· 2019-01-10 · advisory-Consultancy services-auctions 29 financial management- maintenance & services 31 our Partners-our People 32 ... covering the economic updates at local

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161-840-888www.ream.com.kw

His HigHness sHeikH sabaH al-aHmad al-Jaber al-sabaHamir of tHe state of kuwait

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His HigHness sHeikH nawaf al-aHmad al-Jaber al-sabaHCrown PrinCe of tHe state of kuwait

CONTENTS

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Chairman’s speech 7-13

report of sharea advice & Control Panel 14-17

board of directors members of the board 18

executive management 19

our Commitment to you: our Client 21

ream History 23

our Vision-our mission-our Values-our Clients-goals-our services 24

Property management-leasing -brokerage-Valuations 26

advisory-Consultancy services-auctions 29

financial management- maintenance & services 31

our Partners-our People 32

our systems 34

our Processes - our Price 36

annual Corporate governance report 2016 41-59

financial report 63-111

our offices 112

CHairman

abdul Qader J. al-furaiH

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CHairman’s sPeeCHPraise be to almighty allah, and Peace and Prayers be upon our Prophet, His sacred family, and CompanionsThe board of directors of real estate assets management Company (ream) has the pleasure to present to you the annual report 2016, covering the economic updates at local and global levels, in addition to the result of the annual performance, the consolidated financial statements, and independent auditor’s report, for the financial year ended 31 december 2016.

major economic updates at local and global levelsi: global economic updatein 2016 world economy witnessed historic landmarks and major events that contributed to the formulation of a semi-clear vision of the track of events for 2017. The year 2016 was characterized by numerous significant events that affected the economies. The effects of these events may extend into the forthcoming years, at the global and gCC levels, in general, and on the state of kuwait, in particular.

at the outset of the year 2016 a major economic event, i.e. the collapse of oil prices, occurred to an unexpected level, with the price of barrel dropping to below $30. The glut of the oil supply hit record levels, exceeding 1.6mb/day, while the world production registered 94mb/day. The largest volume of production occurred in russia, who injected 11mb/day in the markets. saudi’s production stroke a record amount of 10.7mb/day, and iran produced about 3.7mb/day, after lifting the sanctions imposed on it. affected by such competition in the oil market, the prices calmed down and continued to register low rates, causing the release of cries by certain countries for their dependence on oil as the main source of their revenues. accordingly, several meetings were held, culminating to the fixing of the production ceiling, which, in turn, caused recovery of the oil prices at the global level. The european continent witnessed several events, which weighed heavily on the economies of its countries. breXit referendum formed the largest of these events, as many had not expected that such split would constitute the beginning of challenge for the european union (eu), as the european mass voices were seen thereafter. according to observers, this would mean a painful beginning for the dismantling of the eu. moreover, the elections in france, germany and Holland, and probably italy’s exit, also posed risk that threatened the growth. The winning of the mass could increase isolation in a manner that may cause doubts on the existence of the eu, and the euro zone itself. in addition, the greek debt crisis would increase the state of uncertainty and volatility in the financial markets, thus mainly affecting growth. However, the majority of global economic expectations in 2016 were pessimistic. most of the global organizations expected that 2016 would register a clear recession in the global economy. They attributed such recession to economic slowdown in the majority of the industrialized nations, the slump of capitals in the global markets, and the lower rates of international trade. economic analysts predicted

that 2017 will witness plenty of significant events, and it could be nick-named the “year of difficult decisions” that may change the features of the global economy. as previously discussed, this is based, in the first place, on the economic and political transformations associated with the mass movement witnessed by the european continent, the growth of the Chinese economy, which is expected to register 6%-6.2%, as well as the arrival of the presidential candidate, donald trump, at the white House. His economic policy caused the american economy to respond positively once he won the election. His electoral program, including reform promises, tax reduction, and encouragement of the us economic growth, reflected in the global markets. However, the world bank, in its report, reduced its expectations of the growth of world economy for 2017 by a slight 2.7% due to the increasing doubts surrounding the economic policies at the level of world countries, especially the us. The bank attributed such slip to the increasing doubts on the future trends of the us with regard to the budget, trade, immigration policy and foreign policies, in addition to the ambiguity of the destiny of negotiations on breXit.

ii: gCC economic updatein 2016 the economies of gCC countries were affected by the world countries’ economies, as their economies are dependent on oil revenues, where oil prices were substantially affected. such effect adversely reflected on the economies of the countries of the region. data available for 2016 reveal poor economic activity in the gCC countries due to oil price decline. This caused the growth rates of the gCC economies to retreat in 2016, affected by the shrinkage of government expenditure and the lower growth of local liquidity. world bank report indicated that sustainability of long-term economic growth of gCC countries, and their economic ability, will depend on diversification of their government revenues, away from the oil and gas sector, seeking alternatives for growth in the non-oil sector. according to the report issued by the statistical Center of the gCC countries, gCC economic growth will improve in 2017 to register 3.4% in line with the slight increase in consumer price due to government actions lifting subsidy from petroleum products, and higher interest rates at gCC local banks. The report expected that the construction and transport sectors will lead such growth. world bank (wb), in its report, forecasted the real gdP of the state of kuwait to grow by 2.4% in 2017, up from 2% in 2016, as estimated by the report. meanwhile, wb expected the growth in saudi arabia to be 1.6%, compared to 1% in its 2016 estimates, while in bahrain the growth will be 1.8%, compared to 2%, in uae 2.5%, compared to 2.3%, followed by oman 2.9%, compared to 2.5%. Qatar would have the highest gCC growth of 3.6%, compared to 1.8% in 2016, as estimated by wb.

iii: state of kuwait economic updateThe state of kuwait’s commitment to reduce its production by nearly 133,000 b/d would cause the oil revenues to relatively recede. it is also expected that the business environment and operating activities will face difficulties as

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a result of the decline in capital projects, the difficult financing mechanisms, as well as the increase in the cost of borrowing over the forthcoming period. Hence, there remains the government role in accelerating the application of the economic reform document, which was adopted by the government in march 2016, and the financial reform, in particular, in order to improve the government revenues and reduce expenses over the upcoming years. This would represent the remedial step towards restructuring the national economy and its ability to re-activate the economic development. This was stressed in the sublime address in the opening of the first ordinary round of the 15th legislative session of the national assembly (the Parliament), which referred to the challenges arising from the fluctuation of oil prices and their impact on the state budget, and the importance of adopting effective remedial actions, within the framework of a comprehensive economic reform program.

regarding kuwait stock exchange (kse), a report by national investments Company revealed that kuwait bourse concluded 2016 with varied general indices, compared to 2015. Price index rose by 133 points, or by 2.4%, while the price-weighted index slipped by 1.6 points, or by 4%. average daily volume of traded shares and traded value declined by 22.6% and 23.2%, respectively. average daily traded value amounted to kd 11.6 million in 2016, against kd 15.1 million in 2015. it is noteworthy that the investment sentiment in the bourse had retreated during the first nine months of 2016, bringing the average daily traded value down to nearly kd 10.5 million over the first nine months, a value not witnessed by the market for over 15 years. This evidences the decrease in investors’ confidence in the bourse as an investment tool. meanwhile, the market improved during the fourth quarter of the year, as optimistic sentiment prevailed among investors towards kuwait bourse. during the period in question, average daily traded value stood at nearly kd 14.4 million. such variation in the performance of the market is a natural result reflecting the reality of the unilateral-source local economy, i.e. crude oil dependent economy. bourse indices were almost parallel to the oil price trends. as the oil prices retreated at the outset of the year, to below $30 a barrel, the market notably receded to lose nearly 670 points, thus breaking the 5000 point barrier downwards. meanwhile, the indices movement rebounded upwards with the recovery of the oil prices, increasing to the $50 level. it should be noted that since boursa kuwait Company took over the management of the market in april (the most highlighted event for kuwait stock exchange in 2016), it has applied a successful strategy to upgrade the operating and technical environment for several market mechanisms. The report also indicated that nearly 7 companies have withdrawn from the market during the year, and that other companies will obtain approval of voluntary withdrawal over the upcoming period. such withdrawals are attributable to the decline in the market traded liquidity, infeasible listing due to the decline in their capitalization, as well as the trading of their shares at below their book value. in this context, we would like to commend the resolution of the Capital markets authority (Cma) refusing the withdrawal of a company based on the desire of the small investors (over 5% of company shares), which reflects the effective resolutions of regulators in creating an investment environment that protects the shareholders and investors’ savings. in line with such transformation, and the changes witnessed by

kuwait bourse in its legal status and various mechanisms, Cma continued its efforts towards drawing a new road map to enhance kuwait’s position as an advanced financial center, so as to possess a financial market match global markets that have fertile investment environment capable of attracting local and foreign investment.

local real estate Performance in 2016as an inevitable and logical result, likewise all business sectors that were negatively affected in 2016, this will have a similar effect on the real estate market for the same reasons discussed above, whether those represented in the declining oil prices or other economic reasons, such as the political crises surrounding the region.

according to al-shal report, and the data available at the real estate registration department of the ministry of Justice, the market liquidity dropped to about kd 2,499.2 million, i.e. 24.7% compared to the liquidity in 2015, of about kd 3,317.8 million. in the second half of 2016 liquidity amounted to nearly kd 1,377.5 million, reflecting the probability of the continuing downward trend in 2017, especially the continuing increase in interest rates.

briefly reflecting on the performance of the local real estate market performance over the past 15 years, the real estate market commenced to rise in 2002 and 2003 to hit the level of about kd 2,828 million in liquidity. in 2004 and 2005 the market witnessed a setback in liquidity, amounting to about kd 2,231 million. liquidity gradually improved once again in 2006, although it was the year of corrective actions in the regional financial markets and the kuwaiti stock exchange. liquidity continued to increase to the level of about kd 4,447 million in 2007. However, the liquidity retreated again in a fast pace in 2008 and such drop continued in 2009, where liquidity realized its 2002-low. liquidity recovered in 2010 and such recovery extended to 2014 to realize the highest level during 20022016-, with the liquidity amounting to about kd 4,859.2 million in 2014. liquidity declined in 2015 to the level of kd 3,435.5 million and such decline continued into 2016 to the level of about kd 2,499.2 million.

Company Performance in 2016:The Company’s performance, as compared to its peer real estate companies, was distinctive, thanks to applying the carefully studies business plans and strategies, which were adopted by the Company by diversifying its investment. such direction was conducive to the increase in the Company’s profits during 2015. of the major achievements are:

Collection of the final payment of exiting the investment in the development investment Company, of kd 1. 125,000, noting that the total investment amounted to kd 500,000, and the profit from investment was kd 50,000. earnings will be collected as soon as possible, in coordination with the development investment Company.

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finance lease of kd 66,923 was settled for the fintas real estate properties for the period from 1/10/2015 to 2. 30/9/2016, and 10% of the total debt was settled on the contract amounting to kd 148,051. The outstanding amount of finance is kd 1,332,449, out of kd 2,350,000.

Valuation of the trademark “Century 21 – kuwait” at kd 150,000 - $200,000. accordingly, initial approval 3. was obtained to sell the trademark to the party wishing to purchase, at $200,000. Procedures of selling the trademark with the mother company in the us are in progress.

a contract was signed with lifelong Consulting Company to develop the policies, rules and regulations 4. relating to governance, as per the requirements of Cma, against kd 5,000.

management contract was signed with kfH Capital Co. to manage the portfolio of kuwait investment 5. authority (kia), for a management commission of kd 5,400,000 (five million four Hundred Thousand kuwaiti dinars). The Company is currently in the process of receiving the portfolio in phases.

management contract was signed with a client to manage their real estate portfolio, against a commission 6. of 2%, with annual income of the portfolio amounting to kd 905,000 (nine Hundred Thousand kuwaiti dinars).

a contract was signed with gulf telecommunications Company to manage the customer service center 7. 24/7. The system is to be commenced with effect from 22/1/2017.

The Company partially exited from the shares of al-imtiaz investment group, by selling 200000 shares out 8. of 2502088 shares, and a profit kd 5,800 was realized.

The Company moved to its new premises at injazat tower, from the old premises at al-dhow tower. The 9. move allowed reduction of general and administrative expenses of kd 25,000 annually, i.e. 37% below rent cost.

operating income from ras al-khaimah properties increases, amounting to kd 621,878 in 2016, compared 10. to the same period of last year, of kd 582,501.

operating income from local properties owned by the Company increased, with operating income for 2016 11. amounting to kd 597,886, compared to operating income of kd 582,150 in 2015.

general and administrative expenses were reduced in 2016 to kd 543,395, from kd 687,979 in 2015, or by 12. 21%.

real estate PortfoliosThe Company, through its executive management, continued to increase the efficiency of the company-managed portfolios. The Company achieved occupancy rate of up to 93.42% of the total managed units, in addition to a high collection rate of 92.07% of actual income.

Company’s financial resultsshareholders’ equity for the current year totaled kd 15,844,257, compared to kd 14,936,606 in 2015.

Profits and dividends:rate of return on paid-up capital amounted to 7.60 fils, where the operating income for the year amounted to kd 2,416,520, compared to the operating income of last year, amounting to kd 2,487,597, a decrease of about 2.85%. The Company’s board of directors has recommended not to distribute dividends for 2016, so as to utilize the financial surpluses in achieving the Company’s strategic objectives to increase its investments. The financial statement relating to the distribution of the profits for 2016 is as follows:

amount

statutory reserve 10% 83,492

Voluntary reserve 10% 83,492

Contribution to kuwait foundation for the advancement of sciences 7,512

directors’ remuneration 11,000

Contribution to kuwaiti manpower support fund 18,301

Zakat (1%) 7,320

Cash dividend to shareholders 0

retained earnings 623,799

Previous retained earnings utilized in distribution for the Year 0

minority rights 84

Total 835,000

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The Company’s future ambitions will be focused on continuing its strategy in 2017, in which we aspire to realize good returns to our shareholders. it should be noted that the achievements realized wouldn’t have been realized had it not been for the almighty god and the cooperation of everyone, including the board members through their constant support, or through the executive management, who relentlessly sought to cope with the market conditions, which reflected positively on the Company’s results.

we take this opportunity to express our thanks and appreciation to our clients for their constant and fruitful cooperation towards upgrading the Company’s business in order to realize its objectives. we also extend our thanks to the Company’s auditors and shari’a board for their great efforts.

___________________________abdul Qader Jassim al-furaih

Chairman

rePort of sHareaadViCe and Control Panel

according to decision of general assembly instating the appointment of shari’a supervisory board, and commissioning us to execute this decision, we submit the following report:

we have monitored the contracts that are related to transactions and implementations offered by the company during the fiscal year ending on december 31st 2016, we have conducted due monitoring to form an opinion as to whether the company has complied with the rules and Principles of islamic shari’a, as well as specific fatwas, ruling and guidelines issued by us. it is the management’s responsibility to ensure that the company operates in accordance with the rules and Principles of islamic shari’a. However, our responsibility is limited to form an independent opinion based on our review of the company operations and to report to you.

we have performed our review which included examination and documentation of procedures followed by the co -pany. we have also planned and implemented our review in order to obtain all information and interpretations we deemed necessary for providing us with sufficient evidence to give reasonable assurances that the company has not violated islamic shari’a rules and Principles.

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in our opinion the whole contracts, operations, and transactions made by the company during the year ending on december 31st, 2016, which we have reviewed, were conducted in compliance with the islamic shari’a rules and Prin-ciples.

we ask allah the all mighty to make reason and rightness realized to us

may peace, merci and blessing of allah be upon you .

Members of Sharea Advice and Control Panel

sHeikH: abdul sattar ali al-kattan Head of sharea advice & Control Panel

sHeikH : moHammad omar Jasser member of sharea advice & Control Panel

sHeikH: YaZeed moHammad al-Qattan member of sharea advice & Control Panel

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BOARD OF DIRECTORSMembers Of The Board

1- abdul Qader al-furaih

2- barak ali alshitan

3- nadia ibrahim al saeed

4- abid alilaah a. al mutawa

5- abdulwahab a. al sanad

6- nasser ahmed al-khader

7- ibrahim ismail al-kandari

8- omar khalid al-kandari

Chairman of the board

Vice Chairman of the board

board member

board member

board member

board member

board member

board secretary

1

32 4

7 85 6

EXECUTIVEMANAGEMENT

1- ibrahim ismail al kandari

2- mohammed ahmad saeed

3- salman Hamza ajmi

4- omar khalid al kandari

5- emad m. al Hanini

6- ashraf s. mostafa

7- ahmad i. al Zerbawi

8- fayza a. mohammed

C.e.o

maintenance dept. manager

asst. Properties dept. manager

Head leagal section and board secretary

asst. it dept. manager

asst. finance dept. manager

asst. admin. dept. manager

Head intrnet audit sec.

1

3 5

876

2 4

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our Commitmentto You: our CliEnt ream has now been active as a market leader in the property sector in kuwait for over two decades, during the last 12 months we have undertaken a fundamental review of all our activities to ensure that we are at the forefront of the property sector in kuwait.

we have always prided ourselves on the diligence, care and trustworthiness which ream delivers to its clients with its services and we have now implemented a policy which ensures that they truly meet best practice standards in the international market place.

our clients, staff and shareholders are at the forefront of our endeavours and assure you of our continuing commitment to implement a vigorous strategy to deliver the highest standards across our comprehensive range of services.

during the last year we have pursued policies which place customer care and best practice at the centre of our ethos.

This has involved a major review with knight frank, an international firm of asset and property consultants to review everyone of our activities and service lines, including our marketing, agency, management and professional services so that ream retains its premier position within the kuwait market.

we have acquired prime office space for our staff who are supported by effective guidance and training with the latest in it and office systems. our website has been completely remodelled and we are determined to continue to elevate our business standards to grow the turnover of our business and set the standard for others to follow.

we take this opportunity to thank our clients, shareholders and staff for all their support over the last 12 months with the commitment to serve you in the very best manner through the exciting challenges that the future will bring. ream

is now exceptionally well placed to provide outstanding performance for the future.

