SIMPLY UP IN 2005
In The Name of GodThe Most Gracious The Most Merciful
His Highness
Sheikh Sabah Al-Ahmad Al-Jaber Al-SabahAMIR OF KUWAIT
His Highness
Sheikh Nawaf Al-Ahmad Al-Jaber Al-SabahCROWN PRINCE
His Highness
Sheikh Sabah Al-Ahmad Al-Jaber Al-Sabah(1928 - 2006)
“We testify with the people of Kuwait that you have successfully led the
country into modern civilization”
9
CONTENTS
10 Sharia’a Board
12 Chairman’s Message
16 The Board of Directors
18 Financial Analysis
27 Auditor’s Report and Financial Statements
10
Shari’ah SupervisoryBoard Report
11
Sheikh Dr. Khalid Mathkour Al Mathkour
Chairman
Sheikh Dr. Abdul Aziz Al Qassar
Member
Sheikh Dr. Issam Khalaf Al-Inizi
Member
We have reviewed ADAM company’s activities as well as its contracts and investments
transactions and studied the shari’ah controller’s report during the year ended 31
December 2005. We hereby certify that the company’s all transactions
were practiced in compliance with the Islamic Shari’ah.
12
CHAIRMAN MESSAGE
13
On behalf of my colleagues, the Board Members, the
Management and Myself, I would like to start with thanking
Allah the Almighty and Our Prophet, Peace Be Upon Him.
I would like to congratulate you for the successful results of
2005, and assure you of our perfect performance, thanks to
your efforts, directions and our commitment to our pledge
to accomplish our goals safely. It is quite obvious that our
achievements and aspirations have become visible and
sustainable. Such accomplishments wouldn’t have been
realized without your continuous support and assistance to
overcome all faced obstacles.
14
CHAIRMAN MESSAGE
Esteemed Shareholders,
2005 was a year of great developments and achievements. The financial results as end of 31st December
2005 recorded immense profits despite facing numerous challenges locally and internationally.
Following is a summary of our major achievements and activities:
ADAM executed a number of strategic projects where all Private Placements launched by the company
were successfully accomplished. ADAM managed to secure the needed capital of these placements in
a time record. Dar 1st Holding Company (Khabary) from KD 1-50 Million, Manazel Holding Company
from 15-65 Million and Oqyana Real Estate Company from 1-250 Million. ADAM’s total covered and
issued private placements reached approximately KD 365 Million (US $ 1.3 Billion).
Towards the end of 2005, ADAM launched Al Dar Fund of Funds , the first of its kind in Kuwait, the
Gulf and the whole World. Al Dar Fund of Funds aims at investing in the investment fund units in
compliance with Islamic & Shari’ah Principles. The Fund was very successful and highly appreciated
and accepted by investors during its private placement operations. Other ADAM’s funds namely, Real
Estate Fund, Al Dar Investment Fund and Al Dar Securities Fund continued to its great performance
and recorded remarkable and rewarding profits.
ADAM as well, was very much distinguished by assuming the consultant
role to list share holding closed companies that plan to be listed
on the Kuwait Stock Exchange. ADAM achieved its first listing
operation for Al Dar National Real Estate company. The
company is still undergoing the listing of Kuwait Leisure
Parks Company. In addition, ADAM concluded many
agreements to list several companies during 2006.
ADAM successfully assumed the role of manager
15
and issuance agent to increase Al-Madar Finance & Investment Company’s capital from KD 15-25
Million. The company, through managing the customer’s Private Investment Portfolios succeeded
to attract different investors and provide services with high efficiency which contributed to the
achievement of excellent returns by end of 2005.
On the other hand, ADAM’s financial results recorded KD 23.5 million net profit by end of 2005 and
approximately 17.44 fils earning per share. ADAM’s total revenues reached around KD 26.1 million and
expenditure KD 2.6 Million. The company’s assets mounted to KD 65 million and total shareholders
equity to KD 44 Million. The returns on assets reached approximately 36%, 59% on equity and 117%
on capital. ADAM plans for expansion in the upcoming years. This will be reflected through the
acquisition of new ventures, varied investment activities and numerous consultancy services.
