Annual Report 2017 - ream.com.kw · according to the best global practices related to the...

A n n u a l R e p o r t2 0 1 7

HIS HIGHNESS SHEIKH SABAH AL-AHMADAL-JABER AL-SABAH

AMIR OF THE STATE OF KUWAIT

HIS HIGHNESS SHEIKH NAWAF AL-AHMADAL-JABER AL-SABAH

CROWN PRINCE OF THE STATE OF KUWAIT

HIS HIGHNESS SHEIKH JABER AL MUBARAKAL-HAMAD AL-SABAH

PRIME MINISTER OF THE STATE OF KUWAIT

P.O. Box 33143 Safat,KuwaitE. [email protected]

1 840 888www.ream.com.kw

CONTENTS

Chairman’S Message

Sharea’a Auditors’ Report

Our Vision

Our Mission

Our Commitment Our Client

Our Goal

Our Services

Board of Directors

Executive Management

Ream History

Assets Management

Property Management

Marketing & Pr Department

National Personnel

Advisory

Financial Management

Our Systems

Our Process

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شـركــة إدارة األمــالك العقــاريــة )ريـم( ش.م.ك.عReal Estate Asset Managment Co. K.P.S.C

CHAIRMAN’S MESSAGE

Our Valued Investors,On behalf of the Board Directors of Real Estate Management Company (REAM), I am glad to introduce you to the 2017 Annual Report, in which we will be highlighting the company’s various accomplishments throughout 2017.

Consecutive Achievements The Real Estate Management Co. (REAM) has managed to maintain its leading position in the real estate industry in 2017 through utilizing its robust assets and enduring experience in this field. We were able to accomplish a track re-cord of accolades that reflect the company’s prominent role as one of the top real estate companies in the field of real estate portfolios, facilities management and commercial properties. Since its establishment in 1993, the company’s vast expertise and administrative and technical staff have sustained its reputation and positioned it among the finest companies that provide first-class services to clients.

New Strategy with Defined Goals In order to promote the country’s economic growth, the company has set up a clear strategy for the upcoming five years from 2017 to 2021 that implicates restructuring real estate and financial assets through the diversity of those assets locally and globally, aiming to achieve the best outcome to the company and investors correspondingly. Sub-sequently, the company has benefited from this innovative strategy in 2017 by acquiring major projects in Kuwait and the UK, aiming to develop them and accomplish the highest returns possible. The company also exited some assets that generated profits and returns to the company.

The company is aspiring to do market research on the promising markets to pinpoint and seize the best investment opportunities locally, regionally and internationally, in line with its strategy that is based on the company leadership’s future vision to keep its prominent position.

6 Real Estate Asset Managment Co. K.P.S.C

The Company’s Performance in 2017Throughout 2017, the company’s performance was outstanding, in consideration of the financial indicators achieved through utilizing its financial surpluses with the best opportunities on both the local and international levels. There-fore, the company was able to stand on a solid ground to create its strategy for the future. In comparison to other com-panies in its field, the company’s performance was exceptional, thanks to its investment diversity that contributed to the increase of the company’s profits in 2017.

The company’s profit increased reaching KD 908,934 which is 15% higher than 2016 and the average equity amounted KD 16,137,769 compared to KD 15,844,257 in 2016. The operating revenues for the year reached KD 2,329,567, com-pared to the KD 2,416,520 in last year. The company also continued to boost its managed portfolios’ efficiency, where it achieved occupancy rate of up to 92% of the total managed units, in addition to a high collection rate that reached 90% of the actual revenue.

The Current and Future Growth Drives It is worth mentioning that the company’s success was achieved thanks to the Almighty Allah and our investors’ trust in the company’s board of directors and executive management. The clients’ loyalty, which was gained and based on the incomparable services offered to them, was a key player in encouraging the growth of the company’s achieved re-sults and maintaining our clients database, as well as attracting new clients from the governmental or private sectors.

From our perspective, reaching the required goal is not what success is about; it is about what we aspire to accomplish and maintain. We aspire to sustain the achieved goals and making the ultimate effort towards developing these goals according to the best global practices related to the company’s business, as well as keeping up with the modern tech-nology advancement to provide our clients, whom are our partners of success, with superior services and solutions.

We would like to take a moment to express our gratitude to our respected clients and investors for their loyalty and trust over the years that contributed in advancing our work. We would also like to extend our thanks and gratitude to all the company’s dedicated employees and their unrelenting efforts into achieving its goals, hoping that Allah will help us achieve our endeavors and all our aspirations to meet the expectations of our partners of success.Dear Investors,I would sincerely like to thank you for your tremendous trust that was and will always be our source of motivation and support in our journey. I also encourage you to share with us your remarks and advice, in order to bring together the efforts and our path.

I would also like to extend my gratitude and thanks to our Board of Directors, Executive Management and all the staff members for their extraordinary efforts all year long, improving their performance to accomplish the required reve-nues and avoiding the risks and market fluctuations.

Finally yet importantly, we ask the almighty Allah to keep Kuwait and its people safe.May the peace, mercy and blessings of Allah be upon you,

Shlash HAif ALHajrafChairman

شـركــة إدارة األمــالك العقــاريــة )ريـم( ش.م.ك.ع7

SHAREA’A AUDITORS’ REPORT

SheikhAbdul Sattar Ali Al-Kattan

SheikhHamad Almazyad

SheikhMohammad Omar Jasser


OUR VISION

To be one of the best pioneer and professional real estate companies with high localand regional confidence.

10 Real Estate Asset Managment Co. K.P.S.CReal Estate Asset Managment Co. K.P.S.C

شـركــة إدارة األمــالك العقــاريــة )ريـم( ش.م.ك.عشـركــة إدارة األمــالك العقــاريــة )ريـم( ش.م.ك.ع11

OUR MISSION

To manage and maintain real properties and projects professionally and to provide outstanding level of services and products to our clients and society as the selected, preferred and trusted partner.


OUR COMMITMENT 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 that we de-livers to our clients through 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 as-sure 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 inter-national firm of asset and property consultants to review 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 of-fice 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 sup-port 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.


OUR GOALS

• To treat all people fairly, honestly and respectfully;

• To carry out our business with responsibility, acceptance of criticism and account ability for such works;

•To create added value through our quality services.


OUR SERVICES

We have led the local industry in establishing a strong footprint and of-fering a full spectrum of services, and “State of the Art” technology. We continue to lead in superior client service, volume of business activity, financial performance and many other measures


REAM’S BOARD OF DIRECTORS

Shlash Al HajrafChairman of Board of DirectorsMaster’s degree in Business Administration from the Canadian University in Dubai and a Bachelor’s Degree in Law. He has worked in the field of investment, development and management in the real estate sector for over ten years. He has remarkable experience in the laws of commercial companies, commercial, civil law and markets. Prominent experience during the real-estate restructur-ing in Dubai between 2009 – 2015 where his hierarchy climbed from Executive management, board member, deputy and chairman in multiple organizations.

Abdul Latif Ahmed Al-SunanDeputy Chairman of the BoardPHD degree in law and jurisprudence. He is currently the Deputy Director Gener-al for Development of Minors ‘Funds at the General Authority for Minors’ Affairs as well as the Deputy Chairman of the Board at REAM.

Nadia Ibrahim Al SaeedMemberBA in Psychology - English Section She is the Director of the Department of Com-mercial Activities for Legacies - the General Authority for Minors Affairs. She also serves as Deputy Chairman of the Board of Trustees of an organization as well as board members in other companies.

Abdul Ella Abdullah Al MutawaMemberBachelor of Political Science, Faculty of Commerce, Economics and Political Sci-ence, Kuwait University He is a member of the Board of Directors of Ali Abdul-Wahab Al Mutawa Trading Company and the Executive Director of Baka United General Trading and Contracting Company and Chief Executive Officer of Green Hand (Waqf Services), the General Manager of the People of Kuwait (charitable work in Kuwait). He has been the owner of Abdul-Ilah Al Mutawa Company for General Trading and Contracting since 2002 till moment.


Drar Mohammed Al-HumaidiMemberHe holds a Bachelor’s Degree in Medicine, Surgery and Obstetrics from Royal College of Surgeons in Ireland The MBA study is completed from London Busi-ness school, and is currently responsible for the development and supervision of the real estate sector In the property management company “Ream”. He currently serves as a board member of both MedCorp Holding Company, in ad-dition to several courses including: Decision Making, Risk Based Strategies, Har-vard University, and other courses in medicine and healthcare.

Fahad Abdulmohsen Al MarriMemberGraduated from the UK with Bachelors degree in Mechanical Engineering and Master’s degree from university college of London in Finance, notable experi-ence in investment banking / corporate finance professional with good educa-tional background.

Nasser Ahmed Al-KhaderMemberholds a Bachelor of Civil Engineering Science from Temple University & Master ‘s degree in Business Administration, and serves as the Director of E. Real Es-tate Investment Management, the General Secretariat of Awqaf, and served as a member of the Islamic Council of Bangladesh Bank.

Ibrahim Al - KandariSecretary of the Board of Directors


EXECUTIVE MANAGEMENT

Ibrahim Al - KandariChief Executive OfficerBachelor of Accounting - Kuwait University, 25 years experience in the real es-tate sector with all its segments. Currently he’s the Chief Executive Officer of the Real Estate Asset Management Company (REAM) and has held several positions on boards of directors as president and deputy. prepared studies and reports of real estate awareness and news about the market.

Ahmad Al RoomiMarketing & Public Relations ManagerHe holds a bachelor’s degree in Business Administration from The American University of Sharjah (United Arab Emirates), Starting career from the Dubai Media City and then one of Mubadala projects in Abu Dhabi where he gained experience in marketing, real estate, exhibitions & events on a local and global scale, lately joined Al Mazaya Real Estate where as a team member launched and developed projects in the Gulf Region and Turkey.

Mishari AlsaqabiReal Estate Dept. Mgr.Bachelor’s degree from Kuwait University and a master’s degree from the Amer-ican University of Middle East, 12 years in real estate development and invest-ment, risk analysis, corporate governance and financial analysis. He has held managerial and executive positions in a number of companies such as KFH Real Estate, Direct Investment Manager at Kuwait International Bank and a member of the Board of Directors of Al Ahlia Real Estate and Gulf International Company for Refrigeration and Storage Industries.


Eng. Mohammed Al-RashedDCEO Real Estate & ProjectsGraduated from the Faculty of Engineering and Petroleum - Department of Civil Engineering in 1997.Worked in project management at Wafra Real Estate for 11 years.CEO of Real Estate Projects & Development Sector at Sanam Properties for 9 years.A previous member of the boards of directories for a number of local and Gulf companies in the field of real estate and contracting.

Omar al-KandariHead Of Legal AffairsHead of Legal Affairs and Governance, bachelor’s degree from Kuwait Univer-sity, Member of the Kuwaiti Lawyers Association, 10 years of experience in the private sector in the field of investment, real estate and law, former Secretary of the Board of Directors.

Mr. Ashraf Mustafa Assistant Financial Affairs Manager Holds a bachelor’s degree in financial accounting from Cairo University in 1988 He holds a pre-master’s degree in construction and industrial project costs from Ain Shams University Over 25 years of experience as financial manager, Finan-cial management of various companies in the field of petroleum and energy, real estate companies - financial investments - and auditing in the Arab Republic of Egypt - the United Arab Emirates - Saudi Arabia & Kuwait.


Established 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 cali-ber and pro-active management team the company has grown to become a market leader in Kuwait’s real estate sector.With two decades of practical experience both in Kuwait and United Arab Emirates; REAM has been ex-tremelysuccessful 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 market-place 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 so-phisticated high-rise towers, to commercial office complexes, shopping malls and retail outlets with inter-nationally 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 com-prehensive change Management Programme: These strategically focused areas of works have seen the im-plementation of the latest “Best in Class’’ 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 stakehold-ers Furthermore, the companies corporate identity and its brand guidelines have also been comprehen-sively enhanced and it’s web site elevated to a world class standard, with the latest business and social technological applications. Our corporate collaterals have been further developed to represent our com-mitment and drive to make REAM more successful now and for the foreseeable future.