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ream HistorYestablished in 1993, as a kuwaiti shareholding closed company, real estate asset management (ream) has developed a strong foundation of experienced board members.

driven by strength of leadership, sound business principles and ethical qualities, together with a high caliber and pro-.active management team the company has grown to become a market leader in kuwaitis real estate sector

with two decades of practical experience both in kuwait and united arab emirates; ream has been extremely suc-cessful and highly profitable throughout challenging global and regional economic circumstances.

ream has long been recognized for success and leadership in the commercial real estate services marketplace and has a number of highly regarded and distinguished clientele, setting the company apart from its competitors.

Currently ream, on behalf of their clients, manage a portfolio of some 402 buildings ranging from highly sophisticat-ed high rise towers, to commercial office complexes, shopping mallsand retail outlets with internationally recognised and established brands, to multi let residential properties with over 6380 individual tenants.

more recently ream has taken the initiative to modernise the company through a very focused and comprehensive (Change management Programme: these strategically focused areas of works have seen the implementation of the latest (best Practice systems, processes and procedures, and further internationally recognised training and development of our people.

The Corporate governance practices of ream are designed to strengthen the (board of directors> oversight of

management and to serve the long-term interests of our shareholders, employees and other stakeholders.

furthermore, the companies corporate identity and its brand guidelines have also been comprehensively enhanced and its web site elevated to a world class standard, with the latest business and social technological applications. our corpo-rate collaterals have been further developed to represent our commitment and drive to make ream more successful now and for the foreseeable future.

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our Visionto be a respected leader in the real estate industry; a preferred and trusted partner of choice.

our missiondeliver integrated real estate projects that add real value to the communities we serve, implemented with care and attention to detail, fusing imagination with best practice professionalism.

our Valuestrust, integrity, respect, creativity.•build our reputation by empowering our staff and partners to achieve excellence.•Create an enduring legacy for the communities we serve.•Honour our agreements and conduct business professionally with integrity and respect.•

our Clientsgive back to the communities where we live and work.•to treat our clients with honesty, transparency and fairly.•to embrace our values by the provision of ‘best in class’ service.•to devote our time to achieve common interest.•

goalstreat everyone fairly, honestly, and with dignity and respect.•accept responsibility and be accountable for our actions.•Creating value by delivering the highest quality service to.•

our serViCeswe have led the local industry in establishing a strong footprint and offering a full spectrum of services, and ‘state of the art’ technology. we continue to lead in superior client service, volume of business activity, financial perfor-mance and many other measures.

we provide a myriad of services which are as follows:-

asset mangementour team will consider the life cycle of the product be it Commercial, Hospitality, residential or industrial sectors, through initial feasibility, full design to development, handover and ongoing operations and its subsequent disposal.

our consultancy provision complements the customer requirements, with a unique set of skills and turn-key solution unavailable in the local market place.

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ProPertY managementour highly focused team will establish an execution

plan for the asset of the real estate and provide the

following services as a complete package, under a ‘one

stop shop’ approach or as an individual menu:-

Property and contract management.•

marketing to international standards.•

Capital expenditure management.•

bid solicitation and presentation.•

tender services.•

Vendor selection and contract procurement.•

input on and inspection of contractor perfor-•

mance.

leasinglease management.•

lease Creation.•

budgetary establishment.•

local and regional marketing.•

defaulters and legal Process.•

financial Collections.•

Customer satisfaction surveys.•

brokeragebuying and selling The Property.•

Property information Package.•

local and regional marketing.•

Contract establishment.•

legal Process.•

Valuationsour specialised team has extensive experience in the valuation

of all types of properties, ranging from residential apartments

and commercial offices to shopping malls and retail complexes.

ream have developed a unique valuation model, which when

combined with ‘up to date’ market information and specific

details of the property to be valued, its use and function, will

ensure ream provides an accurate reflection of ‘fair market

value’:

OUR SERVICES INCLUDE THE FOLLOWING VALUATIONS :

of an existing building, an investment opportunity or•

a valuation for land/plots.•

of real estate assets or plant, machinery and equipment.•

an independent valuation of review services.•

of a real estate company, fund, investment management•

business or equity holding.•

understand the current and anticipated future value of real•

estate loan collateral.

real estate due diligence or market studies and / or advice•

on post-merger integration.

if your business is undergoing change and you are seek-•

ing to align your real estate portfolio with business strategy

and optimise value, reduce cost or improve operational ef-

ficiency.

You face complex real estate investment decisions requir-•

ing an objective appraisal of financial and non-financial is-

sues to assist with the decision-making process.

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adVisorYwe understand the differing perspectives of an investor seeking to optimise the value of an income producing asset or develop-ment opportunity versus an occupier seeking to minimise cost. ream can align long dated assets and liabilities with a more fluid business strategy.we use our experience and industry knowledge and advisory capabilities to deliver real estate strategy solutions to bothowners and occupiers.ream has experienced and dedicated professional staff, with ‘best in class’ procedures and systems.our existing client base has gained reductions in financial expenditure by the introduction of shared savings initiatives and business opportunities to expand their business.

our adVisorY team sPeCialise in:advisory services to assist with post acquisition real estate integration and synergy identification.•advisory in real estate investments in emerging markets, we have experience of undertaking feasibility and market stud-•ies globally.inward real estate investors to kuwait and other markets.•we can deliver a full range of impartial valuation and due diligence services.•

ConsultanCY serViCesHighest and best use study.•feasibility studies.•development execution.•Capital expenditure assessment.•

auCtionsream are well positioned and have practical experience within the local market place to deliver your auction needs, through a complete turn-key solution. more recently ream has had first hand experience in auctioning a number of residential proper-ties through an open ascending price auction.ream have created a thorough due diligence process, which ensures the bidders have the latest relevant information available, to make a smooth transactional process, thus ensuring the ‘true underlying value’ of the property is experienced for both seller and buyer.

tYPes of auCtion Can be as FOllOWSopen ascending price auction.•sealed bid auction.•bidding fee auction.•dutch auction.•sealed first price auction.•Commodity auction.•Combinational auction.•

ream will provide best the option for you to consider.

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finanCial managementream is superior in managing the budget and finances for each owner in the most cost-effective manner possible to keep expenses low by the use of:-

budget Preparation.•maintenance and assessment management.•account Payable management.•automated book-keeping services.•audit and tax management.•liaison with accountant on Year-end audits.•liaison with attorney on legal matters.•lnsurance administration.•Collections.•detailed monthly reports.•balance sheet.•trial balance.•income statement.•accounts receivable/Payable.•financial and budget analysis.•supplier Cost - financial audit.•

our financial expertise is highly regarded within the real estate sector by the provisions of high end services, where we are the market leaders in this field.

maintenanCe & serViCesProvide planned preventative maintenance in accordance with HVCa standards.•

meet kuwait regulatory requirements in all aspect of maintenance.•

establish and manage specialised sub-contractor works to ensure highest service levels performance for routine inspec-•tions and repair.

ensure the health, safety and welfare of tenants by maintaining the services to a good standard.•

out of hours call out for our staff to meet agreed service levels.•

life safety of systems operated and maintained by planned maintenance and testing.•

Completion of full annual inspections.•

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our Partiners we have chosen our partners, who have both international exposure and professional experience in world class service delivery. our partners, in joint collaboration, extend our traditional service lines through a combination of dedicated professional staff and ‘tried and tested’ programmes, which can be customised for local market conditions.

Century21 are an internationally recognised company providing high quality real estate and brokerage services to over 8000 offices throughout the world. ream have signed a franchise agreement for delivery of real estate services to ku-wait, egypt, lebanon and united arab emirates.

amlak provide high quality real estate and brokerage services for delivery of real estate services to kuwait, egypt, leba-non and united arab emirates.

amlak oman has been established to provide development and construction services to the sultanate of oman.

ream has established a strategic alliance with knight frank, who have become the world’s largest privately owned global residential and commercial property consultancy. in the 1960s the firm expanded into europe, and in the de-cades that followed, acquired offices in asia- Pacific, australia, africa, the middle east and the Caribbean.

our PeoPle our people are the company’s greatest asset and come from every corner of the business world and, collectively or indi-vidually, provide essential long-term or interim property management services. The diverse and multi-talented mem-bers of the team are far more than experts and leaders in their fields, we consider them relationship-builders at heart, who know that it takes trust, partnership, responsiveness and dedication to make a business the very best it can be.

The intensive change management initiative ensures the continuance of the training and development of our staff through a carefully managed and controlled programme.

our values are also communicated through this requirement, thus our team ensure.

delivery of exceptional performance.•

achievement of success.•

Values of integrity, honesty and loyalty.•

identifiable to our customers.•

dedicated to service.•

our people are driven by a passion for innovative problem-solving and a love of collaboration. as a further sign of commitment, we are developing and implementing ongoing training programs to support our policy and raise envi-ronmental awareness among our employees and business partners.

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our sYstemsreams iCt systems have been thoroughly modernized with the introduction of ‘best in Class’ informational, technological and Communicating operating systems to meet our client’s needs and desired stages of growth.

our efforts have been immense, ensuring that the latest software and hardware products streamline processes and procedures, releasing manpower hours, reducing environmental impact and serving the client with ease of access, immediate information availability, ultra modern and unwavering commitment to service delivery.

enterprise resource Platform - the customer relationship management, the property management systems, the financial software has been fully integrated within the company, with the latest security access and control provi-sions. The system will provide automated reports, statistical and quantitative information, which will be used for continuous improvement of our service delivery.

sYstemsenHanCed are as follows.

Call Center:• a modern environment, combined with the latest telephony services, with internationally recognized ‘helpdesk’ software with a ‘365 day * 24’ hour operating control area, staffed by both arabic and english speaking per-sonnel. The latest customer survey application complements the initiative and is used to measure and then to improve the service.

Web Site:• aesthetically pleasing to the eye, this modern looking website is user friendly with all of the latest social and professional applications. The web-site can provide full property management services to our present and new custom-ers, including live chat technology directly with the call centre, search capabilities with easily controllable parameters, interface with google and pricing index for apartments. in meeting the modern age, our website allows use of all the latest social media functions such as face book, twitter, linked in to enable and empower our customers.

Mobile Phone Application:• our application has been customized in a ‘user friendly’ way, so whilst the customer is on the move, they can receive the latest updated information on the property database.

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our ProCesses ream have spent considerable time updating the existing process and procedures in the company to meet inter-national ‘best in Class’ standards and to meet our ever evolving regulatory and legal requirements.

There has been the introduction of property management manual.

our PriCewe will ensure that our price remains competitive and provides excellent ‘value for money’. we will endeavour to reduce expenditure by introducing the ‘shared savings initiatives’ utilising our vast experience and local and international

knowledge and understanding of best practices.

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real estate asset management ComPanY (ream) - k.s.C. (PubliC) and its subsidiaries

state of kuwait

39

annual CorPorate goVernanCe rePort (2016)

real estate asset management Com-PanY (ream) k.P.s.C

39

introduction 41

Corporate governance at ream 42

fatwa and sharia supervisory board and the forensic audit 43

ream’s board of directors 44

board secretary 45

incentive scheme package paid - 2016 45

bod statement for integrity of financial statements and other activities-related reports as well as sufficient internal control systems

46

internal audit report regarding adequacy of internal Control systems 46

external audit report regarding adequacy of internal Control systems 47

first rule: Construct a balanced board Composition 47

meetings of the board of directors: 49

second rule: establish appropriate roles and responsibilities 50

Third rule: recruit Highly Qualified Candidates for members of a board of directors and the executive management

51

fourth rule: safeguard the integrity of financial reporting 51-52

fifth rule: apply sound systems of risk management and internal audit 52-53

sixth rule: Promote Code of Conduct and ethical standards 54

seventh rule: ensure timely and High Quality disclosure and transparency 55-56

eighth rule: respect the rights of shareholders 57

ninth rule: recognize the roles of stakeholder 58

tenth rule: encourage and enhance Performance 59

eleventh rule: focus on the importance of Corporate social responsibility (Csr) 59

Contents

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introductionThe Corporate governance (Cg) principles, is the systems of rules, practices and processes by which a company is directed and controlled to maintain balancing of the company>s interests, its shareholders and other stakeholders. The main aim of applying the rules of corporate governance in ensuring the compatibility of ream’s objectives with shareholders’ objectives as to enhance investors’ confidence in the ream’s performance efficiency and its ability to manage challenges and crisis.

during the year ream’s team in coordination with a leading consultancy company have reviewed and update the governance framework in order to ensure that all requirements to practice good corporate governance is in place.

The company also has developed plans and programs for continues development of its human resources. The company has held awareness session training to most of its executive management in various levels with presence of the board of directors, and session covered sound implementation of Corporate governance and its role in performance enhancement, and the compatibility of ream’s core values with islamic sharia principles. Compli-ance with the regulatory requirements is part ream’s culture.

main rules of sound corporate governance

- transparency: willingness to provide clear information to be widely known and available (to shareholders and other stakeholders)

- responsibility and accountability: making decisions based on sound principles and clear directions

- fairness: doing business in a fair and equal treatment

- integrity: be honest and take into account the moral side.

The corporate governance rules governing the “decision-taking” and “decision-making” methodology within the Company and motivate the roles of transparency and accountability of those decisions. The main objectives of adopting sound corporate governance rules including shareholder protection, segregation of duties and authority between the executive management who is running ream ‘s business and the board of directors which adopts the company plans and reviews its policies, this is a core to build trust and promotes confidence sense while deal-ing with them, it also enables shareholders and stakeholders to control the company effectively.

Corporate governance principles relies on number of regulations, rules, practices and processes in which the company is being lead and controlled. The corporate governance balance between all stakeholders including cus-tomers, employees, staff, government and society. it also sets the responsibilities and rules of the board of direc-

Real Estate Asset Management Company (REAM) – KPSCAnnual Corporate Governance

Report (2016)(All Amounts Are In Kuwaiti Dinars)

41

tors and executive management in the company, taking into account the protection shareholders’ and stakehold-ers’ rights.

Corporate governance at reamComplying with Capital markets authority Cma law no. 7/2010 and its executive bylaws regulations and its amendments, and from the basis objectives sought by the Cma to organize securities related activities, which in-clude regulate securities activities in a fair, transparent and efficient manner as well as enhancing public awareness of securities activities and of the benefits, risks and obligations arising from investments in securities and encour-age promote its development while enhance investor protection, reduce systemic risks arising from securities activities. in which practicing sound governance and existence of a full-disclosure policy are providing justice and transparency, it also prohibits conflicts of interest and the insiders violations, this will organize the relationship between shareholders, board of directors (bod) and executive management in listed companies.

ream has adopted principles of corporate governance in line with the regulatory requirements as set by regula-tory bodies. ream is evaluating both performance and quality of the services, policies and practices it offers, as to ensure that it is consistent with the corporate governance guidelines applied in kuwait. The main purpose of corporate governance practices application is to organize and regulate the relationship between all the parties in the shareholding companies, starting from shareholders and board members to executive management in order to avoid confiscation by the company management against minority shareholder’s interest.

The adoption of the principles of corporate governance is relying on building a balanced structure of the board of directors and determining its functions and responsibilities with full transparency and ensure the integrity of financial reports issued by ream, and emphasize the role of all stakeholders, whether within ream or outside, in addition, to protect the interests and the rights of shareholders, and to ensure equal treatment among all of them. it did not overlook the vital role of corporate governance rules in ream to organize a systematic decision-making and the credibility of those decisions by following the disclosure and transparency rules, which is considered a key element in stakeholders> rights protection.

ream’s board of directors (bod) has self-mandating the responsibility to improve and develop the foundations of corporate governance in line with the executive regulation of the updated Capital markets authority’s bylaw which was issued in november 2015 and its amendments, and assigned the best-in-class talented, qualified and specialized consulting firm in this field and energies by ream’s internal human resources to ensure sound imple-mentation of good corporate governance.

Good corporate governance is based on the following rules:



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- First: Ethical behavior: ensures the commitment to ethics and rules of professional conduct and balance be-tween the interests of all related stakeholders of ream, and ensures also the transparency in the presentation of financial and non-financial information.

- Second: monitoring and accountability: the importance of developing an integrated system of control and ac-countability to detect deviations, as well as the importance of activating the role of stakeholders in the company’s control environment, and to emphasis that disclosure and transparency is an essential element in the protection of stakeholders, rights.

- Third: Appropriate Organization Management: ensures proper authority and delegation of authorities and re-sponsibilities, separation of functions, and to develop and review incentives and rewards scheme system with link-age to the performance evaluation, both for top management, executive management and staff of ream.

fatwa and sharia supervisory board and the forensic audit Companies which operates in compliance with the provisions of islamic sharia are featured by committing to the principles and provisions of islamic sharia in its business and all activities, which is the most important character-istic that differentiate these islamic shaiaa-compliant companies from conventional companies.

to ensure full compliance with the provisions of islamic sharia, the regulations and laws in the state of kuwait mandating the companies to form fatwa and shari>a supervision board, as to ensure that its businesses is comply-ing with the provisions of islamic sharia as well as providing sharia opinion on all activities, products and services offered by these companies is are in accordance to shariaa , fatwa and sharia board is also offering solutions and alternatives to those products and activities that has concerns/notes.

REAM’s Fatwa and Sharia Supervisory Board main roles can be briefed are as follows:

Provide an annual report to be presented to the general assembly of ream’s Compliance level with the •provisions of islamic sharia.

oversee and monitor the management activities and practices and from shariaa perspective, the executive •management in turn oversees the implementation of the decisions and recommendations of the fatwa and shari>a supervisory board in the company

oversee the training programs and development activities among ream’s staff as to enable them to exer-•cise their responsibilities in accordance with the provisions of islamic sharia. The fatwa and sariaa board

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can also propose to the board of directors to conduct and organize seminars and conferences that address the main economical topics and issues that is of concern from islamic perspective. fatwa and shariaa board meets at least twelve times annually, one of the meetings should be held in ream premises and decisions shall be obligatory to be implemented. The nominated member/candidate for membership of fatwa and shariaa board must possess the required academic qualifications or have an adequate experience in the field of contemporary of islamic financial transactions.

ream’s board of directors1) Mr. Abdul Qader Jassim Al Freeh: Chairman of the board and has acquired several qualifications and experi-ence, where he served as an engineer in the kPC>s international marketing department, mr. al freeh holds a bachelor degree in mechanical engineering from kuwait university, and attended several training courses.