In closing, I take this opportunity to acknowledge with great thanks and deep depreciation the
contribution of all towards the development of ADAM’s activities. I extend my special thanks to
our parent company Investment Dar, praising its continuous support to ADAM’s Management,
Shareholder, Investors, Board Members, Executives and Staff.
Thanking you, once again for your cooperation and wishing every progress and success for our
company’s further development and prosperity.
Omar Sulaiman Al Qadi
Chairman
16
BOARD OF DIRECTORS
& ExECuTIvEMANAGEMENT
17
Omer Suleiman Hamad Al-Kazi
Chairman
Mustafa Ibrahim Al-Saleh
Vice-Chairman
Adnan A. Al-Musallam
Board Member
Ali Mohammed Al-Olaimi
Board Memberque
Saqer Abdullah Thunayan Al-Ghanem
Board Member
Abdulrahman Ali Al-Dawoud
General Manager
18
FINANCIALANALYSIS
I FINANCIAL POSITION IN 2005
In 2005, ADAM succeeded to maintain its positive performance. The company
managed to achieve continuous asset growth and increase by applying a diverse
activity strategy for the local market, and an assortment of resources for major
incomes that aimed to widen its client base. ADAM launched new various services
and Islamic products to increase its revenues and direct its investment activities
towards the asset, which is marked with lesser competition, higher revenues and
lower risks. The company, despite its recent incorporation, sustained a systematic
growth for its operation asset throughout the year.
ADAM’s budget indicates a stable asset level above KD 65 Million (US$ 222.6
Million). This reflected the company’s commitment to a diverse investment that
includes various activities, services and products. An initiative that resulted in a
rewarding achieved revenues for 2005.
19
The graph signifies ADAM's concerned activities in the financial investment domain i.e.
priced & un priced local shares, local funds and trade investments with a total volume of KD
28.7 million. All contributed to more than 44 % of ADAM's asset. The company's agencies
investments reached KD 12.4 million, equal to 19 % of total asset investment in some Islamic
Establishment. ADAM's other debit balances including portfolio and funds management fees
and placement dues, reached approximately KD 12.3 million, equal to 19 % of the total asset.
In addition, ADAM's real estate investment, recorded KD 9.1 million, equal to 14 % of the
total asset.
ADAM’s Asset Distribution in 2005
Cash & Cash equivalents
Available for sale investment
Real Estate Investment
Creditors & other debit balances
Down payment for buying Real Estate
Property & Equipment
Agencies investments
Financial Investment in equivalent value
20
Adam's total dues reached KD. 21.1 million (US $ 72 million). These dues represented the
company's offered discount, and commitments. Such dues were controlled by the company and
had no negative impact on its projects finance or its power to cover future asset investments
cost. It is noted that credit agencies with a total of KD 16.6 millions contributed most, to
ADAM's liabilities. This conveys that more than 78.5% of the company's total liabilities
represent trusted funds to be invested through ADAM's diverse agencies and investment
activities. ADAM's parent company dues reached KD 3.6 million, equal to 16.8% of its total
liabilities. Other creditors, other credit balances and end of service indemnity represented
4.6% & 5.1% of the total liabilities consecutively. Thus, ADAM's debt ratio (total liabilities on
total asset) mounted to 32.5%. A ratio, considered accepted at present, related ADAM's high
and comprehensive proportion of liquidity.
ADAM's budget figures indicated the company's methodical efforts exerted to improve the
returns on shareholder's equity. ADAM showed great concern to introduce best services to
shareholders and customers. This impacted an increase on the shareholder's equity by end
of the company's 1st operation year. A growth to exceed KD 40 million margin. The return
on ADAM shareholder’s equity reached KD 43.9 million (US$ 150 million). ADAM’s
huge retained earnings, equal to 93.6% of its total capital, represented
a major contribution to the returns on the shareholders equity. It is
worth to mention that ADAM’s total shareholder’s equity rate
recorded about 67% by end of 2005. An indication that asserted
ADAM’s strength to finance assumed activities in the future.
Consequently, such a power will contribute to extended
returns on shareholder’s equity by 1.45 times.
