Palm Hills Development SAEs : Announcement re: Rights Issue

THE INFORMATION CONTAINED HEREIN IS RESTRICTED AND IS NOT FOR PUBLICATION, DISTRIBUTION OR RELEASE, DIRECTLY OR INDIRECTLY, IN OR INTO, THE UNITED STATES OF AMERICA, CANADA, AUSTRALIA OR JAPAN.

Invitation to the Existing Shareholders to Subscribe to the capital increase of Palm Hills Developments SAE

I. Company's General Data :

Name of Issuing Company: Palm Hills Developments S.A.E.

Address of Head Office : Smart Village, 6 October City, 6 October Governorate

Legal Form : an Egyptian joint stock company subject to the provisions of Law No. 8 of 1997

Governing Law : Law No. 8 of 1997 and its Executive Regulations and amendments thereof

Object of the Company : Real estate investment in cities and new urban communities, reclaiming and cultivating desert land, provided that the land allocated is for the purpose of reclamation and cultivation, and that modern irrigation methods are applied in farming and not to irrigation by sub-merging, taking into consideration the Prime Minister's Decree No. 350 of 2007 and Presidential Decree No. 356 of 2008 provided the activity is practiced on the reclaimed and cultivated plot of desert land located after around 2 kilometers outside the boundaries of Al Kata Area, East of the Cairo/Alexandria Desert Road - Kilometer 49 - the Company shall obtain all necessary licenses to practice its activity.

Duration of the Company : 25 years, from 10/01/2005 to 09/01/2030

Fiscal Year : starts in January every year and ends in December of the same year.

No. and Date of

Commercial Registration : 6801 on 10/01/2005

Stock Exchange Listing

Status : listed in the Egyptian Stock Exchange in April 2008

Central Depository

Status : all of the Company's shares are deposited in Misr for Clearing, Settlement and Central Depository Company, except for 561 shares not deposited in the Central Depository System

Members of the Board of Directors and their titles:

Auditor of accounts:

Legal Advisor:

Shareholders with shareholding over 5%, according to the Shareholders List issued by Misr for Clearing, Settlement and Central Depository Company on 31/12/2014:

Capital:

Number of shares of

current capital : 1,348,320,000 shares

Type of issued shares : nominal

Nominal value per share : EGP 2 / share

Status of Profits : The shares of increase have the right to the dividends of the financial year ending on 31/12/2015, to be decided by the EGM on due time

Tax Status : Income tax: Palm Hills Developments enjoys an income tax exemption for 10 years, ending on 31 December 2015.

Commercial profits tax: the years from 2005 to 2009 are being examined.

Salaries and wages tax: the years from the commencement of business up until 2010 were examined and the tax differences were paid.

Stamp Duty tax: the years from the commencement of business up until 2006 were examined and the tax differences were paid.

Status of litigations : According to the statement of the legal advisor of the Company there is a number of ordinary cases (civil and labor).

The most significant lawsuits related to the Company's properties are as follows:

- Challenge No. 33432 of 57J, filed before the Supreme Administrative Court to appeal the judgment rendered by the Administrative Court in Case No. 49065 of 64J. The New Urban Communities Authority also filed an appeal regarding the said judgment and the two appeals are being heard at court regarding the plot of land of 230 feddans allocated to the Company in New Cairo City.

- Law No. 32 of 2014 was issued and it provides that no lawsuits shall be admitted for challenging the contracts made by the State except by the parties to these contracts and the court, according to the said law, shall address them automatically and consider them inadmissible for having been filed by a person lacking capacity and this applies to the said lawsuit.

- It is worth noting that the Company settled its claim with the administrative body with regard to the plot of land referred to above, by virtue of the minutes of meeting of the cabinet of ministers held on 16/07/2014 and paid, according to the settlement, 10% of the amounts due by it to the administrative body.

There is a comprehensive statement prepared by the legal advisor of the Company showing and updating the status of all lawsuits filed by and against the Company. The statement is available at the Company's premises for review.

Insurance on the Company's Assets:

Mortgages and liens made on the Company's assets:

There are no mortgages or liens made on the Company's assets.

Business Risks:

The Company operates in the business of real estate investment; that is developing land after purchase and providing such land with utilities in order to build real estate, villages, residential or commercial, for sale or lease.

