EGM Circular Acquisition of Jebel Ali Free Zone

Transcription

THIS DOCUMENT AND THE ACCOMPANYING DOCUMENTS ARE IMPORTANT AND REQUIRE YOUR
IMMEDIATE ATTENTION. If you are in any doubt as to the contents of this document, or as to the action you should
take, you are recommended to seek your own independent financial advice immediately from your stockbroker, bank,
solicitor, accountant, fund manager or other appropriate independent financial adviser authorised under the Financial
Services and Markets Act 2000, as amended, (“FSMA”) if you are resident in the United Kingdom or, if not, from
another appropriately authorised independent professional adviser in the relevant jurisdiction.
If you sell, have sold or otherwise transferred all of your Shares you should send this document, together with the
accompanying Voting Instruction Form, Personal Attendance Request Form and Form of Direction, as soon as possible to the
purchaser or transferee or to the stockbroker, bank or other agent through whom the sale or transfer was effected for delivery
to the purchaser or the transferee. However, the distribution of this document and/or the Voting Instruction Form, Personal
Attendance Request Form and Form of Direction into certain jurisdictions other than the United Kingdom may be restricted
by law. Therefore, persons into whose possession this document and any accompanying documents come should inform
themselves about, and observe, any such restrictions. Any failure to comply with these restrictions may constitute a violation
of the securities laws of any such jurisdiction. If you have sold only part of your holding of Shares you should retain these
documents.
DP WORLD LIMITED
(a company limited by shares incorporated in the Dubai International Financial Centre with registered number 0226)
PROPOSED ACQUISITION OF ECONOMIC ZONES WORLD FZE
PROPOSED CANCELLATION OF THE LISTING OF THE
COMPANY’S SHARES ON THE OFFICIAL LIST OF THE UK FINANCIAL
CONDUCT AUTHORITY AND CESSATION OF TRADING OF SUCH SHARES
ON THE MAIN MARKET OF THE LONDON STOCK EXCHANGE
INDEPENDENT NON-EXECUTIVE DIRECTOR APPOINTMENT
AND
NOTICE OF EXTRAORDINARY GENERAL MEETING
Your attention is drawn to the letter from the Chairman of DP World Limited (the “Company” or “DP World”) which
is set out on pages 3 to 20 of this document and which contains the recommendation of the Board that you vote in favour
of the Resolutions to be proposed at the Extraordinary General Meeting referred to below. Please read the whole of this
document and, in particular, the risk factors set out in Part II (Risk Factors) of this document.
Notice of an Extraordinary General Meeting of the Company to be held at The Wheelhouse, Jebel Ali Port, Jebel Ali,
Dubai at 11.00 a.m. (Dubai Time)/7.00 a.m. (GMT) on Thursday 18 December 2014 is set out at the end of this
document. A Voting Instruction Form, a Personal Attendance Request Form and a Form of Direction for use in
connection with the Extraordinary General Meeting are enclosed with this document.
This document is a circular relating to (i) the proposed acquisition (the “Acquisition”) by DP World FZE, a wholly owned
subsidiary of the Company, of Economic Zones World FZE (“EZW”) from Port and Free Zone World FZE (“PFZW”), (ii) the
proposed cancellation of the listing of the Shares on the premium listing segment of the Official List of the UK Financial
Conduct Authority (the “FCA”) and cessation of trading of such shares on the Main Market of the London Stock Exchange
(together, the “Delisting”) and (iii) confirmation of the appointment of an independent non-executive Director of the Company,
which has been prepared in accordance with the listing rules made by the FCA under section 73A of FSMA (the “Listing
Rules”). This document has been approved by the FCA. Following the Delisting, the Shares will continue to be listed on the
official list of securities maintained by the DFSA and to be traded on NASDAQ Dubai. The Dubai Financial Services Authority
has not reviewed or approved this document and has no responsibility for it.
Citigroup Global Markets Limited, which is authorised by the Prudential Regulation Authority and regulated by the Prudential
Regulation Authority and the Financial Conduct Authority in the United Kingdom, is acting exclusively for the Company and
is not acting for anyone else in connection with the Acquisition and will not be responsible to anyone other than the Company
for providing the protections afforded to clients of Citigroup nor for giving advice in relation to the Acquisition or any matter
or arrangement referred to in this document. Apart from the responsibilities and liabilities, if any, which may be imposed on
Citigroup by FSMA or the regulatory regimes established thereunder, Citigroup assumes no responsibility whatsoever and
makes no representations or warranties, express or implied, in relation to the contents of this document, including its accuracy,
completeness or verification or for any other statement made or purported to be made by the Company, or on the Company’s
behalf, or by Citigroup or on Citigroup’s behalf and nothing contained in this document is, or shall be, relied on as a promise
or representation in this respect, whether as to the past or the future, in connection with the Company or the Acquisition.
Citigroup accordingly disclaims to the fullest extent permitted by law all and any responsibility and liability whether arising
in tort, contract or otherwise which it might otherwise be found to have in respect of this document or any such statement.
Deutsche Bank AG, is authorised under German Banking Law (competent authority: BaFIN Federal Financial Supervisory
Authority). Deutsche Bank AG, London Branch is further authorised by the Prudential Regulation Authority and is subject to
limited regulation by the Financial Conduct Authority and the Prudential Regulation Authority. Details about the extent of its
authorisation and regulation by the Prudential Regulation Authority and regulation by the Financial Conduct Authority are
available on request. Deutsche Bank is acting exclusively for the Company and is not acting for anyone else in connection with
the Acquisition and will not be responsible to anyone other than the Company for providing the protections afforded to clients
of Deutsche Bank nor for giving advice in relation to the Acquisition or any matter or arrangement referred to in this document.
Apart from the responsibilities and liabilities, if any, which may be imposed on Deutsche Bank by FSMA or the regulatory
regimes established thereunder, Deutsche Bank assumes no responsibility whatsoever and makes no representations or
warranties, express or implied, in relation to the contents of this document, including its accuracy, completeness or verification
or for any other statement made or purported to be made by the Company, or on the Company’s behalf, or by Deutsche Bank
or on Deutsche Bank’s behalf and nothing contained in this document is, or shall be, relied on as a promise or representation
in this respect, whether as to the past or the future, in connection with the Company or the Acquisition. Deutsche Bank
accordingly disclaims to the fullest extent permitted by law all and any responsibility and liability whether arising in tort,
contract or otherwise which it might otherwise be found to have in respect of this document or any such statement.
Moelis & Company is authorised and regulated by the Dubai Financial Services Authority and is a branch of Moelis &
Company UK LLP, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority. Moelis &
Company has been appointed by the Company as financial advisor in connection with the Acquisition, and is acting exclusively
for the Company and for no one else in connection with the Acquisition. Moelis & Company will not be responsible to anyone
other than the Company for providing the protections afforded to clients of Moelis & Company nor for providing advice in
relation to the Acquisition or any other matter referred to herein. Apart from the responsibilities and liabilities, if any, which
may be imposed on Moelis & Company by FSMA or the regulatory regimes established thereunder, Moelis & Company
assumes no responsibility whatsoever and makes no representations or warranties, express or implied, in relation to the
contents of this document, including its accuracy, completeness or verification or for any other statement made or purported
to be made by the Company, or on the Company’s behalf, or by Moelis & Company or on Moelis & Company’s behalf and
nothing contained in this document is, or shall be, relied on as a promise or representation in this respect, whether as to the
past or the future, in connection with the Company or the Acquisition. Moelis & Company accordingly disclaims to the fullest
extent permitted by law all and any responsibility and liability whether arising in tort, contract or otherwise which it might
otherwise be found to have in respect of this document or any such statement.
The contents of this document are not to be construed as legal, business or tax advice. Each Shareholder should consult their
own legal adviser, financial adviser or tax adviser for legal, financial or tax advice.
The Company and the Directors whose names appear on page 29 accept responsibility for the information contained in this
document. To the best of the knowledge and belief of the Company and the Directors (who have taken all reasonable care to
ensure that such is the case), the information contained in this document is in accordance with the facts and does not omit
anything likely to affect the import of such information.
Capitalised and certain technical terms contained in this document have the meanings set out in Part X (Definitions) of this
document.
Dated: 13 November 2014
ii
CAUTIONARY NOTE REGARDING FORWARD-LOOKING
STATEMENTS
This document (including the information incorporated by reference into this document) includes forwardlooking statements, including, without limitation, statements containing the words “believe”, “anticipate”,
“expect”, “intend”, “aim”, “plan”, “predict”, “continue”, “assume”, “positioned”, “may”, “will”, “should”,
“shall”, “risk” and other similar expressions that are predictions of or indicate future events and future trends
or identify forward-looking statements. These forward-looking statements include all matters that are not
current or historical facts. In particular, the statements regarding the DP World Group’s and the EZW
Group’s strategy, future financial position and other future events or prospects are forward-looking
statements.
Shareholders should not place undue reliance on forward-looking statements because they involve known
and unknown risks, uncertainties and other factors that are in many cases beyond the control of the DP World
Group or the EZW Group. By their nature, forward-looking statements involve risks and uncertainties
because such statements relate to events and depend on circumstances that may or may not occur in the
future. Forward-looking statements are not indicative of future performance and the actual results of
operations and financial condition of the DP World Group or the EZW Group, and the development of the
industry in which the DP World Group or the EZW Group operates, may differ materially from those made
in or suggested by the forward-looking statements contained in this document. Important risk factors which
may cause actual results to differ include, but are not limited to, those described in Part II (Risk Factors) of
this document. The cautionary statements set out above should be considered in connection with any
subsequent written or oral forward-looking statements that the Company or EZW, or persons acting on their
behalf, may issue.
These forward-looking statements reflect the Company’s and EZW’s judgement at the date of this document
and are not intended to provide any representations, assurances or guarantees as to future events or results.
To the extent required by the Listing Rules, the Prospectus Rules, the Disclosure Rules and Transparency
Rules and other applicable regulation, the Company will update or revise the information in this document.
Otherwise, the Company undertakes no obligation to update or revise any forward-looking statements or
other information, and will not publicly release any revisions it may make to any forward-looking statements
or other information that may result from events or circumstances arising after the date of this document.
Shareholders should note that forward-looking statements contained in this document do not in any way seek
to qualify the working capital statement contained in paragraph 11 of Part IX (Additional Information) of
this document.
No statement in this document is intended to constitute a profit forecast or profit estimate for any period, nor
should any statement be interpreted to mean that earnings or earnings per share will necessarily be greater
or lesser than those for the relevant preceding financial periods for either the Company or EZW as
appropriate.
iii
iv
CONTENTS
Page
EXPECTED TIMETABLE OF PRINCIPAL EVENTS
2
PART I
LETTER FROM THE CHAIRMAN OF DP WORLD LIMITED
3
PART II
RISK FACTORS
21
PART III
DIRECTORS, COMPANY SECRETARY, REGISTERED OFFICE AND
ADVISERS AND PRESENTATION OF INFORMATION
29
PART IV
PRINCIPAL TERMS OF THE ACQUISITION
34
PART V
HISTORICAL FINANCIAL INFORMATION ON THE EZW GROUP
37
PART VI
UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE
ENLARGED GROUP
98
PART VII
PROPERTY VALUATION REPORT
105
PART VIII
OVERVIEW OF THE NASDAQ DUBAI REGULATORY REGIME
113
PART IX
ADDITIONAL INFORMATION
116
PART X
DEFINITIONS
136
1
144
EXPECTED TIMETABLE OF PRINCIPAL EVENTS
The dates and times given in the table below are indicative only and are based on the Company’s current
expectations and may be subject to change.
If any of the times and/or dates above change, the revised times and/or dates will be notified by the Company
to Shareholders through a Regulatory Information Service.
References below to a time of day are to London time.
Event
Time and/or Date
Latest time and date for receipt of Voting Instruction Forms
Forms of Direction, CREST Voting Instructions or electronic
votes for use at the Extraordinary General Meeting
10.00 p.m. (Dubai Time)/6.00 p.m. (GMT)
on 11 December 2014
Extraordinary General Meeting
11.00 a.m. (Dubai Time)/7.00 a.m. (GMT)
on 18 December 2014
Expected date on which Delisting will become effective
Expected date of Completion
21 January 2015
Q2 2015
2
PART I
LETTER FROM THE CHAIRMAN OF DP WORLD LIMITED
DP WORLD LIMITED
Directors:
Registered Office:
Sultan Ahmed Bin Sulayem (Chairman)
Jamal Majid Bin Thaniah (Vice Chairman)
Mohammed Sharaf (Group Chief Executive Officer)
Sir John Parker (Senior Independent Non-Executive
Director and Vice Chairman)
Yuvraj Narayan (Group Chief Financial Officer)
Robert Woods (Independent Non-Executive Director)
Deepak Parekh (Independent Non-Executive Director)
Mark Russell (Independent Non-Executive Director)
Level 5
LOB17
Jebel Ali Free Zone
PO Box 17000
Dubai
United Arab Emirates
DIFC Office:
Office 27, Level 3 GV4
Dubai International
Financial Centre
Gate Village
PO Box 17000
Dubai
13 November 2014
Dear Shareholder,
On 13 November 2014, the Company announced that it and its wholly owned subsidiary, DP World FZE, had
entered into an agreement in relation to the proposed acquisition of EZW, its subsidiaries and subsidiary
undertakings (the “EZW Group”) from PFZW for cash consideration of US$2,600,000,000 (subject to
certain adjustments described in paragraph A.7 below) (the “Acquisition”). Headquartered in Dubai, United
Arab Emirates, EZW Group’s primary business unit is the Jebel Ali Free Zone FZE (“JAFZ”), the leading
industrial logistics park in the Cooperation Council for the Arab States of the Gulf (formerly the Gulf
Cooperation Council) (“GCC”) that is strategically located in the free zone (the “Free Zone”) adjacent to
the Company’s flagship Jebel Ali port in Dubai (“Jebel Ali”).
The proposed transaction represents a unique opportunity, arising from Dubai World’s (as defined below)
ongoing strategic review, for the Company to acquire a strategically important asset. The Acquisition has a
strong strategic rationale, and will create the leading integrated port and free zone in the Middle East region.
The Acquisition will allow DP World, its subsidiaries and subsidiary undertakings (the “DP World Group”)
to enhance its port and logistics offering to its customers in Dubai by strengthening the integration between
Jebel Ali and JAFZ and optimising investment levels in both locations. The Acquisition will also protect the
Jebel Ali port against the risk of potential third-party ownership of JAFZ, as well as continue its track record
of investment in Dubai, as a regional hub, to strengthen the Company’s leadership in the high-growth Middle
East region.
Owing to its size, the Acquisition constitutes a Class 1 transaction for the purposes of the Listing Rules and
therefore requires the approval of Shareholders. PFZW, which is ultimately owned by Dubai World
Corporation (a decree company created and 100 per cent. owned by the Government of Dubai) (“Dubai
World”), is a related party of the Company as Dubai World is currently entitled to exercise or control the
exercise of 80.45 per cent. of the votes able to be cast on all or substantially all matters at general meetings of
the Company. The Acquisition therefore constitutes a related party transaction for the purposes of Chapter 11
of the Listing Rules and, as such, requires the approval of Independent Shareholders. In this document (and in
accordance with the Listing Rules), the term “Independent Shareholders” means, for the purposes of the
Acquisition Resolution (as defined in paragraph A.7 below), any Shareholders other than PFZW and its
associates and, for the purposes of the Delisting Resolution (as defined in paragraph B.3 below), any
Shareholders other than PFZW and any persons acting in concert with it. The Acquisition is also a related party
transaction for the purposes of the DFSA Markets Rules, which also requires Shareholder approval.
3
Separately, as trading liquidity in the Shares has now almost entirely migrated to NASDAQ Dubai, the
Company is also taking the opportunity to seek approval from Shareholders to cancel the listing of the
Shares from the premium segment of the Official List of the FCA (the “London Listing”) and remove
the Shares from trading on the London Stock Exchange (together, the “Delisting”). Following the Delisting,
the Shares will continue to be listed on the official list of securities maintained by the Dubai Financial
Services Authority (the “DFSA”) and traded on NASDAQ Dubai.
The Board is committed to maintaining a high standard of corporate governance in line with DFSA best
practice and has approved the appointment of Mark Russell as an independent non-executive Director of the
Company with effect from 11 August 2014 (the “Director Appointment”) replacing David Williams, who
retired as a director.
I am writing to give you further details of the Acquisition, the Delisting and the Director Appointment,
including the background to and reasons for them, to explain why the Board considers these to be in the best
interests of the Company and to seek your approval for each individual matter at an extraordinary general
meeting of Shareholders.
The Extraordinary General Meeting will be convened at 11.00 a.m. (Dubai Time)/7.00 a.m. (GMT) on
Thursday 18 December 2014 at The World Wheelhouse, Jebel Ali Port, Jebel Ali, Dubai. The notice
convening the Extraordinary General Meeting of the Company is set out at the end of this document and an
explanation of the Resolutions to be proposed at the Extraordinary General Meeting is set out in
paragraph D.1 below.
A. PROPOSED ACQUISITION OF EZW GROUP
1.
Introduction
On 13 November 2014, the Company announced that it and its wholly owned subsidiary, DP World FZE,
had entered into an agreement in relation to the proposed acquisition of the EZW Group from PFZW for cash
consideration of US$2,600,000,000 (subject to certain adjustments described in paragraph A.7 below).
The EZW Group’s primary business unit is JAFZ, a 57 square kilometre modern commercial and industrial
logistics park located adjacent to Jebel Ali. JAFZ accounted for 97 per cent. of the EZW Group’s revenue
and operating profit for the year ended 31 December 2013 and is an integral component of DP World Jebel
Ali’s port-centric integrated logistics offering.
2.
Background to and reasons for the Acquisition
The Acquisition provides significant strategic, operational and financial benefits to the DP World Group,
including:
•
A unique opportunity to preserve control of and optimise investment levels at JAFZ –
a strategically located asset integral to Jebel Ali’s continued success as the leading gateway port
in the Middle East region
•
Enhancing our competitive advantage by delivering a best-in-class customer experience
through strengthening our integrated product offering – consistent with our strategy of
providing port-centric integrated logistics solutions at key gateway locations
•
Stable recurring revenues, healthy margins and strong cash generation delivered by the EZW
Group’s attractive business model
•
Significant growth opportunities from the EZW Group from increasing occupancy, increasing
lease rates and developing new investment properties – underpinned by the continued growth
of Dubai as a trading and logistics hub
•
Attractive financial returns for DP World shareholders – the Acquisition is expected to be more
than 15 per cent. earnings enhancing, to generate greater than a 7 per cent. return on capital
employed in the first full financial year following Completion and to increase the Englarged
Group Adjusted EBITDA margin to close to 50 per cent. on a pro forma basis1
1
No statement in this document should be interpreted as a profit forecast nor to mean that the earnings of the Enlarged Group in
a given period will necessarily be equal to, or greater than, the relevant preceding period.
4
•
Retaining flexibility for growth – the Enlarged Group will have a pro forma leverage ratio of
3.3x Net Debt to Adjusted EBITDA. The Enlarged Group is expected to remain highly cash
generative with no impact to its existing dividend policy, whilst also expecting to generate
significant surplus cash for investment into growth and debt repayment
These benefits are supported by favourable domestic and regional macroeconomic trends. On a regional
level, the GCC has experienced real GDP growth in excess of 4 per cent. per annum since 2010, a trend
expected to continue in 2014 and 2015. On a domestic level, the UAE’s non-oil GDP is expected to grow,
on a nominal basis, from US$270 billion in 2014 to US$542 billion in 2020, representing a compounded
annualised growth rate (“CAGR”) of 12 per cent. Non-oil foreign trade in Dubai has almost doubled from
2007 to 20132. As Dubai consolidates and expands its role as the regional hub for retail and wholesale trade,
Jebel Ali is achieving record volumes, handling 13.6 million TEU in 2013 and 11.4 million TEU during the
first nine months of 2014. Jebel Ali is expected to further benefit from Dubai’s successful bid for the World
Expo 2020 through increased volumes of construction materials and other goods.
A unique opportunity to preserve control of and optimise investment levels at JAFZ – a strategically
located asset integral to Jebel Ali’s continued success as the leading gateway port in the Middle East
region
As a consequence of Dubai World’s ongoing recapitalisation and strategic review of key assets, which could
have resulted in potential third-party ownership of the EZW Group, an opportunity arose for the DP World
Group to acquire the EZW Group. The Acquisition benefits the DP World Group by preserving common
control of an integrated operation and its future expansion, thereby helping to ensure the continued success
of its flagship port terminal.
JAFZ is strategically located adjacent to Jebel Ali and is an integral component of the supply chain of Jebel
Ali’s customers. It is the leading industrial free zone in the GCC in terms of leased and leasable area, with
a breadth of product offering and length of experience that is unmatched by competition in the region. As
part of the Dubai Logistics Corridor, the Free Zone is located within the same customs-bonded complex
(governed by a customs regime with a single customs entry point for the transportation of cargo from one
transport system to another) between a major port and major airport, enabling streamlined and efficient
movement of cargo. JAFZ is also located in close proximity to the site hosting the World Expo in 2020. JAFZ
benefits from long-term Concession and Usufruct Agreements through to 2106, which provide it with the
exclusive right and privilege to provide services within the Concession Area and to use and benefit from the
Usufruct Property.
The satellite image below illustrates the area comprising JAFZ and its juxtaposition to Jebel Ali, Sheikh
Zayed Road (the main road running through Dubai) and the Al Maktoum International Airport.
2
GDP and trade figures have been sourced from reports prepared by Abu Dhabi Commercial Bank, the International Monetary
Fund Economist Intelligence Unit and Dubai Statistics Centre.
5
Jebel Ali and JAFZ have effectively operated as an integrated business, since their creation, as the common
controlling shareholder of the DP World Group and the EZW Group promoted strategic alignment and
cooperation between Jebel Ali and the Free Zone.
Jebel Ali is experiencing high utilisations in excess of 90 per cent. The DP World Group plans to expand
Jebel Ali’s capacity from 17 million TEU as of October 2014 to 19 million TEU by the end of 2015, with
further expansion plans being demand dependent. The next phase of expansion will be via island terminals
and Jebel Ali could more than double its existing capacity over the long-term. Over the last 30 years, the
growth in the number of Free Zone customers and throughput at Jebel Ali has been largely correlated, as
illustrated below3. Continued coordinated development of new investment properties and infrastructure in the
Free Zone is essential to support the planned growth in Jebel Ali’s capacity. In addition, one of the current
key drivers to deliver on targeted levels of productivity metrics is to develop Free Zone infrastructure to fulfil
the requirements of Jebel Ali and increase the overall efficiency of Jebel Ali for customers. Common
ownership of Jebel Ali and the EZW Group will enable this significant investment to be optimised.
8,000
12,000
7,000
6,000
TEUs (000s)
10,000
5,000
8,000
4,000
6,000
3,000
4,000
2,000
2,000
No. of Free Zone Customers
14,000
1,000
-
1980
1983
1986
1989
1992
1995
1998
TEUs Handled
2001
2004
2007
2010
2013
No. of Free Zone Customers
Enhancing our competitive advantage by delivering a best-in-class customer experience through
strengthening our integrated product offering – consistent with our strategy of providing port-centric
integrated logistics solutions at key gateway locations
The DP World Group is one of the largest container terminal operators in the world by capacity and
throughput as well as one of the most geographically diversified. The DP World Group is a global marine
terminals operator with a portfolio of more than 65 terminals across six continents4, including new
developments underway in India, Africa, Europe and the Middle East. One of the cornerstones of the DP
World Group’s operating strategy has been to provide its global customers with value enhancing port and
logistics solutions. The DP World Group believes its ability to offer an “integrated port management” model,
which combines container handling facilities with economic free zones and infrastructure developments, is
a key differentiating factor relative to competition.
Jebel Ali, located in the UAE, is the largest container terminal in the Middle East, and the ninth largest in
the world by throughput, with current capacity of 17 million TEU. It is the DP World Group’s flagship
facility and a significant contributor to the DP World Group’s financial performance. For the year ended
31 December 2013, Jebel Ali generated throughput of 13.6 million TEU which represents 25 per cent. of the
gross throughput handled by the DP World Group across all its facilities. With the addition of 2 million TEU
by the end of 2015, Jebel Ali will boast the largest semi-automated container terminal in the world and will
have a total port capacity of 19 million TEU.
Jebel Ali is universally marketed by the DP World Group as the model for port-centric integrated logistics
solutions by bringing together traditional port operations with free zones, intermodal, logistic facilities,
customs and other services to enhance supply chain efficiencies for customers. The DP World Group’s
London Gateway development in the United Kingdom is modelled on Jebel Ali. The efficiencies promoted
by Jebel Ali’s integrated logistics offering include 2 to 3 days road transit to anywhere in the GCC, the
3
TEUs handled prior to 2007 include activity at Jebel Ali and Port Rashid. Port Rashid's activities were wound down in 2007.
4
As of August 2014.
6
shortest transit time in the world for air cargo, and the ability to transport cargo to airport within 45 minutes
of discharge from Jebel Ali.
Given the high utilisation of both Jebel Ali and the Free Zone, we believe greater focus should now be made
on targeting customers who will deliver the highest yield across both operations. An acquisition of the EZW
Group would allow the Enlarged Group to manage its resources effectively to enhance returns on the
combined asset base.
Offering integrated solutions creates an optimised customer experience which drives revenue generation,
improved efficiencies and management of costs. Dubai’s aviation sector represents a prime example of the
Emirate’s approach of integrating inter-dependent entities to achieve rapid growth and retain market
leadership. The alignment of DP World Group’s interests with its customers and the provision of a solution
to optimise their supply chain productivity provide a competitive advantage for the DP World Group, which
would enable retention of Jebel Ali’s customer base and help protect its leadership position in the region in
face of upcoming competition. Integrated port projects in Abu Dhabi, Qatar and Oman, which are
collectively expected to add over 25 million TEU of capacity in the future, pose long-term competitive
threats to Jebel Ali. The Acquisition achieves integration along the value chain to retain and grow market
share in an evolving competitive landscape, driven by our global customers’ increasing efficiency
requirements.
Stable recurring revenues, healthy margins and strong cash generation delivered by the EZW Group’s
attractive business model
97 per cent. of the EZW Group’s revenue for the year ended 31 December 2013 was generated from (i) lease
rental income (primarily from land5, warehouses, offices and onsite residential accommodation) and
(ii) administrative, registration and licensing services (which are closely linked to leasing activity within the
Free Zone). Leasing and leasing-linked activities represent a highly stable and recurring revenue profile:
•
Land plots, which allow tenants to construct customised facilities at their own expense, contributed
34 per cent. to the EZW Group’s revenue for year ended 31 December 2013. Land plots typically have
lease terms of 5 to 15 years and high opportunity costs associated with relocation due to customised
structures built at the tenant’s expense; and
•
Warehouses, offices and onsite residential accommodation, with typical lease term of one year, benefit
from long-standing customer relationships due to the unique benefits offered by the Free Zone, in
particular adjacency to Jebel Ali and inclusion within the same customs-bonded complex as a major
port and airport.
The recurring nature of revenue is illustrated by the length of tenancy, which averages between 6 years and
11 years (as of 31 December 2013) for each of the primary leasing segments.
Average Number of
Years Occupied
10.9 years
10.3 years
7.4 years
6.0 years
Land
Warehouse
Office
Onsite Residential
Accomodation
Results as of 31 December 2013
JAFZ has consistently maintained high occupancy levels across all key leasing segments (with metrics of
83 per cent. for land, 97 per cent. for warehouse, 94 per cent. for office, and 90 per cent. for onsite residential
accommodation as of July 2014).
5
Relates to leasing of land plots to Free Zone companies on ground leases of typically 5 to 15 years in length, enabling tenants to
construct a bespoke facility to suit their particular business needs.
7
Warehouse
Office
Onsite residential
accommodation
Land
Note: supply of land increased from 29 sqkm as of 31 December 2011 to 30 sqkm as of July 2014. Supply of warehouses increased
from 569 thousand sqm as of 31 December 2011 to 584 thousand sqm as of July 2014. Supply of offices decreased from 132 thousand
sqm as of 31 December 2011 to 123 thousand sqm as of July 2014.
The EZW Group’s EBITDA margins have exceeded 80 per cent. for the year ended 31 December 2013 and
for the six months ended 30 June 2014, which in conjunction with efficient working capital management
with rental payments received, on average, approximately 3 months in advance, has resulted in conversion
of revenue into cash flow from operating activities of approximately 80 per cent. to 90 per cent. over the past
3 years.
Significant growth opportunities from the EZW Group from increasing occupancy, increasing lease rates
and developing new investment properties – underpinned by the continued growth of Dubai as a trading
and logistics hub
The EZW Group is well positioned to drive future growth by:
•
Continuing to increase occupancy of land plots, which have historically achieved a CAGR of
approximately 10 per cent. from 31 December 1990 to 1 July 2014 in terms of area occupied;
•
Increasing average lease rates for land plots upon lease renewals and from rent reviews; growth in
average lease rate for land from 31 December 2011 to 1 July 2014 has represented a CAGR of
approximately 9 per cent; and
•
Developing new warehouses, office space and onsite residential accommodation on approximately
4.5 square kilometres of land reserved for future development. Construction of JAFZA One Tower 1,
a 47,000 square metre office tower, is largely complete and leasing is expected to commence during
the first quarter of 2015.
These growth opportunities are underpinned by the continued growth of Dubai as a trading and logistics hub,
and from an expected increase in demand for commercial and industrial space in the run up to World Expo
in 2020.
In addition, the Acquisition provides the potential for cost savings that will arise from centralisation of
support and head office functions.
3.
Benefits and financial effects of the Acquisition
Attractive financial returns for DP World shareholders
As well as the significant strategic and operational benefits highlighted in paragraph A.2, the Board also
believes there will be significant financial benefits from the Acquisition.
EZW Group is being acquired at a multiple of approximately 10.0x of enterprise value to EBITDA for the
year ended 31 December 2013. On a pro forma basis, the Acquisition would have enhanced DP World
Group’s Adjusted EBITDA margin for the year ended 31 December 2013 by more than 400 basis points to
50.3 per cent6. The Board expects the Acquisition (and assuming that the Acquisition had become effective
6
8
on 30 June 2014) to be greater than 15 per cent. earnings enhancing for the DP World Group, and generate
greater than a 7 per cent. return on capital employed, in the first full financial year following Completion,
even before any integration benefits that may be available are realised7.
Retaining flexibility for growth
On a pro forma basis for the Acquisition, the Enlarged Group’s ratio of net debt of US$5.8 billion as at
30 June 2014 to Adjusted EBITDA of US$1.8 billion for the year ended 31 December 2013 would be
approximately 3.3x (the “Leverage Ratio”). The Board considers the level of debt following the Acquisition
to be appropriate in the context of the ongoing strong cash generation of the Enlarged Group, and that based
on this cash generation, the Enlarged Group will be in a position to generate significant surplus cash for
further growth and debt repayment with no impact to its existing dividend policy.
The above is more fully described in Part VI (Unaudited Pro Forma Financial Information on the Enlarged
Group) of this document. The information is unaudited and has been prepared for illustrative purposes only.
4.
Information on the EZW Group
The EZW Group is a global provider of industrial and logistics infrastructure. EZW is a wholly-owned
subsidiary of PFZW, which in turn is ultimately owned by Dubai World, a decree company created and 100
per cent. owned by the Government of Dubai.
The EZW Group is comprised of five business units: (i) JAFZ; (ii) JAFZA Enterprises FZE (“Enterprises”);
(iii) EZW Corporate (“Corporate”); (iv) Business Center World FZE (“BCW”), and (v) Emerging Business
Units (“EBU”). JAFZ is the EZW Group’s primary business unit and comprises 97 per cent. of the EZW
Group’s revenue and operating profit for the year ended 31 December 2013.
For the year ended 31 December 2013, the EZW Group generated revenue of AED 1,580 million
(US$430 million) and EBITDA of AED 1,280 million (US$348 million). Additional historical financial
information is set out in Part V (Historical Financial Information on the EZW Group) of this document.
JAFZ
JAFZ, one of the largest free zones in the GCC, is a major industrial and commercial development in Dubai,
United Arab Emirates that is strategically located adjacent to Jebel Ali and adjoining the main road running
through Dubai (Sheikh Zayed Road).
On 13 November 2007, JAFZ entered into a long-term Concession Agreement and Usufruct Agreement with
Jebel Ali Free Zone Authority (“JAFZA”) (which were amended on 29 April 2012). The Concession
Agreement provides JAFZ with the exclusive right and privilege to provide certain licensing and
administration services at its own expense within the Concession Area for a period of 99 years. The Usufruct
Rights granted pursuant to the Usufruct Agreement give JAFZ the exclusive right to use and benefit from the
Usufruct Property for a period of 99 years, including the right to lease facilities to tenants, renew a lease or
grant a new lease to a tenant for occupying any part of the Concession Area (with JAFZ being the landlord).
JAFZ’s primary business activity consists of providing and renewing leases in relation to land, warehouses,
offices, onsite residential accommodation, retail outlets, showrooms and workstations. JAFZ also provides
registration and licensing services as well as administration services, such as assisting tenants interface with
various UAE Governmental authorities, ministries and departments in relation to immigration, work visas
and other matters. For the year ended 31 December 2013, 85 per cent. of JAFZ’s revenue was derived from
lease rental income and 15 per cent. from license and registration fees and administrative services. Apart
from payment of a certain percentage of revenue earned from license and registration fees to JAFZA by way
of a concession fee, JAFZ is entitled to retain all of its revenue and income from all of its business activities.
Established as a Free Zone Establishment (as defined in Part III (Directors, Company Secretary, Registered
Office and Advisers and Presentation of Information) of this document) in the Free Zone, JAFZ holds the
7
9
concession rights to operate the Free Zone. The Free Zone offers a number of incentives to foreign
companies to establish operations in the Free Zone, including 100 per cent. foreign ownership of
establishments and zero corporate and income tax rates for a minimum period of 50 years from the date of
commencement of business in the Free Zone. JAFZ’s leasing activity is characterised by high occupancy
levels, stable and recurring revenue stream, and long-standing, diversified customer relationships.
As at 30 June 2014, approximately 7,362 companies were operating in the Free Zone from over 134 different
countries (with approximately 100 “Fortune 500” and large multinational companies as tenants). For the half
year ended 30 June 2014, approximately 45 per cent. of the Free Zone’s total customers had a geographic
base (based on country of incorporation) in the GCC and Middle East, 21 per cent. in Europe, 21 per cent.
in Asia and 13 per cent. in America and Africa. The Free Zone has maintained approximately a 4 per cent.
CAGR of the number of companies established in the Free Zone over the last five years.
The Free Zone’s property portfolio has been valued at US$4.7 billion as described in the Property Valuation
Report prepared by Knight Frank LLP which is set out in Part VII (Property Valuation Report) of this
document.
Other Business Units of the EZW Group
•
Enterprises: develops customised warehouse solutions in the Free Zone to meet bespoke needs and
operational requirements of customers.
•
Corporate: manages JAFZ and two other free zones in Dubai, namely the Dubai Auto Zone and
TechnoPark. Dubai Auto Zone is an automotive industry specific free zone located in the Al Awir
region of Dubai. It is comprised of Al Awir Free Zone for Cars, which specialises in second-hand
automobile trade, and Dubai Textile City. TechnoPark is a research-driven business and industrial park
located just outside JAFZ’s south zone.
•
BCW: provides fully-equipped temporary office facilities on short-term leases (typically 3 to
12 months) in the Free Zone and is managed by Regus PLC.
•
EBU: manages and owns 40 per cent. of Djibouti Dry Port SAFZ, an industrial zone in East Africa.
EBU also comprises of offshore land owned in India and the United States which are earmarked for
future development.
The EZW Group has an experienced management team which has been able to adapt to the changing market
conditions and corresponding changes in the needs of its customers. As of 30 June 2014, the EZW Group
employed 405 employees across all its business units, with JAFZ staff comprising 333 employees.
5.
Financing of the Acquisition
The DP World Group intends to fund the consideration for the Acquisition, its related costs and expenses,
and the ongoing operations of the Enlarged Group from existing cash resources and committed existing
conventional and murabaha term loan and revolving facilities.
The existing US$650,000,000 trust certificates due 2019 issued by JAFZ Sukuk (2019) Limited and JAFZ’s
Syndicated Islamic Facility 2012 will remain in place following completion of the Acquisition, with the DP
World Group retaining flexibility to explore financing options, including but not limited to refinancing
certain of its debt facilities and entering into new facility agreements.
6.
Current trading, trends and prospects
DP World Group
The DP World Group published its annual report and accounts on 20 March 2014 and announced interim
results for the first half of 2014 on 28 August 2014. The Company reported strong financial results from its
global portfolio of marine terminals for the six months ended 30 June 2014, delivering profit attributable to
owners of the Company (before separately disclosed items) of US$332 million, 40.8% ahead of the first half
of 2013 on a like-for-like basis. Revenue for the period (before separately disclosed items) was
10
US$1,659 million, 11.6% ahead of the first half of 2013 on a like-for-like basis. Adjusted EBITDA for the
period (before separately disclosed items) was US$778 million, 19.1% ahead of the first half of 2013 on a
like-for-like basis and representing an adjusted EBITDA margin of 46.9%.
At the time of the interim results announcement, Chairman Sultan Ahmed Bin Sulayem commented:
“DP World is pleased to announce another strong set of first half results. The addition of new capacity and
a pick-up in global trade has resulted in a return to robust volume growth, which has translated into an
impressive financial performance. Our portfolio is well positioned to capitalise on the significant medium to
long-term growth potential of this industry and we continue to seek new opportunities in the faster growing
markets.”
At the time of the interim results announcement, Group Chief Executive Officer Mohammed Sharaf
commented:
“We have reported an excellent set of financial results for the first six months of 2014, delivering 11.6%
like-for-like revenue growth. Encouragingly, earnings continue to significantly outpace revenue growth with
19.1% EBITDA growth and 40.8% EPS growth on a like-for-like basis.
The substantial investment programme that we initiated in 2012 is starting to bear fruit as new capacity aids
in the delivery of stronger top and bottom line growth. We have made good progress at our recently opened
greenfield projects in Embraport, Brazil and DP World London Gateway, UK and we look forward to adding
a further 8 million TEU of capacity to our portfolio over the next two years, providing further opportunity
for growth. Crucially, our balance sheet remains strong and we continue to generate high levels of cashflow,
which gives us the ability to invest in the future growth of our current portfolio, and the flexibility to make
new investments should the right opportunities arise as well as delivering enhanced returns to shareholders
over the medium term.
The near term outlook remains encouraging, however continued geopolitical issues may result in challenges
as the year progresses. Overall, we believe our business is well positioned for medium to long term growth
and we expect to continue to outperform the market. We remain focused on delivering relevant new capacity
in the right markets, improving efficiencies, containing costs and handling higher margin containers to drive
profitability. Our strong first half performance gives us confidence in meeting full year market expectations.”
Trading since 30 June 2014 has been broadly consistent with the DP World Group’s performance in the first
half of 2014.
On 28 October 2014, DP World Group announced it had handled 44.8 million TEU across its global portfolio
of container terminals during the first nine months of 2014, with gross container volumes growing by 9.0 per
cent on a like-for-like basis8. On a reported basis, gross container volumes grew by 10.1 per cent with new
volume at London Gateway (UK) and Embraport (Brazil) contributing to the increase. Growth for the nine
month period was largely driven by the Asia Pacific and India Subcontinent region, Europe and UAE
terminals. UAE delivered another strong performance handling 11.4 million TEU, representing growth of
12.6 per cent year-on-year.
EZW Group
The EZW Group has experienced strong year-on-year revenue growth historically and the Company’s Board
is confident this trend will continue in 2014. The EZW Group’s revenue for six months ended 30 June 2014
was AED 854 million, 10 per cent. higher than revenue for six months ended 30 June 2013. The number of
customers in JAFZ continued to increase with over 350 customers added during the period compared to
313 customers during the same period last year.
The EZW Group’s EBITDA for the six months ended 30 June 2014 was AED 718 million representing
14 per cent. growth over the same period last year and an EBITDA margin of 84 per cent.
8
Like for like gross container volume growth adjusts for new capacity at Embraport (Brazil) and London Gateway (UK) and small
test volumes at Rotterdam (Netherlands).
11
7.
Proposed terms of the Acquisition
In accordance with the terms of the Acquisition Agreement, DP World FZE will acquire EZW’s entire issued
share capital from PFZW for cash consideration of US$2,600,000,000 payable on Completion, subject to
adjustments to the extent the amounts of net debt and working capital in, and capital expenditure by, the
EZW Group at Completion are greater or less than certain agreed targets.
Completion of the Acquisition is subject to the following conditions: (i) the passing of the first resolution set
out in the notice of Extraordinary General Meeting contained in this document, approving the Acquisition
(the “Acquisition Resolution”) and (ii) the completion of the transfer by novation of certain receivables due
to and arrangements entered into by the EZW Group (or the relevant conditions relating to such novations
being waived by DP World FZE, in which case a contractual pass-through mechanism will apply). If the
conditions have not been satisfied (or waived) by 5pm (Dubai Time) on 30 June 2015 (or such later date as
may be agreed between the parties), the Acquisition Agreement will terminate and cease to have effect.
The Acquisition Resolution will require approval from a majority of the votes attaching to the Shares of
Independent Shareholders (being, for the purpose of the Acquisition, any Shareholders other than PFZW and
its associates) which are voted on the Acquisition Resolution at the Extraordinary General Meeting.
For further details of the terms of the Acquisition Agreement please see the summary contained in Part IV
(Principal Terms of the Acquisition) of this document.
8.
Risk factors
For a discussion of certain risk factors which should be taken into account when considering whether or not
to vote in favour of the Acquisition, see Part II (Risk Factors) of this document.
B.
THE DELISTING
1.
Introduction
The Company is taking this opportunity to separately seek approval from the Shareholders to cancel the
listing of the Shares from the premium listing segment of the Official List of the FCA and to remove its
Shares from trading on the Main Market of the London Stock Exchange. Following the Delisting, the Shares
will continue to be listed on the official list of securities maintained by the DFSA and to be traded on
NASDAQ Dubai.
2.
Background to, and reasons for, the proposed Delisting
The Company’s Shares have been listed on the official list of securities maintained by the DFSA and
admitted to trading on NASDAQ Dubai since 2007. In June 2011, a decision was taken to apply for a
premium listing and for the Shares to be admitted to trading on the Main Market of the London Stock
Exchange. A key driver for obtaining a dual listing for the Company was to allow investors who at that time
were unable to invest in the Company through NASDAQ Dubai access to the Company through an
alternative stock exchange.
However, the Directors believe that a significantly higher number of international investors are now able to
invest in shares listed on NASDAQ Dubai than was the case prior to 2011. As at 30 September 2014,
approximately 99 per cent. of the Shares were held by individuals and institutions investing through the
NASDAQ Dubai listing, with less than 1 per cent. being held in depository interest form through the London
Listing. In addition, during the period from 2 September to 1 October 2014, the percentage of trading in the
Shares which occurred on the London Stock Exchange represented approximately just 1 per cent. of total
trading volumes. Furthermore, in May 2014 the UAE was moved from frontier to emerging market status
under the MSCI index classification system, which the Directors believe will help companies listed on
NASDAQ Dubai and the country’s other stock exchanges to attract even more interest from international
investors.
Meanwhile, maintaining the London Listing alongside the NASDAQ Dubai listing adds to the regulatory and
administrative burden on the Company. The Company is also subject to additional costs in connection with
12
maintaining its London Listing, including in relation to the Company’s depository arrangements and there is
a risk that such costs could rise if additional shareholders choose to hold their shares in depository form in
London, which is a variable over which the Company has no control.
Against this backdrop, the Directors believe that the additional regulatory and administrative burden, and the
incremental costs, associated with the London Listing have become disproportionate to the benefits accruing
to the Company and the Shareholders from the London Listing, and risk becoming even more so in future.
As such, the Board and, separately, the Independent Directors are of the view that there is no material benefit
in maintaining the London Listing and the Company wishes to streamline the regulatory and administrative
procedures applicable to it and to consolidate its listing on its home exchange in Dubai where the majority
of its Shares are held.
The Shares will continue to be traded on NASDAQ Dubai and, given the low volume of trading in the Shares
on the London Stock Exchange, the Directors believe that from a liquidity perspective there will be no
negative impact. Further, the Directors continue to be committed to high standards of corporate governance,
as described below.
Details regarding the anticipated consequences of the Delisting from a regulatory and corporate governance
perspective are set out in paragraph B.5 below. Additional details relating to the NASDAQ Dubai regulatory
regime are set out in Part VIII (Overview of the NASDAQ Dubai Regulatory Regime) of this document.
3.
Details of the Delisting
In order to effect the Delisting the Company is required to obtain prior approval from the Shareholders
pursuant to paragraph 5.2.5R(2)(b) of the Listing Rules. Accordingly, at the Extraordinary General Meeting
to be held on 18 December 2014, a shareholder resolution will be proposed, as the third resolution set out in
the notice of Extraordinary General Meeting contained in this document, authorising the Board to proceed
with the Delisting (the “Delisting Resolution”). The Delisting Resolution will be proposed as a special
resolution and will require approval:
(a)
from a majority of not less than 75 per cent. of the votes attaching to the Shares which are voted on
the Delisting Resolution at the Extraordinary General Meeting (the “General Shareholder
Approval”); and
(b)
from a majority of the votes attaching to the Shares of Independent Shareholders which are voted on
the Delisting Resolution at the Extraordinary General Meeting (the “Independent Shareholder
Approval”).
