New SIMPLY UP IN 2005 - Adamco · 2010. 5. 25. · Ali Mohammed Al-Olaimi Board Memberque Saqer...

SIMPLY UP IN 2005

In The Name of GodThe Most Gracious The Most Merciful

His Highness

Sheikh Sabah Al-Ahmad Al-Jaber Al-SabahAMIR OF KUWAIT

His Highness

Sheikh Nawaf Al-Ahmad Al-Jaber Al-SabahCROWN PRINCE

His Highness

Sheikh Sabah Al-Ahmad Al-Jaber Al-Sabah(1928 - 2006)

“We testify with the people of Kuwait that you have successfully led the

country into modern civilization”

9

CONTENTS

10 Sharia’a Board

12 Chairman’s Message

16 The Board of Directors

18 Financial Analysis

27 Auditor’s Report and Financial Statements

10

Shari’ah SupervisoryBoard Report

11

Sheikh Dr. Khalid Mathkour Al Mathkour

Chairman

Sheikh Dr. Abdul Aziz Al Qassar

Member

Sheikh Dr. Issam Khalaf Al-Inizi

Member

We have reviewed ADAM company’s activities as well as its contracts and investments

transactions and studied the shari’ah controller’s report during the year ended 31

December 2005. We hereby certify that the company’s all transactions

were practiced in compliance with the Islamic Shari’ah.

12

CHAIRMAN MESSAGE

13

On behalf of my colleagues, the Board Members, the

Management and Myself, I would like to start with thanking

Allah the Almighty and Our Prophet, Peace Be Upon Him.

I would like to congratulate you for the successful results of

2005, and assure you of our perfect performance, thanks to

your efforts, directions and our commitment to our pledge

to accomplish our goals safely. It is quite obvious that our

achievements and aspirations have become visible and

sustainable. Such accomplishments wouldn’t have been

realized without your continuous support and assistance to

overcome all faced obstacles.

14

CHAIRMAN MESSAGE

Esteemed Shareholders,

2005 was a year of great developments and achievements. The financial results as end of 31st December

2005 recorded immense profits despite facing numerous challenges locally and internationally.

Following is a summary of our major achievements and activities:

ADAM executed a number of strategic projects where all Private Placements launched by the company

were successfully accomplished. ADAM managed to secure the needed capital of these placements in

a time record. Dar 1st Holding Company (Khabary) from KD 1-50 Million, Manazel Holding Company

from 15-65 Million and Oqyana Real Estate Company from 1-250 Million. ADAM’s total covered and

issued private placements reached approximately KD 365 Million (US $ 1.3 Billion).

Towards the end of 2005, ADAM launched Al Dar Fund of Funds , the first of its kind in Kuwait, the

Gulf and the whole World. Al Dar Fund of Funds aims at investing in the investment fund units in

compliance with Islamic & Shari’ah Principles. The Fund was very successful and highly appreciated

and accepted by investors during its private placement operations. Other ADAM’s funds namely, Real

Estate Fund, Al Dar Investment Fund and Al Dar Securities Fund continued to its great performance

and recorded remarkable and rewarding profits.

ADAM as well, was very much distinguished by assuming the consultant

role to list share holding closed companies that plan to be listed

on the Kuwait Stock Exchange. ADAM achieved its first listing

operation for Al Dar National Real Estate company. The

company is still undergoing the listing of Kuwait Leisure

Parks Company. In addition, ADAM concluded many

agreements to list several companies during 2006.

ADAM successfully assumed the role of manager

15

and issuance agent to increase Al-Madar Finance & Investment Company’s capital from KD 15-25

Million. The company, through managing the customer’s Private Investment Portfolios succeeded

to attract different investors and provide services with high efficiency which contributed to the

achievement of excellent returns by end of 2005.

On the other hand, ADAM’s financial results recorded KD 23.5 million net profit by end of 2005 and

approximately 17.44 fils earning per share. ADAM’s total revenues reached around KD 26.1 million and

expenditure KD 2.6 Million. The company’s assets mounted to KD 65 million and total shareholders

equity to KD 44 Million. The returns on assets reached approximately 36%, 59% on equity and 117%

on capital. ADAM plans for expansion in the upcoming years. This will be reflected through the

acquisition of new ventures, varied investment activities and numerous consultancy services.

In closing, I take this opportunity to acknowledge with great thanks and deep depreciation the

contribution of all towards the development of ADAM’s activities. I extend my special thanks to

our parent company Investment Dar, praising its continuous support to ADAM’s Management,

Shareholder, Investors, Board Members, Executives and Staff.

Thanking you, once again for your cooperation and wishing every progress and success for our

company’s further development and prosperity.

