ANNUAL REPORT 2 0 1 3 - Orient Holding Company … Annual Report 2013 H.H. SHAIKH SABAH AL-AHMAD AL-JABER AL-SABAH The Amir of the State of Kuwait H.H. SHAIKH NAWAF AL-AHMAD AL-JABER

www.orient.com.kw

ANNUAL REPORT 2 0 1 3

{Rise up Allah will rise up, to (suitable) ranks (and degrees), those of you who believe and who have been granted (mystic) Knowledge}

Translation of the meaning of the Holy Qur’ân

Mujadilah (11)

In the Name of Allâh,the Most Gracious, the Most Merciful

Annual Report 20135

H.H. SHAIKHSABAH AL-AHMAD AL-JABER AL-SABAH

The Amir of the State of Kuwait

H.H. SHAIKHNAWAF AL-AHMAD AL-JABER AL-SABAH

Crown Prince of the State of Kuwait

HH SHAIKHJABER AL-MUBARAK AL-HAMAD AL-SABAH

Prime Minister of the State of Kuwait

Annual Report 20137

Annual Report 2 0 1 3

CONTENTS Pages

Board Of Directors 9Chairman’s Message 10Associate Companies 13The Fatwa & Shari’a Supervisory Board 14Report Of The Fatwa & Shari’a Supervisory Board 15Executive Management 17Financial Statements For The Year Ended December 31, 2013

With Independent Auditor’s Report19 - 46

Annual Report 20138

Annual Report 20139

Eng. Mijbil Suleman Abdulaziz Al-MutawaDirector

BOARD OF DIRECTORS

Mr. Abdulaziz Abdullah Dekhail Al-ShayaChairman

Mr. Zamel Abdulrahman Mansour Al-ZamelVice Chairman

Mr. Khalid Abdullah Dekhail Al-ShayaDirector

Mr. Abdullatif Abdullah Dekhail Al-ShayaDirector

Mr. Hamed Abdullah Khalid Al-BaderDirector

Shaikh Waleed Khalid Abdullah Al-SabahDirector

Annual Report 201310

CHAIRMAN’S MESSAGE

Dear distinguished brother and sisters;

We welcome you to the Ninth and renewed Annual General Assembly Meeting of Orient Holding Company (formally Orient Investment Company). It pleases me to place between your hands the company’s annual report for the year ended 31/12/2013, which is the first to be published after changing Orient’s activities from an investment company to a holding company.

Throughout 2013 , the Kuwait Stock Market achieved excellent gains during the year on its three indices, especially its price index, which closed at a level of 7549.52 points and recorded an increase of 27.2% compared to its previous close in 2012. This increase had been a result of speculative trading on small stocks which distinguished the trades of the overall market during the year amid relative calm trading of blue chips and the heavier valued companies. While the market cap closed the year at a level of 452.86 points gaining an increase of 8.43% compared to the previous year close of 2012. The Kuwait 15 index closed the year at 1068.42 points recording a gain of 5.88% from its previous year close for the year 2012. Furthermore, the Kuwait stock Exchange came in third place in terms of gains achieved during 2013 after Dubai Financial Market and Abu Dhabi Securities Exchange, while the markets of Saudi Arabia, Qatar, Oman and Bahrain came in the last four positions respectively.

On the other hand, the local real estate market was able to achieve record gains during 2013 in terms of total value of trades totaling 3.9 billion K.D compared to 3.3 billion K.D recorded during the year 2012 which is an increase of about 18%.

In spite of the positive developments seen, which suggest a relative improvement in the domestic economic environment, as well as the favoring stability of oil prices and the country’s increases its fiscal surpluses, the economic performance in general did not rise to the level required to meet the aspirations of the Kuwaiti economic society.

As for the company’s accomplishments in 2013, of the developments that occurred were as follows:

• During the first quarter of 2013, the company’s activities were converted from an investment company to a holding company, and all procedures related to government authorities and jurisdictions were completed.

• During the last quarter of 2013, the company subscribed to the increase in capital of Orient Education Services Company, an associated company that has undertaken the partnership and construction of the Canadian Algonquin College in Kuwait. Completion of the first phase at the end of the year is about 34%.

• The contribution of 20% of the establishment of Sinan Kuwait Real Estate Company. A company that specializes in real estate development in particular selected geographic location such as Turkey, Britain and Saudi Arabia. The company has already begun development of two residential projects in Turkey that will be offered to interested customers in the GCC during the first quarter of 2014.

• Through its subsidiary Bawabat Al-Faiha Real Estate Company, Orient Holding purchased a commercial property in a prime location in Kuwait City. This development comes in light of the company’s strategy to seize opportunities feasible in the real estate market and to diversify the company’s asset base and sources of income.


Abdulaziz Abdullah Al-Shaya

Chairman

• During the year the company was able to capitalize on its financial position and asset base obtaining credit facilities from a local Islamic bank at reasonable terms to finance future investments and real estate projects.

• As for the company’s performance during the year, Orient Holding continued its excellent performance during 2013. The company achieved a net profit of 3.1 million K.D in 2013 (5.9 million K.D in 2012). The company’s return on capital in 2013 was 12.8% (25.7% in 2012), while ROA and ROE were 6.6% and 6.9 respectively (23.9% and 13.6% respectively in 2012).

Based on the mentioned results, I am pleased to inform you that the Board of Directors has raised its recommendation to the General Assembly of the company to distribute cash dividends of 10% of the company’s capital, at 10 fils per share.

To conclude, on my own behalf, and on behalf of the Members of the Board and all departments and employees of your company, I am pleased to express my deepest gratitude to His Highness the Emir and Crown Prince and His Highness the Prime Minister for all the support, guidance and care.

I would like to further extend my greetings and sincere thanks to our shareholders, our clients, and to the Chairman and members of the Fatwa & Shari’a Supervisory Board, and to all Orient Holding employees.

Our last prayer Praised to Allah Almighty, Lord of the Worlds.


Associate Companies

Company Orient Educational Services Company k.s.c.cIncorporation 2005 Country Kuwait Capital 3 million KD ownership 49% Sector Education The Company was founded for the purpose of creating, establishing and administering educational institutions, as well as investing in the educational sector in Kuwait and abroad. The Algonquin College Canada, in Kuwait which has been approved by the Council of Private Universities of the Ministry of Higher Education is considered the main project of the company. Currently, the project is in its first phase and the percentage of completion is 34%.

Company Orient International Health Care Company k.s.c.c

Incorporation 2007 Country Kuwait Capital 1 million KD ownership 41% Sector Health

The company was established for the purpose of investing in the health care and medical laboratories sector. The company currently owns the Health Care Clinic located in Bnied Al-Gar/ Kuwait which provides integrated health care facilities such as the ear, nose and throat clinic, general surgery, a dermatology clinic and pediatric surgery, in addition to the laboratory for medical analysis.

Company Sinan Kuwait Real Estate Company w.l.lIncorporation 2013 Country Kuwait Capital 1.5 million KD ownership 20% Sector Real estate

The Company was founded for the purpose of investing and developing real estate in Kuwait and abroad, specifically in Turkey, The United Kingdom and Saudi Arabia. The company is currently in the process of developing two residential projects in the Republic of Turkey that started during the first quarter of 2014, offering the sale of its units to interested clients in the GCC.

