annual report 2010 - bayaninvest · sheikh\ talal ali abdullah al-jaber al-sabah board member fahad...

$: Annual Report 2010 - BayanInvest · Sheikh\ Talal Ali Abdullah Al-Jaber Al-Sabah Board Member Fahad Othman Al-Saeed Board Member Khaled Faisal Al-Mutawa Board Member 7 Investment$

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Annual Report 2010

BAYAN Investment

Annual Report 2010

His Highness

Sheikh Nawaf Al Ahmad Al Jaber Al SabahCrown Prince of the State of Kuwait

His Highness

Sheikh Sabah Al Ahmad Al Jaber Al SabahEmir of the State of Kuwait

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Annual Report 2010

His Highness

Sheikh Nawaf Al Ahmad Al Jaber Al SabahCrown Prince of the State of Kuwait

His Highness

Sheikh Sabah Al Ahmad Al Jaber Al Sabah

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Annual Report 2010

Amir of the State of Kuwait

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Annual Report 2010

Your gateway to the world of finance and investment

Bayan Investment Company is a shareholding company, established in 1997 according to the articles of incorporation issued by the Real Estate Registration & Authentication Department of Ministry of Justice – State of Kuwait – and the Commercial Licenses issued by the Ministry of Commerce & Industry and the Central Bank of Kuwait – State of Kuwait, aiming at carrying out all direct investment operations for its own benefit and the benefit of its clients in various economic sectors with promising investment horizons, in addition to providing various consultancy and investment services and preparing different studies and researches needed by the business community.

From the onset, Bayan took off in accordance with a long term strategic plan which aims at developing and increasing its capabilities, resources as well as shareholders and clients equities, in addition to diversifying sources of income and activities and the quality of services and products offered.

Despite all the challenges faced throughout the period of Bayanʼs establishment, the results are encouraging. Bayanʼs star shines high in the skies of the investment sector.

And in crowning the efforts exerted by the companyʼs management and staff, and with the support of its shareholders and clients, Bayan was enlisted into the Kuwait Stock Exchange in 2003, and with that, it gave the opportunity to all to participate and benefit from its inexhaustible gifts.

VisionTo be recognized as a regional leader in the provision of high quality business, and investment services and products.

MissionOur mission is to create value for our customers, shareholders, employees and community.

We strive to be among the best providers of financial services and products in Kuwait, delivering a diverse range of established and pioneering products.

We are a highly talented workforce, committed to reliability and consistency, and maximizing every investment opportunity.

We believe in creating an environment where people want to work, and where personal success is aligned with company success.

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Table of Contents

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Annual Report 2010

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Annual Report 2010

Table of Contents

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Annual Report 2010

•Board of Directors•Chairman’s Message•Management report •Subsidiaries & Affiliates•Financial Statements

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Faisal Ali Al-Mutawa

Board of Directors

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Dr.Adel Essa Husain Al-YousifiVice Chairman

Fawzi Dauod Al-MutawaBoard Member

Ayman Bader Al-SultanBoard Member

Sheikh\ Talal Ali Abdullah Al-Jaber Al-SabahBoard Member

Fahad Othman Al-SaeedBoard Member

Khaled Faisal Al-MutawaBoard Member

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Annual Report 2010

Chairman & Managing Director

Faisal Ali Al-MutawaChairman & Managing Director

Board of Directors

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Dr.Adel Essa Husain Al-YousifiVice Chairman

Fawzi Dauod Al-MutawaBoard Member

Ayman Bader Al-SultanBoard Member

Sheikh\ Talal Ali Abdullah Al-Jaber Al-SabahBoard Member

Fahad Othman Al-SaeedBoard Member

Khaled Faisal Al-MutawaBoard Member

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Annual Report 2010

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Chairman’s Message

Annual Report 2010

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Faisal Ali Al-MutawaChairman & Managing Director

Annual Report 2010

Dear Shareholders

During the year 2010, a number of international, regional and local events took place and had a significant impact on the Kuwaiti economy in general and the performance of investment companies in particular. In this respect, the consequences of the global financial crisis have continued to influence the economy, and extended to reach new entities that were not within the framework and were not expected to be affected likewise.