This business is a key business for the national economy, it is affected by market changes, particularly supply and demand whether in terms of the raw materials required for construction or in terms of the purchase and sale transactions of land and realties and it is also affected by cash flows available in the marketplace and is also tremendously affected by economic, political and demographic changes.

Significant Accounting Policies Applied:

The financial statements were prepared in accordance with Egyptian Accounting Standards in light of the Egyptian laws and regulations in force and the related laws and historical cost and the financial statements are quoted in Egyptian pounds.

Relations with the related parties:

Related parties are those concerned with the direct and indirect relations arising between the Company and its affiliated and sister companies or those having a common interest in addition to the relations arising between the Company and the key members of the top management or the employees thereat who have a significant impact, directly or indirectly, on decision making. Transactions with related parties are considered to be any transaction or operation, exchange of resources, services and obligations arising between the Company and those parties and which must be established on the same bases as unrelated parties.

*Disclosures of the legal persons

- Heritage Company for Urban Development (Shehab Mazhar & Co.): Mr. Shehab Mazhar Ahmed Mazhar owns 50% (Managing Director)

- Mansour & Maghraby Company for Investment and Development: Mr. Yassin Ibrahim Lotfy Mansour owns 32.47% (Chairman and Managing Director)

- United Engineering Company for Contracting (U.E.C.C): Palm Hills Development owns 98%.

Disclosures of Affiliated Companies:

First: Direct Investment in affiliated and sister companies:

Second: Indirect Investment:

Disclosures of Commutative Contracts

Second: Subscription Data:

1. Basis for the capital increase resolution:

According to the resolution of the EGM convened on 08/02/2015, approving the capital increase and amendment of Articles 6 and 7 of the Statutes pursuant to the outcome of the subscription:

2- Amount of the increase of the issued capital of the Company from (EGP 2,696,640,000.-) to (EGP 4,344,640,000.-) i.e. by EGP 1,648,000,000.- at the nominal value of the share amounting to EGP 2 in addition to the issuance expenses of (three & half piasters) being 1.75% of the nominal value of the share.

3- Right to Subscription:

According to the extraordinary general meeting held on 08/02/2015, the existing shareholders of Palm Hills Development Company, S.A.E, holders and purchasers of the shares, have the right until the end of the trading session on 19/04/2015 to subscribe at the ratio of 61.11% of the shares owned by each of them in the capital before the increase and they have the right to sell the whole or a part of the subscription right separately from the original share. However, fractions of subscription rights shall be approximated in favour of the minority shareholders from the minority to the majority until the quantity of fractions is used up.

4. Conditions of Payment:

The full value of the subscription in the amount of EGP 2.035/share (EGP 2 value as nominal value + EGP 0.035 as issuance expenses per share) shall be paid.

As for the separate subscription right, the opening trading price of the subscription right and any change thereto shall be determined in the first trading session pursuant to the rules established by the resolution of the Board of Directors of the Authority No. 282 dated 26/04/2012 and announcing the same on the Egyptian Exchange monitors.

5- Date of subscription:

The subscription shall be opened as of 22/04/2015 and shall end 21/05/2015, however, the subscription may be closed once its value is covered in full.

6- Place of receiving the subscription:

Subscription shall be received by the Arab African International Bank and its branches in the Arab Republic of Egypt the details which are as follows:

7- Trading of the subscription right:

The shareholders of the Company have the right to trade the subscription right separately from the original share during the period starting on 22/04/2015 (opening date of the subscription) until 18/05/2015 (three days prior to the closing date of the subscription). The Company shall obtain the preapproval of the Central Depository Company for registering the subscription right and apply for the registration of the subscription right at the Stock Exchange, at least five business days as of the date specified to open the subscription pursuant to the securities listing and delisting rules of the Egyptian Stock Exchange and the executive regulations thereof.

8- Required documents:

A copy of the Identification Card for natural persons and the Commercial Register for legal persons and the document evidencing the ownership of the shares on the date indicated in the announcement (statement of account issued by the depository book-keeper showing the balance of shares owned on the date indicated in the announcement).

9- In the event subscription is not covered :

In the event the subscription is not covered in the first phase, the remaining shares, not subscribed to, shall be re-offered to the existing shareholders and the purchasers of the subscription right for re-subscription, without limiting the subscription percentage. In the event of oversubscription the allocation shall be prorated and the fractions shall be approximated in favor of the minority shareholders. The bank shall reimburse overpaid amounts received for the subscription to the remaining shares within one (1) week of the date of closing of the subscription by the Bank receiving the subscription and which shall be announced duly.