Company Al Nama’a Real Estate Company o.s.cIncorporation Country Oman Capital 500 thousand Omani Riyals ownership 30% Sector Real estate

The company was founded for the purpose of investing and developing real estate in the Sultanate of Oman. The company is considered the window to the real estate sector in the Sultanate. It currently owns distinctive properties in the area of Al-Khuwair and is currently studying the best case scenario for the development of the property.


His Eminence Shaikh Dr. Ali M. Al-Qurra DaghiChairman of the Fatwa & Shari’a Supervisory Board

Shaikh Dr. Abdull Aziz Khalifa Al-QasarMember

Shaikh Dr. Easa Zaki EasaMember

THE FATWA & SHARI’A SUPERVISORY BOARD


Praise is to Allah, Lord of the worlds; and prayers & peace be upon Our Prophet Muhammad, and upon his kinsfolk, companions and those who followed his teachings up to the Day of Judgment …

We, the Fatwa & Shari’a Supervisory Board at Orient Holding Company, have carried out the review and preparation of all the contracts and agreements presented to us; and we have also supervised the applicable principles and the contracts related to the transactions and applications offered by the company during the year ending as at 31st. December, 2013.

Moreover, we have conducted the diligent supervision for giving our opinion on whether the company has com-plied with the provisions and principles of Islamic Shari’a as well as abiding by the specific legal advice, decisions and directions issued by us; and that the liability for the execution of these provisions, principles and legal advice is borne by the management. As far as our responsibility is concerned, it is limited only to expressing an independent point of view, based on what has been referred to us and which we have been acquainted with.

The Board, represented by its Shari’a Department, has carried out the relevant supervision that consisted of exam-ining the documentation and the followed procedures on the basis of testing every type of operation separately.

In Our Opinion:

We believe that all the contracts, operations and transactions concluded by the company during the year ending as at 31st. December, 2013, which we have examined, were totally performed in conformity with Islamic Shari’a provisions.

Therefore, we avail ourselves of this opportunity to express our thanks and appreciation to the management of the company for its response and cooperation with the Board, praying for Almighty Allah to bless all their efforts for the service of Islamic economy and development of our country in a way that realizes good for all.

With Best Regards,

Shaikh Dr. Ali Mohi - Aldeen Al - Qurra Daghi

Chairman of the Fatwa & Shari’a Supervisory Board

Shaikh Dr. Easa Zaki Easa

Member

Shaikh Dr. Abdulaziz Khalifa Al-Qassar

Member

REPORT OF THE FATWA & SHARI’A SUPERVISORY BOARD


EXECUTIVE MANAGEMENT

Hassan Mohammed AbdulrahimActing General Manager

Basel Talat KhafashFinance Manager


Financial StatementsFor The Year Ended December 31, 2013

WithIndependent Auditor’s Report

Pages

AnnualReport2 0 1 3

CONTENTS

Statement of financial position 20 - 21

Statement of income 22

Statement of comprehensive income 24

Statement of changes in equity 25

Statement of cash flows 26 - 27

Notes to financial statements 28 - 46


INDEPENDENT AUDITOR’S REPORT

The ShareholdersOrient Holding Company - K.S.C. (Closed)State of Kuwait

Report on the financial statements

I have audited the accompanying financial statements of Orient Holding Company - K.S.C. (Closed) “the Company” which comprise the statement of financial position as of December 31, 2013, and the statements of profit or loss, profit or loss and other comprehensive income, changes in equity and cash flows for the financial year then ended and a summary of significant accounting policies and other explanatory notes.

Management’s responsibility for the financial statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards and for such internal control as management determines is nec-essary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ responsibility

My responsibility is to express an opinion on these financial statements based on my audit. I conducted my audit in accordance with International Standards on Auditing. Those standards require that I comply with ethical require-ments and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi-nancial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk as-sessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evalu-ating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opin-ion on the financial statements.

Opinion

In my opinion, the financial statements present fairly, in all material respects, the financial position of Orient Hold-ing Company - K.S.C. (Closed) as of December 31, 2013, and of its financial performance and its cash flows for the


Dr. Shuaib A. Shuaib

Licence No. 33-A

RSM Albazie & Co.State of Kuwait

February 13, 2014

financial year then ended in accordance with International Financial Reporting Standards.

Report on other Legal and Regulatory Requirements

Also in my opinion, the financial statements include the disclosures required by the Companies Law No. 25 of 2012 and its amendments and its executive regulation and the Company’s Articles of Association and Article of Incorporation, and I obtained the information required to perform my audit. Proper books of account have been kept, physical stocktaking was carried out in accordance with recognized practice, and the accounting information given in the Director’s Report is in agreement with the Company’s books. According to the information available to me, no violation of the Companies Law No. 25 of 2012 and its amendments and its executive regulation and the company’s Articles of Association and Articles of Incorporation of the Company have occurred during the financial year ended December 31, 2013 that might have had a material effect on the Company’s financial position or its results of operations.

Orient Holding Company - K.S.C. (Closed)


STATEMENT OF FINANCIAL POSITIONAS OF DECEMBER 31, 2013(All amounts are in Kuwaiti Dinars)

Zamel Abdulrahman Al - ZamelVice Chairman

Abdulaziz A. Al-ShayaChairman

ASSETS Note 2013 2012

Cash on hand and at banks 87,753 241,849

Investments at fair value through statement of profit or loss 3 14,342,368 15,085,996

Accounts receivable and other debit balances 57,831 51,202

Lands held for trading 4 - 2,339,341

Investments available for sale 5 23,619,456 22,640,187

Investment in associates 6 1,290,056 891,404

Investment in joint ventures 7 7,281,319 -

Investment in unconsolidated subsidiaries 267,754 267,754

Musharaka Investment 8 87,430 114,445

Properties under development - 15,628

Investment properties 9 - 3,876,500

Fixed assets 10,189 9,205

Total assets 47,044,156 45,533,511

LIABILITIES AND EQUITY

Liabilities:

Accounts payable and other credit balances 528,592 630,912

Finance facilities 10 1,474,264 1,474,264

2,002,856 2,105,176

Provision for end of service indemnity 44,208 44,031

Equity:

Share capital 11 24,167,462 23,016,630

Share premium 12 70,500 70,500

Statutory reserve 13 2,678,275 2,360,606

Voluntary reserve 14 2,264,676 2,264,676

Cumulative changes in fair value 11,524,242 10,706,826

Effect of changes in associate’s equity 2,316 2,316

Retained earnings 4,289,621 4,962,750

Total equity 44,997,092 43,384,304

Total liabilities and equity 47,044,156 45,533,511

The accompanying notes (1) to (23) form an integral part of the financial statements.



