publication.pdf - al mazaya holding company

His Highness SheikhSabah Al-Ahmad Al-Jaber Al-Sabah

Amir of the State of Kuwait

His Highness SheikhNawaf Al-Ahmad Al-Jaber Al-Sabah

The Crown Prince of the State of Kuwait

His Highness SheikhJaber Mubarak Al-Hamad Al-Sabah

Prime Minister

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Message From the ChairmanMessage From the Group CEOVisionMissionBoard of DirectorsExecutive Management Company EstablishmentCapital StructureMajor Shareholders StructureListingOperations / ServicesAl Mazaya HeadquartersSubsidiaries & AssociatesKuwait ProjectsUAE ProjectsRegional ProjectsNew Project - DubaiNew Project - BahrainNew Market - TurkeyFinancial Report 2013Independent Auditors’ Report

CONTENT

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Mr. Rashid Al NafisiChairman

Dear shareholders,

We are delighted to have this opportunity to meet you here at the beginning of this new year, which carries with it news of optimism and hope, and indicators of the company’s vitality and work, assuring you once again that we have fulfilled the promise we made one year ago: which was that Al Mazaya Holding Company would continue its steady and strong movement throughout 2013, measured by internal external milestones and indicators.

MESSAGEfrom the Chairman

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Today, Al Mazaya has announced its results for the fiscal year up to December 31, 2013, which have been highlighted by a 2000% increase in profits year-on-year, up to KD 6 million.

At the end of the fiscal year just passed, the total assets of the company were KD 228 million, compared to KD 221 million in 2012, while the total shareholders’ equity at was KD 91 million, compared to 83.3 million a year earlier - an increase of 9.2%. Additionally, the total short-term obligations of the company have fallen by 13.55%.

Because of this, we must offer our heartfelt thanks to both the Board of Directors and the excellent executive management, as well as the highly experienced engineering, technical and professional workers, and all the employees of Al Mazaya Company for their strong support of the company, a support without which these results could not have been achieved, and has allowed Al Mazaya Holding to remain among the most influential companies in the Gulf and Arab region.

Shareholders of Al Mazaya: You know very well that our path has not always been easy in recent years, characterized by many political, economic and funding changes, and yet the vision of the Board of Directors, as well as the flexible, dynamic and adaptive strategies that have been put in place, has enabled the company to overcome many of the challenges experienced. The company has succeeded in transforming its focus into income-generating assets, especially those assets formerly under development, which is an achievement to the great credit of the current board of directors and the executive management team.

All of this has come as the positive consequence of a number of corrective actions that we have followed, on top of which has been the restructuring of the company, and reordering it from inside in cooperation with competent institutions, as well as the establishment of a new regulation of internal systems and procedures that best serve the management, staff and workers, and support the company›s activity - internally and externally.

Finally, I would like to assure you that your company today has become more influential and stronger than ever before. I therefore take the liberty here of congratulating you on behalf of your company, and congratulating your company on behalf of you.

Thank you.

Mr. Rashid Al Nafisi Chairman

Eng. Ibrahim Al SoqabiGroup CEO

Esteemed Shareholders,Peace Be Upon You,

I am honored, after having become a member of the Al Mazaya Holding Company family, to welcome you here today, and to offer my heartfelt congratulations on the remarkable success achieved by everyone in this great company at the beginning of a new era of further development and progress.

I am delighted to be able to outline the strong position that Al Mazaya Holding Company is in; a position in the real estate development sector which could never be achieved other than with reliance on strategic planning, trust, well determination, and integrity. This can be seen in Al Mazaya’s progression from conception to implementation to growth, and while we can be allowed a moment of pride to recognize what we’ve done, we must therefore continue to innovate, grow, and expand.

MESSAGEfrom the Group CEO

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Shareholders of Al Mazaya: I wish to take this opportunity to confirm that Al Mazaya has been able to maintain its strong operational performance, and its prestigious position in the market within the framework of an ambitious (but realistic) plan and long term strategic objectives. Short-termism can be a curse, and it is one we have avoided by keeping sight at all times of out long term goals.

2013 witnessed a whole series of achievements and successes of which we can rightly be proud. Despite global financial circumstances since 2008, Al Mazaya has managed to remain strong and solid through the continuous implementation of its projects, which have become more resilient and recognized, with increased revenues through the completion of new projects and income-generating assets.

Shareholders: Your company has succeeded during 2013 by entrenching itself in the market through a number of active steps, including the restructuring of all financial obligations, which has provided the liquidity necessary for operational projects and support for the timely delivery of existing projects, including the Villa Residential Project and «Liwan» Project” in Dubai.

Moreover,The company has also been able to close a large number of successful transactions, which have contributed to the upgrading of the financial situation of the company and increase in its assets, including taking possession of a third tower in the heart of the capital of Kuwait (Al Mazaya Tower 3) through a swap deal that resulted in the sale of office space in Mazaya Business Avenue in Dubai, in exchange for the Kuwait City tower and two pieces of land in the Q-Point Project .

Furthermore, the company has entered the sector of Warehouse and Logistics through the development of an industrial project in Bahrain Investment Warf worth more than KD 6 million. The company has recently finished the design and licensing procedures, as well as the establishment of steel work tender to the specialist contractors. The implementation and leasing work will be completed by the end of this year.

Esteemed shareholders,

Speaking on behalf of Al Mazaya’s management team, I wish to assure you that our ambition has no limits, and that Al Mazaya›s future will be replete with further studies for new income-generating and available-for-sale projects. Al Mazaya has conducted extensive studies of the local, Gulf, and regional markets, as preparations to enter into the right sectors that achieve the returns we expect with the low risk we need, taking advantage of the company’s previous experience and the current market factors. We at this time emphasize that Al Mazaya still has many investment opportunities under study, which are intended to see the light in the near future, in accordance with the strategic plan of the company. These projects will help the company achieve another quantum leap ahead.

The company›s plans for the current year are to focus on getting into investments in new markets, following a strict schedule in the execution and delivery of the current projects, bringing a broad marketing plan to market, selling all the current projects, and completing the Al Mazaya Logistics project, so it can be fully leased.

Thank you for your vision, patience and integrity, and Peace Be Upon You.

Eng. Ibrahim Al Soqabi

Group CEO

To be ONE of the MARKET LEADERS in Real Estate Development Locally, Regionally and Internationally with a STRONG BRAND that provides VALUABLE and QUALITY life style.

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VISION

• DEVELOP the most DISTINGUISHED projects based on location, sector and value.

• PROVIDE sustainable VALUE for project delivery, customer loyalty and property services.

• DEVELOP the company manpower with a HIGH CALIBER, ambitious and GOAL ORIENTED team members.

• Maintain and grow a STRONG BRAND position.

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MISSION

Educational BackgroundMr. Al Loughani holds a double major degree in Information System & E-Commerce from the University of Toledo and an MBA degree from London Business School.

Work ExperienceMr. Abdulaziz is currently the Vice Chairman & Executive Director of the Kuwait National Fund for SMEs Development which is a KD2bn fund that is responsible for setting up a startup ecosystem in the State of Kuwait. Previously, he was a Director at Global Capital Management, the alternative investments arm of Global Investment House “Global” and was responsible for establishing a Venture Capital practice at Global. He has played a major role in managing key investments within the Private Equity Group of Global by handling various assignments on corporate restructuring, business planning, deal structuring, due diligence and managing portfolio companies to exit. Abdulaziz currently serves as a member of board on a number of companies within the MENA region in the banking, consumer finance, food & beverage and real estate sectors. Abdulaziz is also an active angel investor (mainly tech startups); He was the Managing Partner of 6alabat.Com until late 2010 where he managed a full exit of the Company. Abdulaziz is a member of the World Economic Forum Global Shapers Community - Kuwait chapter.

Educational BackgroundReceived his Bachelors in Commerce ( Accounting ) from the Faculty of Commerce, Economics & Political Science - Kuwait University.

Work ExperienceIn more than 40 years of business administration, real estate development and management, Mr. Rashid Al Nafisi has a track record of diverse achievements. The multiple roles he has taken on over the past decades underline the breadth of his scientific and practical experience, as well as his distinct management skills. He has served as the Chief Executive Officer of Al Nafisi United Group and the Director of Real Estate Loans Administration at the Kuwait Real Estate Bank. He has also served on the board of a number of companies and banks, including the Farmers› Union, Kuwait Commercial Bank, Loan Committee, Kuwait Asia bank, Kuwait Airways Corporation, and Mazaya Qatar real estate Company. Mr. Rashid Al Nafisi is well-established in the business arena in roles pertaining to real estate development and contracting, and has thus assumed the chairmanship of the Board of Directors of the National Investment Company. He currently hold the position of Chief Executive Officer Al Nafisi Corporation for General Trading and Contracting Company, and Chairman of the Al Mazaya Holding Company since its inception in 2004.

Educational BackgroundReceived his Degree in Business Administration from the Australian College of Kuwait. Mr. Mohammad holds a number of professional Certificates specifically related to the Real Estate sector such as “Real-Estate Evaluation-Theoretical Methods and Operational Implementation”, “Effective Sales Tools and Techniques in Real Estate Perspectives”, “Commercial Real Estate Marketing and Management”, in addition to various other certificates from different professional Real-Estate institutions.

Work ExperienceMr. Mohammad is currently the “Marketing Manager” for Al Hamra Real Estate Co., responsible for marketing the commercial components of Al Hamra Project. Also, he is currently a Board Member in AL Hamra Cinema Co. Previously Al Othman was conducting Real Estate market research and analysis in both the Retail as well as the office space segments for Al-Jal Real-estate Services Co., Ajial Real Estate & Entertainment Co., and Al Hamra Real Estate Co.

Mr. Mohammad K. Al-OthmanBoard Member

Mr. Rashid Al NafisiChairman

Mr. Abdulaziz B. Al LoughaniVice Chairman

BOARDof Directors

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Educational BackgroundMr. Mihrez holds the CFA Charter (2005) and received his MBA (Emphasis Finance) from Lebanese American University (LAU) & holds a Bachelor of Science from the American University of Beirut (AUB).

Work ExperienceMr. Mihrez brings over 12 years of experience in investment banking, asset management and capital markets. He is currently responsible for managing a portfolio of special situation assets worth USD600m which entails proactive management of the underlying positions, focusing on creating and enhancing the value and ensuring an orderly asset disposition. Abdul Hamid is a board member of a number of regional and international companies in the sectors of real estate, insurance, food, industrial, and financial services.During his career, he has led or co-led a number of investment banking transactions worth USD700m covering valuations, financial advisory, mergers & acquisitions, capital raising, bond issuance, financial restructuring and listing assignments. He started his career in the asset management field where he was a member of the management team of 2 mutual funds.

Educational BackgroundEng. Al Shared received his Masters Degree in Environmental Science & holds a Bachelor Degree in Architectural Engineering.

Work ExperienceEng. Abdulrahman Al Shared has held senior positions in several sectors. In October 2004, he contributed to the establishment of Awqaf and Minors Affairs Foundation and was the Secretary General thereof until May 2009. Moreover, he was a Director for Projects and General Maintenance Sector at Dubai Municipality from 2001 till 2004 & the Director for the Building and Governmental Housing. Currently, Eng. Al Shared is a board member in several companies including: Zayed Housing Programme,Dubai World Trade Centre, Dubai Investments PJSC, Emirates Glass Co., Dubai Club For The Disabled (Voluntary), Beit Al Khair Society (Voluntary).

Mr. Abdul Hamid MihrezBoard Member

Eng. Abdulrahman M. Rashed AlsharedBoard Member

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Educational BackgroundEng. Salwa Malhas - holds a Bachelor and a Master Degree in Civil Engineering from the Jordanian University and has more than 20 years experience in Real Estate Development, Business Models and Feasibility Studies.

Work ExperienceEng. Malhas has held several senior positions & in particular in the Real Estate sector and she has a high profile in managing and developing projects from conducting feasibility studies to development, construction & marketing. Her management skills are highly suited to real estate development, project management, investments, establishing of financial models for new realty opportunities, the business development model for any company including the creation of subsidiaries, and the acquisition and the creating of new companies. Eng. Malhas is also experienced in setting up sales & marketing plans for various projects that now stand at over $500m as well as the running of a research department that issues specialized reports tackling the real estate analysis & investment world. Currently Eng.Salwa is a Board member of Al Nawadi Holding Co. She has held remarkable positions as a General Manager of Al Masaken International Company, a member of ACICO, and as the Head of tendering and marketing in Ghassan Ahmed Al Khalid Co. and tendering Engineer in Al Zaben International Co. while currently at Al Mazaya Holding, where she joined from its inception in 2004 till date; currently a board member in Seven Zones Real Estate Co.

Educational BackgroundReceived his Bachelors Degree in Business Administration (with emphasis on Accounting) from the Lebanese American University - Lebanon. He is also a Certified Public Accountant from the State of New Hampshire, USA.

Work ExperienceServed for more than 4 years for RSM International as an Assistant Manager for Assurance & Business Advisory where he managed a portfolio worth of more than USD 650,000. In addition to working on financial audit assignments, he was responsible for Risk Consulting, Internal Auditing and Financial Consulting including M&A transactions and IPO’s. In 2006 Mr. Sheet joined KGL Investment at it’s inception, as Financial Controller, and was very involved in the establishment of finance and support services departments. By 2008, he was promoted to be the Group Financial Controller where he head up the Groups Financial Accounting & Reporting, Budgeting Control, Compliance & Treasury sections. In addition, Mr. Sheet is currently a Board Member of First Dubai Real Estate Development Co.

Mr. Ayman SheetChief FinancialOfficer

Eng. Ibrahim Al SoqabiGroup CEO

Eng. Salwa MalhasChief Business Development &Marketing Officer

Educational BackgroundEng. Al Soqabi holds an MBA from Kuwait Maastricht Business School, and a B.S. (Civil Eng.) from George Washington University in the USA. In addition to that, he was a member of the boards in several companies in different sections, mostly in real estate inside and outside Kuwait.

Work ExperienceEng. Al Soqabi was the General Manager of the KMC Group of Companies, owned by the Kuwait Finance House which is considered one of the top Sharia’a-compliant companies in the Middle East, at which Eng. Al Soqabi managed the holding company – which consists of seven subsidiaries that provide different, variant and specialized real estate services development, including implementation and management of projects. Eng. Al Soqabi has extensive experience in corporate restructuring and the implementation of governance systems, which include companies’ operational systems, and the development of work plans and strategies to enhance the company’s market share.