Only the votes of Independent Shareholders will be counted when assessing whether the Independent
Shareholder Approval threshold has been met. For the purpose of the Delisting Resolution, in accordance
with the definition set out in the Listing Rules, the term “Independent Shareholders” refers to any
Shareholders entitled to vote on the Delisting Resolution other than PFZW and any persons acting in concert
with it.
Conditional upon the Delisting Resolution receiving both the General Shareholder Approval and the
Independent Shareholder Approval at the Extraordinary General Meeting, the Company will apply to cancel
its London Listing and to remove the Shares from trading on the Main Market of the London Stock
Exchange. It is anticipated that the Delisting will take effect on or about 21 January 2015, being in any event
not less than 20 Business Days following the passing of the Delisting Resolution.
4.
Consequences of the Delisting
Following the effective date of the Delisting, the Shares will be listed only on the official list of securities
maintained by the DFSA, and will be capable of being traded only on NASDAQ Dubai.
The Company will continue to be subject to the Markets Law (DIFC Law No.1 of 2012) (the “DIFC
Markets Law”), which is administered by the DFSA, and the various rules made by the DFSA thereunder
(together with the DIFC Markets Law, the “NASDAQ Dubai Rules”).
13
The Company will however no longer be subject to the regulatory requirements which apply to a company
with a London premium listing, namely those set out in the Part VI Rules, the UK Corporate Governance
Code and elsewhere. Following the Delisting the Company will not be required to comply with the
provisions of the Listing Rules relating to companies with a “controlling shareholder” (as defined therein),
and the UK rules on matters such as related party and significant transactions will no longer apply.
Furthermore, it is expected that the relationship agreement entered into between the Company, PFZW and
Dubai World (the “Relationship Agreement”) will be terminated once the Company no longer has a London
Listing, as envisaged by the terms of such agreement.
Nevertheless, the Directors believe that the NASDAQ Dubai Rules, including the mandatory corporate
governance principles enshrined in such rules and the best practice standards which support such principles
(as referred to in Part VIII (Overview of the NASDAQ Dubai Regulatory Regime) of this document) provide
a robust basis on which to maintain corporate governance best practice for the benefit of Shareholders. In
particular, it is a mandatory principle of the DFSA Markets Rules that boards of directors must ensure that
the rights of shareholders are properly safeguarded and prevent any abuse or oppression of minority
shareholders. Following the Delisting, the Board intends to continue to comply with the corporate
governance regime imposed by the NASDAQ Dubai Rules as well as to maintain an appropriate balance of
independent non-executive directors. In this respect, the Board is committed to maintaining a high standard
of corporate governance.
Shareholders should refer to paragraph B.5 below which details a number of statutory and regulatory
provisions that will continue to apply to the Company’s relationship with PFZW following the Delisting and
termination of the Relationship Agreement, as well as the summary of the Relationship Agreement in
paragraph 8.1(c) of Part IX (Additional Information) of this document and the summary of certain key
provisions of the NASDAQ Dubai regulatory regime set out in Part VIII (Overview of the NASDAQ Dubai
Regulatory Regime) of this document.
5.
Corporate governance arrangements
In addition to continued compliance with the corporate governance regime imposed by the NASDAQ Dubai
Rules, the Board believes that the Company benefits from the breadth of experience represented by its
existing balance of independent and non-independent Directors, and therefore intends for all of the existing
independent non-executive Directors to remain in office immediately following the Delisting. In line with
the Company’s Articles of Association, all of the Directors (including the independent non-executive
Directors) will retire from office at the Company’s next annual general meeting, but the Board intends,
subject to them being available for re-election, for the existing four independent non-executive Directors to
be re-appointed at such meeting. Thereafter, the Company will review the composition of the Board from
time to time to ensure that an appropriate balance of independent and non-independent Directors is
maintained.
Under the NASDAQ Dubai Rules the Company is required to demonstrate that it can operate its business
independently of PFZW, as the Company’s controlling shareholder, and its associates from time to time. The
DFSA considers that for an issuer to operate its business independently of its controlling shareholder, all
transactions and relationships between the issuer and the controlling shareholder or any of its associates must
be at arm’s length and on normal commercial terms. As such, whilst the formal Relationship Agreement is
expected to be terminated once the Company no longer has a London Listing, as envisaged by the terms of
such agreement, the Directors intend that all transactions and relationships between the Company and PFZW
or any of its associates are at arm’s length and on normal commercial terms. This principle is further
underpinned by the provisions of the DIFC Companies Law, which require directors to act honestly, in good
faith and lawfully, with a view to the best interests of the Company.
As explained above, the Company will also continue to be bound by the NASDAQ Dubai Rules on
continuous disclosure, periodic financial reporting, disclosure of interests in shares, related party
transactions, insider dealing, market manipulation and the disclosure of price sensitive information, as well
as the DIFC Takeover Rules and the takeover provisions of the DIFC Companies Law. The Company’s
financial statements will continue to be prepared and audited in accordance with International Financial
14
Reporting Standards, and the Company will continue to report on its corporate governance arrangements in
its annual report in accordance with the NASDAQ Dubai Rules.
Furthermore, the Board remains committed to continuing to undertake a comprehensive annual investor
relations programme to facilitate ongoing communication between the Company’s management,
Shareholders and potential investors. In addition, the Company also intends to continue to announce
throughput statistics from its global port portfolio on a quarterly basis, to provide investors and analysts with
an update on the Company's quarterly operational performance.
The Directors believe that the laws and regulations underpinning the NASDAQ Dubai listing regime,
coupled with the skills and experience of its executive management team, will enable the Company to
continue to operate its business effectively and successfully in the best interests of its Shareholders.
C.
THE DIRECTOR APPOINTMENT
The Board approved the appointment of Mark Russell as an independent non-executive Director of the
Company with effect from 11 August 2014 replacing David Williams who retired as a Director. The
Company is now seeking confirmation of the Director Appointment from Shareholders.
Accordingly, at the Extraordinary General Meeting to be held on 18 December 2014, a shareholder
resolution will be proposed, as the second resolution set out in the notice of Extraordinary General Meeting
contained in this document, approving the Director Appointment (the “Appointment Resolution”). The
Appointment Resolution will be proposed as an ordinary resolution and will require approval from a
majority of votes attaching to the Shares which are voted on the Appointment Resolution at the Extraordinary
General Meeting.
The Company’s Nominations & Governance Committee is responsible for identifying individuals qualified
to become Board members. As an initial stage in the Director appointment process the Company collects and
reviews potential candidates’ CVs against an established set of appointment criteria, following which the
chosen candidate meets with the Company’s Senior Independent Non-Executive Director and Vice
Chairman, as the chairman of the Nominations & Governance Committee, as well as with other Board
members as appropriate. Alongside this, the Company collects detailed background information regarding
the chosen candidate, including their professional experience and qualifications, through the completion of
a pre-appointment questionnaire. Following meetings with the Board members Mr Russell was put forward
to the Nominations & Governance Committee for consideration. The Nominations & Governance
Committee in turn recommended Mr Russell’s appointment and put the appointment to the Board for
consideration and, if appropriate, approval.
Mr Russell is a non-executive director of London and Continental Railways Limited and Eurostar
International Limited, and chairman of Eurostar’s Audit Committee. He is also chief executive of the
Shareholder Executive in the UK. Prior to this, Mr Russell was a partner in the corporate finance departments
of KPMG in London and Frankfurt and held senior positions at PricewaterhouseCoopers Corporate Finance,
Robert Fleming, Lazard Brothers and AT Kearney. Based on Mr Russell’s current and previous directorships,
other professional experience and qualifications and, in particular, his relevant financial experience, the
Board considers that Mr Russell will be an effective Director and will make a valuable contribution to the
Company.
Mr Russell does not have any existing or previous relationship, transaction or arrangement with any of the
Directors, or the Company, or its controlling shareholder or any associate of its controlling shareholder
within the meaning of paragraph 13.8.17R(1) of the Listing Rules. In considering Mr Russell’s
independence, the Board has taken into consideration the guidance provided by the UK Corporate
Governance Code and the DFSA Markets Rules. The Board considers Mr Russell to be independent in
accordance with Provision B.1.1 of the UK Corporate Governance Code and Principle 3 of Appendix 4 to
the DFSA Markets Rules, and recommends his appointment to the Shareholders.
15
D.
THE EXTRAORDINARY GENERAL MEETING
1.
The Resolutions
Set out at the end of this document is a notice convening an Extraordinary General Meeting to be held at The
Wheelhouse, Jebel Ali Port, Jebel Ali, Dubai at 11.00 a.m. (Dubai Time)/7.00 a.m. (GMT) on Thursday
18 December 2014 at which the Resolutions will be proposed to approve the Acquisition, the Delisting and
the Director Appointment. The full text of the Resolutions is set out in the notice.
Acquisition Resolution
The Acquisition Resolution proposes that the Acquisition be approved and the Directors be authorised to
implement the Acquisition. The Acquisition Resolution will be proposed as an ordinary resolution and, to be
passed, requires a simple majority of votes attaching to the Shares of Independent Shareholders which are
voted on the Acquisition Resolution. The Acquisition will not proceed if the Acquisition Resolution is not
passed.
For the purpose of the Acquisition Resolution, and in accordance with the provisions of the Listing Rules,
only the Independent Shareholders will be able to vote on the Acquisition Resolution. In this context, the
term “Independent Shareholders” refers to any Shareholders other than PFZW and its associates. PFZW, as
the related party to the Acquisition, has undertaken not to vote on and to take all reasonable steps to ensure
that its associates do not vote on the Acquisition Resolution.
Appointment Resolution
The Appointment Resolution proposes that the Director Appointment be ratified, confirmed and approved.
The Appointment Resolution will be proposed as an ordinary resolution and, to be passed, will require
approval from a majority of the votes attaching to the Shares which are voted on the Appointment
Resolution. The Director Appointment will not be ratified, confirmed or approved if the Appointment
Resolution is not passed.
Delisting Resolution
The Delisting Resolution proposes that the Delisting be approved and the Directors be authorised to
implement the Delisting. The Delisting Resolution will be proposed as a special resolution and, to be passed,
will require approval from (a) a majority of not less than 75 per cent. of the votes attaching to the Shares
which are voted on the Delisting Resolution and (b) a majority of votes attaching to the Shares of
Independent Shareholders which are voted on the Delisting Resolution. The Delisting will not proceed if the
Delisting Resolution is not passed.
For the purpose of the Delisting Resolution, and in accordance with the provisions of the Listing Rules, the
term “Independent Shareholders” refers to any Shareholders other than PFZW and any persons acting in
concert with it.
2.
Action to be taken
You will find enclosed with this document the Voting Instruction Form, Personal Attendance Request
Form and Form of Direction for use at the Extraordinary General Meeting or any adjournment
thereof. Whether or not you intend to be present at the Extraordinary General Meeting, you are
requested to complete and sign the appropriate form and communicate your voting instructions in
accordance with the instructions printed on the Notice of Extraordinary General Meeting set out at
the end of this document.
3.
Entitlement to Attend and Vote
Only those Shareholders entered on the relevant register of shareholders as at 5.00 p.m. (Dubai
Time)/1.00 p.m. (GMT) on Tuesday 25 November 2014 (the record date) shall be entitled to vote at the
Extraordinary General Meeting in respect of the number of Shares registered in their name at that time.
Changes to entries in the register of shareholders after 5.00 p.m. (Dubai Time)/1.00 p.m. (GMT) on Tuesday
25 November 2014 shall be disregarded in determining the rights of any person to attend or vote at the
Extraordinary General Meeting.
16
If the Extraordinary General Meeting is adjourned, entitlement to attend and vote will be determined by
reference to the relevant register of shareholders at 5.00 p.m. (Dubai Time)/1.00 p.m. (GMT) on the
originally stated record date.
4.
Nominee Registration
All the Shares traded on NASDAQ Dubai and the London Stock Exchange are registered in the name of
NASDAQ Dubai Guardian Limited (formerly known as DIFX Guardian Limited) as nominee for the
beneficial owners. NASDAQ Dubai Guardian Limited will not exercise the right to attend and to vote at the
Extraordinary General Meeting but will enable the beneficial owners to attend the Extraordinary General
Meeting and vote in person and/or to exercise voting rights by issuing proxies upon the instruction of
beneficial owners. In order to facilitate this please carefully read and follow the instructions laid-out in the
following section.
5.
Voting/Attendance Request for holders of shares traded on NASDAQ Dubai
(A)
Voting
If you would like to have your Shares voted without attending the Extraordinary General Meeting in
person, please fill out the Voting Instruction Form and return it signed and dated to your broker (or
custodian) if you do not have a NIN account (a NIN account is an account set-up for a shareholder
directly with the NASDAQ Dubai Central Securities Depositary), or to our Registrar if you have a
NIN account, as soon as possible, however, no later than the date required by your broker (or
custodian or the Registrar). Your broker (or custodian or the Registrar) will submit your votes to the
tabulation agent. If you subsequently desire to change your voting, or to attend the meeting in person,
please contact your broker (or custodian or the Registrar) prior to the deadline specified by them in
order to facilitate your changes. The tabulation agent will provide your voting instructions to
NASDAQ Dubai Guardian Limited who will submit the vote on your behalf to the Chairman of the
Link Market Services (EMEA) Limited, the Registrar, are contactable via the following methods:
Email: [email protected]; Tel: +971 (0)4 401 9983; Fax: +971 (0)4 401 9985. If in
any doubt about your account set-up or about receiving dividends please contact the Registrar.
(B)
Attendance in Person or by a Personal Representative
If you would like to attend the Extraordinary General Meeting in person, or if you would like to be
represented by a person of your choice, please fill out the Personal Attendance Request Form and
return it signed and dated to your broker (or custodian) if you do not have a NIN account, or to the
Registrar if you have a NIN account, as soon as possible, but, no later than the date required by your
broker (or custodian or the Registrar). Your broker (or custodian or the Registrar) will submit your
attendance request details to the tabulation agent. You will need to provide a valid proof of photo
identification (e.g. passport, driving licence etc.) at the registration desk of the Extraordinary General
Meeting.
If you subsequently desire to change your personal representative, or to vote without attending in
person, please contact your broker (or custodian or the Registrar) prior to the deadline specified by
them in order to facilitate your changes.
Completion and return of the Voting Instruction Form will not prevent beneficial owners from
attending the Extraordinary General Meeting and voting in person at the Extraordinary General
Meeting, provided you have subsequently changed your instruction to register your attendance at the
meeting in person in the manner specified above.
Please note that you will not be able to vote in person at the Extraordinary General Meeting if you
have not registered for attendance via your broker, custodian or the Registrar as outlined above.
17
6.
Voting/Attendance Request for holders of Shares in depository interest form through CREST
(A)
Voting
This facility is only open to you if you hold Shares in the form of depository interests in CREST. If
you would like to have your Shares voted without attending the Extraordinary General Meeting in
person you will need to direct the Depository, Capita Asset Services Limited, to submit your votes to
the tabulation agent. The tabulation agent will provide your voting instructions to NASDAQ Dubai
Guardian Limited who will submit the vote on your behalf to the Chairman of the Extraordinary
General Meeting, in accordance with your voting instructions.
Voting instructions must be lodged using the Form of Direction enclosed or electronically (see below).
Form of Direction
If you hold Shares in the form of depository interests in CREST you may provide your voting
instructions to the Depository, Capita Asset Services Limited, by completing and returning the
enclosed Form of Direction.
The Form of Direction should be completed in accordance with the instructions on the Form of
Direction.
To be valid, the Form of Direction must be completed and lodged with Capita Asset Services Limited,
40 Dukes Place, London EC3A 7NH, together, if applicable, with the power of attorney or other
authority under which it is signed or a copy of such authority certified by a notary, no later than
10.00 p.m. (Dubai Time) 6.00 p.m. (GMT) on Thursday 11 December 2014.
Alternative form of lodging your voting instructions
If you hold Shares in the form of depository interests in CREST you may transmit voting instructions
by utilising the CREST voting service in accordance with the procedures described in the CREST
manual. CREST personal members or other CREST sponsored members, and those CREST members
who have appointed a voting service provider, should refer to their CREST sponsor or voting service
provider, who will be able to take appropriate action on their behalf.
In order for instructions made using the CREST voting service to be valid, the appropriate CREST
message (a ‘CREST Voting Instruction’) must be properly authenticated in accordance with Euroclear
UK & Ireland’s specifications and must contain the information required for such instruction, as
described in the CREST Manual (available via www.euroclear.com/CREST).
To be effective, the CREST Voting Instruction must be transmitted so as to be received by the
Company’s agent (RA10) no later than 10.00 p.m. (Dubai Time)/6.00 p.m. (GMT) on Thursday
11 December 2014. For this purpose, the time of receipt will be taken to be the time (as determined
by the timestamp applied to the CREST Voting Instruction by the CREST applications host) from
which the Company’s agent is able to retrieve the CREST Voting Instruction by enquiry to CREST in
the manner prescribed by CREST.
Shareholders who hold their Shares in the form of depositary interests in CREST and, where
applicable, their CREST sponsors or voting service providers should note that Euroclear UK &
Ireland does not make available special procedures in CREST for any particular messages. Normal
system timings and limitations will therefore apply in relation to the transmission of CREST Voting
Instructions. It is the responsibility of the Shareholder to take (or, if the shareholder is a CREST
personal member or sponsored member or has appointed a voting service provider, to procure that the
CREST sponsor or voting service provider takes) such action as shall be necessary to ensure that a
CREST Voting Instruction is transmitted by means of the CREST voting service by any particular
time. In this connection, Shareholders and, where applicable, their CREST sponsors or voting service
providers are referred, in particular, to those sections of the CREST Manual concerning the practical
limitations of the CREST system and timings.
18
The Company may treat as invalid a CREST Voting Instruction in the circumstances set out in
Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001.
(B)
If you hold Shares in the form of depository interests in CREST and would like to attend the
Extraordinary General Meeting in person, or be represented by a person of your choice, you should
contact the Depository, Capita Asset Services Limited, 40 Dukes Place, London EC3A 7NH, no later
than 10.00 p.m. (Dubai Time)/6.00 p.m. (GMT) on Thursday 11 December 2014. The Depository will
submit your attendance request details to the tabulation agent. You will need to provide a valid proof
of photo identification (e.g. passport, driving licence etc.) at the registration desk of the Extraordinary
General Meeting.
If you subsequently desire to change your personal representative, or to vote without attending in
person, please contact the Depository prior to the deadline specified by them in order to facilitate your
changes.
Completion and return of the Form of Direction or the electronic voting of your instructions via the
CREST voting service will not prevent beneficial owners from attending the Extraordinary General
Meeting and voting in person at the Extraordinary General Meeting, provided you have subsequently
changed your instruction to register your attendance at the meeting in person in the manner specified
above.
Please note that you will not be able to vote in person at the Extraordinary General Meeting if you
have not registered for attendance via the Depository as outlined above.
7.
Further Information
Your attention is drawn to the further information contained in Part II (Risk Factors), Part IV
(Principal Terms of the Acquisition), Part V (Historical Financial Information on the EZW Group),
Part VI (Unaudited Pro Forma Financial Information on the Enlarged Group), Part VIII (Overview of
the NASDAQ Dubai Regulatory Regime) and in Part IX (Additional Information) of this document. You
are advised to read the whole of this document and not to rely solely on the information contained in
this summary.
8.
Recommendation
The Board, which has been so advised by Moelis & Company, Citigroup and Deutsche Bank, considers
the terms of the Acquisition to be fair and reasonable as far as Shareholders are concerned. In
providing advice to the Board, Moelis & Company, Citigroup and Deutsche Bank have taken into
account the Board’s commercial assessment of the Acquisition.
In addition, the Board considers that the proposed Acquisition, the Delisting and the Director
Appointment are in the best interests of the Company and the Shareholders as a whole and,
accordingly, the Board recommends that the Shareholders vote in favour of the Acquisition Resolution
(PFZW and its associates abstaining), the Delisting Resolution and the Appointment Resolution as the
Directors intend to do so (so far as they are permitted) in respect of their own beneficial holdings of
49,347 Shares in aggregate, representing approximately 0.0060 per cent. of the Company’s issued
share capital (as at 12 November 2014 being the latest practicable date prior to publication of this
document).
Only the Independent Directors voted on the Board’s approval of the Acquisition. Sultan Ahmed Bin
Sulayem, Jamal Majid Bin Thaniah, Mohammed Sharaf and Yuvraj Narayan are not deemed to be
independent for the purposes of the Acquisition and have therefore not taken part in the vote of the
Board on the Acquisition and those among them holding Shares have undertaken not to vote on the
Acquisition Resolution. For the purposes of the Delisting Resolution, only votes cast by independent
non-executive Directors will count towards assessing whether the Independent Shareholder Approval
threshold has been met.
19
Similarly, PFZW has indicated its intention to vote in favour of the Delisting Resolution in respect of
its beneficial holding of 667,735,000 Shares, representing (as at 12 November 2014, being the latest
practicable date prior to the publication of this document) approximately 80.45 per cent. of the total
issued share capital of the Company. Such vote in favour shall not, however, be counted towards
assessing whether the Independent Shareholder Approval threshold has been met with respect to the
Delisting Resolution.
Yours faithfully,
Sultan Ahmed Bin Sulayem
Chairman
20
PART II
RISK FACTORS
Shareholders should consider the following risks and uncertainties together with all the other information
set out in, or incorporated by reference into, this document prior to making any decision as to whether or
not to vote in favour of the Acquisition Resolution.
This section describes the risk factors which the Directors consider to be material in relation to the DP World
Group and the EZW Group which, following Completion, apply to the Enlarged Group. The risks described
below are based on information known at the date of this document, but may not be the only risks to which
the DP World Group, the EZW Group or, following Completion, the Enlarged Group is or might be exposed.
The Directors consider the following risks to be all the known material risks regarding the Acquisition.
Additional risks and uncertainties, which are currently unknown to the Company or that the Company does
not currently consider to be material, may materially affect the business of the DP World Group, the EZW
Group and/or the Enlarged Group and could have material adverse effects on the business, financial
condition, results of operations and prospects of the DP World Group, the EZW Group and/or the Enlarged
Group. If any of the following risks were to occur, the business, financial condition, results of operations and
prospects of the DP World Group, the EZW Group and/or the Enlarged Group could be materially adversely
affected and the value of the Shares could decline and shareholders could lose all or part of the value of their
investment in the Shares.
1.
Risks relating to the Acquisition
Risks of executing the Acquisition could cause the market price of the Shares to decline
The market price of the Shares may decline as a result of the Acquisition, among other reasons, if the DP
World Group does not achieve the expected benefits of its acquisition of EZW as rapidly or to the extent
anticipated by the Company’s financial analysts or investors or at all or if there are any adverse changes in
the political and economic conditions in Dubai or in the real estate market in Dubai, or if there are variations
in the EZW Group’s operating results and/or business developments. If the Acquisition does not complete or
the EZW Group is sold to a buyer outside of the DP World Group this may have a material adverse effect on
the business, prospects, results of operation, financial condition and Share price of the DP World Group.
The implementation of the Acquisition is subject to the satisfaction of certain conditions and those
conditions might not be satisfied
The implementation of the Acquisition is subject to the satisfaction of the following conditions:
•
the completion of the transfer by novation of certain receivables due to and arrangements entered into
by the EZW Group (or the relevant conditions being waived by DP World FZE); and
•
approval of the Acquisition by the Independent Shareholders (as described in paragraph A.7 of Part I
(Letter from the Chairman of DP World Limited) of this document) at the Extraordinary General
Meeting.
There is no guarantee that these conditions will be satisfied (or waived, if applicable). Failure to satisfy or
waive any of these conditions may result in the Acquisition not being completed.
The prospect of the Acquisition could cause disruptions in the businesses of the DP World Group and/or
the EZW Group, which could have material adverse effects on their businesses and financial results
The prospect of the Acquisition could cause disruptions to the businesses of the DP World Group and/or the
EZW Group. Specifically, some current and prospective employees may experience uncertainty about their
future roles in the Enlarged Group, which may adversely affect the DP World Group and the EZW Group’s
abilities to retain or recruit key managers and other employees.
21
If the DP World Group and the EZW Group fail to manage these risks effectively, the business and financial
results of the Enlarged Group could be adversely affected.
2.
Risks relating to the Enlarged Group
The DP World Group and the EZW Group operate in multiple countries and so are subject to
international trade risks
The DP World Group derives and, following completion, the Enlarged Group will continue to derive
a significant part of its revenue from customers in the UAE and worldwide. The Enlarged Group will be
exposed to greater risk due to its greater geographical scope and as a result, in common with other
multi-national organisations, the occurrence of any negative economic, political or geographical events in
these locations could have an adverse impact on revenues. This in turn could cause the Enlarged Group’s
business to be harmed. These international trade risks include, but are not limited to:
•
fluctuations in exchange rates;
•
unexpected changes in regulatory environments;
•
imposition of tariffs and other barriers and restrictions; and
•
changes in foreign investment laws.
Revenues generated by the Free Zone are dependent upon occupancy levels, rental rates and legislation
The success of the EZW Group is largely dependent on the level of revenues generated within the Free Zone
and the exercise by JAFZ of its rights under the Concession Documents (as defined below). Such revenues
are driven by supply of, and demand for, available space which is suitable to tenants in relevant markets, as
well as other factors, such as the perceived desirability of the Free Zone by tenants as a business location.
A decrease in demand for space in the Free Zone, including land, warehouse space, office space and onsite
residential accommodation, will adversely affect occupancy levels in the Free Zone and, correspondingly,
leasing revenue and revenue from registration and licensing activities and administration services.
Additionally, leasing revenue received by JAFZ could also be affected by legislative restrictions on the
permissible level of rental increases and possible future changes in law. Recent Dubai legislation prescribes
the maximum increase which is permitted upon renewal of most types of leases in Dubai and could restrict
JAFZ’s ability to increase rental rates and, accordingly, its leasing revenues generated within the Free Zone.
Shareholders should also consider that the boundaries of the Free Zone are set in the Concession Documents
which means that the growth of JAFZ and, following Completion, the portion of the Enlarged Group’s
business relating to JAFZ is limited to the development of undeveloped properties or the redevelopment of
developed properties in the Free Zone. Demand for space in the Free Zone in the future may be adversely
affected by, among other things, competitive factors (see “JAFZ, and following Completion, the Enlarged
Group, may be subject to competition from other free zones and integrated port projects in the UAE and the
GCC”); a downturn in the global, regional or local economy; circumstances which cause the UAE or Dubai
to be perceived as a less desirable place to do business; a change in law reducing the economic advantages
to tenants of doing business in the Free Zone (see “Financial, political and general economic conditions may
affect the EZW Group’s revenues” and “No assurance can be given as to the impact of a change in law,
regulation or policy”); a decline in the level of services provided to tenants in the Free Zone and a change
in the environmental condition of the Free Zone (see “The Free Zone is subject to environmental
regulations”). A decline in the overall level of leasing revenue generated from the Free Zone and/or revenue
from licensing activities and/or administration services could adversely affect the business, prospects, results
of operation and financial condition of the EZW Group and, following Completion, the Enlarged Group.
Late payment or non-payment of rent could lead to a reduction in revenue received by the EZW Group
Rental payments by tenants in the Free Zone are typically made in advance in one, two or four instalments
per year depending on the type of lease and the individual tenant. However, the financial stability of tenants
may change over time and it is possible that rental payments owing to JAFZ will not be paid on the due date
or will not be paid at all. A significant aggregation of such late payments and/or non-payments could have
22
an adverse effect on the business, prospects, results of operation and financial condition of the EZW Group
and, following Completion, the Enlarged Group. Although continued failure by a tenant to pay the rent due
would usually result in the eviction of such tenant, there may be a delay following the departure of an evicted
tenant before a replacement tenant can be found, during which period the relevant land, office or other space
will remain unoccupied. The EZW Group may need to expend significant time and money attracting
replacement tenants and there is no guarantee that potential new tenants could be sourced or that such tenants
would accept the then market rates (see “Revenues generated by the Free Zone are dependent upon
occupancy levels, rental rates and legislation”). Any of the foregoing factors would reduce the EZW Group’s
cash flow and could have a material adverse effect on the business, prospects, results of operation and
financial condition of the EZW Group and, following Completion, the Enlarged Group.
The valuation of the Free Zone’s, and following Completion, the Enlarged Group’s property portfolio is
inherently subjective and uncertain and is based on assumptions which may prove to be inaccurate
The valuation of the Free Zone’s, and following Completion, the Enlarged Group’s property portfolio is
inherently subjective due to, among other factors, the individual nature of each property, its location and the
expected future rental revenues from that particular property.
The Free Zone’s property portfolio has been valued as at 30 October 2014 on the basis of “Market Value”
in accordance with the Royal Institution of Chartered Surveyors (RICS) Valuation – Professional Standards
(March 2012) Global & UK edition (the “Red Book”), defined as the estimated amount for which a property
should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length
transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without
compulsion. In determining Market Value, the Independent Valuer is required to make certain assumptions.
Such assumptions may prove to be inaccurate. Incorrect assumptions or flawed assessments underlying
a valuation report could negatively affect the Enlarged Group’s financial condition and potentially inhibit the
Enlarged Group’s ability to realise a sale price that reflects the stated valuation. This is particularly so in
periods of volatility or when there has been limited transactional evidence against which property valuations
can be benchmarked. Despite recent signs of stabilisation in the UAE property market, there can be no
assurance that these valuations will be reflected in the actual transaction prices, even where any such
transactions occur shortly after the relevant valuation date, or that the estimated yield and annual rental
income will prove to be attainable.
Further, if the DP World Group acquires properties based on inaccurate valuations, following Completion,
the Enlarged Group’s net assets and results of operations may be materially adversely affected. There is no
assurance that, following Completion, the valuations of the Enlarged Group’s current and prospective
properties will be reflected in the actual transaction prices, even where any such transactions occur shortly
after the relevant valuation date, or that estimated yield and annual rental income will prove to be attainable.
In addition, property valuations are dependent on the level of rental income received and anticipated to be
received on that property in the future and as such, continuing declines in rental income could, following
Completion, have an adverse impact on revenue and the value of the Enlarged Group’s properties.
Any of the foregoing factors could have an adverse impact on the Enlarged Group’s business, prospects,
results of operations and financial condition.
The EZW Group’s developments may be faced with possible cost overruns potentially resulting in those
developments being delayed or otherwise suspended or terminated
As of 30 June 2014, the EZW Group’s committed expansion developments include construction of Jafza
One – Tower 1, infrastructure developments at Jafza South, the Gate 4 development project, ongoing works
on a road network, storm water connection, street numbering and related infrastructure and other
development projects, the EZW Group’s proposed (uncommitted) projects include construction of Jafza One
– Tower 2, Jafz South office blocks and other related projects and infrastructure. Completion of both
committed and proposed developments and related Free Zone infrastructure requires significant capital
expenditure by the EZW Group and, due to possible cost overruns which could, notwithstanding the fact that
cash would still be available to complete this capital expenditure, make the developments uneconomic to
23
undertake, completion of committed and/or proposed developments and related infrastructure may
potentially be delayed, suspended, terminated or materially changed in scope, which may have an adverse
effect on the business, prospects, results of operation and financial condition of the EZW Group and,
following Completion, the Enlarged Group.
JAFZ, and following Completion, the Enlarged Group, may be subject to competition from other free
zones and integrated port projects in the UAE and the GCC
There are currently several free zones in Dubai, including the Free Zone, Dubai Airport Free Zone, Dubai
Internet City, Dubai Media City, Knowledge Village, Dubai International Financial Centre, Dubai Healthcare
City, Dubai Silicon Oasis, Dubai Cars and Automotive Zone and two free zones at Al Maktoum International
Airport. There are also free zones in the other Emirates such as the Fujairah Free Zone, the Ras Al Khaimah
Free Trade Zone, the Ajman Free Zone, the Hamriyah Free Zone located in Sharjah and the new industrial
free zone at Taweelah, known as Khalifa Industrial Zone Abu Dhabi (“KIZAD”).
KIZAD, which is being financially supported by the Abu Dhabi government and is actively bringing in major
industrial occupiers, currently has a capacity of 51 square kilometres that is expected to grow to
approximately 420 square kilometres by 2030. KIZAD is situated adjacent to, and integrated with, the
Khalifa Port, which currently has a twenty foot equivalent container units (“TEU”) capacity of 2.5 million
TEU that is expected to grow to approximately 15 million TEU by 2030.
There are currently also certain other GCC nations, which are developing or expanding integrated port and
free zone projects. Ongoing developments in Qatar and Oman are collectively expected to add approximately
15 million TEU of port capacity supported by approximately 50 square kilometres of adjacent free zone
capacity by 2030.
Currently the EZW Group achieves premium lease rates in the Free Zone and the EZW Group’s ability to
continue to do so is contingent on JAFZ retaining its dominant position in the market by virtue of being a
more attractive location (see “No assurance can be given as to the impact of a change in law, regulation or
policy”) and its ability to attract and retain new and existing customers.
Competition with other free zones and integrated port projects could result in reduced rental returns and
reduced occupancy levels in the Free Zone which would adversely affect the cashflows generated by JAFZ
under the Concession Documents and, accordingly, adversely affect the business, prospects, results of
operation and financial condition of the EZW Group and, following Completion, the Enlarged Group.
Natural disasters and catastrophic events over which the EZW Group has no control
The EZW Group’s business operations and development projects could be adversely affected or disrupted by
natural disasters such as earthquakes, fire, storms or flooding or other potentially catastrophic events, such
as major accidents, diseases, unintentional radioactive explosions or leaks, armed conflicts and terrorist
attacks. Although constructed, operated, maintained and insured to protect against certain of these
occurrences, the Free Zone’s facilities may not be adequately protected in all circumstances. Such
occurrences could result in the disruption of services provided by the EZW Group to its customers, the loss
of the EZW Group’s capital investments, the destruction of office buildings and other infrastructure that
would require reconstruction by the EZW Group, and could negatively affect trade at Jebel Ali. Further, the
consequences of such occurrences could be exacerbated if the losses involve risks for which the EZW Group
is uninsured. As a result, there can be no assurances that any such event with respect to the Free Zone will
not adversely affect the business, prospects, results of operation and financial condition of the EZW Group
and, following Completion, the Enlarged Group.
The Free Zone is subject to environmental regulations
There are provisions under UAE federal law regarding environmental protection and development which
impose liability on owners/developers if they cause harm to the environment. In addition, there are other
provisions in the UAE Civil Code pursuant to which a party may be liable for environmental harm caused to
another party. As a result, JAFZ, being the registered owner of the Usufruct Rights over the Concession Area,
has potential environmental liability as a quasi “land owner” and developer under the provisions of UAE
24
federal law and the UAE Civil Code. The controlled warehousing of radioactive materials is permitted in the
Free Zone. Notwithstanding that the EZW Group complies with various laws and guidelines governing the
use of radiation sources, such as radiation pellets and radiography equipment, an unintentional leak or
explosion of radioactive materials could potentially adversely affect a localised portion of the Free Zone. If
any environmental liability arises in relation to any property “owned” or operated by the EZW Group and it
is not remedied, or is not capable of being remedied, this may have an adverse effect on the business,
prospects, results of operation and financial condition of the EZW Group and, following Completion, the
Enlarged Group (either because of the penalties and related cost implications or because of the disruption to
services provided at the relevant property).
The EZW Group, and following Completion, the Enlarged Group must comply with safety standards in
the Free Zone
The EZW Group has adopted safety standards in accordance with applicable laws and regulations in the
UAE. In addition, JAFZ must comply with safety standards stipulated by JAFZA as competent authority with
respect to the Free Zone. If JAFZ fails to comply with the relevant standards, it may have to pay penalties or
compensation or may be restricted from providing leasing activities or other services which would have an
adverse effect on its revenues from the Free Zone and on its reputation. In addition, any amendments to the
existing laws and regulations relating to environmental and safety standards may impose more burdensome
requirements on the EZW Group, and following Completion, the Enlarged Group and its compliance with
such laws or regulations may require the EZW Group to incur significant capital expenditure or other
obligations or liabilities, which could have an adverse effect on the business, prospects, results of operation
and financial condition of the EZW Group and, following Completion, the Enlarged Group.
Assets of the EZW Group are limited
The concession granted pursuant to the Concession Agreement, the Usufruct Rights granted pursuant to the
Usufruct Agreement and the rights to receive rental proceeds granted under the Master Leases, in each case
to EZW’s primary business unit, JAFZ, by JAFZA, constitute the main part of the EZW Group’s assets and
its primary source of revenues. The Concession Documents impose contractual restrictions on the
termination rights of JAFZA and also include a restriction on certain modifications to the Concession
Documents, which are summarised further in paragraph 8.2 (a) Concession Agreement and (b) Usufruct
Agreement of Part IX (Additional Information) of this document. JAFZ is subject to specific country risks
associated with Dubai and UAE generally, which could include government intervention resulting in
expropriation or nationalisation of assets. Whilst the Company does not consider expropriation or
nationalisation of assets to be a likely risk, if the rights granted under the Concession Documents are
nonetheless expropriated or otherwise nationalised as a result of a change in law or for whatever reason, the
EZW Group would lose its main asset and source of income which would have a material adverse effect on
the business, prospects, results of operation and financial condition of the EZW Group and, following
Completion, the Enlarged Group. The EZW Group would, however, in the event of such loss of rights to the
Concession Documents through no fault of its own, be entitled to claim certain contractual compensation
from JAFZA in accordance with the terms of the Concession Documents. Any modification of the
Concession Documents restricting the concession granted pursuant to the Concession Agreement or the
Usufruct Rights, or of the Master Leases affecting the amounts payable to JAFZ under the Master Leases, or
any modification to the Jebel Ali Free Zone rules governing the operation of companies within the Free Zone
and the permitted use of the Usufruct Property (as defined herein) by JAFZ, could also have an adverse effect
on the business, prospects, results of operation and financial condition of the EZW Group and, following
Completion, the Enlarged Group.
The leverage of the Enlarged Group following Completion could limit the Enlarged Group’s ability to
obtain additional financing on attractive terms
On a pro forma basis and assuming that the Acquisition had become effective on 30 June 2014, the Enlarged
Group would have had net debt of approximately US$5.8 billion and it may incur additional indebtedness in
the future to finance the growth of its business.
25
Such indebtedness of the Enlarged Group could, following Completion, limit the Enlarged Group’s ability
to obtain additional financing in the capital markets on attractive terms.
The Company’s ultimate majority shareholder, Dubai World, and the Government of Dubai have the
ability to exert significant influence over the Company and their interests may conflict with those of
Shareholders or the Company
PFZW owns approximately 80.45 per cent. of the Company’s issued and outstanding share capital and,
therefore, has the ability to exert significant influence over it. PFZW is wholly owned by Dubai World,
a holding company owned by the Government of Dubai. In addition PFZW has two director representatives
on the board of the Company. Accordingly, Dubai World and the Government of Dubai may exert control
over, amongst other things:
•
election of the Company’s directors and, in turn, selection of our management;
•
the Company’s business policies and strategies;
•
budget approval;
•
the issuance of new debt or equity securities and the arrangement of other sources of financing;
•
mergers, acquisitions and disposals of the Company’s assets or businesses;
•
increases or decreases in share capital; and
•
amendments to the Company’s constitutional documents.
Consequently, the Company cannot assure Shareholders that the resolution of any matter at a general
meeting of the Shareholders that may involve the interests of Dubai World or the Government of Dubai, as
represented by PFZW, will be resolved in what Shareholders would consider to be in the Company’s or their
best interests. Further, if the Delisting is approved and implemented, the protections afforded to Shareholders
in the Relationship Agreement and the Listing Rules would cease to apply. In particular, the NASDAQ Dubai
Rules governing transactions with related parties do not preclude a related party from voting on resolutions,
which require shareholder approval. See Part VIII (Overview of the NASDAQ Dubai Regulatory Regime) of
this document for a summary of certain key provisions of the NASDAQ Dubai regulatory regime. See also
section 8.1(c) (Relationship Agreement) of Part IX (Additional Information) of this document for a summary
of certain key terms of the Relationship Agreement.
No assurance can be given as to the impact of a change in law, regulation or policy
The business of the EZW Group and the Concession Documents are subject to Dubai law, the Federal laws
of the UAE and administrative practice in effect from time to time. No assurance can be given as to the
impact of any change to these laws (including, without limitation, the laws and regulations under which the
Free Zone gains its “free zone” and “tax free” status) or administrative practice after the date of this
document, nor can any assurance be given as to whether any such change could have an adverse effect on
the EZW Group. In particular, changes in regulations promulgated by JAFZA could affect JAFZ’s leasing
activities or any of the other services provided by JAFZ and the fees charged for such services which could
have an adverse effect on the business, prospects, results of operation and financial condition of the
EZW Group and, following Completion, the Enlarged Group.
In addition, the Government of Dubai published in 2007 a 10-year strategic plan (the “Dubai Strategic
Plan”), highlighting growth targets in many areas, which include significant infrastructure projects such as
the Al Maktoum International Airport, roads, bridges and mass transportation systems, all of which are
expected to continue to contribute significantly to the overall growth of the Dubai economy and, indirectly,
to the profitability of the Free Zone. Should the Government of Dubai make significant changes to the Dubai
Strategic Plan (whether because of a change in leadership at senior levels, an inability to access funding or
otherwise), the desirability of Dubai and, accordingly, the Free Zone, as a place to do business could be
adversely affected.
26
If the Group and, upon Completion of the Acquisition, the Enlarged Group fails to retain and attract
qualified and experienced employees, its business may be harmed
If the Enlarged Group is unable to retain experienced, capable and reliable personnel, especially senior and
middle management with appropriate professional qualifications, or fails to recruit skilled professional and
technical staff in pace with its growth, its business and financial results may suffer. There is intense
competition in the UAE for skilled personnel, especially at the senior management level, due to
a disproportionately low number of available qualified and/or experienced individuals compared to current
demand. If the EZW Group was unable to retain key members of its senior management and/or hire new
qualified personnel in a timely manner, this could have an adverse effect on the operation of the Free Zone.
The loss of any member of the senior management team may result in: (i) a loss of organisational focus;
(ii) poor execution of operations; and (iii) an inability to identify and execute potential strategic initiatives
such as expansion of capacity. These adverse results could, among other things, reduce potential revenue,
prevent the EZW Group from diversifying its service lines and expose the EZW Group to downturns in the
market in which it operates, all of which could adversely affect the business, prospects, results of operation
and financial condition of the EZW Group and, following Completion, the Enlarged Group.
Financial, political and general economic conditions may affect the EZW Group’s revenues
The EZW Group’s revenues will be largely derived from the Free Zone, which is located in the UAE and
accordingly the results of its operations and prospects may be affected by the financial, political and general
economic conditions prevailing from time to time in the UAE and/or the Middle East generally. While the
UAE is seen as a relatively stable political environment with generally healthy international relations, certain
other jurisdictions in the Middle East are not. In particular, since early 2011 there has been political unrest
in a range of countries in the Middle East and North Africa (“MENA”) region, including Algeria, Bahrain,
Egypt, Jordan, the Islamic Republic of Iran, Iraq, Libya, Oman, the Kingdom of Saudi Arabia, Syria, Tunisia
and Yemen.
The situation has caused significant disruption to the economies of affected countries and has had
a destabilising effect on oil and gas prices. Continued instability affecting the countries in the MENA region
could adversely impact the UAE, although to date the impact on the UAE and the Free Zone has not been
significant. The Enlarged Group’s business may be affected by the financial, political and general economic
conditions prevailing from time to time in the UAE and the Middle East. It is not possible to predict the
occurrence of events or circumstances such as war or hostilities, or the impact of such occurrences, and no
assurance can be given that the EZW Group would be able to sustain its current profit levels if adverse
political events or circumstances were to occur. Any such occurrences could have a material adverse effect
on the business, prospects, results of operation and financial condition of the EZW Group and, following
Completion, the Enlarged Group.
The economies of Dubai and the UAE, like those of many emerging markets, have been characterised by
significant government involvement through direct ownership of enterprises. Whilst Dubai and the UAE
have enjoyed significant economic growth and relative political stability in recent years, there can be no
assurance that such growth or stability will continue. Moreover, while the Government’s policies have
generally resulted in improved economic performance, there can be no assurance that such level of
performance can be sustained. A general downturn or instability in certain sectors of the UAE or the regional
economy could have a material adverse effect on the business, prospects, results of operation and financial
condition of the EZW Group and, following Completion, the Enlarged Group.
Shareholders should also note that the EZW Group’s, and following Completion, the Enlarged Group’s
business and financial performance could be adversely affected by political, economic or related
developments both within and outside the Middle East region because of interrelationships within the global
financial markets. The EZW Group, and following Completion, the Enlarged Group could be adversely
affected in the future by any deterioration of general economic conditions in the markets in which EZW
Group’s customers operate, as well as by international trading market conditions and/or related factors.
