His Highness Sheikh Nawaf Al-Ahmed Al-Jaber Al-Sabah Crown Prince. His Highness Sheikh Jaber Mobarak Al-Hamad Al-Sabah Prime Minister

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4 His Highness Sheikh Sabah AlAhmed AlJaber AlSabah Amir of the His Highness Sheikh Nawaf AlAhmed AlJaber AlSabah Crown Prince His Highness Sheikh Jaber Mobarak AlHamad AlSabah Prime Minister

5 Board of Directors Audit Committee Executive Management External Auditors Fatwa and Shari a Supervisory Board Board of Directors Report Economic Abstract Key Financial Indicators 2012 Fatwa and Shari a Supervisory Board Report Consolidated Financial Statements

6 Dr. Khaled Muhammad Boodai Chairman Dr. Khalid Bin Ibrahim AlSulaiti Member Mr. Salman Marzook AlAlwan Member Ghanim Bin Saad Al Saad AlKuwari Chairman Mr. Ali Ahmad AlZubaid Deputy Chairman & Group CEO Mr. Ali Ahmad AlZubaid Deputy Chairman & Group CEO Dr. Khaled Muhammad Boodai Member Dr. Khalid Bin Ibrahim AlSulaiti Member Mr. Abdul Rahman M. Zaman General Manager Mr. Mahmoud A. AlZubaid Deputy General Manager Mr. Abdullatif M. AlAbdulrazzaq Assistant General Manager Mr. Shehab Waheed Abdel Waheed Chief Financial Officer of Group Mr. Naif Ibrahim AlHajri Assistant Group CEO Mr. Firas Faisal AlKandari Assistant Group CEO Mr. Amr Diaa Rashed Chief Financial Officer Mr. Ahmad I. AlKhalaf Board of Directors Secretary Mr. Salman Marzook AlAlwan Member Independent Auditors Mr. Fawwaz Khalid Yousef AlMarzook Member Mr. Mohammad Barrak AlMutair Member Mr. Mohammad Bin Abdulaziz AlSaad Member 04 05

7 Dr. Essam Khalaf AlEnezi Chairman Dr. Nazem M. AlMesbah Member Dr. Sulaiman Maarafi Safar Member Dr. Khaled Shojaa AlOtaibi Member Dr. Ibrahim Abdullah AlSabaii Member Dr. Naif Mohammad AlAjami Member Dr.Mohammad Oud AlFuzaie Member 06

8 Dear Shareholders, Chairman's Speech Praise be to Allah, Lord of the Worlds, All Peace and Blessings be upon our Prophet Muhammad, his family, his companions and those who followed them until the Day of Judgment, to commence, May Allah s Peace, Mercy and Blessings Be upon You, It gives me great pleasure on behalf of my colleagues in the Board of Directors and the Group s executive management to welcome you at the Seventh Annual Meeting of the Ordinary General Assembly of AlImtiaz Investment Group. I wish to present you with the annual report for the fiscal year ended on December 31st, It includes the Report of the Fatwa and Sharia SupervisoryBoard, the report of Independent Auditors, the consolidated financial statements of Al Imtiaz Investment Group, and the most remarkable financial performance indicators of the Group, in addition to a review of the most significant developments in the global, regional and local economy, and the performance of the investment sector in Kuwait. As this is the final year of your current Board of Directors, as this General Assembly meeting will mark the end of the Broad s term, allows us to include in this report a review of one aspect of the realized performance during the last three years through which the current Board of Directors assumed its responsibilities In fact, this period has been one of the most difficult financial years for global economies and companies in different sectors, specifically investment and finance sectors, since the Great Depression in the 1920s. The difficult global economy environment has not stabilized yet in 2012 or over the previous two years, which is the period when the current Board of Directors assumed the responsibility of managing the company. This prompted global finance institutions reports, like the World Bank and the International Monetary Fund (IMF), to repeatedly decrease their expectations for the performance of the global economy under the impact of poor performance of the major countries economies, which indicatethe continuous effects of the global financial crisis. The highest risks were recorded in the European Union Zone (the Euro), which concluded last year with a negative performance of 0.6%, whereas growth rates of the American economy and the BRICS countries, as well as the emerging economies performance, which is considered the driving force that will save the world from its crisis, including the Chinese economy, which is regarded the second largest global economy, achieving a growth rate of 7.8%, however declining from 9.3% achieved in 2011 as an example. These circumstances put pressures on oil markets and caused a decline in the performance of GCC region s economies to the lowest level. They realized a growth rate of 5.8% in 2012 after realizing7.7% in 2011.The growth rate of the Kuwaiti economy decreased from 6.3% in 2011 to 5.1% in Despite these negative circumstances on local, regional and international level, Alimtiaz Investment Group continued to: Set an exceptional example within the financial sector and the Company carried on with determination to build its flexible strategy that can adapt with the unstable general environment circumstances. Perform a substantial strategic shift in the company s structure to account for the changes in the global economies, transforming into a parent company model followed by a group of subsidiaries and associate companies in different activities and financial sectors that represent the genuine economy. Avoid the crisis risks and maintain the rights of shareholders. That strategy focused on hedging against the worstcase scenario. Focus on reducing the risks of its investments, and mitigate its liabilities pressures. That was done despite indicators propagating from time to time announcing that the worst of the global financial crisis, and its impact on the investment and financial sectors have passed. Make sure to select good investment assets of high quality since its corporation, which enabled the Companyin light of the lack of liquidity crisis to attain financial facilities from a number of banks, in addition to being able to sell some of them for remunerative returns. Work on avoiding the consequences of the crisis, not only by deaing with its liabilities and debt, but also by redirecting some liquidity attained by selling some assets to invest in incomegenerating and high quality assets, which contributed in regulating liquidity and cash flows of the company. These indicators data may soon change, and a problem may occur having negative impacts on the overall financial performance. Moreover, the global growth indicators, although pertinent to macro economy, have no significant effects on micro economy, specifically on companies activities and more especially on already impacted sectors. Those companies still resist the crisis consequences and try to deal with their debts, solve lack of liquidity problem and lack of opportunities offered to the private sector as most of the offered projects aredominated by the public sector, especially in the GCC region, not to mention the internal impacts in the, which have an obvious influence on the acceleration of economy and development. Dear Shareholders, Since liabilities, both in terms of their large size or being of a shortterm, represented the weakest aspect in that crisis, the Company has ended 2012 with total consolidated liabilities of million Kuwaiti dinar at the group level, a declining from million Kuwaiti dinar in 2009, a year after the crisis, when the current Board assumed its responsibilities, equaling a decrease of 72.4%. Whereas the parent company s liabilities amounted to 82 million Kuwaiti dinar only, which is a positive indicator when taking into account the company s assets, capital and equity. This came despite that the company signed a financial lease contract of 25 million Kuwaiti dinar with the Ahli United Bank in 2012, but due to a later modification in liabilities terms, the new contract is to be repaid in seven years. That led to decreasing liabilities, the matter which contributed to lowering financing costs for the three years period ending in December 31, 2012 to 27 million after it was K.D 57.5 million during the three previous years, which is another accomplishment for the company that lays the foundations for future financing opportunities the company may resort to. In this context, and during its current term( ), the Board was able to reduce the Company s total expenses by 19.5% compared to the period between 2007 and 2009, when total expenses amounted to million Kuwaiti dinar compared to the last three years when the total expenses reached million Kuwaiti dinar. That was due to policies adopted by the Company to ration expenses and its restructuring processes that paid off. Furthermore, general and administrative expenses were reduced from 48.6 million at 11.2% in the first three years to 43.3 million in the three years period ending in December 31, The company s total assets decreased at the end of 2012 by 41% compared to 2009 as a natural result of repayment of its debt, and the assets became more financed by its equity which significantly reduced its exposure to risks and increased operations efficiency. Moreover, equity increased as a result of early and flexible actions takenwhen facing the crisis circumstances by selling or keeping assets at sometimes, and acquiring high quality assets at other 08 09