EXECUTIVEManagement

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Educational BackgroundReceived his Bachelor and Master of Science Degrees in Civil Engineering from The University of South Carolina, Columbia, USA, and a Doctor of Philosophy (Ph.D.) Degree in Construction Engineering and Projects Management from the University of Dundee, Scotland, UK. Dr. Jarkas is a Fellow of the UK Society of Professional Engineers, Registered Chartered Engineer (CEng) by the UK Engineering Council (ECUK), recognized and placed on the International Professional Engineers registry of the UK Engineering Council. He is also an active member in several International Professional Associations, Engineering Institutes/Societies, and Arbitration Tribunal Panels. Dr. Jarkas is an authority in Projects and Construction Management with an extensive research record, publications and contribution in the area of Projects and Construction Management, in particular, in the fields of Constructability, Buildability, Construction productivity, Lean Construction, Bidding Practices, Learning Phenomenon in Construction, and Motivation.

Work ExperienceDr. Jarkas’s practical experience spanning over twenty years and encompasses; Planning and Design Management, Structural Design, Structural Damage Assessment, Risk Analysis and Management, Value Engineering, Mediation, Arbitration and ADR, Projects and Construction Management. His Managerial and Technical skills are especially suited to Real Estate Developments, Projects and Construction Management. Currently, he is the Vice Chairman of Al Mazaya Real Estate Development Co., KSCC.

Dr. Abdulaziz M. JarkasChief Projects Officer

Educational BackgroundMr. Khaled holds a Bachelor Degree in Accounting from Faculty of Commerce – English Department, Alexandria University, Egypt. He holds designations for Certified Public Accountant «CPA», Certified Management Accountant «CMA» and Certified Financial Manager «CFM».

Work ExperienceMr. Khaled has over 20 years of operations, corporate finance, consulting, audit, banking, and accounting experience. Mr. Khaled was Chief Operating Officer of F&S Holding Company. From 2005 to 2011, he was Senior Vice President – Finance & Operations of Al-Muthanna Investment Company, a wholly owned subsidiary of Kuwait Finance House. He served as Chief Financial Officer, Vice President and Assistant Secretary of couple of U.S. Property Co. He also was Board Member of Florida Atlantic BOCA Research Park And Deerfield Research Park, State Of Florida, USA. He was Board Member of Muthanna Financial Brokerage Company. He started his career with Barclays Bank, where he worked in the corporate and investment banking department. He has wide and extensive experience in audit and consulting having previously worked with Ernst & Young and Arthur Andersen. During his service with those firms, he was acting manager of a large portfolio of medium to large size clients and was responsible for overall assignment control, client relationship coordination, and quality control assurance.Mr. Khaled is a Board Member of The Kuwaiti Manager Company for Managing Real Estate Projects and internal audit committee member of Mawared United Investment Company. He also is an instructor for full courses of professional designations.

Educational BackgroundMr. Al Hajraf received his Bachelor Degree in Law from Cairo University.

Work ExperienceMr. Al Hajraf has been in the real estate field for over ten years with experience in Kuwait in Commercial, Civil, Real Estate and Criminal law. Having decision-making skills with professional experience in top management works, he brings a rational and analytical approach to problem solving, a high level of integrity and professionalism. He has extensive and professional experience in establishing and managing companies, corporate governance, and has strong skills in the management of Boards, extensive experience in judicial decisions, ten years experience in commercial and civil cases, and strong leadership skills as demonstrated by an ability to recruit manage and motivate a team of in-house employees and high skills in negotiation and settlements.

Mr. Khaled AbdulatifChief Corporate Services Officer

Educational BackgroundEng. Abdullah holds a Bachelor Degree in Civil Engineering from the Kuwait Petroleum and Engineering University and has more than 12 years experience in the real estate sector .

Work ExperienceEng. Abdullah held senior positions in real estate sector as business development manager in first Dubai Real Estate, Deputy Manager of project department in Commercial Real Estate Company (CRC) and as head of development unit in project department in Commercial Real Estate Company (CRC). He has an extensive experience in management, development and operation of the projects from initial study to operate the projects; also he has a high experience in design and construction phase. In addition he has good skills in property management (setting up models to manage the properties of company), preparing study to reduce the expenses cost of properties and establishing of lease plan and strategy for property, currently Al Sultan is a board member in Water Front Real Estate Co.

Eng. AbdullahAl SultanChief Property Management Officer

Mr. Shlash Al HajrafActing CEO –Mazaya FZ

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MAJORShareholders Structure

Commercial Bank Of Kuwait

Gimbal Holding Company

AL MAZAYA HOLDING CO. IS CONSIDERED ONE OF THE LEADING COMPANIES IN ITS LINE OF BUSINESS. THE COMPANY FOCUSES ON REAL ESTATE DEVELOPMENTS & INVESTMENTS IN THE REGION.

The company was established in 1998 and started operations as AL Mazaya Holding Company in 2004 with a paid up capital of KD 15 million which has increased to reach KD 64.9 million. Al Mazaya Holding Company is listed both in the Kuwait Stock Exchange and in the Dubai Financial Market.

Al Mazaya has a diversified structure that is divided among high net worth of investors and solid corporate organizations.

Since its inception, Al Mazaya has adopted a balanced expansion strategy that allowed for mitigating risk, while maximizing investment return and witnessing strong growth. By maintaining diversified business allocations within the building industry and geographical distribution of investments in the region, the company has been able to maintain steady growth in its net profits as a result of such a strategy.

Al Mazaya’s investments have also focused on building alliances and strategic partnerships that allow for developing the company’s competitive edge especially in as far as competing for top-tier business opportunities is concerned.

COMPANYEstablishment

CAPITALStructure

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DUBAI FINANCIAL MARKET

KUWAIT FINANCIAL MARKET

In February 2006, Mazaya Holding Company was listed on the Dubai Financial Market in an effort to become a regional company.

Al Mazaya Holding Company’s great success in the real estate sector was revealed through the company’s listing in the Kuwait Stock Exchange in 2005.

LISTING

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Marketing & Sales Management AL MAZAYA’s marketing services are grounded by an experienced in-house team with a great vision and strategy for brand development. These extensive real estate marketing services provided by the Marketing department both in Kuwait and Dubai prove AL MAZAYA as one of the leading brands in its field. AL MAZAYA’s marketing team is disciplined in providing contingent studies and solutions for: Corporate Identity & Brand Development, Corporate Theme, Marketing & Sales Strategies, Event Planning, Website design & management, Marketing Tools, Advertising Campaigns & PR, and Social Media.

Property ManagementAL MAZAYA Property Management is reputable to provide a safe, physical working environment through preventive, daily and emergency maintenance, guarding and housekeeping services. Property management, a specialist in total project management, plan, implement and manage the maintenance operations for facilities and renovate enduring facilities. Property management is offering a customized service based on clients’ needs with tactical recommendations and future facility strategic engineering and much about the quality of life aspects in the work environment.

Property ValuationPart of AL MAZAYA Holding’s services is valuation in order to fully evaluate all aspects of the deal through an experienced department resulting in determining the true value of property. With an accurate valuation; then prepare the necessary feasibility studies for projects meant for sale or future expansion, as well as accurately calculating a company’s underlying assets. There is a developed and maintained in house database, as well as our management team’s experience and contacts to ensure an up-to-date and most accurate information to present a comprehensive report and study, which can then be used to help finance the real estate project done through banks or finance companies.

OPERATIONS /Services

Real Estate Market Research AL MAZAYA Holding’s Research Department comprises of an experienced team that assesses the large number of risk factors that are associated with the rapidly growing industry of real estate development. Building on a quantitative approach to understanding the processes of the market that provides information, figures, data, and the reasoning behind each change are all analyzed. The Research Department harnesses and compares all of this to prevent conflicting figures, statistics, and data regarding the growth entailed.

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Master Developments Purchasing and apportionment of large spaces to develop in selected areas is considered one of the largest assets AL MAZAYA owns in terms of its services. A fully fledged experienced team assesses the different feasible locations in which the company plans to invest in, or develop, to extract the optimum value for the price purchased through searching for new opportunities and developing opportunities at hand, systematically complete due diligence and gathering information to enable a realistic assessment of the highest potential for any given opportunity, with complete feasibility studies in close support with the finance department. Moreover, the team structure the mainstream plans of the key tasks, assign and continually monitor projects throughout all stages of the development process, develop a project management team to ensure the maximum efficiencies of the projects are met and help administer the project up to the tending phase.

Project Management & Consultancy

AL MAZAYA Holding manages a construction project and operates as an extension to your company, and represents the company interests while leveraging the best possible performance out of all the entities employed on the project. AL MAZAYA Holding direct the day-to day work of all entities involved on the project, while you retain all the major decision making authority. Experience, influencing skills, and leadership style are paramount in determining the effectiveness of a Project from assessing the viability of the development, controlling the design and construction phases to providing the required facility and operation management through leadership and exceptional real estate construction experience & assist avoiding both financial obstacles, and development problems.

Portfolio & Fund ManagementAL MAZAYA Holding provides professional management services to clients and other real estate companies that encompass a variety of consultation on various real estate management aspects including: overall management services, strategic planning and budgeting, business operations, including business development, marketing/sales, administration, and financial & project feasibilities, policies & procedures, operational manuals, setup of information technology systems, organizational and functional structure, staffing, and training.

Real Estate BrokerageAL MAZAYA Holding’s Brokerage is based on the desire to personalize and increase the level of service toward its clients. This service will provide AL MAZAYA Holding’s clients the ability to view its projects online using the latest forms of technology, and allow the ability to follow up this with personalized VIP site visits.

Real Estate Development & InvestmentsThere is a variety of different approaches for development in which AL MAZAYA Holding can be involved in. The range from master developments to individual projects in different sectors, including residential, commercial, industrial, educational and health. These endeavors can be directly owned, owned through a partnership with investors, Joint Venture, and BOT’s (Build, Operate and Transfer).

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Allocation By Geography - 2013 Allocation By Sector - 2013 Sources of Income Allocation - 2013

%72

21%

1%0%

3%2%

1%

Medical

Offices

Retail

Residential

Logistics

Residential - Land

= 5 %

= 23 %

= 2 %

= 62 %

= 1 %

= 8 %

Rent

Sales of Properties

Management Fees

= 36 %

= 56 %

= 8 %

%62

23%

4%

2%

1%8%

%56

8% 36%

Kuwait

UAE

Bahrain

Oman

Saudi Arabia

Lebanon

Turkey

= 21 %

= 72 %

= 1 %

= 2 %

= 3 %

= 1 %

= 0 %

AL MAZAYA is headquartered in Kuwait and Dubai.Operation offices are located in Mazaya Towers, Clover Center in Kuwait and Mazaya Business Avenue in Dubai.

BUSINESS AVENUE - DUBAIJumeirah Lake Towers, AA1 Tower,Floor 45

CLOVER CENTER - KUWAITJabriya, 4th Ring Road, Block 1A

MAZAYA TOWERS - KUWAITAl Murqab Area, Block 3Al Mutanabi Street - Floor 25

DU

BAI

AL MAZAYAHeadquarters

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UNDER MANAGEMENT COMPANY

QATAR• Mazaya Qatar Real Estate Development – (Associate

litsed in Qatar Stock Exchange.

SUBSIDIARIES & ASSOCIATES

SUBSIDIARY COMPANIES

KUWAIT• Al Mazaya Real Estate Development Co. K.S.C.C• Al Mazaya Al Arabia Real Estate Co. W.L.L• Al Mazaya International for Projects Management W.L.L.• Al Mazaya Al Khalijia for General Trading W.L.L.• First Dubai Real Estate Development Company K.S.C. (closed)• Seven Zones Real Estate Company K.S.C.C.• Future International Project Management W.L.L• Waterfront Real Estate Company K.S.C.C.• Mezzan Combined For General Trading - W.L.L. Company• United Circle General Contracting and Building Company-

W.L.L• First Qatar Real Estate Development (Associate )

UAE – DUBAI• Al Mazaya Real Estate FZ L.L.C• Al Dana Real Estate Limited• Al Rayhan Real Estate Limited• Advantage General Trading L.L.C.• Spectrum Real estate Asset Management

LEBANON• Al Mazaya Lebanon S.A.L. (Holding)• Al Mazaya Lamartin S.A.L.

SAUDI ARABIA• Kuwaiti Saudi Co. L.L.C• Al Mazaya Grand Real Estate Development Co.

TURKEY• Mazaya Turkey Joint Stock Co.•PROJECTS•BAHRAIN• Al Mazaya Logistics project is initiated and fully owned by Al

Mazaya Holding Co.

OMAN• Al Mazaya has currently a project under study in Al Mawaleh

in Muscat.

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AIM TO LEAD

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REAL ESTATE DEVELOPMENT & INVESTMENTSPORTFOLIO & FUND MANAGEMENT

PROJECT MANAGEMENT & CONSULTANCYREAL ESTATE BROKERAGE

MARKETING & SALES MANAGEMENT MASTER DEVELOPMENTS

PROPERTY MANAGEMENTPROPERTY VALUATION

REAL ESTATE MARKET RESEARCH

KUWAITProjects

Mazaya Towers are exclusively owned by Al Mazaya and are fully dedicated to serve various business sectors and initiate many business opportunities through luxurior office spaces. Mazaya Towers are assured to set the futuristic business trend in kuwait.

Seven Zones Design Center is a concept undertaken by Al Mazaya to create a breathtaking design center that caters to the needs of consumers by having a “depot of diversity” under one roof. The design center has been exclusively designed to provide rentable showrooms and office spaces to leading related companies with an emphasis on high-end brands.

Al Maha Villas is a residential project valuably located along the Gulf Road in Salwa, Block 9. The project consists of 8 plots, each 840 sq.m. On these 8 plots, 30 villas are built that are either for sale or lease.

Clover Center is Al Mazaya’s first investment into Kuwait’s medical sector. Soaring to 19 floors high, this project is on an area of 4,000 sq.m, located in Al Jabriya area. The project currently is completed and fully operational.

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Global Tower is a business tower strategically located in Sharq, in close proximity to other business ventures in Kuwait City. The tower consists of 22 levels offering luxurious office spaces. Al Mazaya had developed the project and sell it out.

Al Roya project is a residential complex located in Al Mahboulah area, it consists of 61 residential units that vary in area and interior design to attract clients looking for a particular apartment or villa.

It is an idea initialed by Al Mazaya to develop an ambitious real estate project to turn Kuwait into a new financial center and a cultural city. The project is inspired by and in accordance with the desire of the Amir of Kuwait, in order to turn Kuwait into a hub that will attract many investments, both locally and internationally, in addition to a culture and civilization center.

Surra Villas are individual villas located in different areas in Surra with prime locations. Each villa portrays an authentic style and is built with specific engineering and architectural detail that works in accordance with the highest class specifications including swimming pools and beautiful garden surroundings.

