and entitle their holders to a proportionate
share of the entity's net assets in the event of liquidation may be initially measured either at fair value or at
the non-controlling interests' proportionate share of the recognised amounts of the acquiree's identifiable
net assets. The choice of measurement basis is made on a transaction-by-transaction basis.
Other types of non-controlling interests are measured at fair value or, when applicable, on the basis
specified in another IFRS.
When the consideration transferred by the Group in a business combination includes assets or liabilities
resulting from a contingent consideration arrangement, the contingent consideration is measured at its
acquisition-date fair value and included as part of the consideration transferred in a business combination.
Changes in the fair value of the contingent consideration that qualify as measurement period adjustments
are adjusted retrospectively, with corresponding adjustments against goodwill. Measurement period
adjustments are adjustments that arise from additional information obtained during the „measurement
period‟ (which cannot exceed one year from the acquisition date) about facts and circumstances that existed
at the acquisition date.
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3.4
Business combinations (continued)
The subsequent accounting for changes in the fair value of the contingent consideration that do not
qualify as measurement period adjustments depends on how the contingent consideration is classified.
Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates and
its subsequent settlement is accounted for within equity. Contingent consideration that is classified as an
asset or a liability is remeasured at subsequent reporting dates in accordance with IAS 39 Financial
Instruments, or IAS 37 Provisions, Contingent Liabilities and Contingent Assets, as appropriate, with the
corresponding gain or loss being recognised in the consolidated income statement.
When a business combination is achieved in stages, the Group's previously held equity interest in the
acquiree is remeasured to fair value at the acquisition date (i.e. the date when the Group obtains control)
and the resulting gain or loss, if any, is recognised in the consolidated income statement. Amounts arising
from interests in the acquiree prior to the acquisition date that have previously been recognised in other
comprehensive income are reclassified to the consolidated income statement where such treatment would
be appropriate if that interest were disposed of.
If the initial accounting for a business combination is incomplete by the end of the reporting period in
which the combination occurs, the Group reports provisional amounts for the items for which the
accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see
above), or additional assets or liabilities are recognised, to reflect new information obtained about facts
and circumstances that existed at the acquisition date that, if known, would have affected the amounts
recognised at that date.
Business combinations that took place prior to 1 April 2010 were accounted for in accordance with the
previous version of IFRS 3.
3.5
Goodwill
Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess
of the cost of the business combination over the Group‟s interest in the net fair value of the identifiable
assets, liabilities and contingent liabilities recognised. If, after reassessment, the Group‟s interest in the
net fair value of the acquiree‟s identifiable assets, liabilities and contingent liabilities exceeds the cost of
the business combination, the excess is recognised immediately in income statement.
Goodwill arising on the acquisition of a subsidiary or jointly controlled entity represents the excess of the
cost of acquisition over the Group‟s assets in the net fair value of the identifiable assets, liabilities and
contingent liabilities of the subsidiary or jointly controlled entity recognised at the date of acquisition.
Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any
accumulated impairment losses.
For the purpose of impairment testing, goodwill is allocated to each of the Group‟s cash-generating units
expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has
been allocated are tested for impairment annually, or more frequently when there is an indication that the
unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying
amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill
allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of
each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period.
On disposal of a subsidiary or a jointly controlled entity, the attributable amount of goodwill is included
in the determination of the profit or loss on disposal.
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3.6
Investments in associates
An associate is an entity over which the Group has significant influence and that is neither a subsidiary
nor an interest in a joint venture. Significant influence is the power to participate in the financial and
operating policy decisions of the investee but is not control or joint control over those policies.
The results and assets and liabilities of associates are incorporated in these consolidated financial
statements using the equity method of accounting, except when the investment is classified as held for
sale, in which case it is accounted for in accordance with IFRS 5 Non-current Assets Held for Sale and
Discontinued Operations. Under the equity method, an investment in an associate is initially recognised
in the consolidated statement of financial position at cost and adjusted thereafter to recognise the Group's
share of the profit or loss and other comprehensive income of the associate. When the Group's share of
losses of an associate exceeds the Group's interest in that associate (which includes any long-term
interests that, in substance, form part of the Group's net investment in the associate), the Group
discontinues recognising its share of further losses. Additional losses are recognised only to the extent
that the Group has incurred legal or constructive obligations or made payments on behalf of the associate.
Any excess of the cost of acquisition over the Group's share of the net fair value of the identifiable assets,
liabilities and contingent liabilities of an associate recognised at the date of acquisition is recognised as
goodwill, which is included within the carrying amount of the investment. Any excess of the Group's
share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of
acquisition, after reassessment, is recognised immediately in the consolidated income statement.
The requirements of IAS 39 Financial Instruments-Recognition and Measurement are applied to
determine whether it is necessary to recognise any impairment loss with respect to the Group‟s
investment in an associate. When necessary, the entire carrying amount of the investment (including
goodwill) is tested for impairment in accordance with IAS 36 Impairment of Assets as a single asset by
comparing its recoverable amount (higher of value in use and fair value less costs to sell) with its
carrying amount, Any impairment loss recognised forms part of the carrying amount of the investment.
Any reversal of that impairment loss is recognised in accordance with IAS 36 Impairment of Assets to the
extent that the recoverable amount of the investment subsequently increases.
When a group entity transacts with its associate, profits and losses resulting from the transactions with
the associate are recognised in the Group' consolidated financial statements only to the extent of interests
in the associate that are not related to the Group.
3.7
Interests in joint ventures
A joint venture is a contractual arrangement whereby the Group and other parties undertake an economic
activity that is subject to joint control. The results and assets and liabilities of joint ventures are
incorporated in these consolidated financial statements using the equity method of accounting, except
when the investment is classified as held for sale, in which case it is accounted for under IFRS 5 Noncurrent Assets Held for Sale and Discontinued Operations. Under the equity method, investments in joint
venture are carried in the consolidated statement of financial position at cost as adjusted for postacquisition changes in the Group‟s share of the net assets of the joint venture, less dividends received and
less any impairment in the value of individual investments. The Group‟s share in the joint venture‟s
results is recorded in the consolidated income statement.
Where the Group transacts with its jointly controlled entities, unrealised profits and losses are eliminated
to the extent of the Group‟s interest in the joint venture.
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3.8
Non-current assets held for sale
Non-current assets and disposal groups are classified as held for sale if their carrying amount will be
recovered principally through a sale transaction rather than through continuing use. This condition is
regarded as met only when the sale is highly probable and the non-current asset (or disposal group) is
available for immediate sale in its present condition. Management must be committed to the sale, which
should be expected to qualify for recognition as a completed sale within one year from the date of
classification.
When the Group is committed to a sale plan involving loss of control of a subsidiary, all of the assets and
liabilities of that subsidiary are classified as held for sale when the criteria described above are met,
regardless of whether the Group will retain a non-controlling interest in its former subsidiary after the
sale.
Non-current assets (and disposal groups) classified as held for sale are measured at the lower of their
previous carrying amount and fair value less costs to sell.
3.9
Revenue recognition
Provided it is probable that the economic benefits will flow to the Group and the revenue and costs, if
applicable, can be measured reliably, revenue is recognised in the consolidated income statement at the
fair value of the consideration received or receivable as follows:
3.9.1
Sale of goods
Revenue from the sale of goods is recognised when all the following conditions are satisfied:





the Group has transferred to the buyer the significant risks and rewards of ownership of the goods;
the Group retains neither continuing managerial involvement to the degree usually associated with
ownership nor effective control over the goods sold;
the amount of revenue can be measured reliably;
it is probable that the economic benefits associated with the transaction will flow to the Group; and
the costs incurred or to be incurred in respect of the transaction can be measured reliably.
Specifically, revenue from the sale of goods is recognised when goods are delivered and legal title is
passed.
3.9.2
Dividend and interest income
Dividend income from investments is recognised when the shareholder's right to receive payment has
been established (provided that it is probable that the economic benefits will flow to the Group and the
amount of income can be measured reliably).
Interest income from a financial asset is recognised when it is probable that the economic benefits will
flow to the Group and the amount of income can be measured reliably. Interest income is accrued on a
time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is
the rate that exactly discounts estimated future cash receipts through the expected life of the financial
asset to that asset's net carrying amount on initial recognition.
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3.9
Revenue recognition (continued)
3.9.3
Rental income
The Group's policy for recognition of revenue from operating leases is described below.
3.10
Leasing
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks
and rewards of ownership to the lessee. All other leases are classified as operating leases.
3.10.1
The Group as lessor
Rental income from operating leases is recognised on a straight-line basis over the term of the relevant
lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the
carrying amount of the leased asset and recognised on a straight-line basis over the lease term.
3.10.2
The Group as lessee
Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except
where another systematic basis is more representative of the time pattern in which economic benefits
from the leased asset are consumed. Contingent rentals arising under operating leases are recognised as
an expense in the period in which they are incurred.
In the event that lease incentives are received to enter into operating leases, such incentives are
recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental
expense on a straight-line basis, except where another systematic basis is more representative of the time
pattern in which economic benefits from the leased asset are consumed.
3.11
Functional and presentation currency and foreign currencies
The presentation currency of the consolidated financial statements is Arab Emirates Dirhams (“AED”),
as a significant proportion of the Group‟s assets, liabilities, income and expenses are either in AED or
denominated in United States Dollars (“USD”), to which the AED is pegged.
In preparing the financial statements of each individual Group‟s entity, transactions in currencies other
than the entity's functional currency (foreign currencies) are recognised at the rates of exchange
prevailing at the dates of the transactions. At the end of each reporting period, monetary items
denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items
carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at
the date when the fair value was determined. Non-monetary items that are measured in terms of historical
cost in a foreign currency are not retranslated.
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3.11
Functional and presentation currency and foreign currencies (continued)
Exchange differences on monetary items are recognised in the consolidated income statement in the
period in which they arise except for:

exchange differences on foreign currency borrowings relating to assets under construction for future
productive use, which are included in the cost of those assets when they are regarded as an
adjustment to interest costs on those foreign currency borrowings;

exchange differences on transactions entered into in order to hedge certain foreign currency risks;
and

exchange differences on monetary items receivable from or payable to a foreign operation for which
settlement is neither planned nor likely to occur (therefore forming part of the net investment in the
foreign operation), which are recognised initially in other comprehensive income and reclassified
from equity to the consolidated income statement on repayment of the monetary items.
For the purposes of presenting consolidated financial statements, the assets and liabilities of the Group's
foreign operations are translated into AED using exchange rates prevailing at the end of each reporting
period. Income and expense items are translated at the average exchange rates for the period, unless
exchange rates fluctuate significantly during that period, in which case the exchange rates at the dates of
the transactions are used. Exchange differences arising, if any, are recognised in other comprehensive
income and accumulated in equity (attributed to non-controlling interests as appropriate).
On the disposal of a foreign operation (i.e. a disposal of the Group's entire interest in a foreign operation,
or a disposal involving loss of control over a subsidiary that includes a foreign operation, a disposal
involving loss of joint control over a jointly controlled entity that includes a foreign operation, or a
disposal involving loss of significant influence over an associate that includes a foreign operation), all of
the exchange differences accumulated in equity in respect of that operation attributable to the owners of
the Company are reclassified to the consolidated income statement.
In the case of a partial disposal that does not result in the Group losing control over a subsidiary that
includes a foreign operation, the proportionate share of accumulated exchange differences are reattributed to non-controlling interests and are not recognised in the consolidated income statement. For
all other partial disposals (i.e. reductions in the Group's ownership interest in associates or jointly
controlled entities that do not result in the Group losing significant influence or joint control), the
proportionate share of the accumulated exchange differences is reclassified to the consolidated income
statement.
Goodwill and fair value adjustments on identifiable assets and liabilities acquired arising on the
acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and
translated at the rate of exchange prevailing at the end of each reporting period. Exchange differences
arising are recognised in equity.
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3.12
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets,
which are assets that necessarily take a substantial period of time to get ready for their intended use or
sale, are added to the cost of those assets, until such time as the assets are substantially ready for their
intended use or sale.
Investment income earned on the temporary investment of specific borrowings pending their expenditure
on qualifying assets is deducted from the borrowing costs eligible for capitalisation.
All other borrowing costs are recognised in the consolidated income statement in the period in which
they are incurred.
3.13
Taxation
Income tax expense represents the sum of the current tax and deferred tax.
3.13.1
Current tax
The current tax is based on taxable profit for the year. Taxable profit differs from profit as reported in the
consolidated income statement because of items of income or expense that are taxable or deductible in
other years and items that are never taxable or deductible. The Group's liability for current tax is
calculated using tax rates that have been enacted or substantively enacted by the end of the reporting
period.
3.13.2 Deferred tax
Deferred tax is recognised on temporary differences between the carrying amounts of assets and
liabilities in the consolidated financial statements and the corresponding tax bases used in the
computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary
differences. Deferred tax assets are generally recognised for all deductible temporary differences to the
extent that it is probable that taxable profits will be available against which those deductible temporary
differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary
difference arises from goodwill or from the initial recognition (other than in a business combination) of
other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences associated with investments in
subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the
reversal of the temporary difference and it is probable that the temporary difference will not reverse in
the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with
such investments and interests are only recognised to the extent that it is probable that there will be
sufficient taxable profits against which to utilise the benefits of the temporary differences and they are
expected to reverse in the foreseeable future.
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3.13
Taxation (continued)
3.13.2 Deferred tax (continued)
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to
the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part
of the asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in
which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted
or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities
and assets reflects the tax consequences that would follow from the manner in which the Group expects,
at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
3.13.3 Current and deferred tax for the year
Current and deferred tax is recognised in the consolidated income statement. Where current tax or
deferred tax arises from the initial accounting for a business combination, the tax effect is included in the
accounting for the business combination.
3.14
Property, plant and equipment are stated at historical cost less accumulated depreciation and accumulated
impairment loss. Historical cost includes expenditure that is directly attributable to the acquisition of the
asset.
Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as
appropriate, only when it is probable that future economic benefits associated with the item will flow to
the Group and the cost of the item can be measured reliably. All other repairs and maintenance expenses
are charged to the profit or loss in the period in which they are incurred.
Depreciation is calculated using the straight-line method to allocate the assets‟ cost to their residual
values over their estimated useful lives as follows:
Useful life
Buildings
Vehicles
Furniture and fixtures
Office equipment
Machinery and equipment
20 to 25 years
4 years
4 years
3 to 4 years
4 years
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3.14
Property, plant and equipment (continued)
Assets held under finance leases are depreciated over the shorter of their expected useful lives or the term
of the relevant lease.
The estimated useful lives, residual values and depreciation method are reviewed at each year-end, with
the effect of any changes in estimate accounted for on a prospective basis
An asset‟s carrying amount is written down immediately to its recoverable amount if the asset‟s carrying
amount is greater than its estimated recoverable amount.
The gain or loss arising on the disposal or retirement of an item of property, plant and equipment is
determined as the difference between the sales proceeds and the carrying amount of the asset and is
recognised in the profit or loss.
Properties or assets in the course of construction for production, supply or administrative purposes, or for
purposes not yet determined, are carried at cost, less any recognised impairment loss. Cost includes all
direct costs attributable to the design and construction of the property including related staff costs, and for
qualifying assets, borrowing costs capitalised in accordance with the Group‟s accounting policy. When
the assets are ready for intended use, the capital work in progress is transferred to the appropriate
property, plant and equipment category and is depreciated in accordance with the Group‟s policies.
Expenditure incurred to replace a component of an item of property, plant and equipment that is
accounted for separately is capitalised and the carrying amount of the component that is replaced is
written off. Other subsequent expenditure is capitalised only when it increases future economic benefits
of the related item of property, plant and equipment. All other expenditure is recognised in consolidated
income statement as the expense is incurred.
An item of property, plant and equipment is derecognised upon disposal or when no future economic
benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal
or retirement of an item of property, plant and equipment is determined as the difference between the
sales proceeds and the carrying amount of the asset and is recognised in consolidated income statement.
Fully depreciated fixed assets are retained in the financial statements until they are no longer in use and
no further charge for depreciation is made in respect of these assets.
3.15
Investment property
Investment property comprises property held for capital appreciation, rental yields or both, but not for
sale in the ordinary course of business, use in the production or supply of goods or services or for
administrative purposes. Investment property is carried at cost less accumulated depreciation and
impairment losses, if any.
Land held for undetermined use is classified as investment property and is not depreciated.
When the development of investment property commences, it is transferred to capital work-in-progress
until development is complete, at which time it is transferred to the respective category, and depreciated
on the straight-line method, at rates calculated to reduce the cost of the assets to their estimated residual
value over their expected useful lives, as follows:
Building
20 years
Any expenditure that results in the maintenance of property to an acceptable standard or specification is
treated as repairs and maintenance and is expensed in the period in which it is incurred.
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3.15
Investment property (continued)
An investment property is derecognised upon disposal or when the investment property is permanently
withdrawn from use and no future economic benefits are expected from the disposal. Any gain or loss
arising on derecognition of the property (calculated as the difference between the net disposal proceeds
and the carrying amount of the asset) is included in the consolidated income statement in the period in
which the property is derecognised.
3.16
Intangible assets
3.16.1
Intangible assets acquired separately
Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated
amortisation and accumulated impairment losses. Amortisation is recognised on a straight-line basis over
their estimated useful lives. The estimated useful life and amortisation method are reviewed at the end of
each reporting period, with the effect of any changes in estimate being accounted for on a prospective
basis. Intangible assets with indefinite useful lives that are acquired separately are carried at cost less
accumulated impairment losses, if any.
3.16.2 Intangible assets acquired in a business combination
Intangible assets acquired in a business combination and recognised separately from goodwill are initially
recognised at their fair value at the acquisition date (which is regarded as their cost).
Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost
less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets
that are acquired separately.
3.16.3 Operating lease premium
Operating lease premium, included in intangible assets, represents the amount paid as premium to obtain
key locations on rent. Such amounts are initially recognised at cost and in subsequent years these are
stated at cost less accumulated amortisation and impairment losses, if any. Amortisation is charged to the
income statement on a straight-line basis over the estimated useful life of intangible assets. Amortisation
of these intangible assets is carried out over a period of 10 years on a straight line basis from the date of
initial recognition.