CONSOLIDATED STATEMENT OF INCOMEFOR THE YEAR ENDED DECEMBER 31, 2013

(All amounts are in Kuwaiti Dinars)

Note 2013 2012

Revenue:

Net investments income 16 2,140,589 5,764,409

Impairment loss of investments available for sale (12,616) (8,723)

Company’s share of results from associates 6 113,471 648,901

Gain (loss) on sale of investment in an associate 6 4,180 (256,299)

Gain (loss) on sale of investment in a subsidiary 2 - b 28,000 (81,125)

Company’s share of result from joint ventures 7 1,202,635 -

Gain on sale of properties under development 782 86,115

Change in fair value of investment properties - 169,821

Other income 227,146 466,359

Total revenue 3,704,187 6,789,458

Expenses and other charges:

General and administrative expenses 17 (458,876) (546,294)

Finance cost (65,008) (164,465)

Depreciation (3,610) (25,921)Profit for the year before contribution to KFAS, Zakat and Board of Directors’ remuneration 3,176,693 6,052,778

Contribution to KFAS 18 (27,456) (53,953)

Contribution to Zakat 19 (24,202) (56,945)

Board of directors’ remuneration (28,000) (28,000)

Net profit for the year 3,097,035 5,913,880

The accompanying notes (1) to (23) form an integral part of the financial statements



STATEMENT OF COMPREHENSIVE INCOMEFOR THE YEAR ENDED DECEMBER 31, 2013(All amounts are in Kuwaiti Dinars)

2013 2012

Net profit for the year 3,097,035 5,913,880

Other comprehensive income:Items that may be reclassified subsequently to profit or loss

Change in fair value of investments available for sale 1,307,283 7,092,259

Effect of sale of investments available for sale (489,867) -

Other comprehensive income for the year 817,416 7,092,259

Total comprehensive income for the year 3,914,451 13,006,139



Ori

ent H

oldi

ng C

ompa

ny -

K.S

.C. (

Clo

sed)

STAT

EMEN

T O

F CH

AN

GES

IN E

QU

ITY

FOR

THE

YEA

R EN

DED

DEC

EMBE

R 31

, 201

3(A

ll am

ount

s ar

e in

Kuw

aiti

Din

ars)

Shar

e ca

pi-

tal

Shar

e pr

e-m

ium

Stat

utor

y re

serv

eVo

lunt

ary

rese

rve

Cum

ulat

ive

chan

ges

in

fair

valu

e

Effec

t of

chan

ges

in

asso

ciat

es’

equi

ty

reta

ined

ea

rnin

gsTo

tal

Bala

nce

as o

f Dec

embe

r 31,

201

122

,131

,375

70,5

001,

755,

328

1,65

9,39

83,

614,

567

2,31

62,

029,

936

31,2

63,4

20

Shar

e di

vide

nds

and

cash

div

iden

ds88

5,25

5-

--

--

(1,7

70,5

10)

(885

,255

)

Tota

l com

preh

ensi

ve in

com

e fo

r the

yea

r-

--

-7,

092,

259

-5,

913,

880

13,0

06,1

39

Tran

sfer

to re

serv

es-

-60

5,27

860

5,27

8-

-(1

,210

,556

)-

Bala

nce

as o

f Dec

embe

r 31,

201

223

,016

,630

70,5

002,

360,

606

2,26

4,67

610

,706

,826

2,31

64,

962,

750

43,3

84,3

04

Shar

e di

vide

nds

and

cash

div

iden

ds (N

ote

15)

1,15

0,83

2-

--

--

(3,4

52,4

95)

(2,3

01,6

63)

Tota

l com

preh

ensi

ve in

com

e fo

r the

yea

r-

--

-81

7,41

6-

3,09

7,03

53,

914,

451

Tran

sfer

to re

serv

es-

-31

7,66

9-

--

(317

,669

)-

Bala

nce

as o

f Dec

embe

r 31,

201

324

,167

,462

70,5

002,

678,

275

2,26

4,67

611

,524

,242

2,31

64,

289,

621

44,9

97,0

92

The

acco

mpa

nyin

g no

tes

(1) t

o (2

3) fo

rm a

n in

tegr

al p

art o

f the

fina

ncia

l sta

tem

ents

.



STATEMENT OF CASH FLOWSFOR THE YEAR ENDED DECEMBER 31, 2013(All amounts are in Kuwaiti Dinars)

2013 2012

Cash flows from operating activitiesProfit for the year before contribution to KFAS, Zakat and Board of Directors’ remuneration 3,176,693 6,052,778

Adjustments:

Net investments income (2,140,589) (5,764,409)

Impairment loss of investments available for sale 12,616 8,723

Group’s share of results from associates (113,471) (648,901)

(Gain) loss on sale of investment in an associate (4,180) 256,299

(Gain) loss on sale of investment in a subsidiary (28,000) 81,125

Company’s share of results from joint ventures (1,202,635) -

Gain from sale of properties under development (782) (86,115)

Change in fair value of investment properties - (169,821)

Returns income (294) (1,050)

Finance cost 65,008 164,465

Depreciation 3,610 25,921

Provision for end of service indemnity 7,622 21,135

(224,402) (59,850)

Changes in operating assets and liabilities :

Paid to purchase investments at fair value through statement of profit or loss - (269,610)Proceeds from sale of investments at fair value through statement of profit or loss 1,714,033 1,638,512

Accounts receivable and other debit balances 33,120 (1,362)

Accounts payable and other credit balances (225,503) (54,618)

Cash generated from operations 1,297,248 1,253,072

End of service indemnity paid (7,445) (9,200)

Net cash generated from operating activities 1,289,803 1,243,872

Cash flows from investing activities:

Paid to purchase investments available for sale (905,806) (596,776)

Proceeds from sale of investments available for sale 1,218,557 -

Net movement of Musharaka investment 27,015 (114,445)

Paid for inventory in joint venture (141,783) -

Joint ventures dividends received 278,940 -

Paid to purchase investment in an associate (303,000) -

Proceeds from sale of investment in an associate 21,999 4,975,809

Proceeds from sale of investment in a subsidiary 28,000 33,000

Proceeds from sale of properties under development 16,410 501,280

Paid to purchase of fixed assets (4,534) (800)

Proceeds from sale of fixed assets (60) (7,150)

Cash dividends received 643,215 324,783



STATEMENT OF CASH FLOWSFOR THE YEAR ENDED DECEMBER 31, 2013


2013 2012

Returns income received 294 1,050

Net cash generated from investing activities 879,247 5,116,751

Cash flows from financing activities

Finance facilities - (6,175,736)

Finance cost paid (65,008) (164,465)

Paid cash dividends (2,258,138) (885,255)

Net cash used in financing activities (2,323,146) (7,225,456)

Net decrease in cash on hand and at banks (154,096) (864,833)

Cash on hand and at banks at beginning of the year 241,849 1,106,682

Cash on hand and at banks at end of the year 87,753 241,849




NOTES TO THE FINANCIAL STATEMENTSDECEMBER 31, 2013(All amounts are in Kuwaiti Dinars)

1. Incorporation and activities

Orient Holding Company - K.S.C. (Closed) “The Parent Company” was incorporated pursuant to its Article of incorporation authenticated at the Ministry of Justice – Department of Registration and Documentation - in the State of Kuwait under Ref. No. 7931 / Vol. 1 on November 29, 2004.

On a resolution by the extraordinary general assembly held on March 10, 2013 Article (2) of the articles of Association and Articles No. (1) of the article of incorporation for the company has been amended to change the Commercial name of the company from Orient Investment Company – K.S.C (Closed) to Orient Holding Company – K.S.C (Closed), also changing the company’s activity from an investment company to a holding company and amend the company’s activities as follows:

• Management of subsidiaries or participation in the management of other companies that contribute to and providing the necessary support.