21
II ADAM’s Financial Performance in 2005
Local and regional improved economy provided active financial markets, with particular
reference to Islamic investment techniques which constituted the region's major investment
field. ADAM's financial results in 2005 signified tangible improvement in its operation
revenues and business ventures. Such activities were a continuation of ADAM's constant
growth recorded since establishment in 2004. This certified ADAM's concern to utilize all
available resources in compliance with Sharia'h principles. ADAM showed great interest and
commitment to cover the Islamic investment sector with all its investment techniques. To this
end, ADAM innovated tools and products based on selective and diverse local investment
that adequately meet the market need. Such a strategy accounted for ADAM’s distinguished
achievements and rewarding returns by end of 2005. In its first year of operation and after
deducting of KFAC dues, Board Members remunerations, National Labor Support Tax and
Zakat, ADAM’s succeeded to realize a net profit of KD. 23.488 million covering the period
April 6, 2004 to December 31, 2005. Earnings per share scored a record rise in comparison with
similar investment companies, to reach 117.44 fils during the period ended in, 2005
22
ADAM's positive performance and improved profiles can be contributed to two major factors:
The first is represented by the company’s operation revenues that experienced a tangible
improvement to exceed KD. 26 million limits and reach approximately KD 26.11 million
during ADAM’s first year of existence. This reflected a positive performance of ADAM's most
profit indicators. A growth that led to an extended margin ratio of the company's net profit
reaching a record level. ADAM's net profit margin ratio of operation revenues reached an
unprecedented 90% level by end of 2005, compared to similar and conservative Islamic
investment establishment, listed in Kuwait Stock Exchange. This described, as well, ADAM's
competency to adequately invest its asset and efficiently foresee all available investment
opportunities which offered the company's achieved great operation revenues. The second
factor interpreted ADAM's relentless efforts to cut operation expenses through applying best
general expenditure decrease, operation charges and payment control. A policy that resulted
in not exceeding a total expenses level of KD 2.622 million by end of 2005. Adam's operation
expenses on operation revenues scored a low margin not exceeding 10.00% approximate level.
23
The attached graph shows ADAM's revenue structure and related contribution of each revenue
category as and of 2005.
ADAM’s Revenue Resources Distribution 2005
Rate per total Revenues
Investment Services
Revenues
Financial Investment Revenues
Real Estate Investment Revenues
Investment Agencies Revenues
Investment in Associated Company’s Revenues
Available for Sale
Investment Revenues
Other Revenues
24
With reference to total operation revenues, ADAM’s consolidated balance sheet and income
statement indicated the company’s ability to control expenditure and minimize expenses.
ADAM’s actual expenses stood at approximately KD. 2.622 million by end of 2005. The
company’s expenditure rates, in terms of total operation revenues, recorded around 10 %
through its actual financial statement. Most of ADAM’s expenses were focused on employee
expenditure which scored approximately KD 0.635 million, equal to 24.2% of the company’s
total expenses, due to ADAM’s business expansion in 2005. Similarly, general and administration
expenses mounted to KD. 0.630 Million equal to 24% of the company’s total expenditure by
end of last year. In addition, other expenses contributed to ADAM’s total expenditure. These
represented the 20.4% related to administration and consultancy services, and 15.8% of the
finance charges.
25
III ADAM’s Profile & Returns Indicators
ADAM’s profit and returns indicators showed improved performance than budgeted for by
end of 2005. These indicators are generally based on the company’s financial performance
and are used to measure its operation, finance and investment efficiencies. They also reflect
company’s strength to execute these activities to achieve remarkable results. ADAM’s
Return on Average Indicator reached approximately 13.36% in 2005. This performance,
the best at all levels, indicated ADAM’s efficiency to adequately direct its asset and
operation investment. ADAM’s Return on Equity in 2005, mounted to 5.53% level.
This classified ADAM with the great performance of similar Islamic investment
establishments and even with those conservative ones listed on the Kuwait
Stock Exchange. Finally, ADAM’s Return on Capital Indicator recorded
the highest performance, compared to ADAM’s other indicators
by end of 2005. This indicator stood at approximately 4.117%.
A performance considered the highest of all indicators in the
Kuwait Stock Exchange.
