ANNUAL REPORT 2006 - BayanInvest · 2007-08-13 · Crown Prince. Bayan Investment - Annual Report 2006 Board of Directors Faisal Ali Al-Mutawa Chairman & Managing Director Adel Essa

ANNUAL REPORT 2006

Contents:

1 BoardofDirectors2 ManagementList3 Chairman’sMessage5 ManagementReport15 BayanInvestmentSubsidiaries19 Auditors’Report

HisHighnessSheikh Sabah Al-Ahmad Al-Jaber Al-Sabah

AmirofthestateofKuwait

HisHighnessSheikh Nawaf Al-Ahmad Al-Jaber Al-Sabah

CrownPrince

BayanInvestment-AnnualReport2006

Board ofDirectors

Faisal Ali Al-MutawaChairman&ManagingDirector

Adel Essa Hussein Al-YousifiViceChairman

Fawzi Dauod Al-MutawaBoardMember

Ayman Bader Al-SultanBoardMember

Khaled Faisal Al-MutawaBoardMember

Sheikh\Talal Ali AbdullahAl-Jaber Al-SabahBoardMember

Fahad Othman Al-SaeedBoardMember

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Omar Jaber HadeedGeneralManager

Mohamad Yasser IsmailLegalConsultant

Wajih Noujaim NoujaimSeniorManagerAccountingDepartment

Ahmad Othman Al-QuraishiManagerLocalTradingDepartment

Meshal Abdulrahman Al-MelhemManagerBusinessDevelopmentDepartment

Khaled Naser Al-RoudanManagerMarketing&SalesDepartment

Maryam Khalaf Al-KhalafManagerInternationalInvestmentDepartment

Ali Hussein Al SanadViceChairman&ManagingDirector-ArkanHoldingCompany

Abdulwahab Fahad Al-AmeerGeneralManager–BonyanRealEstateCompany

ManagementList


Chairman’sMessage

Dear Shareholders,Iampleasedtopresenttoyou,onbehalfoftheBoardofDirectors,theannualreportofBayaninvestmentCompany,andtoreviewtheachievementsoftheCompanyduring2006.

BayanInvestmentCo.isaKuwaitishareholdingcompany(closed)establishedin1997withthe objective of conducting all financial investment transactions in all economic sectors inside andoutside theStateofKuwait to theCompany’saccountand thatof thirdparties, togetherwith several other investment and financial activities. Despite being listed on Kuwait Stock Exc-change,theCompanyhasitsinvestmentactivityalloverArabianGulfcountriesandcertainArabcountriesinGeneral.

DuetosomeeconomicandpoliticaleventsKuwaitandthewholeregionhaswitnessed,Ku--wait Stock Exchange underwent a general collapse that impacted the performance of stocks of mostKSE-listedcompanies, includingBayanInvestmentCompany.ChiefamongeventswasthedemiseofHisHighnessSheikhJabirAlAhmadAlSabah,AmirofKuwait,mayAllahgranthim mercy, as well as the ensuing internal and external political consequences that have influc-encedtheregion’smarketsandwereamongthestimulibehindalotofcapitalsgoingoutsidethecountry. Yet, due to our balanced and flexible investment policy together with our professional managementteam,wecouldprotecttheCompany’sstockagainstcollapse.

During2006,BayanInvestmentCo.haslisteditsstocksonDubaiFinancialMarketwithintheframeworkofitspursuittoeliminatingbarricadesalongthewayofArabinvestorssothattheycan trade their stocks readily in any Arab country; needless to succumb to confinement to certain region. In this respect, we hope to list Bayan Investment stocks on all Gulf and Arab financial markets,culminatinginworldstockmarkets,particularlyundertheeconomicopenness,global--izationandinternetasthecaseisindealingdirectlywithinternationalcompaniesthroughtheinternet.Thus,suchfactorshelpedopeningnewvistasofinvestmentandwidehorizonsoftrad--ing which will give rise to fulfillment of the current Gulf economic unity projects whereby the Gulf citizenhasthesamerightsalloverArabianGulfcountries.

OutlookMoreover, Bayan Investment Co. continues implementation of its expansion strategy by virtue offocusingonthemostgrowingeconomicsectorsintheregion,particularlytherealestateandindustrialsectors.Inthisrespect,theCompanyhasestablishedanintegratedsystemofsub--sidiaries and affiliates intended to act as investment arms in such sectors; taking geographical diversityintoconsideration.

Ontherealestatesectorlevel,theCompanyraisedthecapitalofGulfHoldingCompanyfromKuwaitiDinaronemilliontoKuwaitiDinarseventymillionsinceithasinvestedinanumberofprojectschiefamongwhichisBahrainFinancialHarborandAreenDesertResort.Moreover,inthebeginningof2006,theCompanyhas,throughGulfHoldingCompanyandincooperationwith Gulf Finance House, launched Villamar at Bahrain Financial Harbor at a cost of approxic-matelyUSD450millionwiththepurposeofestablishingahousingprojectofthreehightowers,residentialvillasandmallsbasedontheconceptionthatBahrainisoneofthemostinvestment-attracting markets all over the region. It is also expected that Bahrain Financial Harbor will be the center point of the financial sector. The Company has also bought a realty in a strategic location

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onArabianGulfstreetthroughBonyanRealEstateCompany,ofBayanInvestmentsubsidiaries,withthepurposeofconstructing a superb and distinctive tower to be the head office of the Company and its subsidiaries. Moreover, the CompanyhaspenetratedtheQatarimarketbyvirtueofparticipatinginestablishingaQataricompanyspecializedinrealestatedevelopment,togetherwiththeCompany’salliancewithalocalinvestmentcompanytomarketandsellequities valuing KD 23 million in investment lands development project in State of Qatar.

