Kids are the foundation of our future with a well established foundation and a well envisioned future, we have earned well deserved and prestigious

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2 Kids are the foundation of our future with a well established foundation and a well envisioned future, we have earned well deserved and prestigious awards that define our commitment and dedication to setting higher standards in building and developing communities.

3 In the name of allah, the most gracious, the most merciful

4 H.H, Sheikh Sabah Al-Ahmad Al-Jaber Al-Sabah Amir of the State of Kuwait

5

6 H.H, Sheikh Nawaf Al-Ahmad Al-Jaber Al-Sabah Crown prince of the State of Kuwait

7

8 H.H. Sheikh Nasser Al-Mohammed Al-Ahmad Al-Sabah Prime minister of the state of Kuwait

9

10 The future is not something we enter. The future is something we create.

11 Contents Chairman s Letter 14 Board of Directors 17 Executive Management 17 Independent Auditor s Report 20 Consolidated statement of income 22 Consolidated balance sheet 23 Consolidated statement of changes in equity 24 Consolidated statement of cash flows 25 Notes to the consolidated financial statements 27

12 Quality Work

13 Can t be Ignored

14 Chairman s Letter In The Name of God, Most Gracious, Most Merciful Honorable Shareholders, Peace and God s Mercy and Blessings be upon you, On behalf of my colleagues and fellow board members, it is my pleasure to present to you the Annual Report of Tamdeen Real Estate Company, which demonstrates the Company s achievements during the year 2007, including the financial statements and the auditors report for the fiscal year ending on 31st December, Honorable Shareholders, The Kuwait economy sustained a good performance during the year 2007, in light of the rising oil prices in the world markets, which helped to realize rewarding rates of growth. The escalation in oil prices contributed largely toward boosting the surpluses of the State s public budget as well as the liquidity levels, and in turn, these were associated with a rise in economic growth rates. Also, there was an increase in the size of government investments, mainly in the country s infrastructure, taking into account the decision of the Central Bank of Kuwait to disconnect the linkage between the Kuwaiti Dinar and the US. Dollar, and linking it instead with a basket of international currencies. Furthermore, the weighted index of Kuwait Stock Exchange scored a rate of growth around 24% during the year 2007, thus reflecting the reality that Kuwait financial markets are among the most promising and low risk. This factor was a driving force in Kuwait economic development in partnership with the real estate private sector as a vital central power for the local economy. It also confirms that Kuwait financial markets represent a safe haven at times of dangerous instability in the other investment and financial markets. Honorable Shareholders, The year 2007 has witnessed positive and rewarding operational developments for Tamdeen Real Estate Company, which as a whole represented a continuation of the plans set out and developed in the previous years. As such, the works were concluded in the developmental project of the commercial Al Manshar Towers & Complex, which began operation during the first quarter of the year 2007 with occupancy rates in the available units exceeding 90%. Moreover, the works were completed in constructing and commencing the operation of Al Manshar Rotana Hotel, with an operational capacity amounting to 200 rooms. This hotel is considered among the outstanding hotels in Kuwait City, in general, and in the Fahaheel area, in particular. In the year 2007, the higher management of Tamdeen Real Estate Company continued implementing the development of the strategic planning it had adopted since year 2005, based mainly on Tamdeen Real Estate Company s focus on activities of developing real estate projects while assigning the tasks of management and operation to specialized subsidiaries to be established for this purpose. This is exactly what was carried out in the past when Tamdeen Shopping Centre Development was established. The same approach was adopted and concluded during the year 2007 by establishing the Manshar Real Estate Company, which main role is to focus on developing the operational performance of Al Manshar Towers & Complex after completing its development plan to become one of the important developmental landmarks in the State of Kuwait. Carrying on the implementation of such strategic planning is expected to contribute substantially 16 Annual Report 2007

15 toward increasing the value of our shareholders investments through ownership in the specialized subsidiaries to the parent company. This will also reflect positively on the size of the parent company s assets, and will augment the efficiency and usefulness of deploying its assets through the subsidiaries. Honorable Shareholders, The year 2007 represented a continuation of the successes the Company had realized during the previous years, which were crowned by attaining several distinct international awards for the two development projects of Al Manshar Towers & Complex and the Fahaheel Water Front Al Kout. The Al Manshar Towers & Complex project attained both the Distinction Award from the American Concrete Institute and the Euro-Money Award, which was conferred on Tamdeen Real Estate Company as the best real estate developer in the State of Kuwait. The Fahaheel Water Front Al Kout project attained the Design & Development Award from the World Board for Shopping Centers as well as receiving the Completion Pioneer Award from the 6th Conference on the Private Sector Role in B.O.T. Projects, and it also achieved the Islamic Architecture Award for year 2007 during the architectural events of City Scape Exhibition in Dubai. Honorable Shareholders, Tamdeen Real Estate Company has managed, with God s Blessings and good fortune, to realize exceptional financial results during the year 2007, clearly witnessed in the improvement of operational results, whereby a 41% gross growth rate was realized in operational revenues as compared with the previous year. Aside from this, the Company realized a growth rate in net profit equal to 256% as the net profits reached 16 Million Kuwaiti Dinars, with an earning per share of 34 Fils. In addition to this, the Company s ability to realize growth rate in total assets amounted to 23% overall. Thus, the Company s total assets reached 432 Million Kuwaiti Dinars. Owing to these outstanding results, the Company s Board of Directors has decided to distribute cash dividends for the fiscal year ended on the 31st December, 2007 at the rate of 10% of the paid up capital, in addition to distributing bonus shares equivalent to 10 shares for each 100 shares, to the shareholders recorded in the Company s books as of the date of holding the General Assembly Meeting. Honorable Shareholders, I would like further, on behalf of my colleagues and fellow board members, to express the highest praise, thanks and immense gratitude to His Highness, the Amir Sheikh Sabah Al-Ahmad Al-Jaber Al-Sabah, may God protect him, His Highness, the Crown Prince Sheikh Nawaf Al-Ahmed Al-Jaber Al-Sabah, may God protect him, and His Highness, the Prime Minister Sheikh Naser Al-Mohammed Al-Ahmad Al- Sabah, may God protect him, for the continuous attention and care to the private sector in the country. Also, I would like to extend my thanks to the honorable shareholders of the Company for the trust and support they have shown us. As a final point, I would like to express my sincere thanks and appreciation to the board members and the staff for the constructive efforts they put forth to realize the anticipated results for the Company during the year Peace and God s Mercy and Blessings be upon you, Mohammed Jassim Al-Marzouk Chairman & Managing Director Tamdeen Real Estate Company - KSC (Closed) and Subsidiaries - Kuwait 17

