H.H. Sheikh Sabah Al-Ahmad. Al-Jaber Al-Sabah. H.H. Sheikh Nawaf Al-Ahmad

Transcription

1 Annual Report

2 2 3 3 H.H. Sheikh Sabah Al-Ahmad Al-Jaber Al-Sabah Amir of the State of Kuwait Mabanee Company S.A.K. T: F: /1 P.O. Box: 5132 SAFAT KUWAIT info@mabanee.com H.H. Sheikh Nawaf Al-Ahmad Al-Jaber Al-Sabah Crown Prince of the State of Kuwait H.H. Sheikh Nasser Al-Mohammad Al-Ahmad Al-Sabah Prime Minister of the State of Kuwait

3 4 Contents 5 Board Members Chairman and Managing Director Message The Avenues New Expansion Districts of Distinction Financial Highlights Independent Auditors Report Consolidated Statement of Financial Position at 31 December 2010 Consolidated Statement of Income for the Year Ended 31 December 2010 Consolidated Statement of Comprehensive Income for the Year Ended 31 December 2010 Consolidated Statement of Changes in Equity for the Year Ended 31 December 2010 Consolidated Statement of Cash Flows for the Year Ended 31 December 2010 to the consolidated financial statements Prestige

4 6 BOARD Members 7 Mohammed Abdulaziz Alshaya Chairman & Managing Director Mohammed A. Latif Alshaya Vice Chairman Abdullah A. Latif Alshaya Board Member Ayman A. Latif Alshaya Board Member Azzam A. Al Fulaij Board Member Mohammad Rashed Al Mutairi Board Member Ahmed Wassim Al Arabi Board Member Main Entrance

5 8 Chairman and Managing Director Message Dear Shareholders of Mabanee Co., May the peace and blessings of Allah be upon you all 9 On behalf of my fellow Members of the Board of Directors, it is my pleasure to present to you the 2010 Annual Report for Mabanee Co. The Annual Report clearly reflects the positive results that the company has achieved over the past year, and affirms the success of the short- and long-term strategies that are in place, as well as the efficiency of the personnel implementing them. In a strong indication of the company s success, Mabanee s net profit came to million (approximately US$ 67 million), compared to 15.3 million in 2009 an increase of 22%. Earnings per share came to 37.2 fils. The company s overall operational revenue came to 35.6 million, while shareholder equity increased 14% to million. Total assets increased 16% to reach million. Based on these results, the Board of Directors recommended the distribution of 10% bonus shares of the paid up capital as of December 31, 2010 for shareholders registered in the company s records on the date of the General Assembly Meeting. New Extension of The Avenues I am delighted to confirm that the construction of the new extension of The Avenues is taking place as scheduled. Around 40% of the extension has been completed, and it is expected to be inaugurated in The new area will create a new dimension in the world of shopping through the different districts that it will include. Proof of the success of The Avenues is the great demand for leasing in the new extension by regional and international high-end brands. These luxury brands believe that their presence in the new extension will bring added value to them, especially after the great success of Phases I and II of The Avenues. Future Expansion We are moving forward with mapping out the plans for Phase IV of The Avenues based on the approvals obtained from government authorities. We will then begin planning for Phase V, which will include a number of hotels in the event that the required licensing is obtained. Phase VI will follow, involving the development of the remaining plot of land. Through our future expansion plans, we aspire to make The Avenues one of the most important shopping cities not only in the region, but also in the world, through its distinguished design and its leasing area which we hope will exceed 400,000 square meters. Given the distinguished methodology that the company has adopted, as well as the experience and prestigious status that it holds, Mabanee is poised to seize investment opportunities based on a number of factors, namely stable cash flow, increasing rate of profit-making, and a professional work environment. A Word of Congratulations and Appreciation On behalf of the Board of Directors and the employees of Mabanee Company, I would like to congratulate H.H. the Amir Sheikh Sabah Al-Ahmad Al-Jaber Al- Sabah, H.H. the Crown Prince Sheikh Nawaf Al-Ahmad Al-Jaber Al-Sabah, and H.H. the Prime Minister Sheikh Nasser Al-Mohammad Al-Ahmad Al-Sabah on the occasion of the 5th Anniversary of the Accession of H.H. the Amir to the Throne, the 20th Anniversary of the Liberation of Kuwait, and the 50th Anniversary of the Independence. I pray to Almighty Allah that He continue to guide our leaders along the right path towards greater success and prosperity. To conclude, and on behalf of the Board of Directors, I would like to express my gratitude and appreciation to our shareholders for their trust, which encourages us to exert all the effort that we can in order to realize the goals of our company and its strategies. Mohammed Abdulaziz Alshaya Chairman and Managing Director

6 The Avenues New Expansion The Avenues New Expansion 11 The Avenues New Expansion redefines the shopping experience by engaging customers through a series of unique journeys. It s the ultimate destination that makes people want to keep returning. It will be a completely new concept for shopping; inspired by some of the oldest cities in the world. This New Expansion comprises six defined districts, each with its own unique character, collectively creating a varied and vibrant customer experiences. The districts include: The Grand Avenue, Prestige, The Mall, The Souk, SoKu, and Bazaar. The expansion is the third phase of The Avenues; the cost of construction will reach up to 150 million (more than US$ 500 million). With a land area extending over 100,000 square meters; the built up area covers more than 450,000 square meters, including a rental area of 90,000 square meters. The project will feature more than 400 stores distributed within the 6 districts, accommodating up to 5,000 car parks. The work at this project began in October 2009 with a construction program of around two and a half years to complete, and is scheduled to open in mid Mabanee Co. signed contracts with a number of major international companies to complete the project, using the best building methods. For the first time in Kuwait, the entire project is covered with ETFE, a material that allows the passage of sunlight without over-heating, giving a sense of being outdoors. The Grand Avenue

