in the name of allah the most gracious, most...

Oqyana Real EstateCompany K.S.C. (Closed) And its subsidiary - State of Kuwait

Annual Report 2009 Annual Report 2009

In the name of Allah the most gracious,most merciful

2 Oqyana Real EstateCompany K.S.C. (Closed) And its subsidiary - State of Kuwait

Annual Report 2009Annual Report 2009

HIS HIGHNESSSheikh Sabah Al-AhmadAl-Jaber Al-SabahAMIR OF THE STATE OF KUWAIT

Annual Report 2009 Oqyana Real EstateCompany K.S.C. (Closed) And its subsidiary - State of Kuwait


HIS HIGHNESSSheikh Nawaf Al-AhmadAl-Jaber Al-SabahCROWN PRINCEOF THE STATE OF KUWAIT

HIS HIGHNESSSheikh Naser Al-Mohammad Al-Ahmad Al-SabahPRIME MINISTEROF THE STATE OF KUWAIT



O q y a n a R e a l E s t a t e A n n u a l R e p o r t 2 0 0 9



Chairman's Message

Shari’ah Supervisory Committee Report

Independent Auditor’s Report

6

8

10




In the name of Allah the most gracious, most merciful

Dear Shareholders, Peace and Allah’s Mercy and Blessings be upon you,On behalf of my colleagues, members of the Board of Directors and myself as well as the executive staff of OQYANA Real Estate Company, it is my pleasure to welcome you and present the annual report of the company for the year ended 31 December 2009. The annual report which includes the Shari’ah Supervisory Board Report and the Auditor’s report, witnessed the repercussion of the downturn in the world’s economy and clearly reflected on the performance of all economic sectors, and in particular, the real estate sector which experienced a noticeable contraction since the last quarter of 2008 until now. This downturn culminated in a decline in all indices of financial performance for companies operating within the various sectors, where several investment companies incurred significant losses. Such losses ultimately resulted in the implementation of more conservative policies by the financial and banking institutions in terms of extending facilities and granting loans. And, on the other hand the region is effected by the consequences of the Dubai crisis which participated by itself on all sectors specially the real estate sector, that lead directly to decrease in the valuation of the assets. This can be considered as the main reason for the loss recorded during this year as the company re-evaluated its possessed assets, especially the project ‘OQYANA World First’, in Dubai. A fair and realistic valuation was prepared by the well-known and prominent valuation real estate consultants, who highlighted their attention to the direct analysis on the severe fluctuations in the real estate market in Dubai, in the region and the world.

Dear Shareholders, It is not clear that the real estate market has passed its worst stages till the year end of 2009. The latest anticipation approaching from UAE and specially from Dubai refers that they managed to compromise with the negative effect of the financial crisis gradually. They have reached this position by exerting immense efforts, which will enable them to meet their outstanding obligations and continue their role in the ongoing development of the UAE real estate market. There is no doubt that this will reflect a positive effect on the new projects in the region generally and in ‘OQYANA World First’ project specifically. The company, however, continued with its efforts to seek the required finance for implementing work for some of the component of ‘OQYANA World First’ project.



Dear Shareholders, As for our prestigious sea front project at the ‘Al Seef’ area in the Kingdom of Bahrain, the official approval has been obtained recently including the approval of municipality of the city of Al Manama for the project’s master plan. OQYANA Real Estate Company which owns an area of about 100000M2 was sub-divided to 17 lots, varying in their areas, all of which has a high percentage of a built-up area up to 1450%. The possessed lots are among the prestigious project been named as “Water Garden City”. OQYANA Real Estate Company shall focus immediately on marketing these lots for targeting local, regional and international real estate companies and funds.

Dear Shareholder, The company put forward their application to be listed in Kuwait Stock Exchange in October 2009, in which in-depth studies were carried out to look for proper timing for the listing, in addition to the demands and the repeated requests of the respectful shareholders. The company submitted to Kuwait Stock Exchange authorities all of the required documents together with the audited financial statement up to 30th September, 2009. The higher technical committees of the Kuwait Stock Exchange and in its meeting of March 2010, decided to postpone the decision of the company’s request until the financial statement for year ended, 31 December 2009 was obtained. On this occasion, OQYANA Real Estate Company would like to express its thanks and appreciation to all the members of the Technical Committees at the Kuwait Stock Exchanges for their kind cooperation during the series of meetings held during the review of company’s application. We hope from our hearts that Allah will grant us all the success in achieving our goal for listing OQYANA Real Estate Company as soon as possible. Dear Shareholders,In line with the principles of specifying the real and actual value of the company assets representing around two million square meters of land and water properties, the company, during the previous financial year as of 31 December, 2009, reached a net loss of about Kuwaiti Dinars 72.6 Million, compared to the achieved profits of about Kuwaiti Dinars 98 Million in 2008. The company’s total assets amounted to about Kuwaiti Dinars 438 Million in 2009, compared to the result of 2008 which was about Kuwait Dinars 493 Million. Furthermore, the shareholders equity valued at about Kuwaiti Dinars 369 Million versus Kuwait Dinars 429 Million as of last year.At this stage, we would like to point out that the main reason for the unrealized losses at the year end of 2009 is mainly due to the re-evaluation of the assets which is 100% owned by the company and these losses will be altered to profits, with Allah’s blessings, in the coming years, once the assets are appreciated in its value with the improvement of the real estate market.

AcknowledgementsIn conclusion, I would like to extend my thanks to the honorable shareholders of the company for the trust and support provided to us during the previous year. In addition, I would like to express my sincere thanks and appreciation to the members of the Shari’ah Supervisory Board, the board members and the executive administration of the company for their sincere efforts and support. I plea to Almighty Allah to maintain his endowments on us all, and to preserve our beloved country under the supervision of His Highness, the Amir, Sheikh Sabah Al Ahmad Al-Jaber Al-Sabah, His Highness, the Crown Prince, Sheikh Nawaf Al-Ahmed Al-Jaber Al-Sabah and His Highness, the Prime Minister Sheikh Nasser Al-Mohammed Al-Ahmad Al-Sabah. May Allah protect them.

Peace and Allah’s mercy and blessings be upon you.

Board Chairman and Members



Committee Report




Auditor’s Report


The ShareholdersOqyana Real Estate Company K.S.C. (Closed) State of Kuwait

Report on the consolidated financial statementsWe have audited the accompanying consolidated financial statements of Oqyana Real Estate Company K.S.C. (Closed) (“the Parent company”) and its subsidiary (together referred to as “the Group”) which comprise the consolidated statement of financial position as at December 31, 2009 and the related consolidated statements of income, comprehensive income cash flows and changes in equity for the year then ended and a summary of significant accounting policies and other explanatory notes.

Board’s responsibility for the consolidated financial statementsBoard of the Parent company 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.

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, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Parent company>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 internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a reasonable basis for our audit opinion on the consolidated financial statements.

Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Group as at December 31, 2009 and of its financial performance and its cash flows for the year then ended, in accordance with International Financial Reporting Standards.

Report on other legal and regulatory requirements Furthermore, in our opinion proper books of account have been kept by the Parent company and the consolidated financial statements together with the contents of the report of the board of directors relating to these consolidated financial statements, are in accordance therewith. We further report that we obtained the information and explanation that we required for the purpose of our audit and that the consolidated financial statements incorporate the information that is required by the Commercial Companies Law of 1960, as amended, and by the Parent company’s memorandum of association and physical counting was carried out in accordance with recognized practices, To the best of our knowledge and belief, no violations of either the Commercial Companies Law of 1960 nor of the Parent company’s memorandum of association have occurred during the year ended December 31, 2009 that might have had a material effect on the business of the Group or on its financial position.