9 its customers proving its high credibility. Moreover, Dimah Capital acted as the third party investment and fund management arm within the group. times based on circumstances. For instance, the company now owns most of its headquarters building the Dhow Tower whose value increased by about 1.3 million Kuwaiti dinar in The Dhow Tower also started producing income and enabled the company to headquarter most of its companies in one location. The company also carried on executing its strategy, and now owns a group of promising operational companies in different financial sectors. For example, Dimah Capital is now a subsidiary of the Group, and has started to act as the group s financial and investment arm. The company along with Triple E Holding Company also acquired a majority share in HOT Engineering & Construction Company, which is specialized in the contracting and construction sector and became a subsidiary as well, constituting along with other subsidiaries the Group s services arm, specifically in oil and energy sector, in addition to acquiring other subsidiary companies in vital sectors like real estate, health, education, IT etc Dear Shareholders, During the last three years, the company could cope with the hard crisis circumstances, and at the same time, was able to grow its equity which amounted to 215 million Kuwaiti dinar by the end of 2012, an increase of 34.3 million Kuwaiti dinar or 19% compared to 2009, along with book value per share of 190 Kuwaiti fils. That accomplishment was made despite distributing dividends to shareholders with a total value of 30.2 million Kuwaiti dinar in three years time, which might be a unique case in the investment companies sector as the Company kept distributing dividends since its corporation in May Although the 2012 s results are still a matter of a legal dispute with the Capital Markets Authority (CMA), the Board of Directors suggests distributing 7% cash dividends for 2012 from the previous years balance of carried over profits. Despite the Company has reservations in the evaluating its assets, it achieved profits of million Kuwaiti dinar before deducting the provisions in the last three years ( ), compared to 94.4 million Kuwaiti dinar in the period from 2007 to The reason when the company s profits during the crisis outweigh those reached at the time of boom is that the management was able to resist the temptations of reevaluation of its assets at a higher value in time of boom, and kept them at low cost prices although International Accounting Standards permitted that. In addition, the Company has started its restructuring plan very early by selling its assets at lower than market prices at that time, but higher than the cost prices and by repaying its liabilities. This reserved policy adopted by the Company s management led to hedging by allocating provisions of 61.2 million Kuwaiti dinar in the last three years, despite continuing its reserved policy in evaluating its assets. Although the value of the provisions increased over the last three years by four times compared to the period from 2007 to 2009, their impact on net profits, which amounted to 54.2 million Kuwaiti dinar, was limited, as they decreased by 20.9 million Kuwaiti dinar for the period from 2010 to 2012 compared to the period from 2007 to Dear Shareholders, The Board of Directors set its eyes on building a solid investment group that can keep on working and offering returns for years to come, and maintain its shareholders equity. On this occasion, allow me to express my gratitude and appreciation for your support to the company and its endeavors during this highly critical and difficult phase, which helped the Group quickly mitigate the crisis impacts, and for your high responsiveness to the Board s quick and prudent decisions, which enabled the company to avoid bigger issues that could have occurred if it were not for your support, as well as your understanding of this stage s difficulties and sensitivity. Today, we reap the benefits of the outstanding collaboration between the Board and Shareholders, Currently, Alimtiaz Investment Group is the largest investment company (with its traditional and Islamic parts) in Kuwait in terms of total shareholders equity, the second largest in terms of capital, and the fourth largest investment company (with available data) in terms of assets as of the end of It is a distinct accomplishment to reach this position in a period of seven years among more than 90 investment companies working in the Kuwaiti market. In conclusion, I pray to Allah to grant us success and the best of luckfor your company, and progress and prosperity for our national economyunder the prudent leadership of His Highness the Emir of Kuwait and his Crown Prince. I pray to Allah Almighty to preserve our country and other Muslim countries from all evils, and guide us to work for the goodness of our nations. Furthermore, I would like to thank the executive management, and pass gratitude to all staff members. I would also like to thank the honorable members of the Fatwa and Shari a Supervisory Board for their scrupulous efforts, sound opinions and sincere advice regarding the matters concerning Shari a compliance, contracts and business operations referred to them, which they have examined and reviewed, as well as for their solutions in support of Shari a compliant applications of economic transactions. I also wish to offer my regards to the attending and participating persons. May Allah s Peace, Mercy and Blessings be with You, Ghanim Bin Saad Al Saad AlKuwari Chairman of the Board of Directors Furthermore, the moneys managed on behalf of third parties outside the budget (trusted moneys) decreased from million Kuwaiti dinar in 2009 to 52.7 million Kuwaiti dinar at the end of December That was because of returning the moneys to its customer investors and shareholders in its portfolios and investment funds when it sensed their need for their moneys after the global financial crisis, although these moneys maturity terms were not due then, and in response to regulatory authorities requirements at that time. Alimtiaz Investment Group, thanks to God, fulfilled its obligations toward 10 11