With the outset of 2010, State of Kuwait was still suffering the gross consequences of the global financial crisis that have adversely affected the global economy and the main stock exchanges since the peak of such crisis in mid 2008. In 2010, the Kuwaiti economy has suffered the impacts of such crisis on the one hand, and the government’s indifference in taking prompt and definitive procedures to put an end to the recession suffered by the national economy and rescue Kuwait Stock Exchange, on the other hand. Furthermore, the financial crisis impact was aggravated by the economic crisis that occurred in the Euro zone in the first quarter of 2010 in the wake of the Greek economy’s stagnancy and adoption of a European rescue plan for it.

The governmental role’s recession was represented by refraining from spending a significant part of the funds adopted in the annual financial plan in 2010. In its declaration of the achievements accomplished in the elapsed nine months of the financial year 2010/2011, the government stated that the expenditures approved for the period, amounting to KD 12.23 billion were not spent, where the actual expenditures amounted to KD 8.09 billion representing only 66% of the spending planned for the period and 46% approximately of the spending planned for the financial year. In fact, this should supposedly have contributed to injecting more liquidity in the national economy and help the private sector undertake its role in supporting the Kuwaiti economy. In addition, bureaucratic laws and regulations continued to be enforced in such a manner that has incapacitated the production cycle. These bureaucratic laws and regulations and their impact were admitted by the government in several press releases. These events have resulted in extraordinary decline of the prices of shares in Kuwait Stock Exchange; most of its listed stocks have remarkably dropped below their fair value.

These policies have resulted in a credit crisis because of the inability of a section of investors to pay the installments and interests of loans due to the losses they have incurred; which forced the banks to be more conservative in granting credit; thus, leading to more recession of the private sector’s investments in the State of Kuwait.

Managment Report

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Managment ReportAnnual Report 2010

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During 2010, Kuwait Stock Exchange has witnessed significant fluctuation. The market has recorded remarkable variance led by banks’ stocks. The development plan and the law of Capital Markets Authority are merely central tools that contribute to bring about more progress and prosperity in the forthcoming year 2011. From another perspective, the market has shown positive influence and increased trust of shareholders in a relative different manner compared to 2009. In this respect, the weighted index has realized distinctive earnings estimated at 25.51% where the price index has closed at insignificant loss of 0.17%. Furthermore, Kuwait Stock Exchange has ranked fifth among all GCC countries, thus advancing one rank ahead compared to last year.

Bayan Investment Company’s management has continued its investment strategy that avoids speculation and carefully and calculatedly manages the risks. The Local Investments Department, in cooperation with the Researches and Studies Department in the Company, conducts continuous analysis of Kuwait Stock Exchange performance to arrive at the latest developments of the trading movement by relying on principal and technical analyses of listed companies made by an integrated team specialized in the field of asset management within the framework of the general methodology the Company adopts in seizing the best opportunities on the local, Gulf and international levels.

Furthermore, in implementing its local investment strategy, the Local and GCC Investments Department has adopted an integrated methodology to penetrate different attractive investment channels of added value to the local investor in order to realize high and rewarding returns to the Company’s clients with minimum acceptable risk by adopting qualitative distribution that creates the highest possible degree of balance in investing in different sectors. For this purpose, the Company’s Management has taken firm steps led by prime specialized professionals to carefully select promising investments in spite of the prevalent pessimistic spirit of this year which resulted from the continuous recession of the local market. However, the Management is continuously embarking upon everything that can contribute to developing the Company’s shareholders’ equities and clients’ base by adapting the investment and consultancy services rendered to the clients, in addition to the available expertise, with the hope of promoting investment instruments and opportunities and provide the highest degrees of security and control of risks within the evaluated limits. In spite of the global financial crisis and its direct impact on the Kuwaiti economy in general and the investment companies in particular, Bayan Investment Company could maintain its clientele in addition to opening new portfolios whose performance and profitability were greatly influenced by the Company’s Management through executing some voluminous profitable transactions. In addition, the Management has arranged execution of an acquisition of an unlisted company in favor of Bayan Investment Company’s clients in cooperation with the Marketing and Sales Department as well as the other departments in the Company.