Omar Sulaiman Al Qadi

Chairman

16

BOARD OF DIRECTORS

& ExECuTIvEMANAGEMENT

17

Omer Suleiman Hamad Al-Kazi

Chairman

Mustafa Ibrahim Al-Saleh

Vice-Chairman

Adnan A. Al-Musallam

Board Member

Ali Mohammed Al-Olaimi

Board Memberque

Saqer Abdullah Thunayan Al-Ghanem

Board Member

Abdulrahman Ali Al-Dawoud

General Manager

18

FINANCIALANALYSIS

I FINANCIAL POSITION IN 2005

In 2005, ADAM succeeded to maintain its positive performance. The company

managed to achieve continuous asset growth and increase by applying a diverse

activity strategy for the local market, and an assortment of resources for major

incomes that aimed to widen its client base. ADAM launched new various services

and Islamic products to increase its revenues and direct its investment activities

towards the asset, which is marked with lesser competition, higher revenues and

lower risks. The company, despite its recent incorporation, sustained a systematic

growth for its operation asset throughout the year.

ADAM’s budget indicates a stable asset level above KD 65 Million (US$ 222.6

Million). This reflected the company’s commitment to a diverse investment that

includes various activities, services and products. An initiative that resulted in a

rewarding achieved revenues for 2005.

19

The graph signifies ADAM's concerned activities in the financial investment domain i.e.

priced & un priced local shares, local funds and trade investments with a total volume of KD

28.7 million. All contributed to more than 44 % of ADAM's asset. The company's agencies

investments reached KD 12.4 million, equal to 19 % of total asset investment in some Islamic

Establishment. ADAM's other debit balances including portfolio and funds management fees

and placement dues, reached approximately KD 12.3 million, equal to 19 % of the total asset.

In addition, ADAM's real estate investment, recorded KD 9.1 million, equal to 14 % of the

total asset.

ADAM’s Asset Distribution in 2005

Cash & Cash equivalents

Available for sale investment

Real Estate Investment

Creditors & other debit balances

Down payment for buying Real Estate

Property & Equipment

Agencies investments

Financial Investment in equivalent value

20

Adam's total dues reached KD. 21.1 million (US $ 72 million). These dues represented the

company's offered discount, and commitments. Such dues were controlled by the company and

had no negative impact on its projects finance or its power to cover future asset investments

cost. It is noted that credit agencies with a total of KD 16.6 millions contributed most, to

ADAM's liabilities. This conveys that more than 78.5% of the company's total liabilities

represent trusted funds to be invested through ADAM's diverse agencies and investment

activities. ADAM's parent company dues reached KD 3.6 million, equal to 16.8% of its total

liabilities. Other creditors, other credit balances and end of service indemnity represented

4.6% & 5.1% of the total liabilities consecutively. Thus, ADAM's debt ratio (total liabilities on

total asset) mounted to 32.5%. A ratio, considered accepted at present, related ADAM's high

and comprehensive proportion of liquidity.

ADAM's budget figures indicated the company's methodical efforts exerted to improve the

returns on shareholder's equity. ADAM showed great concern to introduce best services to

shareholders and customers. This impacted an increase on the shareholder's equity by end

of the company's 1st operation year. A growth to exceed KD 40 million margin. The return

on ADAM shareholder’s equity reached KD 43.9 million (US$ 150 million). ADAM’s

huge retained earnings, equal to 93.6% of its total capital, represented

a major contribution to the returns on the shareholders equity. It is

worth to mention that ADAM’s total shareholder’s equity rate

recorded about 67% by end of 2005. An indication that asserted

ADAM’s strength to finance assumed activities in the future.

Consequently, such a power will contribute to extended

returns on shareholder’s equity by 1.45 times.

21

II ADAM’s Financial Performance in 2005

Local and regional improved economy provided active financial markets, with particular

reference to Islamic investment techniques which constituted the region's major investment

field. ADAM's financial results in 2005 signified tangible improvement in its operation

revenues and business ventures. Such activities were a continuation of ADAM's constant

growth recorded since establishment in 2004. This certified ADAM's concern to utilize all

available resources in compliance with Sharia'h principles. ADAM showed great interest and

commitment to cover the Islamic investment sector with all its investment techniques. To this

end, ADAM innovated tools and products based on selective and diverse local investment

that adequately meet the market need. Such a strategy accounted for ADAM’s distinguished

achievements and rewarding returns by end of 2005. In its first year of operation and after

deducting of KFAC dues, Board Members remunerations, National Labor Support Tax and

Zakat, ADAM’s succeeded to realize a net profit of KD. 23.488 million covering the period

April 6, 2004 to December 31, 2005. Earnings per share scored a record rise in comparison with

similar investment companies, to reach 117.44 fils during the period ended in, 2005

22

ADAM's positive performance and improved profiles can be contributed to two major factors:

The first is represented by the company’s operation revenues that experienced a tangible

improvement to exceed KD. 26 million limits and reach approximately KD 26.11 million

during ADAM’s first year of existence. This reflected a positive performance of ADAM's most

profit indicators. A growth that led to an extended margin ratio of the company's net profit

reaching a record level. ADAM's net profit margin ratio of operation revenues reached an

unprecedented 90% level by end of 2005, compared to similar and conservative Islamic

investment establishment, listed in Kuwait Stock Exchange. This described, as well, ADAM's

competency to adequately invest its asset and efficiently foresee all available investment

opportunities which offered the company's achieved great operation revenues. The second

factor interpreted ADAM's relentless efforts to cut operation expenses through applying best

general expenditure decrease, operation charges and payment control. A policy that resulted

in not exceeding a total expenses level of KD 2.622 million by end of 2005. Adam's operation

expenses on operation revenues scored a low margin not exceeding 10.00% approximate level.

23

The attached graph shows ADAM's revenue structure and related contribution of each revenue

category as and of 2005.

ADAM’s Revenue Resources Distribution 2005

Rate per total Revenues

Investment Services

Revenues

Financial Investment Revenues

Real Estate Investment Revenues

Investment Agencies Revenues

Investment in Associated Company’s Revenues

Available for Sale

Investment Revenues

Other Revenues

24

With reference to total operation revenues, ADAM’s consolidated balance sheet and income

statement indicated the company’s ability to control expenditure and minimize expenses.

ADAM’s actual expenses stood at approximately KD. 2.622 million by end of 2005. The

company’s expenditure rates, in terms of total operation revenues, recorded around 10 %

through its actual financial statement. Most of ADAM’s expenses were focused on employee

expenditure which scored approximately KD 0.635 million, equal to 24.2% of the company’s

total expenses, due to ADAM’s business expansion in 2005. Similarly, general and administration

expenses mounted to KD. 0.630 Million equal to 24% of the company’s total expenditure by

end of last year. In addition, other expenses contributed to ADAM’s total expenditure. These

represented the 20.4% related to administration and consultancy services, and 15.8% of the

finance charges.

25

III ADAM’s Profile & Returns Indicators

ADAM’s profit and returns indicators showed improved performance than budgeted for by

end of 2005. These indicators are generally based on the company’s financial performance

and are used to measure its operation, finance and investment efficiencies. They also reflect

company’s strength to execute these activities to achieve remarkable results. ADAM’s

Return on Average Indicator reached approximately 13.36% in 2005. This performance,

the best at all levels, indicated ADAM’s efficiency to adequately direct its asset and

operation investment. ADAM’s Return on Equity in 2005, mounted to 5.53% level.

This classified ADAM with the great performance of similar Islamic investment

establishments and even with those conservative ones listed on the Kuwait

Stock Exchange. Finally, ADAM’s Return on Capital Indicator recorded

the highest performance, compared to ADAM’s other indicators

by end of 2005. This indicator stood at approximately 4.117%.

A performance considered the highest of all indicators in the

Kuwait Stock Exchange.

Al Dar Asset Management Company (ADAM) K.S.C. (Closed)State of Kuwait

Financial Statements and Auditor’s Report

For the period from 6 April 2004 (date of incorporation) till 31 December 2005

27

29

CONTENTS

31 Auditor’s Report

32 Balance Sheet

33 Statement of Income

34 Statement of Changes in Equity

35 Statement of Cash Flows

36 Notes to the Financial Statements

31Al Dar Asset Management Company K.S.C. (Closed) Annual Report 2005

Auditor’s Report to the Shareholders

We have audited the accompanying balance sheet of Al Dar Asset Management Company (ADAM)

K.S.C. (Closed), (“the Company”) as of 31 December 2005 and the related statements of income,

changes in equity and cash flows for the period from 6 April 2004 (date of incorporation) till 31

December 2005.

Respective responsibilities of management and auditor

These financial statements are the responsibility of the Company’s management. Our responsibility is

to express an opinion on these financial statements based on our audit.

Basis of opinion

We conducted our audit in accordance with International Standards on Auditing. Those Standards

require that we plan and perform the audit to obtain reasonable assurance about whether the

financial statements are free of material misstatement. An audit includes examining, on a test basis,

evidence supporting the amounts and disclosures in the financial statements. An audit also includes

assessing the accounting principles used and significant estimates made by management, as well

as evaluating the overall financial statement presentation. We believe that our audit provides a

reasonable basis for our opinion.

Opinion

In our opinion, the financial statements present fairly, in all material respects, the financial position

of the Company as of 31 December 2005, and of the results of its operations, and cash flows for the

period then ended in accordance with International Financial Reporting Standards.