2) Dr. Ahmed Abdullatif Al-Senan: Vice Chairman of the board, and has many experiences where he currently has the rule as the deputy general manager of minor’s funds development - the Public authority for minors affairs, and holds a bachelor of islamic studies, master of the islamic ossoul shariaa education and doctorate degrees in law and jurisprudence.

3) Mr. Abdul Wahab Asaad Al Sanad: member of the board of directors, mr. al sanad is one of the national well-known trademarks and is currently the general manager of al rai Commercial markets Complex. He holds a bachelor of arts - kuwait university and mba, he is also the vice chairman of the board of directors of al-sanad holding Co., and bod member of amlak for real estate services and consulting company.

4) Ms. Nadia Ibrahim Al-Saeed: member of the board of directors and holds the position as director of commer-cial business of legacies at the general authority for minors affairs, she holds a bachelor>s degree in psychology - english section, also serves as bod’s Vice Chairman of one-third of the late abdullah abdullatif al-othman.

5) Mr. Nasser Ahmad Al Khedr: member of the board of directors and served as director of real estate investment management, kuwait awqaf Public foundation, and holds a bachelor degree in Civil engineering from temple university, usa and master>s degree in business administration, and is a member of the Council of bangladesh islamic bank.

6) Mr. Abd-ALLAH Abd-ALILAH Al-Mutawa: member of the board of directors, and is one of the key business-man who have hands-on experience in the business with a variety of experience in several areas, and holds a bach-elor degree in Political science faculty of Commerce and economics and Political science - kuwait university, also he is a bod member of ali abdul wahab al-mutawa group, and executive director of the united network for general trading and Contracting, and Ceo of green Hand company (waqf educational services) in london



45

- united kingdom, and he is a general manager of mibarrit ahl al khair kuwait (charitable work in kuwait), and owns abd-allaH al-mutawa, general trading and Contracting company since 2002 as well as sharjah in-ternational real estate company.

7) Mr. Ibrahim Ismail Al-Kandari: executive board member and Ceo of real estate asset management (ream), mr. al-kandari holds a bachelor degree - faculty of Commerce, economics and Political science - kuwait univer-sity, also he is the chairman of amlak for real estate services and consulting company.

board secretary mr. omar khaled al-kanderi, is the of the board of directors secretary, he is one of the company>s qualified ex-ecutives heading ream’s legal affairs department. He holds a bachelor of law and shariaa - kuwait university. He is also a board member of amlak for real estate services and consulting company.

incentive scheme package paid - 2016kwd 000

Compensation group/Categorybonuses paid to board members pillow pack 42

total bonuses number of staff group /Category

26,404 9

top management and staff involved in the activities lined risks (financial, audit, risk, commitment, the secretariat of the mystery)

38.601 80 other staff rather than the above mentioned65,005 89 Total

starting from 2017, The company adopted an incentive and compensation methodology which is in line with the regulatory requirements of Cma, particularly module 15 of the Cma bylaws regarding Corporate governance requirements, where the company granting several incentives for its staff as per annual performance appraisals to the all staff members, which is in accordance to the professional standards. The bonuses are allocated to each employee’s performance as to motivate and encourage continues enhancement of the functionality level, and in ac-cordance to the kuwaiti labor law in civil sector. The company was engaged with external consulting firm in order to further develop plans for both short and long-term incentives as to create an attractive business environment and to motivate employees from various functional levels within the company.

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The external consulting firm is also working with ream’s team to review the mandates within the Job descrip-tions to update the rules of each staff member in the company and their responsibilities, which would support the segregation of duties in the company.

bod statement for integrity of financial statements and other activities-related reports as well as sufficient internal control systems

The Company has established a highly efficient internal control systems, and based on the approved governance structure by the board of directors which is consistent with the company’s strategy, a popper implementation of the policies and procedures is being monitored through the internal audit, risk management and compliance functions, in which internal controls systems are tested vs. the mandated responsibilities and entrusted authorities to each function, as well as inter-communication channels between the company’s departments and various levels as to avoid any conflict of interest.

Complying with Cma regulatory requirements the company appointed external auditors to review annually the company’s internal control systems (iCr report) to ensure the adequacy of the internal control systems, and present it to the board audit and risk management Committee for approval and to the board of directors for ratification before it is sent to the Cma.

The board of directors undertakes to the shareholders that the financial statements for the year 2016 have been prepared by the executive management of the company under the supervision of the board of directors and audited in accordance with international accounting standards (ias) and international financial reporting standards (ifrs) with compliance to the transparency and disclosure requirements without any miss-presentation nor misleading or hiding to any data that may affect the integrity of the financial statements of the company.

internal audit report regarding adequacy of internal Control systems

The Company’s internal audit function provides independently an objective based assurance and consultancy services over the design and operating effectiveness of the company’s system of internal controls by performing periodic risk based audits and reviews to evaluate and improve the effectiveness of risk management, control process and governance process.

audit reports are issued summarizing the results from each performed audit engagement which are then distributed to the responsible auditees (departmental heads of the auditable departments/units. These reports provide evidence to support the annual evaluation of the overall operating effectiveness of the internal control environment.

However, any internal control system can only provide reasonable, but not absolute assurance that the objectives of that control system are met. further, the design of a control system must reflect the fact that there are resources constraints, and that the benefits of controls must be considered relative to their costs.

as a result of the above evaluation, it can be concluded that the internal control environment is appropriately designed and



47

operating effectively as of 31st december 2016. shareholders can access the audit Committee report to the general assem-bly through the investor relations unit in ream.

ream owns adequate internal control systems which ensures compliance and adherence to the policies and guidelines of the company, the internal auditors are practicing their duties completely independent. internal audit team has also the ap-propriate experience, in addition to adequate knowledge of auditing financial and accounting tasks and related activities. The relationship between the internal audit team and the audit Committee is a relationship which is characterized by high professionalism which serve the independence of the control and its effectiveness, through assisting the audit Committee in the performance of their responsibilities, in particular responsibilities for internal audit on the company’s several activities.

external audit report regarding adequacy of internal Control systems

The bod assigned 2 external audit firms (grant Thornton-al Qataami & alaiban- and Hind al sareia –mazars- ) to audit ream financial statements in which they certified a proper presentation of the financials in compliance with international accounting standards and international financial reporting standards for the year was met, . a detail of the auditor report and disclosures can be founded in the financial statements and audit report section of this annual report for the year ended 31 december 2016 enclosed to the financials.

Main shareholders who has controlling/influence shares as at 31 December:

Shareholder Ownership Percentage

39.234 % Public authority for minors affairs

29.665 % tadawoul stocks and bonds international trading Company

14.573% noura ali al ibrahim

6.823% abd alaZiZ asaad al sanad

4.522% kuwait awqaf Public foundation

3.923% international islamic Charitable organization

first rule: Construct a balanced board Composition

- Board Role and its responsibilities

The role of ream’s board of directors represents the balance core which aims at achieving shareholders’ goals and pursuing the company executive management. board of directors aim at accomplishing the strategic goals of ream through ensuring that executive management are perfectly performing its assigned roles and that it enhances the company’s competitive capac-ity, achieving high growth rates, and increasing profits and that executive management resolutions and actions are always for the benefit of the shareholders.

- Board of Directors

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real estate asset management Company (ream’s) board composite of 7 members including non-executive member and independent members, the board is supervising the company’s operation and protecting the shareholder’s rights and is di-recting the top management by segregating and distributing the rules.

in addition to that, ream’s bod is executing all rules and responsibilities as mandated in the memorandum and article of association of ream and the applicable laws and regulations in kuwait.

- Board Sub Committees

ream has established the following bod sub committees as to assist the board in its rules and mandates effectively and ef-ficiently as follows:

- Board Risk Management and Audit Committee (BRAC)

ream;s board risk management and audit Committee is ensuring the soundness and integrity of financial reporting of the company, in addition to sufficiency and effectiveness of the internal control systems applied in ream, by ensuring full compliance of the company’s policies and procedures in addition to compliance with the applicable laws and regulations is-sue by regulatory bodies, the committee is also ensuring the soundness and integrity of financial reporting of the company by complying with international financial reporting standards (ifrs). braC playing an important rule to identify and assess the several types of risks the company’s activities are exposed to and how to deal with these risks, in light of he Company’s policies in this regard, especially the risk appetite policy.

note: The audit committee and risk Committee were merged after obtaining the necessary approval from Capital markets authority (Cma)

- Board Nominations and Remuneration Committee (BNRC)

ream’s bnrC is responsible to choose and select qualifies persons to fulfill board membership and its committees, it also authorized to select form candidates/applicants for executive management positions.

The committee is also monitoring the remuneration policy and compensations, in order to motivate the human resources whom are qualified and high technically capable as well as attract the highly qualified people in the future.

Executive Management The executive management plays an important role in the implementation of strategic plans for the company in addition to the application of systems and internal policies and to ensure their suitability and effectiveness, in addition to the daily operations management in ream and management of its resources to ensure increased profits and lower costs, according to the strategy of ream and objectives.





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meetings of the board of directors:

The board of directors held 12 meetings during the year. re-composition of the board took place twice during 2016, once in 1st of march 2016 where mr. brak ali al-shitan, representing the general authority for minors> affairs, and mr. raed khalid al khorafi representing the kuwait awqaf Public foundation, replaced by the new members mr. abdullatif ahmed al-senan and mr. nasser ahmed al-khader. another board composition took place on 30th may 2016 by electing mr. abdul Qader Jassim al freeh as board’s Chairman and mr. ibra-him ismail al-kandari as a member, replacing mr. assad abd alaZiZ al sanad and abd alaZiZ assad al sanad. The current board members attended the board>s meetings as follows:

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Meetings attended by board members

Independent representative of Executive / non-executive Adjective Board members names

7 elected non-executive Chairman of the board of directors abdul Qader Jassim al freeh

9Public authority for minors affairs repre-

sentative

non-executive Vice Chairman of the board ahmed abdullatif al-senan

12 tadawoul investment Co. representative non-executive member abdul wahab asaad al sanad

7 elected executive member ibrahim ismail al-kandari

11kuwait awqaf Public foundation represen-

tativenon-executive member nadia ibrahim al-saeed

11kuwait awqaf Public foundation and Public

authority for minors affairs representative

non-executivemember

nasser ahmad al khedr

11 independent non-executive member abd-allaH abd-alilaH al-mutawa

second rule: establish appropriate roles and responsibilities

- Segregation of Duties There must be clear segregation of duties between board of directors and executive management in the way that ensures full independency; so that board of directors can perform its responsibilities effectively.

- Four Eyes PrinciplesThe company shall have systems of internal control that cover all the company’s activities. The systems of internal control maintain the com-pany financial soundness, data accuracy, operations effectiveness in various aspects, provided that internal principles of the internal control of the dual control (four eyes Principles) shall be considered in the organizational structure, which are:ream applies the segregation of duties, dual Control and four eyes Principles in all activates involves risks.board roles and responsibilities include, for example without limitation:1. approving company major goals, strategies, plans and policies, for example, at the minimum:a. The company comprehensive strategy, main work plans, reviewing and directing the same.b. Company ideal capital structure and financial goals.

c. apparent policy for profits distribution of various types (cash/ non-cash) so that shareholders’ and company’s interests are accomplished.

d. Performance goals, execution pursuing and company comprehensive performance.

e. Company organizational and employment structures and periodic review thereof.

2. acknowledging annual estimated budgets and approving phase and annual financial information.

3. supervising company main capital charges, assets ownership and disposing of the same.

4. ensuring the company’s commitment with policies and procedures that procure the company’s compliance with internal applicable rules and regulations.

5. safeguarding accuracy and validity of the data and information to be disclosed in accordance with applicable disclosure and transparency policies and rules.

6. Constructing effective communication channels that enable the company shareholders periodic and continuous access to company various activities and any essential developments therein.

7. setting corporate governance system – without these rules – general supervision thereof and monitoring how effective it is and amending the same, if necessary.

8. Pursuing performance of each members of a board of directors and executive management member subject to key Per-formance indicators (kPis).

9. Preparing annual report to be cited in the annual general assembly including the requirements and procedures of com-pleting corporate governance rules and commitment degree thereof. However, this report shall be included in the annual report of company activities and showing the complied and non-compliance rules and excuses for the same.

10. forming specialized committees where period, authorities and responsibilities of the committee are clarified and how the board shall monitor it. formation resolution shall also include titles of members and determining their roles, rights and duties. This is in addition to assessing performance and works of the committees and their main members.

11. ensuring that company certified policies and conditions are transparent and clear so that resolutions’ taking and wise governance principles are applied. This in addition to separating authorities and authorities of both the board of direc-tors and executive management. in this regard, the board shall:

a. approve internal rules and regulations concerning the company work and development, and any subsequent roles, spe-cializations, roles and responsibilities amongst different organizational levels.

b. approve authorization and execution policy of executive management assigned works. 3-



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Third rule: recruit Highly Qualified Candidates for members of a board of directors and the executive management

The board established board nomination and remuneration committee which is composite of 3 members one of them is independent who is mr. abd alilaH al moutawaa and its chairman is non-executive member, the membership and its working is determined and detailed in the committee charter.

fourth rule: safeguard the integrity of financial reporting The soundness of financial statements of the company is considered an important indicator of the integrity and credibility of ream in relation to presenting the financial position thereof. Consequently, it increases the confidence of investors in data and information provided by ream and allows shareholders to have

access to their rights. Therefore, ream has developed a mechanism to verify soundness and integrity of the financial state-ments thereof, supervise and audit accounts of the company by the audit and risk management Committee (barC), and verify independence and integrity of external auditor.

existence of the audit committee shall be considered a main feature indicating application of good governance, as such the committee shall incorporate the culture of liability inside the company (ream) through ensuring the soundness and integ-rity of financial reporting of the company, in addition to sufficiency and effectiveness of the conditions of internal control systems applied in such a company.

ream has also launched several initiatives during 2016 in order to strengthen the foundations of control and improvement of the internal control environment, including:

•Formationofadevelopmentcommitteefromtheexecutivemanagementofastoassistindevelopingpoliciesandproce-dures with assistance from a specialized leading consultancy firm as to be submitted to the board for approval and rati-fication, as to be in line with the business market requirements and company’s strategy, business model and regulatory requirements.

•Launchedprojectreviewandfurtherenhancethegovernanceframeworkwithassistancefromaspecializedleadingcon-sultancy firm as to ensure the availability of adequate controls and optimal use of the Capital markets authority law 7-2010 and 1-2016 as approved by kuwaiti legislature, and use it for enhancing the company performance. The bod and its committees and charters have been updated. some new policies and procedures are also articulated as required by Cma. The necessary reporting structures are being built currently.

•AssignedanindependentexternalauditfirmtoreviewtheinternalcontrolsystemsICRaccordingtotheinstructionsofthe Capital markets authority.

•StartedtrainingtoBoardofDirectors,ChiefExecutiveOfficer,Executivemanagementandstaffmembers,atall levels



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(middle, upper and top management) as to increase the regulatory culture.

•ObtainedtheapprovaloftheCapitalMarketsAuthoritytomergebothauditandriskmanagementcommittees,withafullcommitment that the new merged committee will play the roles prescribed in module 15 of the Cma bylaws, as to en-hance the role of supervision and facilitate the periodical meetings starting from the year 2017, god-willing.

Below are the audit committee authorities and responsibilities:1. review periodical financial statements prior to their submission to the board of directors and provide such board with

opinion and recommendation concerning them, in order to ensure fairness and transparency of financial statements.

2. Provide the board of directors with its recommendations concerning the appointment, re appointment, or replacement of the external auditors, and specify the remunerations thereof. upon recommendation of appointment, it is considered to verify independence of such external auditors and review letters.

3. follow up works of external auditors and ensure no services other than services related to audit functions are provided to the company.

4. Consider remarks of external auditors on the company financial statements and follow up measures taken regarding them.

5. Consider the applied accounting policies and provide the board of directors with opinion and recommendation in this regard.

6. evaluate the extent of sufficiency of internal audit systems in place, and prepare a report including the opinion and recom-mendations of the committee in this regard.

7. supervise the company’s internal audit department, in order to ensure its effectiveness in performing the operations and tasks assigned by the board of directors.

8. recommend appointment of an internal audit manager, his transfer, and removal, in addition to evaluating his perfor-mance, and the performance of the internal audit department.

9. review and approve audit plans proposed by the internal auditor and provide feedback.

10. review the results of the internal audit reports and ensure that the necessary corrective actions were taken concerning the observations stated in such reports.

11. review the outcomes of regulatory bodies reports and ensure that necessary measures were taken in this regard.

12. Verify the company compliance with related rules, policies and regulations.

fifth rule: apply sound systems of risk management and internal audit The board of directors shall be able to understand and analyze the nature and extent of risks encountered by the company’s activities, in order to reduce them as much as possible. in addition, it shall identify the proper procedure to deal therewith.





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This shall include identifying internal or external factors resulting in occurrence of such risks and developing appropriate measures to face the same, in light of the special strategies and policies applied in this regard, particularly the company’s risk appetite.

The sound risk management requires effective internal audit systems that shall provide auditing on the soundness of fi-nancial statements and the efficiency of the company activities and shall evaluate the extent of commitment to supervisory measures.

ream shall have a department/ an office/ an independent unit of risk management, which shall identify, measure, and monitor risks associated with the Company’s activities

The company organizational structure approved by the board of directors shall have a department/ an office/ an indepen-dent unit, which shall primarily measure, monitor, and mitigate all types of risks encountered by the company in accordance with the following:

1. The company shall apply effective systems and procedures of risk management, so that it can perform the key functions thereof, which are measuring and monitoring all types of risks exposed to by the company, provided that such process shall be conducted periodically and such systems and procedures shall be amended when necessary.

2. ream shall develop systems of periodical reports, as they are considered as one of the most important methods in the process of risks monitor and mitigation.

3. officials of risk department/ office, unit shall be independent through the direct affiliation thereof to the board of direc-tors. in addition, they shall assume a significant extent of authorities, in order to perform their roles properly without being granted financial authorities and authorities.