In spite of the fluctuating and cautious performance of Kuwait Stock Exchange index in 2010, which has resulted by one way or another in a slight variance in stock prices compared to 2009, and due to the conservative strategy adopted by Bayan Investment Company during the last year, the Company has managed to maintain diversity of investments in its portfolios, in addition to holding leading shares that helped the Company avoid suffering restrictive financial defaults.

Furthermore, the Investment Funds Department in Bayan Investment Company has managed to successfully pass the year 2010 with the least amount of losses compared to different investment funds of other local companies. Chief among the reasons of such success is the efforts exerted by the team in the department of relevance, where sale and liquidity leverage decisions were taken mostly at the right time during the year. This has limited the drop in the Funds’ assets and decelerated its decline to make it slower than the market that was rapidly dropping on the one hand, together with selecting companies’ shares of operational returns with regular cash dividends on the other hand.

Meanwhile, the Management is getting ready to seize optimal opportunities available in the market in light of the availability of good companies in the market with attractive prices, based on the annual financial statements of such companies, and the overall optimistic atmosphere of the country’s economy as well as the mega projects which the country is preparing itself to accomplish.

From another perspective, the Studies and Research Department has continued playing its role, divided into media and analytical, during 2010. The Department has continued to issue the reports and statistics

Managment Report

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prepared for publishing, whether they are published in newspapers, news websites or directly sent by email to those benefiting from Bayan Investment Company’s reports. In addition, the Department has also continued to provide internal reports and studies designed to fulfill the needs of the Company’s different departments for the purpose of assisting such departments in the decision making process.

Noteworthy, the Department’s performance was crowned with Bayan Investment Company’s winning the award of “Best GCC Conventional Investment Advisory, 2010” by “World Finance” prestigious magazine. In this respect, the Judging Panel has stated in its decision that this award came in recognition of the Company’s balanced performance during the year and its leading role in the investor service by offering a range of economic reports and studies that contribute to the investment decision.

As far as the reports prepared for publishing, the Department has witnessed an increase in the number of requests received, whether from individuals or institutions, to add the requesting parties to the Company’s mailing database in order to receive a copy of the reports upon issuing. Moreover, Bayan Investment Company’s reports began to be broadcast in several important news websites such as Al-Arabia news website, which significantly proves the degree of success such reports have attained. In the same context, “Factset Company”, which provides information and reports on world financial markets to its clients, has requested to contract with Bayan Investment Company to allow Factset to publish Bayan’s reports on its website. In doing so, Factset has joined the other prominent institutions that have already contracted with Bayan Investment for the same purpose. These prominent institutions include Thomson Reuters, Bloomberg, Capital IQ and other institutions that entrusted the reports issued by the Company.

From another perspective, the Studies and Research Department has taken a leap in 2010 towards covering the listed companies in GCC stock markets by means of building a large database that covers the most important data of GCC companies in the seven markets. This has resulted in reaping the early fruits of such database in the form of new reports about the GCC stock markets listed companies’ profits, following the example of Kuwait Stock Exchange, and for the first time. The first edition of these reports was issued to cover the profits of listed companies for the elapsed nine months of 2010.

In addition, the Department has started carrying out preparations pertaining to essential changes in the quality of internal reports provided by the Department. In this respect, the Department has commenced establishing a new system for proportional evaluation of stocks listed on Kuwait Stock Exchange and GCC stock markets. Meanwhile, the first phase of such system has been accomplished. During such phase, listed companies shall be redistributed to new sectors that are more accurate and effective than the sectors of official market. It is expected that the Department issues a daily report about the fair value of stocks listed on GCC stock markets on the basis of proportional evaluation before the first quarter of 2011.