Furthermore, in our opinion, proper books of accounts have been kept by the Company and the

financial information included in the report of the Board of Directors are in agreement with

company’s books of account. We further report that we obtained the information and explanations

that we required for the purpose of our audit and that the financials statements incorporate all

the information that is required by the Commercial Companies Law of 1960, as amended, and by

the Articles of Association of the Company, that an inventory was duly carried our and that, to

the best of our knowledge and belief, no violations of the Commercial Companies Law of 1960, as

amended, or of the Articles of Association of the Company have occurred during the period ended

31 December 2005 that might have materially affected the Company’s results of operation or its

financial position.

We further report that, during the course of our audit we have not become of any material violations

of the provisions of Law No. 32 of 1968, as amended, concerning currency, the Central Bank of Kuwait

and the organization of banking business and its related regulations during the period ended 31

December 2005.

Bader A. Al WazzanLicence No. 62A

Kuwait,27 February 2005

32

Note31 December

2005

ASSETS

Cash and cash equivalents 3 97,096

Wakala investments 4 12,432,274

Financial investments at fair value through profit and loss 5 28,656,350

Receivables and other debit balances 6 12,374,055

Available for sale investments 7 2,215,632

Investments properties 8 4,561,771

Advance payments to purchase real estate 9 4,533,506

Property and equipment 122,904

Intangible assets 16,704

Total assets 65,010,292

LIABILITIES AND EQuITY

Liabilities

Payables and other credit balances 10 963,343

Wakala Payable 11 16,570,943

Due to parent company 22 3,553,519

End of service indemnity 18,995

Total liabilities 21,106,800

Equity

Share capital 12 20,000,000

Statutory reserve 13 2,381,237

Voluntary reserve 14 2,381,237

Change in fair value reserve 415,432

Retained earnings 18,725,586

Total equity 43,903,492

Total liabilities and equity 65,010,292

The accompanying notes form an integral part of these financial statements

Balance Sheet As at the 31 December 2005

(All amounts are in Kuwaiti Dinars)

Omar Soliman Al - KaziChairman

Mustafa E. Al-SalehVice Chairman



Statement of Income For the period from 6 April 2004 (date of incorporation) till 31 December 2005


Note

Period from 6 April 2004 till

31 December 2005

Revenues

Wakala investments income 769,911

Income from financial investments at fair value through profit and loss

15 10,093,606

Available for sale investments income 16 369,223

Company’s share in results of associate 122,811

Gain on sale of investment in associate 389,680

Investment services’ revenue 17 12,586,043

Investments properties’ revenue 18 1,772,524

Other income 5,821

26,109,619

Expenses and other charges

Finance cost 414,538

Consultants and administrative service expenses 536,921

General and administrative expenses 19 630,465

Staff cost 634,767

Losses on foreign currency differences 80,557

Board of Directors’ remuneration 110,000

Contribution to Kuwait Foundation for advancement of science “KFAS” 214,311

2,621,559

Net profit for the period 23,488,060

Earnings per share (fils) 20 117.44

34

Statement of Changes in Equity For the period from 6 April 2004 (date of incorporation) till 31 December 2005


Share capital

Statutory reserve

voluntary reserve

Change in fair value

reserveRetained earnings Total

Subscription in share capital 20,000,000 - - - - 20,000,000

Changes in fair value of available for sale investments

- - - 415,432 - 415,432

Net profit for the period - - - - 23,488,060 23,488,060

Transfer to reserves - 2,381,237 2,381,237 - (4,762,474) -

Balance as of 31 December 2005 20,000,000 2,381,237 2,381,237 415,432 18,725,586 43,903,492



Statement of Cash Flows For the period from 6 April 2004 (date of incorporation) till 31 December 2005



31 December 2005

Cash flows from operating activities


Adjustments:

Wakala investments income (769,911)

Changes in fair value of investments at fair value through profit and loss (6,141,579)

Available for sale investments income (369,223)

Investment properties’ revenue (1,772,524)

Company’s share in results of associate (122,811)

Gain on sale of investment in associate (389,680)

Finance cost 414,538

Depreciation and amortisation 73,290

End of service indemnity 18,995

Operating profit before changes in working capital 14,429,155

Financial investments at fair value through profit and loss (22,901,697)

Receivables and other debit balances (12,374,055)

Payables and other credit balances 963,343

Due to parent company 3,553,519

Net cash used in operating activities (16,329,735)

Cash flows from investing activities

Payment in debit Wakala investment (12,298,000)

Proceeds of Wakala investments 635,637

Net paid to purchase of available for sale investments (2,387,000)

Proceeds from sale of available for sale investments 829,286

Dividends received 513,664

Payment to purchase investment properties (11,568,638)

Proceeds from sale of investment properties 8,779,391

Advance payments to purchase real estate (4,533,506)