10-Plan of the Company in using the funds collected:

A. East Cairo Housing Projects :

The Company shall buy new land plots from the New Urban Communities Authority through the auctions made by the Authority.

Aspects of Utilization :

- Palm Hills Development Company "Palm Hills" is currently increasing the lands available to it by acquiring directly from the market and/or through the auctions made by the State, such as the auction made to sell 2 parcels of land in Cairo having a total area of 285,600 square meters (68 feddans). Also, the Company is negotiating to acquire a parcel of land in East Cairo having an area of 134,400 square meters (32 feddans). The Company intends to use these lands in building multi-purpose integrated projects.

- It is worth pointing out that the New Urban Communities Authority announced in October 2014 an auction to sell parcels of lands connected to the new urban communities provided with utilities, including the 2 parcels of land mentioned above. Palm Hills participated, through New Cairo Real Estate Development Company (an affiliate company 99.985% owned by Palm Hills), in this auction to acquire the said parcel of land.

B. Joint Development Project :

By sharing a parcel of land at New Cairo City

Aspects of Utilization :

- Palm Hills Development Company "Palm Hills" is currently at the final stage of negotiation to enter into a contract to participate with a reputable real-estate development company to develop a parcel of land owned by the partner on Cairo-Suez Highway, of an area of 433,650 square meters (103 feddans). The target of the project is to provide apartments with various surface areas and at different prices.

- The agreement between the two parties will be in the form of profit-sharing of the project revenues. As part of the agreement, Palm Hills will pay for the entire cost of construction and development while the partner will pay for the cost of the acquisition of the land.

C. Building, Development and Operation of Shopping Malls and Office Buildings :

The Company shall build on land allocated to the Company for commercial projects (office buildings and shopping malls) and acquire new commercial ventures.

Aspects of Utilization :

- The Company has 185,927 square meters of land allocated for establishing commercial projects and these lands are located in several distinguished sites in East and West Cairo which the Company will develop in the next few years.

- The Company will also increase its investments in the commercial sector by adding new projects to its present portfolio in East and West Cairo Zones by developing shopping malls and office buildings in order to provide a regular source of income generating annual return and, thus, secure stable earnings for the Company.

D. Payment of due financial entitlements :

Payment of financial entitlements due to Mansour and Maghrabi Company as the Company obtained an interest-free loan in the past 4 years (from 2011 to 2014).

E. School Project :

- Palm Hills is currently negotiating with a leading international company specialized in school management to assume the operation and management of the school immediately upon the completion of the building works. It is expected that Palm Hills will pay the costs of buildings and land in return for 20% of the earnings or the investment value at a capitalization ratio of 12%, whichever is higher.

- The school will provide all teaching facilities and high-standard classrooms, offices, laboratories computer rooms, libraries, activity halls and spaces for sports + high-quality teaching services for the school students that comply with the local and international school requirements.

The Company would like to disclose that in case of not awarding the auction in New Cairo to the Company (Item-A, East Cairo Residential Projects) or not concluding a final partnership agreement (Item-B, Joint Development Projects), the funds will be channeled to bank deposits until there are alternative investment opportunities or to provide for the Company's cash liquidity requirements for the existing projects.

11-Expected Return from this utilization :

- Significant growth of the Company and expansion in several activities, ranging from regular return-earning commercial projects to high-standard housing projects which are expected to generate remunerative returns on the investments, at local rates expected for investments ranging from 18% to 30%.

- Reduction of the Company's debts by paying off EGP 250 million, being part of the amount due to Mansour and Maghrabi Company, and increasing the Company's assets by increasing the capital and shareholders' equities by equivalent increases in the Company's capital.

The significant financial indices according to the financial statements during the previous three years pursuant to the most recent financial position as of 31/12/2014:

The Company's Board of Directors ratified, at the board meeting held on 19/02/2015, the financial statements as of and for the fiscal year ending on 31/12/2014 and an ordinary general shareholders meeting is being called to convene to discuss this issue.