16 18 Annual Report 2007

17 Board of Directors Mohammed Jassim Al Marzouk - Chairman & Managing Director Ali Yacoub Aryan - Vice Chairman Abdul Wahab Marzouq Al Marzouq - Board Member Sheikh Majed Jaber Al Sabah - Board Member Mohammed Fouad Al Ghanim - Board Member Osama Abdul Latif Al Abdul Jaleel - Board Member Lekhdar Moussi - Board Member Executive Management Mohammed Jassim Al Marzouk - Chairman and Managing Director Bassam Baddar - General Manager - Projects Salah Abdulaziz Al Bahar - General Manager - Administration Khalid Omar Abbas - General Manager - Finance Tamdeen Real Estate Company - KSC (Closed) and Subsidiaries - Kuwait 19

18 Recognition

19 is given to the best

20 Independent auditors report To the shareholders of Tamdeen Real Estate Company - KSC (Closed) Kuwait Report on the Consolidated Financial Statements We have audited the accompanying consolidated financial statements of Tamdeen Real Estate Company (A Kuwaiti Closed Shareholding Company) (the parent company) and its subsidiaries (the group), which comprise the consolidated balance sheet as at 31 December 2007, and the related consolidated statements of income, changes in equity and cash flows for the year then ended, and a summary of significant accounting policies and the explanatory notes. Management s Responsibility for the Consolidated Financial Statements The parent company s management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. 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 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 22 Annual Report 2007

21 evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the group as at 31 December 2007, and the results of its operations and its cash flows for the year then ended in accordance with International Financial Reporting Standards. Report on Other Legal and Regulatory Requirements 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 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 Commercial Companies Law of 1960, and by the parent company s articles of association, as amended, that an inventory was duly carried out and that, to the best of our knowledge and belief, no violations of the Commercial Companies Law, nor of the articles of association of the parent company, as amended, have occurred during the year that might have had a material effect on the business of the group or on its financial position. Abdullatif M. Al-Aiban (CPA). (Licence No. 94-A) of Grant Thornton Anwar Al-Qatami & Co. Fawzia Mubarak Al-Hassawi (Licence No. 80-A) of UHY-Fawzia Mubarak Al-Hassawi Kuwait, 6 March 2008 Tamdeen Real Estate Company - KSC (Closed) and Subsidiaries - Kuwait 23

22 Consolidated statement of income Notes Year ended Year ended 31 Dec Dec Income Operational income 11,625 8,252 Operational expenses 5 (4,511) (2,358) Net operational income 7,114 5,894 Other operational income 6 1, Management fees from real estate and investment portfolios Profit from sale of share in consolidated subsidiary 753 1,567 Profit from sale of investment properties 12 3,726 - Profit from sale of land included in project in progress 13 1,850 - Net investments income 7 16,207 6,091 Share of profit in associated companies Other income Foreign currency exchange profit/(loss) 351 (510) 32,650 15,774 Expenses and other charges Staff costs 3,057 2,076 General and administrative expenses 2,805 2,000 Finance costs 10,026 5,071 15,888 9,147 Profit from operations 16,762 6,627 Contribution to Kuwait Foundation for the Advancement of Sciences (KFAS) (139) (62) Contribution to Zakat 8 (9) - Provision for National Labour Support Tax (405) (172) Board of directors remuneration (170) (120) Profit for the year 16,039 6,273 Attributable to : Minority interest 4,477 1,743 Shareholders of the parent company 11,562 4,530 16,039 6,273 EARNINGS PER SHARE ATTRIBUTABLE TO THE SHAREHOLDERS OF THE PARENT COMPANY Fils 13.4 Fils The notes set out on pages 27 to 54 form an integral part of these consolidated financial statements. 24 Annual Report 2007

23 Consolidated balance sheet Notes Year ended Year ended 31 Dec Dec Assets Non-current assets Available for sale investments , ,461 Investments in associated companies 11 51,113 7,073 Investment properties 12 86,759 90,088 Projects in progress 13 68,450 69,523 Machines and equipment , ,360 Current assets Cash and bank balances 1,595 1,272 Short-term deposits 4,347 6,604 Investments at fair value through statement of income Accounts receivable and other debit balances 15 7,120 4,092 Investments in land and real estate held for trading 16 14,522 8,600 27,602 20,585 Total assets 432, ,945 Equity and liabilities Equity attributable to shareholders of the parent company Share capital 33,920 33,920 Share premium 11,132 11,132 Treasury shares 17 (34) (34) Reserve of profit on sale of treasury shares Legal reserve 18 5,451 4,255 Voluntary reserve 18 6,849 5,653 Foreign currency translation reserve (868) - Retained earnings 13,313 8,211 Cumulative changes in fair value 122,679 90, , ,523 Minority interest 63,908 57,911 Total equity 257, ,434 Liabilities Non-current liabilities Term loans 19 85,600 83,807 Bonds issued 20 19,848 19,792 Refundable rental deposits 2,077 2,051 Provision for end of service indemnity , ,095 Current liabilities Bank facilities 21 4,172 4,928 Accounts payable and other credit balances 22 18,029 21,338 Current portion of term loans 19 44,890 6,150 67,091 32,416 Total liabilities 175, ,511 Total equity and liabilities 432, ,945 Mohammed Jassim Al Marzouk Chairman and Managing Director Ali Yacoub Ghafil Aryan Vice-Chairman The notes set out on pages 27 to 54 form an integral part of these consolidated financial statements. Tamdeen Real Estate Company - KSC (Closed) and Subsidiaries - Kuwait 25

24 Consolidated statement of changes in equity Equity attributable to shareholders of the parent company Reserve of profit Foreign on sale of currency Cumulative Share Share Treasury treasury Legal Voluntary translation Retained changes in Minority capital Premium shares shares reserve reserve reserve earnings fair values Total interest Total Balance as at 31 December ,000 11,132 (34) 715 3,789 5,187-10,371 68, ,796 41, ,749 Cash dividends to shareholders (Note 23) (3,838) - (3,838) - (3,838) Stock dividends (Note 23) 1, (1,920) Net changes in fair value of available for sale investments ,035 22,035-22,035 Profit for the year ,530-4,530 1,743 6,273 Transferred to reserves (932) Changes in minority interest ,215 14,215 Balance as at 31 December ,920 11,132 (34) 715 4,255 5,653-8,211 90, ,523 57, ,434 Cash dividends to shareholders (Note 23) (4,068) - (4,068) - (4,068) Net changes in fair value of available for sale investments ,008 32,008-32,008 Profit for the year ,562-11,562 4,477 16,039 Transferred to reserves ,196 1,196 - (2,392) Changes in foreign currency translation reserve (868) - - (868) - (868) Changes in minority interest ,520 1,520 Balance as at 31 December ,920 11,132 (34) 715 5,451 6,849 (868) 13, , ,157 63, ,065 The notes set out on pages 27 to 54 form an integral part of these consolidated financial statements. 26 Annual Report 2007

