w w w . k r e i c . c o m . k · 2013. 10. 24. · board of directors shaikh. mohammad j. al-sabah...

�

KUWAIT REAL ESTATE INVESTMENT CONSORTIUM - KSC. (CLOSED)

Declared Capital 10,000,000 Kuwaiti Dinars

Paid-up Capital 10,000,000 Kuwaiti Dinars

Commercial Registry Number 20953

Established in Kuwait in Oct. 26th, 1975

P.O.Box 23411 - Safat - 13095 - State of Kuwait

Tel: (965) 2448260 - (9 Lines) Fax: (965) 2434454 - 2434440

Cairo Branch: 46 Bahjat Ali St. - Al-Zamalik Tel.: (202) 7354504

w w w . k r e i c . c o m . k w

�

The Amir of KuwaitH. H. Sheikh Sabah Al-Ahmed Al-Sabah

�

The Crown Prince of KuwaitH. H. Sheikh Nawaf Al-Ahmed Al-Jaber Al-Sabah

�

The Prime Minister of KuwaitH. H. Sheikh Nasser Al-Mohamed Al-Ahmed Al-Sabah

�

Contents

Board of Directors

Borad Members Report

Real Estate and Construction Department

Investment Department

Auditor’s Report to the Sharehlders

Financial Statement for the Year Ended �� December �00�

��

��

��

��

�0

��

��

Board of Directors

Shaikh. Mohammad J. Al-Sabah

Eng. Saleh A. Al-kouh

Ahmad T. R. Al-Tahous

Dr. Faisal A. Al-kandari

Abdul-Rahman M. Al-Nassar

Mohammad M. Al-Ajmi

Dr. Haider H. Al-Jumah

Ali S. Al-Ghunaim

Chairman & Managing Director

Deputy Chairman

Board Member

Board Member

Board Member

Board Member

Board Member

General Manager

��

Report of Board Members

Gentlemen shareholders:

The board members of Kuwait Real Estate Investment Consortium have the pleasure to submit you the �� annual report, including the results of annual performance , consoli--dated financial data and the report of the Independent auditor’s report for the financial year �00�.

The year �00� has witnessed important political and economic events that have on the overall of economic and investment activities internationally and locallycrude oil prices have an essential effect on fiscal surpluses that led to the escalation of indicators circulation and improving performance and profitability of the Kuwait stock market as well as rising in the indicators of circulation and the real estate prices in the local market at a highest levels, the central bank of Kuwait has released the link of ex--change of the Kuwaiti dinar to the American dollar especially during �00� in the highest inflation rate in the last five years, which amounted to �.�%. There was also a reduction in the interest rate on the Kuwaiti dinar more than once during �00� to reach �.��%.

Regarding the activities of your company «Kuwait Real Estate Investment Consortium» Fiscal year �00� marked the achievement of good results that raise the Equity of share--holders to ��.�� million Kuwaiti dinars (��.� million Kuwaiti dinars �00�) after the KREIC achieved net profits amounted �.�� million Kuwaiti dinars as rise of ��% (�.�� million Kuwaiti dinars �00�). Most of the output from the core activity of the KREIC on the man--agement fees and other funds, which amounted to �.�0 million Kuwaiti dinars represent--ing �0% from the total income which is �.�� million Kuwaiti dinars.

Regarding to the net rental income amounted to �� thousand Kuwaiti dinars (direct maintenance expenses �.�%), decrease ��.��% of �00�

the efforts of KREIC have been marked according to the sale of Zamalek Tower in Cairo investigators counted a profit �� thousand Kuwaiti dinars. The KREIC also used their

��

surplus amounts above their requirements in a best way realized revenues amounted to �� thousand Kuwaiti dinars, as well as achieving income reached to �� kuwaiti dinar from the available investments of sales and the profits of corporate co.

Regarding to the expenses and other charges, were reached �.�� million Kuwaiti dinars (�.�� million Kuwaiti dinars in �00�), for which staff costs �.�� million Kuwaiti dinars, representing ��% which decrease of up to ��% of what it was in �00�.

KREIC continued its efforts searching for viable investment opportunities locally and Ara--bian Gulf, where the amount of investment projects in �00� through a real estate valued at �.�0 million Kuwaiti dinars (included Sunset Hills project in Bahrain, Investate water--front project in Dubai, and Al-Jaddaf Real Estate Company in the State of Kuwait).

Update of the re-scheduling, the investment portfolio of Kuwait Investment Authority has been handed the third and final phase in December �00� smoothly.

The Board members has recommended the distribution of cash dividends by �% (five percent) of the nominal value of the share. On this occasion, we would like to extend our sincere thanks to the executive manage--ment and all employees of the company for their kind efforts and assistance in achieving these outstanding results.

on behalf of all of us we appreciate Kuwait Investment Authority to their continuous sup--port for achieving better results.

finally, we ask Allah Almighty to Help us all to Serve our Beloved Kuwait Under the Amir of Kuwait His Highness Sheikh Sabah Al-Ahmad Al-Jaber Al-Sabah, His Highness the Crown Prince and His Highness the Prime Minister.God bless them all.

Mohammad Al-Jarrah Al-SabahChairman and Managing Director

��

Real estate and Construction Department

Local Real Estate portfolio:

KREIC local real estate portfolio consists of a variety of real estate properties, commer--

cial and residential buildings located in various areas in the state of Kuwait. These are

characterized by a high occupancy percentage due to the efforts exerted by the depart--

ment in maintenance and leasing.