10 1 The Global Economy According to the International Monetary Fund s (IMF) estimations, the global economy size at the end of 2012 amounted to $71.9 trillion, and could have been higher if it was not affected by a major crisis that caused a deflation of about 0.6% in This was the first deflation of the global economy as a whole since World War II. Afterwards, the global economy continued with a positive growth of 5.3% in 2010, 3.9% in 2011 and 3.5% in This quick recovery is considered an achievement when compared to what occurred globally after the major crisis occurred in Most of the recovery was a result of the emerging economies dominating half of the global economy growth rate. For example, both China and India achieved a growth of 7.8% and 4% respectively in It should be noted that that growth rates achieved by China and India were lower than those achieved in 2011, namely 9.3% for China and 7.7% for India. Also, the Brazil s growth rate decreased from 2.7% in 2011 to 0.9% in Moreover,in 2012 the USA achieved a growth rate of 2.2% and Japan achieved a growth rate of 2% in Japan, but the EU had a deflation of 0.6%. The International Monetary Fund decreased its estimations for the 2012 and 2013 global economy growth from 3.3% and 3.6% in the October 2012 report to 3.2% and 3.5% respectively in the January 2013 report. As for the latest estimations issued in April this year, the IMF fixed its 2012 global economy growth estimates at 3.2% and decreased the 2013 s estimates to 3.3%, which means that the IMF s estimations for the current year s growth are directed towards a decline in the last six months, although they are still positive and above 3%, which is an acceptable percentage in light of the crisis recovery circumstances. One of the most important obstacles to reading the global economy course in the short term is how Europe will face its sovereign debt crisis, especially with the continuous concerns about the steadfastness of some economies, like Greece, Spain and Italy. In light of the disparate results of elections results, as was the case in Italy recently, it remains hard to bet on the stability of a specific economic line in managing the crisis in those countries. Consequently, it is a challenge to accurately predict how quickly Europe, the monetary union, will recover. The other obstacle facing the global economyis the US sovereign debts and the growing political controversy over raising the government debtceiling and reducing public expenditure. Furthermore the US Federal Bank has continued its quantitative easing policy and the Bank of Japan followed this path as well, which is regarded another positive factor that is added to the European Central Bank efforts to save the Euro and consequently that contribute to the recovery of the global economy. 2 The Regional Economy (GCC Countries) was 7.3% in 2012, and it achieved a compound annual nominal growth of 7% in the period from 2008 to That was despite recording a highly negative nominal growth of 20.6% in Initial estimates indicate that GCC s nominal GDP has reached about $1.55 trillion in 2012, achieving an increase compared to the highest level of nominal GDP of $1.44 trillion in 2011, which in turn is much higher than its 2007 s level, a year before the crisis, when it reached $928.6 billion. Nominal GDP of the GCC States during the period ( ) Year * 2012 Initial estimates. Source: IMF April 2013 and Alshall. The oil sector s average contribution to the GCC s GDP was 49.2% in the period from 2008 to 2012, which indicates that the region s economies rely on oil. Initial estimations indicate that the old contribution has increased to 51% in 2012 with the oil prices remaining high and the increase of GCC region s oil production. However, that contribution might decrease in 2013 if oil prices fall below $100 even with the same production level staying at the 2012 s level. Oil is the growth drive without negative impacts in the short term, but it is also involves the highest risks. For example, fears of a possible depression in global economy led to a decrease in oil prices from more than $130 in July 2008 to less than $40 in December in the same year, which comprises a 70% decline in less than 6 months, a high decline in a short period. The IMF estimates a real GDP growth in the six GCC countries in 2013 and 2014 of 3.8% and 4% respectively, which are less than the average real growth of 5.5% during the period from 2008 to The nominal economy size of these countries will amount to $1.58 trillion in The justification for the expected growth reduction is that the powerful oil market in 2012 and part of 2013 will not remain in the upcoming years because oil supplies from other countries will increase and because of the low growth rates of the global economy. KSA UAE Kuwait Qatar Oman Bahrain Billion $ The GCC s real GDP achieved a growth rate of 5.8% in 2012 according to the IMF s estimations, which is higher than the average real growth rate realized in the period from 2008 to 2012 which amounted to 5.5%. A notable slight real growth of the region s economy of 0.2% occurred in The nominal GDP 12 13