Ali Abdulrahman Al-HasawiLicense No. 30A

Rödl Middle EastBDO Burgan-International Accountants

July 15, 2010 State of Kuwait

Auditor’s Report



Consolidated statement of financial position

Consolidated statement of income

Consolidated statement of comprehensive income

Consolidated statement of cash flows

Consolidated statement of changes in equity

Notes to consolidated financial statements

14

15

16

17

18

19



As at December 31,2009All amounts are in Kuwaiti Dinars

Notes 2009 2008

Assets

Cash and cash equivalents 4 371,996 1,976,990

Investments at fair value through statement of income

5 2,593,305 3,555,237

Investments available for sale 6 4,450,000 10,800,000

Investment in unconsolidated subsidiary 7 80,971 80,971

Receivables and other debt balances 8 137,113 753,080

Land and real estate under development 9 41,179,131 37,753,120

Investment properties 10 389,036,828 437,995,931

Intangible assets 6,020 12,039

Property and equipment 72,036 168,734

Total assets 437,927,400 493,096,102

Liabilities and equity

Liabilities

Payables and other credit balances 11 6,798,478 7,061,594

Term financing 12 61,582,073 57,170,593

Provision for staff indemnity 91,342 39,429

Total liabilities 68,471,893 64,271,616

Equity

Share capital 13 262,500,000 250,000,000

Statutory reserve 14 18,839,156 18,839,156

Voluntary reserve 15 18,839,156 18,839,156

Change in fair value reserve - (400,000)

Foreign exchange translation reserve 6,708,112 (6,131,981)

Retained earnings 62,569,083 147,678,155

Total equity 369,455,507 428,824,486

Total liabilities and equity 437,927,400 493,096,102

Consolidated statement of financial position

Dr. Nabeel Jafar Abdul RaheemChairman and Managing Director

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




Note 2009 2008

Revenues

Unrealized (losses)/gains on change in fair value of investment properties

10 (60,471,198) 123,061,700

Impairment in value of land and real estate under development

9 (2,667,436) -

Net investment losses 16 (7,710,011) (21,604,524)

Other losses 17 (1,296,624) (471,078)

(72,145,269) 100,986,098

Expenses and other charges

Finance cost 3,813 14,365

Depreciation and amortization 45,827 65,945

Management and custody fees 1,659 23,106

General and administrative expenses 18 412,504 573,453

463,803 676,869

(Loss)/profit for the year before deductions (72,609,072) 100,309,229

Contribution to Kuwait Foundation for the Advancement of Science (KFAS)

- (902,783)

Zakat 19 - (983,750)

Net (loss)/profit for the year (72,609,072) 98,422,696

(Loss)/earning per share (fils) 20 (28) 37

Consolidated statement of incomeFor the year ended December 31,2009All amounts are in Kuwaiti Dinars

As at December 31,2009All amounts are in Kuwaiti Dinars



2009 2008


Other comprehensive income

Change in fair value of investments available for sale

(6,350,000) (400,000)

Impairment losses in financial assets available for sale

6,750,000 -

Differences on translation of foreign currency 12,840,093 6,870,565

Total other comprehensive income 13,240,093 6,470,565

Total comprehensive (loss)/income for the year (59,368,979) 104,893,261

Consolidated statement of comprehensive incomeFor the year ended December 31,2009All amounts are in Kuwaiti Dinars




Note 2009 2008

Operating activities

(Loss)/profit for the year before contribution to KFAS and Zakat

(72,609,072) 100,309,229

Adjustments for:


Provision for end of services indemnity 51,913 5,821Unrealized losses/(gains) on change in fair value of investment properties

60,471,198 (123,061,700)

Impairment in value of land and real estate under development

2,667,436 -

Net investment losses 7,711,931 21,604,524


Operating loss before working capital changes (1,656,954) (1,061,816)Investments at fair value through statement of income

- 342,393

Receivable and other debit balances 615,967 (521,236)

Due from related parties - (1,762)

Payables and other credit balances (263,116) (7,047,853)

Net cash used in operating activities (1,304,103) (8,290,274)

Investing activitiesPaid for land and real estate under development

(4,552,208) (14,939,656)

Paid for property and equipments - (120,996)

Cash dividends received - 1,872,149

Paid for investment properties (129,010) (642,666)

Net cash used in investing activities (4,681,218) (13,831,169)

Financing activities

Term finance 4,411,480 19,056,697

Finance cost paid (3,813) (14,365)

Net cash from financing activities 4,407,667 19,042,332

Foreign currency translate (27,340) -

Net decrease in cash and cash equivalents (1,604,994) (3,079,111)

Cash and cash equivalents at the beginning of the year

1,976,990 5,056,101

Cash and cash equivalents at the end of the year 4 371,996 1,976,990

Consolidated statement of cash flowsFor the year ended December 31,2009All amounts are in Kuwaiti Dinars




Sha

rec

ap

ital

Sta

tuto

ry

rese

rve

Vo

lunt

ary

re

serv

e

Cha

nge

in

fair

valu

e

rese

rve

Fore

ign

cur

renc

y tr

ans

latio

n re

serv

e

Reta

ine

d

ea

rnin

gs

Tota

l

Bala

nc

e a

t Ja

nu

ary

1, 2

008

250,

000,

000

8,80

8,23

48,

808,

234

-(1

3,00

2,54

6)69

,554

,850

324,

168,

772

Tota

l co

mp

reh

en

sive

inc

om

e

for t

he

ye

ar

--

-(4

00,0

00)

6,87

0,56

598

,422

,696

104,

893,

261

Tra

nsf

er t

o Z

aka

t p

rovi

sion

--

(237

,547

)-

--

(237

,547

)

Tra

nsf

er t

o re

serv

es

-10

,030

,922

10,2

68,4

69-

-(2

0,29

9,39

1)-

Bala

nc

e a

t D

ec

em

be

r 31,

20

0825

0,00

0,00

018

,839

,156

18,8

39,1

56(4

00,0

00)

(6,1

31,9

81)

147,

678,

155

428,

824,

486

Bala

nc

e a

t Ja

nu

ary

1, 2

009

250,

000,

000

18,8

39,1

5618

,839

,156

(400

,000

)(6

,131

,981

)14

7,67

8,15

542

8,82

4,48

6To

tal c

om

pre

he

nsiv

e lo

ss fo

r th

e y

ea

r

--

-40

0,00

012

,840

,093

(72,

609,

072)

(59,

368,

979)

Bon

us

sha

res

(No

tes

25)

12,5

00,0

00-

--

-(1

2,50

0,00

0)-

Bala

nce

at D

ec

em

be

r 31,

200

926

2,50

0,00

018

,839

,156

18,8

39,1

56-

6,70

8,11

262

,569

,083

369,

455,

507

Co

nso

lida

ted

sta

tem

en

t o

f ch

an

ge

s in

eq

uity

For t

he y

ear e

nded

Dec

emb

er 3

1,20

09A

ll am

ount

s are

in K

uwa

iti D

ina

rs

The

ac

co

mp

any

ing

no

tes

form

an

inte

gra

l pa

rt o

f the

se c

ons

olid

ate

d fi

nanc

ial s

tate

me

nts

Annual Report 2009

Notes to the consolidated financial statementsFor the year ended December 31,2009All amounts are in Kuwaiti Dinars



Incorporation and activities1-

Oqyana Real Estate Company – Kuwaiti Shareholding Company (Closed) [previously known as Dimnat Al Khalej Real Estate Company – Kuwaiti Shareholding Company (Closed)] is registered in the State of Kuwait and was incorporated and authenticated on April 7, 2002 at the Ministry of Justice – Real Estate Registration and Authentication Department under No. 1254/ Volume 1. The main activities of the Parent company are as follows:

Owning, buying and selling real estate and land as well as developing them inside - Kuwait and abroad, also managing properties for others without breaching the articles stipulated in the existing laws that prohibit the trading in private residential plots as stipulated in those laws.