Ontheindustrialsector level,BayanInvestmentCo.strivestoenhanceitspresenceinthissectorthroughArkanHoldingCompany,bycompletingferriteproductionprojectinEgyptandConcreteblockwithPolystyreneproductionprojectinKuwait.

Infact,thebusinessstrategyadoptedbyBayanInvestmentCo.aimsatdiversifyingsourcesofincomeandmitigatingrisks.Onthelocallevel,theCompanyisworkingonlaunchingtwonewinvestmentfundsoneofwhichisSharia-com--pliant. Regionally, Bayan Investment Co. strives to encourage small projects and that of private equity through joinc-ingstrategicpartnershipswithsuccessfulinvestorsforthesakeofdevelopingsuchprojectsandrealizingrewardingrevenues that far exceed those realized from alternative traditional opportunities. This trend can also exemplified the participating in establishment of Tashkeel Media Company that operates in media field targeting children below 14 years old in the Arab and Islamic world through creating inherent means that represent a significant and fundamenc-talchangeinchildmediaindustry.Moreover,theCompanyparticipatedin“BahriMediaNetworkCompany”projectwhichaimsatestablishingandformingadistinguishedmedianetworkinArabicinKuwaitandtheregionhingingonworld class quality in the field of media as well as marine entertainment advertising, informational, educational and investmentthroughthreedifferentmassmediaincludingapublishedmagazine,asatellitechannelandawebsite.

Internationally,theCompanyhasrecently,incooperationwithprominentinternationalinvestmenthousesandbanks,participatedinpromisinginitialpublicofferings(IPO’s)inChinatowhichBayanlooksatpromisinglyandoptimisti--cally, due to the prolificacy of investments available in that region of the world.

In conclusion, I extend profound gratitude and acknowledgements to His Highness Amir of Kuwait Sheikh Sabah Al AhmadAlJabirAlSabah,HisHighnessCrownPrincessofKuwaitSheikhNawafAlAhmadAlJabirAlSabahandHisHighnessPrimeMinisterSheikhNasserAlMuhammadAlAhmadAlSabahfortheirkindcareandunceasingsupportto the investment sector in the country. We also express our thanks to His Excellency Minister of Finance, Chairman of the Kuwait Investment Authority and His Excellency Governor of Central Bank of Kuwait for their continuous supc-porttousinperformingourduties.

Moreover, we extend thanks to the Company’s clients and shareholders for their trust and support. Appreciation is duealsototheCompany’semployeeswhosecontributiontotheCompany’sachievementsarehighlyvaluable.WepraytoAllahtheAlmightytoevergrantallofustheblessingofpeaceandsafety,andtorightlyguideustoserveourdearcountryandmaintainitsdevelopmentandwelfare.

MayAllahgrantHisblessingstoallofus,,

FaisalAliAlMutawaChairmanandManagingDirector


Management Report

During 2006, and despite the drop witnessed by Kuwait Stock Exchange during the year whichimpactedtheperformanceofstocksofmostKSE-listedcompanies,BayanInvestmentCo. recorded good performance due to its strategic plan aiming to expanding the Company’s activities anddevelopthevolumeofitsbusinessaswellasitspolicyinmanagingstudiedandmeasured risks. This performance was reflected on all of the Company’s main financial indicators due to the consistent and integrated efforts of the Company’s Board of Directors, Executive Managec-ment,Departmentsandemployees.

We review below a synopsis of the Company’s significant activities during 2006:

Local Investment DepartmentIn 2006, Kuwait Stock Exchange, as well as other financial markets in the Gulf, have witnessed a collapse compared to previous years. In fact, that stagnation and fluctuation was due to cerc-taineconomicandpoliticaleventswitnessedbyKuwaitandtheregion,chiefamongwhichisthedemiseofHisHighnessAmirofKuwaitSheikhJabirAlAhmadAlSabah,MayAllahbestowmercy upon him, as well as the ensuing internal and external political consequences that have influenced the region’s markets and were among the stimuli behind a lot of capitals going outc-sidethecountry.

AllthesefactorshavejointlyimpactedtheperformanceofLocalInvestmentDepartmentcom--paredtothelastyear.Yet,praisebetoAllah,andduetotheTopManagementandourdearclients’ confidence in the efficient professionals managing their investments, the Company could pass such conditions. In this year, we aspire to positive results that reflect the conservative inc-vestmentpolicytheCompanyadoptsinmanagingitsassetsandthoseofthirdparties.

Asset Management TheCompanyadoptsaconservativeinvestmentpolicyawayfromspeculationsandwherebyrisksarecarefullystudied.

LocalInvestmentDepartment, incooperationwiththeResearch&StudiesDepartmentintheCompany, conducts continuous analysis of Kuwait Stock Exchange performance to know the latestdevelopmentsoftradingthroughrelyingonthebasicandtechnicalanalysesofKSElistedcompanies by a competent team seasoned in the field of asset management within the general frameworkadoptedbytheCompany.

Third Party Asset ManagementDuring2006,assetsmanagedtotheaccountoftheCompany’sclientswitnessedslightfallbackat a percentage below than that registered by KSE weighted index, yet the volume of managed assets grew at a percentage exceeding 10% due to the persistent work of the clients’ portfolio managementteamtosolicitnewclientsfromKuwaitandArabianGulffromamongpotentialcli--ents who recognized great investment opportunity in Kuwait Stock Exchange due to rates drop and quality of investment opportunities.