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UAEProjects

Sky Gardens, a luxurious residential tower, is uniquely located at the entry to the prestigious Dubai International Financial Center (DIFC), south of the Dubai Emirates Towers.Sky Gardens consists of 40 floors of luxurious apartments.

Mazaya Business Avenue comprises of three commercial towers, each one rising to an imposing 45 storey building. The development contains ultra modern offices business centers, state of the art recreational centers, meeting rooms, retail plazas, cafes and more.

The Villa project is situated just off the Emirates Road at the North East Corner of Dubailand. It is considered to be “The Ultimate Spanish Lifestyle”, inspired by generous spaces for outdoor living, including expert landscaping and the coolness and tranquility of Spanish style courtyard housing.

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Mazaya developed 7 medical buildings in the Dubai Healthcare City - DHCC. The DHCC site comprises of 500 acres and offers all forms of medical facilities, disease prevention centers, as well as wellness amenities. The services provided serve residents from the UAE, GCC, and surrounding regions.

The Icon Towers 1 and 2 in Jumeirah Lakes are residential towers that consist of up to 400 units that vary in area and interior design. The towers have a wonderful lake view from one side and a spectacular view of Jumeirah Islands from the other side.

Morina Residence, owned by First Dubai, a Mazaya subsidiary, is located along the canal near the entrance of Shams Abu Dhabi on Reem Island. Morina is a luxurious 29 storey residential tower offering phenomenal views onto the canal and mangroves. Morina Residence offers exclusive 1, 2, 3 bedroom apartments, duplexes and townhouses.

Located at Al Manara and Al Safa, positioned either side of Interchange 3 on Sheikh Zayed Road, Indigo is an office and retail use building registered with the Dubai Lands Department as Freehold for GCC citizens and companies.

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The Queue Point project (Phase 1) is located throughout Liwan, which is ideally located in Dubailand, at the junction of Emirates Road and Al Ain Road. Queue Point consists of one, two, and three bedroom freehold apartments as well as office spaces of various sizes. Phase (1) of the project is comprising of 25 medium housing buildings.

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- (Phase 1)

UAEProjects

REGIONALProjects

Remani project is a new development idea located in Al Mawaleh, Oman and owned by Al Mazaya Real Estate. The development will include 60 villas in two types, a swimming pool, a clubhouse, a gymnasium and Commercial area.

The project is located in one of the most important commercial streets in the city of Riyadh, where the majority of banks and investment companies in the city are based.The project is a complex of three towers with a unique design & architectural features. It is considered as a land mark in the vicinity.

Badia Residence, consists of 73 residential villas, a sports club, and a multi-function hall. Launched by Oman Real Estate Portfolio, the villas are based on two different models. Badia Residence preserves the strong family ideals that Omani’s treasure yet incorporates modern facilities.

25

26

(Phase 2)

The Queue Point project (Phase 2) is located throughout Liwan, which is ideally located in Dubailand, at the junction of Emirates Road and Al Ain Road. Queue Point consists of one, two, and three bedroom freehold apartments as well as office spaces of various sizes.

27

NEW PROJECTDubai

MAZAYA LOGISTICS is a concept initiated and wholly owned by Al Mazaya in the world of Industry to construct, develop, and operate ideal key storage solutions. Mazaya Logistics is a reliable, flexible and experienced warehousing solution with a state of the art warehousing management system. Its prime location in Bahrain Investment Wharf (BIW) makes it the key choice for many local, international and national companies.

28

NEW PROJECTBahrain

29

Al Mazaya is planning to Develop a Residential complex in Turkey-Istanbul after the completion of Mazaya Turkey Incorporation. The plan is to engage the company into a partnership throughout a joint venture with a good reputable Real Estate Turkish Developer.

30

NEW MARKETTurkey

31

AL MAZAYA HOLDING COMPANY K.S.C.AND ITS SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENT 31 DECEMBER 2013

FINANCIAL REPORT2013

33

Independent auditors’ reportConsolidated statement of financial positionConsolidated statement of incomeConsolidated statement of comprehensive incomeConsolidated statement of changes in equityConsolidated statement of cash flowsNotes to the consolidated financial statements

3536373839

40-4142-78

Index Page

34

INDEPENDENT AUDITORS' REPORT TO THE SHAREHOLDERS OF AL MAZAYA HOLDING COMPANY K.S.C.P.

Report on the Consolidated Financial StatementsWe have audited the accompanying consolidated financial statement of Al Mazaya Holding Company K.S.C.P. (the “Parent Company”) and its subsidiaries (collectively the “Group”), which comprise the consolidated statement of financial position as at 31 December 2013, and the consolidated statement of income, consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Consolidated Financial StatementsThe management of the Parent Company 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 consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ ResponsibilityOur responsibility is to express an opinion on these consolidated 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 about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors’ judgement, including the assessment of the risks of material misstatement of the consolidated 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 consolidated 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.

OpinionIn our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Group as at 31 December 2013, and its financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards. Report on Other Legal and Regulatory RequirementsFurthermore, in our opinion proper books of account have been kept by the Parent Company and the consolidated financial statements, together with the contents of the report of the Parent Company’s Board of Directors relating to these consolidated financial statements, are in accordance therewith. We further report that we obtained all the information and explanations that we required for the purpose of our audit and that the consolidated financial statements incorporate all information that is required by the Companies Law No. 25 of 2012, as amended, and by the Parent Company's Memorandum of Incorporation and Articles of Association, that an inventory was duly carried out and that, to the best of our knowledge and belief, no violations of the Companies Law No. 25 of 2012, as amended, or of the Parent Company’s Memorandum of Incorporation and Articles of Association have occurred during the year ended 31 December 2013 that might have had a material effect on the business of the Parent Company or on its financial position.

WALEED A. AL OSAIMI LICENCE NO. 68-A OF ERNST & YOUNGAL AIBAN, AL OSAIMI & PARTNERS

26 January 2014Kuwait

DR. SAUD HAMAD AL-HUMAIDILICENSE NO. 51 AOF DR. SAUD HAMAD AL-HUMAIDI & PARTNERSMEMBER OF BAKER TILLY INTERNATIONAL

15

01 35

2,266,732358,706

89,094,87114,250,13512,750,873

118,721,317

86,385,9375,563,047

17,445,840109,394,824228,116,141

64,931,97721,655,39310,289,8987,354,9781,408,173

)21,788,181(673,551636,546

5,797,886

90,960,2216,207,117

97,167,338

337,21120,497,70522,000,00042,874,916

1,500,0002,399,595

--

68,662,79812,523,8672,987,627

88,073,887

130,948,803228,116,141

2,266,732160,913

74,474,14618,630,80312,894,223

108,426,817

93,788,2465,446,486

13,391,425112,626,157221,052,974

64,931,97721,655,3939,675,7806,740,860

927,863(21,788,181)

(369,033)487,818

1,025,071

83,287,5484,552,280

87,839,828

336,911-

31,000,00031,336,911

7,000,000-

8,500,0003,947,108

62,069,97917,443,3522,915,796

101,876,235

133,213,146221,052,974

7

89.1011

121314

15151616

17

1918

18191920

2114

2013KD

ASSETSNon-current assetsGoodwillProperty and equipmentInvestment propertiesInvestment in joint ventures and associatesFinancial assets available for sale

Current assetsProperties held for tradingAccounts receivable and other debit balances Cash and cash equivalents

Total assetsEQUITY AND LIABILITIESEquityShare capitalShare premiumStatutory reserveVoluntary reserveFair value reserveTreasury sharesOther reservesForeign currency translation reserveRetained earnings

Equity attributable to equity holders of the Parent CompanyNon-controlling interestsTotal equity

LiabilitiesNon-current liabilitiesEmployees’ end of service benefitsTawarruq payableTerm loans

Current liabilitiesTerm loansTawarruq payableWakala and murabaha payablesDeferred consideration on acquisition of propertiesAdvances from customersAccounts payable and other credit balancesBank overdrafts

Total liabilitiesTOTAL LIABILITIES AND EQUITY

2012KD

Notes

Rasheed Y. Al-Nafisi – Chairman

Ibrahim A. AlSoqabi – Group CEO

Consolidated Statement of Financial PositionAL MAZAYA HOLDING K.S.C.P. AND ITS SUBSIDIARIESAt 31 December 201316

The attached notes 1 to 30 form part of these consolidated financial information.

36

22

78

9,10

12232430

15

6

2013KD

2012KD

Revenue from sale of properties held for trading

Rental income

Net management fees and commission income

REVENUE

Cost of sale of properties held for trading

Cost of rental

COST OF REVENUE

GROSS PROFIT

General and administrative expenses

Impairment of goodwill

Net change in fair value of investment properties

Gain on disposal of investment properties

Share of results of associates and joint ventures including impairment

Gain on partial disposal of an associate

Reversal of impairment loss on properties held for trading

Net investment loss

Other (loss) income

Provision for doubtful debts

Interest income

Finance costs

Foreign exchange loss

Profit for the year before contribution for directors’ remuneration, Kuwait

Foundation for Advancement of Sciences )“KFAS”(, National Labour

Support Tax )“NLST”( and Zakat

Board of Directors’ Remuneration

KFAS

Attributable to:

Equity holders of the Parent Company

Non-controlling interests

PROFIT FOR THE YEAR

BASIC AND DILUTED EARNING PER SHARE ATTRIBUTABLE TO EQUITY

HOLDERS OF THE PARENT COMPANY


21,401,2783,964,882609,780

25,975,940

)17,070,175()1,119,465(

)18,189,640(

7,786,300

)3,593,275(-

5,083,148126,271309,76526,052704,717

)350,813()591,651(

-75,837

)2,634,303( )2,691(

6,939,357

)85,000()55,129(

6,799,228

6,001,051798,177

6,799,228

10.27 fils

29,301,6152,843,6651,356,697

33,501,977

(23,592,161)(931,638)

(24,523,799)

8,978,178

(3,313,264)(825,000)

(1,965,753)-

1,331,230-

1,312,868(2,532,136)

752,552(236,167)114,489

(3,260,256)(21,868)

334,873

--

334,873

290,55344,320

334,873

0.50 fils

Notes

Consolidated Statement of IncomeAL MAZAYA HOLDING K.S.C.P. AND ITS SUBSIDIARIESFor the year ended 31 December 2013 17

37

6,799,228

119,582

314,316

41,497148,728

624,123

7,423,351

6,630,089793,262

7,423,351

334,873

(2,056,862)

2,767,082

(96,031)24,170

638,359

973,232

914,88658,346

973,232

Profit for the year

Other comprehensive income )loss(:

Net changes in fair value of financial assets available for sale

Transferred to income statement on impairment of financial assets

available for sale

Transferred to income statement on sale of financial assets available for

sale

Exchange differences on translation of foreign operations

Net other comprehensive income to be reclassified to profit or loss in

subsequent periods

Total comprehensive income for the year

Attributable to:

Equity holders of the Parent Company

Non-controlling interests

Total comprehensive income for the year

2013KD

2012KD


Consolidated Statement of Comprehensive IncomeAL MAZAYA HOLDING K.S.C.P. AND ITS SUBSIDIARIESFor the year ended 31 December 2013

23

23

Notes

18

38

Con

solid

ated

Sta

tem

ent O

f Cha

nges

In E

quity

AL

MA

ZAY

A H

OLD

ING

CO

MPA

NY

K.S

.C.P

. AN

D IT

S SU

BSI

DIA

RIE

SA

t 31

Dec

embe

r 20

13

64,9

31,9

77 -

- -

-

64,9

31,9

77

64,9

31,9

77

-

- -

-

- -

64,9

31,9

77

21,6

55,3

93 -

- -

-

21,6

55,3

93

79,7

60,7

32 -

-

-

- -

(58,

105,

339)

21,6

55,3

93

9,67

5,78

0

-

- -

614,

118

10,2

89,8

98

9,64

6,72

5 -

- -

-

2

9,05

5 -

9,67

5,78

0

6,74

0,86

0

-

- -

614,

118

7,35

4,97

8

6,71

1,80

5 -

- -

-

2

9,05

5 -

6,74

0,86

0

927,

863

-

48

0,31

0

48

0,31

0

-

1,40

8,17

3

327

,700 -

6

00,1

63

6

00,1

63

- - -

927,

863

(21,

788,

181)

- - -

-

)21,

788,

181(

(21

,788

,181

) -

-

- - - -

(21,

788,

181)

(369

,033

)

-

- -

1,0

42,5

84

-

673

,551

(369

,033

) - - - - - -

(369

,033

)

487,

818

-

148,

728

148,

728 -

-

636

,546

463,

648 -

24,1

70

24,1

70

- - -

487,

818

1,02

5,07

1

6,00

1,05

1 -

6,00

1,05

1 -

(1,2

28,2

36)

5,79

7,88

6

(58,

105,

339)

290,

553 -

2

90,5

53

79

2,62

8

(58,

110)

58,1

05,3

39

1,02

5,07

1

At 1

Janu

ary

201

3

Profi

t for

the

year

Oth

er c

ompr

ehen

sive

inc

ome

(loss

) for

the

year

Tota

l com

preh

ensi

ve

inco

me

for

the

year

Part

ial d

ispo

sal o

f

sub

sidi

ary

Tran

sfer

to r

eser

ves

At

31 D

ecem

ber

2013

At 1

Janu

ary

201

2

Profi

t fo

r th

e ye

ar

Oth

er c

ompr

ehen

sive

inc

ome

for

the

year

Tota

l com

preh

ensi

ve

inco

me

for

the

year

Tran

sfer

to n

on-c

ontr

ollin

g

int

eres

t

Tran

sfer

to r

eser

ves

Extin

guis

hmen

t of

accu

mul

ated

loss

es a

gain

st

shar

e pr

emiu

m (

note

15(

c))

At 3

1 D

ecem

ber

2012

Shar

e ca

pita

lK

D

Stat

utor

yre

serv

eK

D

Shar

e pr

emiu

mK

D

Volu

ntar

yre

serv

eK

D

Fair

valu

ere

serv

eK

D

Trea

sury

shar

esK

D

Oth

er

rese

rves

KD

Fore

ign

curr

ency

tr

ansl

atio

n re

serv

eK

D

Ret

aine

d ea

rnin

gs

KD

83,2

87,5

48

6,00

1,05

1

629,

038

6,63

0,08

9

1,04

2,58

4

-

90,9

60,2

21

81,5

80,0

34

290,

553

624,

333

914,

886

792,

628 - -

83,2

87,5

48

Sub-

tota

lK

D

4,55

2,28

0

798,

177

(4,9

15)

793,

262

861,

575 -

6,2

07,1

17

5,

286,

562

44,3

20

14,0

26

5

8,34

6

(792

,628

) - -

4,55

2,28

0

87,8

39,8

28

6,79

9,22

8

624,

123

7,42

3,35

1

1,90

4,15

9

-

97

,167

,338

86

,866

,596

334,

873

638,

359

973,

232 - - -

87,8

39,8

28

Non

-co

ntro

lling

inte

rest

sK

DTo

tal

KD

The

atta

ched

not

es 1

to 3

1 fo

rm p

art o

f the

se c

onso

lidat

ed fi

nanc

ial i

nfor

mat

ion.