Owning, buying and selling shares and real estate bonds for the benefit of the - Company only inside Kuwait and abroad.

Preparing studies and offer consultations in all kinds of real estates aspects if only - the required conditions are met concerning the parties that perform such services.

Performing maintenance works related to buildings and real estates owned by the - Company and others including maintenance work, execution of civil, mechanical, electrical, elevators, and air conditioning work to ensure the protection and safety of the buildings.

Organizing real estate exhibitions related to the Company’s real estate projects in - accordance with Ministry’s applicable regulations.

Utilizing financial surplus available to the Company, by investing it in financial and - real estate portfolios managed by specialized companies.

The Parent company is permitted to conduct the above mentioned activities inside Kuwait and aboard. The Parent company shall have the right to have an interest or to take part in any manner with the authorities that practice similar operations, or that may help the Parent company to achieve its objectives inside Kuwait and abroad. The Parent company shall also acquire these authorities or merge them with the Parent company.

The subsidiary company has the same activities of the Parent company.

As at December 31, 2009 the Group had 17 employees (28 employees as at December 31, 2008).

The Parent company’s registered address is Sharq, Al-Shuhadaa Street, KRE Tower, P.O. Box 26334 Safat -13124 - State of Kuwait.

The consolidated financial statements of Oqyana Real Estate Company K.S.C. (Closed) and its subsidiary for the year ended December 31, 2009 were authorized for issue in accordance with a resolution of the directors on July 15, 2010. The shareholders’ General Assembly has the power to amend these consolidated financial statements after issuance.




Adoption of new and revised International Financial Reporting Standards (IFRS)2-

Standards and interoperations adopted during the year:2/1) The Group has adopted the new standards, interpretations, and amendments to (IFRS issued by International Accounting Standards Board (IASB), which are effective for the financial statements for the annual period beginning on or after January 1, 2009.

The new requirements in respect of these amendments are summarized below:

IAS 1 “presentation of financial statements” (Revised)The revised standard separates owner and non-owner changes in equity. The statement of changes in equity includes only details of transactions with owners, with non-owner changes in equity presented as a single line. In addition, the standard introduces the statement of comprehensive income: it presents all items of recognized income and expenses, either in a single statement or in two linked statements. The Group elected to present two statements.

IFRS 8 “operation segments”The new standard which replaced IAS 14: Segment reporting requires a “management approach” under which segment information is presented on the same basis as that used for internal reporting purposes. This has resulted in the segments being reported in a manner that is more consistent with the internal reporting provided to the chief operating decision maker.

Amendment to IFRS 7 “ Financial Instruments Disclosures” (Revised)The amendments of IFRS 7 expand the disclosures required in respect of fair value measurements of financial instruments and liquidity risk. The Group has selected not to provide comparative information for these expanded disclosures in the current year in accordance with the transitional reliefs offered in these amendments.

IAS 23 “Borrowing Costs” (Revised)IAS 23 Borrowing Costs (Revised 2007) requires the capitalization of borrowing costs to the extent they are directly attributable to the acquisition, production or construction of qualifying assets that need a substantial period of time to get ready for their intended use or sale. The adoption of the revised standard did not have any effect on the measurement and recognition of the Group’s assets, liabilities, income and expenses.

IAS 40 «Investment Property» (Revised) IAS 40 has been amended as part of improvements to IFRS (2008), to include within its scope investment property in the course of construction. Therefore, following the adoption of the amendments and in line with the general accounting policy, investment property under construction is measured at fair value (where that fair value is reliably determinable), with changes in fair value recognized in profit or loss. The adoption of the amendment did not have any effect on the measurement and recognition of the Group’s assets, liabilities, income and expenses.

Annual Report 2009




Standards and interpretations issued, but not yet effective: 2/2) At the date of authorization of these consolidated financial statements, certain new standards, amendments and interpretations have been issued but are not yet effective, and have not been adopted.

IFRS 3 Business Combinations (Revised)The standard is applicable for business combinations occurring in reporting periods beginning on or after July 1, 2009 and will be applied prospectively. The new standard introduces changes to the accounting requirements for business combinations, but still requires use of the purchase method, and will have a significant effect on business combinations occurring in future reporting periods.

IFRS 9 Financial Instruments The IASB aims to replace IAS 39 Financial Instruments: Recognition and Measurement in its entirety by the end of 2010, with the replacement standard to be effective for annual periods beginning January 1, 2013 and earlier application is permitted. IFRS 9 is the first part of Phase 1 of this project. The main phases are:

Phase 1: Classification and Measurement •Phase 2: Impairment methodology •Phase 3: Hedge accounting •

As per the instructions of Ministry of Commerce and Industry of Kuwait dated on December 30, 2009, the technical committee of the Ministry which is responsible for adopting the accounting standards decided to postpone the application of International Financial Reporting Standard “9” until another notice, due to the non-completion of its remaining stages.

IAS 27 Consolidated and Separate Financial Statements (Revised) The revised standard introduces changes to the accounting requirements for the loss of control of a subsidiary and for changes in the Group’s interest in subsidiaries. These changes are effective from July 1, 2009 and will be applied prospectively in accordance with the transitional provisions and so do not have an immediate effect on the Group’s financial statements.

IAS 28 Investments in Associates (Revised)The revised standard introduces changes to the accounting requirements for the loss of significant influence of an associate and for changes in the Group’s interest in associates. These changes are effective from July 1, 2009 and will be applied prospectively in accordance with the transitional provisions and so do not have an immediate effect on the Group’s financial statements.

IFRIC 17 Distributions of Non-Cash Assets to OwnersThe interpretation provides guidance on the appropriate accounting treatment when an entity distributes assets other than cash as dividends to its shareholders.

Annual improvements for accounting standards




The IASB has issued improvements for International Financial Reporting Standards 2009 which have led to a number of changes in the detail of the Group’s accounting policies – some of which are changes in terminology only, and some of which are substantive but have had no material effect on amounts reported. Most of these amendments become effective in annual periods beginning on or after July 1, 2009 or January 1, 2010:

IFRS 5 “Non-current Assets Held for Sale and Discontinued Operations”•Effective for the periods beginning on or after January 1, 2010As part of improvements to IFRSs during (2009) disclosures in the financial statements have been modified to reflect the IASB’s clarification that the disclosure requirements in Standards other than IFRS 5 do not generally apply to non-current assets classified as held for sale and discontinued operations.

IAS 7 “Statement of Cash Flows” •Effective for the periods beginning on or after January 1, 2010 The amendments of IAS 7 (as a part of improvements to IFRSs (2009)) specify that only expenditures that result in a recognized asset in the statement of financial position can be classified as investing activities in the statement of cash flows. Consequently, cash flows in respect of development costs that do not meet the criteria in IAS 38 Intangible Assets for capitalization as part of an internally generated intangible assets (and, therefore, are recognized in profit or loss as incurred) have been reclassified from investing to operating activities in the statement of cash flows.

The management anticipates that the new standards and interpretations will be adopted in the Group’s accounting policies for the period beginning on or after the effective date of the pronouncement. Certain other new standards and interpretations have been issued but are not relevant to the Group’s operations and therefore not expected to have a material impact on the Group’s financial statements.

Significant accounting policies3-

The principals accounting policies applied in the preparation of these consolidated financial statements are set out below:

Basis of preparation3/1) These consolidated financial statements are prepared in accordance with International - Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB), and Interpretations issued by the International Financial Reporting Interpretation Committee (IFRIC) and state of Kuwait Commercial Companies’ law requirements.The accounting policies have been consistently applied during the year, as a similar - base for the policies applied in the previous year, except for the adoption of (Note 2).

Accounting convention 3/2) These consolidated financial statements are prepared under the historical cost -

convention, adjusted through the revaluation of some assets according to fair value as explained in detail in the accompanying policies and disclosures.