Management of Others’ Real Estates

KREIC is currently running real estate portfolios for Kuwait Investment Authority and

Settlement of Governmental Purchased Debts office. Due to the exceptional performance,

KREIC managed to increase the volume of the two portfolios during �00� which led to an

increase in the revenues of these portfolios.

Projects Management

Projects Management is one of the KREIC vital Activities. The real estate and construc--

tion department is currently running many engineering projects. most of the prominent

projects is done on behalf of the Kuwaiti Ministry of Foreign Affairs, in addition to the

offers for managing more projects to be started during �00�.

Real Estate Evaluation

KREIC has become one of the leading companies in real estate evaluation due to KREIC>s

trust and professionalism in applying scientific methods in real estate evaluation that has

led to increase the dealers trust. Some of KREIC main clients are local banks, Kuwait

awqaf public foundation, Investment and real estate Companies and many individuals.

Real Estate Services

In accordance to a real estate services agreement with KIA, for managing and then sell--

ing unutilized diplomatic real estate in a Several countries. KREIC sold more than �0%

of the real estate properties and efforts are underway to best liquidate for the remaining

real estate.

��

Investment Department

Investment department has a good experience in managing and developing projects in

different sectors (touristic, real estate, industrial, investment, agricultural and service) in

most of Arab countries, through KREIC regional offices in Arab Republic of Egypt, Tuni--

sian Republic.

Investments owned by Kuwait Real Estate Investment consortium

The Lebanese real estate investment Consortium

The LREIC was established in ��, IT owns a land in Sharoon real estate area- Sofer of

��,�� M² in area. In addition to the land located in Aramoun area about �� thousand

square meters.

Sofer / Sharon Project -Lebanon

General description of the area:

The property is located in the Sharon / Sofer district at an average �,��0 m above sea

level, at a distance of �0 km from Beirut and reached via Beirut-Damascus international

high way.

General information of the property:

Background:

The property is located in plot No. ��, which was sorting to �� plots (�� plots intended

for sale and � plots as an infrastructure).

��

Arab Ceramic Company:

Established in �� to produce & selling the sanitary appliances, ceramics, and tiles.

the net profit of the company had reached ��.0� million Egyptian pounds in �00�(��%

of capaid capital) the board of directors has recommended to distribute ��% as cash

dividend & �0% bonus shares of a capital (capital will up raised to �� million Egyptian pounds).

Al-Jaddaf Real Estate Company:

the Company is affiliated to the Bina wa

Nama Investment Co. and Aayan real estate

Co, which is incorporated for the purpose of

acquiring concession right and the develop--

ment of the four plots of the land in AL-Jad--

daf area in Dubai / UAE.

Al-Jaddaf Real Estate Company. It has been

established specifically to Avenue project, the

project will provide markets and boutiques and restaurants, which will complement the

presentations in traditional areas neighbors. the high buildings are designed for allow--

ing largest overlooking view in the gulf so this investment will return to the investor an

annual internal return estimated to ��%.

Investate waterfront project, Dubai

Investate waterfront project (Investate waterfront) is one of the projects which will be

held in the city of Dubai Arabs exterior water area Dubai supported by the main devel--

oper Al-Nakhel company(palm Co.).

Investate waterfront project consists of Hotel and luxury apartments and a commercial

section and a spa services in addition to luxury apartments area amounting to build �.�

million square feet or about �� thousand square meters and is his location in the front

line facing the sea along with ��0 meters of natural beaches.

It is expected to achieve an annual internal rate of return (IRR) �� yearly as well as the

recovery will start in the third quarter of �00� on annual batches with its profit.

��

Sunset Hills project

the project sunset hills consists of ru--

ral houses villas, some with balconies

and others furnished two-floor, there

was focus on the design of villas &

buildings of the project sunset hills

according to the taste of Arab archi--

tecture. project is located above the

high hills give an overlooking view in

the sunset.

It is scheduled to be completed in the third quarter of �00�.

First Real Estate Consortium Fund: -

Fund at providing a real estate investment opportunities for attracting people to invest in

the real estate sector through real estate activities including trading in the real estate op--

erations for lands, units and buildings from different types for buying, selling, developing

and renting inside Kuwait in achieving a good financial returns in a high security levels.

Manager: Kuwait Real Estate Investment Consortium (K.S.C.).

Custodian: Kuwait Clearing Co. (K.S.C.).

Copital of the fund-: From � millon Kuwaiti dinars to �0 million Kuwaiti dinars (variable).

Nominal Value at Foundation Dat ��/��/�00� KD �.000

Net Value of the Unit as on ��/��/�00� KD �.�0�

Cash Dividends Performance From Foundatian

��

Sharq Project:

The project is located in Sharq - Ahmed Al-Jaber

Street at an area of �� m�, The Building consists of

�� floors each floor is of ��0 m� area. The project

will include all the technological services to become

a smart building.

It is expected that the project will be completed at the

end of year �00�.

Residential Building BniedAlgar

The project is located in Bnied algar at an area of

��0 m� and overlooks three streets. The building

consisting of �� Floors each floor from �st to the ��th

Floor consists of � apartments, one of these Consist--

ing of three bedrooms and maid room.

The other tow apartments tow-bedrooms and maid

room, The project provide many services, such as

swimming pool, sport room, playground for children

and car park in addition to Internet services and Cen--

tral satellite .

It is expected that the project would be completed at

the end of �00�.