27
If, following Completion, there are significant, unforeseen difficulties integrating the business operations
of the DP World Group and the EZW Group, they could adversely affect the business of the Enlarged
Group
On Completion, the Company intends, to the extent possible, to integrate the EZW Group’s operations into
the DP World Group. The Company’s goal in integrating these operations will be to optimise supply chain
productivity and efficiencies of Jebel Ali’s customers, coordinate future expansion of Jebel Ali and the Free
Zone and achieve certain cost savings from centralisation of support and head office functions. However, the
Company may encounter difficulties integrating its operations with the operations of the EZW Group,
resulting in a delay or the failure to achieve the anticipated benefits. If such difficulties are significant, this
could adversely affect the business of the Enlarged Group.
On Completion, the Enlarged Group will be subject to extensive regulations which may increase costs
In each of the jurisdictions in which the EZW Group operates and in which, following Completion, the
Enlarged Group will operate, it has to comply with laws, regulations and administrative policies which relate
to not only environmental regulations (see “The Free Zone is subject to environmental regulations”) and
safety standards (see “The EZW Group, and following Completion, the Enlarged Group must comply with
safety standards in the Free Zone”) but also employment (including pensions), anti-corruption, banking and
tax. Each aspect of the regulatory environment in which the EZW Group operates and in which, following
completion, the Enlarged Group will operate is subject to change, which may be retrospective. Complying,
or failing to comply, with existing or new regulations could result in additional costs for, or financing or sales
restrictions on, the EZW Group and, following Completion, the Enlarged Group, which could have an
adverse effect on the business, prospects, results of the operation and financial condition of the EZW Group
and, following Completion, the Enlarged Group.
The DP World Group’s and the EZW Group’s insurance may be inadequate to cover all risks or the
insurers may deny coverage of material losses incurred by the DP World Group or the EZW Group
Each of the DP World Group and the EZW Group endeavours to identify and obtain insurance to cover its
risks and liabilities (including, among others, natural disasters, product liability and business interruption).
Not every risk or liability can be protected against by insurance, and, for insurable risks, the limits of
coverage reasonably obtainable in the market may not be sufficient to cover all losses or liabilities incurred.
Due to the limitations in the availability of overall coverage, the DP World Group and/or the EZW Group
may have to bear substantial costs for uninsured losses that could have an adverse effect upon its business,
results of operations and overall financial condition. Additionally, disputes with insurers over coverage may
affect the timing of cash flows and, in the event of litigation with the insurer, an outcome unfavourable to
the DP World Group or the EZW Group may have an adverse effect on the DP World Group’s or the EZW
Group’s, or following Completion, the Enlarged Group’s business, results of operations and overall financial
condition.
28
PART III
DIRECTORS, COMPANY SECRETARY, REGISTERED OFFICE AND
ADVISERS AND PRESENTATION OF INFORMATION
Directors
Sultan Ahmed Bin Sulayem (Chairman, Non-Executive Director)
Jamal Majid Bin Thaniah (Vice Chairman, Non-Executive Director)
Mohammed Sharaf (Group Chief Executive Officer,
Executive Director)
Sir John Parker (Vice Chairman, Senior Independent
Non-Executive Director)
Yuvraj Narayan (Group Chief Financial Officer,
Executive Director)
Robert Woods (Independent Non-Executive Director)
Deepak Parekh (Independent Non-Executive Director)
Mark Russell (Independent Non-Executive Director)
Company Secretary
Bernadette Allinson
Registered office address
Level 5
LOB17
Jebel Ali Free Zone
PO Box 17000
Dubai
DIFC office address
Office 27
Level 3, GV4
Dubai International Financial Centre
Gate Village
PO Box 17000
Dubai
Financial Adviser to the Company
Moelis & Company UK LLP DIFC Branch
Office Suite 203-204, Level 2, Gate Village 1
DIFC, PO Box 506777
Dubai
Joint Financial Adviser to the
Company and Joint Sponsors
Citigroup Global Markets Limited
Citigroup Centre
Canada Square
London E14 5LB
United Kingdom
Deutsche Bank AG, London Branch
Winchester House
1 Great Winchester Street
London EC2N 2DB
United Kingdom
29
Legal Advisers to the Company
as to English Law
Clifford Chance LLP
10 Upper Bank Street
Canary Wharf
London E14 5JJ
United Kingdom
Legal Advisers to the Company
as to DIFC and UAE Law
Clifford Chance LLP
Building 6, Level 2
The Gate Precinct
PO Box 9380 Dubai
Legal Advisers to the Joint
Financial Adviser to the
Company and Joint Sponsors
as to English Law
Freshfields Bruckhaus Deringer LLP
65 Fleet Street
London
EC4Y 1HS
Registrar
Link Market Services (EMEA) Limited
Office No 35
Level 15, The Gate Building
PO Box 506875
Dubai
Depository
Capita Asset Services Limited
40 Dukes Place
London, EC3A 7NH
United Kingdom
Auditor to the Company
KPMG LLP
PO Box 3800
Level 32
Emirates Towers Sheikh Zayed Road
Dubai
Reporting Accountant to the
Company
KPMG LLP
15 Canada Square
London E14 5GL
United Kingdom
Reporting Accountant to the
Company as regards Historical
Financial Information on the
EZW Group
PricewaterhouseCoopers (Dubai Branch)
Emaar Square
Building 4
Level 8
P.O. Box 11987
Dubai
Independent Valuer
Knight Frank LLP
55 Baker Street
London
W1U 8AN
30
Presentation of financial information
Financial information relating to the EZW Group has been extracted without material adjustment from the
consolidated historical financial information set out in Part V (Historical Financial Information on the
EZW Group) of this document. The accounting policies of DP World Limited have been applied to the
consolidated historical financial information of the EZW Group set out in Part V (Historical Financial
Information on the EZW Group) on a consistent basis with the accounting policies adopted in DP World
Limited’s annual consolidated accounts for the year ended 31 December 2013.
The condensed interim consolidated financial information relating to EZW and set out in Part A of
Part V (Historical Financial Information on the EZW Group) is unaudited and the Directors confirm that the
accounting policies adopted in the preparation of the condensed interim consolidated financial information
are consistent with those followed in the preparation of DP World Limited’s annual consolidated financial
statements for the year ended 31 December 2013.
Unless otherwise indicated, financial information in this document relating to DP World and EZW has been
prepared in accordance with IFRS.
Other sources are included in footnotes, where relevant.
Non-IFRS financial measures
In this document, certain financial measures of the DP World Group, the EZW Group and the Enlarged
Group that are presented are not measures of financial performance defined under IFRS, or any other
internationally accepted accounting principles. These financial measures are referred to as “non-IFRS”. The
principal non-IFRS financial measures used in this document are discussed below.
Non-IFRS earnings and liquidity measures and earnings adjustments
EBITDA – a measure of segment performance based on earnings before interest, tax, depreciation and
amortisation (“EBITDA”).
Adjusted EBITDA – a measure of segment performance based on earnings before separately disclosed items,
interest, tax, depreciation and amortisation (“Adjusted EBITDA”).
Net debt – consists of cash and bank balances less interest bearing loans and borrowings (“Net Debt”).
However, these non-IFRS measures are not measures or adjustments defined under IFRS or any other
internationally accepted accounting principles, and you should not consider such items as an alternative to
the historical financial results or other indicators of the DP World Group’s or the EZW Group’s performance
defined under IFRS. The non-IFRS earnings and liquidity measures, as defined herein, may not be
comparable to similarly titled measures as presented by other companies due to differences in the way
non-IFRS earnings measures are calculated for purposes of this document. Even though these types of
non-IFRS measures are used by management to assess ongoing operating performance and these types of
measures are commonly used by investors, they have important limitations as analytical tools, and you
should not consider them in isolation or as substitutes for analysis of the results of the DP World Group and
the EZW Group as reported under IFRS.
Presentation of other information
Operational Data
Certain volume figures in this Prospectus are expressed in “TEUs”. A TEU is a twenty-foot equivalent unit
that is based on the dimensions of a cargo container 20 feet long by 8 feet wide by 8 feet 6 inches high, with
a maximum load of 24 tons.
“Throughput” is a measure of container handling activity. The two main categories of container throughput
are origin and destination (“O&D”), which is also often referred to as import and export, and transhipment.
Every container shipped by sea is by definition an export container at the origination terminal and an import
container at the destination terminal. O&D throughput is cargo that has to either go to, or be collected from,
31
a particular terminal because of its proximity to the point of consumption or distribution. A container that is
transferred from one ship to another at some point during the journey is said to be transhipped, which gives
rise to transhipment throughput at an intermediate terminal somewhere between the load terminal and the
discharge terminal. Throughput includes the handling of imports, exports, empty containers and
transhipments.
“Capacity” refers to the theoretical amount of throughput that a container terminal could handle in a year
and is generally based on the size of the terminal’s container stacking area and the capacity of its quay, which
in turn is based on the length of the quay and the capacity of the ship-to-shore cranes that are available.
“Occupancy” refers to the percentage of leased area compared to total leasable area.
Currencies and exchange rate information
In this document, references to (i) “$”, “US$”, “USD”, “US dollars” and “dollars” are to the lawful
currency of the United States, (ii) “AED”, “UAE dirham” and “dirham” are to the lawful currency of the
United Arab Emirates, (iii) “€” and “euro” are to the currency introduced at the start of the third stage of the
European economic and monetary union pursuant to the Treaty Establishing the European Community, as
amended, (iv) “£”, “Pounds Sterling” and “Sterling” are to the lawful currency of the United Kingdom.
Since November 1997, the UAE Dirham has been pegged to the US dollar at a rate equal to
AED3.6725=US$1.00 or US$0.272294=AED1.
The following table shows for each of the periods indicated (in each case rounded to the nearest hundredth)
the high, low, average and period end noon buying rates for such period in The City of New York for cable
transfers payable in Pounds Sterling as certified for customs purposes by the Federal Reserve Bank of New
York and expressed in US dollars per £1.00. The rates set out below may differ from the actual rates used in
the preparation of the financial statements and other financial information that appear elsewhere in this
document. The inclusion of these exchange rates in this document is for illustrative purposes only and does
not mean that any amounts reported herein actually represent a specific amount in another currency or that
any such amounts could have been converted at any particular rate, if at all.
Years ended December 31
High
2011
2012
2013
1.6691
1.6275
1.6574
US dollars per £1.00
Low
Average(1) Period end
1.5358
1.5301
1.4837
1.6043
1.5853
1.5641
1.5537
1.6262
1.6574
Month ended
US dollars per £1.00
High
Low
January 2014
February 2014
March 2014
April 2014
May 2014
June 2014
July 2014
August 2014
September 2014
October 2014
1.6612
1.6750
1.6743
1.6883
1.6976
1.7105
1.7165
1.6874
1.6502
1.6216
1.6335
1.6300
1.6491
1.6583
1.6709
1.6747
1.6889
1.6570
1.6088
1.5930
Note:
(1) The average of the exchange rates for each day during the year.
No incorporation of website information
The contents of the DP World Group’s website (www.dpworld.com) does not form part of this document.
32
Certain defined terms
In this document, unless the context otherwise requires, “JAFZ” refers to Jebel Ali Free Zone FZE, a
company established in the free zone of Jebel Ali (a “Free Zone Establishment”) with Registration Number
01283 on 5 March 2006 pursuant to Law No 9 of 1992 of H.H. Sheikh Maktoum Bin Rashid Al Maktoum,
Ruler of Dubai, and the Implementing Regulations issued by the Jebel Ali Free Zone Authority.
Certain terms used in this document, including certain capitalised terms and certain technical and other
terms, are defined in Part X (Definitions) of this document.
33
PART IV
PRINCIPAL TERMS OF THE ACQUISITION
1.
Structure of the Acquisition
On 13 November 2014 DP World, DP World FZE and PFZW entered into the Acquisition Agreement in
respect of the acquisition by DP World FZE of the entire issued share capital of EZW (the “EZW Shares”),
subject to the satisfaction of certain conditions.
2.
Acquisition Agreement
On the terms and subject to the conditions of the Acquisition Agreement, DP World FZE will acquire the
EZW Shares. The key terms of the Acquisition Agreement are summarised below.
3.
Consideration
The consideration for the acquisition of EZW Shares will be US$ 2,600,000,000 payable on Completion,
subject to adjustments to the extent the amounts of net debt and working capital in, and capital expenditure
by, the EZW Group at Completion are greater or less than certain agreed targets (the adjusted consideration
being referred to in this Circular as the “Consideration”).
4.
Conditions to Completion
Completion is conditional upon (i) the passing of the Acquisition Resolution and (ii) the completion of the
transfer by novation of certain receivables due to and arrangements entered into by the EZW Group (or
the relevant conditions being waived by DP World FZE). Please see the paragraph headed ‘Carve-Outs’
below for further details.
If the conditions have not been satisfied (or waived) by 5pm (Dubai time) on 30 June 2015 (or such later date
as may be agreed between the parties), the Acquisition Agreement will terminate and cease to have effect.
If, prior to Completion, PFZW is in breach of a Fundamental Warranty (as defined below), or events occur
which result in a ‘Material Adverse Effect’ (as explained further below) then DP World FZE can elect to
proceed to Completion or, after expiry of a cure period during which PFZW may remedy the relevant breach
or event, terminate the Acquisition Agreement.
For the purposes of the Acquisition Agreement, a ‘Material Adverse Effect’ means the occurrence or
commencement of a matter or event, during the period from the date of the Acquisition Agreement until
Completion, which results in or will (within 9 months) result in either (i) the market value of the EZW Shares
decreasing by 30 per cent. or more from their value as at the date of the Acquisition Agreement; or (ii) the
market value of the property assets of the EZW Group decreasing by 20 per cent. or more from their value
as at the date of the Acquisition Agreement; or (iii) the operation or viability of the business of Jebel Ali Free
Zone FZE (in the manner it is carried on at the date of the Acquisition Agreement) being fundamentally
jeopardised. However, a change or effect resulting from any of the following will not constitute a Material
Adverse Effect: (a) the announcement of the Acquisition Agreement, the Acquisition or the completion of
the transactions contemplated thereby, (including the loss or departure of officers or other employees of the
EZW Group, and the termination or notified termination of (or the failure to renew) any contracts with
customers, suppliers or other business partners), (b) any change in applicable law or regulation (excluding
in the UAE) or change in accounting standards, principles or interpretations thereof applicable to the EZW
Group, (c) a decline in general financial, industry, market or economic conditions in the UAE or any other
country (other than as a result of acts of war, terrorism or armed hostilities), save for a matter or event which
has a materially disproportionate effect on the EZW Group as compared with other industry participants or
competitors, (d) any actions taken by any member of the EZW Group which DP World, or DP World FZE
or an authorised representative of either of them has approved, consented to, directed, instructed or requested
in writing, (e) any member of the EZW Group not taking an action where a written direction or instruction
not to take such action has been made by DP World, DP World FZE or an authorised representative of either
34
of them, (f) any change in the debt ratings of Jebel Ali Free Zone FZE or any of the debt securities of the
EZW Group in and of itself, (g) any failure by the EZW Group to meet its internal budgets, plans or forecasts
of its revenues, earnings or other financial performance or results of operations in and of itself, or (h) any
matters disclosed in the Acquisition Agreement, disclosure letter or certain other transaction documentation
(or their respective schedules or annexures).
The Acquisition Agreement obliges DP World not to withdraw the recommendation from the Board to the
Independent Shareholders to vote in favour of the Acquisition Resolution other than in certain limited
circumstances, including where particular termination rights in the Acquisition Agreement are triggered
(such as on the occurrence of a Material Adverse Effect), or where a new event occurring after the date of
the Acquisition Agreement gives rise to: (i) an actual liability of, or cost to, the DP World Group (net of any
corresponding asset, monetary claim or recovery), and/or (ii) a liability that will require provision in the next
consolidated audited financial statements of the Company and its subsidiaries, which amount to at least
US$ 800,000,000 in aggregate.
5.
Carve-Outs
The Acquisition Agreement contains the following conditions precedent to Completion relating to the
transfer by novation of certain arrangements involving the EZW Group (the “Carve-Out Conditions”):
(a)
certain receivables due to EZW from third parties (the “Third Party Receivables”) are to be novated
to PFZW for no consideration as a condition precedent to Completion, with the result that PFZW
becomes entitled to the Third Party Receivables;
(b)
EZW will assume the obligations of Dubai World in respect of a receivable due to JAFZ from Dubai
World (the “DW Receivable”) for no consideration as a condition precedent to Completion; and
(c)
in 2013, EZW sold the majority of its shares in a company then known as EZW Gazeley Holdings
Limited (“Gazeley”) (together with certain related instruments) to a fund managed by an affiliate of
Brookfield Asset Management, Inc. In connection with that sale, EZW retained a number of rights
(such as entitlements to additional consideration) and liabilities (such as pursuant to warranties and
indemnities given by it as well as various other matters), as well as a small shareholding. These
arrangements are to be novated to PFZW, and EZW’s remaining shareholding in Gazeley transferred
to PFZW, as a condition precedent to Completion.
DP World FZE has attributed no value to the arrangements to be novated in connection with the Carve-Out
Conditions for the purposes of determining the Consideration.
The Acquisition Agreement requires PFZW to use its reasonable endeavours to satisfy the Carve-Out
Conditions but recognises that it may not be possible to achieve this before the longstop date (being 30 June
2015, or such later date as may be agreed between the parties) (for example, where necessary third party
consents are not forthcoming). Accordingly, DP World FZE has the right to waive any one or more of these
Carve-Out Conditions. In the event of a waiver a contractual pass-through mechanism will apply pursuant to
which DP World FZE agrees to procure that PFZW receives the benefit of the arrangements that are the
subject of the carve-out and DP World FZE receives the benefit of an indemnity from PFZW in relation to
any associated liabilities incurred.
The conditions relating to the Third Party Receivables and DW Receivable may be waived by DP World FZE
at any time. The condition relating to the arrangements in respect of Gazeley may be waived by DP World
FZE after 30 April 2015.
6.
Warranties and tax covenant
PFZW has given certain warranties to DP World and DP World FZE which are customary for a transaction
of this nature (including, amongst other things, in respect of its power and ability to enter into and perform
the Acquisition Agreement, title to the EZW Shares, certain specific information in this Circular, accounts
and financial matters, material contracts, intellectual property, insurance, real estate matters, employees,
litigation, anti-bribery and corruption, and taxation).
35
The Acquisition Agreement also contains a customary tax indemnity relating to matters occurring prior to
Completion.
The Acquisition Agreement contains certain limitations on the ability of DP World and/or DP World FZE to
claim against PFZW in connection with the Acquisition documentation, including for breach of a warranty
or under the tax covenant. PFZW’s liability in connection with the Acquisition documentation is (subject to
certain limited exceptions) limited to a maximum amount equal to the Consideration (including in respect of
all claims under those warranties relating to (i) PFZW’s title to the EZW Shares, (ii) PFZW’s power and
ability to enter into and perform the Acquisition Agreement, (iii) EZW’s title to shares of its subsidiary
undertakings and there being no encumbrances in respect of those shares, (iv) the EZW Group’s title to its
freehold and usufruct properties and (v) there being no breaches of the Concession Agreement by Jebel Ali
Free Zone FZE (together the “Fundamental Warranties”)). However, PFZW’s aggregate liability in respect
of all other claims under the warranties (excluding the Fundamental Warranties) and claims under the tax
covenant is limited to a maximum amount of 30 per cent. of the Consideration.
Furthermore, PFZW will not be liable for any particular claim under the documentation relating to the
Acquisition (with certain limited exceptions) for less than US$ 2,800,000, and will have no liability unless
the value of all such claims exceeds US$ 28,000,000 (in which case PFZW will (subject to the limitations
in the preceding paragraph) be liable for the entire amount and not just the excess above US$ 28,000,000).
In addition, claims under the tax warranties or tax covenant must be brought within six months following
expiry of any period during which a tax authority could issue an assessment of liability to tax (or, where there
is no such period, within a period of five years and one month from the date of Completion. Other claims
under the warranties must be brought within a period of 18 months following Completion.
The Acquisition Agreement contains a number of other customary limitations on PFZW’s liability for claims
under the Acquisition documentation.
The Fundamental Warranties will be deemed to be repeated immediately prior to Completion.
7.
Pre-Completion covenants
During the period from the date of the Acquisition Agreement until Completion (and other than with prior
written consent (or direction) from DP World FZE or DP World (or their authorised representative or
nominee)), PFZW has agreed to procure that each member of the EZW Group will operate its business in
the ordinary way so as to maintain it as a going concern and, furthermore, that each member of the EZW
Group will not undertake certain specified acts or matters.
36
PART V
HISTORICAL FINANCIAL INFORMATION ON THE EZW GROUP
PART A: CONDENSED INTERIM CONSOLIDATED HISTORICAL FINANCIAL
INFORMATION RELATING TO THE EZW GROUP FOR THE SIX MONTHS ENDED
30 JUNE 2014
CONDENSED INTERIM CONSOLIDATED BALANCE SHEET
Note
ASSETS
Non-current assets
Property and equipment
Land use rights
Investment properties
Investment in associates and joint ventures
Due from related parties
Trade and other receivables
Derivative financial instruments
7
7
7
8
Current assets
Cash and bank balances
8
Total assets
As at
30 June
2014
(Unaudited)
AED’000
As at
31 December
2013
(Audited)
AED’000
11,764
8,384,302
3,682,719
41,245
705,053
293,604
2,118
–––––––––
13,120,805
–––––––––
13,540
8,429,665
3,552,340
39,331
694,601
368,287
4,442
–––––––––
13,102,206
–––––––––
77,246
119,408
1,379,736
1,412
–––––––––
1,577,802
–––––––––
14,698,607
93,697
215,214
1,030,366
2,221
–––––––––
1,341,498
–––––––––
14,443,704
4,764,000
4,220,737
(36,605)
–––––––––
8,948,132
–––––––––
4,764,000
3,697,169
(40,930)
–––––––––
8,420,239
–––––––––
26,248
2,349,394
1,996,582
39,504
–––––––––
4,411,728
–––––––––
23,988
2,346,304
2,325,570
39,944
–––––––––
4,735,806
–––––––––
––––––––– –––––––––
EQUITY AND LIABILITIES
EQUITY
Share capital
Retained Earnings
Translation reserve
Total equity
LIABILITIES
Non-current liabilities
Employees’ end of service benefits
Sukuk borrowing
Borrowings
Deferred revenue
9
10
37
Note
Current liabilities
Borrowings
Trade and other payable
Income tax payable
Deferred revenue
Due to related parties
10
8
Total liabilities
Total equity and liabilities
As at
30 June
2014
(Unaudited)
AED’000
As at
31 December
2013
(Audited)
AED’000
189,398
811,472
151
302,832
34,894
–––––––––
1,338,747
–––––––––
5,750,475
–––––––––
14,698,607
184,951
824,759
125
262,657
15,167
–––––––––
1,287,659
–––––––––
6,023,465
–––––––––
14,443,704
––––––––– –––––––––
38
CONDENSED INTERIM CONSOLIDATED STATEMENT OF INCOME
Note
Continuing operations
Revenue
Cost of sales
Gross profit
Other income
Share of profit from associate and joint ventures
General and administrative expenses
Selling and marketing expenses
Operating profit
Waiver of loan from the parent company
Finance income
Finance costs
Profit before tax
Income tax
Profit for the period from continuing operations
Discontinued operations
Loss for the period from discontinued operations
12
Profit for the period
For the six months
ended 30 June
2014
2013
(Unaudited)
(Unaudited)
AED’000
AED’000
853,543
(170,882)
–––––––––
682,661
62,571
1,913
(96,045)
(25,852)
–––––––––
625,248
–
47,130
(148,598)
–––––––––
523,780
(212)
–––––––––
523,568
774,848
(164,153)
–––––––––
610,695
23,651
2,018
(81,974)
(19,915)
–––––––––
534,475
5,164,545
174,259
(306,713)
–––––––––
5,566,566
(236)
–––––––––
5,566,330
–
–––––––––
523,568
(33,625)
–––––––––
5,532,705
––––––––– –––––––––
39
CONDENSED INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months
ended 30 June
2014
2013
(Unaudited)
(Unaudited)
AED’000
AED’000
Other comprehensive income:
Items that may be subsequently reclassified to profit or loss
Currency translation differences
Total comprehensive income for the period
523,568
4,325
–––––––––
4,325
–––––––––
527,893
5,532,705
(8,573)
–––––––––
(8,573)
–––––––––
5,524,132
––––––––– –––––––––
40
CONDENSED INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the period ended 30 June 2014
Balance at 1 January 2014
Other comprehensive income
Total comprehensive income
Balance at 30 June 2014 (unaudited)
For the period ended 30 June 2013
Other comprehensive income
Total comprehensive income
Balance at 30 June 2013 (unaudited)
Share
capital
AED’000
(Accumulated
losses)/
retained
earnings
AED’000
4,764,000
–
–
–––––––––
–
–––––––––
4,764,000
3,697,169
523,568
–
–––––––––
523,568
–––––––––
4,220,737
(40,930)
–
4,325
–––––––––
4,325
–––––––––
(36,605)
8,420,239
523,568
4,325
–––––––––
527,893
–––––––––
8,948,132
4,764,000
–
–
–––––––––
–
–––––––––
4,764,000
(2,283,280)
5,532,705
–
–––––––––
5,532,705
–––––––––
3,249,425
(28,634)
–
(8,573)
–––––––––
(8,573)
–––––––––
(37,207)
2,452,086
5,532,705
(8,573)
–––––––––
5,524,132
–––––––––
7,976,218
Translation
reserve
AED’000
Total
AED’000
––––––––– ––––––––– ––––––––– –––––––––
––––––––– ––––––––– ––––––––– –––––––––
41
CONDENSED INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS
Note
Cash flows from operating activities
Profit before tax
Adjustments for:
Depreciation and amortisation
Sukuk borrowing profit charges
Other finance costs
Provision for employees’ end of service benefits and general
pension and social security
Provision for impairment of accounts receivable
Finance income
Share of (profit)/loss from associates and joint ventures
Waiver of shareholder loan
Loss/(gain) on sale of property and equipment/
investment property
Foreign exchange gain
Payment of employees’ end of service benefits and general
pension and social security
Income tax paid
Working capital adjustments:
Trade and other payable
Deferred revenue
7
8
Net cash generated from operating activities
Cash flows from investing activities
Proceeds from sale of disposal group classified as held for sale
Purchase of property and equipment
Purchase of investment properties – net of accruals
Decrease/(increase) in restricted cash
Investment in long term deposits
Interest received
Net cash (used in)/generated from investing activities
42
12
7
For the six months
ended 30 June
2014
2013
(Unaudited)
(Unaudited)
AED’000
AED’000
523,780
5,566,566
92,721
83,572
65,026
95,298
84,253
222,460
6,677
2,972
(38,718)
(1,913)
–
5,962
1,497
(24,863)
(2,018)
(5,164,545)
1,194
(8,412)
(7)
(149,396)
(4,920)
(193)
(4,563)
(273)
91,653
(9,806)
26,356
19,727
39,735
–––––––––
889,451
–––––––––
(187,595)
(25,407)
6,380
(2,882)
18,470
–––––––––
439,337
–––––––––
–
(1,207)
(70,098)
6,000
(108,578)
3,363
–––––––––
(170,520)
–––––––––
1,006,902
(681)
(43,449)
(194,959)
–
3,517
–––––––––
771,330
–––––––––
Note
Cash flows from financing activities
Finance costs paid
Repayment of borrowings
Other finance charges paid
10
Net cash used in financing activities
Increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Cash and cash equivalents comprises:
Cash at banks and on hand
Fixed deposits
Restricted cash
Cash and cash equivalent
For the six months
ended 30 June
2014
2013
(Unaudited)
(Unaudited)
AED’000
AED’000
(130,080)
(342,720)
(7)
–––––––––
(472,807)
–––––––––
246,124
379,042
668
–––––––––
625,834
–––––––––
(202,674)
(1,197,999)
(14,946)
–––––––––
(1,415,619)
–––––––––
(204,952)
958,065
(1,187)
–––––––––
751,926
–––––––––
1,379,736
(590,470)
(163,432)
625,834
948,387
–
(196,461)
751,926
The principal non-cash transaction is the recovery of advance payment from a contractor of AED102 million
relating to investment properties under construction during the period.
43
1.
LEGAL STATUS AND ACTIVITIES
Economic Zones World FZE (the “Establishment”) was established as a Jebel Ali Free Zone Establishment,
under registration number 1293 on 14 March 2006. The Establishment’s registered address is P.O. Box
16888, Jebel Ali, Dubai, United Arab Emirates.
The Establishment is a wholly owned subsidiary of Ports & Free Zone World FZE (the “parent company”).
The ultimate parent company is Dubai World Corporation (the “ultimate parent”).
The Establishment and its subsidiaries (together, the “EZW Group”) develop and manage free zones,
develop, sell and lease warehouses and provide facility management services. The EZW Group’s principal
subsidiaries, joint ventures and associates are as follows:
Name of entity
Principal activity
Holding percentage
30 June
30 June
2014
2013
Subsidiaries
Jebel Ali Free Zone FZE (JAFZ)
JAFZA Holding FZE
JAFZA Enterprise FZE
Business Center World FZE
Development and management of free zones
Development and sale of warehouses
Facility provider and management
100
100
100
100
100
100
100
100
40
40
Associate
Djibouti
Djibouti Dry Port SAFZ (DDP)
On 13 November 2007 and amended on 29 April 2012, the Establishment entered into two agreements with
Jebel Ali Free Zone Authority (JAFZA), one to acquire land use right for a period of 99 years and another
for the purchase of assets. The Establishment paid JAFZA AED 8.9 billion and AED 3 billion as
consideration for the acquisition of land use right and purchase of assets respectively. Under the land use
right agreement, the Establishment will be liable to pay JAFZA a contingent consideration of 2% of revenue
(limited to licensing and registration activity) earned from the fourth year onward and increases to 50% by
the end of the 99th year.
2.
BASIS OF PREPARATION
The condensed interim consolidated financial information for the six months period ended 30 June 2014 has
been prepared in accordance with IAS 34, ‘Interim financial reporting’. The condensed interim consolidated
financial information should be read in conjunction with the annual consolidated financial statements of the
EZW Group for the year ended 31 December 2013, which have been prepared in accordance with IFRS.
3.
ACCOUNTING POLICIES
The interim condensed consolidated financial information is unaudited and the directors of DP World
Limited confirm that the accounting policies adopted in the preparation of the interim condensed
consolidated financial information are consistent with those followed in the preparation of DP World
Limited’s annual consolidated financial statements for the year ended 31 December 2013.
4.
ESTIMATES
The preparation of condensed interim consolidated financial information requires management to make
judgments, estimates and assumptions that affect the application of accounting policies and the reported
amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.
In preparing these condensed interim consolidated financial information, the significant judgments made by
management in applying the accounting policies of DP World Limited and the key sources of estimation
uncertainty were the same as those that applied to the consolidated financial statements of DP World Limited
for the year ended 31 December 2013.
44
5.
FINANCIAL RISK MANAGEMENT
5.1
Financial risk factors
The EZW Group’s activities expose it to a variety of financial risks: market risk (including currency
risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity
risk. The condensed interim consolidated financial information do not include all financial risk
management information and disclosures required in the annual financial statements, and should be
read in conjunction with the EZW Group’s annual financial statements as at 31 December 2013. There
have been no changes in the risk management factors since year end or in any risk management
policies.
5.2
Liquidity risk
Compared to the year end, there were material changes in the contractual undiscounted cash out flows
for financial liabilities resulting from partial settlement of term loan (Note 10). The table below
analyses the EZW Group’s non-derivative financial liabilities and net-settled derivative financial
liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to
the contractual maturity date.
Derivative financial liabilities are included in the analysis if their contractual maturities are essential
for an understanding of the timing of the cash flows. The amounts disclosed in the table are the
contractual undiscounted cash flows.
At 30 June 2014
Borrowings
Sukuk borrowing
Trade and other payables excluding
advancesfrom customers and
unearned revenue
Less than
1 year
AED’000
Between 1
year and
2 years
AED’000
Between 2
years and
5 years
AED’000
Over 5
Years
AED’000
301,282
167,144
318,430
167,144
1,116,838
501,433
899,330
2,387,320
772,374
34,894
––––––––
1,275,694
–
–
––––––––
485,574
–
–
––––––––
1,618,271
–
–
––––––––
3,286,650
377,866
167,144
377,555
167,144
1,196,152
501,433
1,959,204
2,554,464
790,019
12,070
––––––––
1,347,099
–
–
––––––––
544,699
–
–
––––––––
1,697,585
–
–
––––––––
4,513,668
––––––––
At 30 June 2013
Borrowings
Sukuk borrowing
Trade and other payables excluding
advances from customers and
unearned revenue
––––––––
5.3
––––––––
––––––––
––––––––
––––––––
––––––––
––––––––
Fair value estimation
The table below analyses financial instruments carried at fair value, by valuation method. The
different levels have been defined as follows:
•
Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).
•
Inputs other than quoted prices included within level 1 that are observable for the asset or
liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2)
•
Inputs for the asset or liability that are not based on observable market data (that is,
unobservable inputs) (level 3).
45
The following table presents the EZW Group’s assets that are measured at fair value at 30 June 2014.
30 June 2014
Assets
Derivative used for hedging
30 June 2013
Assets
Derivative used for hedging
Level 1
AED’000
Level 2
AED’000
Level 3
AED’000
Total
AED’000
–
––––––––
3,530
––––––––
–
––––––––
3,530
––––––––
–
––––––––
12,572
––––––––
–
––––––––
12,572
––––––––
There were no transfers between levels 1, 2 and 3 during the period.
6.
SEASONALITY OF OPERATIONS
The EZW Group’s financial results for any half year are not necessarily indicative of results to be expected
for the full year. Interim period revenues and earnings are typically sensitive to economies in which the EZW
Group operates, market conditions, and in particular, to contracts entered to sell and lease warehouses. In the
financial year ended 31 December 2013, 49.0% of revenues accumulated in the first half of the year, with
51.0% accumulating in the second half.
7.
PROPERTY AND EQUIPMENT, LAND USE RIGHTS AND INVESTMENT PROPERTIES
Property and
equipment
AED’000
Period ended 30 June 2014
Opening net book amount as at 1 January 2014
Additions for the period
Disposals/write off
Depreciation and amortization
Exchange differences
Closing net book amount as at 30 June 2014 (unaudited)
Opening net book amount as at 1 January 2013
Additions for the period
Transfer
Disposals/write off
Depreciation and amortization
Closing net book amount as at 30 June 2013 (unaudited)
Land use
rights
AED’000
Investment
properties
AED’000
13,540
1,207
–
(2,983)
–
––––––––
11,764
8,429,665
–
–
(45,363)
–
––––––––
8,384,302
3,552,340
172,284
(1,194)
(44,375)
3,664
––––––––
3,682,719
23,836
681
(560)
(7)
(6,218)
13
––––––––
17,745
8,520,391
–
–
–
(45,363)
–
––––––––
8,475,028
3,591,593
26,939
560
(19,784)
(43,717)
(7,401)
––––––––
3,548,190
––––––––
––––––––
––––––––
––––––––
––––––––
––––––––
Sukuk borrowing and borrowings are secured by the majority of land use rights (Note 9 and 10).
8.
RELATED PARTY TRANSACTIONS AND BALANCES
Related parties represent ultimate parent, parent, fellow subsidiaries, directors and key management
personnel of the EZW Group, and entities jointly controlled or significantly influenced by such parties.
46
During the period, the EZW Group entered into the following significant transactions with related parties in
the ordinary course of business, carried out on terms and conditions, agreed between the parties:
Six months ended 30 June
2014
2013
(Unaudited)
(Unaudited)
AED’000
AED’000
Income:
Revenue generated from other related parties
Interest income and unwinding of fair value loss from
– ultimate parent company
– other related parties
Expenses:
Interest expense recharged from parent company
Cost recharged from other related parties
Security services – other related party
Other operating expenses – other related parties
Repair and maintenance – other related parties
Key management remuneration:
– Salaries and other short term employee benefits
– Termination and post-employment benefits
38,429
32,644
16,625
3,228
15,749
3,944
–
5,642
2,874
6,039
23,141
88,569
5,332
2,569
5,070
20,787
21,908
1,479
––––––––
23,387
24,483
1,496
––––––––
25,979
–
––––––––
5,164,545
––––––––
––––––––
Waiver of loan from shareholder
––––––––
Balances with related parties included in the balance sheet are as follows:
30 June 31 December
2014
2013
(Unaudited)
(Audited)
AED’000
AED’000
Due from related parties comprises:
Due from other related parties
Loan to ultimate parent
Loans to other related parties
Less: fair value loss
59,324
758,052
106,353
(141,430)
––––––––
782,299
Analysed between:
Current
Non-current
––––––––
––––––––
77,246
705,053
––––––––
782,299
93,697
694,601
––––––––
788,298
––––––––
––––––––
Due to other related parties
34,894
47
75,569
750,771
113,688
(151,730)
––––––––
788,298
––––––––
––––––––
15,167
Loan receivable from the ultimate parent of AED 758,052,000 (31 December 2013: AED 750,771,000) is
interest bearing at rate of 2% and is payable by 2019, recognised initially at fair value. The fair value was
based on cash flows discounted at a rate of 5.6%, which was reflective of the Establishment’s weighted
average cost of capital at the time of initial recognition. The undiscounted value and carrying values at the
balance sheet date are as follows:
Due from ultimate parent
Undiscounted
30 June
2014
AED’000
Fair value
30 June
2014
AED’000
Undiscounted
31 December
2013
AED’000
Fair value
31 December
2013
AED’000
758,052
106,353
–––––––––
864,405
620,876
102,099
–––––––––
722,975
750,771
113,688
–––––––––
864,459
604,251
108,478
–––––––––
712,729
––––––––– ––––––––– ––––––––– –––––––––
9.
SUKUK BORROWING
On 19 June 2012, the EZW Group issued through its subsidiary JAFZ Sukuk (2019) Limited Sukuk trust
certificates (“Sukuk”) for a nominal value of AED 2,387 million (AED 2,340 million net of transaction costs
of AED 47 million) that are listed on NASDAQ Dubai and the Irish Stock Exchange. The Sukuk borrowing
matures seven years from the issue date and bears a profit commission at a coupon rate of 7% per annum to
be paid semi-annually. The carrying amounts of the Sukuk are denominated in United States Dollars
(“US$”). The Sukuk borrowing is secured in parri passu with borrowings (Note 10).
The following fair values of Sukuk borrowing are based on quoted market rates:
Carrying amount
30 June 31 December
2014
2013
(Unaudited)
(Audited)
AED’000
AED’000
Sukuk borrowing
10.
2,349,394
––––––––
2,346,304
––––––––
Fair value
30 June 31 December
2014
2013
(Unaudited)
(Audited)
AED’000
AED’000
2,745,609
––––––––
2,727,513
––––––––
BORROWINGS
Non-current
Term loan
Deferred borrowing costs
Current
Term loan
Total borrowings
30 June
2014
(Unaudited)
AED’000
31 December
2013
(Audited)
AED’000
2,025,560
(28,978)
–––––––––
1,996,582
–––––––––
2,373,560
(47,990)
–––––––––
2,325,570
–––––––––
220,000
(30,602)
–––––––––
189,398
–––––––––
2,185,980
214,720
(29,769)
–––––––––
184,951
–––––––––
2,510,521
––––––––– –––––––––
48
Movements in borrowings are analysed as follows:
AED’000
Opening amount as at 1 January 2014
Transaction costs charged to income statement
2,510,521
18,179
(342,720)
–––––––––
2,185,980
Closing amount as at 30 June 2014 (unaudited)
–––––––––
Opening amount as at 1 January 2013
Transaction costs charged to income statement
4,243,440
13,755
(1,197,999)
–––––––––
3,059,196
Closing amount as at 30 June 2013 (unaudited)
–––––––––
Borrowings are secured with the assignment of accounts receivable and mortgage over certain land use
rights.
The term loan bears an interest at a rate of three months EIBOR plus 2.75% per annum payable on a
quarterly basis. The interest rate on the term loan is revised effective 22 September 2014 to EIBOR plus
1.85% per annum. During the period, the EZW Group has made payment and prepayment of borrowing
towards the term loan of AED 342,720,000.
During the period ended June 2013, the pledged subsidiary was disposed and the borrowings were partially
settled from the proceeds thereof.
11.
COMMITMENTS
(a)
Capital commitments
The EZW Group’s estimated expenditures contracted for at the reporting date amounted to
AED 273,006,000 (31 December 2013: AED 247,663,000).
(b)
Operating lease commitments – as lessor
The EZW Group has commercial property leases on land for which the right of use was granted for
99 years and investment properties, consisting of office accommodation, warehouses and staff
accommodation. These non-cancellable leases have remaining terms of between 1 and 15 years. All
land leases entered after April 2007 contain a rent review provision whereby the EZW Group will
review the rent every 5 years, subject to certain negotiated rent caps.
Future minimum rentals receivable under non-cancellable operating leases as at 30 June 2014 and
31 December 2013 are as follows:
Within one year
After one year but not more than five years
More than five years
30 June
2014
(Unaudited)
AED’000
31 December
2013
(Audited)
AED’000
1,026,145
1,895,330
2,127,181
–––––––––
5,048,656
878,962
1,711,373
1,765,511
–––––––––
4,355,846
––––––––– –––––––––
49
(c)
Contingencies
During the period, the EZW Group has received notification of potential claims of AED 28,719,000
against the indemnity provided during the sale of its fully owned subsidiary in 2013 (Note 12). No
provisions in relation to these claims are recognised in this condensed interim consolidated financial
information. In the opinion of EZW directors, after taking appropriate legal advice, the outcome of
these legal claims will not give rise to any significant loss beyond the amounts provided for at 30 June
2014.
12.
NON-CURRENT ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS
On 10 June 2013, the EZW Group completed the disposal of EZW Gazeley Holdings Limited for a net sale
proceed of AED 1,370,065,000, the assets and liabilities of which were presented as held for sale following
the approval of the EZW Group’s Board of Directors on April 2012.
The results of discontinued operations until disposal were as follows:
10 June
2013
Revenue
Expenses
Share of loss from joint ventures
Operating profit
Finance income
Finance expense
Profit before tax
Income tax expense
Loss on disposal of discontinued operations after taxation
Total loss after tax from discontinued operations
140,659
(131,727)
––––––––
8,932
(9,158)
––––––––
(226)
69,230
(4,593)
––––––––
64,411
(7,333)
––––––––
57,078
––––––––
(90,703)
––––––––
(33,625)
––––––––
The net assets and liabilities at disposal and the loss therefrom were as follows:
10 June
2013
Cash proceeds
Vendor loan notes at fair value
1,006,902
404,683
–––––––––
1,411,585
(41,520)
–––––––––
1,370,065
–––––––––
Total proceeds at fair value
Less: Disposal transaction costs
Net proceeds from disposal
Assets and liabilities of the disposal group:
Property held for development and sale
Borrowings
Deferred tax liability
Trade and other payables
Net assets disposed
50
(1,860,242)
(156,984)
(141,513)
434,747
105,471
157,753
–––––––––
(1,460,768)
–––––––––
(90,703)
–––––––––
PART B: ACCOUNTANTS’ REPORT ON THE CONSOLIDATED HISTORICAL FINANCIAL
INFORMATION RELATING TO THE EZW GROUP
The Directors:
DP World Limited
PO Box 17000
Dubai
Citigroup Global Markets Limited (“Citi”)
Citigroup Centre
Canada Square
London
E14 5LB
Deutsche Bank (“Deutsche Bank”)
London
EC2N 2DB
13 November 2014
Dear Sirs
DP World Limited
We report on the financial information of Economic Zones World FZE and its subsidiaries (the “Target
Group”) set out in Part C of Part V below (the “IFRS Financial Information Table”). The IFRS Financial
Information Table has been prepared for inclusion in the “Class 1” and related party circular dated
13 November 2014 (the “Circular”) issued by DP World Limited (the “Company”) on the basis of the
accounting policies of the Company set out in note 2 of the IFRS Financial Information Table. The
“Circular” (including any supplementary circular) constitutes an “Investment Circular” for the purposes
of the Terms of Business. This report is required by item 13.5.21R of the Listing Rules and is given for the
purpose of complying with that item and for no other purpose.
Responsibilities
The Directors of the Company are responsible for preparing the IFRS Financial Information Table in
accordance with International Financial Reporting Standards.
It is our responsibility to form an opinion as to whether the IFRS Financial Information Table gives a true
and fair view, for the purposes of the Circular and to report our opinion to you.
Save for any responsibility which we may have to those persons to whom this report is expressly addressed
and which we may have to shareholders of the Company as a result of the inclusion of this report in the
Circular, to the fullest extent permitted by law we do not assume any responsibility and will not accept any
liability to any other person for any loss suffered by any such person as a result of, arising out of, or in
accordance with this report or our statement, required by and given solely for the purposes of complying with
item 13.4.1R(6) of the Listing Rules, consenting to its inclusion in the Circular.
Basis of opinion
We conducted our work in accordance with the Standards for Investment Reporting issued by the Auditing
Practices Board in the United Kingdom. Our work included an assessment of evidence relevant to the
amounts and disclosures in the financial information. It also included an assessment of significant estimates
and judgments made by those responsible for the preparation of the financial information and whether the
accounting policies are appropriate to the Company’s circumstances, consistently applied and adequately
disclosed.