The consolidated financial statements are presented in Kuwaiti Dinar.-

Annual Report 2009




Basis of consolidation 3/3) The consolidated financial statements include the financial statements of the Parent company and its subsidiary (Oqyana Jersey (W.L.L). – England, (which practices its activities through Dubai branch), wholly owned subsidiary referred to as (“the Group”) in these consolidated financial statements.

Subsidiaries are those enterprises controlled by the Parent company. Control exists when the Parent company has the power, directly or indirectly, to govern the financial and operating policies of an enterprise so as to obtain benefits from its activities. The consolidated financial statements of the Subsidiary are included in the consolidated financial statements effective from the date of control commences until the date of effective cease that control. Inter-Group balances and transactions, including inter-Group profits and unrealized gains/ losses, are eliminated in preparing the consolidated financial statements. The consolidated financial statements are prepared by using unified accounting policies for the like transactions.

Business combinations3/4) Acquisitions of subsidiaries and businesses are accounted for using the purchase method. The cost of the business combination is measured as the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 Business Combinations are recognized at their fair values at the acquisition date.

Goodwill arising on acquisition is recognized as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognized. If, after reassessment, the Parent company’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognized immediately in the consolidated statement of comprehensive income.

Recognition / de-recognizing of financial assets3/5) A financial asset or a financial liability is recognized when the Group becomes a party to the contractual provisions of the instrument. Financial asset (in whole or in part) is derecognized when the contractual rights to the cash flows from the financial asset expire or when the Group transfers substantially all the risks and rewards of ownership or when the Group has neither transferred retained substantially all the risks and rewards of ownership and when it no longer has control over the asset or a proportion of the assets. A financial liability is derecognized when the obligation specified in the contract is discharged, cancelled or expired.

Critical accounting estimates and judgments3/6) According to the accounting policies applied by the Group and in conformity with IFRS require management to make estimates and assumptions that affect the reported amounts of assets and liabilities.




Classification of landUpon acquisition of a land, the management classifies the land into one of the following categories, based on the intention of the management for the use of the land.Properties under developmentWhen the intention of the management is to develop land in order to sell it in the future, both the land and the construction costs are classified as properties held for trading till the properties are ready for use at which time.

Projects under constructionWhen the intention of the management is to develop a land in order to rent it in the future, both the land and the construction costs are classified as investment properties till the properties are ready for use at which time. Properties held for tradingWhen the intention of the management is to sell land in the ordinary course of business.

Investment propertiesWhen the intention of the management is to earn rentals from land or hold land for capital appreciation or if the intention is not determined for land by Group.

Impairment of investmentsThe Group treats available for sale investments as impaired when there has been a significant or prolonged decline in the fair value below its cost. The determination of what is “significant” or “prolonged” requires significant judgment. In addition, the Group also evaluates among other factors, normal volatility in the share price for quoted investments and the future cash flows and the discount factors for unquoted investments.

Classification of investmentsManagement decides on acquisition of an investment whether it should be classified as held for trading or at fair value through statement of income, or available for sale.

The Group classifies financial assets as held for trading if the acquired primarily for the purposes of short-term profit making.

Classification of investments as investments 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 statement of income in the management accounts, they are classified as at fair value through statement of income. All other investments are classified as available for sale.

Estimation uncertaintyThe key assumptions concerning the future and other key sources of estimation uncertainty at the consolidated financial position date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:

Annual Report 2009




Valuation of unquoted equity investments.

Valuation of unquoted equity instrument is normally based on one of the following recent arm’s length market transactions:Fair value of other similar instruments- The expected cash flows discounted at current rates applicable for items with similar - terms and risk characteristics.Other valuation models.-

The determination of the cash flows and discount factors for unquoted equity investments requires significant estimation.

Cash and cash equivalents3/7) Cash and cash equivalent comprise cash on hand and at banks and short term bank deposits with a maturity date not exceeding three months from the date of deposit.

Financial instruments3/8)

Classification The classification depends on the purpose for which the investments were acquired. Management determines the classification of its financial instrument at initial recognition and re-evaluates this designed every reporting date.

The Group has classified its financial instruments as follows:

Financial assets at fair value through statement of incomeThis category has two sub-categories financial assets held for trading and those designated at fair value through statement of income. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term or if so designed by management.

Receivables There are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the Group provides goods and services directly to a debtor with no intention of trading the receivables.

Assets available for sale These are non derivative financial assets that are either designated in this category or not included in any of the above categories and are principally, those acquired to be held, for an indefinite period of time which could be sold when liquidity is needed or upon changes in rates of profit.

Recognition and de-recognition Regular purchase and assets of financial assets are recognized on settlement date – the date on which the Group delivers or receives the asset. Financial assets are derecognized when the rights to receive cash flows from the assets have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership.




Measurement Financial assets are initially recognized at fair value plus transaction cost for all financial assets not carried at fair value through statement of income. Financial assets carried at fair value through statement of income are initially recognized at fair value and transaction costs are expensed in the statement of income.Subsequently, investment available for sale and financial assets at fair value through statement of income are carried at fair value, and receivables are carried at amortized cost using the effective yield method.

Realized and unrealized gains and losses arising from changes in the fair value of the financial assets at fair value through statement of income’ category, are included in the statement of income for the period in which they arise. Changes in the fair value of financial assets classified as available for sale investments are recognized in equity, when available for sale financial assets are sold or impaired; the accumulated changes in fair value recognized in equity are included in the statement of comprehensive income.

Fair valuesThe fair values of financial instruments in regular financial market are bases on last bid prices.For the unquoted investment, the Group establishes fair value by reference to others that are substantially the same, or by using the expected discounted cash flow analysis after adjustment to reflect the same circumstances of the issuing Group. Available for sale investments, which its fair value have not been determined are carried at cost less impairment losses.

Impairment in valueThe Group assesses at each financial position date whether there is objective evidence that a financial asset or a Group of financial assets is impaired. In the case of equity securities classified as available for sale, a significant 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 for available for sale financial assets, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognized in profit or loss – is removed from equity and recognized in the statement of income. Impairment losses recognized in the statement of income on equity instruments are not reversed through the statement of income.

A specific provision for impairment of receivables is established when there is objective evidence that the Group will not be able to collect all amounts of receivable. The amount of the specific provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, including amounts recoverable from guarantees and collateral, discounted at the effective rate of return. The amount of the provision is recognized in the statement of income.

Intangible assets 3/9) Acquisition costs of other intangible assets are capitalized and amortized on straight-line bases over its estimated useful life, which expected to be three years.

Property, plant and equipment 3/10) Property, plant and equipment are stated at cost less accumulated depreciation and

Annual Report 2009




impairment losses. Depreciation is charged to statement of income on straight line basis over the estimated useful lives of property, plant and equipment as follows:

Useful livesVehicles years 3Equipments years 3Furniture years 3

The initial cost of property, plant and equipment includes cost of purchase and any directly attributable cost of bringing these assets to their current location and condition.

The estimated useful lives of the property, plant and equipment are reviewed periodically. If there is a change in the estimated useful lives, this change took place starting from the year of change with no retroactive effect.

Land and real estate under development3/11) Lands and real estate under development are recognized at cost, which includes development costs. When the development process completed. The land and real estate are classified either as investment property or land and real estate held for trading or as property for the Group’s Self-Occupation as per management intention regarding the future use of properties.

Investment properties3/12) Investments properties, which are properties held to earn rentals and/or for capital appreciation, are stated at their fair value at the financial position date. Gains or losses arising from changes in the fair value of investment properties are included in the statement of income for the period in which they arise.