25 Consolidated statement of cash flows Notes Year ended Year ended 31 Dec Dec OPERATING ACTIVITIES Profit for the year attributable to shareholders of the parent company 11,562 4,530 Adjustments: Depreciation 2,406 1,428 Provision for end of service indemnity Profit from sale of share in consolidated subsidiary (753) (1,567) Net unrealised loss from investments at fair value through statement of income - 3 Net loss from sale of investments at fair value through statement of income Profit from sale of investment properties 12 (3,726) - Profit from sale of land included in projects in progress 13 (1,850) - Decline in value of projects in progress Net profit from sale of available for sale investments (10,216) (2,832) Permanent decline in value of available for sale investments Net investments income (16,207) (6,091) Share of profit in associated companies (482) (410) Finance costs 10,026 5,071 (8,178) 837 End of service indemnity paid (191) (157) Operating (loss)/profit before changes in operating assets and liabilities (8,369) 680 Changes in operating assets and liabilities: Accounts receivable and other debit balances (3,028) (2,851) Accounts payable and other credit balances (3,309) 9,535 Refundable rental deposits Net cash (used in)/from operating activities (14,680) 7,462 INVESTING ACTIVITIES Proceeds from sale of investment properties 9,552 - Sale of investments at fair value through statement of income Net sale/(purchase) of available for sale investments 7,414 (19,820) Investments in land and real estate held for trading (5,922) (6) Investments in associated companies (28,663) 16,956 Investments in unconsolidated subsidiary companies - 1,250 Purchase of investment properties (3,465) (2,753) Investments in consolidated subsidiary companies 171 (972) Projects in progress (13,404) (51,099) Net purchase of machines and equipment (594) (129) Net investments income 16,207 6,091 Net cash used in investing activities (18,704) (49,831) FINANCING ACTIVITIES Cash dividends paid to shareholders (4,068) (3,838) Change in minority interest 5,997 15,958 Change in bank facilities (756) 3,485 Bonds issued Change in term loans 41,115 37,293 Change in foreign currency translation reserve (868) - Finance costs paid (10,026) (5,071) Net cash from financing activities 31,450 47,882 Net (decrease)/increase in cash and cash equivalents (1,934) 5,513 Cash and cash equivalents at the beginning of the year 7,876 2,363 Cash and cash equivalents at the end of the year 24 5,942 7,876 The notes set out on pages 27 to 54 form an integral part of these consolidated financial statements. Tamdeen Real Estate Company - KSC (Closed) and Subsidiaries - Kuwait 27

26 Great achievements build a monument which shall endure until the sun grows cold.

27 Notes to the consolidated financial statements 31 December Incorporation and Activities The parent company was incorporated in Kuwait on 16 December 1982 in accordance with the Commercial Companies Law. Its shares are listed on the Kuwait Stock Exchange. The principal activities of the parent company are investing in land and real estate both inside and outside the State of Kuwait, for the purposes of ownership, resale, leasing and renting. The parent company is also engaged in the development and construction of buildings and real estate projects, managing the properties of others, establishing and managing real estate investment funds, real estate studies and consultancy, and investing in companies with activities similar to its own and in portfolios managed by professional companies and authorities. The address of the parent company s registered office is PO Box 21816, Safat 13079, State of Kuwait. The consolidated financial statements for the year ended 31 December 2007 were authorised for issue by the parent company s board of directors on 6 March 2008 and are subject to the approval of the general assembly of the shareholders. 2. Adoption of new and revised International Financial Reporting Standards In the current year, the group has adopted IFRS 7 Financial Instruments: Disclosures which is effective for annual reporting periods beginning on or after 1 January 2007, and the consequential amendments to IAS 1 Presentation of Financial Statements and IFRIC 10 Interim Financial Reporting and Impairment effective for annual reporting periods beginning on or after 1 November IFRS 7 Financial Instruments: Disclosures IFRS 7 Financial Instruments: Disclosures is mandatory for reporting periods beginning on 1 January 2007 or later. The new standard replaces and amends disclosure requirements previously set out in IAS 32 Financial Instruments: Presentation and Disclosures. All disclosures relating to financial instruments including all comparative information have been updated to reflect the new requirements. In particular, the group s financial statements now feature: Tamdeen Real Estate Company - KSC (Closed) and Subsidiaries - Kuwait 29

28 Notes to the consolidated financial statements 31 December 2007 A sensitivity analysis, to explain the group s market risk exposure in regards to its financial instruments, and Net gain or loss on each category of financial assets The first time adoption of IFRS 7, however, has not resulted in any prior-period adjustments of cash flows, net income or balance sheet line items. IAS 1 Presentation of Financial Statements In accordance with the amendments to IAS 1 Presentation of Financial Statements, the group now reports on its capital management s objectives, policies and procedures in each annual financial report. IFRIC 10 Interim Financial Reporting and Impairment IFRIC 10 Interim Financial Reporting and Impairment prohibits the impairment losses recognised in an interim period on goodwill and investments in equity instruments and in financial assets carried at amortised cost to be reversed at a subsequent balance sheet date. This interpretation does not have any impact on the group s financial statements. The following new Standards and Interpretations which are yet to become effective have not been adopted: IAS 1 (Revised) Presentation of Financial Statements (effective for annual periods beginning on or after 1 January 2009) IFRS 8 Operating Segments (effective for annual periods on or after 1 January 2009) IAS 23 (Revised) Borrowing costs (effective for accounting periods beginning on or after 1 January 2009) IFRIC 11 IFRS 2 Group and Treasury Share Transactions (effective for annual periods beginning on or after 1 March 2007) IFRIC 12 Service Concession Arrangements (effective for annual periods beginning on or after 1 January 2008) IFRIC 13 Customer Loyalty Programmes (effective for annual periods beginning on or after 1 July 2008) IFRIC 14 IAS 19 The limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction (effective for annual periods beginning on or after 1 January 2008) Based on the group s current business model and accounting policies, management does not expect material impact on the group s financial statements in the period of initial applications of the above interpretations. IFRS 8 Operating Segments is a disclosure standard which may result in a redesignation of the group s reportable segments but is not expected to have any impact on the results of operations of the group. IAS 1 Presentation of Financial Statements has been revised to require that an entity must 30 Annual Report 2007