REAM HISTORY


ASSET MANAGEMENT

Our 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.


PROPERTY MANAGEMENT

LEASING

BROKERAGE

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 Service Sinclude The Following Valuation:

•Of an existing building, an investment •Of a real estate company, fund, investmentopportunity or a valuation for land/plots. management business or equity holding.

•Of real estate assets or plant, machinery and equipment •Understand the current and anticipated future

•an independent valuation of review services value of real estate loan collateral

Our 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 contractorperformance.

•Lease Management. •Lease Creation.

•Budgetary Establishment. •Local and Regional Marketing.

•Defaulters and Legal Process. • Financial Collections.

•Customer Satisfaction Surveys.

•Buying and Selling the Property. •Property Information Package.

•Local and Regional Marketing. •Contract Establishment.

•Legal Process.


1. Track trends and monitor competition

2. Work and transmit brand values

3. Coordinate efforts with those of the marketing partners of the company

4. Innovate

5. Communicate with the rest of the company

6. Manage marketing budgets

7. Define strategic marketing plans

MARKETING & PR DEPARTMENT


NATIONAL PERSONNEL

The Department of Legal Affairs and Governance plays an important role in the decision-making process issued by the administrative leaders of the Company or the relevant departments. It is well known that the administrative decision must rely on a basis, which is comprised of the laws, regulations and rules which outline the legal positions. Further, the Legal Department comprises a specialized, experienced and efficient team to respond to consultations, solve problems, disputes, hear customer complaints and respond to them in accordance with the sound legal procedures. Further, the Legal Affairs of the Company has a prominent role in defending the rights of the Company and its clients in front of all government departments, the courts, and judicial committees, which can be considered as an associate of the Company in addition to achieving operational income through the services provided by the (Profit Centre for Supporting Services( of the Company. It guarantees the legality of the work and the services provided by the Compa-ny, as well as may be considered as the safety valve of the Company, given the tasks it undertakes

Mission:1. Provide legal advice regarding the interpretation of the rules, regulations and laws.2. File legal cases and prepare summons, memoranda and appeals related thereto and represent the Company be-fore all courts and legal departments.3. Preparing, drafting and studying contracts concluded by the Company.4. Representing the Company before courts and investigative bodies.5. Follow-up of customer issues with periodic reports on the progress of cases.6. Collection of debts and transfer the Department into a profit centre. 7. Keep the original documents of the Company8. Follow-up of the internal administrative investigation processes, settlements and reports issued for the same. 9. Conduct all work related to conformity, governance and compliance in accordance with the laws related to the Capital Market Authority, Kuwait Stock Exchange and the Ministry of Commerce and Industry.


ADVISORY

We understand the differing perspectives of an investor seeking to optimise the value of an income producing asset or development opportunity versus an occupier seeking to minimise cost. REAM can align long dated assets and lia-bilities with a more Fluid business strategy. We use our experience and industry knowledge and advisory capabilities to deliver real estate strategy solutions to both owners 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 initia-tives 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 andmarket studies globally Inward real estate investors to Kuwait and other markets.

•We can deliver a full range of impartial valuation and due diligence services.

CONSULTANCY SURVEYS•Highest 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 firsthand experience in auctioning a number of residential properties through an open ascending price auctionREAM 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 expe-rienced for both seller buyer.


Ream is superior in managing the budget and finances for each owner in the most cost-effective manner possible to keep 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.

•Insurance Administration.

•Collections.

•Detailed Monthly Report.

•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.

FINANCIAL MANAGEMENT

MAINTENANCE & SERVICES•Provide 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 inspections 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.


OUR SYSTEMS

REAMs ICT systems have been thoroughly modernized with the introduction of ‘Best in Class’ Informational Techno-logical 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 fi-nancial software has been fully integrated within the company, with the latest security access and control provisions. The system will provide automated reports, statistical and quantitative information, which will be used for continu-ous improvement of our service delivery.

SYSTEMS ENHANCED ARE AS FOLLOWS

•Call Center: a modern environment, combined with the latest telephony services, with internationally recognized ‘helpdesk’ software with a ‘365 day’s 24’ hours operating control area, staffed by both Arabic andEnglish-speaking personnel. 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 website can provide full property management services to our present and new customer, including live chat technology directly with the call center, search capabilities with easily controllable pa-rameters, interface with Google and pricing index for apartments. In meeting the modern age, our website allows use of all latest social media functions such as facebook, twitter, linkedIn to enable and empower our customers

•Mobile Phone Application: Our application has been customized in a ‘User Friendly’ way, so whilst the custom - er is on the move, they can receive the latest updated information on the property database


REAM have spent considerable time updating the existing process and procedures in the company to meet interna-tional ‘Best in Class’ standards and to meet our ever evolving regulatory and legal requirementsThere 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 re-duce expenditure by introducing the ‘Shared Savings I nitiatives’ utilising our vast experience local and international knowledge and understanding of best practices

OUR PROCESSES


ANNUAL CORPORATE GOVERNANCEREPORT 2017

REAL ESTATE ASSETS MANAGEMENTCOMPANY REAM K.P.S.C

Introduction

Corporate governance at REAM

Shariah’ Advisory And Supervisory Board, first rule

Second rule

Third rule, Fourth rule

Fifth rule

Sixth rule, Seventh rule

Eight, Ninth, Ten rule

Eleventh rule

Report Of Dealings With Related Parties

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CONTENTS

INTRODUCTION

Corporate governance rules are the principles, systems and procedures that best protect and balance the interests of corporate management, shareholders and other stakeholders. The main objective of implementing the Code of Corporate Governance is to ensure that the Real Estate Management Company (REAM) complies with shareholders’ objectives to enhance investor confidence in REAM’s performance efficiency and ability to cope with crises. REAM’s team mandated with governance has reviewed and updated the corporate governance framework and ensured the existence of all the requirements and procedures required to complete the Code of Corporate Governance.

Governance is the set of policies and regulations governing the relationship between the Company Board of Directors and its shareholders and other stakeholders. It also provides the structure through which the Company’s objectives, long-term strategy, and means of achieving them are set and identifying parties to monitor their performance.

The process of full compliance with regulatory requirements is a reflection of REAM’s culture. During the year 2017, the Company set up a series of activities that comply with the requirements of the Capital Market Authority and the Board’s aspirations and ambitions for excellence in the performance and practice of governance at a high level com-pared to the performance of the leading institutions in the same field. The Company has designed the organization-al structure in line with the requirements of good governance. The Board of Directors has taken into consideration the importance of preparing the Company’s general strategy in the long term (2017-2021) according to the general principles of governance. The Board has outlined these objectives by setting up the necessary training programs for the continuous development of its human resources, and inspire social responsibility in the work environment and among the personnel by undertaking social activities and participating in them.

The rules of corporate governance regulate the method of taking all decisions within the Real Estate Management Company (REAM) and stimulate the transparency and credibility of those decisions. One of the most important ob-jectives of the Corporate Governance Code is to protect shareholders and to separate power between the executive management of REAM and the Board of Directors, which prepares and reviews plans and policies in this Company, which provides reassurance and confidence in dealing with it, as well as enable shareholders and stakeholders to have effective control over REAM.

Corporate governance relies on a number of systems, rules, practices and processes through which the Company is directed and controlled. Corporate governance balances between all stakeholders in the Company, including clients, employees, administrators, government and society. It also defines the responsibilities and duties of the Board of Directors and senior management of the Company, taking into consideration the protection of shareholders ‘and stakeholders’ rights.


CORPORATE GOVERNANCE AT REAM

In accordance with the Capital Market Authority Law, its Executive Regulations and amendments, and based on the objectives of the Capital Market Authority to regulate the securities activity in a fair, competitive and transparent manner, and to educate the public about the activity of securities and the benefits, risks and obligations associated with investing in securities and promoting its development while providing protection to dealers in securities activity, as well as minimizing the typical risks that are expected to occur in this activity.

Therefore, the application of sound governance practices and the existence of a full disclosure policy achieve justice and transparency and prevent conflicts of interest and inside information exploitation, which will regulate the rela-tionship between the shareholders, the Board of Directors and the executive management of the joint stock compa-nies.

REAM has adopted the principles of corporate governance in line with standards applied by the responsible bodies. REAM assesses the performance and quality of its services, policies and practices to ensure that they comply with corporate governance guidelines in the State of Kuwait.

The main objective of implementing corporate governance practices is to regulate the relationship between all par-ties in joint stock companies, starting with the shareholders and Board members to executive management, to avoid expropriation of ownership by REAM’s management at the expense of small shareholders. The adoption of the prin-ciples of governance is based on building a balanced structure of the Board of Directors, defining its functions and responsibilities in a transparent manner, ensuring the integrity of the financial reports issued by REAM, and confirm-ing the role of stakeholders both within and outside REAM. This is in addition to protecting the interests and rights of shareholders and ensure equal treatment between them.

REAM Company did not disregard the vital role of corporate governance regulating the methodology of taking deci-sions, and motivating the transparency and credibility of such decisions by disclosure of all its decisions, material movements and following the rules of disclosure and transparency which are considered as a fundamental element in the protection of stakeholders’ rights.

The Board of Directors of REAM has taken upon itself to improve and develop the foundations of governance in line with the Executive Regulations of the Capital Market Authority Law and its amendments, and to harness the internal human resources capacities to ensure the exercise of sound governance.

THE CODE OF CORPORATE GOVERNANCE IS BASED ON THE FOLLOWING:

• First: Ethical Conduct: this is to ensure compliance with ethical standards and standards of professional ethics, achieve the balance of all stakeholders in relation to the Real Estate Management Company (REAM) and transparency in presenting financial and non-financial information. The Company has circulated the ethical code of work to all employees in the Company.

• Second: Oversight and accountability: The importance of a comprehensive system of control and accountability to detect deviations and violations, as well as the importance of activating the role of stakeholders in the control of Real Estate Management Company (REAM), and the emphasis on transparency and disclosure in protecting the rights of stakeholders.

• Third: Sound Administrative Organization: The sound administrative organization is responsible for the distribution of powers and responsibilities, the separation of powers, and the placement of incentives and rewards through the evaluation of the performance of the managers and employees of the Real Estate Management Company (REAM. The Company has also updated its organizational structure in line with its strategy and corporate governance require-ments.


SHARIAH’ ADVISORY AND SUPERVISORY BOARD

Shariah-compliant companies are committed to the principles of Islamic Sharia in all their activities and operations, which is one of the most significant elements distinguishing Shariah compliant companies from traditional compa-nies.

In order to ensure full compliance with the provisions of Islamic Shari’a, the laws and regulations of the State of Kuwait require the formation of Shari’ah Advisory and Supervisory Boards in these companies, whereby they are responsible for ensuring that all acts comply with Islamic Shari’ah. Further, they express Shariah opinion on the activ-ities, products and services offered by companies operating in accordance with the provisions of the Islamic Shariah, and provide solutions and alternatives to products and activities subject to the Shariah observations.

The works of REAM Company’s Shariah Advisory and Supervisory Board are summarised in the following; • Submit an annual report to be presented at the General Assembly to show how REAM’s business is in line with Is-lamic Shariah.• Overseeing the business of the Shariah Supervisory and Advisory Department, which in turn oversees the imple-mentation of the decisions and recommendations of Shari’ah Advisory and Supervisory Board of the Real Estate Management Company (REAM).

First Rule:Build a balanced structure of the Board1- The role of the Board of Directors and its responsibilitiesThe role of the Board of Directors of the Real Estate Management Company (REAM) represents the balance point that works to achieve the objectives of the shareholders and follow up the executive management of the Company, as the Board seeks to achieve the objectives of the Real Estate Management Company (REAM) strategy by ensuring that the executive management works to enhance the Company’s competitiveness, achieve high growth rates, maximize profits, and that executive management decisions and procedures are always in the interest of shareholders.

2- Formation of REAM Board of Directors: The Board of Directors of REAM is comprised of 7 members. The Board includes non-executive members and inde-pendent members. The Board of Directors supervises REAM’s business and protects the shareholders’ rights. It also directs the senior management of the Company through the distribution of responsibilities, In addition, REAM’s Board of Directors assumes the responsibilities set forth in REAM Memorandum of Association and applicable laws and regulations in the State of Kuwait.