Al Dar Asset Management Company (ADAM) K.S.C. (Closed)State of Kuwait
Financial Statements and Auditor’s Report
For the period from 6 April 2004 (date of incorporation) till 31 December 2005
27
29
CONTENTS
31 Auditor’s Report
32 Balance Sheet
33 Statement of Income
34 Statement of Changes in Equity
35 Statement of Cash Flows
36 Notes to the Financial Statements
31Al Dar Asset Management Company K.S.C. (Closed) Annual Report 2005
Auditor’s Report to the Shareholders
We have audited the accompanying balance sheet of Al Dar Asset Management Company (ADAM)
K.S.C. (Closed), (“the Company”) as of 31 December 2005 and the related statements of income,
changes in equity and cash flows for the period from 6 April 2004 (date of incorporation) till 31
December 2005.
Respective responsibilities of management and auditor
These financial statements are the responsibility of the Company’s management. Our responsibility is
to express an opinion on these financial statements based on our audit.
Basis of opinion
We conducted our audit in accordance with International Standards on Auditing. Those Standards
require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
Opinion
In our opinion, the financial statements present fairly, in all material respects, the financial position
of the Company as of 31 December 2005, and of the results of its operations, and cash flows for the
period then ended in accordance with International Financial Reporting Standards.
Furthermore, in our opinion, proper books of accounts have been kept by the Company and the
financial information included in the report of the Board of Directors are in agreement with
company’s books of account. We further report that we obtained the information and explanations
that we required for the purpose of our audit and that the financials statements incorporate all
the information that is required by the Commercial Companies Law of 1960, as amended, and by
the Articles of Association of the Company, that an inventory was duly carried our and that, to
the best of our knowledge and belief, no violations of the Commercial Companies Law of 1960, as
amended, or of the Articles of Association of the Company have occurred during the period ended
31 December 2005 that might have materially affected the Company’s results of operation or its
financial position.
We further report that, during the course of our audit we have not become of any material violations
of the provisions of Law No. 32 of 1968, as amended, concerning currency, the Central Bank of Kuwait
and the organization of banking business and its related regulations during the period ended 31
December 2005.
Bader A. Al WazzanLicence No. 62A
Kuwait,27 February 2005
32
Note31 December
2005
ASSETS
Cash and cash equivalents 3 97,096
Wakala investments 4 12,432,274
Financial investments at fair value through profit and loss 5 28,656,350
Receivables and other debit balances 6 12,374,055
Available for sale investments 7 2,215,632
Investments properties 8 4,561,771
Advance payments to purchase real estate 9 4,533,506
Property and equipment 122,904
Intangible assets 16,704
Total assets 65,010,292
LIABILITIES AND EQuITY
Liabilities
Payables and other credit balances 10 963,343
Wakala Payable 11 16,570,943
Due to parent company 22 3,553,519
End of service indemnity 18,995
Total liabilities 21,106,800
Equity
Share capital 12 20,000,000
Statutory reserve 13 2,381,237
Voluntary reserve 14 2,381,237
Change in fair value reserve 415,432
Retained earnings 18,725,586
Total equity 43,903,492
Total liabilities and equity 65,010,292
The accompanying notes form an integral part of these financial statements
Balance Sheet As at the 31 December 2005
(All amounts are in Kuwaiti Dinars)
Omar Soliman Al - KaziChairman
Mustafa E. Al-SalehVice Chairman
33Al Dar Asset Management Company K.S.C. (Closed) Annual Report 2005
The accompanying notes form an integral part of these financial statements
Statement of Income For the period from 6 April 2004 (date of incorporation) till 31 December 2005
(All amounts are in Kuwaiti Dinars)
Note
Period from 6 April 2004 till
31 December 2005
Revenues
Wakala investments income 769,911
Income from financial investments at fair value through profit and loss
15 10,093,606
Available for sale investments income 16 369,223
Company’s share in results of associate 122,811
Gain on sale of investment in associate 389,680
Investment services’ revenue 17 12,586,043
Investments properties’ revenue 18 1,772,524
Other income 5,821
26,109,619
Expenses and other charges
Finance cost 414,538
Consultants and administrative service expenses 536,921