3.16.4 Distribution rights
Distribution rights are being amortised over a period of 5 years which represents the period over which
the Group has contractually agreed the distribution rights with the principal.
3.16.5 Brand acquisition costs
Brand acquisition costs are amortised over a period of 15 years and relates to amount paid by the Group
for purchase of rights to manufacture and distribute a brand of jewellery.
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3.16.6 Derecognition of intangible assets
An intangible asset is derecognised on disposal, or when no future economic benefits are expected from
use or disposal. Gains or losses arising from derecognition of an intangible asset, measured as the
difference between the net disposal proceeds and the carrying amount of the asset, are recognised in the
consolidated income statement when the asset is derecognised.
3.17
Impairment of tangible and intangible assets other than goodwill
At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible
assets to determine whether there is any indication that those assets have suffered an impairment loss. If
any such indication exists, the recoverable amount of the asset is estimated in order to determine the
extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an
individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the
asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets
are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest
group of cash-generating units for which a reasonable and consistent allocation basis can be identified.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for
impairment at least annually, and whenever there is an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in
use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks specific to the asset for
which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying
amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount.
An impairment loss is recognised immediately in the consolidated income statement.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating
unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying
amount does not exceed the carrying amount that would have been determined had no impairment loss
been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is
recognised immediately in the consolidated income statement.
3.18
Inventories
The cost of diamond jewellery, pearl jewellery and watches is determined based on the specific
identification method.
The cost of gold owned by the Group is determined on the basis of weighted average purchase price for
the reporting period.
Making charges related to inventory of own and unfixed gold jewellery is included in inventories.
Inventories are stated at the lower of cost and net realisable value. Costs are those expenses incurred in
bringing each product to its present location and condition. Net realisable value represents the estimated
selling price for inventories less all estimated costs of completion and costs necessary to make the sale.
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3.19
Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a
past event, it is probable that the Group will be required to settle the obligation, and a reliable estimate
can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the
present obligation at the end of the reporting period, taking into account the risks and uncertainties
surrounding the obligation. When a provision is measured using the cash flows estimated to settle the
present obligation, its carrying amount is the present value of those cash flows (where the effect of the
time value of money is material).
When some or all of the economic benefits required to settle a provision are expected to be recovered
from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will
be received and the amount of the receivable can be measured reliably.
Onerous contracts
Present obligations arising under onerous contracts are recognised and measured as provisions. An
onerous contract is considered to exist where the Group has a contract under which the unavoidable costs
of meeting the obligations under the contract exceed the economic benefits expected to be received under
it.
3.20
Financial instruments
Financial assets and financial liabilities are recognised when Group‟s entity becomes a party to the
contractual provisions of the instrument.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are
directly attributable to the acquisition or issue of financial assets and financial liabilities (other than
financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from
the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition.
Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair
value through profit or loss are recognised immediately in the consolidated income statement.
3.20.1 Financial assets
Financial assets are classified into the following specified categories: financial assets „at fair value
through profit or loss' (FVTPL), „held-to-maturity' investments, „available-for-sale' (AFS) financial assets
and „loans and receivables'. The classification depends on the nature and purpose of the financial assets
and is determined at the time of initial recognition. All regular way purchases or sales of financial assets
are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or
sales of financial assets that require delivery of assets within the time frame established by regulation or
convention in the marketplace.
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3.20.1 Financial assets (continued)
3.20.1.1 Effective interest method
The effective interest method is a method of calculating the amortised cost of a debt instrument and of
allocating interest income over the relevant period. The effective interest rate is the rate that exactly
discounts estimated future cash receipts (including all fees and points paid or received that form an
integral part of the effective interest rate, transaction costs and other premiums or discounts) through the
expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on
initial recognition.
Income is recognised on an effective interest basis for debt instruments other than those financial assets
classified as at FVTPL.
3.20.1.2 Financial assets at FVTPL
Financial assets are classified as at FVTPL when the financial asset is either held for trading or it is
designated as at FVTPL. A financial asset is classified as held for trading if:



it has been acquired principally for the purpose of selling it in the near term; or
on initial recognition it is part of a portfolio of identified financial instruments that the Group
manages together and has a recent actual pattern of short-term profit-taking; or
it is a derivative that is not designated and effective as a hedging instrument.
A financial asset other than a financial asset held for trading may be designated as at FVTPL upon initial
recognition if:


such designation eliminates or significantly reduces a measurement or recognition inconsistency that
would otherwise arise; or
the financial asset forms part of a group of financial assets or financial liabilities or both, which is
managed and its performance is evaluated on a fair value basis, in accordance with the Group's
documented risk management or investment strategy, and information about the grouping is provided
internally on that basis; or it forms part of a contract containing one or more embedded derivatives,
and IAS 39 Financial Instruments: Recognition and Measurement permits the entire combined
contract (asset or liability) to be designated as at FVTPL.
Financial assets at FVTPL are stated at fair value, with any gains or losses arising on remeasurement
recognised in the consolidated income statement. The net gain or loss recognised in the consolidated
income statement incorporates any dividend or interest earned on the financial asset and is included in the
consolidated income statement. Fair value is determined in the manner described in Note 38.
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3.20.1.3 Held to maturity
Investments which have fixed or determinable payments with fixed maturities which the Bank has the
intention and ability to hold to maturity, are classified as held to maturity investments. Held to maturity
investments are carried at amortized cost, using effective interest rate method less any impairment.
Amortized cost is calculated by taking into account any discount or premium on acquisition using an
effective interest rate method.
Any gain or loss on such investments is recognised in the consolidated income statement when the
investment is derecognised or impaired.
Investments classified as held to maturity and not close to their maturity, cannot ordinarily be sold or
reclassified without impacting the Bank‟s ability to use this classification and cannot be designated as a
hedged item with respect to interest rate or prepayment risk, reflecting the longer-term nature of these
investments.
3.20.1.4 Available-for-sale financial assets (AFS financial assets)
AFS financial assets are non-derivatives that are either designated as AFS or are not classified as (a)
loans and receivables, (b) held-to-maturity investments or (c) financial assets at fair value through profit
or loss (FVTPL).
The Group has investments in unlisted shares that are not traded in an active market but that are classified
as AFS financial assets and stated at fair value at the end of each reporting period (because the directors
consider that fair value can be reliably measured). Fair value is determined in the manner described in
Note 38. Changes in the carrying amount of AFS monetary financial assets relating to changes in foreign
currency rates, interest income calculated using the effective interest method and dividends on AFS
equity investments are recognised in the consolidated income statement. Other changes in the carrying
amount of available-for-sale financial assets are recognised in other comprehensive income. Where the
investment is disposed of or is determined to be impaired, the cumulative gain or loss previously
accumulated in the equity is reclassified to the consolidated income statement.
Dividends on AFS equity instruments are recognised in the consolidated income statement when the
Group's right to receive the dividends is established.
The fair value of AFS monetary financial assets denominated in a foreign currency is determined in that
foreign currency and translated at the spot rate prevailing at the end of the reporting period. The foreign
exchange gains and losses that are recognised in the consolidated income statement are determined based
on the amortised cost of the monetary asset. Other foreign exchange gains and losses are recognised in
other comprehensive income.
AFS equity investments that do not have a quoted market price in an active market and whose fair value
cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such
unquoted equity investments are measured at cost less any identified impairment losses at the end of each
reporting period.
53
3
3.20.1.5 Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are
not quoted in an active market. Loans and receivables (including accounts receivables, bank balances and
cash, and due from related parties) are measured at amortised cost using the effective interest method,
less any impairment.
Interest income is recognised by applying the effective interest rate, except for short-term receivables
when the recognition of interest would be immaterial.
3.20.1.6 Impairment of financial assets
Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of each
reporting period. Financial assets are considered to be impaired when there is objective evidence that, as
a result of one or more events that occurred after the initial recognition of the financial asset, the
estimated future cash flows of the investment have been affected.
For AFS equity investments, a significant or prolonged decline in the fair value of the security below its
cost is considered to be objective evidence of impairment.
For all other financial assets, objective evidence of impairment could include:




significant financial difficulty of the issuer or counterparty; or
breach of contract, such as a default or delinquency in interest or principal payments; or
it becoming probable that the borrower will enter bankruptcy or financial re-organisation; or
the disappearance of an active market for that financial asset because of financial difficulties.
For certain categories of financial assets, such as account receivables, assets that are assessed not to be
impaired individually are, in addition, assessed for impairment on a collective basis. Objective evidence
of impairment for a portfolio of receivables could include the Group's past experience of collecting
payments, an increase in the number of delayed payments in the portfolio past the average credit period,
as well as observable changes in national or local economic conditions that correlate with default on
receivables.
For financial assets carried at amortised cost, the amount of the impairment loss recognised is the
difference between the asset's carrying amount and the present value of estimated future cash flows,
discounted at the financial asset's original effective interest rate.
For financial assets carried at cost, the amount of the impairment loss is measured as the difference
between the asset's carrying amount and the present value of the estimated future cash flows discounted
at the current market rate of return for a similar financial asset. Such impairment loss will not be reversed
in subsequent periods.
The carrying amount of the financial asset is reduced by the impairment loss directly for all financial
assets with the exception of accounts receivables, where the carrying amount is reduced through the use
of an allowance account. When an account receivable is considered uncollectible, it is written off against
the allowance account. Subsequent recoveries of amounts previously written off are credited against the
allowance account. Changes in the carrying amount of the allowance account are recognised in the
consolidated income statement.
54
3
3.20.1.6 Impairment of financial assets (continued)
When an AFS financial asset is considered to be impaired, cumulative gains or losses previously
recognised in other comprehensive income are reclassified to the consolidated income statement in the
period.
For financial assets measured at amortised cost, if, in a subsequent period, the amount of the impairment
loss decreases and the decrease can be related objectively to an event occurring after the impairment was
recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that
the carrying amount of the investment at the date the impairment is reversed does not exceed what the
amortised cost would have been had the impairment not been recognised.
In respect of AFS equity securities, impairment losses previously recognised in the consolidated income
statement are not reversed through profit or loss. Any increase in fair value subsequent to an impairment
loss is recognised in other comprehensive income and accumulated in the equity. In respect of AFS debt
securities, impairment losses are subsequently reversed through profit or loss if an increase in the fair
value of the investment can be objectively related to an event occurring after the recognition of the
impairment loss.
3.20.1.7 Derecognition of financial assets
The Group derecognises a financial asset only when the contractual rights to the cash flows from the
asset expire, or when it transfers the financial asset and substantially all the risks and rewards of
ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the
risks and rewards of ownership and continues to control the transferred asset, the Group recognises its
retained interest in the asset and an associated liability for amounts it may have to pay. If the Group
retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group
continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds
received.
On derecognition of a financial asset in its entirety, the difference between the asset's carrying amount
and the sum of the consideration received and receivable and the cumulative gain or loss that had been
recognised in other comprehensive income and accumulated in equity is recognised in the consolidated
income statement.
3.20.2 Financial liabilities and equity instruments
3.20.2.1 Classification as debt or equity
Debt and equity instruments issued by Group‟s entity are classified as either financial liabilities or as
equity in accordance with the substance of the contractual arrangements and the definitions of a financial
liability and an equity instrument.
3.20.2.2 Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after
deducting all of its liabilities. Equity instruments issued by the Group are recognised at the proceeds
received, net of direct issue costs.
3.20.2.3 Financial liabilities
Financial liabilities are classified as either financial liabilities „at FVTPL' or „other financial liabilities'.
55
3
3.20.2 Financial liabilities and equity instruments (continued)
3.20.2.4 Other financial liabilities
Other financial liabilities (including interest bearing loans and borrowings, accounts payable and
accruals, and due to related parties) are subsequently measured at amortised cost using the effective
interest method.
The effective interest method is a method of calculating the amortised cost of a financial liability and of
allocating interest expense over the relevant period. The effective interest rate is the rate that exactly
discounts estimated future cash payments (including all fees and points paid or received that form an
integral part of the effective interest rate, transaction costs and other premiums or discounts) through the
expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount
on initial recognition.
3.20.2.5 Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only when, the Group's obligations are
discharged, cancelled or they expire. The difference between the carrying amount of the financial liability
derecognised and the consideration paid and payable is recognised in the consolidated income statement.
3.21
Contingencies
Contingent liabilities are not recognised/recorded in the consolidated financial statements. They are
disclosed unless the possibility of an outflow of resources embodying economic benefits is remote. A
contingent asset is not recognised in the consolidated financial statements but disclosed when an inflow
of economic benefits is probable.
3.22
Derivative financial instruments
The Group enters into derivative financial instruments to manage its exposure to interest rate risk,
including interest rate swaps and interest rate caps.
Derivative financial instruments are initially measured at fair value at contract date, and are subsequently
re-measured at fair value at the end of each reporting period. All derivatives are carried at their fair
values as assets where the fair values are positive and as liabilities where the fair values are negative. A
derivative is presented as a non-current asset or a non-current liability if the remaining maturity of the
instrument is more than 12 months and it is not expected to be realised or settled within 12 months. Other
derivatives are presented as current assets or current liabilities.
Fair values of the derivatives are carried out by independent valuers by reference to quoted market prices,
discounted cash flow models and recognised pricing models as appropriate.
Changes in the fair value of derivative financial instruments that do not qualify for hedge accounting are
recognised in profit or loss as they arise. Derivative financial instruments that do not qualify for hedge
accounting are classified as held for trading derivatives.
For the purpose of hedge accounting, the Group designates certain derivatives into two types of hedge
categories: (a) fair value hedges which hedge the exposure to changes in the fair value of a recognised
asset or liability; and (b) cash flow hedges which hedge exposure to variability in cash flows that are
either attributable to a particular risk associated with a recognised asset or liability, or a highly probable
forecasted transaction that will affect future reported net income.
56
4.
Critical accounting judgements and key sources of estimation uncertainty
While applying the accounting policies as stated in Note 3, management of the Group has made certain
judgments, estimates and assumptions that are not readily apparent from other sources. The estimates and
associated assumptions are based on historical experience and other factors that are considered to be
relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period of the revision in which the estimate is revised if the revision
affects only that period or in the period of the revision and future periods if the revision affects both
current and future periods.
4.1
Critical judgements in applying accounting policies
The following are the critical judgements, apart from those involving estimations (see 4.2 below), that the
directors have made in the process of applying the Group's accounting policies and that have the most
significant effect on the amounts recognised in the consolidated financial statements.
4.1.1
Classification of investments
Management decides on acquisition of an investment whether it should be classified as financial assets
carried at fair value through profit and loss (FVTPL), held to maturity investments or available for sale
financial assets.
For those investments classified as “held to maturity”, management ensures that the requirements of IAS
39 Financial Instruments: Recognition and Measurement are met and, in particular that the Group has the
intention and ability to hold these investments to maturity.
The Group classifies investments as fair value though profit and loss (FVTPL), if they are acquired
primarily for the purpose of making a short term profit by the Group or held for trading.
All other investments are classified as available for sale investments.
4.1.2
Impairment of available-for-sale financial assets
The Group follows the guidance of IAS 39 Financial Instruments: Recognition and Measurement to
determine whether an available-for-sale financial asset is impaired. This determination requires
significant judgment. In making this judgment, the Group evaluates, among other factors, the duration
and extent to which the fair value of an investment is less than its cost; and the financial health of and
near-term business outlook of the investee, including factors such as industry and sector performance,
changes in technology and operational and financing cash flows.
The Management recognises the decline in the fair value of available-for-sale investments in the
consolidated income statement as impairment loss when the change in fair value is significant and
prolonged.
57
4.
Critical accounting judgements and key sources of estimation uncertainty (continued)
4.1
Critical judgements in applying accounting policies (continued)
4.1.3
Impairment of Goodwill
The Group carries out an impairment testing annually in respect of the goodwill on acquisition of
subsidiaries. In carrying out the impairment analysis, the Group makes the following estimates which are
critical:
-
Growth rate: The Management uses the projected cash flows over a 5 year horizon. The growth
rate used in determining the perpetual cash flows is computed keeping in view the nature of the
industry and the general growth in the economic activity witnessed in the region where the Group
operates.
-
Discount rate: The Management discounts the cash flows using its weighted average cost of
capital. In determining the cost of capital, estimated risk free rate of return adjusted for the equity
market risk premium and the cost of debt is considered in proportion to the debt-equity structure of
the Group
The Management performs sensitivity analysis on the above assumptions in ascertaining its impact on the
carrying value of the goodwill in the consolidated financial statements. Changes in the above
assumptions may have a material impact on the recoverable amounts of goodwill.
4.1.4
Impairment of Investment Properties
The Group carries out the impairment review of its investment properties annually. Independent qualified
valuers are engaged to value the investment properties to identify the existence of impairment, if any.
The independent valuers use comparable basis or comparable basis cross referenced by investment
valuation approach, comparable basis cross referenced by residual valuation approach depending on the
nature of the properties. In cases where comparable transactions are not available, the management
considers the value in use based on the intended use of the respective properties.
4.1.5
Classification of properties
In the process of classifying properties, management has made various judgments. Judgment is needed to
determine whether a property qualifies as an investment property, property, plant and equipment and/or
property held for resale. The Group develops criteria so that it can exercise that judgment consistently in
accordance with the definitions of investment property, property, plant and equipment and property held
for resale. In making its judgment, management considered the detailed criteria and related guidance for
the classification of properties as set out in IAS 2, IAS 16 and IAS 40, in particular, the intended usage of
property as determined by the management.
4.1.6
Revenue recognition
Management has considered the detailed criteria for the recognition of revenue from the sale of goods set
out in International Accounting Standard 18: Revenue, and in particular whether the Company had
transferred risks and rewards of ownership of the goods. Based on the acceptance by the customer of the
liability for the goods sold, management is satisfied that the significant risks and rewards have been
transferred and the recognition of the revenue is appropriate.
58
4.
4.1
Critical judgements in applying accounting policies (continued)
4.1.7
Beneficial ownership
The Abdullah Brothers hold certain investments, property, plant and equipment and investment
properties (together called as “Assets”) for the beneficial interest of the Group. The Abdullah brothers
have represented to the Group that these Assets are held by them on behalf of and for the benefit of the
Group under trust. The Management believes that the interests of the Group are secured through the
Enforceable Undertaking and Cascade agreement that the Abdullah brothers have signed, which restricts
the disposal of any assets without the consent of the Group.