11 The final account of the 2000\ \ The Local Economy GDP Initial estimates indicate that the Kuwaiti economy achieved a real growth of 5.0% in 2012, and the nominal GDP was $170.1 billion, which is a nominal growth of 5.7% compared to 2011 ($160.9 billion). Most of the growth was achieved due to the increase of the Kuwaiti oil barrel average price from $107.5 in 2011 to $108.6 in 2012, in addition to the increase of the daily average production to 2.75 million bpd compared to 2.6 million bpd in 2011, and to Kuwait s official OPEC share of 2.22 million bpd. The Kuwaiti government recalculated the official data of real growth for the period from 2006 to 2011, and the new data indicates that the Kuwaiti economy real growth reached 6.3% in 2011, after a deflation for two consecutive years of 7.1% in 2009 and 2.4% in Total GDP with current prices, its real growth rate and the average price of Kuwaiti oil barrel * 2012 Initial estimates. Source: The Quarterly Statistical Bulletin of the Central Bank of Kuwait December 2012, IMF June 2013 and Alshall. Public Finance For thirteen years, Kuwait s general budget has continued to achieve a surplus amounted to KWD 13.2 billion for the 2011\2012 fiscal year, which was the highest surplus rate ever reached over the aforementioned years. More over, it is expected to a surplus of about KWD 11 billion will be achieved in the current fiscal year, namely (2012/2013). Oil revenues contributed with no less than 92.8% to the total budget revenues during periods ( ) and ( ). The majority of the budget s expenses are current ones; they include direct and indirect salaries, civilian and military wages, and those amounts transferred to social security and for supporting goods and services Source: The Ministry of Finance 2012 and Alshall. Population and labor force The compound annual growth of Kuwait s population for the period ( ) was about 4.7% with an increase of 5.5% for nonkuwaitis and 3% for Kuwaitis. Kuwait has been experiencing an expansive demographic policy since Furthermore, the Kuwaiti contribution to the total population decreased from 37.1% in 2002 to 31.7% in 2012, and the total population increased from 2.4 million, of which thousand were Kuwaitis, in 2002, to 3.8 million including 1.2 million Kuwaitis in While the increase in the Kuwaiti population increase seems natural in part, a small part of the increase is due to granting Kuwaiti citizenship to a number of the population. The reason for the nonkuwaitis number increase may be the financial expansion during , which encouraged higher rates of importing labor force by businesses and house owners with the absence of any governmental demographic policy. The annual growth of nonkuwaitis population decreased during 2008 and 2009 by 0.4% and 0.5% respectively as a result of the global financial crisis and its impact on the local economy. However, the increase started with higher percentages of 2.9% in 2010, 3.3% in 2011 and a notable increase of 3.9% in 2012; Kuwait doesn t adopt any declared demographic policy to handle quality and quantity. Demographic growth in Kuwait Source: Population and labor force statistics from the Public Authority for Civil Information December 2012 and Alshall

12 Local Economy performance expectations The latest economic growth expectations issued by the Economist Intelligence Unit indicate that the Kuwaiti economy may achieve a growth of 4.2% in 2013, with the continuous state of uncertainty around the world caused by the European crisis. Indicators for oil prices impacts and decrease indicate lower positive growth expectations this year; however such lower rates shall be reached only of the global economy does not undergo any depression and the risks implied in the continuous decrease of growth rates seem relatively high, albeit far exceeded by the possibility of the globe overcoming the European sovereign debt crisis, and more optimistically the US sovereign debt. Since the local economy growth depends on a key variable which is the oil sector performance, the economy performance follows the positive or negative fluctuations in oil prices,. According to the Economist Intelligence Unit, it is also expected the Kuwaiti nominal GDP will reach $171.8 billion in Source: The Central Bank of Kuawit and consolidated financial statements of investment companies. A. Companies listed in the investment sector Total assets of 39 listed investment companies (traditional and Islamic) with available statements in 2012 amounted to KWD 5.1 billion. Total assets for every company amounted to KWD million in 2012, compared to the highest rate of KWD million reached at the end of 2007, which represents a decline of about 48%. Equity rate of these companies dropped gradually from KWD million for each company in 2007, to KWD 57.8 million at the end of Consolidated budget of listed investment companies (with available data) Source: Economist Intelligence Unit report estimates June 2013 and Alshall 4. Investment Sector The number of Kuwaiti investment companies registered at the Central Bank of Kuwaitis 93 companies by the end of 2012, compared to 95 in 2011 and 100 in Average assets of investment companies in Kuwait dropped from KWD million for every company at the end of 2007 to about KWD million at the end of That decrease is attributed to the ramifications of the global financial crisis. Investment companies average liabilities amounted to KWD 83 million (for every company) at the end of 2012 after it was KWD 82.3 million at the end of 2011; the highest average liabilities level was around KWD million for every company at the end of Source: Consolidated financial statements of listed investment companies. The table includes listed investment companies (with available data). *The table doesn t include KIPCO since it s a holding company and Burgan Bank is included in its statement