��

Kuwait Real Estate Investment Consortium - KSC. (Closed) State of Kuwait

Consolidated Financial Statements andIndependent Auditor’s Report

�� December �00�

�0

Kuwait Real Estate Investment Consortium - K.S.C. (Closed)State of Kuwait

Independent auditor’s report to the shareholdersWe have audited the accompanying consolidated financial statements of Kuwait Real Estate Investment Consortium K.S.C. – (Closed), “the Parent company” and its subsidiary (together referred to as Kreic) which comprise the consolidated balance sheet as of �� December �00�, and the consolidated income statement, consolidated statement of changes in equity and consolidated cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes.Parent Company management’s responsibility for the consolidated financial statementsParent Company’s management is responsible for the preparation and fair presentation of these consoli--dated financial statements in accordance with International Financial Reporting Standards. This respon--sibility 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 ac--counting estimates that are reasonable in the circumstances.Auditor’s responsibilityOur responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance 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 auditor’s judgment, includ--ing the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Parent Company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonable--ness 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 on the consolidated financial statements.OpinionIn our opinion, the consolidated financial statements presented fairly, in all material respects, the con--solidated financial position of Kreic as of �� December �00�, and of its consolidated financial perfor--mance and its cash flows for the year then ended in accordance with International Financial Reporting Standards.Furthermore, in our opinion, proper books of accounts have been kept by the Parent Company and the consolidated financial statements, together with the contents of the report of the Board of Directors, are in accordance therewith. We further report that we obtained the information that we required for the pur--pose of our audit and the consolidated financial statements incorporate all information that is required by the Commercial Companies Law of ��0, as amended, and by the Parent Company’s Article of As--sociation, that an inventory count was duly carried out and that, to the best of our knowledge and belief, no violations of the Commercial Companies Law of ��0, as amended, or of the Article of Association of the Parent Company have occurred during the year ended �� December �00� that might have had a material effect on the business of Kreic or on its consolidated financial position.

Bader A. Al Wazzan License No. ��-A Bader & Co. PricewaterhouseCoopers Kuwait, �� February �00�

��

Consolidated Balance Sheet as at 31 December 2007(All amounts are in Thousand Kuwaiti Dinars)

Note 2007 2006Assets Cash and cash equivalents � �,�� ,��Investments at fair value through profit and loss � �,�� ,��0Investments available for sale � �,�� 0�Receivables and other debit balances � �0� ��Due from related parties � �,�� ,��Land and real estate held for trading - �Held to maturity investments �� Land and real estate under development �0 �,�� Investment in unconsolidated subsidiary - �0Investments in associates �� ,�� ,��Investment properties �� ,�� ,��Property and equipment �� Total Assets ��,�� ,��

Liabilities and EquityLiabilitiesPayables and other credit balances �� ,0�� ,��Equity Share capital �� 0,000 �0,000Statutory reserve �� ,�� ,��Voluntary reserve �� ,�� ,��Foreign currency translation reserve (��) (��)Change in fair value reserve �� Retained earnings �,�� ,��0Total Shareholders’ Equity ��,�� ,��Total liabilities and Equity ��,�� ,��

The accompanying notes form an integral part of these consolidated financial statements.

Sheikh Mohammad j. Al – Sabah Saleh Abd-Allah Al-Kooh Ali S. Al-Ghunaim Chairman and Managing Director Deputy Chairman General Manager

��

Consolidated Statment of Income For the year ended 31 December 2007(All amounts are in Thousand Kuwaiti Dinars)

Note 2007 2006Revenue Management fees � �,�� ,��Net rental income of investment properties �� Income from selling investment properties �� -Income from selling land and real estate held for trading � ��Income fees from valuation of properties owned by others �� Investments income �� Interest income �� 0Kreic’s share in associates’ result s �� Other income �0 ��Total revenue �,�� ,��Expenses and other charges General and administrative �� Staff costs �� ,�� ,��Depreciation �0 �� 0�Foreign currency exchange differences �� Kuwait Foundation for the Advancement of Science �� 0Zakat �� -Board of Directors remuneration �� Total expenses and other charges �,�� ,�� Net profit for the year �,�� ,��Earnings per share (fils) �� .�� .��

The accompanying notes form an integral part of these consolidated financial statements.

��Con

solid

ated

Sta

tem

ent

of c

hang

es in

Equ

ity fo

r th

e ye

ar e

nded

31

Dec

embe

r 20

07(A

ll am

ount

s ar

e in

Tho

usan

d K

uwai

ti D

inar

s)

Bala

nce

at 1

Jan

uary

200

6

�0

,000

�,��

0

�,�

�0

(��

�)

�0

�,�

��

�

�,0�

�C

hang

es in

fai

r va

lue

of in

vest

men

ts

-

-

-

-

��

-

��Tr

ansf

erre

d to

sta

tem

ent o

f in

com

e on

sal

e of

inve

stm

ents

-

-

-

-

(�0

)

-

(�

0)Fo

reig

n cu

rren

cy tr

ansl

atio

n di

ffere

nces

of

fore

ign

asso

ciat

es

-

-

-

�

0�

-

-

�0

�N

et c

hang

es r

ecog

nize

d di

rect

ly in

equ

ity

-

-

-

�0�

��

-

��

Net

pro

fit fo

r th

e ye

ar

-

-

-

-

-

�,

��

�

,��

To

tal p

rofit

rec

ogni

zed

-

-

-

�

0�

�

�

�,��

�

�,�

��

Div

iden

ds fo

r ye

ar �

00�

-

-

-

-

-

(�,0

00)

(�,0

00)

Tran

sfer

to r

eser

ves

-

�

��

��

-

-

(�

��)

-Ba

lanc

e at

31

Dec

embe

r 20

06

�0,

000

�

,��

�

,��

(�

��)