The Board of Directors also creates the required balance between the interests of the Company’s shareholders, the stakeholders and the requirements for the protection of the Company and its assets. Therefore, the Company has prioritized its strategic objectives and priorities.


3- Meetings of the Board of Directors:The Board of Directors met during the year 12 times. The Board was restructured on 23/4/2017 with the departure of Mr. Abdul Qader Jassim Al Farih, the Board Chairman, and Mr. Abdulwahab Asaad Al Sind and Mr. Ibrahim Ismail Al Kandari, For the next three years, three members of the Board of Directors were appointed as representatives of the Public Authority for Minors’ Affairs in an alliance with the Awqaf Public Foundation with a percentage of 47,756. They include Mr. Abdullatif Ahmed Al-Sanan, Mr. Nasser Ahmad Al-Khader and Ms. Nadia Ibrahim Al-Saeed. Further, four members were elected to the Board who include Mr. Shlash Heef Mubarak Al-Hajraf, Mr. Dirar Mohamed Al Hamidi, Mr. Abdul-Elah Abdulla Al-Mutawa and Mr. Fahad Abdul Mohsen Al-Marri. The present members of the Board of Directors attended meetings of the Board are as follows:

Committees emanating from the Board of Directors:The Board has formed three committees emanating from the Board of Directors in order to assist the Board in assum-ing the tasks entrusted to it efficiently and effectively. These are detailed as follows:

Names of Board members

Committee

Title

Committee Members

Executive/ non executive

Member Classification

Elected/ appointed – inde-pendent/ non independent – executive/ non executive

Total meetings of the board

Frequencies of attending the

Board meetings

Number ofmeetings

Shlash Heef Mubarak Al Hajraf Dr. Abdulatif Ahmad Al Sanan

Nadiya Ibrahim Al Saeed

Abdul-Ellah Abdulla Al Mutawa Dirar Mohamed Saleh Al Hamidi Fahad Abdulmohsen Mohamed Al Marri Nasser Ahmad Al Khader

Audit and Risk Manage-ment Committee

Nominations and Remu-nerations Committee

Executive Committee

Board chairman Vice Chairman

Member

Member Member Member Member

Abdulatif Ahmad Al Sanan (Chairman)Abdul-Ellah Abdulla Ali al MutawaDirar Mohamed Saleh Al Humaidi Nasser Ahmad Ibrahim Al Khader Shlash Heef Al Hjraf (chairman) Nadiya Ibrahim Jassim Al Saeed

Fahed Abdulmohsen Mohamed Al MarriShlash Heef Al Hjraf (chairman)

Abdulatif Ahmad Al Sanan Dirar Mohamed Saleh Al Humaidi

Non executive Non executive

Non executive

None executiveNon executive

None executiveNon executive

Elected Representative of the Public Authority for Minors Affairs

Representative of the Public Authority for Minors Affairs

Independent Elected

Independent Representative of Awqaf

Public Foundation in alliance with the Public Authority for

Minors Affairs

Non executiveIndependent

Non executive Non executive Non executive Non executive Independent

Non executive Non executiveNon executive

1212

12

12121212

1212

11

12121211

10

4

6


Second Rule:Proper identification of tasks and responsibilities

- Separation of powersThere is a clear separation of powers between the Board of Directors and the executive management in a manner that ensures full independence, so that the Board of Directors can carry out its responsibilities of properly defining tasks and responsibilities.- Dual Control - Four Eyes PrinciplesThe Real Estate Management Company REAM implements the principel of Dual Control and the principle of separa-tion of powers in all risky activities.The functions and responsibilities of the Board of Directors include the following:1) Adopting the objectives, strategies, plans and policies of the Company, including the following:• The Company’s overall strategy and the main action plans, review and direct them. • The optimal capital structure of the Company and its financial objectives.• Clear profit distribution policy (cash/in kind) for the benefit of shareholders’ and the Real Estate Management Com-pany (REAM).• Performance objectives and monitoring the comprehensive performance of the Real Estate Management Company (REAM). • Organizational and job structures in the Real Estate Management Company (REAM) and conducting periodic review of them.2) Approving the annual budget estimates and approving the interiml and annual financial statements.3) Overseeing the Company’s capital expenditures, acquisition of assets and managing them.4) Ensuring the compliance of the Real Estate Management Company (REAM) to the policies and procedures of the Real Estate Management Company (REAM) for the applicable internal regulations and rules. 5) Ensure the accuracy and integrity of data and information to be disclosed in accordance with the applicable dis-closure and transparency policies and procedures.6) Establish effective channels of communication that allow REAM shareholders to regularly and periodically review the various activities of the Company and any significant developments.7) Establish a special governance system in the Real Estate Management Company (REAM) in a way that does not contradict with the provisions of these rules, general supervision of the same, controlling the extent of its efficiency and amendment, if needed.8) Follow up the performance of each member of the Board of Directors and Executive Management in accordance with Key Performance Indicators (KPIs.)9) Prepare an annual report to be read in the annual general assembly of the Company, including the requirements and procedures for updating the rules of corporate governance and the extent of compliance with them. This report should be included in the annual report prepared for the activities of the Real Estate Management Company (REAM), which should point out the rules which have been complied with and those which have not been complied with, with the justifications of the non compliance. 10) The formation of specialized committees emanating from the Board in accordance with a charter that clarifies the duration of the committee, its powers and responsibilities, and the manner of supervision by the Board. The decision also includes naming members and defining their duties, rights and functions, as well as evaluating the assessment of the performance and work of these committees and their key members.11) Ensure that the policies and regulations adopted by the Company are transparent and clear so as to facilitate the decision-making process and achieve the principles of good governance, separation of powers and authorities be-tween the Board of Directors and executive management.



Third Rule:Selection of qualified members of the Board of Directors and Executive Management

The Board of Directors has formed a Nomination and Remuneration Committee consisting of three members, at least one of which is an independent member, who is Mr. Fahad Abdulmohsen Al Marri, and its Chairman is a non executive member of the Board of Directors. This Committee is specialized to receive applications for membership of the Board of Directors and make recommendations thereon to the Board of Directors.

Implementation of the Company Remunerations PolicyThe Nomination and Remuneration Committee of the Board of Directors manages the process of awarding remuner-ations within the Company, starting with the performance evaluation to final report preparation with the total remu-nerations granted. The Board is fully responsible for making final decisions regarding the approval of all incentives, remunerations and bonuses. The Board of Directors, through the Nomination and Remuneration Committee, carry out the periodic review of this policy and monitor its effectiveness or the need to make any amendment thereto.

Fourth Rule:Ensure the integrity of financial reports

The integrity of the financial statements of the Company is one of the important indicators of the integrity and credi-bility of Real Estate Management Company (REAM) in presenting its financial position, thus increasing investor confi-dence in the data and information provided by REAM and allowing the shareholders to exercise their rights. Therefore, REAM has established a mechanism to ensure the integrity and accuracy of its financial statements, supervision and audit of the accounts and financial statements of the Company by the Audit Committee, and ensuring the indepen-dence and impartiality of the external auditor.The existence of the Audit Committee is one of the main features evidencing the implementation of the rules of good governance. This Committee works to establish a culture of commitment within REAM by ensuring the integrity and accuracy of the financial reports of the Company as well as ensuring the adequacy and effectiveness of internal con-trol systems applied in the Real Estate Management Company (REAM).

- Declaration of the integrity and accuracy of the prepared financial reports: The Executive Management submits a written undertaking to REAM’s Board of Directors to ensure the integrity and accuracy of the financial statements of the Company, that they cover all financial aspects of operating data and re-sults and prepared in accordance with International Financial Reporting Standards. Further, the Board of Directors submits to the Company shareholders a declaration for the accuracy and integrity of the financial statements and reports related to the Company’s activity (copy of the declaration enclosed.)



Board of Directors’ declaration for the accuracy and integrity of the financial statements and reports related to the Company’s activity:

Kuwait in ...... / ....... / 2018 AD

Gentlemen/Shareholders of the Real Estate Management Company

Dear sirs,Subject: declaration and undertaking of the accuracy and integrity of financial reportsWith reference to the above subject, and the commitment of the Board of Directors to apply the principles of gover-nance, and ensure the integrity and accuracy of financial reports:We, the Chairman and Members of the Board of Directors of REAM, certify the accuracy and integrity of the financial statements provided to the external auditor and that the financial statements of the Company have been presented fairly and accurately in accordance with International Accounting Standards applied in the State of Kuwait, approved by CMA and reflect the Company’s financial position as on 31 December 2017, pursuant to the information and reports we received from the Executive Management and Auditors, and the due diligence exerted to verify the accuracy and soundness of such reports.

Name Title Signature

Mr. Shlash Heef Mubarak Al Hajraf Chairman -------------

Mr. Abdulatif Ahmad Al Sanan Vice chairman -------------

Mrs. Nadiya Ibrahim Al Saeed Board member -------------

Mr. Abdul-Elah Abdulla Al Mutawa Board member -------------

Mr. Dirar Mohamed Al Hamidi Board member -------------

Mr. Fahed Abdulmohsen Al Marri Board member -------------

Mr. Nasser Ahmad Al Khader Board member -------------


Fifth Rule:Develop proper risk management and internal control systems

The Board of Directors has the ability to understand and analyze the nature and magnitude of the risks facing REAM’s activities to minimize them as much as possible, as well as to identify the appropriate procedure for dealing with them. This includes identifying internal or external factors that have led or lead to such risks and methods of address-ing them, in the light of the strategies and policies adopted in this regard, in particular REAM’s risk appetite.REAM relies on a set of control systems and control rules covering all the activities of the Company and its depart-ments. These systems and rules work to maintain the integrity of the financial position of the Company and the ac-curacy of its statements. The Company organizational structure reflects the dual controls and includes proper iden-tification of powers, responsibilities and complete segregation of functions, in addition to avoiding the conflict of interests. In the course of 2017, the Company contracted with an external office to provide services and reports to the Risk Management Unit and submit them to the Board of Directors.

Internal Audit Report on the adequacy of internal control and control systems:The Company’s internal audit provides independent, objective and advisory services on the design and effectiveness of the Company’s internal control systems by conducting a periodic risk assessment and review program to assess and improve the effectiveness of risk management, oversight and governance. The audit reports that summarize the results are issued by each audit function, which are sent to the heads of the relevant units/ departments. These reports provide a guide to support the annual assessment of the overall effectiveness of the internal control environ-ment.

However, an internal audit system can only provide a reasonable assurance and not an absolute assurance in con-nection with achieving the control system’s objectives. Furthermore, the control system design should reflect the existence of restrictions and determinants on the resources and that the benefits of control should be taken into consideration in comparison with its costs.

As a result of the above assessment, it is possible to conclude that the internal control environment is properly de-signed and effective as on 31 December 2017. Shareholders can view the report of the Audit Committee in the General Assembly of Shareholders through the Investors Affairs Unit of the Company.

REAM has internal controls and control systems to ensure compliance with the Company’s policies and instructions. Internal auditors exercise their functions independently. The internal audit team and the Audit Committee are highly professional in serving the independence and effectiveness of the audit, in order to assist the Audit Committee in discharging its responsibilities and, in particular, its responsibilities related to the Company’s various activities and operations.

External Audit Certificate on the adequacy of the Company’s internal control and control systemsThe Board of Directors of the Company has entered into an agreement with two Audit Offices (Grant Thornton, Al Qatami, Al Eban and Partners and Al Bazai & Partners) to audit the accounts of the Company and ensure the integrity of the accounting records, for the period ended 31 December 2017 in accordance with the budget



Sixth Rule:Promote professional behaviour and ethical values

The establishment of a culture of professional conduct and ethical values within REAM reinforces investor confidence in REAM’s integrity and financial integrity. The commitment of all REAM employees, whether Board members, Ex-ecutive Management, or other employees with the Company’s internal policies and regulations and the legal and regulatory requirements will lead to achieving the interests of all parties related to REAM, in particular shareholders, without conflict of interest and a high degree of transparency. The Company has circulated the Ethical Code of Con-duct to all the Company personnel. The Code comprises a set of standards and criteria of professional behaviour and ethical values. All personnel signed a declaration and undertaking of the confidentiality of the internal information in their possession, to prevent the Board members and employees from exploting the internal information in the Real Estate Management Company (REAM) for their personal benefit, in compliance with the governance instructions issued by the Capital Markets Authority.