Equi

ty a

ttrib

utab

le to

equ

ity h

olde

rs o

f the

Par

ent C

ompa

ny

334,873

93,706

236,167

1,965,753

-

(1,312,868)

825,000

2,532,136

(1,331,230)

-

(114,489)

3,260,256

21,868

99,706

6,610,878

17,100,323

(5,249,109)

(18,887,860)

80,938

(8,657,323)

1,496,065

(49,685)

1,446,380

2,405,076

(124,916)

(2,198,232)

-

(174,054)

(2,055,815)

-

(344,234)

1,720,810

-

-

-

138,915

114,489

(517,961)

30

8

12

7

23

8

9

9

9

2013KD

2012KD

Notes

OPERATING ACTIVITIES

Profit for the year

Adjustments to reconcile profit to net cash flows:

Depreciation

Provision for doubtful debts

Net change in fair value of investment properties

Gain on disposal of investment properties

Reversal of impairment loss on properties held for trading

Impairment of goodwill

Net investment loss

Share of results of associates and joint venture including impairment

Gain on partial disposal of an associate

Interest income

Finance costs

Foreign exchange loss

Provision for employees’ end of service benefits

Working capital adjustments:

Properties held for trading

Accounts receivable and other debit balances

Accounts payable and other credit balances

Deferred consideration on acquisition of properties

Advances from customers

Cash flows from operations

Employees’ end of service benefits paid

Net cash flows from operating activities

INVESTING ACTIVITIES

Decrease in restricted cash balances

Purchase of property and equipment

Purchase of investment properties

Proceeds from disposal of investment properties

Interest acquired in joint venture

Investment in a joint venture

Proceeds received on distribution of assets in joint venture

Purchase of financial assets available for sale

Proceeds from sale of financial assets available for sale

Proceeds from partial disposal of associate

Proceeds from partial disposal of a subsidiary

Dividend received from an associate

Dividends income received

Interest income received

Net cash flows used in investing activities

6,799,228

63,944

-

)5,083,148(

)126,271(

)704,717(

-

350,813

)309,765(

)26,052(

)75,837(

2,634,303

2,691

83,340

3,608,529

8,342,128

)116,561(

)4,922,176(

)3,947,108(

6,592,819

9,557,631

)43,040(

9,514,591

62,486

)261,737(

)10,149,170(

826,360

-

-

3,936,112

-

262,932

577,510

1,904,159

297,880

5,000

75,837

)2,462,631(

Consolidated Statement of Cash FlowsAL MAZAYA HOLDING K.S.C.P. AND ITS SUBSIDIARIESFor the year ended 31 December 201320


40

14

)14,500,000(

14,397,300

)2,634,303(

)2,737,003(

4,314,957

)269,887(

4,266,287

8,311,357

(4,500,000)

-

(3,260,256)

(7,760,256)

(6,831,837)

(858,348)

11,956,472

4,266,287

FINANCING ACTIVITIES

Term loans repaid

Net movement in tawarruq, murabaha and wakala payables

Finance costs paid

Net cash flows used in financing activities

NET INCREASE )DECREASE( IN CASH AND CASH EQUIVALENTS

Foreign currency translation adjustments

Cash and cash equivalents at the beginning of the year

CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR

31 December2013KD

31 December2012KD

Notes


Consolidated Statement of Cash FlowsAL MAZAYA HOLDING K.S.C.P. AND ITS SUBSIDIARIESFor the year ended 31 December 2013 21

07 41

Notes to The Consolidated Financial StatementAL MAZAYA HOLDING COMPANY K.S.C.P. AND ITS SUBSIDIARIES31 December 2013

1. CORPORATE INFORMATION

Al Mazaya Holding Company - K.S.C.P. (the “Parent Company”) was incorporated on 7 November 1998 under the

Companies Law No. 25 of 2012 and amended thereto. The Parent Company is engaged in investment in local and foreign

companies, real estate properties and consultancy services. This consolidated financial statement presents the results of the

Parent Company and its subsidiaries (collectively referred to as the “Group”).

The registered head office of the Parent Company is at Mazaya Tower 01, Al Murqab, P.O. Box 3546, Safat 13036, State

of Kuwait.

The principal activities of the Parent Company as per the article of association are as follows:

Ownership of Kuwaiti and foreign shareholding companies, ownership of shares and portions of limited liability Kuwaiti

and foreign companies or participating in the formation of those companies, as well as managing and guaranteeing those

companies, granting loans to the companies in which it owns shares in and guaranteeing them towards others, provided

that the percentage of participation of the holding company in the capital of the borrowing company is not less than 20%,

ownership of industrial property rights including intellectual rights, trade marks, industrial marks, industrial fees or any

other rights relating to such assets and leasing them to other companies to utilize them whether inside or outside the state

of Kuwait, ownership of the movable assets and real properties needed to operate within the applicable laws, utilization

of its available financial surpluses by investing them in financial real estate portfolios managed by specialized companies.

The Parent Company has the right to practice its aforementioned objectives inside the State of Kuwait and abroad for itself

or as agent or representative to other, the Company has the right as well to have interest or to participate with entities that

practice similar operations or assist the Company in achieving its objectives inside and outside Kuwait, and such it has the

right to establish, form partnership, purchase or merge with those entities.

The consolidated financial statements of the Group for the year ended 31 December 2013 were authorised for issue by

the Board of Directors on 26 January 2014, and are issued subject to the approval of the Ordinary General Assembly of

the shareholders of the Parent Company. The shareholders’ General Assembly has the power to amend the consolidated

financial statements after issuance.

The New Companies Law issued on 26 November 2012 by Decree Law no. 25 of 2012 (the “Companies Law”), cancelled

the Commercial Companies Law No. 15 of 1960. The Companies Law was subsequently amended on 27 March 2013 by

Decree Law no. 97 of 2013 (the Decree). The Executive Regulations of the new amended law issued on 29 September 2013

and was published in the official Gazette on 6 October 2013.

As per article three of the executive regulations, the companies have one year from the date of publishing the executive

regulations to comply with the new amended law.

2. BASIS OF PREPERATION

The consolidated financial statements of the Group have been prepared on the historical cost basis, except for financial

assets available for sale, and investment properties that have been measured at fair value.

The consolidated financial statements are presented in Kuwaiti Dinars (“KD”), which is the functional currency of the Parent

Company. The consolidated financial statements have been prepared in accordance with International Financial Reporting

Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and applicable requirements of

Ministerial Order No. 18 of 1990.

42


3. CHANGES IN ACCOUNTING POLICIES

New and amended standards and interpretationsThe accounting policies adopted are consistent with those of the previous financial year, except for the following new and amended IFRS effective as of 1 January 2013:

The adoption of the standards or interpretations is described below:

IAS 1 Presentation of Items of Other Comprehensive Income – Amendments to IAS 1

The amendments to IAS 1 change the grouping of items presented in OCI. Items that could be reclassified (or ‘recycled’)

to profit or loss at a future point in time would be presented separately from items that will never be reclassified. The

amendment affects presentation only and therefore has no impact on the Group’s financial position or performance.

IFRS 7 Disclosures — Offsetting Financial Assets and Financial Liabilities - Amendments to IFRS 7

These amendments require an entity to disclose information about rights to set-off and related arrangements (e.g., collateral

agreements). The disclosures would provide users with information that is useful in evaluating the effect of netting

arrangements on an entity’s financial position. The new disclosures are required for all recognised financial instruments

that are set off in accordance with IAS 32 financial instruments: presentation. The disclosures also apply to recognised

financial instruments that are subject to an enforceable master netting arrangement or similar agreement, irrespective of

whether they are set off in accordance with IAS 32. The Group does not have any assets with these characteristics so there

has been no effect on the presentation of its consolidated financial statements.

IFRS 10 Consolidated Financial Statements

IFRS 10 establishes a single control model that applies to all entities including special purpose entities. IFRS 10 replaces the

parts of previously existing IAS 27 Consolidated and Separate Financial Statements that dealt with consolidated financial

statements and SIC-12 Consolidation – Special Purpose Entities. IFRS 10 changes the definition of control such that an

investor controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee

and has the ability to affect those returns through its power over the investee. To meet the definition of control in IFRS

10, all three criteria must be met, including: (a) an investor has power over an investee; (b) the investor has exposure, or

rights, to variable returns from its involvement with the investee; and (c) the investor has the ability to use its power over

the investee to affect the amount of the investor’s returns. The adoption of this standard did not have any material impact

on the consolidated financial position or performance of the Group.

IFRS 11 Joint Arrangements and IAS 28 Investment in Associates and Joint Ventures

IFRS 11 replaces IAS 31 Interests in Joint Ventures and SIC-13 Jointly-controlled Entities — Non-monetary Contributions by

Venturers. IFRS 11 removes the option to account for jointly controlled entities (JCEs) using proportionate consolidation.

Instead, JCEs that meet the definition of a joint venture under IFRS 11 must be accounted for using the equity method. This

amendment does not have any impact on the consolidated financial statement.

24

09 43


IFRS 12 Disclosure of Involvement with Other Entities IFRS 12 sets out the requirements for disclosures relating to an entity’s interests in subsidiaries, joint arrangements, associates and structured entities. It does not apply to certain employee benefit plans, separate financial statements to which IAS 27 Separate Financial Statements applies (except in relation to unconsolidated structured entities and investment entities in some cases), certain interests in joint ventures held by an entity that does not share in joint control, and the majority of interests in another entity accounted for in accordance with IFRS 9 Financial Instruments. IFRS 12 adds to the disclosure requirements of IAS 1 by specifically requiring an entity to disclose all significant judgements and estimates made in determining the nature of its interest in another entity or arrangement, and in determining the type of joint arrangement in which it has an interest. Adoption of this standard did not have any impact on the consolidated financial statement of the Group and the new disclosure are made in consolidated financial statement.

IFRS 13 Fair Value Measurement IFRS 13 establishes a single source of guidance under IFRS for all fair value measurements. The standard does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under IFRS when fair value is required or permitted. IFRS 13 requires an entity to disclose information that helps users of its financial statements to assess both of the following: (a) For assets and liabilities that are measured at fair value on a recurring or non-recurring basis in the statement of financial position after initial recognition, the valuation techniques and inputs used to develop those measurements. (b) For fair value measurements using significant unobservable inputs, the effect of the measurements on profit or loss or other comprehensive income for the period.

The application of IFRS 13 has not materially impacted the fair value measurements carried out by the Group. IFRS 13 also requires specific disclosures on fair values, some of which replace existing disclosure requirements in other standards, including IFRS 7 Financial Instruments: Disclosures. Some of these disclosures are specifically required for non-financial instruments, thereby affecting the disclosures of consolidated financial statements. The Group provides these disclosures in Note 29.

Standard issue but not yet effectiveStandards issued but not yet effective up to the date of issuance of the Group’s financial statements are listed below. This listing of standards issued is those that the Group reasonably expects to have an impact on disclosures, financial position or performance when applied at a future date. The Group intends to adopt these standards when they become effective.

IFRS 9 ‘Financial Instruments’:The standard was issued in November 2009, however at the IASB meeting in July 2013, the IASB tentatively decided to defer the mandatory effective date of IFRS 9 to be left open. However, IFRS 9 would still be available for early application. The standard improves the ability of the users of the financial statement to assess the amount, timing and uncertainty of future cash flows of the entity by replacing many financial instrument classification categories, measurement and associated impairment methods. The application of IFRS 9 will result in amendments and additional disclosures relating to financial instruments and associated risks.

IAS 32 Offsetting Financial Assets and Financial Liabilities — Amendments to IAS 32These amendments clarify the meaning of “currently has a legally enforceable right to set-off”. The amendments also clarify the application of the IAS 32 offsetting criteria to settlement systems (such as central clearing house systems) which apply gross settlement mechanisms that are not simultaneous. This amendment is not expected to impact the Group’s financial position or performance and becomes effective for annual periods beginning on or after 1 January 2014.

Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27)These amendments are effective for annual periods beginning on or after 1 January 2014 provide an exception to the consolidation requirement for entities that meet the definition of an investment entity under IFRS 10. The exception to consolidation requires investment entities to account for subsidiaries at fair value through profit or loss. This amendment would not be relevant to the Group, since the Group would not qualify to be an investment entity under IFRS 10.

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4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESBasis of consolidation The consolidated financial statements comprise the financial statements of the Parent Company and its subsidiary as at 31 December 2013. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if and only if the Group has:• Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee)• Exposure, or rights, to variable returns from its involvement with the investee, and• The ability to use its power over the investee to affect its returns

When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:• The contractual arrangement with the other vote holders of the investee• Rights arising from other contractual arrangements• The Parent Company’s voting rights and potential voting rights

The financial statements of the Subsidiary are prepared at the same reporting year as the Parent Company using consistent accounting policies. Subsidiaries are consolidated from the date on which the Group obtains control and continues to be consolidated until the date that such control ceases.

All material intra-group balances and transactions, including material unrealised gains and losses arising on intra-group transactions are eliminated on consolidation.

Non-controlling interest represents the portion of profit and loss and net assets not held by the Group and are presented separately in the consolidated statement of income and within equity in the consolidated statement of financial position separately from equity attributable to the equity holders of the Parent Company.

A change in the ownership interest of a subsidiary, without a change of control, is accounted for as an equity transaction. Losses are attributed to the non controlling interest even if that results in a deficit balance. If the Group loses control over a subsidiary, it:• Derecognises the assets (including goodwill) and liabilities of the subsidiary;• Derecognises the carrying amount of any non controlling interest;• Derecognises the cumulative translation differences, recorded in equity;• Recognises the fair value of the consideration received;• Recognises the fair value of any investment retained;• Recognises any surplus or deficit in consolidated statement of income; and• Reclassifies the Parent Company’s share of components previously recognised in other comprehensive income to

consolidated statement of income or retained earnings as appropriate.