29 present all non-owner changes in equity either in one statement of comprehensive income or in two separate statements (i.e. a statement of income and a statement of comprehensive income). Components of comprehensive income such as changes in revaluation surplus, gains and losses on remeasuring available for sale investments and gains and losses arising from translating the financial statements of foreign operation may not be presented in the statement of changes in equity. The application of the revised standard is not expected to result in any prior period adjustments of cash flow, net income or balance sheet line items in the initial period of application. IAS 23 Borrowing Costs has been amended resulting into elimination of the previously available option to expense all borrowing costs when incurred. Under the revised standard, all borrowing costs that are directly attributable to qualifying assets are to be capitalised. The application of the revised standard is not expected to have a material impact on the financial statements in the period of initial application because it has always been group s accounting policy to capitalise borrowing costs incurred on qualifying assets. The group does not intend to apply any of the above pronouncements early. The following standards, amendments and interpretations are mandatory for reporting periods beginning on or after 1 January 2007 but they are not relevant to the group s operations: IFRIC 7 Applying the Restatement Approach under IAS 29 Financial Reporting in Hyper-Inflationary Economies; and IFRIC 9 Reassessment of Embedded Derivatives. 3. Significant Accounting Policies Preparation of the consolidated financial statements The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards under the historical cost convention except for the investments measured at fair value as explained below. Basis of consolidation The consolidated financial statements comprise the financial statements of the parent company and its subsidiaries as of 31 December each year. Subsidiaries are those enterprises controlled by the parent company. Control exists when the group 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 Tamdeen Real Estate Company - KSC (Closed) and Subsidiaries - Kuwait 31

30 Notes to the consolidated financial statements 31 December 2007 subsidiaries, other than those that are acquired with a view to disposal within twelve months from the date of acquisition, are included in the consolidated financial statements from the date that control effectively commences until the date that control effectively ceases. The financial statements of the subsidiaries are consolidated on a line-by-line basis by adding together like items of assets, liabilities, income and expenses. Any significant intra-group balances and transactions, and any unrealised gains arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. The financial statements of subsidiaries are prepared for the same reporting year as the parent company, using consistent accounting policies. Adjustments are made to bring into line any dissimilar accounting policies that may exist. Minority interests represent the portion of profit or loss and net assets not held by the Group and are presented separately in the income statement and within equity in the consolidated balance sheet, separately from parent shareholders equity. Acquisitions of minority interest are accounted for using the parent entity extension method, whereby, the difference between the consideration and the book value of the share of the net assets acquired is recognised as goodwill. Investment in consolidated subsidiaries represents the parent company s share in 51.37% of the share capital of Tamdeen Investment Co. KSC (Closed) (51.81% at 31 December 2006) which was acquired effectively at the beginning of 2003 in addition to the parent company s share in 19.3% of the share capital of Tamdeen Shopping Centers Company KSC (Closed) (19.3% at 31 December 2006) which was incorporated in March 2005 and the parent company exercises control over this company and according to the management contract dated 7 March During the year, the parent company and one of its subsidiary companies [Tamdeen Investment Co. KSC (Closed)] established Manshar Real Estate Company KSC (Closed). The parent company and its subsidiary owns 100% from share capital of the new company. Recognition of income and expenditure Profits and losses on sale of investments are recognised as and when they are realised. Dividends income is recognised when the right to receive payment is established. Other income and expenditure are accounted for under the accrual basis. Finance costs Finance costs are recognised in the consolidated statement of income for the year on a time proportion basis over the maturity period of the related liabilities. Investments in associated companies Associates are enterprises in which the group exerts significant 32 Annual Report 2007

31 influence including a holding of 20% to 50% of the voting power of the investee company. The consolidated financial statements include the group s share of the associates results using the equity method of accounting based on the latest audited financial statements. Under the equity method of accounting, the initial investment is recorded at cost and the carrying amount is increased or decreased to recognise the group s share of profit or loss and other changes in the equity of the associated company. Distributions received from the associated company reduce the carrying amount of the investment. An assessment of the investment in associated company is performed when there is an indication that the asset has been impaired or the impairment losses recognised in prior years no longer exist. Investments in land and real estate held for trading Trading properties are stated at the lower of cost and net realisable value. Costs are those expenses incurred in bringing each property to its present condition including identifiable finance cost. Net realisable value is based on estimated selling price less any further costs expected to be incurred on completion and disposal. Investments at fair value through statement of income «Investments at fair value through statement of income» are initially recognised at cost, excluding transaction costs. These investments are such as «held for trading». «Held for trading investments» are acquired principally for the purpose of selling or repurchasing it in the near term or are a part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short term profit taking. After initial recognition, investments at fair value through statement of income are remeasured at fair value. Gain or loss arising either from the sale or changes in fair value of «investments at fair value through statement of income» are recognised in the consolidated statement of income. Available for sale investments «Available for sale investments» are initially recognised at cost plus transaction costs that are directly attributable to the acquisition. After initial recognition, available for sale investments are remeasured at fair value except for investments in equity securities that do not have a quoted market price in an active market and whose fair value cannot be reliably measured, which are measured at cost. Unrealised gain or loss on remeasurement of available for sale investments to fair value is recognised directly in equity in «cumulative changes in fair value» account until the investment is derecognised or determined to be impaired, at which time the cumulative gain or loss previously recognised in equity is recognised in the consolidated statement of income. Tamdeen Real Estate Company - KSC (Closed) and Subsidiaries - Kuwait 33

32 Notes to the consolidated financial statements 31 December 2007 Fair value Fair value is the amount for which an asset could be exchanged, or liability settled, between knowledgeable, willing parties in an arm s length transactions. For securities traded in organised financial markets, fair value is determined by reference to Stock Exchange quoted market bid prices at the close of business on the balance sheet date. For securities where there is no quoted market price, a reasonable estimate of the fair value is determined by reference to the current market value of another instrument which is substantially the same, or is based on the expected discounted cash flows, or determined by using valuations implied by significant financial events e.g. indicative bids, partial exits, or additional investments, or determined by using valuations implied by third party issuers having substantially the same line of business as the investee or other appropriate valuation techniques. The determination of fair value is done for each investment individually. Investment properties Investment properties are valued at cost less accumulated depreciation and any impairment losses. Investment properties are valued on an individual basis annually by an independent evaluator. Investment properties are derecognised when they have either been disposed of or when the investment property is permanently withdrawn from use and no future benefit is expected from its disposal. Any gains or losses on the derecognition of an investment property are recognised in the consolidated statement of income in the year of derecoginition. Treasury shares The parent company s own shares are accounted for as treasury shares and are stated at cost. When the treasury shares are sold, gains are credited to a separate account in equity under treasury shares profit reserve which is non distributable. Any realised 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 realised subsequently on the sale of treasury shares are first used to offset any previously recorded losses in the order of reserves, retained earnings and the treasury shares reserve account. No cash dividends are distributed 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. Machines and equipment Machines and equipment are stated at cost less accumulated depreciation and any impairment losses. Machines and equipment are depreciated at annual rates estimated to fully depreciate the cost of the assets over their expected useful lives. Term loans Term loans are carried on the balance sheet date at their principal 34 Annual Report 2007