51
We planned and performed our work so as to obtain all the information and explanations which we
considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the
financial information is free from material misstatement whether caused by fraud or other irregularity or
error.
Opinion
In our opinion, the IFRS Financial Information Table gives, for the purposes of the Circular dated
13 November 2014, a true and fair view of the state of affairs of the Target Group as at the dates stated and
of its profits/losses, cash flows and changes in equity for the periods then ended in accordance with
International Financial Reporting Standards.
Yours faithfully
PricewaterhouseCoopers Dubai branch
52
PART C: CONSOLIDATED HISTORICAL FINANCIAL INFORMATION RELATING TO THE
EZW GROUP
Consolidated balance sheet
Note
2013
AED’000
As at 31 December
2012
AED’000
2011
AED’000
ASSETS
Non-current assets
Property and equipment
Investment property
Land use right
Intangible assets
Investment in an associate
Investment in joint ventures
Available for sale financial assets
5
6
7
8
9
10
11
12
13
14
13,540
3,552,340
8,429,665
–
39,331
–
–
694,601
4,442
368,287
–––––––––
13,102,206
–––––––––
23,836
3,591,593
8,520,391
–
38,120
–
–
744,463
–
44,880
–––––––––
12,963,283
–––––––––
31,258
3,990,911
8,610,538
793,125
39,987
384
22,127
724,042
–
55,891
–––––––––
14,268,263
–––––––––
Current assets
Properties held for development and sale
15
12
13
14
16
Assets classified as held for sale
17
–
93,697
2,221
215,214
1,030,366
–––––––––
1,341,498
–––––––––
–
–––––––––
14,443,704
–
538,072
–
33,987
959,567
–––––––––
1,531,626
–––––––––
2,042,176
–––––––––
16,537,085
2,164,151
515,599
–
336,735
1,351,014
–––––––––
4,367,499
–––––––––
–
–––––––––
18,635,762
18
4,764,000
3,697,169
–
(40,930)
–––––––––
8,420,239
–––––––––
4,764,000
(2,283,280)
–
(28,634)
–––––––––
2,452,086
–––––––––
4,764,000
(907,558)
(124,203)
73,504
–––––––––
3,805,743
–––––––––
19
20
21
24
22
23,988
2,346,304
2,325,570
–
39,944
–––––––––
4,735,806
–––––––––
18,913
2,340,450
4,056,861
–
40,831
–––––––––
6,457,055
–––––––––
16,877
–
3,278
108,997
41,720
–––––––––
170,872
–––––––––
TOTAL ASSETS
EQUITY AND LIABILITIES
Equity
Share capital
Retained earnings/(accumulated losses)
Hedge reserve
Translation reserve
––––––––– ––––––––– –––––––––
Total equity
Employees’ end of service benefits
Sukuk borrowing
Borrowings
Deferred revenue
53
Note
Current liabilities
Current tax liabilities
Sukuk borrowing
Borrowings
Deferred revenue
24
13
23
20
21
12
22
Liabilities classified as held for sale
17
Total liabilities
TOTAL EQUITY AND LIABILITIES
As at 31 December
2013
2012
AED’000
AED’000
125
–
824,759
–
184,951
15,167
262,657
–––––––––
1,287,659
–––––––––
–
–––––––––
6,023,465
–––––––––
14,443,704
243
–
862,634
–
186,579
5,735,740
259,923
–––––––––
7,045,119
–––––––––
582,825
–––––––––
14,084,999
–––––––––
16,537,085
2011
AED’000
12,857
127,726
972,832
7,500,000
347,309
5,418,850
279,573
–––––––––
14,659,147
–––––––––
–
–––––––––
14,830,019
–––––––––
18,635,762
––––––––– ––––––––– –––––––––
54
Consolidated income statement
Notes
Continuing operations
Revenue
Cost of sales
Gross profit
Other operating income
Share of profit from an associate
Expenses
General and administrative expenses
Selling and marketing expenses
Operating profit
Finance income
Finance costs
Finance costs – net
Profit before tax
Income tax expense
25
26
27
9
28
29
12
31
31
31
24
Profit for the year from continuing
operations
Discontinued operations
Profit/(Loss) for the year from
discontinued operations
17
Profit/(loss) for the year
For the year ended 31 December
2013
2012
2011
AED’000
AED’000
AED’000
1,580,381
(344,074)
–––––––––
1,236,307
83,872
4,041
1,471,983
(694,912)
–––––––––
777,071
49,597
2,850
1,353,273
(606,718)
–––––––––
746,555
54,134
866
(188,782)
(49,190)
–––––––––
1,086,248
5,164,545
247,067
(483,331)
(236,264)
6,014,529
(455)
–––––––––
(176,828)
(38,972)
–––––––––
613,718
–
161,514
(671,616)
(510,102)
103,616
(522)
–––––––––
(165,424)
(30,561)
–––––––––
605,570
–
62,515
(619,786)
(557,271)
48,299
(903)
–––––––––
6,014,074
–––––––––
103,094
–––––––––
47,396
–––––––––
(33,625)
–––––––––
5,980,449
(1,478,816)
–––––––––
(1,375,722)
50,197
–––––––––
97,593
––––––––– ––––––––– –––––––––
55
Consolidated statement of comprehensive income
2013
2012
2011
AED’000
AED’000
AED’000
5,980,449
Profit/(loss) for the year
Other comprehensive income:
Items that may be subsequently reclassified to
profit or loss
Net investment hedge
Ineffective hedge reserve recycled to
consolidated statement of income
Cash flow hedges
Change in fair value
Ineffective hedge reserve recycled to
consolidated statement of income
(12,296)
–
Other comprehensive income for the year
Total comprehensive income/(loss) for the year
arises from:
– Continuing operations
– Discontinuing operations
97,593
(36,574)
5,688
–
(15,335)
–
(65,564)
–
58,397
89,387
–
––––––––
(12,296)
––––––––
65,806
––––––––
22,065
––––––––
–
––––––––
79,740
––––––––
5,968,153
––––––––
6,001,778
––––––––
(33,625)
––––––––
5,968,153
(1,353,657)
––––––––
157,436
––––––––
(1,511,093)
––––––––
(1,353,657)
177,333
––––––––
123,003
––––––––
54,330
––––––––
177,333
––––––––
56
(1,375,722)
––––––––
–
––––––––
Consolidated statement of changes in equity
Profit for the year
Other comprehensive
income
Loss for the year
Other comprehensive
income
Profit for the year
Other comprehensive
income
Balance at 31 December
2013
Translation
reserve
AED’000
(Accumulated
losses)/
Retained
earnings
AED’000
Total
AED’000
83,151
–
(1,005,151)
97,593
3,628,410
97,593
Share
capital
AED’000
Hedge
reserve
AED’000
4,764,000
–
(213,590)
–
–
–––––––––
4,764,000
–
89,387
–––––––––
(124,203)
–
(9,647)
–––––––––
73,504
–
–
–––––––––
(907,558)
(1,375,722)
79,740
–––––––––
3,805,743
(1,375,722)
–
–––––––––
4,764,000
–
124,203
–––––––––
–
–
(102,138)
–––––––––
(28,634)
–
–
–––––––––
(2,283,280)
5,980,449
22,065
–––––––––
2,452,086
5,980,449
–
–––––––––
–
–––––––––
(12,296)
–––––––––
–
–––––––––
(12,296)
–––––––––
4,764,000
–
(40,930)
3,697,169
8,420,239
––––––––– ––––––––– ––––––––– ––––––––– –––––––––
57
Consolidated statement of cash flows
Notes
Cash flows from operating activities
Profit before tax from continuing operations
Adjustments for:
Depreciation and amortisation
Impairment charge
Liabilities no longer required written back
Profit commission on Sukuk borrowing
Other finance cost
Provision for doubtful accounts receivable
Provision for employees’ end of service
benefits and general pension and
social security
Finance income (excluding foreign
exchange gain)
Share of profit from an associate
Loss on sale of property and equipment/
investment properties
Foreign exchange (gain)/loss, net
Payment of employees’ end of service
benefits and general pension and
social security (Note 19)
Income tax refund/(paid)
2013
2012
2011
AED’000
AED’000
AED’000
6,014,529
103,616
48,299
26, 28
26
27
31
31
14
193,475
–
–
167,144
316,187
3,076
192,406
339,296
–
316,516
355,100
13,882
196,094
247,017
(10,794)
380,094
232,011
11,802
30
14,522
11,390
11,937
31
9
(58,009)
(4,041)
(56,182)
(2,850)
(62,515)
(866)
12
31
24,373
(5,164,545)
(189,058)
11,257
–
(105,332)
832
–
7,681
(9,460)
(551)
(9,354)
(492)
(13,586)
(709)
(106,177)
11,720
104,443
215
1,847
–––––––––
1,319,690
–––––––––
44,137
131,133
(2,571)
7,369
(16,400)
–––––––––
1,332,921
–––––––––
228,820
(20,953)
105,939
(98,324)
20,135
–––––––––
1,282,914
–––––––––
1,006,902
(4,885)
(125,357)
57
(167,929)
(481,892)
2,830
6,550
–––––––––
236,276
–––––––––
–
(6,144)
(77,848)
–
(1,502)
751,003
4,717
19,443
–––––––––
689,669
–––––––––
–
(2,454)
(348,640)
409
56,844
(751,003)
4,408
26,472
–––––––––
(1,013,964)
–––––––––
Working capital adjustments:
Deferred revenue
Net cash generated from operating activities
Cash flows from investing activities
Proceeds from sale of disposal group classified
as held for sale
Purchase of property and equipment
Purchase of investment property
Proceeds from sale of fixed assets
Deposits under lien
Investment in long term deposits
Dividend received
Interest received
9
Net cash used in investing activities
58
Notes
Cash flows from financing activities
Finance cost paid
Repayment of Sukuk borrowing
Proceeds from issuance of Sukuk borrowing
Proceeds from bank borrowings
Other finance cost paid
Net cash used in financing activities
Net decrease in cash and bank balances
Cash and bank balances, beginning of the year
Cash and bank balances, end of the year
16
59
2013
2012
2011
AED’000
AED’000
AED’000
(362,860)
–
(1,754,718)
–
–
(15,653)
–––––––––
(2,133,231)
–––––––––
(577,265)
958,065
(1,758)
–––––––––
379,042
(469,857)
(7,500,000)
(60,280)
2,387,320
4,400,000
(187,187)
–––––––––
(1,430,004)
–––––––––
592,586
457,193
(91,714)
–––––––––
958,065
(381,695)
–
–
–
3,278
–
–––––––––
(378,417)
–––––––––
(109,467)
562,788
3,872
–––––––––
457,193
––––––––– ––––––––– –––––––––
1.
LEGAL STATUS AND ACTIVITIES
Economic Zones World FZE (the “Establishment”) was established as a Jebel Ali Free Zone Establishment,
under registration number 1293 on 14 March 2006. The Establishment’s registered address is
P.O. Box 16888, Jebel Ali, Dubai, United Arab Emirates.
The Establishment is a wholly owned subsidiary of Ports & Free Zone World FZE (the “parent company”).
The ultimate parent company is Dubai World Corporation (the “ultimate parent”).
The Establishment and its subsidiaries (together, the “EZW Group”) develop and manage free zones,
develop, sell and lease warehouses and provide facility management services. The EZW Group’s principal
subsidiaries and associate are as follows:
Name of entity
Holding percentage
2013
2012
2011
Principal activity
Subsidiaries
Jebel Ali Free Zone FZE
(JAFZ)
JAFZA Holding FZE
JAFZA Enterprises FZE
Business Center World FZE
100
100
100
Development and sale of warehouses
Facility provider and management
100
100
100
100
100
100
100
100
100
Development, sale and leasing of distribution
warehouses
warehouses
warehouses
warehouses
–
100
100
–
100
100
–
100
100
–
100
–
warehouses
warehouses
–
50
50
–
–
50
40
40
40
United Kingdom
EZW Gazeley Limited
(“Gazeley”)
EZW Gazeley Holdings
Limited
Gazeley Limited
Fen Farms Developments
Limited
Joint venture
United Kingdom
BL Gazeley Limited
Fen Farms Developments
Limited
Associate
Djibouti
Djibouti Dry Port
SAFZ (DDP)
On 13 November 2007 and amended on 29 April 2012, the EZW Group entered into two agreements with
JAFZA, one agreement to acquire land use right for a period of 99 years and another agreement for the
purchase of assets. The EZW Group paid JAFZA AED 8.9 billion and AED 3 billion as consideration for
the acquisition of land use right and purchase of assets respectively. Under the land use right agreement, the
EZW Group will be liable to pay JAFZA a contingent consideration of 2% of revenue (limited to licensing
and registration activity) earned from the fourth year onward and increases to 50% by the end of the
99th year.
60
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of this consolidated financial information are set
out below. These policies have been consistently applied to all the years presented unless otherwise stated.
2.1
Basis of Preparation
The consolidated financial information of the Establishment has been prepared for the purpose of this
document in accordance with the requirements of the Listing Rules, in accordance with International
Financial Reporting Standards (“IFRS”) and applicable IFRS interpretations committee (IFRS IC) as
applied by DP World Limited. This consolidated financial information has been prepared under the
historical cost convention as modified by the revaluation of derivative financial instruments. The
accounting policies of DP World Limited have been applied to report the consolidated historical
financial information of the Establishment on a consistent basis with the accounting policies adopted
in DP World Limited’s annual consolidated accounts for the year ended 31 December 2013.
The preparation of the consolidated financial information in conformity with IFRS requires the use of
certain critical accounting estimates. It also requires management to exercise its judgement in the
process of applying the accounting policies of DP World Limited. The areas involving a higher degree
of judgement or complexity, or areas where assumptions and estimates are significant to the
consolidated financial information is disclosed in Note 4.
The consolidated financial information of the Establishment includes the reported financial position
and results of EZW Gazeley Holdings Limited until the disposal of the subsidiary on 10 June 2013.
No adjustments have been made in this consolidated financial information in connection with any
Carve-Out Conditions specified in the Acquisition Agreement in respect of Gazeley Holdings
Limited. For the details of financial position and results of the disposal group refer to Note 17
“Non-current assets held for sale and discontinued operations” of the consolidated financial
information.
Operating segments have been determined based on information regularly reviewed by the Chief
Operating Decision Maker – the CEO of the Establishment. All of the Establishment’s operating
segments are subject to similar risks and returns and exhibit similar economic characteristics and one
reportable segment has therefore been identified, being the development, management, sales and
leasing of warehouses. This single reportable segment has been determined on the basis of the
similarity between and interconnectedness of all of the Establishment’s products.
No end-customer contributes more than 10 per cent. of the Establishment’s revenue. The majority of
the Establishment’s operations and customers are based in the UAE, where the Establishment is
domiciled. After the disposal of Gazeley Holdings Limited on 10 June 2013 (Note 17), the
Establishment has no material assets outside of the UAE. In 2013, AED 140,659,000 of the
Establishment’s revenue was attributable to sales to customers outside the UAE (based on the location
of where the sale originated) (2012: AED 412,879,000; 2011: AED 1,143,409,000).
(a)
New and amended standards adopted by the EZW Group
The following standards have been adopted by the EZW Group for the first time for the
financial year beginning on or after 1 January 2013 and do not have a material impact on the
EZW Group:
•
Amendment to IAS 1, ‘Financial statement presentation’ regarding other comprehensive
income. The main change resulting from these amendments is a requirement for entities
to group items presented in ‘other comprehensive income’ (OCI) on the basis of whether
they are potentially reclassifiable to profit or loss subsequently (reclassification
adjustments).
•
Amendment to IFRS 7, ‘Financial instruments: Disclosures’, on asset and liability
offseting. This amendment includes new disclosures to facilitate comparison between
those entities that prepare IFRS financial statements to those that prepare financial
statements in accordance with US GAAP.
61
(b)
•
IFRS 10, ‘Consolidated financial statements’ builds on existing principles by identifying
the concept of control as the determining factor in whether an entity should be included
within the consolidated financial statements of the parent company. The standard
provides additional guidance to assist in the determination of control where this is
difficult to assess.
•
IFRS 12, ‘Disclosures of interests in other entities’, effective for annual periods
beginning on or after 1 January 2013, includes the disclosure requirements for all forms
of interests in other entities, including joint arrangements, associates, special purpose
vehicles and other off balance sheet vehicles.
•
IFRS 13, ‘Fair value measurement’, aims to improve consistency and reduce complexity
by providing a precise definition of fair value and a single source of fair value
measurement and disclosure requirements for use across IFRSs. The requirements,
which are largely aligned between IFRSs and US GAAP, do not extend the use of fair
value accounting but provide guidance on how it should be applied where its use is
already required or permitted by other standards within IFRSs.
•
IAS 28 Investments in Associates and Joint Ventures (as amended in 2011) outlines how
to apply, with certain limited exceptions, the equity method to investments in associates
and joint ventures. The standard also defines an associate by reference to the concept of
“significant influence”, which requires power to participate in financial and operating
policy decisions of an investee (but not joint control or control of those policies).
New standards and interpretations not yet adopted
A number of new standards and amendments to standards and interpretations are effective for
annual periods beginning after 1 January 2013, and have not been applied in preparing this
consolidated financial information. None of these is expected to have a significant effect on the
consolidated financial information of the EZW Group, except the following set out below:
•
IAS 32 (amendment), ‘Financial instruments: Presentation’, (effective from 1 January
2014);
•
IFRS 9, ‘Financial instruments’, (effective from 1 January 2018).
There are no other IFRS or IFRS IC interpretations that are not yet effective that would be
expected to have a material impact on the EZW Group.
2.2
Basis of Consolidation
(a)
Subsidiaries
Subsidiaries are all entities (including structured entities) over which the EZW Group has
control. The EZW Group controls an entity when the EZW Group is exposed to, or has rights
to, variable returns from its involvement with the entity and has the ability to affect those
returns through its power over the entity. Subsidiaries are fully consolidated from the date on
which control is transferred to the EZW Group. They are deconsolidated from the date that
control ceases.
The EZW Group applies the acquisition method to account for business combinations. The
consideration transferred for the acquisition of a subsidiary is the fair values of the assets
transferred, the liabilities incurred to the former owners of the acquiree and the equity interests
issued by the EZW Group. The consideration transferred includes the fair value of any asset or
liability resulting from a contingent consideration arrangement. Identifiable assets acquired and
liabilities and contingent liabilities assumed in a business combination are measured initially
at their fair values at the acquisition date. The EZW Group recognises any non-controlling
interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the
non-controlling interest’s proportionate share of the recognised amounts of acquiree’s
62
identifiable net assets. Acquisition-related costs are expensed as incurred. If the business
combination is achieved in stages, the acquisition date fair value of the acquirer’s previously
held equity interest in the acquiree is remeasured to fair value at the acquisition date through
profit or loss.
Any contingent consideration to be transferred by the EZW Group is recognised at fair value
at the acquisition date. Subsequent changes to the fair value of the contingent consideration that
is deemed to be an asset or liability is recognised in accordance with IAS 39 either in profit or
loss or as a change to other comprehensive income. Contingent consideration that is classified
as equity is not remeasured, and its subsequent settlement is accounted for within equity.
The excess of the consideration transferred, the amount of any non-controlling interest in the
acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over
the fair value of the identifiable net assets acquired is recorded as goodwill. If the total of
consideration transferred, non-controlling interest recognised and previously held interest
measured is less than the fair value of the net assets of the subsidiary acquired in the case of a
bargain purchase, the difference is recognised directly in the income statement.
All the EZW Group companies have 31 December as their year-end. Consolidated financial
statements are prepared using uniform accounting policies for like transactions. Accounting
policies of subsidiaries have been changed where necessary to ensure consistency with the
policies adopted by the EZW Group.
(b)
Eliminations on consolidation
Inter-company transactions, balances and unrealised gains or losses on transactions between
EZW Group companies are eliminated. When necessary amounts reported by subsidiaries have
been adjusted to conform with the EZW Group’s accounting policies.
(c)
Associate and joint ventures
An associate is an entity over which the EZW Group has significant influence but not control,
generally accompanying a shareholding of between 20%–50% of the voting rights. A joint
venture is a contractual arrangement between the EZW Group and one or more other parties to
undertake economic activity that is subject to joint control.
Investments in associate and joint ventures are accounted for using the equity method of
accounting. Under the equity method, the investment is initially recognised at cost, and the
carrying amount is increased or decreased to recognise the investor’s share of the profit or loss
of the investee after the date of acquisition. The EZW Group’s investment in associate and joint
ventures includes goodwill identified on acquisition.
The EZW Group’s share of post-acquisition profit or loss is recognised in the consolidated
statement of income, and its share of post-acquisition movements in other comprehensive
income is recognised in other comprehensive income with a corresponding adjustment to the
carrying amount of the investment. When the EZW Group’s share of losses in an associate/joint
venture equals or exceeds its interest in the associate/joint venture, including any other
unsecured receivables, the EZW Group does not recognise further losses, unless it has incurred
legal or constructive obligations or made payments on behalf of the associate/joint venture.
The EZW Group determines at each reporting date whether there is any objective evidence that
the investment in the associate/joint venture is impaired. If this is the case, the EZW Group
calculates the amount of impairment as the difference between the recoverable amount of the
associate/joint venture and its carrying value and recognises the amount adjacent to ‘share of
profit/(loss) from joint ventures and associates’ in the consolidated statement of income.
Profits and losses resulting from upstream and downstream transactions between the
EZW Group and its associate are recognised in the EZW Group’s consolidated financial
63
information only to the extent of unrelated investor’s interests in the associates. Unrealised
losses are eliminated unless the transaction provides evidence of an impairment of the asset
transferred. Accounting policies of associates have been changed where necessary to ensure
consistency with the policies adopted by the EZW Group.
2.3
Foreign Currency Translation
(a)
Functional and presentation currency
Items included in the financial statements of each of the EZW Group’s entities are measured
using the currency of the primary economic environment in which the entity operates
(‘the functional currency’). The consolidated financial information is presented in United Arab
Emirates Dirhams (“AED”), which is the Establishment’s functional and presentation currency.
(b)
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange
rates prevailing at the dates of the transactions or valuation where items are re-measured.
Foreign exchange gains and losses resulting from the settlement of such transactions and from
the translation at year-end exchange rates of monetary assets and liabilities denominated in
foreign currencies are recognised in the consolidated statement of income, except when
deferred in other comprehensive income as qualifying cash flow hedges and qualifying net
investment hedges.
Translation differences on non-monetary financial assets and liabilities are reported as part of
the fair value gain or loss. Translation differences on non-monetary financial assets such as
equities classified as available-for-sale are included in the fair value reserve in equity.
Balances and transactions denominated in US dollars (“US$”) have been translated into the
presentation currency at a fixed rate as the exchange rate of AED to US$ has been pegged since
1981.
(c)
EZW Group companies
The results and financial position of all the EZW Group entities (none of which has the
currency of a hyperinflationary economy) that have a functional currency different from the
presentation currency are translated into the presentation currency as follows:
(i)
Assets and liabilities for each balance sheet presented are translated at the closing rate
at the date of the balance sheet;
(ii)
Income and expenses for each statement of income are translated at average exchange
rates; and
(iii)
All resulting exchange differences are recognised in other comprehensive income.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as
assets and liabilities of the foreign entity and translated at the closing rate.
2.4
Property and Equipment
Property and equipment are stated at historical cost less accumulated depreciation. Historical cost
includes expenditures that are 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 EZW Group and the cost of the item can be measured reliably. The carrying amount of the
replaced part is derecognised. All other repairs and maintenance are charged to the consolidated
statement of income during the financial period in which they are incurred.
64
Depreciation is calculated using the straight-line method to allocate their cost to their residual values
over their estimated useful lives, as follows:
Years
Buildings
Motor and utility vehicles
Furniture and fixtures
Equipment
20-50
5-10
5-10
1-5
The assets’ residual values, useful lives and methods of depreciation, are reviewed and adjusted if
appropriate at each financial year end.
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.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount
and are recognised within the consolidated statement of income.
Capital work-in-progress is stated at cost. When commissioned, capital work-in-progress is
transferred to the appropriate category of property and equipment and depreciated in accordance with
the EZW Group’s policy.
2.5
Investment Property
Property that is held for long term rental yields or for capital appreciation or both, and that is not
occupied by the companies in the consolidated EZW Group, is classified as investment property.
Investment property also includes property that is being constructed or developed for future use as
investment property.
Investment property is measured initially at its cost, including related transaction costs and where
applicable borrowing costs. After initial recognition, investment property is carried at cost less
accumulated depreciation and impairment, if any.
The fair value for disclosure purposes of the investment property is based on active market prices,
adjusted, if necessary, for any difference in the nature, location or condition of the specific asset.
If this information is not available, the EZW Group uses alternative valuation methods, such as recent
prices on less active markets or discounted cash flow projections. Valuations are performed as of the
financial position date by professional valuers who hold recognised and relevant professional
qualifications and have recent experience in the location and category of the investment property
being valued.
Subsequent expenditure is capitalised to the asset’s carrying amount, only when it is probable that
future economic benefits associated with the expenditure will flow to the EZW Group and the cost of
the item can be measured reliably. All other repairs and maintenance costs are expensed when
incurred. When part of an investment property is replaced, the carrying amount of the replaced part is
derecognised.
When investment property is sold, gains and losses on disposal are determined by reference to its
carrying amount and are taken into account in determining operating profit.
Investment property under construction is not depreciated until such time as the relevant assets are
completed and commissioned.
65
Land is not depreciated. Depreciation is calculated using the straight-line method to allocate their cost
to their residual values over their estimated useful lives, as follows:
Years
Buildings
Infrastructure
20-35
5-50
The useful lives and depreciation method are reviewed periodically to ensure that the method and
period of depreciation are consistent with the expected pattern of economic benefits from these assets.
Investment property under construction is not depreciated until such time as the relevant assets are
completed and commissioned.
2.6
Intangible Assets
(a)
Goodwill
Goodwill arises on the acquisition of subsidiaries, associates and joint ventures and represents
the excess of the consideration transferred over the EZW Group’s interest in net fair value of
the net identifiable assets, liabilities and contingent liabilities of the acquiree and the fair value
of the non-controlling interest in the acquiree.
For the purpose of impairment testing, goodwill acquired in a business combination is allocated
to each of the Cash Generating Units (“CGUs”), or groups of CGUs, that is expected to benefit
from the synergies of the combination. Each unit or group of units to which the goodwill is
allocated represents the lowest level within the entity at which the goodwill is monitored for
internal management purposes. Goodwill is monitored at the operating segment level.
Goodwill impairment reviews are undertaken annually or more frequently if events or changes
in circumstances indicate a potential impairment. The carrying value of goodwill is compared
to the recoverable amount, which is the higher of value in use and the fair value less costs to
sell. Any impairment is recognised immediately as an expense and is not subsequently
reversed.
(b)
Customer contracts and brand names
Separately acquired brand names and customer contracts are shown at historical cost. Brand
names and customer contracts acquired in business combination are recognised at fair value at
the acquisition date.
Customer contracts have a finite useful life and are carried at cost less accumulated
amortisation. Amortisation is calculated using the straight-line method to allocate the cost of
customer contracts over their estimated useful life of 10 years.
Brand names are not amortised. Brand names are tested for impairment annually or more
frequently if impairment indicators arise. The carrying value of brand names is compared to the
recoverable amount, which is the higher of value in use and the fair value less costs to sell. Any
impairment is recognised immediately as an expense and is not subsequently reversed.
2.7
Land Use Right
The total cost of acquiring land use right is capitalised as a land use right asset and is carried at cost
less accumulated amortisation. Amortisation is calculated using the straight-line method to allocate
the cost over the term of rights of 99 years that is included under ‘cost of sales’ in the consolidated
statement of income.
2.8
Impairment of Non-Financial Assets
Assets that are subject to amortisation are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. An impairment loss is
recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The
66
recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the
purposes of assessing impairment, assets are grouped at the lowest levels for which there are
separately identifiable cash flows (cash-generating units). Non-financial assets that suffered
impairment are reviewed for possible reversal of the impairment at each reporting date.
2.9
Property Held for Development and Sale
Land and building identified as held for sale, including buildings under construction, are classified as
such and are stated at the lower of cost and estimated net realisable value. The cost of
work-in-progress comprises construction costs, infrastructure costs and other related direct costs. Net
realisable value is the estimated selling price in the ordinary course of business, less cost of
completion and selling expenses.
2.10 Non-Current Assets Held for Sale and Discontinued Operations
Non-current assets are classified as assets held for sale when their carrying amount is to be recovered
principally through a sale transaction and a sale is considered highly probable. They are stated at the
lower of carrying amount and fair value less costs to sell.
A discontinued operation is a component that represents a major line of business or a geographical
area of operations that has been disposed of, is classified as discontinued resulting from a cessation
of operations or classified as held for sale.
2.11 Financial Assets
2.11.1 Classification
The EZW Group classifies its financial assets as loans and receivables and derivatives.
The classification depends on the purpose for which the financial assets were acquired.
Management determines the classification of its financial assets at initial recognition.
Loans and receivables are non-derivative financial assets with fixed or determinable payments
that are not quoted in an active market. They are included in current assets, except for
maturities greater than 12 months after the end of the reporting period which are classified as
non-current assets. The EZW Group’s loans and receivables comprise ‘due from related
parties’, ‘trade and other receivables’ and ‘cash and bank balances in the balance sheet
(Notes 12, 14 and 16 respectively).
Derivatives are categorised as held for trading unless they are designated as hedges. Assets in
this category are classified as current assets if expected to be settled within 12 months,
otherwise they are classified as non-current.
2.11.2 Recognition and Measurement
Regular purchases and sales of financial assets are recognised on the trade-date – the date on
which the EZW Group commits to purchase or sell the asset. Investments are initially
recognised at fair value plus transaction costs for all financial assets not carried at fair value
through profit or loss. Financial assets carried at fair value through profit or loss are initially
recognised at fair value, and transaction costs are expensed in the income statement. Financial
assets are derecognised when the rights to receive cash flows from the investments have
expired or have been transferred and the EZW Group has transferred substantially all risks and
rewards of ownership. Loans and receivables are subsequently carried at amortised cost using
the effective interest method.
2.12 Offsetting Financial Instruments
Financial assets and liabilities are offset and the net amount reported in the consolidated balance sheet
when there is a legally enforceable right to offset the recognised amounts and there is an intention to
settle on a net basis or realise the asset and settle the liability simultaneously.
67
2.13 Impairment of Financial Assets
(a)
Assets carried at amortised cost
The EZW Group assesses at the end of each reporting period whether there is objective
evidence that a financial asset or group of financial assets is impaired. A financial asset or a
group of financial assets is impaired and impairment losses are incurred only if there is
objective evidence of impairment as a result of one or more events that occurred after the initial
recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the
estimated future cash flows of the financial asset or group of financial assets that can be reliably
estimated.
Evidence of impairment may include indications that the debtors or a group of debtors are
experiencing significant financial difficulty, default or delinquency in interest or principal
payments, the probability that they will enter bankruptcy or other financial reorganisation, and
where observable data indicate that there is a measurable decrease in the estimated future cash
flows, such as changes in arrears or economic conditions that correlate with defaults.
For loans and receivables category, the amount of the loss is measured as the difference
between the asset’s carrying amount and the present value of estimated future cash flows
(excluding future credit losses that have not been incurred) discounted at the financial asset’s
original effective interest rate. The carrying amount of the asset is reduced and the amount of
the loss is recognised in the consolidated income statement. If a loan has a variable interest rate,
the discount rate for measuring any impairment loss is the current effective interest rate
determined under the contract. As a practical expedient, the EZW Group may measure
impairment on the basis of an instrument’s fair value using an observable market price.
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 (such as an
improvement in the debtor’s credit rating), the reversal of the previously recognised
impairment loss is recognised in the consolidated statement of income.
(b)
Assets classified as available-for-sale
In the case of equity securities classified as available-for-sale, a significant or prolonged
decline in the fair value of the equity security below its cost is considered as an indicator that
the securities are impaired. If any such evidence exists for available-for-sale financial assets,
the cumulative loss – measured as the difference between the acquisition cost and the current
fair value, less any impairment loss on that financial asset previously recognised in profit or
loss – is removed from equity and recognised in the separate consolidated statement of income.
Impairment losses recognised in the consolidated statement of income on equity instruments
are not reversed through the consolidated statement of income.
2.14 Derivative Financial Instruments and Hedging Activities
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and
are subsequently re-measured at their fair value. The method of recognising the resulting gain or loss
depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the
item being hedged. The EZW Group designates its derivatives as hedges of a particular risk associated
with a recognised asset or liability or a highly probable forecast transaction (cash flow hedge) or
hedges of net investments in foreign operations.
The EZW Group documents at the inception of the transaction the relationship between hedging
instruments and hedged items, as well as its risk management objectives and strategy for undertaking
various hedging transactions. The EZW Group also documents its assessment, both at hedge inception
and on an on-going basis, of whether the derivatives that are used in hedging transactions are highly
effective in offsetting changes in fair values or cash flows of hedged items. A hedge of the foreign
currency risk of a firm commitment is accounted for as a cash flow hedge.
68
The fair values of various derivative instruments used for hedging purposes are disclosed in Note 13.
The full fair value of a hedging derivative is classified as a non-current asset or liability when the
remaining hedged item is more than 12 months, and as a current asset or liability when the remaining
maturity of the hedged item is less than 12 months. Trading derivatives are classified as a current asset
or liability.
(a)
Cash flow hedge
The effective portion of changes in the fair value of derivatives that are designated and qualify
as cash flow hedges is recognised in other comprehensive income. The gain or loss relating to
the ineffective portion is recognised immediately in the consolidated statement of income.
Amounts accumulated in equity are reclassified to profit or loss in the periods when the hedged
item affects profit or loss (for example, when the forecast sale that is hedged takes place). The
gain or loss relating to the effective portion of interest rate swaps hedging variable rate
borrowings is recognised in the consolidated statement of income within ‘Finance cost – net’.
However, when the forecast transaction that is hedged, results in the recognition of a
non-financial asset (for example, inventory or fixed assets), the gains and losses previously
deferred in equity are transferred from equity and included in the initial measurement of the
cost of the asset. The deferred amounts are ultimately recognised in cost of goods sold in the
case of inventory or in depreciation in the case of fixed assets.
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for
hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity
and is recognised when the forecast transaction is ultimately recognised in the consolidated
statement of income. When a forecast transaction is no longer expected to occur, the cumulative
gain or loss that was reported in equity is immediately transferred to the consolidated statement
of income.
(b)
Net investment hedge
Hedges of net investments in foreign operations are accounted for similar to cash flow hedges.
Any gain or loss on the hedging instrument relating to the effective portion of the hedge is
recognised in other comprehensive income. The gain or loss relating to the ineffective portion
is recognised in the income statement. Gains and losses accumulated in equity are included in
the income statement when the foreign operation is partially disposed of or sold.
2.15 Trade Receivables
Trade receivables are amounts due from customers for properties sold or services performed in the
ordinary course of business. If collection is expected in one year or less (or in the normal operating
cycle of the business if longer), they are classified as current assets. If not, they are presented as
non-current assets.
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost
using the effective interest method, less provision for impairment.
2.16 Cash and Bank Balances
In the consolidated statement of cash flows from continuing operations, cash and bank balances
include cash in hand, deposits held at call with banks, other short-term highly liquid investments with
original maturities of three months or less from continuing operations.
2.17 Share Capital
Ordinary shares are classified as equity when there is no obligation to transfer cash or other assets.
69
2.18 Trade Payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary
course of business from suppliers. Accounts payable are classified as current liabilities if payment is
due within one year or less (or in the normal operating cycle of the business if longer). If not, they are
presented as non-current liabilities.
Trade payables are recognised initially at fair value and subsequently measured at amortised cost
using the effective interest method.
2.19 Provisions
Provisions are recognised when the EZW Group has a present legal or constructive obligation as a
result of past events, it is probable that an outflow of resources embodying economic benefits will be
required to settle the obligation and a reliable estimate of the amount can be made. Provisions are not
recognised for future operating losses.
Provisions are measured at the present value of the expenditures expected to be required to settle the
obligation using a pre-tax rate that reflects current market assessments of the time value of money and
risks specific to the obligation. Increases in provisions due to the passage of time are recognised as
interest expense.
Where there are a number of similar obligations, the likelihood that an outflow will be required in
settlement is determined by considering the class of obligations as a whole. A provision is recognised
even if the likelihood of an outflow with respect to any one item included in the same class of
obligation may be small.
2.20 Advances from Customers
Instalments received from buyers for sales of warehouses and/or service prior to meeting the revenue
recognition criteria, are recognised as advances from customers. These are considered a current
liability as they are repayable on demand on cancellation of the contracts, subject to certain penalties.
2.21 Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are
subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs)
and the redemption value is recognised in the statement of income over the period of the borrowings
using the effective interest method.
Fixed term loan from a parent company to a subsidiary is recognised initially at fair value, estimated
by discounting the future loan repayments based on the rate the subsidiary would pay at an arm’s
length basis for a loan with similar conditions. Subsequently, the loan is measured at amortised cost,
using the effective interest rate method.
Waivers of loans by the parent company are accounted for as a gain recognised in the income
statement in the period where this reflects the underlying economic substance of the transaction.
Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the
extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is
deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some
or all of the facility will be drawn down, the fee is capitalised as a pre-payment for liquidity services
and amortised over the period of the facility to which it relates.
2.22 Borrowing Costs
General and specific 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.
70
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 statement of income in the period in which
they are incurred.
2.23 Employees’ Benefits
(a)
End of service benefits to non-UAE nationals
An accrual is made for the estimated liability for employees’ entitlements to annual leave and
leave passage as a result of services rendered by the employees up to the balance sheet date.
Provision is made, using actuarial techniques, for the full amount of end of service benefits due
to the non-UAE Nationals in accordance with the EZW Group policy and UAE labour law, for
their periods of service up to the balance sheet date. The accrual relating to annual leave and
leave passage is included in trade and other payables, while the provision relating to
employees’ end of service benefits is disclosed as a non-current liability.
(b)
General pension and social security
Effective 1 January 2003, the EZW Group joined the pension scheme operated by the Federal
General Pension and Social Security Authority. Accordingly contributions for eligible UAE
National employees are made and charged to the consolidated statement of income, in
accordance with the provisions of Federal Law No. 7 for 1999 relating to Pension and Social
Security Law.
2.24 Revenue Recognition
Revenue is measured at the fair value of the consideration received or receivable, and represents
amounts receivable for goods supplied, stated net of discounts, returns and value added taxes. The
EZW Group recognises revenue when the amount of revenue can be reliably measured; when it is
probable that future economic benefits will flow to the entity; and when specific criteria have been
met for each of the EZW Group’s activities, as described below. The EZW Group bases its estimate
of return on historical results, taking into consideration the type of customer, the type of transaction
and the specifics of each arrangement.
(a)
Lease rental
Lease rental is recognised on a straight line basis over the lease term. Where the consideration
for the lease is received for subsequent period, the attributable amount of revenue is deferred
and recognised in the subsequent period. Unrecognised revenue is classified as deferred
revenue under liabilities in the balance sheet.
(b)
Sale of property
Revenue from sale of property, normally warehouses, is recognised in the consolidated
statement of income when the risks and rewards of ownership are transferred to the buyer. The
significant risks and rewards are deemed to be transferred when the property is transferred to
the buyer, which in the case of the buildings generally takes place only upon completion of
construction and physical handover of the property.
(c)
Administrative services
Revenue from license, registration, administration and consultancy service are recognised as
the service is provided.
(d)
Other operating income
Other operating income is recognised when the service is provided and right to receive
payment is established.
71
2.25 Interest Income
Interest income is recognised using the effective interest method. When a loan and receivable is
impaired, the EZW Group reduces the carrying amount to its recoverable amount, being the estimated
future cash flow discounted at the original effective interest rate of the instrument, and continues
unwinding the discount as interest income. Interest income on impaired loan and receivables is
recognised using the original effective interest rate.
2.26 Current and Deferred Income Tax
The tax expense for the year comprises current and deferred tax. Tax is recognised in the consolidated
income statement, except to the extent that it relates to items recognised in other comprehensive
income or directly in equity. In this case, the tax is also recognised in other comprehensive income or
directly in equity, respectively.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively
enacted at the balance sheet date in the countries where the EZW Group and its subsidiaries operate
and generate taxable income.
Management periodically evaluates positions taken in tax returns with respect to situations in which
applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the
basis of amounts expected to be paid to the tax authorities.
Deferred income tax is recognised, using the liability method, on temporary differences arising
between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial
information. However, deferred tax liabilities are not recognised if they arise from the initial
recognition of goodwill; deferred income tax is not accounted for if it arises from initial recognition
of an asset or liability in a transaction other than a business combination that at the time of the
transaction affects neither accounting nor taxable profit or loss.
Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially
enacted by the balance sheet date and are expected to apply when the related deferred income tax asset
is realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised only to the extent that it is probable that future taxable
profit will be available against which the temporary differences can be utilised.
Deferred income tax is provided on temporary differences arising on investments in subsidiaries
except for deferred income tax liability where the timing of the reversal of the temporary difference
is controlled by the EZW Group and it is probable that the temporary difference will not reverse in
the foreseeable future.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset
current tax assets against current tax liabilities and when the deferred income taxes assets and
liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity
or different taxable entities where there is an intention to settle the balances on a net basis.
3.
FINANCIAL RISK MANAGEMENT
3.1
Financial Risk Factors
The EZW Group’s activities expose it to a variety of financial risks: market risk (including currency
risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity
risk. The EZW Group’s overall risk management programme focuses on the unpredictability of
financial markets and seeks to minimise potential adverse effects on the EZW Group’s financial
performance. The EZW Group uses derivative financial instruments to hedge certain risk exposures.
72
(a)
Market risk
(i)
Currency risk
The EZW Group operates internationally and is exposed to foreign exchange risk arising
from various currency exposures, primarily with respect to the UK pound and EURO.
Foreign exchange risk arises from future commercial transactions, recognised assets and
liabilities and net investments in foreign operations.
The EZW Group has certain investments in foreign operations, whose net assets are
exposed to foreign currency translation risk. Currency exposure arising from the net
assets of the EZW Group’s foreign operations is managed primarily through borrowings
denominated in the relevant foreign currencies.
At 31 December 2013, the EZW Group had no material exposure to the UK pound and
EURO as a result of disposal of its investments in EZW Gazeley Limited (Note 17).
At 31 December 2012, if the currency had weakened/strengthened by 1% against the
UK pound with all other variables held constant, post-tax loss for the year would have
been AED 4,105,000 higher/lower (2011: AED 2,118,000), mainly as a result of foreign
exchange gains/losses on translation of UK pound-denominated trade receivables,
financial assets at fair value through profit or loss, debt securities classified as
available-for-sale and foreign exchange losses/gains on translation of UK
pound-denominated borrowings.
(ii)
Price risk
The EZW Group is not exposed to equity securities or commodity price risk.
(iii)
Cash flow and fair value interest rate risk
The EZW Group’s interest rate risk arises from Sukuk – JAFZ Sukuk Limited borrowing
and bank borrowings denominated in the AED. Borrowings issued at variable rates
expose the EZW Group to cash flow interest rate risk which is partially offset by cash
held at variable rates. Borrowings issued at fixed rates expose the EZW Group to fair
value interest rate risk. The EZW Group management did not set ratio of variable rate
borrowings to fixed rate borrowings.
The EZW Group manages its cash flow interest rate risk by using floating-to-fixed
interest rate swaps. Such interest rate swaps have the economic effect of converting
borrowings from floating rates to fixed rates. Generally, the EZW Group raises long
term borrowings at floating rates and swaps them into fixed rates that are lower than
those available if the EZW Group borrowed at fixed rates directly. Under the interest rate
swaps, the EZW Group agrees with other parties to exchange, at specified intervals
(primarily quarterly), the difference between fixed contract rates and floating-rate
interest amounts calculated by reference to the agreed notional amounts.
If the interest rate on the non-hedged portion of borrowing of AED 1,538,280,000
(2012: AED 4,339,720,000; 2011: AED 3,500,000,000) had been 1% higher/lower with
all other variables held constant, profit for the year would have been AED 15,383,000
(2012: AED 43,397,000; 2011: AED 35,000,000) lower/higher, mainly as a result of
higher/lower interest expense on floating rate borrowings.
If the interest rate on the hedged portion of borrowing of AED 1,050,000,000 had been
1% higher with all other variables held constant, profit for the year would have been
AED 3,015,000 (2012 & 2011: Not applicable) lower. If the interest rate had been 1%
lower with all other variables held constant, profit for the year would have been
AED 10,500,000 (2012 & 2011: Not applicable) higher. This is mainly as a result of
exercise of the swaption agreements.
73
(b)
Credit risk
Credit risk is the risk that one party to a financial instrument will cause a financial loss for the
other party by failing to discharge an obligation. The EZW Group has no significant
concentrations of credit risk. Credit risk arises from cash and bank balances held at banks, trade
receivables, including rental receivables from lessees and derivatives while there is no credit
risk arising from due from related parties. Credit risk is managed on a EZW Group basis. The
EZW Group has policies in place to ensure that rental contracts are entered into only with
lessees with an appropriate credit history. The EZW Group’s maximum exposure to credit risk
to customer is in Note 14.
