1 kuwait real estate investment consortium - ksc. (closed) declared capital 10,000,000 kuwaiti...

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w w w . k r e i c . c o m

KUWAIT REAL ESTATE INVESTMENT CONSORTIUM - KSC. (CLOSED)

Declared Capital 10,000,000 Kuwaiti Dinars

Paid-up Capital 10,000,000 Kuwaiti Dinars

Commercial Registry Number 20953

Established in Kuwait in Oct. 26th, 1975

P.O.Box 23411 - Safat - 13095 - State of Kuwait

Tel: (965) 22448260 - (9 Lines) Fax: (965) 22434454 - 22434440

E m a i l : k r e i c . c o m

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The Amir of KuwaitH. H. Sheikh Sabah Al-Ahmed Al- Jaber Al-Sabah

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The Crown Prince of KuwaitH. H. Sheikh Nawaf Al-Ahmed Al-Jaber Al-Sabah

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The Prime Minister of KuwaitH. H. Sheikh Nasser Al-Mohamed Al-Ahmed Al-Sabah

Contents

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12

14

16

19

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Board of Directors

Borad Members Report

Direct investment Department

Real estate & portfolio Department

Projects & maintenance Department

Financial Statement for the Year Ended 31 December 2010

Consolidated Balance Sheet as at 31 December 2010

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Chairman

Deputy Chairman

Board Member

Board Member

Board Member

Board Member

Board Member

General Manager

Eng. Saleh A. Al-Kouh

Dr. Faisal A. Al-Kandari

Abdullah Abdul Wahab Al- Ramadan

Fauzi Abdul Hamid Al- Mani

Mohammed Muhanna Al- Gurbah

Hashim Saif Al- Saif

Dr. Haider H. Al-Jumah

Ali S. Al-Ghunaim

Board of Directors

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Report of Board Members

Gentlemen shareholders

The Board members of Kuwait Real Estate Investment Consortium KREIC has the pleaser to introduce the 34th of annual report including the most important economic developments, the results of the annual performance, the consolidated financial statements and the report of the independent auditor for the fiscal year ended December 31, 2010.

Year 2010 has witnessed many of the effecting events on the economic and political situation and the most important is:

On the domestic leve , the adoption of the Law Capital Market Authority, which assigned the responsibility of legislative and regulatory on the Kuwait Stock Exchange and this leading to support the efficiency and effectiveness in the follow-up and control the market, which still suffers from the case of volatility since the beginning of the financial crisis that the reasons was centered in a weak investor confidence and a slowdown of credit growth 0.4% for the year 2010, which led to falling the real estate prices and shares which constituted a burden and a significant pressure on the performance of financial indicators for the Kuwait Stock Exchange (although of the gains which have been achieved in 2010), where the price indicators of the market closed at the level of 6955.5 points (7005.3 points - 2009).

On the domestic monetary Situation the Central Bank of Kuwait has focused its effort in the scope which associated with formulating and implementing the monetary policy, the supervision and control the financial banking machines unites and reinforcing their ability to address the negative impacts of the challenges and overcome them and to carry out its role in advancing local economic activity the Central Bank of Kuwait continuo to take the reduction of the Kuwaiti dinar discount rate to reach 2.5% (2009 - 3.75%).

It should be noted that The oil prices during the year 2010 was characterized as a consistent rise where, the price of a barrel of Kuwaiti oil for the year 2010 was closed about 85.5 U.S. dollars, up 41% (for closure in 2009 (60.3 U.S. dollars per barrel).

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Gentlemen Shareholders , , ,

With regarding to the activities of Kuwait Real Estate Investment consortium, despite of the negative continuing effects of global economic financial crisis ... KREIC was able and combined the efforts of the executive department and its employees to overcome these obstacles and the difficult economic conditions. KREIC was able to achieve a net profit of 964 thousand Kuwaiti dinar, an increase of 104% (472 thousand Kuwaiti dinar 2009).

Where the terms of revenue for the KREIC’s focused on: Management fees property of others are 474 thousand Kuwaiti dinar per increase of 9.7% (434 thousand Kuwaiti dinar / 2009).

The net rental income is 754 thousand Kuwaiti dinar, decrease of 11.6% (853 thousand Kuwaiti dinar / 2009) as result of the sale of certain real estate assets.

The KREIC’s share in the results of associated companies is reached to 1.236 thousand Kuwaiti dinar, up to 94% (637 thousand Kuwaiti dinar / 2009).

In addition to the amount of 357 thousand Kuwaiti dinar which is result from the sale of the real estate investments (755 thousand Kuwaiti dinar / 2009) the income of the bank interest is (26 thousand Kuwaiti dinar) as well as miscellaneous income, which amounted to 39 thousand Kuwaiti dinar. With regard to expenses and other charges , the items were focused in the staff costs amounted to 1285 thousand Kuwaiti dinar , decreases of 8.5% (1404 thousand Kuwaiti dinar - 2009) and the general and administrative expenses amounted to 231 thousand Kuwaiti dinar (234 thousand Kuwaiti dinar / 2009).

In addition the consumption is 182 thousand Kuwaiti dinar (196 thousand Kuwaiti dinar - 2009) and the continues of negative impact of the financial crisis on some of the KREIC’s investment was negative loss amounted to 173 thousand Kuwaiti dinar (428 thousand Kuwaiti dinar - 2009).

KREIC’s has to complete the implementation of construction projects during the year 2010 to be so has completed the construction, preparing and leasing the wholly of KREIC Building commercial complex for government authority .. The residential building Bneid Al Gar in the progress of renting during the second quarter of 2011.

Accordingly, the Board of Directors recommends transferring the profits for this year to the rights of shareholders.

The lead members of the Governing Council commended the executive management of what has been achieved from the results of this year, as well as to the gentlemen in the brotherhood in the Kuwait Investment Authority for what they give KREIC of fruitful cooperation in order to achieve better results.

Finally, we ask Allah Almighty to safe guard, His Highness Sheikh Sabah Al- Ahmad Al- Jaber Al- Sabah His Highness the Crown Prince and His Highness the Prime Minister, God bless them all.

Eng. Saleh A. Al-KouhChairman

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Direct Investment Department

The activity of the Direct Investment Department based on the strong principles work and competitive

edge, the searching for investment opportunities, secure and profitable within and outside the State of

Kuwait, and to the continued development of existing investments according to the recent events and

economic trends expected, and establishment of companies to be set in collaboration with others as

well as contributing to the companies and investing in investment funds to be agreed with the KREIC’s

activity.

The direct investment department following the moderate investment policy tries to seize investment

opportunities and remunerative.