Payment to purchase investment in associate (785,129)

Proceeds from sale investment in associate 1,297,620

Payment to purchase property and equipment (195,515)

Payment to purchase intangible assets (17,383)

Net cash used in investing activities (19,729,573)

Cash flows from financing activities

Proceeds from subscription in share capital 20,000,000

Proceeds from credit Wakala investment 16,398,000

Finance cost paid (241,596)

Net cash generated from financing activities 36,156,404

Cash and cash equivalents at end of the period 97,096


36

Notes to the Financial Statements For the period from 6 April 2004 (date of incorporation) till 31 December 2005

(All amounts are in Kuwaiti Dinars unless otherwise stated)

1. Incorporation and activities

Al Dar Asset Management Company (ADAM) K.S.C. (Closed) “the Company” was incorporated in

Kuwait, in accordance with the authenticated memorandum of association number 1778 Vol. 1

on 3 April 2004. The Company registered in the Commercial register on 6 April 2004 under number

99764. The Company was also registered as an investment Company subject to the supervision of

Central Bank of Kuwait on 11 July 2004.

The Company’s headquarters is located at the state of Kuwait – Sharq area – Suhada street –

Raya Tower.

On 21 August 2005, the General Assembly of the Shareholders approved the change of the Company’s

financial year to start from 1 January each year instead of 1 November each year.

The first financial year of the company starts from the date of incorporation and ends on 31 December

2005. Accordingly these financial statements have been prepared for the period from 6 April 2004

(date of incorporation) till 31 December 2005.

The Company’s activities are represented in carrying out all investment activities, finance, management

of funds, movable and non-movable rights, carrying out investment projects and other complementary

or related activities in accordance with Noble Islamic Shariaa principles.

The Company is owned by 100% to the Investment Dar (K.S.C.C.) “Parent Company”.

The Company has employed 27 employees as of 31 December 2005.

These financial statements were approved for issuance by the board of directors on 27 February 2005.

These financial statements are subject to the approval of the General Assembly of shareholders.

37



Al Dar Asset Management Company K.S.C. (Closed) Annual Report 2005

2. Basis of preparation and significant accounting policies

2.1 Basis of preparation

The financial statements are prepared in accordance with International Financial Reporting Standards

(IFRS) under the historical cost basis, as modified by fair value of investments at fair value through

profit and loss, available for sale investment and investment properties.

The preparation of financial statements in accordance with International Financial Reporting

Standards requires the use of certain critical accounting estimates and assumptions.

2.2 Cash and cash equivalents

Cash on hand, time and demand deposits at banks and financial institutions whose original maturity

do not exceed three months from the date of placement are classified as cash and cash equivalents.

2.3 Financial instruments

The Company has early adopted the changes over IAS (39) (Financial Instruments) (Recognition &

Measurement) and IAS (32) Financial instrument, (Presentation & Disclosures).

38



Classification

The Company classifies its financial assets at the purchase date based on the purpose of acquisition

of such investments and re-evaluates this classification periodically as follows:

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 in this category if acquired

principally for the purpose of selling in the short term or if its a part of portfolio generate a short

term profit.

Receivables

This category includes the financial instruments other than the financial derivative with fixed or

determinable payments and that are not quoted in an active market.

Available for sale assets

These are financial assets that are 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

Financial instruments are initially recognized when the company becomes a party in a contractual

agreement on these financial instruments. Regular purchases and sales of financial instrument are

recognised on settlement date – the date on which the Company delivers or receives the financial

instrument. Financial instruments are derecognised when the rights to receive cash flows from the

assets have expired or have been transferred and the Company has transferred substantially all risks

and rewards of ownership.

39




Measurement

Financial assets are initially recognised at fair value (plus transaction costs for all financial assets not

carried at fair value through profit and loss).

Subsequently, available for sale financial assets and financial assets at fair value through profit and

loss are carried at fair value. Receivables are carried at amortised cost using the effective yield method

after deducting any impairment in value.

Realised and unrealised gains and losses arising from changes in the fair value of the ‘financial assets

at fair value through profit and loss category are included in the income statement unrealized gains

and loss arising from changes in the fair value of financial assets classified as available-for-sale are

recognized in equity except the losses resulting from impairment in value.

When available for sale financial asset are sold, the accumulated change in fair value recognized in

the equity are transferred to income statement.

At the balance sheet date, the company reviews the available for sale asset to determine, if there is

any elements for impairment in value.

The fair value of quoted financial assets are determined based on last bid prices, for the quoted

financial assets, the fair value estimated by using other suitable valuation methods.

Impairment in value of financial assets

The impairment in value is measured as the difference between the acquisition cost and the current

fair value, less any impairment losses on that asset previously recognised in income statement.

Impairment losses are recognised in the income statement for the period in which they arise.