7 DISTRICTS of Distinction 15 The Grand Avenue With an atmosphere much like the Champs Elysees, The Grand Avenue is a truly beautiful, tree-lined boulevard that echoes grandeur. The retail facades are a mix of three styles; European, local and contemporary under a transparent roof structure that will reinforce and enhance the external appearance and the atmosphere intended. The Grand Avenue is up to 500 meters in length and is 22 meters wide in average. Some stores along the length of the district have small upper floor terraces (balconies), smoothly accessed by elevators, escalators and stairs as alternative access method to the first floor units. Prestige Where luxury meets elegance and provides the visitors of The Avenues with a prestigious shopping experience. It is located in a unique area overlooking the Fifth Ring Road. Prestige houses high-end brands, along with a number of cafes and restaurants that serve the finest of international cuisines spread over two levels. The district has a 23 meters high dome built using rich materials that enhance the luxuriousness of the retail outlets it adorns, such as Harvey Nichols. Customers and shoppers will be offered a world-class shopping experience that is unmatched anywhere else. The Mall The Mall is considered an extension to the existing shopping experience with a variety of well-known brands distributed on two floor, acting as a link between The Avenues Phases. The classic mall environment, with its clearly defined architectural style, allows with a series of courtyard plazas to provide ample of space for cafes and restaurants that will enhance the lively atmosphere. Contemporary modern architectural styles are incorporated throughout the district, with a clean, minimalist feel to the spaces and streets, giving prominence to the retail merchandise. For jewelry, precious stones and gold lovers, The Mall will include the Gold Souk. The designs and colors of the retail facades of the Gold Souk reflect the value of the goods on sale. The first floor above the Gold Souk is designated for children entertainment with an area of more than 5,000 square meters. SoKu The hip and funky SoKu takes its influence from New York s bohemian Soho district. An acronym for South of Kuwait, SoKu is Kuwait s answer to an iconic urban shopping experience Attracting Kuwait s young, trendy population, the district is perfectly poised to accommodate today s leading youth brands. Edgy, city architecture provides a street savvy appeal and a cultural environment that encapsulates everything in up to the minute retailing, including art galleries, which display the arts of all kinds. Restaurants, cafes and bistros at SoKu provide respite and meeting places to hang out and chill with friends. Tree shaded courtyards provide focal meeting spaces with food and beverage outlets strategically positioned within each courtyard to further animate the space. The Souk Modeled on a traditional Kuwaiti Souk, this district is an interpretation of this traditional regional retail architecture. The Souk at The Avenues is carefully designed to replicate the visual and sensory stimulus characteristic of the Souk environment. Narrow streets provide a market trader feel with units devoted to an array of products. Smaller units provide suitable locations for startup retailers giving a fresh edge and entrepreneurial spirit to the district. Retailers and salespeople in the Souk, as is their tradition, open the wooden doors of their shops from the early morning hours to serve their customers. They are confident that the shoppers will find traditional unique items only in this area. The shoppers can extend their trip at the Souk through spending time at the cafes and restaurants that offer best Kuwaiti cuisine surrounded by the sounds of the retailers who are competing to lure the buyers. The Souk embodies the spirit of the active daily life as they were living in Kuwait years ago. Bazaar The district is inspired by the Grand Bazaar located in the vibrant city of Istanbul. The Avenues Bazaar district located in the new expansion of The Avenues evokes all the energy, authenticity and life of a traditional Bazaar through a number of stores allocated to the corridors connected to one another, offering fabrics, carpets, antiques, furniture and household accessories.

8 FINANCIAL Highlights Net Profit 18.7 Million Total Assets Million Total Equity Million Operating Revenue 35.6 Million Earnings Per Share (EPS) fils Share Book Value 251 fils

9 18 19 NET PROFIT (Million ) TOTAL SHAREHOLDERS EQUITY (Million ) Financial Highlights EARNING PER SHARE (Kuwaiti Fils) SHARE BOOK VALUE (Kuwaiti Fils) Financial Highlights

10 21 MABANEE COMPANY S.A.K. (CLOSED) AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS AND INDEPENDENT AUDITORS REPORT FOR THE YEAR ENDED 31 DECEMBER 2010 Main Entrance

11 22 23 Al Aiban, Al Osaimi & Partners Al Aiban, Al Osaimi & Partners Fahad Al-Salem Street Salhia Complex, Entrance 2 P.O. Box 23049, Safat Kuwait City, Kuwait Tel: Fax: Ahmed Al-Jaber Street Dar Al-Awadi Complex P.O. Box 20174, Safat Sharq, Kuwait Tel: Fax: P.O. Box 74 Safat Safat, Kuwait Baitak Tower, st Floor Safat Square Ahmed Al Jaber Street Tel: / Fax: kuwait@kw.ey.com INDEPENDENT AUDITORS REPORT INDEPENDENT AUDITORS REPORT (continued) To The Shareholders of Mabanee Company S.A.K. (Closed) Report on the Consolidated Financial Statements We have audited the accompanying consolidated financial statements of Mabanee Company S.A.K. (Closed) ( the Company ) and its subsidiaries (together referred to as the Group ), which comprise the consolidated statement of financial position at 31 December 2010, and the consolidated statements of income, comprehensive income, changes in equity and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes. Management s Responsibility for the Consolidated Financial Statements The Group s management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our 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 whether the consolidated financial statements are free from material misstatement. To The Shareholders of Mabanee Company S.A.K. (Closed) Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Group at 31 December 2010, and the results of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards. Report on Other Legal and Regulatory Requirements Furthermore, in our opinion proper books of account have been kept by the Group and the consolidated financial statements, together with the contents of the report of the Group 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 Commercial Companies Law of 1960, as amended, and by the Company s Articles of Association, that an inventory was duly carried out and that, to the best of our knowledge and belief, no violations of the Commercial Companies Law of 1960, as amended or the Company s Articles of Association have occurred during the year ended 31 December 2010 that might have had a material effect on the business of the Group or on its financial position. 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 judgment, 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 auditors consider internal control relevant to the Group 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 Group 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. JASSIM AHMAD AL-FAHAD LICENCE NO. 53 A DELOITTE AL-FAHAD, AL-WAZZAN & CO. 21 February 2011 Kuwait WALEED A. AL OSAIMI LICENCE NO. 68 A OF ERNST & YOUNG AL AIBAN, AL OSAIMI & PARTNERS Auditors Report Auditors Report

12 24 25 CONSOLIDATED STATEMENT of Financial position At 31 December 2010 CONSOLIDATED STATEMENT OF INCOME Non-current assets Property and equipment 5 991, ,998 Investment properties 6 211,328, ,797,153 Investments in associates 7 16,564,451 17,049,300 Available for sale investments 8 15,691,810 18,663, ,576, ,182,644 Current assets Accounts receivable and prepayments 9 6,738,000 4,258,107 Cash and bank balances 10 5,106,892 10,171,803 11,844,892 14,429,910 TOTAL ASSETS 256,421, ,612,554 EQUITY AND LIABILITIES Equity Share capital 11 50,511,450 45,919,500 Statutory reserve 12 12,086,877 10,127,673 General reserve 13 12,086,877 10,127,673 Treasury shares 14 (2,448,908) (2,644,679) Treasury shares reserve 4,271,489 4,417,923 Fair value reserve 351,526 (1,082,001) Retained earnings 50,123,985 44,527,984 Total equity 126,983, ,394,073 Investment properties revenue 18a 35,603,999 34,488,650 Investment properties expenses 18b (7,436,840) (6,941,472) Depreciation 6 (3,185,365) (3,050,879) Profit from operations 24,981,794 24,496,299 Net loss from financial investments 18c (232,957) (486,500) General and administrative expenses (2,766,471) (2,459,569) Finance costs (1,844,918) (4,937,688) Allowance for doubtful debts 9 (19,363) (1,033,124) Other income 24,239 24,545 Foreign currency (loss) / gain (65,434) 854,296 Share of results from associates 7 (484,849) (314,713) Profit for the year before contributions to Kuwait Foundation for the Advancement of Sciences ( KFAS ), National Labour Support Tax ( NLST ), Zakat and Directors fees 19,592,041 16,143,546 Contribution to KFAS (176,328) (160,292) Contribution to NLST (482,869) (427,357) Contribution to Zakat (192,709) (176,103) Directors fees (70,000) (70,000) Profit for the year 18,670,135 15,309,794 Basic and diluted earnings per share fils fils Non-current liabilities Provision for staff indemnity 402, ,058 Security deposits 9,133,841 9,413,538 Long-term loans 15 85,982,858 20,178,571 95,519,631 30,039,167 Current liabilities Bank overdrafts 10-5,043,440 Short-term loans 16 14,000,000 56,686,381 Trade and other payables 17 19,918,073 17,449,493 33,918,073 79,179,314 Total liabilities 129,437, ,218,481 TOTAL EQUITY AND LIABILITIES 256,421, ,612,554 Mohammed Abdulaziz Alshaya Chairman and Managing Director Financial Statements The accompanying notes form an integral part of these consolidated financial statements. The accompanying notes form an integral part of these consolidated financial statements. Financial Statements