4. such risk department/ office / unit shall have qualified human cadres of professional competences and technical capabili-ties.

5. review transactions to be made by the company with the related Parties and provide proper recommendations thereof to the board of directors.

Below are the minimum authorities and roles of the risk management committee:

1. Prepare and review risk management strategies and policies prior to getting them approved by the board of directors and verify application of such strategies and policies and that they are appropriate to the company’s nature and level of activi-ties.

2. ensure provision of resources and systems sufficient for risk management.

3. evaluate systems and mechanisms of identifying, measuring and monitoring various types of risks that may face the com-pany, in order to identify areas of weakness.

4. assist the board of directors to identify and evaluate the company’s acceptable risk level, and ensure that the company does not exceed such level after it approval by the board of directors.

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5. review the organizational structure of risk management and provide recommendations in this regards prior to its ap-proval by the board of directors.

6. Verify independence of the risk management employees from activities that result in subjecting the company to risks.

7. Verify that the risk management employees fully understand the risks surrounding of ream and raise awareness of em-ployees concerning risk culture.

8. Prepare periodical reports concerning the nature of risks facing the company and submitting such reports to the com-pany’s board of directors.

9. review issues raised by the related audit committee, which may affect risk management in the ream.

10. The risk management committee shall hold periodical meetings at least quarterly per annum and when necessary and it shall prepare the minutes thereof.

sixth rule: Promote Code of Conduct and ethical standards establishing the culture of code of conduct and the ethical standards inside a company promotes the confidence of investor in such company’s integrity and financial soundness, as the commitment by all employees in the company, either the mem-bers of a board of directors, executive management, or other employees, to the company policies and regulations as well as the legal and regulatory requirements shall result in achieving interests of all the related Parties, particularly shareholders, without conflicts of interest and with a significant extent of transparency.

ream developed a business Charter including standards and determinants of Code of Conduct and ethical standards.

The business charter shall include a set of determinants and standards with the following as minimum:

1. establish the principle that each members of a board of directors and executive management shall abide by the laws and instructions, represent all shareholders, and abide by what is for the interest of the company, the shareholders, and other stakeholders, without limitation to one group only.

2. The members of a board of directors and executive management not used the official position of influence to achieve a private interest or any personal interests for them or for any third party.

3. not to use the company assets and resources to achieve personal interests and use such assets and resources optimally to achieve the company goals.

4. ensure developing an elaborate system and a clear mechanism that prevents the members of a board of directors and employees from exploiting the information they have due to the position thereof for personal interest, and prohibiting disclosure of the company information and data, except in the cases that permit disclosure in accordance with legal re-quirements.

5. ensure developing procedures regulating operations of related Parties.





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6. establish a clear separation between the company’s interests and those related to a members of a board of directors, through developing mechanisms by the board of directors for giving priority to the company’s interests over the interests of the board of directors.

7. The members of a board of directors shall disclose to the board of directors any mutual interests with the company, di-rectly or indirectly.

8. restrict the participation of a members of a board of directors in discussing, expressing opinion, or voting on any issues presented to the board of directors which the board member may have a mutual interest with the company, directly or indirectly.

9. ream developed a mechanism that allows the company’s employees to report internally the doubts thereof concerning any unsound practices or issues that raise suspicions in the financial reports or the internal control systems or any other issues. moreover, proper arrangements that allow conducting an independent and fair investigation concerning such issues shall be developed, along with ensuring confidentiality for the bona fide whistle-blower to ensure protecting him against any negative effect or damage that may be caused thereto due to reporting such practices.

Professional Code of Conduct and Ethics:in this context, the approved professional conduct rules by the board of directors, prevent board members and staff from the exploitation of ream’s internal information for their personal benefit (insiders), it is worthy o mention that the rules of professional code of conduct are published on the company’s website, which is in compliance with the regulations of corpo-rate governance issued by the capital markets authority.

seventh rule: ensure timely and High Quality disclosure and transparencyaccurate disclosure is one of the key features of the methods of monitoring the company’s activities and evaluating its perfor-mance, as it contributes in improving the levels of understanding by shareholders, investors, and the public of the company structures and activities, in addition to policies applied by such company. it also evaluates the company performance in relation to ethical standards. moreover, accurate disclosure is considered as a factor contributing to attract capital, as it influ-ences investors and increases the average of confidence and safety for investors in relation to the financial soundness of the company, in particular, and financial sector, in general, through allowing investors to get acquainted with all aspects related to the company activities and financial statements.

one of the reasons for various financial and accounting imbalances in some companies is that the departments of such companies do not apply sound practices in the field of disclosure and transparency, in addition to the poor policies and pro-cedures applied by the companies during the process of accurate and timely disclosure of all issues related to the company financial position, activities, and administrative and operational information.

55





Disclosures TypeFinancial ImpactDisclosuresDateSerial Number

infonarepresentatives appointment in ream’s board of directors18/01/20161

announcementna ream’s board meet to discuss the financial statements forthe financial year ended 31/12/2015

01/03/20162

infona ream’s board of directors recommends not to distributedividends for the year ended 31/12/2015

02/03/20163

infona.replacement of board of directors member21/03/20164

announcementna ream profit amounted to 166 000 kd for the 3 months

.ended 31/03/201610/05/20165

announcementnaream’s board meeting to discuss Q1 2016 financials10/05/20166

announcementna ordinary and extra-ordinary general assembly meetings

and election of additional board members and board of.director’s re-composition

30/05/20167

announcementna disclosure is complementary from ream about the meeting.of the general assembly

31/05/20168

announcementna.ream’s board meeting to discuss Q2 2016 financials04/08/20169

announcementna.ream’s financial results for Q2 201607/08/201610

announcementna.ream’s board meeting to discuss Q3 2016 financials07/11/201611

announcementna.Q3 2016 financials disclosure08/11/201612

accurate and timely disclosure and transparency are the most important cornerstones and rules of corporate governance that allow share-holders to access the entire rights thereof, as such disclosure helps to:

1. establish basis of financial soundness of the company, in particular, and the financial sector in general.

2. Provide information and data for all persons who are concerned with the company, whether they are current or potential investors.

3. Provide continuous follow-up of the company events.

4. facilitate accountability of the board of directors and the executive management.

during the year, ream announced the following disclosures on the boursa website and to the Capital markets authority and on website of the company as to promote transparency and integrity:





57

eighth rule: respect the rights of shareholders goals of shareholders are mainly to raise the value of investments and contributions thereof; achieve good returns of such invest-ments; and verify that the current management of the company endeavors to maximize competitiveness and achieve high rates of growth. Conflicts between the goals of both shareholders and the company’s management may negatively effect of the shareholders’ rights. accordingly, application of governance rules will ensure consistency between goals of both shareholders and the company management and promote the efficiency of the system that protects the rights thereof.

Variations in the structure of shareholders, which is formed of a different set of individuals and institutions of varied goals and abilities, results in difficulty of assuming the responsibility of managing the company’s activities by shareholders, as such respon-sibility shall be assumed by the board of directors and the team of managers. accordingly, the rights of shareholders shall depend on a set of basic issues and tasks, such as electing the members of a board of directors, forming a board of directors, amending ream’s articles of association, approving unusual transactions, in addition to other basic tasks as specified by the Companies law, and its executive bylaws, and by the articles of association of such company. a sound governance system ensures having access by shareholder to the basic rights thereof to a significant extent of fairness and equality, ensuring equal dealing with all shareholders and protection against breach of the rights thereof, in addition to protecting capitals of shareholders against misuse by the company managers, the member of a board members, and major shareholders.

General rights of shareholders shall include:1. list the ownership value of their shared investment in the company records.

2. dispose shares, including registration and transfer of ownership.

3. receive the decided share in dividends.

4. receive a share in company assets in case of liquidation.

5. Have access to data and information of the company activity and operational and investment strategy regularly and eas-ily.

6. Participate in meetings of the shareholders’ general assembly and vote on the resolutions thereof.

7. elect members of a board of directors.

8. Control performance of the company, in general, and the board of directors, in particular.

9. Hold the company’s members of a board of directors or the executive management accountable and file tort cases if they fail to meet roles entrusted thereto.

REAM approved the following mechanism policies in respect to Shareholder’s’ Rights:1. general assembly participation methodology

2. Voting mechanism in general assembly

57





ninth rule: recognize the roles of stakeholder respecting and protecting the rights of stakeholders shall be in accordance with related laws applicable in the state of kuwait, such as the labor law and the Companies law and its executive bylaws in addition to the agreements concluded between parties and any additional undertakings made by the company towards stakeholders; as protecting the rights of stakeholders pursuant to laws entitle them to receive actual compensations if the rights thereof are breached. The framework of corporate governance practices shall include acknowledgment of the rights of stakeholders and encourage the coopera-tion between the company and stakeholders in various fields; as contributions of stakeholders is a very important resource in establishing company competitiveness and in supporting the levels of its profitability.

tenth rule: encourage and enhance PerformanceContinuous training of the board member and executive management has become a cornerstone of good governance rules, as this significantly contributes to enhance the company performance when the board of directors and the executive man-agement fully exercise their roles and responsibilities entrusted thereto. Continuous training provides the members of a board of directors and executive

management with proper understanding and knowledge of all issues related to the company activity and make them familiar with recent developments in administrative, financial, and economic fields through ability to do strategic plans in accor-dance with the company needs. This will consequently achieve the company’s goals.

ream developed mechanisms that allow the board members and executive management to attend the training Programs and Courses continuously (annually)

ream has developed key Performance indicators (kPis), in order to evaluate the board of directors as a whole, and the contribution of each member of the board of directors and each committee thereof, in addition to evaluating the perfor-mance of executive managers on regular basis (annually), as well as identifying the areas of weaknesses and strengths, and propose to remedy the same in a manner that is

consistent with the company’s interest.

below are some kPis, for example and without limitation:

1. Qualitative Indicators:a. what is the degree of deviation between the company’s projected budget and the actual achieved figures?

b. what is the extent of achieved progress towards the desired goals?

c. what is the extent of response to correct remarks identified by the regulatory bodies?

d. what is the extent of immediate response to realize problems and the ability to solve them?

e. what is the turnover rate of employees? to measure the degree of loyalty to the company.





59

f. what are received training courses? to what extent they are related to the work?

2. Quantitative Indicators:a. return on average assets.

b. return on shareholders’ average equity.

c. net profit margin

eleventh rule: focus on the importance of Corporate social responsibility (Csr)The concept of social responsibility is the commitment by the company to act ethically and contribute to achieving sustain-able development for the society in general and employees at the company in particular. This shall be through improving living, social, and economic conditions for workforce and families thereof, in addition to the entire society and contribution to reducing levels of unemployment

and optimal utilization of its available resources.

social responsibility of in business shall rely on:

1. Continuous commitment by the company to act ethically in accordance with laws and general norms.

2. sustainable contribution to achieve economic and social development through the following:

a. attract national labour.

b. improve the quality of living conditions of workforce and the families thereof, local society, and entire society.

C. when a company dedicates a percentage of profits for social services and projects, the general assembly shall so approve.

ream developed a policy that aims to achieve balance between the company goals and those of the society. such policy shall work on developing living, social, and economic conditions of the society, in which the policy carries out its activity in several ways, but not limited to:

1. assist in providing job opportunities and create proper conditions.

2. support and encourage national labour and enhancing efficiency and competitiveness thereof.

3. support small enterprises and open new prospects serving different categories of the society.

4. design company activities consistent with economic and cultural status of the society.

5. Protect environment against pollution and other environmental damages.

6. Provide training programs to develop capacity of targeted groups in the society.

7. Contribute in the limitation of damages of negative phenomena that prevailing in the society and take voluntary charitable initiatives

59





real estate asset management ComPanY (ream) - k.s.C. (PubliC) and its subsidiaries

state of kuwait

Consolidated finanCial statement for tHe Year ended deCember 31, 2016 witH indePendent auditors’ rePort

61

Contents

Independent auditors’ report Page

Consolidated statement of profit or loss 68Consolidated statement of profit or loss and other comprehensive income 69Consolidated statement of financial position 70Consolidated statement of changes in equity 71Consolidated statement of cash flows 73Notes to the consolidated financial statements 74- 111

63

To the Shareholders Real Estate Asset Management Company (REAM) – KPSCKuwait

Report on the Audit of the Consolidated Financial Statements

Opinion We have audited the consolidated financial statements of Real Estate Asset Management Company (REAM) – KPSC (“Parent Company”) and Subsidiaries (the Group), which comprise the consolidated statement of financial position as at 31 December 2016, and the consolidated statement of profit or loss, consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at 31 December 2016, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs).

Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined the matters described below as the key audit matters.

Real Estate Asset Management Company (REAM) – KPSC And Subsidiaries Consolidated Financial statement

31 December 2016Independent auditors’ report

(All Amounts Are In Kuwaiti Dinars)

Independent auditors’ report to the shareholders of Real Estate Asset Management Company (REAM) – KPSC (continued)

Impairment in value of investment properties and the disclosures made in respect of fair value of the properties The Group’s investment properties represent 66% (in value) of the total assets and comprise of land and rental buildings located in Kuwait & and other GCC countries. The Group’s policy is to carry investment properties at cost less accumulated depreciation, and any impairment losses. The carrying amounts are reviewed at each annual reporting date on an individual basis to assess whether they are recorded in excess of their recoverable amount. Provision for impairment losses, if any, are made where carrying value exceed the recoverable amount. In order to assist the Group’s management to assess whether the investment properties are recorded in excess of their recoverable amount, fair valuation of investment properties are performed annually by external valuators, as detailed in note 11. Further, the notes to the consolidated financial statements discloses the fair value of the investment properties as determined by external valuators, which is considered an important disclosure in the consolidated financial statements. These external valuations are based on number of assumptions, including estimated rental revenues, capitalization yields, historical transactions, market knowledge and occupancy rates. Due to the significance of investment properties, and the fact that valuations are highly dependent on assumptions & estimates we determined this to be a key audit matter. Refer to Note 11 for more information on Investment Properties.

Our audit procedures included, among others, assessing the appropriateness of management’s process for, identifying & assessing impairment losses for investment properties, including reviewing and assessing the work of the external valuers and their valuations and management’s consideration of competence and independence of the external valuers. We reviewed the valuation reports from the external valuers and agreed the fair value of the properties to the financials statement disclosures, and compared them individually to the carrying value of investment property. We assessed the appropriateness of the valuation methodologies used in assessing the fair value of the investment properties including discussions with the management on the estimates and assumptions used in assessing the fair value of investment properties. We furthermore assessed that the property related data (i.e rental income and occupancy) used as input for the external valuations is consistent with information obtained during our audit.

Other Information included in the Group’s 2016 annual reportManagement is responsible for the other information. Other information consists of the information included in the Group’s 2016 Annual Report, other than the consolidated financial statements and our auditors’ report thereon. We obtained the report of the Parent Company’s Board of Directors, prior to the date of our auditors’ report and we expect to obtain the remaining sections of the Group’s Annual Report after the date of our auditors’ report.

Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.


31 December 2016(All Amounts Are In Kuwaiti Dinars)

65

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed on the other information obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRSs, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements (continued)

In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Group’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

•Identifyandassesstherisksofmaterialmisstatementoftheconsolidatedfinancialstatements,whetherdueto



fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

•Obtainanunderstandingofinternalcontrolrelevanttotheauditinordertodesignauditproceduresthatareappropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the group’s internal control.

•Evaluatetheappropriatenessofaccountingpoliciesusedandthereasonablenessofaccountingestimatesandrelated disclosures made by management.

•Concludeontheappropriatenessofmanagement’suseofthegoingconcernbasisofaccountingand,basedonthe audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the group’s ability to continue as a going concern. if we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the group to cease to continue as a going concern.

•Evaluatetheoverallpresentation,structureandcontentoftheconsolidatedfinancialstatements,includingthedisclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

•Obtain sufficient appropriate audit evidence regarding the financial information of the entities or businessactivities within the group to express an opinion on the consolidated financial statements. we are responsible for the direction, supervision and performance of the group audit. we remain solely responsible for our audit opinion.



67

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements (continued)

We communicate with management regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

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 Parent Company’s board of directors relating to these consolidated financial statements, are in accordance therewith. We further report that we obtained all the information and explanations that we required for the purpose of our audit and that the consolidated financial statements incorporate all information that is required by the Companies Law No. 1 of 2016 and its Executive Regulations, as amended, and by the Parent Company’s Memorandum of Incorporation and Articles of Association, as amended, that an inventory was duly carried out and that, to the best of our knowledge and belief, no violations of the Companies Law, the Executive Regulations, or of the Parent Company’s Memorandum of Incorporation and Articles of Association, as amended, have occurred during the year ended 31 December 2016 that might have had a material effect on the business or financial position of the Parent Company.

anwar Y. al-Qatami, f.C.C.a(licence no. 50-a)

of grant Thornton – al-Qatami, al-aiban & Partners

Hend abdullah al surayea(licence no. 141-a)

Hend abdullah al surayea & Co.member of maZars

kuwait13 february 2017



note 2016 2015

Incomeoperating revenue 7 2,416,520 2,487,597direct operating costs 7 (1,059,363) (1,125,222)

net operating revenue 1,357,157 1,362,375gain on sale of investment properties - 92,290Profit on deposits with islamic financial institutions 22,834 18,207(loss)/gain on sale of available for sale investments (24,466) 165,000dividends income 53,555 84,040reversal of provisions no longer required 40,912 24,078other income 60,573 94,785

1,510,565 1,840,775

Expenses and other chargesgeneral, administrative & other expenses 8 543,395 687,979depreciation and amortisation 49,034 48,243Provision for doubtful debts 13 17,879 17,550finance costs 65,257 72,475

675,565 826,247

Profit for the year before contribution to kfas, provision for nlst, provision for Zakat and board of directors’ remuneration

835,000 1,014,528

Contribution to kuwait foundation for the advancement of sciences (kfas) (7,512) (7,163)Provision for national labour support tax (nlst) (18,301) (22,598)Provision for Zakat (7,320) (7,408)board of directors’ remuneration 25 (11,000) (24,000)Profit for the year 790,867 953,359

Attributable to :owners of the Parent Company 790,783 902,963non-controlling interests 84 50,396

790,867 953,359basic and diluted earnings per share attributable to the owners of the Parent Company (fils) 9 7.60 8.68

The notes set out on pages 11 to 46 form an integral part of these consolidated financial statements.