Seventh RuleDisclosure and transparency in an accurate and timely manner

The principle of disclosure and transparency is one of the most important pillars of the business in REAM. Such trans-parency should provide an atmosphere of trust and confidence, both internally and externally. Transparency also ensures clear communication between shareholders, the Board of Directors and the executive management. In order to achieve the objectives, during 2017 REAM posted the following disclosures on the bourse website through the elec-tronic disclosure portal and through the electronic signature, in addition to providing the Capital Markets Authority with all disclosures and on the website of the Real Estate Management Company (REAM) to promote transparency and integrity:

SerialNo.

Date Disclosure Impact on thefinancial position

1

234567

8

9

10

2017/02/9

2017/02/142017/02/142017/04/5

2017/04/112017/04/202017/04/23

2017/04/24

2017/04/24

2017/04/25

REAM Board of Directors met on 13/2/2017 to discuss the financial statements for the fiscal year ended on 31/12/2016

REAM- supplementary disclosure in connection with the results of the Board of Directors meeting. REAM- supplementary disclosure in connection with the results of the Board of Directors meeting.

Disclosure in connection with convening the ordinary general assembly on Sunday, 23/4/2016.Disclosure in connection with the resignation from the Board of Directors membership

Supplementary disclosure – in connection with the agenda of the ordinary general assembly. Reminder- date of convening the ordinary general assembly for the fiscal year ended on

31/12/2016Supplementary disclosure- in connection with the results of the ordinary general assembly meet-

ing for the fiscal year ended on 31/12/2016 Disclosure on the results of the ordinary general assembly meeting for the fiscal year ended on

31/12/2016Disclosure on substantial information – commenting on a press news.

Nil

NilNilNil NilNilNil

Nil

Nil

Nil


SerialNo.

Date Disclosure Impact on thefinancial position

1112

13

14

15

16

17

18

19

20

21232425

262728

2930

2017/05/22017/05/10

2017/05/14

2017/05/15

2017/06/11

2017/07/11

2017/07/26

2017/07/31

2017/08/7

2017/09/18

2017/09/192017/09/282017/10/112017/10/15

2017/11/82017/11/122017/11/14

2017/12/122017/12/12

Dividends for the fiscal year ended on 31/12/2016 REAM Company Board of Directors convened on 4 May 2017 for discussing the

results of the first quarter ended on 31 March 2017Reminder of REAM Board of Directors convened on 14 March 2017 to discuss the

first quarter statements ended on 31/12/2017REAM disclosure in connection with the results of the Board of Directors meeting for approving

the results of the interim financial statements for the period ended on 31 March 2017 REAM Company disclosure of substantial information – acquisition of land in the

United Kingdom

Disclosure by REAM Company on the appointing of vice chief executive officer for the real estate and projects sector.

REAM Company Board of Directors convened on 31 June 2017 to discuss the state-ments of the second quarter ended on 30 June 2017

Results of the interim financial statements for the period ended on 30 June 2017 – Real Estate Management Company (REAM)

Disclosure of substantial information – exit by selling an influential share

Disclosure of substantial information – exit by selling its share in the Sultanate of Oman

Supplementary disclosure in connection with the exit from a subsidiary company Appointment of marketing and public relations manager

REAM Company Board of Directors convened on Sunday to discuss entry in a real estate projectSupplementary disclosure in connection with entering in a real estate project

Appointment of the Real Estate Department manager REAM Company Board of Directors convened on 14 November 2017 to discuss the third quarter statements

Results of the interim financial statements of REAM Company for theperiod ended on 30 September 2017

Disclosure of substantial information. Selling an investment real estate. Disclosure of substantial information – acquisition of a land

NilNil

Nil

Nil

The effect on the financial position of this transaction shall be reflected in

the Company financial statements for the year 2017

Nil

Nil

Nil

The effect on the financial position of this transaction shall be reflected in

the Company financial statements for the year 2017

Expected profit is KD 90.000. The effect on the financial position of this transaction

shall be reflected in the Company financial statements for the year 2017

Nil The effect shall be determined subsequently.

The effect on the financial position of this transaction shall be reflected in the Compa-

ny financial statements for the year 2017Nil Nil

Realized profit is approximately KD 900.000. The effect on the financial position of this

transaction shall be reflected in the Compa-ny financial statements for the year 2017

NilThe effect on the financial posi-tion of this transaction shall be reflected in the Company finan-cial statements for the year 2017



Eighth Rule:Observing Shareholders’ Equities

According to the Company’s policy for the protection of the rights of stakeholders and shareholders, all the share-holders of the Company have general and clear rights, including recording the value of shares held in the books of account, registering, transferring and assigning ownership of shares, receipt of dividend, participation in meetings of the General Assembly of shareholders and voting on its decisions, electing the members of the Board of Directors, monitoring the performance of the Company in general and the Board of Directors in particular, holding the Board of Directors and executive management accountable and filing accountability cases in the event of non performance of the job duties mandated to them.

Major Shareholders of the Company with significant shares of the Company’s capital as on 31 December 2017:

Ninth Rule:Recognizing the role of stakeholders

• Protect the rights of stakeholders The respect and protection of the rights of stakeholders must be in accordance with the relevant laws of the State of Kuwait such as the Labor Law, the Companies Law and its Implementing Regulations, in addition to the contracts con-cluded between the parties and any additional commitments made by the Real Estate Management Company. The protection of the rights of stakeholders under the law gives them the opportunity to obtain effective compensation in case of violation of any of their rights. The Company has prepared policies and procedures that protect the rights of stakeholders and allow them to obtain legal compensation in the event of violation of any of their rights according to the rules of corporate governance. These policies also specify the Company’s need to maintain positive working relationships and clarify the policy of reporting violations and receive complaints and deal with them.

Tenth Rule:Enhance and improve performance

Based on the Company’s belief in the importance of continuous development in human investment, it provided the required training environment for the members of the Board of Directors and the Executive Management in accor-dance with the annual training plans. Two workshops were held under the title of “Corporate Governance and Com-munication Protocols” and “Accounting for Non-Accountants”, in order to foster the competencies of the Board of Directors members and the Executive Management, the dissemination of a culture of commitment and sense of con-trol, which shows the Company’s keenness to encourage a culture of continuous training and develop the skills and capabilities of the team.The Nomination and Remuneration Committee has also conducted a performance evaluation for the Board of Di-rectors, Board Members and Executive Management (Chief Executive Officer and Vice CEO), in accordance with the approved annual evaluation systems and mechanisms.

Shareholder Ownership percentage

Kuwait and the Middle East Financial Investment Company – Clients 1 Public Authority for Minors Affairs

49.815%39.234%


Eleventh Rule:Focus on the importance of social responsibility

The Real Estate Management Company (REAM) is committed to its continuous social responsibilities through social behaviours aimed at achieving sustainable development for the society in general and its employees in particular by improving the living, social and economic conditions of the workforce and their families, in addition to society as a whole, and work to reduce the rate of unemployment in the society and reduce the waste of environmental resources.On 11/11/2017, the Corporate Governance Team in REAM Company organized a blood donation campaign at its head-quarters in Injazat Tower in Sharq area, in cooperation with the Blood Bank, where the campaign was well accepted by REAM employees as well as employees of other companies located in Injazat Tower, and their contribution to so-cial responsibility to contribute to human life. The number of donors amounting to 50 donors including a number of employees of REAM and other companies. REAM has also conducted a training course on the “Analysis of Complaints Received by the Maintenance Department and How to Reduce the Time Spent to Address Them” for the trainee Yousef Abdullah Salem during the period from 1 to 31 August 2017 and obtained the training program certificate and a finan-cial reward from the Company.


REPORT OF DEALINGS WITH RELATEDPARTIES

Shareholders of the Company

Dear Sirs,I’m pleased to submit a report on the dealings with related parties for the fiscal year ended on 31 December 2017. Dealings with related parties are considered a customary form in the business activity, which are usually represented in the dealings of REAM Company with the key shareholders, members of the Board of Directors, senior management personnel and companies under its control in order to undertake the management of a number of the Company’s activities or manage joint ventures, which result in financial transactions and services between the parties.

In connection with the Real Estate Management Company (REAM) and as the dealings with related parties include dealing with the key shareholders in the Company and members of the Board of Directors, the dealings are managed by the chief executive officer who chairs the administrative staff in the Company, whose decisions are ratified and approved by the Board of Directors for all the terms and procedures of such transactions.

The most significant dealings with related parties as on 31 December 2017 are represented in the following;

Statement of dealings with related parties as on 31/12/2017

Description Kuwaiti dinar Relationship Nature of the account

Public Authority for Minors Affairs Awqaf Public FoundationsMr. Abdul-Ellah Al Mutawa

Al Foz Investment Company

KD 50,000 KD 300,000KD 25,000

KD 9,600,000

Key shareholder in the Company Shareholder

Board memberA company with joint control and influence

Organizing a real estate auction Management of a real estate portfolio Management of a real estate portfolioAcquisition of Salhia land, investment portfolio

Chairman Shlash Heef Mubarak Al Hajraf


Kuwait: 28/3/2018

Shareholders of the Real Estate Management Company (REAM) KSCPAudit Committee’s Report for the Fiscal Year Ended on 31 December 2017

Dear sirs, The Audit Committee is one of the main features of implementing the rules of good governance. The effectiveness of the Committee is directly related to the effectiveness of the Board of Directors. The Audit Committee carries out its duties under the powers and responsibilities of the Board of Directors in supervising the Company’s financial reports, accounting, internal and external auditing, matters related to internal control, as well as coordination with external auditors of the Company.

The Committee has performed its duties during the fiscal year ended on 31 December 2017, including, but not limited to, the following:• Reviewing the periodic financial statements before presenting them to the Board of Directors, and recommending them to the Board of Directors in order to ensure the fairness and transparency of the financial reports.•Prepare and review risk management strategies and policies before they are approved by the Board of Directors, and ensure that these strategies and policies are implemented and that they are commensurate with the nature and size of the Company’s activities.•Recommending the appointment of an external office to conduct the internal audit activity.•Review and approve the audit plan proposed by the internal auditor.•Ensuring that the Company complies with relevant laws, policies, regulations and instructions.In conclusion, we would like to note that we, the members of the Audit Committee, are mindful of the tasks that are entrusted to us to the fullest.

Audit and Risk Management Committee Members:

Committee chairman/ Abdu-latif Ahmad Al Sanan

Abdul-Ellah Abdulla Al Mutawa

Dirar Mohamed Al Hamidi Nasser Ahamd Al Khader


Consolidated financial statements and independent auditors’ reportReal Estate Asset Management Company (REAM) – KPSC and SubsidiariesKuwait31 December 2017

Independent auditors’ report

Consolidated statement of profit or loss

Consolidated statement of profit or loss and other comprehensive income

Consolidated statement of financial position

Consolidated statement of changes in equity

Consolidated statement of cash flows

Notes to the consolidated financial statements

60

63

64

65

66

68

70

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

Impairment of investment properties (continued)Our audit procedures, included among others, reviewing the assumptions and methodologies used by the Group to determine impairment, if any, with regard to its investment properties. We reviewed the valuation reports of the ex-ternal independent valuators and compared them individually to the carrying value of the investment properties. We further reviewed the adequacy of the disclosures made in relation to the investment properties of the Group in note 12 to the consolidated financial statements.

Other Information included in the Group’s 2017 annual reportManagement is responsible for the other information. Other information consists of the information included in the Group’s 2017 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 ex-pect 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.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other infor-mation 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 mis-stated. 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 ConsolidatedFinancial Statements Management is responsible for the preparation and fair presentation of the consolidated financial statements in ac-cordance 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.

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 real-istic alternative but to do so.

Those Charged with Governance are responsible for overseeing the Group’s financial reporting process. Auditors’ 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 auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accor-dance 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.