Impairment losses recognised in the income statement on equity instruments are not reversed

through the income statement.

40



2.4 Investment properties

Properties not occupied by the Company and acquired for long-term leases or for capital appreciation

in future are classified as investment properties.

Investment properties are stated at cost on acquisition and re-measured at fair value. Fair value is

determined by an independent valuator on each balance sheet date. Gains or losses arising from

change in fair value are recognised in the income statement.

2.5 Land and real estate under development

Land and real estate under development are recognized at cost, which includes development

costs. When the development process is 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 Company’s self-

occupation as per management intention regarding the future use of these properties.

2.6 Investment in associate

Associates are those enterprises in which the Company owns 20% to 50 % of voting rights, or generally

has significant influence on their financial, operating, and administrative policies but does not extend

to a direct or indirect control by the Company over those companies. Investment in associates are

accounted for under equity method taking into consideration impairment in value. In accordance

with equity method, the Company’s share in operating results of associates are presented in the

consolidated balance sheet at a value that reflects the Company’s share in net assets of associates.

2.7 Property and equipment

Property and equipment are stated at historical cost less accumulated depreciation and impairment

losses. Cost comprises of acquisition costs and all directly attributable costs of bringing the asset to

working condition for its intended use.

Depreciation is calculated on the straight-line basis over the estimated useful lives, which are

three years.

41




2.8 Intangible assets

Goodwill

Goodwill represents the excess of fair value of net assets acquired from subsidiary, associate and

joint projects over the acquisition cost at the date of acquisition. Goodwill is carried at cost less

accumulated impairment losses which is tested annually.

Computer software

Cost of acquisition of computer software are capitalized based on the actual incurred costs that

are necessary to use these software. These assets are amortized over their expected useful lives of

three years.

2.9 Impairment of non financial assets

Property and equipment and intangible assets are reviewed at the balance sheet date to indicate

the impairment in value whenever the events or changes in circumstances indicate that the carrying

amount may not be recoverable. Whenever the carrying amount exceeds the recoverable amount,

the impairment losses are recognised in the income statement.

2.10 Wakala payables

Wakala payables are recognized initially at fair value, net of transactions costs incurred. Subsequently

Wakala payables are carried at amortised cost. The difference between the received amount from

Wakala payables and the paid amount are recognized as a finance cost over the time of the Wakala

using the effective yield method.

2.11 End of service Indemnity

The company is liable under Kuwaiti labour law, to make payments to employees for post employment

benefits under a defined benefit plan. Such payment is made on a lump sum basis at the end of an

employee’s service.

42



This liability is unfunded and has been computed as the amount payable as a result of involuntary

termination of employees on the balance sheet date. The Company estimates that this method will

give a reliable approximation of the present value of this obligation.

2.12 Revenue recognition

Murabaha, Musawama, Wakala & Ijarah income are recognized on a time proportion basis as to yield

a constant periodic profit rate of return based on the outstanding balances for these transactions.

Dividend income is recognized when the Company’s right to receive dividends is established.

Gain from sale of land and real estate is recognized on completion of the sales contract.

Portfolio management fees is recognised when accrued.

2.13 Foreign currencies

The functional currency of the Company is the Kuwaiti Dinar. Foreign currency transactions are

recorded in Kuwaiti Dinars at the exchange rates prevailing at the date of the transaction. Monetary

assets and liabilities denominated in foreign currencies are converted to Kuwaiti Dinars at the closing

rate prevailing at the year-end. Resultant gains or losses are taken to statement of income.

2.14 Zakat

Based on the recommendation of the Sharia supervisory Board, the company stated to calculate

Zakat based on Weaa Al-Zakat, which consists of assets and liabilities that are subject to Zakat. Zakat

is deducted from the voluntary reserve.

43




2.15 Fiduciary assets

Assets held in trust or in a fiduciary capacity are not treated as assets of the Company and accordingly

are not included in these financial statements.

3. Cash and cash equivalents

31 December 2005

Current accounts at banks 5,721

Saving accounts 56,375

Cash on hand 35,000

97,096

4. Wakala investments

This balance represents the amounts invested with some Islamic institutions, out of which an amount

of KD 10,905,205 with the parent company (Note 22).

The average effective rate of return on these wakalla are 8.60% as of 31 December 2005.

44



5. Financial investments at fair value through profit and loss

31 December 2005

Held for trading investments 6,909,281

Investments designated at fair value at inception 21,747,069

28,656,350

Financial investments at fair value through profit and loss includes:

Investments in local shares - quoted 11,030,960

Investments in local shares - unquoted 4,883,260

Investments in foreign shares - unquoted 662,340

Investments in local funds 12,079,790

28,656,350

Investments in quoted shares include amount of KD 228,678 and investments in unquoted shares

include an amount of KD 2,529,226 represents investments registered by the parent company’s name

and there are letters of assignment from the parent company to the company by the ownership of

these investments.