33 amount. Interest is charged as an expense as it accrues, with unpaid amounts included in loans balances. Provisions A provision (other than the provision for investments and loans receivable) is recognised in the balance sheet when the group has a legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows that reflects current market assessments for such liabilities. Impairment and uncollectability of financial assets An assessment is made at each balance sheet date to determine whether there is objective evidence that a specific financial asset, or group of similar assets, may be impaired. If such evidence exists, the estimated recoverable amount of that asset is determined and any impairment loss, based on the net present value of future anticipated cash flows, is recognised in the consolidated statement of income. For assets carried at amortised cost, future anticipated cash flows are discounted at the financial instrument s original effective interest rate. For assets carried at fair value, impairment is the difference between cost and fair value. Recognition and derecognition of financial assets and liabilities A financial asset or a financial liability is recognised when the group becomes a party to the contractual provisions of the instrument. A financial asset (in whole or in part) is derecognised either when the group has transferred substantially all the risks and rewards of ownership or when it has neither transferred nor retained substantially all the risks and rewards and when it no longer has control over the asset or a proportion of the asset. A financial liability is de-recognised when the obligation specified in the contract is discharged, cancelled or expired. Trade and settlement date accounting All regular way purchases and sales of financial assets are recognised on the trade date i.e. the date that the entity commits to purchase or sell the asset. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame generally established by regulation or convention in the market place. Use of estimates The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the reported amount of financial assets and liabilities at the date of the consolidated financial statements. Tamdeen Real Estate Company - KSC (Closed) and Subsidiaries - Kuwait 35

34 Notes to the consolidated financial statements 31 December 2007 The use of estimates is principally limited to the determination of fair valuation of unquoted investments and investment properties. Related party transactions Related parties consist of directors, executive officers, their close family members and companies of which they are principal owners. All related party transactions are conducted on an arm s length basis. End of service indemnity Provision for end of service indemnity is computed on the basis of employees accumulated periods of service at the consolidated balance sheet date, in accordance with Kuwait labour law for the private sector bye-laws. Foreign currencies Foreign currency transactions are converted into functional currency of each company at the rates of exchange prevailing at the time of the transactions. Monetary assets and liabilities denominated in foreign currencies are retranslated into functional currencies using the rates of exchange ruling at the balance sheet date. All exchange differences arising are reflected in the consolidated statement of income. As at the reporting date, the assets and liabilities of foreign subsidiaries are translated into the parent company s presentation currency (the Kuwaiti Dinars) at the rate of exchange ruling at the balance sheet date, and their income statements are translated at the average exchange rates for the year. Exchange differences arising on translation are taken directly to foreign exchange translation adjustments within equity. On disposal of a foreign entity, the deferred cumulative amount recognised in equity relating to the particular foreign currency is recognised in the consolidated income statement. Cash and cash equivalent Cash and cash equivalents as stated in the consolidated statement of cash flows are represented by bank and cash balances and short term deposits. 4. Critical accounting judgements and key sources of estimation uncertainty In the application of the group s accounting polices, which are described in note 3, management is required to make judgements, estimates and assumption 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. 36 Annual Report 2007

35 Key sources of estimation uncertainty The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below: 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. The determination of the cash flows and discount factors for unquoted equity investments requires significant estimation. Critical judgements in applying accounting policies In the process of applying the group s accounting policies, management has made the following significant judgements, apart from those involving estimations, which have the most significant effect in the amounts recognised in the consolidated financial statements: Classification of real estate properties Management decides on acquisition of a real estate property whether it should be classified as trading, property held for development or investment property. The group classifies property as trading property if it is acquired principally for sale in the ordinary course of business. The group classifies property as property under development if it is acquired with the intention of development. The group classifies property as investment property if it is acquired to generate rental income or for capital appreciation, or for undetermined future use. Classification of investments Management decides on acquisition of an investment whether it should be classified as held for trading, at fair value through statement of income, or available for sale. The group classifies investments as trading if they are acquired primarily for the purpose of making a short term profit by the dealers. Classification of investments as investment at fair value through statement of income depends on how management monitors the performance of these investments. When they are not classified as held for trading but have readily available reliable fair values and the changes in fair values are reported as part of income statement in the management accounts, they are classified as at fair value through statement of income. All other investments are classified as available for sale. Tamdeen Real Estate Company - KSC (Closed) and Subsidiaries - Kuwait 37

36 Notes to the consolidated financial statements 31 December Operational expenses Year ended Year ended 31 Dec Dec Staff costs Investment properties depreciation (Note 12) 2,293 1,389 Other real estate expenses 1, ,511 2, Other operational income Year ended Year ended 31 Dec Dec Car parkings and yacht club membership revenue Rental termination fees 725 1,137 Projects management fees Services revenue Al Kout complex Other miscellaneous revenue ,302 1, Net investments income Year ended Year ended 31 Dec Dec Net loss from sale of investments at fair value through statement of income - (227) Net profit from sale of available for sale investments 10,216 2,832 Impairment in value of available for sale investments (807) (275) Net unrealised loss from investments at fair value through statement of income - (3) Dividends income 5,798 3,555 Interest income 1, ,207 6, Annual Report 2007

37 8. Contribution to Zakat In accordance with the requirements of the Law No. 46 of 2006 relating to Zakat and the contribution of public and closed shareholding companies to the country s budget, a provision of Zakat amounting to 1% of operating profits after adding all provisions as stipulated in the instructions of the Ministry of Finance, was calculated effective from 10 December Earnings per share attributable to the shareholders of the parent company Year ended Year ended 31 Dec Dec Profit for the year attributable to the shareholders of the parent company (KD, 000) 11,562 4,530 Weighted average number of outstanding shares (excluding treasury shares) (in thousand) 339, ,029 Earnings per share 34.1 Fils 13.4 Fils 10. Available for sale investments Local managed portfolios and funds 29,618 36,351 Participation in unquoted local company shares 5,172 2,377 Participations in capital of companies located outside Kuwait 162, , , ,461 Participations in capital of companies outside Kuwait include the company s subsidiary investments [Tamdeen Investment Co. KSC (Closed)] and which represent quoted investments in foreign markets. Included in these participations is an investment by the subsidiary in the share capital of a Gulf quoted financial institution and this participation is mortgaged with a total fair value of KD127,114 thousand (KD77,918 thousand at 31 December 2006) against bank loans (Note 19). Tamdeen Real Estate Company - KSC (Closed) and Subsidiaries - Kuwait 39