INDEPENDENT AUDITORS’ REPORT



Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements (continued)As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to 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, mis-representations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are ap-propriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and relat-ed disclosures made by management.

• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast signifi-cant 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 auditors’ report to the related disclosures in the consolidated financial state-ments 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 auditors’ report. However, future events or conditions may cause the Group to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, 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 business activities 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.

We communicate with Those Charged with Governance regarding, among other matters, the planned scope and tim-ing 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 re-quirements 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 auditors’ 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 state-ments 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 Compa-nies Law No.1 of 2016 and its the Executive Regulations, as amended, or of the Parent Company’s Memorandum of Incorporation and Articles of Association, as amended, have occurred during the year ended 31 December 2017 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. Nayef M. Al-BazieLicence No. 50-A Licence No. 91-Aof Grant Thornton – Al-Qatami, Al-Aiban & Partners RSM Albazie & Co.

Kuwait28 March 2018

INDEPENDENT AUDITORS’ REPORT


IncomeOperating revenueDirect operating costsNet operating revenue Profit on deposits with Islamic financial institutionsGain on sale of investments at fair value through profit or lossGain/(loss) on sale of available for sale investmentsGain on sale of investment propertiesGain on sale of a subsidiaryDividend incomeReversal of provisions no longer requiredOther income

Expenses and other chargesGeneral, administrative and other expensesDepreciation and amortisation Provision for doubtful debtsFinance costsImpairment of goodwillImpairment of investment propertiesImpairment of available for sale investments

Profit for the year before contribution to KFAS, provision forNLST, provision for Zakat and board of directors’ remunerationContribution to Kuwait Foundation for the Advancement ofSciences (KFAS)Provision for National Labour Support Tax (NLST)Provision for ZakatBoard of directors’ remuneration

Profit for the year

Attributable to :Owners of the Parent CompanyNon-controlling interests

Basic and diluted earnings per share attributableto owners of the Parent Company (Fils)

Notes

88

127

9

14

12

22

10

Year ended 31 Dec.

2017KD

2,329,567(1,038,103) 1,291,464

9,863189,333138,524

1,074,980100,63633,37391,85213,554

2,943,579

(813,440) (36,448)(16,213)

(107,730)(200,000)(594,980)(204,690)

(1,973,501)

970,078

(8,783) (24,386) (9,754)

(24,000)

903,155

908,934 (5,779)903,155

8.74

Year ended 31 Dec.

2016KD

2,416,520(1,059,363)1,357,157

22,834-

(24,466)--

53,55540,91260,573

1,510,565

(543,395)(49,034)(17,879)(65,257)

---

(675,565)

835,000

(7,512)(18,301)(7,320)

(11,000)

790,867

790,78384

790,867

7.60

CONSOLIDATED STATEMENT OF PROFIT OR LOSS

The notes set out on pages 12 to 46 form an integral part of these consolidated financial statements.


Profit for the year

Other comprehensive income:Items that will be reclassified to consolidated statement of profitor loss in subsequent periods:Exchange differences arising on translation of foreign operationsRealisation of foreign currency translation reserve (note 7)Available for sale investments:-Net change in fair value during the year-Transferred to consolidated statement of profit or loss on impairment-Transferred to consolidated statement of profit or loss on saleTotal other comprehensive (loss)/incomeTotal comprehensive income for the year

Attributable to:Owners of the Parent CompanyNon-controlling interests

Year ended 31 Dec.

2017KD

903,155

-(34,490)

(85,023)97,706

(73,666)(95,473)807,682

813,461 (5,779)807,682

Year ended 31 Dec.

2016KD

790,867

740-

54,050-

62,078116,868907,735

907,65184

907,735


CONSOLIDATED STATEMENT OF ORLOSS AND PROFIT OR LOSS OTHER COMPREHENSIVE INCOME


CONSOLIDATED STATEMENT OF ORLOSS AND PROFIT OR LOSS OTHER COMPREHENSIVE INCOME

AssetsNon-current assetsGoodwillIntangible assetsProperty and equipmentInvestment propertiesAvailable for sale investmentsTotal non-current assetsCurrent assetsAccounts receivable and other assetsDue from real estate ownersInvestments at fair value through profit or lossDeposits with Islamic financial institutionsCash and cash equivalentsTotal current assetsTotal assetsEquity and liabilitiesEquityShare capital Share premiumShare options reserveTreasury sharesTreasury shares reserveLegal reserveVoluntary reserveCumulative changes in fair valueForeign currency translation reserveRetained earnings Equity attributable to owners of the Parent CompanyNon-controlling interestsTotal equityNon-current liabilitiesProvision for end of service benefitsCurrent liabilitiesIjara finance payablesMurabaha payablesDue to real estate ownersDue to related partiesAccounts payable and other liabilitiesProvision for lawsuitsTotal current liabilitiesTotal liabilitiesTotal equity and liabilities

Notes

111213

14

15

16

17

18

1919

20

21

Year ended 31 Dec.

2017KD

221,545112,59797,482

12,067,121846,680

13,345,425

3,526,299246,233

7,000,000-

484,44911,256,98124,602,406

10,450,0001,812,000

34,000(64,654)

1,2711,251,8181,131,584

(5,999)-

1,527,749 16,137,769

142,94216,280,711

337,742

-5,182,7221,112,234700,000930,271 58,726

7,983,9538,321,695

24,602,406

Year ended 31 Dec.

2016KD

421,545118,53793,318

13,011,5881,398,188

15,043,176

352,78223,526

-150,000

4,054,8444,581,152

19,624,328

10,450,0001,812,000

34,000(64,654)

1,2711,154,2321,033,998

54,98434,490

1,333,93615,844,257

148,72115,992,978

326,057

1,347,514-

1,041,865-

807,188108,726

3,305,2933,631,350

19,624,328

CONSOLIDATED STATEMENT OF FINANCIAL POSITION


Shlash H. M. Al-HajrafChairman

Ibrahim Ismail Al-Kandri Chief Executive Officer


CONSOLIDATED STATEMENT OFCHANGES IN EQUITY

Bala

nce a

s at 1

Janu

ary 2

017

Cash

divi

dend

(not

e 22)

Prof

it/(lo

ss) f

or th

e yea

r

Othe

r com

preh

ensiv

e los

s

for t

he ye

ar

Tota

l com

preh

ensiv

e (lo

ss)

/inco

mef

or th

e yea

r

Tran

sfer t

o re

serv

es

Balan

ce as

at 31

Dece

mber

2017

Non-

cont

rolli

ng

inte

rests

KD

148,7

21 -

(5,77

9) -

(5,77

9)

-

142,

942

Sub-

tota

l

KD

15,8

44,25

7

(519

,949)

908,9

34

(95,4

73)

813,4

61

-

16,1

37,7

69

Reta

ined

earn

ings

KD

1,333

,936

(519

,949)

908,9

34

-

908,9

34

(195

,172)

1,52

7,74

9

Fore

ign cu

rrenc

y tra

nslat

ion r

eser

ve

KD

34,4

90 - -

(34,

490)

(34,

490)

- -

Cum

ulat

ive ch

ange

s in

fair

valu

e

KD

54,9

84 - -

(60,

983)

(60,

983)

-

(5,9

99)

Volu

ntar

yre

serv

e

KD

1,033

,998

- - - -

97,58

6

1,13

1,58

4

Lega

lre

serv

e

KD

1,154

,232

- - - -

97,58

6

1,25

1,81

8

Trea

sury

shar

es

rese

rve

KD 1,27

1

- - - - -

1,27

1

Equi

ty a

ttri

buta

ble

to o

wne

rs o

f the

Par

ent C

ompa

nyKD

-

Trea

sury

shar

es

KD

(64,6

54)

- - - - -

(64,

654)

Shar

e opt

ions

re

serv

e

KD 34,00

0

- - - - -

34,0

00

Shar

epr

emiu

m

KD

1,812

,000

- - - - -

1,81

2,00

0

Shar

eca

pita

l

KD

10,45

0,000

- - - - -

10,4

50,0

00

Tota

l

KD

15,99

2,978

(519

,949)

903,1

55

(95,4

73)

807,6

82

-

16,2

80,7

11

The

note

s set

out

on

page

s 12

to 4

6 fo

rm a

n in

tegr

al p

art o

f the

se co

nsol

idat

ed fi

nanc

ial s

tate

men

ts.


Bala

nce

as at

1 Ja

nuar

y 20

16

Prof

it fo

r the

year

Othe

r com

preh

ensiv

e in

com

e

Tota

l com

preh

ensiv

e in

com

e

for t

he ye

ar

Chan

ge in

non

-con

trolli

ng

inte

rest

s

Tran

sfer

to re

serv

es

Balan

ce as

at 31

Dec

embe

r 201

6

Non-

cont

rolli

ng

inte

rests

KD

148,

652

84 - 84 (15) -

148,

721

Sub-

tota

l

KD

14,

936,

606

790,

783

116,

868

907,

651

- -

15,8

44,2

57

Reta

ined

earn

ings

KD

710,

137

790,

783

-

790,

783

-

(166

,984

)

1,33

3,93

6

Fore

ign cu

rrenc

y tra

nslat

ion r

eser

ve

KD 33,7

50 - 740

740 - -

34,4

90

Cum

ulat

ive ch

ange

s in

fair

valu

e

KD

(61,

144)

-

116,

128

116,

128

- -

54,9

84

Volu

ntar

yre

serv

e

KD

950,

506

- - - -

83,4

92

1,03

3,99

8

Lega

lre

serv

e

KD

1,07

0,74

0

- - - -

83,4

92

1,15

4,23

2

Trea

sury

shar

es

rese

rve

KD 1,27

1

- - - - -

1,27

1

Equi

ty a

ttri

buta

ble

to o

wne

rs o

f the

Par

ent C

ompa

nyKD

-

Trea

sury

shar

es

KD

(64,

654)

- - - - -

(64,

654)

Shar

e opt

ions

re

serv

e

KD 34,0

00 - - - - -

34,0

00

Shar

epr

emiu

m

KD

1,81

2,00

0

- - - - -

1,81

2,00

0

Shar

e ca

pita

l

KD

10,4

50,0

00

- - - - -

10,4

50,0

00

Tota

l

KD

15,0

85,2

58

790,

867

116,

868

907,

735

(15) -

15,9

92,9

78

The

note

s set

out

on

page

s 12

to 4

6 fo

rm a

n in

tegr

al p

art o

f the

se co

nsol

idat

ed fi

nanc

ial s

tate

men

ts.


OPERATING ACTIVITIESProfit for the year before contribution to KFAS, provision for NLST, provision for Zakat and board of directors’ remunerationAdjustments:Depreciation and amortisationGain on sale of investments at fair value through profit or loss(Gain)/loss on sale of available for sale investmentsProfit on deposits with Islamic financial institutionsDividend incomeGain on sale of investment propertiesGain on sale of property and equipmentProvision for doubtful debtsReversal of provisions no longer requiredFinance costsProvision for end of service benefitsImpairment of goodwillImpairment of investment propertiesImpairment of available for sale investmentsGain on sale of a subsidiary

Changes in operating assets and liabilities:Accounts receivable and other assetsDue from/to real estate ownersPurchase of investments at fair value through profit or lossAccounts payable and other liabilitiesBoard of directors’ remuneration paidEnd of service benefits paidNet cash (used in)/from operating activities

INVESTING ACTIVITIESProceeds from deposits with Islamic financial institutionsProfit received on deposits with Islamic financial institutionsProceeds from sale of available for sale investmentsAdditions of investment propertiesProceeds from sale of investment propertiesAdditions of property and equipmentProceeds from sale of property and equipmentProceeds from sale of a subsidiaryDividends income received Net cash from investing activities

Year ended 31 Dec.

2017KD

970,078

209,619(189,333)(138,524)

(9,863) (33,373)

(1,074,980)-

16,213(91,852)107,73060,480

200,000594,980204,690

(100,636)725,229

(3,140,785) (152,338)

(7,000,000)104,636(11,000)(42,282)

(9,516,540)

150,0008,271

566,359(5,297,956)6,926,801(37,886)

-390,82533,373

2,739,787

Year ended 31 Dec.