Impairment of non financial assets3/13) Property, plant and equipment, investment in subsidiary, investment in associates, goodwill and other intangible assets are reviewed as at the date of preparing the statements of financial position in order to determine whether there is an objective evidence of impairment in value if such evidence exists, the estimated recoverable amount of the assets are determined and any impairment loss is recognized in the statement of comprehensive income when the carrying amount of the asset is in excess of the recoverable amount.

The recoverable amount is the higher of an asset’s net selling price or its value in use. The net selling price represents the amount obtainable from the sale of an asset in an arm’s length transaction, while the asset value in use represents the present value of estimated future cash flows expected to arise from the continuing use of an assets, and with its disposal at the end of it useful life. Recoverable amounts are estimated for each item of the assets on an individual basis or if this is impractical for the cash flows generating unit.

Reversal of impairment losses recognized in prior years is recorded as income when there is an indication that the impairment losses for the asset no longer exist or has decreased net book value of an item and impairment loss should not be exceed its net book value in case that the loss has not been initially recognized.




Payables and accruals3/14) Liabilities are recognized for amounts to be paid in the future for goods or services received, whether billed by the supplier or not.

Term financing 3/15) Finance by others acquired by the Group is recognized at fair value less transaction costs. Subsequently such finance is stated at amortized cost. The difference between the amount collected (less any transaction cost) and value to be paid is recognized over the contract term in the consolidated statement of comprehensive income using effective cost rate.

Borrowing costs3/16) Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset should be capitalized as part of the cost of that asset. The capitalized of borrowing costs should commence when expenditures for the asset have been incurred and activities that are necessary to prepare the asset for its intended use or sale are in progress.

Borrowing costs that are not directly attributable to a qualifying asset should be recognized as an expense in the period in which they are incurred and accounted for on an accrual basis.

End of service indemnity3/17) Provision is made for amounts payable to employees under the Kuwaiti Labor Law in the private sector and employee contracts. This liability, which is unfunded, represents the amount payable to each employee as a result of involuntary termination on the financial position date, and approximates the present value of the final obligation.

Revenue recognition3/18) Wakala income is recognized as it is earned, on a time apportionment basis, using the effective rate of return.

Gain on sale of investments is measured by the difference between the sale proceeds and the carrying amount of the investment at the date of disposal, and is recognized at the same time of the sale.

Other categories of income are recognized when earned, at the time the related services are rendered and / or on the basis of the terms of the contractual agreement of each activity.

Foreign currencies3/19)

Transactions and balancesThe Group’s books are kept in Kuwaiti Dinars. Foreign currency transactions are accounted for at the prevailing exchange rates at the date of the transaction. Monetary assets and liabilities balances denominated in foreign currencies are translated at the prevailing rate

Annual Report 2009




at consolidated financial position date. Resultant differences in currency changes are taken to the consolidated statement of comprehensive income. A resultant difference in currency changes from translating non-monetary financial assets which is measured with fair value is considered a part of the differences of changes in the fair value.

Financial statements translationTransactions of subsidiary and associations are not present part of the Group transaction. The assets and liabilities for these companies are translated to Kuwaiti Dinar by using the prevailing rate at the consolidated financial position date, the revenue and expenses are translated using the average of the exchange rates during the year. Resultant differences in currency change are taken to the consolidated equity statement directly under the “foreign currency translation reserve”.

Dividends3/20) Dividends are recognized as a liability in the Group’s consolidated financial statements in the period in which the dividends are approved by the shareholders.

Segment reporting3/21) A segment is a distinguishable component of the Group that is engaged in providing products or services, business segment or providing products or services within a particular economic environment, geographical segment, where it is subject to risks and rewards that are different from other segments.

Contingencies3/22) Contingent liabilities are not recognized but disclosed in the financial statements except when the possibility of an outflow of resources embodying economic benefits is remote.

A contingent asset is not recognized in the financial statements but disclosed when an inflow of economic benefits is probable.

Cash and cash equivalents4- 2009 2008

Cash on hand 782 1,506Cash at bank 371,053 1,975,115Cash with portfolio manager 161 369

371,996 1,976,990

Investments at fair value through statement of income5- 2009 2008

Investments in quoted shares – Listed 2,543,511 3,507,426Investments in funds 49,794 47,811

2,593,305 3,555,237

The investments at fair value through statement of income represent local quoted shares and unquoted local funds.




Investments in shares include an amount of KD 2,528,711 (2008: KD 3,389,586) that has been pledged against Murabaha payable (Note 12).

Investments available for sale 6- 2009 2008

Investments in quoted shares – Unlisted 4,450,000 10,800,0004,450,000 10,800,000

The investments in quoted shares (unlisted) for available sale represents the Group’s holding in private company, this investment is carried at last financial statement for that Company.Investments in unquoted shares (unlisted) is completely pledged (2008: KD 10,800,000) against Tawaroq contracts (Note 12).

Investment in unconsolidated subsidiary7-

On November 14, 2008 the Group acquired 100% of the share capital of Oqyana Real Estate Company W.L.L. which is located in Kingdom of Bahrain and operating in the field of real estates. The share capital of the subsidiary amounting to Bahraini Dinar 100,000 equivalent to KD 80,971. The subsidiary has not been consolidated due to immateriality as it comprises 0.02% of the Parent company’s total assets. The recorded amount of investment includes goodwill amounting to KD 7,899.

Receivables and other debit balances8- 2009 2008

Advance payment to suppliers 51,601 265,167Staff receivable 401 1,316Refundable deposits 11,370 30,813Prepaid expenses 31,731 199,508Due from related parties - 1,762Others 42,010 254,514

137,113 753,080

The carrying amount of trade receivables approximates its fair value, and the other items within receivables and other debit balances do not contain impaired assets. The maximum exposure to credit risk at the reporting date is the fair value of each item of receivables mentioned above. The Group does not hold any collateral as security.

Land and real estate under development 9- 2009 2008

Balance at beginning of the year 37,753,120 189,440,228Additions 4,609,098 15,650,425Transfer to investment properties - (163,022,027)Foreign currency translation differences 1,484,349 (4,315,506)Impairment losses in value (2,667,436) - Balance at ending of the year 41,179,131 37,753,120

Annual Report 2009




Land and real estate under development represents the amounts paid on acquiring and development one of the islands (world islands project – Dubai).

The above balance includes capitalized finance costs of KD 3,536,432 being charged during the year ended December 31, 2009 (during the year ended December 31, 2008: KD 2,881,621).

The investment properties have been recorded at fair value, on the basis of valuation carried out by two independent valuers resulting in impairment in value amounting to KD 2,667,436 charged to the consolidated statement of income.

Investment properties10- 2009 2008

Balance at beginning of the year 437,995,931 140,697,264 Additions 129,010 642,666 Transfer from land and real estate underdevelopment

- 163,022,027

Foreign currency translation differences 11,383,085 10,572,274Change in fair value (60,471,198) 123,061,700

Balance at ending of the year 389,036,828 437,995,931

The investment properties consist of 20 islands in the world islands project – Dubai for the value of KD 238,772,559 that is owned by Oqyana Jersey Limited (United Kingdom) (100% owned subsidiary) and another property in Kingdom of Bahrain for the value of KD 150,264,269. The legal owner of the investment property in Bahrain is Oqyana Real Estate Co. (100% owned subsidiary), which assigned in writing the ownership of the property in favor of the Parent company.

The investment properties have been recorded at fair value, on the basis of valuation carried out by two independent valuers from Kingdom of Bahrain and United Arab Emirates.

Investment property with a value of KD 168,242,756 (2008: KD 148,477,181) has been pledged against Murabaha payable (Note 12).

Also, the Group agreed with some financial institutions to restructure some of the debts due on the Group against mortgaging investment properties amounting to KD 6,142,578 and the mortgage procedures are currently under process (Note 12).

