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H. H. Sheikh

Sabah Al Ahmad Al Jaber Al Sabah

The Amir of the State of Kuwait

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H. H. Sheikh

Nawaf Al Ahmad Al Jaber Al Sabah

The Crown Prince of the State of Kuwait

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TABLE OF CONTENT

Company Overview 10

Board of Directors and Executive Management 11

Report of the Board of Directors 12

Shariaa Advisory Committee Report 17

Independent Auditors Report 18

Income Statement 20

Statement of Comprehensive Income 21

Statement of Financial Position 22

Statement of Changes in Equity 23

Cash Flow Statement 24

Notes to the Financial Statements 25

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Company Name : Manafae Investment Co. (K.S.C.) closed

Date of Establishment : October 5, 2005

Address : Sharq, Kuwait, Khalid Bin Al-Waleed Street,

Shaheed Tower, Floor 11

P. O. Box : P.O. Box 3132 Safat, 13032 Kuwait

Telephone : (965) 22925888

Fax : (965) 22475704 / 22495954

E-mail : [email protected]

Website : www.manafae.com

Issued & Paid Capital : KWD 20,088,143

Main Activities : Investing in all economic sectors, asset management, establish &

manage investment funds.

Shariaa Advisory Committee : Al Mashora and Al Rayah for Islamic Financial Consulting

Independent External Auditors : Ernst & Young Al Aiban, Al Osaimi & Partners Al WahaAuditing Ofce

Major Share Holders : KIPCO Asset Management Company

Al-Imtiaz Investment Company

Public Institution for Social Security

The Securities House Company

Secretariat General of Al-Awkaf

Bait Al Zakat

Public Authority for Minors

Our Message : We are committed to innovate, develop and provide investment

products and consultancy services that are compliant with

Islamic Shariaa standards that will achieve superior returns and

added values to all of our shareholders and clients.

Company Overview

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Mr. Eid Hathal Al-Nesaf

Chairman

Mr. Talal Mohammad Al-Mutawa

Vice Chairman & CEO

Mr. Ahmad Saad Al-Hashan

Board Member

Sheikh Ali Mohammad Al-Sabah

Board Member

Mr. Khaled Abdullah Al-Saeed

Board Member

Mr. Ayman Mohammad Al-Mutair

Board Member

Mr. Mohammed A. Al Hubail

Board Member

Mr. Aref Ahmed Qamber

Board Secretary

Executive Management

Talal Mohammad Al-Mutawa

Vice Chairman & CEO

Aref Ahmed Qamber

Deputy CEO - Support Services

& Board Secretary

Abdulaziz Mutlaq Al-Osaimi

Assistant CEO - Local & Gulf Trading

Mohammed Helmy Shakweer

Senior Manager - Operations

Khaled Mohammed Abu Gharara

Manager - Head of Internal Audit Dept.

Marwan Jasim Al-Musallam

Manager - Direct Investment

Board of Directors and Executive Management

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In the Name of Allah the Most Graceful the Most Merciful

Praise to Almighty God and Peace and Prayer Be Upon His Final Messenger, his purefamily, his noble companions and Followers to the Day of Judgment,

Honorable Shareholders,

May peace and Allahs mercy and blessings be upon you,

On behalf of myself and the Members of the Board of Directors of Manafae Investment Company, I would

like to welcome you to your Seventh General Assembly Meeting for the nancial year ended 31 December

2012. I have the pleasure to present to you the Annual Report for the nancial year ended 31 December 2012,

including the report of the Fatwa & Sharia Supervisory Board, a review of the main business developments

that took place during the scal year ended 31 December 2012, a presentation of the Companys nancial

statements, the external auditors report and an outline of the major economic developments at the local,

regional and global levels.

The year 2012 was a continuation of the political and economical changes in the region and the world that

resulted from the nancial crisis having a clear impact on regional and world economies which were pushed

back to square one particularly the advanced economies performance. The year 2012 continued to witness

wild uctuations in economic activities and in particular the investment and real estate sectors. The business

sectors of different economies are still facing more difculties and challenges resulting from tight credit andthe difculty of obtaining the required funding for projects along with the abstention of the nancial and

banking institutions around the world and in the region from granting the said facilities due to the global

nancial crisis and its serious consequences.

The geopolitical developments witnessed in our region and the rest of the world, the instability of the political

and economical situation and the incapability to predict the development of the situation contributed to the

weakness of the economic activities in all sectors particularly in the investment and asset under management.

The overall trend for investors both individual and corporate was to abstain from long term nancial

investment and employ their money in a short term liquid nancial instruments and more conservativeinvestment opportunities. At the same time, it was becoming increasingly difcult to liquidate existing

investments in order to honor the obligations which became even more burdensome as the global nancial

crisis dragged on.


The year 2012 witnessed many political and economic events that deeply impacted the performance of

the investment companies sector. On the local level, although the local economy continued to grow but its

impact on the businesses sector was relatively limited. The government continued to execute the development

plan projects that had been approved in 2011 in the value of KD 35 billion related to the construction and

development of roads, water, electricity and different services networks. However, the internal political

Report of the Board of Directors

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unrest and repetitive changes of the government slowed down the progress of the development plan in

accordance with its time schedule.

The Gross Domestic Product witnessed an increase of 5.7% compared to 4.4% increase last year due tohigher oil prices and production. The average price ranged between USD 92 and USD 121 accompanied

with an increase varying between 12% and 47% compared to the previous year. The government budget

witnessed a surplus that may reach KD 13.6 billion due to increase aforementioned and decrease in the

governmental expenditure particularly the investment projects. The government, on the other hand, is not

sparing the effort to activate the monetary policy tools by maintaining the discount rate at low levels in order

to provide liquidity, encourage the borrowing, get the wheels of the economic machine turning and promotes

the national economy. However, these policies did not realize any positive results until the moment because

they are still negatively inuenced by the general surrounding environment and as a result thereof the banks

are still abstaining from granting the necessary funds to the institutions and companies of the private sector

in order to accelerate the growth in the country.

At the regional level, the Gulf Cooperation Council Countries continued to achieve positive growth levels

supported by the global increase of oil prices compared to the levels achieved in 2011. This increase was

reected positively in higher oil revenues and large budget surpluses despite the higher public expenditure

of all GCC member countries although different growth rates were achieved individually. It is expected that

the Saudi economy will achieve an exceptional growth in 2013 which will be reected positively on all

economic sectors and activities in the Kingdom whose government announced a series of huge structural

projects. This announcement was also made by the economies of the UAE, Qatar and Kuwait. Growth isexpected to continue during the coming years, though at varying rates, depending on developments in the

global oil markets.