General and administrative expenses 19 630,465
Staff cost 634,767
Losses on foreign currency differences 80,557
Board of Directors’ remuneration 110,000
Contribution to Kuwait Foundation for advancement of science “KFAS” 214,311
2,621,559
Net profit for the period 23,488,060
Earnings per share (fils) 20 117.44
34
Statement of Changes in Equity For the period from 6 April 2004 (date of incorporation) till 31 December 2005
(All amounts are in Kuwaiti Dinars)
Share capital
Statutory reserve
voluntary reserve
Change in fair value
reserveRetained earnings Total
Subscription in share capital 20,000,000 - - - - 20,000,000
Changes in fair value of available for sale investments
- - - 415,432 - 415,432
Net profit for the period - - - - 23,488,060 23,488,060
Transfer to reserves - 2,381,237 2,381,237 - (4,762,474) -
Balance as of 31 December 2005 20,000,000 2,381,237 2,381,237 415,432 18,725,586 43,903,492
The accompanying notes form an integral part of these financial statements
35Al Dar Asset Management Company K.S.C. (Closed) Annual Report 2005
Statement of Cash Flows For the period from 6 April 2004 (date of incorporation) till 31 December 2005
(All amounts are in Kuwaiti Dinars)
Period from 6 April 2004 till
31 December 2005
Cash flows from operating activities
Net profit for the period 23,488,060
Adjustments:
Wakala investments income (769,911)
Changes in fair value of investments at fair value through profit and loss (6,141,579)
Available for sale investments income (369,223)
Investment properties’ revenue (1,772,524)
Company’s share in results of associate (122,811)
Gain on sale of investment in associate (389,680)
Finance cost 414,538
Depreciation and amortisation 73,290
End of service indemnity 18,995
Operating profit before changes in working capital 14,429,155
Financial investments at fair value through profit and loss (22,901,697)
Receivables and other debit balances (12,374,055)
Payables and other credit balances 963,343
Due to parent company 3,553,519
Net cash used in operating activities (16,329,735)
Cash flows from investing activities
Payment in debit Wakala investment (12,298,000)
Proceeds of Wakala investments 635,637
Net paid to purchase of available for sale investments (2,387,000)
Proceeds from sale of available for sale investments 829,286
Dividends received 513,664
Payment to purchase investment properties (11,568,638)
Proceeds from sale of investment properties 8,779,391
Advance payments to purchase real estate (4,533,506)
Payment to purchase investment in associate (785,129)
Proceeds from sale investment in associate 1,297,620
Payment to purchase property and equipment (195,515)
Payment to purchase intangible assets (17,383)
Net cash used in investing activities (19,729,573)
Cash flows from financing activities
Proceeds from subscription in share capital 20,000,000
Proceeds from credit Wakala investment 16,398,000
Finance cost paid (241,596)
Net cash generated from financing activities 36,156,404
Cash and cash equivalents at end of the period 97,096
The accompanying notes form an integral part of these financial statements
36
Notes to the Financial Statements For the period from 6 April 2004 (date of incorporation) till 31 December 2005
(All amounts are in Kuwaiti Dinars unless otherwise stated)
1. Incorporation and activities
Al Dar Asset Management Company (ADAM) K.S.C. (Closed) “the Company” was incorporated in
Kuwait, in accordance with the authenticated memorandum of association number 1778 Vol. 1
on 3 April 2004. The Company registered in the Commercial register on 6 April 2004 under number
99764. The Company was also registered as an investment Company subject to the supervision of
Central Bank of Kuwait on 11 July 2004.
The Company’s headquarters is located at the state of Kuwait – Sharq area – Suhada street –
Raya Tower.
On 21 August 2005, the General Assembly of the Shareholders approved the change of the Company’s
financial year to start from 1 January each year instead of 1 November each year.
The first financial year of the company starts from the date of incorporation and ends on 31 December
2005. Accordingly these financial statements have been prepared for the period from 6 April 2004
(date of incorporation) till 31 December 2005.
The Company’s activities are represented in carrying out all investment activities, finance, management
of funds, movable and non-movable rights, carrying out investment projects and other complementary
or related activities in accordance with Noble Islamic Shariaa principles.
The Company is owned by 100% to the Investment Dar (K.S.C.C.) “Parent Company”.