In light of Bayan Investment Companyʼs keen to ensure its presence in media and optimize its role in the society, the Marketing & Sales Department performs a major support role complementing the activities of the remaining departments of the Company. This is accomplished through interactively carrying out and supervising all the functions of marketing and Sales for the Company’s products in a close coordination with the respective departments. The Department also seeks to be a “Profit Center”, prepared and qualified for contributing to Bayan’s overall profitability. In this context, the Department will be endeavoring to attract new clients and capitals for the Company’s portfolios and products, as well as to contribute in innovating and marketing value- added new products and services.

The Department supervises several activities in different areas. The usual duties performed by the Department include the production of publications and bulletins of trade mark (what is commonly called the “Direct Marketing”); preparation of all types of advertising and marketing campaigns; public relations, coordination for publishing Bayan’s reports and researches in dailies and magazines with an attempt to expand and open new canals for publishing; management of the trade mark of the Company and the activities associated therewith; participation in environmental and corporate social activities, enhancing internal communications among all departments and employees of the Company, using different means and activities designed for furthering interactive communication; actively participating in strengthening relations with Bayan’s clients; building-up a data and information base that supports the decision-making process with regard to studies and proposals to introduce new products and services.

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Corporate Social Responsibility

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In this respect, the Marketing and Sales Department has proposed several solutions during 2010 to preserve the Company’s inventory of branded stationary, in addition to monitoring and conserving consumption by means of introducing and developing internal forms as well as the Department’s policies and procedures in an attempt to reduce operational costs. Moreover, the Department has expanded the range of its marketing activity through fulfilling the wishes of a handful specialized institutions in the field of researches and studies to receive the closings and monthly reports of the investment funds issued by the Company to include in the related search engines such as “Bloomberg”, “Sundoog Fund Database” and “Eurekahedge”.

Furthermore, Bayan Investment Company, through the Marketing and Sales Department, was able to build strong ties and relations with different mass media and to expand the range for publishing the reports issued by the Company, either in printed or electronic newspapers or economic bulletins broadcasts. This is because these reports adopt high level professional standards and abide by fixed rules and procedures in distributing the reports, in addition to the system used to monitor, follow-up and evaluate the response level of these entities to the various publications issued by Bayan Investment Company.

Moreover, the Department tended to follow up and record Bayan Investment Company’s achievements and participations in a number of local and international conferences and forums, in addition to hosting many guests and programs represented by its chairman of the Board, together with participating in a handful of reports issued by international media networks, chief among which is the report prepared and published by “Marcopolis” French network and published also by BBC news network about the State of Kuwait, the report prepared by “Oxford Business Group” about the State of Kuwait entitled “The Report: Kuwait 2011”, and the report prepared by “Forbes” international magazine which will be published during the “World Economic Forum 2011”. In addition, the Company has participated in the conference of the “International Institute of Finance (IIF)” held in Austria. Noteworthy, Bayan Investment Company has won “Super Brands – 2010” voting among a selected list that comprised 1300 names of prominent trademarks because of the Companyʼs remarkable media presence.

For the purpose of providing a stable and secure technological environment for performing the commercial operations processing, and to keep pace with the rapid development which the information technology world is witnessing, the Information Technology Department in Bayan Investment Company has continued during 2010 providing technical support and technological strategic planning and implementation services to Bayan Investment Company’s departments as well as the Company’s subsidiaries and affiliates, in addition to a handful of activities pertinent to technical systems, databases, management and maintenance of the electronic network, providing interactive channels and providing technical support and consultancy.

The Department has also managed to implement practical and cost effective solutions to update and develop the applications used in the Company to help the business units to perform their core and non-core functions. These updates included modifying and updating the in-house developed applications or provided by third parties systems, upgraded to the latest releases and versions as required by supervisory authorities. Regarding the interactive channels that connect the Company with its shareholders and clients and stakeholders, the Information Technology Department continued managing and updating the relevant means and systems, including corporate and subsidiaries’ websites and e-mails development and management services.