Here some of outlines which have been contributed by KREIC and operate under the Direct Investment

Department

Al Jadaf Real Estate Company

KREIC Contributed with Al Jadaf Real Estate Co that carries out

the Real investment activities specifically established to own and

develop the Avenue project (In Dubai- United Arab Emirates).

Lebanese Real Estate Investment Consortium S.A.L

Lebanese consortium LREIC was founded in 1994 and owns the

residential investment component of about 120 housing units (Sofer Hills Project).

Sofer Hills

The property is located on the area 109, 000 square meters in the Sofar - Sharon area Real Estate

- Mount Lebanon - Aley on the average height of 1,350 m above sea level which giving the visible

location, the project is located on the distance of 27 km from Beirut, 11 km from Aley , 6 km from

Bhamdun and 7 km from the Hamana. The Property has been counted to 72 plot, 66 of these plot

prepared and ready for construction after it was completed the first phase of establishing the

infrastructure for the whole project and the implementation of all the infrastructure services.

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Sunset Hills – Bahrain:Sunset Hills is one of the prominent developments projects in Bahrain, which is located near the Bahrain International Airport and Bahrain International Circuit for the Formula and the University of Bahrain to the southern gate of the Al Areen, the project will cost 13 billion U.S. dollars. The project is located on a land area of 44 thousand square meters, the total area 60 thousand square meters, the project includes a number of (10) Villas (200) flat and (41) houses and a health club and 4 retailers.The process of developing the project has began during the last quarter of 2007 the first and second phases have been completed of the infrastnucture works and expected to be completed the entire project in 2010.

Arab Ceramics Company (Arasemco) www.Aracemco.comArab Ceramics Company (Arasemco) founded in 1975, According to the scope of investment capital and foreign Arab and Free Zones.The company is a pioneer in the manufacture and production of sanitary ware and porcelain tiles of various kinds, with the advantage of producing local and imported raw materials to suit all tastes and levels at the local level, Arab, African and European, the company holds the international quality certificate from the Dutch Foundation Kiowa. the total amounted to property rights, is 221,522,501 and equivalent to one million Egyptian pounds equivalent to 22% of the capital, 100 million Egyptian pounds (the KREIC’s share of 24.39%) and up to the rate of 190% of capital in addition to cash dividends grew to 75% for the year 2010 (50% 2009).

Investment Water Front project:Investment Water Front project consists of luxury Hotel , furnished apartments, commercial section and spa resort provided in addition to luxury apartments built-up area totaling 2.1 million square feet located on the front line in front of the sea along the up to 150 meters.

Waterfront Real Estate CompanyThe Project is located in the Emirate of Dubai, specifically in Al-Arab city near the Palm Jebel Ali and a total area of 28.200 square meters.

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Real Estate and Portfolio Department

The continued impact of the global

economic crisis on some countries such

European countries and North America,

some countries were able to limit the

impact of the crisis during the year of

2010 especially Asian countries, which

they enjoy the ability to export the raw

materials such as oil, one of them from

Kuwait country. That helped improving

the trading of the local property market,

where the residential, investment and

commercial sectors has the proportion of 52% and 35% and 12% respectively of the value of real

estate trading which amounted of KD 2, 2 Billion, the industrial and stores sectors has obtained the

rate of 1%.

While, the number of deals made during

the year are 7,388 deals. The residential

and investment sectors were obtained the

big share of the rate as 75.6% and 22%

respectively.

Distribution sectors according to the number of transactions

ResidentialIndustrialInvestmentStoresCommercialCoast Line

Distribution sectors by value of sales

ResidentialIndustrialInvestmentStoresCommercialCoast Line

51%

0.2%

35%

1%12%

0.5%

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Real Estate Assets and portfolios Department

During this year , Kuwait real estate investment consortium has focused

its activities on the development of real

estate - which owned by KREIC, Where

the real estates rate formed as 91% of the

investments management while the others

of real estate investments are represented

as a remaining rate and concentrated by

KREIC First Real Estate Fund.

Real Estate Portfolio of KREIC

Regarding with the domestic legislation, and

to achieve the benefit of KREIC, the real estate

portfolio focused on both commercial and

residential sectors and this accompanied by

a rise in the relative weight of the investment

sector portfolio by 11%.

The market values of the assets

management are KD 26.9 Million as the

end of the year 2010, compared with KD

14.2 Million of the year 2009.

Distribution of Department's Real Estate

90%80% 70% 60% 50% 40% 30% 20% 10% 0%

Starting of 2010

Commetcial Real Estate Investment Real Estate

Ending of 2010

Distribution of Department's investment

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%Real Estate PortfolioReal Estate FundsReal Estate

70%

60%

50%

40%

30%

20%

10%

0%Real Estate

PortfolioInvestmentReal Estate

CommercialReal Estate

Real Estate Funds

Starting of 2010 Ending of 2010

Distribution of Department's investment

91%

7% 2%

70%

68%

13%23

%

12%

7%

5%2%

85%

74%

26%

15%

18

34%

25%

20%

16% 2%3%

After receiving the KREIC’s Building Management in Sharq, the Residential Building in Bneid Al Gar

and sealing the real estate of “Salmiya 10”, the market value of the portfolio amounted to KD 24.5

million compared with KD11.8 million for the year 2009.

Funds and Portfolios

KREIC First Real Estate Fund is represented as 6% of the total value of the assets of the department

and 88% of the value of investment funds, amounted of the net value is KD 1.371 as on the 31/12/2010

that achieving a return of 13.48% since the beginning of the year.

While the rate of portfolios is 2% of the total value of the assets, the department is still follow up their

situation closely in order to achieve the interest of KREIC.

Real Estate Portfolio Department at the end of 2010

KREIC Residential Complex (Bneid Algar)

Salmiya 20

Hawalli 79

Alborj AlAbid (Salmiya)

KREIC Office Tower (Sharq)

KREIC Tower (AlMrgab)

Real Estate Portfolio Department at the beginning of 2010

KREIC Tower (AlMrgab)

Salmiya 10

Salmiya 20

Hawalli 79Alborj AlAbid (Salmiya)

53%

32%

5% 4%6%

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Projects and maintenance department

Local Real Estate Portfolio

Local real estate portfolio consists of a variety of real estate investment and commercial are distributed

in different areas of Kuwait, these are characterized by high occupancy percentage due to the efforts

exerted by the department in the follow-up maintenance and leasing.

Property Management

KREIC is currently working on, the real estate portfolio management for the Kuwait Investment Authority

and the settlement and managing office for government purchased debts, as KREIC are managing

and operating the First Real Estate Fund, in addition to the managing of some real estate projects for

the government outside the State of Kuwait.