The Company has employed 27 employees as of 31 December 2005.
These financial statements were approved for issuance by the board of directors on 27 February 2005.
These financial statements are subject to the approval of the General Assembly of shareholders.
37
Notes to the Financial Statements For the period from 6 April 2004 (date of incorporation) till 31 December 2005
(All amounts are in Kuwaiti Dinars unless otherwise stated)
Al Dar Asset Management Company K.S.C. (Closed) Annual Report 2005
2. Basis of preparation and significant accounting policies
2.1 Basis of preparation
The financial statements are prepared in accordance with International Financial Reporting Standards
(IFRS) under the historical cost basis, as modified by fair value of investments at fair value through
profit and loss, available for sale investment and investment properties.
The preparation of financial statements in accordance with International Financial Reporting
Standards requires the use of certain critical accounting estimates and assumptions.
2.2 Cash and cash equivalents
Cash on hand, time and demand deposits at banks and financial institutions whose original maturity
do not exceed three months from the date of placement are classified as cash and cash equivalents.
2.3 Financial instruments
The Company has early adopted the changes over IAS (39) (Financial Instruments) (Recognition &
Measurement) and IAS (32) Financial instrument, (Presentation & Disclosures).
38
Notes to the Financial Statements For the period from 6 April 2004 (date of incorporation) till 31 December 2005
(All amounts are in Kuwaiti Dinars unless otherwise stated)
Classification
The Company classifies its financial assets at the purchase date based on the purpose of acquisition
of such investments and re-evaluates this classification periodically as follows:
Financial assets at fair value through profit and loss
This category has two sub-categories: financial assets held for trading, and those designated at fair
value through profit or loss at inception. A financial asset is classified in this category if acquired
principally for the purpose of selling in the short term or if its a part of portfolio generate a short
term profit.
Receivables
This category includes the financial instruments other than the financial derivative with fixed or
determinable payments and that are not quoted in an active market.
Available for sale assets
These are financial assets that are not included in any of the above categories and are principally,
those acquired to be held, for an indefinite period of time which could be sold when liquidity is
needed or upon changes in rates of profit.
Recognition and de-recognition
Financial instruments are initially recognized when the company becomes a party in a contractual
agreement on these financial instruments. Regular purchases and sales of financial instrument are
recognised on settlement date – the date on which the Company delivers or receives the financial
instrument. Financial instruments are derecognised when the rights to receive cash flows from the
assets have expired or have been transferred and the Company has transferred substantially all risks
and rewards of ownership.
39
Notes to the Financial Statements For the period from 6 April 2004 (date of incorporation) till 31 December 2005
(All amounts are in Kuwaiti Dinars unless otherwise stated)
Al Dar Asset Management Company K.S.C. (Closed) Annual Report 2005
Measurement
Financial assets are initially recognised at fair value (plus transaction costs for all financial assets not
carried at fair value through profit and loss).
Subsequently, available for sale financial assets and financial assets at fair value through profit and
loss are carried at fair value. Receivables are carried at amortised cost using the effective yield method
after deducting any impairment in value.
Realised and unrealised gains and losses arising from changes in the fair value of the ‘financial assets
at fair value through profit and loss category are included in the income statement unrealized gains
and loss arising from changes in the fair value of financial assets classified as available-for-sale are
recognized in equity except the losses resulting from impairment in value.
When available for sale financial asset are sold, the accumulated change in fair value recognized in
the equity are transferred to income statement.
At the balance sheet date, the company reviews the available for sale asset to determine, if there is
any elements for impairment in value.
The fair value of quoted financial assets are determined based on last bid prices, for the quoted
financial assets, the fair value estimated by using other suitable valuation methods.
Impairment in value of financial assets
The impairment in value is measured as the difference between the acquisition cost and the current
fair value, less any impairment losses on that asset previously recognised in income statement.
Impairment losses are recognised in the income statement for the period in which they arise.
Impairment losses recognised in the income statement on equity instruments are not reversed
through the income statement.
40
Notes to the Financial Statements For the period from 6 April 2004 (date of incorporation) till 31 December 2005
(All amounts are in Kuwaiti Dinars unless otherwise stated)
2.4 Investment properties
Properties not occupied by the Company and acquired for long-term leases or for capital appreciation
in future are classified as investment properties.