��

�

,��0

�

�,��

�

Bala

nce

at 1

Jan

uary

200

7

�0,

000

�

,��

�

,��

(��

)

��

�

,��0

�

�,��

�C

hang

es in

fai

r va

lue

of in

vest

men

ts

-

-

-

-

�

-

�Fo

reig

n cu

rren

cy tr

ansl

atio

n di

ffere

nces

of

fore

ign

asso

ciat

es

-

-

-

(

��)

-

-

(�

�)N

et c

hang

es r

ecog

nize

d di

rect

ly in

equ

ity

-

-

-

(��

)

�

- (�

�)N

et p

rofit

for

the

year

-

-

-

-

-

�,��

�

�,��

�To

tal p

rofit

rec

ogni

zed

-

-

-

(

��)

�

�,��

�

�,��

�D

ivid

ends

for

year

�00

�

-

-

-

-

-

(�

00)

(�00

)Tr

ansf

er to

res

erve

s

-

��

0

��

0

-

-

(�00

)

-Ba

lanc

e at

31

Dec

embe

r 20

07

�0,

000

�,

��

�,�

��

(��

�)

�

�

�,�

��

��,

��

The

acco

mpa

nyin

g no

tes

from

an

inte

gral

par

t of

thes

e co

nsol

idat

ed fi

nanc

ials

sta

tem

ents

Shar

eca

pita

lSt

atut

ory

rese

rve

Volu

ntar

y re

serv

e

Fore

ign

curr

ency

tr

ansl

atio

nre

serv

eC

hang

es in

fai

r va

lue

rese

rve

Reta

ined

ea

rnin

gsTo

tal

��

Consolidated Statment of Cash Flows the year Ended 31 December 2007(All amounts are in Thousand Kuwaiti Dinars)

Note 2007 2006Cash flows from operating activities Net profit for the year �,�� ,�� Adjustments: Gain on sale of investment properties (��) - Investments income (��) (��) Interest income (��) (��0) Kreic’s share of associates’ results (��) (��) Depreciation �� 0� Impairment in unconsolidated subsidiary �� - Provisions for liabilities �� 0� Operating profit before changes in operating assets and liabilities �,�0� �,��0 Investments at fair value – income statement (�,0��) �� Receivables and other debit balances (��) � Due from related parties (�,0��) �� Land and real estate held for trading � � Payables and other credit balances �� (��) Utilization of provisions for liabilities (��) (��) Net cash flows (used in)/ resulted from operating activities (�,��) �,�� Cash flows from investing activities Purchase of available for sale investments (�,��) (��0) Proceeds from sale of available for sale investments �� Paid for land and real estate under development (�0�) (�) Dividends received from associate �� Proceeds from sale of investment properties �,��0 - Purchase of investments properties (��) (��) Purchase of property and equipment (��) (�) Interest received �� Dividends received from investments �� Net cash flows from investing activities �� Cash flows from financing activitiesDividends paid (�00) (�,000) Net cash flows used in financing activities (�00) (�,000) Net (decrease) / increase in cash and cash equivalents (�,��) �� Cash and cash equivalents at beginning of the year �,�� ,�� Cash and cash equivalents at end of the year � �,�� ,��

The accompanying notes the form an integral part of these consolidated financial statements.

��

1. Incorporation of Kreic

Kuwait Real Estate Investment Consortium (“The Parent Company”) is a Kuwaiti Shareholding Com--pany (Closed) incorporated in �� October �� and it is a subsidiary of Kuwait Investment Author--ity. The Company is engaged in carrying out real estate transactions, investment in securities and investment portfolios management activities inside and outside Kuwait.The consolidated financial statements include the financial statements of the parent Company and its subsidiary (Note �.�) together referred as Kreic.The Parent Company’s principle location is Al Sharq, Ahmed Al Jaber Street, P.O. Box ��, Safat ��0��, Kuwait.Kuwait Investment Authority owns ��.��% of the total shares of the Parent Company. The consolidated financial statements were authorised for issue by the Board of Directors on �� February �00�. The shareholders of the Parent Company have the authority to amend these financial statements at the annual general assembly meeting.

2. Basis of preparation and significant accounting policies

The principle accounting policies applied in the preparation of these consolidated financial state--ments are set out below. These policies have been consistently applied to all the years presented.

2.1 Basis of preparation

These financial statements have been prepared in accordance with International Financial Report--ing Standard (IFRS). The financial statements have been prepared under the historical cost conven--tion, as modified by the revaluation of financial assets at fair value through profit or loss, available for sale financial assets.The preparation of financial statements in conformity with IFRS requires the use of certain criti--cal accounting estimates. It also requires management to exercise its judgment in the process of applying the company’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note (�).During the year, Certain International Financial Reporting Standards have been issued, in addition to some amendments and interpretations issued by the International Financial Reporting Interpre--tations Committee.> Standards, amendments and interpretations effective for the year ending 31 December 2007- IFRS � Financial Instruments: Disclosures which requires new disclosures on Kreic financial instru--ments but have no impact on the classification and valuation of Kreic financial instruments. - IAS � Presentation of Financial Statements: Capital Disclosure.- IFRIC Interpretation �0 Interim Financial Reporting and Impairment prohibits the impairment losses recognized in an interim period on goodwill and investments in equity instruments and in financial assets carried at cost which is recognized during interim periods. This standard does not have any impact on Kreic financial statements.

These additional disclosures will help the users of the financial statements to evaluate the degree of significance of the financial instruments to Kreic financial position and to its financial performance and the nature and the extent of the financial risks that Kreic is exposed to as a result from dealing with the financial instruments at the date of the financial statements and Kreic policies in managing those risks.> The following standards and Interpretations, were issued, and are mandatory for accountingperiods beginning on or after 1 January 2007; by they are not relevant to Kreic operations.