Projects Management

The Engineering Projects Management is the most important activities of the KREIC, and they are

currently managing several engineering projects mainly for the Kuwaiti Ministry of Foreign Affairs.

KREIC has submitted their offers to manage more projects in the future.

The Engineering Projects Management is currently consultant some of the projects in order to develop

some of the existing Real Estate of KREIC.

Real Estate Evaluation

KREIC is one of the leading companies in Real Estate Evaluation because of its credibility and

professionalism due to pursuing the scientific and technical evaluation. KREIC were able to attract

a number of Kuwaiti Banks and Government Agencies as well as a number of investment and Real

Estate companies.

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Residential building Bneid Al GarLocated in Bneid Al Gar on an area of 2940 m2 and overlooks

the three streets, the building is investment complex consists

of 16 floors, 1 st to the 14th floor consists of three apartments

one of these are three-bedroom with its accessories, and the

other two apartments is a two bedrooms and its accessories

the 15 and 16 floors are two apartments four rooms system

and its accessories. The project has several public services

such as swimming pool, sport room, children’s play area

and parking area - basement and ground floor, in addition

the intercom services, central satellite, where the leasing

process will begin from the first quarter of 2011.

KREIC Building ManagementKREIC building is located in sharq -Ahmad Al-Jaber Street

Block 5 plot 47 with an area 638 square meters, KREIC

Building is a complex of administrative offices, consisting

of 25 Floors of an area of 250 square meters per net for

one floor, the complex is a smart buildings, as it includes

all the modern technology services. The complex had been

leased entirely to the State Property Management- Ministry

of Finance for the exploitation of the Central Tenders

Committee.

Kuwait Real Estate Investment Consortium - KSC. (Closed) And its subsidaryState of Kuwait

Consolidated Financial Statements andIndependent Auditor’s Report

31 December 2010

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INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS

Report on the Consolidated Financial Statements

We have audited the accompanying consolidated financial statements of Kuwait Real Estate Investment Consortium K.S.C. (Closed), “the Parent Company” and its subsidiary (together referred to as “the Group”) which comprise the consolidated statement of financial position as of 31 December 2010, and the consolidated statements of income, comprehensive income, changes in equity and cash flow for the year then ended, and a summary of significant accounting policies and other explanatory notes.

Management’s Responsibility for the Consolidated Financial Statements

The Parent Company’s management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control.

An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as of 31 December 2010, and its financial performance

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and its cash flows for the year then ended in accordance with International Financial Reporting Standards.

Other Matters

We refer to note (6) to the consolidated financial statements where the fair value of one of the investments classified at fair value through profit or loss amounting to KD 910 thousand as of 31 December 2010 (KD 958 thousand as of 31 December 2009) has been determined based on the management estimates taking into consideration the financial difficulties faced by the investees as a result of the global and regional economic crisis. Our opinion is not qualified in respect of this matter.

Report on Other Legal and Regulatory Requirements

Furthermore, in our opinion, proper books of accounts have been kept by the Parent Company and the consolidated financial statements, together with the contents of the report of the Board of Directors relating to these financial statements, are in accordance therewith. We further report that we obtained the information that we required for the purpose of our audit and the consolidated financial statements incorporate all information that is required by the Commercial Companies Law of 1960, as amended, and by the Parent Company’s Articles of Association, that an inventory was duly carried out and that, to the best of our knowledge and belief, no violations of the Commercial Companies Law of 1960, as amended, or of the Articles of Association of the Parent Company have occurred during the year ended 31 December 2010 that might have had a material effect on the business of the Group or on its consolidated financial position except as disclosed in note (21) to the consolidated financial statements.

Jassim Al-FahadLicense No. 53-ADeloitte & Touche

Al Fahad, Al Wazzan & Co.Kuwait

10 March 2011

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Consolidated Statement of Financial Position as of 31 December 2010(All amounts are in Thousand Kuwaiti Dinars)

Note 2010 2009AssetsCurrent assetsCash and cash equivalents 5 2,378 1,542Investments at fair value through profit or loss 6 4,030 4,648Accounts receivables 7 84 250Due from related parties 8 373 1,492

6,865 7,932Non-current assetsInvestments available for sale 9 2,900 3,158Held to maturity investments 28 30Land and real estate under development 10 1,471 10,049Investment in associates 11 2,729 2,317Investment properties 12 17,726 5,766Property and equipment 45 33

24,899 21,353Total assets 31,764 29,285

Liabilities and EquityCurrent liabilitiesAccounts payables 13 4,806 3,165Total Liabilities 4,806 3,165EquityShare capital 14 10,000 10,000Statutory reserve 15 3,409 3,305Voluntary reserve 16 3,409 3,305Foreign currency translation reserve (577) (356)Change in fair value reserve 162 63Group’s share in associate’s reserves (43) (39)Retained earnings 10,598 9,842Total equity 26,958 26,120Total Liabilities and Equity 31,764 29,285

The accompanying notes form an integral part of these consolidated financial statements.

Saleh Abdullah Al-Kouh Dr. Faisal Abdullah Al – Kandari Ali S. Al-GhunaimChairman Vice Chairman General Manager

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Note 2010 2009RevenueManagement fees 8 474 434Net rental income 17 754 854Gain on sale of investment properties 357 755Investments losses 18 (173) (428)Interest income 26 96Group’s share in associate’s results 11 1,236 637Other income 39 54

2,713 2,402Expenses and other chargesGeneral and administrative 19 231 234Staff costs 20 1,263 1,404Depreciation 182 196Provision for doubtful debts 7 3 20Foreign currency translation (gains)/ losses (6) 28

Contribution to Kuwait Foundation for the Advancement of Science

9 5

Zakat 11 8Board of Directors› remuneration 21 56 35

1,749 1,930

Net profit for the year 964 472Earnings per share (fils) 22 9.64 4.72


Consolidated Balance Sheet as at 31 December 2010(All amounts are in Thousand Kuwaiti Dinars)

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2010 2009

Net profit for the year 964 472Other comprehensive incomeChange in fair value of investment available for sale (257) 103Impairment of investments available for sale 356 -Foreign currency translation (221) 93Group›s share in associates› reserves (4) (25)

(126) 171Total comprehensive income for the year 838 643


Consolidated Statement of Comprehrnsive Income for the year ended 31 December 2010(All amounts are in Thousand Kuwaiti Dinars)

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28

Note 2010 2009Cash flows from operating activities:Net profit for the year 964 472

Adjustments:Gain on sale of investment properties (357) (755)Provisions no longer required (9) (4)Investments losses 18 173 428Interest income (26) (96)Group’s share in associate’s results (1,236) (637)Depreciation 182 196Provision for doubtful debts 7 3 2Operating loss before changes in operating assets and liabilities (306) (394)Investments at fair value through profit or loss 646 498Accounts receivables 168 430Due from related parties 1,118 75Accounts payables 387 104Net cash flows generated from operating activities 2,013 713Cash flows from investing activities:Paid for land and real estate under development (2,596) (4,699)Dividends received from an associate 635 237Proceeds from sale of investment properties 632 -Purchase of investments properties - (66)Purchase of property and equipment (30) (26)Interest received 26 96Dividends received 18 156 120Net cash used in investing activities (1,177) (4,338)Net increase/ (decrease) in cash and cash equivalents 836 (3,625)Cash and cash equivalents at beginning of the year 1,542 5,167Cash and cash equivalents at end of the year 5 2,378 1,542

The accompanying notes the form an integral part of these consolidated financial statements.