The consolidated financial statements include the financial statements of the Parent Company and the following subsidiaries, where the Parent Company has direct investment :

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Real estate development











99.7%

100%

80%

80%

99%

99.85%

99.9%

96%

90.81%

93.6 %

99%

99.7%

100%

80%

80%

99%

99.85%

99.9%

96%

92.23%

93.6 %

99%

Principal activities

Al Mazaya Real Estate Development Company K.S.C. (Closed)

Al Mazaya Real Estate Free Zone( FZ)/ LLC

Al Dana Real Estate Limited

Al Rayhan Real Estate Limited

Advantage General Trading Co. W.L.L.

Mazaya Lebanon Company - S.A.L. (Holding)

Mazaya Lamartien - S.A.L.

Seven Zones Real Estate Company K.S.C. (Closed)

First Dubai Real Estate Development Company – K.S.C.

(Closed)

Waterfront Real Estate Company K.S.C. (Closed)

Mezzan Combined For General Trading - W.L.L. Company

ownership

interest %

2013

ownership

interest %

2012

Country of

incorporationEntity

Kuwait

U.A.E

U.A.E

U.A.E

U.A.E

Lebanon

Lebanon

Kuwait

Kuwait

Kuwait

Kuwait

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Business combinations and goodwillA business combination is the bringing together of separate entities or businesses into one reporting entity as a result one entity, the acquirer, obtaining control of one or more other businesses. The acquisition method of accounting is used to account for business combinations. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interests in the acquiree. Under this method, the Group recognises, separately from goodwill, identifiable assets acquired, liabilities assumed and any non-controlling interests in the acquiree at the acquisition date. For each business combination, the Group elects to measure the non-controlling interests in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition costs incurred are expensed and included in other expenses.

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree.

If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date through profit or loss.

Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or liability will be recognised in accordance with IAS 39 either in consolidated statement of income or as a change to other comprehensive income. If the contingent consideration is classified as equity, it will not be remeasured. Subsequent settlement is accounted for within equity. In instances where the contingent consideration does not fall within the scope of IAS 39, it is measured in accordance with the appropriate IFRS.

Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interest over the Group’s net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognised in profit or loss.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.

Where goodwill forms part of a cash-generating unit (group of cash generating units) and part of the operations within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash-generating unit retained.

Financial assets and liabilities

Initial recognition and measurementFinancial assets and liabilities within the scope of IAS 39 are classified as “loans and receivables”, “available for sale investments” and “financial liabilities other than at fair value through profit or loss”. The Group determines the appropriate classification of each instrument at initial recognition.

Regular way purchases or sales of financial assets are recognised using trade date accounting. Financial liabilities are not recognised unless the Group becomes a party to the contractual provisions of the instrument.

Financial assets and liabilities are measured initially at fair value (transaction price) plus, in case of a financial asset or financial liability not classified as at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial asset or financial liability. Transaction costs on financial assets and financial liabilities at fair value through profit or loss are expensed immediately.

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Subsequent measurementThe subsequent measurement of financial assets and liabilities depends on their classification as described below:

Financial assetsCash and cash equivalentsFor the purpose of the consolidated statement of cash flows, cash and cash equivalents consist of cash in hand, bank balances and short term deposits with an original maturity of three months or less, net of outstanding bank overdrafts.

Loans and receivablesLoans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial recognition loans and receivables are carried at amortised cost using the effective interest rate method, less impairment losses, if any. Amortised cost is calculated by taking into account any discount or premium arising on acquisition and fees or costs that are an integral part of the interest rate method.

The effective interest rate method amortisation is included in the consolidated statement of income. The losses arising from impairment are recognised in the consolidated statement of income.

Bank deposit and accounts receivable are classified as “Loan and advances”.

Financial assets available for sale Financial assets available for sale are those non-derivative financial assets that are designated as available for sale or are not classified as loans and receivables. After initial recognition at cost including transaction costs associated with the acquisition, financial assets whose fair value cannot be reliably measured are carried at cost less impairment losses, if any.

Changes in fair value of available for sale investments are reported as a separate component of other comprehensive income until the investment is derecognised or the investment is determined to be impaired, at which time, the cumulative gain or loss previously reported in other comprehensive income is included in the consolidated statement of income.

Financial liabilitiesThe Group’s financial liabilities include Term loans, bank overdrafts, Wakala, Murabaha and Tawarruq payables and accounts payable and other credit balances.

Term loans and bank borrowingsAfter initial recognition, interest bearing term loans and bank overdraft are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in the income statement when the liabilities are derecognised as well as through the EIR amortisation process. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance costs in the consolidated statement of income. Unpaid amounts of term loan are included in ‘accounts payable and other credit balances’.

Term loans and bank overdraft are carried on the consolidated statement of financial position at their principal amounts less any repayment. Installments due within one year from the reporting date are shown as current liabilities.

Wakala and murabaha payablesWakala and murabaha payables represent the amount payable on a deferred settlement basis for assets purchased under murabaha arrangements. Installments due within one year from the reporting date are shown as current liability. Wakala and murabaha payables are stated at gross amount of the payable, net of deferred profit payable. Profit payable is expensed on a time apportionment basis taking into account of the profit rate attributable and the balance outstanding.

Tawarruq payablesTawarruq payable represent amounts due to financial institutions arising from an Islamic financing arrangement where the liability is settled on a deferred settlement basis for assets purchased. Tawarruq payable are stated at the gross amount of the payables, net of deferred profit payable. Tawarruq cost is expensed on a time apportionment basis taking account of the profit rate attributable and the balance outstanding.

48


Accounts payable and other credit balancesLiabilities are recognised for amounts to be paid in the future for goods or services received, whether billed by the supplier or not.

Derecognition of financial assets and financial liabilities

Financial assetsA financial asset (or, where applicable a part of a financial asset or a group of similar financial assets) is derecognised where:

•therightstoreceivecashflowsfromtheassethaveexpired;•theGrouphastransferreditsrightstoreceivecashflowsfromtheassetorhasassumedanobligationtopaythereceivedcash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

Financial liabilitiesA financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in the consolidated statement of income.

Offsetting of financial instrumentsFinancial assets and liabilities are offset and net amount is reported in the consolidated statement of financial position when the Group has currently legal enforceable right to offset and intends to settle either on a net basis or to realise the asset and settle the liability simultaneously.

Impairment of financial assetsThe Group assesses at each reporting date whether there is any objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred ‘loss event’) and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the borrowers or a group of borrowers is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

Financial assets available for saleFor financial assets available for sale, the Group assess at each reporting date whether there is objective evidence that a financial asset available for sale or a group of financial assets available for sale is impaired. In the case of equity investments classified as available for sale, objective evidence would include a significant or prolonged decline in the fair value of the equity investment below its cost. ‘Significant’ is evaluated against the original cost of investment and ‘prolonged’ against the period in which fair value has been below its cost. Where there is evidence of impairment, the cumulative loss measured as the difference between the acquisition cost and the current fair value, less any impairment loss on those financial assets available for sale previously recognised in the consolidated statement of income is removed from other comprehensive income and recognised in the consolidated statement of income.

Impairment losses in equity investments are not reversed through consolidated statement of income; subsequent increase in their fair value after impairment is recognized directly in other comprehensive income.

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Impairment of receivableAn estimate of the collectible amount of receivable is made when collection of the full amount is no longer probable. For individually significant amounts, this estimation is performed on an individual basis. Amounts which are not individually significant, but which are past due, are assessed collectively and a provision applied according to the length of time past due, based on historical recovery rates.

Fair value measurementThe Group measures financial instruments, such as, financial asset available for sale and non-financial assets, at fair value at each statement of financial position date. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

• In the principal market for the asset or liability, or• In the absence of a principal market, in the most advantageous market for the asset or liability

The principal or the most advantageous market must be accessible to the Group. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

Fair value measurement of financial instrumentsFair values for financial instruments traded in active markets are based on closing bid prices. For all other financial instruments including financial instruments for which the market has become inactive, the fair value is determined by using appropriate valuation techniques. Valuation techniques include the fair value derived from recent arm’s length transaction, comparison to similar instruments for which market observable prices exist, discounted cash flow method or other relevant valuation techniques commonly used by market participants. For investments in equity instruments, where a reasonable estimate of fair value cannot be determined, the investment is carried at cost.

The fair value of financial instruments carried at amortised cost, other than short-term in nature is estimated by discounting the future contractual cash flows at the current market interest rates for similar financial instruments.

The fair value of a derivative financial instrument is the equivalent of the unrealised gain or loss from marking to market the derivative financial instrument, using relevant market rates or internal pricing models.

Fair value measurement of non-financial instrumentsFair values of non-financial instruments are measured based on valuation provided by independent valuers.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:• Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities• Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is

directly or indirectly observable• Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is

unobservable

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Fair value measurementFor assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines whether transfers have occurred between Levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

Interest in joint venturesJointly controlled entitiesThe Group has investment in joint venture, which are jointly controlled entity, whereby the venturers have a contractual arrangement that establishes joint control over the economic activities of the entities. The arrangement requires unanimous agreement for financial and operating decisions among the venturers. The Group recognises its interest in the joint venture using the equity method. Under the equity method, investment in a joint venture is initially recognised at cost and adjusted thereafter for the post-acquisition change in the Group’s share of net assets of the joint venture. Any goodwill arising on the acquisition of the Group’s interest in a jointly control entity is accounted for in accordance with the Group’s accounting policy for goodwill arising on the acquisition of joint venture.

The Group recognises in the consolidated statement of income its share of the total recognised profit or loss of the joint venture from the date that influence or ownership effectively commenced until the date that it effectively ceases. Distributions received from a joint venture reduce the carrying amount of the investment. Adjustments to the carrying amount may also be necessary for changes in the Group’s share in the joint venture arising from changes in the joint venture’s equity that have not been recognised in the joint venture’s statement of income. The Group’s share of those changes is recognised directly in equity. Unrealised gains on transactions with an joint venture are eliminated to the extent of the Group’s share in the joint venture. Unrealised losses are also eliminated unless the transaction provides evidence of impairment in the asset transferred

Jointly controlled assetsThe Group has joint control of certain properties held for trading. The Group recognises its interests in the jointly controlled asset using the proportionate consolidation method whereby the Group includes its share of the asset and liabilities and related income and expenses on a line by line basis in its consolidated financial statements.

Investment in associatesAn 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. The considerations made in determining significant influence are similar to those necessary to determine control over subsidiaries.

The Group’s investment in its associate is accounted for using the equity method. Under the equity method, the investment in the associate is carried in the consolidated statement of financial position at cost plus post acquisition changes in the Group’s share of net assets of the associate. Unrealised gains and losses resulting from transactions between the Group and the associate are eliminated to the extent of the interest in the associate.

The Group recognises in the consolidated statement of income its share of the total recognised profit or loss of the associate from the date that influence or ownership effectively commenced until the date that it effectively ceases. Distributions received from an associate reduce the carrying amount of the investment. Adjustments to the carrying amount may also be necessary for changes in the Group’s share in the associate arising from changes in the associate’s equity that have been recognised in the associate’s statement of comprehensive income.

The Group’s share of those changes is recognised directly in equity. Unrealised gains on transactions with an associate are eliminated to the extent of the Group’s share in the associate. Unrealised losses are also eliminated unless the transaction provides evidence of impairment in the asset transferred.

An assessment of investment in an associate is performed when there is an indication that the asset has been impaired, or that impairment losses recognised in prior years no longer exist. Whenever impairment requirements of IAS 36, indicate that investment in an associate may be impaired, the entire carrying amount of investment is tested by comparing its recoverable amount with its carrying value.

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The difference in reporting dates of the associates and the Group is not more than three months. Adjustments are made for the effects of significant transactions or events that occur between that date and the date of the Group’s consolidated financial statements. The associate’s accounting policies conform to those used by the Group for like transactions and events in similar circumstances.

Upon loss of significant influence over the associate, the Group measures and recognises any retaining investment at its fair value. Any differences between the carrying amount of the associate upon loss of significant influence and the fair value of the remaining investment and proceeds from disposal are recognised in the consolidated statement of income.

Investment propertiesInvestment properties comprises developed property and property under construction or re-development held to earn rentals or for capital appreciation or both. Property held under a lease is classified as investment property when the definition of an investment property is met.

Investment property is measured initially at cost including transaction costs. Transaction costs include transfer taxes, professional fees for legal services and initial leasing commissions to bring the property to the condition necessary for it to be capable of operating. The carrying amount also includes the cost of replacing part of an existing investment property at the time that cost is incurred if the recognition criteria are met.

Subsequent to initial recognition, investment property is stated at fair value. Gains or losses arising from changes in the fair values are included in the consolidated statement of income in the year in which they arise.

Investment property is derecognised when it has been disposed of or permanently withdrawn from use and no future economic benefit is expected from its disposal. Any gains or losses on the retirement or disposal of investment property are recognised in the consolidated statement of income in the year of retirement or disposal.

Gains or losses on the disposal of investment property are determined as the difference between net disposal proceeds and the carrying value of the asset in the previous full period consolidated financial statements.

Transfers are made to investment property when, and only when, there is a change in use, evidenced by the end of owner occupation or commencement of an operating lease. Transfers are made from investment property when, and only when, there is a change in use, evidenced by commencement of owner occupation or commencement of development with a view to sale.

Property and equipmentProperty and equipment are stated at cost less accumulated depreciation and any impairment in value.

Depreciation is calculated on a straight line basis over the estimated useful lives of assets as follows:

Computer hardware and software 3 yearsFurniture and fixtures 5 yearsMotor vehicles 5 years

The carrying values of property and equipment are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets are written down to their recoverable amount.

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Impairment of non-financial assetsThe Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s (CGU) fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, recent market transactions are taken into account, if available.

If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded subsidiaries or other available fair value indicators.

The Group bases its impairment calculation on detailed budgets and forecast calculations which are prepared separately for each of the Group’s cash-generating units to which goodwill allocated. These budgets and forecast cash flow calculations generally cover a period of two to five years.

Properties held for tradingProperty acquired or being constructed for sale in the ordinary course of business, rather than to be held for rental or capital operation, is held as properties held for trading and is measured at lower of cost and net realisable value.

Cost includes freehold and leasehold rights for land, amount paid to contractors for construction, borrowing costs, planning and design costs, cost of site preparation, professional fees for legal services, property transfer taxes, construction overheads and other related costs.

Net realizable value is the estimated selling price in the ordinary course of business, based on market prices at the reporting date and discounted for the time value of money of material, less costs of completion and estimated cost of sale.

The cost of properties held for trading recognised in profit or loss on disposal is determined with reference to the specific cost incurred on the property sold and an allocation of any non-specific costs based on the relative size of the property sold.

Employees’ end of service benefitsThe Group provides end of service benefits to its expatriate employees. Provision is made for amounts payable to employees under the Kuwaiti Labour Law, employee contracts and applicable labour laws in the countries where the subsidiaries operate. The expected costs of these benefits are accrued over the period of employment.