38 Notes to the consolidated financial statements 31 December Investments in associated companies This caption comprises of the investments of the parent company and its subsidiaries in the following associated companies: Place of Share Value Share Value Company s name incorporation % % Ajmal Holding Company - BSC Bahrain 38 6, ,545 Barwat Al-Doha Real Estate Co. WLL Qatar 35 14, ,528 Tamdeen Holding Co. KSC (Closed) (under establishment) Kuwait 55 16, Fucom for Central Markets KSC (Closed) (under establishment) Kuwait Beyoo Leasing & Financing Co. KSC (Closed) (under establishment) Kuwait 40 6, British Industries for Printing & Packaging Co. KSC (Closed) Kuwait 25 2, Tamdeen Entertainment Co. KSC (Closed) Kuwait 75 4, ,113 7,073 During the year, the subsidiary company (Tamdeen Investment Company) transferred projects in progress with a total value of KD14,895 thousand to Barwat Al-Doha Real Estate Co. WLL Qatar (associated company) as settlement of the outstanding balance of its share in this associated company (Note 13). As follow the financial statements for associated companies that was presented by the management of those companies and not audited financial statements on the date of balance sheet: Assets 105,544 29,235 Liabilities (16,787) (9,104) Net assets 88,757 20,131 Profit/(loss) for the year 881 (383) 40 Annual Report 2007

39 12. Investment properties Machinery and Land Buildings equipment Total Total Cost At 1 January 32,576 58,314 5,052 95,942 67,048 Additions 3, ,465 2,753 Transferred from projects in progress (Note 13) - 1,325-1,325 26,141 Disposals (5,826) - - (5,826) - At 31 December 30,215 59,639 5,052 94,906 95,942 Accumulated depreciation At 1 January - 4,572 1,282 5,854 4,465 Charge for the year - 1, ,293 1,389 At 31 December - 6,222 1,925 8,147 5,854 Net book value At 31 December 30,215 53,417 3,127 86,759 90,088 Fair value 157, ,936 Investment properties include: Land, buildings, it s related machinery and equipment, and it is depreciated as the following: Buildings Machinery and equipment 20 to 50 years 15 years The above fair value has been assessed by an independent external evaluator. The investment properties include properties related to the parent company with net book value of KD18,866 thousand (2006: KD63,344 thousand) and investment properties related to one of its subsidiary companies [Tamdeen Investment Co. KSC (Closed)] with nil net book value (2006: KD5,826 thousand) mortgaged for local banks against long-term loans (Note 19). The group has sold during the year a land of total amount KD9,552 thousand from which a profit has resulted of amount KD3,726 thousand (2006: Nil). Tamdeen Real Estate Company - KSC (Closed) and Subsidiaries - Kuwait 41

40 Notes to the consolidated financial statements 31 December Projects in progress Cost At 1 January 70,183 45,225 Additions 17,812 51,099 Transferred to investment properties (Note 12) (1,325) (26,141) Disposals (17,453) - At 31 December 69,217 70,183 Provision for decline in value At 1 January Charge for the year At 31 December Net book value At 31 December 68,450 69,523 The disposals item includes land and real estate of total amount KD14,895 thousand and which have been transferred to investments in associated companies (Barwat AL-Doha Real Estate Co. WLL Qatar) in order to settle the outstanding share of the group in that investment (Note 11). The group has sold during the year a land of book value KD2,280 thousand for an amount of KD4,130 thousand from which a profit has resulted of amount KD1,850 thousand. Projects in progress include mortgaged project for one of the subsidiary companies [Tamdeen Shopping Centers Company KSC (Closed)] with book value of KD54,635 thousand (2006: KD37,712 thousand) for local banks against long term loans (Note 19) and bank facilities (Note 21). 42 Annual Report 2007

41 14. Machines and equipment Furniture, fixtures Machines and and office equipment equipment Total Total Cost At 1 January Additions At 31 December , Accumulated depreciation At 1 January Charge for the year At 31 December Net book value At 31 December The parent company and its subsidiaries depreciate machines and equipment using the following annual rates: Machines and equipment 20% Furniture, fixtures and office equipment 20% to 33.33% 15. Accounts receivable and other debit balances Receivable from tenants 1,171 1,136 Staff receivable Prepaid expenses Due from related company 334 2,004 Accrued income Paid for acquisition of land 4,000 - Other debit balances 1, ,611 4,699 Provision for doubtful debts (491) (607) 7,120 4,092 Tamdeen Real Estate Company - KSC (Closed) 43 and Subsidiaries - Kuwait

42 Notes to the consolidated financial statements 31 December 2007 The paid for the acquisition of land item represents the amount paid from one of the subsidiary companies [Tamdeen Shopping Centers CO. KSC (Closed)] to purchase Mashaa land according to an agreement dated 26 November Total value of this land is KD46,051 thousand. The unpaid amount is due in full on 31 January Investments in land and real estate held for trading Cost At 1 January 8,600 8,594 Additions 5, ,522 8,600 Investments in land and real estate held for trading represent the parent company s share in the real estate portfolio (it is a land inside Kuwait). This investment is managed by one of the subsidiary companies [Tamdeen Investment Co. KSC (Closed)]. The remaining amount of the portfolio was paid during the year. 17. Treasury shares At the consolidated balance sheet date, the parent company owned 170,925 (2006 : 170,925 shares) of its own shares equivalent to 0.05% (2006 : 0.05%) of the total shares issued. The market value of these shares accordingly to purchase orders at the consolidated balance sheet date was KD73 thousand (2006 : KD72 thousand). 18. Reserves In accordance with the Commercial Companies Law of Kuwait, 10% of the profit of each year is transferred to the legal reserve until such time that the balance of the reserve account equals 50% of the balance of the paid up share capital. Distribution of the legal reserve is limited to the amount required to enable the payment of 44 Annual Report 2007