Notes to the Consolidated Financial Statement 31 December 2010(All amounts are in Thousand Kuwaiti Dinars unless otherwise stated)


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Incorporation of the Group1.

Kuwait Real Estate Investment Consortium (“The Parent Company”) is a Kuwaiti Shareholding Company (Closed) incorporated in 26 October 1975 and it is a subsidiary of Kuwait Investment Authority. The Company is engaged in carrying out real estate activities, investment in securities and investment and real estate portfolios management activities inside and outside Kuwait.

The consolidated financial statements include the financial statements of the Parent Company and its fully owned subsidiary (Lebanon Real Estate Investment Consortium Company) together referred as the “Group”.

The subsidiary’s aggregate assets is equivalent to KD 1,670 thousand as of 31 December 2010 (2009: KD 1,784 thousand as of 31 December 2009) aggregate net losses is equivalent of KD 14 thousand for the year ended 31 December 2010 (KD 35 thousand for the year ended 31 December 2009).

The audited financial statements for the subsidiaries for the year ended 31 December 2010 were used in the preparation of the consolidated financial statements for the Group.

During the year ended 31 December 2010, the Parent Company has terminated the article of association of one of its wholly-owned subsidiaries Kuwait Distinguished Real Estate Consortium Company (W.L.L). This termination was recorded in the Commercial Register. No gains or losses resulted from this transaction.

The Parent Company is located in Al Sharq, Ahmed Al Jaber Street, P.O. Box 23411, Safat 13095, Kuwait.

Kuwait Investment Authority owns 99.127% of the total shares of the Parent Company.

The consolidated financial statements were authorized for issue by the Board of Directors on 10 March 2011.

Basis of preparation and Significant accounting policies2.

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented in these financial statements unless otherwise stated.

Basis of preparation2.1

The financial statements have been prepared in accordance with International Financial Reporting Standard (IFRS) on the historical cost basis except for certain financial instruments that are measured at fair values.


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2.1.1 New and revised IFRSs affecting amounts reported in the current year (and/or prior years)

The following new and revised IFRSs have been adopted in these consolidated financial statements. The application of these new and revised IFRSs has not had any material impact on the amounts reported for the current and prior years but may affect the accounting for future transactions or arrangements.

Amendments to IFRS 5 Non-current Assets Held for Sale and Discontinued Operations

The amendments to IFRS 5 clarify that the disclosure requirements in IFRSs other than IFRS 5 do not apply to non-current assets (or disposal groups) classified as held for sale or discontinued operations unless those IFRSs require (i) specific disclosures in respect of non-current assets (or disposal groups) classified as held for sale or discontinued operations, or (ii) disclosures about measurement of assets and liabilities within a disposal group that are not within the scope of the measurement requirement of IFRS 5.All the assets and liabilities of a subsidiary should be classified as held for sale when the Group is committed to a sale plan involving loss of control of that subsidiary, regardless of whether the Group will retain a non-controlling interest in the subsidiary after the sale.

Amendments to IAS 1 Presentation of Financial Statements

The amendments to IAS 1 clarify that the potential settlement of a liability by the issue of equity is not relevant to its classification as current or noncurrent.

Amendments to IAS 7 Cash Flows

The amendments to IAS 7 specify that only expenditures that result in a recognised asset in the statement of financial position can be classified as investing activities in the statement of cash flows.

IFRS 3 (revised in 2008) Business Combinations

IFRS 3(2008) allows a choice on a transaction-by-transaction basis for the measurement of non-controlling interests at the date of acquisition either at fair value or at the non-controlling interest’s share of recognised identifiable net assets of the acquiree.

IFRS 3(2008) changes the recognition and subsequent accounting requirements for contingent consideration.

IFRS 3(2008) requires acquisition-related costs to be accounted for separately from the business combination, generally leading to those costs being recognised as an expense in profit or loss as incurred.


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IAS 27 (revised in 2008) Consolidated and Separate Financial Statements

The revised Standard has affected the Group›s accounting policies regarding changes in ownership interests in its subsidiaries that do not result in loss of control. Increases in interests in existing subsidiaries or decreases in interests in existing subsidiaries that did not involve a loss of control are dealt with in equity, with no impact on goodwill or profit or loss. When control of a subsidiary is lost as a result of a transaction, event or other circumstance, the revised standard requires the Group to derecognise all assets, liabilities and non-controlling interests at their carrying amount and to recognise the fair value of the consideration received. Any retained interest in the former subsidiary is recognised at its fair value at the date control is lost. The resulting difference is recognised as a gain or loss in profit or loss.

IAS 28 (revised in 2008) Investments in Associates

The principle adopted under IAS 27(2008) (see above) that a loss of control is recognised as a disposal and re-acquisition of any retained interest at fair value is extended by consequential amendments to IAS 28.

IFRIC 17 Distributions of Non-cash Assets to Owners

The Interpretation provides guidance on the appropriate accounting treatment when an entity distributes assets other than cash as dividends to its shareholders.

IFRIC 18 Transfers of Assets from Customers

The Interpretation addresses the accounting by recipients for transfers of property, plant and equipment from ‘customers’ and concludes that when the item of property, plant and equipment transferred meets the definition of an asset from the perspective of the recipient, the recipient should recognise the asset at its fair value on the date of the transfer, with the credit being recognised as revenue in accordance with IAS 18 Revenue.

2.1.2 New and revised IFRSs in issue but not yet effective

The Group has not applied the following new and revised IFRSs that have been issued but are not yet effective:

IFRS 9 Financial Instruments

Amendments to IFRS 7 Level of disclosures about Credit risk and collateral held

IAS 24 Related Party Disclosures

Amendments to IAS 1 Presentation of analysis of items of other comprehensive income


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Amendments to IAS 32 Classification of Rights Issues

IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments

IFRS 9 «financial instruments» becomes effective for financial years beginning on or after •1 January 2013. The adoption of this standard will have material impact on the amounts of the Group’s financial assets and liabilities, this impact cannot be estimated until the relevant studies are carried out.