13 26 27 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Profit for the year 18,670,135 15,309,794 Other comprehensive income: Change in fair value of available for sale investments Transfer to consolidated statement of income on sale of available for sale investments Transfer to consolidated statement of income on impairment of available for sale investments Other comprehensive income / (loss) for the year 930,602 (2,259,838) 18c (407,568) (1,635,118) 18c 910,493 2,931,935 1,433,527 (963,021) Total comprehensive income for the year 20,103,662 14,346,773 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Total Retained earnings Fair value reserve Treasury shares reserve Treasury shares General reserve Statutory reserve Share capital 41,745,000 8,513,318 8,513,318 (2,300,079) 4,634,120 (118,980) 36,621,400 97,608,097 Balance at 31 December (963,021) 15,309,794 14,346,773 Total comprehensive (loss)/ income for the year 4,174, (4,174,500) - Issue of bonus shares (Note 22) Transfer to reserves - 1,614,355 1,614, (3,228,710) - Purchase of treasury shares (1,004,497) (1,004,497) Sale of treasury shares ,897 (216,197) ,700 45,919,500 10,127,673 10,127,673 (2,644,679) 4,417,923 (1,082,001) 44,527, ,394,073 Balance at 31 December ,433,527 18,670,135 20,103,662 Total comprehensive income for the year 4,591, (4,591,950) - Issue of bonus shares (Note 22) Cash dividend (Note 22) (4,563,776) (4,563,776) Transfer to reserves - 1,959,204 1,959, (3,918,408) - Purchase of treasury shares (589,920) (589,920) Sale of treasury shares ,691 (146,434) ,257 50,511,450 12,086,877 12,086,877 (2,448,908) 4,271, ,526 50,123, ,983,296 Balance at 31 December 2010 The accompanying notes form an integral part of these consolidated financial statements. The accompanying notes form an integral part of these consolidated financial statements. Financial Statements Financial Statements

14 28 29 CONSOLIDATED STATEMENT OF CASH FLOWS CONSOLIDATED STATEMENT OF CASH FLOWS OPERATING ACTIVITIES Profit for the year before contribution to KFAS, NLST, Zakat and Directors fees 19,592,041 16,143,546 Adjustments for: Depreciation 3,338,916 3,169,579 Provision for staff indemnity 174, ,268 Net loss from financial investments 18.c 232, ,500 Share of results from associates 7 484, ,713 Allowance for doubtful debts 9 19,363 1,033,124 Loss on sale of property and equipment Finance costs 1,844,918 4,937,688 25,688,516 26,251,806 Movements in working capital Accounts receivable and prepayments (2,499,256) 1,197,771 Trade and other payables 1,788,433 45,545 Security deposits (279,697) 300,748 Cash generated from operations 24,697,996 27,795,870 Staff indemnity paid (218,865) (2,914) KFAS, NLST, and Zakat paid (821,967) (281,443) Net cash generated from operating activities 23,657,164 27,511,513 INVESTING ACTIVITIES Purchase of property and equipment 5 (473,205) (234,654) Proceeds from sale of property and equipment Investments in associates - (997,826) Purchase of investment properties (41,005,590) (15,108,690) Purchase of available for sale investments (7,846,617) (24,609,546) Proceeds from sale of investments carried at fair value through statement of income - 771,594 Proceeds from sale of available for sale investments 11,748,602 29,190,255 Interest income received - 134,244 Dividend income received on investments carried at fair value through statement of income Dividend income received on available for sale investments - 29, , ,800 Net cash used in investing activities (37,306,632) (10,186,440) FINANCING ACTIVITIES Purchases of treasury shares (589,920) (1,004,497) Proceeds from sale of treasury shares 639, ,700 Term loans repaid (57,114,952) (56,427,892) Term loans obtained 80,232,858 29,800,000 Cash dividend (4,508,121) - Finance costs paid (5,031,125) (5,554,791) Net cash generated from / (used in) financing activities 13,627,997 (32,743,480) Net decrease in cash and cash equivalents (21,471) (15,418,407) Cash and cash equivalents at 1 January 5,128,363 20,546,770 Cash and cash equivalents at 31 December 10 5,106,892 5,128,363 Financial Statements The accompanying notes form an integral part of these consolidated financial statements. The accompanying notes form an integral part of these consolidated financial statements. Financial Statements