4.2
Key sources of estimation uncertainty
The following are the key assumptions concerning the future, and other key sources of estimation
uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment
to the carrying amounts of assets and liabilities within the next financial year.
4.2.1
Useful lives and depreciation of property, plant and equipment and investment properties
The cost of property, plant and equipment and investment properties is depreciated over the estimated
useful life, which is based on the expected usage of the asset, expected physical wear and tear, and the
repairs and maintenance program and the residual value. The Group reviews the estimated useful lives of
property, plant and equipment and investment properties at the end of each annual reporting period. The
management has not considered any residual value as it is deemed immaterial.
4.2.2.
Fair value of investment properties and investment properties under development
The best evidence of fair value is current prices in an active market for similar lease and other contracts.
In the absence of such information, the Group determined the amount within a range of reasonable fair
value estimates. In making its judgment, the Group considered recent prices of similar properties in the
same location and similar conditions, with adjustments to reflect any changes in the nature, location or
economic conditions since the date of the transactions that occurred at those prices. Such estimation is
based on certain assumptions, which are subject to uncertainty and might materially differ from the actual
results.
The determination of the fair value of revenue-generating properties requires the use of estimates such as
future cash flows from assets (such as leasing, tenants‟ profiles, future revenue streams, capital values of
fixtures and fittings, and the overall repair and condition of the property) and discount rates applicable to
those assets. In addition, development risks (such as construction and leasing risks) are also taken into
consideration when determining the fair value of investment properties under development. These
estimates are based on local market conditions existing at the end of the reporting period.
The continuing volatility in the global financial system and in real estate industry has contributed to the
significant reduction in transaction volumes in the UAE. Therefore, in arriving at their estimates of
market values as at 31 March 2011, the valuers have used their market knowledge and professional
judgement and have not only relied solely on historic transactional comparables. In these circumstances,
there is greater degree of uncertainty than which exists in a more active market in estimating market
values of investment property.
59
4.
4.2
Key sources of estimation uncertainty (continued)
4.2.3
Impairment of properties under development
Properties classified under capital work in progress and development work in progress are assessed for
impairment based on assessment of cash flows on individual cash-generating units when there is
indication that those assets have suffered an impairment loss. Cash flows are determined with reference
to recent market conditions, prices existing at the end of the reporting period, contractual agreements and
estimations over the useful lives of the assets and discounted using a range of discounting rates that
reflects current market assessments of the time value of money and the risks specific to the asset. The net
present values are compared to the carrying amounts to assess any probable impairment.
4.2.4
Impairment of investments in joint ventures and associates
Management regularly reviews its investments in joint ventures and associates for indicators of
impairment. This determination of whether investments in joint ventures and associates are impaired
entails Management‟s evaluation of the specific investee‟s profitability, liquidity, solvency and ability to
generate operating cash flows from the date of acquisition and until the foreseeable future. The difference
between the estimated recoverable amount and the carrying value of investment is recognised as an
expense in profit or loss. Management is satisfied that no impairment provision is necessary on its
investments in joint ventures and associates.
4.2.5
Impairment of trade and other receivables
An estimate of the collectible amount of trade and other receivables is made when collection of the full
amount is no longer probable. This determination of whether the receivables are impaired entails
Management‟s evaluation of the specific credit and liquidity position of the customers and related parties
and their historical recovery rates, including discussion with legal department and review of current
economic environment. Management is satisfied that no additional impairment is required on its trade and
other receivables in excess of amount already provided.
4.2.6
Impairment of due from related parties and long term loans
An estimate of the collectible amount of due from related parties and long term loans is made when
collection of the full amount is no longer probable. For individually significant amounts, this estimation
is performed on an individual basis. Amounts which are not individually significant, but which are past
due, are assessed collectively and allowance is made according to the length of time past due, based on
historical recovery trends.
Any difference between the amounts actually collected in future periods and the amounts expected will
be recognised in the consolidated income statement. Refer to Notes 25 and 26 for details relating to gross
due from related parties and long term loans and impairment thereon as at the reporting date.
4.2.7
Inventories measurement
Inventories are held at the lower of cost and net realisable value. When inventories become old or
obsolete, an estimate is made of their net realisable value. For individually significant amounts this
estimation is performed on an individual basis. Amounts which are not individually significant, but
which are old or obsolete, are assessed collectively and a provision applied according to the inventory
type and the degree of ageing or obsolescence, based on historical selling prices.
Further an estimate of the collectible amount of gold unfixed with trade receivables is made when
recovery of inventory of inventories is no longer probable or the cash margins securing these inventories
are not sufficient to cover the exposure. Refer to Note 22 for details relating to gross inventory,
allowance for slow moving and obsolete inventories and allowance for other inventory exposures as at
the reporting date.
60
4.
4.2
4.2.8
Determination of fair values
A number of the Group‟s accounting policies and disclosures require the determination of fair value, for
both financial and non-financial assets and liabilities. Fair values have been determined for measurement
purposes based on the following methods:
(a) Investments in equity and debt securities
Quoted investments carried at fair value through profit or loss are equity investments in publicly quoted
companies that are listed on a recognised stock exchange and are traded on a regular basis in organised
markets. The fair value of such investments is determined by reference to the bid price of the listed
instruments as of the statement of financial position date.
The fair value of unquoted private equity and venture capital investments is determined in the first
instance using valuations implied by material financing events for the specific investment in question that
involves a third party. An example of a material event would be where a sale is imminent and credible
bids have been received from third parties wherein the fair value would be established with reference to
the range of bids received, based on management‟s assessment of the most likely realisation value within
the range.
Another example of a material event would be where an arm‟s length financing transaction has occurred
recently that is (i) material in nature; (ii) involves third parties; and (iii) attaches an implicit value to the
company. As a second step, in the event that such third party evidenced recent measure of specific fair
value for an individual investment is not available, the fair value is determined by following valuation
techniques using a multiples-based approach applied to the most recent and relevant operating
performance metric of the underlying company, typically earnings before interest, tax, depreciation and
amortisation (EBITDA) and sometimes sales. The choice of the appropriate multiple to be used is taken
from a universe of comparable publicly listed companies, recent merger and acquisition transactions
involving comparable companies, and multiples implied by discounted cash flows.
Management will exercise its judgment in choosing the most appropriate multiple from within the
universe established above.
As indicated above, the Group‟s management uses its best judgment in determining the fair values for
unquoted private equity and venture capital investments from within a range of fair values implied by
market comparables based on management‟s knowledge and experience of the relevant industry.
The fair values of debt securities held-to-maturity financial assets are based on the quoted market value
of similar assets. The fair value of held-to-maturity investments is determined for disclosure purposes
only. The fair value of unquoted infrastructure investment fund is based on the independent valuation of
the fund.
(b) Derivatives
The fair value of derivative financial instruments is discounted to the net present value using prevailing
market rates and foreign currency rates at the statement of financial position date.
The fair value of forward exchange contracts is based on their listed market price, if available. If a listed
market price is not available, then fair value is estimated by discounting the difference between the
contractual forward price and the current forward price for the residual maturity of the contract using a
risk-free interest rate.
The fair value of interest rate swaps is based on broker quotes.
61
4.
4.2
4.2.8
Determination of fair values (continued)
(c) Non-derivative financial liabilities
Fair value, which is determined for disclosure purposes only, is calculated based on the present value of
future principal and interest cash flows, discounted at the market rate of interest at the reporting date. For
floating rate interest bearing loans and borrowings, the fair value normally approximates to their carrying
value.
5
Segment information
A reportable segment is a component of the Group that engages in business activities from which it may
earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of
the Group’s other components. All operating segments’ operating results are reviewed regularly by the
Group’s management to make decisions about resources to be allocated to the segment and assess its
performance, and for which discrete financial information is available.
Products and services from which reportable segments derive their revenues
Information reported to the chief operating decision maker for the purposes of resource allocation and
assessment of segment performance focuses on types of goods delivered. The Group's reportable
segments under IFRS 8 are therefore segregated into five segments (wholesale and retail) as follows:
-
Gold bullion and jewellery,
Diamond jewellery,
Pearl jewellery,
Watches, and
Others
Others segment represents/consists of precious stones, corporate gifts and fashion accessories.
The accounting policies of the reportable segments are the same as the Group's accounting policies
described in Note 3. Segment profit represents the profit earned by each segment without allocation of
depreciation and amortization expenses, and share of results of equity accounted investments. This is the
measure reported to the chief operating decision maker for the purposes of resource allocation and
assessment of segment performance.
The Group accounts for inter-segment sales as if the sales were to third parties, that is, at current market
prices.
The following table presents revenue and profit information and certain asset and liability information
relating to the Group‟s operating segments for the year ended 31 March 2011 and 2010. The Group has
not elected to present information on geographical areas considering information availability and the cost
of collating such information. Owing to the nature of its business, no single customer accounts for more
than 10% of the Group‟s revenues.
62
5
Segment information (continued)
Amount in AED’000
Year ended 31 March 2011
Particulars
External revenue
Internal revenue (Note a)
Total revenue
Results
Depreciation and amortisation
Share of results of equity
accounted investments
Segment profit/(loss) (Note b)
Operating assets (Note c)
Operating liabilities (Note d)
Other disclosures
Capital expenditure
Investments accounted for
Using equity method
Note a:
Note b:
Note c:
Note d:
Note e:
Gold bullion
and jewellery
Diamond
jewellery
Pearl
jewellery
Watches
1,944,500
1,173,720
───────
3,118,220
═══════
764,602
473,363
───────
1,237,965
═══════
59,913
33,351
───────
93,264
═══════
87,609
59,678
───────
147,287
═══════
Others
95,916
───────
95,916
═══════
Unallocated
and Corporate
Consolidation
adjustments
Total
───────
═══════
(1,740,112)
───────
(1,740,112)
═══════
2,952,540
───────
2,952,540
═══════
-
-
-
-
-
(45,203)
-
(45,203)
-
-
-
-
-
3,532
-
3,532
196,001
═══════
945,951
═══════
17,576
═══════
═══════
328,206
═══════
931,328
═══════
101,537
═══════
═══════
28,417
═══════
50,085
═══════
1,576
═══════
═══════
30,034
═══════
58,282
═══════
9,169
═══════
═══════
10,501
═══════
111,987
═══════
═══════
═══════
(539,883)
═══════
1,605,408
═══════
2,560,145
═══════
15,686
90,586
═══════
═══════
(7,113)
═══════
═══════
═══════
53,276
═══════
3,710,454
═══════
2,690,003
═══════
15,686
90,586
═══════
Inter segment revenues are eliminated on consolidation.
Allowances for inventories has been allocated to each reportable segment based on the nature of the product against which provision been made. The management
does not include other expenses as part of internal review of reportable segments. These expenses are included under „Unallocated and Corporate‟.
Inventories, margin with banks, margin money with trade payable and unrealised gain on forward contract are allocated to reportable segments.
Provision for purchase of gold and margin money from trade receivable are allocated to reportable segments and all other liabilities are classified as part of
„Unallocated and Corporate‟.
Included within the unallocated and corporate and consolidation adjustment columns are certain balances, which due to their nature, are not allocated to reportable
segments.
63
5
Segment information (continued)
Amount in AED’000
Year ended 31 March 2010
Particulars
External revenue
Internal revenue (Note a)
Total revenue
Results
Depreciation and amortisation
Share of results of equity
accounted investments
Segment (loss)/profit (Note b)
Operating assets (Note c)
Operating liabilities (Note d)
Other disclosures
Capital expenditure
Investments accounted for
Using equity method
Note a:
Note b:
Note c:
Note d:
Note e:
Gold bullion
and jewellery
Diamond
jewellery
Pearl
jewellery
Watches
Others
Unallocated
and Corporate
2,092,176
1,267,922
───────
3,360,098
═══════
989,819
506,886
───────
1,496,705
═══════
59,270
35,831
───────
95,101
═══════
98,388
62,697
───────
161,085
═══════
63,406
───────
63,406
═══════
───────
═══════
Consolidation
adjustments
Total
3,303,059
(1,873,336)
─────── ───────
(1,873,336)
3,303,059
═══════ ═══════
-
-
-
-
-
(60,016)
-
(60,016)
-
-
-
-
-
(23,698)
-
(23,698)
(308,506)
═══════
114,079
═══════
425,885
═══════
═══════
366,972
═══════
1,149,857
═══════
═══════
═══════
25,433
═══════
44,168
═══════
═══════
═══════
21,504
═══════
83,027
═══════
═══════
═══════
9,628
═══════
25,951
═══════
═══════
═══════
(1,929,569)
═══════
2,623,748
═══════
2,652,776
═══════
35,274
261,114
═══════
(1,814,538)
═══════ ═══════
4,040,830
═══════ ═══════
3,078,661
═══════ ═══════
-
35,274
261,114
═══════ ═══════
Inter segment revenues are eliminated on consolidation.
Allowances for inventories has been allocated to each reportable segment based on the nature of the product against which provision been made. The management
does not include other expenses as part of internal review of reportable segments. These expenses are included under „Unallocated and Corporate‟.
Inventories, margin with banks, margin money with trade payable and unrealised gain on forward contract are allocated to reportable segments.
Provision for purchase of gold and margin money from trade receivable are allocated to reportable segments and all other liabilities are classified as part of
„Unallocated and Corporate‟.
Included within the unallocated and corporate and consolidation adjustment columns are certain balances, which due to their nature, are not allocated to reportable
segments.
64
6
Disposal of subsidiaries
During the year ended 31 March 2011, the Board of directors of the Company resolved to dispose of the
subsidiaries listed below. Sale and purchase agreements were entered into with the non-controlling interests
towards the settlement of amounts due to the Group in respect of relinquishing its share in the equity of
those subsidiaries. The subsidiaries disposed of during the year are as follows:
a)
b)
c)
d)
e)
f)
g)
Damas Jewellery Company, Egypt
Tarek Soliman Guirguis Glamour Company, Egypt
Mukund Jewellery LLC, UAE
Dhanak Jewellery LLC, UAE
Armaan Jewellery LLC, UAE
Al Maleekha Jewellery, UAE
Mangaldas Sunderji & Sons Jewellers LLC, UAE
The results of subsidiaries disposed of during the year ended 31 March 2011 up to the effective date of
disposal are as follows:
Statement of comprehensive income for the year ended 31 March 2011:
Particulars
Revenue
Cost of sales
Gross profit
General, administration, selling and distribution expenses
Profit for the year
Attributable to :
Shareholders of the Parent
Profit for the year
31 March
2011
AED’000
31 March
2010
AED‟000
122,560
(98,871)
──────
23,689
201,274
(164,568)
──────
36,706
(17,381)
──────
6,308
══════
(27,369)
──────
9,337
══════
3,762
2,546
──────
6,308
══════
5,419
3,918
──────
9,337
══════
The details of the settlement are as follows:
31 March
2011
AED’000
Group‟s exposure on the dates of settlement*
Consideration as per the settlement agreement
Settlement loss
Impairment loss on discounting of non-current portion
of settlement consideration
191,921
(176,568)
──────
15,353
39,982
──────
Total loss on disposal of subsidiaries
55,335
══════
*Group‟s exposure includes the investments in the share capital, trade receivables and trade payables.
During the year ended 31 March 2010, the Group did not acquire or dispose of any subsidiary.
65
7
Discontinued Operations
During the year ended 31 March 2011, there were no discontinued operations.
During the year ended 31 March 2010, the Board of directors of the Group resolved to discontinue the
operations of Damas Europe SPA and DIT Group SPA, subsidiaries. The results of discontinued
operations were as follows:Statement of comprehensive income:
Particulars
Revenue
Cost of sales
Gross profit
General, administration, selling and
distribution expenses
Finance costs
Impairment loss on goodwill and intangible
assets written off
Other income
Impairment of net assets of a subsidiary
Loss for the year
Attributable to:
Shareholders of the Parent
Damas Europe
SPA
AED‟000
DIT Group
SPA
AED‟000
Total
AED‟000
──────
-
5,803
(3,598)
──────
2,205
5,803
(3,598)
──────
2,205
(19,859)
-
(42,827)
(1,878)
(62,686)
(1,878)
(7,053)
──────
(26,912)
══════
(24,588)
85
(765)
──────
(67,768)
══════
(24,588)
85
(7,818)
──────
(94,680)
══════
(26,912)
──────
(26,912)
══════
(60,902)
(6,866)
──────
(67,768)
══════
(87,814)
(6,866)
──────
(94,680)
══════
66
7
Discontinued Operations (continued)
Cash flow movements on account of discontinued operations are as follows:
Damas Europe
SPA
AED‟000
Operating activities
Investing activities
Financing activities
Earnings per share:
Basic and diluted loss from discontinued
operation (Note 34)
(19,859)
──────
(19,859)
══════
DIT Group
SPA
AED‟000
(9,901)
62
4,387
──────
(5,452)
══════
Total
AED‟000
(29,760)
62
4,387
──────
(25,311)
══════
(0.09)
(a) Damas Europe SPA
During the year ended 31 March 2010, the Group had written off AED 7.1 million of net assets relating
to Damas Europe SPA pursuant to a decision made by the Board of Directors of the subsidiary to cease
operations. Damas Jewellery LLC, a subsidiary had extended a corporate guarantee to a bank of Damas
Europe SPA amounting to AED 5.5 million which was invoked by the bank during the year ended March
31, 2010. Furthermore, Damas LLC had executed a letter of patronage favouring a bank of Damas
Europe SPA against which a provision amounting to AED 10.6 million (Euro 2 million) was made.
Furthermore, a provision of AED 3.5 million towards the capital contribution to this entity which was
earlier set off against a vendor liability was made. In October 2009, a decision was taken to place Damas
Europe SPA in liquidation. The liquidation process is on-going and as per the legal advice received, the
Group has made adequate provisions and believes that no further losses are expected to arise as a result
of this liquidation process.
(b) DIT Group SPA
On 28 September 2009, the Board of Directors of the Group resolved to voluntarily wind up the
operations of DIT Group SPA, Italy. The Group has decided to place this Company under liquidation in
order to prevent further losses. The liquidation process is on-going and as per the legal advice received,
the Group has made adequate provisions and believes that no further losses are expected to arise as a
result of this liquidation process.