Investment properties are stated at cost on acquisition and re-measured at fair value. Fair value is
determined by an independent valuator on each balance sheet date. Gains or losses arising from
change in fair value are recognised in the income statement.
2.5 Land and real estate under development
Land and real estate under development are recognized at cost, which includes development
costs. When the development process is completed, the land and real estate are classified either as
investment property or land and real estate held for trading or as property for the Company’s self-
occupation as per management intention regarding the future use of these properties.
2.6 Investment in associate
Associates are those enterprises in which the Company owns 20% to 50 % of voting rights, or generally
has significant influence on their financial, operating, and administrative policies but does not extend
to a direct or indirect control by the Company over those companies. Investment in associates are
accounted for under equity method taking into consideration impairment in value. In accordance
with equity method, the Company’s share in operating results of associates are presented in the
consolidated balance sheet at a value that reflects the Company’s share in net assets of associates.
2.7 Property and equipment
Property and equipment are stated at historical cost less accumulated depreciation and impairment
losses. Cost comprises of acquisition costs and all directly attributable costs of bringing the asset to
working condition for its intended use.
Depreciation is calculated on the straight-line basis over the estimated useful lives, which are
three years.
41
Notes to the Financial Statements For the period from 6 April 2004 (date of incorporation) till 31 December 2005
(All amounts are in Kuwaiti Dinars unless otherwise stated)
Al Dar Asset Management Company K.S.C. (Closed) Annual Report 2005
2.8 Intangible assets
Goodwill
Goodwill represents the excess of fair value of net assets acquired from subsidiary, associate and
joint projects over the acquisition cost at the date of acquisition. Goodwill is carried at cost less
accumulated impairment losses which is tested annually.
Computer software
Cost of acquisition of computer software are capitalized based on the actual incurred costs that
are necessary to use these software. These assets are amortized over their expected useful lives of
three years.
2.9 Impairment of non financial assets
Property and equipment and intangible assets are reviewed at the balance sheet date to indicate
the impairment in value whenever the events or changes in circumstances indicate that the carrying
amount may not be recoverable. Whenever the carrying amount exceeds the recoverable amount,
the impairment losses are recognised in the income statement.
2.10 Wakala payables
Wakala payables are recognized initially at fair value, net of transactions costs incurred. Subsequently
Wakala payables are carried at amortised cost. The difference between the received amount from
Wakala payables and the paid amount are recognized as a finance cost over the time of the Wakala
using the effective yield method.
2.11 End of service Indemnity
The company is liable under Kuwaiti labour law, to make payments to employees for post employment
benefits under a defined benefit plan. Such payment is made on a lump sum basis at the end of an
employee’s service.
42
Notes to the Financial Statements For the period from 6 April 2004 (date of incorporation) till 31 December 2005
(All amounts are in Kuwaiti Dinars unless otherwise stated)
This liability is unfunded and has been computed as the amount payable as a result of involuntary
termination of employees on the balance sheet date. The Company estimates that this method will
give a reliable approximation of the present value of this obligation.
2.12 Revenue recognition
Murabaha, Musawama, Wakala & Ijarah income are recognized on a time proportion basis as to yield
a constant periodic profit rate of return based on the outstanding balances for these transactions.
Dividend income is recognized when the Company’s right to receive dividends is established.
Gain from sale of land and real estate is recognized on completion of the sales contract.
Portfolio management fees is recognised when accrued.
2.13 Foreign currencies
The functional currency of the Company is the Kuwaiti Dinar. Foreign currency transactions are
recorded in Kuwaiti Dinars at the exchange rates prevailing at the date of the transaction. Monetary
assets and liabilities denominated in foreign currencies are converted to Kuwaiti Dinars at the closing
rate prevailing at the year-end. Resultant gains or losses are taken to statement of income.
2.14 Zakat
Based on the recommendation of the Sharia supervisory Board, the company stated to calculate
Zakat based on Weaa Al-Zakat, which consists of assets and liabilities that are subject to Zakat. Zakat
is deducted from the voluntary reserve.