2016KD

835,000

309,930-

24,466(22,834)(53,555)

-(69)

17,879(40,912)65,25761,164

----

1,196,326

28,609(791,099)

-(48,354)(24,000)

(163,902)197,580

-22,834

189,860--

(34,666)120

-53,555

231,703

CONSOLIDATED STATEMENT OF CASH FLOWS


FINANCING ACTIVITIES

Repayment of Ijara finance payables

Proceeds from Murabaha payables

Finance costs paid

Cash dividends paid

Change in non-controlling interests

Net cash from/(used in) financing activities

Net (decrease)/increase in cash and cash equivalents

Cash related to disposed subsidiary

Cash and cash equivalents at beginning of the year

Cash and cash equivalents at end of the year

Notes

16

Year ended 31 Dec.

2017KD

(1,347,514)

5,146,540

(71,548)

(519,949)

-

3,207,529

(3,569,224)

(1,171)

4,054,844

484,449

Year ended 31 Dec.

2016KD

(148,051)

-

(66,923)

-

(15)

(214,989)

214,294

-

3,840,550

4,054,844



1 Incorporation and activities of the Parent CompanyReal Estate Asset Management Company (REAM) - KPSC (“the Parent Company”) was incorporated and authenticat-ed 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 Boursa Kuwait. 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, supermarkets, commercial and industrial exhibitions and its related legal aspects.− Rental and renting of real estate or commercial, residential, and industrial complexes.− To carry out various civil, electrical, sanitary and mechanical maintenance and the execution of its various com mitments including 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 parent company.− To act as an intermediary or as a broker for buying and selling real estate, and commercial, residential or indus trial projects.− Importing and exporting equipment, tools and materials relating to the above items.− Managing the execution of real estate projects.− To undertake security tasks.− Acquisition, buying and selling real estate companies’ shares and bonds for the parent company inside and out side Kuwait.− Acquisition, development and selling properties and lands for the parent company, inside and outside Kuwait, in addition to the 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 portfo lios managed by specialized companies and parties.− Representing companies of similar objectives to that of the parent company inside and outside Kuwait.− Direct investment for erecting the infrastructure of areas and projects whether residential, commercial, industri al or environmental, 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 invest ments.− Acquisition and management of hotels, health clubs and touristic sites including renting and leasing.− Management, operating, investing, renting and leasing hotels, clubs, motels, hotel residences, hostels, picnic areas, gardens, 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 associat ed 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 Ministry.− Launching real estate auctions in accordance with the Ministry’s regulations;− Acquisition and management of commercial and residential complexes;− Managing, establishing and acquiring real estate companies and companies with similar objectives to that of the parent company.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1 Incorporation and activities of the Parent Company (continued)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 Parent Company’s registered address is P.O. Box 29910, Al-Safat 13153, State of Kuwait.

The Parent Company has amended its articles in accordance with Law No. (1) of 2016.

The consolidated financial statements were authorized for issue by the Board of Directors on 28 March 2018. The shareholders’ general assembly of the Parent Company has the power to amend these consolidated financial state-ments after issuance.

2 Basis of preparation The consolidated financial statements of the Group have been prepared under historical cost convention except for available for sale investments and investments at fair value through profit or loss 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.

The Group has elected to present the “statement of comprehensive income” in two statements: the “statement of profit or loss” and the “statement of profit or loss and other comprehensive income”.

3 Statement of complianceThese consolidated financial statements have been prepared in accordance with the International Financial Report-ing Standards (“IFRS”) promulgated by the International Accounting Standards Board (“IASB”), and Interpretations issued by the International Financial Reporting Interpretations Committee (“IFRIC”) of the IASB.

4 Changes in accounting policies

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 2017 which have been adopted by the Group. Information on these new standards is presented below:parent company.

Standard or Interpretation Effective for annual periods beginning IAS 7 Statement of Cash Flows- Amendments 1 January 2017Annual Improvements to IFRSs 2014-2016 Cycle 1 January 2017

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).


4 Changes in accounting policies (continued)

4.1 New and amended standards adopted by the Group (continued)

IAS 7 Statement of Cash Flows- Amendments (continued)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 need ed to satisfy this requirement;• suggest a number of specific disclosures that may be necessary in order to satisfy the above requirement, includ ing: o changes in liabilities arising from financing activities caused by changes in financing cash flows, foreign exchange rates or fair values, or obtaining or losing control of subsidiaries or other businesses; o a reconciliation of the opening and closing balances of liabilities arising from financing activities in the statement of financial position including those changes identified immediately above.

The Group’s liabilities arising from financing activities comprise of Ijara finance payables and Murabaha payables. There were no material non-cash transactions on those accounts and accordingly, no separate disclosure was made in those consolidated financial statements. Apart from these additional disclosures the application of the amend-ments did not have any impact on the consolidated financial statements of the Group.

Annual Improvements to IFRSs 2014-2016 CycleAmendments to IFRS 12 - Clarifies the scope of IFRS 12 by specifying that its disclosure requirements (except for those in IFRS 12. B10-B16) apply to an entity’s interests in a subsidiary, joint venture or an associate 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.

The application of the amendments did not have any impact on the consolidated financial statements of the Group as none of the Group entities are classified as, or included in disposal Group that is classified as held for sale.

4.2 IASB Standards issued but not yet effectiveAt the date of authorisation of this consolidated financial information, 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’ accounting poli-cies 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 issued but are not expected to have a material impact on the Group’s consolidated financial information.

Standard or Interpretation Effective for annual periods beginning IFRS 2 Share-based Payment- 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 2018parent company.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)




4.2 IASB Standards issued but not yet effective (continued)

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 2;• The 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 pay ment that changes the classification of the transaction from cash-settled to equity-settled.

Management does not anticipate that the application of the amendments in the future will have a significant 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.

The main areas of expected impact are as follows: • the classification and measurement of the financial assets 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 irrevoca ble 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 pre sented in other comprehensive income to the extent those changes relate to own credit risk.

IFRS 9 contains three principal classification categories for financial assets: measured at amortised cost, fair value through other comprehensive income (FVOCI) and Fair value through profit or loss (FVTPL). The standard eliminates the existing IAS 39 categories of held to maturity, loans and receivables and available for sale.

Further, the gains and losses on subsequent measurement of debt type financial instruments measured at Fair Value Through Other Comprehensive Income (FVOCI) will be recognised in equity and will be recycled to profit or loss on derecognition or reclassification.




IFRS 9 Financial Instruments (continued)

The Group will apply IFRS 9 retrospectively and recognize any difference between the previous carrying amount and the carrying amount as at 1 January 2018 in opening retained earnings. The Group will not restate prior periods.

Management of the Group is in the process of assessing the impact of adopting this standard on its consolidated financial statements.

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 custom-ers.

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 individu al 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. perfor mance-based) pricing, and introducing an overall constraint on revenue;• Time value – when to adjust a contract price for a financing component;• Specific issues, including – o non-cash consideration and asset exchanges o contract costs o rights of return and other customer options o supplier repurchase options o warranties o principal versus agent o licencing o breakage o non-refundable upfront fees, and o consignment and bill-and-hold arrangements.





IFRS 15 Revenue from Contracts with Customers (continued)Upon adoption of IFRS 15, the Group will apply the cumulative effect approach by retrospectively adjusting retained earnings on 1 January 2018. The Group will not restate prior periods.

Based on the current available information, management does not anticipate that the adoption of this standard will have a material impact on the Group’s 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 informa-tion. 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 pro vides 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; and• 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.






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.Management does not anticipate that the application of the amendments in the future will have a significant impact on the Group’s consolidated financial statements.

5 Significant accounting policies 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

Amlak Real Estate Services and Consulting Co. – KSC (Closed)REAM UK Limited

Amlak Integrated Projects – WLL

Country of incorporation

Kuwait

United KingdomSultanate of Oman

Percentage of ownership

2017

75%

100%-

2016

75%

100%-

Principal activities

Brokerage

Real estateReal 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.

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



5 Significant accounting policies (continued)

5.2 Business combinations 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 transac-tion. 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.

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 as-set 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 classifi-cation 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 con-solidated 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.




5.2 Business combinations (continued)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 ser-vices 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 reve-nue 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 Profit from sale of investment propertiesGain 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 similar income 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 Profit from deposits with Islamic financial institutionsIncome from deposits with Islamic financial institutions and income from investment in cash in a portfolio is recog-nized on a time-proportion basis using the effective rate of return method.




5.5 Operating expensesOperating expenses are recognised in the consolidated statement of 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 capital-ised 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 di-rectly 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 accumulated 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 and 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 amor-tisation and any accumulated impairment losses. The useful life and amortisation method are reviewed periodically to ensure that the method and period of amortisation 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 accumulat-ed 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 amortisation and impairment losses. Amortisation is calculated based on straight line meth-od over the asset’s useful life which is estimated at 25 years.




5.8 Intangible assets (continued)

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 estimated at 3 years. 5. 9 Investment propertiesInvestment property, which are property held to earn rentals and/or for capital appreciation, is measured initially at cost, including transaction costs. Freehold land is carried at cost, which is deemed to have an indefinite life; accord-ingly, it is not subject to depreciation.

Subsequent to initial recognition, investment property other than land is measured at cost less accumulated de-preciation, 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 devel-opment. 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.

Properties under developmentProperties under development are carried at cost less any impairment in value. Cost represent any expenses in-curred by the Group that are directly attributable to the development of the asset.

The carrying value of properties under development is reviewed for impairment when events or changes in cir-cumstances indicate that carrying value may not be recoverable. If any such indication exists, the assets are written down to their recoverable amounts.

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 indepen-dent 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.




5.10 Impairment testing of goodwill and non-financial assets (continued)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 as-sessment of respective 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 recover-able 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 provi-sions 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 (a) The Group has transferred substantially all the risks and rewards of the asset or (b) The Group has neither transferred nor retained substantially all risks and rewards of the asset, but has trans ferred control of the asset.

When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass- through ar-rangement, 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.




5.11 Financial instruments (continued)

5.11.1 Recognition, initial measurement and derecognition (continued)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 carry-ing 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:

• Loans and receivables• Financial assets at fair value through profit or loss (FVTPL).• 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.

• Loans and receivablesReceivables 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 classi-fied 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:

• Accounts receivable and other assetsAccounts 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 assets”.





5.11.2 Classification and subsequent measurement of financial assets (continued)

• Due from real estate ownersDue from real estate owners represent financial assets originated by the Parent Company by providing service di-rectly to those related parties that have fixed or determinable payments and are not quoted in an active market.

• Cash and cash equivalents Cash and cash equivalents comprise of cash on hand, bank balances and cash in a portfolio less than three months which are subject to an insignificant risk of changes in value.

• Financial assets at FVTPLClassification of investments as financial assets at FVTPL depends on how management monitors the performance of these investments. When they are not classified as held for trading but have readily available reliable fair values and the changes in fair values are reported as part of statement of profit or loss in the management accounts, they are as designated at FVTPL upon initial recognition.

All derivative financial instruments fall into the category of FVTPL, except for those designated and effective as hedg-ing instruments, for which the hedge accounting requirements apply.

Assets in this category are measured at fair value with gains or losses recognised in statement of profit or loss. The fair values of financial assets in this category are determined by reference to active market transactions or using a valuation technique where no active market exists. Assets in this category are classified as current assets if expected to be settled within 12 months; otherwise, they are classified as non-current.

• AFS financial assetsAFS 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. Im-pairment charges are recognised in profit or loss. All other AFS financial assets are measured at fair value.

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 reclassifi-cation 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 finan-cial 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 occur-ring after the impairment loss was recognised.





5.11.2 Classification and subsequent measurement of financial assets (continued)

• AFS financial assets (contiuned0AFS 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, murabaha payables, due to real estate owners, due to related parties and accounts payable and other liabilities.

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 lossThese 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 and Murabaha payableIjara finance payables/Murabaha payables represent amounts payable on a deferred settlement basis for assets purchased under Ijara/Murabaha arrangements. Ijara finance payables/Murabaha 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.

All the profit-related charges are included within finance costs.

• Due to real estate ownersDue to real estate owners represent financial assets or liabilities originated by the Parent Company as a result of pro-viding real estate management services directly to real estate owners.