Most of other amendments will have impact on disclosures and presentation only.•

Basis of Consolidation2.2

Subsidiaries

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries). Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

Income and expenses of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the effective date of acquisition and up to the effective date of disposal, as appropriate. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group.

All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.

Changes in the Group’s ownership interests in subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Group’s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Company.

When the Group loses control of a subsidiary, the profit or loss on disposal is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. Any related accumulated items in equity will be accounted for as if the Company had directly disposed of the relevant assets (reclassified to profit or loss or transferred directly to retained earnings). The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting.


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Business combinations

Acquisitions of businesses combination are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree. Acquisition-related costs are generally recognised in profit or loss as incurred.

At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value at the acquisition date.

Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer’s previously held interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain.

Non-controlling interests may be initially measured either at fair value or at the non-controlling interests’ proportionate share of the recognised amounts of the acquiree’s identifiable net assets. The choice of measurement basis is made on a transaction-by-transaction basis.

When a business combination is achieved in stages, the Group’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date (the date when the Group obtains control) and the resulting gain or loss, if any, is recognised in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognised in other comprehensive income are reclassified to profit or loss where such treatment would be appropriate if that interest were disposed of.

Goodwill

Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the business less accumulated impairment losses, if any.

For the purposes of impairment testing, goodwill is allocated to each of the Group’s cash-generating units (or groups of cash-generating units) that is expected to benefit from the synergies of the combination. Any impairment loss for goodwill is recognised directly in profit or loss. An impairment loss recognised for goodwill is not reversed in subsequent periods.

Investments in associates

An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.


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The results and assets and liabilities of associates are incorporated in these consolidated financial statements using the equity method of accounting. Under the equity method, an investment in an associate is initially recognised in the consolidated statement of financial position at cost and adjusted thereafter to recognise the Group’s share of the profit or loss and other comprehensive income of the associate. When the Group’s share of losses of an associate exceeds the Group’s interest in that associate, the Group discontinues recognising its share of further losses. Additional losses are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate.

Any excess of the cost of acquisition over the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities of an associate recognised at the date of acquisition is recognised as goodwill, which is included within the carrying amount of the investment. Any excess of the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognised immediately in profit or loss.

The entire carrying amount of the investment (including goodwill) is tested for impairment as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs to sell) with its carrying amount. Any impairment loss is recognised immediately in the profit or loss. Any reversal of that impairment loss is recognised to the extent that the recoverable amount of the investment subsequently increases.

When a group entity transacts with its associate, profits and losses resulting from the transactions with the associate are recognised in the Group’ consolidated financial statements only to the extent of interests in the associate that are not related to the Group.

Financial instruments2.3

Financial assets and financial liabilities are recognised when a group entity becomes a party to the contractual provisions of the instrument.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.

Financial Assets

Financial assets are classified into the following specified categories: financial assets ‘at fair value through profit or loss’ (FVTPL), held to maturity, ‘available-for-sale’ (AFS) financial assets and ‘loans and receivables’. The classification depends on the nature and purpose of the financial assets. All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. The Group has determined the classification of its financial assets as follows:


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Financial assets at fair value through profit or loss (FVTPL)

Financial assets are classified as at FVTPL when the financial asset is either held for trading or it is designated as at FVTPL. Financial assets at FVTPL are stated at fair value, with any gains arising on remeasurement recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any dividend or interest earned on the financial asset. Fair value is determined in the manner described in note 3.

Held to maturity assets

There are non-derivative financial assets with fixed or determinable payments, and the management has the intent and ability to hold them to their maturities.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables (including trade and other receivables and cash and cash equivalent) are measured at amortised cost using the effective interest method, less any impairment.

Available for sale (AFS)

AFS financial assets are non-derivatives and are not classified as (a) loans and receivables, (b) held-to-maturity investments or (c) financial assets at fair value through profit or loss.

The financial assets available for sale are re-measured at fair value. The fair value is determined in the manner described in note 3.

Changes in the fair value of available-for-sale financial assets are recognised in other comprehensive income and accumulated under the heading of changes in fair value reserve.

Where the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously accumulated in the investments revaluation reserve is reclassified to profit or loss.

AFS equity investments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are measured at cost less any identified impairment losses at the end of each reporting period.

Dividends on AFS equity instruments are recognised in profit or loss when the Group’s right to receive the dividends is established. Foreign exchange gains and losses are recognised in other comprehensive income.

Impairment in value

Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment will be affected.


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For AFS equity investments, a significant or prolonged decline in the fair value of the security below its cost is considered to be objective evidence of impairment.

Objective evidence of impairment for a portfolio of receivables could include the Group’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period, as well as observable changes in national or local economic conditions that correlate with default on receivables.

For financial assets carried at amortised cost, the amount of the impairment loss recognised is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate.

For financial assets carried at cost, the amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited to the income statement.

In respect of AFS equity securities, impairment losses previously recognised in profit or loss are not reversed through profit or loss. Any increase in fair value subsequent to an impairment loss is recognised in other comprehensive income.

Derecognition

The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. On derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income and accumulated in equity is recognised in profit or loss.

Financial liabilities

Financial liabilities (including borrowings) are recognised initially at fair value, net of transaction costs incurred subsequently measured at amortised cost using the effective interest method. Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method.

De recognition

The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged and expired. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.

Land and real estate under development2.4

Land and real estate under development are recognized at cost, which includes development


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cost. When the development process is completed, the land and real estate are classified as either investment properties or land and real estate held for trading according to the management’s intention regarding the future use of these properties.

Investment properties 2.5

Properties not occupied by the Group and acquired for long-term leases or for capital appreciation in future are classified as investment properties. Investment properties are stated at cost less accumulated depreciation and impairment losses if any. Land is not depreciated, building are depreciated on straight line basis.

Property, plant and equipment2.6

Property, plant and equipment are stated at cost less accumulated depreciation and any impairment losses. Cost includes the purchase price and directly associated costs of bringing the asset to a working condition for its intended use. Maintenance and repairs, replacements and improvements of minor importance are expensed as incurred. In situations, where it is clearly demonstrated that the expenditure has resulted in an increase in the future economic benefits expected to be obtained from the use of an item of property, plant and equipment beyond its originally assessed standard of performance, the expenditure is capitalized.

Depreciation is calculated based on estimated useful life of the applicable assets except for the land on a straight line basis.