Notes to the Consolidated Financial Statement 31 December 2007(All amounts are in Thousand Kuwaiti Dinars)

��

- IFRIC �, ‘Scope of IFRS �’, requires consideration of transactions involving the issuance of equity instruments, where the identifiable consideration received is less than the fair value of the equity instruments issued in order to establish whether or not they fall within the scope of IFRS �. This standard does not have any impact on the company’s financial statements.- IFRS �, ‘Insurance contracts’;- IFRIC �, ‘Applying the restatement approach under IAS �0, Financial reporting in hyperinflation--ary Economies’; and IFRIC �, ‘Re-assessment of embedded derivatives’.

Standards and Interpretations have been issued but are not yet effective, and have not yet been adopted by the Company.

- IFRIC ��, ‘IFRS � – Company and treasury share transactions’. - IAS (��) (Amendment) «Borrowing costs» effective from � January �00�. - IFRS (�) (Operating segments) effective from � January �00�.

2.2 Basis of consolidation

The consolidated financial statements include the subsidiaries which are controlled by the parent company. The subsidiary is that enterprise controlled by the parent company, directly or indirectly to govern the financial and operating policies of an enterprise so as to obtain benefits from its ac--tivities, the control exists if the parent company has more than �0% of the voting rights in the sub--sidiary. Subsidiaries are fully consolidated from the date on which control is transferred to Parent Company. They are de-consolidated from the date that control ceases. Inter-company balances and transactions between the parent company and its subsidiary are eliminated on consolidation.

Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by Kreic.

The subsidiaries that are immaterial to Kreic and not consolidated are stated at cost less impair--ment losses.

The subsidiary Company is Kuwait Distinguish Real Estate Group, W.L.L. the capital of which is KD �0,000 and the Parent Company owns a percentage of �00% of its capital. �% from the subsidiary shares is registered in the name of a related party who is holding these shares as a nominee holder on account and for the benefit of the Parent Company.

Associates

Associates are all entities over which Kreic has significant influence but not control, generally ac--companying a shareholding of between �0% and �0% of the voting rights assumes existence of significant influence. Investments in associates are accounted for using the equity method of accounting and are initially recognised at cost. Investment balance includes goodwill net of impairment losses (if any).Kreic share of its associates’ post-acquisition profits or losses is recognised in the income state--ment, and its share of post-acquisition movements in reserves is recognised in equity. Unrealized gains on transactions between Kreic and its associates are eliminated to the extent of Kreic interest in the associates. Unrealized losses are also eliminated unless the transaction pro--vides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by Kreic.


��

2.3 Financial instruments Classification

Kreic classified its financial investments at the date of acquisition based on the purpose of acquir--ing these investments. Kreic had classified its financial assets as at fair value through profit and loss, available for sale investment and assets held to maturity.

Financial assets at fair value through profit and loss

This category has two sub-categories: financial assets held for trading, and those designated at fair value through profit or loss at inception. A financial asset is classified into this category if ac--quired principally for the purpose of selling in the short term or if so designated by management.The financial assets designated at fair value through profit and loss at inception are classified in this category, if they are managed and their performance is evaluated and internally reported on a fair value basis in accordance with a documented investment strategy.

Held to maturity assets

These are non derivative financial assets with fixed or determinable payments, and the manage--ment has the intent and ability to hold them to their maturities.

Available for sale assets These financial assets represented in investments that are principally those acquired to be held for an indefinite period of time that are either designated in this category or not included in any of the above categories.

Recognition and De-recognition

Financial instruments are recognised when Kreic becomes a party in a contractual agreement of financial instrument. Purchases and sale of financial assets are recognised at settlement date, the date on which Kreic receive or deliver the financial assets.Financial assets are de-recognised when the rights to receive cash flows from the assets have ex--pired or when Kreic has transferred substantially all risks and rewards or ownership to other party.MeasurementFinancial assets are initially recognised at fair value (plus transaction costs for all financial assets not classified at fair value through profit or loss). Subsequently, financial assets at fair value through profit and loss and available for sale invest--ments are carried at fair value. Unrealized gains or losses arising from changes in fair value of the financial assets at fair value through profit and loss are included in the statement of income. Gains or losses arising from change in fair value of the financial assets available for sale are recognised in changes in fair value reserve in equity except for the losses arising of impairment in value.When available for sale investments are sold, the accumulated changes in fair value recognised in equity are included in the income statement.The fair value of quoted investments is based on current bid prices.Held to maturity assets are initially recognised at cost and subsequently at amortised cost using effective interest method less any impairment in value.Impairment loss of financial assetsAn assessment is made at each balance sheet date to determine whether there is objective evidence that a financial asset or group of financial assets is impaired. In the case of equity securities classi--fied as available for sale, a significant or prolonged decline in the fair value of the security below


��

its cost is considered as an indicator that the securities are impaired. If any such evidence exists, the cumulative losses-measured as the difference between the acquisition cost and the current fair value less any impairment losses on that financial asset previously recognized in the profit or loss are removed from equity and recognized in the income statement. Impairment losses recognized in the income statement on equity instruments are not reversed through the income statement.

2.4 Cash and cash equivalents

Cash and cash equivalents represent cash on hand, and at banks and time deposits that mature within three months from the date of placement.