67
8
General, administrative, selling and distribution expenses
Personnel expenses
Rent expenses
Other administrative expenses
Advertising, sales promotion/marketing and selling expenses
Depreciation of property, plant and equipment
and investment properties
Amortisation of intangible assets
Advances/bad debts written off
9
2010
AED‟000
147,646
76,852
98,619
59,586
144,374
90,940
134,182
62,010
35,338
9,865
6,676
──────
434,582
══════
45,489
14,527
17,051
──────
508,573
══════
2011
AED’000
2010
AED‟000
38,318
68,282
5,715
36,928
10,958
1,477
──────
161,678
══════
55,567
43,970
26,143
14,634
14,001
5,484
──────
159,799
══════
2011
AED’000
2010
AED‟000
10,927
──────
10,927
══════
21,231
6,763
──────
27,994
══════
Finance costs
Interest on gold loan
Interest on term loan
Standby LC commission
Interest on overdraft
Other bank charges
Loss on fair valuation of interest rate swaps
10
2011
AED’000
Finance income
Interest income from fixed deposits
Interest income from corporate loan [Note 21(a)]
68
11
Share of results of equity accounted investments
Share of loss from jointly controlled entities [Note 20(a)]
Share of profit from associates [Note 20 (d)]
2011
AED’000
2010
AED‟000
(10,185)
13,717
──────
3,532
══════
(30,836)
7,138
──────
(23,698)
══════
The share of results of equity accounted investments is net of provision of AED 26.6 million (2010: AED
29.7 million) made for losses incurred by jointly controlled entities/ associates in excess of the
contributed capital. For statement of financial position purposes these provisions have been presented as a
provision against long term loans and due from related parties (Note 25).
12
Impairment losses
On amounts due from Abdullah Brothers (Note 25 & Note 26)
On property, plant and equipment [Note 12 (b)]
On investment properties [Note 17(a)]
On investment in jointly controlled entities [Note 12 (c) & Note 20(a)]
On investment in associates [Note 12 (d) & Note 20(d)]
On long term loans and dues from related parties (Note 25)
On available for sale investments [Note 12 (e)]
On intangible assets [Note 12(f)]
On trade and other receivables
2011
AED’000
2010
AED‟000
14,095
8,146
5,102
28,441
──────
55,784
══════
457,007
106,106
54,741
28,431
84,420
14,095
15,982
29,816
──────
790,598
══════
(a) At 31 March 2011, an independent valuation of the investment properties was carried out by
qualified valuers. Fair value was determined based on the valuation standards of the Royal
Institution of Chartered Surveyors chartered surveyors. Based on the valuation, an impairment loss
of AED 14.1 million (2010: AED Nil) was recognized in the consolidated income statement.
(b) At 31 March 2010 an impairment loss of AED 106.1 million (Note 16) was recognized against
property, plant and equipment following management's impairment review of all properties due to
the effect of the overall downturn in global market conditions and the uncertainty associated with
the future use of these assets in the business.
.
69
12
Impairment losses (continued)
(c) During the year ended 31 March 2010, an impairment loss of AED 54.7 million was recognized
against certain investments in jointly controlled entities. Impairment was considered necessary due
to the continued losses reported by these entities and uncertainties over recovery of the Group‟s
investments.
(d) During the year ended 31 March 2010, an impairment loss of AED 28.4 million was recognized
against investments in certain associates owing to uncertainty of availability of future cash profits to
recover the Group‟s investments.
(e) At 31 March 2011, an impairment provision of AED 5.1 million (2010: AED 14.1 million) [Note 21
(b)] was recognised against available for sale investments based on the fair valuation and
assessment of performance of those investments.
(f) During the year ended 31 March 2010, an impairment loss of AED 16 million was recognized
against intangible assets, following management‟s annual review in view of a decline in earnings
from these assets (Note 19).
13
Allowance for inventories loaned to customers [Note 22 (c)]
Allowance for doubtful receivables [Note 23(e)]
Allowance for slow moving inventories [Note 22(b)]
14
2011
AED’000
2010
AED‟000
814
──────
814
══════
434,421
121,109
16,608
──────
572,138
══════
2011
AED’000
2010
AED‟000
──────
══════
73,350
6,240
──────
79,590
══════
Loss on settlement of gold liability [Note 14 (a)]
Loss on settlement of gold loan [Note 14 (b)]
70
14
Loss on settlement of bank liabilities (continued)
(a)
During the year ended 31 March 2010, due to the liquidity crisis, the Group could not meet some
margin calls against outstanding gold loans, which resulted in fixing of gold loans by a bullion
bank. The resulting liability was settled through inventory with a carrying amount of AED 140.1
million which was valued by the bullion bank at AED 66.7 million, resulting in a loss of
AED 73.4 million. During the year, these jewelleries were fully repurchased from the bullion
bank at the purchase price originally paid to the bank.
(b)
During the year ended 31 March 2010, the Group had given gold jewellery to offset certain gold
loan liabilities on which the Group incurred a loss of AED 6.2 million.
15
Other income
2011
AED’000
Gain on settlement of supplier liability [Note 15 (a)]
Gain on disposals of investments designated as fair value
through profit or loss
Commission income
Insurance claim received
Provisions/ liabilities no longer required written back
Recoveries made against allowances made on trade receivables [Note
23(e)]
Recoveries made against advances written off
Recoveries made against allowances made on inventories [Note 22 (c)]
Reversal of impairment loss on long term loans and
dues from related parties
Gain on disposal of equity accounted entities
Allowance for slow moving inventories written back [Note 22(b)]
Miscellaneous income
Income from held to maturity investments
Dividend income from available for sale investments
Income from consignment ventures
Dividend income from investments designated as fair value
through profit or loss
Gain on sale of available for sale investments
(a)
2010
AED‟000
-
11,386
1,102
1,131
17,132
7,980
8,304
9,253
3,569
19,910
-
24,386
28,865
1,926
6,077
128
15,517
1,058
1,416
566
──────
113,479
══════
544
100
──────
46,871
══════
During the year ended 31 March 2010, the Group had entered into a settlement agreement with
one of its suppliers to settle an outstanding liability amounting to AED 25.2 million for an
amount of AED 13.8 million resulting in a gain of AED 11.4 million.
71
16
Cost:
At 1 April 2010
Additions
Transfers
Disposals
Written off
Exchange differences
Write off relating to disposal of subsidiaries
(Note 6)
At 31 March 2011
Accumulated depreciation and impairment:
At 1 April 2010
Charge for the year
Eliminated on transfers
Eliminated on disposals
Eliminated on write off
Eliminated on disposal of subsidiaries (Note 6)
At 31 March 2011
Carrying amount:
At 31 March 2011
Vehicles
AED’ 000
Furniture
and
fixtures
AED’ 000
Office
equipment
AED’ 000
Machinery
and
equipment
AED’ 000
Capital
work-inprogress
AED’ 000
Total
AED’ 000
104,523
290
(2,610)
-
10,323
438
(9)
(322)
-
146,270
4,069
482
(902)
(11,705)
265
27,814
988
(355)
(896)
-
10,974
388
225
(1,226)
(42)
-
29,117
6,041
(343)
-
329,021
12,214
(2,450)
(15,253)
265
(31,838)
─────
70,365
─────
(107)
─────
10,323
─────
(14,523)
─────
123,956
─────
(908)
─────
26,643
─────
(1,741)
─────
8,578
─────
(3,526)
─────
31,289
─────
(52,643)
─────
271,154
─────
12,556
5,296
(2,610)
(3,375)
─────
11,867
─────
9,303
711
(9)
(292)
(87)
─────
9,626
─────
101,901
21,693
(15)
(332)
(11,433)
205
(8,072)
─────
103,947
─────
21,123
3,367
(110)
(896)
(498)
─────
22,986
─────
7,159
1,565
134
(310)
(42)
(1,663)
─────
6,843
─────
─────
─────
152,042
32,632
(934)
(14,981)
205
(13,695)
─────
155,269
─────
58,498
═════
697
═════
20,009
═════
3,657
═════
1,735
═════
31,289
═════
115,885
═════
Land and
buildings
AED’ 000
72
16
Cost:
At 1 April 2009
Additions
Transfers
Disposals
Written off
Write off relating to discontinued operations (Note 7)
Transfer to investment properties (Note 17)
At 31 March 2010
At 1 April 2009
Charge for the year
Eliminated on disposals
Write off relating to discontinued operations (Note 7)
Impairment losses (Note 12)
Transfer to investment properties (Note 17)
At 31 March 2010
Carrying amount:
At 31 March 2010
Vehicles
AED‟ 000
Furniture
and
fixtures
AED‟ 000
Office
equipment
AED‟ 000
Machinery
and
Equipment
AED‟ 000
Capital
work-inprogress
AED‟ 000
Total
AED‟ 000
227,498
2,542
9,177
(1,000)
(1,955)
2,088
(21,826)
(112,001)
─────
104,523
─────
10,454
203
(172)
(130)
(32)
─────
10,323
─────
175,217
14,782
117
(3,087)
(24,194)
1,239
(17,804)
─────
146,270
─────
31,619
1,495
627
(22)
(2,591)
151
(3,465)
─────
27,814
─────
27,039
1,785
31
(553)
(509)
2,211
(19,030)
─────
10,974
─────
162,363
13,840
(9,952)
(2,615)
235
(134,754)
─────
29,117
─────
634,190
34,647
(7,449)
(29,249)
5,794
(62,157)
(246,755)
─────
329,021
─────
11,914
4,908
(415)
113
(1,386)
48,299
(50,877)
─────
12,556
─────
8,817
727
(154)
5
(92)
─────
9,303
─────
93,438
33,429
(1,898)
(19,456)
270
(3,882)
─────
101,901
─────
19,385
5,274
(21)
(2,085)
123
(1,553)
─────
21,123
─────
17,637
2,734
(593)
(379)
620
(12,860)
─────
7,159
─────
57,807
(57,807)
─────
─────
151,191
47,072
(2,666)
(22,335)
1,131
(19,773)
106,106
(108,684)
─────
152,042
─────
91,967
═════
1,020
═════
44,369
═════
6,691
═════
3,815
═════
29,117
═════
176,979
═════
Land and
buildings
AED‟ 000
73
16
a) At March 31, 2011, capital work-in-progress amounting to AED Nil (2010: AED 8.2 million) is
held in the name of Oriental Int. Co. for Gold and Jewellery Trade, a related party, for the
beneficial interest of the Group.
b) At March 31, 2011, property, plant and equipment with a carrying amount of AED 21.2 million
(2010: AED 19.4 million) is mortgaged with banks against bank loans obtained by the Group
(Note 29).
c) Land and buildings include several freehold and leasehold plots of land and buildings used for
the purposes of the Group‟s operations.
17
Investment properties
a)
Land and
building
AED’000
Capitalwork-inprogress
AED’000
Total
AED’000
112,001
─────
112,001
─────
134,754
──────
134,754
──────
246,755
──────
246,755
──────
112,001
23,016
52,246
─────
187,263
─────
134,754
2,829
(52,246)
──────
85,337
──────
246,755
25,845
──────
272,600
──────
2,578
48,299
─────
50,877
─────
57,807
──────
57,807
──────
2,578
106,106
──────
108,684
──────
50,877
2,706
5,005
─────
58,588
─────
57,807
9,090
──────
66,897
──────
108,684
2,706
14,095
──────
125,485
──────
128,675
═════
61,124
═════
18,440
══════
76,947
══════
147,115
══════
138,071
══════
Cost:
Transfer from property, plant and equipment
At 31 March 2010
At 1 April 2010
Additions
Transfer
At 31 March 2011
Transfer from property, plant and equipment
- Depreciation
- Impairment loss
At 31 March 2010
At 1 April 2010
Depreciation charge for the year
At 31 March 2011
Carrying amount:
At 31 March 2011
At 31 March 2010
74
17
Investment properties (continued)
(b) Land and building amounting to AED 44.1 million (2010: AED 13.1 million) (cost) has been
mortgaged with banks against bank loans obtained by the Group (Note 29). Land and buildings
amounting to AED 36.1 million (2010: AED 13.1 million) (cost) is held in the names of the
Abdullah Brothers and a company owned by them (Founding shareholders) for the beneficial
interest of the Group.
c)
Capital work in progress with the carrying amount of AED 18.44 million (2010: AED nil) has been
mortgaged with banks against bank loans obtained by the Group (Note 29).
d)
Investment properties comprise a number of commercial properties and vacant land, which are still
not put to use. Properties with a carrying amount of AED 138.1 million had been transferred from
property, plant and equipment to investment properties during the year ended 31 March 2010, since
these assets were no longer used by the Group for the Group‟s business and the intention of the
management was to hold them for capital appreciation or rental.
e)
At March 31, 2011, the fair value of these properties was AED 159 million (2010: AED 174.6
million) based on the valuation performed by qualified independent valuers. Fair value was
determined based on the valuation standards of the Royal Institution of Chartered Surveyors. The
fair values were determined based on the comparable market value or the value in use approach as
deemed appropriate. The valuation of the investment properties are based on an individual
assessment, for each property type of both, their future earnings and their required yield based on
management‟s strategy.
18
Goodwill
a)
2011
AED’000
Cost:
As at 1 April
Write off related to discontinued operations (Note 7)
As at 31 March
b)
556,969
(17,315)
─────
539,654
═════
The balance at the year end represents goodwill on acquisition of Damas Jewellery LLC and
Damas & Al Ghannam Jewellery Co. WLL. Annual impairment testing for goodwill is carried out
by management. For the purpose of impairment testing, goodwill has been allocated to the
following cash generating units:
Damas Jewellery LLC
Damas & Al Ghannam Jewellery Co. WLL
Total
c)
539,654
─────
539,654
═════
2010
AED‟000
2011
AED’000
2010
AED‟000
532,492
7,162
─────
539,654
═════
532,4922
7,1622
─────
539,6544
═════
The impairment test is based on a “value in use” computation. These computations use cash flow
projections based on a five year financial plan approved by the management and the Board of
Directors.
75
18
Goodwill (continued)
d)
Key assumptions used in value in use computation:
The key assumptions on which management has based its cash flow projections to test impairment of
goodwill are as follows:
Growth rate:
- Management has projected cash flows at a compounded annual growth rate (CAGR) of 0.96% p.a.
for a 5 year horizon. The growth rate is considered appropriate by management considering the
nature of the industry and the general growth in the economic activity witnessed in the countries
where these entities operate.
Profit margins:
- Estimates are based on management’s assumption of achieving a stabilised level of performance in
line with historical trends.
Discount rate:
- Management has used discount rates of 8.64% per annum throughout the respective assessment
periods, reflecting the current estimated weighted average cost of capital of the Group. The discount
rate has been calculated using an estimated risk free rate of return adjusted for the estimated equity
market risk premium and the cost of debt for the Group.
76
19
Intangible assets
Operating
lease
premium
AED’000
Cost:
As at 1 April 2009
Additions during the year
Written off
Currency translation
Write off relating to discontinued operations
(Note 7)
As at 31 March 2010
Additions during the year
Write off relating to disposal of subsidiaries
(Note 6)
Written of disposal
As at 31 March 2011
Accumulated amortisation and impairment:
As at 1 April 2009
Amortisation
Elimination relating to discontinued operations
(Note 7)
As at 31 March 2010
Amortisation
Elimination on disposal of subsidiaries (Note 6)
As at 31 March 2011
Carrying amount:
As at 31 March 2011
As at 31 March 2010
102,063
627
(24,319)
164
Brand
acquisition Distribution
costs
rights
AED’000
AED’000
6,979
-
Total
AED’000
11,025
-
120,067
627
(24,319)
164
(12,128)
─────
66,407
676
(6,979)
─────
-
─────
11,025
-
(19,107)
─────
77,432
676
(2,047)
(6,000)
227
─────
59,263
─────
─────
─────
─────
11,025
─────
(2,047)
(6,000)
227
─────
70,288
─────
39,183
12,322
(8,338)
(1)
1,105
-
4,961
2,205
-
45,249
14,527
(8,338)
(1)
(10,965)
─────
32,201
7,660
(5,958)
(24)
(2,028)
─────
31,851
─────
(1,105)
─────
─────
─────
─────
7,166
2,205
─────
9,371
─────
(12,070)
─────
39,367
9,865
(5,958)
(24)
(2,028)
─────
41,222
─────
27,412
═════
34,206
═════
═════
═════
1,654
═════
3,859
═════
29,066
═════
38,065
═════
77
20
Investments accounted for using the equity method
2011
AED’000
2010
AED‟000
61,328
29,258
─────
90,586
═════
144,750
116,364
─────
261,114
═════
144,750
(13,871)
(10,185)
(17,175)
222,975
(18,009)
(30,836)
-
20,115
(6,056)
(56,250)
─────
61,328
═════
25,361
(54,741)
─────
144,750
═════
Investments in jointly controlled entities [Note 20 (a)]
Investments in associates [Note 20 (d)]
Balance as at 31 March
a) Movement in investments in jointly controlled entities is as follows:
Balance as at 1 April
Dividends received during the year
Share of loss recognised during the year (Note 11)
Transfer to long term loan
Unabsorbed losses in excess of contributed capital
netted off against long term loans/due from related parties (Note 25)
Disposals during the year
Transfer to other receivables [Note 20(c)]
b) Summarized financial information of jointly controlled entities:
2011 (AED’000)
Name
Assets
Premium Investments International LLC
Paspaley Pearl Jewellery LLC
D‟Damas Jewellery (India) Pvt. Ltd.
Al Zain Trading Co. WLL
Time Center LLC
Damas Saudi Arabia Company Ltd.