• Investing its funds in trading of shares, bonds and other securities.

• Acquiring real estate and chattels to conduct its activities in the permissible limits according to the law

• Financing or lending funds to companies in which it owns shares or stocks and guaranteeing them with oth-ers, and in this case the participation rate of the holding company should not be less than 20% in the capital of the borrowing company.

• Acquiring industrial property rights such as patents, trademarks and industrial designs or industrial fees or privilege rights or any other related rights related to that and lease them to its subsidiaries or to other com-panies, whether inside or outside the State of Kuwait.

• Investing surplus funds available with the company by investing in portfolios managed by specialized com-panies.

The amendment was authenticated at the Commercial Register under No. 104289 on April 7, 2013.

The Parent Company is authorized to engage or participate, in any way, with other firms conducting similar ac-tivities or activities which may help the company in its objectives, either inside or outside Kuwait. The Company is also authorized to acquire such firms or participate in their equity.

The Parent Company’s registered address is P.O Box: 22866, Safat – 13089, State of Kuwait.

The total number of employees of the Parent Company as of December 31, 2013 is 13 employees (December 31, 2012 - 16 employees).

The Companies Law issued on November 26, 2012 by Decree Law No. 25 of 2012 (the “Companies Law”), can-celled the Commercial Companies Law No. 15 of 1960. Some articles of Companies Law No.25 were subse-quently amended by decree law No.97 of 2013. The Executive Regulation of the new amended law was issued on September 29, 2013 and was published in the official Gazette on October 6, 2013. As per article three of the executive regulation, the companies have one year from the date of publishing the executive regulation to comply with the new amended law.

The financial statements were authorized for issue by the Board of Directors on February 13, 2014. The Share-holders’ General Assembly has the power to amend these consolidated financial statements after issuance.

2. Significant accounting policies

The accompanying financial statements have been prepared in accordance with the International Financial Re-porting Standards issued by the International Accounting Standards Board (IASB) and applicable requirements of Ministerial Order No. 18 of 1990. Significant accounting policies are summarized as follows:



NOTES TO THE FINANCIAL STATEMENTSDECEMBER 31, 2013


a) Basis of preparation

The financial statements are presented in Kuwaiti Dinars and are prepared under the historical cost con-vention except for investments at fair value through statement of profit or loss and other investments available for sale which are stated at their fair value. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The accounting policies applied by the Company are consistent with those used in the previous year except for the changes due to implementation of the following new and amended Interna-tional Financial Reporting Standards as of January 1, 2013:

IAS 1 Presentation of items of other comprehensive income

The amendments to IAS 1 require items of other comprehensive income to be grouped into two catego-ries

Items that will not be reclassified, subsequently to statement of profit or loss.

Items that may be reclassified to statement of profit or loss when specific conditions are met. The amend-ments are effective for annual periods beginning on or after July 1, 2012.

IAS 28 Investments in associates and joint ventures.

As a consequence of the new IFRS 11 Joint Arrangements and IFRS 12 Disclosure of Interests in other entities IAS 28 Investments in Associates has been renamed IAS 28 Investments in Associates and Joint Ventures and describes the application of the equity method to investments in Joint Ventures in addition to associates.

The revised standard becomes effective for annual periods beginning on or after January 1, 2013.

IFRS 7 Offsetting financial assets and financial liabilities and related disclosures

The amendments to IFRS 7 require entities to disclose information about rights of offset and related ar-rangements for financial instruments under an enforceable master netting agreement or similar arrange-ment. The amendments are effective for annual periods beginning on or after January 1, 2013.

IFRS 11 Joint Arrangements

The new Standard requires a party to a joint arrangement to determine the type of joint arrangement in which it is involved by assessing its rights and obligations and then account for those rights and obliga-tions in accordance with that type of joint arrangement. Joint arrangements are either joint operations or joint ventures:

• In a joint operation:

Parties have rights to the assets, and obligations for the liabilities, relating to the arrangement. Joint opera-tors recognise their assets, liabilities, revenue and expenses in relation to their interest in the joint opera-tion

• In a joint venture:

Parties have rights to the net assets of the arrangement. A joint venturer applies the equity method of ac-counting for its investment in a joint venture in accordance with IAS 28 Investments in Associates and Joint Ventures (2011). Unlike IAS 31, the use of ‘proportionate consolidation’ is not permitted.




IFRS 11 is effective for annual periods beginning on or after 1 January 2013.

IFRS 12 Disclosure of Interests in Other Entities

The new Standard combines, enhances and replaces the disclosure requirements for subsidiaries, joint ar-rangements, associates and unconsolidated structured entities. It requires extensive disclosure of informa-tion that enables users of financial statements to evaluate the nature of, and risks associated with, interests in other entities and the effects of those interests on the entityís financial position, financial performance and cash flows. IFRS 12 is effective for annual periods beginning on or after 1 January 2013.

IFRS 13 Fair Value Measurement

This IFRS:

• defines fair value.

• sets out in a single IFRS a framework for measuring fair value.

• requires disclosures about fair value measurements.

IFRS 13 applies when other IFRSs require or permit fair value measurements. It does not introduce any new requirements to measure an asset or a liability at fair value, change what is measured at fair value in IFRS or address how to present changes in fair value. The new requirements are effective for annual periods beginning on or after 1 January 2013.

The preparation of financial statements in conformity with International Financial Reporting Standards re-quires management to make judgments, estimates and assumptions in the process of applying the Com-panyís accounting policies. Significant accounting judgments, estimates and assumptions are disclosed in Note 2(r).

Standards and Interpretations issued but not effective

The following IASB Standards and Interpretations have been issued but are not yet effective, and have not yet been adopted by the Company:

Amendments to IAS 32 offsetting financial assets and financial liabilities

The amendments to IAS 32 clarify the meaning of ìcurrently has a legally enforceable right of set offî and ìsimultaneous realization and settlementî. These are effective for annual periods beginning on or after January 1, 2014.

IFRS 9 Financial Instruments:

The standard, which was earlier effective for annual periods beginning on or after January 1, 2015 and now deferred specifies how an entity should classify and measure its financial assets. It requires all finan-cial assets to be classified entirely based on the entityís business model for managing the financial assets and the contractual cash flow characteristics of the financial assets. Financial assets are measured either at amortized cost or fair value. These requirements improve and simplify the approach for classification and measurement of financial assets compared with the requirements of IAS 39. They apply a consistent approach to classifying financial assets and replace the numerous categories of financial assets in IAS 39, each of which had its own classification criteria. They also result in one impairment method, replacing the numerous impairment methods in IAS 39 that arise from the different classification categories.





b) Principles of consolidation

The financial statements incorporate the financial statements of Orient Holding Company - K.S.C. (Closed) and the following subsidiaries:

Name of Subsidiaries Country of incorporation Percentage of holding

2013 2012

Orient Global Holding Company – K.S.C. (Closed) State of Kuwait - 99%

During the year ended December 31, 2013 the company has sold all its investment in Orient Global Hold-ing Company – K.S.C. (Closed) which resulted a gain of KD 28,000.

c) Financial instruments

Financial assets and financial liabilities carried on the Statement of Financial Position include cash at banks, investments receivables, payables and finance facilities.