Payables and other credit balances 11- 2009 2008

Trade payables 2,845,641 2,938,289Due to related parties 1,327,328 1,175,150 Accrued expenses 170,192 123,812 Kuwait foundation for advancement of science 1,330,348 1,330,348

Zakat tax 983,750 983,750




Advance payment from customers 116,314 240,317Staff leave provision 22,900 32,381Other credit balances 2,005 237,547

6,798,478 7,061,594

Term financing12- 2009 2008

Tawaroq contracts 18,450,982 8,950,992Wakala payable - 20,290,526Murabaha payable 43,131,091 27,929,075

61,582,073 57,170,593

Tawaroq contract include an amount of KD 12,028,813 due in 2010 and KD 6,422,170 due in 2011, with average cost rate is 7.8% (11.97% for the year ended December 31, 2008).Murabaha payable include an amount of KD 13,151,870 due in 2010 and KD 29,979,220 due from 2011 to 2013, with average cost rate is 7.25% (6.1% for the year ended December 31, 2008).

Investments in quoted shares (listed) include an amount of KD 2,528,711 (2008: KD 3,389,586) that has been pledged against Murabaha payable (Note 5).

Investments in unquoted shares are completely pledged (2008: KD 10,800,000) against Tawaroq payable (Note 6).

Investments properties with a value of KD 168,242,756 (2008: KD 148,477,181) has been pledged against Murabaha payable (Note 10).

Also, the Group agreed with some financial institutions to restructure some of the debts due on the Group against mortgaging investment properties amounting to KD 6,142,578 and the mortgage procedures are currently under process (Note 10).

Capital13-

The authorized, issued and fully paid-up capital is as follows:2009 2008

(Capital (KD 262,500,000 250,000,000(Capital (number of shares 2,625,000,000 2,500,000,000

Statutory reserve14-

As required by the Commercial Companies Law and the Parent company’s memorandum of association, 10% of annual net profit before KFAS, Zakat and BOD remuneration is transferred to statutory reserve. The Parent company may resolve to discontinue such annual transfers when the reserve equals 50% of the capital. This reserve is not available for distribution except in cases stipulated by Law and the Parent company’s memorandum of association.

Voluntary reserve15-

Annual Report 2009




As required by the Parent company’s memorandum of association, a percentage of the net profit for the year, to be calculated according to the Board of Directors’ recommendation subject to the approval of the general assembly meeting, is to be transferred to the voluntary reserve. Such transfer may be discontinued by a resolution of the Shareholders upon recommendation by the Board of Directors. The Board of Directors has suggested not transfer for this year due to losses.

Net investment losses16-

2009 2008

Realized gain on sale of investments at fairvalue through statement of income - 9,385

Profit from wakalah 1,920 - Unrealized losses on changes in fair value of investments at fair value through statementof income

(961,931) (23,486,058)

Impairment losses in financial assets available for sale

(6,750,000) -

Dividend income - 1,872,149

(7,710,011) (21,604,524)

Other losses17-

2009 2008

Foreign exchange differences (1,540,155) (852,780)

Sundry 243,531 381,702

(1,296,624) (471,078)

General and administrative expenses 18-

General and administrative expenses included staff cost amounting to KD 292,791 and consultancy and professional fees and business developments for the year ended December 31, 2009 amounting to KD 31,248 (for the year ended December 31, 2008: KD 326,880 and KD 149,450 respectively).

Zakat19-

This item represents Zakat computed in accordance with law No 46/2006 related to Zakat imposed on the general and closed shareholding companies, Zakat is calculated as 1 % from net profit before deducting the Parent company’s provisions and reserves.

(Loss)/earning per share20-

(Loss)/earnings per share is calculated by dividing net (loss)/profit for the year attributable to the shareholders of the Parent company over the weighted average number of




ordinary shares outstanding during the year as follows:

2009 2008

(Net (loss)/profit for the year (KD (72,609,072) 98,422,696 Weighted average number of outstanding shares

2,625,000,000 2,625,000,000

(Loss)/earning per share (fils) (28) 37

Issued bonus shares have been accounted for in the calculation of earnings per share for the two years ended December 31, 2009/2008.

Transaction with related parties 21-

Transactions represents transaction with related parties, i.e., shareholders, directors, senior management of the Group, and companies of which they are principally owners. Prices and terms of these transactions are approved by the Group management.

Summary of the balances resulted from these:

Mainshareholders

2009 2008

Consolidated statement offinancial positionDue from related parties - - 1,762

Due to related parties 1,255,465 1,327,329 1,175,150

2009 2008

Consolidated statement of income Unrealized losses on changes in fair value of investments at fair value through statement ofincome

936,075 23,335,002

Cash dividends - 1,872,149

Compensation of key management personnel 191,345 227,168

The transactions with related parties are subject to approval of the shareholders at the general assembly.

Segment information22-

Business information segments:

The Group manages its activities through two main segments:

Real estate segments - Investments segments -



No

tes

to t

he

co

nso

lida

ted

fin

an

cia

l sta

tem

en

tsFo

r th

e y

ea

r en

de

d D

ec

em

be

r 31,

2009

All

am

ou

nts

are

in K

uw

aiti

Din

ars

2009

2008

Re

al e

sta

teIn

vest

me

nts

Tota

l R

ea

l est

ate

Inve

stm

en

tsTo

tal

Re

ven

ue

(63,

138,

634)

(7,7

10,0

11)

(70,

848,

645)

123,

061,

700

(21,

604,

524)

101,

457,

176

Exp

en

ses

(462

,144

)(1

,659

)(4

63,8

03)

(653

,763

)(2

3,10

6)(6

76,8

69)

Lo

ss)/

pro

fit fo

r th

e y

ea

r) b

efo

re o

the

r lo

sse

s a

nd

un

dist

ribu

ted

exp

en

ses

(63,

600,

778)

(7,7

11,6

70)

(71,

312,

448)

122,

407,

937

(21,

627,

630)

100,

780,

307

Oth

er l

oss

es

(1,2

96,6

24)

(471

,078

)

Un

dist

ribu

ted

exp

en

ses

-(1

,886

,533

)

Ne

t (lo

ss)/

pro

fit(7

2,60

9,07

2)98

,422

,696




The geographic distribution for assets / liabilities23-

Assets Liabilities

2009 2008 2009 2008

Kuwait 7,193,503 14,688,548 65,262,150 60,886,532

UAE 280,387,393 329,849,400 3,209,743 3,385,084

Bahrain Kingdom 150,346,504 148,558,154 - -

437,927,400 493,096,102 68,471,893 64,271,616

Equity capital ratio 24- 2009 2008

Share capital (KD) 262,500,000 250,000,000Weighted share capital (KD) 262,500,000 250,000,000Equity including weighted share capital (KD) 369,455,507 428,824,486Equity including weighted share capital /weighted share capital

141% 172%

Proposed dividends25-

On July 15, 2010 the Board of Directors proposed not to distribute dividends for the year ended December 31, 2009 (2008: 5% bonus share approved by shareholders at the annual general assembly) and also proposed not to distribute remuneration for Board of Directors for 2009 (2008: Nil).

The above is subject to the approval of the shareholders at the annual general assembly.

Financial instruments26-

Fair value of financial instruments Fair value is defined as the amount at which the instrument could be exchanged in a current transaction between knowledgeable willing parties in an arm’s length transaction, other than in force or liquidation sale. The Group used recognized assumptions and methods to estimate the fair value of the financial instruments. The fair value of financial assets and financial liabilities are determined as follows:

The fair value of other financial assets and financial liabilities with standard terms and •conditions and trade on active liquid markets is determined with reference to quoted market prices.The fair value of other financial assets and financial liabilities (excluding derivative •instruments) is determined in accordance with generally accepted pricing models based on discounted cash flow analysis using prices from observable current market transactions and dealer quotes for similar financial instruments.The fair values of financial instruments carried at amortized cost are not significantly •different from their carrying values.