2.5 Land and real estate held for trading

Land and real estate acquired for resale are stated at cost. Cost is determined for each individual asset and represented in fair value of the consideration given to acquire the land plus brokerages, registration and any other costs that are necessary to develop the real estate. Land and real estate held for trading are carried out at the lower of cost and net recoverable value on individual basis. Net recoverable value is the estimated selling price less estimated selling costs.

2.6 Land and real estate under development

Land and real estate under development are recognized at cost, which includes development cost.When the development process is completed, the land and real estate are classified either as in--vestment properties or land and real estate held for trading according to the management’s inten--tion regarding the future use of these properties.

2.7 Investment properties

Properties not occupied by Kreic and acquired for long-term leases or for capital appreciation in future are classified as investment properties. Investment properties except land are stated at cost less accumulated depreciation and impairment losses and they are depreciated over �� years. The land is stated at cost less any accumulated impairment losses.

2.8 Property and equipment

Property and equipment are stated at cost less accumulated depreciation and impairment losses. Cost comprises acquisition costs and all directly attributable costs of bringing the asset to working condition for its intended use. Depreciation is provided in equal instalments over the estimated useful lives of the assets.

2.9 Impairment of non financial assets

Assets that have an indefinite useful life are not subject to amortization and are tested annually for impairment. Assets that are subject to amortization are reviewed annually for impairment when--ever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell or value in use. Impairment losses are recognised in the income statement for the period in which they arise.


��

2.10 Other provisions

Provisions are recognised when Kreic has a present obligation (legal or constructive) arising from past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obliga--tion. Where the effect of the time value of money is material, the amount of a provision shall be the present value of the expenditures expected to be required to settle the obligation.

2.11 End of service’s indemnity

Kreic is liable under Kuwait Labour Law to make payments under defined benefit plans to employ--ees at cessation of employment. The defined benefit plan is un-funded and is based on the liability that would arise on involuntary termination of all employees on the balance sheet date. This basis is considered to be a reliable approximation of the present value of Kreic liability.

2.12 Revenue recognition

Revenue from management fees is recognised as it accrues based on rates specified in the portfolio management agreement. Interest income is recognised as it accrues, taking into account the asset and the applicable interest rate. Dividends income is recognised when right to receive payment is established. Rent revenue is recognized on the accrual basis. Revenue from sale of land and real estate is recognised on the completion of the sale contract.

2.13 Foreign currencies

The functional currency of Kreic is the Kuwaiti Dinar. Foreign currency transactions are recorded in Kuwaiti Dinars at the rate of exchange prevailing at the time of the transaction. Foreign exchange gains and losses resulting from the settlement of such transactions and from transaction at the year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the statement of income. Non – Monetary assets and liabilities denominated in foreign currencies, which are stated at his--otical cost or amortized cost are translated at the foreign exchange rate prevailing at the date of translation. Non – Monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to Kuwaiti Dinars at the foreign exchange rates prevailing at the dates the values were determined.Net investments in foreign associates and subsidiaries are translated at the exchange rates pre--vailing at the date of the balance sheet. Revenues and expenses are translated at the average ex--change rates for the year. Gains and losses resulting from these transactions are directly included in shareholders’ equity in foreign currency translation reserve.

2.14 Dividends

The dividends attributable to shareholders of the Parent Company are recognized as liabilities in the consolidated financial statements in the period in which the approval of such dividends from the Parent Company’s shareholders takes place.

2.15 Fiduciary assets

Assets held in trust or in a fiduciary capacity are not treated as assets of Kreic and accordingly are not included in these consolidated financial statements.


�0

3. Financial risk management

3.1 Financial risk factors

Kreic activities expose it to a variety of financial risks: market risk including foreign currency risk, fair value risk resulted from changes of interest rates, cash flow risk resulted from changes of inter--est rates, and price risk), credit risk and liquidity risk.Kreic management of these financial risks are concentrated in diversifying its investments over the different sectors and currencies. Kreic also prepares recent studies to monitor fluctuations expected in the market in order to preserve Kreic assets and in order to reduce the bad effects to the pos--sible lowest level (if any).

Market risk

Foreign currency risk

Kreic is exposed to the foreign currency risk as a result from dealing in foreign currencies mainly in Egyptian Pound and U.S Dollar. The foreign currency risk is resulted from the future transactions that take place on Kreic net investments in the foreign associates with Egyptian Pound and some investments in US. DollarKreic exposure to this risk is considered immaterial as the total investment in foreign currency is not considered material to Kreic total investments. Nevertheless, Kreic on regular basis monitors the movement of the foreign exchange rates against Kuwaiti Dinar to identify the effect on its financial statements and to take the necessary procedures.

Price risk

- Kreic is exposed to the risk of the fluctuation in the price of equity financial instruments as Kreic has available for sale investments and investments at fair value through profit and loss.- In order for Kreic to manage this risk, a monitoring of the market prices takes place on regular bases with following a diversification strategy in the investments.- Kreic exposure to this kind of risk is considered minimal as most of the investments at fair value are concentrated in real estate funds. The percentage of the investments in real estate funds to total investments has amounted to ��% as of �� December �00� (��% as of �� December �00�).

Interest rate risk

As Kreic does not have financial assets bear interest rates, Kreic is not exposed to the risk of changes in the fair value of financial instruments , neither nor exposed to the risk of fluctuations in the cash flows as a result from the change in the interest rates as Kreic does not have liabilities carry interest rates.Credit risk

Credit risk is highly concentrated in cash and cash equivalents and due from related parties; Kreic holds the cash and cash equivalents at entities and financial institutions with high credit reputation. The amount due from related parties is concentrated in the ultimate parent company, which is a governmental body in the State of Kuwait.