The table below excludes cash in hand amounting to AED 1,091,000 (2012: AED 320,000;
2011: AED 114,735,000) and presents an analysis of short term bank deposits and cash and
bank balances by rating agency designation at the end of reporting period based on Moody’s
ratings or its equivalent for the main banking relationships:
Counterparties with external credit rating (Moody’s)
A1
A2
A3
Baa1
Baa2
B2
Aa2
Caa1
*
2013
AED’000
2012
AED’000
2011
AED’000
150,400
215,487
104
169,451
281,726
–
–
–
212,107
–––––––––
1,029,275
30,309
137,868
4,076
387,342
321,339
–
–
49
78,264
–––––––––
959,247
376,845
–
263,080
481,960
–
116
113,120
–
114,735
–––––––––
1,349,856
––––––––– ––––––––– –––––––––
*
(c)
Balances of AED 212,107,000 (2012: AED 78,264,000; 2011: AED 118,747,000) are maintained with banks
with no formal credit rating. However, management views these banks to be high-credit-quality financial
institutions and does not expect these financial institutions to default.
Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and the availability of
funding through an adequate amount of credit facilities. Due to the dynamic nature of the
underlying business, the EZW Group maintains flexibility in funding by keeping credit lines
available.
The table below analyses the EZW Group’s financial liabilities into relevant maturity based on
the remaining period at the balance sheet to the contractual maturity date. The amounts
disclosed in the table are the contractual undiscounted cash flows. Balances due within
12 months equal their carrying balances as the impact of discounting is not significant.
74
At 31 December 2013
Bank borrowings
Sukuk borrowing
excluding advances from
customers and unearned
revenue
Less than
1 year
AED’000
Between
1 year
and 2 years
AED’000
Between
2 years
and 5 years
AED’000
Over 5
years
AED’000
184,951
167,144
450,634
167,144
1,106,527
501,433
1,363,020
2,470,892
774,806
15,167
–––––––––
1,142,068
–
–
–––––––––
617,778
–
–
–––––––––
1,607,960
–
–
–––––––––
3,833,912
186,579
167,144
770,614
167,144
1,820,058
501,433
3,645,724
2,638,036
902,000
5,735,740
–––––––––
6,991,463
–
–
–––––––––
937,758
–
–
–––––––––
2,321,491
–
–
–––––––––
6,283,760
347,309
7,862,844
413
–
1,668
–
1,276
–
128,935
–
–
–
936,304
7,583
–––––––––
9,282,975
–
–
–––––––––
413
–
–
–––––––––
1,668
–
–
–––––––––
1,276
––––––––– ––––––––– ––––––––– –––––––––
At 31 December 2012
Bank borrowings
Sukuk borrowing
revenue
––––––––– ––––––––– ––––––––– –––––––––
At December 2011
Bank borrowings
Sukuk Al Musharaka
Derivative financial
instruments
revenue
––––––––– ––––––––– ––––––––– –––––––––
The EZW Group had undrawn borrowing facilities as of 31 December 2013 Nil (2012: Nil and
2011: AED 57,279,000).
3.2
Capital Management
The EZW Group’s objectives when managing capital are to safeguard the EZW Group’s ability to
continue as a going concern in order to provide returns for shareholder and to maintain an optimal
capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the
EZW Group may adjust the amount of profit distributed to shareholder or manage its working capital
requirements. Consistent with others in the industry, the EZW Group monitors capital on the basis of
the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as
total borrowings (including current and non-current borrowings as shown in the consolidated balance
sheet) less cash and bank balances (including short term deposits). Total capital is calculated as ‘Total
equity’ as shown in the consolidated balance sheet plus net debt.
75
The gearing ratios at 31 December 2013, 2012 and 2011 were as follows:
2013
AED’000
Borrowings net (Note 21)
Sukuk borrowings net (Note 20)
Loan from and due to related parties (Note 12)
Less: Cash and bank balances (Note 16)
2011
AED’000
2,510,521
4,243,440
350,587
2,346,304
2,340,450
7,500,000
15,167
5,735,740
5,418,850
(1,030,366)
(959,567)
(1,351,014)
––––––––––– ––––––––––– –––––––––––
3,841,626
11,360,063
11,918,423
8,420,239
2,452,086
3,805,743
––––––––––– ––––––––––– –––––––––––
12,261,865
13,812,149
15,724,166
––––––––––– ––––––––––– –––––––––––
31%
82%
76%
Net debt
Total equity
Total capital
Gearing ratio
3.3
2012
AED’000
––––––––––– ––––––––––– –––––––––––
Fair Value Estimation
The financial instruments carried at fair value by valuation method are categorised as follows:
•
Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).
•
Inputs other than quoted prices included within level 1 that are observable for the asset or
liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2).
•
Inputs for the asset or liability that are not based on observable market data (that is,
unobservable inputs) (level 3).
The following table presents the EZW Group’s assets and liabilities that are measured at fair value:
31 December 2013
Assets
used for hedging
31 December 2012
Assets
Available-for-sale financial assets
31 December 2011
Assets
Available-for-sale financial assets
Liabilities
used for hedging
Level 1
AED’000
Level 2
AED’000
Level 3
AED’000
Total
AED’000
––––––––
–
––––––––
6,663
––––––––
–
––––––––
–
––––––––
–
––––––––
23,410
––––––––
23,410
––––––––
––––––––
–
––––––––
–
––––––––
22,127
––––––––
–
––––––––
127,726
––––––––
–
––––––––
––––––––
6,663
22,127
127,726
The fair value of financial instruments traded in active markets (recognised stock exchanges) is based
on quoted market prices at the balance sheet date (level 1). A market is regarded as active if quoted
prices are readily and regularly available from an exchange, dealer, broker, industry EZW Group,
pricing service, or regulatory agency, and those prices represent actual and regularly occurring market
transactions on an arm’s length basis. The quoted market price used for financial assets held by the
EZW Group is the current bid price.
76
The fair value of financial instruments that are not traded in an active market is based on valuation
techniques (level 2). The fair value of the unlisted securities is based on net asset values provided by
the fund managers. The fair market value of these investments, as indicated by the fund managers are
based on:
(a)
For listed investments, current bid prices in an active market;
(b)
For unlisted investments, valuations based on fundamentals and rationale of the portfolio
performed by independent valuers.
The fair value of loan to ultimate parent for disclosure purposes is estimated by discounting the future
contractual cash flows at the current market interest rate that is available to the EZW Group for similar
financial instruments. The EZW Group did not have any other financial assets or liabilities that are
measured at fair value as at 31 December 2013, 2012 and 2011.
4.
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
Estimates and judgements are continually evaluated and are based on historical experience and other factors,
including expectations of future events that are believed to be reasonable under the circumstances.
The EZW Group makes estimates and assumptions concerning the future. The resulting accounting estimates
will, by definition, seldom equal the related actual results. The estimates and assumptions that have a
significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the
next financial year are addressed below.
(a)
Impairment of non-financial assets
Impairment of non-financial assets is a key area involving management judgement, requiring
assessment as to whether the carrying value of assets can be supported by the net present value of
future cash flows derived from such assets using cash flow projections which have been discounted at
an appropriate rate.
In calculating the net present value of the future cash flows, certain assumptions are required to be
made in respect of the impairment reviews. The key assumptions on which management has based its
cash flow projections when determining the recoverable amount of the assets are as follows:
•
Management’s projections have been prepared on the basis of strategic plans, knowledge of the
market, and management’s views on achievable growth in market share over the long term period
of five to fifteen years.
•
The discount rate of 11.8% based on the EZW Group’s weighted average cost of capital with a
risk premium reflecting the relative risks in the markets in which the businesses operate.
•
Growth rate of 3% based on a conservative view of the long term rate of growth.
At 31 December 2013, no impairment charge (2012: AED 339,296,000; 2011: AED 247,017,000) has
been recognised against investment property under construction (Note 6).
77
5.
PROPERTY AND EQUIPMENT
Cost
At 1 January 2011
Additions
Transfers
Transfer to investment
property
Disposals/write off
At 1 January 2012
Additions
Transfer to assets classified as
held for sale asset
Disposals/write off
At 1 January 2013
Additions
Transfers
Disposals/write off
At 31 December 2013
Depreciation
At 1 January 2011
Charge for the year
Disposals/write off
At 1 January 2012
Charge for the year
Transfer to assets classified as
held for sale asset
Disposals/write off
At 1 January 2013
Charge for the year
Disposals/write off
At 31 December 2013
Net book value
At 31 December 2013
At 31 December 2012
At 31 December 2011
Buildings
AED’000
Motor and
utility
vehicles
AED’000
Furniture
and
fixtures
AED’000
Equipment
AED’000
163
442
–
384
–
–
61,499
3,419
4,156
24,815
75
286
Capital
work-inprogress
AED’000
7,385
188
(4,442)
Total
AED’000
94,246
4,124
–
–
–
(11)
––––––––
594
–
–
(290)
(4)
––––––––
90
–
–
(5,784)
130
––––––––
63,420
5,963
–
(45)
–
––––––––
25,131
78
(3,108)
(15)
–
––––––––
8
211
(3,108)
(6,134)
115
––––––––
89,243
6,252
(605)
–
11
––––––––
–
–
–
–
––––––––
–
––––––––
–
–
–
––––––––
90
–
–
–
––––––––
90
––––––––
(633)
(2,179)
(9)
––––––––
66,562
4,020
218
(200)
––––––––
70,600
––––––––
–
–
–
––––––––
25,209
42
16
(2)
––––––––
25,265
––––––––
–
–
–
––––––––
219
823
(234)
–
––––––––
808
––––––––
(1,238)
(2,179)
2
––––––––
92,080
4,885
–
(202)
––––––––
96,763
––––––––
2
109
–
(3)
––––––––
108
–
325
8
(241)
(2)
––––––––
90
–
27,710
11,581
(5,097)
113
––––––––
34,307
11,539
20,885
2,640
(45)
–
––––––––
23,480
1,070
14
–
(14)
–
––––––––
–
–
48,936
14,338
(5,397)
108
––––––––
57,985
12,609
(101)
–
(7)
––––––––
–
–
–
––––––––
–
––––––––
–
–
–
––––––––
90
–
–
––––––––
90
––––––––
–
(2,179)
(63)
––––––––
43,604
14,808
(142)
––––––––
58,270
––––––––
–
–
–
––––––––
24,550
316
(3)
––––––––
24,863
––––––––
–
–
–
––––––––
–
–
–
––––––––
–
––––––––
(101)
(2,179)
(70)
––––––––
68,244
15,124
(145)
––––––––
83,223
––––––––
–
––––––––
–
––––––––
486
–
––––––––
–
––––––––
–
12,330
––––––––
22,958
––––––––
29,113
402
––––––––
659
––––––––
1,651
808
––––––––
219
––––––––
8
13,540
––––––––
23,836
––––––––
31,258
–––––––– –––––––– –––––––– –––––––– –––––––– ––––––––
78
Depreciation included under:
Cost of sales (Note 26)
General and administrative expenses (Note 28)
Profit for the year from discontinued operations
2013
AED’000
2012
AED’000
2011
AED’000
–
15,124
–
–––––––––
15,124
683
11,926
–
–––––––––
12,609
2,148
10,971
1,219
–––––––––
14,338
Buildings and
infrastructure
AED’000
Investment
properties
under
construction
AED’000
Total
AED’000
––––––––– ––––––––– –––––––––
6.
INVESTMENT PROPERTY
Land
AED’000
Cost
At 1 January 2011
Additions
Transfers from a related party
Transfers from property and equipment
Transfers
Disposal
Translation differences
At 1 January 2012
Additions
Transfers
Return of sale of a warehouse
Disposal
Translation
At 1 January 2013
Additions
Transfers
Disposal
Translation
At 31 December 2013
Depreciation and impairment
At 1 January 2011
Charge for the year
Impairment charge
Disposals
At 1 January 2012
Charge for the year
Return of sale of a warehouse
Impairment charge
Disposals
At 1 January 2013
Charge for the year
At 31 December 2013
198,421
–
–
–
–
(220)
(16,539)
–––––––––
181,662
–
–
–
(94)
(3,445)
–––––––––
178,123
–
–
–
(10,556)
–––––––––
167,567
–––––––––
3,238,527
–
–
–
310,113
(188)
–
–––––––––
3,548,452
–
19,864
17,055
(40,036)
–
–––––––––
3,545,335
26,978
2,775
–
–
–––––––––
3,575,088
–––––––––
1,369,999
347,563
156,016
3,108
(310,113)
(2,429)
(951)
–––––––––
1,563,193
42,261
(19,864)
–
(5,520)
(48)
–––––––––
1,580,022
56,327
(2,775)
(24,377)
–
–––––––––
1,609,197
–––––––––
4,806,947
347,563
156,016
3,108
–
(2,837)
(17,490)
–––––––––
5,293,307
42,261
–
17,055
(45,650)
(3,493)
–––––––––
5,303,480
83,305
–
(24,377)
(10,556)
–––––––––
5,351,852
–––––––––
49,410
–
–
–
–––––––––
49,410
–
–
–
–
–––––––––
49,410
–
–––––––––
49,410
–––––––––
686,721
92,499
–
–
–––––––––
779,220
89,067
4,193
–
(23,065)
–––––––––
849,415
87,625
–––––––––
937,040
–––––––––
229,178
–
247,017
(2,429)
–––––––––
473,766
–
–
339,296
–
–––––––––
813,062
–
–––––––––
813,062
–––––––––
965,309
92,499
247,017
(2,429)
–––––––––
1,302,396
89,067
4,193
339,296
(23,065)
–––––––––
1,711,887
87,625
–––––––––
1,799,512
–––––––––
79
Land
AED’000
Buildings and
infrastructure
AED’000
Investment
properties
under
construction
AED’000
Total
AED’000
Net book value
At 31 December 2013
118,157
2,638,048
796,135
3,552,340
–––––––––
–––––––––
–––––––––
–––––––––
At 31 December 2012
128,713
2,695,920
766,960
3,591,593
–––––––––
–––––––––
–––––––––
–––––––––
At 31 December 2011
132,252
2,769,232
1,089,427
3,990,911
–––––––––
–––––––––
–––––––––
–––––––––
The following amounts have been recognised in the consolidated income statement in respect of investment
property:
Lease rental
Direct operating expenses
Impairment of investment property under construction
2013
AED’000
2012
AED’000
2011
AED’000
1,312,055
149,001
–––––––––
–
1,222,950
151,430
–––––––––
339,296
1,225,466
250,529
–––––––––
247,017
––––––––– ––––––––– –––––––––
At 31 December 2013, the EZW Group had contractual obligations for capital commitment of
AED 247,663,000 (2012: AED 332,204,000; 2011: AED 136,990,000).
Management has provided, for each class of property, assumptions made in the determination of fair values
and other key information on the properties. Management believes that this information is beneficial in
evaluating the fair values of the investment property.
31 December
2013
AED’000
31 December
2012
AED’000
31 December
2011
AED’000
6,331,181
796,136
–––––––––
7,127,317
5,869,135
766,958
–––––––––
6,636,093
4,989,043
1,089,427
–––––––––
6,078,470
Buildings and infrastructure
Investment properties under construction
Total
––––––––– ––––––––– –––––––––
The fair values are within Level 3 of the fair value hierarchy.
On an annual basis, the EZW Group engages external, independent and qualified valuers to determine the
fair value of the EZW Group’s investment property.
The external valuations of the level 3 investment properties have been performed using income
capitalisation. The external valuers, in discussion with the EZW Group’s management, have determined
these inputs based on the current lease rates, specific conditions and comparable rentals in the corresponding
market.
The EZW Group has investment properties in Dubai, of which significant portion has been leased out.
The significant unobservable inputs used in the fair value measurement categorised within level 3 of the fair
value hierarchy of the entity’s portfolios of investment property are:
•
Estimated rental value (per square metre per annum)
•
Rent growth per annum
•
Estimated long term occupancy rate
•
Discount rate and terminal growth rate
80
Significant increases/(decreases) in estimated rental value (per square metre per annum ) and rent growth per
annum in isolation would result in a significantly higher/(lower) fair value measurement. Significant
increases/(decreases) in long term occupancy rate and discount rate in isolation would result in a
significantly lower/(higher) fair value measurement.
For all investment property the current use of the properties is their highest and best use.
At 31 December 2013, 2012 and 2011, the EZW Group’s investment property were fair valued on an open
market basis by independent professionally qualified valuers who have recent experience in the locations and
categories of the investment properties valued. Based on such valuation, the fair value of the
investment property at 31 December 2013 is AED 7,127,317,000 (2012: AED 6,636,093,000;
2011: AED 6,078,470,000) including investment property under construction of AED 796,136,000
(2012: AED 766,958,000; 2011: AED 1,089,427). At 31 December 2013, no impairment charge
(2012: AED 339,296,000; 2011: AED 247,017,000) has been recognised in the consolidated statement of
income.
7.
LAND USE RIGHT
Cost
At 1 January
Transfer from related party
Additions (Note 12)
At 31 December
Amortisation
At 1 January
Charge for the year (Note 26)
At 31 December
Net book value at 31 December
2013
AED’000
2012
AED’000
2011
AED’000
8,981,867
–
–
–––––––––
8,981,867
–––––––––
8,981,284
–
583
–––––––––
8,981,867
–––––––––
8,923,000
58,284
–
–––––––––
8,981,284
–––––––––
461,476
90,726
–––––––––
552,202
–––––––––
8,429,665
370,746
90,730
–––––––––
461,476
–––––––––
8,520,391
280,270
90,476
–––––––––
370,746
–––––––––
8,610,538
––––––––– ––––––––– –––––––––
The amortisation is included under ‘cost of sales’ in the consolidated statement of income (Note 26). Sukuk
borrowing and borrowings are secured with the majority of the land use rights (Note 20 and 21).
8.
INTANGIBLE ASSETS
Cost
At 1 January 2011
At 1 January 2012
Acquisition of subsidiary
Transfer to assets classified as held for
sale asset (Note 17)
At 31 December 2012
Goodwill
AED’000
Brand
names
AED’000
Customer
Contracts
AED’000
Total
AED’000
977,713
7,486
–––––––––
985,199
–––––––––
2,222
321,417
2,464
–––––––––
323,881
–––––––––
–
51,840
393
–––––––––
52,233
–––––––––
–
1,350,970
10,343
–––––––––
1,361,313
–––––––––
2,222
(1,005,103)
17,682
–––––––––
–
–––––––––
(335,887)
12,006
–––––––––
–
–––––––––
(53,171)
938
–––––––––
–
–––––––––
(1,394,161)
30,626
–––––––––
–
–––––––––
81
Amortisation and impairment
At 1 January 2011
At 1 January 2012
Transfer to assets classified as held for
sale asset (Note 17)
At 31 December 2012
Net book value
At 31 December 2013
At 31 December 2012
At 31 December 2011
9.
Goodwill
AED’000
Brand
names
AED’000
Customer
Contracts
AED’000
545,862
–
4,180
–––––––––
550,042
–––––––––
–
–
–
–––––––––
–
–––––––––
12,826
5,371
(51)
–––––––––
18,146
–––––––––
558,688
5,371
4,129
–––––––––
568,188
–––––––––
(551,551)
1,509
–––––––––
–
–––––––––
–
–
–––––––––
–
–––––––––
(17,820)
(326)
–––––––––
–
–––––––––
(569,371)
1,183
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
435,157
–––––––––
–
–––––––––
–
–––––––––
323,881
–––––––––
–
–––––––––
–
–––––––––
34,087
–––––––––
–
–––––––––
–
–––––––––
793,125
–––––––––
2013
AED’000
2012
AED’000
2011
AED’000
38,120
4,041
(2,830)
–
–––––––––
39,331
39,987
2,850
(4,717)
–
–––––––––
38,120
43,523
866
(4,408)
6
–––––––––
39,987
Total
AED’000
INVESTMENTS IN AN ASSOCIATE
At 1 January
Share of profit
Dividend received
At 31 December
––––––––– ––––––––– –––––––––
The results of EZW Group’s associate, and its aggregated assets and liabilities are as follows:
2013
AED’000
2012
AED’000
2011
AED’000
23,414
78,081
–––––––––
101,495
24,947
81,812
–––––––––
106,759
21,408
87,219
–––––––––
108,627
Total liabilities
12,527
–––––––––
12,527
20,967
–––––––––
20,967
19,800
–––––––––
19,800
Total revenues
25,664
22,512
19,347
10,103
8,519
2,163
Current assets
Non-current assets
Total assets
––––––––– ––––––––– –––––––––
Current liabilities
––––––––– ––––––––– –––––––––
––––––––– ––––––––– –––––––––
––––––––– ––––––––– –––––––––
Profit
82
10.
INVESTMENTS IN JOINT VENTURES
2013
AED’000
At 1 January
Additional loan during the year
Repayment of loan during the year
Share of profit/(loss)
Disposal*
Transfer to asset classified as held for sale asset
–
–
–
–
–
–
–
–––––––––
–
At 31 December
*
2012
AED’000
2011
AED’000
384
–
(15,212)
16,764
(6)
(804)
(1,126)
–––––––––
–
32,194
4,315
–
(5,152)
(30,506)
–
(467)
–––––––––
384
––––––––– ––––––––– –––––––––
During the financial year ended 31 December 2011 one of the EZW Group’s United Kingdom based joint ventures disposed land
for a value of AED 61,012,000. The disposal of land has reduced the carrying value of the joint venture by AED 30,506,000.
Summary of financial information of joint ventures:
2013
AED’000
2012
AED’000
2011
AED’000
–
–
–––––––––
–
–
–
–––––––––
–
637,499
–
–––––––––
637,499
Total liabilities
–
–
–––––––––
–
–
–
–––––––––
–
511,053
411,306
–––––––––
922,359
Total revenues
–
–
177,624
–
–
(30,869)
2013
AED’000
2012
AED’000
2011
AED’000
–
–
–
–
––––––––
–
22,127
455
(23,410)
828
––––––––
–
17,052
4,943
–
132
––––––––
22,127
Current assets
Non-current assets
Total assets
––––––––– ––––––––– –––––––––
Current liabilities
––––––––– ––––––––– –––––––––
––––––––– ––––––––– –––––––––
––––––––– ––––––––– –––––––––
(Loss)/profit
11.
AVAILABLE FOR SALE FINANCIAL ASSETS
Income:
At 1 January
Additions
Transfer to asset of classified as held for sale asset
At 31 December
––––––––
83
––––––––
––––––––
12.
RELATED PARTY TRANSACTIONS AND BALANCES
Related parties include the parent and the ultimate parent company, the shareholders, key management
personnel, associate and any businesses which are controlled or jointly-controlled, directly or indirectly by
the shareholders and directors or over which they exercise significant management influence.
During the year, the EZW Group entered into the following significant transactions with related parties in
the normal course of business and at prices and terms agreed by the EZW Group’s management.
Income:
Revenue generated from other related parties
Management fee from other related parties
Other operating income – other related parties
Interest income and unwinding of fair value loss –
ultimate parent company
Finance income – other related parties
Expenses:
Interest expense recharged from parent company (Note 31)
Cost recharged from other related parties
Other operating expenses – other related parties
Repair and maintenance – other related parties
Security services – other related party
Key management remuneration:
– Salaries and other short term employee benefits
– Termination and post-employment benefits
2013
AED’000
2012
AED’000
2011
AED’000
27,788
37,411
5,164,545
–
28,607
34,524
–
–
22,641
–
–
6,008
32,198
7,948
30,582
10,324
28,142
8,752
88,569
4,390
17,906
41,912
5,593
180,023
5,487
20,570
33,442
4,717
220,704
19,437
8,510
47,080
3,454
32,920
2,489
––––––––
35,409
31,398
1,884
––––––––
33,282
21,971
3,557
––––––––
25,528
–
––––––––
–
––––––––
–
––––––––
583
––––––––
156,016
––––––––
58,284
––––––––
2013
AED’000
2012
AED’000
2011
AED’000
–
75,569
––––––––
75,569
750,771
113,688
––––––––
940,028
(151,730)
––––––––
788,298
429,945
89,999
––––––––
519,944
736,089
197,240
––––––––
1,453,273
(170,738)
––––––––
1,282,535
429,945
67,526
––––––––
497,471
721,366
209,469
––––––––
1,428,306
(188,665)
––––––––
1,239,641
––––––––
Balance sheet items:
Transfer-in of investment property – parent company
Transfer of land use rights from other related party (Note 7)
––––––––
––––––––
Related party balances include the following:
Due from parent company
Loan to ultimate parent
Loans to other related party
Less: unamortised fair value adjustment
––––––––
84
––––––––
––––––––
Analysed between:
Current
Non-current
2013
AED’000
2012
AED’000
2011
AED’000
93,697
694,601
––––––––
788,298
538,072
744,463
––––––––
1,282,535
515,599
724,042
––––––––
1,239,641
15,167
–
––––––––
15,167
14,952
5,720,788
––––––––
5,735,740
7,583
5,411,267
––––––––
5,418,850
––––––––
Due to other related parties
Loan from the parent company
––––––––
––––––––
––––––––
––––––––
––––––––
The loan from the parent company at the end of 31 December 2013 Nil (2012: AED 5,720,788,000; 2011:
5,411,267,000) was interest bearing at the rate of 3.9% and with original maturity of 23 September 2011,
recognised initially at fair value. The fair values are within level 3 of the fair value hierarchy.
During the financial year ended 31 December 2013, the loan from the parent company of
AED 5,164,545,000 was waived and recognised as a gain in the income statement following the economic
substance of the related transaction being the disposal of a subsidiary for acquisition of which the loan was
obtained (Note 17).
The loan receivable from the ultimate parent of AED 750,771,000 (2012: AED 736,089,000;
2011: AED 721,366,000) is interest bearing at rate of 2% and matures by 2019, recognised initially at fair
value. The fair value is based on cash flows discounted at a rate of 5.6%, which was reflective of the
Establishment’s weighted average cost of capital at the time of initial recognition. The fair values are within
level 2 of the fair value hierarchy. The undiscounted value and current carrying value of this balance at the
balance sheet date are as follows:
Undiscounted
2013
AED’000
Non-current due from ultimate
parent
Non-current due from other
related parties
Fair value Undiscounted
2013
2012
AED’000
AED’000
Fair value Undiscounted
2012
2011
AED’000
AED’000
Fair value
2011
AED’000
750,771
604,251
736,089
572,054
721,366
541,472
113,688
––––––––
864,459
108,478
––––––––
712,729
197,240
––––––––
933,329
190,537
––––––––
762,591
209,469
––––––––
930,835
200,698
––––––––
742,170
–––––––– –––––––– –––––––– –––––––– –––––––– ––––––––
13.
DERIVATIVE FINANCIAL INSTRUMENTS
During the financial year ended 31 December 2013, the EZW Group has entered into interest rate swap
agreements (“swaptions”) for a notional amount of AED 1,050,000,000 (2012 & 2011: Not applicable).
Under these swaptions, in consideration for a premium, the EZW Group has purchased the right, but not the
obligation, to receive an agreed upon capped 3 months EIBOR interest rate.
The EIBOR cap rates that can be exercised during the corresponding reference periods as per the terms of
the swaptions are as follows:
Reference periods
EIBOR cap rate
From 19 December 2013 to 18 December 2014
1.10%
1.45%
1.95%
The fair value of the EZW Group’s derivative financial instruments, which represent swaptions that are not
traded in an active market, is determined by using valuation techniques which maximise the use of
observable market data (Mark to Market) where it is available and rely as little as possible on entity specific
estimates. Since significant inputs required to fair value the swaptions are obtained through quotations from
85
banks for new swaptions under similar terms, the instrument is included in level 2. The fair value of
swaptions and interest rate swaps can be analysed as follows:
Current assets
Non-current assets
Current liability
2013
AED’000
2012
AED’000
2011
AED’000
2,221
4,442
–
––––––––
6,663
–
–
–
––––––––
–
–
–
(127,726)
––––––––
(127,726)
––––––––
––––––––
––––––––
As of 31 December 2012, these interest rate swap contracts were ineffective as the associated financial
liabilities had been settled during the year.
As at 31 December 2011, the EZW Group had various interest rate swap contracts for a notional principal
amount of AED 4,339,075,000.
These effective interest rate swaps related to fixed interest rates that vary from 4.5% to 6.0% and the main
floating rate was EIBOR. Gains and losses recognised in hedge reserve in equity on interest rate swap
contracts will be continuously released to the consolidated statement of income till its maturity. During 2012,
these interest rate swaps matured and were settled. (31 December 2011: AED 127,726,000 as liability fair
value).
14.
TRADE AND OTHER RECEIVABLES
Trade receivables
Less: provision for impairment of trade receivables
Other receivables and prepayments
2013
AED’000
2012
AED’000
2011
AED’000
107,523
(89,185)
––––––––
18,338
565,163
––––––––
583,501
105,569
(92,572)
––––––––
12,997
65,870
––––––––
78,867
355,189
(79,749)
––––––––
275,440
117,186
––––––––
392,626
215,214
368,287
––––––––
583,501
33,987
44,880
––––––––
78,867
336,735
55,891
––––––––
392,626
––––––––
Analysed between:
Current assets
Non-current assets
––––––––
––––––––
––––––––
––––––––
––––––––
At 31 December 2013, 2012 and 2011, the EZW Group had a broad base of customers with no concentration
of credit risk within trade receivables.
The carrying amounts of the EZW Group’s trade receivables are denominated in the following currencies:
AED
EURO
GBP
USD
2013
AED’000
2012
AED’000
2011
AED’000
107,523
–
–
–
––––––––
107,523
105,569
–
–
–
––––––––
105,569
114,753
238,204
2,178
54
––––––––
355,189
––––––––
––––––––
––––––––
As at 31 December 2013, trade receivables of AED 2,193,000 (2012: AED 3,064,000;
2011: AED 119,347,000) were fully performing. As of 31 December 2013, trade receivables of
AED 16,145,000 (2012: AED 9,933,000; 2011: AED 156,093,000) were past due but not impaired.
86
These relate to a number of independent customers for whom there is no recent history of default. The ageing
analysis of these trade receivables is as follows:
Up to 30 days
31–120 days
120–360 days
Over 360 days
As at 31 December
2013
AED’000
2012
AED’000
2011
AED’000
1,650
2,567
4,896
7,032
––––––––
16,145
1,507
757
3,783
3,886
––––––––
9,933
6,888
76,116
65,432
7,657
––––––––
156,093
––––––––
––––––––
––––––––
As at 31 December 2013, trade receivables of AED 89,185,000 (2012: AED 92,572,000;
2011: AED 79,749,000) were impaired and provided for. The ageing of these receivables is as follows:
Up to 30 days
31–120 days
120–360 days
Over 360 days
As at 31 December
2013
AED’000
2012
AED’000
2011
AED’000
658
2,082
9,616
76,829
––––––––
89,185
262
4,188
23,171
64,951
––––––––
92,572
994
8,643
13,029
57,083
––––––––
79,749
––––––––
––––––––
––––––––
Movements in the EZW Group’s provision for impairment of trade receivables are as follows:
At 1 January
Provision for impairment of receivables (Note 28)
Write off
Reversal of provision for impairment of receivables
Translation adjustments
As at 31 December
2013
AED’000
2012
AED’000
2011
AED’000
92,572
3,076
(6,463)
–
–
––––––––
89,185
79,749
13,882
–
(1,079)
20
––––––––
92,572
67,825
12,648
–
(705)
(19)
––––––––
79,749
––––––––
––––––––
––––––––
The creation and release of provision for impairment of receivables have been included in “General and
administrative expenses” (Note 28) in the consolidated statement of income. Amounts charged to the
allowance account are generally written off when there is no expectation of recovering additional cash.
The other classes within trade and other receivables do not contain impaired assets. The maximum exposure
to credit risk at the reporting date is the fair value of each class of receivable mentioned above. The EZW
Group does not hold any collateral as security.
The carrying value less impairment provision of trade receivables is assumed to approximate their fair values
due to the short-term nature of trade receivables. Other receivables approximate their fair values. The fair
values are within level 3 of the fair value hierarchy.
87
15.
PROPERTY HELD FOR DEVELOPMENT AND SALE
At 1 January 2011
Additions
Cost of sales charged to profit from discontinued operations
As at 31 December 2011
Additions
Cost of sales charged to loss from discontinued operations
Transfer to assets classified as held for sale asset (Note 17)
Movement
Land
AED’000
Work-inprogress
AED’000
Total
AED’000
1,063,722
21,852
–
–
–––––––––
1,085,574
110,968
(97,777)
(1,149,979)
51,214
–––––––––
–
–––––––––
–
–––––––––
–
1,297,475
701,682
(920,194)
(386)
–––––––––
1,078,577
262,567
(231,357)
(1,230,968)
121,181
–––––––––
–
–––––––––
–
–––––––––
–
2,361,197
723,534
(920,194)
(386)
–––––––––
2,164,151
373,535
(329,134)
(2,380,947)
172,395
–––––––––
–
–––––––––
–
–––––––––
–
––––––––– ––––––––– –––––––––
Properties held for development and sale represented costs incurred with respect to development of various
logistics warehouses outside United Arab Emirates (mainly United Kingdom and Europe). The expected date
of completion for these assets was in the range between years 2013 to 2018.
During financial year ended 31 December 2012, properties amounting to AED 612,123,000
(2011: AED 616,000,000) were pledged against bank loans.
16.
CASH AND BANK BALANCES
Cash and bank balances including call deposits
Short-term fixed deposits
2013
AED’000
2012
AED’000
2011
AED’000
482,017
548,349
–––––––––
1,030,366
314,797
644,770
–––––––––
959,567
328,495
1,022,519
–––––––––
1,351,014
––––––––– ––––––––– –––––––––
Cash and bank balances include the following for the purposes of the consolidated statement of cash flows
from continuing operations:
2013
AED’000
Less: restricted bank balances
Less: long term fixed deposits
Less: cash and bank balances classified as assets
held for sale
1,030,366
(169,432)
(481,892)
–
–––––––––
379,042
2012
AED’000
959,567
(1,502)
–
–
–––––––––
958,065
2011
AED’000
1,351,014
–
(751,003)
(142,818)
–––––––––
457,193
––––––––– ––––––––– –––––––––
The fixed deposits earned interest at rates ranging from 0.6% to 7.1% per annum (2012: 0.3% to 4%;
2011: 0.4% to 8.5%). Bank accounts are held with locally incorporated banks and branches of international
banks.
88
17.
NON-CURRENT ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS
On 10 June 2013, the EZW Group disposed its subsidiary, EZW Gazeley Holdings Limited, for net sale
proceeds of AED 1,370,065,000. The results of the discontinued operations were as follows:
10 June
2013
Revenue
Expenses
Share of profit/(loss) from joint ventures
Operating profit
Impairment loss recognised on the re-measurement
Finance income
Finance expense
Profit/(loss) before tax
Income tax expense
Total loss after tax from discontinued operations
31 December
2012
140,659
(131,727)
–––––––––
8,932
(9,158)
–––––––––
(226)
–
69,230
(4,593)
–––––––––
64,411
(7,333)
–––––––––
57,078
–––––––––
(90,703)
–––––––––
(33,625)
412,879
(370,945)
–––––––––
41,934
16,764
–––––––––
58,698
(1,439,464)
4,081
(102,165)
–––––––––
(1,478,850)
34
–––––––––
(1,478,816)
–––––––––
–
–––––––––
(1,478,816)
31 December
2011
1,143,409
(1,022,134)
–––––––––
121,275
(5,153)
–––––––––
116,122
–
7,874
(54,136)
–––––––––
69,860
(19,663)
–––––––––
50,197
–––––––––
–
–––––––––
50,197
––––––––– ––––––––– –––––––––
The net assets and liabilities at disposal and the loss therefrom are as follows:
10 June 2013
Total proceeds at fair value
Less: transaction costs
1,411,585
(41,520)
–––––––––
1,370,065
–––––––––
Net proceeds from disposal
Assets and liabilities of the disposal group:
Property held for development and sale
Borrowings
Net assets disposed
(1,860,242)
(156,984)
(141,513)
434,747
105,471
157,753
–––––––––
(1,460,768)
–––––––––
(90,703)
–––––––––
The assets and liabilities relating to EZW Gazeley Holdings Limited have been presented as held for sale on
31 December 2012:
(a)
Assets classified as held for sale
2012
AED’000
Properties held for development and sale
Other current assets
1,791,623
250,553
–––––––––
2,042,176
–––––––––
89
(b)
Liabilities classified as held for sale
2012
AED’000
Bank borrowings
Deferred tax liabilities
Other current liabilities
383,792
110,036
88,997
–––––––––
582,825
–––––––––
The summary of cash flows from the EZW Gazeley Holdings Limited for 2012 was as follows:
Operating cash flows
Investing cash flows
Financing cash flows
3,270
(103,964)
17,348
–––––––––
(83,346)
Net cash flows
18.
–––––––––
SHARE CAPITAL
At 31 December 2013, the share capital comprised of 4,764 (2012: 4,764; 2011: 4,764) issued and fully paid
shares of AED 1,000,000 each.
19.
EMPLOYEES’ END OF SERVICE BENEFITS
As at 1 January
Transfer in
Payments during the year
As at 31 December
2013
AED’000
2012
AED’000
2011
AED’000
18,913
8,576
13
(3,514)
––––––––
23,988
16,877
3,612
–
(1,576)
––––––––
18,913
18,790
3,778
(264)
(5,427)
––––––––
16,877
–––––––– –––––––– ––––––––
In accordance with the provisions of IAS 19, management has carried out an exercise to assess the present
value of its obligations at 31 December 2013, using the projected unit method, in respect of employees’ end
of service benefits payable under the UAE Labour Law. Under this method, an assessment has been made of
an employee’s expected service life with the EZW Group and the expected basic salary at the date of leaving
the service. Management has assumed average increment/promotion cost of 5% (2012: 5%; 2011: 5%). The
expected liability at the date of leaving the service has been discounted to its net present value using a
discount rate of 4.5% (2012: 2.6%; 2011: 4.25%).
20.
SUKUK BORROWING
The EZW Group had issued through its subsidiary JAFZ Sukuk Limited trust certificates (“Sukuk”) for a
nominal value of AED 7,500,000,000 on 27 November 2007 listed on NASDAQ Dubai and the London
Stock Exchange. Sukuk, maturing five years from the issue date and bears a profit commission at rate of six
months EIBOR plus 1.30% per annum to be paid semi-annually. The carrying amounts of Sukuk were
denominated in AED.
The EZW Group has settled Sukuk on 21 June 2012 and issued through its subsidiary JAFZ Sukuk (2019)
Limited new Sukuk trust certificates for a nominal value of AED 2,387,320,000 on 19 June 2012 listed on
NASDAQ Dubai and the Irish Stock Exchange. Sukuk, mature seven years from the issue date and bears a
profit commission at average coupon rate of 7% per annum to be paid semi-annually. The carrying amounts
of Sukuk are denominated in United Stated Dollars (“US$”). Sukuk are secured in parri passu with
borrowings (Note 21).
90
The following fair values of Sukuk are based on quoted market rates at the end of reporting years:
2013
AED’000
Sukuk borrowing
21.
Carrying amount
2012
2011
AED’000
AED’000
2013
AED’000
Fair value
2012
AED’000
2011
AED’000
2,346,304 2,340,450 7,500,000 2,727,513 2,731,739 6,999,375
––––––––– ––––––––– ––––––––– ––––––––– ––––––––– –––––––––
BORROWINGS
Non-current
Term loan
2013
AED’000
2012
AED’000
2011
AED’000
2,373,560
(47,990)
––––––––
2,325,570
4,130,280
(73,419)
––––––––
4,056,861
3,278
–
––––––––
3,278
214,720
(29,769)
––––––––
184,951
––––––––
2,510,521
212,718
(26,139)
––––––––
186,579
––––––––
4,243,440
347,309
–
––––––––
347,309
––––––––
350,587
2013
AED’000
2012
AED’000
2011
AED’000
4,243,440
–
21,800
(1,754,719)
–
–
––––––––
2,510,521
350,587
4,481,699
(99,559)
(110,755)
(383,792)
5,260
––––––––
4,243,440
536,019
18,002
–
(200,434)
–
(3,000)
––––––––
350,587
–––––––– –––––––– ––––––––
Current
Term loan
Total borrowings
–––––––– –––––––– ––––––––
Movements in borrowings are analysed as follows:
Opening amount as at 1 January
Drawdown during the period
Transaction costs movement, net
Transfer to liabilities classified as held for sale
Closing amount as at 31 December
–––––––– –––––––– ––––––––
During the financial year ended 31 December 2012, the EZW Group obtained a syndicated loan facility from
a consortium of banks and utilised it in full to partially settle Sukuk borrowing (Note 20). The term loan bore
an interest at a rate of three months EIBOR plus 4.25% per annum and paid on quarterly basis. Effective
19 September 2013, the interest rate on term loan has been revised to EIBOR plus 3% per annum. During
the financial year ended 31 December 2013, the EZW Group has made repayments towards term loan of
AED 1,751,440,000, including AED 1,102,000,000 received from the parent company upon disposal of the
its pledged shares of its fully owned subsidiary as required under the terms of the Borrowing. At
31 December 2013, the loan repayment terms were as follows:
Principal repayment
term
%
AED’000
Less than 1 year
Between 1 year and 2 years
Between 2 years and 5 years
Over 5 years
8.30
8.94
33.59
49.17
––––––––
100.00
Total
214,720
231,440
869,440
1,272,680
––––––––
2,588,280
–––––––– ––––––––
91
Borrowings are secured with the assignment of accounts receivable and mortgage over certain land use
rights. The carrying value of the borrowing approximates its fair values. The fair values are within Level 3
of the fair value hierarchy.
22.
DEFERRED REVENUE
2013
AED’000
At 1 January
Additions during the year
Released during the year
2012
AED’000
2011
AED’000
300,754
321,293
297,019
1,317,368 1,267,228 1,171,628
(1,315,521) (1,233,494) (1,147,237)
–
(55,249)
–
–
976
(117)
––––––––– ––––––––– –––––––––
302,601
300,754
321,293
––––––––– ––––––––– –––––––––
At 31 December
Analysed as:
Current portion
Non-current portion
262,657
259,923
279,573
39,944
40,831
41,720
––––––––– ––––––––– –––––––––
302,601
300,754
321,293
––––––––– ––––––––– –––––––––
23.
TRADE AND OTHER PAYABLES
Trade payables
Refundable deposits
Accrued expenses and provisions
Advances from customers
Retentions payable to contractors
Interest accrued
Other payables
2013
AED’000
2012
AED’000
2011
AED’000
62,796
544,205
95,421
52,375
21,322
8,861
39,779
––––––––
824,759
70,867
493,525
177,483
33,610
30,854
13,600
42,695
––––––––
862,634
109,943
434,466
293,492
44,109
37,912
32,626
20,284
––––––––
972,832
–––––––– –––––––– ––––––––
The carrying value of trade and other payables is assumed to approximate their fair values due to the
short-term nature of trade and other payables. The fair values are within level 3 of the fair value hierarchy.
24.
INCOME TAX, DEFERRED TAX ASSET AND DEFERRED TAX LIABILITY
At 1 January 2011
Charges for the year
Paid during the year
Reversal
Refund during the year
Transfer from other business
92
Income
tax
payable
AED’000
Deferred
tax
asset
AED’000
Deferred
tax
liability
AED’000
(1,613)
(14,967)
1,117
13,966
(12,570)
424
786
––––––––
31,873
–
–
(33,023)
–
–
1,150
––––––––
(121,155)
(17)
–
13,475
–
–
(1,300)
––––––––
At 1 January 2012
Reversal
Transfer from other business
At 1 January 2013
At 31 December 2013
Income
tax
payable
AED’000
Deferred
tax
asset
AED’000
Deferred
tax
liability
AED’000
(12,857)
(2,316)
7,771
(1,100)
262
8,369
(372)
(243)
(455)
551
22
––––––––
(125)
–
–
–
–
–
–
–
–
–
–
–
––––––––
–
(108,997)
2,929
–
18
–
110,036
(3,985)
–
–
–
–
––––––––
–
–––––––– –––––––– ––––––––
Income tax expense is recognised based on management’s estimate of the weighted average annual income
tax rate expected for the full financial year. The estimated average annual tax rate used for the year ending
31 December 2013 is in the range of 30.9% – 33.3% (2012: 17.6% – 33.3 %; 2011: 15% – 33.3%).
Tax charge in the income statement
Current income tax
Current tax charge
Adjustment for prior years
2013
AED’000
2012
AED’000
2011
AED’000
476
(21)
––––––––
455
522
–
––––––––
522
555
348
––––––––
903
1%
2%
––––––––
Effective tax rate
Reconciliation of the total tax charge
Profit from operations before tax
Income not subject to taxation
Expenses not deductible for tax purposes
0%
Accounting profit subject to taxation
Tax calculated at domestic tax rates in respective countries
Prior year adjustment – current tax
Prior year adjustment – deferred tax
Tax charge
6,014,529
(6,007,109)
601
––––––––
8,021
476
(21)
–
––––––––
455
––––––––
––––––––
103,616
(104,442)
5,832
––––––––
5,006
522
–
–
––––––––
522
––––––––
––––––––
48,299
(36,784)
865
––––––––
12,380
555
343
5
––––––––
903
––––––––
Unrecognised tax losses
In addition, the EZW Group has tax losses of AED 23,797,000 (2012: AED 23,226,745;
2011: AED 22,192,890) that are available for offset against future taxable profits of the companies in which
the losses arose. Deferred tax assets have not been recognised in respect of these losses as they may not be
used to offset taxable profits elsewhere in the EZW Group and they have arisen in subsidiaries where,
presently, insufficient evidence exists that they will be recoverable in the foreseeable future.