13 The global financial crisis, and later the European sovereign debt crisis, negatively affected the performance of most of the investment sector s companies, and most of them incurred losses in 2008, which continued to Losses of the listed investment companies (with available statements) decreased to KWD million as of the end of 2012, at a loss rate of KWD 3.1 Million for each company, compared to a loss rate that amounted to KWD million and at annual loss rate of KWD 4.8 million for each company by the end of The highest loss rate was incurred in 2009 with KWD million; each company incurred a loss of KWD 21.9 million. Consolidated budget of listed Islamic investment companies (with available data) Loss & profit of total listed investment companies (with available data) Source: Consolidated financial statements of listed Islamic investment companies. Source: Consolidated financial statements of listed investment companies. The table includes listed investment companies (with available data). *The table doesn t include KIPCO since it s a holding company and Burgan Bank is included in its statement. B. Consolidated financial performance of listed Islamic investment companies The number of Islamic investment companies listed in Kuwait Stock Exchange decreased to 14 companies in That decrease was due to the Capital Markets Authority s decision to cancel the listing of some companies including 7 Islamic investment companies. Islamic investment companies recorded losses during , and the average loss for every company reached its maximum value in 2009 with KWD 30.6 million due to the global financial crisis repercussions, and the general local management s failure to avoid the unnecessary impacts. However, the Islamic investment companies sector achieved profits at the end of 2011 where average profit of every company reached KWD 2.3 million. The average loss for every company was KWD 0.7 million at the end of It s worth mentioning that Alimtiaz Investment Group achieved a profit of KWD 22.7 million in 2011, but recorded a loss of KWD 9.8 million at the end of Loss & profit of total listed Islamic investment companies (with available data) Total assets of 12 of such companies (with available statements) amounted to KWD 1.3 billion at the end of 2012, whereas their total liabilities amounted to KWD 651 million; i.e.,50% of their total assets. Assets of listed Islamic investment companies (with available statements) represent 25.5% of the total assets of listed investment companies in 2012, whereas the Islamic Investment companies liabilities represent 22.9% and their equities constitute 28.8% for the same period. Total equities of listed Islamic investment companies represent 50% of its total assetsin C. Comparing the company s performance with the listed Islamic investment companies and the investment sector companies Liabilities to assets ratio of Alimtiaz Investment Group declined from 82.4% in 2008 to 33.1% in 2012 according to the its 2012 audited statements. Alimtiaz Investment Group s assets decreased by 3.1% at the end of 2012 compared to 2011, whereas average assets of listed Islamic investment companies decreased by 14.1%, and the same applies to other traditional investment companies with a decrease of 6.7% for the same period

14 Alimtiaz Investment Group achieved an increase in equity from 2007 until the end of 2011, whereas equity decreased for each of Islamic investment companies and all listed investment companies from 2008 until 2010, and increased in 2011 for both of them in general. However, Alimtiaz Investment Group s equity decreased by 10.2% in 2012 compared to 2011, and decreased by 4.3% and 0.8% for Islamic investment companies and all listed investment companies respectively. Comparing listed Islamic investment companies and investment sector companies D. The largest 10 companies listed in the investment sector in terms of capital at the end of 2012 Total equity of the biggest 10 listed investment companies listed in terms of capital reached KWD 1.4 billion, which represent 60.1% of the investment companies total equity. Alimtiaz Investment Group is the biggest investment company in Kuwait in terms of total equity and the second largest listed investment companies (traditional & Islamic) in terms of its capital which was KWD million at the end of It is also the fourth largest investment company (with available statements) in terms of assets as of the end of 2012; value of its total assets was KWD million. Alimtiaz Investment Group liabilities reached KWD million at the end of The largest 10 companies listed in the investment sector in terms of capital at the end of 2012 Alimtiaz order in the invesmtent sector in terms of equity between Source: Consolidated financial statements companies with available data (39 companies) at the end of *The table doesn t include KIPCO since it s a holding company and Burgan Bank is included in its statement. 21

15 Sectoral & Geographical Investments Diversification as of 31 Dec, 2012 Financial Indicators as of Dec 31, 2012 Million K.D Total Assets, Total Liability & Total Equity Million K.D Sectoral & Geographical investments Diversification as 31 Dec,

16 Dividends Since Inception Total Equity attributable to Shareholders Parent Company Million K.D Proposed Total Debts & Liabilities as of Dec 2012 Million K.D Total Equity attributable to Owners of the Parent Company PaidUp Capital since Inception Million K.D 24 25