31 December 2016Consolidated statement of profit or loss(All Amounts Are In Kuwaiti Dinars)

69

2016 2015

Profit for the year 790,867 953,359

Other comprehensive income:

items that will be reclassified to consolidated statement of profit or loss in subsequent periods:

exchange differences arising on translation of foreign operations 740 12,697

available for sale investments:

-net change in fair value during the year 54,050 2,178

-transferred to consolidated statement of profit or loss on sale 62,078 (795)

total other comprehensive income 116,868 14,080

Total comprehensive income for the year 907,735 967,439

Attributable to:

owners of the Parent Company 907,651 917,043

non-controlling interests 84 50,396

907,735 967,439



31 December 2016Consolidated statement of profit or loss

and other comprehensive income (All Amounts Are In Kuwaiti Dinars)

note 2016 2015Assetsnon-current assetsgoodwill 421,545 421,545intangible assets 118,537 124,477Property and equipment 10 93,318 103,717investment properties 11 13,011,588 13,267,745available for sale investments 12 1,398,188 1,496,386total non-current assets 15,043,176 15,413,870Current assetsaccounts receivable and other debit balances 13 352,782 401,349due from real estate owners 14 23,526 30,790deposits with islamic financial institutions 15 150,000 150,000Cash in hand and at banks 16 4,054,844 3,840,550total current assets 4,581,152 4,422,689total assets 19,624,328 19,836,559Equity and liabilitiesEquityshare capital 17 10,450,000 10,450,000share premium 1,812,000 1,812,000share options reserve 34,000 34,000treasury shares 18 (64,654) (64,654)treasury shares reserve 1,271 1,271legal reserve 19 1,154,232 1,070,740Voluntary reserve 20 1,033,998 950,506Cumulative changes in fair value 54,984 (61,144)foreign currency translation reserve 34,490 33,750retained earnings 1,333,936 710,137equity attributable to owners of the Parent Company 15,844,257 14,936,606non-controlling interests 148,721 148,652Total equity 15,992,978 15,085,258Non-current liabilitiesProvision for end of service indemnity 21 326,057 433,142Current liabilitiesijara finance payables 22 1,347,514 1,497,231due to real estate owners 14 1,041,865 1,840,228accounts payable and other credit balances 23 807,188 871,974Provision for lawsuits 24 108,726 108,726total current liabilities 3,305,293 4,318,159Total liabilities 3,631,350 4,751,301total equity and liabilities 19,624,328 19,836,559

abdulqader Jassim alfuraih Chairman

ibrahim ismail al-kandri director & Ceo



31 December 2016Consolidated statement of financial position


71

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31 December 2016Consolidated statement of changes in equity


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,936

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31 December 2016Consolidated statement of changes in equity (continued)


73

note 2016 2015oPerating aCtiVitiesProfit for the year before contribution to kfas, provision for nlst, provision for Zakat and board of directors’ remuneration 835,000 1,014,528

adjustments:depreciation and amortisation 309,930 301,741loss/(gain) on sale of available for sale investments 24,466 (165,000)Profit on deposits with islamic financial institutions (22,834) (18,207)dividends income (53,555) (84,040)gain on sale of investment properties - (92,290)gain on sale of property and equipment (69) (142)gain on sale of intangible assets - (68,521)Provision for doubtful debts 17,879 17,550reversal of provisions no longer required (40,912) (24,078)finance costs 65,257 72,475Provision for end of service indemnity 61,164 81,489

1,196,326 1,035,505Changes in operating assets and liabilities:accounts receivable and other debit balances 28,609 574,636due from/to real estate owners (791,099) (12,400)accounts payable and other credit balances (48,354) (10,120)board of directors’ remuneration paid (24,000) (36,000)end of service indemnity paid (163,902) (137,475)Net cash from operating activities 197,580 1,414,146

inVesting aCtiVitiesProceeds from deposits with islamic financial institutions - 1,850,000Profit received on deposits with islamic financial institutions 22,834 25,550Proceeds from sale of available for sale investments 189,860 458,678additions on investment properties - (492,479)Proceeds from sale of investment properties - 261,312additions on property and equipment (34,666) (47,570)Proceeds from sale of property and equipment 120 247Proceeds from sale of intangible assets - 72,954dividends income received 53,555 84,040Net cash from investing activities 231,703 2,212,732

finanCing aCtiVitiesPaid for the ijara finance payables (148,051) (164,500)finance costs paid (66,923) (74,325)Cash dividends paid - (1,914,886)Change in non-controlling interests (15) -Net cash used in financing activities (214,989) (2,153,711)Net increase in cash in hand and at banks 214,294 1,473,167

Cash in hand and at banks at beginning of the year 3,840,550 2,367,383Cash in hand and at banks at end of the year 16 4,054,844 3,840,550



31 December 2016Consolidated statement of cash flows(All Amounts Are In Kuwaiti Dinars)

Incorporation and activities of the Parent Company1. real estate asset management Company (ream) - kPsC (“the Parent Company”) was incorporated and authenticated at the ministry of Justice – real estate registration department under ref. no. 15 Vol. 447 dated 12 september 1993 and registered at the Commercial register under ref. no. 53705 dated 7 november 1993. The Parent company is listed on the kuwait stock exchange. The Parent Company and its subsidiaries are together referred to as “the group”.

The Parent Company’s main activities are as follows:The management of commercial, residential or industrial real estate, and the organization and administration of free markets, 1. supermarkets, commercial and industrial exhibitions and its related legal aspects.

rental and renting of real estate or commercial, residential, and industrial complexes.2.

to carry out various civil, electrical, sanitary and mechanical maintenance and the execution of its various commitments including 3. cleaning, environment protection, and related services.

to carry out real estate, economical, technical and engineering studies and consultancy assignments relating to the objectives of the 4. parent company.

to act as an intermediary or as a broker for buying and selling real estate, and commercial, residential or industrial projects.5.

importing and exporting equipment, tools and materials relating to the above items.6.

managing the execution of real estate projects.7.

to undertake security tasks.8.

acquisition, buying and selling real estate companies’ shares and bonds for the parent company inside and outside kuwait.9.

acquisition, development and selling properties and lands for the parent company, inside and outside kuwait, in addition to the 10. management of properties owned by others, all in accordance with the respective laws and regulations and with due reference to the prohibition to trade in the private residence sector as stipulated in these laws.

utilization of excess funds available at the parent company by way of investing in financial and real estate portfolios managed by 11. specialized companies and parties.

representing companies of similar objectives to that of the parent company inside and outside kuwait.12.

direct investment for erecting the infrastructure of areas and projects whether residential, commercial, industrial or environmental, 13. and the management of real estate sites in accordance with the bot (build, operate and transfer) system.

development, investment, and management of engineering laboratories associated with real estate investments.14.

acquisition and management of hotels, health clubs and touristic sites including renting and leasing.15.

management, operating, investing, renting and leasing hotels, clubs, motels, hotel residences, hostels, picnic areas , gardens, 16. exhibitions, restaurants, cafeterias, residential complexes, touristic and health resorts, sporting and leisure sites and shops of all categories and levels including all basic services and ancillary services associated with them and other necessary services for them.

organizing real estate exhibitions associated with the parent company’s projects in accordance with the rules stipulated by the 17. ministry.


31 December 2016Notes to the consolidated financial statements (continued)


75

launching real estate auctions in accordance with the ministry’s regulations;18.

acquisition and management of commercial and residential complexes;19.

managing, establishing and acquiring real estate companies and companies with similar objectives to that of the parent company.20.

Incorporation and activities of the Parent Company (continued)1. The Parent Company has the right to have an interest or to take part in any manner with the authorities that practice similar operations, or that may help it to achieve its objectives inside kuwait or abroad. The Parent Company can also acquire these authorities or companies, or merge them with it.

The objectives for which the Parent Company was established shall be practiced according to islamic sharia, and the Parent Company shall not analyze the above objectives as it allows it directly or indirectly to deal in usury or work against islamic sharia rules.

The new Companies law no. 1 of 2016 was issued on 24 January 2016 and published in the official gazette on 1 february 2016 in which they have cancelled law no. 25 of 2012 and its amendments thereto, as stipulated in article (5) thereto. The new law will be effective retrospectively from 26 november 2012. The executive regulations of law no. 1 of 2016 were issued on 12 July 2016.

The Parent Company’s registered address is P.o. box 29910, al-safat 13153, state of kuwait.

The consolidated financial statements were authorized for issue by the board of directors on 13 february 2017. The shareholder’s general assembly has the power to amend these consolidated financial statements after issuance.

Basis of preparation 2. The consolidated financial statements of the group have been prepared under historical cost convention except for available for sale investments that have been measured at fair value.

The consolidated financial statements have been presented in kuwaiti dinars (“kd”), which is the functional and presentation currency of the Parent Company.

Statement of compliance3. These consolidated financial statements have been prepared in accordance with the international financial reporting standards (“ifrs”) promulgated by the international accounting standards board (“iasb”), and interpretations issued by the international financial reporting interpretations Committee (“ifriC”) of the iasb.

Changes in accounting policies4.

4.1 New and amended standards adopted by the Groupa number of new and revised standards are effective for annual periods beginning on or after 1 January 2016 which have been adopted by the group but did not have any significant impact on the financial position or the results for the year. information on these new standards is presented below:




Standard or Interpretation Effective for annual periods begin-ning

ifrs 11 accounting for acquisitions of interests in Joint operations -amendments 1 January 2016

ias 1 ‘disclosure initiative - amendments 1 January 2016

ias 16 and ias 38 Clarification of acceptable methods of depreciation and amortisa-tion - amendments 1 January 2016

ias 27 equity method in separate financial statements - amendments 1 January 2016

ifrs 10, ifrs 12 and ias 28 investment entities: applying the Consolidation exception - amendments 1 January 2016

annual improvements to ifrss 2012–2014 Cycle 1 January 2016

IFRS 11 Accounting for Acquisitions of Interests in Joint Operations - Amendmentsamendments to ifrs 11 Joint arrangements require an acquirer of an interest in a joint operation in which the activity constitutes a business (as defined in ifrs 3 business Combinations) to apply all of the business combinations accounting principles in ifrs 3 and other ifrss, except for those principles that conflict with the guidance in ifrs 11. it also requires disclosure of the information required by ifrs 3 and other ifrss for business combinations.

The amendments apply both to the initial acquisition of an interest in joint operation, and the acquisition of an additional interest in a joint operation (in the latter case, previously held interests are not remeasured). The amendments apply prospectively to acquisitions of interests in joint operations.

IAS 1 Disclosure Initiative – AmendmentsThe Amendments to IAS 1 make the following changes:

materiality: The amendments clarify that (1) information should not be obscured by aggregating or by providing immaterial •information, (2) materiality considerations apply to the all parts of the financial statements, and (3) even when a standard requires a specific disclosure, materiality considerations do apply.statement of financial position and statement of profit or loss and other comprehensive income: The amendments (1) introduce •a clarification that the list of line items to be presented in these statements can be disaggregated and aggregated as relevant and additional guidance on subtotals in these statements and (2) clarify that an entity’s share of oCi of equity-accounted associates and joint ventures should be presented in aggregate as single line items based on whether or not it will subsequently be reclassified to profit or loss.notes: The amendments add additional examples of possible ways of ordering the notes to clarify that understandability and •comparability should be considered when determining the order of the notes and to demonstrate that the notes need not be presented in the order so far listed in paragraph 114 of ias 1. The iasb also removed guidance and examples with regard to the identification of significant accounting policies that were perceived as being potentially unhelpful.




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IAS 16 and IAS 38 Clarification of Acceptable Methods of Depreciation and Amortisation - AmendmentsAmendments to IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets address the following matters:

a depreciation method that is based on revenue that is generated by an activity that includes the use of an asset is not appropriate for •property, plant and equipmentan amortisation method that is based on the revenue generated by an activity that includes the use of an intangible asset is generally •inappropriate except for limited circumstancesexpected future reductions in the selling price of an item that was produced using an asset could indicate the expectation of •technological or commercial obsolescence of the asset, which, in turn, might reflect a reduction of the future economic benefits embodied in the asset.

IAS 27 Equity Method in Separate Financial Statements - AmendmentsThe Amendments to IAS 27 Separate Financial Statements permit investments in subsidiaries, joint ventures and associates to be optionally accounted for using the equity method in separate financial statements.

IFRS 10, IFRS 12 and IAS 28 ‘Investment Entities: Applying the Consolidation Exception - AmendmentsThe Amendments are aimed at clarifying the following aspects:

exemption from preparing consolidated financial statements. The amendments confirm that the exemption from preparing •consolidated financial statements for an intermediate parent entity is available to a parent entity that is a subsidiary of an investment entity, even if the investment entity measures all of its subsidiaries at fair value.a subsidiary providing services that relate to the parent’s investment activities. a subsidiary that provides services related to the •parent’s investment activities should not be consolidated if the subsidiary itself is an investment entity. application of the equity method by a non-investment entity investor to an investment entity investee. when applying the equity •method to an associate or a joint venture, a non-investment entity investor in an investment entity may retain the fair value measurement applied by the associate or joint venture to its interests in subsidiaries.disclosures required. an investment entity measuring all of its subsidiaries at fair value provides the disclosures relating to investment •entities required by ifrs 12.

Annual Improvements to IFRSs 2012–2014 Cycleamendments to ifrs 5 - adds specific guidance in ifrs 5 for cases in which an entity reclassifies an asset from held for sale to held i. for distribution or vice versa and cases in which held-for-distribution accounting is discontinued

amendments to ifrs 7 - additional guidance to clarify whether a servicing contract is continuing involvement in a transferred ii. asset, and clarification on offsetting disclosures in condensed interim financial statements

amendments to ias 19 - Clarify that the high quality corporate bonds used in estimating the discount rate for post-employment iii. benefits should be denominated in the same currency as the benefits to be paid

amendments to ias 34 - Clarify the meaning of ‘elsewhere in the interim report’ and require a cross-referenceiv.




4.2 IASB Standards issued but not yet effectiveat the date of authorisation of these consolidated financial statements, certain new standards, amendments and interpretations to existing standards have been published by the iasb but are not yet effective, and have not been adopted early by the group.

management anticipates that all of the relevant pronouncements will be adopted in the group’s accounting policies for the first period beginning after the effective date of the pronouncements. information on new standards, amendments and interpretations that are expected to be relevant to the group’s consolidated financial statements is provided below. Certain other new standards and interpretations have been published but are not expected to be relavent to the group’s consolidated financial statements.

Standard or Interpretation Effective for annual periods beginning

ias 7 statement of Cash flows- amendments 1 January 2017

ifrs 10 and ias 28 sale or Contribution of assets between and an investor and its associate or Joint Venture - amendments no stated date

ifrs 2 share-based Payment- amendments 1 January 2018

ifrs 4 and ifrs 9 - amendments 1 January 2018ifrs 9 financial instruments: Classification and measurement 1 January 2018ifrs 15 revenue from Contracts with Customers 1 January 2018ifrs 16 leases 1 January 2019ias 40 investment Property - amendments 1 January 2018annual improvements to ifrss 2014-2016 Cycle 1 January 2017 and 2018ifriC 22 foreign Currency transactions and advance Consideration 1 January 2018

IAS 7 Statement of Cash Flows- AmendmentsThe amendments are designed to improve the quality of information provided to users of financial statements about changes in an entity’s debt and related cash flows (and noncash changes)

The Amendments:

require an entity to provide disclosures that enable users to evaluate changes in liabilities arising from financing activities. an entity •applies its judgement when determining the exact form and content of the disclosures needed to satisfy this requirement suggest a number of specific disclosures that may be necessary in order to satisfy the above requirement, including: •

changes in liabilities arising from financing activities caused by changes in financing cash flows, foreign exchange rates or 0fair values, or obtaining or losing control of subsidiaries or other businesses

a reconciliation of the opening and closing balances of liabilities arising from financing activities in the statement of 0financial position including those changes identified immediately above.

These amendments are not expected to have any material impact on the group’s consolidated financial statements.




79

IFRS 10 and IAS 28 Sale or Contribution of Assets between and an Investor and its Associate or Joint Venture - AmendmentsThe amendments to ifrs 10 Consolidated financial statements and ias 28 investments in associates and Joint Ventures (2011) clarify the treatment of the sale or contribution of assets from an investor to its associate or joint venture, as follows:

require full recognition in the investor’s financial statements of gains and losses arising on the sale or contribution of assets that •constitute a business (as defined in ifrs 3 business Combinations)require the partial recognition of gains and losses where the assets do not constitute a business, i.e. a gain or loss is recognised only •to the extent of the unrelated investors’ interests in that associate or joint venture.

These requirements apply regardless of the legal form of the transaction, e.g. whether the sale or contribution of assets occurs by an investor transferring shares in a subsidiary that holds the assets (resulting in loss of control of the subsidiary), or by the direct sale of the assets themselves.

iasb has postponed the effective date indefinitely until other projects are completed. However, early implementation is allowed. These amendments are not expected to have any material impact on the group’s consolidated financial statements.

IFRS 2 Share-Based Payment- Classification and Measurement The amendments relate to clarification on the following:

ifrs does not specifically address the impact of vesting and non-vesting conditions on the measurement of the fair value of the •liability incurred in a cash-settled share-based payment transaction. The amendments address this lack of guidance by clarifying that accounting for these conditions should be accounted for consistently with equity-settled share-based payments in ifrs 2The amendment adds guidance to ifrs 2 to the effect that a scheme with compulsory net-settlement feature would be classified as •equity-settled in its entirety (assuming it would be so classified without the net settlement feature); and The amendment addresses the accounting for a modification to the terms and conditions of a share-based payment that changes the •classification of the transaction from cash-settled to equity-settled.

These amendments are not expected to have any material impact on the group’s consolidated financial statements.IFRS 4 and IFRS 9 - Amendments The amendments provide entities that issue insurance contracts with temporary accounting solutions for the practical challenges of implementing ifrs 9 before the forthcoming new insurance Contracts standard. These amendments are not expected to have any material impact on the group’s consolidated financial statements.