At the global level, the economy witnessed a series of crises and changes that weighed heavily on the global

growth rates. In Europe, the sovereign debt crisis that hit a number of countries clearly inuenced the Euro

zone countries where the Euro lost considerable ground against the worlds other major currencies. Europe

was not alone in this crisis, the American economy also impacted due to the debt ceiling, liquidity availability,

unemployment rates increase, commodities and raw materials prices and uctuations of the American dollar

exchange rate in the global currencies market. In accordance with the latest economic reports, the Americaneconomy showed a negative growth during the fourth quarter of 2012 against all expectations and despite the

improvement of the American local expenditure indices and the increase of the American share market that

witnessed a remarkable activity in 2012.


Under the rapid changes of the local, regional and world economies, your company continued to manage its

investment risks following the same conservative investment policy which it had adopted since incorporation

in order to safeguard the shareholders rights. The company worked harder and harder to strengthen the

relations with its business partners in various elds with a view to strengthen its presence in the local and

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regional markets while managing the risks and offering more comprehensive and specialized products to its

customers and establishing and building business base so that the company will reap the fruits of these efforts

in the future with Allahs grace.

In the eld of investment, the company continued to follow a prudent approach in participating in investment

opportunities due to the persistence of the nancial crisis and instability of the nancial markets. Accordingly

we participated in only a small number of short-term investments that are highly liquid while continuing to

follow up and administer existing investments. Meanwhile, we continued to re-organize and re-structure our

investment portfolio with a view to safeguard the shareholders equity and strengthen the companys assets

so that it will always be prepared to face potential risks.

Internally, the company continued to develop its business processes and systems to keep them conformant

to the requirements of local and regional supervisory authorities. To this end, the company carefully studiedthe requirements of the Capital Markets Authority as contained in the CMA law, and continue to fulll those

requirements in order to obtain a license for the company from the Authority. We also continue to strengthen

our internal control system and risk management processes.

Internally, the company continued to develop its business processes and systems in accordance with the

requirements of local and regional supervisory authorities. To this end, the management of the company

worked to fulll the requirements of the Capital Markets Authority as per the CMA law especially in terms

of the policies and procedures related to the assets management, direct investment and operations. We have

also continued strengthening our comprehensive corporate governance systems and prudent management,

risk management, internal control processes and anti-money laundering.


Against these economic and political circumstances and changes, the company recorded a net loss of KD

2.794 million during 2012. This loss resulted mainly from taking specic and precautionary provisions

totaling KD 2.5 million to against the decline in the value of the companys investments. This result is

also attributed to the decline of the volume of our main business activities namely asset management on

behalf of third parties and not participating in new investments in order to avoid potential risks. This led to a

negative effect on the total operational revenues of the company during 2012. We have continuously sought

to restructure our internal operations, reduce our operational costs and achieve the best use of the availableresources.

The total assets amount was KD 18.30 million in 2012 (KD 21.70 million in 2011) which included 40.4%

liquid assets. The total shareholders equity declined to KD 17.6 million against KD 21.1 million in 2011

representing a reduction of 16.9% resulting from the decline in the value of investments and the loss that

resulted from business operations for 2012.

The company currently seeks to set a business strategy aiming at strengthening its nancial position,

diversifying its income sources and seizing suitable investment opportunities available under the present

circumstances by tapping the rich experience our work team, cooperating with business partners and members

Report of the Board of Directors (Continued)

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of our board of directors to benet from our good reputation, implementing well-studied precautionary and

hedging policies designed to minimize risks for the shareholders and clients with a view to realize the desired

results.

Accordingly, the Board of Directors recommends your honorable assembly not to distribute any dividends in

respect of our business results for the nancial year ending on 31 December 2012.


In conclusion, I pray to Almighty God to enable us to overcome this crisis and its implications. We continue

to urge those who are in charge of the country s economic affairs in both the legislative and the executive

branches to take the measures as may be necessary to reactivate our local economy, address the difculties

that stand in the way of its development and activity, activate the private sector and involve it in development

operations and projects, implement the ve-year development plan of the State as a rst step toward achieving

a sustainable development that will benet all individuals, companies and institutions.

We pray to Almighty God to protect our country, to guide us to what is good in his divine wisdom, to give

lasting security and assurance to our beloved country under the auspicious leadership of H.H. Amir of

Kuwait Sheikh Sabah Al-Ahmed Al-Jaber Al-Sabah and H.H. the Crown Prince Sheikh Nawwaf Al-Ahmed

Al-Jaber Al-Sabah, may Allah protect them and strengthen our wise government in performing the role

expected of it in reactivating our national economy and serve and maintain the dignity of the Kuwaiti people.

We would also like to extend our profound appreciation to the role performed by the Sharia Supervisory

Board along with the management and employees of the company for all their efforts made in last year.

Thank you for your presence and kind attention.

May God safeguard you, and peace be upon you.

Chairman of the Board

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Shariaa Advisory Committee Report

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Report on the Financial Statements

We have audited the accompanying nancial statements of Manafae Investment Company K.S.C.

(Closed) (the Company), which comprise the statement of nancial position as at 31 December 2012,

and the income statement, statement of comprehensive income, statement of changes in equity and

statement of cash ow for the year then ended, and a summary of signicant accounting policies and

other explanatory information.

Managements Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these nancial statements inaccordance with International Financial Reporting Standards (IFRS) as adopted for use by the State of

Kuwait and for such internal control as management determines is necessary to enable the preparation

of nancial statements that are free from material misstatement, whether due to fraud or error.

Auditors Responsibility

Our responsibility is to express an opinion on these nancial statements based on our audit. We

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

that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance

about whether the nancial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures

in the nancial statements. The procedures selected depend on the auditors judgement, including the

assessment of the risks of material misstatement of the nancial statements, whether due to fraud or

error. In making those risk assessments, the auditor considers internal control relevant to the entitys

preparation and fair presentation of the nancial statements in order to design audit procedures that are

appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness

of the entitys internal control. An audit also includes evaluating the appropriateness of accounting

policies used and reasonableness of accounting estimates made by the Companys management, as well

as evaluating the overall presentation of the nancial statements.

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Independent Auditors Report

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We believe that the audit evidence we have obtained is sufcient and appropriate to provide a basis for

our audit opinion.

Opinion

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

the Company as at 31 December 2012, and its nancial performance and cash ows for the year then

ended in accordance with International Financial Reporting Standards as adopted for use by the State

of Kuwait.

Report on Other Legal and Regulatory Matters

Furthermore, in our opinion proper books of account have been kept by the Company and the nancialstatements, together with the contents of the report of the Companys board of directors relating to these

nancial 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 nancial statements incorporate

all information that is required by the Companies Law No. 25 of 2012, and by the Companys Articles of

Association, as amended, that an inventory was duly carried out and that, to the best of our knowledge

and belief, no violations of the Companies Law No. 25 of 2012, nor of the Articles of Association, as

amended, have occurred during the year ended 31 December 2012 that might have had a material effect

on the business of the Company or on its nancial position.

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

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

of Kuwait and the organisation of banking business, and its related regulations during the year ended 31

December 2012.