The assets’ residual values, useful lives and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

Gains or losses on disposals are determined by the difference between the sales proceeds and the carrying amount of the asset and is recognized in the income statement.

Impairment of tangible and intangible assets other than goodwill2.7

At the end of each reporting period, the Group reviews the carrying amount of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. The recoverable amount is the higher of an asset’s fair value less costs to sell or value in use. Impairment losses are recognised in the income statement for the period in which they arise. When an impairment loss subsequently reverses, the carrying amount of the asset is increased to the extent that it does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised immediately in profit or loss.

Provisions2.8

Provisions are recognized when the Group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Provisions are measured at the present value of the consideration expected to be required to settle the obligation using a rate that reflects current market assessments of the time value of money and the risks specific to the obligation.


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End of service’s indemnity2.9

The Group is liable under Kuwait Labour Law to make payments under defined benefit plans to employees at termination of employment, regarding the labour in other countries; the indemnity is calculated based on law identified in these countries. Such payment is made on a lump sum basis at the end of an employee service. Defined benefit plan is un-funded and is based on the liability that would arise on involuntary termination of all employees on the balance sheet date. This basis is considered to be a reliable approximation of the present value of the Group’s liability.

Revenue recognition2.10

Management fees are recognized based on a time proportion basis as specified in the portfolios’ management agreement.

Interest income from deposits is recognized on time basis, and other revenues and expenses are recognized on an accrual basis.

Dividends income is recognized when right to receive payment is established.

Rent revenue is recognized on a straight-line method during the contract period.

Revenue from sale of land and real estate is recognized on the completion of the sale contract These risks and rewards are transferred generally to the buyer on delivery

Leasing2.11

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

The Group as lessor

Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease.

Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Group’s net investment outstanding in respect of the leases.

The Group as lessee

Assets held under finance leases are initially recognised as assets of the Group at their fair value at the inception of the lease. The corresponding liability to the lessor is included in the consolidated statement of financial position as a finance lease obligation.

Operating lease payments are recognised as an expense on a straight-line basis over the lease term. In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis


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Foreign currencies2.12

Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in ‘Kuwaiti Dinars’ (KD), which is the Company’s, functional and the Group’s presentation currency.

Transactions and balances

Foreign currency transactions are translated into Kuwaiti Dinars using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end in the income statement.

Group companies

The results and financial position of all the Group entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

Assets and liabilities for each financial position presented are translated at the closing rate at the date of that balance sheet.

Income and expenses for each income statement are translated at average exchange rates.

All resulting exchange differences are recognized as a separate component of equity.

Proposed dividends 2.13

The dividends attributable to shareholders of the Parent Company are recognized as liabilities in the consolidated financial statements in the period in which the dividends are approved by the Parent Company’s shareholders.

Fiduciary assets2.14

Assets held in trust or in a fiduciary capacity are not treated as assets of the Group and accordingly are not included in these consolidated financial statements.

Financial risk management3.

Financial risks3.1

The activities of the group expose it to a series of financial risks, market risks, which include foreign currency risks and risks of change in fair value resulting from the change in interest rates, and risks of fluctuations in cash flows resulting from changes in interest rates, and risks of market prices in addition to credit risk and liquidity risks.


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The Group is managing these financial risks by focusing on a continuous evaluation of market conditions and its trends and the management’s assessments of the changes for long and short-term market factors.

The Group relies on its internal sources to finance its activities.

Market risk

Foreign exchange risk

Foreign exchange risk is the risk of fluctuation of the fair value or on cash flow of financial instruments resulting from the change in exchange rates of foreign currencies.

The Group is exposed to the foreign exchange risk as a result from dealing in foreign currencies mainly in Egyptian Pound and U.S Dollar and Lebanese Lira. The foreign exchange risk is resulted from the future transactions that take place on the Group’s net investments in the foreign associates and subsidiaries with Egyptian Pound, Lebanese Lira and certain investments at fair value in US Dollar.

The Group’s exposure to this risk is considered immaterial as the Group’s total investments in foreign currency are not considered material to the Group’s total investments as a whole. Nevertheless, the Group monitors on a regular basis the movement of the foreign exchange rates against Kuwaiti Dinar to identify the effect on its financial statements and to take the necessary procedures.

Fair value risk

The fair value risk is the risk of fluctuation in value of financial instrument resulting from change in market price. The Group is exposed to the fair value risk arising from its investments classified in the consolidated financial statements as available for sale investments.

The Group is exposed to the risk of fluctuations in the value of equity instruments classified as investments available for sale and investments at fair value through profit or loss.

The Group manages this risk by monitoring the market prices on a regular basis by implementing a diversified strategy in its investments. The Group is attempting to concentrate its investments in real estate companies to minimize the risk of fluctuations in fair value.

The proportion of the Group’s investments in real estate securities and funds is 45% of the Group’s total investments as of 31 December 2010 (30% as of 31 December 2009).

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

As the Group does not have financial assets bear interest rates, the Group is not exposed to the risk of changes in the fair value of financial instruments , neither nor exposed to the risk of fluctuations in the cash flows as a result from the change in the interest rates as the Group does not have liabilities carry interest rates.


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The Group is exposed to the risk of cash flows fluctuation resulting from changes of interest rates on deposits; the exposure of this risk is minimal as the maturities of deposits are short-term.

Credit risk

Credit risk is the risk that the Group will incur a loss because its customers, clients or counterparties failed to discharges their contractual obligations.

Credit risk is managed by the level of the Group by monitoring credit policy on regular basis.

Credit risk is highly concentrated in cash and cash equivalents and due from related parties; The Group holds the cash and cash equivalents at entities and financial institutions with high credit reputation. The amount due from related parties is concentrated with the Parent Company’s major shareholder, which is a governmental body in the State of Kuwait and Real Estate Fund managed by the Group.

Liquidity risk

The liquidity risk is the risk that the Group becomes unable to settle its liabilities when due.

The management of liquidity risk is mainly to maintain sufficient balance of cash, highly liquid financial instruments and financial resources are made available to meet the needs of liquidity.

The Group monitors liquidity risk by maintaining group of highly liquid financial investments. This facilitates to the Group, the availability of liquidity when needed. In addition, the group studies the extent of liquidity in these investments on a regular basis and adjusts the components of these assets when this is necessary.

All of the Group’s liabilities are due within three months from the date of the consolidated financial statements.

Fair value estimation 3.2

The fair values of financial assets and financial liabilities are determined as follows:

The fair values of financial assets and financial liabilities with standard terms and conditions •and traded on active markets are determined with reference to quoted market prices.