IFRS 9 Financial Instruments The iasb published ifrs 9 ‘financial instruments’ (2014), representing the completion of its project to replace ias 39 ‘financial instruments: recognition and measurement’. The new standard introduces extensive changes to ias 39’s guidance on the classification and measurement of financial assets and introduces a new ‘expected credit loss’ model for the impairment of financial assets. ifrs 9 also provides new guidance on the application of hedge accounting.

management has started to assess the impact of ifrs 9 but is not yet in a position to provide quantified information. at this stage the main areas of expected impact are as follows:




the classification and measurement of the financial assets will need to be reviewed based on the new criteria that considers the assets’ •contractual cash flows and the business model in which they are managed. an expected credit loss-based impairment will need to be recognised on the trade receivables and investments in debt-type assets •currently classified as available for sale and held-to-maturity, unless classified as at fair value through profit or loss in accordance with the new criteria. it will no longer be possible to measure equity investments at cost less impairment and all such investments will instead be measured •at fair value. Changes in fair value will be presented in profit or loss unless an irrevocable designation is made to present them in other comprehensive income.if the fair value option continues to be elected for certain financial liabilities, fair value movements will be presented in other •comprehensive income to the extent those changes relate to own credit risk.

although earlier application of this standard is permitted, the technical Committee of the ministry of Commerce and industry of kuwait decided on 30 december 2009, to postpone this early application till further notice.

IFRS 15 Revenue from Contracts with Customers ifrs 15 replaced ias 18 “revenues”, ias 11 “Construction Contract” and several revenue – related interpretations and provides a new control-based revenue recognition model using five-step approach to all contracts with customers.

The five steps in the model are as follows:

identify the contract with the customer•identify the performance obligations in the contract•determine the transaction price•allocate the transaction price to the performance obligations in the contracts•recognise revenue when (or as) the entity satisfies a performance obligation.•

The standard includes important guidance, such as

Contracts involving the delivery of two or more goods or services – when to account separately for the individual performance •obligations in a multiple element arrangement, how to allocate the transaction price, and when to combine contracts timing – whether revenue is required to be recognized over time or at a single point in time •Variable pricing and credit risk – addressing how to treat arrangements with variable or contingent (e.g. performance-based) pricing, •and introducing an overall constraint on revenue time value – when to adjust a contract price for a financing component •specific issues, including – •

non-cash consideration and asset exchanges 0contract costs 0rights of return and other customer options 0supplier repurchase options 0warranties 0




81

principal versus agent 0licencing 0breakage 0non-refundable upfront fees, and 0consignment and bill-and-hold arrangements. 0

The group’s management has yet to assess the impact of this standard on these consolidated financial statements.

IFRS 16 Leases ifrs 16 will replace ias 17 and three related interpretations. leases will be recorded on the statement of financial position in the form of a right-of-use asset and a lease liability.

management is yet to fully assess the impact of the standard and therefore is unable to provide quantified information. However, in order to determine the impact, management is in the process of:

performing a full review of all agreements to assess whether any additional contracts will now become a lease under ifrs 16’s new •definition deciding which transitional provision to adopt; either full retrospective application or partial retrospective application (which means •comparatives do not need to be restated). The partial application method also provides optional relief from reassessing whether contracts in place are, or contain, a lease, as well as other reliefs. deciding which of these practical expedients to adopt is important as they are one-off choices assessing their current disclosures for finance and operating leases as these are likely to form the basis of the amounts to be capitalised •and become right-of-use assets determining which optional accounting simplifications apply to their lease portfolio and if they are going to use these exemptions •assessing the additional disclosures that will be required.•

IAS 40 Investment Property - AmendmentsThe amendments to ias 40 clarifies that transfers to, or from, investment property are required when, and only when, there is a change in use of property supported by evidence. The amendments also re-characterise the list of circumstances appearing in paragraph 57(a)–(d) as a non-exhaustive list of examples of evidence that a change in use has occurred. The board has also clarified that a change in management’s intent, by itself, does not provide sufficient evidence that a change in use has occurred. evidence of a change in use must be observable.


Annual Improvements to IFRSs 2014-2016 Cycle amendments to ifrs 12 - Clarifies the scope of ifrs 12 by specifying that its disclosure requirements (except for those in ifrs i. 12. b17) apply to an entity’s interests irrespective of whether they are classified (or included in a disposal group that is classified) as held for sale or as discontinued operations in accordance with ifrs 5. amendment is effective for annual periods beginning on or after 1 January 2017.




amendments to ias 28 - Clarifies that a qualifying entity is able to choose between applying the equity method or measuring an ii. investment in an associate or joint venture at fair value through profit or loss, separately for each associate or joint venture at initial recognition of the associate or joint venture. amendment is effective for annual periods beginning on or after 1 January 2018.


IFRIC 22 Foreign Currency Transactions and Advance ConsiderationThe interpretations looks at what exchange rate to use for translation when payments are made or received in advance of the related asset, expense or income. a diversity was observed in practice in circumstances in which an entity recognises a non-monetary liability arising from advance consideration. The diversity resulted from the fact that some entities were recognising revenue using the spot exchange rate at the date of the receipt of the advance consideration while others were using the spot exchange rate at the date that revenue was recognized. ifriC 22 addresses this issue by clarifying that the date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income (or part of it) is the date on which an entity initially recognises the non-monetary asset or non-monetary liability arising from the payment or receipt of advance consideration.


Significant accounting policies 5. The significant accounting policies adopted in the preparation of the consolidated financial statements are set out below:

5.1 Basis of consolidationThe group financial statements consolidate those of the Parent Company and all of its subsidiaries. subsidiaries are all entities (including structured entities) over which the group has control. The group controls an entity when the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. subsidiaries are fully consolidated from the date on which control is transferred to the group and they are deconsolidated from the date that control ceases. all subsidiaries have a reporting date of 31 december.

The details of the consolidated subsidiaries are as follows:

Name of subsidiary Country ofincorporation

Percentage of ownership

Principalactivities

amlak real estate services and Consulting Co. – ksC (Closed) kuwait 75% brokerageamlak integrated Projects – wll sultanate of oman 100% real estate

all transactions and balances between group companies are eliminated on consolidation, including unrealised gains and losses on transactions between group companies. where unrealised losses on intra-group asset sales are reversed on consolidation, the underlying asset is also tested for impairment from a group perspective. amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the group.




83

Profit or loss and other comprehensive income of subsidiaries acquired or disposed of during the year are recognised from the date the group gains control, or until the date the group ceases to control the subsidiary, as applicable.

non-controlling interests, presented as part of equity, represent the portion of a subsidiary’s profit or loss and net assets that is not held by the group. The group attributes total comprehensive income or loss of subsidiaries between the owners of the Parent and the non-controlling interests based on their respective ownership interests. losses within a subsidiary are attributed to the non-controlling interests even if that results in a deficit balance.

a change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. if the group loses control over a subsidiary, it:

derecognizes the assets (including goodwill) and liabilities of the subsidiary•derecognizes the carrying amount of any non-controlling interests•derecognizes the cumulative translation differences, recorded in equity•recognizes the fair value of the consideration received•recognizes the fair value of any investment retained•recognizes any surplus or deficit in profit or loss•reclassifies the Parent’s share of components previously recognized in other comprehensive income to profit or loss or retained •earnings, as appropriate, as would be required if the group has directly disposed of the related assets or liabilities.

5.2 Business combinations The group applies the acquisition method in accounting for business combinations. The consideration transferred by the group to obtain control of a subsidiary is calculated as the sum of the acquisition-date fair values of assets transferred, liabilities incurred and the equity interests issued by the group, which includes the fair value of any asset or liability arising from a contingent consideration arrangement. acquisition costs are expensed as incurred. for each business combination, the acquirer measures the non-controlling interests in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets.

if the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date through consolidated statement of profit or loss.

The group recognises identifiable assets acquired and liabilities assumed in a business combination regardless of whether they have been previously recognised in the acquiree’s financial statements prior to the acquisition. assets acquired and liabilities assumed are generally measured at their acquisition-date fair values.

when the group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree.

any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. subsequent changes to the fair value of the contingent consideration which is deemed to be asset or liability will be recognised in accordance with ias 39 either in consolidated statement of profit or loss or as charge to consolidated statement of profit or loss and other comprehensive income. if the contingent consideration is classified as equity, it will not be remeasured until it is finally settled within consolidated statement of profit or loss and other comprehensive income.




goodwill is stated after separate recognition of identifiable intangible assets. it is calculated as the excess of the sum of a) fair value of consideration transferred, b) the recognised amount of any non controlling interest in the acquiree and c) acquisition-date fair value of any existing equity interest in the acquiree, over the acquisition-date fair values of identifiable net assets. if the fair values of identifiable net assets exceed the sum calculated above, the excess amount (i.e. gain on a bargain purchase) is recognised in consolidated statement of profit or loss immediately.

5.3 Goodwillgoodwill represents the future economic benefits arising from a business combination that are not individually identified and separately recognised. see note 5.2 for information on how goodwill is initially determined. goodwill is carried at cost less accumulated impairment losses. refer to note 5.10 for a description of impairment testing procedures.

5.4 Revenuerevenue arises from rendering of services, investing activities and real estate activities. it is measured by reference to the fair value of consideration received or receivable.

revenue is recognised to the extent that it is probable that the economic benefits will flow to the group and the revenue can be reliably measured, regardless of when payment is made. The following specific recognition criteria should also be met before revenue is recognised;

5.4.1 Revenues from services rendered revenue from services rendered represents, revenue from managing properties, brokerage services, security services and maintenance services provided for others. revenue from services rendered is recognised when earned. Consideration received for these services is initially deferred, included in other liabilities and is recognised as revenue in the period when they are earned.

5.4.2 Rental income The group earns rental income from operating leases of its investment properties. rental income is recognised on a straight-line basis over the term of the lease.

5.4.3 Revenue from sale of investment propertiesrevenue from sale of investment properties is recognised on completion of sale contract and after transferring the risk and rewards associated with the investments property to the purchaser and the amount of revenue can be reliably measured.

5.4.4 Interest and similar incomeinterest income and expenses are reported on an accrual basis using the effective interest method.

5.4.5 Dividend incomedividend income, other than those from investments in associates, are recognised at the time the right to receive payment is established.

5.4.6 Income from deposits with Islamic financial institutionsincome from deposits with islamic financial institutions is recognized on a time-proportion basis using the effective rate of return method.




85

5.5 Operating expensesoperating expenses are recognised in profit or loss upon utilisation of the service or at the date of their origin.

5.6 Borrowing costsborrowing costs directly attributable to the acquisition, construction or production of a qualifying asset are capitalised during the period of time that is necessary to complete and prepare the asset for its intended use or sale. other borrowing costs are expensed in the period in which they are incurred and reported in finance costs.

5.7 Property and equipmentProperty and equipment are initially recognised at acquisition cost or manufacturing cost, including any costs directly attributable to bringing the assets to the location and condition necessary for it to be capable of operating in the manner intended by the group’s management.

Property and equipment are subsequently measured using the cost model, cost less subsequent depreciation and impairment losses. depreciation is recognised on a straight-line basis to write down the cost less estimated residual value of property and equipment. The useful life and depreciation method are reviewed periodically to ensure that the method and period of depreciation are consistent with the expected pattern of economic benefits arising from items of property and equipment. The following annual rates are applied:

furniture 5 years

equipment electrical tools 5 years

Computers 5 years

Vehicles 5 years

material residual value estimates and estimates of useful life are updated as required, but at least annually.

when assets are sold or retired, their cost and accumulated depreciation are eliminated from the accounts and any gain or loss resulting from their disposal is recognised in the consolidated statement of profit or loss.

5.8 Intangible assetsintangible acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is the fair value as at the date of acquisition.

following initial recognition, intangible assets with finite useful lives are carried at cost less any accumulated amortization and any accumulated impairment losses. The useful life and amortization method are reviewed periodically to ensure that the method and period of amortization are consistent with the expected pattern of economic benefits from items of finite intangible assets. intangible assets with indefinite useful lives are carried at cost less accumulated impairment losses.

5.8.1 Franchisefranchise represents rights to use trade name, which is recognized initially at cost, and is subsequently measured at cost less accumulated amortization and impairment losses. amortization is calculated based on straight line method over the asset’s useful life which is estimated at 25 years.




5.8.2 Computer software acquired computer software licenses are capitalized on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortized over their estimated useful lives which is estemated at 3 years.

5.9 Investment propertiesinvestment property, which are property held to earn rentals and/or for capital appreciation, is measured initially at their cost, including transaction costs. freehold land is carried at cost, which is deemed to have an indefinite life; accordingly, it is not subject to depreciation.

subsequent to initial recognition, investment property other than land is measured at cost less accumulated depreciation, and any impairment losses. depreciation is computed on a straight-line basis over the useful life of the buildings which is estimated at 30 years. The carrying amounts are reviewed at each statement of financial position date on an individual basis to assess whether they are recorded in excess of their recoverable amount. Provision for impairment losses, if any, are made where carrying value exceed the recoverable amount.

investment properties are derecognized when either they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. gains or losses arising on the retirement or disposal of an investment property are recognized in the consolidated statement of profit or loss.

transfers are made to investment property when, and only when, there is a change in use, evidenced by the end of owner occupation, commencement of an operating lease to another party or completion of construction or development. transfers are made from investment property when, and only when, there is a change in use, evidenced by commencement of owner occupation or commencement of development with a view to sale.

5.10 Impairment testing of goodwill and non financial assetsfor impairment assessment purposes, assets are grouped at the lowest levels for which there are largely independent cash inflows (cash generating units). as a result, some assets are tested individually for impairment and some are tested at cash-generating unit level. goodwill is allocated to those cash-generating units that are expected to benefit from synergies of the related business combination and represent the lowest level within the group at which management monitors goodwill.

Cash-generating units to which goodwill has been allocated (determined by the group’s management as equivalent to its operating segments) are tested for impairment at least annually. all other individual assets or cash-generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

an impairment loss is recognised for the amount by which the asset’s or cash-generating unit’s carrying amount exceeds its recoverable amount, which is the higher of fair value less costs to sell and value-in-use. to determine the value-in-use, management estimates expected future cash flows from the asset or each cash-generating unit and determines a suitable interest rate in order to calculate the present value of those cash flows. The data used for impairment testing procedures are directly linked to the group’s latest approved budget, adjusted as necessary to exclude the effects of future reorganisations and asset enhancements.

discount factors are determined individually for each asset or cash-generating unit and reflect management’s assessment of respective




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risk profiles, such as market and asset-specific risks factors.

impairment losses for cash-generating units reduce first the carrying amount of any goodwill allocated to that cash-generating unit. any remaining impairment loss is charged pro rata to the other assets in the cash-generating unit. with the exception of goodwill, all assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist. an impairment charge is reversed if the cash-generating unit’s recoverable amount exceeds its carrying amount.

5.11 Financial instruments

5.11.1 Recognition, initial measurement and derecognitionfinancial assets and financial liabilities are recognised when the group becomes a party to the contractual provisions of the financial instrument and are measured initially at fair value adjusted by transactions costs, except for those carried at fair value through profit or loss which are measured initially at fair value. subsequent measurement of financial assets and financial liabilities are described below.

all ‘regular way’ purchases and sales of financial assets are recognised on the trade date i.e. the date that the entity commits to purchase or sell the asset. regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame generally established by regulation or convention in the market place.

a financial asset (or, where applicable a part of financial asset or part of group of similar financial assets) is primarily derecognised when:

rights to receive cash flows from the assets have expired; •The group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows •in full without material delay to a third party under a ‘pass through’ arrangement; and either

The group has transferred substantially all the risks and rewards of the asset or a.

The group has neither transferred nor retained substantially all risks and rewards of the asset, but has transferred control of b. the asset.

when the group has transferred its rights to receive cash flows from an asset or has entered into a pass- through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. when it has neither transferred nor retained substantially all the risks and rewards of the asset, nor transferred control of the asset, the group continues to recognise the transferred asset to the extent of the group’s continuing involvement. in that case, the group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the group has retained.

a financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. when an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in consolidated statement of profit or loss.

5.11.2 Classification and subsequent measurement of financial assetsfor the purpose of subsequent measurement, financial assets other than those designated and effective as hedging instruments are classified into the following categories upon initial recognition:




receivables•available-for-sale (afs) financial assets.•

all financial assets are subject to review for impairment at least at each reporting date to identify whether there is any objective evidence that a financial asset or a group of financial assets is impaired. different criteria to determine impairment are applied for each category of financial assets, which are described below.

all income and expenses relating to financial assets that are recognised in profit or loss are presented within finance costs, finance income or other financial items, except for impairment of trade receivables which is presented within other expenses.

Receivables•receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. after initial recognition, these are measured at amortised cost using the effective interest rate method, less provision for impairment. discounting is omitted where the effect of discounting is immaterial. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period. These are classified as non-current assets.

individually significant receivables are considered for impairment when they are past due or when other objective evidence is received that a specific counterparty will default. receivables that are not considered to be individually impaired are reviewed for impairment in groups, which are determined by reference to the industry and region of a counterparty and other shared credit risk characteristics. The impairment loss estimate is then based on recent historical counterparty default rates for each identified group.

The group categorises receivables into following categories:

Receivables and other financial assets•trade receivable are stated at original invoice amount less allowance for any uncollectible amounts. an estimate for doubtful debts is made when collection of the full amount is no longer probable. bad debts are written off as incurred.

receivables which are not categorised under any of the above are classified as “other debit balances/other financial assets”.

Due from related parties• due from related parties represent financial assets originated by the Parent Company by providing service directly to those related parties that have fixed or determinable payments and are not quoted in an active market.

Cash and bank balances and Short term deposits •Cash on hand and demand deposits are classified under cash and bank balances and short term deposits represent deposits placed with islamic financial institutions with a maturity of less than one year.

AFS financial assets•afs financial assets are non-derivative financial assets that are either designated to this category or do not qualify for inclusion in any of the other categories of financial assets.

financial assets whose fair value cannot be reliably measured are carried at cost less impairment losses, if any. impairment charges are recognised in profit or loss. all other afs financial assets are measured at fair value.