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Investment Funds ManagementMoreover,duringthelastyear,theCompanyhasmanagedaninvestmentfund,anditisplannedtolaunchtwoinvest--mentfundsduring2007withdifferentobjectivesandactivities.Inaddition,theDepartmentiscurrentlyworkingonincorporatinganIslamicSharia-compliantactivitiesinsuchfunds.

Company Portfolio ManagementDuring2006, thetradingportfoliohasslightlydroppedcomparedto thepreviousyear.Asaforementioned, this isduetotheeventswitnessedbyKuwaitduringthattime.Yet,hingingonthelocalandregionaleconomicandpoliticalfactors, analyses indicate a significant improvement in the Portfolio’s performance and development through seizing investment opportunities that realize benefit and welfare to the Company and its clients.

Ea’mmar & Estethmar FundActivity of Net Asset Value (KD) during 2006:


Fund’s Monthly Performance During 2006:

January 2006After the success realized by Ea’mmar & Estethmar Fund in December 2005 through itsparticipation in the real estate and investment exhibition held in Regency Palace Hotel, and in the Kuwaiti real estate and investment exhibition held in Al Raya Hotel, the management team decided to distribute semicannual dividends at 18% of the nominal value of unit (KF 180 per unit) to theunitholdersregisteredasofDecember31st2005,andthisrecommendationwasapprovedbytheregulatoryauthorities.

February 2006During February 2006, Ea’mmar & Estethmar Fund was active by marketing five residentialvillas in Aqeela area. Moreover, the Fund was in diligent pursuit of serious opportunities during 2006 for acquiring a number of investment buildings to develop the Fund’s assets. This in addic-tiontotheDevelopmentproject(4)launchedbytheFundinitsparticipationintheRealEstateInvestment and Construction Exhibition held in Regency Palace Hotel from April 3rdtoApril7th2006. The management team decided to distribute semicannual dividends at 18% of the nominal valueofunit(KF180perunit)totheunitholdersregisteredasofDecember31st2005,andthisrecommendationwasapprovedbytheregulatoryauthorities.

March 2006After the serious attempts conducted by Ea’mmar & Estethmar Fund during March 2006 todevelop its assets, the Fund concluded an agreement for purchasing 11 plots in Aqeela area, Block1,todevelopit.InadditiontothepreparationsconductedbytheFundtoparticipateintheReal Estate, Investment and Construction Exhibition held in Kuwait Regency Palace Hotel from April3rdtoApril7th 2006, and the Fund distributed semicannual dividends at 18% of the nominal valueofunit(KF180perunit)totheunitholdersregisteredasofDecember31st2005,andthisrecommendationwasapprovedbytheregulatoryauthorities.

April 2006During February 2006, Ea’mmar & Estethmar Fund was active by marketing five residentialvillas in Aqeela area. Moreover, the Fund was in diligent pursuit of serious opportunities during 2006 for acquiring a number of investment buildings to develop the Fund’s assets. This in addic-tiontotheDevelopmentproject(4)launchedbytheFundinitsparticipationintheRealEstateInvestment and Construction Exhibition held in Regency Palace Hotel from April 3rdtoApril7th2006. Moreover, the Fund Manager decided to distribute semicannual dividends at 18% of the nominalvalueofunit(KF180perunit)totheunitholdersregisteredasofDecember31st2005,andthisrecommendationwasapprovedbytheregulatoryauthorities.

May 2006DuringMay2006,Ea’mmar&EstethmarFundwasactivebymarketinganumberofresiden--tial villas in Aqeela area. Moreover, the fund was in diligent pursuit of serious opportunities to develop its assets. In addition, the Fund has prepared for a new exhibition that was held in The PalmsBeachHotelandSpawithinonemonth.

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June 2006DuringJune2006,Ea’mmar&EstethmarFundwasactivebymarketingfivevillasoftheresidentialvillastockownedby the Fund in Aqeela area. Moreover, the Fund has delivered a number of constructed villas for the owners who fulfilled reservation of a number of residential villas earlier, together with the preparations of the exhibition that was heldinThePalmsBeachHotelandSpafromJuly10thtoJuly13th2006.

July 2006DuringJuly2006,Ea’mmar&EstethmarFundwasactivebymarketingfivevillasoftheresidentialvillastockownedby the Fund in Aqeela area. Moreover, the Fund has concluded construction contracts for five residential villas, and deliveredanumberofconstructedvillasfortheownerswhofulfilledreservationofanumberofresidentialvillasear--lier, together with the preparations of the exhibition that was held in The Palms Beach Hotel and Spa from July 10th toJuly13th 2006. Moreover, the Fund Manager decided to distribute semicannual dividends for 2006 at 7.5 % to unit holdersregisteredasofJune30th2006beginningfromAugust19th2006.

August 2006DuringAugust2006,Ea’mmar&EstethmarFundwasactivebymarketing7villasoftheresidentialvillastockownedby the Fund in Aqeela area. Moreover, the Fund has concluded construction contracts for 18 residential villas, and deliveredanumberofconstructedvillasfortheownerswhofulfilledreservationofanumberofresidentialvillasdur--ing that time. Moreover, the Fund Manager decided to distribute semicannual dividends for 2006 at 7.5 % to unit holdersregisteredasofJune30th2006beginningfromAugust19th2006.

September 2006DuringSeptember2006,Ea’mmar&EstethmarFundwasactivebyselling15villasof the residentialvillastockowned by the Fund in Aqeela area. Moreover, the Fund has bought 19 residential flats in Al Mahboula area. In addic-tion to the preparations conducted by the Fund to participate in the Real Estate Exhibition held in Al Raya Hotel from 1stto4thofOctober2006.