Financial instruments are classified as liabilities or equity in accordance with the substance of the contrac-tual arrangement. Distributions to holders of financial instruments classified as equity are charged directly to equity. Financial instruments are offset when the Company has a legally enforceable right to offset and intends to settle either on a net basis or to realize the asset and settle the liability simultaneously.

1) Investments

The Company classifies its investments in the following categories: Investments at fair value through statement of profit or loss and available for sale investments. The classification depends on the pur-pose for which the investments were acquired and is determined at initial recognition by the manage-ment.

(i) Investments at fair value through statement profit or loss

This category has two sub-categories: investments held for trading, and those designated at fair value through statement of profit or loss at inception.

- An investment is classified as held for trading if acquired principally for the purpose of selling in the short term or if it forms part of an identified portfolio of investments that are managed together and has a recent actual pattern of short-term profit making or it is a derivative that is not desig-nated and effective as a hedging instrument.

- An investment is designated by the management on initial recognition if such designation elimi-nates or significantly reduces a measurement or recognition inconsistency that would otherwise arise or; if they are managed and their performance is evaluated and reported internally on a fair value basis in accordance with a documented risk management or investment strategy.

Investments in this category are classified as current assets if they are either held for trading or are expected to be realized within 12 months form the end of the financial period.

(ii) Investments available for sale

Investments available for sale are non-derivative financial assets that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of the investment within 12 months from the end of the financial period.




Purchases and sales of investments are recognized on trade date – the date on which the Company commits to purchase or sell the assets. Investments are initially recognized at fair value plus trans-action costs for all financial assets not carried at fair value through statement profit or loss.

After initial recognition, investments at fair value through statement of profit or loss and invest-ments available for sale are subsequently carried at fair value. The fair values of quoted invest-ments are based on current bid prices. If the market for an investment is not active (and for unlisted securities), the Company establishes fair value by using valuation techniques. These include the use of recent arm’s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, and option pricing models refined to reflect the issuer’s spe-cific circumstances.

Realized and unrealized gains and losses from investments at fair value through statement of profit or loss are included in the statement of profit or loss. Unrealized gains and losses arising from changes in the fair value of investments available for sale are recognized in cumulative changes in fair value in statement of comprehensive income.

Where investments available for sale could not be measured reliably, these are stated at cost less impairment losses, if any.

When an investment available for sale is disposed off or impaired, any prior fair value earlier re-ported in comprehensive income is transferred to the statement of profit or loss.

An investment (in whole or in part) is derecognized either when:

The contractual rights to receive the cash flows from the investment have expired.

When the Company has transferred its rights to receive cash flows from the investment and ei-ther:

(1) Has transferred substantially all the risks and rewards of ownership of the investment.

(2) Has neither transferred nor retained substantially all the risks and rewards of the investment, but has transferred control of the investment. Where the Company has retained control, it shall continue to recognize the investment to the extent of its continuing involvement in the invest-ment.

The Company assesses at the end of each reporting period position whether there is objective evi-dence that a financial asset or a group of financial assets is impaired. In the case of equity securities classified as available for sale, a significant or prolonged decline in the fair value of the security be-low its cost is considered in determining whether the securities are impaired. If any such evidence exists for investments available for sale, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that investment previ-ously recognized in the statement of profit or loss is removed from other comprehensive income and recognized in the statement of profit or loss. Impairment losses recognized in the statement of profit or loss on available for sale equity instruments are not reversed through the statement of profit or loss.

2) Accounts receivable

Receivables are recognized initially at fair value and subsequently measured at amortized cost, using the effective rate of return, less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the Company will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability





that the debtor will enter bankruptcy or financial reorganization, and default or delinquency in payments are considered indicators that the trade receivable is impaired. The amount of the provision is the differ-ence between the asset’s carrying amount and the present value of estimated future cash flows, discount-ed at the original effective rate of return. The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognized in the statement of profit or loss. When a trade receivable is uncollectible, it is written off against the allowance account for trade receivables. Sub-sequent recoveries of amounts previously written off are credited in the statement of profit or loss.

3) Accounts payable

Accounts payables include trade and other payables. Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Trade payables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non - current liabilities.

4) Finance facilities:

Finance facilities represents an agreement whereby the Company receives a certain amount of cash from another party, and invests it according to specific conditions in return for a certain fee (percentage of the profit generated from investment). They are subsequently re-measured and carried out at amortized cost using the effective yield method.

d) Associates:

Associates are those enterprises in which the Company has significant influence, which is the power to participate in financial and operating policy decisions of the associate. The financial statements include the Company’s share of the results and assets and liabilities of associates under the equity method of ac-counting from the date that significant influence effectively commences until the date that significant influence effectively ceases, except when the investment is classified as held for sale, in which case it is accounted for under IFRS 5 “Non-current Assets Held for Sale and Discontinued Operations”. Under the eq-uity method, investments in associates are carried in the statement of financial position at cost as adjusted for post-acquisition changes in the Company’s share of the net assets of the associate, less any impairment in the value of individual investments. The Company recognizes in its other comprehensive income for its share of changes in other comprehensive income of associate. Losses of an associate in excess of the Com-pany’s interest in that associate (which includes any long-term interests that, in substance, form part of the Company’s net investment in the associate) are not recognized except to the extent that the Company has an obligation or has made payments on behalf of the associate.

Gains or losses arising from transactions with associates are eliminated against the investment in the as-sociate to the extent of the Company’s interest in the associate.

Any excess of the cost of acquisition over the Company’s share of the net fair value of the identifiable as-sets, liabilities and contingent liabilities of the associate recognized at the date of acquisition is recognized as goodwill. The goodwill is included within the carrying amount of the investment in associates and is as-sessed for impairment as part of the investment. Any excess of the Company’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognized immediately in the statement of profit or loss.

Upon loss of significant influence over the associate, the Company measures and recognizes any retaining investment at its fair value. Any difference between the carrying amount of the associate upon loss of sig-nificant influence and the fair value of the retaining investment and proceeds from disposal is recognized in the statement of profit or loss.




After the application of the equity method, the Company determines whether it is necessary to recognize impairment loss on the Company’s investment in its associate. The Company determines at each finan-cial period whether there is any objective evidence that the investment in associate is impaired. If this is the case, The Company calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognizes the amount in the statement of profit or loss.

Joint Arrangements

The Company classifies its interests in joint arrangements as either joint operations or joint ventures de-pending on the Company’s right to the assets and obligations for the liabilities of the arrangements.

Joint Ventures

A joint venture is a joint arrangement, whereby the parties that have joint control of the arrangement have rights to the net assets of the joint arrangement. Joint control is the contractually agreed sharing of con-trol of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control.

Investment in Joint Ventures is accounted based on equity method similar to associates.

Joint Operations

A joint operation is a joint arrangement, whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control.

When a company entity undertakes its activities under joint operations, the company as a joint operator recognizes in relation to its interest in a joint operation:

• Its assets, including its share of any assets held jointly.

• Its liabilities, including its share of any liabilities incurred jointly.

• Its revenue from the sale of its share of the output arising from the joint operation.