Liquidity risk

Liquidity risk management implies maintaining sufficient balance of cash and highly liquid market--able securities and the availability of finance resources to meet the needs of Kreic liquidity.Maturity profile of assets and liabilities at �� December �00�.


��


Liabilities Payables and other credit balances � �0� �0� �,��0 �,��End of service indemnity - - - �0� �0� � �0� �0� �,�� ,0��

Maturity profile of assets and liabilities at �� December �00�:

Liabilities

Payables and other credit balances �� ,�0� �,��End of service indemnity - - - �� ,��0 �,��

3.2 Capital risk management

Kreic objectives when managing capital are to safeguard the its ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure, Kreic may adjust the amount of dividends paid to sharehold--ers, return capital to shareholders, issue new shares or sell assets to reduce debt. As followed by the other Companies in the same business, the company monitors capital on the basis of gearing ratio.

Kreic manages this risk through monitoring the gearing ratio; the ratio is calculated as net debt divided by total capital. Net debt s calculated as total borrowings less cash and cash equivalents. Total capital is calculated as equity as shown in the balance sheet plus net debt.

3.3 Fair value estimation

The fair values of quoted investments are based on current bid prices. As for unlisted securities, the Company establishes fair value by using reference to other similar instruments and by discounted cash flow analysis. Available for sale investments whose fair value can not be determined, they are recognized at cost less impairment.

4. Significant accounting estimates and assumptions

Kreic makes estimates and assumptions related to future. It is rarely that the accounting estimates equal the actual results. The estimates and assumptions that may have significant risks related to adjustments that have impact on carrying values of assets and liabilities during the next financial year are as follows: Fair values – investment in unquoted securities

Valuation techniques for unquoted equity investments is in which estimates are used representing the expected cash flows discount rates, return trades, adjusted local market prices, credit risks, re--lated cost and other valuation techniques used by market participants. Kreic calibrates the valua--tion techniques periodically and tests these for validity using either prices from observable current market transactions in the same instrument or other available observable market data.

Within 1 month

From 3 to 1 year

From 1 to 5 years

TotalFrom 1 to3 months

Within 1 month

From 3 to 1 year

From 1 to 5 years

TotalFrom 1 to3 months

��

Available for sale investments impairment

Kreic follows IAS (��) guidelines when determining whether there is impairment of available for sale investment. This requires financial judgment from the management, for providing such judg--ment, Kreic assesses the extent of impairment period with the cost in addition to other factors including the financial position of the investee, performance rate of the industry and sector of the investee belongs, the extent of technology changes and cash flows from operating and financing activities.

5. Cash and cash equivalents

2007 2006Term deposits and call accounts �,��0 �,��Cash at banks �� Cash in portfolios �� - �,�� ,��

5.1 The effective interest rate on term deposits �.�% as of �� December �00� (�.�% - as at �� December �00�)

5.2 Time deposits mature within three months from date of deposit.

5.3 The fair value for cash and cash equivalents is equal to its book value as of �� December �00� – as of �� December �00�.

6. Investments at fair value through prof it and loss

This item represents Kreic investment in local funds with KD, valuated at fair value according to the latest available reports provided by the managers of those funds.

7. Available for sale investments

2007 2006Local share �,�� Foreign share �,�� ,�� 0�

7.1 The following is available for sale investments analysis with foreign currencies as of 31 Decem ber:

2007 2006Kuwaiti Dinar �,�� US Dollar �,��0 ��Other � � �,�� 0�

7.2 Available for sale investments include as of �� December �00� investments amounted �� Thoosand KD, has been recorded at cost less the impairment loss ( �� thousand KD as of �� December �00�).


��


8. Receivables and other debit balances

2007 2006Trade receivables �� Accrued revenues �0 ��Others debit balances �� 0� ��Impairment provision (�0�) (��) �0� ��

8.1 The fair value of trade receivables as of �� December �00� and as of �� December �00� equals its book value as of those years.

8.2 As follows the impairment provision movement:

2007 2006Balance at the beginning of the year �� Provided �� Utilization (��) (��)Balance at the end of the year �0� ��

9. Related parties transactions

This item represents transactions with the principle shareholder in Kuwait Real Estate Investment Consortium and the fund managed by it. The prices and settlement terms related to these transac--tions are approved by Kreic management.

2007 2006TransactionsRevenues Principle shareholder’s portfolio management fees �,�� ,��First real estate fund management fees �� 0� �,�� ,��

The following are the balances due from the related parties as of �� December:

2007 2006Kuwait Investment Authority �,�� ,��First Real Estate Fund �� ,�� Doubtful debts provision - (��) �,�� ,��

Related parties transactions are subjected to the approval of shareholders in the General Assembly.

The movement of doubtful debts provision during the year is represented in the utilization of the balance in writing off the doubtful debts.

��

10. Land and real estate under development

During the year, Kreic had decided to demolish some of its investment properties for the purpose of re-development. This amount represents the cost of the land on which the demolished buildings were built in addition to some necessary costs to develop such properties.

11. Investments in associates

Country of Ownership 2007 2006 incorporation % Arab Brick Company - Egyptian Shareholding Egypt ��.�0% � �CompanyArab Ciramic Company - Egyptian Shareholding Egypt ��.�0% �,��0 �,��CompanyFinancial Economic Development Company - Egyptian Shareholding Company Egypt ��.�0% � � �,�� ,��

11.1 Kreic share in the net assets and the results of those associates have been recorded based on the recent available financial statements as of �0 September �00�.