October 2006During October 2006, Ea’mmar & Estethmar Fund has supervised a new project in Aqeela area, Block 2, comprising of 5 residential villas in preparation to launching them in the coming real estate exhibitions. Moreover, the Fund has bought24residentialflatsinAlMahboulawithadistinguishedseaview,andtheFundhaspreparedthemforinvest--mentduringNovember.Furthermore, theFundhasparticipated in theRealEstate, InvestmentandConstructionExhibition held in Regency Hotel from November 6thtoNovember10th2006.

November 2006Ea’mmar&EstethmarFundhaslaunchedDevelopment4Projectwhichcomprisesanumberofdistinctivevillaswithhigh quality finishing in Al Aqeela area, Block 2. Actual work in the project has already started and the foundations phasewasaccomplished.Moreover,duringNovember2006,theFundhaspreparedAlWahaFlatsGroupinAlMah--boulaforinvestmentsinceitbeganbuying3residentialunits.Furthermore,theFundsearchedforpiecesoflandsininternalareasonwhichtoconstructresidentialtowersforinvestmentpurposes.

December 2006Ea’mmar&EstethmarFundhasaccomplishedpreparationofallflatsitowns.Thesepreparationsincludedkitchens,lightning,generallocationandsecuritysystem.TheFundhasalsomadesuchflatsavailableforthedisposalofcli--entswhocompletedthebuyingtransactions.Furthermore,theFundhaspreparedanumberofflatstobelaunchedin the real estate and investment exhibition to be held on February 4th2007inAlRayaHotel.Inadditiontostartingthe preparation of Development 4 Project which comprises a group of villas with distinguished finishing in Al Aqeela area,Block2.


*During2006,Ea’mmar&EstethmarFundrealizedgoodperformanceandrevenuesamonglocal real estate funds, and this was positively reflected on the following:

1-Attractingcapitalsofnewclients,thusincreasingtheFund’scapitalsteadily.Statistically,40clients(individuals/corporate)during2006.2c Distributing dividends to the Fund’s shareholders for the first half of the year ending on June 30th2006atanamountofKF75perunitandforthesecondhalfoftheyearendingonDecem--ber31st2006atanamountofKF50.3-Owningstockofdistinguishedrealestateassets.4-InDecember2005,NetAssetValue(NAV)amountedtoKD1.230andinDecember2006itamounted to KD 1.065 since the Fund realized a gross annual revenue of 8.51%.5-During2006,theManagementdecidedtoconverttheFundtocomplywiththeprovisionsofIslamicSharia.

Studies and Research DepartmentTheStudiesandResearchDepartmentisoneofthemostimportantsourcesthatprovidesBay--an Investment Co. with a comprehensive vision on the economic facts that influence the different investmentdecisionsthroughtheDepartment’sperformanceofitsfunctionasanintegratedsys--temtosupportdecisiontaking.Inthisrespect,theStudiesandResearchDepartmentprovidesacomprehensivevarietyofconsultancyservicestothebusinesscommunityinsideandoutsideKuwait. Furthermore, the Department has included specialized professionals in the differentfields in the work team in the Studies and Research Department to ensure realization of the three principles according to which the Department operates:

• Utmostaccuracy• Continuation• Effectiveness

The duties of this Department fall in two main fields:

First: Internal Studies and ReportsTheStudiesandResearchDept.providesinternaldepartmentsinBayanInvestmentwithavari--etyofstudiesandreportsdesignedtomeettheneedsoftheCompany’sdifferentdepartments.These studies and report are subject to continuous development to increase their efficiency in collectingdataandgeneratinginformationnecessarytotakeinternaldifferentinvestmentdeci--sions.

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These reports include model forms such as companies’ financial analysis reports, studies of offered investment opc-portunities,valuatingthefairpriceoflistedcompanies,andpreparingreportsonsupportandresidencelevelsforallstocks listed on Kuwait Stock Exchange. Moreover, the Studies and Research Department respond to exceptional requests for conducting new reports and studies able to generate certain required information with the utmost acc-curacy possible and within definite timeframes.

In addition, the Department continuously searches the types of work of the departments benefiting from the reports and studies conducted by the Studies and Research Departments and devises new products that provide efficient supporttothefunctionsofsuchdepartments.

Second: Media Studies and ReportsTheStudiesandResearchDepartmentcouldpositionBayanInvestmentnameamongleadinginvestmentcompa--niesinlocalmarketaswellasregionalmarketsintermsofpreparingupdatedstudiesandreportsandpresentingthemtothemarket,theprivatesectorwithallofitssegmentsandtosatellitechannelswithintheframeworkoftheirspecializedeconomicprograms.

Moreover, the Studies and Research Department provides coverage of the Gulf stock exchange markets’ perforc-manceondaily,weeklyandmonthlybasis,togetherwithhighlightingtheprominenteconomicupdatesofeachcoun--try.

Inaddition,theStudiesandResearchDepartmentinBayanInvestmentCo.isdistinguishedbyprovidingamonthlyreportthatcoversprojectedsupportandresistancelevelsforGulfmarketsindices.Thereportisvaluableandgreatlyappreciatedbyspecialists.

DuetotheaccuracyofreportsissuedbyBayanInvestmentCompany,aswellasthedistinguishedperformanceofitsanalysts,thenumberoflocalandinternationalspecializedbodiesthatarekeenonpublishingsuchreportseitherinnewspapers,onwebsitesorthroughtheirchannelshasincreased.Moreover,televisionchannelsspecializedineconomyandbusinesspaydiligentheedtorepeatedlyinvitetradersandanalystsfromtheLocalInvestmentsDe--partment and the Studies and Research Department. In this context, Bayan publicly presents its vision regarding the significant updates in Gulf financial markets.