Due to the importance of having a stable, efficient and reliable network resources and applications, that ensure a smooth and efficient running to corporate systems without interruption or downtime, the Department has prioritized the availability of the networks and infrastructural resources by providing solutions and practices based on industry standards that are best fit the corporate needs. Some of year 2010 practices included network and infrastructure maintenance, backup policy activities and managing the data recovery and business continuity plans, in addition to providing reliable internet services through the implementation of a redundant connection with active/passive recovery plans.

In this respect, Bayan Investment Company is distinguished for its ability to provide professional and accurate technological consultancy services through a professional and integrated team; thus seizing investment opportunities with technological nature.

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Corporate Social Responsibility

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Bayan Investment Company continued its activities of supporting corporate social responsibility “CSR” programs and contributing by its efforts to advancing the civil society and the services provided to citizens by:

- Contributing to the gala dinner organized by the American University of Beirut alumni and held in the State of Kuwait in 2010.

- Participating in sponsoring the sixth gala dinner of the Children Cancer Center of Lebanon held in the State of Kuwait.

- Supporting the initiative of “Madrasati Palestine” launched by the Office of Her Majesty Queen Rania Al-Abdullah and held in the State of Kuwait.

mpanympany

Al-Safwa International Consultancy Companympany

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Subsidiaries & Affiliates

Annual Report 2010

Bonyan

Arkan Holding Company

Arkan Holding CompanySubsidiaries

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Bonyan R eal Estate Company

Bonyan Real Estate Company

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Arkan Holding Company is a Kuwaiti shareholding company (closed) established by Bayan Investment Company in 2003 with the objective of investing in industrial activities in the Arab region. The Company was established with an authorized capital of Kuwaiti Dinar one million which has been increased in 2004 to Kuwaiti Dinars five millions in order for the Company to execute the projects that have been studied and approved by the executive team and management. Objectives • Targeting certain industrial fields that contribute to transferring high technology to Arab countries. • Investing in emerging industries with high growth rates. • Satisfying the needs of new manufacturing enterprises in the Arab World.• Presenting up-to-date technology that is not used before in the Arab industrial sector.• Realizing high return on investment (ROI).

Subsidiaries of Arkan Holding Company

Arkan Industry and Mining Company (Egypt): An Egyptian Shareholding Company, that was established by the end of 2004 to execute and manage the Companyʼs project in Arab Republic of Egypt to produce and market the ferrite, glazing and lining which are the main raw materials used is ceramic manufacturing.

The Company has established its factory and provided it with the latest industrial technology in cooperation with two mega companies from Spain and Italy. The factory was established on an area of 20,000 square meters in 10th of Ramadan City (near Cairo). The factory has been operated by the end of 2007.

Successfully, A contract has been concluded to sell the factoryʼs complete production in the first year of operation. In light of the success the product has realized in the markets, the Company decided to execute the second phase of the project which includes building three new furnaces, in addition to a unit for grinding and treating the raw materials. The second phase was operated on November 2008, and the factory is in process of adding an additional grinding unit which will begin production within March 2010. Moreover, the Company has obtained approval of gas batching from the Egyptian government in case the Company wishes to expand by adding a third phase of production.

So far, Arkan Industry and Mining Company is considered one of the most prominent projects of the mother Company since the project has realized profits approximating KD 780,000, i.e. equivalent to 21% return on shareholders equities for the year ended on December 31, 2010.

Moreover, the Company continued implementing its investment plan aiming at engendering the best industrial investment opportunities in the Arab region, particularly in the GCC countries. This is being done by virtue of studying the relative advantages, natural resources and available markets of these countries.