WALEED A. AL OSAIMI ALI OWAID RUKHEYES

LICENCE NO. 68A LICENCE NO. 72-A

OF ERNST & YOUNG

AL AIBAN, AL OSAIMI & PARTNERS

MEMBER OF THE INTERNATIONAL

ACCOUNTING GROUP

Kuwait 2012

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2012 2011

Notes KD KD

REVENUE

Fees and commission income 3 133,380 228,713

Murabaha and nance income 88,016 67,839

Realised loss on nancial assets at fair value

through income statement (7,440) (185,135)

Unrealised loss on nancial assets at fair value

through income statement 7 (1,457,093) (794,939)

Income from nancing of future trades 343 27,675Realised gain on sale of nancial assets available

for sale 303,588 191,641

Gain on sale of investment property - 100,833

Foreign exchange gain (loss) 6,931 (1,650)

Dividend income 64,335 80,446

Other income 14,193 -

(853,747) (284,577)

EXPENSES

Administrative expenses 1,021,435 933,299

Finance costs 3,244 -

Reversal of provision no longer required (144,255) -

Reversal of credit losses (409) (3,581)

Depreciation 16,559 32,914

Impairment of nancial assets available for sale 8 790,791 1,330,411

Provision on receivables 252,869 144,255

Write off of property and equipment - 4,764

1,940,234 2,442,062

LOSS FOR THE YEAR 4 (2,793,981) (2,726,639)

BASIC AND DILUTED LOSS PER SHARE 5 (14.88) ls (14.17) ls

The attached notes from 1 to 19 form an integral part of these nancial statements.

Income Statement

For The Year Ended 31 December 2012

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Statement Of Comprehensive Income


2012

KD

2011

KD

Loss for the year (2,793,981) (2,726,639)

Other comprehensive loss

Change in fair value of nancial assets available for sale (1,226,495) (1,924,818)

Impairment loss on nancial assets available for sale 790,791 1,330,411

Realised gain on sale of nancial assets available for sale (303,588) (191,641)

Other comprehensive loss for the year (739,292) (786,048)

Total comprehensive loss for the year (3,533,273) (3,512,687)


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2012 2011

Notes KD KD

ASSETS

Cash and balances with banks 6 7,404,094 6,528,100

Financial assets at fair value through income

statement

7

3,769,315 5,463,128

Receivables from nancing of future trades - 40,498

Other assets 967,751 700,582

Financial assets available for sale 8 6,156,598 8,939,133

Property and equipment 23,525 18,231

TOTAL ASSETS 18,321,283 21,689,672

LIABILITIES

Other liabilities 745,259 540,401

EQUITY

Share capital 9 20,088,143 20,088,143

Share premium 9 22,917 22,917

Treasury shares 10 (902,928) (862,954)

Statutory reserve 11 737,689 737,689

General reserve 12 766,953 766,953

Cumulative changes in fair values 671,683 1,410,975

Employees stock option reserve 11,459 11,459Accumulated loss (3,819,892) (1,025,911)

Total equity 17,576,024 21,149,271

TOTAL LIABILITIES AND EQUITY 18,321,283 21,689,672

Eid Hathal Al-Nasafey Talal Mohammed Al Mutawa

Chairman Vice Chairman and Chief Executive Ofcer


Statement Of Financial Position

As At 31 December 2012

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Notes2012

KD

2011

KDOPERATING ACTIVITIESLoss for the year (2,793,981) (2,726,639)

Non-cash adjustments to reconcile loss for the year to net cash ows:Unrealised loss on nancial assets at fair value through income

Statement 7 1,457,093 794,939Realised gain on sale of nancial assets available for sale (303,588) (191,641)Gain on sale of investment property - (100,833)Dividend income (64,335) (80,446)Other income (14,193) -Finance costs 3,244 -Reversal of provision no longer required (144,255) -Reversal of credit losses (409) (3,581)Depreciation 16,559 32,914Impairment of nancial assets available for sale 8 790,791 1,330,411Provision on receivables 252,869 144,255

Write-off of property and equipment -

4,764Provision for employees end of service benets 223,304 77,790

(576,901) (718,067)

Working capital adjustments:Financial assets at fair value through income statement 236,720 2,275,172Receivables from nancing of future trades 40,498 358,063Other assets (375,374) 951,585Other liabilities (7,225) (136)

Cash ows (used in) from operations (682,282) 2,866,617Employees end of service benets paid (19,608) (39,280)

Net cash ows (used in) from operating activities (701,890) 2,827,337

INVESTING ACTIVITIESPurchase of nancial assets available for sale (488,017) (207,155)Proceeds from sale of nancial assets available for sale 2,052,444 305,358Proceeds from sale of investment property - 937,500Purchase of property and equipment (25,982) (2,422)Proceeds from sale of property and equipment 18,322 -Dividends received 64,335 80,446

Net cash ows from investing activities 1,621,102 1,113,727

FINANCING ACTIVITIESPurchase of treasury shares (39,974) (365,875)Finance cost paid (3,244) -

Net cash ows used in nancing activities (43,218) (365,875)

NET INCREASE IN CASH AND BALANCES WITHBANK

875,994 3,575,189

Cash and balances with bank at 1 January 6,528,100 2,952,911

CASH AND BALANCES WITH BANK AT 31DECEMBER

6 7,404,094 6,528,100


Cash Flow Statement


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1 CORPORATE INFORMATION

The nancial statements of Manafae Investment Company K.S.C (Closed) (the Company) for the

year ended 31 December 2012 were authorised for issue in accordance with a resolution of the Board

of Directors on 22 January 2013. The shareholders of the Company have the power to amend these

nancial statements at the ordinary general assembly.

The Annual General Assembly of the shareholders of the Company approved the nancial statements of

the Company for the year ended 31 December 2011 on 14 May 2012 and no dividends were recommended

for distribution.

The Company is a Kuwaiti closed shareholding company registered and incorporated in Kuwait on 5

October 2005 under the Commercial Companies Law No 25 of 2012 and is listed on the Kuwait Stock

Exchange. The Company is registered with the Central Bank of Kuwait (CBK) as an investment

company and is subject to the supervision of Capital Markets Authority (CMA).

The Companys shares are listed on the Kuwait Stock Exchange. The Companys registered head ofce

is at Al Sharq, Khaled Bin, Al-Waleed Street,, Al-Shaheed Tower, 11 Floor, P.O. Box 3132, Safat,,

Kuwait.

The Companys main activities are to invest in all sectors, manage third parties funds and portfolios,

to act as investment trustees, to perform economical and scal activities as per Shareea law, to act as

an intermediary to provide loans, consumer nance, consultancy and undertake technical and economic

feasibility studies.

2.1 BASIS OF PRESENTATION

Basis of preparation

The nancial statements are prepared on a historical cost basis, except for the revaluation of nancial

assets at fair value through income statement, nancial assets available for sale and investment properties

that have been measured at fair value.

The nancial statements are presented in Kuwaiti Dinars, which is also the functional currency of the Company.