6. Receivables and other debit balances

31 December 2005

Accrued subscription fees 7,544,975

Accrued portfolio and funds management fees 1,465,711

Kuwait clearing company 2,917,027

Other debit balances 446,342

12,374,055

45




7. Available for sale investments

This balance represents local quoted shares with an amount of KD 2,215,632 which are registered by

the parent company’s name and there is a letter of assignments by the ownership of these investments

as of 31 December 2005.

8. Investment properties

The following is the investment properties movement during the period ended in 31 December 2005:

31 December 2005

Purchases 11,568,638

Less

Sale during the period 8,779,390

Add

Profit from sale of investments properties 293,397

Profit from revaluation of investment properties 1,479,126

Balance as of 31 December 2005 4,561,771

9. Advance payments to purchase real estate

This balance represents advance payments to purchase real estate in one of GCC countries. The total

payments have amounted to KD 4,533,506 as of 31 December 2005. The Company’s share in the

total value of the real estate is amounting to KD 15,051,162. According to contract conditions, the

finalization of this transaction depends on the seller’s approval on the engineering designs.

46



10. Payables and other credit balances

31 December 2005

Other credit balances 639,032

Board of directors’ remuneration 110,000

Kuwait Foundation for Advancement of Science “KFAS” 214,311

963,343

11. Wakala payable

The balance represent in an amounts received from other to invest it as Wakala investment with right

to contract with self, out of this an amount to KD 501,630 belongs to the Parent Company (Note 22).

The weighted average rate of return for these Wakala are 8.50% as of 31 December 2005.

12. Share capital

The authorised, issued and paid up capital is amounting to KD 20,000,000 allocated over 200,000,000

shares of 100 fils par value each and all shares are paid in cash.

13. Statutory reserve

As required by the Commercial Companies Law and the Company’s Articles of Association, 10% of

the net profit for the year before Kuwait Foundation for Advancement of Science share and Board

of Directors’ remuneration is required to be transferred to statutory reserve. The general assembly

may resolve to discontinue such annual transfers when the statutory reserve exceed half of the share

47




capital. This reserve is not available for distribution on the shareholders but may be used to secure

appropriation of profit to shareholders up to 5% of paid up capital in such years where the profit

of the company do not allow such percentage of appropriation. When the balance of the reserve

exceeds half of share capital, the general assembly is permitted to utilise amounts in excess of half of

the share capital in aspects seen appropriate for the benefits of the Company and its shareholders.

14. voluntary reserve

In accordance with the Company’s Articles of Association, a percentage of Company’s net profit before

Kuwait Foundation for Advancement of Science share and Board of Directors remuneration for the

year as proposed by the Board of Directors and approved by the General Assembly is transferred to

voluntary reserve. Such annual transfer may be discontinued by resolution of the General Assembly

based on the proposal from the Board of Directors. The Board of Directors proposed a transfer of

10% of net profit for the period ended 31 December 2005 to voluntary reserve.

15. Income from financial investments at fair value – through profit and loss


31 December 2005

Changes in fair value 6,141,579

Cash dividends 386,927

Realized gain 3,565,100

10,093,606

48



16. Available for sale investments income


31 December 2005

Realized gain 242,486

Cash dividends 126,737

369,223

17. Investment services’ revenue


31 December 2005

Underwriting fees 8,295,975

Funds management, real estate and financial portfolios fees 4,225,383

Subscription Fees 64,685

12,586,043

18. Investment properties’ revenue


31 December 2005

Change in fair value 1,479,126

Realized gain 293,398

1,772,524

49




19. General and administrative expenses

General and administrative expenses include an amount of KD 50,000 represent company’s

establishment expenses which was charged to the income statement for the period in accordance

with Article (10) of the Articles of Association of the Company.

20. Earnings per share

Earning per share is calculated based on the net profit for the period and the weighted average

number of ordinary outstanding shares during the period. The calculation of earning per share is

as follows:


31 December 2005


Number of shares (shares) 200,000,000

Earnings per share (Fils) 117.44

21. Proposed dividends

The Board of Directors proposed the dividends of bonus share with 90% of the paid up capital, which

will increase company’s capital from KD 20,000,000 to KD 38,000,000. This proposal is subject to the

approval of the shareholders’ General Assembly and the public authorities.

50



22. Related parties’ transactions

Related parties represent company’s shareholders who have represented in the board, members of

the Board of Directors and Senior Management. In the normal course of business and by the approval

of Company’s management, the Company entered into transactions with related parties during the

period ended 31 December 2005.