Arkan Holding Company

Arkan Holding CompanySubsidiaries

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Bonyan R eal Estate Company

Bonyan Real Estate Company

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Bonyan Real Estate Company, K.S.C.C “the real estate arm” of Bayan Investment Company was established in Kuwait in 2004. Since its inception, the Company has adopted a business model that aims at coping with the boom in the real estate sector, and at leveraging the robust real estate activity in the Arabian Gulf, and MENA region ensuring the highest returns on investments. The Company also seeks to attain a leading position in the real estate sector, by adopting modern concepts that keep pace with the latest developments in the global real estate industry and by applying those concepts in designing and marketing landmark properties.

The primary role of Bonyan Real Estate Company is to provide Bayan Investment and its clients with the professional and technical services required for the planning, design, construction, operation and project management of real estate development projects in the most efficient and cost-effective manner and in accordance with the overall Bayan Investment’s strategic objectives. Furthermore, the Company is seeking to establish and manage real estate funds and portfolios of various real estate properties.

Objectives • Utilizing the excess liquidity by investing in financial portfolios managed by specialized third parties. • Preparing studies and providing consultancy services in relation to real estate sector. • Conducting building and facility maintenance operations including civil, mechanical, electrical, air-conditioning and all works necessary for building sustainability and safety.• Organizing real estate exhibitions to promote special real estate projects.• Developing, operating, and managing third parties real estate properties.

Al Noor Holding company

Al-Safwa International Consultancy Company


Dar Al-Dhabi Holding Company

Dar Al-Dhabi Holding Company.


Al-Safwa International Consultancy Company is a limited liability company established by Bayan Investment in 2004 for the purpose of providing consultancy services for Bayan Investment group and representing it before the supervisory and controlling authorities, in addition to the regular follow-up of concluded obligations, and providing optimal solutions to withstand disputes to preserve the rights and properties of Bayan Investment group and avoid incurring any significant financial liabilities on part of the Company.

Al-Safwa International Consultancy Company is managed by a team from the legal and financial departments as well as other departments of Bayan Investment. During 2010, the Company has succeeded to conclude annual contracts with Dar Al-Dhabi Holding and Real Estate Companies and Safwan Company to provide consultancy services and supports, treasury operations, settling some disputes and representing the aforementioned companies before the supervisory and monitory authorities.

Objectives • Providing economic advisory.• Providing consultancy services in the fields of management, marketing, financial, communication and information technology.

ال�صفوةالدولية

Al-SAFWAInternational

Al Noor Holding company

Al-Safwa International Consultancy Company


Dar Al-Dhabi Holding Company

Dar Al-Dhabi Holding Company.


Dar Al-Dhabi Holding is a Kuwaiti shareholding company (Holding) that has increased its capital with KD 99,000,000 to become KD 100,000,000; and operates in compliance with the Islamic regulations “Sharia”. The Company’s main objective is to invest in the United Arab Emirates through the establishment or acquisition of subsidiaries in Kuwait or UAE. The Companyʼs initial investment is the acquisition of Dar Al-Dhabi Real Estate; which owns the attractive investment opportunity in Al-Reem Island in Abu-Dhabi in UAE, to develop five plots within Najmat Abu-Dhabi Project.

BAYAN Investment Company - K.S .C. (CLOSED) and SubsidiariesState of Kuwait

Consolidated Financial Statements for the Year Ended December 31, 2010with Independent Auditors’ Report

Financial Statements

Financial Statements



Independent Auditors’ Report

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Consolidated Statement of IncomeAnnual Report 2010

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Consolidated Statement of Comperhensive IncomeAnnual Report 2010

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Consolidated Statement of Changes in EquityAnnual Report 2010

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Consolidated Statement of Cash FlowsAnnual Report 2010

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Consolidated Statement of Cash FlowsAnnual Report 2010

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Notes to Consolidated Financial Statements31

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Notes to Consolidated Financial StatementsAnnual Report 2010

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34 Notes to Consolidated Financial StatementsAnnual Report 2010

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Annual Report 2010