Statement of compliance

The nancial statements have been prepared in accordance with the regulations of the State of Kuwait

for nancial services institutions regulated by the Central Bank of Kuwait. These regulations require

adoption of all International Financial Reporting Standards (IFRS) except for the International

Accounting Standard (IAS) 39 requirement for a collective provision, which has been replaced by

the Central Bank of Kuwaits requirement for a minimum general provision as described under the

accounting policy for impairment of assets.

The accounting policies are consistent with those used in the previous year except for the following:

IFRS 7 Financial Instruments: Disclosures Enhanced Derecognition Disclosure Requirements

(effective 1 July 2011)

Notes To The Financial Statements

At 31 December 2012

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2.2 CHANGES IN ACCOUNTING POLICY AND DISCLOSURES

The amendment requires additional disclosure about nancial assets that have been transferred but not

derecognised to enable the user of the Companys nancial statements to understand the relationship with

those assets that have not been derecognised and their associated liabilities. In addition, the amendmentrequires disclosures about the entitys continuing involvement in derecognised assets to enable the users

to evaluate the nature of, and risks associated with, such involvement. The Company does not have any

assets with these characteristics so there has been no effect on the presentation of its nancial statements.

Standards issued but not yet effective

The following IASB Standards have been issued but are not yet effective and have not been early adopted

by the Company:

Standards issued but not yet effective

IAS 1: Financial Statement Presentation Presentation of Items of Other Comprehensive Income

(Amendment) (effective 1 July 2012)

The amendments to IAS 1 change the grouping of items presented in other comprehensive income

(OCI). Items that could be reclassied (or recycled) to prot or loss at a future point in time (for

example, actuarial gains and losses on dened benet plans and revaluation of land and buildings) would

be presented separately from items that will never be reclassied (for example, net gain on hedge of

net investment, exchange differences on translation of foreign operations, net movement on cash ow

hedges and net loss or gain on available-for-sale nancial assets).

IAS 32: Offsetting Financial Assets and Financial Liabilities (Amendment) (effective 1 January 2014)

These amendments clarify the meaning of currently has a legally enforceable right to set-off. The

amendments also clarify the application of the IAS 32 offsetting criteria to settlement systems (such as

central clearing house systems) which apply gross settlement mechanisms that are not simultaneous.

IFRS 7: Disclosures Offsetting Financial Assets and Financial Liabilities (Amendment) (effective 1 January 2013)

These amendments require an entity to disclose information about rights to set-off and related arrangements

(e.g., collateral agreements). The disclosures would provide users with information that is useful in

evaluating the effect of netting arrangements on an entitys nancial position. The new disclosures are

required for all recognised nancial instruments that are set off in accordance with IAS 32 FinancialInstruments: Presentation. The disclosures also apply to recognised nancial instruments that are subject

to an enforceable master netting arrangement or similar agreement, irrespective of whether they are set

off in accordance with IAS 32.

IFRS 9: Financial Instruments: Classication and Measurement (effective 1 January 2015)

IFRS 9, as issued, reects the rst phase of the IASBs work on the replacement of IAS 39: Financial

Instruments: Recognition and Measurement and applies to classication and measurement of nancial

assets and nancial liabilities as dened in IAS 39. The standard was initially effective for annual periods

beginning on or after 1 January 2013, but Amendments to IFRS 9 Mandatory Effective Date of IFRS 9and Transition Disclosures, issued in December 2011, moved the mandatory effective date to 1 January

2015. In subsequent phases, the IASB will address hedge accounting and impairment of nancial assets.

Notes To The Financial Statements (continued)

At 31 December 2012

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2.2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

IFRS 10: Consolidated Financial Statements (effective 1 January 2013)

IFRS 10 replaces the portion of IAS 27 Consolidated and Separate Financial Statements that addresses

the accounting for consolidated nancial statements. It also addresses the issues raised in SIC-12

Consolidation Special Purpose Entities.

IFRS 10 establishes a single control model that applies to all entities including special purpose entities.

The changes introduced by IFRS 10 will require management to exercise signicant judgement

to determine which entities are controlled and therefore are required to be consolidated by a parent,

compared with the requirements that were in IAS 27.

IFRS 12: Disclosure of Involvement with Other Entities (effective 1 January 2013)IFRS 12 includes all of the disclosures that were previously in IAS 27 related to consolidated nancial

statements, as well as all of the disclosures that were previously included in IAS 31 and IAS 28. These

disclosures relate to an entitys interests in subsidiaries, joint arrangements, associates and structured

entities. A number of new disclosures are also required.

IFRS 13: Fair Value Measurement (effective 1 January 2013)

IFRS 13 establishes a single source of guidance under IFRS for all fair value measurements. IFRS 13

does not change when an entity is required to use fair value, but rather provides guidance on how to

measure fair value under IFRS when fair value is required or permitted.

The application of the above standards is not expected to have a material impact on the nancial position

or performance of the Company except for IFRS 9 and IFRS 13. The management is in the process of

determining the impact of IFRS 9 and IFRS 13 on the nancial position, performance and disclosures

of the Company.

2.3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of the signicant accounting policies used in preparation and presentation of the nancial

statements are set out below:

Revenue recognition

Revenue is recognised to the extent that it is probable that the economic benets will ow to the Company

and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration

received.

The following specic recognition criteria are also followed before revenue is recognised:

Fees earned for the provision of services over a year, are accrued over that year. These fees include

management fees, incentive fees and commission income. Fee income is recognised when specicservices are rendered.

Dividend income is recognised when the right to receive payment is established.

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Murabaha income is recognised on a time proportion basis so as to yield a constant periodic rate

of return based on the net balance outstanding.

Finance costs on loans are expensed using the effective yield method.

Cash and balances with banks

For the purpose of the statement of cash ow, cash and balances with banks consist of bank balances and

murabaha investments with original maturity of three months.

Financial assets and liabilities

The Company classies its nancial assets and liabilities as nancial assets at fair value through income

statement, loans and receivables, nancial assets available for sale or nancial liabilities other thanat fair value through income statement. The Company determines the classication of nancial assets and

liabilities at initial recognition.

A regular way purchase of nancial assets is recognised using the trade date accounting. Financial liabilities

other than at fair value through income statement are not recognised unless one of the parties has performed

or the contract is a derivative contract.

Financial assets and liabilities are measured initially at fair value (transaction price) plus, in case of a nancial

asset or nancial liability not at fair value through income statement, directly attributable transaction costs.

Transaction costs on nancial assets at fair value through income statement are expensed immediately, while

on other debt instruments they are amortised.

Financial assets at fair value through income statement

A nancial asset at fair value through income statement includes nancial assets held for trading and nancial

assets designated upon initial recognition at fair value through income statement. Financial assets are

classied as held for trading if they are acquired for the purpose of selling in the near term. Gains or losses

on nancial assets held for trading are recognised in income statement. Financial assets are designated at fair

value through income statement if they are managed and their performance is evaluated on reliable fair value

basis in accordance with documented investment strategy.