• Its share of the revenue from the sale of the output by the joint operation.

• Its expenses, including its share of any expenses incurred jointly.

The company accounts for the assets, liabilities, revenues and expenses relating to its interest in a joint operation in accordance with the IFRSs applicable to the particular assets, liabilities, revenues and ex-penses.

When a company entity transacts with a joint operation in which a company entity is a joint operator (such as a sale or contribution of assets), the Company is considered to be conducting the transaction with the other parties to the joint operation, and gains and losses resulting from the transactions are recognized in the company financial statements only to the extent of other parties’ interests in the joint operation.

When a company entity transacts with a joint operation in which a company entity is a joint operator (such as a purchase of assets), the Company does not recognize its share of the gains and losses until it resells those assets to a third party.

f) Investment properties:

Investment properties comprise completed property, property under construction or re-development





held to earn rentals or for capital appreciation or both. Investment properties are initially measured at cost including purchase price and transaction costs. Subsequent to initial recognition, investment properties are stated at their fair value at the end of financial period. Gains or losses arising from changes in the fair value of investment properties are included in the statement of profit or loss for the period in which they arise.

Property interest that is held under an operating lease is classified and accounted for as investment prop-erty when the property would otherwise meet the definition of an investment property and the lessee uses the fair value model.

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 state-ment 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 or commencement of an operating lease to another party. Transfers are made from investment property when, and only when, there is a change in use, evidenced by commence-ment of owner occupation or commencement of development with a view to sale.

g) Properties under development:

Properties acquired, constructed or in the course of construction for sale are classified as properties under development. Unsold properties are stated at cost. Sold properties in the course of development are stat-ed at cost plus attributable profit / loss less progress billings. The cost of properties under development includes the cost of land and other related expenditures which are capitalized and when activities that are necessary to get the properties ready for its intended use. Net realizable value represents the estimated selling price less costs to be incurred in selling the property.

The property is considered to be completed when all related activities, including the infrastructure and facilities for the entire project, have been completed. At that stage, the total asset value is eliminated from properties under development.

h) Fixed assets:

The initial cost of fixed assets comprises its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use. Expenditures incurred after the fixed assets have been put into operation, such as repairs and maintenance and overhaul costs, are normally charged to statement of income or loss in the period in which the costs are incurred. In situations where it can be clearly demonstrated that the expenditures have resulted in an increase in the future economic benefits expected to be obtained from the use of an item of fixed assets beyond its originally assessed standard of performance, the expenditures are capitalized as an additional cost of fixed assets.

Fixed assets are stated at cost less accumulated depreciation and impairment losses. 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 included in statement of profit or loss for the period.

Depreciation is computed on a straight-line basis over the estimated useful lives of fixed assets as fol-lows:

Assets Useful life

Furniture and fixtures 5

Decorations 5

Machines and equipment 3




The useful lives and depreciation method are reviewed periodically to ensure that the method and period of depre-ciation are consistent with the expected pattern of economic benefits from items of fixed assets.

i) Impairment of tangible and intangible assets excluding goodwill:

At each statement of reporting period, the Company reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Recoverable amount is the higher of the fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a discount rate that re-flects current market assessments of the time value of money and the risks specific to the asset.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognized immediately in the statement of profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been rec-ognized for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognized immediately in the statement of profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

j) Provision for end of service indemnity:

Provision is made for amounts payable to employees under the Kuwaiti Labor Law in the private sector and employees’ contracts. This liability, which is unfunded, represents the amount payable to each em-ployee as a result of involuntary termination at the statement of financial position date, and approximates the present value of the final obligation.

k) Share capital:

Ordinary shares are classified as equity.

l) Revenue recognition:

The Company recognizes revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the Company and specific criteria have been met for each of the Company’s activities as described below. The amount of revenue is not considered to be reliably measur-able until all contingencies relating to the sale have been resolved. The Company basis its estimates on historical results taking into consideration the type of customer the type of transactions and the specifies of each arrangement.

Dividend income

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

Gain on sale of investments

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

Sale of properties under development:





When the agreement is within the scope of IAS 11 – “construction contracts” and its outcome can be esti-mated reliably, the Company recognizes the revenue by reference to the stage of completion of the con-tract activity in accordance with IAS 11 – “construction contracts”.

When the agreement is within the scope of IAS 18 – “Revenue”, Company recognizes revenue at time of completion, when the significant risks and rewards of ownership of real estate are being transferred from Company at a single time.

If the significant risks and rewards of ownership are transferred as when construction progresses, the Com-pany recognize revenue by reference to the percentage of completion method.

If there is a doubt about the future economic benefits flowing to the Company, the Company recognizes revenue based on the installment percentage.

Other income

Fees and commission income is recognized at the time the related services are provided.

m) Provisions:

A provision is recognized when the Company has a present legal or constructive obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimate. Where the effect of the time value of money is material, the amount of a provision is the present value of the expenditures expected to be required to settle the obligation. Provisions are not recognized for future operating losses.

n) Finance costs:

Finance costs are recognized in the statement of profit or loss in the period which they are incurred on weighted time apportionment basis.

o) Foreign currencies:

Foreign currency transactions are translated into Kuwaiti Dinars at rates of exchange prevailing on the date of the transactions. Monetary assets and liabilities denominated in foreign currency as at the end of reporting period are retranslated into Kuwaiti Dinars at rates of exchange prevailing on that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are included in statement of profit or loss for the period. Translation differences on non-monetary items such as equity investments which are classified as investments at fair value through profit or loss are reported as part of the fair value gain or loss. Translation differences on non-monetary items such as equity investments classified as investments available for sale are included in “cumulative changes in fair value” in other comprehensive income.

The assets and liabilities of the foreign subsidiary are translated into Kuwaiti Dinars at rates of exchange prevailing at the end of financial period. The results of the subsidiary are translated into Kuwaiti Dinars at rates approximating the exchange rates prevailing at the dates of the transactions. Foreign exchange dif-ferences arising on translation are recognized directly in other comprehensive income. Such translation differences are recognized in statement of profit or loss in the period in which the foreign operation is disposed off.




Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

p) Contingencies:

Contingent liabilities are not recognized but disclosed in the consolidated financial statements, except when the possibility of an outflow of resources embodying economic loss is remote.

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

q) Dividend distribution

Dividend distribution to the company’s shareholders is recognised as a liability in the Company’s financial statements in the period in which the dividends are approved by the company’s shareholders.

r) Critical accounting estimates and judgments:

The Company makes judgments, estimates and assumptions concerning the future. The preparation of financial statements in conformity with International Financial Reporting Standards requires management to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the year. Actual results could differ from the estimates.

Judgments:

In the process of applying the Company’s accounting policies which are described in Note 2, management has made the following judgments that have the most significant effect on the amounts recognized in the financial statements:

(i) Revenue Recognition:

Revenue is recognized to the extent it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. The determination of whether the revenue recognition criteria as specified under IAS 18 are met requires significant judgment.

(ii) Provision for doubtful debts:

The determination of the recoverability of the amount due from customers and the factors determining the impairment of the receivable involve significant judgment.

(iii) Classification of investments:

On acquisition of an investments, the Company decides whether it should be classified as “at fair value through statement of profit or loss” or “available for sale” or “held to maturity”. The Company follows the guidance of IAS 39 on classifying its investments.