• Due to related partiesDue to related parties represent financial liabilities originated by the related party by providing service to the Parent Company that have fixed or determinable payments and are not quoted in an active market.

• Accounts payables and other liabilitiesAccounts payables and other 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.

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.

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 fi-nancial 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.

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

Legal 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 transla-tion of financial statements of the Group’s foreign entities into KD.• Cumulative change in fair value – 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 Company are recorded separately within equity.

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




5.13 Provisions, contingent assets and contingent liabilities (continued)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 set-tlement 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 ex-tent of the credit balance on that account. Any excess losses are charged to retained earnings then to the voluntary reserve and legal 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 finan-cial 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 cur-rency 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 retrans-lated 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 Foreign currency translation (continued)

5.16.3 Foreign operations In the Group’s financial statements, all assets, liabilities and transactions of Group entities with a functional curren-cy 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. Good-will and fair value adjustments arising on the acquisition of a foreign entity have been treated as assets and liabili-ties 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 benefitsThe 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.

In addition to the end of service benefits, with respect to its Kuwaiti national employees, the Group makes contribu-tions to the Public Institution for Social Security calculated as a percentage of the employees’ salaries.

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 calcula-tion based on the Foundation’s Board of Directors’ resolution, which states that income from associates and subsid-iaries and transfer to legal 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 resolu-tion No. 58/2007 effective from 10 December 2007.

5.19 Related party transactionsRelated parties consist of directors, executive officers, their close family members and companies which they are principal owners. All related party transactions are approved by management.



6 Significant management judgements and estimation uncertainty The preparation of the Group’s consolidated financial statements requires management to make judgments, esti-mates and assumptions that affect the reported amount of revenues, expenses, assets and liabilities and the disclo-sure 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 judg-ments, 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 comprehen-sive 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 sub-sequently 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 ap-preciation, or for undetermined future use. And if such properties are under development they are classified under investment properties under development



6 Significant management judgments and estimation uncertainty (continued)

6.1 Significant management judgments (continued)

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 measure-ment 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 as-sets) The carrying amounts of the Group’s non-financial assets are reviewed at each reporting date to determine wheth-er 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.

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.



6 Significant management judgments and estimation uncertainty (continued)

6.2 Estimation uncertainty (continued)

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 observ-able, 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 Gain on sale of a subsidiaryDuring the year, the Parent Company sold 100% of its shareholding in “Amlak Integrated Projects Company - W.L.L.” (Oman) for a consideration of KD390,825 and waiver of the amount due to the Parent Company by the subsidiary.

The details of the sold subsidiary’s assets and liabilities are as follows:

Assets- Investment properties- Cash and cash equivalents

Liabilities- Due to related parties- Accounts payables and other liabilitiesNet assets disposed Fair value of consideration receivedWaiver of amount due from subsidiaryNet consideration givenGain on sale of subsidiaryRealisation of foreign currency translation reserveNet gain on sale of a subsidiary

2017KD

325,6651,171

(636,776)(2,157)

(312,097)390,825

(636,776)(245,951)

66,14634,490

100,636

The revenue and net loss generated by this subsidiary amounted to KD Nil and KD818 respectively (31 December 2016: KD Nil and KD1,073 respectively).



Revenue from services rendered:- Property management - Maintenance services- Security services - Brokerage servicesRental from properties

Staff costs Other expenses

Profit for the year attributable to the owners of the Parent Company (KD)Weighted average number of outstanding shares (excluding treasury shares)Basic and diluted earnings per share attributable to the owners of the Parent Company (Fils)

RevenueKD

927,124153,946107,848162,023978,626

2,329,567

351,659461,781813,440

908,934103,989,883

8.74

Year ended 31 Dec. 2017


KD


KD



KD


KD

Direct costsKD

243,424280,95779,70239,488

394,5321,038,103

RevenueKD

923,274107,852131,91428,806

1,224,6742,416,520

352,646190,749543,395

790,783103,989,883

7.60

Direct costsKD

252,980263,958107,48219,095

415,8481,059,363

8 Operating revenue / direct operating costs

9 General, administrative & other expenses

10 Basic and diluted earnings per share attributable to the owners of the Parent Company

Direct operating costs include staff costs of KD471,868 (31 December 2016: KD526,383) and depreciation expenses charged for investment properties amounting to KD169,957 (31 December 2016: KD258,976).

Basic 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:



11 Property and equipment

31 December 2017CostAt beginning of the yearAdditionsAt end of the year

Accumulated depreciationAt beginning of the yearCharge for the yearAt end of the year

Net book value At end of the year

31 December 2016CostAt beginning of the yearAdditionsDisposals At end of the year

Accumulated depreciationAt beginning of the yearCharge for the yearRelating to disposals At end of the year


Direct operating costs Expenses and other charges

3,21430,50833,722


KD


KD

1,92043,09445,014

TotalKD

520,24337,886

558,129

426,92533,722

460,647

97,482

487,34734,666(1,770)520,243

383,63045,014(1,719)426,925

93,318

VehiclesKD

4,375-

4,375

4,374-

4,374

1

4,375--

4,375

4,140234

-4,374

1

ComputersKD

268,5917,273

275,864

219,06520,903

239,968

35,896

265,1773,414

-268,591

193,61125,454

-219,065

49,526

Equipment & electrical tools

KD

90,2733,251

93,524

80,7863,001

83,787

9,737

87,8373,035(599)

90,273

76,2905,094(598)

80,786

9,487

FurnitureKD

157,00427,362

184,366

122,7009,818

132,518

51,848

129,95828,217(1,171)157,004

109,58914,232(1,121)122,700

34,304

The depreciation charged for the year was distributed as follows:



31 December 2017CostAt beginning of the yearAdditionsDisposalsDe-recognition on disposal of a subsidiary (note 7)At end of the year

Accumulated depreciation and impairmentAt beginning of the yearCharge for the yearImpairment lossRelated to disposalsAt end of the year


31 December 2016CostAt beginning of the yearForeign currency exchange differencesAt end of the year

Accumulated depreciationAt beginning of the yearCharge for the yearAt end of the year


LandKD

6,922,5032,600,000

(2,173,728)(325,665)7,023,110

--

269,916-

269,916

6,753,194

6,919,6842,819

6,922,503

---

6,922,503

BuildingsKD

7,619,221-

(6,267,586)-

1,351,635

1,530,136169,957

-(1,439,493)

260,600

1,091,035

7,619,221-

7,619,221

1,271,160258,976

1,530,136

6,089,085

Properties under

developmentKD

-4,547,956

--

4,547,956

--

325,064-

325,064

4,222,892

---

---

-

TotalKD

14,541,7247,147,956

(8,441,314)(325,665)

12,922,701

1,530,136169,957594,980

(1,439,493)855,580

12,067,121

14,538,9052,819

14,541,724

1,271,160258,976

1,530,136

13,011,588

12 Investment properties

The depreciation charged for the year was included within direct operating costs.a) The fair value of the investment properties at the date of the consolidated statement of financial position was estimated to be KD13,123,892 (31 December 2016: KD16,529,313). The fair value of the local properties was deter-mined based on valuations obtained from two independent valuators, who are specialised in valuing these types of investment properties. One of these valuator is a local bank and the other is a local reputable valuator. The fair value of the foreign properties was determined based on valuations obtained from two independent valuators. The signif-icant inputs and assumptions are developed in close consultation with management. The valuations are primarily based on 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. When the market comparison ap-proach 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 (2016: 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.



13 Available for sale investments

12 Investment properties (continued)

b) Investment properties with a carrying value of KD5,444,229 are secured against murabaha payables (note 20). c) During the year, the Group purchased a plot of land for KD4,547,956 in the UK for the purpose of development which is registered in the name of a subsidiary, REAM UK Limited. d) During the year, the Parent Company entered into an agreement with a related party to sell a local investment property with a carrying value of KD260,710 for a total consideration of KD1,150,000, resulting in a net gain of KD889,290. Under the same agreement, the Parent Company acquired a local investment property with a value of KD2,600,000 from the related party. Under the same agreement, the Parent Company settles the purchase consideration to the related party by way of KD885,000 in cash (out of which KD750,000 was paid during the year). In addition, the parties are required to assume certain bank liabilities associated with the investment properties. However, as the bank formalities were not completed by the reporting date, the Group recognised a net liability of KD700,000 as amount due to related party. Subsequent to the reporting date, bank formalities were completed. e) During the year, the Parent Company sold investment properties in United Arab Emirates for a total consideration of KD6,926,801 resulting in a gain of KD185,690.

13 Available for sale investments (continued)

It was not possible to reliably measure the fair value of investments amounting to KD428,777 (31 December 2016: KD648,761) due to non-availability of a reliable method that could be used to determine the fair value of such in-vestments. Accordingly, these are stated at their cost less impairment losses, if any. Management is not aware of any circumstances that would indicate any impairment in the value of these investments as of the reporting date.

Investments in unquoted securities- Local - Foreign

Investments in managed funds - LocalInvestments in managed portfolios- Local quoted- Real estate portfolios- Foreign unquoted

31 Dec. 2017KD

124,17516,776

140,951

6,773

-7,102

691,854698,956846,680

31 Dec. 2016KD

182,07516,776

198,851

8,696

230,209104,503855,929

1,190,6411,398,188



Trade receivables (a)Accrued rentPrepaid expensesStaff receivables Retention against bank guaranteesRefundable depositsAdvances to purchase investment properties (b)Other debit balances

Provision for doubtful debts (c)

20172016

31 Dec. 2017KD

199,942332,40133,42744,57436,01452,567

2,977,675255,429

3,932,029(405,730)3,526,299

Impaired

173,929178,359

31 Dec. 2016KD

185,695274,61328,51237,06335,80952,686

-145,231759,609

(406,827)352,782

Total

199,942185,695

Past due but not impaired More than 90 days

26,0137,336

Neither past due nor impaired Less than 90 days

--

14 Accounts receivable and other assets

a) Trade receivables are non-interest bearing and are generally due within 90 days. The aging analysis of these trade receivables is as follows:

As of 31 December 2017, trade receivables amounting to KD173,929 (2016: KD178,359) were impaired and provided for. The remaining provision for doubtful debts amounting to KD231,801 (2016: KD228,468) were provided against certain past due accrued income balances and other debit balances. The Group expects to recover a portion of these receivables.

b) During the year, the Parent Company signed an agreement to purchase a local investment property for a total consideration of KD2,785,000 and assume liabilities on the property amounting to KD6,000,000. The Parent Com-pany transferred KD2,880,000 to the seller during the year and recognised this amount under advances to purchase investment properties as the ownership of the property was not transferred as of the reporting date.



94

14 Accounts receivable and other assets (continued)

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

17 Share capital

The share capital of the Parent Company consists of 104,500,000 shares with a par value of 100 Kuwaiti fils per share (2016: 104,500,000 shares with a par value of 100 Kuwaiti fils per share) and all shares are paid up in cash.

15 Investments at fair value through profit or loss

16 Cash and cash equivalents

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

This represents investments in a portfolio in an unquoted foreign investment managed by a related party.

This represents investments in a portfolio in an unquoted foreign investment managed by a related party.

Balance at the beginning of the yearCharge for the yearProvision no longer required Write off during the yearBalance at the end of the year

Investments in managed portfolio- Unquoted securities

Cash in handCash at banks

31 Dec. 2017KD

406,82716,213

-(17,310)405,730

31 Dec. 2017KD

7,000,0007,000,000

31 Dec. 2017KD

86,858397,591484,449

31 Dec. 2016KD

397,44817,879(8,500)

-406,827

31 Dec. 2016KD

--

31 Dec. 2016KD

95,8593,958,9854,054,844



95

Number of treasury shares (share)Percentage of treasury shares to paid up capital (%)Market value (KD) Cost (KD)

31 Dec. 2017

510,1170.49

169,35964,654

31 Dec. 2016

510,1170.49

99,98364,654

18 Treasury shares

21 Accounts payable and other liabilities

19 Reserves

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 Par-ent Company may resolve to discontinue such annual transfers when the reserve equals 50% of the share capital. This reserve is not available for distribution except in circumstances stipulated by the Law and the Parent Compa-ny’s Articles of Association.

