Chairman’s letter

Dear Shareholders,

It is a great honor to serve Egyptian Resorts Company as Chairman of the Board of Directors, 13 years after I co-authored the original feasibility study for Sahl Hasheesh, our flagship development on the Red Sea coast. I have had the immense pleasure of watching Sahl Hasheesh grow from an idea into one of the finest resorts in Egypt.

With this pride in my heart, I am now entrusted with the responsibility of guiding ERC during a period of transformation for both the Company and the great nation in which we live and work. While the first few months of 2011 have certainly reinvigorated Egyptian society and inspired great hopes in Egyptians from all walks of life, Egyptian businesses that depended on foreign investment and tourism in-flows are now experiencing a slow-down, the extent and duration of which even industry experts cannot predict.

On top of these challenges, the Egyptian Tourism Development Authority recently announced without warning that it had rescinded its 20 million square meter approval for Phase 3 located at the rear of Sahl Hasheesh away from the bay, for which we had already paid 27 percent of the land’s contract value and spent over USD 6.8 million on master planning, on grounds that are, to date, not officially disclosed to the company.

Upon receiving the news, we promptly responded publicly with a pledge to appeal the decision before the Tourism Development Authority. We are also prepared to put our faith in the legal system and present our case in court in the event the TDA rejects our formal appeal.

Regardless of the outcome of the appeal, Management has made the strategic decision to upgrade the company’s business model to position ERC to take a more direct role in the development of the remaining 4.94 million square meters of undeveloped land in our uncontested land bank. The board supports this new strategic direction without reservation.

We will work with leading developers and investors to bring Phases I and II of development to completion, project-by-project. Specifically, the company made significant progress in the expansion of infrastructure and utilities capacity, notably completing its state-of-the-art fiber optics network design for Phase I and II in February 2011. Simultaneously, we will sell properties off-plan to a discerning clientele. We have already piloted this strategy with great success; pre-launch sales of the Sawari Marina properties – co-developed with Orascom Development Holding – at the end of 2010 and into 2011 saw us book reservations in excess of USD 20 million. Ongoing sales at Sawari will support our revenue streams throughout the year, while our modified strategy will see us depend more on revenues from our strategic assets stream in the medium-term.

Finally, ERC’s forward looking strategy does not preclude future land sales to sub-developers. We will continue to review all bids from interested sub-developers, but will only sell at attractive valuations to protect the interests of shareholders, in the form of land bank residual value, and that of our existing sub-developers.

Dr. Samir Makary
Chairman of the Board