43 a dividend of 5% of paid-up share capital to be made in years when retained earnings are insufficient for the payment of a dividend of that amount. 10% of the year profit is transferred to the voluntary reserve, and this transfer could be ceased based on the board of director decision. Transfers to the voluntary reserve are made in accordance with the recommendation of the board of directors to the general assembly. 19. Term loans Denominated in Japanese Yen with annual interest rate 2% over LIBOR (2% at 31 December 2006) - 3,291 Denominated in U.S. Dollar with annual interest rate ranging between 2% to 2.25% over LIBOR (2% to 2.25% at 31 December 2006) - 5,096 Denominated in Kuwaiti Dinars with annual interest rate ranging between 1.125% to 2.75% over KIBOR (1.125% to 2.75% at 31 December 2006) 130,490 74,350 Denominated in Euro with annual interest rate 2% over LIBOR (2% at 31 December 2006) - 7, ,490 89,957 The loans are due for repayment as follows: Within one year 44,890 6,150 From one to five years 85,600 83, ,490 89,957 All of the term loans are granted for the parent and its subsidiary companies by local banks. The total amount of the instalments relating to the loans which are due to be repaid within twelve months from the consolidated balance sheet date is shown as a current liability. Loans are granted for the parent company against the mortgage of investment properties with a book value of KD18,866 thousand (2006 : KD63,344 thousand) (Note 12). Loans are granted for subsidiary companies against the mortgage of investments in shares with a fair value of KD127,114 thousand (2006 : KD77,918 thousand) (Note 10) and mortgage of investment properties with nil net book value (2006: KD5,826 thousand) (Note 12), and mortgage of real estate project with value of KD54,635 thousand (2006: KD37,712 thousand) (Note 13). Tamdeen Real Estate Company - KSC (Closed) and Subsidiaries - Kuwait 45

44 Notes to the consolidated financial statements 31 December Bonds issued The parent company issued KD20,000 thousand bonds on 14 September 2005 at an issue price of 100%. The bonds bear interest at rate of 7.25% for first three years and 8.25% for remaining two years, payable half yearly in arrears and mature in September 2008 with ability to be renewed up to September The issue expenses are being charged to operations over the life of the bonds. 21. Bank facilities Bank facilities in the form of overdraft facilities are granted to the parent company and its subsidiaries by local banks to finance the working capital and the real estate activities. They are completely repayable under demand with annual floating interest rate which is equal to current interest rate in market. The bank facilities are granted against mortgage of investment properties included in projects in progress (Note 13). 22. Accounts payable and other credit balances Retentions for executed works 3,380 4,592 Income received in advance 2,056 1,695 Accrued leave and expenses 3,954 1,645 Due to related companies Uncollected dividends to shareholders Other credit balances 8,215 12,336 18,029 21, Annual Report 2007

45 23. Proposed appropriations The board of directors of the parent company proposed to distribute cash dividends of 10% or 10 Kuwaiti Fils per share and bonus shares of 10% per share from the paid-up share capital, and distribute KD120 thousand as remuneration to the board of directors of the parent company (KD120 thousand in 2006). This proposal is subject to the approval of the annual general assembly of shareholders. On 25 April 2007, the general assembly of shareholders approved the cash dividend of 12% or 12 Kuwaiti fils per share to the shareholders registered at that date as per records for the year ended 31 December 2006 (12% per share as cash dividends and bonus shares of 6% per share from the paid-up share capital to the shareholders for the year ended 31 December 2005). 24. Cash and cash equivalents Cash and cash equivalents included in the consolidated statement of cash flows comprise of following consolidated balance sheet balances: Cash and bank balances 1,595 1,272 Short-term deposits 4,347 6,604 5,942 7,876 Tamdeen Real Estate Company - KSC (Closed) and Subsidiaries - Kuwait 47

46 Notes to the consolidated financial statements 31 December Segmental analysis The principal trading activities of the parent company and its subsidiaries are all carried out within the State of Kuwait. With the exception of participation in capital of companies outside Kuwait (Note 10), all of the assets and liabilities are located in Kuwait. A segmental analysis of total income, net profit, total assets, total liabilities and net assets employed by activity is as follows: Real estate Investment Total Year ended at 31 December 2007 Total income 14,446 18,204 32,650 Profit for the year attributable to shareholders of the parent company 1,195 10,367 11,562 Total assets 167, , ,083 Total liabilities (104,507) (70,511) (175,018) Minority interest - (63,908) (63,908) Net assets employed 63, , ,157 Year ended at 31 December 2006 Total income 6,919 8,855 15,774 Profit for the year attributable to shareholders of the parent company (204) 4,734 4,530 Total assets 163, , ,945 Total liabilities (99,225) (39,286) (138,511) Minority interest - (57,911) (57,911) Net assets employed 64,252 90, , Annual Report 2007

47 26. Related party transactions Included in the transactions carried out by the group during the year, there are certain transactions with related parties within the normal activities of the group involving shareholders who are represented in the board of directors in addition to other major shareholders. These transactions were incorporated in the consolidated financial statements as follows: Consolidated balance sheet Accounts receivable and other debit balances 7,851 2,161 Accounts payable and other credit balances 7, Cash at investment portfolios 3,127 - Projects in progress - 39,300 Consolidated income statement Interest on term loans and bank facilities - 9 Net profit from sale of available for sale investments Management fees 564 1,596 General and administrative expenses (top management salaries and remunerations) Contra accounts off consolidated balance sheet items Net book value of customers portfolios (major shareholders) 93,710 29, Commitments and contingent liabilities At the consolidated balance sheet date, the parent company had commitments against outstanding letters of guarantee submitted in favour of third parties of KD4,701 thousand (2006: KD1,250 thousand), and commitments against investments for KD363thousand (2006: KD538 thousand) relating to one of the subsidiary companies [Tamdeen Investment Co. KSC (Closed)]. 28. Contra accounts off consolidated balance sheet items One of the subsidiary companies [Tamdeen Investment Co. KSC (Closed)] manages investment portfolios for third parties which had a net book value of KD461,426 thousand at 31 December 2007 (2006: KD37,217 thousand). These balances are not included in the consolidated balance sheet. Tamdeen Real Estate Company - KSC (Closed) and Subsidiaries - Kuwait 49

48 Notes to the consolidated financial statements 31 December Risk management objectives and policies The group s activities expose it to variety of financial risks: market risk (including currency risk, interest rate risk, price risk), credit risk and liquidity risk. The group s management of these financial risks is carried out by the continuous valuation of the market s circumstances and directions and by the management s estimation for the long and short term variations in order to minimize the potential adverse effects on the group s financial performance. Long term financial investments are managed to generate lasting returns. The group does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes. The most significant financial risks to which the group is exposed to are described below Market risk a) Foreign currency risk The group mainly operates in the GCC, Europe and other Middle Eastern countries and is exposed to foreign currency risk arising from various foreign currency exposures, primarily with respect to US Dollar, Lebanese Lira and Qatari Riyal. Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities and net investments of the group in subsidiary companies and foreign associated companies. To mitigate the group s exposure to foreign currency risk, non-kuwaiti Dinar cash flows are monitored, in addition to monitoring its effect on the financial position of the group throughout the year. Also the group deals with well experienced financial institutions in this field and which provides the group with a consultative opinion in case there is any significant variation in the foreign currency exchange prices. The group had the following exposures denominated in foreign currencies translated to Kuwaiti Dinar at the closing rate at year end: 50 Annual Report 2007