Furthermore,theCompanyprovidesseveraldetailedreports,eitherpublishedornot,toinvestorsthroughtheelec--tronicmailfreeofcharge.


Studies and Research Department Activities During 2006:

Reports Provided by the Department During 2006:The Studies and Research Department in Bayan Investment Co. issues a series of reportsincluding22 reports comprisingdaily,weeklyandmonthly reports, togetherwithannual andregular reports.This production is published to various readers either inside the Company,throughmailgroupsorinnewspapers.ThenumberofreportsproducedbytheStudiesandRe--search Department approximately totaled 2,395 reports during 2006.

Such reports cover in detail the performance of Kuwait Stock Exchange, the companies listed onit,theperformanceofGulfCooperationCountries’marketsingeneral,inadditiontothemostimportanteconomicnewspertinenttoinvestment.

Studies Provided by the Department During 2006:The Studies and Research Department has provided to the Company’s Departments andSections a number of studies and reports on KSEclisted companies covering financial analyc-sis aspects of financial statements, valuation of the fair price of companies’ shares as well as preparing executive summaries on newly listed companies and assessing investing in them in certaincases. Inadditiontotheeconomicreportsdirectedtootherdepartmentseachaspertheir need and request, and such reports represent economic brief on the country targeted for investment.

Part of the Studies and Research Department Achievements in 2006During2006,certainachievementsdeemedsteadystepsalongthewayofdevelopmentandspreadbytheStudiesandResearchDepartmentwererealized.Asforreports,anewbunchofreportsvaryingaccordingtotimeandcontentwereintroduced,andtheDepartmentisalwayskeenonprovidingtheinvestmentandbusinesscommunitywithinnovative,newandvalueadd--ingcontributions.

Moreover, the Studies and Research Department received requests from local newspapers durc-ing the last year to provide special and exclusive reports for their economic papers, and the Department has responded to some of such requests in such a manner that supports presence anddoesnotharmthespreadofotherreports.

Chiefamongthemost importantachievementsduringtheyear iscontractingwithReuterstoprovidematerialsthroughwhichtoparticipateintheReutersKnowledgeservice.Afterseveralmeetingsandsubjecting theDepartment’s reports toa testperiodbyReuters for tryingandstudying theperformanceandpersistency,aMemorandumofUnderstandingwassignedbyvirtueofwhichReutersprovideallthereportsitreceivesfromtheStudiesandResearchDepart--menttoitssubscribersoftheabovementionedservice.

In this respect, the Department continued building a unique database that includes all the news of KSE-listed companies released by KSE Management itself. This database includes nowaround9,500newscoveringtheperiodfrom2004topresent,withsearchoptionprovided.

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International Investment DepartmentTheInternationalInvestmentDepartmentinBayanInvestmentCompanyistheconnectinglinkbetweentheCom--pany and international financial institutions and banks since the Department strives to foster its relations with all bodc-ies outside the State of Kuwait. Moreover, the Department aims at diversifying the Company’s external investments intermsofsectorsandgeographicallocationstorealizetheutmostpossiblerevenuesandminimizetherisksthatthreatoverallperformance.

The Department’s functions can be summarized as follows:•MonitoringtheCompany’scurrentinvestmentsandraisingrecommendationsontheirperformancetotheTopMan--agement.• Providing the Top Management with a monthly report highlighting the performance of external investments and explaining the diversity extent of such investments in terms of type, country, currency and sector.•Studyingnewinvestmentoffersandpresentingrecommendationsintheirregard.• Fostering and developing the Company’s relations with different international financial institutions.•StudyingcertainpromisinginternationalsectorsandmarketstospotthebestinvestmentopportunitiestotheCom--panyanditsclients.•StrivingtoofferthebestinvestmentopportunitieswiththeirdifferentobjectivesandtypesforinvestorsintheStateofKuwait.

Achievements:FortheDepartment’sachievementsin2006,theyareincarnatedintheCompany’sinvolvementincertaingooddirectinvestments and their participation in some Asian public offerings that realized rewarding profits at the end of the year. Moreover,theDepartmenthasmonitoredtheperformanceofitscurrentinvestmentsaccurately,andmoveditsfundsfromweakperforminginvestmentstootherpromisingones.

Marketing and Business Development DepartmentDuring 2006, this Department has realized prominent achievements that have positively reflected on highlighting BayanInvestmentnameinthemediaandsocialdomainbyvirtueofitsseveralparticipationsindifferentactivitieslo--callyandinternationally,aswellasthroughactivemarketingoftheCompany’sdifferentproductsandservices.Inad--dition,theMarketingandBusinessDevelopmentDepartmentsucceededinsupportingandenhancingthegoodover--all impression in the financial sector and among investors of Bayan Investment as a successful business model.

TheMarketingandBusinessDevelopmentDepartmentsupervisesseveralactivitiesondifferentlevels.ChiefamongthedutiesperformedbytheDepartmentisthepreparationofpublicationsandprintedmaterials,preparingformediaandmarketingcampaignsofdifferenttypes,publicrelations,coordinatingtopublishthereportsandstudiesreleasedbyBayanInvestmentCompanyinnewspapersandmagazines,managingtheCompany’strademarkandtheper--tinentactivities,enhancing internalcommunicationamongdifferentdepartmentsandemployees in theCompanythroughmeansandactivitiesthatcontributetojointcommunicationandreaction,participatinginmanagingandde--velopingrelationswiththeCompany’sclientsandconstructingdatabasesandinformationtobeusedamongotheressentialsfordecisionmakingpertinenttostudiesandrecommendationstodevisenewproductsandservices.