With respect to its national employees, the Parent Company makes contributions to Public Institution for Social Security calculated as a percentage of the employees’ salaries. The Parent Company’s obligations are limited to these contributions, which are expensed when due.

Treasury sharesTreasury shares consist of the Parent Company’s own issued shares that have been reacquired by the Group and not yet reissued or cancelled. The treasury shares are accounted for using the cost method. Under this method, the weighted average cost of the shares reacquired is charged in equity. When the treasury shares are reissued, gains are credited to a separate account in equity (the “treasury shares reserve”), which is not distributable. Any realised losses are charged to the same account to the extent of the credit balance in that account. Any excess losses are charged to retained earnings then to the voluntary reserve and statutory reserve. Gains realised subsequently on the sale of treasury shares are first used to offset any previously recorded losses in the order of reserves, retained earnings and the treasury shares reserve account. No cash dividends are paid on these shares. The issue of bonus shares increases the number of treasury shares proportionately and reduces the average cost per share without affecting the total cost of treasury shares.

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Other reservesOther reserve is used to record the effect of changes in ownership interest in subsidiaries, without loss of control.

ProvisionsA provision is recognised when the Group has a present legal or constructive obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. Where the Group expects some or all of a provision to be reimbursed, for example, under an issuance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to a provision is presented in the consolidated statement of income net of any reimbursement.

Revenue recognitionRevenue is recognized to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured, regardless of when the payment is being made. Revenue is measured at fair value of the consideration received or receivable. The following specific recognition criteria must also be met before revenue is recognized:

Sale of property held for tradingA property is regarded as sold when the significant risks and rewards of ownership of real estate property have been transferred to the buyer, which is normally on unconditional exchange of contracts. For conditional exchanges, sales are recognised only when all the significant conditions are satisfied.

Sales of property under developmentWhere property is under development and agreement has been reached to sell such property when construction is complete, the directors consider whether the contract comprises:

i) A contract to construct a property or, ii) ii) a contract for the sale of a completed property.

Where a contract is judged to be for the construction of a property, revenue is recognised using the percentage of completion method as construction progresses. Where the contract is judged to be for the sale of a completed property, revenue is recognised when the significant risks and rewards of ownership of the real estate have been transferred to the buyer. If, however, the legal terms of the contract are such that the construction represents the continuous transfer of work in progress to the purchaser, the percentage-of-completion method of revenue recognition is applied and revenue is recognised as work progresses. Continuous transfer of work in progress is applied when:

• The buyer controls the work in progress, typically when the land on which the development takes place is owned by the final customer; • and all significant risks and rewards of ownership of the work in progress in its present state are transferred to the buyer as construction progresses, typically, when buyer cannot put the incomplete property back to the Group.

In such situations, the percentage of work completed is measured based on the costs incurred up until the end of the reporting period as a proportion of total costs expected to be incurred.

Gain on sale of investments financial assets available for sale Gain on sale of investment is measured by the difference between the sale proceeds and the carrying amount of investment at the date of disposal, and is recognised at the time of the sale.

Rental incomeRental income receivable from operating leases except for contingent rental income which is recognised when it arises. Initial direct costs incurred in negotiating and arranging an operating lease are recognised as an expense over the lease term on the same basis as the lease income.

Dividends incomeDividend income is recognized when the right to receive payment is established, which is generally when shareholders approve the dividend.

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Revenue recognition )continued(

Management feesManagement fees earned for the provision of services over a period of time are accrued for over that period.

Interest incomeInterest income is recognised as the interest accrues using the effective yield method.

LeasesThe determination of whether an arrangement is, or contains a lease is based on the substance of the arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset.

Group as a lessorLeases where the Group retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same basis as rental income.

Group as a lessee Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. Operating lease payments are recognised as an expense in the consolidated statement of income on a straight-line basis over the lease term, except for contingent rental payments which are expensed when they arise.

A property interest that is held by the Group under an operating lease may be classified and accounted for as an investment property when the property otherwise meets the definition of an investment property, evaluated property by property, and based on management’s intention. The initial cost of a property interest held under a lease and classified as an investment property is determined at the lower of the fair value of the property and the present value of the minimum lease payments. An equivalent amount is recognised as a liability.

Borrowing costs Borrowing costs are generally expensed as incurred. Borrowing costs are capitalised, if they are directly attributable to a project, as part of projects under construction, over the period of the construction until the project concerned is completed and becomes ready for its intended use, on the basis of actual borrowings and actual expenditure incurred on the project. Capitalisation of borrowing costs ceases when substantially all activities necessary to prepare the project for its intended use are complete. Borrowing costs capitalised is calculated using the Group’s weighted average cost of borrowings.

ContingenciesContingent liabilities are not recognised in the consolidated financial statements, but are disclosed unless the possibility of an outflow of resources embodying economic benefits is remote.Contingent assets are not recognised in the consolidated financial statements, but are disclosed when an inflow of economic benefit is probable.

TaxationKuwait Foundation for the Advancement of Sciences (KFAS)The Parent Company calculates the contribution to KFAS at 1% in accordance with the modified calculation based on the Foundation’s Board of Directors resolution, which states that the income from associates and subsidiaries, Board of Directors’ remuneration, transfer to statutory reserve should be excluded from profit for the year when determining the contribution.

National Labour Support Tax (NLST)The Parent Company calculates the NLST in accordance with Law No. 19 of 2000 and the Ministry of Finance Resolutions No. 24 of 2006 at 2.5% of taxable profit for the year. As per law, income from associates and subsidiaries, cash dividends from listed companies which are subjected to NLST have been deducted from the profit for the year.

36

55


ZakatContribution to Zakat is calculated at 1% of the profit of the Parent Company in accordance with the Ministry of Finance resolution No. 58/ 2007.

Segment informationA segment is a distinguishable component of the Group that engages in business activities from which it earns revenues and incurs costs. The operating segments are used by the management of the Group to allocate resources and assess performance and the reporting is consistent with the internal reports provided to the chief operation decision maker. Operating segments exhibiting similar economic characteristics, product and services, class of customers where appropriate are aggregated and reported as reportable segments.

Foreign currency translationEach entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency.

Transactions and balances Transactions in foreign currencies are initially recorded by the Group entities at their respective functional currency rates prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency spot rate of exchange ruling at the reporting date. All differences are taken to the consolidated statement of income. Tax charges and credits attributable to exchange differences on those monetary items are also recorded in consolidated statement of income.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined . The gain or loss arising on retranslation of non-monetary items is treated in line with the recognition of gain or loss on change in fair value of the item (i.e., translation differences on items whose fair value gain or loss is recognised in other comprehensive income or profit or loss is also recognised in other comprehensive income or profit or loss, respectively).

Group companies The assets and liabilities of foreign operations are translated into Kuwaiti Dinars at the rate of exchange prevailing at the reporting date and their statement of incomes are translated at average exchange rates during the period where such averages are reasonable approximation of actual rates. The exchange differences arising on the translation are recognised in other comprehensive income. On disposal of a foreign operation, the component of other comprehensive income relating to that particular foreign operation is recognised in the consolidated statement of income.

5. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS

The preparation of the Group’s consolidated financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.

Judgments In the process of applying the Group's accounting policies, management has made the following judgements, apart from those involving estimations, which has the most significant effect on the amounts recognised in the consolidated financial statements:Classification of propertyThe Group determines whether a property is classified as investment property or properties held for trading:

• Investment property comprises land and buildings which are not occupied substantially for use by, or in the operations of, the Group, nor for sale in the ordinary course of business, but are held primarily to earn rental income and/or capital appreciation.• Properties held for trading comprises property that is held for sale in the ordinary course of business.

37

56


Estimates and assumptions The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below:

The group based its assumptions and estimation parameters available when the consolidated financial statements were prepared. Existing circumstances and assumptions about future developments however may change due to market changes or circumstances arising beyond the content of the Group. Such changes are reflected in the assumptions when they occur.

Estimation of net realisable value for property held for tradingProperty held for trading is stated at the lower of cost and net realisable value (NRV). NRV for completed property held for trading is assessed with reference to market conditions and prices existing at the reporting date and is determined by the Group in the light of recent market transactions.

NRV in respect of property held for trading under construction is assessed with reference to market prices at the reporting date for similar completed property, less estimated costs to complete construction and less an estimate of the time value of money to the date of completion.

Valuation of investment propertiesFair value of investment properties have been assessed by an independent real estate appraiser. Two main methods were used to determine the fair value of property interests in investment properties; (a) formula based discounted cash flow analysis and (b) comparative analysis as follows:

(a) Formula based discounted cash flow, is based on a series of projected free cash flows supported by the terms of any existing lease and other contracts and discounted at a rate that reflects the risk of the asset.

(b) Comparative analysis is based on the assessment made by an independent real estate appraiser using values of actual deals transacted recently by other parties for properties in a similar location and condition, and based on the knowledge and experience of the real estate appraiser.

The significant methods and assumptions used by valuers in estimating fair value of investment property are stated in note 8 and 29.

Valuation of unquoted equity investmentsValuation of unquoted equity investments is normally based on one of the following:• Recent arm’s length market transactions;• Current fair value of another instrument that is substantially the same;• The expected cash flows discounted at current rates applicable for items with similar terms and risk characteristics; or• Other valuation models.

The determination of the cash flows and discount factors for unquoted equity investments requires significant estimation. Where this estimation cannot be reliably determined these investments are carried at cost less impairment.

Impairment of trade accounts receivableAn estimate of the collectible amount of trade accounts receivable is made when collection of the full amount is no longer probable. For individually significant amounts, this estimation is performed on an individual basis. Amounts which are not individually significant, but which are past due, are assessed collectively and a provision applied according to the length of time past due, based on historical recovery rates. Any difference between the actual amounts collected in future periods and the amounts expected will be recognised in the consolidated statement of income.

Impairment of goodwill The Group tests whether goodwill is impaired at least on an annual basis. This requires an estimation of the value in use of the cash-generating units to which the goodwill is allocated. Estimating the value in use requires the Group to make an estimate of the expected future cash flows from the cash-generating unit and also to choose a suitable discount rate in order to calculate the present value of those cash flows.

23 57


6,001,051

Shares

649,319,770

)64,802,134(

584,517,636

10.27 fils

290,553

Shares

649,319,770

(64,802,134)

584,517,636

0.50 fils

Profit for the year attributable to equity holders of the Parent Company

Weighted average number of ordinary shares

Less: weighted average number of treasury shares

Weighted average number of shares outstanding

Basic and diluted earnings per share attributable to the equity holders

of the parent company- )fils(

2013

KD

2012

KD

Investment properties mainly comprise of the following;

39

74,474,146

10,149,170

)700,089(

-

5,083,148

88,496

89,094,871

73,856,672

2,198,232

-

345,710

(1,965,753)

39,285

74,474,146

Balance at the beginning of the year

Additions (refer note (i) below)

Disposals

Transferred from properties held for trading (Note 12)

Net gain (loss) from fair value adjustment (refer note

(ii) below)


Balance at the end of the year

2013

KD

2012

KD

7. GOODWILL

Goodwill represents excess of consideration paid for acquisition of First Dubai Real Estate Development Company K.S.C.P. (FDDRE) shares over and above the fair value of the identifiable assets and liabilities. During the year management has tested the carrying value of goodwill for impairment based on fair value of FDDRE shares quoted on the Kuwait Stock Exchange and has noted no impairment.

During the previous year management tested the carrying value of goodwill based on cash flows from the underlying real estate projects of FDDRE. The management used cash flow projection for 1 to 2 years, applying 15% discount rate and recorded an impairment loss of KD 825,000. For projecting cash flows, management used assumptions of market rate per sq. ft. derived from the valuation performed for properties held for trading in the books of FDDRE.

8. INVESTMENT PROPERTIES

6. BASIC AND DILUTED EARNING PER SHARE Basic and diluted earnings per share is computed by dividing the profit for the year attributable to the equity holders of the Parent Company by the weighted average number of shares outstanding during the year less treasury shares.

The following reflects the profit and share data used in the basic and diluted profit per share computations:

58


Sensitivity analysisThe tale below presents the sensitivity of the valuation to changes by 5% in the most significant assumptions underlying the valuation of the investment property.

40

7,605,552

81,489,319

89,094,871

6,901,421

67,572,725

74,474,146

Land

Developed property held for earning rental income

2013

KD

2012

KD

+/-5%

+/-5%

380,278

4,074,466

345,071

3,378,636

Land

Developed property held for earning rental income

Changes in the

valuation assumption

Impact on profit for

the year 2013

KD

Impact on profit for

the year 2012

KD

Certain investment properties with a carrying value of KD 19,080,400 (31 December 2012: KD 14,283,688) are collateralised against term loans amounting to KD 23,500,000 (31 December 2012: KD 38,000,000) (note 18).

(i) Additions includes the purchase of an investment property amounting to KD 9,800,000 from related party. For detail of transaction refer note 25.

(ii) Valuations of investment properties were conducted by two independent appraisers with a recognised and relevant professional qualification and recent experience of the location and category of investment properties being valued. The change in fair value was calculated based on the lower of the two values. Fair value of the investment properties is arrived at by reference to industry acknowledged methods of valuations that depend on market data including recent sales value of comparable properties. Further details are provided in note 29.

Investment properties mainly comprise of the following;

59

Notes to The Consolidated Financial StatementAL MAZAYA HOLDING COMPANY K.S.C.P. AND ITS SUBSIDIARIES31 December 2013 419. INVESTMENT IN JOINT VENTURES

The Group further holds 50% ownership in Villa 492 – Project (the Villa) that is accounted using proportionate consolidation method.

(i) During the previous year, the Parent Company entered into an agreement with one of its partners, Al Nafisi National Real Estate Group K.S.C.(Closed) (NNRG), to distribute certain assets of it’s joint venture (JVs) Al Wahda Real Estate Investment Limited (Al Wahda).

During the year, the Group received the remaining balance of its share of assets from the assets distributed in cash amounting to AED 51,000,000 equivalent to KD 3,936,112 and is netted off against the carrying value of Al Wahda.

(ii) During the previous year the Parent Company entered into an agreement with its partner NNRG to distribute certain assets of its joint venture Villa – 492 Project (the Villa). The Group’s share in asset distributed amounted to KD 5,059,535, comprising of properties held for trading amounting to KD 1,300,746 and the balance amount of KD was received in cash during the year (after netting of other balances related to the JV). The distribution of assets was effected based on the fair value of properties held for trading as on the date of the contract determined by an independent valuer.