93
25.
REVENUE
Lease rental income
License and registration fees
Administrative services
Management fee income
2013
AED’000
2012
AED’000
2011
AED’000
1,315,521
121,333
103,613
39,914
––––––––
1,580,381
1,226,700
111,984
97,398
35,901
––––––––
1,471,983
1,143,779
103,793
99,662
6,039
––––––––
1,353,273
2013
AED’000
2012
AED’000
2011
AED’000
90,726
90,484
87,625
61,603
–
13,636
––––––––
344,074
90,730
95,776
89,750
60,312
339,296
19,048
––––––––
694,912
90,476
96,667
94,647
67,553
247,017
10,358
––––––––
606,718
2013
AED’000
2012
AED’000
2011
AED’000
18,701
14,828
11,778
10,467
6,075
4,403
4,296
–
–
–
13,324
––––––––
83,872
–
18,005
10,747
–
3,936
4,406
1,020
–
–
932
10,551
––––––––
49,597
–
9,463
10,382
–
2,422
4,151
1,126
10,794
4,872
1,203
9,721
––––––––
54,134
2013
AED’000
2012
AED’000
2011
AED’000
131,330
12,429
10,969
15,124
121,190
20,880
4,877
11,926
107,285
29,894
–
10,971
3,076
15,854
––––––––
188,782
13,882
4,073
––––––––
176,828
12,648
4,626
––––––––
165,424
––––––––
26.
––––––––
––––––––
––––––––
OTHER OPERATING INCOME
Recovery from contractors in lieu of revenue lost
Lease transfer, sub-lease income and lease commission
Public health services
Sale of property from repossessed facility
Courier service income
Facility manager operating fee income
Rent on occupancy post termination
Liabilities no longer required written back
Security service allocation
Fines and penalties income
Others
––––––––
28.
––––––––
COST OF SALES
Amortisation land use right (Note 7)
Utilities
Depreciation (Note 5, 6)
Repairs and maintenance
Impairment of investment property (Note 6)
Others direct operating costs
27.
––––––––
––––––––
––––––––
GENERAL AND ADMINISTRATIVE EXPENSES
Staff costs (Note 30)
Expenses recharged by related parties
Legal and professional fees
Depreciation (Note 5)
Provision for impairment of trade and other
receivables (Note 11)
Others
––––––––
94
––––––––
––––––––
29.
SELLING AND MARKETING EXPENSES
Staff costs (Note 30)
Others
2013
AED’000
2012
AED’000
2011
AED’000
38,332
10,858
––––––––
49,190
30,882
8,090
––––––––
38,972
25,708
4,853
––––––––
30,561
2013
AED’000
2012
AED’000
2011
AED’000
155,140
8,576
5,946
–
––––––––
169,662
140,682
3,612
7,778
–
––––––––
152,072
151,426
3,778
8,159
(30,370)
––––––––
132,993
131,330
38,332
––––––––
169,662
121,190
30,882
––––––––
152,072
107,285
25,708
––––––––
132,993
2013
AED’000
2012
AED’000
2011
AED’000
6,975
21,138
19,008
10,888
189,058
–
––––––––
247,067
16,447
22,978
17,928
–
105,332
(1,171)
––––––––
161,514
18,203
23,434
19,706
–
–
1,172
––––––––
62,515
––––––––
30.
––––––––
STAFF COSTS
Salaries and other staff benefits
End of service benefits (Note 19)
Pension expenses
Reversal of bonus provision
––––––––
Included under:
General and administrative expenses (Note 28)
Selling and distribution expenses (Note 29)
––––––––
31.
––––––––
––––––––
––––––––
––––––––
––––––––
FINANCE COST – NET
Finance income:
Interest income on bank deposits
Interest income on balance due from a related party
Unwinding of fair value loss of due from a related party
Unwinding of fair value loss of other receivables
Foreign exchange gain
Others
Finance cost:
Profit commission on Sukuk
Fair value loss on interest rate swaptions
Fair value loss on interest rate swaps designated as cash
flow hedges transferred from equity
Interest on loans from the parent company (Note 12)
Interest on bank borrowing
Amortisation of deferred borrowing costs
Foreign exchange losses
Others
(167,144)
(7,088)
(197,041)
–
(264,548)
–
–
(88,569)
(182,994)
(35,634)
–
(1,902)
––––––––
(483,331)
––––––––
(236,264)
(119,475)
(180,023)
(134,315)
(16,505)
–
(24,257)
––––––––
(671,616)
––––––––
(510,102)
(115,546)
(220,704)
–
–
(7,681)
(11,307)
––––––––
(619,786)
––––––––
(557,271)
––––––––
95
––––––––
––––––––
32.
FINANCIAL INSTRUMENT BY CATEGORY
Assets as per balance sheet
31 December 2013
Trade and other receivables excluding prepayments
31 December 2012
31 December 2011
Available for sale investments
Loans and
receivables
AED’000
Availablefor-sale
AED’000
Derivatives
AED’000
–
581,213
788,298
1,030,366
––––––––
2,399,877
––––––––
–
–
–
–
––––––––
–
––––––––
6,663
–
–
–
––––––––
6,663
––––––––
13,687
1,282,535
959,567
––––––––
2,255,789
––––––––
–
–
–
––––––––
–
––––––––
–
–
–
––––––––
–
––––––––
332,245
–
1,239,641
1,351,014
––––––––
2,922,900
–
22,127
–
–
––––––––
22,127
–
–
–
–
––––––––
–
––––––––
––––––––
––––––––
Other financial
Derivative
liabilities at
liability amortised cost
AED’000
AED’000
Financial liabilities per balance sheet
31 December 2013
Trade and other payables excluding customer advances
Bank borrowing
Sukuk borrowing
–
–
–
–
–––––––––
–
772,384
15,167
2,510,521
2,346,304
–––––––––
5,644,376
–
–
–
–
–––––––––
–
829,023
5,735,740
4,243,440
2,340,450
–––––––––
13,148,653
127,726
–
–
–
–
–––––––––
127,726
–
928,720
5,418,850
350,587
7,500,000
–––––––––
14,198,157
––––––––– –––––––––
31 December 2012
Bank borrowings
Sukuk borrowing
––––––––– –––––––––
31 December 2011
Bank borrowings
Sukuk Al-Musharaka
––––––––– –––––––––
96
33.
CONTINGENCIES AND COMMITMENTS
(a)
Operating lease commitments – as lessor
The EZW Group has commercial property leases on land for which the right of use was granted for
99 years and investment properties, consisting of office accommodation, warehouses and staff
accommodation. These non-cancellable leases have remaining terms of between 1 and 15 years. All
land leases entered after April 2007 contain a rent review provision whereby the EZW Group will
review the rent every 5 years, subject to certain negotiated rent caps.
Future minimum rentals receivable under non-cancellable operating leases:
Within one year
More than five years
2013
AED’000
2012
AED’000
2011
AED’000
878,962
1,711,373
1,765,511
–––––––––
4,355,846
847,099
1,633,320
1,906,510
–––––––––
4,386,929
760,344
1,615,352
1,541,975
–––––––––
3,917,671
–
–
–––––––––
–
683
8,654
–––––––––
9,337
687
13,524
–––––––––
14,211
––––––––– ––––––––– –––––––––
(b)
Operating lease commitments – as lessee
Within one year
––––––––– ––––––––– –––––––––
97
PART VI
UNAUDITED PRO FORMA FINANCIAL INFORMATION
ON THE ENLARGED GROUP
Section A: Introduction
The unaudited pro forma financial information set out below has been prepared to illustrate the effect of the
Acquisition on the net assets of the DP World Group as if the Acquisition had taken place on 30 June 2014
and on the consolidated income statement of the DP World Group as if the Acquisition had taken place on
1 January 2013. The unaudited pro forma financial information has been prepared on the basis of, and should
be read in conjunction with, the notes set out below.
The unaudited pro forma statement of net assets of the Enlarged Group is based on the consolidated net
assets of the DP World Group as at 30 June 2014 and has been prepared on the basis that the Acquisition was
effective as of 30 June 2014 and in a manner consistent with the accounting policies adopted by the
DP World Group in preparing the unaudited interim financial statements for the six months ended 30 June
2014. The unaudited pro forma income statement of the Enlarged Group is based on the consolidated profits
of the DP World Group for the year ended 31 December 2013 and has been prepared on the basis that the
Acquisition was effective at 1 January 2013 and in a manner consistent with the accounting policies adopted
by the DP World Group in preparing the audited financial statements for the year ended 31 December 2013.
Because of its nature, the unaudited pro forma financial information addresses a hypothetical situation and,
therefore, does not represent the Enlarged Group’s actual financial position or results. It may not, therefore,
give a true picture of the Enlarged Group’s financial position or results nor is it indicative of the results that
may, or may not, be expected to be achieved in the future. The pro forma financial information has been
prepared for illustrative purposes only in accordance with Annex II of the Prospectus Directive Regulation.
98
Section B: Unaudited Pro Forma Statement of Net Assets of the Enlarged Group
Non-current assets
Property, plant and
equipment
Goodwill
Port concession rights
Land use rights
Investment properties
Investments in equity
accounted investees
Deferred tax assets
Other investments
Accounts receivable and
prepayments
Current assets
Inventories
Accounts receivable and
prepayments
Bank balances and cash
Total assets
Deferred tax liabilities
Employees’ end of
service benefits
Pension and postemployment benefits
Interest bearing loans and
borrowings
Accounts payable and
accruals
Current liabilities
Income tax liabilities
Pension and postemployment benefits
Interest bearing loans and
borrowings
Accounts payable and
accruals
Total liabilities
Net assets
Net debt
DP World
Group
Note 1
USD’000
Note 2
USD’000
Note 3
USD’000
6,332,159
1,571,309
2,934,849
–
–
3,203
–
–
2,282,996
1,002,783
–
–
–
–
–
–
–
–
–
–
2,726,344
1,355
72,707
11,231
–
–
–
–
–
–
–
–
204,473
–––––––––
13,843,196
272,505
–––––––––
3,572,718
–
–––––––––
–
–
–––––––––
–
57,264
–
–
–
732,266
3,492,609
–––––––––
4,282,139
–––––––––
18,125,335
53,932
375,694
–––––––––
429,626
–––––––––
4,002,344
940,970
–
–
–
–
–
940,970
68,331
7,147
–
–
–
–
75,478
188,452
–
–
–
–
–
188,452
5,683,890
1,183,384
–
1,350,000
–
–
8,217,274
493,501
–––––––––
7,375,144
10,757
–––––––––
1,201,288
–
–––––––––
–
–
–––––––––
1,350,000
–
–––––––––
–
–
–––––––––
–
504,258
–––––––––
9,926,432
206,325
41
–
–
–
–
206,366
8,866
–
–
–
–
–
8,866
144,225
51,572
–
–
–
–
195,797
1,084,584
–––––––––
1,444,000
8,819,144
–––––––––
9,306,191
312,920
–––––––––
364,533
1,565,821
–––––––––
2,436,523
–
–
––––––––– –––––––––
–
–
–
1,350,000
––––––––– –––––––––
(2,600,000)
–
–
–
––––––––– –––––––––
–
–
–
–
––––––––– –––––––––
(276,771)
440,248
1,397,504
–––––––––
1,808,533
11,734,965
–––––––––
9,306,191
2,335,506
–––––––––
859,261
–––––––––
2,600,000
–––––––––
–
–––––––––
5,794,768
–––––––––
Adjustments
Note 4
Note 5
USD’000
USD’000
–
–
(2,600,000) 1,350,000
––––––––– –––––––––
(2,600,000) 1,350,000
––––––––– –––––––––
(2,600,000) 1,350,000
Note 7
USD’000
Pro forma
USD’000
–
–
–
–
–
–
440,248
–
–
–
6,335,362
2,011,557
2,934,849
2,282,996
1,002,783
–
–
–
–
–
–
2,737,575
1,355
72,707
(276,771)
–
––––––––– –––––––––
(276,771)
440,248
200,207
–––––––––
17,579,391
–
–
57,264
–
–
–
–
––––––––– –––––––––
–
–
––––––––– –––––––––
(276,771)
440,248
786,198
2,618,303
–––––––––
3,461,765
–––––––––
21,041,156
––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– –––––––––
–
–––––––––
–
–––––––––
Notes:
1.
The net assets of DP World as at 30 June 2014 have been extracted without adjustment from its unaudited interim financial
statements for the six months ended 30 June 2014.
2.
The net assets of EZW to be acquired have been extracted without material adjustment from the statement of financial position
of EZW as at 30 June 2014 as set out in Part V of this document. The statement of financial position of EZW as at 30 June 2014
has been converted from AED to US$ at a rate of AED3.6725=US$1.00, being the prevailing rate at that date.
3.
The adjustment in Note 3 reflects the purchase consideration of the Acquisition, payable upon completion. The initial
consideration to be received by PFZW under the terms of the Sale and Purchase Agreement is US$2,600 million which is wholly
payable in cash from existing reserves of DP World and its conventional and murabaha term and revolving facilities (see Note 4
99
below). The actual consideration payable will be subject to further adjustment to reflect the extent to which the amounts of net
debt and working capital in, and capital expenditure by, the EZW Group at Completion are greater or less than certain agreed
targets.
4.
The adjustment in Note 4 reflects the expected draw-down of US$1,350million on DP World’s existing conventional and
murabaha term and revolving facilities.
5.
The adjustment represents assets and liabilities in which EWZ will cease to have any economic interest or exposure. They
comprise related party loans receivable of US$197million and a receivable in respect of the sale of a subsidiary of US$80 million.
6.
Net debt of DP World at 30 June 2014 as extracted without adjustment from notes 11 and 16 to its unaudited condensed
consolidated interim financial statements for the six months ended 30 June 2014 is US$2.3 billion.
DP World net debt
at 30 June 2014
USD’000
Interest bearing loans and borrowings
5,828,115
(3,492,609)
––––––––––
2,335,506
Net debt
––––––––––
Net debt of EZW at 30 June 2014 as extracted without material adjustment from its statement of financial position as set out in
Part V of this document is US$859 million.
EZW net debt
at 30 June 2014
USD’000
Interest bearing loans and borrowings
1,234,955
(375,694)
––––––––––
859,261
Net debt
––––––––––
The pro forma adjustments in notes 3 and 4 above have been reflected in the calculation of pro forma net debt.
No adjustment has been made to reflect the trading results of DP World or EZW since 30 June 2014 or any other change in their
financial positions in these periods.
7.
The adjustment in Note 7 represents the goodwill that will be recognised in the Enlarged Group’s financial statements upon
completion of the Acquisition. The amount disclosed of US$440 million is calculated as the cash purchase consideration of
US$2,600 million less adjusted net assets acquired of US$2,160 million. Adjusted net assets acquired have been calculated as
the net assets of EZW as at 30 June 2014 of U$2,437 million less assets and liabilities of EZW not to be acquired by DP World
of US$277 million as stated in Note 5 in this Section B. A fair value assessment of the assets and liabilities acquired, including
a valuation of the intangible assets, as required by IFRS 3 (Revised) has not yet been performed.
100
Section C: Unaudited Pro Forma Income Statement of the Enlarged Group
DP World
Group
Note 1
USD’000
Revenue
Cost of sales
Gross profit
General and
administrative expenses
Other income
Profit on sale and
termination of businesses
Share of profit/(loss) from
equity accounted
investees (net of tax)
Results from operating
activities
Waiver of loan from
parent company
Finance income
Finance costs
Net finance costs
Profit before tax
Income tax expense
Profit for the year
Adjusted EBITDA
Adjusted EBITDA margin
Note 2
USD’000
Adjustments
Note 4
USD’000
3,073,248
430,328
–
(1,849,087)
(93,689)
–
––––––––– ––––––––– –––––––––
1,224,161
336,639
–
(412,676)
21,458
(64,798)
22,838
Note 5
USD’000
Memorandum
adjustment
for
significant
one-off
Pro forma
Note 7
USD’000
USD’000
Adjusted
Enlarged
Group
Pro forma
USD’000
–
–
–––––––––
–
3,503,576
–
(1,942,776)
–
––––––––– –––––––––
1,560,800
–
3,503,576
(1,942,776)
–––––––––
1,560,800
–
–
–
–
(477,474)
44,296
–
–
(477,474)
44,296
158,188
–
–
–
158,188
–
158,188
80,061
–––––––––
1,100
–––––––––
–
–––––––––
–
–––––––––
81,161
–––––––––
–
–––––––––
81,161
–––––––––
1,071,192
295,779
–
–
1,366,971
–
1,366,971
–
1,406,275
–
–
1,406,275 (1,406,275)
–
84,493
67,275
(10,887)
–
140,881
–
140,881
(369,439)
(131,608)
–
(23,572)
(524,619)
–
(524,619)
––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– –––––––––
(284,946)
(64,333)
(10,887)
(23,572)
(383,738)
–
(383,738)
––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– –––––––––
786,246
1,637,721
(10,887)
(23,572) 2,389,508 (1,406,275)
983,233
(64,458)
(124)
(64,582)
–
(64,582)
––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– –––––––––
721,788
1,637,597
(10,887)
(23,572) 2,324,926 (1,406,275)
918,651
––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– –––––––––
1,414,241
46.0%
–––––––––
348,461
80.9%
–––––––––
–
–
–––––––––
–––––––––
1,762,702
50.3%
–––––––––
–
–––––––––
1,762,702
50.3%
–––––––––
Notes:
1.
The income statement of DP World for the year ended 31 December 2013 has been extracted without adjustment from its audited
annual accounts for the year ended 31 December 2013.
2.
The income statement of EZW has been extracted without material adjustment from the income statement of EZW for the year
ended 31 December 2013 as set out in Part V of this document. The income statement of EZW for the year ended 31 December
2013 has been converted from AED to US$ at a rate of AED3.6725=US1.00, being the average prevailing rate for the year ended
31 December 2013. The adjustment will have a continuing impact on DP World with the exception of the waiver of loan from
parent company which was a one off item for EZW in 2013. The impact of excluding this item has been illustrated in the
memorandum column.
3.
The Acquisition has been accounted for as an acquisition in accordance with IFRS 3. Transaction costs incurred by DP World
before completion of the Acquisition are assumed to have been expensed in the period before 1 January 2013 and are therefore
not reflected in the pro forma income statement. The pro forma statement of net assets does not give effect to fair value
adjustments to net assets arising from the purchase price being greater than the book value of the net assets acquired. The
pro forma purchase price premium has been attributed to goodwill and no pro forma amortisation nor impairment charge has been
applied to the goodwill balance in the period presented. The fair value adjustments, when finalised post completion of the
Acquisition, may be material.
4.
EZW receives interest on the related party loans mentioned in Note 5 of Section B of this pro forma financial information. The
interest income and associated unwinding of a fair value loss recognised during the year ended 31 December 2013 is eliminated
as these receivables will be carved out prior to the completion of the proposed transaction.
5.
The adjustment reflects interest which would have been paid on the drawing down of US$1,350 million referred to in note 4 of
Section B of Part VI of this document.
6.
DP World measures segment performance based on the earnings before separately disclosed items, interest, tax, depreciation and
amortisation (“Adjusted EBITDA”). Adjusted EBITDA of DP World as extracted without adjustment from note 7 to the audited
financial statements of DP World for the year ended 31 December 2013 is US$1.4 billion.
101
Adjusted EBITDA of EZW as extracted without material adjustment from the audited financial statements of EZW for the year
ended 31 December 2013 is US$348.5 million.
Adjusted EBITDA
of EZW for the
year ended
31 December 2013
USD’000
Result from operating activities
Depreciation
Amortisation
Separately disclosed items
295,779
27,978
24,704
–
––––––––––
348,461
Adjusted EBITDA
––––––––––
The pro forma ratio of net debt of US$5.8 billion as at 30 June 2014 as set out in Section B of Part VI of this document to adjusted
EBITDA of US$1.8 billion for the year ended 31 December 2013 as set out in this Section C of Part VI of this document is 3.3x.
No adjustment has been made to reflect the trading results of DP World or EZW since 31 December 2013 or any other change
in their financial positions in these periods.
7.
In the year ended 31 December 2013, EZW reported a waiver of loan by its parent company amounting to US$1.4 billion. This
resulted in a gain of US$1,406 million which was recognised in the income statement in that year. Because this item is of a
one-off and exceptional nature in the context of EZW’s usual reporting and was not reported in previous financial year periods,
and because this item is material in the context of the pro forma income statement, a memorandum adjustment to the pro forma
has also been displayed which excludes this one-off item. This approach is more consistent with the usual operations of the
Enlarged Group and provides a more accurate representation of the actual pro forma position of the Enlarged Group had the
Acquisition been effective at 1 January 2013.
102
Section D: Accountant’s Report on the Unaudited Pro Forma Financial Information of the Enlarged
Group
KPMG
KPMG LLP
Transaction Services
15 Canada Square
Canary Wharf
London E14 5GL
United Kingdom
Tel +44 (0) 20 7311 1000
Fax +44 (0) 20 7311 3311
DX 157460 Canary Wharf 5
The Directors
DP World Limited
PO Box 17000
Dubai
13 November 2014
Dear Sirs
DP World Limited
We report on the pro forma financial information (the ‘Pro forma financial information’) set out in Part VI
of the Class 1 and related party circular dated 13 November 2014 (the “Circular”), which has been prepared
on the basis described, for illustrative purposes only, to provide information about how the acquisition of
Economic Zones World FZE by DP World FZE, a whole owned subsidiary of DP World Limited might have
affected the financial information presented on the basis of the accounting policies adopted by DP World
Limited in preparing the financial statements for the period ended 31 December 2013. This report is required
by paragraph 13.3.3R of the Listing Rules of the Financial Conduct Authority and is given for the purpose
of complying with that paragraph and for no other purpose.
Responsibilities
It is the responsibility of the directors of DP World Limited to prepare the Pro forma financial information
in accordance with paragraph 13.3.3R of the Listing Rules of the Financial Conduct Authority.
It is our responsibility to form an opinion, as required by paragraph 7 of Annex II of the Prospectus Directive
Regulation, as to the proper compilation of the Pro forma financial information and to report that opinion to
you.
In providing this opinion we are not updating or refreshing any reports or opinions previously made by us
on any financial information used in the compilation of the Pro forma financial information, nor do we accept
responsibility for such reports or opinions beyond that owed to those to whom those reports or opinions were
addressed by us at the dates of their issue.
Save for any responsibility which we may have to those persons to whom this report is expressly addressed
and which we may have to the shareholders of DP World Limited as a result of the inclusion of this report
in the Circular, to the fullest extent permitted by law we do not assume any responsibility and will not accept
any liability to any other person for any loss suffered by any such other person as a result of, arising out of,
or in connection with this report or our statement, required by and given solely for the purposes of complying
with Listing Rule 13.4.1R(6), consenting to its inclusion in the Circular.
103
Basis of opinion
We conducted our work in accordance with the Standards for Investment Reporting issued by the Auditing
Practices Board in the United Kingdom. The work that we performed for the purpose of making this report,
which involved no independent examination of any of the underlying financial information, consisted
primarily of comparing the unadjusted financial information with the source documents, considering the
evidence supporting the adjustments and discussing the Pro forma financial information with the directors
of DP World Limited.
We planned and performed our work so as to obtain the information and explanations we considered
necessary in order to provide us with reasonable assurance that the Pro forma financial information has been
properly compiled on the basis stated and that such basis is consistent with the accounting policies of
DP World Limited.
Our work has not been carried out in accordance with auditing or other standards and practices generally
accepted in the United States of America or other jurisdictions and accordingly should not be relied upon as
if it had been carried out in accordance with those standards and practices.
Opinion
In our opinion:
•
the Pro forma financial information has been properly compiled on the basis stated; and
•
such basis is consistent with the accounting policies of DP World Limited.
Yours faithfully
104
PART VII
PROPERTY VALUATION REPORT
The Board of Directors
on behalf of DP World Limited
PO Box 17000
Dubai
Citigroup Global Markets Limited
Citigroup Centre
33 Canada Square
London E14 5LB
Deutsche Bank
Winchester House
London EC2N 2DB
13 November 2014
Dear Sirs
VALUATION REPORT ON THE PROPERTY PORTFOLIO
1.
Introduction
1.1
In accordance with our instructions we have carried out a valuation of the usufruct interest in the
properties referred to in the Schedule appended to this Report (the “Properties”) and now report our
opinion of the Market Values of the Properties as at 30th October 2014 (the “Valuation Date”). The
scope of our instructions have been set out in the Terms of Engagement letter, dated 30 October 2014,
as agreed with the above three parties.
1.2
This Report is required for inclusion in a circular (the “Circular”) which is to be published in
connection with approval for a Class 1 and Related Party Transaction, as defined by the UK Listing
Rules, in respect of DP World Limited, a company whose shares are listed on the Premium listing
segment of the Official List of the UK Financial Conduct Authority (the “FCA”) and admitted to
listing on the official list of securities maintained by the DFSA and trading on the Main Market of the
London Stock Exchange and admitted to listing and trading on the NASDAQ Dubai stock exchange,
and is provided expressly for this purpose and this purpose only.
1.3
The Properties comprise offices, warehouses, staff/worker accommodation, showrooms, food courts,
land leased to end users, and a mixed use project in the course of development and these have been
classed as investment properties.
1.4
The valuations have been prepared in accordance with the RICS Valuation – Professional Standards
January 2014, issued by the Royal Institution of Chartered Surveyors (the “Red Book”), and as an
independent expert in accordance with the relevant listing rules published by the Financial Conduct
Authority (“FCA”) under section 73A of the Financial Services and Markets Act 2000 of the United
Kingdom (the “Listing Rules”), including LR13.4.4 and LR13.4.5 of the Listing Rules.
1.5
The Schedule comprises brief details of each of the assets by Group, the associated terms of tenure,
occupational tenancy overview and details of Net Annual Rent, as well as Market Values, as at
30th October 2014.
105
Net Annual Rent is defined within the FCA’s handbook as:
“The current income or income estimated by the valuer:
(1)
Ignoring any special receipts or deductions arising from the property;
(2)
excluding Value Added Tax and before taxation (including tax on profits and any allowances
for interest on capital or loans); and
(3)
after making deductions for superior rents (but not for amortisation) and any disbursements
including, if appropriate, expenses of managing the property and allowances to maintain it in
a condition to command its rent.”
1.6
The Properties were inspected within the last ten weeks.
2.
Compliance and Disclosures
2.1
Knight Frank LLP is instructed as External Valuer, as defined by the Red Book and regulations made
by the Financial Conduct Authority.
2.2
Knight Frank LLP has undertaken valuations of the majority of the properties within the last
12 months but report without any conflict of interest.
2.3
The valuers, on behalf of Knight Frank LLP, with responsibility for this report are Harry Morten
MRICS and Stephen Flanagan MRICS, both RICS Registered Valuers. Parts of the valuation have
been undertaken by additional valuers. We confirm that the valuers and additional valuers collectively
meet the requirements of RICS Valuation – Professional Standards VPS 3, having sufficient current
knowledge of the particular market and the skills and understanding to undertake the valuation
competently.
2.4
In relation to Knight Frank LLP’s preceding financial year, the proportion of the total fees paid by the
Company to the total fee income of Knight Frank LLP was less than 5 per cent. We recognise and
support the RICS Code of Conduct and have procedures for identifying conflict of interest checks.
3.
Basis of Valuation
3.1
The Properties have been valued on the basis of Market Value in accordance with the RICS Valuation –
Professional Standards VPS4(1.2). This is an internationally recognised basis and is defined as:
“the estimated amount for which an asset or liability should exchange on the valuation date between
a willing buyer and a willing seller in an arm’s length transaction after proper marketing and where
parties had each acted knowledgeably, prudently and without compulsion.”
3.2
No allowance has been made for expenses of realisation or for any taxation which may arise, and our
valuations are expressed exclusive of any Value Added Tax that may become chargeable.
3.3
Our valuations reflect usual deductions in respect of purchaser’s costs and, in particular, liability for
the purchaser’s share of transfer fees applicable in Dubai, United Arab Emirates, at the valuation date.
3.4
Our valuation has been undertaken using appropriate valuation methodology and our professional
judgement.
3.5
The valuers opinion of Market Value was primarily derived using recent comparable market
transactions on arm’s length terms, where available, and appropriate valuation techniques (The
Investment Method).
3.6
In the case of Properties having development potential, the Residual Method has been adopted which
is the generally accepted method for valuing such properties. In these instances we form an opinion
of the completed development (Gross Development Value) using the Investment Method and deduct
from it the total costs of development and an allowance for developer’s profit. We would note that only
one of the assets is in the course of development.
106
3.7
The Properties have been valued individually and not as part of a portfolio.
3.8
Save as otherwise disclosed, it has been assumed for the purpose of valuation that the relevant
interests in the Properties are free of mortgage, charge or other debt security and no deduction has
been made for such charge or debt.
4.
Valuation Assumptions
4.1
Sources of Information
Our valuations are based on information provided by Economic Zones World (EZW) of PO Box
16888 Dubai, United Arab Emirates (the vendor) upon which we have relied, and which has not been
verified by us. Our assumptions (as defined in the Red Book) relating to this information are set out
below. If any of the information or assumptions are subsequently found to be incorrect then our
valuations should be reviewed.
4.2
We would note that where information or documentation has not been provided to us we have adopted
the appropriate assumptions required to undertake, and report, Market Values. When considering the
covenant strength of individual tenants we have not carried out credit enquiries but have reflected
within our valuations our general understanding of the investment market’s likely perception of
tenants’ financial status.
4.3
Title
We have been provided with copy documentation of the Usufruct Agreements by the client and EZW
in regard to the tenure of the properties, but have not received a Report on Title.
Our valuations are prepared on the basis that the Properties have good and marketable titles and are
free of any undisclosed onerous burdens, outgoings or restrictions. The tenure of each property is
identified within the Schedule. We have assumed that the status and associated benefits of the free
zone status will continue indefinitely.
4.4
Tenancy Information
We have been provided by Economic Zones World with, and relied upon, copies of tenancy schedules
for the multi let assets, and copies of occupational leases for the single let assets that the Properties
are subject to. Where copies of leases have not been provided, nor occupational tenancy information
referred to within the associated property details, we have relied upon a tenancy schedule as provided
to us by EZW.
Several of the Properties have either vacant space within the building (that is to be considered
lettable), or have space that is effectively occupied by Group Companies. To this end, we have been
provided with a tenancy schedule detailing the status of each demised area, either as expired, allocated
for group use, under termination or vacant. To confirm, for the purpose of our reporting, we have
valued any space or land not currently leased (including land parcels reserved for EZW) as effectively
vacant and available for lease as at the valuation date, and allowed appropriate void periods until the
space may become income producing. In the case of Group Companies (i.e. space occupied by EZW
and its subsidiary companies) we have assumed that their occupation would immediately be
regularised through a formal lease at a Market Rent.
4.5
We reflect our general appreciation of potential purchasers’ likely perceptions of the financial status
of tenants. We have not, however, carried out detailed investigations as to the financial standing of the
tenants and have assumed, unless informed otherwise, that in all cases there are no significant arrears
of payment and that they are capable of meeting their obligations under the terms of leases and
agreements.
4.6
Land Register Inspection and Searches
We do not undertake searches or inspections of any kind (including web based searches) for title or
price paid in any publicly available land registers, including Dubai Land Department (DLD).
107
4.7
Planning, Highway and Other Statutory Regulations
We have made verbal enquiries of the Free Zone authority who control planning and highway matters
with the Jebel Ali Free Zone (JAFZ), who has provided us with verbal advice on matters affecting the
properties, although this information was given to us on the basis it should not be relied upon.
We have not seen specific planning consents and, except where advised to the contrary have assumed
that the Properties have been (and in the case of the Property under construction – will be) erected and
are being occupied and used in accordance with all requisite consents and that there are no
outstanding statutory notices.
4.8
Structural Condition
We have not been instructed to carry out structural surveys of the Properties, nor to test the services,
but have reflected in our valuations, where necessary, the findings contained within any building
reports or construction reports that EZW has provided us with, as well as the general condition of the
Properties as observed during the course of our internal and external inspections. Our valuations
assume the buildings contain no deleterious materials and that the sites are unaffected by adverse soil
condition, except where we have been notified to the contrary.
4.9
Environmental Issues
We have not carried out any investigations into past or present uses of either the Properties or
neighbouring land to establish whether there is any potential for contamination for these uses or sites
to the Properties.
We understand that none of the Properties are, nor are likely to be, affected by land contamination and
that there are no ground conditions which would affect the present or future use of the properties.
Should it be established subsequently that contamination exists at any of the Properties or an any
neighbouring land or that the Properties have been or are being put to a contaminative use this could
reduce the values now reported.
4.10 Property Insurance
Our valuations assume that the Properties would, in all respects, be insurable against all usual risks
including terrorism, flooding and rising water table at normal commercially acceptable premiums.
4.11 Building Areas
Our valuations are based on the measurements contained within the tenancy schedules, which have
been provided to us by EZW. We have assumed these measurements have been undertaken in
accordance with the RICS Code of Measuring Practice. We understand all Warehouse areas are
provided to us on a Gross Internal Area basis with the Office areas provided on a Net Internal Area
basis in keeping with general market practices.
5.
Valuation
5.1
We are of the opinion that the aggregate Market Value of the unexpired usufruct interests in the
Properties as at 30th October 2014 is AED 17,351,150,000 (Seventeen Billion, Three Hundred and
Fifty One Million, One Hundred and Fifty Thousand UAE Dirhams)*
The tenure of the Properties comprises the following:
Long Leasehold (usufruct)
Freehold
AED 17,351,150,000
–
–––––––––––––––––
AED 17,351,150,000
Total
–––––––––––––––––
100%
–
–––––
100%
––––
*
Valuation equates to US$4,724,615,385 based on exchange rate as at the 30th October 2014 being US$1.00 =
AED 3.6725.
We further confirm that, as at today’s date, there has been no material change in value since the
Valuation Date.
108
6.
General Conditions
6.1
This Valuation Report has been prepared for inclusion in the Circular. Knight Frank LLP hereby gives
consent to the inclusion of this Valuation Report in the Circular and to the references to this Valuation
Report and Knight Frank LLP in the Circular in the form and context in which they appear. Knight
Frank LLP authorises, and accordingly takes responsibility for, the contents of this Valuation Report
for the purposes of the relevant provisions of the Listing Rules applicable to the Circular and confirms
that the information contained in this Valuation Report is, to the best of our knowledge and having
taken all reasonable care to ensure that this is the case, in accordance with the facts and contains no
omission likely to affect its import.
6.2
The contents of this Valuation Report may be used only for the specific purpose to which they refer.
Before this Report, or any part thereof, is reproduced or referred to, in any document, circular or
statement or published in any way whatsoever whether in hard copy or electronically (including on
any web site), and before its contents, or any part thereof, are disclosed orally or otherwise to a third
party, Knight Frank LLP’s written approval as to the form and context of such publication or
disclosure must first be obtained, but may not be unreasonably withheld or delayed. For the avoidance
of doubt such approval is required whether or not Knight Frank LLP is referred to by name and
whether or not the contents of our Report are combined with others.
Yours faithfully
Harry Morten MRICS
For and on behalf of Knight Frank LLP
Partner, London Valuations
[email protected]
Stephen Flanagan MRICS
Partner, Valuations Dubai
[email protected]
Reviewed (but not undertaken) by:
Peter Barnard FRICS
Partner, London Valuations
[email protected]
109
SCHEDULE TO THE VALUATION REPORT
THE PROPERTY PORTFOLIO
Reference
Description,
Age, Tenure
Term of
Tenancies
Current Net
Annual Rent
receivable AED
Market Value as at
30 October
2014
Asset Type
Description
Group 1
Vacant land plots,
usufruct
Land
All vacant land in JAFZ
including JAFZA Special
Projects land
Vacant
Vacant
AED 1,698,300,000
Group 2
Occupied land
plots, usufruct
Land
All plot leased to 3rd parties in
JAFZ
5-15 years
AED 606,881,017
AED 9,135,300,000
AED 606,881,017
AED 10,833,600,000
AFZA One, under
construction,
usufruct
Office,
Convention
Centre, Hotel
Mixed use development
comprising of two large office
towers, convention centre and
a 4 star hotel (under
construction)
Vacant
N/A
N/A
AED 604,800,000
Group 4
LOBs 1-13 and
20&21, 1995-1999,
usufruct
Office
15 individual low rise office
buildings typically in clusters
of 2 to 4 buildings. All low
rise (G+1) office buildings in
JAFZ North Zone
1 year
AED 37,395,366
AED 340,000,000
Group 5
EWW G+3, 2008,
usufruct
Office
Two standalone G+3 office
buildings in JAFZ South Zone,
in close proximity to Hellman
and G +1
1 year
AED 4,035,108
AED 38,900,000
Group 6
Leased Office
Buildings 14,15 &
16, 1998, usufruct
Office
Three standalone office
buildings. All mid rise (G+6)
storeys in JAFZ North Zone
1 year
AED 41,793,952
AED 490,800,000
Group 7
LOB 18 & 19, 2008,
usufruct
Office
Two high rise office towers on
a common podium alongside
Sheikh Zayed Road, adjacent
to JAFZ South Zone
1 year
AED 64,035,117
AED 657,700,000
Group 8
Technopark Office
Buildings, 2010,
usufruct
Office
Two adjoined office buildings
located in Technopark, some
5km South West of JAFZ
South Zone
1 year
AED 31,175,605
AED 299,600,000
Group 9
FZS1- Light
Industrial Units
Phase 7&8 – South
Zone, 2008, usufruct
Warehouse
Cluster of 216 warehouses in
JAFZ South Zone
1 year
AED 48,453,181
AED 433,800,000
Group 10
FZS2 – Light
Industrial Unit Phase
9a – South Zone,
2009, usufruct
Warehouse
JAFZ South Zone
1 year
AED 12,092,584
AED 110,500,000
Group 11
FZS5 – Light
Industrial Units
Phase 12 – South
Zone, 2008, usufruct
Warehouse
JAFZ South Zone
1 year
AED 13,520,182
AED 123,600,000
Group 12
RA07 – Light
Industrial Units 15,
2010, usufruct
Warehouse
JAFZ North Zone
1 year
AED 17,734,896
AED 155,000,000
Group 13
RA08 – Light
Industrial Units 13,
2001, usufruct
Warehouse
JAFZ North Zone
1 year
AED 152,379,838
Group 14
WT01 – E Water
Tank and Yellow,
1987, usufruct
Warehouse
JAFZ North Zone
1 year
AED 8,898,615
Subtotal
Group 3
Subtotal
Subtotal
AED 178,435,148
110
AED 604,800,000
AED 1,827,000,000
AED 1,268,300,000
AED 65,400,000
Reference
Group 16
Description,
Age, Tenure
PVAXX, Hellman &
G+1, Chinamex,
2007, 2007 & 2000
respctively, usufruct
Asset Type
Description
PVAXX – G+3 Office building
Warehouse (G+1
comprises offices) adjoined to a 6,000m2
Warehouse in JAFZ North
Zone, directly fronting Sheikh
Zayed Road.
Term of
Tenancies
Current Net
Annual Rent
receivable AED
Market Value as at
30 October
2014
1–10 years
AED 21,253,459
AED 226,000,000
Hellman and G+1 – two
warehouses, adjoining a G+1
office building in JAFZ South
Zone
Chinamex – Standalone
warehouse in JAFZ South
Zone – circa 15,000m2
Subtotal
Group 15
AED 274,332,755
Showrooms
Approx. 106 units comprising
Showroom / Warehouse
accommodation fronting onto
a new highway through JAFZ
South Zone
1 year
AED 26,242,764
AED 284,000,000
Customised
Warehouses –
Hitachi, Goodrich,
Pyramid Building,
UPS, Eagle
Building, 2006,
2007, 2009, 2006 &
2004 respectively,
usufruct
Customised
Hitachi – Warehouse in JAFZ
North Zone, with large loading
area
15 years
AED 21,467,714
AED 226,100,000
Subtotal
Group 17
AED 26,242,764
AED 2,382,600,000
S3B4 – Showrooms,
2011, usufruct
AED 284,000,000
Pyramid – Warehouse fronting
onto the highway into JAFZ
South Zone from JAFZ North
Zone
UPS – Standalone warehouse
in close proximity to Pyramid
Eagle Building – Warehouse
located in JAFZ South Zone
Goodrich (now UTC) –
bespoke built high tech
warehouse in JAFZ South
Zone overlooking the E311
with prominent frontage
Subtotal
AED 21,467,714
AED 226,100,000
Group 18
On Site Residential –
Old West, 1997,
usufruct
Staff
Accommodation
Older staff accommodation in
the portfolio, situated by Gate
7. Earlier phases of Old West
have been demolished and
only part of the original
development remains.
Provides 264 bed spaces
1 year
AED 4,336,032
AED 29,700,000
Group 19
JAFZ North Ladies,
JAFZ North (New
West), JAFZ North
(West), 1996, 2003 &
1996, usufruct
Staff
Accommodation
Major development of staff
accommodation in a secure
gated community next to Gate
7 of the North Zone. Two
phases of buildings, initial
phase G+2 and the last phase
(New West) built over G+3
levels. Provides approximately
2,573 bed spaces
1 year
AED 43,264,032
AED 318,070,000
Group 20
On Site Residential
– Technopark, 2012,
usufruct
Staff
Accommodation
Pre-fabricated modular
portacabin staff
accommodation which is less
than 2 years old and is stacked
over G+1 levels
1 year
AED 3,774,408
AED 21,300,000
111
Reference
Description,
Age, Tenure
Term of
Tenancies
Current Net
Annual Rent
receivable AED
Market Value as at
30 October
2014
Asset Type
Description
Group 21
JAFZ North (East),
1997-2005, usufruct
Staff
Accommodation
Older staff accommodation in
the East section of the North
Zone fronting Sheikh Zayed
Road and close to Gate 3 and
the Truck gate. Blocks of G+1
storeys, differentiated with
rooms for Labours, Juniors
and Seniors. Provides circa
1,558 bed spaces for workers
1 year
AED 24,768,331
AED 173,500,000
Group 22
JAFZ South G+6,
2009, usufruct
Staff
Accommodation
Large, self contained staff
accommodation village in the
South Zone, completed in
2009. Comprises 17 towers of
G+6 storeys and built to a
modern, good quality
specification. Set around a
large retail mall/commercial
centre within landscaped
grounds. Provides 3,326 bed
spaces for workers
1 year
AED 76,956,000
AED 576,000,000
Group 23
JAFZA South G+1,
2014, usufruct
Staff
Accommodation
Pre-fabricated modular
portacabin staff
accommodation which brand
new and yet to be occupied
and is stacked over G+1 levels
1 year
N/A
Food Courts –
JAFZA Commercial
Centre, LIU 15 Food
Court, LOB 15 Food
Court, LIU 12 Food
Court, 2009, 2012,
2003 & 2011
respectively, usufruct
Food Courts
JAFZA Commercial Centre –
retail centre located within the
OSR JAFZ South G+6
development
1 year
Subtotal
Group 24
AED 153,098,805
AED 7,890,901
AED 15,700,000
AED 1,134,270,000
AED 58,780,000
LIU 15 Food Court – located
alongside LIU 15, adjacent to
roundabout 7 in JAFZ North
Zone
LOB 15 Food Court – main
food court for all office tenants
close to gate 4, JAFZ North
Zone
LIU 12 Food Court – adjacent
to LIU 12, recently
reconfigured for Dubai Health
Authority
Subtotal
AED 7,890,901
Grand Total
AED 1,268,349,104
US$345,363,950
AED 58,780,000
AED 17,351,150,000
US$4,724,615,385
Note:
* For the purposes of this valuation report, Knight Frank have categorised mixed use facilities based on the majority use of such a
building and included workstations as part of the individual office buildings. This may differ from management analysis by category
elsewhere in the Circular, where sub-segments of mixed use buildings are apportioned according to actual use and workstations are
treated under a separate leasing category.
112
PART VIII
OVERVIEW OF THE NASDAQ DUBAI REGULATORY REGIME
The following paragraphs set out an overview of certain key aspects of the NASDAQ Dubai regulatory
regime.
1.
Corporate governance framework
Companies listed on NASDAQ Dubai are subject to the corporate governance regime imposed by the
NASDAQ Dubai Rules and administered by the DFSA, which impose the overarching principle that a
company should have in place a corporate governance framework which is adequate to promote prudent and
sound management in the long term interests of the company and its shareholders. This overarching principle
is supported by seven subsidiary governance principles, as set out below, which are legally binding, and are
contained in Part 3 of the DFSA Markets Rules, and supplemented by additional “Best Practice Standards”
set out in Appendix 4 of the DFSA Markets Rules. The Best Practice Standards are designed to provide
flexibility so that a company may achieve the outcome intended by the general governance principles whilst
taking into account the unique nature of individual businesses. Compliance with the Best Practice Standards
is on a “comply or explain” basis similar to that of the UK Corporate Governance Code.