The related parties transactions and balances are as follows:


31 December 2005

Purchase of associate company 785,129

Purchase of available for sale investments 2,387,800

Purchase of investment properties 9,947,213

Purchase of land under development 2,279,437

Wakala investments 35,171,150

Wakala investments income 505,946

Subscription fees 550,000

Investment management fees 189,015

Purchase investments at fair value through profit and loss 5,586,881

Wakalla and Murabaha payable 4,300,000

Finance cost 48,060

Board of Directors remuneration 110,000

The balance due to the Parent Company as at 31 December 2005 amounted to KD 3,553,519 -

credit balance.

51




23. Financial risk management

In the ordinary course of business, the Company is exposed to several financial risks. These risks are

managed based on the approved policies from the Board of Directors.

23.1 Credit risk

Credit risk is the risk that one party to a financial instrument may fail to discharge an obligation on

maturity date and cause the other party to incur a financial loss. Wakala, cash & cash equivalents are

considered the most of the assets exposed to credit risk. The company mitigate this risk by dealing

with strong credit rating banks & financial institutions.

23.2 Foreign currency risk

Represented in the risk of fluctuations in foreign exchange rates that may adversely affect the cash

flows of the company or values of assets and liabilities in foreign currencies. Most of the company’s

transaction in local currency, so it’s not exposed to this risk.

The company manages this risk through concentration of its business transactions in the local currency

& monitoring on a periodic basis the exchange rate.

23.3 Liquidity risk

Liquidity risk is the risk that the Company may unable to meet its financial commitments when

they mature. The management mitigates this risk by diversifying its finance sources and assets

managements while taking into consideration the retention of sufficient balance of cash and other

high liquid items.

The following table, summarize the maturities of assets and liabilities for the company. The maturities

of assets and liabilities were determined based on the period from the balance sheet date to the

contractual maturity date.

52



The maturity analysis of financial assets and liabilities as of 31 December 2005 is as follows:

Within 3 months

From 3 months

to 1 yearFrom 1

to 5 yearsMore than

5 years Total

Assets

Cash at bank and financial institutions

97,096 - - - 97,096

Wakala investments - 3,928,778 8,503,496 - 12,432,274

Investments at fair value through profit and loss 6,909,281 - 21,747,069 - 28,656,350

Receivables & other debit balances

11,893,468 480,587 - - 12,374,055

Investments available for sale

- - 2,215,632 - 2,215,632

Investment properties - - 4,561,771 - 4,561,771

Advance payment to purchase real estate

- - 4,533,506 - 4,533,506

Property and equipment - - 122,904 - 122,904

Intangible assets - - 16,704 - 16,704

18,899,845 4,409,365 41,701,082 - 65,010,292

Liabilities

Payables and other credit balances

- 963,343 - - 963,343

Wakala payables - 5,065,404 11,505,539 - 16,570,943

Due to the parent company - 3,553,519 - - 3,553,519

Employee’s end of service indemnity

- - - 18,995 18,995

- 9,582,266 11,505,539 18,995 21,106,800

Net liquidity gap 18,899,845 (5,172,901) 30,195,543 (18,995) 43,903,492

53




23.4 Market risk

Market risk is the risk that the value of a financial instrument will fluctuate as a result of changes in

market prices, whether those changes are caused by factors specific to a financial instrument, or its

issuer, or factors affecting all securities traded in the market.

The company is exposed to market risk with respects to its investments. The company continuously

monitors developments in the markets and analyses the operations and financial performance of

investees to manage this risk.

23.5 Fair values of financial instruments

Fair value is the amount for which an asset could be exchanged or a liability settled between

knowledgeable willing parties in an arm’s length transaction. The estimated fair value of financial

instruments carried at amortised cost approximates their book values.

24. Geographical distribution of assets and liabilities

31 December 2005

Assets Liabilities

Kuwait 55,509,789 21,106,800

GCC 9,095,277 -

Other Arab countries - -

USA 59,002 -

Europe 346,224 -

65,010,292 21,106,800

54



25. Contingent liabilities and commitments

31 December 2005

Unpaid capital commitments for contracts to develop lands 10,517,656

26. Off balance sheet items

The Company manages portfolios and financial funds for others and the balances of these portfolios

are not included in the balance sheet of the Company. The net assets of these managed portfolios

amounted to KD 567,037,829 as of 31 December 2005.

27. Zakat

Based on Board of Directors proposal, the company deducted Zakat amounted to KD 730,995

from the voluntary reserve. This proposal is subject to the approval of the General Assembly of

the shareholders.

Date post:	12-Sep-2020
Category:	Documents
Upload:	others
View:	1 times
Download:	0 times

New SIMPLY UP IN 2005 - Adamco · 2010. 5. 25. · Ali Mohammed Al-Olaimi Board Memberque Saqer...

Documents