Roberto Coin Middle East LLC
Flamingo Jewellery India Pvt Ltd
37,044
1,420
28,273
24,327
180,611
66,318
35,539
28,091
108,453 112,860
7,585
6,756
───── ─────
397,505 239,772
═════ ═════
Group‟s share of results
Liabilities
Equity*
35,623
3,946
114,293
7,448
(4,407)
829
─────
157,732
═════
Revenue
26,767
16,352
109,098
31,868
162,521
6,353
─────
352,959
═════
Profit/(loss)
7,142
1,459
11,679
650
(41,054)
431
─────
(19,693)
═════
(10,185)
═════
78
20
Investments accounted for using the equity method (continued)
b) Summarized financial information of jointly controlled entities (continued)
2010 (AED‟000)
Names of jointly controlled entities
Assets
Liabilities
Premium Investments International LLC
Paspaley Pearl Jewellery LLC
Trading House Kristall DMCC #
D‟Damas Jewellery (India) Pvt. Ltd.
Al Zain Trading Co. WLL
Time Center LLC
Damas Toomban Pvt. Ltd #
Damas Saudi Arabia Company Ltd.
Roberto Coin Middle East LLC
Flamingo Jewellery India Pvt Ltd
45,806
3,593
27,762
25,722
1,315
97,544
63,548
167,487
68,782
38,377
30,416
38,819
1,990
207,960 125,749
7,485
7,086
1,301
2,083
───── ─────
633,856 328,969
═════ ═════
Equity*
42,213
2,040
1,315
33,996
98,705
7,961
36,829
82,211
399
(782)
─────
304,887
═════
Revenue
19,565
14,445
1,237
231,595
84,402
41,854
42,139
263,589
3,459
518
─────
702,803
═════
Profit/(loss)
2,349
114
1,671
8,358
1,927
5,044
(48,505)
(584)
(1,398)
─────
(31,024)
═════
(30,836)
═════
* Equity includes retained earnings/(accumulated losses) and shareholders current account. Refer Note
40.1 for details of ownership interests in jointly controlled entities.
c) During the year, the Group has not accounted for its share of results relating to its investment in a
jointly controlled entity owing to the on-going litigation regarding recovery of the Group‟s
investment. Accordingly the carrying value of the investment amounting to AED 56.3 million has
been transferred to “other receivables” [Note 23(i)].
d) Movement in investments in associates is as follows:
Dividends received
Share of profit recognised during the year (Note 11)
Unabsorbed losses in excess of contributed capital
netted off against long term loans/due from related parties
(Note 25)
Disposal during the year
Transfer from due to related parties
Transfer to other receivables [Note 20(f)]
2011
AED’000
2010
AED‟000
116,364
(19,359)
13,717
175,205
(28,177)
7,138
6,411
(78,243)
(9,632)
─────
29,258
═════
4,408
(28,431)
(13,779)
─────
116,364
═════
79
20 Investments accounted for using the equity method (continued)
e) Summarized financial information of associates
2011 (AED’000)
Name
Assets
Liabilities
Damas Muchevherat
Daiso Japan Value Stores LLC
LTC International General Trading Co
LTC International Qatar LLC
Daiso Trading
DPG Diamonds DMCC
Al Mana Jewellery Co. - Damas WLL
Al Baraka Jewellery WLL
Tanya Collections Ltd.
Islanders Maldives Pvt Ltd
Crescendo Jewellery Design Ltd
43,958
35,370
22,729
16,221
4,198
2,630
31,729
28,637
4,285
1,105
39,181
2,885
11,289
6,749
48,505
28,934
2,803
14,092
19,513
5,986
───── ─────
228,190 142,609
═════ ═════
Equity*
8,588
6,508
1,568
3,092
3,180
36,296
4,540
19,571
(11,289)
13,527
─────
85,581
═════
Revenue
Profit/(loss)
44,985
48,357
9,943
68,218
3,881
191,534
18,194
41,061
9,006
38,283
─────
473,462
═════
2,519
5,591
765
16,193
30
14,720
1,604
3,512
2,852
2,203
─────
49,989
═════
13,717
═════
Summarized financial information of associates
2010 (AED‟000)
Names of associates
Damas & Chalco General Trading Co LLC#
Damas Muchevherat
Style Avenue Middle East FZ Company
[(Note 20(e)] #
Daiso Japan Value Stores LLC
LTC International General Trading Co
LTC International Qatar LLC
Daiso Trading
DPG Diamonds DMCC
Al Mana Jewellery Co.-Damas WLL
Al Baraka Jewellery WLL
Himo LLC#
Lucci 2 SARL#
Tanya Collections Ltd.
Islanders Maldives Pvt Ltd
Felopateer Palace#
Style Avenue Bahrain Company WLL#
Assets
Liabilities
Equity*
Revenue
Profit/(loss)
34,639
37,556
35,039
26,621
(400)
10,935
18,360
29,484
(3,992)
99
95,653
17,047
4,426
22,723
4,055
604
30,430
15,171
43,330
9,806
30,035
5,246
282,543
22,853
63,014
─────
719,131
═════
63,932
11,580
2,652
20,220
833
367
3,567
5,667
7,687
362
14,174
15,899
134,246
10,815
37,551
─────
391,212
═════
31,721
5,467
1,774
2,503
3,222
237
26,863
9,504
35,643
9,444
15,861
(10,653)
148,298
12,038
25,463
─────
327,920
═════
130,715
34,712
15,483
65,331
4,680
164,362
20,583
14,525
816
33,128
14,189
177,851
34,906
34,435
─────
793,560
═════
(13,855)
5,447
(980)
14,806
140
11,249
669
4,080
(202)
1,535
(3,894)
57
736
(25,161)
─────
(9,266)
═════
7,138
═════
* Equity includes retained earnings/(accumulated losses) and shareholders current account. Refer Note
40.2 for details of ownership interests in associates.
80
20
Investments accounted for using the equity method (continued)
# Represents entities where the Group has sold its equity interest during the year.
f) During the year, the Group has not accounted for its share of results relating to its investments in two
associates on the basis that the Group is negotiating a settlement agreement with the other
shareholders for disposal of its investments in these associates. Accordingly the carrying value of the
investment amounting to AED 9.6 million as at 31 March 2011 has been transferred to “other
receivables” and management believes that the amount is fully recoverable as letter of intent is
already signed with the other partners.[Note 23(i)]
21
Other financial assets
2011
AED’000
2010
AED‟000
Corporate loan
Less: Allowance for doubtful loan [Note 21 (a)]
Available for sale investments [(Notes 21 (b) and (e)]
Held to maturity investments [Note 21 (d)]
Other trade receivables - non-current [Note 23(h)]
Other non-trade receivables [Note 23(h)]
Unrealised gain on fair valuation of forward contracts
[Notes 22 (i) & Note 35]
311,511
(311,511)
29,498
39,943
168,666
311,511
(311,511)
34,600
21,059
37,383
-
4,352
─────
242,459
═════
177
─────
93,219
═════
Other financial assets - current
Other financial assets - non- current
4,352
238,107
─────
242,459
═════
21,236
71,983
─────
93,219
═════
a)
During the year ended 31 March 2010, an allowance was made for an outstanding loan amounting to
AED 293.9 million (USD 80 million) and accrued interest. This loan was extended to Dubai
Ventures Group Limited in 2008. The Group is currently reviewing various options to secure its
interest in the matter.
b)
Movement in available-for-sale investments is as follows:
2011
AED’000
As at 1 April
Add: Purchase during the year
Less: Disposal during the year
Less: Change in fair value and impairment losses (Note 12)
As at 31 March
c)
34,600
(5,102)
─────
29,498
═════
2010
AED‟000
48,073
1,000
(378)
(14,095)
─────
34,600
═════
As at 31 March 2011, available for sale investments comprise investments in unquoted equity shares
and unquoted equity funds. The fair value of the unquoted equity shares is based on the net asset
value of the underlying investments provided by the fund manager / investee companies. Based on
the assessment of fair valuation, an impairment loss of AED 5.1 million (2010: AED 14.1 million)
has been recognised in the consolidated income statement.
81
21
Other financial assets (continued)
d)
Held to maturity investment amounting to AED nil (2010: AED 21.06 million) represented coupon
notes. This investment carried guaranteed interest rates of 7.5 % p.a. This investment was
redeemed on its maturity during the year ended 31 March 2011.
e)
As at 31 March 2011 and 31 March 2010, certain investments are held by the Abdullah Brothers
who have confirmed that they are holding these investments for the beneficial interest of the
Group.
f)
Investments designated as fair value through profit or loss represent shares in quoted equity
securities. Movement in investments designated as fair value through profit or loss (FVTPL) are as
follows:
As at 1 April
Less: Disposal during the year
Less: Change in fair value
As at 31 March
2011
AED’000
2010
AED‟000
─────
═════
24,855
(16,558)
(8,297)
─────
═════
The fair value of the above investments is based on their period end closing bid prices in the respective
markets.
22
Inventories
a)
Cost of inventory on hand (net of consignment inventory) (gold
and gold jewellery, diamonds, pearls, watches, silver and other
precious stones) [Notes 22(d), 22(e) and 22(g)]
Gold unfixed with trade receivables
Gold unfixed with jointly controlled entities/ associated companies
Provision for gold purchases [Note 32(c)]
Less: Gold unfixed received on loan from banks
[Note 29 (c) & Note 35]
Less: Gold unfixed from trade payables
Less: Gold unfixed from joint venturer‟s contribution
Less: Allowance for slow moving/obsolete inventories [Note 22(b)]
Less: Allowance for inventories loaned to customers [Note 22 (c)]
Net inventories
2011
AED’000
2010
AED‟000
1,872,608
550,315
258,256
──────
2,681,179
2,217,324
490,032
331,944
439,419
──────
3,478,719
(516,908)
(57,401)
──────
2,106,870
(48,801)
(585,318)
──────
1,472,751
══════
(1,388,570)
(20,519)
(24,299)
──────
2,045,331
(54,031)
(618,269)
──────
1,373,031
══════
82
22
Inventories (continued)
b) The movement in the allowance for slow and non-moving inventories is as follows:
2011
AED’000
As at 1 April
Add: Allowance made during the year
Less: Reversal of excess allowance (Note 15)
Less: Allowance relating to discontinued operations
Less: Written off
As at 31 March
54,031
(1,926)
(1,239)
(2,065)
─────
48,801
═════
2010
AED‟000
39,348
16,608
(1,925)
─────
54,031
═════
c) The movement in the allowance for inventories lent to customers is as follows:
2011
AED’000
As at 1 April
Add: Allowance made during the year
Add: Margin money utilised
Less: Recoveries against provision (Note 15)
Less: Written off
As at 31 March
618,269
(19,910)
(13,041)
─────
585,318
═════
2010
AED‟000
434,421
183,848
─────
618,269
═════
d) Cost of inventory on hand excludes gold received on consignment basis from banks and bullion
lenders amounting to AED 86.9 million (511,698 grams) [2010: AED 86.9 million (660,502 grams)].
e) Cost of inventory on hand includes unfixed gold given to certain parties on consignment basis
amounting to AED 113.3 million (667,322 grams) [2010: AED 101.5 million (806,354 grams)]
valued at weighted average purchase price.
f) Inventories are hypothecated to banks against the borrowing facilities obtained by the Group (Note
29).
g) At March 31, 2011, cost of inventory on hand includes making charges relating to own and unfixed
jewellery amounting to AED 60.9 million (2010: AED 78.9 million).
h) The Group in the normal course of business borrows gold on an unfixed basis which it converts into
gold jewellery or trades as bullion. This jewellery and bullion is further used as stock in trade and is
sold to various customers on a fixed or unfixed basis. The Group enters into forward purchases and
forward sales to minimise the price risk to which it is being exposed. The Group reduces the exposure
to gold price by borrowing gold on an unfixed basis. These are then sold as manufactured jewellery or
bullion, at which point, the price will be fixed at the spot rate.
i)
Revaluation of open forward contracts at fair market value as at 31 March 2011 has resulted in an
unrealised gain of AED 4.3 million (2010: AED 0.2 million) (Notes 21 and 35). This revaluation gain
is grouped in other financial assets under current assets in the statement of financial position.
83
22
Inventories (continued)
The Group monitors these forward contracts as part of its own/book stock as follows:
Net inventory (as above)
Provision for gold purchases [Note 32(c)]
Forward purchases (at deal rate) (Note 35)
Economic position of Group’s inventory
2011
AED’000
2010
AED‟000
1,472,751
423,223
──────
1,895,974
══════
1,373,031
(439,419)
720,716
──────
1,654,328
══════
j)
The Group has received margins against gold unfixed with trade receivables, which has been
separately presented as a current liability amounting to AED 2.8 million (2010: AED 5.4 million).
The Group has paid margins against gold unfixed from trade payables amounting to AED nil (2010:
AED 0.5 million) which have been separately presented as a current asset.
k)
The Group provides gold on an unfixed basis to various consignment venturers, debtors, associates
and jointly controlled entities without any margin and to certain parties against cash margin.
As at 31 March 2010, total exposures arising from these parties on account of gold and non-gold
exposures were AED 613.5 million (4,969,739 grams) and AED 4.7 million respectively. After netting
off of the margin received from debtors amounting to AED 183.8 million, management has considered a
100% provision amounting to AED 434.4 million against the net exposure (Note 13). A 100% provision
has been made for gold receivable from debtors owing to uncertainties in recovery of gold from these
parties and jointly controlled entities due to the continued losses reported by these entities and concerns
over the recoverability of the unfixed gold provided to these entities.
Management considered it prudent to provide for these exposures which have arisen on account of the
considerable increase in the gold price, the financial viability of these parties and the general economic
condition in the region. However, the management is in the process of formulating strategies for recovery
of the unfixed gold from these parties including finalisation of amicable settlement plans and have
recovered inventories worth AED 19.9 million (2010: AED nil) as at the reporting date.
84
23
Trade receivables and prepayments
Trade receivables
Allowance for doubtful debts
Other trade receivables [Note 23(h)]
Other non-trade receivables [Note 23(h)]
Dues from credit card companies
Prepayments
Advances and other receivables [Note 23(i)]
Refundable deposits
2011
AED’000
2010
AED‟000
167,434
(113,881)
──────
53,553
17,077
61,368
2,328
17,731
100,597
11,697
──────
264,351
══════
215,418
(137,289)
──────
78,129
27,303
2,674
19,604
41,568
15,348
──────
184,626
══════
a)
The average credit period on sales of goods is between 90 to 180 days. There is no interest charged
on trade receivables. Allowances for trade receivables are recognized based on estimated
irrecoverable amounts determined by reference to past default experience of the counterparty and
an analysis of the counterparty financial position.
b)
Trade receivables disclosed above include AED 12.9 million (2010: AED 24.1 million) that are past
due at the end of the reporting period for which the Group has not recognised an allowance for
doubtful debts because there has not been a significant change in credit quality and the amounts are
still considered recoverable. The Group does not hold any collateral over these balances nor does it
have a legal right of offset against any amounts owed by the Group to the counterparties.
c)
As at 31 March 2011, the ageing of unimpaired trade receivables is as follows:
Total
AED‟000
<30
days
AED‟000
30-90
days
AED‟000
91-180
days
AED‟000
>180
days
AED‟000
31 March 2011
53,553
29,727
10,892
4,286
8,648
31 March 2010
78,129
28,345
25,686
8,465
15,633
d)
Trade receivables are hypothecated to certain banks against the borrowing facilities (Note 29).
e)
Movement in the allowance for doubtful debts is as follows:
2011
AED’000
As at 1 April
Charge for the year (Note 13)
Write off related to discontinued operations
Amounts recovered during the year (Note 15)
Amounts written off as uncollectible
Foreign exchange gains and losses
As at 31 March
137,289
814
(21)
(9,253)
(14,948)
──────
113,881
══════
2010
AED‟000
27,549
121,109
(11,266)
(103)
──────
137,289
══════
85
23
Trade receivables and prepayments (continued)
In determining the recoverability of a trade receivable, the Group considers any change in the credit
quality of the trade receivable from the date was granted up to the end of the reporting period.
f)
Age of impaired trade receivables:
>180
days
AED‟000
31 March 2011
113,881
31March 2010
137,289
g)
Charge for the year ended 31 March 2010 amounting to AED 121.1 million was on account of 100%
allowances on receivables from certain consignment venturers and other debtors where the
relationships were managed primarily by the Abdullah Brothers. The management is in the process
of formulating strategies for recoveries from these parties and are confident of recovery of a
significant portion of the amount outstanding. However, given the change in the role of the Abdullah
Brothers and the uncertainty around the timing of recoveries, management considered it prudent to
make allowances for these balances. During the current year, the Group has recovered AED 9.3
million (2010: AED nil) against these allowances.
h)
During the year ended 31 March 2011, the Group entered into settlement agreements with certain
partners of jointly controlled entities, associates and debtors to recover AED 374.6 million (2010:
AED 94.5 million) which represents the total balance due from these parties. However, as per the
settlement agreements, the recoverable amount is AED 345.1 million (2010: AED 77.4 million) over
an agreed period. Accordingly, the non-recoverable amount of AED 29.5 million (2010: AED 17.2
million) and AED 43.6 million (2010: AED 12.7 million) due to expected delay in collection have
been impaired. The net other trade and non-trade receivables balance as per the settlement agreement
is presented as:
2010
2011
AED‟000
AED’000
Other trade receivables
Other non-trade receivables
Less: Allowance for impairment loss
Current
Non-current (Note 21)
87,894
284,459
──────
372,353
(70,774)
──────
301,579
──────
77,429
──────
77,429
(12,743)
──────
64,686
──────
17,077
61,368
──────
78,445
──────
27,303
──────
27,303
──────
54,468
168,666
──────
223,134
──────
37,383
──────
37,383
──────
86
23
i)
Trade receivables and prepayments (continued)
Advances and other receivables balance includes advances to suppliers amounting to AED 13.1
million (2010: AED 2.3 million).
Advances and other receivables also include AED 56.3 million and AED 9.6 million in respect of
equity accounted entities in which the Group has plans to exit. [Note 20(c) & Note 20(f)].
24
For the purposes of the consolidated statement of cash flows, cash and cash equivalents include cash on
hand and in banks, net of outstanding bank overdrafts. Cash and cash equivalents at the end of the
reporting period as shown in the consolidated statement of cash flows can be reconciled to the related
items in the consolidated statement of financial position as follows:
Fixed and margin deposits with banks
Total bank balances and cash
Less:
Bank overdrafts (Note 29)
Fixed and margin deposits under lien (Note 29)
Fixed deposits with original maturity after 90 days
Cash and cash equivalents
2011
AED’000
2010
AED‟000
371,623
49,564
──────
421,187
598,929
156,285
──────
755,214
(1,281,599)
(9,755)
(6,356)
──────
(876,523)
══════
(690,843)
(391,888)
(203)
──────
(327,720)
══════
Fixed deposits carry interest rates ranging from 1 % p.a. to 3 % p.a. depending on the tenure and maturity
of deposits (2010: from 1 % p.a. to 4.5 % p.a.). The maturity periods of these deposits range between 3
and 6 months.