Significant disclosure concerning the purchasers of the subscription right:

For investors who purchased the subscription right separately from the original share:

1- The period permitted to purchase or sell the subscription right starts on 22/04/2015 and ends on 18/05/2015 after which the subscription right shall be delisted from the Stock Exchange and no trading thereon shall be made.

2- The holder of the right is entitled to subscribe to the capital increase from 22/04/2015 until 21/05/2015.

3- The right to subscribe to the capital increase shares against the number of the rights purchased thereby during the subscription period starts on 22/04/2015 and ends on 21/05/2015.

4- In the event the subscription to the increase is not covered in the first stage, subscription will be opened again and the subscribers of the first stage shall be entitled to subscribe in the second stage without limitation to the shareholding percentage, and a relevant announcement shall be made on time after the approval of the Financial Supervisory Authority.

5- The right to trade the right of subscription either by selling or purchasing at the Egyptian Stock of Exchange is effective during the period from 22/04/2015 until the end of the trading session on 18/05/2015 as long as no subscription was made to the shares of the issued capital increase against the number of the rights purchased thereby.

6- In the event of exercising the subscription right, a subscriber is not entitled to trade all or a part of the shares subject of the capital increase upon depositing the subscription value.

7- In the event of continuing to hold the right without subscription during the subscription periods referred to above, the right shall be valueless and no legal nor financial liabilities shall be ensued vis-à-vis the issuing company.

Tarek Abdelrahman

Managing Director

The information contained herein is restricted and is not for publication, distribution or release, directly or indirectly, in or into, the United States of America, Canada, Australia or Japan.

This document does not constitute or form part of any offer or invitation to sell, or any solicitation of any offer to purchase nor shall it (or any part of it) or the fact of its distribution, form the basis of, or be relied on in connection with, any contract therefor. The capital increase and the distribution of this document and other information in connection with the capital increase in certain jurisdictions may be restricted by law and persons into whose possession any document or other information referred to herein comes should inform themselves about and observe any such restriction. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction.

The price and value of, and income from, the securities issued in the capital increase may go down as well as up. Persons needing advice should consult a professional adviser.

The capital increase is not being made in or into the United States of America or to any U.S. person (as defined in Regulation S under the United States Securities Act of 1933, as amended (the "Securities Act")). These materials are not an offer for sale of any securities in the United States. Securities may not be offered or sold in the United States absent registration or an exemption from the registration requirements of Securities Act. The Company has not registered, and does not intend to register, any portion of the capital increase in the United States, and does not intend to conduct a public offering of any securities in the United States.

No person has been authorized to give any information or to make any representations other than those contained in this announcement and, if given or made, such information or representations must not be relied on as having been authorized by the Company. In addition, no agent or representative of the Company accepts any responsibility whatsoever for the contents of this document and no representation or warranty express or implied, is made by any agent or representative as to the information set out in this document.

Neither the content of the Company's website (or any other website, including but not limited to the websites of the Company's subsidiaries, joint ventures or restricted affiliates) nor the content of any website accessible from hyperlinks on the Company's website (or any other website, including but not limited to the websites of the Company's subsidiaries, joint ventures or restricted affiliates) is incorporated into, or forms part of, this announcement.

This document contains forward-looking statements, which include all statements other than statements of historical facts, including, without limitation, any statements preceded by, followed by or including the words "targets," "believes," "expects," "aims," "intends," "may," "anticipates," "would," "could" or similar expressions or the negative thereof. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors beyond the Company's control that could cause the Company's actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding the Company's present and future business strategies and the environment in which it will operate in the future. These forward-looking statements speak only as at the date of this document. The Company expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in its expectations with regard thereto or any change in events, conditions or circumstances on which any of such statements are based.

This communication is only directed at (i) persons who are outside the United Kingdom; (ii) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "Order"); and (iii) high net worth entities, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as "relevant persons"). The securities referred to herein are only available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such securities will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or rely on this communication or any of its contents.

Any offer of securities to the public that may be deemed to be made pursuant to this communication in any EEA Member State that has implemented Directive 2003/71/EC (as amended and together with any applicable implementing measures in any Member State, the "Prospectus Directive") is only addressed to qualified investors in that Member State within the meaning of the Prospectus Directive. This document is an advertisement and not a prospectus for the purposes of the applicable measures implementing the Prospectus Directive and as such does not constitute an offer to sell or the solicitation of an offer to purchase securities.