The Company classifies investments as “at fair value through profit or loss” if they are acquired primarily for the purpose of short term profit making or if they are designated at fair value through profit or loss at inception, provided their fair values can be reliably estimated. The Company classifies investments as “held to maturity” if the Company has the positive intention and ability to hold to maturity. All other investments are classified as “available for sale”.

(iv) Impairment of investments:

The Company follows the guidance of IAS 39 to determine when an available-for-sale equity investment is impaired. This determination requires significant judgment. In making this judgment, the Company





evaluates, among other factors, a significant or prolonged decline in the fair value below its cost; and the financial health of and short term business outlook for the investee, including factors such as industry and sector performance, changes in technology and operational and financing cash flow. The determination of what is “significant” or “prolonged” requires significant judgment.

Estimates and assumptions:

The key assumptions concerning the future and other key sources of estimating uncertainty at the state-ment of financial position date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

(i) Fair value of unquoted equity investments:

If the market for a financial asset is not active or not available, the Company establishes fair value by using valuation techniques which include the use of recent arm’s length transactions, reference to other instru-ments that are substantially the same, discounted cash flow analysis, and option pricing models refined to reflect the issuer’s specific circumstances. This valuation requires the Company to make estimates about expected future cash flows and discount rates that are subject to uncertainty.

(ii) Provision for doubtful debts:

The extent of provision for doubtful debts involves estimation process. Provision for doubtful debts is made when there is an objective evidence that the Company will not be able to collect the debts. Bad debts are written off when identified. The benchmarks for determining the amount of provision or write-down include ageing analysis, technical assessment and subsequent events. The provisions and write-down of accounts receivable are subject to management approval.

(iii) Revaluation of investment properties:

The Company carries its investment properties at fair value, with change in fair values being recognised in the statement of profit or loss. Two main methods were used to determine the fair value of the investment properties:

Formula based discounted cash flow is based on a series of projected free cash flows supported by the terms of any existing lease and other contracts and discounted at a rate that reflects the risk of the asset.

Comparative analysis is based on the assessment made by an independent real estate appraiser using val-ues of actual deals transacted recently by other parties for properties in a similar location and condition, and based on the knowledge and experience of the real estate appraiser.

3. Investments at fair value through statement of profit or loss

Investments at fair value through statement of profit or loss are represented in local quoted securities held for trading denominated in Kuwaiti Dinar.

4. lands held for trading

During the year, the company has transferred the held for trading lands to investment in joint ventures (Note 7).




5. Investments available for sale

2013 2012

Quoted securities – local 22,902,375 21,842,486

Unquoted securities – local 717,081 729,697

Unquoted securities – foreign - 68,004

23,619,456 22,640,187

It was not possible to reliably measure the fair value of unquoted investments amounting of KD 717,081 (De-cember 31, 2012 – KD 797,701) due to non-availability of a reliable method that could be used to determine the fair value of such investments. Accordingly, they were stated at their cost less impairment losses.

Investments available for sale are denominated in the following currencies:

Currency 2013 2012

Kuwaiti Dinar 23,619,456 22,572,183

United States Dollar - 68,004

23,619,456 22,640,187

Investments available for sale include investments of KD 14,560,000 (December 31, 2012 – KD 15,080,000) pledged to a local bank against finance facilities (Note 10).

6. Investment in associates

2013 2012

Balance at the beginning of the year 891,404 5,641,136

Addition 303,000 -

Disposal of an associate (17,819) (5,232,108)

Reclassification in an associate - (166,525)

Group’s share of results from associates 113,471 648,901

Balance at the end of the year 1,290,056 891,404

During the year, the company has sold its share in an associate which results a gain of KD 4,180.

The company’s share in associates’ assets, liabilities, revenues and results was as follows:

Assets Liabilities Revenues Results

2013 1,432,495 142,439 1,098,306 113,471


2012 993,697 102,293 1,675,866 648,901





7. Investment in joint ventures

2013 2012

Transferred from lands held for trading (Note 4) 2,339,341 -

Transferred from investment properties (Note 9) 3,876,500 -

Additions 323,156 -

Disposals (181,373) -

Company’s share of result from joint ventures 1,202,635 -

Cash dividends received (278,940) -

7,281,319 -

The company’s share in joint ventures’ assets, liabilities, revenues and results was as follows:


7,281,319 - 1,389,798 1,202,635

8. Musharaka investment

Musharaka investment represents the interest in jointly controlled assets for agreed percentage for which the income is recorded in accordance with the Musharaka contract. No income was recorded during the year end-ed December 31, 2013.

9. Investment properties

During the year, the company has transferred the investment properties to investment in joint ventures (Note 7).

10. Finance facilities

Finance facilities represent agreements made with a local bank. The finance facilities carry annual finance charges by 4.25% (2012 – 5.25 %) and guaranteed against investments available for sale (Note 5).

11. Share capital

Authorized, issued and fully paid-up capital consists of 241,674,615 shares (December 31, 2012 – 230,166,300 shares) with a par value of 100 fils each and all shares are in cash.

12. Share premium

This represents cash received in excess of the par value of the shares issued. The share premium is not distribut-able except under specific circumstances as provided in Law.

13. Statutory reserve

As required by the Companies Law and the Parent Company’s Articles of Association 10% of the net profit for the year before contribution to Kuwaiti Foundation for the Advancement of Sciences (KFAS), Zakat and Board of Directors’ remuneration is transferred to statutory reserve. The Parent Company may resolve to discontinue such annual transfers when the reserve equals 50% of the capital. This reserve is not available for distribution except in cases stipulated by Law and the Parent Company’s Articles of Association.




14. Voluntary reserve

As required by the Parent Company’s Articles of Association, 10% of the profit for the year attributable to equity holders of the Parent Company before contribution to KFAS, NLST, Zakat and Board of Directors’ remunera-tion 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. The Board of Directors has recommended on its meeting held on February 13, 2014 to discontinue voluntary reserve transfers and this recommendation is subject to the approval of the shareholders’ General Assembly.

15. Proposed Dividends

The Board of Directors’ meeting held on February 13, 2014 recommended cash dividends of 10 fils per share. This recommendation is subject to the approval of the Company’s Ordinary Shareholders’ Annual General As-sembly.

The Shareholders’ General Assembly meeting held on May 7, 2013 approved the Board of Directors’ recom-mendation of cash dividends of 10 fils per share, and 5 bonus shares for every 100 shares for the year ended December 31, 2012 and the capital increase through bonus shares was registered in the commercial register on May 19, 2013.

16. Net investments income

2013 2012Realized gain from investments at fair value through statement of profit or loss 132,214 403,079

Realized gain from investments available for sale 526,969 -Unrealized gain from investments at fair value through statement of profit or loss 838,191 5,036,547

Dividend income 643,215 324,783

2,140,589 5,764,409

17. General and administrative expenses

2013 2012

Staff cost 231,297 302,590

Rent expenses 81,897 90,960

Professional fees 34,687 41,035

Other expenses 110,995 111,709

458,876 546,294

18. Contribution to Kuwait Foundation for the Advancement of Sciences

Contribution to Kuwait Foundation for the Advancement of Sciences is calculated at 1% of the profit of the Company after deducting its share of income from shareholding associates and transfer to statutory reserve.