Contributions and Achievements of the Department in 2006: 1-Participatinginsponsoringthesecondinternationalconference“InternationalEconomicDi--rectionII”entitled«ManagingDevelopmentandCompetitiveness»organizedbytheCollegeofBusinessAdministrationofKuwaitUniversity.2-Participatinginsponsoringthemediacampaignof«Mahmeya»(Thenationalprojectofenvi--ronmentalawarenessdevelopment).3c Participating in sponsoring the Gulf Forum and Exhibition in Jordan held in the Hashemite KingdomofJordan«GulfinJordan»withtheobjectiveofmarketingBayanInvestmentCompa--ny’sinvestmentsandenhancingitsrelationsinJordan.4-ParticipatinginsponsoringthethirdinternationalconferenceofpreventingsmokingorganizedbyKuwaitSocietyforSmoking&CancerPrevention.5-Participating insponsoring theNationalDayandLiberationDay festivalorganizedbyTheNationalUnionofKuwaitiStudents,UnitedStatesBranchinDenver.6-ParticipatinginsponsoringthetwentythirdannualconferenceofTheNationalUnionofKu--waitiStudents,UnitedStatesBranchunderthetitle“Myhome…GenerationandaVision” inNewYorkCity.7-Participating insponsoring thenational festival tohonor thememoryof lateHisHighnessJabirAlAhmadAlSabahorganizedbytheindependentlistinKuwaitUniversityunderthetitle“InfaithfulnesstoJabir”.8-Participating insponsoring thetelevisiondialogueprogram6/6broadcastedonChannel1andthesatellitechannelofStateofKuwaitTelevision.9-ParticipatinginsponsoringthecharityceremonyofAmericanUniversityGraduatesSocietyheldintheStateofKuwait.10-ParticipatinginsponsoringthecharitydinnerofChildCancerCenterinLebanonheldintheStateofKuwait.11-HoldingGhabgah(Party)duringtheholymonthofRamadanandGergi’an(Kuwaititradition)foremployeesandtheirfamiliesofBayanInvestmentCompanyanditssubsidiaries,inadditiontopressandmediarepresentativesduringtheholymonthofRamadan.

Inthisrespect,severalcontributionsandsponsoringasabovementionedaremadewithintheframeworkofBayanInvestmentCompany’sadoptionoftheconceptofsocialandresponsiblecorporatecitizenwhichencompassesvarioussocial,environmentalandculturalactivities.

Corporate Finance DepartmentThedutiesandactivitiesoftheCorporateFinanceDepartmenthaveawidescope,rangingfromdirect investment, private equity and joint ventures to business services functions such as busic-nessvaluationandin-houseinvestmentanalysisandconsultingservicesaswellascoordina--tion with existing investment partners and subsidiaries. The year 2006 saw many developments withinthedepartmentsuchasthehiringofnewprofessionalswithhighercredentials,addingfreshnewbloodtothedepartment.

TheCorporateFinanceDepartment isverypleased toannounce theestablishmentofBahryMediaNetworkCompany(Bahry)intheendof2006.Thecompany’smajorityownedbyBayanInvestmentCompanyandourpartnerisSaffarforGeneralTradingandContracting.Itwases--tablishedasaKuwaitishareholdingcompanywithacapitalofKD1,000,000.Thisinvestmenthas enhanced Bayan Investment Co.’s exposure and position in the growing media market and

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sinceitisbasedinKuwaitithasaccesstoapopulationthatconsiderssearelatedactivitiesaspartofitsdeeprootedheritage. Furthermore, Bahry has allowed itself the capability to expand into the international arena by offering Engc-lishprogramsthataresubtitledinArabic.Bahryisnotonlytargetinganichemarketbutalsohasadiverserangeofrevenue streams: Bahry TV Channel, Bahry International Magazine, and Bahry online.

InthepastyeartheCorporateFinanceDepartmentalsoplayedbothanactivein-houseconsultingroleandamar--keting role in an exciting new investment opportunity in Qatar. This investment, Barwat AlcKhor, is based on the developmentoftheAl-KhorlandinQatarandwaspursuedinconjunctionwithBayanInvestmentCo.’sfully-ownedsubsidiary,BonyanRealEstateCompany.TheBarwatAl-Khorprojectdidnotonlyofferanovelstructureandcol--laboration with highly capable strategic partners, but also, it offered Bayan Investment Co. increased exposure to the realestateboominthethrivingQatarimarket.

TheCorporateFinanceDepartmentwasalsodeeplyinvolvedinanalyzing,assessing,andmakingrecommendationsfor the exciting investment opportunities that are brought to Bayan Investment Co. on a regular basis. Because Bayan is oftentimes viewed and sought after as a strategic partner in private equity investments, the company consistently receivesoffersandideasfromreputableestablishmentswithnovelandintriguingbusinessconcepts.

Information Technology DepartmentTheInformationTechnologyDepartment(ITDept.hereandafter)missionistoprovidetechnologicalstrategicplan--ningandImplementationservicesforBayanInvestmentcompany’sdepartmentsandsubsidiariestoenablethemachievetheirbusinessgoals.

Year 2006 was a challenging, successful, and exciting year for the IT Dept., high growth in the number of employees and the required services took place which required significant expansion in the technological infrastructure and the offeredservices.