15 ESTABLISHMENT AND PRINCIPAL ACTIVITIES Mabanee Company S.A.K. (Closed) ( the Company ) is a Kuwaiti Shareholding Company (Closed) established and registered in Kuwait in The Company and its subsidiaries (together referred to as the Group ) are engaged in the manufacture and erection of pre-cast buildings, other construction work and the installation of sanitary, mechanical, electrical and other equipment that relates to the construction industry. It is also engaged in real estate investment and surplus funds are invested in portfolios managed by specialised firms. The Company is listed on the Kuwait Stock Exchange. The Company is an associated company of Alshaya United Company W.L.L. The registered address of the Company is P.O. Box 5132, Safat 13052, Kuwait. These consolidated financial statements were approved for issuance in accordance with a resolution of the Board of Directors on 21 February The Annual General meeting of the Company s shareholders has the power to amend these consolidated financial statements after issuance. 2. ADOPTION OF NEW AND REVISED STANDARDS During the year, the Group has adopted all the standards that came into effect for annual periods beginning on or after 1 January The main changes in the Group s accounting policies relate to IFRS 3 (Revised) Business Combinations and consequential amendments to IAS 27 Consolidated and Separate Financial Statements and IAS 28 Investments in Associates. IFRS 3 (revised in 2008) Business Combinations IFRS 3 (2008) has been applied in the current year prospectively to business combinations for which the acquisition date is on or after 1 January 2010 in accordance with the relevant transitional provisions. The revised standard requires acquisition-related costs to be accounted for separately from the business combination, generally leading to those costs being recognised as an expense in the consolidated statement of income as incurred, whereas previously they were accounted for as part of the cost of the acquisition. It also allows a choice on a transaction-by-transaction basis for the measurement of noncontrolling interests at the date of acquisition (previously referred to as minority interests) either at fair value or at the non-controlling interests share of recognised identifiable net assets of the acquiree. If the business combination is achieved in stages, the acquirer s equity interest held prior to control being obtained is remeasured to fair value at the date of obtaining control, and any gain or loss is recognized in the consolidated statement of income. IAS 27 (revised in 2008) Consolidated and Separate Financial Statements The revised Standard has specifically, affected the Group s accounting policies regarding changes in ownership interests in its subsidiaries that do not result in loss of control. Previously, increases in interests in existing subsidiaries were treated in the same manner as the acquisition of subsidiaries, with goodwill or a bargain purchase gain being recognised, when appropriate; for decreases in interests in existing subsidiaries that did not involve a loss of control, the difference between the consideration received and the adjustment to the non-controlling interests was recognised in the consolidated statement of income. Under IAS 27 (2008), all such increases or decreases are dealt with in equity, with no impact on goodwill or profit or loss. IAS 28 (revised in 2008) Investments in Associates The principle adopted under IAS 27 (2008) (see above) that a loss of control is recognised as a disposal and re-acquisition of any retained interest at fair value is extended by consequential amendments to IAS 28. Therefore, when significant influence over an associate is lost, the investor remeasures any investment retained in the former associate at fair value, with any consequential gain or loss recognised in the consolidated statement of income. None of the other new standards, interpretations and amendments effective for the first time from 1 January 2010, have had a material effect on the consolidated financial statements. 2. ADOPTION OF NEW AND REVISED STANDARDS (continued) The following Standards and Interpretations issued by the International Financial Reporting Interpretations Committee are effective for the current period with no impact to the Group s consolidated financial statements: Standards IFRS 1 (Revised) First-time Adoption of International Financial Reporting Standards IFRS 2 (Revised) Share-based Payment IFRS 8 (Revised) Operating Segments IAS 1 (Revised) Presentation of Financial Statements IAS 7 (Revised) Statement of Cash Flows IAS 17 (Revised) Leases IAS 36 (Revised) Impairment of Assets IAS 39 (Revised) Financial Instruments: Recognition and Measurement Standards and interpretations in issue not yet effective At the date of authorisation of these consolidated financial statements, the following Standards and Interpretations were in issue but not yet effective: IAS 1 (Revised) Presentation of Financial Statements Effective for annual periods beginning on or after 1 January 2011 IAS 12 (Revised) Income tax Effective for annual periods beginning on or after 1 January 2012 IAS 24 (Revised) Related Party Disclosure Effective for annual periods beginning on or after 1 January 2011 IAS 27 (Revised) Consolidated and Separate Financial Statements Effective for annual periods beginning on or after 1 July 2010 IAS 32 (Revised) Financial Instruments: Presentation Effective for annual periods beginning on or after 1 February 2010 IAS 34 (Revised) Interim Financial Reporting Effective for annual periods beginning on or after 1 January 2011 IFRS 1 (Revised) First-time Adoption of International Financial Reporting Standards Effective for annual periods beginning on or after 1 July 2010 IFRS 3 (Revised) Business Combinations Effective for annual periods beginning on or after 1 July 2010 IFRS 7 (Revised) Financial Instruments: Disclosure Effective for annual periods beginning on or after 1 January 2011 IFRS 9 Financial Instruments Effective for annual periods beginning on or after 1 January 2013 IFRIC 13 (Revised) Customer Loyalty Programmes Effective for annual periods beginning on or after 1 January 2011 Management anticipates that the adoption of these Standards and Interpretations once they become effective in future periods will not have a material financial impact on the consolidated financial statements of the Group in the period of initial application. IFRS 9 was issued in November 2009 and replaces those parts of IAS 39 relating to the classification and measurement of financial assets. IFRS 9 retains but simplifies the mixed measurement model and establishes two primary measurement categories for financial assets; amortised cost and fair value. The basis of classification depends on the entity s business model and the contractual cash flow characteristics of the financial asset. While adoption of IFRS 9 is mandatory from 1 January 2013, earlier adoption is permitted. The Group is considering the implications of the standard, the impact on the Group and the timing of its adoption by the Group.

16 SIGNIFICANT ACCOUNTING POLICIES Statement of compliance The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ( IFRS ) and interpretations issued by the International Financial Reporting Interpretations Committee, and applicable requirements of Ministerial Order No. 18 of Basis of preparation These consolidated financial statements have been prepared on the historical cost basis except for available for sale investments and investments which are measured at fair value. These consolidated financial statements are presented in Kuwaiti Dinars ( ), which is also the Group s functional and presentation currency. The accounting policies used in the preparation of the consolidated financial statements are consistent with those used in the previous year, except for the newly adopted accounting policies as a result of the implementation of the new standards that became effective from 1 January Basis of consolidation These consolidated financial statements include the financial statements of the Parent Company and its wholly owned subsidiaries which are controlled by the Parent Company (collectively the Group ) as mentioned in note 21. Control exists when the Parent Company has the power, directly or indirectly, to govern the financial and operating policies of an enterprise so as to obtain benefits from its activities. The financial statements of the subsidiaries are included in these consolidated financial statements on a line by line basis from the date that control effectively commences until the date that control effectively ceases. Inter-company balances and transactions, including inter-company profits and unrealised profits and losses are eliminated on consolidation. Consolidated financial statements are prepared using uniform accounting policies for like transactions and other events in similar circumstances. Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with those used by the Group. Non-controlling interest in the equity of subsidiaries not attributable to the Group is reported as noncontrolling interest in the consolidated statement of financial position. Profit or losses of subsidiaries not attributable to the Group is reported in the consolidated statement of income as profit or losses attributable to non-controlling interests. Losses are allocated to the non-controlling interest even if they exceed the non-controlling interest s share of equity in the subsidiary. Transactions with non-controlling interests are treated as transactions with equity owners of the Group. Gains or losses on disposals to non-controlling interests are recorded in equity. Property and equipment Property and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses. Cost includes the purchase price and directly associated cost of bringing the asset to a working condition for its intended use. Depreciation is calculated based on the estimated useful lives of the applicable assets on a straight-line basis. Maintenance and repairs, replacements and improvements of minor importance are expensed as incurred. Significant improvements and replacements of assets are capitalised. Gains and losses on retirement or disposal of assets are included in the consolidated statement of income. 3. SIGNIFICANT ACCOUNTING POLICIES (continued) Investments in associates An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture. 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 results and share in net assets and liabilities of associates are incorporated in these consolidated financial statements using the equity method of accounting, except when the investment is classified as held for sale, in which case it is accounted for in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations. Under the equity method, investments in associates are carried in the consolidated statement of financial position at cost as adjusted for post-acquisition changes in the Group s share of the net assets of the associate, less any impairment in the value of individual investments. Losses of an associate in excess of the Group s interest in that associate (which includes any long-term interests that, in substance, form part of the Group s net investment in the associate) are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate. Where a Group entity transacts with an associate of the Group, profits and losses are eliminated to the extent of the Group s interest in the relevant associate. Impairment of non-financial assets At each reporting date, the Group reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cashgenerating units for which a reasonable and consistent allocation basis can be identified. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in the consolidated statement of income, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease. Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (cash-generating unit) in prior years. A reversal of impairment loss is recognized immediately in the consolidated statement of income, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase. Investment properties Investment property, which is property held to earn rentals and/or for capital appreciation, is measured initially at its cost, including transaction costs. This investment property represents freehold land carried at cost which is deemed to have an indefinite life; accordingly it is not subject to depreciation. Subsequent to initial recognition, investment property is measured at cost less accumulated impairment losses. The carrying amounts are reviewed at each statement of financial position date on an individual basis to assess whether they are recorded in excess of their recoverable amount. Provisions for impairment losses, if any, are made where carrying values exceed the recoverable amount. An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from the disposal. Any gain or loss arising on de-recognition of the property (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the period in which the property is derecognised.