UAE 50 50

Country of

incorporation2013 2012

Al Wahda Real Estate Investment

Limited

(note 9(i) and (ii)) 899,573 4,548,739

2013

KD

2012

KD

Ownership percentage % Carrying value

4,548,739

-

286,946

)3,936,112(

-

-

899,573

3,221,917

(1,776,054)

873,007

-

2,055,815

174,054

4,548,739


At 1 January

Disposal

Share of results for the year including impairment

Proceeds received on distribution of assets in joint venture

Funds transferred to the joint venture

Acquisition from another partner


2013

KD

2012

KD

Movement in investment joint ventures:

60


Share of Al Wahada Real Estate Investment Limited statement of financial position

The following amounts are included in the consolidated financial statements as a result of the proportionate consolidation of Villa:

6,036,679

)4,237,534(

1,799,145

899,573

3,337,569

573,892

286,946

Al Wahada Real

Estate Investment

Limited

KD

Asset

Liabilities

Net assets

Group's share of net assets

Revenues

Profit for the year

Group's share of results

12,739,199

(3,641,721)

9,097,478

4,548,739

7,625,484

2,396,980

1,198,490

2013 2012

Al Wahada Real

Estate Investment

Limited

KD

2013KD

1,189,247

-

660,760

1,241,602

)724,038(

Current assets

Non-current assets

Current liabilities

Income

Expenses

2012KD

2,877,137

997,197

3,385,252

3,110,979

(1,163,695)

42

61


The summarized financial information of the associates is given as follows:

Investment in associates include quoted associates with a carrying value of KD 4,836,897 (2012: KD 5,557,024) having a market value of KD 5,549,983 (2012: KD 5,409,789).

Classification of associates where the Group holds less than 20 percent of the voting power of the investee is based on the existence of significant influence exercised by the Group. This is evidenced by the Group’s management agreement, participation in policy and decision making process of the investee with sufficient degree for the Group to demonstrate that it has significant influence over the respective associates.

2013KD

16,008,513

)2,657,951(

13,350,562

1,770,052

22,819

Parent Company’s share of assets and liabilities:

Assets

Liabilities

Equity

Parent Company’s share revenue and results:

Revenue

Group’s share of profit (loss) for the year

2012KD

15,595,976

(1,513,912)

14,082,064

1,064,594

(47,299)

4310. INVESTMENT IN ASSOCIATES

Ownership %

Qatar

Kuwait

4,836,897

8,513,665

13,350,562

Mazaya Qatar Real

Estate Development

Q.S.C

First Qatar Real

Estate Development

K.S.C.(Closed)

2012

KD

2013

KD2013

Country of

Incorporation

Principal

activities2012

5,557,024

8,525,040

14,082,064

5.72

17.54

6.37

17.54

Real

estate

services

Real

estate

services


Disposal

Dividend received

Share of results including reversal of impairment



2013KD

14,082,064

)551,458(

)297,880(

22,819

95,017

13,350,562

2012KD

13,568,654

-

-

458,223

55,187

14,082,064

62


(i) Additions includes the purchase of an property held for trading amounting to KD 868,299 from related party. For detail of transaction refer note 25.

(ii) Disposal includes the sale of property held for trading of KD 4,668,299 to a related party. For more details of transaction refer note 25.

12. PROPERTIES HELD FOR TRADING

2013KD

93,788,247

8,728,048

)17,070,175(

-

704,717

-

235,100

86,385,937


Additions (refer note (i) below)

Disposals (refer note (ii) below)

Transferred to investment properties (note 8)

Net impairment reversal for the year

Net transfers



2012KD

107,372,223

16,219,784

(23,592,161)

(345,710)

1,312,868

(7,951,891)

773,133

93,788,246

Impairment loss of KD 314,316 (31 December 2012: KD 2,767,082) has been made against certain quoted and unquoted securities on which there has been a significant or prolonged decline in value (note 23).

Available for sale investments with a fair value of KD 6,846,035 31 December 2012: KD 6,761,573) are pledged against certain term loans disclosed in note 18.

Unquoted equity shares are carried at cost, less impairment, if any, due to the non-availability of reliable measures of their fair values. Management has performed a review of its unquoted equity investments to assess whether impairment has occurred in the value of these investments and recorded an impairment loss of KD 311,873 (2012: KD 2,572,957) in the consolidated income statement. Based on the latest available financial information, management is of the view that no further impairment loss is required as at 31 December 2013 in respect of these investments. Impairment loss of KD 2,443 (2012: KD 194,125) is recorded in consolidated income statements on quoted equity shares.

2013KD

2,706,947

2,565,811

7,478,115

12,750,873

Quoted:

Equity securities

Unquoted:

Equity securities

Funds and managed portfolios

2012KD

2,732,376

2,555,187

7,606,660

12,894,223

11. FINANCIAL ASSETS AVAILABLE FOR SALE

44

63


Notes to The Consolidated Financial Statements

13. ACCOUNTS RECEIVABLE AND OTHER DEBIT BALANCES

2013KD

4,907,813

334,525

22,915

717,282

553,006

6,535,541

)972,494(

5,563,047

Trade receivables

Advance payments

Advance for investments

Due from related parties (note 25)

Other receivables

Provision for doubtful debts (note 30.1.3)

2012KD

3,996,395

261,708

495,577

1,121,759

543,541

6,418,980

(972,494)

5,446,486

45

2013

8,369,901

19,408,346

6,103,786

33,882,033

-

49,790,055

2,713,849

52,503,904

8,369,901

69,198,401

8,817,635

86,385,937

Land

Properties under development

Developed properties

UnsoldKD

SoldKD

TotalKD

2012

13,536,538

10,562,889

15,220,658

39,320,085

-

46,638,826

7,829,335

54,468,161

13,536,538

57,201,715

23,049,993

93,788,246

Land

Properties under development

Developed properties

UnsoldKD

SoldKD

TotalKD

Properties held for trading mainly comprise the following;

64


14. CASH AND CASH EQUIVALENTS

Restricted bank balances represent escrow accounts restricted for receiving and making payments for specific construction activity and these may not be available for use within 90 days.

15. SHARE CAPITAL, SHARE PREMIUM, ACCUMULATED LOSSES AND ANNUAL GENERAL MEETING

a) Share capital;

b) Share premium;Share premium represents the cash received in excess of the par value of the share issued. This is not available for distribution.

c) Retained earnings/(accumulated losses); On 14 June 2012, the ordinary Annual General Meeting of the Parent Company’s shareholders approved to extinguish accumulated losses of KD 58,105,339 as of 31 December 2011 against the share premium.

d) Annual general meeting;The Annual General Meeting (“AGM”) held 9 June 2013 approved the consolidated financial statements for the year ended 31 December 2012. The General Assembly approved not to distribute any dividends for the year ended 31 December 2012 (2011: Nil).

e) The board of directors’ have proposed directors’ remuneration for the year ended 31 December 2013 amounting KD 85,000 (2012: KD Nil) and that is subject to approval by annual general assembly.

f) The board of directors’ have proposed 6% bonus shares in respect of the year ended 31 December 2013 (2012: nil) and is subject to approval at the annual general assembly.

2013KD

17,516,278

-

)70,438(

17,445,840

)2,987,627(

14,458,213

)6,146,856(

8,311,357

Cash in hand and at banks

Short term deposits

Cash in portfolios

Bank overdrafts

Restricted bank balances

2012KD

13,066,745

146,222

178,458

13,391,425

(2,915,796)

10,475,629

(6,209,342)

4,266,287

Authorised, issued and fully paid

64,931,977 64,931,977Shares of KD 0.100 each

2013KD

2012KD

46

65

Notes to The Consolidated Financial StatementAL MAZAYA HOLDING COMPANY K.S.C.P. AND ITS SUBSIDIARIES31 December 2013 4716. RESERVES

i) Statutory reserveIn accordance with the Companies Law and the Parent Company's Articles of Association, 10% of the profit for the year attributable to shareholders of the Parent Company (before contributions to KFAS, NLST, board of directors’ remuneration and Zakat) has been transferred to statutory reserve. The Parent Company may resolve to discontinue such annual transfers when the reserve totals 50% of the paid up share capital. Distribution of the reserve is limited to the amount required to enable the payment of a dividend of 5% of paid up share capital to be made in years when accumulated profits are not sufficient for the payment of a dividend of that amount.

ii) Voluntary reserveThe Parent Company’s Articles of Association require that 10% of the profit for the year attributable to the shareholders of the Parent Company (before contributions to KFAS, NLST, board of directors’ remuneration and Zakat) has been transferred to a Voluntary reserve. There are no restrictions on distribution of general reserve.

2013KD

32,250,000

10,843,301

3,225,000

Number of shares (numbers)

Cost (KD)

Market value (KD)

2012KD

32,250,000

10,843,301

2,354,250

During the year, a subsidiary company had pledged shares of the Parent Company, included in treasury shares above against tawarruq payable amounting to KD 3,150,000 (2012: KD 3,500,000) as detailed below:

Reserves (share premium and statutory reserve) of the Parent Company equivalent to the cost of treasury shares have been earmarked as non-distributable.

18. TERM LOANS

2012

64,802,134

9.98

6,480,213

Number of shares

Percentage of issued shares (%)

Market value (KD)

2011

64,802,134

9.98

4,730,556

17. TREASURY SHARES

2013KD

1,500,000

22,000,000

23,500,000

Current portion

Non-current portion

2012KD

7,000,000

31,000,000

38,000,000

66


The Group is required to repay the term loan in sixteen quarterly instalments between 2012 and 2016 at a similar interest rate. The average effective interest rate on the term loans is 5.16% (2012: 5.63%) per annum.

Certain assets with carrying value of KD 25,926,435 (31 December 2012: KD 21,045,261) were collateralized against the term loans (Note 8 and 11).

Shares of a listed subsidiary company with a fair value of KD 52,700,000 (31 December 2012: KD 24,480,000) and investment in associate with a carrying value of KD 9,192,519 (31 December 2012: KD 9,136,509) were collateralized against the term loans.

19. TAWARRUQ, WAKALA AND MURABAHA PAYABLES

Certain shares in subsidiary with a fair value of KD 51,057,000 (2012: KD 7,047,000) are pledged against Tawarruq maturing on 31 December 2018.

20. DEFERRED CONSIDERATION ON ACQUISITION OF PROPERTIES

The deferred consideration on acquisition of properties was payable to the master developer against certain properties held for trading. During the year, the Parent Company settled this amount by sale of certain properties held for trading to the master developer.

2013KD

22,897,300

-

-

22,897,300

Tawarruq payables

Wakala payable

Murabaha payable

2012KD

-

5,000,000

3,500,000

8,500,000

48

67

Notes to The Consolidated Financial StatementAL MAZAYA HOLDING COMPANY K.S.C.P. AND ITS SUBSIDIARIES31 December 2013 49

22. NET MANAGEMENT FEES AND COMMISSION INCOME

2013KD

6,121,968

-

2,337,366

61,444

172,353

3,830,736

12,523,867

Trade payables

Amounts due to related parties (note 25)

Retentions payable

Accrued development costs

Dividends payable

Other payables and accrued expenses

2012KD

8,018,974

173,438

5,221,208

802,891

194,719

3,032,122

17,443,352

2013KD

739,469

)129,689(

609,780

Management fees and commission income

Cost of management fees and commission

income

2012KD

1,503,682

(146,985)

1,356,697

23. NET INVESTMENT LOSS

24. OTHER )LOSS( INCOME

Other (loss) income include the following gains and losses:

)41,497(

5,000

)314,316(

)350,813(

)580,717(

)10,934(

)591,651(

96,031

138,915

(2,767,082)

(2,532,136)

471,456

281,096

752,552

Realized gain on disposal of available for sale investments

Dividend income

Impairment loss on financial assets available for sale (note 11)

Net (loss) gain on settlement of liabilities and claims

Others

2012

KD

2012

KD

2013KD

2013KD

21. ACCOUNTS PAYABLE AND OTHER LIABILITIES

68


-

-

-

4,668,299

-

-

-

403,513

-

4,668,299

-

403,513

-

714,082

231,733

Consolidated statement of income:

Revenue from sale of

properties held for trading

Net management fees and

commission income

Net rental income

Consolidated statement of

financial position:

Amounts due from related

parties (note 13)*

Amounts due to related

parties (note 21)*

Cash and cash equivalents

Major

shareholders

KD

Other related

parties

KD

Associates

KD

2013

KD

2012

KD

25. RELATED PARTY TRANSACTIONS

These represent transactions with related parties, i.e. Subsidiaries, shareholders, directors and key management personnel of the Group, and entities controlled, jointly controlled or significantly influenced by such parties. Pricing policies and terms of these transactions are approved by the Group’s management.

Transactions with related parties included in the consolidated financial statement are as follows:

* Amounts due from/to related parties are interest free and are receivable on demand or payable on demand.

Other transactionDuring 2013, the Parent Company has entered into a contract with a related party to purchase an investment property amounting to KD 9,800,000 and property held for trading amounting to KD 868,299 at fair value. The fair value of the investment property and property held for trading purchased by the Parent Company is determined by an independent valuer as agreed by the parties to the contract. The purchase price was required to be settled by the Parent Company in the form of sales of certain units of properties held for trading amounting to KD 4,668,299 and taking over a bank borrowing of that related party (note 8 and 12).

Further, the legal procedure to transfer the ownership of investment property purchased by the Parent Company is under process as at the reporting date (note 8).

50

Major

shareholders

KD

Other related

parties

KD

Associates

KD

2013

KD

2012

KD

239,696

-

-

-

-

-

477,586

-

-

717,282

-

-

1,121,759

173,438

261,952

69


Compensation for board members and other key management member for the year are as follows:

2013KD

2013KD

2013KD

750,070

32,313

782,383

5,303,801

6,920,921

7,546,133

263,725

538,325

)368,244(

433,806

Salaries and other short term benefits

Terminal benefits

Revenue

Profit for the year

Total comprehensive income

Operating

Investing

Financing

Net increase (decrease) in cash and cash equivalents

2012KD

2012KD

2012KD

717,178

20,423

791,601

2,764,098

773,607

1,174,184

(3,349,680)

2,460,899

(49,254)

(938,035)

51

26. SIGNIFICANT NON CONTROLLING INTEREST

The summarised consolidated financial statement of First Dubai Real Estate Development Company K.S.C.P is provided below. This information is based on amounts before inter-company eliminations.