OneofthestrengthsoftheITDept.atBayanInvestmentCompanyistheabilitytodevelopbusinessapplicationsin-house,thusenablingBayanInvestmentfullcontrolonthesesystems,fastsupportandbeingprotectedfromtheoutsidevendordelays;Theapplicationdevelopmentandmaintenanceactivitiescontinuedduring2006toupgradethe components of the existing business applications, and new systems were developed in coordination with the otherdepartmentsofthecompanytosupporttheirbusinessoperations.

The Networking Infrastructure was upgraded as Bayan Investment rented the 13th floor of Suad Complex which required the IT Dept. to analyze, plan and implement the technical environment setup in coordination with the exterc-nal vendors. Also based on the Central Bank of Kuwait requirements; Bayan Headquarter is now connected to the Central Bank’s financial reporting system under a secured connectivity channel.

AimingforenhancingtherelationshipbetweenBayanInvestmentCo.,itsclients,andthepublic;thenewcorporatewebsitewasunder thedevelopmentphase; thenewcorporatewebsitewillworkasacommunicationchannel topresent the corporate products information, news and events, incdepth financial studies and research and other services.

TheITstaffcontinuedtoprovidesupportservicesforallusersensuringthehighavailabilityofallsystemsandre--quired services. Training sessions were also conducted for the employees on a regular basis to ensure the proper utilizingofthecorporateapplications.


Bonyan Real Estate Company – K.S.C (Closed)

BonyanRealEstateCompanyisoneofBayanInvestmentSubsidiariesestablishedintheStateofKuwaitin2004tobethe“realestatearm”ofBayanInvestment.Sincetheveryoutset,theCompanyadoptedaconceptthatkeepspacewiththeboomoftherealestatesectorandthethrustofrealestateactivityinGulfareaandtheMiddleEasttorealizethehighestreturnsoninvestmentsandascendtotheleadingpositionintherealestatesectorwithcontemporaryconceptsproceedinginconformitywiththelatestinternationaldevelopmentsinthisrespectbyvirtue of launching distinguished real estate edifices. Below are the most prominent achievec-ments of Bonyan Real Estate Company during 2006:

First: Kuwait ProjectsBonyan Real Estate Company owned two plots of land in Dasman and Sharq areas in strategic andvitallocationscharacterizedbypromisingfuture,andtheCompanyhassoldtheplotofDas--man at a profitable price. As for the plot located in Sharq area on Gulf Road, the Company is still in the process of getting municipality approval to change the land zoning into commercial offices with an increased FAR. Moreover, the Company has envisaged a diversified, distinguished and contemporarilyintegratedrealestateprojectthathingesondevelopingsuchplotstogetherwiththe adjacent ones. The project encompasses the following:

• Two towers, one of which is 97 floors high, and will be the highest in the State of Kuwait.• Luxurious residential suites comprising of 1,2,3 bedroom flats and penthouses viewing the sea fromonedirectionandthecityfromanotherdirection.• Smart offices encompassing the most upctocdate technology.• A luxurious five star hotel with royal suites, world class restaurants, clubs, health resorts and entertainmentfacilities.• Conference center and celebration hall equipped with upctocdate audio and visual equipment aswellasinternationalandfestivalshospitalityprograms.•Carparkingstoservetheproject.

ThecostofthisprojectisestimatedatKD128million.

Second: Bahrain ProjectsBonyanRealEstateCompanybegansetting the technicalbases towards the launchofGulfHoldingCompanythroughconductingtheeconomicfeasibilitystudies,settingthearchitecturalplans,developinganintegratedstrategyfortheCompany’sfutureprojectsandadaptingalles--sentialsofitsbusinessprogressbyvirtueoffollowingupthesuccessfulplacementcampaignthatculminatedinincreasingtheCompany’scapitalfromKuwaitiDinaronemilliontoKD70mil--lion. The early results of the Company’s launch comprised the following projects:

BayanInvestment Subsidiaries

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1. Bahrain Financial Harbor Villamar Project: The project is residential and administrative constructed on five plots of land whose area total 32,600 square meters andislocatedinthesouthernpartofBahrainFinancialHarbor.Moreover,theprojecthasthreeresidentialtowersencompassing 494 luxurious residential flats whose areas range from 100 to 260 square meters, as well as 54 villas and 6 roofs whose areas range from 350 to 450 square meters to serve Bahraini and GCC citizens as well as expac-triates.Inthisproject,diligentheedwaspaidtotheintegrationamongfacilities,restaurants,entertainmentplaces,superb hospitality services and modern lifestyle. Gross approximate cost of the project amounts to USD 450 million and it is expected to accomplish execution of the project in June 2009, knowing that the preliminary designs of the projectwereconductedandreviewedinDecember2006.

2. Al - Areen Desert Resort ProjectWithin the framework of this project, Areen City Center is being constructed on an area of 260,821 square meters encompassing luxurious flats of various designs (single room, two, three bedrooms), in addition to a wide variety of superb villas and «Town House» to serve residents of the Center in which excellent services are provided in a modernstylemingledwithtraditionaltouchthatinspirestheBahrainiheritage,togetherwithopencafes,cinemas,majesticrestaurants.Allsuchelementsmaketheprojectastrikinglydistinguishedtourismandentertainmentprojectin Kingdom of Bahrain. Gross approximate cost of the project amount to USD 450 million. The structural layout was conductedandamendedinDecember2006.