17 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Financial assets Financial assets are recognised and derecognised on trade date where the purchase or sale of a financial assets is under a contract whose terms require delivery of the financial assets within the timeframe established by the market concerned, and are initially measured at fair value, plus transaction costs, except for those financial assets classified as at fair value through statement of income, which are initially measured at fair value. Financial assets are classified into the following specified categories: cash and bank balances, investments at fair value through statement of income, available for sale investments and accounts receivable. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. Cash and cash equivalents Cash and cash equivalents comprise cash in hand and bank balances, net of outstanding bank overdrafts.. Accounts receivable Accounts receivable are measured at initial recognition at fair value, and are subsequently measured at amortised cost using the effective interest rate method. Appropriate allowances for estimated irrecoverable amounts are recognised in the consolidated statement of income when there is objective evidence that the asset is impaired. The allowance recognised is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition. Effective interest rate method The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset, or, where appropriate, a shorter period Available for sale investments Investments available for sale are initially recorded at fair value plus transaction costs that are directly attributable to the acquisition. After initial recognition, AFS investments are remeasured at fair value except for investment in equity securities that are not traded in an active market and whose fair value cannot be reliably measured, which are carried at cost. Gains and losses arising from changes in fair value are recognised directly in other comprehensive income and accumulated in the fair value reserve with the exception of impairment losses, interest calculated using the effective interest method and foreign exchange gains and losses on monetary assets, which are recognised directly in the consolidated statement of income. Dividends on AFS equity instruments are recognised in the consolidated statement of income when the Group s right to receive the dividend is established. Where the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously recognised in the fair value reserve is reclassified to the consolidated statement of income for the period. 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Financial assets (Continued) Impairment of financial assets Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of each reporting date. Financial assets are considered to be impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the asset have been impacted. For unlisted equity investments classified as AFS, a significant or prolonged decline in the fair value of the security below its cost is considered to be objective evidence of impairment. For all other financial assets, objective evidence of impairment could include: significant financial difficulty of the issuer or counterparty; or default or delinquency in interest or principal payments; or it becoming probable that the borrower will enter bankruptcy or financial re-organisation. Certain categories of financial assets, such as accounts receivables, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Group s past experience of collecting payments, an increase in the number of delayed payments in the portfolio, as well as observable changes in national or local economic conditions that correlate with default on receivables. The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of accounts receivables, where the carrying amount is reduced through the use of an allowance account. When an accounts receivable is considered uncollectable, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in the consolidated statement of income. With the exception of AFS equity instruments, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through consolidated statement of income to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised. In respect of AFS equity investments, impairment losses previously recognised through consolidated statement of income are not reversed through consolidated statement of income. Any increase in fair value subsequent to an impairment loss is recognised in other comprehensive income. Derecognition of financial assets and liabilities The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire; or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received. A financial liability is derecognised when the obligation specified in the contract is discharged, cancelled or expired. When 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 consolidated statement of income.

18 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Financial liabilities Trade payables Liabilities are recognised for amounts to be paid in the future for goods or services received, whether billed by the supplier or not. Bank borrowings Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the consolidated statement of income over the period of the borrowings using the effective interest method. Borrowing costs directly attributable to the acquisition, construction, or production of qualifying assets which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. All other borrowing costs are recognised in the consolidated statement of income in the year in which they are incurred. Treasury shares Treasury shares consist of the Parent s own shares that have been issued, subsequently reacquired by the Parent and not yet reissued or cancelled. The treasury shares are accounted for using the cost method. Under the cost method, the weighted average cost of the shares reacquired is charged to a contra equity account. When the treasury shares are reissued, gains are credited to a separate account in equity (treasury shares reserve) which is not distributable. Any realized losses are charged to the same account to the extent of the credit balance on that account. Any excess losses are charged to retained earnings then reserves. Gains realized 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 gain on sale of treasury shares 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. Provisions Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the statement of financial position date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows. When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably. 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Provision for staff indemnity Provision is made for staff indemnity which is payable on completion of employment. The provision is calculated in accordance with Kuwait Labour Law based on employees salaries and accumulated periods of service or on the basis of employment contracts, where such contracts provide extra benefits. The provision, which is unfunded, is determined as the liability that would arise as a result of the involuntary termination of staff at the statement of financial position date, on the basis that this computation is a reliable approximation of the present value of this obligation. Revenue recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and revenue can be reliably measured. Dividend income Dividend income from investments is recognised when the shareholder s right to receive payment has been established. Interest income Interest income is recognised using the effective interest rate method by reference to the principal outstanding and the interest rate applicable. Arrangement fees Arrangement fee is recognised when right to receive payment has been established. Leasing The Group as lessor Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. The Group as lessee Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred. In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Foreign currencies Transactions denominated in foreign currencies are translated into at rates of exchange prevailing at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are retranslated into at rates of exchange prevailing at the statement of financial position date. The resultant exchange differences are taken to the consolidated statement of income.

19 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Offsetting Financial assets and liabilities are offset when the Group has a legally enforceable right to offset and intends to settle either on a net basis or to realise the asset and settle the liability simultaneously. Dividend distribution Dividend distribution to the Group s shareholders is recognised as a liability in the Group s consolidated financial statements in the period in which the dividends are approved by the Group s shareholders. Contribution to Kuwait Foundation for the Advancement of Sciences The Company is legally required to contribute to the Kuwait Foundation for the Advancement of Sciences ( KFAS ). The Company s contributions to KFAS are recognized as an expense in the period during which the Company s contribution is legally required. Zakat Effective 10 December 2007, the Company has provided for Zakat in accordance with the requirements of Law No. 46 of The Zakat charge calculated in accordance with these requirements is charged to the consolidated statement of income. Contingencies Contingent liabilities are not recognised in the consolidated statement of financial position, 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 benefits is probable. 4. critical accounting judgements and key sources of estimation uncertainty) In the application of the Group s accounting policies, which are described in note 3, management is required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. Critical judgements in applying accounting policies The following are the critical judgements, apart from those involving estimations (see below), that management has made in the process of applying the entity s accounting policies and that have the most significant effect on the amounts recognised in consolidated financial statements. Classification of investments Management decides on the acquisition of an investment whether to classify it as available for sale or at fair value through statement of income. The Group classifies investments as at fair value through statement of income if the investment has been acquired principally for the purpose of selling it in the near term and its fair value can be reliably determined. All other investments are classified as available for sale. 4. critical accounting judgements and key sources of estimation uncertainty (CONTINUED) Critical judgements in applying accounting policies (Continued) Impairment of available for sale investments The Group follows the guidance of IAS 39 Financial Instruments: Recognition and measurement to determine when an available for sale investment is impaired. This determination requires significant judgement. In making this judgement, the Group assesses, among other factors, whether objective evidence of impairment exists. Investment properties revenue The Group has entered into investment agreements for leased units on its investment properties. Income under these agreements is a combination of arrangement fees, rentals, recovery of certain expenses, and maintenance fees. The method of revenue recognition relating to fees arising under these agreements requires judgment within the context of International Accounting Standard 18 - Revenue. Key sources of estimation uncertainty The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the statement of financial position date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year: Valuation of unquoted equity investments Valuation 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. Impairment of investment properties and property and equipment The Group s management tests annually whether tangible assets and investment properties have suffered impairment in accordance with accounting policies stated in note 3, the recoverable amount of an asset is determined based on value-in-use method. This method uses estimated cash flow projections over the estimated useful life of the asset discounted using market rates. Depreciation of investment properties and property and equipment The Group s management determines the useful lives and related depreciation charges. The depreciation charge for the year will change significantly if actual life is different from the estimated useful life of the asset. Impairment of receivables The Group s management reviews periodically items classified as receivables to assess whether a provision for impairment should be recorded in the consolidated statement of income. Management estimates the amount and timing of future cash flows when determining the level of provisions required. Such estimates are necessarily based on assumptions about several factors involving varying degrees of judgement and uncertainty. Critical judgements in applying accounting policies The following are the critical judgements, apart from those involving estimations (see below), that management has made in the process of applying the entity s accounting policies and that have the most significant effect on the amounts recognised in consolidated financial statements. Classification of investments Management decides on the acquisition of an investment whether to classify it as available for sale or at fair value through statement of income. The Group classifies investments as at fair value through statement of income if the investment has been acquired principally for the purpose of selling it in the near term and its fair value can be reliably determined. All other investments are classified as available for sale.