Summarised consolidated statement of profit or loss:

Summarised consolidated statement of financial position as at 31 December:

Summarised consolidated cash flow statement for year ending 31 December:

2013KD

29,571,502

43,041,431

11,245,426

2,625,000

58,742,507

55,202,547

3,539,960

Current assets

Non-current assets

Current liabilities

Non-current liabilities

Total equity

Attributable to:

Equity holders of parent

Non-controlling interest

2012KD

27,962,031

38,455,060

15,220,717

-

51,196,374

47,850,374

3,346,000

70


2012

714,083

(1,100,774)

KuwaitKD

UAEKD

Segment revenue

Segment (loss) profit *

KSAKD

OthersKD

TotalKD

31,561,667

7,563,952

925,974

(3,712,206)

300,253

(2,416,099)

33,501,977

334,873

2013

403,513

454,710

KuwaitKD

UAEKD

Segment revenue

Segment (loss) profit *

KSAKD

OthersKD

TotalKD

23,393,968

6,520,991

1,820,700

)592,007(

357,759

415,534

25,975,940

6,799,228

2012

11,828,905

2,519

KuwaitKD

UAEKD

Total segment assets

Total segment liabilities

KSAKD

OthersKD

TotalKD

150,883,528

69,055,178

53,419,854

64,155,449

4,920,687

-

221,052,974

133,213,146

2013

11,449,255

15,622

KuwaitKD

UAEKD


Total segment liabilities

KSAKD

OthersKD

TotalKD

142,856,067

77,693,429

68,668,247

53,239,752

5,142,572

-

228,116,141

130,948,803

27. SEGMENT INFORMATION

i) Primary segment information:

For management purposes, the Group is divided into three main geographical segments that are: State of Kuwait, United Arab Emirates (UAE), Kingdom of Saudi Arabia (KSA) and others, where the Group performs its main activities in the real estate segment. There is no income generating transactions between the Group’s segments.

* Segment results are computed after allocating common cost to the geographical segments based on asset base of the segment.

71


ii) Primary segment information:

iii) Secondary segment information:

52

2013

2012

KuwaitKD

KuwaitKD

UAEKD

UAEKD

KSAKD

KSAKD

OthersKD

OthersKD

TotalKD

TotalKD

2012

33,501,977

221,052,974

ResidentialKD

CommercialKD

Total segment revenue


OtherKD

TotalKD

26,258,068

65,354,921

5,887,212

102,907,471

1,356,697

52,790,582

2013

25,975,940

228,116,141

ResidentialKD

CommercialKD

Total segment revenue


OthersKD

TotalKD

14,860,760

52,764,086

10,893,939

122,716,722

221,241

52,635,333

Other segmental

information:

Change in fair value of

investment properties

Impairment reversal on property held

for trading

(Loss) gain on financial

assets available for sale

Impairment loss on financial assets

available for sale

Other segmental

information:

Change in fair value of

investment properties

Impairment reversal on property held

for trading

(Loss) gain on financial

assets available for sale

Impairment loss on financial assets

available for sale

)558,967(

-

)41,497(

)314,316(

(668,491)

-

96,031

(2,767,082)

5,154,172

704,717

-

-

2,909,406

1,312,868

-

-

221,885

-

-

-

(2,573,313)

-

-

-

266,058

-

-

-

(1,633,355)

-

-

-

5,083,148

704,717

)41,497(

)314,316(

(1,965,753)

1,312,868

96,031

(2,767,082)

72

Notes to The Consolidated Financial StatementAL MAZAYA HOLDING COMPANY K.S.C.P. AND ITS SUBSIDIARIES31 December 2013 5328. CAPITAL COMMITMENTSThe Group has agreed construction contracts with third parties and is consequently committed to future capital expenditure in respect of properties under construction amounting to KD 17,777,462 (31 December 2012: KD 14,665,565).

29. FAIR VALUES MEASUREMENTFinancial instruments comprise financial assets and financial liabilities

The fair value of financial assets and financial liabilities that are not carried at fair value is not materially different from their carrying amounts

The methodologies and assumptions used to determine fair values of assets is described in fair value section of Note 4: Significant Accounting Policies.

Financial instruments The Group held the following financial instruments available for sale fair valued at the reporting date in the consolidated statement of financial position:

The following table shows a reconciliation of the opening and closing amount of level 3 assets which are recorded at fair value:

)134,363(

)86,418(

At 1 January2013KD

Gain (loss)recorded in the

consolidated statement of

incomeKD

Financial assets available for sale:

Equity securities

Funds and managed portfolio

Gain recorded in other

comprehensive income

KD

Net purchases, sales and

settlementsKD

At31 December

2013KD

29,346

)125,575(

2,555,187

7,606,660

115,630

83,448

2,565,811

7,478,115

-

(1,567,200)

At 1 January2012KD

Lossrecorded in the consolidated statement of

incomeKD

Loss recorded in other

comprehensive income

KD

Net purchases, sales and

settlementsKD

At31 December

2012KD

(1,841,188)

(570,094)

4,626,679

9,774,316

(230,304)

(30,362)

2,555,187

7,606,660

2013

2012

12,750,873

12,894,223

Level 1KD

Level 1KD

Level 2KD

Level 2KD

Financial assets available for sale

Financial assets available for sale

Level 3KD

Level 3KD

TotalKD

TotalKD

-

-

2,706,947

2,732,376

10,043,926

10,161,847

Financial assets available for sale:

Equity securities

Funds and managed portfolio

73


Description of significant unobservable inputs to valuation of financial assets: Unquoted equity securities are valued based on book value method using latest financial statement available of the investee entities and adjusted for lack of marketability discount in the range of (15% to 20%). The Group has determined that market participants would take into account these discounts when pricing the investments.

Funds and managed portfolio have been valued based on Net Asset Value (NAV) of the fund provided by the custodian of the fund or portfolio.

Non-financial instruments Investment properties are fair valued at 30 November 2013 and are classified under level 3 fair value hierarchy and reconciliation is provided in note 8.

Description of significant unobservable inputs to valuation of non-financial assets: Fair value of investment properties were determined using Mark to Market method, conducted by valuators considering transaction prices of the property and similar properties. The significant unobservable valuation input used for the purpose of valuation is the market price per square foot and varies from property to property. A reasonable change in this input would result in an equivalent amount of change in fair value.

Certain investment properties owned by the Group on Build Operate and Transfer (BOT) basis are valued using discounted cashflow and capitalization of rental income.

30. RISK MANAGEMENT

IntroductionRisk is inherent in the Group’s activities but it is managed through a process of ongoing identification, measurement and monitoring, subject to risk limits and other controls. This process of risk management is critical to the Group’s continuing profitability.

Risk management structureThe Board of Directors of the Parent Company are ultimately responsible for the overall risk management approach and for approving the risk strategies and principles.

The major risks to which the Group is exposed in conducting its business and operations, and the means and organisational structure it employs in seeking to manage them strategically in building shareholder value are outlined below.

Excessive risk concentrationConcentrations arise when a number of counterparties are engaged in similar business activities, or activities in the same geographic region, or have similar economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions. Concentrations indicate the relative sensitivity of the Group’s performance to developments affecting a particular industry or geographical location.

In order to avoid excessive concentrations of risk, the Group’s policies and procedures include specific guidelines to focus on country and counter party limits and maintaining a diversified portfolio. Identified concentrations of credit risks are controlled and managed accordingly.

30.1Credit riskCredit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The Group manages credit risk by setting limits for individual counter-parties, monitors credit exposures, and continually assesses the creditworthiness of counterparties, with the result that the Group’s exposure to bad debts is not significant.

54

74

Notes to The Consolidated Financial StatementAL MAZAYA HOLDING COMPANY K.S.C.P. AND ITS SUBSIDIARIES31 December 2013 55

2012KD

972,494

-

-

972,494


Charge for the year

Written off


2011KD

10,449,677

236,167

(9,713,350)

972,494

The Group trades only with recognised, creditworthy third parties. In addition, receivable balances are monitored on an ongoing basis. For transactions that do not occur in the country of the relevant operating unit, the Group does not offer credit terms without the approval of the Group management.

With respect to credit risk arising from the other financial assets of the Group, which comprise bank balances, short term deposits and account receivables, the Group’s exposure to credit risk arising from default of the counterparty, with a maximum exposure equal to the carrying amount these instruments.

Due to the nature of the Group’s business, the Group does not take possession of collaterals.

The financial assets of the Group are distributed over the following geographical regions:

30.1.1 Gross maximum exposure to credit riskThe table below shows the gross maximum exposure to credit risk across the Group’s financial assets.

The Group’s exposure is predominately to real estate and construction sectors.

There is no concentration of credit risk with respect to real estate receivables, as the Group has a large number of tenants.

30.1.2 Credit quality of financial assets that are neither past due nor impairedThe Group neither uses internal credit grading system nor external credit grades. The Group manages credit quality by ensuring that credit is granted only to known creditworthy parties.

30.1.3 Past due and impaired The Group does not have any past due but not impaired financial assets as at 31 December 2013 and 31 December 2012.Gross amount due amounting to KD 2,129,737 (2012: KD 2,129,737) were impaired with a provision of KD 972,494 (2012: KD 972,494). The movement in provision allowance during the year is as follows:

Allowance for doubtful debts for receivables

2013KD

6,280,165

16,163,114

7,224

22,450,503

Geographical regions:

Kuwait

Dubai

Other

2012KD

5,460,094

12,822,242

7,030

18,289,366

2013KD

17,440,462

5,010,041

22,450,503

Bank balances and short term deposits

Accounts receivable

2012KD

13,386,421

4,902,945

18,289,366

75


30.2 Liquidity risk Liquidity risk is the risk that the Group will be unable to meet its liabilities when they fall due. To limit this risk, management has arranged diversified funding sources, manages assets with liquidity in mind, and monitors liquidity on a daily basis.

The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank deposits and loans.

The table below summarises the maturity profile of the Group’s financial liabilities based on contractual undiscounted repayment obligations. The liquidity profile of financial liabilities reflects the projected cash flows which includes future interest payments over the life of these financial liabilities.

31 December 2013

3,408,300

2,688,438

7,566,055

3,021,238

16,684,031

4,219,837

7,547,813

2,554,012

-

14,321,662

26,380,112

26,377,189

12,523,867

3,021,238

68,302,406

18,751,975

16,140,938

2,403,800

-

37,296,713

Tawarruq payable

Term loans


Bank overdraft

Total undiscounted liabilities

Within 1 yearKD

1 - 2 yearsKD

2 - 5 yearsKD

TotalKD

3,555,492 4,444,365 17,777,4629,777,605 Capital commitments

Within 1 yearKD

1 - 2 yearsKD

2 - 5 yearsKD

TotalKD

Commitments

31 December 2012

9,040,000

9,225,000

1,022,483

-

3,120,435

22,407,918

-

9,300,000

3,180,783

3,947,108

-

16,427,891

9,040,000

44,625,000

17,443,352

3,947,108

3,120,435

78,175,895

-

26,100,000

13,240,086

-

-

39,340,086

Wakala and murabaha payables

Term loans


Deferred consideration on acquisition of

properties

Bank overdraft

Total undiscounted liabilities

Within 1 yearKD

1 - 2 yearsKD

2 - 5 yearsKD

TotalKD

2,933,113 3,666,391 14,665,5658,066,061Capital commitments

Within 1 yearKD

1 - 2 yearsKD

2 - 5 yearsKD

TotalKD

Commitments

56

76


30.3.2 Equity price riskEquity price risk arises from changes in the fair values of equity investments. The Group manages this through diversification of investments in terms of geographical distribution and industry concentration. The majority of the Group’s quoted investments are quoted on the regional Stock Exchanges.

The effect on other comprehensive income (OCI) as a result of a change in the fair value of equity instruments held as available for sale financial assets at 31 December 2013 due to 5% increase in the following market indices with all other variables held constant is as follows:

The effect on the profit before directors’ remuneration and taxation represents increase in fair value of impaired available for sale investments which will be recorded in the consolidated income statement.

50 basis points increase

Increase (decrease) in profit

2013KD

2012KD

Kuwaiti Dinars 246,938 247,359

30.3 Market risk Market risk is the risk that the value of an asset will fluctuate as a result of changes in market variables such as interest rates, foreign exchange rates and equity prices, whether those changes are caused by factors specific to the individual investment or its issuer or factors affecting all investments traded in the market.

Market risk is managed on the basis of pre-determined asset allocations across various asset categories, diversification of assets in terms of geographical distribution and industry concentration, a continuous appraisal of market conditions and trends and management’s estimate of long and short term changes in fair value.

30.3.1 Interest rate riskInterest rate risk arises from the possibility that changes in interest rates will affect future profitability or the fair values of financial instruments. Interest rate risk is managed by the finance department of the Parent Company. The Group is exposed to interest rate risk on its interest bearing assets and liabilities (bank deposits, loans and borrowings and bonds) as a result of mismatches of interest rate repricing of assets and liabilities. It is the Group's policy to manage its interest cost using a mix of fixed and variable rate debts. The Group's policy is to keep a substantial portion of its borrowings at variable rates of interest.

The sensitivity of the consolidated statement of income is the effect of the assumed changes in interest rates on the Group’s profit before directors’ remuneration and taxation, based on floating rate financial assets and financial liabilities held at 31 December 2013. There is no impact on equity.

The following table demonstrates the sensitivity of the consolidated statement of income to a reasonable charge in interest rates of 50 basis points, with all other variables held constant.

57

Effect on OCI

2013KD

2012KD

KSE ( 5%)

Others

11,177

80

136,381

80

±

Market indices

77


Effect on profit (loss)

for the year

2013KD

2012KD

UAE Dirhams 177,471 118,016

31. CAPITAL MANAGEMENT The primary objective of the Group’s capital management is to ensure that it maintains healthy capital ratios in order to support its business maximise shareholder value and remain within the quantitative loan covenants.

The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. No changes were made in the objectives, policies or processes during the year ended 31 December 2013 and 31 December 2012.

The Group monitors capital using a gearing ratio as per the debt covenant for their loans, which is net debt divided by total capital plus net debt. The Group’s policy is to keep the gearing ratio below 120%. The Group includes within net debt, interest bearing loans and borrowings, tawarruq, wakala and murabaha payables and other payables, less bank balances and cash.

2013KD

49,384,927

)17,445,840(

31,939,087

97,167,338

33%

Debts

Less: cash and cash equivalent

Net debt

Equity

Net debt to equity ratio

2012KD

49,415,796

(13,391,425)

36,024,371

87,839,928

41%

30.3.3 Foreign currency riskCurrency risk is the risk that the value of the financial instrument on monetary items will fluctuate due to changes in the foreign exchange rates. The Group incurs foreign currency risk on transactions denominated in a currency other than the Kuwaiti Dinar. The Group ensures that the net exposure is kept to an acceptable level, by dealing in currencies that do not fluctuate significantly against the Kuwaiti Dinar.

If the Kuwaiti Dinar had strengthened or weakened against the foreign currencies assuming a change of 5%, this would have the following impact on the consolidated statement of income:

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