17 Praise be to Allah, and Peace and Blessings be upon our Prophet, and His Family and Companions. Dear Shareholders of Al Imtiaz Investment Group, May Allah s Peace, Mercy and Blessings Be upon you, In accordance with the Fatwa and Shari a Supervisory Board task that you have assigned to us we, therefore, have reviewed the contracts and transactions entered into by the Company during the period from January 1st, 2012 to December 31st, Our responsibility is confined to express an independent opinion on the company s compliance with the Principles of Islamic Shari a in its businesses and activities. Based on the report of the Shari a audit referred by the Shari a Supervisory Department, which accomplished the audit in accordance with the decisions made by the Board as per the standards and regulations of the Accounting and Auditing Organization for Islamic Financial Institutions, which require planning and implementation of audit and review measures in order to acquire all the required information, explanations and acknowledgements to provide reasonable confirmation that the company complies with the Principles of Islamic Shari a as stated by us. Hence, we believe that the audit works conducted by the management provide an appropriate basis for expressing a reasonable opinion. It is worth noting that the compliance with the implementation of contracts and transactions in accordance with the Principles of Islamic Shari a, as stated by us, is the responsibility of the Company s Management. Consequently, the Board believes as follows: 1. The company, during the relevant period, has fulfilled its duties regarding the implementation of contracts and transactions in accordance with the provisions of Islamic Shari a, as reflected in the Shari a opinions, guidelines and decisions released by us during the said period, and that no violations to the Islamic Shari a are found to be contradictory with such opinion. 2. All revenues resulted from sources or methods that are prohibited by Islamic Shari a have been set aside to be disposed of in charity. 3. The calculation of Zakat has been conducted in accordance with the principles approved of by the Board. May Allah bless our Prophet Muhammad, His Family and Companions. Praise be to Allah, Lord of the Worlds. Dr. Nazem M. AlMesbah Member Dr. Essam Khalaf AlEnezi Chairman Dr. Sulaiman Maarafi Safar Member Dr. Khaled Shojaa AlOtaibi Member Dr. Ibrahim Abdullah AlSabaii Member Dr. Naif Mohammad AlAjami Member Dr. Mohammad Oud AlFuzaie Member 27

18 Independent Auditors Report Consolidated statement of financial position Consolidated statement of income Consolidated statement of comprehensive income Consolidated statement of changes in equity Consolidated statement of cash flows

19 Al Jawhara Tower, 6th floor Khaled Ben AlWaleed street, Sharq P.O.Box 25578,Safat, Kuwait Telephone number: Fax: INDEPENDENT AUDITORS REPORT TO THE SHAREHOLDERS AL IMTIAZ INVESTMENT GROUP COMPANY K.S.C. (CLOSED) STATE OF KUWAIT Report on the consolidated financial statements We have audited the accompanying consolidated financial statements of Al Imtiaz Investment Group Company K.S.C. (Closed) (the Parent Company) and its subsidiaries (the Group), which comprise the consolidated statement of financial position as of 31 December 2012, 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 Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards as adopted in the State of Kuwait, 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. Opinion In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the financial position of (the Parent Company) and its subsidiaries (the Group) as of 31 December 2012, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted in. Emphasis of a matter We draw attention to Note no. (11) of the consolidated financial statements regarding investment in an associate. Our opinion is not qualified in respect of this matter. Report on Other Legal and Regulatory Requirements 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 and by the Parent Company s Memorandum and Article 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 nor of the Parent Company s Memorandum and Articles of Association, have occurred during the year that might have had a material effect on the business or the consolidated financial position of the Group. We further report that, during the course of our audit, we have not become aware of any material violations, during the year, of the provisions of Law No. 32 of 1968, as amended, concerning currency, the Central Bank of Kuwait and the organization of banking business, and its related regulations. 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. 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 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. Qais M. Al Nisf Licence No. 38 A BDO Al Nisf & Partners Kuwait: 27 June 2013 Dr. Shuaib A. Shuaib Licence No. 33 A RSM Albazie & Co