20 PROPERTY AND EQUIPMENT 6. INVESTMENT PROPERTIES Fixture, office equipment and prefabricated site buildings Tools and motor vehicles Total Cost At 1 January ,511 56, ,838 Additions 207,354 27, ,654 Disposals (2,125) - (2,125) At 31 December ,740 83,627 1,028,367 Additions 472, ,205 Disposals (1,467) - (1,467) At 31 December ,416,213 83,892 1,500,105 Accumulated depreciation At 1 January ,321 37, ,618 Charge for the year 111,965 6, ,700 Disposals (949) - (949) At 31 December ,337 44, ,369 Charge for the year 142,814 10, ,551 Disposals (524) - (524) At 31 December ,627 54, ,396 Carrying amount At 31 December ,586 29, ,709 At 31 December ,403 39, ,998 Annual depreciation rates 13.3% - 25% 10% - 20% Cost At beginning of the year 177,128, ,402,807 Additions 44,716,350 15,725, ,844, ,128,600 Accumulated depreciation At beginning of the year 7,331,447 4,280,568 Charge for the year 3,185,365 3,050,879 10,516,812 7,331,447 Carrying amount 211,328, ,797,153 Annual depreciation rates 2%-3.33% 2% 3.33% The balance includes 58,608,186 (2009: 13,897,586), which represents costs incurred in the construction of Phase III of The Avenues commercial complex, no depreciation has been charged as Phase III of the property is still under development. During 2010, borrowing costs of 3,710,760 relating to phases under construction of The Avenues complex has been capitalised within the total costs (2009: 617,103). Management has estimated the economical useful life for the Avenues Mall to be 50 years. The average fair value of the investment properties at the statement of financial position date was estimated by independent valuers to be 502,796,830 (2009: 323,232,288). 7. investments in associates Details of the Group s associates at 31 December are as follows: Name of associates Al-Rai Logistica K.S.C. (Closed) Injaz Real Estate Building Company W.L.L. Principal activity Warehousing facilities, construction and management Real estate development and investments Place of incorporation and operation Ownership interest and voting power 2010 % 2009 % Kuwait % % Kuwait 40% 40% Balance at 1 January 17,049,300 16,366,187 Additions - 699,000 Group s share of results from associates (484,849) (314,713) Goodwill - 298,826 Balance at 31 December 16,564,451 17,049,300

21 investments in associates (CONTINUED) Summarised financial information in respect of the Group s share in the financial statements of the associates as at and for the year ended 31 December is as follows: 8. AVAilable for sale INVESTMENTs Group s share of assets 29,654,082 29,617,819 Group s share of liabilities (12,589,891) (12,079,707) Group s share of revenue 3,236,973 3,079,302 Group s share of results from associates (484,849) (314,713) At 31 December 2010 certain investments amounting to 4,314,489 (2009: 4,602,685) were carried at cost, due to the lack of an active market or other reliable measure of their fair values. The average credit period on rendering of services is 30 days. No interest is charged on the overdue trade receivables. The Group has provided fully for all receivables over 365 days because historical experience is such that receivables that are past due beyond 365 days are generally not recoverable. Trade receivables between 31 days and 365 days are provided for based on estimated irrecoverable amounts, determined by reference to past default experience. At 31 December 2010, trade receivables of 891,016 (2009: 2,289,780) were fully performing. Quoted local equities 7,737,298 10,638,345 Unquoted local equities 2,872,573 2,657,352 Unquoted foreign equities 5,081,939 5,367, Accounts receivable and prepayments 15,691,810 18,663,193 Trade receivables 1,943,503 3,322,904 Less: allowance for doubtful debts (1,052,487) (1,033,124) 891,016 2,289,780 Advances to contractors 2,777,367 42,052 Other receivables 841, ,865 Prepaid expenses 771, ,521 Current accounts with associates (Note 19) 1,456, ,889 6,738,000 4,258, Accounts receivable and prepayments (CONTINUED) Movement in the allowance for doubtful debts Balance at 1 January 1,033,124 - Charged for the year 19,363 1,033,124 Balance at 31 December 1,052,487 1,033,124 In determining the recoverability of a trade receivable, the Group considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the reporting date. The concentration of credit risk is limited due to the customer base being large and unrelated. Accordingly, management believes that there is no further provision required in excess of the allowance for doubtful debts. The carrying amounts of the Group s trade and other receivables are denominated in Kuwaiti Dinars. The maximum exposure to credit risk at the reporting date is the fair value of each class of receivable mentioned above (see note 25). 10. CASH AND cash equivalents Cash and cash equivalents included in the consolidated statement of cash flows include the following statement of financial position amounts: Bank overdrafts have a maximum facility limit of 7.2 million and carry an interest rate ranging between 2% to 2.25% (2009: 1.25% to 2.25%) over the Central Bank of Kuwait discount rate per annum. Cash and bank balances 5,106,892 10,171,803 Bank overdrafts - (5,043,440) 5,106,892 5,128, SHARE CAPITAL Authorised, issued and fully paid up share capital consists of 505,114,500 shares of nominal value 100 fils each (2009: 459,195,000 shares of nominal value 100 fils each). 12. STATUTORY RESERVE In accordance with the Commercial Companies Law and the Company s Articles of Association, 10% of the profit for the year before KFAS, NLST, Zakat and Directors fees is to be transferred to statutory reserve until this reserve reaches a minimum of 50% of share capital. Distribution of this reserve is limited to the amount required to enable the payment of a dividend of 5% of share capital in years when retained earnings are not sufficient for payment of such dividend. 13. general reserve In accordance with the Company s Articles of Association, 10% of the profit for the year before KFAS, NLST, Zakat and Directors fees has been transferred to the general reserve. This transfer may be discontinued by a resolution adopted by the ordinary assembly as recommended by the Board of Directors. There are no restrictions on distributions from the general reserve.

