Chairman's Message

By all measures, 2007 was a challenging year. The U. S. sub-prime crisis was undoubtedly the year’s most frequently debated issue. The crisis, which left reputable financial institutions bleeding in its wake, continues to cast its pall on the global economy and threatens to send the credit crunch spiraling into a recession. With mounting losses, central banks in the U. S. and Europe pumped liquidity into the markets. Listed companies shed more than half their value and the sale of distressed assets became the order of the day. Emaar, with its limited exposure in the U. S. market and focus on the luxury residential segment, weathered the turbulence with fortitude.

It is commonly said in Urdu that a river is formed, drop by drop. Thus, step by step, Emaar is forging ahead in its mission to become one of the world’s most valuable companies, as defined in its “Vision 2010”.

ACHIEVEMENTS OF 2007

Financial Performance

Focusing on business segmentation, international expansion and strong regional partnerships in 2007, Emaar recorded annual net profits of AED 6.575 billion (US$ 1.790 billion), 3 per cent higher than the net profit of AED 6.371 billion (US$ 1.735 billion) recorded in 2006 in spite of significantly lower land sales and slow down of the US real-estate sector during 2007.

Annual revenue increased by 25 per cent to AED 17.566 billion (US$ 4.782 billion) compared to AED 14 billion (US$ 3.813 billion) in 2006. Earnings per share (EPS) for the year 2007 were AED 1.08 (US$ 0.29) compared to AED 1.05 (US$ 0.29) in 2006.

Our strategy of creating significant value for our shareholders is progressing well. The net asset value of the Group, including the fair value of the land, real estate properties and market value of listed associates / companies, increased 46 per cent from AED 11.6 per share in 2006 to AED 16.9 per share in 2007.

The land bank of Emaar increased from 468 million square meters in 2006 to 519 million square meters as at end of 2007.

The value of this land increased by 74 per cent from AED 68 billion to AED 118 billion.

Moving forward in 2008, the cash resources of Emaar have been earmarked for further strengthening our Malls and Hospitality assets to generate a stable stream of revenues, as well as for initial infrastructure requirements for our various international entities.

Management Structure

Management structure is pivotal to the success of Emaar in achieving its mission. In 2006, Emaar established the Corporate Office based in Dubai and shaped a strong management team for our international subsidiaries and business segments.

In 2007, we reinforced Emaar’s leadership through a two-pronged strategy. At the country level, we inducted seven senior executives, bringing our team of chief executive officers, chief operating officers and general managers to full strength and fuelling the growth momentum of our international businesses.

At the Corporate Office level, we expanded our team of Regional Managing Directors. Each Regional Managing Director has a specific geographical focus and will drive the expansion of the various markets redistributed under their charge. The Corporate Office plays the role of a facilitator to Emaar’s businesses, ensuring the successful replication of Emaar’s business model in Dubai overseas and the inculcation of our distinctive corporate culture within our international operations. To this effect, we created the positions of Chief Information Officer and Director, Customer Care, to place Emaar at the forefront of information technology and customer service, respectively.

Integration of Acquisitions and Joint Venture Company

The focus of our Group is on execution with a clear objective to ensure the timely and quality delivery of our domestic and international projects. We acquired John Laing Homes and Hamptons International to grow our residential development capabilities and expand our international sales channels, respectively. With a similar eye to execution, we entered into a joint venture with Turner International to scale up our project management capabilities.

The integration of these acquisitions and this joint venture into the Emaar group is, hence, paramount for us to optimize the value of these alliances. In 2007, we successfully deployed senior management from John Laing Homes to our operations in Dubai and India. They are, notably, Richard Rodriguez (CEO, Emaar Dubai) and Bill Ratazzi (CEO, Emaar MGF). This will be followed by the relocation of more senior executives from the United States to the Middle East-North Africa (MENA) region. Turner International (ME) has also commenced project coordination for the Emaar Group, completing the construction of sales centres and “Street of Dreams” model homes for Morocco, Saudi Arabia, Egypt, India and Pakistan.

Emaar Design Centre

A globally integrated company is an enterprise that shapes its strategy, management and operations in a truly global way. It locates its operations and functions anywhere in the world, based on the right cost, skills and business environment. These operations are integrated horizontally and globally.