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gains and losses are recognised in other comprehensive income and reported within the fair value reserve within equity, except for impairment losses, and foreign exchange differences on monetary assets, which are recognised in profit or loss. when the asset is disposed of or is determined to be impaired, the cumulative gain or loss recognised in other comprehensive income is reclassified from the equity reserve to profit or loss and presented as a reclassification adjustment within other comprehensive income.

The group assesses at each reporting date whether there is objective evidence that a financial asset available for sale or a group of financial assets available for sale is impaired. in the case of equity investments classified as financial assets available for sale, objective evidence would include a significant or prolonged decline in the fair value of the equity investment below its cost. ‘significant’ is evaluated against the original cost of the investment and ‘prolonged’ against the period in which the fair value has been below its original cost. where there is evidence of impairment, the cumulative loss is removed from other comprehensive income and recognised in the consolidated statement of profit or loss.

reversals of impairment losses are recognised in other comprehensive income, except for financial assets that are debt securities which are recognised in profit or loss only if the reversal can be objectively related to an event occurring after the impairment loss was recognised.

afs financial assets are included in non-current assets unless the investment matures or management intends to dispose of it within 12 months of the end of the reporting period.

5.11.3 Classification and subsequent measurement of financial liabilitiesThe group’s financial liabilities include ijara finance payables, accounts payable and other credit balances, and due to related parties.

The subsequent measurement of financial liabilities depends on their classification. The group classifies all its financial liabilities as “financial liabilities other than at fair value through profit or loss (fVtPl)”.

Financial liabilities other than at fair value through profit or loss•These are stated at amortised cost using effective interest rate method. The group categorises financial liabilities other than at fVtPl into the following categories:

Ijara finance payables•ijara finance payables represent amounts payable on a deferred settlement basis for assets purchased ijara arrangements. ijara finance payables are stated at the gross amount of the payable, net of deferred finance cost. deferred finance cost is expensed on a time apportionment basis taking into account the borrowing rate attributable and the balance outstanding.

Due from/(to) real estate owners•due from/(to) real estate owners represent financial assets or liabilities originated by the Parent Company as a result of providing real estate management services directly to real estate owners.

Accounts payables and other financial liabilities•liabilities are recognised for amounts to be paid in the future for goods or services received, whether billed by the supplier or not, and classified as trade payables. financial liabilities other than at fVtPl which are not categorised under any of the above are classified as “other financial liabilities”

all interest-related charges and, if applicable, changes in an instrument’s fair value that are reported in profit or loss, are included within finance costs or finance income.




Due to related parties•due to related parties represent financial liabilities originated by these related parties by providing service to the parent company that have fixed or determinable payments and are not quoted in an active market.

5.11.4 Amortised cost of financial instrumentsThis is computed using the effective interest method less any allowance for impairment. The calculation takes into account any premium or discount on acquisition and includes transaction costs and fees that are an integral part of the effective interest rate.

5.11.5 Offsetting of financial instrumentsfinancial assets and financial liabilities are offset and the net amount reported in the consolidated statement of financial position if, and only if, there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously.

5.11.6 Fair value of financial instrumentsThe fair value of financial instruments that are traded in active markets at each reporting date is determined by reference to quoted market prices or dealer price quotations (bid price for long positions and ask price for short positions), without any deduction for transaction costs.

for financial instruments not traded in an active market, the fair value is determined using appropriate valuation techniques. such techniques may include using recent arm’s length market transactions; reference to the current fair value of another instrument that is substantially the same; a discounted cash flow analysis or other valuation models.

an analysis of fair values of financial instruments and further details as to how they are measured are provided in note 29.2.

5.12 Equity, reserves and dividend paymentsshare capital represents the nominal value of shares that have been issued and paid up.

share premium includes any premiums received on issue of share capital. any transaction costs associated with the issuing of shares are deducted from share premium.

share option reserve represents of remuneration is granted to the group’s employees (including executive directors) in the form of share-based payment transactions, wereby employees render service in exchange for shares or rights over shares (“equity settled transactions”).

statutory and voluntary reserves comprise appropriations of current and prior period profits in accordance with the requirements of the companies’ law and the parent company’s articles of association.

other components of equity include the following:

foreign currency translation reserve – comprises foreign currency translation differences arising from the translation of financial •statements of the group’s foreign entities into kdfair value reserve – comprises gains and losses relating to available for sale financial assets •

retained earnings includes all current and prior period retained profits. all transactions with owners of the parent are recorded separately within equity.




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dividend distributions payable to equity shareholders are included in other liabilities when the dividends have been approved in a general meeting.

5.13 Provisions, contingent assets and contingent liabilitiesProvisions are recognised when the group has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of economic resources will be required from the group and amounts can be estimated reliably. timing or amount of the outflow may still be uncertain.

Provisions are measured at the estimated expenditure required to settle the present obligation, based on the most reliable evidence available at the reporting date, including the risks and uncertainties associated with the present obligation. where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. Provisions are discounted to their present values, where the time value of money is material.

Contingent assets are not recognised in the consolidated financial statements, but are disclosed when an inflow of economic benefits is probable.

Contingent liabilities are not recognised in the consolidated statement of financial position, but are disclosed unless the possibility of an outflow of resources embodying economic benefits is remote.

5.14 Treasury sharestreasury shares consist of the Parent Company’s own issued shares that have been reacquired by the group and not yet reissued or cancelled. The treasury shares are accounted for using the cost method. under this method, the weighted average cost of the shares reacquired is charged to a contra account in equity.

when the treasury shares are reissued, gains are credited to a separate account in equity, (the “reserve of profit on sale of treasury shares”), which is not distributable. any realised losses are charged to the same account to the extent of the credit balance on that account. any excess losses are charged to retained earnings then to the voluntary reserve and statutory reserve. no cash dividends are paid on these shares. The issue of stock dividend shares increases the number of treasury shares proportionately and reduces the average cost per share without affecting the total cost of treasury shares.

5.15 Segment reportingThe group has three operating segments: real estate management, property brokerage and investment segments. in identifying these operating segments, management generally follows the group’s service lines representing its main products and services. each of these operating segments is managed separately as each requires different approaches and other resources. all inter-segment transfers are carried out at arm’s length prices.

for management purposes, the group uses the same measurement policies as those used in its consolidated financial statements. in addition, assets or liabilities which are not directly attributable to the business activities of any operating segment are not allocated to a segment.




5.16 Foreign currency translation

5.16.1 Functional and presentation currencyThe consolidated financial statements are presented in currency kuwait dinar (kd), which is also the functional currency of the Parent Company. each entity in the group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency.

5.16.2 Foreign currency transactions and balances foreign currency transactions are translated into the functional currency of the respective group entity, using the exchange rates prevailing at the dates of the transactions (spot exchange rate). foreign exchange gains and losses resulting from the settlement of such transactions and from the remeasurement of monetary items denominated in foreign currency at year-end exchange rates are recognised in profit or loss. non-monetary items are not retranslated at year-end and are measured at historical cost (translated using the exchange rates at the transaction date), except for non-monetary items measured at fair value which are translated using the exchange rates at the date when fair value was determined.

5.16.3 Foreign operations in the group’s financial statements, all assets, liabilities and transactions of group entities with a functional currency other than the kd are translated into kd upon consolidation. The functional currency of the entities in the group has remained unchanged during the reporting period.

on consolidation, assets and liabilities have been translated into kd at the closing rate at the reporting date. goodwill and fair value adjustments arising on the acquisition of a foreign entity have been treated as assets and liabilities of the foreign entity and translated into kd at the closing rate. income and expenses have been translated into kd at the average rate over the reporting period. exchange differences are charged/credited to other comprehensive income and recognised in the foreign currency translation reserve in equity. on disposal of a foreign operation, the related cumulative translation differences recognised in equity are reclassified to profit or loss and are recognised as part of the gain or loss on disposal.

5.17 End of service indemnityThe group provides end of service benefits to its employees. The entitlement to these benefits is based upon the employees’ final salary and length of service, subject to the completion of a minimum service period in accordance with relevant labour law and the employees’ contracts. The expected costs of these benefits are accrued over the period of employment. This liability, which is unfunded, represents the amount payable to each employee as a result of termination on the reporting date

with respect to its kuwaiti national employees, the group makes contributions to the Public institution for social security calculated as a percentage of the employees’ salaries. The group’s obligations are limited to these contributions, which are expensed when due.




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5.18 Taxation

5.18.1 National Labour Support Tax (NLST)nlst is calculated in accordance with law no. 19 of 2000 and the minister of finance resolutions no. 24 of 2006 at 2.5% of taxable profit of the group after deducting directors’ fees for the year. as per law, income from associates and subsidiaries, cash dividends from listed companies which are subjected to nlst have to be deducted from the profit for the year.

5.18.2 Kuwait Foundation for the Advancement of Sciences (KFAS)The contribution to kfas is calculated at 1% of taxable profit of the group in accordance with the modified calculation based on the foundation’s board of directors’ resolution, which states that income from associates and subsidiaries transfer to statutory reserve should be excluded from profit for the year when determining the contribution.

5.18.3 ZakatContribution to Zakat is calculated at 1% of the profit of the group in accordance with the ministry of finance resolution no. 58/2007 effective from 10 december 2007.

6. Significant management judgements and estimation uncertainty The preparation of the group’s consolidated financial statements requires management to make judgments, estimates and assumptions that affect the reported amount of revenues, expenses, assets and liabilities and the disclosure of contingent liabilities, at the end of the reporting period. However uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected in future periods.

6.1 Significant management judgments in the process of applying the group’s accounting policies, management has made the following significant judgments, which have the most significant effect on the amounts recognised in the consolidated financial statements:

6.1.1 Classification of financial instrumentsJudgements are made in the classification of financial instruments based on management’s intention at acquisition. such judgement determines whether it is subsequently measured at cost, amortised cost or at fair value and if the changes in fair value of instruments are reported in the consolidated statement of profit or loss or other comprehensive income.

The group classifies financial assets as held for trading if they are acquired primarily for the purpose of short term profit making.

designation of financial assets as at fair value through profit or loss depends on how management monitors the performance of these financial assets.

when they are not classified as held for trading but have readily available fair values and the changes in fair values are reported as part of profit or loss in the management accounts, they are designated as at fair value through profit or loss.

Classification of assets as loans and receivables depends on the nature of the asset. if the group is unable to trade these financial assets due to inactive market and the intention is to receive fixed or determinable payments the financial asset is classified as loans and receivables.

all other financial assets are classified as available for sale.




6.1.2 Classification of real estatemanagement decides on acquisition of a real estate whether it should be classified as trading, property under development or investment property. such judgement at acquisition determines whether these properties are subsequently measured at cost or net realisable value whichever is lower or fair value and if the changes in fair value of these properties are reported in the statement of profit or loss.The group classifies property as trading property if it is acquired principally for sale in the ordinary course of business. and if such properties are under development with an intention of being sold in future they are classified under trading properties under development.The group classifies property as investment property if it is acquired to generate rental income or for capital appreciation, or for undetermined future use. and if such properties are under development they are classified under investment properties under development

6.1.3 Control assessmentwhen determining control, management considers whether the group has the practical ability to direct the relevant activities of an investee on its own to generate returns for itself. The assessment of relevant activities and ability to use its power to affect variable return requires considerable judgement.

6.2. Estimation uncertainty information about estimates and assumptions that have the most significant effect on recognition and measurement of assets, liabilities, income and expenses is provided below. actual results may be substantially different.

6.2.1. Impairment of available for sale investmentsThe group treats available for sale equity investments as impaired when there has been a significant or prolonged decline in the fair value below its cost or where other objective evidence of impairment exists. The determination of what is “significant” or “prolonged” requires considerable judgement. in addition, the group evaluates other factors, including the future cash flows and the discount factors for unquoted equities.

6.2.2 Impairment of goodwill The group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the value in use of the cash-generating units to which the goodwill is allocated. estimating the value in use requires the group to make an estimate of the expected future cash flows from the cash-generating unit and also to choose a suitable discount rate in order to calculate the present value of those cash flows.

6.2.3 Impairment of non financial assets (investment properties, property & equipment and intangible assets) The carrying amounts of the group’s non-financial assets are reviewed at each reporting date to determine whether there is any indication or objective evidence of impairment or when annual impairment testing for an asset is required. if any such indication or evidence exists, the asset’s recoverable amount is estimated and an impairment loss is recognised in the consolidated statement of profit or loss whenever the carrying amount of an asset exceeds its recoverable amount. assessing the recoverable amount involves significant assumptions and estimates.

6.2.4 Useful lives of depreciable assets (investment properties, property & equipment and intangible assets)management reviews its estimate of the useful lives of depreciable assets at each reporting date, based on the expected utility of the assets. The depreciation charge for the year will change significantly if actual life is different from the estimated useful life of the asset.




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6.2.5 Impairment of receivables The group’s management reviews periodically items classified as receivables to assess whether a provision for impairment should be recorded in profit or loss. in particular, considerable judgement by management is required in the estimation of amount and timing of future cash flows when determining the level of provisions required. such estimates are necessarily based on assumptions about several factors involving varying degrees of judgement and uncertainty. during the year ended 31 december 2016, no impairment losses were recognised for receivables (2015: kd nil).

6.2.6 Fair value of financial instrumentsmanagement apply valuation techniques to determine the fair value of financial instruments where active market quotes are not available. This requires management to develop estimates and assumptions based on market inputs, using observable data that market participants would use in pricing the instrument. where such data is not observable, management uses its best estimate. estimated fair values of financial instruments may vary from the actual prices that would be achieved in an arm’s length transaction at the reporting date.

7. Operating revenue / direct operating costs

Year ended 31 December 2016 Year ended 31 December 2015

Revenue Direct costs Revenue Direct costs

KD KD KD KD

Revenue from services rendered:

- Property management 923,274 252,980 944,330 285,879

- maintenance services 107,852 263,958 75,421 209,875

- security services 131,914 107,482 176,984 139,446

- brokerage services 28,806 19,095 42,575 33,079

- rental from properties 1,224,674 415,848 1,248,287 456,943

2,416,520 1,059,363 2,487,597 1,125,222

direct operating costs include staff costs of kd526,383 (31 december 2015: kd573,124).

8٫ General, administrative & other expenses

Year ended 31 Dec. 2016

Year ended 31 Dec. 2015

KD KD

staff costs 352,646 411,472other expenses 190,749 276,507

543,395 687,979




9. Basic and diluted earnings per share attributable to the owners of the Parent Companybasic and diluted earnings per share is calculated by dividing the profit for the year attributable to the owners of the Parent Company by the weighted average number of shares outstanding during the year as follows:

2016 2015

Profit for the year attributable to the owners of the Parent Company (kd) 790,783 902,963weighted average number of outstanding shares (excluding treasury shares) (share) 103,989,883 103,989,883Basic and diluted earnings per share attributable to the owners of the Parent Company (Fils) 7.60 8.68




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10. Property and equipment

Furniture Equipment & electrical tools Computers Vehicles Total

31 December 2016

Costat beginning of the year 129,958 87,837 265,177 4,375 487,347additions 28,217 3,035 3,414 - 34,666disposals (1,171) (599) - - (1,770)At end of the year 157,004 90,273 268,591 4,375 520,243

Accumulated depreciationat beginning of the year 109,589 76,290 193,611 4,140 383,630Charge for the year 14,232 5,094 25,454 234 45,014relating to disposals (1,121) (598) - - (1,719)at end of the year 122,700 80,786 219,065 4,374 426,925

Net book value at end of the year 34,304 9,487 49,526 1 93,318

31 December 2015

Costat beginning of the year 124,667 83,084 230,142 4,375 442,268additions 6,677 5,667 35,226 - 47,570disposals (1,386) (914) (191) - (2,491)At end of the year 129,958 87,837 265,177 4,375 487,347

accumulated depreciationat beginning of the year 99,332 70,085 168,330 3,265 341,012Charge for the year 11,619 7,113 25,397 875 45,004relating to disposals (1,362) (908) (116) - (2,386)At end of the year 109,589 76,290 193,611 4,140 383,630

Net book value At end of the year 20,369 11,547 71,566 235 103,717

The depreciation charge for the year was distributed as follows:

2016 2015

direct operating costs 1,920 2,701expenses and other charges 43,094 42,303

45,014 45,004




11. Investment propertiesLands Buildings Total

31 december 2016Costat beginning of the year 6,919,684 7,619,221 14,538,905foreign currency exchange differences 2,819 - 2,819At end of the year 6,922,503 7,619,221 14,541,724

accumulated depreciationat beginning of the year - 1,271,160 1,271,160Charge for the year - 258,976 258,976at end of the year - 1,530,136 1,530,136

Net book value At end of the year 6,922,503 6,089,085 13,011,588

31 December 2015Costat beginning of the year 7,084,198 7,133,742 14,217,940additions 7,000 485,479 492,479disposals (186,098) - (186,098)foreign currency exchange differences 14,584 - 14,584At end of the year 6,919,684 7,619,221 14,538,905

Accumulated depreciationat beginning of the year - 1,020,363 1,020,363Charge for the year - 250,797 250,797At end of the year - 1,271,160 1,271,160

Net book value At end of the year 6,919,684 6,348,061 13,267,745

The fair value of the investment properties at the date of the consolidated statement of financial position was estimated to be kd16,529,313 (31 december 2015: kd16,753,142) The fair value of the investment properties has been determined based on valuations obtained from two independent valuators, who are specialised in valuing these types of investment properties. The significant inputs and assumptions are developed in close consultation with management. one of these valuator is a local bank (for local investment properties) who has valued the investment properties using primarily two methods, one of which is the yield method and other being a combination of the market comparison approach for the land and cost minus depreciation approach for the buildings. The other valuators who are reputable valuators have also valued the investment properties primarily by using a combination of the methods noted above. when the market comparison approach is used, adjustments have been incorporated for factors specific to the land in question, including plot size, location and current use. for the valuation purpose, the group has selected the lower value of the two valuations (2015: lower of two valuations). as the significant valuation inputs used are based on unobservable market data, these are classified under level 3 fair values hierarchy.

direct operating costs include depreciation expenses charged for the year amounting to kd258,976 (31 december 2015: kd250,797).