49 US Dollar 163, ,275 Qatari Riyal 11,891 (5,250) Lebanese Lira Euro - (7,220) Japanese Yen - (3,291) The sensitivity tests relating to foreign currency were performed according to the following assumptions: Sensitivity percentage of foreign currency % US Dollar 5 5 Qatari Riyal 5 5 Lebanese Lira 5 5 Euro - 5 Japanese Yen - 5 The sensitivity percentages mentioned above have been determined based on the average exchange rates in the previous twelve months. If the Kuwaiti Dinar had strengthened against the foreign currencies assuming the sensitivity given in the table above, then this would have the following impact on the consolidated profit for the year and consolidated equity: Profit for the year Equity US Dollar 168 (115) 7,991 6,329 Qatari Riyal (225) (358) Lebanese Lira Euro - (361) - - Japanese Yen - (165) - - (55) (997) 8,811 6,425 Tamdeen Real Estate Company - KSC (Closed) and Subsidiaries - Kuwait 51

50 Notes to the consolidated financial statements 31 December 2007 If the Kuwaiti Dinar had weakened against the foreign currencies assuming the sensitivity given in the table above, then this would have the following impact on the consolidated profit for the year and consolidated equity: Profit for the year Equity US Dollar (168) 115 (7,991) (6,329) Qatari Riyal (820) (96) Lebanese Lira (2) (2) - - Euro Japanese Yen (8,811) (6,425) Exposures to foreign exchange rates vary during the year depending on the volume and nature of the transactions. Nonetheless, the analysis above is considered to be representative of the group s exposure to the foreign currency risk. b) Interest rate risk Interest rate risk arises from the possibility that changes in interest rates will affect future profitability or the fair values of financial instruments. As the group has no significant interest bearing assets, so it is not exposed to interest rate risk with respect to its revenue, but the group is exposed to interest rate risk with respect to its borrowings which are either at fixed or variable interest rates. The group manages these risks by dealing with well reputable institutions in addition to maintaining a suitable mix of its financial liabilities bearing fixed or variable interest rates. The group monitors its financial positions on a daily basis, and studies the information related to interest prices periodically in order to evaluate the usefulness probability of the decrease or increase in the interest prices for the next periods, and the effect of this on the group s cash flows and profit, together with the corrective procedures in order to face occurrence chances of these probabilities. The following table illustrates the sensitivity of the consolidated profit for the year to a reasonably possible change in interest rates of +5% and 5% (2006: +5% and 5%) with effect from the beginning of the year. These changes are considered to be reasonably possible based 52 Annual Report 2007

51 on observation of current market condition. The calculation are based on the group s financial instruments held at the balance sheet date. All other variables are held constant % - 5% + 5 % - 5% Profit for the year (426) 426 (178) 178 c) Equity Price risk The group is exposed to equity price risk with respect to its investments, especially which related to its investments in equity contribution. Equity investments are classified as investments carried at fair value through statement of income (including trading securities) and available for sale investments. To manage its price risk arising from investments in equity securities, the group diversifies its portfolio. Diversification of the portfolio is done in accordance with the limits set by the group. The sensitivity analyses below have been determined based on the exposure to equity price risks at the date of the consolidated financial statements. If equity prices had been 5% higher, the effect on the consolidated equity for the year ended 31 December 2007 would have been as follows: Equity Available for sale investments 9,502 7,934 If equity prices had been 5% lower, the effect on consolidated equity for the year ended 31 December 2007 would have been as follows: Equity Available for sale investments (9,502) (7,934) Tamdeen Real Estate Company - KSC (Closed) and Subsidiaries - Kuwait 53

52 Notes to the consolidated financial statements 31 December Credit risk Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The group credit policy and exposure to credit risk is monitored on an ongoing basis. The group seeks to avoid undue concentrations of risks with individuals or groups of customers in specific locations or business through diversification of its activities. It also obtains security when appropriate. The group s exposure to credit risk is limited to the carrying amounts of financial assets recognised at the consolidated balance sheet date, as summarized below: Investments at fair value through statement of income Available for sale investments 197, ,461 Cash and cash equivalents 5,942 7,876 Accounts receivable and other debit balances 7,120 4, , , Concentration of assets & liabilities The group operates in different geographical areas. A geographical analysis based on location of assets is as follows: Assets Liabilities Kuwait 252, , , ,511 Other Middle Eastern Countries 179, , Europe America , , , , Annual Report 2007

53 29.4 Liquidity risk Liquidity risk is the risk that the group will be unable to meet its liabilities when they fall due. To limit this risk, management has arranged diversified funding sources, manages assets with liquidity in mind, and monitors liquidity on a daily basis. Maturity periods as at 31 December 2007 Within one From 1 to 3 From 3 to 12 Over one month months months year Total Liabilities Loans and bank facilities 3,117 1,856 45, , ,654 Bonds issued ,354 21,354 Accounts payable and other credit balances 1,216 3,669 10,942 2,202 18,029 Refundable rental deposits ,077 2,077 Provision for end of service indemnity Total liabilities 4,333 5,525 56, , ,516 Maturity periods as at 31 December 2006 Within one From 1 to 3 From 3 to 12 Over one month months months year Total Liabilities Loans and bank facilities 577-8,906 92, ,086 Bonds issued ,792 19,792 Accounts payable and other credit balances 1,059 2,281 3,892 14,105 21,337 Refundable rental deposits ,052 2,052 Provision for end of service indemnity Total liabilities 1,636 2,281 12, , , Capital risk management The group s capital management objectives are to ensure the group s ability to continue as a going concern and to provide adequate return to its shareholders through the optimization of the capital structure. The group manages the capital structure and makes adjustments in the light of changes in economic conditions and risk characteristics of the underlying assets. In order to maintain Tamdeen Real Estate Company - KSC (Closed) and Subsidiaries - Kuwait 55

54 Notes to the consolidated financial statements 31 December 2007 or adjust the capital structure, the group may adjust the amount of dividends paid to shareholders or return capital to shareholders or issue new shares. The group s capital structure consists of the following items: Bank facilities 4,172 4,928 Bonds issued 19,848 19,792 Accounts payable against purchase of investments 4,058 7,158 Term loans (Note 19) 85,600 83,807 Current portion of term loans (Note 19) 44,890 6,150 Less: Cash and cash equivalents (Note 24) (5,942) (7,876) Net debt 152, ,959 Total equity 257, ,434 Total capital 409, ,393 Net debt to total capital 37% 35% 31. Comparative figures Certain comparative figures have been reclassified to conform with the current year s presentation of the consolidated financial statements. This reclassification has no effect on the financial statements of the previous year including equity, net profit and cash and cash equivalents. 56 Annual Report 2007

55 Every great achievement is the victory of a flaming heart