20 Consolidated statement of financial position as at 31 December 2012 Notes (Restated) Assets Cash and cash equivalents 4 21,699,195 28,444,122 Time deposits 5 421,174 4,364,801 Investments at fair value through statement of income 6 4,450,798 4,747,992 Receivables and other debit balances 7 67,751,273 71,729,181 Murabaha receivables 8 724,726 2,574,847 Property held for trading 7,855,737 7,855,737 Workinprogress 400,296 2,002,758 Other assets 7,234,805 6,010,537 Properties under development 9 22,011,230 10,854,500 Available for sale investments ,982, ,283,983 Investment in associates 11 54,236,374 49,690,764 Investment properties 12 49,793,733 18,006,253 Property, plant and equipment 13 28,210,878 31,281,609 Goodwill 3,144,478 2,592,696 Assets held for sale 14 15,494,678 Total assets 371,917, ,934,458 Equity and liabilities Liabilities Payables and other credit balances 15 52,109,533 48,424,204 Finance lease obligation 16 36,102,439 11,054,302 Murabaha and wakala payable 17 31,396,158 44,378,246 Provision for employees end of service indemnity 3,574,797 3,015,194 Total liabilities 123,182, ,871,946 Equity Share capital ,361, ,361,735 Share premium 19 34,108,277 34,108,277 Treasury shares 20 ( 3,682,805) (2,078,050) Statutory reserve 21 16,089,426 16,089,426 Voluntary reserve 22 30,676,870 30,676,870 Other equity items 23 ( 7,165,293) (2,326,712) Retained earnings 31,536,400 52,481,828 Equity attributable to shareholders of parent company 214,924, ,313,374 Noncontrolling interests 33,809,573 34,749,138 Total equity 248,734, ,062,512 Total equity and liabilities 371,917, ,934,458 The accompanying notes on pages 37 to 80 form an integral part of these consolidated financial statements. The accompanying notes on pages 8 to 51 form an integral part of these consolidated financial statements. Consolidated statement of income Notes Income Net investment income 24 4,860,238 1,246,699 Murabaha income 84, ,144 Management, placement and subscription fees 700, ,758 Rental income 1,240, ,782 Profits from sale of a subsidiary which became an associate 11 8,940,759 Profits from sale of assets held for sale 14 3,417,427 36,380,809 Group s share of associates' results 11 ( 4,031,275) (2,727,768) Unrealized gain from change in the fair value of an associate which became a subsidiary 4,783,237 Change in fair value of investment properties 12 2,113,665 2,937,609 Loss from sale of investment properties (25,000) Other income 7,001,084 3,813,099 Total income 24,327,970 47,974,369 Expenses and charges General and administrative expenses 25 9,656,002 13,513,676 Finance costs 26 4,477,095 3,282,326 Management, placement and subscription costs 229, ,703 Gains from foreign currency translation ( 226,937) (202,890) Impairment and other provisions 27 11,693,035 8,149,947 Impairment provision/(reversal of provision) of investments in associates 11 3,185,423 (981,063) Depreciation of property, plant and equipment 13 3,446,008 1,031,485 Total expenses and charges 32,460,062 25,174,184 (Loss)/profit for the year before KFAS, NLST, Zakat and Board of Directors remuneration (8,132,092) 22,800,185 Contribution to Kuwait Foundation for the Advancement of Sciences 28 (174,991) National Labor Support tax 29 (366,434) Zakat 30 (177,385) Board of Directors remuneration (140,000) Net (loss)/profit for the year (8,132,092) 21,941,375 Attributable to: Shareholders of the parent company (9,808,824) 22,722,236 Noncontrolling interests 1,676,732 (780,861) Net (loss)/profit for the year (8,132,092) 21,941,375 (Loss)/earnings per share attributable to the Parent Company's shareholders (fils) 31 (8.86) The accompanying notes on pages 37 to 80 form an integral part of these consolidated financial statements. Mr. Abdul Rahman M. Zaman General Manager Ali Ahmed Zubaid Vice Chairman & CEO of the Group Ghanim Bin Saad Al Saad Chairman 32 33

21 Consolidated statement of comprehensive income Consolidated statement of changes in equity Net (loss)/profit for the year (8,132,092) 21,941,375 Other comprehensive income: Change in fair value of available for sale investments ( 1,180,675) 890,371 Property, plant and equipment revaluation surplus 164,415 Foreign currency translation differences ( 32,565) 332,631 Share of other comprehensive (loss)/income of associates ( 723,545) 3,049,442 Other comprehensive (loss)/income for the year ( 1,772,370) 4,272,444 Total comprehensive (loss)/income for the year (9,904,462) 26,213,819 Attributable to: Shareholders of the parent company (11,581,194) 26,994,680 Noncontrolling interests 1,676,732 (780,861) Total comprehensive (loss)/income for the year (9,904,462) 26,213,819 The accompanying notes on pages 8 to 51 form an integral part of these consolidated financial statements. The accompanying notes on pages 37 to 80 form an integral part of these consolidated financial statements. Total equity Noncontrolling interests Equity attributable to shareholders of parent company Retained earnings Other equity items (note 23) Voluntary reserve Statutory reserve Treasury shares Share premium Share capital 231,502, ,577,546 Balance as at 31 December ,361,735 34,108,277 13,731,321 25,960,661 ( 3,829,871 ) 48,170, ,502,203 13,075, ,577,546 Cash dividends ( 11,336,174 ) ( 11,336,174 ) (11,336,174 ) Effect of purchase of share in a subsidiary ( 2,769,285 ) ( 2,769,285 ) (2,769,285 ) Purchase of treasury shares ( 2,078,050 ) ( 2,078,050 ) (2,078,050 ) Change in noncontrolling interests 22,454,656 22,454,656 Total comprehensive income/(loss) for the year 4,272,444 22,722,236 26,994,680 ( 780,861 ) 26,213,819 Transfer to reserves 2,358,105 4,716,209 ( 7,074,314 ) Balance as at 31 December ,361,735 34,108,277 ( 2,078,050 ) 16,089,426 30,676,870 ( 2,326,712 ) 52,481, ,313,374 34,749, ,062,512 Balance as at 31 December ,361,735 34,108,277 ( 2,078,050 ) 16,089,426 30,676,870 ( 2,326,712 ) 52,481, ,313,374 34,749, ,062,512 Cash dividends ( 11,136,604 ) ( 11,136,604 ) (11,136,604 ) Effect of sale of share in a subsidiary ( 3,106,329 ) ( 3,106,329 ) (3,106,329 ) Net purchase of treasury shares ( 1,604,755 ) ( 1,604,755 ) (1,604,755 ) Change in noncontrolling interests ( 2,616,297 ) (2,616,297 ) Profit from sale of treasury shares 40,118 40,118 40,118 Total comprehensive loss for the year ( 1,772,370 ) (9,808,824) (11,581,194) 1,676,732 (9,904,462) Balance as at 31 December ,361,735 34,108,277 ( 3,682,805 ) 16,089,426 30,676,870 ( 7,165,293 ) 31,536, ,924,610 33,809, ,734,183 The accompanying notes on pages 37 to 80 form an integral part of these consolidated financial statements