87
25
Related party balances and transactions
a) The Group‟s entities enter into transactions with other companies and entities that fall within the
definition of a related party contained in International Accounting Standard 24. Such transactions are
in the normal course of business at terms agreed between the parties. Related parties comprise
associates, joint ventures, the Abdullah Brothers, Directors and key management personnel of the
Group, and entities controlled, jointly controlled or significantly influenced by such parties.
Jointly controlled entities and associates
Sales
Purchases of goods
Fees for services rendered
The Abdullah Brothers
Senior Advisor fees
Other related parties
Selling and distribution expenses
2011
AED’000
2010
AED‟000
242,465
═══════
17,475
═══════
═══════
218,991
═══════
33,702
═══════
24
═══════
6,370
═══════
═══════
5,305
═══════
8,942
═══════
b) Other than those balances mentioned in Note 30, balances with related parties included in the statement
of financial position are as follows:
2011
Due from
Due to
Long term related
related
loans
parties
parties
AED’000 AED’000 AED’000
Jointly controlled entities
and associate companies
Less: Transfer to investment
Less: Allowance for additional
losses of associates/ Jointly
controlled entities in excess of
contributed capital [Note 20(a)
& Note 20(d)]
Less: Impairment losses
Amounts due from Abdullah
Brothers‟ (Note 26)
Current
Non-current
2010
Due from
Due to
Long term
related
related
loans
parties
parties
AED‟000 AED‟000 AED‟000
57,769
-
195,147
-
3,459
-
101,480
-
186,300
19,783
(13,779)
(1,425)
(820)
──────
55,524
(25,101)
(7,326)
──────
162,720
──────
3,459
(5,977)
(50,372)
──────
45,131
(23,792)
(34,048)
──────
128,460
─────
6,004
──────
55,524
══════
154,631
──────
317,351
══════
──────
3,459
══════
──────
45,131
══════
306,800
──────
435,260
══════
─────
6,004
═════
55,524
──────
55,524
══════
162,720
154,631
──────
317,351
══════
3,459
──────
3,459
══════
45,131
──────
45,131
══════
128,460
306,800
──────
435,260
══════
6,004
─────
6,004
═════
88
25
Related party balances and transactions (continued)
c) Long term loans to related parties (associates and jointly controlled entities) represent loans which are
interest free, unsecured and have no fixed terms of repayment. These loans are in the nature of
working capital advances and are not expected to be recalled within a period of twelve months from
the reporting date and hence the Group is carrying it at cost.
d) Outstanding balances at 31 March 2011 arise in the normal course of business. During the year ended
31 March 2011, the Group has recorded an additional impairment of AED 8.1 million (2010: 541.4
million) on amounts owed by related parties (Note 12).
e) Compensation of key management personnel
The remuneration of Executive Directors and other members of key management during the year is as
follows:
2010
2011
AED‟000
AED’000
Short-term benefits
Gratuity
Sitting fees
26
6,391
111
───────
6,502
========
7,646
400
───────
8,046
========
2011
AED’000
2010
AED‟000
Amounts due from shareholders
Balance at 1 April
Net amounts (repaid)/withdrawn during the year
Add: Fixed deposit of the Group utilised by a bank against a loan in
the name of a Company owned by the shareholder
Add: Gold receivables (Note a below)
Long term loan set off during the year (Note 30)
Remuneration and sitting fees
Less: Impairment provision [Note 26(a)]
306,800
(2,169)
259,524
101,899
(150,000)
──────
154,631
══════
150,131
255,513
(3,260)
(457,007)
──────
306,800
══════
a) During the year ended 31, March 2010, The Abdulla Brothers had withdrawn 1,940,250 grams of gold
on an unfixed basis and the value of this gold amounting to AED255.5 million based on the gold prices
at March 31, 2010 was reflected as the amount due from shareholders. Subsequently during the year
ended 31, March 2011, the above gold withdrawn was fixed by The Abdullah Brothers and the Group
at an agreed rate of US$ 1,115 per oz based on mutual Agreement. Further The Abdullah Brothers
have made payments amounting to AED 2.2 million directly to subsidiaries of the Group in Turkey
and Lebanon.
b) The amounts due from the Abdullah Brothers are expected to be collected over a period of 3 years
from 1 May 2011 as per the Cascade Agreement (Note 41.2) entered into with them. Accordingly,
these have been classified as non-current assets as at the reporting date.
c) During the year ended March 31, 2010, based on the assets identified and valued then and the expected
timing of recoveries, the Group considered it prudent to make an allowance for impairment of AED
457 million against the amounts due from the Abdullah Brothers.
89
26
Amounts due from shareholders (continued)
d) The Board and the management is committed to enforcing full payment of all amounts due to the
Group, as per the Cascade agreement (Note 41.2) on a prudent basis, there has been no reversal of the
allowance for impairment made in the previous year.
27
Share capital
Authorised capital
1,000,000,000 shares of USD 1 each
Issued and paid up capital:
989,228,009 ordinary shares of USD 1 each
28
2011
AED’000
2010
AED‟000
3,673,500
══════
3,673,500
══════
3,633,932
══════
3,633,932
══════
Reserves
a) Statutory reserve
In accordance with the Articles of Association of the Company and its subsidiaries and the UAE
Commercial Companies Law, the following subsidiaries have established statutory reserves by
appropriation of 10% of profit for each year until the reserve equals 50% of its share capital:











Damas LLC, UAE
Damas Jewellery LLC, UAE
Ocean Jewellery LLC, UAE
Al Mana Damas International LLC, UAE
Ayodhya Jewellery LLC, UAE
Gem Universe LLC, Oman
Damas Company WLL, Bahrain
Damas & Al Ghannam Jewellery Co WLL, Kuwait
Arshi Jewellery LLC, UAE
Farhan Jewellery LLC, UAE
Ahlan Wa Marhaba Jewellers LLC, UAE
This reserve is not available for distribution except as stipulated by the Law. The transfer may be
discontinued when the reserve equals 50% of the paid up share capital of the individual companies.
b) Currency translation reserve
The currency translation reserve represents all the foreign exchange differences arising from the
translation of the financial statements of foreign subsidiaries of the Group.
90
28
Reserves (continued)
c) Merger reserve
The Company acquired 100% of Damas LLC through the exchange of shares of the Company for shares
held by the Founding Shareholders and non-controlling shareholders of Damas LLC (“Share Swap”) in
June 2008.
Since the Company and Damas LLC were owned and controlled by the Abdullah Brothers, the acquisition
of Damas LLC by the Company was treated as a common control transaction and had been prospectively
accounted for under the pooling of interests method, using the predecessor basis of accounting. Since no
consideration was paid by the Company for the acquisition of Damas LLC, the entire issued and paid up
share capital of the two entities was recognized as a merger reserve in equity.
29
a)
Current
Bank overdrafts
Loans payable on demand [Note 29 (b)]
Trust receipts
Short term loans
Local bills discounting
Non-current
Long-term loans
Total
2011
AED’000
2010
AED‟000
1,281,599
1,093,243
24,612
1,884
8,386
──────
2,409,724
690,843
1,346,180
42,613
7,649
8,386
──────
2,095,671
7,136
──────
2,416,860
══════
5,815
──────
2,101,486
══════
b) Refer Note 41.1 for disclosure of subsequent events.
c) In addition to the above loans, the Group has outstanding gold loans as at 31 March 2011 received
from bullion banks on unfixed basis aggregating to 3,559 Kgs (2010: 10,544 Kgs). Refer Note 22.
d) As at 31 March 2011, the aggregate bank borrowings including the above unfixed gold loans amount
to AED 3,021.7 million (2010: AED 3,490.1 million).
Bank borrowings are secured by:
I.
Fixed deposits amounting to AED 9.8 million (2010: AED 391.8 million) and held to maturity
investments amounting to AED nil (2010: AED 21 million) (Notes 24 and 21).
II.
Hypothecation of inventories and receivables on pari passu basis with banks. (Notes 22 and 23).
III. Assignment of insurance policy on pari passu basis.
IV. Unconditional, continuing, joint and several guarantees of Mr. Tawfique Abdullah, Mr. Tawhid
Abdullah and Mr. Tamjid Abdullah, founding shareholders on behalf of the Group.
V. Mortgage of properties, plant and equipment amounting to AED 21.2 million (2010: AED 19.4
million) [Note 16(b)] and investment properties comprising of land and buildings amounting to
AED 44.1 million (2010: AED 13.1 million) [Note 17(b)] and capital work in progress with the
carrying value of AED 18.4 million (2010: AED nil) [Note 17(c)].
VI. Corporate cross guarantees from Group companies.
VII. Promissory notes.
VIII. Security cheque against bank borrowings.
91
30
Long term loans from shareholders
2011
AED’000
2010
AED‟000
══════
150,000
══════
During the year, the Group received a letter of set off from the shareholders authorizing the Group to
adjust the long term loan due to them against their outstanding current account balances (Note 26).
31
Provision for employees’ end of service benefits
As at 1 April
Charge for the year
Less: relating to discontinued operations
Less: relating to disposal of subsidiaries
Less: paid during the year
As at 31 March
32
2011
AED’000
2010
AED‟000
22,959
5,175
(691)
(3,973)
──────
23,470
══════
23,679
6,050
(3,052)
(3,718)
──────
22,959
══════
2011
AED’000
2010
AED‟000
107,363
14,124
48,326
74,962
1,463
──────
246,238
══════
169,748
13,674
79,835
520,718
8,791
──────
792,766
══════
a)
Trade payables
Deposits from customers
Other liabilities [Note 32 (e)]
Accruals and provisions [Note 32(c)]
Fair value of interest rate swaps
Presented in the statement of financial position as:
Trade payables and accruals - non-current
Trade payables and accruals - current
2011
AED’000
2010
AED‟000
32,599
213,639
──────
246,238
══════
792,766
──────
792,766
══════
b) The average credit period on purchases of goods is 15 days to 30 days for gold jewellery and 30 days
to 120 days for diamond and other non-gold inventory. There is no interest charged on the past due
trade payables.
c) Accruals and provisions include an amount of AED nil (2010: AED 439.4 million) with respect to
provisions for gold purchases [Note 22(a)]. The Group has also entered into forward contracts for
gold (Note 35).
92
32
Trade payables and accruals (continued)
d) Accruals and provisions include accrued interest expenses of AED 6.0 million (2010: AED 14.8
million).
e) In the financial year 2008-09, the partner of an associate company had contributed 601kg of gold to
that entity by availing a gold loan from a bullion bank based on a standby letter of credit issued by a
Commercial Bank. On 1 January 2009, the Group had entered into a share transfer agreement with the
partner to acquire the partner‟s equity interest in that entity. The gold was transferred to the Group
and was held by the Group on an unfixed basis which was subsequently dollarised by the bullion
bank at AED 77 million by invoking the standby letter of credit. Consequently, the partner sent a
notice of arbitration to the Group requesting settlement. During the year, the Group finalised the
repayment of the outstanding amounts over 49 instalments in respect of which post-dated cheques
were issued. Further the Group is also servicing the finance cost incurred by the former partner on the
amounts outstanding.
33
Contingencies and commitments
a)
Corporate guarantees
Other bank guarantees
Stand-by letters of credit
Commitments
Capital commitments
2011
AED’000
2010
AED‟000
39,701
6,528
198,279
══════
30,088
10,360
══════
550
══════
2,829
══════
564,396
The stand-by letters of credit are provided by commercial banks in favour of the suppliers of gold who
have lent unfixed gold to the Group.
b) Operating lease commitments as a lessee
The Group leases various retail outlets, offices and warehouses under non-cancellable operating lease
agreements. The lease terms are between five and 10 years, and the majority of lease agreements are
renewable at the end of the lease period at market rate. The Group does not have an option to purchase the
leased outlets at the expiry of the lease periods.
Payments recognized as an expense
Future minimum lease payments:
Within one year
After one year but not more than five years
More than five years
Total operating lease expenditure contracted for
at the reporting date
2011
AED’000
2010
AED‟000
76,852
90,940
══════
══════
33,070
10,872
770
──────
33,464
21,451
2,511
──────
44,712
══════
57,426
══════
93
33
Contingencies and commitments (continued)
c) Litigations
(i) Outstanding legal cases against the Group as at 31 March 2011 include a case under arbitration
relating to its subsidiary in Italy, DIT Group SPA (formerly Stefan Hafner SPA) (“the subsidiary”)
(Note 7). In the earlier years, the Group had acquired the business of Stefan Hafner SPA from the
previous owner, Mr. Stefan Hafner for an agreed consideration. Subsequently, Mr. Stefan Hafner
commenced arbitration proceedings against the subsidiary wherein he claimed to have not been paid a
fair price for the sale of his business and claimed an additional consideration of AED 41.9 million
(Euro 7.8 million). The subsidiary had rejected this claim and filed a counter claim against Mr.
Stefan Hafner claiming an amount of AED 8.7 million (Euro 1.6 million) representing losses suffered
by the subsidiary on the non recovery of outstanding receivables taken over from Mr. Stefan Hafner
and certain expenses incurred by the subsidiary on behalf of Mr. Stefan Hafner.
The legal counsel representing the Group in this case has confirmed that arbitration judgment is
suspended after the death of Mr. Stefen Hafner. Management expects that there will not be any claim
in this litigation against the Group.
(ii) The Group received a legal notice from the joint venture partner of a jointly controlled entity on 10
May 2010, notifying the Company and one of its subsidiaries Damas Jewellery LLC, of a claim filed
before the Abu Dhabi Courts for AED 114.7 million in relation to the joint venture business that the
subsidiary had participated in Abu Dhabi, UAE.
In reference to the civil suit filed by the joint venture partner claiming compensation for an alleged
breach of the joint participation agreement that the subsidiary of the Company had signed when
establishing the venture, the Group defended its position before the courts and filed a counterclaim.
The Court of First Instance, confirmed the view of the Group as to the strength of its position, and
rejected the claim of the joint venture partner and further accepted the counterclaim filed by the
Group. Currently, the joint venture partner appealed the verdict pronounced by the Court of First
Instance. Management still firmly believes that the Court of Appeal will confirm the verdict issued by
the Court of First Instance. This is based on an independent legal confirmation that the case has no
legal ground as well as the legal analysis of the pronounced verdict.
d) Other contingencies
The Group has been made aware of an alleged claim for AED 49.6 million by a financial institution,
against a shareholder, pertaining to a personal guarantee issued by the said shareholder for securing
its banking facilities in an entity that is jointly controlled by the Group. The Board of Directors has
reviewed this matter and believes that the said guarantee was given by the shareholder in his personal
capacity.
94
34
Earnings per share (EPS)
Basic earnings per share is calculated by dividing profit for the period attributable to shareholders of the
Company by the weighted average number of ordinary shares outstanding during the year.
2011
Earnings:
Profit/(loss) for the year attributable to
shareholders of the parent from continuing operations (AED‟ 000)
Shares:
Weighted average number of shares outstanding
for calculating basic EPS (Note 27)
Earnings per share
Basic and diluted earnings/(loss) per share AED
Basic and diluted earnings/(loss) per share from
continuing operations AED
Basic and diluted earnings (loss) per share from
discontinued operations AED (Note 7)
35
50,724
──────
2010
(1,821,906)
──────
989,228,009
───────
989,228,009
───────
0.05
═══════
(1.93)
═══════
0.05
═══════
(1.84)
═══════
═══════
(0.09)
═══════
Forward gold contracts
In the ordinary course of business, the Group utilizes forward gold contracts for trading purposes only.
Forwards are contractual agreements to either buy or sell a specified currency, commodity or financial
instrument at a specified price and date in the future. Forwards are customized contracts transacted in the
over-the-counter market.
The details of the forward contracts are as follows:
Notional
amount
less than
3 months
AED’000
31 March 2011
Forward purchases
423,223
Fair value
AED’000
427,575
Revaluation
gain
AED’000
4,352
31 March 2010
Forward purchases
720,716
720,893
177
These forward contracts are measured at fair value as at 31 March 2011 which resulted in the recognition
of gain in the income statement and a corresponding asset amounting to AED 4.4 million (2010: AED
0.2 million) [Notes 21 and 22(i)].
95
36
Financial risk management
The Group‟s principal financial liabilities, other than derivatives, comprise interest bearing loans and
borrowings, trade payables and accruals, margin from trade receivable against unfixed gold, long term
loans from Abdullah Brothers and dues to related parties. The main purpose of these financial liabilities
is to raise finance for the Group‟s operations. The Group has various financial assets such as bank
balances and cash, due from related parties, trade receivables and other financial assets, and margin to
trade payables against unfixed gold, which arise directly from its operations.
The Group also enters into derivative transactions, primarily forward gold contracts and interest rate
swaps. The purpose is to hedge its gold price and interest rate risks.
Other than exposure to gold price risk mentioned in Note 22(h), the main risks arising from the Group‟s
financial instruments are interest rate risk, credit risk, liquidity risk and foreign currency risk. The Board
of Directors review and agree policies for managing each of these risks which are summarised below.
a)
Interest rate risk management
The Group‟s exposure to the risk of changes in market interest rates relates primarily to the Group‟s
borrowings with floating interest rates.
To manage this risk, the Group enters into interest rate swaps, in which the Group agrees to exchange, at
specified intervals, the difference between fixed and variable rate interest amounts calculated by reference
to an agreed upon notional principal amount.
Interest rate sensitivity analysis
The sensitivity analyses below have been determined based on the exposure to interest rates for both
derivatives and non-derivative instruments at the end of the reporting period. For floating rate assets and
liabilities, the analysis is prepared assuming the amount of asset or liability outstanding at the end of the
reporting year was outstanding for the whole year.