The fair values of other financial assets and financial liabilities are determined in accordance •with generally accepted pricing models based on discounted cash flow analysis.

The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable.

Level one: Quoted prices in active markets for identical assets or liabilities.•

Level two: quoted prices included within level I that are observable for the asset or liability, •either directly (that is, as prices) or indirectly.


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Level three: Inputs for the asset or liabilities that are not based on observable market •data.

The table below represents the financial instrument’s analysis that recorded at fair value on the levels above mentioned:

2010Level one Level two Total

Assets Investments available for sale 95 2,805 2,900

2009Level one Level two Total

Assets Investments available for sale 171 2,987 3,158

Critical accounting estimates4.

4.1 Critical accounting estimates and assumptions

In the application of the Group’s accounting policies, which are described in (note 2), the management is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Impairment of receivables

The Group reviews investments in debt instruments on a quarterly basis to assess whether a provision for impairment should be recorded in the statement of income. In particular, considerable judgment by management is required in the estimation of the amount and timing of future cash flows when determining the level of provisions required.

Impairment of fixed assets

The Group reviews the fixed assets on a continuous basis to determine whether a provision for impairment should be recorded in the statement of income. In particular, considerable judgment by management is required in the estimation of the amount and timing of future cash flows when determining the level of provisions required. Such estimates are necessarily based on assumptions about several factors involving varying degrees of judgment and uncertainty, and actual results may differ resulting in future changes to such provisions.


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Evidence of impairment of investments

The Group determines “available for sale” equity investments as impaired when there has been a significant or prolonged decline in their fair value below their cost. The determination of what is “significant” or “prolonged” requires significant judgment. In addition, the Group also evaluates among other factors, normal volatility in the share price for quoted equities and the future cash flows and the discount factors of unquoted equities. Impairment may be considered appropriate when there is evidence of deterioration in the financial position of the investee, industry and sector performance, changes in technology and operational and financing cash flows.

Impairment of associates

Estimation has been made for the existence of impairment of an associate while there is an indicator for this impairment. The Group has studied the book value of the Group’s investments in associate including goodwill, accordingly, impairment in goodwill study is not prepared independently. Impairment and reversal of those losses are recognized in the consolidated statement of income

Cash and cash equivalents5. 2010 2009

Time deposits and call accounts 1,194 1,206Cash at banks and on hand 1,184 313Cash in portfolios - 23

2,378 1,542

The effective interest rate on term deposits is 1.62% as of 31 December 2010 (2.75% as of 5.1 31 December 2009)

Time deposits mature within three months from date of placement.5.2

Most of cash and cash equivalent balances are in Kuwaiti Dinars as of 31 December 2010/ 5.3 2009.

Investments at fair value through profit or loss 6. 2010 2009

Investments in real estate funds 1,994 1,877Investments in money market funds 910 958Investments in unquoted shares 1,126 1,255Investments in quoted shares - 558

4,030 4,648

Investments at fair value through profit or loss are dominated into the following currencies:6.1 2010 2009

Kuwaiti Dinar 3,626 4,050Others 404 598

4,030 4,648


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The fair values of the investments in real estate funds are based on the net asset value provided 6.2 from these funds› managers.

The Group’s investments in money market funds represent an investment in one of the 6.3 local funds, which has liquidity difficulties due to the impacts of the global and regional financial crisis. The fund’s manager has suspended units redemption. Furthermore, neither the financial statements nor the net asset value of the fund were approved by the regulatory authorities. Based on this, the Group’s management has estimated the fair value of its investments in this fund of KD 910 thousand as of 31 December 2010 (KD 958 thousands as of 31 December 2009), while the value as per the correspondence received from the fund’s manager amounted to KD 1,082 thousand as of 31 December 2010 (KD 1,108 thousand as of 31 December 2009).

Accounts receivables7. 2010 2009

Trade receivables 403 506Accrued revenues 61 109Other receivables 123 144

587 759Provision for impairment (503) (509)

84 250

Trade receivables include an amount of KD 56 is equivalent to Lebanese Lira 297,552 as of 7.1 31 December 2010 (KD 11 is equivalent to Lebanese Lira 61,930 as of 31 December 2009).

The provision’s movement is as follows:7.2 2010 2009

Balance at the beginning of the year 509 507Provided 3 2Provisions no longer required (9) -Balance at the end of the year 503 509

Related parties transactions 8.

This item represents transactions with the principle shareholder in Kuwait Real Estate Investment Consortium and the fund managed by the Group. The prices and settlement terms related to these transactions are approved by the Group’s management.


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2010 2009TransactionsManagement fees for principal shareholder’s portfolio 436 402Management fees of First Real Estate Fund 38 32Gain on sale of investment properties 357 755Executive committee 14 12Board of Directors and executive committee remuneration 56 35

Balances due from the related parties as of 31 December:2010 2009

BalancesKuwait Investment Authority 437 211

First Real Estate Fund 37 1,382

474 1,593Doubtful debts provision (101) (101)

373 1,492

Related parties transactions are subject to the approval of shareholders in the General Assembly.

Investments available for sale 9. 2010 2009

Local shares – unquoted 1,069 1,338Foreign shares – unquoted 1,831 1,820

2,900 3,158

The following is an analysis of investments available for sale as of 31 December: 9.1 2010 2009

Kuwaiti Dinar 1,069 1,338US Dollar 1,822 1,811Others 9 9

2,900 3,158

Investments available for sale as of 31 December 2010 include investments amounted to 9.2 KD 1,554 thousand carried at cost (KD 1,554 thousands as of 31 December 2009). The management has not identified any indicators of impairment in these investments.

Investments available for sale include an amount of KD 1,346 thousand as of 31 December 2010 9.3 (KD 1,604 thousand as of 31 December 2009) whose fair values were determined based on the investees’ latest available financial statements.

During the year ended 31 December 2010, the Group’s management estimated impairment 9.4 losses of available for sale investments amounted to KD 356 thousand as a result of significant decrease in its fair value below cost (KD Nil as of 31 December 2009).


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Land and real estate under development10. 2010 2009

Balance at the beginning of the year 10,049 5,289Additions during the year 3,821 4,760Transfer to investment properties (note 12) (12,399) -Balance at the end of the year 1,471 10,049

10.1 Additions amounting to KD 1,255 thousand have been eliminated from the statement of cash flows as it is a non-cash transaction (note 12).