After initial recognition, nancial assets at fair value through income statement are remeasured at fair value

with all changes in fair value recognised in the income statement.

Loans and receivables

Loans and receivables are non-derivative nancial assets with xed or determinable payments that are

not quoted in an active market.

After initial recognition loans and receivables are carried at amortised cost using the effective prot rate

method, less impairment losses, if any. 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 prot rate.


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Loans and receivables (continued)

Bank balances, murabaha investments, receivables from future trades and other assets are classied as

loans and receivables.

Murabaha is an Islamic transaction involving the Companys purchase and immediate sale of an asset

at cost plus an agreed prot. The amount due is settled on a deferred payment basis. Where the credit

risk of the transaction is attributable to a nancial institution, the amount due is classied as a murabaha

investment. Where the credit risk is attributable to a party other than a nancial institution, the amount due

is classied as a murabaha receivable.

Financial assets available for sale

Financial assets available for sale are those non-derivative nancial assets that are designated as

available for sale or are not classied as nancial assets at fair value through income statement or loans

and receivables.

After initial recognition, nancial assets available for sale are measured at fair value with gains and losses

being recognised as a separate component of other comprehensive income until the nancial assets are

derecognised or until the nancial assets are determined to be impaired at which time the cumulative

gain and loss previously reported in other comprehensive income is recognised in the income statement.

Financial assets whose fair value cannot be reliably measured are carried at cost.

Financial liabilities other than at fair value through income statementFinancial liabilities are stated using effective cost rate method. Loans and other liabilities are

classied as nancial liabilities other than at fair value through income statement.

Fair value

The fair value of nancial assets and liabilities traded in recognised nancial markets is determined by

reference to their quoted market bid price at the close of business on the reporting date. For all other

nancial assets or liabilities where there is no quoted market price, a reasonable estimate of fair value

is determined by reference to the current fair value of another instrument that is substantially the same,

recent arms length market transactions or discounted cash ow analysis or other valuation models.

Derecognition

Financial assets

A nancial asset (or, where applicable a part of a nancial asset or part of a group of similar nancial

assets) is derecognised when:

the rights to receive cash ows from the asset have expired or

the Company has transferred its rights to receive cash ows from the asset or has assumed an

obligation to pay the received cash ows in full without material delay to a third party under a

pass-through arrangement or the Company has transferred substantially all the risks and rewards of the asset, or

the Company has neither transferred nor retained substantially all the risks and rewards of the

asset, but has transferred control of the asset.

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Financial assets and liabilities(continued)

When the Company has transferred its rights to receive cash ows from an asset or has entered into a

pass- through arrangement, and has neither transferred nor retained substantially all the risks and rewards

of the asset nor transferred control of the asset, a new asset is recognised to the extent of the Companys

continuing involvement in the asset.

Financial liabilities

A nancial liability is derecognised when the obligation under the liability is discharged or cancelled or

expired. When an existing nancial liability is replaced by another from the same lender on substantially

different terms, or the terms of an existing liability are substantially modied, such an exchange or

modication is treated as a derecognition of the original liability and the recognition of a new liability, the

difference in the respective carrying amounts is recognised in the income statement.

Offsetting

Financial assets and liabilities are offset when the Company has a legally enforceable right to offset and

intends to settle either on a net basis or to realise the asset and settle the liability simultaneously.

Investment properties

Investment properties are initially measured at cost, including transaction cost. Subsequently, all investment

properties are carried at fair value determined based on valuation performed by independent valuers at

the end of each year using valuation methods consistent with the nature and usage of the investment

properties. Gains or losses from change in the fair value are recognised in the income statement.

Investment properties are derecognised when either they have been disposed of or when the investment

property is permanently withdrawn from use and no future economic benet is expected from its disposal.

The difference between the net disposal and the carrying amount of the asset is recognised in the income

statement in the year of derecognition.

Property and equipment

Property and equipment is stated at cost less accumulated depreciation and/or accumulated impairment

losses, if any. Depreciation is calculated on a straight line basis over the estimated useful lives assets as

follows:

Leasehold improvements 3 years

Ofce equipment, computer hardware and software 3 years

Furniture 5 years

Motor vehicles 4 years


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An item of property and equipment is derecognised upon disposal or when no future economic benets

are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as

the difference between the net disposal proceeds and the carrying amount of the asset) is included in the

income statement in the year the asset is derecognised.

The carrying values of property and equipment are reviewed for impairment when events or changes in

circumstances indicate the carrying value may not be recoverable. If any such indication exists and where the

carrying values exceed the estimated recoverable amount, the assets are written down to their recoverable amount.

Expenditure incurred to replace a component of an item of property and equipment that is accounted for

separately is capitalised and the carrying amount of the component that is replaced is written off. Other

subsequent expenditure is capitalised only when it increases future economic benets of the related item of

property and equipment. All other expenditure is recognised in the income statement as the expense is incurred.

The assets residual values, useful lives and methods of depreciation are reviewed at each nancial year

end, and adjusted prospectively if appropriate.

Provisions

Provisions are recognised when the Company has a present obligation (legal or constructive) arising

from a past event and the costs to settle the obligation are both probable and able to be reliably measured.

Employees end of service benetsThe Company provides end of service benets to its employees. The entitlement to these benets is based

upon the employees nal salary and length of service, subject to the completion of a minimum service

year. The expected costs of these benets are accrued over the period of employment.

With respect to its national employees, the Company makes contributions to social security scheme

calculated as a percentage of the employees salaries. The Companys obligations are limited to these

contributions, which are expensed when due.

Treasury shares

Treasury shares consist of the Companys own issued shares that have been reacquired by the Company

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 the equity. When

the treasury shares are reissued, gains are credited to a separate account in equity, treasury shares reserve,

which is not distributable. Any realised losses are charged to the same account to the extent of the credit

balance on that account. Any excess losses are charged to retained earnings then to the general reserve and

statutory reserve.

Gains realised subsequently on the sale of treasury shares are rst used to offset any previously recorded

losses in the order of reserves, retained earnings and the treasury shares reserve account. No cashdividends are paid on these shares. The issue of stock dividend increases the number of treasury shares

proportionately and reduces the average cost per share without affecting the total cost of treasury shares.

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Foreign currency translation

Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to

Kuwaiti Dinars at rates of exchange prevailing on that date. Any resultant gains or losses are recognised

in the income statement.

Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency

are translated using the exchange rates as at the date of the initial transactions. Non-monetary assets and

liabilities denominated in foreign currencies that are stated at fair value are translated to Kuwaiti

Dinars at the foreign exchange rates prevailing at the dates that the values were determined. In case of non-

monetary assets whose change in fair values are recognised directly in other comprehensive income, foreign

exchange differences are recognised directly in other comprehensive income and for non-monetary assets

whose change in fair value are recognised in the income statement are recognised in the income statement.