The following table demonstrates the sensitivity of the consolidated income statement to reasonably
possible changes in interest rates, with all other variables held constant:
Increase/
decrease
in basis
points
31 March 2011
+10
-10
Effect on (loss)
/profit on the
year
AED „000
(3,022)
3,022
31 March 2010
+10
-10
(5,631)
5,631
96
36
Financial risk management (continued)
b)
Credit risk management
The Group seeks to limit its credit risk with respect to customers by setting credit limits for individual
customers and monitoring outstanding receivables.
The Group sells its products to a large number of customers comprising the Group‟s customer base. No
single customer accounts for more than 10% of the total outstanding as at 31 March 2011 and 2010.
With respect to credit risk arising from the other financial assets of the Group, including bank balances
and cash, investments and derivative instruments with positive values, the Group‟s exposure to credit risk
arises from default of the counterparty, with a maximum exposure equal to the carrying amount of these
instruments.
c)
Liquidity risk management
The responsibility for liquidity risk management rests with the Board of Directors and the management of
the Group, which has built an appropriate liquidity risk management framework for managing the
Group‟s short, medium and long term funding and liquidity requirements. The Group manages liquidity
risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously
monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and
liabilities.
The Group‟s terms for retail sales require amounts to be paid on delivery of jewellery and for wholesale
sales within 90 to 180 days of the date of sale except on sales to consignment debtors, high net worth
individuals and sales on approval basis.
The table below summarises the maturities of the Group‟s undiscounted financial liabilities as at 31
March 2011, based on contractual payment dates.
At 31 March 2011
Interest bearing loans and
borrowings (Note 41.1)
Total
Less than
1 year
AED’000
1 to 5
years
AED’000
>5 years
AED’000
Total
AED’000
351,309
196,711
3,459
──────
551,479
══════
2,098,707
32,599
──────
2,131,306
══════
87,292
──────
87,292
══════
2,537,308
229,310
3,459
───────
2,770,077
═══════
97
36
Financial risk management (continued)
c)
Liquidity risk management (continued)
At 31 March 2010
Interest bearing loans and
borrowings (Note 41.1)
Long term loans from
the Abdullah Brothers
Total
d)
Less than
1 year
AED‟000
1 to 5
years
AED‟000
>5 years
AED‟000
Total
AED‟000
2,128,553
339,673
6,004
4,914
-
1,851
-
2,135,318
339,673
6,004
150,000
──────
2,624,230
══════
──────
4,914
══════
──────
1,851
══════
150,000
───────
2,630,995
═══════
Foreign currency risk management
The Group‟s consolidated statement of financial position can be impacted significantly by movements in
the AED to foreign currency exchange rates.
There is no other significant exchange rate risk as substantially all of financial assets and financial
liabilities are denominated in UAE Dirhams or USD to which the UAE Dirham is pegged.
The table below indicates the Group‟s foreign currency exposure at year-end, as a result of its monetary
assets and liabilities. The analysis calculates the effect of a reasonably possible movement of the AED
currency rate against the Euro and Swiss Francs (CHF), with all other variables held constant, on the
consolidated income statement.
Assets
AED’000
31 March 2011 Euro
CHF
31 March 2010
Euro
CHF
Liabilities
AED’000
16,521
1,536
29,870
Increase/decrease
Effect on
in exchange rate (loss)/profit
to AED
AED’000
+5%
-5%
826
(826)
+5%
-5%
(77)
77
+5%
-5%
1,493
(1,493)
+5%
-5%
-
98
37
Capital risk management
The Group manages its capital to ensure that entities in the Group will be able to continue as going
concerns while maximising the return to stakeholders through the optimisation of the debt and equity
balance. No changes were made in the objectives, policies or processes during the year ended 31 March
2011.
The capital structure of the Group consists of net debt (interest bearing loans offset by bank balances and
cash) and equity of the Group (comprising issued capital, accumulated losses, and reserves).
38
a)
Financial instruments
Significant accounting policies
Details of the significant accounting policies and methods adopted, including the criteria for recognition,
the basis of measurement and the basis on which income and expenses are recognised, in respect of each
class of financial asset, financial liability and equity instrument are disclosed in Note 3 to the consolidated
financial statements.
b)
Categories of financial instruments
Financial assets:
At amortized cost
Trade and other receivables
Long term loans to related parties
At fair value
2011
AED’000
2010
AED‟000
421,187
208,609
233,212
317,351
55,524
755,214
58,442
162,722
435,260
45,131
33,850
──────
1,269,733
══════
34,777
──────
1,491,546
══════
2,416,860
230,651
3,459
-
2,101,486
330,882
6,004
150,000
1,463
──────
2,652,433
══════
8,791
──────
2,597,163
══════
Financial liabilities:
At amortized cost
Trade payable and accruals
Long term loans from Abdullah Brothers
At fair value
Fair value of interest rate swaps
99
38
c)
Financial instruments (continued)
Fair values of financial instruments carried at amortised cost
The management considers that the carrying amounts of financial assets and financial liabilities measured
at amortised cost in the consolidated financial statements approximate their fair values.
d)
Fair value measurements recognised in the consolidated statement of financial position
The following table provides an analysis of financial instruments that are measured subsequent to initial
recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is
observable.
-
-
Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets
for identical assets or liabilities.
Level 2 fair value measurements are those derived from inputs other than quoted prices included
within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly
(i.e. derived from prices).
Level 3 fair value measurements are those derived from valuation techniques that include inputs for
the asset or liability that are not based on observable market data (unobservable inputs).
Assets measured at fair value
At 31 March 2011
Available-for-sale investments
Forward contracts - gold
At 31 March 2010
Available-for-sale investments
Forward contracts - gold
Liabilities measured at fair value
At 31 March 2011
Interest rate swap - not hedged
At 31 March 2010
Interest rate swap - not hedged
Level 1
AED’000
Level 2
AED’000
Level 3
AED’000
Total
AED’000
──────
══════
3,070
4,352
──────
7,422
══════
26,428
──────
26,428
══════
29,498
4,352
──────
33,850
══════
──────
══════
4,530
177
──────
4,707
══════
30,070
──────
30,070
══════
34,600
177
──────
34,777
══════
──────
══════
1,463
──────
1,463
══════
──────
══════
1,463
──────
1,463
══════
──────
══════
8,790
──────
8,790
══════
──────
══════
8,790
──────
8,790
══════
During the year ended 31 March 2011 and 2010, there were no transfers between Level 1 and Level 2 fair
value measurements.
100
38
d)
Financial instruments (continued)
Fair value measurements recognised in the consolidated statement of financial position
(continued)
Reconciliation of Level 3 fair value measurements of financial assets
Impairment allowance
2011
AED’000
2010
AED‟000
30,070
(3,642)
──────
26,428
══════
43,615
(13,545)
──────
30,070
══════
The investments classified under Level 3 category have been fair-valued based on information available
for each investment such as net asset value.
e)
Fair value sensitivity analysis
The following table shows the sensitivity of fair values to 10% increase or decrease as at 31 March 2011:
Reflected in consolidated
income statement
Favourable
Unfavourable
change
change
AED’000
AED’000
Reflected in other
comprehensive income
Favourable
Unfavourable
change
change
AED’000
AED’000
31 March 2011
measured at fair value
-
-
2,950
(2,950)
31 March 2010
measured at fair value
-
-
3,460
(3,460)
101
39
Entities included in the consolidated financial statements
Details of the Company‟s subsidiaries are as follows:
Name
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
Damas LLC
Damas Jewellery LLC
Damas Jewellery DMCC
Damas Vault DMCC*
Al Wasel DMCC*
Ocean Jewellery LLC
Al Mana Damas International LLC
Diminco Damas Diamond Manufacturing DMCC*
Ayodhya Jewellers LLC
Time art watches and optics trading LLC
Emirates Jewellery Manufacturing Company*
Arshi Jewellery LLC
Farhan Jewellery LLC
Ahlan Wa Marhaba Jewellers LLC
Gem Universe LLC
Damas Company WLL
Damas & Al Ghannam jewellery Co WLL
Tawhid & Muktasem Jewellery
Damas Jewellery SAL
Damas Dis Ticaret A.S
Demas Jewellery Pvt. Ltd.*
Soir Jewellery Pvt. Ltd. *
Islanders Demas Pvt. Ltd.
Damas Hong Kong Ltd.*
Damas (Thailand) Co. Ltd.
Universe Jewellers Limited*
Royal Jewellers Inc.*
7816 3rd Avenue LLC*
Damas Southall Limited
Damas UK Ltd.
Country of incorporation
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
Oman
Bahrain
Kuwait
Jordan
Lebanon
Turkey
India
India
Maldives
Hong Kong
Thailand
USA
USA
USA
UK
UK
*Dormant Subsidiaries
102
39
Entities included in the consolidated financial statements (continued)
39.1 Damas LLC - UAE
Damas LLC is a limited liability company incorporated in the UAE on 28 May 1978 as per commercial
registration certificate no. 41717 issued by the Department of Economic Development, Dubai.
The share capital of the Company is AED 1,421,000,000 divided into 1,421,000 shares of AED 1,000
each.
The following shareholders have contributed to the share capital of Damas LLC and share profits and
losses in the following ratios:
Damas International Limited
Damas SPV Jewellery LLC
UAE Company
UAE Company
99.999%
0.001%
1,420,999 shares
1 share
Damas SPV Jewellery LLC holds one share for the beneficial interest of Damas International Limited
39.2 Damas Jewellery LLC - UAE
Damas Jewellery LLC - Dubai is a limited liability company established and registered on 05 March 1980
as per the commercial registration certificate no. 41342 issued by the Department Of Economic
Development, Dubai, UAE.
The share capital of the Company is AED 50,000,000 divided into 50,000 shares of AED 1,000 each.
Damas SPV Jewellery LLC holds one share for the beneficial interest of Damas LLC.
The following shareholders have contributed to the share capital of Damas Jewellery LLC - Dubai and
share profits and losses in the following ratios:
Damas LLC
UAE Company
UAE Company
99.998%
0.002%
49,999 shares
1 share
39.3 Damas Jewellery DMCC - UAE
Damas Jewellery DMCC - Dubai is a limited liability company registered on 06 February 2006 as per
commercial registration certificate no. 30411 issued by Dubai Multi Commodities Centre, UAE.
The share capital of the Company is AED 3,600,000 divided into 36 shares of AED 100,000 each.
The following shareholders have contributed to the share capital of Damas Jewellery DMCC - Dubai and
Damas LLC
UAE Company
100%
36 shares
103
39
39.4 Damas Vault DMCC - UAE
Damas Vault DMCC is a limited liability company registered on 17 August 2008 as per license no. 30915
issued by Dubai Multi Commodities Centre, UAE.
The share capital of the Company is AED 1,000,000 divided into 10 shares of AED 100,000 each.
The following shareholder has contributed to the share capital of Damas Vault DMCC:
Damas LLC
UAE Company
100%
10 shares
39.5 Al Wasl DMCC - UAE
Al Wasl DMCC is a limited liability company incorporated in the Emirate of Dubai as per license no.
30729 dated 12 July 2007 issued by the Dubai Multi Commodities Centre, UAE.
The share capital of the Company is AED 200,000 divided into 200 shares of AED 1,000 each
The following shareholder has contributed to the share capital of Al Wasl DMCC:
Damas Jewellery DMCC
UAE Company
100%
200 shares
39.6 Ocean Jewellery LLC – UAE
Ocean Jewellery LLC - Dubai is a limited liability company registered on 15 June 1980 as per
commercial registration certificate no. 40500 issued by the Department Of Economic Development,
Dubai, UAE.
The share capital of the Company is AED 300,000 divided into 300 shares of AED 1,000 each. Damas
SPV Jewellery LLC holds the shares for the beneficial interest of Damas LLC.
The following shareholders have contributed to the share capital of Ocean Jewellery LLC, Dubai and
Damas Jewellery LLC
Mr. Mayur Jayantilal
Mr. Praveen Kumar Jayantilal
Mrs. Sagar Kalavati Jayantilal
UAE Company
UAE Company
Indian National
Indian National
Indian National
37%
28%
16%
12.665%
6.335%
111 shares
84 shares
48 shares
38 shares
19 shares
104
39
39.7 Al Mana Damas International LLC - UAE
Al Mana Damas International LLC – Dubai is a limited liability company registered on April 21, 2002 as
per commercial registration certificate no. 59128 issued by the Department Of Economic Development,
Dubai.
The share capital of the Company is AED 300,000 divided into 300 shares of AED 1,000 each.
Mr.Tawfique Abdullah, Mr. Tawhid Abdullah and Mr.Tamjid Abdullah hold shares for the beneficial
interest of Damas Jewellery LLC.
The following shareholders have contributed to the share capital of Al Mana Damas International LLC –
Dubai and share profits and losses in the following ratios:
Mr. Tawfique Abdullah
Mr. Tawhid Abdullah
Mr. Tamjid Abdullah
Mr. Hisham Saleh H. Al Mana
Mr. Kamal Saleh H. Al Mana
Mr. Wissam Saleh H. Al Mana
UAE National
UAE National
UAE National
Qatari National
Qatari National
Qatari National
17%
17%
17%
16.33%
16.33%
16.34%
51 shares
51 shares
51 shares
49 shares
49 shares
49 shares
39.8 Diminco Damas Diamond Manufacturing DMCC- UAE
Diminco Damas Diamond Manufacturing DMCC is a company incorporated in the Emirate of Dubai as
per license no. 30063 dated 22 May 2004.
The share capital of the Company is AED 200,000 divided into 200 equity shares of AED 1,000 each par
value.
The following shareholders have contributed to the share capital of Diminco Damas Diamond
Manufacturing DMCC and share the profits and losses in the following ratios:
Damas Jewellery LLC
Digico Holding Ltd.
UAE Company
Hong Kong Company
52.50%
47.50%
105shares
95 shares
39.9 Ayodhya Jewellers LLC - UAE
Ayodhya Jewellers LLC - Dubai is a limited liability company registered on 14January 1995 as per
commercial registration certificate no. 44170 issued by the Department Of Economic Development,
Dubai, UAE.
The following shareholders have contributed to the share capital of Ayodhya Jewellers LLC and share
profits and losses in the following ratios:
Damas Jewellery LLC
UAE Company
UAE Company
99%
1%
297 shares
3 shares
105
39
39.10 Time art watches and optics trading LLC- UAE
Time art watches and optics trading LLC, UAE is a limited liability company registered on 18 June 2007
as per commercial registration certificate no. 1011906 issued by the Department of Economic
Development, Dubai, UAE.
The following shareholders have contributed to the share capital of Time art watches and optics trading
LLC and share profits and losses in the following ratios:
Damas Jewellery LLC
UAE Company
UAE Company
99.997%
0.003%
299 shares
1 share
39.11 Emirates Jewellery Manufacturing Company LLC- UAE
Emirates Jewellery Manufacturing Company LLC is a limited Liability Company registered on 14 June
2007 as per registration no. 1011731 issued by the Department of Economic Development, Dubai, UAE.
Further the company has obtained an industrial license for a Branch in Dubai Multi Commodities Centre
under license no 30758 dated 16 September 2007.
The Share capital of the company comprises of 300 Shares of AED 1,000 each, aggregating to AED
300,000
The following shareholders have contributed to the share capital of Emirates Jewellery Manufacturing
Company LLC – Dubai and share profits and losses in the following ratios:
Emaar Industries and Investments PJSC UAE Company
Damas Jewellery LLC
UAE Company
52%
48%
156 Shares
144 Shares
Damas Jewellery LLC and Emaar have entered into a share transfer agreement for transferring Emaar‟s
shares to Damas Jewellery LLC. The other legal formalities for effecting the share transfer are imminent.
However, pending the transfer of shares, the entity is considered as wholly owned subsidiary.
39.12 Arshi Jewellery LLC - UAE
Arshi Jewellery LLC is a limited liability company registered on 26 January 2002 as per commercial
registration certificate no. 58358 issued by the Department of Economic Development, Dubai, UAE.
The Share Capital of the Company is AED 300,000 divided into 300 shares of
Damas SPV Jewellery LLC holds the shares for the beneficial interest of Damas LLC
AED 1,000 each.
The following shareholders have contributed to the share capital of Arshi Jewellery LLC and share profits
and losses in the following ratios:
Damas Jewellery LLC
Mr. Mohamed Akram Haji Ahmed
Mrs. Rakhsanah Haji Ahmed Murgant
UAE Company
UAE Company
Indian National
Indian National
48%
27%
13%
12%
144 shares
81 shares
39 shares
36 shares
.
106
39
39.13 Farhan Jewellery LLC – UAE
Farhan Jewellery LLC is a limited liability company registered on 14 March 1992 as per the commercial
registration no. 40921 issued by the Department of Economic Development, Dubai, UAE.
The Share Capital of the Company is AED 300,000 divided into 300 shares of AED 1,000each
The following shareholders have contributed to the share capital of Farhan Jewellery LLC and share
profit and losses in the following ratios:
Damas Jewellery LLC
Mrs. Shabana Naheed Miya Khan
UAE Company
Indian National
75%
25%
225 shares
75 shares
39.14 Ahlan Wa Marhaba Jewellers LLC -UAE
Ahlan Wa Marhaba Jewellers LLC is a limited liability company registered on 9 February 2004 as per
commercial registration no. 47177 issued by the Economic Development Department, Sharjah, UAE.
The Share Capital of the Company is AED 150,000 divided into 150 shares of AED 1,000 each.
The following shareholders have contributed to the share capital of Ahlan Wa Marhaba Jewellers LLC
and share profit and losses in the following ratios:
Damas Jewellery LLC
Mr. Bharat Kumar Jamnadas Sagar
Mrs. Krishna Bharat Kumar
UAE Company
Indian National
Indian National
51%
30%
19%
77 shares
45 shares
28 shares
39.15 Gem Universe LLC - Oman
Gem Universe LLC is a Limited Liability Company registered on 19 March 2002 with commercial
registration certificate no. 1/12279/7 issued by the Ministry of Trade & Industry, Muscat, Oman.
The share capital of the Company is Omani Riyals 150,000 divided into 150,000 shares of Omani Riyals 1
each.