19. Contribution to Zakat

Contribution to Zakat is calculated at 1% on the consolidated profit of the Company after deducting its share of profit from Kuwaiti shareholding associates & un-consolidated subsidiaries subject to the same law, also its share of Zakat paid by Kuwaiti shareholding subsidiaries subject to the same law and cash dividends received from Kuwaiti shareholding companies subject to the same law in accordance with law No. 46 for year 2006 and Ministerial resolution No. 58 for year 2007 and their executive regulations.





20. Related party transactions

The Company has entered into various transactions with related parties, i.e. Major shareholders, Board of Direc-tors members, key management personnel and other related parties in the normal course of its business. Prices and terms of payment are approved by the Company’s management. Significant related party transactions and balances are as follows:

Other related parties 2013 2012

Balance included in the statement of financial position:

Accounts receivable and other debit balances 13,076 13,076 13,076

Accounts payable and other credit balances 203,670 203,670 241,930

Compensation to key management personnel 2013 2012

Short-term benefits 72,438 75,519

Long-term benefits 11,167 6,809

Related party transactions are subject to the approval of the shareholders’ General Assembly.

21. Contingent liabilities

As at December 31, 2013 there is a bank guarantee submitted on behalf of the associate company of KD 1,493,000 (2012 – KD 943,000), also an amount of KD 1,079,500 which represents obligation for increasing the capital of an associate.

22. Financial risk management

In the normal course of business, the Company uses primary financial instruments such as cash at banks, in-vestments, accounts receivable, accounts payable and finance facilities and as a result, is exposed to the risks indicated below. The Company currently does not use derivative financial instruments to manage its exposure to these risks.

a) Credit risk:

Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation causing the other party to incur a financial loss. Financial assets which potentially subject the Company to credit risk consist principally of cash at banks, accounts receivable.

The Company maximum exposure arising from default of the counter party is limited to the carrying amount of cash at a bank and receivables.

b) Liquidity risk:

Liquidity risk is the risk that the Company will encounter difficulty in raising funds to meet commitments associated with financial instruments. To manage this risk, the Company periodically assesses the financial viability of customers and invests in bank and financial institutes deposits or other investments that are readily realizable.

The maturity table of financial liabilities:




2013From 3

months to 12 months

Total

Financial Liabilities


Finance facilities 1,474,264 1,474,264

Total liabilities 2,002,856 2,002,856

2012From 3

months to 12 months

Total

Financial Liabilities



Total liabilities 2,105,176 2,105,176

c) Market risk

Market risk is the risk that the fair value or future cash flows of financial instruments will fluctuate due to changes in market variables such as rate of returns, foreign exchange rates and equity prices as indicated below:

i) Cost rate risk

Financial instruments are subject to the risk of changes in value due to changes in the level of rate of cost. The effective rate of cost and the periods in which rates bearing financial assets and liabilities are repriced or mature are indicated in the respective notes.

ii) Foreign currency risk

The Company incurs foreign currency risk on transactions that are denominated in a currency other than the Kuwaiti Dinar. The Company may reduce its exposure to fluctuations in foreign exchange rates through the use of derivative financial instruments. The Company ensures that the net exposure is kept to an ac-ceptable level, by dealing in currencies that do not fluctuate significantly against the Kuwaiti Dinar. The Company is not exposed to foreign currency risk.

iii) Equity price risk

Equity price risk is a risk that the value of a financial instrument will fluctuate as a result of changes in the level of equity indices and the value of individual stocks, whether those changes are caused by factors specific to the individual instrument or its issuer or factors affecting all instruments traded in the market. The company manages this risk through diversification of investments in terms of geographical distribu-tion and industry concentration.

The effect on other comprehensive income (as a result of a change in the fair value of equity instruments held as available-for-sale at December 31) due to a reasonably possible change in equity indices, with all other variables held constant, is as follows:





2013 2012

Market indices

Change in eq-

uityprice

%

Effect on statement

of compre-hensive income

Effect on state-

ment of profit or

loss

Change in equity

price%

Effect on statement of comprehen-sive income

Effect on statement of profit or loss

Kuwait Stock Exchange ± 5% ±1,145,119 ±717,118 ± 5% ± 1,092,124 ±754,300

d) Fair value of financial instruments

The Company measures financial assets such as investments at fair value through profit or loss and avail-able for sale investments and non – financial assets such as investment properties, properties plant and equipment at fair value at each reporting date.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly trans-action between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

• In the principal market for the asset or liability.

• In the absence of a principal market, in the most advantageous market for the asset or liability

All assets and liabilities for which fair value is measured or disclosed in the financial statements are catego-rised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

Level 1: Quoted (unadjusted) market prices in active markets for identical assets or liabilities.

Level 2: Valuation techniques for which the lowest level input that is significant to the fair value measure-ment is directly or indirectly observable.

Level 3: Valuation techniques for which the lowest level input that is significant to the fair value measure-ment is unobservable.

The following table shows an analysis of financial instruments recorded at fair value by level of the fair value hierarchy:

2013 Level 1 Level 3 Total

Investments at fair value through statement of profit or loss

14,342,368 - 14,342,368

Investments available for sale 22,902,375 717,081 23,619,456

2012 Level 1 Level 3 Total

Investments at fair value through statement of profit or loss

15,085,996 - 15,085,996

Investments available for sale 21,842,486 797,701 22,640,187




As of December 31, the fair values of financial instruments approximate their carrying amounts, with the ex-ception of certain financial assets available for sale carried at cost as indicated in Note 5. The management of the Company has assessed that fair value of cash and cash equivalents, time deposits, accounts receivable, due to banks, short-term loans, bonds, wakala and murabaha payables, term loans, accounts payable approximate their carrying amounts largely due to the short-term maturities of these instruments.

During the year there were no transfers between Level 1, Level 2 and Level 3.

For assets and liabilities that are recognized in the financial statements on a recurring basis, the Company determines whether transfers have occurred between Levels in the hierarchy by re-assessing categorization based on the lowest level input that is significant to the fair value measurement as a whole at the end of each financial period.

23. Capital risk management

The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a go-ing concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, issue new shares or sell assets to reduce debt.

The Company monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including ‘current and non-current borrowings’ as shown in the consolidated statement of financial position) less cash and cash equivalents. Total capital is calcu-lated as ‘equity’ as shown in the statement of financial position plus net debt.

For the purpose of capital risk management, the total financial resources consist of the following compo-nents:

2013 2012

Cash on hand and at banks (87,753) (241,849)


Net debt 1,386,511 1,232,415

Total equity 44,997,092 43,384,304

Total capital resources 46,383,603 44,616,719

Gearing ratio 2.99% 2.76%



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSDECEMBER 31, 2013


Office : 22493360 /1Fax : 22493362

www.orient.com.kw

Documents

ANNUAL REPORT 2 0 1 3 - Orient Holding Company … Annual Report 2013 H.H. SHAIKH SABAH AL-AHMAD AL-JABER AL-SABAH The Amir of the State of Kuwait H.H. SHAIKH NAWAF AL-AHMAD AL-JABER