Impairment of nancial assets

An assessment is made at each reporting date to determine whether there is objective evidence that a

specic nancial asset may be impaired. A nancial asset or a group of nancial assets is deemed to be

impaired if, and only if, there is objective evidence of impairment as a result of one or more events that

has occurred after the initial recognition of the asset (an incurred loss event) and that loss event (or

events) has an impact on the estimated future cash ows of the nancial asset or the group of nancial

assets that can be reliably estimated. Evidence of impairment may include indications that the borrower

or a group of borrowers is experiencing signicant nancial difculty, default or delinquency in interest

or principal payments, the probability that they will enter bankruptcy or other nancial reorganisation

and where observable data indicate that there is a measurable decrease in the estimated future cash

ows, such as changes in economic conditions that correlate with defaults. If such evidence exists, an

impairment loss, is recognised in the income statement.

Impairment is determined as follows:

for assets carried at amortised cost, impairment is based on estimated cash ows discounted at

the original effective interest rate

for assets carried at fair value, impairment is the difference between cost and fair value

for assets carried at cost, impairment is the difference between actual cost and the present

value of estimated future cash ows discounted at the current market rate of return for a similar

nancial asset

For non equity nancial assets the carrying amount of the asset is reduced through the use of an allowance

account and the amount of the loss is recognised in the income statement.

If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because

of an event occurring after the impairment was recognised, the previously recognised impairmentloss is increased or reduced by adjusting the allowance account. In addition, a provision is made to cover

impairment for specic groups of assets where there is a measurable decrease in estimated future cash ows.


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Impairment of nancial assets (continued)

In addition, in accordance with Central Bank of Kuwait instructions, a minimum general provision is made

on all applicable credit facilities (net of certain categories of collateral) that are not provided for specically.

Financial assets available for sale

For nancial assets available for sale, the Company assesses at each reporting date whether there is

objective evidence that a nancial assets available for sale or a group of nancial assets available for sale

is impaired. In the case of equity investments classied as nancial assets available for sale, objective

evidence would include a signicant or prolonged decline in the fair value of the equity investment

below its cost. Where there is evidence of impairment, the cumulative loss - measured as the difference

between the acquisition cost and the current fair value, less any impairment loss on those nancial assets

available for sale previously recognised in the income statement - is removed from other comprehensive

income and recognised in the income statement.

Reversal of impairment losses is recorded when there is an indication that the impairment losses

recognised for the asset no longer exist or have decreased. The reversal of impairment losses are

recognised in the income statement except for nancial assets available for sale equity investments

which are recognised in the cumulative changes in fair values.

Share based payment transactions

The cost of share based payment transactions with employees is measured by reference to the fair value

at the date on which they are granted. The fair value of the employee stock options is determined using

the Black-Scholes option pricing model. Measurement inputs include share price on measurement date,

exercise price, volatility, risk free interest rate and expected dividend yield. The fair value of these

options is recognised as an expense over the vesting period with corresponding effect to equity.

Contingencies

Contingent liabilities are not recognised in the statement of nancial position, but are disclosed unless

the possibility of an outow of resources embodying economic benets is remote.

Contingent assets are not recognised in the statement of nancial position, but are disclosed when an

inow of economic benets is probable.

Fiduciary assets

Assets held in trust or duciary capacity are not treated as assets or liabilities of the Company and

accordingly are not included in the nancial statements.

Taxation

Kuwait Foundation for the Advancement of Sciences (KFAS)

The Company calculates the contribution to KFAS at 1% in accordance with the modied calculation

based on the Foundations Board of Directors resolution, which states that the income from associates

and subsidiaries, board of directors remuneration, transfer to statutory reserve should be excluded from

prot for the year when determining the contribution.

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Zakat

Contribution to Zakat is calculated at 1% of the prot of the Company in accordance with the Ministryof Finance resolution No. 58/2007.

Signicant accounting judgments, estimates and assumptions

The preparation of the nancial statements requires management to make judgments, estimates and

assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the

disclosure of contingent liabilities, at the reporting date. However, uncertainty about these assumptions

and estimates could result in outcomes that could require a material adjustment to the carrying amount

of the asset or liability affected in the future.

The most signicant use of judgements and estimates are as follows:

Classication of nancial instruments

Judgements are made in the classication of nancial instruments based on managements intention at

acquisition.

Impairment of nancial assets available for sale

The Company treats nancial assets available for sale as impaired when there has been a signicant or

prolonged decline in the fair value below its cost or where other objective evidence of impairment exists.

The determination of what is signicant or prolonged requires considerable judgement.

Valuation of unquoted equity investments

Valuation of unquoted equity investments is normally based on one of the following:

recent arms length market transactions;

current fair value of another instrument that is substantially the same; or

the expected cash ows discounted at current rates applicable for items with similar terms and risk

characteristics;

The determination of the cash ows and discount factors for unquoted equity investments requires

signicant estimation.

3. FEES AND COMMISSION INCOME

2012

KD

2011

KD

Management fees from duciary activities 122,378 187,679

Commission income from duciary activities 4,564 37,045

Incentive and custody fees from duciary activities 6,438 3,989

133,380 228,713


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4. LOSS FOR THE YEAR

The loss for the year is stated after charging:

2012

KD

2011

KD

Staff costs 853,774 774,393

Rent operating leases 46,253 55,853

5. BASIC AND DILUTED LOSS PER SHARE

Basic and diluted loss per share is calculated by dividing the loss for the year by the weighted average

number of ordinary shares less treasury shares, outstanding during the year.

2012 2011

KD KD

Loss for the year (2,793,981) (2,726,639)

Shares Shares

Weighted average number of issued and paid-up shares,

less treasury shares outstanding during the year 187,808,060 192,416,827

Basic and diluted loss per share (14.88) ls (14.17) ls

The effect of outstanding stock options have not been considered in the computation of diluted loss per

share as the result is anti-dilutive.

6. CASH AND BALANCES WITH BANKS

Cash and balances with banks included in the statement of cash ows include the following amounts:

2012 2011

KD KD

Cash at banks and on hand 2,393,319 1,528,100

Murabaha investments 5,010,775 5,000,000

Cash and balances with banks 7,404,094 6,528,100

Murabaha investments represent murabaha deposits with local nancial institutions maturing within

three months from the original date.

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7. FINANCIAL ASSETS AT FAIR VALUE THROUGH INCOME STATEMENT

2012 2011

KD KDHeld for trading

Quoted equity securities - 236,720

Designated

Unquoted equity securities 3,769,315 5,226,408

3,769,315 5,463,128

The Company has recognised unrealised loss of KD 1,457,093 (31 December 2011: KD 790,161) on the

unquoted equity securities. Unquoted equity securities represents investment in a company in the Kingdom

of Bahrain that deals in the development of properties whose fair value has been determined based on an

acceptable method of valuation, which includes independent valuation of the underlying assets.