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12. Available for sale investments31 Dec. 2016 31 Dec. 2015

KD KD

investments in unquoted securities 648,761 665,345investments in managed investment portfolios 740,731 822,345investments in managed investment funds 8,696 8,696

1,398,188 1,496,386

it was not possible to reliably measure the fair value of investments amounting to kd648,761 (31 december 2015: kd665,345) due to non availability of reliable method that could be used to determine the fair value of such investments. accordingly, these were stated at their cost less impairment losses, if any. management is not aware of any circumstances that would indicate any impairment/further impairment in the value of these investments as of the date of consolidated statement of financial position.

The movement on the available for sale investments during the year is as follows:

31 Dec. 2016 31 Dec. 2015KD KD

balance at the beginning of the year 1,496,386 1,787,886disposals (152,248) (293,678)Change in fair value 54,050 2,178balance at the end of the year 1,398,188 1,496,386

available for sale investments are denominated in the following currencies:

31 Dec. 2016 31 Dec. 2015KD KD

kuwaiti dinar 931,502 1,013,116us dollar 118,921 50,890saudi riyal 14,970 14,970sterling Pound 315,678 400,293uae dirham 17,117 17,117

1,398,188 1,496,386




13. Accounts receivable and other debit balances31 Dec. 2016 31 Dec. 2015

trade receivables (a) 185,695 242,785accrued revenue 274,613 273,735Prepaid expenses 28,512 30,979staff receivable 37,063 37,990retention against bank guarantees 35,809 35,766refundable deposits 52,686 52,085other debit balances 145,231 125,457

759,609 798,797Provision for doubtful debts (b) (406,827) (397,448)

352,782 401,349a) trade receivables are non interest bearing and are generally due within 90 days. The aging analysis of these trade receivables is as follows:

Neither past due nor impaired

Past due but not impaired

Impaired TotalLess than 90 days More than 90

days

2016 - 7,336 178,359 185,6952015 62,016 14,940 165,829 242,785

as of 31 december 2016, trade receivables amounting to kd178,359 (2015: kd165,829) were impaired and provided for. The remaining provision for doubtful debts amounting to kd228,468 (2015: kd231,619) were provided against certain past due accrued income balances and other debit balances. The group expects to recover a portion of these receivables.

b) The movement in the provision for doubtful debts is as follows:

31 Dec. 2016 31 Dec. 2015

balance at the beginning of the year 397,448 379,898Charge for the year 17,879 17,550Provision no longer required (8,500) -balance at the end of the year 406,827 397,448

c) The other classes within accounts receivable and other debit balances do not contain impaired assets. The maximum exposure to credit risk at the date of consolidated financial statements is the fair value of each class of receivable mentioned above. The group does not hold any collateral as security for accounts receivables and other debit balances.




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14. Due from/to real estate ownersThe group has entered into deals with various real estate owners and the balances are represented as follows:

Major share-holders Others Total 31 Dec.

2016Total 31 Dec.

2015

Consolidated statement of financial positiondue from real estate owners 17,045 6,481 23,526 30,790due to real estate owners 348,516 693,349 1,041,865 1,840,228

15. Deposits with Islamic financial institutionsThe effective rate of return on deposits with islamic financial institution range from 1.5% to 2% per annum (31 december 2015: from 1.5% to 2% per annum). These deposits have an average maturity of one year.

16. Cash in hand and at banks31 Dec. 2016 31 Dec. 2015

Cash in hand 95,859 55,883Cash at banks 3,958,985 3,784,667

4,054,844 3,840,550

17. Share capital The share capital of the Parent Company consists of 104,500,000 shares with par value of 100 kuwaiti fils per share (2015: 104,500,000 shares with par value of 100 kuwaiti fils per share) and all shares are paid up in cash.

18. Treasury shares31 Dec. 2016 31 Dec. 2015

number of treasury shares (share) 510,117 510,117Percentage of treasury shares to paid up capital (%) 0.49 0.49market value (kd) 99,983 67,335Cost (kd) 64,654 64,654

19. Legal reserveas required by the Companies law and the Parent Company’s articles of association, 10% of the profit for the year before contribution to kuwait foundation for the advancement of sciences (kfas), provision for national labour support tax (nlst), provision for Zakat and board of directors’ remuneration is transferred to legal reserve. The Parent Company may resolve to discontinue such transfer when the reserve equals 50% of the share capital. This reserve is not available for distribution except in cases stipulated by law and the Parent Company’s articles of association.




20. Voluntary reserveas required by the Parent Company’s articles of association, 10% of the profit for the year before contribution to kuwait foundation for the advancement of sciences (kfas), provision for national labour support tax (nlst), provision for Zakat and board of directors’ remuneration is transferred to the voluntary reserve. such transfer may be discontinued by a resolution of the shareholders’ general assembly upon recommendation by the board of directors.

21. Provision for end of service indemnity31 Dec. 2016 31 Dec. 2015

balance at the beginning of the year 433,142 554,248Charge for the year 61,164 81,489Paid during the year (163,902) (137,475)Provision no longer required (4,347) (9,260)transferred to provision for law suits (note 24) - (55,860)balance at the end of the year 326,057 433,142

22. Ijara finance payables31 Dec. 2016 31 Dec. 2015

ijara financing contracts with promise to purchase 1,392,709 1,547,423deferred finance costs (45,195) (50,192)

1,347,514 1,497,231

The ijara facilities agreement matured on 30 september 2016 and the management renewed this agreement till 30 september 2017. These facilities are secured by investment properties with a carrying value of kd4,604,916 (2015: kd4,634,992).

23. Accounts payable and other credit balances31 Dec. 2016 31 Dec. 2015

trade payables 187,247 207,595retention payable 38,192 43,521staff payables 5,994 5,078income received in advance 66,790 91,890accrued expenses 175,892 164,501accrued leave 64,277 78,312refundable rental deposits 104,113 95,257Provision for kuwait foundation for the advancement of sci-ences 7,512 7,603Provision for national labour support tax 18,301 22,598Provision for Zakat 7,320 7,498other credit balances 131,550 148,121

807,188 871,974




103

24. Provision for lawsuits31 Dec. 2016 31 Dec. 2015

balance at the beginning of year 108,726 52,866

transferred from provision for end of service indemnity (note 21) - 55,860

balance at the end of the year 108,726 108,726

25. Dividends & board of directors remunerationThe board of directors’ meeting held on 13 february 2017 proposed not to distribute cash dividends for the year ended 31 december 2016. This proposal is subject to approval by the shareholders’ general assembly. The board of directors has also declared to distribute an amount of kd 11,000 (2015: kd 24,000) as a remuneration to the members of the board of directors which has been carried in the consolidated statement of profit or loss for the current year. further, the board of directors has proposed to distribute an additional amount of kd 42,000 as a remuneration to the members of the board of directors, which has not been carried in the consolidated statement of profit or loss for this year and it will be carried in the next year under expenses and other charges upon approval by the shareholders’ general assembly.

The ordinary general assembly of shareholders held on 30 may 2016 approved the consolidated financial statements for the year ended 31 december 2015 and the directors’ proposal not to distribute any cash dividends to the shareholders of the Parent Company for the year ended 31 december 2015 (distribution of cash dividends to the shareholders of the Parent Company by 18.5 fils per share equivalent to kd1,923,813 for the year ended 31 december 2014), and to pay the board of directors an amount of kd24,000 as remuneration for the year ended 31 december 2015 (kd 36,000 for the year ended 31 december 2014).

26. Related party transactionsrelated parties represent the directors and key management personnel of the group, and other related parties such as major shareholders




and companies in which directors and key management personnel of the group are principal owners or over which they are able to exercise significant influence or joint control. Pricing policies and terms of these transactions are approved by the group’s management.

significant related party transactions and balances included in the consolidated financial statements are as follows:

2016 2015

Consolidated statement of financial positiondue from real estate owners:awqaf Public foundation (major shareholder) 16,245 30,160Public authority for minors’ affairs (major shareholder) 800 -

due to real estate owners:Public authority for minors’ affairs (major shareholder) 50,846 75,467awqaf Public foundation (major shareholder) 297,670 233,737

2016 2015

Consolidated statement of profit or lossoperating revenue (revenue from services rendered) 478,029 571,108direct operating costs * 332,708 397,366general, administrative and other expenses (rent expenses) 7,584 4,584

benefits of key management personnelshort-term employee benefits 63,202 52,635board of directors’ remuneration 11,000 24,000other long-term benefits 4,819 8,806

* The direct operating costs incurred by the Parent Company on the properties which are managed on behalf of related parties amounted to kd332,708 (2015: kd397,366).

27. Segment reportingThe group is divided into operational divisions to manage its various lines of business. The Parent Company’s management has classified the group’s services into the following business segments:

real estate management operations: represented in the management and leasing of real estate.•

investment operations: represented in real estate investment and investments in shares.•

Property brokerage operations: represented in real estate brokerage services such as sale and purchase of real estate properties.•

There are no inter-segmental transactions. These divisions are the basis on which the group presents its significant segment information, and it is as follows:




105

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301




28. Financial risk managementThe group’s activities expose it to variety of financial risks: market risk (including currency risk, interest rate risk, price risk), credit risk and liquidity risk.

The Parent Company’s board of directors are ultimately responsible for the overall risk management and for approving risk strategies and principles. The group’s risk management is carried out by investment management and audit committee and focuses on actively securing the group’s short to medium term cash flows by minimizing the potential adverse effects on the group’s financial performance through internal risk reports. long term financial investments are managed to generate lasting returns.

The group does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes.

The most significant financial risks to which the group is exposed to are as follows:

28.1 Market riska) Foreign currency riskforeign currency risk is the risk that the fair values or future cash flows of a financial instrument will fluctuate due to changes in foreign exchange rates.

The group mainly operates in the kuwait and gCC and is exposed to foreign currency risk arising from various foreign currency exposures, primarily with respect to us dollar, aed, omani riyal, saudi riyal and gbP. foreign exchange risk arises from future commercial transactions, recognised assets and liabilities and net investments in foreign operations.

to mitigate the group’s exposure to foreign currency risk, management works on maintaining a balanced exposure of assets and liabilities by currency to minimize fluctuations. generally, the group’s risk management procedures distinguish short-term foreign currency cash flows (due within twelve months) from longer-term cash flows. where the amounts to be paid and received in specific currency are expected to largely offset one another, no further hedging activity is undertaken.

The group had the following exposures denominated in foreign currencies, translated into kuwaiti dinar at the closing rate:

31 Dec. 2016 31 Dec. 2015

KD KD

us dollar 116,407 3,125

aed 1,132,498 383,004

omani riyal 326,382 425,230

gbP 40,166 21,058

exposures to foreign exchange rates vary during the year depending on the volume and nature of the transactions. nonetheless, the analysis above is considered to be representative of the group’s exposure to the foreign currency risk.




107

b) Interest rate riskinterest rate risk arises from the possibility that changes in interest rates will affect future profitability or the fair values of financial instruments. The group is not significantly exposed to such risk, since the group in principle does not pay or earn interest, and operates as per islamic shari’a. The finance costs charged to profit or loss represent profit charged by islamic financial institutions on its ijara finances (refer note 22) and profit on deposits represent profit earned on deposits placed with islamic financial institutions (refer note 15).

c) Price riskThe group is exposed to equity price risk with respect to its equity investments. equity investments are classified as available for sale securities. some of the group’s investments are listed on the kuwait stock exchange.

to manage its price risk arising from investments in equity securities, the group diversifies its portfolio where possible. diversification of the portfolio is done in accordance with the limits set by the group.

The sensitivity analyses below have been determined based on the exposure to equity price risks at the date of the consolidated financial statements. There has been no change in the methods and assumptions used in the preparation of the sensitivity analysis.

if the prices of securities had been 5% higher/lower, the effect on the equity for the year ended 31 december would have been as follows:

Equity31 Dec. 2016 31 Dec. 2015

market stock exchange index + 5% 11,510 9,508market stock exchange index – 5% (11,510) (9,508)




28.2 Credit riskCredit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The group’s credit policy and exposure to credit risk is monitored on an ongoing basis. The group seeks to avoid undue concentrations of risks with individuals or groups of customers in specific locations or business through diversification of its activities. it also obtains collateral security when appropriate.

The group’s exposure to credit risk is limited to the carrying amounts of financial assets recognised at the date of the consolidated statement of financial position, as summarized below:

31 Dec. 2016 31 Dec. 2015

accounts receivable and other debit balances (excluding prepaid expenses) 324,270 370,370due from real estate owners 23,526 30,790deposits with islamic financial institutions 150,000 150,000Cash in hand and at banks 4,054,844 3,840,550available for sale investments 1,398,188 1,496,386

5,950,828 5,888,096

also, refer note 13 for further details relating to accounts receivable.

28.3 Liquidity riskliquidity risk is the risk that the group will be unable to meet its liabilities when they fall due. to limit this risk, the group’s management has arranged diversified funding sources, manages assets with liquidity in mind, and monitors liquidity on a regular basis.

The contractual maturities of financial liabilities based on undiscounted cash flows are as follows:

Up to 1 month

1-3 months

3-12 months

1-5Years Total

31 December 2016Financial liabilities (undiscounted)ijara finance payables - - 1,347,514 - 1,347,514due to real estate owners 416,746 - 625,119 - 1,041,865accounts payable and other credit balances - 632,188 175,000 - 807,188

416,746 632,188 2,147,633 - 3,196,567

31 December 2015Financial liabilities (undiscounted)ijara finance payables - - 1,497,231 - 1,497,231due to real estate owners 523,426 - 1,316,802 - 1,840,228accounts payable and other credit balances - 324,122 547,852 - 871,974

523,426 324,122 3,361,885 - 4,209,433




109

29. Financial assets and liabilities29.1 Categories of financial assets and liabilitiesThe carrying amounts of the group’s financial assets and liabilities as stated in the consolidated statement of financial position may also be categorized as follows:

31 Dec. 2016

31 Dec. 2015

Financial assets - available for sale investments (note 12) - at fair value 749,427 831,041 - at cost less impairment, if any 648,761 665,345

1,398,188 1,496,386Receivables at Amortised costs: - accounts receivable and other debit balances (excluding prepaid expenses) 324,270 370,370

- due from real estate owners 23,526 30,790 - deposits with islamic financial institutions 150,000 150,000 - Cash in hand and at banks 4,054,844 3,840,550

4,552,640 4,391,710Total financial assets 5,950,828 5,888,096

Financial liabilities (at amortised costs) : - ijara finance payables 1,347,514 1,497,231 - due to real estate owners 1,041,865 1,840,228 - accounts payable and other credit balances 807,188 871,974Total financial liabilities 3,196,567 4,209,433

fair value represents amounts at which an asset could be exchanged or a liability settled on an arm’s length basis. in the opinion of the Parent Company’s management, except for certain available for sale investments which are carried at cost less impairment in value and other assets which suffered from impairment in value, the carrying amounts of financial assets and liabilities as at 31 december 2016 and 31 december 2015 approximate their fair values.




29.2 Fair value hierarchy all assets and liabilities for which fair value is measured or disclosed in the financial statements are grouped into three levels of a fair value hierarchy. The three levels are defined based on the observability of significant inputs to the measurement, as follows:

- 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 liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

- level 3: inputs for the asset that are not based on observable market data (i.e unobservable inputs).

The level within which the asset or liability is classified, is determined based on the lowest level of significant input to the fair value measurement.

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

At 31 December 2016 Level 1 Level 2 Level 3 Total Assets at fair valueavailable for sale investments: - investments in managed investment portfolios a 230,209 510,522 - 740,731 - investments in managed investment funds a - 8,696 - 8,696total assets 230,209 519,218 - 749,427

At 31 December 2015 Level 1 Level 2 Level 3 Total

Assets at fair valueavailable for sale investments: - investments in managed investment portfolios a 190,159 632,186 - 822,345 - investments in managed investment funds a - 8,696 - 8,696total assets 190,159 640,882 - 831,041

Fair value measurementsa) Investments in managed investment portfolios and funds The underlying investments in managed portfolios and funds represent quoted securities, unquoted securities & private equity funds. The quoted securities are publicly traded in stock exchanges and fair values have been determined by reference to their quoted bid prices at reporting date. The unquoted securities and private equity funds are valued based on latest reports received from the managers.




111

29.3 Fair value measurement of non-financial assets for disclosure purposesThe group discloses the fair value of its investments properties annually, and the details are disclosed in note 11.

30. Capital risk managementThe group’s objectives when managing capital resources are to safeguard the group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for external users and to maintain an optimal financial resources structure to reduce the cost of capital. in order to maintain or adjust the optimal financial resources structure, the group can amend the cash dividends paid to shareholders, decrease share capital, issue new shares, sell assets to reduce debt or obtain additional loans. The Capital comprise of total equity excluding cumulative changes in fair value and foreign currency translations reserves, and is measured at kd15,903,504 (2015: kd15,112,652). as of the reporting date, the group’s cash & cash equivalents exceeded its borrowings (ijara finance payables).

31. Contingent liabilities at the reporting date, the group had contingent liabilities in respect of outstanding bank guarantees amounting to kd181,807 (2015: kd133,271).

32. Comparative figuresCertain comparative figures have been reclassified to conform with the current year’s presentation of the consolidated financial statements. This reclassification has no effect on the consolidated financial statements for the previous year including equity, total assets, total liabilities, net profit and cash and cash equivalents.




Head offiCe - managementkuwait, sharq, khaled ibn al waleed street,

injazat tower, 3rd floor

tel: (965) 22286900

fax: (965) 22286899

P.o.box: 29910, safat 13153 kuwait

website: www.ream.com.kw

e-mail: [email protected]

Call Center: 1-840-888� Property management

� residential units

� Commercial units

� funished apartments

� Private Property

� facility management

branCHes & offiCes

real estate & legal affairskuwait, sharq, khaled ibn al waleed street,

injazat tower, 11th floor

tel: (965) 22286900

fax: (965) 22202061

fax: (965) 22286898

maintenanCe dePt.kuwait, sharq, khaled ibn al waleed street,

injazat tower, 11th floor

tel: (965) 22286900

fax: (965) 22202060

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