Annual Report 2009




Fair value measurement recognized in the statement of financial positionThe Group adopted the amendments to IFRS 7 effective from January 1, 2009. These amendments require the company to present certain information about financial instruments measured at fair value in the statement of financial position.

The following table presents financial assets measured at fair value in the statement of financial position in accordance with the fair value hierarchy. This hierarchy Groups financial assets into two levels based on the significance of inputs used in measuring the fair value of the financial assets.

The fair value hierarchy has the following levels: Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities; •Level 2: inputs other than quoted prices included within Level 1 that are observable for •the asset or liabilities, either directly (i.e. as prices) or indirectly (i.e. derived from prices); The level within which the financial asset or liability is classified is determined based on the lowest level of significant inputs to the fair value measurement.

The financial assets and liabilities measured at fair value in the statement of financial position are grouped into the fair value hierarchy as follows:

December 31, 2009:Level 1 Level 2 Total

Investments at fair value through statement of income Quoted securities 2,543,511 - 2,543,511Investments funds - 49,794 49,794

Investments available for sale Quoted securities - Unlisted - 4,450,000 4,450,000

2,543,511 4,499,794 7,043,305

December 31, 2008:There have been no comparative financial statements according to the disclosures required in the amendment as the standard does not require showing the comparative figures in the first year of adoption.

Financial risks management The Group’s use of financial instruments exposes it to financial risks such as credit risk, market risk, and liquidity risk.

The Group continuously reviews its risk exposures and takes the necessary procedures to limit these risks at acceptable levels.




The significant risks that the Group is exposed to are as follows:

Credit risk • Credit risk is the risk that one party to a financial instrument will fail to pay an obligation causing the other party to incur a financial loss. Financial assets, which potentially subject the Group to credit risk, consist principally of cash and cash equivalents and receivables. Cash is deposited at financial institution with high credit reputation. Credit risk with respect to receivables is limited due to dispersion across large number of customers. For more details, refer to note (8). The majority of the Group’s trade receivables mature within 90 days and most of these debts are due from individuals and companies.

Therefore, the management believes there is no future credit risk provision required in excess of the normal provision for impairment of trade receivables.

Liquidity risks •Liquidity risks are the risk that the Group will be unable to meet its cash obligations. The management of liquidity risks consists of keeping sufficient cash, arranging financing sources through enough facilities, managing highly liquid assets and monitoring liquidity on a periodical basis by method of future cash flow.

The maturity of liabilities stated below based on the period from the financial position date to the contractual maturity date. In case of financial instruments that do not have a contractual maturity date, the maturity is based on management’s estimate of time period in which the asset will be collected or disposed to settle the liability. Liabilities stated below represents the contractual maturity of financial assets and liabilities based on undiscounted cash flows, as such, these balances accrued during period less than one year so the discount will be immaterial.



The

follo

win

g is

ma

turit

y ta

ble

for t

he

fin

an

cia

l ass

ets

an

d li

ab

ilitie

s a

s o

f De

ce

mb

er 3

1, 2

009:

With

in 3

m

on

ths

Fro

m 3

mo

nth

s to

1 y

ea

rFr

om

1 t

o

5 ye

ars

Mo

re t

ha

n

5 ye

ars

Tota

l

Ass

ets

C

ash

an

d c

ash

eq

uiv

ale

nts

371,

996

--

-37

1,99

6In

vestm

ents

at f

air v

alu

e th

roug

h sta

tem

ent o

f inco

me

-2,

593,

305

--

2,59

3,30

5In

vest

me

nt

ava

ilab

le fo

r sa

le

--

4,45

0,00

0-

4,45

0,00

0In

vest

me

nt

in u

nc

on

solid

ate

d s

ub

sidia

ry-

--

80,9

7180

,971

Re

ce

iva

ble

s a

nd

oth

er d

eb

t b

ala

nc

es

-13

7,11

3-

-13

7,11

3La

nd

an

d re

al e

sta

te u

nd

er d

eve

lop

me

nt

--

41,1

79,1

31-

41,1

79,1

31In

vest

me

nts

pro

pe

rtie

s

--

389,

036,

828

-38

9,03

6,82

8Pr

op

ert

y a

nd

eq

uip

me

nt,

an

d in

tan

gib

le a

sse

ts-

-78

,056

-78

,056

Tota

l ass

ets

37

1,99

62,

730,

418

434,

744,

015

80,9

7143

7,92

7,40

0

Lia

bili

ties

Paya

ble

s a

nd

oth

er c

red

it b

ala

nc

es

410

6,79

8,06

8-

-6,

798,

478

Term

fin

an

cin

g13

,151

,870

12,0

28,8

1336

,401

,390

-61

,582

,073

Pro

visio

n fo

r sta

ff in

de

mn

ity-

-91

,342

-91

,342

Tota

l lia

bili

ties

13,1

52,2

8018

,826

,881

36,4

92,7

32-

68,4

71,8

93N

et l

iqui

dity

ga

p(1

2,78

0,28

4)(1

6,09

6,46

3)39

8,25

1,28

380

,971

369,

455,

507

As

disc

lose

d in

th

e t

ab

le a

bo

ve,

the

cu

rre

nt

liab

ilitie

s (d

ue

with

in o

ne

ye

ar)

exc

ee

de

d it

s c

urr

en

t a

sse

ts b

y K

D 2

8,87

6,74

7 a

s a

t D

ec

em

be

r 31,

200

9 (2

008:

KD

57,

946,

880)

.

The

Gro

up

is

de

pe

nd

en

t o

n a

vaila

bili

ty o

f c

on

tinu

ed

su

pp

ort

fro

m t

he

fin

an

cia

l in

stitu

tion

s (r

esc

he

du

ling

of

the

fa

cili

ties

fro

m

sho

rt t

erm

to

me

diu

m/l

on

g c

red

it fa

cili

ties)

(N

ote

s -

12)

an

d t

he

ma

na

ge

me

nt

ha

s b

ee

n a

ble

to

re

sch

ed

ule

th

e c

red

it fa

cili

ties

am

ou

ntin

g t

o K

D 3

6,40

1,39

0 fr

om

sh

ort

te

rm t

o lo

ng

te

rm fa

cili

ties,

ma

turit

y o

n in

sta

llme

nts

sta

rtin

g fr

om

201

1 to

201

3

The

ma

na

ge

me

nt i

s in

the

pro

ce

ss o

f ne

go

tiatin

g th

e te

rms o

f th

e se

ttle

me

nt o

f th

e sh

ort

term

pa

yab

les a

mo

un

ting

to K

D 2

5,18

0,68

3 w

ith t

he

fin

an

cia

l in

stitu

tion

s w

he

reb

y th

is sh

ort

te

rm p

aya

ble

s w

ill b

y c

on

vert

ed

into

me

diu

m o

r lo

ng

te

rm c

red

it fa

cili

ties.

Th

e

ma

na

ge

me

nt

is c

on

fide

nt

tha

t th

ey

will

be

ab

le t

o re

ne

go

tiate

th

e t

erm

s o

f th

ese

fac

ilitie

s a

s c

on

tem

pla

ted

at

this

sta

ge

.