Unrealised gain (loss) is analysed as follows:

2012

KD

2011

KD

Held for tradingQuoted equity securities - (4,778)

Designated

Unquoted equity securities (1,457,093) (790,161)

(1,457,093) (794,939)

8. FINANCIAL ASSETS AVAILABLE FOR SALE

2012

KD

2011

KD

Unquoted equity securities 3,764,819 5,817,285

Managed portfolios 1,094,829 1,088,653

Investment in equity funds 1,296,950 2,033,195

6,156,598 8,939,133


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8. FINANCIAL ASSETS AVAILABLE FOR SALE (CONTINUED)

At 31 December 2012, certain nancial assets available for sale amounting to KD 1,161,333 (31

December 2011: KD 2,325,101) were carried at cost less, impairment due to the non availability of

reliable measures of their fair values. The management has performed a review of nancial assets

available for sale to assess whether impairment has occurred in the value of these investments and

recorded an impairment loss of KD 790,791 (2011: KD 1,330,411) in the income statement. Based

on the latest available nancial information, management is of the view that no further impairment

provision is required as at 31 December 2012 in respect of these investments.

9. SHARE CAPITAL AND SHARE PREMIUM

Authorised, issued and fully paid-up capital consists of 200,881,430 shares (2011: 200,881,430 shares)

of 100 ls per share (2011: 100 ls per share) which are fully paid in cash. The share premium is notavailable for distribution.

10. TREASURY SHARES

2012 2011

Number of shares 13,220,000 12,500,000

Percentage of issued shares 6.58% 6.22%

Market value (KD) 740,320 700,000

11. STATUTORY RESERVE

In accordance with the Commercial Companies Law and the Companys articles of association, no transfer

has been made to the statutory reserve, since losses have been incurred during the year.

Distribution of the statutory reserve is limited to the amount required to enable the payment of a dividend

of 5% of paid-up share capital to be made in years when accumulated prots are not sufcient for the

payment of a dividend of that amount.

12. GENERAL RESERVE

In accordance with the Companys articles of association 10% of the prot for the year before contribution

to KFAS, Zakat and directors remuneration is to be transferred annually to the voluntary reserve. There

are no restrictions on distributions from general reserve. No transfer has been made to the statutory reserve,

since losses have been incurred during the year.

13. CONTINGENT LIABILITES AND COMMITMENTS

As at 31 December 2012, the Company had contingent liabilities in respect of bank guarantees arising in

the ordinary case of business from which it is anticipated that no material liabilities will arise, amounting

to KD 105,000 (31 December 2011: KD 105,000).As at 31 December 2012, the Company had capital commitments to invest in Etqaan Shariah fund and

securities amounting to KD 878,724 (31 December 2011: KD 878,724).

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14. RELATED PARTY TRANSACTIONS

Related parties represent major shareholders, directors and key management personnel of the Company,

and entities controlled, jointly controlled or signicantly inuenced by such parties. Pricing policies and

terms of these transactions are approved by the Companys management.

Balances and transactions with related parties are as follows:

Major

shareholders

Other related

parties2012 2011

KD KD KD KD

Statement of nancial position:

Financial assets available for sale 1,125,347 220,360 1,345,707 1,854,597

Major

shareholders

Other related

parties2012 2011

KD KD KD KD

Income statement:

Fees and commission income 8,643 1,910 10,553 18,086

Impairment on nancial assets

available for sale107,520 107,520 239,329

Compensation of key management personnel:

The remuneration of directors and other members of key management during the year are as follows:

2012 2011

KD KD

Salaries and short-term benets 499,277 536,857

Employees end of service benets 78,176 58,909

577,453 595,766

15. SEGMENTAL INFORMATION

For management purposes, the Company is organised into two major business segments. The principal

activities and services under these segments are as follows:

Proprietary investment management : Investing of Companys funds in unquoted securities,

lending to corporate and individual customers and

managing the Companys liquidity requirements.

Investment management and advisory

services:

Discretionary and non-discretionary investment portfolio

management, managing of local and international

investment funds and providing advisory and structurednance services and other related nancial services.

Trading : Investing of funds in quoted securities.


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15. SEGMENTAL INFORMATION (continued)

Management monitors operating segments separately for the purpose of making decisions about resource

allocation and performance assessment. Segment performance is evaluated based on segmental return

on investments. Property and equipment (including depreciation) and taxation are managed on a group

basis and are not allocated to individual operating segments.

The following table presents information regarding the Companys operating segments.

2012

Proprietary

investment

management

Investmentmanagementand advisory

services

Trading Unallocated Total

KD KD KD KD KD

Total (loss) revenue (1,113,013) 120,676 36,382 102,208 (853,747)

Total expenses 992,057 114,623 659,451 174,103 1,940,234

(Loss) prot for the

year(2,105,070) 6,053 (623,069) (71,895) (2,793,981)

Total assets 9,925,913 - - 8,395,370 18,321,283

Total liabilities 1,905 - - 743,354 745,259

2011

Proprietary

investment

management

Investmentmanagementand advisory

services

Trading Unallocated Total

KD KD KD KD KD

Total (loss) revenue (491,036) 249,737 (111,117) 67,839 (284,577)

Total expense 1,627,311 98,494 566,655 149,602 2,442,062

(Loss) prot for the

year(2,118,347) 151,243 (677,772) (81,763) (2,726,639)

Total assets 14,206,038 - 236,720 7,246,914 21,689,672

Total liabilities 1,905 - - 538,496 540,401

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15. SEGMENTAL INFORMATION (continued)

Geographical information

As at 31 December 2012 Total income

Non-current

assets

KD KD

Kuwait 250,484 2,392,982

International (1,104,231) 3,787,141

(853,747) 6,180,123

As at 31 December 2011 Total incomeNon-current

assets

KD KD

Kuwait 412,003 2,526,074

International (696,580) 6,431,290

(284,577) 8,957,364

Non-current assets for this purpose consist of nancial assets available for saleand property and

equipment.

16. FAIR VALUE OF FINANCIAL INSTRUMENTS

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

knowledgeable, willing parties in an arms length transaction. Underlying the denition of fair value is

the presumption that the Company is a going concern without any intention, or need, to liquidate, curtail

materially the scale of its operations or undertake a transaction on adverse terms.

The estimated fair values of nancial assets, except for certain unquoted equity instruments classied as

investments available for sale (Note 8), approximated their respective net book values at the reporting date.

Fair value hierarchy

The Company uses the following hierarchy for determining and disclosing the fair values of nancial

instruments by valuation technique:

Level 1: quoted (unadjusted) prices in an active market for identical assets and liabilities;

Level 2: other techniques for which all inputs which have a signicant effect on the recorded fair value

are observable, either directly or indirectly; and

Level 3: techniques which use inputs that have a signicant effect on the recorded fair value are notbased on observable market data.


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16. FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)

As at 31 December 2012, the Company held the following nancial instruments measured at fair value.