Investments in associates 11. Country of

incorporationOwnership

%2010 2009

Arab Ceramic Company - Egyptian Shareholding Co. Egypt 24.4 2,727 2,315Arab Brick Company - Egyptian Shareholding Co. Egypt 31.5 1 1Financial Economic Development Company Egyptian Shareholding Company

Egypt 23.8 1 1

2,729 2,317

The Group’s shares in the net assets and the results of operations of “Arab Ceramic Company 11.1 – Egyptian Shareholding Company” have been recorded based on the latest available un-audited financial information reviewed by the auditor of this company as of 30 September 2010. The fair value of the investment in associate is equivalent to KD 9,152 thousand (KD 3,116 thousand as of 31 December 2009).

The following is a summary of the financial information for the associate company as of 11.2 30 September:

2010Total Assets Total Liabilities Total Revenue Net Profit

15,206 3,069 13,331 4,914

2009Total Assets Total Liabilities Total Revenue Net Profit

12,924 2,822 9,576 2,979

Investment properties12.

Investment properties are represented in residential buildings and commercial complexes in various areas in the State of Kuwait. The fair value of the investment properties amounted to KD 24.5 million as of 31 December 2010 (KD 11.8 million as of 31 December 2009) was determined based on valuation provided by a technical party.


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The investment properties’ movement is as follows:2010 2009

Opening balance 5,766 6,478Additions - 24

Transfer from land and real estate under development (note 10) 12,399 -

Disposals (275) (553)Depreciation (164) (183)Balance as of the end of the year 17,726 5,766

During the year ended 31 December 2010, the Group has sold one of investment properties to a related party. This transaction has resulted in gain of KD 357 thousand.

Accounts payables13. 2010 2009

Employees end of service indemnity 1,456 1,385Due to staff 560 576Provision for claims 806 768Other provisions 120 120Customers advances 128 75Other payables 1,633 152Accrued expenses 83 76Contribution to KFAS 9 5Zakat 11 8

4,806 3,165

13.1 Most of the accounts payables are in Kuwaiti Dinars as of 31 December 2010 / 2009.

13.2 Other payables include an amount of KD 1,255 thousand as of 31 December 2010, represents the amounts due to the contractors carrying out the construction work of certain real estate that have been transferred from land and real estate under development to investment properties during the year, these amounts have been eliminated from the statement of cash flows as it is a non-cash transaction.

Share capital14.

The issued and fully paid up capital is amounted to KD 10 million distributed over 100 million shares 100 fils per share, all shares are in cash.

Statutory reserve15.

In accordance with the Commercial Companies Law for the year 1960 and the Parent Company’s Articles of Association 10% of the net profit for the year before Kuwait Foundation for the Advancement of Sciences (KFAS), Board remuneration and Zakat expense is to be transferred to the statutory reserve. The shareholders may resolve to discontinue such annual


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transfers when the statutory reserve reaches half of the share capital. Distribution of the statutory reserve is limited to the amount required to enable the payment of a dividend of 5% of share capital in years when retained earnings are not sufficient for the payment of a dividend of that amount. When the balance of the reserve exceeds 50% of share capital, the General Assembly is permitted to utilize amounts in excess of 50% of the share capital in aspects seen appropriate for the benefit of the shareholders.

Voluntary reserve16.

In accordance with the Parent Company’s Articles of Association, 10% of the net profit before KFAS and Board remuneration and Zakat expense proposed by the Board of Directors and approved by the General Assembly is transferred to voluntary reserve. Such annual transfers may be discontinued by a resolution of the General Assembly based on the proposal by the Board of Directors. The Board of Directors proposed to transfer 10% of the net profit before KFAS, BOD remuneration and Zakat to voluntary reserve.

Net rental income17. 2010 2009

Total rental revenues 802 906Total rental expenses (48) (52)

754 854

Investments losses18. 2010 2009

Investments available for sale:Cash dividend 51 51Impairment in value (356) -

(305) 51Investments at fair value through profit or loss:Cash dividend 105 68Gain from sale 65 68Change in the fair value (38) (615)

132 (479)(173) (428)

General and administrative 19. 2010 2009

Rent expenses 93 91Maintenance expenses 15 16Others 123 127

231 234


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Staff cost20. 2010 2009

Salaries and wages 698 814Employees end of service indemnity 172 175Accrued leave 114 125Staff bonus 159 180Social securities and other staff benefits 120 110

1,263 1,404

Board of Director’s remuneration21.

The Parent Company’s Board of Directors proposed Board of Director’s remuneration for the year ended 31 December 2010 amounted to KD 56 thousand (2009 : KD 35 thousand) which subject to the approval of the shareholders in the general assembly. This amount exceeds the maximum limit stipulated in Article No. (150) of Commercial Companies Law and Article No. (25) of the Parent Company’s Articles’ of association.

Earnings per share22.

Earnings per share are calculated by dividing the net profit of the year by the weighted average number of outstanding shares during the year as follows:

2010 2009Net profit for the year (KD thousand) 964 472Weighted average No. of outstanding shares (shares) 100,000,000 100,000,000Earnings per share (fils) 9.64 4.72

Proposed dividends and Board of Directors remuneration23.

The General Assembly of the shareholders of the Parent Company has approved on 31 March 2010 the financial statements of the Group for the year ended 31 December 2009 and approved no dividend distribution.

On 10 March 2011, the Board of Directors had proposed no dividend distribution for the year 2010.

By Meeting of the General Assembly on 28 March 2011, proposed dividend by 6% of the capital (And Approved).

Segment information24.

The group is organized into business segments; real estate, investments and projects and maintenance management. Segments results are reported to senior executive management. Furthermore, Group’s operating results, assets and liabilities are reported according to geographical areas in which the Group operates. Revenue, profits, assets and liabilities are measured according to the same accounting bases followed in preparing the consolidated financial statements.


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Business segment analysis in line with internal reports submitted to management is as follows:

Investment management

Real estatemanagement

Projects & maintenance management

Total

2010 2009 2010 2009 2010 2009 2010 2009

Segment revenue 1,408 717 1,119 1,377 186 308 2,713 2,402

Segment results 866 164 160 315 14 41 1,040 520Unallocated expenses (76) (48)Net profit for the year 964 472

Geographical segment analysis

KuwaitMiddle East

(Except Kuwait)Total

2010 2009 2010 2009 2010 2009Total revenue 1,671 1,420 1,042 982 2,713 2,402Total assets 24,593 21,573 7,171 7,712 31,764 29,285Total liabilities 4,685 3,024 121 141 4,806 3,165

Contingent liabilities and commitments25. 2010 2009

Bank guarantees 67 69Capital commitments on properties development contracts 1,256 3,484

Fiduciary assets26.

The fiduciary assets have amounted KD 37,891 thousand as of 31 December 2010 (KD 11,078 thousand as of 31 December 2009).

1 kuwait real estate investment consortium - ksc. (closed) declared capital 10,000,000 kuwaiti...

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