12. Investment properties 2007 2006

Cost �0,�� ,��Accumulated depreciation (�,��) (�,��)Impairment losses (��) (��)Net book value �,�� ,��

12.1 The fair value of the investment properties amounted KD ��.�� million as at �� December �00� (KD ��.�0 million as at �� December �00�).

12.2 During the year, lands with a cost amounted KD �.0�0 million is transferred from investment properties item to the land and real estate under development item, as a decision to demolish the real estate constructed on those lands has been taken for the purpose for re-development. An accelerated depreciation for the building has been made with an amount of KD �� thous and and the accumulated depreciation of the building has been closed against the cost of the build ingat the date of transfer decision.


��

13. Payables and other credit balances 2007 2006

Trade payables �� Amounts received in advance from customers �� Staff accruals �0� ��Provisions for claims �,�� Other provision ��0 ��0Contribution to KFAS �� 0Zakat � -Board of Directors remuneration �� Accrued expenses ��0 �0�Employees end of service indemnity �0� ��

�,0�� ,��

14. Share capital

The issued and fully paid up capital is amounting to KD �0 million as of �� December �00� and as of �� December �00� distributed over �00 million shares of �00 fils per share.

15. Statutory reserves

In accordance with the Commercial Companies Law for the year ��0 and the Parent Company’s Articles of Association, �0% of the net profit for the year before Kuwait Foundation for the Ad--vancement of Sciences, Board remuneration and Zakat expense is to be transferred to the statutory reserve. The shareholders may resolve to discontinue such annual transfers when the statutory re--serve reaches half of the share capital. Distribution of the statutory reserve is limited to the amount required to enable the payment of a dividend of �% of share capital in years when retained earn--ings are not sufficient for the payment of a dividend of that amount. When the balance of the re--serve exceeds �0% of share capital, the General Assembly is permitted to utilize amounts in excess of �0% of the share capital in aspects seen appropriate for the benefit of the shareholders.

16. Voluntary reserve

In accordance with the Parent Company’s Articles of Association, �0% of the net profit before KFAS and Board of Directors Remuneration proposed by the Board of Directors and approved by KreicAssembly is transferred to voluntary reserve. Such annual transfers may be discontinued by a reso--lution of the General Assembly based on the proposal put forward by the Board of Directors.


��

17. Investments Income

2007 2006Available for sale investments Cash dividend - �Gain on sale �� Investments at fair value through income statement Cash dividends �� 0Losses from sale (��) (��)Change in the fair value �� (��0) �� Investments in unconsolidated subsidiary (��) -Impairment of investments in unconsolidated subsidiary (��) - ��

18. and administrative

2007 2006 Rent expenses �� 0�Maintenance expenses �� Others ��

19. Staff cost 2007 2006 Salaries and wages �� Employees end of service indemnity �� 0�Accrued leaves �0� ��Accrued bonus �00 �00Social securities and other staff benefits �� Provision for claims and other provisions �� ,�� ,��

20. Depreciation

Depreciation charged to the statement of income for the year ended �� December �00� in--cludes KD �� thousand representing the net book value of some Kreic properties that had beendemolished during the year for the purpose of re-development (Note ��).

21. Zakat

During the year ended �� December �00� the Regulation for the Law of Zakat has been issued, it is imperative that every Kuwaiti Shareholding Company to deduct �% of its profits as Zakat and are supplied to the Ministry of Finance to spend on Share’ a manners. The amount retained for Zakat is calculated on the basis of the net profits of Kreic multiplied by the number of days from the date of issuance of the Regulation on � December �00� up to �� December �00�.


��

22. Earnings per share

Earnings per share are calculated by dividing the net profit of the year by the weighted average number of outstanding shares during the year.

2007 2006Net profit for the year (KD thousand) �,�� ,��Weighted average No. of outstanding shares (share) �00,000,000 �00,000,000Earnings per share (fils) ��.�� .��

23. Proposed dividends and Board of Directors remuneration

Board of Directors proposed cash dividends of �% with the total amount of KD �00,000 for the year ended �� December �00� (�% with the total amount of KD �00,000 for the year ended �� December �00�) as well as remuneration for the Board of Directors with an amount of KD �� thousand for the year ended �� December �00� (KD �� thousand for the year ended �� December �00�). These proposals are subject to the approval of the shareholders at the general assembly.

24. Contingent liabilities and commitments 2007 2006 Letters of guarantee �� Capital commitments on properties development contracts ��0 -

25. Fiduciary assets

The fiduciary assets have amounted KD �0�,�� thousand as at �� December �00� (KD ��,�� thousand as at �� December �00�).

26. Segment information

Business segment analysis

The primary segmental reporting for Kreic is based on type of business which consists of commer--cial activity as follows:

Investment Real estate management management Total

2007 2006 2007 2006 2007 2006 Segment revenue �,�� ,��0 �,0�� ,�� ,�� ,��Segment results �,�� ,�0� �� ,�0� �,��Unallocated expenses (�0) (��)Net profit for the year �,�� ,��


��

Geographical segment analysis

The secondary segment reporting in Kreic is the geographical distribution, which consists of: Kuwait Middle East Total (Except Kuwait) 2007 2006 2007 2006 2007 2006 Total revenue �,�� ,�� ,0�� 0 �,�� ,��Total assets ��,�� ,�� ,�� ,�� ,�� ,��Total liabilities �,�� ,�� 0 �� ,0�� ,��

27. Comparative figures

Certain comparative figures have been reclassified to conform with the presentation of the financial statements for the year ended �� December �00�.


w w w . k r e i c . c o m . k · 2013. 10. 24. · board of directors shaikh. mohammad j. al-sabah...

Documents