With the globally integrated company as a model, Emaar created the Emaar Design Centre. Based in Newport Beach, California, the Emaar Design Centre is the new focal point of Emaar’s core competencies in conceptualization, master-planning, development, landscaping and interior design. With Emaar’s projects largely driven by the Californian lifestyle, the Emaar Design Centre will provide our Company crucial access to the abundant talent of the States. A milestone in our road towards Vision 2010, the Emaar Design Centre will provide a continual pipeline of consistently high quality designs for our projects throughout the world.

International Businesses

We invested more than AED 18 billion in our international businesses. Our sales centres and “Street of Dreams” model homes were duly completed in various markets and 2007 marked the first year that Emaar launched its projects in the international arena. Consumer response to our sales launches was more than encouraging with Emaar having launched 3,891 units and sold 2,456 units in these pilot international projects excluding the United States. The sales are commendable considering that 67 per cent of the units were launched only in the fourth quarter of 2007. 2007 was also the first year when our international business began contributing positively towards our earnings. Our joint ventures in India and Morocco contributed positively to our earnings in 2007.

Business Segments

We are pleased to inform our shareholders that Emaar Malls Group is in the process of completing the construction of their key assets in Dubai, namely, The Dubai Mall and Dubai Marina Mall. With a combined asset value of AED 9 billion and gross leasable area exceeding 3.9 million square feet, The Dubai Mall and Dubai Marina Mall are scheduled to open concurrently in the third quarter of 2008.

In 2007, Emaar Hospitality Group opened three hotels in Downtown Burj Dubai: Al Manzil, Qamardeen and The Palace, The Old Town. Emaar Hospitality Group will open an additional four hotels in Dubai: Burj Lake Hotel, Dubai Mall Hotel, Dubai Marina Hotel and the Armani Hotel in Burj Dubai. Emaar Hospitality Group will have an asset portfolio of more than AED 3.5 billion.

2007 was also a milestone for Emaar Education. Following the commencement of ER (Emaar Raffles) International School in Singapore, the first Raffles International School in Dubai opened its doors at Umm Suqeim in September with an intake of 500 students during the inaugural semester. In the same year, Emaar Education announced its intention to establish a University of Arts to promote arts education in the Middle East and North Africa region and the Subcontinent. The establishment of the University of the Arts is another step by Emaar towards becoming a provider of world-class education. The decision to enter into the arts education industry is strategic as there is growing demand for local arts education of international standards in the MENA region and Indian Subcontinent. The University of the Arts initiative will help to nurture creativity and cultivate global talent in these regions.

Burj Dubai, Armani Residences and the Boulevard

With the Burj Dubai and the launch of the Armani Residences, Emaar reached a high point in its ten-year history.

Burj Dubai became the world’s tallest building and free-standing structure in 2007. At over 600 meters, Burj Dubai has now scaled over 158 livable levels, the largest number of storeys for any building in the world. It gives us great pride and pleasure to share this historical achievement with our shareholders and our fellow citizens of Dubai. For Emaar, it is a dream come true to be able to create history and a world-class icon that will help seal Dubai’s place on the world map.

Emaar launched the Armani Residences in the Burj Dubai in October 2007. The residences achieved pricing up to AED 12,888 per square foot, which is one of the highest price products in the world. In the inaugural launch, we sold 51 units at prices averaging AED 10,145 per square foot.

The creation of the Boulevard in Downtown Burj Dubai is yet another defining moment for Emaar. With the Boulevard, Emaar will create a world-class boulevard that parallels, if not surpassing, the Champs Elysee and Rodeo Drive of Beverly Hills.

Bawadi

In October 2007, Emaar joined hands with Bawadi LLC, a member of Tatweer, to develop 70 million square feet of land in Bawadi, the largest hospitality and leisure development in the world, located in Dubailand.

The AED 60 billion project will be a signature development by the joint venture with equal equity participation by Bawadi LLC and Emaar. The joint venture is expected to generate earnings by 2009. The management expects that the compounded annual rate of returns on the project will exceed 15 per cent.

As the pioneer of master-planned communities in Dubai and with an accomplished track record in creating world-class developments, Emaar has established credentials in property development. Our partnership with Bawadi LLC will increase our land bank in Dubai by 76 per cent to 162 million square feet. This transaction is a perfect fit to the Dubai Strategic Plan outlined by His Highness Sheikh Mohammed, which underscores the need for Dubai taking leadership position by leveraging on its strengths.

Emaar MGF IPO

Spinning off Emaar subsidiaries and associate companies is a key tenet of our strategy for establishing Emaar as one of the most valuable companies by 2010. Targeting to list at least one company per financial year, Emaar commenced the process in 2007 with Emaar MGF.