22 TREASURY SHARES Number of own shares 3,025,290 2,752,400 Percentage of issued shares 0.60% 0.60% Book value () 2,448,908 2,644,679 Market value () 2,420,232 1,899,156 Reserves equivalent to the cost of purchase of the treasury shares have been earmarked as nondistributable in the Company. 15. LONG-TERM LOANS Long-term loans include the following loans payable to local banks: a) b) c) d) e) f) g) Unsecured loan to the Company. The balance is repayable in 8 equal quarterly instalments with last instalment due on 24 August 2012 with the option to renew for additional periods. The total available facility is 10,000,000 (See Note 16-g). Unsecured loan in the books of the subsidiaries. The balance was paid on 27 January 2010 (See Note 16-h). Unsecured loan to the Company. The balance is repayable in 15 equal quarterly instalments with last instalment due on 1 January The total available facility is 25,000,000 (See note 16-e). Unsecured loan to the Company. The balance is repayable in 12 equal quarterly instalments with last instalment due on 1 April The total available facility is 10,000,000. Unsecured loan to the Company. The balance is repayable in 16 equal quarterly instalments with last instalment due on 31 December The total available facility is 17,750,000 (See note 16-f). Unsecured loan to the Company. The balance is repayable in 12 equal quarterly instalments with last instalment due on 1 January The total available facility is 9,800,000 (See note 16-d). Unsecured loan in the books of the subsidiaries. The balance is repayable in 16 equal quarterly instalments with last instalment due on 31 December The total available facility is 32,500,000. 3,750,000 8,750,000-11,428,571 23,300,000-5,200,000-13,250,000-8,000,000-32,482,858-85,982,858 20,178, SHORT-TERM LOANS Short-term loans include the following loans payable to local banks: a) b) c) d) e) f) Unsecured loan to the Company. The balance was paid on 27 January Unsecured loan to the Company. The balance is repayable on 30 April 2011 with option to renew for additional periods. The total available facility is 3,000,000. Unsecured loan to the Company. The balance was paid on 6 September Unsecured loan to the Company. The balance is transferred to long term-term loan (See note 15-f) Unsecured loan to the Company. The balance is transferred to long term-term loan (See note 15-c) Unsecured loan to the Company. The balance is repayable in 16 equal quarterly instalments with last instalment due on 31 December The total available facility is 17,750,000 (See note 15-e). 17. trade and other PAYABLEs - 15,000,000 3,000,000 3,000,000-3,922,095-8,000,000 1,500,000 19,800,000 4,500,000 - g) Current portion of long-term loan (See Note 15-a) 5,000,000 1,250,000 h) Current portion of long-term loan (See Note 15-b) - 5,714,286 14,000,000 56,686,381 Trade payables 959, ,907 Retentions payable 4,872,085 3,412,186 Payable to contractors 8,072,659 7,448,259 Rent received in advance 2,094,869 2,821,558 Payable to KFAS, NLST, and Zakat 886, ,030 Other payables 3,032,274 2,137,553 19,918,073 17,449,493

23 SEGMENT REPORTING The Group has adopted IFRS 8 Operating Segments with effect from 1 January Under IFRS 8, reported segment profits are based on internal management reporting information that is regularly reviewed by the chief operating decision maker in order to allocate resources to the segment and to assess its performance and is reconciled to the Group s profit or loss. In contrast, the predecessor standard (IAS 14 Segment Reporting ) required an entity to identify two sets of segments (business and geographical). Following the adoption of IFRS 8, the identification of the Group s reportable segments has not changed. The Group is organised into functional divisions in order to manage its various lines of business. For the purpose of segment reporting, the Group s management uses the following business segments: a) Construction and real estate investment: includes real estate development, Group s properties, projects leasing and the construction activity for self or others. b) Financial investments: includes investments in portfolios, shares and financial instruments in and outside Kuwait managed by self or by specialised firms. Segment reporting information for the year ended 31 December is as follows: Financial investments Unallocated Total Construction and real estate investment Segment revenue 35,603,999 34,488,650 (232,957) (486,500) (2,677) 878,841 35,368,365 34,880,991 Segment results 24,981,794 24,496,299 (311,601) (554,358) (6,000,058) (8,632,147) 18,670,135 15,309, a) Investment properties revenue The details of revenue relating to construction and real estate investment are: 18. b) Investment properties expenses The details of expenses relating to construction and real estate investment are: 18. c) Financial investments The details of net loss from financial investments are: Rental income from outlets and basements 32,616,870 30,730,931 Arrangement fees from tenants - 1,544,700 Advertising services for tenants 2,058,691 1,543,057 Others 928, ,962 35,603,999 34,488,650 Land rent 2,546,412 2,231,650 Repair and maintenance 3,661,052 3,589,844 General expenses 1,229,376 1,119,978 Dividend income on investments carried at fair value through statement of income 7,436,840 6,941,472-29,595 Dividend income on available for sale investments 269, ,800 Net gain on sale of investments carried at fair value through statement of income - 8,678 Net gain on sale of available for sale investments 407,568 1,635,118 Interest income - 134,244 Impairment in value of available for sale investments (910,493) (2,931,935) (232,957) (486,500)

24 related party transactions Related parties represent major 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. a) Balances with related parties included in the consolidated statement of financial position are as follows: Accounts receivable and prepayments Current account with associates (see Note 9) 1,456, ,889 b) Transactions with related parties included in the consolidated statement of income are as follows: Rental income 5,785,706 4,731,889 c) Compensation of key management personnel The remuneration of directors and other members of key management during the year were as follows: Salaries and other short-term benefits 546, ,196 Termination benefits 100, , , , BASIC AND DILUTED EARNINGS PER SHARE Basic and diluted earnings per share is computed by dividing profit for the year by the weighted average number of shares outstanding during the year. There are no potential dilutive ordinary shares. The information necessary to calculate basic earnings per share based on the weighted average number of shares outstanding during the year is as follows: Profit for the year 18,670,135 15,309,794 Number of authorised, issued and fully paid shares outstanding during the year The basic and diluted earnings per share for the previous year was fils before retrospective adjustment to the number of shares for bonus shares issued in 2009 (see Note 22). Shares Shares 505,114, ,114,500 Less: Weighted average number of treasury shares during the year (3,044,354) (2,059,195) Weighted average number of outstanding shares during the year 502,070, ,055,305 Basic and diluted earnings per share fils fils 21. subsidiaries Details of the Group s subsidiaries at 31 December 2010 are as follows: Name of subsidiary Kuwait Prefabricated Building Company W.L.L. Place of incorporation Proportion of ownership interest and voting power % % Kuwait Principal activities General trading and contracting Al-Rai Real Estate Company W.L.L. Kuwait Investment in real estate Second National for Trading and Contracting Company W.L.L. The Avenues Holding S.A.K. (Closed) Kuwait Kuwait Al-Rai Lake Company W.L.L Kuwait Fifth Ring Road Company W.L.L. Kuwait KBCC Realty International Limited B.V.I Investments Mabanee Egypt for Real Estate Development Ltd. Investments, general trading and contracting Management of movie theatres Investments, general trading and contracting Investments, general trading and contracting Egypt Investment in real estate Mabanee Bahrain Company W.L.L Bahrain Investment in real estate 22. proposed dividends The Board of Directors have proposed the distribution of bonus shares of 10% (2009:10%) and cash dividend of Nil (2009:10 fils per share) of the paid-up capital as at 31 December 2010 to the shareholders of record as of the date of the general assembly. This proposal is subject to approval at the Annual General Assembly Meeting. The Annual General Assembly held on 28 March 2010 approved the annual audited consolidated financial statements for the year ended 31 December 2009 and the proposed distribution of bonus shares of 10% (2008: bonus shares of 10%) and cash dividend of 10 fils per share (2008: Nil) of the paid-up capital at 31 December 2009 to the shareholders of record as of the date of the Annual General Assembly. 23. commitments and CONTINGENT LIABILITIES At the statement of financial position date, there was a capital commitment amounting to 100,267 in respect of uncalled capital of investments (2009: 101,116). The Group s management has approved future capital expenditures contracted for at the statement of financial position date amounting to 110,338,431 (2009: 136,834,707). At 31 December 2010, the Group has given letters of credit and bank guarantees amounting to 277,934 (2009: 5,390,000). 24. Fair Value of FINANCIAL INSTRUMENTS Financial instruments comprise of financial assets and financial liabilities. Financial assets consist of cash and bank balances, short term deposits, receivables, and investments. Financial liabilities consist of bank overdrafts, term loans, and payables. The fair values of financial instruments, with the exception of certain available for sale investments carried at cost (Note 8) are not materially different from their carrying values. The fair value of financial instruments traded in active markets is based on quoted market prices at the statement of financial position date. The quoted market price used for financial assets held by the Group is the current bid price. For financial assets and liabilities that are liquid or having a short-term maturity (less than three months) it is assumed that the carrying amounts approximate to their fair value. This assumption is also applied to variable rate financial instruments.