Principle 1 – Board of directors
Every Reporting Entity must have an effective board of directors which is collectively accountable for
ensuring that the Reporting Entity’s business is managed prudently and soundly.
Principle 2 – Division of responsibilities
The board of directors must ensure that there is a clear division between the board’s responsibility for setting
the strategic aims and undertaking the oversight of the Reporting Entity and the senior management’s
responsibility for managing the Reporting Entity’s business in accordance with the strategic aims and risk
parameters set by the board.
Principle 3 – Board composition and resources
The board of directors, and its committees, must have an appropriate balance of skills, experience,
independence and knowledge of the Reporting Entity’s business, and adequate resources, including access
to expertise as required and timely and comprehensive information relating to the affairs of the Reporting
Entity.
Principle 4 – Risk management and internal control systems
The board of directors must ensure that the Reporting Entity has an adequate, effective, well defined and
well-integrated risk management, internal control and compliance framework.
Principle 5 – Shareholder rights and effective dialogue
The board of directors must ensure that the rights of shareholders are properly safeguarded through
appropriate measures that enable the shareholders to exercise their rights effectively, promote effective
dialogue with shareholders and other key stakeholders as appropriate, and prevent any abuse or oppression
of minority shareholders.
Principle 6 – Position and prospects
The board of directors must ensure that the Reporting Entity’s financial and other reports present an accurate,
balanced and understandable assessment of the Reporting Entity’s financial position and prospects by
ensuring that there are effective internal risk control and reporting requirements.
113
Principle 7 – Remuneration
The board of directors must ensure that the Reporting Entity has remuneration structures and strategies that
are well aligned with the long-term interests of the entity.
2.
Board composition
The Best Practice Standards provide that a company’s board of directors should be comprised of at least two
independent non-executive directors, with a third of the board being non-executive directors.
3.
Board committees
Under the Best Practice Standards, a company’s audit committee should be made up of at least two
independent non-executive directors, at least one of whom should have recent and relevant financial
experience. The remuneration committee should be made of up at least three directors, of whom the majority
should be independent non-executive directors, and the nomination committee should be comprised of at
least a majority of independent non-executive directors.
4.
Pre-emption rights
Pursuant to the NASDAQ Dubai Rules, the board of a company is required to ensure that, unless otherwise
provided in the company’s constitutional documents, existing shareholders have a pre-emptive right to
subscribe for new issues of shares where the issue is made for cash but this requirement can be waived if the
company obtains the prior approval of shareholders in general meeting by way of a simple majority vote.
5.
Significant transactions
The NASDAQ Dubai Rules apply a relatively simple regime for significant transactions whereby any
acquisition or disposal of an asset by the company which is valued at 50 per cent. or more of the value of the
company’s net assets as at the date of its last published financial statements will require the approval of a
simple majority of shareholders.
6.
Related party transactions
Pursuant to the NASDAQ Dubai Rules, where a proposed related party transaction amounts to more than
5 per cent. of the value of the company’s net assets as at the date of its last published financial statements,
the company will be required to obtain the approval of a majority of shareholders prior to entering into the
transaction. The related party shareholders are not precluded from voting on the resolution. Where the related
party transaction amounts to less than such a value, the company must notify the DFSA of the key terms of
the transaction and explain the basis upon which these are fair and reasonable (including a written
confirmation from an independent third party acceptable to the DFSA). This is a notification requirement
rather than application for approval, and must be notified to the DFSA as soon as possible after the
transaction has been entered into.
There are a limited number of exceptions from the above, such as ordinary course transactions on arms’
length terms and smaller value transactions where the transaction (or series of transactions with the same
related party in any 12 month period) does not exceed 0.25 per cent. of the value of the company’s net assets
as stated in its last published financial reports.
7.
Provisions relating to controlling shareholders
Pursuant to the NASDAQ Dubai Rules, companies are required to ensure that they can operate their business
independently of any controlling shareholder (being, in essence, a person or group of persons acting together
who control 30 per cent. or more of the company’s voting rights and/or the appointment of one or more
directors who in turn are able to exercise a majority of the votes at board meetings) and any of its associates
at all times. The DFSA considers that for an issuer to operate its business independently of its controlling
shareholder, all transactions and relationships between the issuer and the controlling shareholder or any of
its associates must be at arm’s length and on normal commercial terms. The NASDAQ Dubai Rules do not
impose any other provisions specifically targeted at companies with a controlling shareholder.
114
8.
Delisting
If a NASDAQ Dubai listed entity wishes to delist its securities it must submit a request to the DFSA in
writing. The DFSA may then impose such conditions or requirements as it considers appropriate, which
could, but will not necessarily, include a requirement to obtain shareholder approval. The DFSA will
however require sufficient notice to be provided to shareholders so as to enable them to sell their shares prior
to any delisting.
9.
Contents of circulars
The contents of shareholders’ circulars are not prescribed in detail in the NASDAQ Dubai Rules, and are
likely to be subject to the discretion of the DFSA on a case-by-case basis.
10.
Disclosure and dealing in securities
The DIFC Markets Law and the NASDAQ Dubai Rules require the disclosure of information relating to
acquisitions and disposals of major shareholdings. Once a shareholder’s interest in the company’s securities
reaches 5 per cent, a subsequent notification is required every time such shareholder’s financial interest in
shares passes through one full percentage point from the last level reported.
The company is also required to disclose transactions in its securities by connected persons where
(i) a connected person holds 5 per cent. or more of the company’s voting securities and (ii) there is any
increase or decrease by 1 per cent. or more in any such interest.
Dealings in the company’s shares are subject to Part 6 of the DIFC Markets Law relating to prevention of
market abuse.
A company is also required to seek DFSA approval before implementing a share buy-back programme and
the DFSA may impose conditions or restrictions on any such programme.
115
PART IX
ADDITIONAL INFORMATION
1.
Responsibility
The Company and the Directors, whose names appear in Part I (Letter from the Chairman of DP World
Limited) of this document, accept responsibility for the information contained in this document. To the best
of the knowledge and belief of the Company and the Directors (who have taken all reasonable care to ensure
that such is the case), the information contained in this document is in accordance with the facts and does
not omit anything likely to affect the import of such information.
2.
Company Details
The Company was incorporated on 9 August 2006 under DIFC law as a company limited by shares.
The Company’s registered number is 0226 and its name is DP World Limited. The Company is governed in
particular by the DIFC Companies Law.
The Company’s principal executive offices are located at LOB 17, Jebel Ali Free Zone, Dubai, UAE.
Its registered address is PO Box 17000, Dubai, UAE and the Company also maintains an office in the DIFC
at Office 27, Level 3 GV4, Dubai International Financial Centre, Gate Village, PO Box 17000, Dubai, UAE.
The Company’s telephone number is +971 4 881 1110.
3.
Share capital
As at 12 November 2014, being the latest practicable date prior to the publication of this document, the
issued share capital of the Company was US$1,660,000,000, comprising 830,000,000 Ordinary Shares of
US$2.00 each.
4.
Directors’ and Senior Managers’ interests in Shares
As at 12 November 2014 (the latest practicable date prior to the publication of this document), the interests
of Directors and Senior Managers in the issued share capital of the Company (all of which, unless otherwise
stated, are beneficial) that have been notified by each Director to the Company pursuant to the Disclosure
and Transparency Rules were and are expected to be, immediately following completion of the Acquisition
as follows:
Director/Senior Manager
Number of
Shares
Percentage of
issued share
capital of the
Company
Mohammed Sharaf
Yuvraj Narayan
Sir John Parker
Mohammed Al Muallem
28,221
13,864
7,262
4,712
0.0034%
0.0017%
0.0009%
0.0006%
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5.
Major Interest in Shares
As at 12 November 2014 (the latest practicable date prior to the publication of this document), and so far as
is known to the Company by virtue of the notifications made to it pursuant to the Disclosure and
Transparency Rules, the name of each person (other than any Director) who, directly or indirectly, is
interested in five per cent. or more of the voting rights in the Company, and the amount of such person’s
interest, is as follows:
Shareholder
Port and Free Zone World FZE
Number of
Shares
Percentage of
issued share
capital of the
Company
667,735,000
80.45%
6.
Directors’ Service Contracts
(a)
Executive Directors’ service agreements, remuneration and emoluments
Each of the Executive Directors is employed pursuant to a service agreement with DP World FZE, a
subsidiary of DP World, and is entitled to receive a base salary and certain other benefits under the
relevant service agreement. The particulars of these service agreements are set out below:
Director
Mohammed Sharaf
Yuvraj Narayan
Appointment date/
Date of service
agreement if
different
Basic annual
salary
Notice period
22 March 2011
22 March 2011
AED2,543,172*
AED2,169,900
6 months
6 months
Note:
*
Excludes utilities, which are paid directly to the Dubai Electricity and Water Authority.
All Executive Directors’ service contracts are terminable by DP World FZE on six month’s notice and,
without notice, on payment of six months base salary. DP World FZE may terminate the contracts of
the Executive Directors with immediate effect for cause. The service agreement contains restrictive
covenants covering non-compete, non-solicitation of employees, non-solicitation and non-deal of
customers, clients and suppliers which apply for up to six months following its termination.
The duration of the restrictive covenants will be reduced by any period of time that the Executive
Director is on garden leave during his notice period.
(b)
Non-Executive Directors’ letters of appointment and fees
The Non-Executive Directors do not have service contracts. Their terms of appointment are governed
by letters of appointment. The Company has no contractual obligation to provide any benefits to any
of the Non-Executive Directors upon termination of their directorship.
Each Non-Executive Director’s letter of appointment is with the Company and for a fixed term of
three years. They can be terminated on six months’ notice by either party. Each Director is subject to
annual re-election by the Shareholders at each annual general meeting pursuant to the Articles.
117
The effective date of each of the Non-Executive Directors’ current letter of appointment are set out
below:
Name
Date
11 May 2014
Jamal Majid Bin Thaniah
11 May 2014
Sir John Parker
1 January 2013
Deepak Parekh
11 May 2014
Robert Woods
1 January 2014
Mark Russell
11 August 2014
Sultan Ahmed Bin Sulayem’s and Jamal Majid Bin Thaniah’s letters of appointment include
additional terms to reflect their roles as representatives of PFZW on the Board as required by the
Relationship Agreement (see section 11.1 (c) of Part IX (Additional Information) of this document).
The fees and other remuneration payable by the Company to each of the Non-Executive Directors,
which includes remuneration for their services in being a member of, or chairing, a Board Committee,
are set out below:
Name
Non-Executive Director Fee
Jamal Majid Bin Thaniah
Sir John Parker
Deepak Parekh
Robert Woods
Mark Russell
nil*
nil*
US$515,955*
US$146,925
US$114,785*
US$114,785
Notes:
7.
*
Sultan Ahmed Bin Sulayem and Jamal Majid Bin Thaniah are not remunerated by the Company.
**
Sir John Parker and Robert Woods are paid in pounds sterling represented in equivalent US$. For further information on
currency exchange rates please see Currencies and exchange rate information in Part III (Directors, Company Secretary,
Registered Office and Advisers and Presentation of Information) of this document.
Related Party Transactions
Other than the Acquisition, save as disclosed below and in the financial information relating to related party
transactions as set out in:
•
Note 29 (Related Party Transactions) to the Consolidated Financial Statements at page 106 of the
World Annual Report and Accounts 2013;
•
Note 27 (Related Party Transactions) to the Consolidated Financial Statements at page 95 of the DP
World Annual Report 2012; and
•
Note 27 (Related Party Transactions) to the Consolidated Financial Statements at page 94 of the DP
World Annual Report 2011,
LR13
each of which is incorporated by reference into this document, and as set out below, for each of the years
ended 31 December 2013, 2012 and 2011, and during the period between 31 December 2013 and
12 November 2014 (being the latest practicable date prior to the publication of this document), the DP World
Group entered into no announceable transactions with related parties.
Please refer to paragraph 13 of this Part IX (Additional Information) of this document for further details
about information incorporated by reference.
Acquisition of Dubai Trade FZE
On 21 June 2014, the DP World Group acquired a 100 per cent. interest in Dubai Trade FZE for a total
consideration of US$9,500,000 (cash acquired on acquisition: US$7,498,000) from PFZW.
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Acquisition of World Security FZE
On 2 October 2014, the DP World Group acquired a 100 per cent. interest in World Security FZE for a total
consideration of US$25,479,457 (including cash acquired on acquisition of US$6,000,000) from Istithmar
World Ventures LLC.
8.
Material Contracts
8.1
Material contracts of the DP World Group
The following are all of the contracts (not being contracts entered into in the ordinary course of
business) which have been entered into by the Company and/or members of the DP World Group
within the two years immediately preceding the date of this document and are, or may be, material to
the DP World Group or which have been entered into at any time by the Company or any member of
the DP World Group and contain any provisions under which the Company or any member of the
DP World Group has any obligation or entitlement which is, or may be, material to the DP World
Group at the date of this document:
(a)
Acquisition Agreement
A description of the principal terms of the Acquisition Agreement is set out in Part IV
(Principal Terms of the Acquisition) of this document.
(b)
US$1,000,000,000 convertible bond due 2024
On 19 June 2014 DP World issued senior unsecured convertible bonds due 2024 with a
principal amount of US$1,000,000,000 (the “Convertible Bonds”) convertible into Shares.
The Convertible Bonds bear interest at an annual rate of 1.75% and are convertible at a
conversion price of US$27.1396 per Share (which represents a premium of 37.5%).
Ranking. The Convertible Bonds constitute direct, unconditional, unsubordinated and
unsecured obligations of DP World ranking pari passu and rateably, without any preference
among themselves, and equally with all other existing and future unsecured and
unsubordinated obligations of DP World save, in the event of a winding up, for such obligations
that may be preferred by provisions of law that are mandatory and of general application.
Change of Control. Upon the occurrence of a change of control, each holder of the Convertible
Bond has the right to require DP World to either (a) redeem its Convertible Bond at par plus
accrued interest, or (b) convert the Convertible Bonds into Shares. A change of control shall
occur if the Government of Dubai (i) ceases to hold (directly or indirectly) at least 50% of
DP World’s issued share capital, or otherwise ceases to control (directly or indirectly)
DP World (for example, by way of control of the board of directors), or (ii) owns, directly of
indirectly, more than 85 per cent. of DP World.
Restrictive Covenants. The Convertible Bonds have the benefit of a negative pledge which is
usual and customary for debt securities of this type. Subject to certain exceptions in respect of
project finance indebtedness and securitisation indebtedness, none of DP World nor any of its
subsidiaries is permitted to grant security over capital markets securities, unless at the same
time it grants the same security to the Convertible Bonds.
The negative pledge does not apply to permitted security, which includes, for example, secured
debt securities of a target entity provided that such entity is merged into or consolidated into
DP World or any of its subsidiaries, or security over property or assets subsequently acquired
by a member of the DP World Group as long as the security was not created in contemplation
of the acquisition.
Events of Default. The Convertible Bonds are subject to certain customary events of default,
and upon the occurrence of an event of default, the Convertible Bonds are redeemable at par
plus accrued interest.
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(c)
Relationship Agreement
On 25 May 2011, the Company, PFZW and Dubai World entered into the Relationship
Agreement to govern their relationship following admission of the Shares to trading on the
London Stock Exchange.
Independence
The Company has its own operational management team. PFZW has undertaken to exercise its
voting powers in relation to the Company to ensure that the Company is operating and making
decisions for the benefit of the shareholders of the Company as a whole and independently of
it and Dubai World, and has further agreed not to exercise its voting rights in favour of any
amendment to the Articles, or to approve any related party transaction in a manner which would
be contrary to the principle of independence of the Company.
Board
PFZW shall be entitled to appoint (and remove and re-appoint) such number of directors to the
Board (each a “PFZW Director”) as permitted by law subject to its obligation to act in the best
interests of the Company. It is also agreed that at least half the Board (excluding the chairman)
shall comprise independent non-executive directors and the parties have agreed to take steps to
ensure this remains the case and that the Company shall procure that the Board’s audit,
remuneration and nominations and governance committees will be constituted in a manner
compliant with the UK Corporate Governance Code.
The Board shall manage the Company independently of Dubai World and PFZW in accordance
with the Articles, the Listing Rules and applicable law.
Provision of information and confidentiality
PFZW shall, subject to the Company’s obligations under all applicable laws (including, without
limitation, the Listing Rules and the DTRs), be provided with financial, management and/or
other information reasonably required by it (or any of its associates, including Dubai World)
for the purposes of any internal or external reporting requirements which the relevant party is
required by internal compliance, law or regulation to make. PFZW shall be entitled to disclose
any such information received to its associates provided that, PFZW shall otherwise (and shall
procure that any associate to whom any information is passed shall) keep confidential any
information relating to the DP World Group provided to it.
Subject to the above, PFZW Directors will be bound by confidentiality obligations preventing
the disclosure of information regarding any business interest that may be of interest to the
Company received in his capacity as a director of the Company to business interests that
compete with the Group. Where a PFZW Director receives information in a capacity other than
as a director of the Company, which imposes on him a duty of confidentiality, he shall not be
obliged to disclose that information to the Company.
A PFZW Director shall not be entitled to disclose information to PFZW if it relates to a
transaction or proposed transaction between a member of the DP World Group and PFZW,
Dubai World or any of their associates.
These obligations of a PFZW Director are required to be reflected in each PFZW Director’s
terms of appointment.
Non-compete and non-solicit
For a period of one year from 1 June 2011, being the date of admission of the Shares to the
Premium segment of the Official List and to the London Stock Exchange (“Admission”),
PFZW and Dubai World have agreed not to, and have agreed to procure that none of Dubai
World’s subsidiaries, operate, establish or acquire a business which competes in the same main
120
markets as the Company, subject, amongst other standard exclusions, to the exclusion of
PFZW’s and Dubai World’s businesses as at Admission.
PFZW and Dubai World have agreed not to solicit for employment, and to procure that none
of Dubai World’s subsidiaries solicit for employment, any of the directors or senior managers
of the Company (from time to time) for a period of one year from the date of Admission.
This does not prevent a director or senior manager being hired who, without solicitation,
responds to a general advertisement or any other non-directed search enquiry or who makes an
unsolicited contact for employment.
Arm’s length transactions
All transactions and relationships between any member of the DP World Group and PFZW,
Dubai World or any of their associates shall be conducted at arm’s length, on a normal
commercial basis and in accordance with the related party transaction rules set out in Chapter
11 of the Listing Rules. All new transactions or material amendments to existing agreements
between any member of the DP World Group and PFZW, Dubai World or any of their
associates, to which Chapter 11 of the Listing Rules applies, must also be approved by a
majority of the independent directors.
Share disposals and acquisitions
For as long as PFZW together with any of its associates holds at least 15 per cent. of the Shares
or, if sooner, until another holder together with any of its associates holds more Shares than
PFZW together with any of its associates, the Company agrees to co-operate and provide such
assistance as PFZW may reasonably request in connection with any future sale of Shares by
PFZW subject to certain exceptions, including that such sale of Shares will not result in a
breach of, default under, or acceleration of, any indebtedness pursuant to any of the Company’s
finance arrangements and compliance with all reasonable requirements of the Company with a
view to maintaining an orderly market.
PFZW and Dubai World agree, and shall procure agreement from Dubai World’s subsidiaries,
that they will not, without prior approval of the Company’s Board, acquire or arrange to
acquire, any Shares or any interests in Ordinary Shares which would increase the proportion of
Shares held by Dubai World and its subsidiaries to more than the proportionate number held
by it at the date of Admission.
Term
The Relationship Agreement shall terminate immediately upon PFZW and Dubai World and its
subsidiaries, when taken together, ceasing to hold at least 15 per cent. of the Shares.
The Relationship Agreement may also be terminated by PFZW upon the delisting of the
Company or the occurrence of certain insolvency events.
Accession
If PFZW or another subsidiary of Dubai World wishes to transfer Shares to an associate in an
off-market transaction, the result of which being that the associate will hold 15 per cent. or
more of the Shares in issue, PFZW and Dubai World must procure that such associate becomes
a party to the Relationship Agreement.
(d)
Conventional and Murabaha term and revolving facilities
On 30 June 2014 the Company entered into agreements documenting unsecured syndicated
conventional and murabaha term and revolving facilities (the “Syndicated Facilities”)
between, amongst others, the Company, Barclays Bank PLC, Citibank N.A., London Branch,
Deutsche Bank, Emirates NBD Bank PJSC, HSBC Bank Middle East Limited, J.P. Morgan
Limited, National Bank Of Abu Dhabi PJSC, Samba Financial Group, Dubai Branch, Société
Générale, The Bank Of Nova Scotia Asia Limited and Union National Bank PJSC as
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conventional mandated lead arrangers and bookrunners, Abu Dhabi Commercial Bank PJSC,
Credit Industriel Et Commercial, London Branch, DNB Bank ASA, Mashreqbank psc and The
Bank Of Tokyo-Mitsubishi UFJ, Ltd. as conventional mandated lead arrangers, Dubai Islamic
Bank PJSC, First Gulf Bank PJSC and Noor Islamic Bank PJSC as murabaha arrangers and
bookrunners, Deutsche Bank Luxembourg S.A. as conventional facility agent, Noor Islamic
Bank PJSC as murabaha investment agent and Deutsche Bank Luxembourg S.A, as global
agent (the “Syndicated Facilities Documentation”).
The Syndicated Facilities comprise US$3,000,000,0000 multicurrency facilities made up of
(i) a US$1,000,000,000 conventional term loan facility with a final maturity date of 30 June
2017 (“Facility A”), (ii) a US$1,390,000,000 conventional revolving credit facility with a final
maturity date of 30 June 2019 (“Facility B”) and (iii) a US$610,000,000 Islamic revolving
murabaha facility with a final maturity date of 30 June 2019 (the “Murabaha Facility”).
The Syndicated Facilities are permitted to be used for the general corporate purposes of the
Company and its subsidiaries. Interest/profit on the Syndicated Facilities is payable based on a
specified margin over either EURIBOR or LIBOR.
Repayment and Voluntary Prepayments. All outstandings under Facility A, Facility B and the
Murabaha Facility must be repaid on the applicable final maturity date. The Syndicated
Facilities Documentation provides for voluntary prepayments of outstandings and voluntary
cancellations of unutilised commitments on customary terms. Amounts prepaid under either
Facility B or the Murabaha Facility may be reborrowed; amounts prepaid or repaid under
Facility A may not be reborrowed. The Syndicated Facilities Documentation also contains
mandatory prepayment provisions which the Company believes are usual and customary for
facilities of this type.
Change of Control. The Syndicated Facilities Documentation contains a mandatory
prepayment change of control provision whereby an individual lender/murabaha participant
can call for repayment of its share of outstandings if the Government of Dubai ceases to own,
either directly or indirectly, at least fifty per cent. of the issued share capital of the Company
or otherwise ceases to control, either directly or indirectly, the Company.
Undertakings and Covenants. The Syndicated Facilities Documentation contains affirmative
and negative undertakings which the Company believes are usual and customary for facilities
of this type. In addition, the Syndicated Facilities Documentation contains a total net debt to
consolidated total net debt plus equity financial covenant, where equity refers to the amount of
equity on the balance sheet of the Company.
Events of Default. The Syndicated Facilities Documentation contains certain customary events
of default.
(e)
US$1,750,000,000 6.85% Senior Notes Due 2037
Pursuant to a US$5,000,000,000 medium term note programme established on 27 June 2007
(which was subsequently updated on 4 November 2010) (the “DP World MTN Programme”),
on 2 July 2007 the Company issued notes under the DP World MTN Programme due 2037 in
principal amount of US$1,750,000,000, bearing interest at an annual rate of 6.85%
(the “Senior Notes”). The Senior Notes are listed on NASDAQ Dubai and the London Stock
Exchange and are admitted to trading on the London Stock Exchange’s Gilt Edged and Fixed
Interest Market.
Ranking. The Senior Notes constitute direct, unconditional and unsecured obligations of the
Company and shall at all times rank pari passu and without any preference among themselves,
and rank at least equally with all other unsecured and unsubordinated indebtedness and other
monetary obligations of the Company, present and future.
122
Repayment and Redemption. Upon the occurrence of an event of default, the Senior Notes are
redeemable at par plus accrued interest. Unless previously redeemed, or purchased and
cancelled, the Senior Notes are redeemable at par plus accrued interest on the maturity date.
Change of Control. Upon the occurrence of a change of control, each holder of the Senior
Notes has the right to require the Company to redeem its Senior Notes at par plus accrued
interest. A change of control shall occur if the Government of Dubai ceases to hold (directly or
indirectly) at least 50% of the Company’s issued share capital, or otherwise ceases to control
(directly or indirectly) the Company (for example, by way of control of the boar d of directors).
Restrictive Covenants. The Senior Notes have the benefit of a negative pledge which is usual
and customary for debt securities of this type. Subject to certain exceptions in respect of project
finance indebtedness and securitisation indebtedness, none of DP World nor any of its
time it grants the same security to the Senior Notes.
of the acquisition.
Events of Default. The Senior Notes are subject to certain customary events of default, and
upon the occurrence of an event of default, the Senior Notes are redeemable at par plus accrued
interest.
(f)
US$1,500,000,000 Trust Certificates (Sukuk Al-Mudaraba) Due 2017
On 2 July 2007, DP World Sukuk Limited (the “Issuer”) issued trust certificates due 2017 in
principal amount of US$1,500,000,000 (the “DP World Certificates”). The DP World
Certificates are listed on NASDAQ Dubai and the London Stock Exchange and are admitted to
trading on the London Stock Exchange’s Gilt Edged and Fixed Interest Market.
Upon issuance of the DP World Certificates, the proceeds were invested by the Issuer on behalf
of the holders as capital in a Mudaraba in accordance with an agreed Shari’a compliant
investment plan, which includes investment in a second terminal adjacent to the then current
Jebel Ali Terminal within the Jebel Ali Free Zone. All of the assets of the Mudaraba (including
the capital and all assets acquired through investment of the capital during the term of the
Mudaraba) are “Mudaraba Assets”. The DP World Certificates represent an undivided
beneficial ownership interest in the Trust Assets (which include the Mudaraba Assets, all of the
Issuer’s rights under the transaction documents and amounts standing to the credit of the
transaction account).
Periodic distribution amounts from the profit generated by the Mudaraba are payable on the
DP World Certificates. This is expected to be an amount equal to 6.25 per cent. per annum on
the aggregate principal amount of DP World Certificates. To the extent that the amount of profit
generated through the investment plan is less than the amount necessary to make such periodic
distribution amounts, the Company (as Mudareb under the DP World Certificates) may provide
Shari’a compliant liquidity financing to ensure that sufficient funds are available to pay such
periodic distribution amounts. To the extent that the amount of profit generated through the
investment plan is greater than the amount necessary to make such periodic distribution
amounts, the Company is entitled to retain such excess amount for its own account by way of
an incentive fee for acting as Mudareb.
Ranking. Each DP World Certificate evidences an undivided beneficial ownership interest in
the Trust Assets and ranks pari passu, without any preference, with the other DP World
Certificates. The DP World Certificates are limited recourse obligations of the Issuer.
123
Redemption. Upon the occurrence of a change of control, each holder of the DP World
Certificates has the right to require the Issuer to redeem any or all of such holder’s DP World
Certificates in an amount equal to 100 per cent. of the aggregate principal amount thereof, plus
accrued and unpaid periodic distribution amounts, if any, to the redemption date. Unless
previously redeemed or purchased and cancelled, the DP World Certificates are redeemable at
par plus accrued and unpaid periodic distribution amounts, if any, to the scheduled redemption
date. In connection with any such redemption, the Issuer shall exercise its rights under the
purchase undertaking granted by the Company in favour of the Issuer (the “Purchase
Undertaking”) to require the Company to purchase from it the Mudaraba Assets (or relevant
portion thereof, as applicable) for an amount equal to the 100 per cent. of the aggregate
principal amount of the DP World Certificates being redeemed, plus accrued and unpaid
periodic distribution amounts, if any, to the relevant redemption date of such DP World
Certificates.
Change of Control. Upon the occurrence of a change of control, the DP World Certificates are
redeemable in an amount equal to 100 per cent. of the aggregate principal amount thereof, plus
accrued and unpaid periodic distribution amounts, if any, to the redemption date. A change of
control shall occur if the Government of Dubai ceases to hold (directly or indirectly) at least
50% of the Company’s issued share capital, or otherwise ceases to control (directly or
indirectly) the Company (for example, by way of control of the board of directors).
Covenants. The DP World Certificates have the benefit of a negative pledge which is usual and
customary for debt securities of this type. Subject to certain exceptions in respect of project
finance indebtedness and securitisation indebtedness, none of DP World nor any of its
time it grants the same security to the Senior Notes.
of the acquisition.
Dissolution Event. The DP World Certificates are subject to certain customary dissolution
events, and upon the occurrence of any such dissolution event, the DP World Certificates are
redeemable in an amount equal to 100 per cent. of the aggregate principal amount thereof, plus
accrued and unpaid periodic distribution amounts, if any, to the redemption date.
(g)
Joint Sponsors’ Agreement
On the date of this document, the Company and each of the Joint Sponsors have entered into a
sponsors’ agreement (the “Sponsors’ Agreement”). Pursuant to the Sponsors’ Agreement the
Joint Sponsors have agreed to act jointly as sponsors to the Company in connection with the
approval of this Circular and otherwise in connection with the Acquisition. The obligations of
the Joint Sponsors are subject to certain conditions which are typical for an agreement of this
nature, including the continued accuracy of certain warranties. In addition, each of the Joint
Sponsors has the right to terminate the Sponsors’ Agreement before Completion in certain
specified circumstances. Under the terms of the Sponsors’ Agreement, the Company has agreed
to provide the Joint Sponsors with certain indemnities, undertakings and warranties.
The indemnities provided by the Company indemnify the Joint Sponsors against, inter alia,
claims made against them or losses incurred by them, subject to certain exceptions.
8.2
Material contracts of the EZW Group
The following are all of the contracts (not being contracts entered into in the ordinary course of
business) which have been entered into by EZW and/or members of the EZW Group within the
two years immediately preceding the date of this document and are, or may be, material to the EZW
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Group or which have been entered into at any time by EZW or any member of the EZW Group and
contain any provisions under which EZW or any member of the EZW Group has any obligation or
entitlement which is, or may be, material to the EZW Group at the date of this document:
(a)
Concession Agreement
From 13 November 2007 (the “Commencement Date”), JAFZA granted a concession to JAFZ
pursuant to a concession agreement dated 13 November 2007, as subsequently amended and
restated on 29 April 2012 (the “Concession Agreement”), which provides JAFZ with
the exclusive right and privilege to provide certain licensing and other administration services
(the “Services”) at JAFZ’s own expense within a specified area that comprises substantially all
of the Free Zone (the “Concession Area”), as follows:
(i)
processing licences on behalf of JAFZA for persons applying to operate in the Free
Zone;
(ii)
licensing of advertising in the Concession Area (including sales, placement and
maintenance);
(iii)
the provision of any other business, activities, facilities and services which are incidental
to performing;
(iv)
those Services listed at (i) and (ii) above;
(v)
the provision of any other business, activities, facilities and services ordinarily provided
from time to time at free zones (including commercial ventures and developments of all
types) provided that the prior written consent of JAFZA has been obtained (such consent
not be unreasonably withheld or delayed); and
(vi)
such other businesses, activities, facilities and services as JAFZ may wish to provide and
which are approved by JAFZ in accordance with the Concession Agreement (such
approval not to be unreasonably withheld or delayed).
JAFZA’s obligations under the Concession Agreement include, inter alia:
(i)
providing overall security in respect of the common areas of the Concession Area and
procuring the availability of utilities (including water, power, telecommunication,
electricity and used water treatment) to the Concession Area;
(ii)
maintaining reasonable access for JAFZ to the Concession Area and maintaining the
common use infrastructure and any superstructure in the Concession Area;
(iii)
liaising with PCFC in co-ordinating the provision of environmental policy and control;
(iv)
maintaining the JAFZA Trademark;
(v)
issuing or renewing licences for applicants applying to JAFZ to operate in the
Concession Area; and
(vi)
procuring the provision of facility services such as non-hazardous waste collection
within the Concession Area and co-operating with JAFZ or any sub-contractor to do all
things reasonably necessary to assist in the provision of the Services.
All revenue and income generated by JAFZ from the provision of the Services during the
Concession Period (as defined below) belong to JAFZ, subject to the terms of the Concession
Agreement. However, in relation to some of the administration services to be provided by
JAFZ, JAFZ may be required to pass on a certain portion of the fees received for such
administration services to other Dubai or Federal Government entities (for instance, the
Immigration Department in the case of visa issuances) where such Government entity is
125
the actual legal provider of the service to the recipient and where JAFZ would be acting as an
intermediary only.
In consideration of the rights granted by JAFZA to JAFZ under the Concession Agreement,
JAFZ pays a fee to JAFZA (the “Concession Fee”). The Concession Fee is calculated on an
annual basis and is payable throughout the Concession Period monthly in arrears.
No Concession Fee was payable during the first 3 years after the Commencement Date;
thereafter, it is calculated as an amount equal to 2 per cent. of the revenues arising from the
licensing and registrations charges (i.e., for the avoidance of doubt, not of any other revenue,
including, in particular, rental income) as more particularly set out in the Tariff, increasing by
2 per cent. every five years.
The concession granted to JAFZ is for a period of 99 years (the “Concession Period”) from
the Commencement Date. However, JAFZA has the right to terminate the Concession
Agreement upon an event of default of JAFZ, being: (i) a breach by JAFZ of its obligations
under the Concession Agreement which has a material adverse effect (as defined in the
Concession Agreement); (ii) non-payment of the Concession Fee or part thereof when due; and
(iii) JAFZ ceasing to carry on the Services or abandoning or substantially abandoning the
operation of any part of the Concession Area. However, JAFZA is not entitled to terminate the
concession as long as any amounts are outstanding under any finance arrangements.
(b)
Usufruct Agreement
From the Commencement Date, JAFZA granted the Usufruct Rights over the Concession Area
and the immoveable fixed assets therein (the “Usufruct Property”) to JAFZ pursuant to a
usufruct agreement dated 13 November 2007, as subsequently amended and restated on
29 April 2012 (the “Usufruct Agreement”). As consideration for the grant of the Usufruct
Rights, JAFZ paid a one-off fee to JAFZA at the time of entering into the Usufruct Agreement.
The Usufruct Rights extend to the infrastructure and the superstructure (excluding the common
use infrastructure and superstructure) and all fixtures and fittings relating to the Usufruct
Property. The Usufruct Rights give JAFZ the exclusive right to use and benefit from the
Usufruct Property, including the right to lease facilities to tenants in the Free Zone, renew a
lease or grant a new lease to a tenant for occupying any part of the Concession Area (with JAFZ
being the landlord).
Under the Usufruct Agreement, JAFZA assigned to JAFZ all of its rights, title and interest in
all revenues due to it under all the leases for the Concession Area granted by JAFZA prior to
the Commencement Date.
The term of the Usufruct Agreement is 99 years commencing on the Commencement Date.
JAFZA has the right to terminate the Usufruct Agreement upon an event of default of JAFZ
under the Usufruct Agreement (which events are substantially similar to those in the
Concession Agreement). However, JAFZA will not be entitled to terminate the Usufruct
Agreement as long as any amounts are outstanding under any finance arrangement. As a matter
of law, the Usufruct Rights are registered with the Dubai Land Department and therefore are
similar in nature to registration of title.
(c)
Master Lease Agreement
Historically, JAFZA had been named as the party entering into the leases of properties within
the Concession Area, rather than JAFZ, as some relationships with clients pre-date the creation
of JAFZ. Accordingly, as JAFZ is the commercial operator of the Free Zone, JAFZ and JAFZA
have entered into three master leases (the “Master Leases”) that together cover all property in
the Concession Area. The Master Leases sit above the commercial leases that JAFZA has
entered into with each customer and are effective from 14 November 2007.
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The key terms of the Master Leases are:
(i)
the term of two of the Master Leases, which relate to the area of premises over which
short-term or annual leases have been granted, is for 9 years and 364 days;
(ii)
the third Master Lease relating to land plots that have been leased to third parties for
longer periods (generally between 5 and 30 years) is for a term of 35 years;
(iii)
all of the amounts paid by the customers to JAFZA (as landlord) are payable to JAFZ
under the Master Leases as rental due under the relevant Master Lease. JAFZA’s liability
for such payments is limited to the amounts actually received from the customers under
the Master Leases;
(iv)
JAFZ is authorised to collect the rent payable by customers to JAFZA and to enforce the
customer leases on behalf of JAFZA;
(v)
JAFZ is obliged to perform all of the obligations of JAFZA, as landlord, under the
customer leases;
(vi)
JAFZ is permitted to assign any right in the Master Leases and JAFZA has expressly
consented to any such assignment; and
(vii) for all renewals of customer leases after 31 October 2012, the relevant area of the
Concession Area to which that lease being renewed relates will automatically be
surrendered from the relevant Master Lease and JAFZA will no longer lease that part of
the Free Zone under the Master Lease. In addition, JAFZA will cease to have any
commercial lease with the relevant renewing customer and instead JAFZ will enter into
a new/renewed lease directly with the relevant customer.
(d)
Standard Form Leases
The Free Zone has four standard form leases which are used for leases of property in the Free
Zone, one for each of plots of land, warehouses, offices and residential premises (each a
“Standard Form Lease”). Each Standard Form Lease will be comprised of a “Particulars”
document and a “Terms and Conditions” document. The Terms and Conditions of each
Standard Form Lease are in substantially the same form, except for certain amendments
appropriate for the different uses of the property for which the relevant Standard Form Lease
is drafted.
The following paragraphs give an overview of the key provisions of the Standard Form Leases.
JAFZ’s lease costs. The Standard Form Leases for the offices and residential premises are
drafted to reflect that the rent is intended to be inclusive of utility charges and other outgoings.
In respect of the Standard Form Leases relating to plots of land and warehouses, the tenant
covenants to pay for all electricity, water and sewerage consumed at the premises, as well as
all existing and future local authority charges, taxes, assessments and other outgoings
whatsoever relating to their premises. There is limited scope for leakage of rent, as tenants
under the Standard Form Leases are required to pay the annual rent in advance both by way of
cleared funds and by way of post-dated cheques.
In addition, JAFZ is entitled to be reimbursed for any actual costs (excluding any opportunity
and funding costs) incurred as a result of a tenant failing to pay any sum due but not paid on
time under a lease and the tenant indemnifies JAFZ for its legal costs and disbursements
incurred in connection with any breach by it and/or termination of its lease due to its own
default.
On a practical level, JAFZ, as the community landlord, will provide certain maintenance and
security services in the Free Zone as a matter of course. Under the Standard Form Leases there
is only a limited obligation on JAFZ to keep the Free Zone in good repair and condition. Under
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each of the Standard Form Leases except in respect of residential premises for staff
accommodation (for which the rent is intended to be inclusive) there is a mechanism whereby
JAFZ can recharge the costs of providing any services it provides to the customer in the Free
Zone.
Lease renewal. Under the Standard Form Leases, the tenant must give JAFZ at least
three months notice (in the case of leases relating to warehouses, offices and residential
premises) or at least six months notice (in the case of leases relating to land) prior to expiry of
the term of the lease of its intention to renew the lease. The terms and condition of any renewal
will be agreed between the parties save for the renewed rent which will be solely determined
by JAFZ.
Rent review. The longer term Standard Form Lease in respect of plots of land contains an open
market rent review provision to be undertaken upon specified review dates. For the other
Standard Form Leases which are all intended to be used for shorter terms, as set out above,
JAFZ has the ability to determine the rent on any renewal of the relevant lease. In the Standard
Form Leases for land there is also the ability for JAFZ to cap the amount by which it may
increase the rent upon renewal at the outset of the lease.
Indemnity. Under each of the Standard Form Leases the tenant is required to keep JAFZ fully
indemnified against all actions, proceedings, claims, demands, costs and liability arising out of,
amongst other things, any breach of any covenant by the tenant contained in the Standard Form
Lease, any accident, loss or damage to any person or property in or on the premises or any
breach of Dubai law.
Assignment. The Standard Form Leases expressly provide that JAFZ may at any time assign its
rights under the Standard Form Lease to any third party. An assignment of rights, such as the
right to receive payments under a lease agreement, is permitted under Dubai law, though
perfection of such assignment requires either the assignor or assignee giving the counterparty
to the lease agreement notice of the assignment.
Termination. There are no termination rights in favour of the tenant under the Standard Form
Leases. Each Standard Form Lease provides that all disputes under the lease must be referred
to the Dubai courts. A tenant wishing to terminate its lease due to a breach by JAFZ would need
to rely on the general provisions under the law applicable in Dubai.
JAFZ has a number of termination rights under the Standard Form Leases, including where the
tenant fails to pay rent 30 days after it becomes payable and does not perform or observe any
of the tenant covenants contained in the Standard Form Lease.
Upon termination, there is no obligation under any of the Standard Form Leases on JAFZ to
return any rent paid by the tenant in respect of the unexpired portion of the lease term.
However, at law, if a tenant was to bring a claim in the Dubai courts to recover any such sums,
it is likely that the court would permit JAFZ only to maintain such portion of the rent as would
cover direct and foreseeable damages resulting from the tenant’s breach. UAE courts tend to be
reluctant to permit the party suffering damage to derive benefit from the breach, hence if JAFZ
was able to rent the premises out for the same period at the same or a higher rent, the tenant
may be able to recover some of its rent through the courts on the basis that JAFZ would not
have suffered damage due to the breach.
(e)
Syndicated Islamic Facility 2012
Certain financial institutions (the “Facility Participants”) have provided the Free Zone with
an AED 4,400,000,000 facility. The facility documentation was signed on 14 June 2012. It is
an amortising facility with a maturity date falling in 2020. The facility is structured in a Shari’a
compliant way with the proceeds being used to purchase a portfolio (the “Facility Wakala
Portfolio”) consisting of real estate assets which are leased to third parties.
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The Facility Participants contributed funding to Dubai Islamic Bank PJSC as investment agent
in order for it to acquire the Facility Wakala Portfolio. The Free Zone continues to manage the
portfolio under a service agency agreement and the Facility Participants earn a return.
The service agency agreement sets out the details (and relevant calculations) for amounts
which the Investment Agent shall endeavour to collect through revenues from the Facility
Wakala Portfolio for each profit payment which are linked to EIBOR plus a margin.
The service agency agreement has been amended on two separate occasions (pursuant to deeds
of amendment dated 28 August 2013 and 15 September 2014) to document, inter alia, a
reduction in the margin range in each case; the margin currently stands at 2.10 per cent.
per annum with it dropping to 1.85 per cent. per annum if a net debt to EBITDA leverage test
is being met. Profit payments are payable on a quarterly basis.
The commercial terms agreement (the “Commercial Terms Agreement”) sets out the key
commercial terms relating to the Islamic Facility, including the representations, covenants and
events of default. The Commercial Terms Agreement also sets out various mandatory
prepayment events and events of default pursuant to which the Investment Agent shall in certain
circumstances be entitled to exercise its rights to require a prepayment of the Islamic Facility (in
whole or in part) and a transfer back to the Free Zone of the Facility Wakala Portfolio.
The Commercial Terms Agreement also provides for financial covenants including a debt
service cover ratio, loan to value ratio and limitations on capital expenditure. There are also
customary operating restrictions on the Free Zone including its ability to acquire and dispose
of assets, as well as raise and secure financial indebtedness.
Events of default in the Commercial Terms Agreement are also customary and include (among
others) failure by the Free Zone to comply with any provision of the documents evidencing the
Islamic Facility.
(f)
Guarantee
In addition to the Security Documents, pursuant to a guarantee dated 14 June 2012, EZW
guaranteed in favour of the Onshore Security Agent (as the beneficiary) (for and on behalf of
the financiers) the due and punctual observance and performance by the Free Zone of all its
obligations under or pursuant to the Facility Finance Documents. This Guarantee was strictly
limited to the greater of US$300 million and two thirds of the net proceeds received by EZW
from the disposal of all or substantially all of the Gazeley Group or the assets of such group
(the “Gazeley Sale”). Pursuant to a letter dated 19 September 2013 from EZW to Citibank,
N.A., UAE Branch, the Gazeley Sale is stated to have occurred on 10 June 2013 and an amount
equivalent to US$300 million was paid to the Free Zone to be applied by the Free Zone in
prepayment of the Islamic Facility. In that same letter Citibank, N.A., UAE Branch confirmed
termination of EZW’s guarantee dated 14 June 2012 by reason of EZW having complied in full
with its obligations thereunder.
(g)
Allocation Deed in respect of the Islamic Facility and the Certificates
The Allocation Deed was entered into between, among others, the Offshore Security Agent, the
Onshore Security Agent, the Allocation Agent, the Investment Agent (as agent for the Facility
Participants), the Facility Participants, the Hedge Counterparties (if any), the Delegate
(as agent for the Certificateholders), the Trustee, the account banks, the Agents and the Free
Zone.
The Liabilities owed by the Free Zone to the Secured Parties and the Transaction Shared
Security granted by the Free Zone to the Secured Parties, rank pro rata and pari passu,
regardless of: (i) the date upon which the Liability arises; (ii) the order of registration, notice,
execution or otherwise of the Transaction Shared Security; and (iii) any discharge or
intermediate payment of the Liabilities in whole or in part.