In the last quarter of 2007, Emaar MGF filed a Draft Red Herring Prospectus with the Securities and Exchange Board of India (SEBI) to sell a 10 per cent stake (117.4 million shares) to the public through an IPO. Emaar MGF received approval from SEBI in January 2008. However, Emaar MGF decided to withdraw and postpone its IPO to an appropriate time as a result of prevailing adverse market sentiments, which were fuelled by renewed indications of a US recession and global meltdown.

Emaar MGF remains committed to executing its projects in hand and is well funded to ensure that this delayed IPO will not hamper its growth plans. The company expects to return to the market at a later date when sentiment and liquidity conditions are better.

Management by Objectives

This year saw the implementation of the Management by Objectives (MBOs) and Key Performance Indicators (KPIs) process of performance measurement throughout the Emaar Group. The process has incorporated all of the different businesses and environments in which Emaar finds itself today - from the expansion into Malls, Hospitality & Leisure, Healthcare, Education and Financial Services, to the geographical expansion throughout the MENA region and into Europe, Asia and North America

The central aim behind the adoption of the MBO and KPI system is to ensure that all of Emaar’s people continue to pull in the same direction and maintain a sense of focus when working in an environment of rapid change. In addition, as Emaar continues to grow in size and stature it becomes increasingly important to develop a means by which to compare achievements against the most successful, most esteemed companies in the world.

ON THE HORIZON

Our management philosophy focuses unwaveringly on how we intend to create value for our shareholders. The central tenet of our strategy is to define our customer value proposition and relentlessly refine our internal processes to deliver this value propostion
to our customers.

Our fundamental financial strategy is simple. To increase shareholder value, we have to increase our sales and reduce our cost. We can grow our revenue and raise productivity by lowering our direct and indirect expenses; by utilizing our financial and physical assets more efficiently; and by ensuring that any bloating costs in the organization are de-layered. The emerging markets of this region are becoming increasingly competitive even as customers here are becoming more sophisticated and demanding. In this light, the optimization of productivity is critical for Emaar if our Group is to continue its ascent in international rankings.

Enterprise Risk Management

Enterprise risks are factors that can potentially cause heavy financial losses or fundamentally undermine the competitive position of the company. On a broader basis, enterprise risks can be segmented into three categories: (a) macro threats that emerge from the general geopolitical and macroeconomic environment in which the company operates; (b) sector threats that emerge from trends or uncertainties that are reshaping the specific industry; and (c) operational threats that reach a level of severity that they impact on the company’s strategic performance.

While Emaar has been consistently attaining its financial objectives, we do not believe in resting on our laurels. On the contrary, we believe in reinforcing Emaar and safeguarding its continuity even as it becomes increasingly exposed to the attendant risks that come with growth and expansion. It is to this effect that, under the direction of the Board of Directors, Emaar initiated the programme for Enterprise Risk Management in 2007. We established a team dedicated to risk management with the incorporation of this function under the Audit Committee, which was subsequently renamed the Audit and Risk Management Committee to reflect its enlarged purview. The team has already proceeded to establish the process for risk management, which will be a key focal point
for Emaar in 2008.

IN CONCLUSION

Business does not proceed in a straight line. The best of plans, meticulously plotted to the last detail, can be put to the test by unexpected events. With due deliberation, we have set an audacious goal for Emaar: To be one of the world’s most valuable companies by 2010. By aiming higher, we hope to achieve bigger things.

We live in a fast-moving world where speed is everything. A hundred percent perfection is a commendable goal, but we will achieve it only by becoming entirely irrelevant in a fast-pace environment. We cannot stand still. We have to act.

Growth is limited only by our mindset, our ability to innovate and create differentiation in the marketplace. If we live by our convictions, we can do almost anything that we set out to do.

In the words of His Highness Sheikh Mohammed Bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai: “Those who neglect the new will remain at the back of the line; those who wait for luck to make things happen will be disappointed; those who let time manage their affairs will discover that time is a friend to those who work and take initiatives, but an enemy to those who depend on others and grow lazy.”

To fulfill Vision 2010, it is paramount that we leverage on global management expertise. Emaar will employ the skills and knowledge of the global workforce, creating an international talent pool and a data-bank of best practices for our Group across the globe.

Today, Emaar has “Vision 2010” clearly in its sight. We remain firmly committed to create unprecedented value for our shareholders with the transformation of Emaar as one of the world’s most valuable companies by 2010.

H. E. Mohamed Ali Alabbar
Chairman
Emaar Properties PJSC