25 Fair Value of FINANCIAL INSTRUMENTS (CONTINUED) 25. RISK MANAGEMENT (CONTINUED) Fair value hierarchy The table below analyzes financial instruments carried at fair value, by valuation methods. The different levels have been defined as follows: Level 1 : quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2 : inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs) Liquidity risk (continued) 31 December 2010 Within 3 months 3 to 12 months 1 to 5 years Total Loans 3,732,740 15,420,962 94,771, ,925,312 Security deposits - - 9,133,841 9,133, December 2010 Level 1 Level 2 Level 3 Total Trade and other payables 10,932,345 8,985,728-19,918,073 Total liabilities 14,665,085 24,406, ,905, ,977,226 Available for sale investments 7,737,298 3,087, ,500 11,377,321 Contingent liabilities , , December 2009 Level 1 Level 2 Level 3 Total Available for sale investments 10,638,345 2,869, ,500 14,060, December 2009 Within 3 months 3 to 12 months 1 to 5 years Total Loans 20,411,133 36,899,227 22,617,408 79,927,768 The table below analyses the movement in these financial instruments classified as level 3. Security deposits - - 9,413,538 9,413,538 At 1 January 2010 Change in fair value Additions Sale/ redemption Exchange rate movements At 31 December 2010 Bank overdrafts 5,058, ,058,566 Trade and other payables 4,845,277 12,604,216-17,449,493 Total liabilities 30,314,976 49,503,443 32,030, ,849,365 Contingent liabilities 5,100, ,000 5,390,000 Equities and other investments 552, , FINANCIAL RISK MANAGEMENT Risk is inherent in the Group s activities but it is managed through a process of ongoing identification, Risk 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 and each individual within the Group is accountable for the risk exposures relating to his or her responsibilities. The Group is exposed to credit risk, liquidity risk and market risk, the latter being subdivided into interest risk, foreign currency risk and equity price risk. It is also subject to operating risks. The independent risk control process does not include business risks such as changes in the environment technology and industry. They are monitored through the Group s strategic planning process Market risk Market risk is the risk that the value of a financial instrument will fluctuate as a result of changes in market prices. The Group manages this risk by investing surplus funds with professional portfolio managers and by diversifying its investments Interest rate risk Interest rate risk is the sensitivity of the Group s financial condition to future movements in interest rates. The Group would be exposed to interest rate risk as a result of mismatches in the amounts of interest sensitive assets and liabilities that mature or reprice in a given period. The following table demonstrates the sensitivity of the consolidated statement of income to reasonably possible changes in interest rates, with all other variables held constant. The sensitivity of the consolidated statement of income is the effect of the assumed changes in interest rates on the Group s profit for one year, based on the floating rate financial assets and financial liabilities held at 31 December. There is no impact on the Group s equity Credit risk Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group has adopted a policy of only dealing with creditworthy counterparties as a means of mitigating the risk of financial loss from defaults. The Group is exposed to credit risk on bank balances, and receivables. The Group s exposure to credit risk arises from default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments. The Group s exposure to credit risk is considered to be low as it does not have significant exposure to any individual customer or counterparty. Policies and procedures are in place to perform ongoing credit evaluations of the financial condition of counterparties and customers Liquidity risk Liquidity risk is the risk that an enterprise will encounter difficulty in raising funds to meet its commitments. The Group manages liquidity risk by maintaining adequate cash and cash equivalents, overdraft facilities and borrowing facilities and by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. The table below summarises the maturities of the Group s undiscounted financial liabilities at 31 December 2010 and 2009, based on contractual payment dates and current market interest rates. Increase/decrease in basis points Effect on profit for the year / , ,788 Interest rate risk sensitivity to interest rate movement will be on a symmetric basis because financial instruments that can give rise to non-symmetric movement are not significant Foreign exchange risk The Group is not significantly exposed to foreign exchange risk as the Group s foreign currency assets and liabilities are not significant.

26 RISK MANAGEMENt (continued) 25.3 Market risk (Continued) Equity price risk Equity price risk arises from changes in the fair values of equity investments. The unquoted equity price risk exposure arises from the Group s investment portfolio. Group s quoted investments are listed on the Kuwait Stock Exchange. The effect on equity (as a result of a change in the fair value of available for sale investments at 31 December) due to a reasonably possible change in market indices, with all other variables held constant is as follows: Market indices Change in equity Price Effect on equity Change in equity price Effect on equity % % Kuwait Stock Exchange 5 576, , Operational risk Operational risk is the risk of loss arising from systems failure, human error, fraud or external events. When controls fail to perform, operational risks can cause damage to reputation, have legal or regulatory implications, or lead to financial loss. The Group cannot expect to eliminate all operational risks, but through a control framework and by monitoring and responding to potential risks, the Group is able to manage the risks. Controls include effective segregation of duties, access, authorisation and reconciliation procedures, staff education and assessment processes. 26. CAPITAL RISK MANAGEMENT The Group manages its capital to ensure that it will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the gearing ratio, which is net debt divided by equity. The capital structure of the Group consists of debt, which includes the borrowings disclosed in note 15 and 16, cash and cash equivalents as disclosed in note 10 and equity. Gearing ratio The gearing ratio at year end was as follows: Debt 99,982,858 81,908,392 Cash and bank balances (5,106,892) (10,171,803) Net debt 94,875,966 71,736,589 Equity 126,983, ,394,073 Net debt to equity ratio 75% 64% The Grand Avenue