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“Liabilities” means all present and future liabilities and obligations at any time of the Free
Zone to any Secured Parties, both actual and contingent and whether incurred solely or jointly
or in any other capacity.
(h)
Summary of the Terms of the Security
Security was created by the Free Zone in favour of the Onshore Security Agent or the Offshore
Security Agent, as applicable, for the benefit of: (i) the Facility Participants; (ii) the Trustee,
the Delegate, the Agents and the Certificateholders (each a “Sukuk Finance Party”); or in
each case a representative thereof (a “Participants’ Representative”); (iii) any Receiver or
Security Delegate (each as defined in the Allocation Deed); (iv) the Hedge Counterparties; and
(v) the Allocation Agent, each a “Secured Party” and such security being the “Transaction
Shared Security”.
The current Transaction Shared Security consists of the following:
(i)
(i)
two mortgages granted in favour of the Onshore Security Agent over the Usufruct Rights
in respect of part of the Free Zone;
(ii)
an assignment agreement relating to (i) all present and future receivables from the
Secured Portfolio arising under the Master Leases; and (ii) an assignment of insurances
on the Secured Portfolio;
(iii)
a pledge over the Onshore Collection Account; and
(iv)
a charge over the Offshore Collection Account, the Insurance Proceeds Account and
each of the Facility Service Reserve Accounts.
Trust Certificates (JAFZ Sukuk) Due 2019
On 19 June 2012, JAFZ Sukuk (2019) Limited (the “Trustee”) issued US$650,000,000 trust
certificates due 2019 (the “Certificates”). The Certificates mature on 19 June 2019 and are
admitted to trading on the Irish Stock Exchange and NASDAQ Dubai. The Certificates
evidence an undivided beneficial ownership interest in a portfolio of income generating real
estate assets which are held on trust.
The proceeds from the Certificates were applied by the Trustee towards the acquisition of a
portfolio of income generating real estate assets (the “Wakala Portfolio”). The Trustee
appointed JAFZ as its servicing agent in respect of the Wakala Portfolio. The revenues
generated by the Wakala Portfolio in each profit period (the “Wakala Portfolio Revenues”)
are applied towards the periodic distributions of profit in respect of the Certificates. Each
holder of the Certificates is entitled to periodic distribution amounts in an amount equal to
7.00 per cent. per annum on the aggregate principal amount of Certificates held by such holder.
In the event that the Wakala Portfolio Revenues for any profit period are greater than what is
due in respect of the Certificates on the immediately following periodic distribution date, the
amount of any excess is retained by the servicing agent as a reserve. If there is a shortfall of
Wakala Portfolio Revenues in any profit period, amounts will be transferred from the reserve
to meet the shortfall. If, having applied such amounts standing to the credit of the reserve, there
are still insufficient funds to pay the periodic distribution amounts due in respect of the
Certificates, the servicing agent may either:
(a)
provide Shari’a compliant funding to the Trustee itself; or
(b)
procure Shari’a compliant funding from a third party to be paid to the Trustee,
in each case in the amount required to ensure that there is no shortfall and on terms that such
funding is repayable from future excess Wakala Portfolio Revenues or on the date on which the
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Certificates are redeemed in full through a deduction (by way of set-off) from the exercise price
payable upon redemption of the Certificates.
Ranking. Each Certificate evidences an undivided ownership interest of the Certificateholders
in the assets held on trust, and is a direct, unsubordinated, unsecured and limited recourse
obligation of the Trustee. Each Certificate will rank pari passu, without any preference or
priority, with the other Certificates.
All amounts due from JAFZ under the transaction documents to which it is a party constitute
direct, unconditional, unsubordinated and secured obligations of JAFZ and will rank pari passu
among themselves and at least pari passu with all other present and future unsubordinated and
secured obligations of JAFZ, save for such obligations as may be preferred by provisions of
law that are both mandatory and of general application.
Redemption. On 19 June 2019, the Trustee will have the right under a purchase undertaking to
require JAFZ to purchase all of the Trustee’s rights, title, interests, benefits and entitlements in,
to and under the Wakala Portfolio. The exercise price payable by JAFZ, together with any
Wakala Portfolio Revenues then held by the servicing agent and payable to the Trustee under
the Service Agency Agreement, are intended to fund the final dissolution amount payable by
the Trustee, which will be equal to all accrued profit plus outstanding principal.
The Trust may be dissolved prior to 19 June 2019 (resulting in the prepayment of the
Certificates) for the following reasons: (i) redemption following a dissolution event or a
mandatory dissolution event, (ii) an early redemption for tax reasons, (iii) at the option of the
Certificateholders following a change of control event, (iv) at the option of the Trustee if,
following the occurrence of a change of control event, holders of 75 per cent. or more of the
aggregate outstanding face amount of those Certificates exercise their change of control put
option, (v) upon the occurrence of a total loss event and (vi) upon the occurrence of a
mortgaged property loss event.
In each of these cases, the Certificates (or part thereof) shall be redeemed by the Trustee at the
dissolution distribution amount, which will be equal to all accrued profit plus outstanding
principal.
Change of Control. Each Certificateholder will have the right to require the redemption of its
Certificates upon the Government of Dubai or any agency or other part thereof ceasing to be
the ultimate owner (either directly or indirectly) of more than 50 per cent. of the share capital
of JAFZ or otherwise cease to control, directly or indirectly, JAFZ.
Security. JAFZ’s obligations under the Transaction Documents are secured by the transaction
shared security. See “Summary of the Terms of the Security”.
Covenants. The JAFZ Sukuk contains a negative pledge and other certain restrictive covenants
given by JAFZ that are consistent with a sub-investment grade.
Dissolution Event. The Certificates are subject to certain customary dissolution events that,
if any of them occurs, would permit the holders of at least 20 per cent. in aggregate principal
amount of Certificates then outstanding to require the trust to be dissolved and all Certificates
redeemed for an amount equal to the 100 per cent. of the aggregate principal amount thereof,
plus accrued and unpaid periodic distribution amounts, if any, to the redemption date.
(j)
Sale of the Gazeley Group
On 10 June 2013 the EZW disposed of 94.9 per cent. of its shares in the company formerly
known as EZW Gazeley Holdings Limited (“Gazeley Holdings”) (the “Sale Shares”), the
parent company of Gazeley Group, a specialist developer of large scale logistics warehouses
and distribution parks in key strategic locations across the UK, Western Europe and China,
pursuant to a sale and purchase agreement with an entity affiliated with Brookfield Property
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Partners, L.P. and its institutional partners (acting through a fund managed by an affiliate of
Brookfield Asset Management, Inc.) (“Brookfield”). EZW retained a 5.1 per cent. holding of
shares.
The key terms of the material transaction documents relating to the sale of the Gazeley Group
are as follows
Share Purchase Agreement (“SPA”)
The SPA sets out the contractual terms on which EZW sold 94.9 per cent. of the Sale Shares
and its entire holding of CISX listed PIK notes issued by a Gazeley Group entity
(“Eurobonds”), to Brookfield. The consideration for the transfer of the Sale Shares and the
Eurobonds was made up of a cash amount plus the issuing of a vendor loan note by Brookfield
to EZW, as described below (the “Seller Loan”).
Under the terms of the SPA, EZW provided Brookfield with a standard set of business
warranties. EZW is also liable to indemnify Brookfield against any losses it incurs in respect
of a defined list of liabilities, including (i) any contingent liability relating to (a) the defective
design or construction services provided by the Gazeley Group, or (b) historic disposals of
properties by the Gazeley Group, and (ii) any tax liability of the Gazeley Group relating to the
period prior to completion of the sale as described below. Claims in respect of most of the
warranties and under most of the contingent liability indemnities must be made within
18 months of completion of the sale and EZW’s aggregate maximum liability for all claims
under the SPA, other than in certain limited circumstances, is the total amount of cash received
from Brookfield. Where Brookfield does make a claim under the SPA, in most circumstances
EZW is entitled to set-off the amount due in respect of such claim against amounts which
remain outstanding under the Seller Loan.
EZW retained approximately 5.1% of its shares in Gazeley Holdings (the “Retained Shares”).
The Retained Shares are subject to a call option in favour of Brookfield which allows
Brookfield to acquire those shares for nominal consideration on or before 30 September 2020.
EZW has undertaken not to transfer the Retained Shares before that date and, to the extent it
does, will indemnify Brookfield in respect of certain taxes which become payable by
Brookfield as a result. Brookfield will indemnify EZW in respect of certain liabilities it incurs
as a result of its ownership of the Retained Shares.
Vendor Loan Agreement (“VLA”)
The VLA sets out the contractual terms on which EZW is deemed to have lent a portion of the
consideration for the acquisition of Gazeley Holdings to Brookfield. On signing, the debt
obligation was novated to a different Brookfield entity (“Borrower”). The Borrower is obliged
to repay fixed amounts of the Seller Loan when specified properties currently owned by the
Gazeley Group (the “Properties”) are either sold or otherwise utilised in certain ways
(an “Activation”). Each of the Properties has an allocated loan amount (“Allocated Loan
Amounts”) and, on the Activation of the relevant Property, its Allocated Loan Amount is the
amount which is repayable to EZW. The majority of the Properties are secured in favour of
EZW.
The Seller Loan matures five years following completion of the sale. On maturity the Borrower
is entitled to repay (in cash) the outstanding amount of the Seller Loan. If the Borrower elects
not to so repay the outstanding amount, EZW can either (i) convert the outstanding amount into
equity in the Gazeley Group on a pound for pound basis based on the valuation of the Gazeley
Group at that time, (ii) repurchase (for no consideration additional to the existing allocated loan
amount of the relevant Property under the VLA) the outstanding Properties which have not be
Activated, or (iii) instruct the Borrower to appoint a broker to sell the Properties on EZW’s
behalf (in which case EZW will be entitled to the sale proceeds). The VLA includes customary
events of default which, if triggered, will require the repayment of the Seller Loan.
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Tax Indemnity
The Tax Indemnity sets out the contractual terms on which EZW will indemnify Brookfield for
certain tax liabilities that may arise in the Gazeley Group. It also governs the parties’
responsibilities for preparing and filing tax returns of the Gazeley Group relating to tax periods
that commence before completion of the sale. EZW agreed to indemnify Brookfield for any tax
liabilities of the Gazeley Group arising on or before completion of the sale and for tax liabilities
arising in certain limited circumstances after the sale. The Tax Indemnity contains customary
exceptions from EZW’s liability for the Gazeley Group tax liabilities.
9.
Litigation
(a)
Company litigation
There are no governmental, legal or arbitration proceedings (including any such proceedings which
are pending or threatened of which the DP World Group is aware) which may have, or have had during
the 12 months preceding the date of this document, a significant effect on the financial position or
profitability of the DP World Group.
(b)
EZW litigation
There are no governmental, legal or arbitration proceedings (including any such proceedings which
are pending or threatened of which the DP World Group is aware) which may have, or have had during
the 12 months preceding the date of this document, a significant effect on the financial position or
profitability of the EZW Group.
10.
No significant change
(a)
The Company
There has been no significant change in the financial or trading position of the DP World Group since
30 June 2014, the date to which the Company’s last unaudited interim financial statements were
prepared.
There has been no significant change in the value of the Properties from the valuation date of the
Property Valuation Report, as set out in Part VII (Property Valuation Report) of this document.
(b)
EZW
There has been no significant change in the financial or trading position of the EZW Group since
30 June 2014, the date to which EZW’s latest consolidated interim financial information has been
drawn up.
11.
Working Capital
The Company is of the opinion that, taking into account existing available facilities and existing cash
resources, the working capital available to the Enlarged Group is sufficient for its present requirements, that
is, for at least the next 12 months from the date of this document.
12.
Consents
(a)
Citigroup has given and has not withdrawn its written consent to the inclusion in this document of
references to its name in the form and context in which the name appears.
(b)
Deutsche Bank has given and has not withdrawn its written consent to the inclusion in this document
of references to its name in the form and context in which the name appears.
(c)
Moelis & Company has given and has not withdrawn its written consent to the inclusion in this
document of references to its name in the form and context in which the name appears.
133
(d)
PricewaterhouseCoopers has given and has not withdrawn its written consent to the inclusion of its
report set out in Section B of Part V (Historical Financial Information on the EZW Group) of this
document in the form and context in which it appears. There is no professional body of auditors in the
UAE and, accordingly, PricewaterhouseCoopers is not a member of any professional body in that
country. However, PricewaterhouseCoopers is registered with the Registrar of Practicing Accountants
at the UAE Ministry of Economy and Planning, as required by the UAE Federal Law No. 22 of 1995.
(e)
KPMG LLP has given and has not withdrawn its written consent to the inclusion of its report set out
in Section D of Part VI (Unaudited Pro Forma Financial Information on the Enlarged Group) of this
document in the form and context in which it appears. KPMG LLP is registered to carry out audit
work by the Institute of Chartered Accountants in England and Wales and has no material interest in
the Group.
(f)
Knight Frank LLP, a firm of chartered surveyors and a member of the Royal Institution of Chartered
Surveyors whose business address is at 55 Baker Street, London, W1U 8AN, has given and not
withdrawn its written consent to the inclusion in this document of the Property Valuation Report in
the form set out at Part VII (Property Valuation Report) of this document, as well as references to its
name and has authorised the contents of such part of this document.
13.
Incorporation by reference
Your attention is drawn to the following information which is incorporated by reference into this document:
Reference document
Information incorporated by reference
DP World Limited and its subsidiaries condensed
consolidated interim financial statements 30 June
2014
Note 17 (Transactions with related parties) to the
Condensed Consolidated interim financial statements
30 June 2014.
DP World Annual Report and Accounts 2013
Note 29 (Related Party Transactions) to Consolidated
Financial Statements as set out at page 106 of the
DP World Annual Report and Accounts 2013.
DP World Annual Report 2012
Note 27 (Related Party Transactions) to the
Consolidated Financial Statements at page 95 of the
DP World Annual Report 2012.
DP World Annual Report 2011
Note 27 (Related Party Transactions) to the
Consolidated Financial Statements at page 94 of the
DP World Annual Report 2011.
14.
Documents Available for Inspection
Copies of the following documents will be available for inspection, during usual business hours on any
Business Day at the offices of Clifford Chance LLP, 10 Upper Bank Street, London E14 5JJ, United
Kingdom and at the registered office of the Company, Level 5, LOB17, Jebel Ali Free Zone, Dubai, United
Arab Emirates, from the date of this document up to and including the date of the Extraordinary General
Meeting:
(a)
the Acquisition Agreement;
(b)
the Articles of the Company;
(c)
the DP World Annual Report and Accounts for the year ended December 2013;
(d)
the audited consolidated accounts of the Company for the financial periods ended 2011 and 2012;
(e)
the audited consolidated accounts of EZW for the financial periods ended 31 December 2011,
31 December 2012 and 31 December 2013;
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(f)
the accountant’s report from the Company’s Reporting Accountants with respect to the historical
financial information on the EZW Group set out in Part V (Historical Financial Information on the
Enlarged Group) of this document;
(g)
the unaudited pro forma statement of the combined net assets of the Enlarged Group set out in Part VI
(Unaudited Pro Forma Financial Information on the Enlarged Group) of this document;
(h)
the Property Valuation Report set out in Part VII (Property Valuation Report) of this document; and
(i)
this document.
Dated: 13 November 2014.
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PART X
DEFINITIONS
The following definitions apply throughout this document unless the context otherwise requires:
“Acquisition Agreement”
means the share purchase agreement entered into between
DP World, DP World FZE and PFZW on 13 November 2014,
setting out the terms and conditions of the Acquisition, as described
in more detail in Part IV (Principal Terms of the Acquisition) of this
document
“Acquisition Resolution”
means the first resolution (proposed as an ordinary resolution) set
out in the notice of Extraordinary General Meeting contained in this
document, approving the Acquisition
“Acquisition”
means the proposed acquisition by DP World FZE of the entire
issued share capital of EZW from PFZW
“Adjusted EBITDA”
means DP World Group’s measure of segment performance based
on earnings before separately disclosed items, interest, tax,
depreciation and amortisation
“Admission”
means the admission of the Shares to the Premium segment of the
Official List and to the London Stock Exchange
“Agents”
means together, the Paying Agents, the Calculation Agent and the
Transfer Agents
“Allocation Agent”
means Citibank N.A., UAE Branch acting in its capacity as
allocation agent pursuant to the Allocation Deed
“Allocation Deed”
means the allocation deed dated 14 June 2012 and made between,
amongst others, the Facility Finance Parties, the Hedge
Counterparties, the Security Agents and the Free Zone and acceded
to on the Closing Date by each of the Trustee, the Delegate and the
Agents, and includes such deed as from time to time modified or
supplemented in accordance with the provisions contained therein
“Appointment Resolution”
means the second resolution (proposed as an ordinary resolution)
set out in the notice of Extraordinary General Meeting contained in
this document, approving the Director Appointment
“Articles”
means the articles of association of the Company as amended from
time to time
“BCW”
means Business Center World FZE, a company established in the
Jebel Ali Free Zone and a business unit of EZW World
“Board”
means the board of Directors of the Company
“Business Day”
means a day which is not a Saturday or Sunday, Christmas Day,
Good Friday or a bank holiday in the United Kingdom
“Certificateholders”
means the holders of the Certificates
“Certificates”
means trust certificates due 2019 in principal amount of
US$650,000,000 issued by the Trustee on 19 June 2012
“Circular”
means this document
136
“Citigroup” or “Citi”
means Citigroup Global Markets Limited, a company incorporated
in England and Wales with company registration number 01763297
“Commencement Date”
means 13 November 2007, when JAFZA granted a concession to
JAFZ pursuant to the Concession Agreement
“Company’s Reporting
Accountants”
means KPMG LLP of 15 Canada Square London E14 5GL United
Kingdom
“Completion”
means the completion of the Acquisition in accordance with the
Acquisition Agreement once all Conditions have been satisfied or
waived
“Concession Agreement”
means the concession agreement between JAFZA and JAFZ dated
13 November 2007 and amended and restated on 29 April 2012
pursuant to which JAFZA granted JAFZ a concession with
exclusive rights and privileges to provide the Services within the
Concession Area
“Concession Area”
means a specified area that comprises substantially all of the
Jebel Ali Free Zone
“Concession Documents”
means collectively the Concession Agreement and the Usufruct
Agreement
“Concession Fee”
means the fee payable by JAFZ to JAFZA pursuant to the
Concession Agreement in consideration of the rights granted to
JAFZ thereunder
“Concession Period”
means a period of 99 years from the Commencement Date
“Conditions”
means the conditions to Completion, namely: (i) the passing of the
Acquisition Resolution and (ii) the Completion of the transfer by
novation of certain receivables due to and arrangements entered into
by the EZW Group (or the relevant conditions being waived by DP
World FZE)
“Convertible Bond”
means the senior unsecured convertible bonds due 2024 with a
principal amount of US$1,000,000,000 issued by the Company
“Corporate”
means EZW Corporate, a business unit of the EZW Group
“CREST Voting Instruction”
means a properly authenticated CREST message appointing and
instructing a proxy to attend and vote in place of a Shareholder at
the Extraordinary General Meeting and containing the information
required to be contained in the CREST Manual
“CREST”
means the relevant system (as defined in the Regulations) in respect
of which Euroclear is the operator (as defined in the Regulations)
“Delegate”
means Deutsche Trustee Company Limited
“Delisting Resolution”
means the third resolution (proposed as a special resolution) set out
in the notice of Extraordinary General Meeting contained in this
document, approving the Delisting
“Delisting”
means the proposed cancellation of the Company’s London Listing
and removal of its Shares from trading on the Main Market of the
London Stock Exchange
“Depository”
means Capita Asset Services Limited
137
“Deutsche Bank”
means Deutsche Bank, a company incorporated in Germany with
branch registration in England and Wales BR 000005
“DFSA Markets Rules”
means the rules made by the DFSA under Article 8 of the DIFC
Markets Law
“DFSA”
means the Dubai Financial Services Authority
“DIFC Companies Law”
means the DIFC Companies Law No. 2 of 2009 (as amended)
“DIFC Markets Law”
means the Markets Law DIFC Law No. 1 of 2012
“DIFC”
means the Dubai International Financial Centre
“Director Appointment”
means the appointment of Mark Russell as an independent
non-executive Director of the Company with effect from 11 August
2014
“Directors”
means the directors of the Company whose names are set out in
Part III (Directors, Company Secretary, Registered Office and
Advisers and Presentation of Information) of this document
“Disclosure and Transparency
Rules” or “DTRs”
means the disclosure rules and transparency rules made by the FCA
under section 73A of FSMA
“DP World Certificates”
means trust certificates due 2017 in principal amount of
US$1,500,000,000 issued by the Issuer on 2 July 2007
“DP World Group”
means the Company, its subsidiaries and subsidiary undertakings
“DP World MTN Programme”
means the Company’s US$5,000,000,000 medium term note
programme established 27 June 2007 (subsequently updated on
4 November 2010)
“DP World” or “Company”
means DP World Limited, incorporated in the Dubai International
Financial Centre with registered number 0226
“Dubai Strategic Plan”
means a 10 year strategic plan published by the Government of
Dubai in 2007
“Dubai”
means the Emirate of Dubai
“Dubai World”
means Dubai World Corporation, a decree company created and
100 per cent. owned by the Government of Dubai
“EBITDA”
means earnings before interest, tax, depreciation and amortisation
“EBU”
means Emerging Business Units, a business unit of the EZW Group
“EIBOR”
means Emirates Interbank Offered Rate
“Enlarged Group”
means with effect from Completion, the combined group
comprising the DP World Group as enlarged following completion
of the Acquisition
“Enterprises”
means Jafza Enterprises FZE
“EURIBOR”
means the Euro Interbank Offer Rate
“Euroclear”
means Euroclear UK & Ireland Limited
“Extraordinary General Meeting”
means the extraordinary general meeting of the Company to be held
at The Wheelhouse, Jebel Ali Port, Jebel Ali, Dubai at 11.00 a.m.
138
(Dubai Time)/7.00 a.m. (GMT) on Thursday 18 December 2014
(and any adjournment thereof) for the purposes of considering and,
if thought fit, approving the Resolutions
“EZW Board” or “EZW Directors”
means the board of directors of EZW
“EZW Group”
means EZW, its subsidiaries and subsidiary undertakings
“EZW Shares”
has the meaning given in paragraph 1 of Part IV (Principal Terms of
the Acquisition)
“EZW”
means Economic Zones World FZE
“Facility A”
means the Company’s US$1,000,000,000 conventional term loan
facility with a final maturity date of 30 June 2017
“Facility B”
means the Company’s US$1,390,000,000 conventional revolving
credit facility with a final maturity date of 30 June 2019
“Facility Finance Documents”
means the documents containing the terms of the Islamic Facility
“Facility Service Reserve
Accounts”
means the accounts established for the purpose of reserving
amounts of certain debt service obligations in connection with the
Islamic Facility and the Trust Certificates
“FCA”
means the UK Financial Conduct Authority
“Form of Direction”
means the enclosed form of direction for use at the Extraordinary
General Meeting
“Free Zone”
means the Jebel Ali free zone, Dubai, UAE
“FSMA”
means the Financial Services and Markets Act 2000 of the United
Kingdom
“Gazeley Group”
means Gazeley Holding Limited (Jersey) (formerly EZW Gazeley
Holdings Limited), Gazeley Holdings UK Limited (formerly EZW
Gazeley Limited) and Gazeley Limited
“Gazeley Sale”
means the disposal by EZW of all or substantially all of the Gazeley
Group or the assets of such group
“GCC”
means the Cooperation Council for the Arab States of the Gulf
(formertly the Gulf Cooperation Council)
“General Shareholder Approval”
means the vote in favour by a majority of not less than 75 per cent.
of the votes attaching to the Shares which are voted on the Delisting
Resolution at the Extraordinary General Meeting
“Guarantee”
means the guarantee provided by EZW and referred to in paragraph
8.2(f) of Part IX (Additional Information) of this document
“Hedge Counterparties”
means those providers of hedging facilities to JAFZ in connection
with the Facility Finance Documents
“IFRS”
means International Financial Reporting Standards
“Independent Directors”
means Sir John Parker, Robert Woods, Deepak Parekh and Mark
Russell
139
“Independent Shareholder
Approval”
means the vote in favour by a majority of the votes attaching to the
Shares of Independent Shareholders which are voted on the
Delisting Resolution at the Extraordinary General Meeting
“Independent Shareholders”
means in accordance with the Listing Rules (i) for the purpose of
the Acquisition Resolution, any Shareholders other than PFZW and
its associates and (ii) for the purpose of the Delisting Resolution,
any Shareholders other than PFZW or any persons acting in concert
with PFZW
“Insurance Proceeds”
means all amounts received by JAFZ from insurances relating to the
Usufruct Property
“Investment Agent”
means Dubai Islamic Bank PJSC
“Islamic Facility”
means the syndicated Islamic facility referred to in
paragraph 8.2(e) of Part IX (Additional Information) of this
document
“Issuer”
means DP World Sukuk Limited
“JAFZ”
means Jebel Ali Free Zone FZE, a company established in the Jebel
Ali Free Zone with registration number 01283
“JAFZA”
means the Jebel Ali Free Zone Authority
“Jebel Ali”
means the Jebel Ali port in Dubai
“KIZAD”
means Khalifa Port and Industrial Zone
“LIBOR”
means the London Interbank Offer Rate
“Listing Rules”
means the listing rules made by the FCA under section 73A of
FSMA
“London Listing”
the listing of the Shares on the Premium listing segment of the
Official List of the FCA
“London Stock Exchange”
means the London Stock Exchange PLC or its successor
“Master Leases”
means the three master leases entered into between JAFZA and
JAFZ that together cover all property in the Concession Area
commercial leases that JAFZA has entered into with each customer
and are effective from 14 November 2007
“MENA”
means the Middle East and North Africa
“Moelis & Company”
Moelis & Company UK LLP DIFC Branch, a branch of Moelis &
Company UK LLP, with DFSA Reference Number F001620
“Mudaraba Assets”
means all of the assets of the Mudaraba (including the capital and
all assets acquired through investment of the capital during the term
of the Mudaraba) resulting from the proceeds of the DP World
Certificates invested by the Issuer on behalf of the holders as capital
in Mudaraba
“Murabaha Facility”
means the Company’s US$610,000,000 Islamic revolving
murabaha facility with a final maturity date of 30 June 2019
“NASDAQ Dubai CSD Account”
means an account held with NASDAQ Dubai’s Central Securities
Depositary
140
“NASDAQ Dubai CSD”
means the NASDAQ Dubai Central Securities Depositary
“NASDAQ Dubai Guardian”
means the NASDAQ Dubai Guardian Limited (formerly known as
DIFX Guardian Limited)
“NASDAQ Dubai Rules”
means the DIFC Markets Law and the various rules made by the
DFSA thereunder
“NASDAQ Dubai”
means the NASDAQ Dubai Stock Exchange
“Net Debt”
means cash and cash equivalents less interest bearing loans and
borrowings
“O&D”
means origin and destination, which is often referred to as import
and export
“Official List”
means the official list of the FCA
“Offshore Collection Account”
means the account maintained by JAFZ held with Standard
Chartered Bank (London branch)
“Offshore Security Agent”
means Citibank, N.A., London branch
“Onshore Collection Account”
means the account maintained by JAFZ held with Dubai Islamic
Bank PJSC
“Onshore Security Agent”
means Citibank N.A., UAE Branch
“Part VI Rules”
means the rules made by the FCA pursuant to Part VI of FSMA
“Personal Attendance Request
Form”
means the enclosed personal attendance request form for use at the
“PFZW Director”
means a Director appointed by PFZW
“PFZW”
Port and Free Zone World FZE
“Port”
means the Jebel Ali Port
“PRA”
means the UK Prudential Regulation Authority
“Properties”
means the usufruct interest in the properties referred to in the
Schedule appended to the Property Valuation Report
“Property Valuation Report”
means the property valuation report prepared by Knight Frank UAE
Limited and set out in Part VII (Property Valuation Report) of this
document
“Prospectus Rules”
means the rules for the purposes of Part IV FSMA in relation to the
offers of securities to the public and the admission of securities to
trading on a regulated market
“Purchase Undertaking”
means a purchase undertaking granted by the Company in favour of
the Issuer under the DP World Certificates
“Real Estate Assets”
means a real estate related asset consisting of a plot of land (and in
certain cases where the Free Zone owns the building, the buildings
attached thereto) situated in the Concession Area which is leased to
a third party
141
“Receiver”
means a receiver or receiver and manager or administrative receiver
of the whole or any part of the property that is subject to the
Security Documents
“Registrar”
means Link Market Services (EMEA) Limited
“Regulations”
means the Uncertificated Securities Regulations 2001 of the United
Kingdom
“Relationship Agreement”
means the relationship agreement entered into between PFZW,
Dubai World and the Company on 25 May 2011
“Reporting Entity”
has the meaning given in Article 38 of the DIFC Markets Law,
including any person that has shares admitted to an official list of
securities maintained by the DFSA
“Resolutions”
means collectively the Acquisition Resolution, the Delisting
Resolution and the Appointment Resolution, to be proposed at
the Extraordinary General Meeting (and set out in the notice of
Extraordinary General Meeting contained in this document)
“Secured Portfolio”
means all leased assets owned by JAFZ and its subsidiaries (other
than any project finance company) located within the property
subject to the mortgage referred to in paragraph 8.2(h)(i) of
Part IX (Additional Information) of this document
“Security Delegate”
means any delegate, agent, attorney or co-trustee appointed by the
Offshore Security Agent or the Onshore Security Agent
“Security Documents”
means those documents described in paragraph 8.2(h) of
Part IX (Additional Information) of this document
“Senior Notes”
means notes issued by the Company under the DP World MTN
Programme due 2037 in principal amount of US$1,750,000,000
bearing an interest at an annual rate of 6.85%
“Services”
means certain licensing and administration services provided by
JAFZ in the Concession Area pursuant to the Concession
Agreement
“Share(s)”
means the ordinary shares of US$2.00 each in the capital of the
Company
“Shareholders”
means holders of Shares
“Syndicated Facilities
Documentation”
means the agreements documenting the Syndicated Facilities
“Syndicated Facilities”
means the unsecured syndicated conventional and murabaha term
and revolving facilities entered into by the Company on 30 June
2014 between, amongst others, the Company, Barclays Bank PLC,
Citibank N.A., London Branch, Deutsche Bank, Emirates NBD
Bank PJSC, HSBC Bank Middle East Limited, J.P. Morgan
Limited, National Bank Of Abu Dhabi PJSC, Samba Financial
Group, Dubai Branch, Société Générale, The Bank Of Nova Scotia
Asia Limited and Union National Bank PJSC as conventional
mandated lead arrangers and bookrunners, Abu Dhabi
Commercial Bank PJSC, Credit Industriel Et Commercial, London
Branch, DNB Bank ASA, Mashreqbank psc and The Bank Of
Tokyo-Mitsubishi UFJ, Ltd. as conventional mandated lead
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arrangers, Dubai Islamic Bank PJSC, First Gulf Bank PJSC and
Noor Islamic Bank PJSC as murabaha arrangers and bookrunners,
Deutsche Bank Luxembourg S.A. as conventional facility agent,
Noor Islamic Bank PJSC as murabaha investment agent and
Deutsche Bank Luxembourg S.A, as global agent
“TEU”
means twenty foot equivalent container units
“Trustee”
means JAFZ Sukuk (2019) Limited
“UAE”
means the United Arab Emirates
“UK” or “United Kingdom”
means the United Kingdom of Great Britain and Northern Ireland
“US” or “United States”
means the United States of America (including the states of the
United States and the District of Columbia), its possessions and
territories and all areas subject to its jurisdiction
“$”, “US$”, “USD”, “US
dollars” or “dollars”
means United States Dollars, being the lawful currency of the
United States of America
“Usufruct Agreement”
means the usufruct agreement dated 13 November 2007 and
amended and restated on 29 April 2012 pursuant to which JAFZA
granted Usufruct Rights over the Usufruct Property to JAFZ
“Usufruct Property”
means the Concession Area and immovable fixed assets contained
therein which are subject to the Usufruct Rights
“Usufruct Rights”
means the exclusive rights granted by JAFZA to JAFZ to use and
benefit from the Concession Area and the fixed assets therein
“Voting Instruction Form”
means the enclosed voting instruction form for use at the
“Wakala Portfolio Revenues”
means the revenues generated by the Wakala Portfolio in each profit
period
“Wakala Portfolio”
means a portfolio of income generating real estate assets acquired
through the application of proceeds from the Certificates
All times referred to are London time unless otherwise stated.
Words importing the singular shall include the plural and vice versa, and words importing the masculine
gender shall include the feminine or neutral gender.
143
DP WORLD LIMITED
NOTICE IS HEREBY GIVEN that an EXTRAORDINARY GENERAL MEETING of DP World
Limited (the “Company”) will be held at The Wheelhouse, Jebel Ali Port, Jebel Ali, Dubai at 11.00 a.m.
(Dubai Time)/7.00 a.m. (GMT) on Thursday 18 December 2014 for the purpose of considering and, if
thought fit, passing the following resolutions.
Resolution 1 will be proposed as an ordinary resolution and, to be passed, will require approval from a
majority of the votes attaching to the Shares of Independent Shareholders (as defined in the notes to this
Notice) which are voted on Resolution 1.
Resolution 2 will be proposed as an ordinary resolution and, to be passed, will require approval from a
majority of the votes attaching to the Shares which are voted on Resolution 2.
Resolution 3 will be proposed as a special resolution and, to be passed, will require approval from
(a) a majority of not less than 75 per cent. of the votes attaching to the Shares of Shareholders which are
voted on Resolution 3 and (b) a majority of the votes attaching to the Shares of Independent Shareholders
(as defined in the notes to this Notice) which are voted on Resolution 3.
ORDINARY RESOLUTIONS
RESOLUTION 1
THAT the proposed acquisition by DP World FZE, a wholly owned subsidiary of the Company, of the entire
issued share capital of Economic Zones World FZE from Port and Free Zone World FZE (the
“Acquisition”), substantially on the terms and subject to the conditions of the share purchase agreement
dated 13 November 2014 between the Company, DP World FZE and Port and Free Zone World FZE (the
“Acquisition Agreement”), as summarised in Part IV (Principal Terms of the Acquisition) of the circular to
shareholders of the Company dated 13 November 2014 (the “Circular”), and all other agreements and
ancillary agreements contemplated by the Acquisition Agreement be and are hereby approved and the
directors of the Company (the “Directors”) (or any duly constituted committee thereof) be authorised:
(a)
to take all such steps as may be necessary or desirable in connection with, and to implement, the
Acquisition; and
(b)
to agree such modifications, variations, revisions, waivers or amendments to the terms and conditions
of the Acquisition (provided such modifications, variations, revisions, waivers or amendments are not
material), and to any documents relating thereto, as they may in their absolute discretion think fit.
RESOLUTION 2
THAT the appointment of Mark Russell as a director of the Company with effect from 11 August 2014
(the “Director Appointment”) be and is hereby ratified, confirmed and approved.
144
SPECIAL RESOLUTION
RESOLUTION 3
THAT the proposed cancellation of the listing of the Company’s Shares on the premium listing segment of
the Official List of the Financial Conduct Authority and cessation of trading of the Shares on the Main
Market of the London Stock Exchange (together, the “Delisting”) be and is hereby approved and the
Directors of the Company be and are hereby authorised to cause such Delisting to be effected and to do
and/or procure to be done all such acts or things as they may consider necessary or desirable in connection
therewith.
By order of the Board
Registered Office:
Level 5
LOB17
Jebel Ali Free Zone
PO Box 17000
Dubai
Dated: 13 November 2014
B. Allinson
Company Secretary
Proxies
Holders of ordinary shares entitled to attend and vote may appoint one or more proxies to attend and, on a
poll, vote in their place at general meetings of the Company. Any proxy so appointed need not also be a
shareholder.
Notes:
As at the date of this Notice, there were 830,000,000 ordinary shares of US$2.00 each in issue, each with equal voting rights.
Entitlement to Attend and Vote
Only those shareholders entered on the relevant register of shareholders as at 5.00 p.m. (Dubai
Time)/1.00 p.m. (GMT) on Tuesday 25 November 2014 (the record date) shall be entitled to vote at the
Extraordinary General Meeting in respect of the number of shares registered in their name at that time.
Changes to entries in the register of members after 5.00 p.m. (Dubai Time)/1.00 p.m. (GMT) on Tuesday
25 November 2014 shall be disregarded in determining the rights of any person to attend or vote at the
In order to comply with the requirements of paragraph 11.1.7R(4) of the Listing Rules, Resolution 1 will
require approval as an ordinary resolution from a majority of the votes attaching to the Shares of Independent
Shareholders (as defined below) which are voted on Resolution 1.
In order to comply with the requirements of paragraph 5.2.5R(2)(b) of the Listing Rules, Resolution 3 will
require approval from (a) a majority of not less than 75 per cent. of the votes attaching to the Shares which
are voted on Resolution 3 and (b) a majority of the votes attaching to the Shares of Independent Shareholders
(as defined below) which are voted on Resolution 3. Only the votes of Independent Shareholders (as defined
below) will be counted when assessing whether the Independent Shareholder Approval threshold has been
met.
In accordance with the Listing Rules, the term “Independent Shareholders” means, (a) for the purpose of
Resolution 1 (approving the Acquisition), any Shareholders other than Port and Free Zone World FZE and
its associates and (b) for the purpose of Resolution 3 (approving the Delisting), any Shareholders other than
Port and Free Zone World FZE and persons acting in concert with it. If you are in any doubt as to whether
or not you are classified as an Independent Shareholder for either of these purposes, please contact Link
Market Services (EMEA) Limited, the Registrar, via: [email protected]; Tel: +971 (0)4 401
9983; Fax: +971 (0)4 401 9985.
Resolution 2 will require approval from a majority of the votes attaching to the Shares which are voted on
Resolution 2.
145
If the Extraordinary General Meeting is adjourned, entitlement to attend and vote will be determined by
reference to the relevant register of shareholders at 5.00 p.m. (Dubai Time)/1.00 p.m. (GMT) on the
originally stated record date.
Nominee Registration
All the shares traded on NASDAQ Dubai and the London Stock Exchange are registered in the name of
NASDAQ Dubai Guardian Limited (formerly known as DIFX Guardian Limited) as nominee for the
beneficial owners. NASDAQ Dubai Guardian Limited will not exercise the right to attend and to vote at the
Extraordinary General Meeting but will enable the beneficial owners to attend the Extraordinary General
Meeting and vote in person and/or to exercise voting rights by issuing proxies upon the instruction of
beneficial owners. In order to facilitate this please carefully read and follow the instructions laid-out in the
following section.
Voting/Attendance Request for holders of shares traded on NASDAQ Dubai
1.
Voting
If you would like to have your Shares voted without attending the Extraordinary General Meeting in person,
please fill out the Voting Instruction Form and return it signed and dated to your broker (or custodian) if you
do not have a NIN account (a NIN account is an account set-up for a shareholder directly with the NASDAQ
Dubai Central Securities Depositary), or to our Registrar if you have a NIN account, as soon as possible,
however, no later than the date required by your broker (or custodian or the Registrar). Your broker (or
custodian or the Registrar) will submit your votes to the tabulation agent. If you subsequently desire to
change your voting, or to attend the meeting in person, please contact your broker (or custodian or the
Registrar) prior to the deadline specified by them in order to facilitate your changes. The tabulation agent
will provide your voting instructions to NASDAQ Dubai Guardian Limited who will submit the vote on your
behalf to the Chairman of the Extraordinary General Meeting.
Link Market Services (EMEA) Limited, the Registrar, are contactable via the following methods: Email:
[email protected]; Tel: +971 (0)4 401 9983; Fax: +971 (0)4 401 9985. If in any doubt about
your account set-up or about receiving dividends please contact the Registrar.
2.
If you would like to attend the Extraordinary General Meeting in person, or if you would like to be
represented by a person of your choice, please fill out the Personal Attendance Request Form and return it
signed and dated to your broker (or custodian) if you do not have a NIN account, or to the Registrar if you
have a NIN account, as soon as possible, but, no later than the date required by your broker (or custodian or
the Registrar). Your broker (or custodian or the Registrar) will submit your attendance request details to the
tabulation agent. You will need to provide a valid proof of photo identification (e.g. passport, driving licence
etc.) at the registration desk of the Extraordinary General Meeting.
If you subsequently desire to change your personal representative, or to vote without attending in person,
please contact your broker (or custodian or the Registrar) prior to the deadline specified by them in order to
facilitate your changes.
Completion and return of the Voting Instruction Form will not prevent beneficial owners from attending the
Extraordinary General Meeting and voting in person at the Extraordinary General Meeting, provided you
have subsequently changed your instruction to register your attendance at the meeting in person in the
manner specified above.
Please note that you will not be able to vote in person at the Extraordinary General Meeting if you have not
registered for attendance via your broker, custodian or the Registrar as outlined above.
146
Voting/Attendance Request for holders of Shares in depository interest form through CREST
3.
Voting
This facility is only open to you if you hold Shares in the form of depository interests in CREST. If you
would like to have your Shares voted without attending the Extraordinary General Meeting in person you
will need to direct the Depository, Capita Asset Services Limited, to submit your votes to the tabulation
agent. The tabulation agent will provide your voting instructions to NASDAQ Dubai Guardian Limited who
will submit the vote on your behalf to the Chairman of the Extraordinary General Meeting, in accordance
with your voting instructions.
Voting instructions must be lodged using the Form of Direction enclosed or electronically (see below).
Form of Direction
If you hold Shares in the form of depository interests in CREST you may provide your voting instructions
to the Depository, Capita Asset Services Limited, by completing and returning the enclosed Form of
Direction.
The Form of Direction should be completed in accordance with the instructions on the Form of Direction.
To be valid, the Form of Direction must be completed and lodged with Capita Asset Services Limited,
40 Dukes Place, London EC3A 7NH, together, if applicable, with the power of attorney or other authority
under which it is signed or a copy of such authority certified by a notary, no later than 10.00 p.m. (Dubai
Time)/6.00 p.m. (GMT) on Thursday 11 December 2014.
Alternative form of lodging your voting instructions
Electronic voting instructions via the CREST voting service
If you hold Shares in the form of depository interests in CREST you may transmit voting instructions by
utilising the CREST voting service in accordance with the procedures described in the CREST manual.
CREST personal members or other CREST sponsored members, and those CREST members who have
appointed a voting service provider, should refer to their CREST sponsor or voting service provider, who
will be able to take appropriate action on their behalf.
In order for instructions made using the CREST voting service to be valid, the appropriate CREST message
(a ‘CREST Voting Instruction’) must be properly authenticated in accordance with Euroclear UK & Ireland’s
specifications and must contain the information required for such instruction, as described in the CREST
Manual (available via www.euroclear.com/CREST).
To be effective, the CREST Voting Instruction must be transmitted so as to be received by the Company’s
agent (RA10) no later than 10.00 p.m. (Dubai Time)/6.00 p.m. (GMT) on Thursday 11 December 2014. For
this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the
CREST Voting Instruction by the CREST applications host) from which the Company’s agent is able to
retrieve the CREST Voting Instruction by enquiry to CREST in the manner prescribed by CREST.
Shareholders who hold their Shares in the form of depositary interests in CREST and, where applicable, their
CREST sponsors or voting service providers should note that Euroclear UK & Ireland does not make
available special procedures in CREST for any particular messages. Normal system timings and limitations
will therefore apply in relation to the transmission of CREST Voting Instructions. It is the responsibility of
the Shareholder to take (or, if the shareholder is a CREST personal member or sponsored member or has
appointed a voting service provider, to procure that the CREST sponsor or voting service provider takes)
such action as shall be necessary to ensure that a CREST Voting Instruction is transmitted by means of the
CREST voting service by any particular time. In this connection, Shareholders and, where applicable,
their CREST sponsors or voting service providers are referred, in particular, to those sections of the CREST
Manual concerning the practical limitations of the CREST system and timings.
The Company may treat as invalid a CREST Voting Instruction in the circumstances set out in
Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001.
147
4.
If you hold Shares in the form of depository interests in CREST and would like to attend the Extraordinary
General Meeting in person, or be represented by a person of your choice, you should contact the Depository,
Capita Asset Services Limited, 40 Dukes Place, London EC3A 7NH no later than 10.00 p.m. (Dubai
Time)/6.00 p.m. (GMT) on Thursday 11 December 2014. The Depository will submit your attendance
request details to the tabulation agent. You will need to provide a valid proof of photo identification (e.g.
passport, driving licence etc.) at the registration desk of the Extraordinary General Meeting.
If you subsequently desire to change your personal representative, or to vote without attending in person,
please contact the Depository prior to the deadline specified by them in order to facilitate your changes.
Completion and return of the Form of Direction or the electronic voting of your instructions via the CREST
voting service will not prevent beneficial owners from attending the General Meeting and voting in person
at the Extraordinary General Meeting, provided you have subsequently changed your instruction to register
your attendance at the meeting in person in the manner specified above.
Please note that you will not be able to vote in person at the Extraordinary General Meeting if you have not
registered for attendance via the Depository as outlined above.
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EGM Circular Acquisition of Jebel Ali Free Zone

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