22 Consolidated statement of cash flows (Restated) Cash flows from operating activities (Loss)/profit for the year before KFAS, NLST, Zakat and Board of Directors remuneration (8,132,092) 22,800,185 Adjustments: Net investment income ( 4,860,238) (1,246,699) Murabaha income ( 84,725) (109,144) Change in fair value of investment properties ( 2,113,665) (2,937,609) Profits from sale of assets held for sale ( 3,417,427) (36,380,809) Loss from sale of investment properties 25,000 Group s share of associates' results 4,031,275 2,727,768 Finance costs 4,477,095 3,282,326 Impairment and other provisions 11,693,035 8,149,947 Impairment provision/(reversal of provision) of investments in associates 3,185,423 (981,063) Depreciation of property, plant and equipment 3,446,008 1,031,485 Provision for employees end of service indemnity 973,016 2,607,172 9,197,705 (1,031,441) Changes in operating assets and liabilities: Investments at fair value through statement of income 379,886 (5,729,935) Receivables and other debit balances ( 15,663,424) (187,142) Murabaha receivables ( 10,178,794) 1,133,955 Property held for trading ( 1,050,464) (7,855,737) Workinprogress 1,602,462 Other assets ( 2,072,921) (5,341,912) Payables and other credit balances 30,448,625 31,098,528 Cash generated from operations 12,663,075 12,086,316 Payment of employees end of service indemnity ( 290,804) (849,312) Net cash generated by operating activities 12,372,271 11,237,004 Cash flows from investing activities Time deposits 1,893,627 (3,334,801) Properties under development (5,554,500) Net movement in available for sale investments 20,175,562 (20,865,904) Net movement in investment in associates ( 1,358,301) 20,266,741 Investment properties acquired ( 18,026,670) (13,011,180) Net movement on property, plant and equipment ( 4,568,136) (18,924,618) Goodwill (647,141) Proceeds from sale of assets held for sale 9,789, ,108,952 Cash dividends received 414, ,072 Cash dividends received from associates 245, ,696 Net cash generated by investing activities 8,566,230 64,988,317 Cash flows from financing activity Cash dividends paid to shareholders ( 11,136,604) (11,336,174) Purchase of treasury shares ( 1,604,755) (2,078,050) Treasury shares reserve 40,118 Effect of sale/purchase of share in a subsidiary 53,440 (2,769,285) Murabaha and wakala payable ( 14,483,941) (68,723,263) Finance costs paid ( 2,670,311) (5,261,569) Effect of change in noncontrolling interests 2,118,625 21,673,795 Net cash used in financing activities ( 27,683,428) (68,494,546) Net (decrease) /increase in cash and cash equivalents ( 6,744,927) 7,730,775 Cash and cash equivalents at beginning of the year 28,444,122 20,713,347 CASH AND CASH EQUIVALENTS AT END OF YEAR (Note 4) 21,699,195 28,444,122 The accompanying notes on pages 37 to 80 form an integral part of these consolidated financial statements. 1. INCORPORATION AND ACTIVITIES Al Imtiaz Investment Company K.S.C. (Closed) (Parent Company) is a Kuwaiti closed shareholding company incorporated on 30 April 2005 in the. The name of the Parent Company was changed to based on a resolution by the extraordinary general assembly held on 26 April 2012 and this was registered in the commercial register under No on 19 June It is engaged in investments and related financial services. All parent company s activities are approved by the Fatwa and Shari a Supervisory Board and are conducted in accordance with Islamic Shari a. The Parent Company s shares were listed on the Kuwait Stock Exchange on 19 April The Group s consolidated financial statements comprise the financial statements of the Parent Company and its subsidiaries (the Group), see note 3.3. The Company s registered address is P. O. Box 29050, Safat Zip Code State of Kuwait. The consolidated financial statements were authorized for issue by the Parent Company s board of directors on 27 June The Shareholders General Assembly has the power to amend these consolidated financial statements after issuance. The Companies Law issued on 26 November 2012 by Decree Law No. 25 of 2012 (the Companies Law ), which was published in the Official Gazette on 29 November 2012, cancelled the Commercial Companies Law No. 15 of The Companies Law was subsequently amended on 27 March 2013 by Decree Law No. 97 of 2013 (the Decree). According to articles 2 and 3 of the Decree, Executive Regulations, which shall be issued by the Ministry of Commerce and Industry by 26 September 2013 will determine the basis and rules which the Parent company shall adopt to regularise its affairs with the Companies Law as amended. 2. ADOPTION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRSs) The accounting policies adopted in the preparation of the consolidated financial statements are consistent with those used in previous year except as follows. 2.1 New and revised IFRSs adopted by the Group The Group has adopted the following amended IFRS during the year: Amendments to IFRS 7, Financial instruments: Disclosures, on transfer of financial assets (Effective for annual periods beginning on or after 1 July 2011) The amendment requires additional disclosure about financial assets that have been transferred but not derecognized to enable the user of the Group s financial statements to understand the relationship with those assets that have not been derecognized and their associated liabilities. In addition, the amendment requires disclosures about continuing involvement in derecognized assets to enable the user to evaluate the nature of, and risks associated with, the entity s continuing involvement in those derecognized assets. The amendment is effective for annual periods beginning on or after 1 July The adoption of the amendment did not have any impact on the consolidated financial position or performance of the Group