Third: Abu Dhabi ProjectsBonyan Company has reviewed a number of current real estate projects in Abu Dhabi and expressed willingness to joinastrategicpartnershipbyvirtueofagreementsofunderstandingwithrealestatedevelopmentcompaniesaswellaswiththeTouristicDevelopmentandInvestmentCompany(TDIC)ownedbyAbuDhabigovernmenttodevelopapartintheculturalarealocatedinthewesternpartofAlSa’adiatIsland.TheprojectofdevelopingAlSa’adiatIslandaims at turning such natural island, being 27 square kilometer and 500 meters from Abu Dhabi city shores, to an internationaltourismdestination.Itwillbedevelopedinthreephasesandworkswillbeaccomplishedin2018.Thisproject is one of the mega real estate projects in Abdu Dhabi since the preliminary estimations of it approximately amountedtoUSD27billion.


Al Noor Holding Company

AlNoorHoldingCompanyisaholdingKuwaitishareholdingcompanyfullyownedtoBayanIn--vestmentCompany,andwasestablishedduring2004.TheCompanyworksinestablishingandowningdifferenttypesofcompanies’shares.AlNoorHoldingCompanywasestablishedwiththeobjective to establish and own leading companies in the field of information technology, develc-opingworkmethodsandattainingsuccessintheinformationtechnologymarketinKuwait.TheCompany focuses its efforts on spotting opportunities through a unique perspective hinges on understandingandknowingtheinformationtechnologymarketusingthebestavailableinvest--ment tools in establishing new technology companies, owning or merging existing companies working in this field in cooperation with strategic investors.

Moreover,AlNoorHoldingCompanyhassetasystemofsubsidiariestorealizetheobjectivebehinditsincorporation.TheCompanyhasestablishedNoorSkillsConsultancyandTrainingCompany,W.L.L,withtheobjectiveofinauguratingprivatetraininginstitutions,andmanagementconsultancy, organizing exhibitions, conferences and sport camps. Moreover, the Company esc-tablished Noor Search Consultancy and Market Studies Company, W.L.L, to work in the fields of media,advertising,publishing,distribution,managementandmarketingconsultancy,televisionandsatellitemedia,printingandpress.Inaddition,theCompanyestablishedNoorMethodProj--ectManagementCompany,W.L.L,toprovideeconomicandmanagementconsultancyaswellas organizing exhibitions, conferences and sport camps, together with project management. Furthermore,theCompanyaspirestointensifyitseffortsandreaptheirfruitsin2007byvirtueofactualrewardinginvestmentstobemadebyAlNoorHoldingCompanyoritssubsidiariestothebenefit of the Company and investors.

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Arkan Holding Company

Year2006witnessedmanyachievementsofArkanHoldingCompanybyvirtueofmakingremarkableprogressinitsprojectsthatwerestudiedandapprovedinthelasttwoyears.Moreover,theCompanycontinueditsbusinessplanaimingatsearchingforthebestindustrialopportunitiesintheArabregion,particularlyinGulfCooperationCouncilcountries,throughstudyingthenaturalresourcesandmarketsinsuchcountries.TheCompany’sManagementhasalso supported the work team with the best efficient professionals in the field of industry and investment opportunities studying.

Subsidiaries of Arkan Holding Company

Arkan Industry and Mining Company (Egypt): ArkanIndustryandMiningCompanyisanEgyptianShareholdingCompanyandasubsidiaryofArkanHoldingCom--pany established in 2004 to execute and manage the Company’s project in Arab Republic of Egypt for producing and marketingferrite(whichistherawmaterialformingtheglasslayeronthesurfaceofceramic).Moreover, 2006 witnessed the accomplishment of executing most of the project works and establishing the factory on an area of twenty thousand square meters in 10th of Ramadan City (near Cairo). The factory is constructed with up-to-datetechnologyandincooperationwithtworenownedcompaniesinSpainandItaly.

It is expected that commercial production of the project begins during March 2007.

Arkan International Construction Materials Company (Kuwait):In2006,theCompanyobtainedtheapprovalofthePublicAuthorityofIndustrytoestablishaprojectforproducingConcrete block with Polystyrene on an area of twelve thousand square meters. The Company is currently waiting for designatingsuchareainanynewlyestablishedindustrialzonescurrentlyplannedbythePublicAuthorityofIndus--try.

Silicon Carbide Production Project (Qatar):This is the first project of its kind in the Arab region, and it aims at producing silicon carbide material which is used inthermalsmanufacturing,sandpaperandabrasionmaterials.Moreover,itisusedasanadditivematerialinmanu--facturingironandsteel.

ThefeasibilitystudyoftheprojectprovedthattheArabianGulfareaistheoptimalplacetoestablishsuchprojectduetoavailabilityofenergywhichisoneofessentialinputsintheproject.

In2006,approvaloftheQatariMinistryofIndustrywasobtainedtoestablishtheproject,inadditiontoobtainingtheapproval of the Qatari Ministry of Commerce and Economy to establish the Company with a 100% Kuwaiti capital.

Furthermore, it is expected that 2007 will witness starting the executive works of the project.

Contents:

23 IndependentAuditors’report25 Consolidatedbalancesheet26 Consolidatedstatementofincome27 Consolidated statement of changes in shareholders’ equity28 Consolidated statement of cash flows29c48 Notes to consolidated financial statements

IndependentAuditor’sReport

BAYAN INVESTMENT COMPANY K.S.C. (CLOSED)AND SUBSIDIARIESSTATE OF KUWAIT

CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2006

WITH INDEPENDENT AUDITORS’ REPORT



























Documents

ANNUAL REPORT 2006 - BayanInvest · 2007-08-13 · Crown Prince. Bayan Investment - Annual Report 2006 Board of Directors Faisal Ali Al-Mutawa Chairman & Managing Director Adel Essa