No

tes

to t

he

co

nso

lida

ted

fin

an

cia

l sta

tem

en

tsFo

r th

e y

ea

r en

de

d D

ec

em

be

r 31,

2009

All

am

ou

nts

are

in K

uw

aiti

Din

ars



The

follo

win

g is

ma

turit

y ta

ble

for t

he

fin

an

cia

l ass

ets

an

d li

ab

ilitie

s a

s o

f De

ce

mb

er 3

1, 2

008:

With

in 3

mo

nths

Fro

m 3

mo

nths

to 1

ye

ar

Fro

m 1

toye

ars

5 M

ore

tha

n5

yea

rsTo

tal

Ass

ets

Ca

sh a

nd

ca

sh e

qu

iva

len

ts1,

976,

990

--

-1,

976,

990

Inve

stm

en

ts a

t fa

ir va

lue

th

rou

gh

sta

tem

en

t o

fin

co

me

-3,

555,

237

--

3,55

5,23

7

Inve

stm

en

t a

vaila

ble

for s

ale

--

10,8

00,0

00-

10,8

00,0

00

Inve

stm

en

t in

un

co

nso

lida

ted

su

bsid

iary

--

-80

,971

80,9

71

Re

ce

iva

ble

s a

nd

oth

er d

eb

t b

ala

nc

es

-75

3,08

0-

-75

3,08

0

La

nd

an

d re

al e

sta

te u

nd

er d

eve

lop

me

nt

--

37,7

53,1

20-

37,7

53,1

20

Inve

stm

en

ts p

rop

ert

ies

--

437,

995,

931

-43

7,99

5,93

1

Pro

pe

rty

an

d e

qu

ipm

en

t, a

nd

inta

ng

ible

ass

ets

--

180,

773

-18

0,77

3

To

tal a

sse

ts1,

976,

990

4,30

8,31

748

6,72

9,82

480

,971

493,

096,

102

Lia

bili

ties

Paya

ble

s a

nd

oth

er c

red

it b

ala

nc

es

123,

812

6,93

7,78

2-

-7,

061,

594

Term

fin

an

cin

g43

3,28

856

,737

,305

--

57,1

70,5

93

Pro

visio

n fo

r sta

ff in

de

mn

ity-

-39

,429

-39

,429

To

tal l

iab

ilitie

s55

7,10

063

,675

,087

39,4

29-

64,2

71,6

16

Ne

t liq

uid

ity g

ap

1,41

9,89

0(5

9,36

6,77

0)

486,

690,

395

80,9

7142

8,82

4,48

6

No

tes

to t

he

co

nso

lida

ted

fin

an

cia

l sta

tem

en

tsFo

r th

e y

ea

r en

de

d D

ec

em

be

r 31,

2009

All

am

ou

nts

are

in K

uw

aiti

Din

ars

Annual Report 2009




Market risks • Market risk, comprise of price risk, interest rate risk and currency risk. These risks arise due

to change in market prices, interest rates and foreign currency rates.

Foreign currencies risks Foreign currencies risks arise from transactions with foreign currencies. The Group manages these risks by setting limits on transaction with other foreign currencies and counterparty and limiting its transaction business in major currencies with reputable counterparties.

The Group’s significant net exposure to foreign currency denominated monetary assets less monetary liabilities at the financial position date, translated into Kuwaiti Dinars at the closing rates are as follows:

2009Equivalent

2008Equivalent

KD KD

US Dollars (22,569,617) (17,784,995)

UAE Dirhams 277,177,651 326,464,317

Bahraini Dinar 120,344,515 120,820,159

If the foreign currencies had strengthened against the Kuwaiti Dinar assuming the above sensitivity 1%, then this would have the following impact on the profit for the year, and the Group’s equity.

Percentage of changesin currencies

2009 2008 Statement of income

Equity Statement of income

Equity

US Dollars 1+ (225,696) - (177,849) -

UAE Dirhams 1+ 2,799,517 (27,740) 2,895,188 369,455

Dinar Bahraini 1+ 1,203,445 - 1,208,201 -

If the foreign currencies had weakened against the Kuwaiti Dinar assuming the above sensitivity 1%, then there would be an equal and opposite impact on the profit for the year and the Group’s equity.

Cash flow and fair value interest rate risks As the Group has no significant interest-bearing assets, the Group’s income and operating cash flows are substantially not affected by the changes in market interest rates.

The Group’s interest rate risk arises from long-term borrowings. Borrowings issued at variable rates expose the Group to cash flow interest rate risk. The Group is not exposed to cash flow changes due to changes in the interest rates on Wakala and Murabaha as these facilities issued at fixed rates.




Equity price risksTo manage its equity price risks arising from investments in equity securities, the Group diversifies its portfolio. Diversification of the portfolio is done in accordance with the limitations set by the Board of Group.

During the year, the Group held investments classified on the statement of financial position as investments at fair value through statement of income and investments available for sale.

The equity price risk sensitivity is determined on the assumptions of changes in Kuwait stock market by 5%+/- for the year 2009 and 2008.

The sensitivity analyses below have been determined based on the exposure to equity price risks at the reporting date. The analysis reflects the impact of positive changes to equity prices in accordance with the above-mentioned equity price risk sensitivity assumptions. All other variables are held constant.

Statement of income

Equity

2009 2008 2009 2008

Investments at fair value through statement of income 127,175 175,371 - -

Investments available for sale 222,500 - - 540,000

In case of a negative change in equity prices by 5% and other variables are held constant, there would be an equal and opposite impact on the profit for the year and equity and the balances shown above would be negative.

Capital risk management 27-

The Group’s objectives when managing capital is safeguarding the Group’s ability to continue as a going concern to be able to provide returns to shareholders and benefits to other beneficiaries with risk level.

The Group determines share capital that is adequate for risks and manages its capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, issue new shares, or sell assets to reduce debt.

Consistently with others in the industry, the Group monitors capital on the basis of debt – to – adjusted equity. This ratio is calculated as net debts divided by total adjusted equity. Net debts calculated as total debts including facilities, as shown in the statement of financial position less cash and cash equivalent. Total adjusted equity comprise of all components of equity (share capital reserves and retained earning).

Annual Report 2009




The gearing ratio as follows:

2009 2008

Debts 61,582,073 57,170,593

Less: Cash and cash equivalent 371,996 1,976,990

Net debts 61,210,077 55,193,603

Total equity 369,455,507 428,824,486

Total equity and debts 430,665,584 484,018,089

Gearing ratio 14% 11%

Stand alone statement of financial position for Oqyana Real Estate Company 28- K.S.C (Closed) – “Parent company”

2009 2008

Assets

Cash and cash equivalents 82,194 5,262

Investments at fair value through statement of income

2,593,305 3,555,237

Investment available for sale 4,450,000 10,800,000

Investment in subsidiary 270,550,511 332,677,267

Receivables and other debt balances 44,076 257,033

Investments properties 150,264,268 148,477,181

Intangible assets 6,020 12,039

Property and equipment 19,171 58,979

Total assets 428,009,545 495,842,998

Liabilities and equity

Liabilities

Payables and other credit balances 3,658,044 3,710,055

Term financing 61,582,073 57,170,593

Provision for staff indemnity 22,033 5,883

Total liabilities 65,262,150 60,886,531

Equity

Share capital 262,500,000 250,000,000

Statutory reserve 18,839,156 18,839,156

Voluntary reserve 18,839,156 18,839,156

Change in fair value reserve - (400,000)

Retained earnings 62,569,083 147,678,155

Total equity 362,747,395 434,956,467

Total liabilities and equity 428,009,545 495,842,998



Annual Report 2009

Stand alone statement of income for Oqyana Real Estate Company K.S.C (Closed) – 29- “Parent company”

2009 2008

Revenues

Real estate income 1,658,077 7,137,251

Net investment losses (7,710,011) (21,604,524)

Share of (losses)/profit from subsidiary (64,796,711) 115,924,449

Other losses (1,296,624) (471,078)

(72,145,269) 100,986,098

Expenses and other charges



Management and custody fees 1,659 23,106

General and administrative expenses 412,504 573,453

463,803 676,869

(Loss)/profit for the year before KFAS, and Zakat (72,609,072) 100,309,229

Contribution to Kuwait Foundation for the Advancement of Sciences (KFAS)

- (902,783)

Zakat - (983,750)


(Loss)/earning per share (fils) (28) 37

in the name of allah the most gracious, most...

Documents