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), pro-vision for Zakat and board of directors’ remuneration is transferred to the voluntary reserve. Such annual transfers may be discontinued by a resolution of the shareholders’ general assembly upon recommendation by the board of directors. There are no restrictions on distribution of voluntary reserve.

20 Murabaha payables

Murabaha payables represent short term murabaha facilities with a local Islamic bank at profit margin of 2% per an-num over Central Bank of Kuwait discount rate. The murabaha payables are secured against investment properties with a carrying value of KD5,444,229 (note 12).

Trade payables Retention payableStaff payables Income received in advance Accrued expensesAccrued leave Refundable rental depositsProvision for Kuwait Foundation for the Advancement of SciencesProvision for National Labour Support Tax Provision for ZakatOther credit balances

31 Dec. 2017KD

310,39146,2475,3001,183

73,38072,942

219,7008,783

24,3869,754

158,205930,271

31 Dec. 2016KD

187,24738,1925,994

66,790175,89264,277

104,1137,512

18,3017,320

131,550807,188



96

• The Group enters into transactions with various real estate owners on whose behalf it manages their properties.

22 Proposed dividends & Annual General Assembly

Subsequent to the reporting date, the board of directors proposed to distribute cash dividend of 5 Fils per share and directors’ remuneration of KD24,000 for the year ended 31 December 2017. This proposal is subject to the approval of the general assembly and the regulatory authorities.

The ordinary general assembly of shareholders held on 23 April 2017 approved the consolidated financial state-ments for the year ended 31 December 2016, the directors’ proposal to distribute cash dividends of 5 Fils per share equivalent to KD519,949 and to pay the board of directors an amount of KD42,000 as remuneration for the year ended 31 December 2016. Board of directors’ remuneration amounting to KD11,000 was recorded in the consoli-dated statement of profit or loss for the year ended 31 December 2016, and the remaining amount of KD31,000 was recorded in the consolidated statement of profit or loss for the current year under General, administrative and other expenses.

23 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:

Included in consolidated statement of financial positionInvestments at fair value through profit or loss (note 15) Due from real estate owners (major shareholders)*Due to real estate owners (major shareholders)*Due to related parties

Included in consolidated statement of profit or lossOperating revenue*Direct operating costs Gain on sale of investment propertiesGain on sale of investments at fair value through profit or lossGeneral, administrative and other expenses (rent expenses)

Benefits of key management personnelShort-term employee benefitsBoard of directors’ remuneration and other compensationOther long-term benefits

31 Dec. 2017KD

7,000,00018,663

493,368700,000

Year ended31 Dec. 2017

KD

336,831 202,098 889,290189,333

7,584

69,000 105,000

5,621

31 Dec. 2016KD

-17,045

348,516

Year ended31 Dec. 2016

KD

478,029332,708

--

7,584

63,20211,0004,819



24 S

egm

ent r

epor

ting

The

Grou

p is

div

ided

into

ope

ratio

nal d

ivis

ions

to m

anag

e its

var

ious

line

s of b

usin

ess.

The

Par

ent C

ompa

ny’s

man

agem

ent h

as c

lass

ified

the

Grou

p’s s

ervi

ces

into

the

follo

win

g bu

sine

ss se

gmen

ts:

• Re

al e

stat

e m

anag

emen

t ope

ratio

ns: r

epre

sent

ed in

the

man

agem

ent a

nd le

asin

g of

real

est

ate.

• In

vest

men

t ope

ratio

ns: r

epre

sent

ed in

real

est

ate

inve

stm

ent a

nd in

vest

men

ts in

shar

es.

• Pr

oper

ty b

roke

rage

ope

ratio

ns: r

epre

sent

ed in

real

est

ate

brok

erag

e se

rvic

es su

ch a

s sal

e an

d pu

rcha

se o

f rea

l est

ate

prop

ertie

s.

Ther

e ar

e no

inte

r-se

gmen

tal t

rans

actio

ns. T

hese

div

isio

ns a

re th

e ba

sis o

n w

hich

the

Grou

p pr

esen

ts it

s sig

nific

ant s

egm

ent i

nfor

mat

ion,

and

it is

as f

ollo

ws:

Segm

ents

ope

ratin

g re

venu

eSe

gmen

ts re

sults

Una

lloca

ted

item

s:Pr

ofit

on d

epos

its w

ith Is

lam

ic fi

nanc

ial i

nstit

utio

nsRe

vers

al o

f pro

visi

ons n

o lo

nger

requ

ired

Oth

er In

com

eO

ther

non

-ope

ratin

g ex

pens

esFi

nanc

e co

sts

Impa

irmen

t of g

oodw

illKF

AS, N

LST,

Zak

at a

nd d

irect

ors’

rem

uner

atio

nPr

ofit

for t

he y

ear

Addi

tiona

l inf

orm

atio

n:

Segm

ent a

sset

sSe

gmen

t lia

bilit

ies

Depr

ecia

tion

and

amor

tisat

ion

Prop

erty

bro

-ke

rage

ope

ra-

tions

KD

28,8

069,

711

658,

804

61,3

43

5,94

0

Inve

stm

ent

oper

atio

nsKD -

29,0

89

14,9

82,5

32

1,34

8,58

1 25

8,97

6

Real

est

ate

man

agem

ent

oper

atio

nsKD

2,38

7,71

41,

347,

446

3,98

2,99

2 2,

221,

426

45,0

14

Tota

lKD

2,32

9,56

72,

028,

640

9,86

391

,852

13,5

54(8

66,1

01)

(107

,730

)(2

00,0

00)

(66,

923)

903

,155

24,6

02,4

06 8

,321

,695

20

9,61

9

Prop

erty

bro

ker-

age

oper

atio

nsKD

162,

023

122,

535

481,

881

61,6

635,

940

Inve

stm

ent

oper

atio

nsKD -

737,

176

22,9

58,8

09

5,88

2,72

2 16

9,95

7

Real

est

ate

man

agem

ent

oper

atio

nsKD

2,16

7,54

4 1

,168

,929

1,16

1,71

6 2,

377,

310

33,7

22

Year

end

ed 3

1 De

cem

ber 2

017

Year

end

ed 3

1 De

cem

ber 2

016

Tota

lKD

2,41

6,52

01,

386,

246

22,8

3440

,912

60,5

73(6

10,3

08)

(65,

257)

-(4

4,13

3)79

0,86

7

19,6

24,3

283,

631,

350

309,

930



US DollarAEDOmani RiyalGBP

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

b) Interest rate 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 is charged to profit or loss on Islamic financing as Ijara and on Murabaha (refer note 20).

31 Dec. 2017KD

109,842 112,543

1,123 37,519

31 Dec. 2016KD

204,964 1,132,498

1,025 40,167

25 Risk management objectives and policies

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

The Parent Company’s board of directors are ultimately responsible for the overall risk management and for ap-proving 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 specula-tive purposes.

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

25.1 Market risk

a) 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 state of Kuwait, GCC and United Kingdom 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 hedg-ing activity is undertaken.

The Group had the following exposures denominated in foreign currencies, translated into Kuwaiti Dinar at the closing rate:



Accounts receivable and other assetsDue from real estate ownersDeposits with Islamic financial institutionsBank balances

31 December 2017Financial liabilitiesMurabaha payablesDue to real estate owners Due to related partiesAccounts payable and other liabilities

31 Dec. 2017KD

3,492,872246,233

-397,591

4,136,696

Up to 1 monthKD

2,934,7211,112,234

-79,863

4,126,818

1-3 monthsKD

2,274,329-

700,000647,014

3,621,343

3-12 monthsKD

---

203,394203,394

1-5 YearsKD

-----

TotalKD

5,209,0501,112,234700,000930,271

7,951,555

31 Dec. 2016KD

324,27023,526

150,0003,958,9854,456,781

Financial risk management (continued)

25.1 Market risk (continued)

c) Price riskThis is a risk that the value of financial instruments will fluctuate as a result of changes in market prices, whether these changes are caused by factors specific to individual instrument or its issuer or factors affecting all instruments, traded in the market. Some of the Group’s investments are listed on the Kuwait Stock Exchange. However, the Group is not exposed to any significant equity price risk as a possible reasonable change in equity prices will not have a significant impact on the consolidated financial statement of the Group.

25.2 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:

25.3 Liquidity risk

Liquidity risk is the risk that the Group will be unable to meet its liabilities when they fall due. To limit this risk, 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:



31 December 2016Financial liabilitiesIjara finance payables Due to real estate owners Accounts payable and other credit balances

At 31 December 2017Available for sale investmentsAccounts receivable and other assetsDue from real estate ownersInvestments at fair value through profit or lossCash and cash equivalents

At 31 December 2016Available for sale investments Accounts receivable and other assetsDue from real estate ownersDeposits with Islamic financial institutionsCash and cash equivalents

Up to 1 monthKD

-416,746

-416,746

GCCKD

576,1573,492,872246,233

-484,449

4,799,711

963,589324,27023,526

150,0004,054,8445,516,229

1-3 monthsKD

--

632,188632,188

EuropeKD

200,687--

7,000,000-

7,200,687

315,678----

315,678

3-12 monthsKD

1,392,709 625,119 175,0002,192,828

USAKD

69,836----

69,836

118,921----

118,921

1-5 YearsKD

----

TotalKD

1,392,7091,041,865807,188

3,241,762

TotalKD

846,6803,492,872246,233

7,000,000484,449

12,070,234

1,398,188324,27023,526

150,0004,054,8445,950,828

Financial risk management (continued)

25.3 Liquidity risk (continued)

25.4 Concentration of financial assets

The distribution of financial assets by geographic region is as follows:

26 Financial assets and liabilities

26.1 Categories of financial assets and liabilitiesThe carrying amounts of the Group’s financial assets and liabilities as stated in the consolidated statement of finan-cial position may also be categorized as follows:



Financial assetsAvailable for sale investments- At fair value- At cost less impairment, if any

Investments at fair value through profit or loss- Designated on initial recognition

Receivables (at amortised costs):- Accounts receivable and other assets - Due from real estate owners - Deposits with Islamic financial institutions- Cash and cash equivalents

Total financial assets

Financial liabilities (at amortised costs) :- Ijara finance payables - Murabaha payable - Due to real estate owners - Due to related parties- Accounts payable and other liabilitiesTotal financial liabilities

31 Dec. 2017KD

417,903428,777846,680

7,000,000

3,492,872246,233

-484,449

4,223,55412,070,234

-5,182,7221,112,234700,000930,271

7,925,227

31 Dec. 2016KD

749,427648,761

1,398,188

-

324,27023,526

150,0004,054,8444,552,6405,950,828

1,347,514-

1,041,865-

807,1883,196,567

26 Financial assets and liabilities (continued)

26.1 Categories of financial assets and liabilities (continued)

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 2017 and 31 December 2016 approximate their fair values. 26.2 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.



At 31 December 2017

Assets at fair valueInvestments at fair value through profit or loss- Investment in managed portfolioAvailable for sale investments:- Investments in managed portfolios- Investments in managed fundsTotal assets

At 31 December 2016

Assets at fair valueAvailable for sale investments:- Investments in managed portfolios- Investments in managed fundsTotal assets

Note

a

aa

Note

aa

Level 1KD

-

---

Level 1KD

230,209-

230,209

Level 2KD

7,000,000

411,1306,773

7,417,903

Level 2KD

510,5228,696

519,218

Total KD

7,000,000

411,1306,773

7,417,903

Total KD

740,7318,696

749,427

Level 3KD

-

---

Level 3KD

---

26 Financial assets and liabilities (continued)

26.2 Fair value hierarchy (continued)The financial assets measured at fair value in the consolidated statement of financial position are Grouped into the fair value hierarchy as follows:

Fair value measurements

a) 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 deter-mined 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.

26.3 Fair value measurement of non-financial assets for disclosure purposesThe Group discloses the fair value of its investments properties and property under development annually, and the details are disclosed in note 12.

27 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 KD16,274,712 (2016: KD15,903,504).

28 Contingent liabilities At the reporting date, the Group had contingent liabilities in respect of outstanding bank guarantees amounting to KD113,315 (2016: KD181,807).



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