31 December 2012 Level : 1 Level : 2 Level : 3 Total

KD KD KD KD

Financial assets at fair value through

income statement:

Unquoted equity securities - 3,769,315 3,769,315

Financial assets available for sale: -

Unquoted equity securities and

managed portfolios - - 3,890,227 3,890,227

Investment in equity funds - 1,105,038 - 1,105,038

- 1,105,038 7,659,542 8,764,580

31 December 2011 Level : 1 Level : 2 Level : 3 Total

KD KD KD KD

Financial assets at fair value through

income statement:

Unquoted equity securities 236,720 - 5,226,408 5,463,128

Financial assets available for sale:

Unquoted equity securities and managed

portfolios

- - 2,639,561 2,639,561

Investment in equity funds - 1,649,370 - 1,649,370

236,720 1,649,370 7,865,969 9,752,059

During the year, there have been no movement in Level 3 and no transfers between hierarchies.

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17. MATURITY ANALYSIS OF ASSETS AND LIABILITIES

The table below summarises the maturity prole of the Companys assets and liabilities. The maturities

of assets and liabilities have been determined according to when they are expected to be recovered

or settled. The maturity prole for nancial assets at fair value through income statement, nancial

assets available for sale and investment properties is determined based on managements estimate of

liquidation of those assets.

The maturity prole of assets and liabilities is as follows:

31 December 2012 Within 2 to 3 3 to 6 6 to 12 1 to 5

1 month months months months years Total

KD KD KD KD KD KD

Assets

Bank balances and

cash7,404,094 - - - - 7,404,094

Financial assets at fair

value through income

statement

- - 3,769,315 - 3,769,315

Financing of future

trades - - - - --

Other assets 39,992 794,937 13,612 119,210 - 967,751

Financial assets

available for sale - - - - 6,156,598 6,156,598

Property and

equipment - - - -23,525 23,525

Total assets 7,444,086 794,937 13,612 3,888,525 6,180,123 18,321,283

TOTAL Liabilities 1,993 23,899 5,980 127,053 586,334 745,259


1 month months months months Years Total

KD KD KD KD KD KDAssets

Bank balances and

cash2,528,100 4,000,000 - - - 6,528,100

Financial assets at fair

value

through incomestatement

236,720 - - 5,226,408 - 5,463,128


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Financing of future

trades- 40,498 - - - 40,498

Other assets 345,998 33,849 53,591 267,144 - 700,582

Financial assets

available for sale- - - - 8,939,133 8,939,133

Property and

equipment- - - - 18,231 18,231

Total assets 3,110,818 4,074,347 53,591 5,493,552 8,957,364 21,689,672


18. RISK MANAGEMENT

Risk is inherent in the Companys activities but it is managed through a process of ongoing identication,

measurement and monitoring, subject to risk limits and other controls. This process of risk management

is critical to the Companys continuing protability and each individual within the Company is

accountable for the risk exposures relating to his or her responsibilities. The Company is exposed to

liquidity risk and market risk, the latter being subdivided into prot rate risk, currency risk, equity price

risk and prepayment risk. It is also subject to operating risks. The independent risk control process

does not include business risks such as changes in the environment technology and industry. They are

monitored through the Companys strategic planning process.

18.1 CREDIT RISK

Credit risk is the risk that one party to a nancial instrument will fail to discharge an obligation and

cause the other party to incur a nancial loss.

The Company has policies and procedures in place to limit the amount of credit exposure to any counter

party. These procedures include the non-concentration of credit risk.

Maximum exposure to credit risk

The Companys policy is to grant murabahas only to portfolio clients against collateral of their funds

and securities managed by the Company. In addition, receivable balances are monitored on an ongoing

basis with the result that the Companys exposure to bad debts is not signicant.

With respect to credit risk arising from the other nancial assets of the Company, which comprise bank

balances and other assets, the Companys exposure to credit risk arises from default of the counterparty,

with a maximum exposure equal to the carrying amount of these instruments as disclosed in the statement

of nancial position. Where nancial instruments are recorded at fair value, it represents the current

maximum credit risk exposure but not the maximum risk exposure that could arise in the future as a

result of changes in values.

17. MATURITY ANALYSIS OF ASSETS AND LIABILITIES (continued)

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18. RISK MANAGEMENT (CONTINUED)

18.2 LIQUIDITY RISK (continued)


1 month months months months years Total

KD KD KD KD KD KD


18.3 MARKET Risk

Market risk is the risk that the value of an asset will uctuate as a result of changes in market variables

such as prot rates, foreign exchange rates, equity prices and prepayment risk whether those changes are

caused by factors specic to the individual investment or its issuer or factors affecting all investments

traded in the market.

Market risk is managed on the basis of pre-determined asset allocations across various asset categories,

diversication of assets in terms of geographical distribution and industry concentration, a continuous appraisal

of market conditions and trends and managements estimate of long and short term changes in fair value.

18.3.1 Prot rate risk

Prot rate risk arises from the possibility that changes in prot rates will affect future cash ows or the

fair values of nancial instruments. The Company is not exposed to material prot rate risk as all Islamic

nancial instruments are at xed prot rates.

18.3.2 Currency risk

Currency risk is the risk that the value of a nancial instrument will uctuate due to changes in foreign

exchange rates. Currency risk is managed by the operations department of the Company on the basis of

limits determined by the Companys board of directors and a continuous assessment of the Companys

open positions and current and expected exchange rate movements. Management believes that there is

minimal risk of signicant losses due to exchange rate uctuations and consequently the Company does

not hedge foreign currency exposures.

The effect on loss before taxation (due to change in the fair value of monetary assets and liabilities), as

a result of change in currency rate, with all other variables held constant is shown below:

Increase in currency rate by 5 %

Effect on loss

2012 2011

KD KD

USD 29,380 173

SAR - 1,602

The decrease in foreign currency rate percentage will have the opposite effect on the loss of the company.

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18.3.3 Equity price risk

Equity price risk arises from changes in the fair values of equity investments. The equity price risk

exposure arises from the Companys investment portfolio. The Company manages this throughdiversification of investments in terms of geographical distribution and industry concentration.

Changes in equity price by 10 %

Effect on equity Effect on loss

2012 2011 2012 2011

Market indices KD KD KD KD

Kuwait 194,594 108,865 - 110,130

Bahrain 279,540 413,729 376,931 522,641

Saudi Arabia - - - -

Others 3,966 - - 46,406

18.3.4 Prepayment risk

Prepayment risk is the risk that the Company will incur a nancial loss because its customers and

counterparties repay or request repayment earlier or later than expected. The Company is not signicantly

exposed to prepayment risk.

19. CAPITAL MANAGEMENT

The primary objective of the Companys capital management is to ensure that it maintains healthy

capital ratios in order to support its business and maximise shareholder value.

The Company manages its capital structure and makes adjustments to it in light of changes in business

conditions. No changes were made in the objectives, policies or processes during the year ended 31

December 2012 and 2011. Capital comprises share capital, share premium, treasury shares, statutory

reserve, general reserve, cumulative changes in fair values, employees stock option reserve and

accumulated decit, and is measured at KD 17,576,024 as at 31 December 2012 (2011: KD 21,149,271).


At 31 December 2012

Documents

2012 Manafea ENG