The following shareholders have contributed to the share capital of Gem Universe LLC - Oman:
Damas Jewellery LLC
Mr. Mohd. Bin Omer Abdul Rehman
UAE Company
Oman National
70%
30%
105,000 shares
45,000 shares
Mr. Mohd. Bin Omer Abdul Rehman has represented that he holds shares for the beneficial interest of
Damas Jewellery LLC.
107
39
39.16 Damas Company WLL - Bahrain
Damas Company WLL is a limited liability company incorporated in Kingdom of Bahrain with certificate
no. 40554 dated 29 April 1998 issued by Ministry of Commerce, Kingdom of Bahrain.
The share capital of the Company is Bahraini Dinar 100,000 divided into 1,000 shares Bahraini Dinar 100
each.
The following shareholders have contributed to the share capital of the Damas Company WLL and share
Damas Jewellery LLC
UAE Company
UAE Company
99.90%
0.10%
999 shares
1 share
Damas SPV Jewellery LLC holds one share for beneficial interest of Damas Jewellery LLC through a
separate memorandum of understanding.
39.17 Damas & Al Ghannam jewellery Co WLL, Kuwait
Damas & Al Ghannam Jewellery Co WLL is a limited liability company registered on 21 July 2003 as
per commercial registration certificate no. 95245 issued by the Ministry of Commerce & Industry,
Kuwait.
The share capital of the Company is KD 250,000 divided into 100 shares of KD 2,500 each.
The following shareholders have contributed to the share capital of Damas & Al Ghannam jewellery Co
WLL and share profits and losses in the following ratios:
Damas Jewellery LLC
Kapico Group Holding Company Co.,
UAE Company
Kuwaiti Company
90%
10%
90 shares
10 shares
39.18 Tawhid & Muktasem Jewellery - Jordan
Tawhid & Muktasem Jewellery, Jordan is registered under no. 58086 on 7 January 2001 in the Hashemite
Kingdom of Jordan.
The share capital of the Company is JD 100,000. Mr. Tawhid Abdullah holds shares for the beneficial
interest of Damas Jewellery LLC through a separate memorandum of understanding.
The following shareholders have contributed to the share capital of the Tawhid & Muktasem Jewellery,
Jordan in the following ratios, however the profit sharing ratios for each shop is governed by a separate
memorandum of understanding:
Mr. Tawhid Abdullah
Mr. Al Muktasem Mohammed
Bakheet Al Shayab
UAE National
Jordanian National
50%
50%
JD 50,000
JD 50,000
108
39
39.19 Damas Jewellery SAL - Lebanon
Damas Jewellery SAL, Lebanon was registered on 5 November 2003 in Lebanon Mount commercial
register under No. 2002149 C.R. in accordance with Articles 26, 49 and 98 of the Law of Commerce of
the Ministry of Justice in the Republic of Lebanon.
The share capital of the Company has been set at Lebanese Lira (LL) 30 million divided into 300 shares
with a nominal value of LL 100,000 each. Mr. Tawhid Abdullah holds shares for the beneficial interest of
Damas Jewellery LLC through a separate memorandum of understanding.
The following shareholders have contributed to the share capital of Damas Jewellery SAL and share
Mr. Tawhid Abdullah
Mr. Joseph Hana Himo
Mr. Bashir Hana Himo
UAE national
Lebanese national
Lebanese national
96.66%
1.67%
1.67%
290 shares
5 shares
5 shares
39.20 Damas Dis Ticaret A.S-Turkey
Damas Dis Ticaret A.S. (Damas Foreign Trade Stock Company) is a stock company registered in
accordance with Turkish Commercial Code on 16 July 2007 vide certificate of incorporation no. 632885
issued by the Trade Registry Office, Istanbul.
The share capital of the Company is YTL (New Turkish Lira) 4,000,000 divided into 40,000 shares of
YTL 100 each. Mr.Tawfique Abdullah, Mr. Tamjid Abdullah and Mr. Tawhid Abdullah hold the shares
for the beneficial interest of Damas Jewellery LLC.
The following shareholders have contributed to the share capital of Damas Dis Ticaret A.S and share
Damas Jewellery LLC
Mr. Tawfique Abdullah
Mr. Tamjid Abdullah
Mr. Tawhid Abdullah
Mr. Mehmet Gokce Atuk
Mrs. Dilek Ertek
UAE Company
UAE National
UAE National
UAE National
Turkish National
Turkish national
96%
1%
1%
1%
0.5%
0.5%
38,400 shares
400 shares
400 shares
400 shares
200 shares
200 shares
109
39
39.21 Demas Jewellery Pvt. Ltd. – India
Demas Jewellery Pvt. Ltd. is a company incorporated in the State of Karnataka in India on 6 February,
2007.
The authorized capital is fixed at Indian Rupees (INR) 10,000,000. The issued capital of the Company is
INR 715,000 divided into 71,500 shares, the value of each share is INR 10 and all of them are cash
shares.
The following shareholders have contributed to the share capital of Demas Jewellery Pvt. Ltd. and share
the profits and losses in the following ratios:
Mr. Chetan Vaya
Mr. Mukund Vaya
Indian National
Indian National
93%
7%
66,500 shares
5,000 shares
Mr. Mukund Vaya and Mr. Chetan Vaya hold the above shares for beneficial interest of Damas Jewellery
LLC through separate memorandum of understanding.
39.22 Soir Jewellery Pvt. Ltd. - India
Soir Jewellery Pvt. Ltd. is a Company incorporated in the State of Maharashtra in India on 28 March
2007.
The authorized capital is fixed at INR 20,000,000. The issued capital of the Company is INR 19,947,400
divided into 1,994,740 shares, the value of each share is INR 10 and all of them are cash shares.
The following shareholders have contributed to the share capital of Soir Jewellery Pvt. Ltd. and share the
Damas LLC
Mr. Tamjid Abdullah
UAE Company
UAE National
99.99%
00.01%
1,994,640 shares
100 shares
Mr. Tamjid Abdullah holds the above shares for beneficial interest of Damas LLC as per a separate
memorandum of understanding.
39.23 Islanders Demas Pvt. Ltd. - Maldives
Islanders Demas Pvt. Ltd. is a private limited company incorporated in Republic of Maldives as per
certificate no. C-36/2002 dated 31 January 2002 issued by Ministry of Trade and Industries, Republic of
Maldives.
The share capital of the Company is Maldivian Rufiyaa 10,000 divided into 10,000 shares of Maldivian
Rufiyaa 1 each.
The following shareholders have contributed to the share capital of Islanders Demas Pvt. Ltd. - Maldives
and share profits and losses in the following ratios:
Damas Jewellery LLC
Mr. Abdul Rasheed
UAE Company
Maldivian National
75%
25%
7,500 shares
2500 shares
110
39
39.24 Damas Hong Kong Limited – Hong Kong
Damas Hong Kong Limited is a company incorporated in Hong Kong as per license no. 1034325 dated 28
March 2006. Damas Jewellery LLC holds 100% of the equity of the company.
The share capital of Damas Hong Kong Limited is Hong Kong Dollar 1,000 divided into 100 equity
shares of Hong Kong Dollar 10 each at par value.
39.25 Damas (Thailand) Co. Ltd. – Thailand
Damas (Thailand) Co. Ltd is a company incorporated in Bangkok as on 14 March 2003 as per registration
no. 50254600298.
The share capital of the Company is Thailand Baht 1,000,000 divided into 10,000 equity shares of
Thailand Baht 100 each at par value.
The following shareholders have contributed to the share capital of the Damas (Thailand) Co. Ltd Thailand and share profits and losses in the following ratios:
Nithi Takviriyanun
Damas Jewellery LLC
Panitta Saengchai
Pokepiboon Aon-Eiam
Preeyawan Luesuwanthad
Srisamorn Kooyingrat
Onruedee Mitcharoenthavorn
Thai National
UAE Company
Thai National
Thai National
Thai National
Thai National
Thai National
50.95%
49.00%
0.01%
0.01%
0.01%
0.01%
0.01%
5,095 shares
4,900 shares
1 share
1 share
1 share
1 share
1 share
The above shareholders are holding shares for the beneficial interest of Damas Jewellery LLC through a
separate Memorandum of Understanding.
39.26 Universe Jewellers Limited – USA
Universe Jewellers Ltd is a limited company incorporated in state of New York, USA as per certificate
dated 30 March 1999 issued as per the Provisions of the Business Corporation Law of the State of New
York.
The share capital of the Company is divided into 200 shares with no par value.
The following shareholders have contributed to the share capital of Universe Jewellers Ltd, New York,
USA and share profits and losses in the following ratios:
Damas Jewellery LLC
Mr. Tamjid Abdullah
UAE Company
UAE National
99%
1%
198 shares
2 shares
Mr. Tamjid Abdullah holds shares for the beneficial interest of Damas Jewellery LLC through a separate
111
39
39.27 Royal Jewellers Inc. - USA
Royal Jewellers Inc. is a limited company incorporated in State of New York, USA as per certificate
dated 30 March 1999 issued as per the Provisions of the Business Corporation Law of the State of New
York.
The share capital of the Company is divided into 200 shares with no par value.
The following shareholders have contributed to the share capital of Royal Jewellers Inc. and share profits
and losses in the following ratios:
Damas Jewellery LLC
Mr. Tamjid Abdullah
UAE Company
UAE National
99%
1%
198 shares
2 shares
Mr. Tamjid Abdullah holds shares for the beneficial interest of Damas Jewellery LLC through a separate
39.28 7816 3rd Avenue LLC – USA
7816 3rd Avenue LLC is a limited liability company incorporated in State of New York, USA as per
certificate dated 9 June 2005 issued as per the Provisions of the Limited Liability Company Law of the
State of New York.
The share capital of the Company is divided into 100 units with no par value.
The following shareholders have contributed to the share capital of 7816 3 rd Avenue LLC and share
Damas Jewellery LLC
Royal Jewellers Inc
UAE Company
USA Company
99%
1%
99 units
1 unit
39.29 Damas Southall Limited - UK
Damas Southall Limited is a private limited company incorporated under the Companies Act 1985 on 14
August 2007 vide certificate of incorporation no. 5905292 issued by the Registrar of companies for
England and Wales.
The share capital of Damas Southall Limited UK is GBP100 divided into 100 shares of GBP 1 each.
The following shareholders have contributed to the share capital of Damas Southall Limited and share
Damas Jewellery LLC
Mr. Tawhid Abdullah
UAE Company
UAE National
99%
1%
99 shares
1 share
Mr. Tawhid Abdullah holds one share for the beneficial interest of Damas Jewellery LLC.
112
39.29 Damas UK Ltd. - UK
Damas UK Limited is a private limited company incorporated under the Companies Act 1985 on 21 June 2006
vide certificate of incorporation no. 5852897 issued by the Registrar of companies for England and Wales.
The following shareholders have contributed to the share capital of Damas UK Limited and share profits and
losses in the following ratios:
Damas Jewellery LLC
Mr. Tawhid Abdullah
UAE Company
UAE National
99%
1%
99 shares
1 share
The share capital of Damas UK Limited is GBP100/- divided into 100 shares of GBP 1/- each. Mr. Tawhid
Abdullah holds one share for the beneficial interest of Damas Jewellery LLC.
40
Investments in equity accounted entities
40.1 Investments in jointly controlled entities
The Group holds investments in the following jointly controlled entities as at 31 March 2011:
Country of
Ownership
Name
incorporation
interest
Premium Investments International LLC (Note a below)
Paspaley Pearl Jewellery LLC (Notes c, d and e below)
Time Center LLC (Note a below)
Roberto Coin Middle East LLC (Notes c, d and e below)
Deepu Jewellery DMCC (Note a and d below)
Al Zain Trading Co WLL (Note b below)
Damas Saudi Arabia Company Ltd. (Notes a and d below)
D‟Damas Jewellery (India) Private Ltd. (Note a and d below)
Flamingo Jewellery India Pvt Ltd (Note a and d below)
a)
b)
c)
d)
e)
UAE
UAE
UAE
UAE
UAE
Bahrain
KSA
India
India
50%
51%
50%
51%
51%
50%
49%
49%
51%
The shares are held in the name of Damas Jewellery LLC.
The shares are held in the name of Damas LLC.
The shares are held in the name of Damas SPV Jewellery LLC for the beneficial interest of the
Group.
The investment is considered to be an investment in jointly controlled entity since the Company has
joint control over the financial and operating policies of these companies.
Damas share in profit is 50%
113
40.2
Investments in associates
The Group holds investments in the following associates as at 31 March 2011:
Name
Daiso (Japan) Value Stores LLC (Note d & e below)
DPG Diamonds DMCC (Note a below)*
Daiso Trading (Note (f) below)
Al Baraka Jewellery WLL (Note a below)
Al Mana Jewellery Co. - Damas WLL
LTC International Qatar LLC (Notes d & f below)
LTC International General Trading Co. (Note f below)
Metamorph Real Estate WLL (note a below)
Damas Mucevherat (Notes a, b, c, d & f below)
Islanders Maldives Pvt Ltd (Notes d below)
Tanya Collections Ltd (Note f below)
Country of
incorporation
Ownership
interest
UAE
UAE
Bahrain
Bahrain
Qatar
Qatar
Kuwait
Kuwait
Turkey
Maldives
Hongkong
Thailand
51%
33.33%
35%
33.33%
49%
50%
35%
30%
51%
50%
27%
49%
*Dormant entities.
a)
b)
c)
d)
e)
f)
Mr. Tawhid Abdullah holds shares in these entities for the beneficial interest of Damas Jewellery
LLC.
Mr. Tamjid Abdullah holds shares in these entities for the beneficial interest of Damas Jewellery
LLC.
Mr. Tawfique Abdullah holds shares in these entities for the beneficial interest of Damas Jewellery
LLC.
The investment is considered to be an investment in associate since the Company does not have
control over the financial and operating policies of these Companies.
Group‟s share in profit is 50%.
The shares are held in the name of Damas Jewellery LLC.
114
41
Subsequent events
41.1 Restructuring of bank borrowings
The Group has completed restructuring of the entire bank borrowings of Damas LLC amounting to AED
3,015 million on 11 May 2011.
Negotiations were held between the Group and the banks from October 2009, which concluded with the
signing of the new Facility Agreement (“FA”) and upon completion of the conditions precedent as laid
down in the FA.
Under the financial restructuring, the total bank borrowings have been segregated into three tranches with
tranche 1, amounting to AED 1,093 million repayable over a period of 6 years by way of quarterly
scheduled installments amounting to AED 45.75 million each. The balance of the debt amounting to AED
1,922 million is segregated into tranche 2 debt amounting to AED 1,447 million and tranche 3 debt
amounting to AED 475 million. Tranche 2 and Tranche 3 are revolving in nature with the interest rates to
be reviewed at the end of three years. Under the FA, the entire bank debt currently bears the pricing of the
applicable interbank borrowing (Libor/Eibor) rates and a margin of 350 basis points, with the exception of
tranche 3, which carries a discounted rate of the applicable interbank borrowing rate plus a margin of
262.50 basis points. However, the Group has to service additional interest on tranche 3 until the
repayment of tranche 1, which will provide the lenders an internal rate of return of 10% (“Enhanced
Return”) on the debt outstanding under tranche 3. Subsequent to the full repayment of tranche 1, the
discounted rate and enhanced rate of return applicable to tranche 3 facility will cease and accordingly the
cost of borrowings will be in line with the rates applicable to tranche 2.
Under the financial restructuring, the repayment of tranche 1 borrowings amounting to AED 1,093
million is to be made from the operating cash flows of the Group. This repayment will be accelerated by
application of mandatory pre-payments to be made by the Group, from the funds received from sources
other than the normal operations, like the sale of assets, exit from investments and distributions received
from the Abdulla Brothers under the cascade agreement. These mandatory pre-payments will lower the
repayment period for tranche 1 and also reduce period for payment of Enhanced Return under tranche 3.
Under the financial restructuring, the entire bank debt has been secured by providing a commercial
mortgage over the real estate; guarantees provided by the Group and some of its associate companies, as
well as by the individual guarantees of the Abdulla Brothers; and assignment of rights under the insurance
policies held by the Group in favour of the banks.
Under the financial restructuring, the Group has undertaken to adhere to the following covenants at all
times namely:

hold physical gold inventory equal to or greater than the outstanding gold loans;

maintain positive net worth; and

pass a cash cover test to be carried out half yearly starting from 30 September 2011.
Under the financial restructuring, the Group will have the ability to declare dividend to its shareholders
after the repayment of Tranche 1 debt.
115
41
Subsequent events (continued)
41.2 Cascade Agreement
As a condition precedent to the completion of the financial restructuring, a Cascade Agreement
(“Cascade”) was signed on 1 May 2011 between the Abdullah Brothers (the "Abdullah Brothers"), the
Group and the other bank creditors to the Abdulla Brothers. Cascade is a mechanism established to allow
the Group and other bank creditors to recover amounts owed by the Abdullah Brothers to their creditors
and provide a legal framework for an orderly liquidation from the sale of assets of the Abdullah Brothers
during a three year period beginning from 1 May 2011. The Cascade is based on agreement between all
creditors of the Abdulla Brothers to enhance potential recovery of outstanding balance owed by them. The
Group signed the Cascade after obtaining advice from independent legal and financial advisors.
Under the Cascade, the Abdulla Brothers have agreed to repay AED 614 million to the Group.
41.3 Acquisition of additional stake in Damas Saudi Arabia Company Ltd
Subsequent to the year end, the Group acquired additional stake of 49% in Damas Saudi Arabia Company
Ltd, a jointly controlled entity, on 5 April 2011 owing to which the shareholding of the Group in Damas
Saudi Arabia Company increased to 98% which resulted in Damas Saudi Arabia Company Ltd becoming
a subsidiary of the Group. The total consideration for the acquisition amounted to SAR 100 million
settled by cash and transfer of properties.
41.4 Acquisition of additional stake in Damas & Al Ghannam jewellery Co WLL, Kuwait
Subsequent to the year end, the Group acquired additional stake of 10% in Damas & Al Ghannam
jewellery Co WLL, Kuwait (“the Company”) effective 1 June 2011, upon which the Company became a
wholly owned subsidiary. The total consideration for the acquisition amounts to KD 275,000 payable in 5
equal monthly installments from the 15 May 2011.
116

Damas International Limited and its Subsidiaries Dubai

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