43
Notes to the Financial Statements For the period from 6 April 2004 (date of incorporation) till 31 December 2005
(All amounts are in Kuwaiti Dinars unless otherwise stated)
Al Dar Asset Management Company K.S.C. (Closed) Annual Report 2005
2.15 Fiduciary assets
Assets held in trust or in a fiduciary capacity are not treated as assets of the Company and accordingly
are not included in these financial statements.
3. Cash and cash equivalents
31 December 2005
Current accounts at banks 5,721
Saving accounts 56,375
Cash on hand 35,000
97,096
4. Wakala investments
This balance represents the amounts invested with some Islamic institutions, out of which an amount
of KD 10,905,205 with the parent company (Note 22).
The average effective rate of return on these wakalla are 8.60% as of 31 December 2005.
44
Notes to the Financial Statements For the period from 6 April 2004 (date of incorporation) till 31 December 2005
(All amounts are in Kuwaiti Dinars unless otherwise stated)
5. Financial investments at fair value through profit and loss
31 December 2005
Held for trading investments 6,909,281
Investments designated at fair value at inception 21,747,069
28,656,350
Financial investments at fair value through profit and loss includes:
Investments in local shares - quoted 11,030,960
Investments in local shares - unquoted 4,883,260
Investments in foreign shares - unquoted 662,340
Investments in local funds 12,079,790
28,656,350
Investments in quoted shares include amount of KD 228,678 and investments in unquoted shares
include an amount of KD 2,529,226 represents investments registered by the parent company’s name
and there are letters of assignment from the parent company to the company by the ownership of
these investments.
6. Receivables and other debit balances
31 December 2005
Accrued subscription fees 7,544,975
Accrued portfolio and funds management fees 1,465,711
Kuwait clearing company 2,917,027
Other debit balances 446,342
12,374,055
45
Notes to the Financial Statements For the period from 6 April 2004 (date of incorporation) till 31 December 2005
(All amounts are in Kuwaiti Dinars unless otherwise stated)
Al Dar Asset Management Company K.S.C. (Closed) Annual Report 2005
7. Available for sale investments
This balance represents local quoted shares with an amount of KD 2,215,632 which are registered by
the parent company’s name and there is a letter of assignments by the ownership of these investments
as of 31 December 2005.
8. Investment properties
The following is the investment properties movement during the period ended in 31 December 2005:
31 December 2005
Purchases 11,568,638
Less
Sale during the period 8,779,390
Add
Profit from sale of investments properties 293,397
Profit from revaluation of investment properties 1,479,126
Balance as of 31 December 2005 4,561,771
9. Advance payments to purchase real estate
This balance represents advance payments to purchase real estate in one of GCC countries. The total
payments have amounted to KD 4,533,506 as of 31 December 2005. The Company’s share in the
total value of the real estate is amounting to KD 15,051,162. According to contract conditions, the
finalization of this transaction depends on the seller’s approval on the engineering designs.
46
Notes to the Financial Statements For the period from 6 April 2004 (date of incorporation) till 31 December 2005
(All amounts are in Kuwaiti Dinars unless otherwise stated)
10. Payables and other credit balances
31 December 2005
Other credit balances 639,032
Board of directors’ remuneration 110,000
Kuwait Foundation for Advancement of Science “KFAS” 214,311
963,343
11. Wakala payable
The balance represent in an amounts received from other to invest it as Wakala investment with right
to contract with self, out of this an amount to KD 501,630 belongs to the Parent Company (Note 22).
The weighted average rate of return for these Wakala are 8.50% as of 31 December 2005.
12. Share capital
The authorised, issued and paid up capital is amounting to KD 20,000,000 allocated over 200,000,000
shares of 100 fils par value each and all shares are paid in cash.
13. Statutory reserve
As required by the Commercial Companies Law and the Company’s Articles of Association, 10% of
the net profit for the year before Kuwait Foundation for Advancement of Science share and Board
of Directors’ remuneration is required to be transferred to statutory reserve. The general assembly
may resolve to discontinue such annual transfers when the statutory reserve exceed half of the share
47
Notes to the Financial Statements For the period from 6 April 2004 (date of incorporation) till 31 December 2005
(All amounts are in Kuwaiti Dinars unless otherwise stated)
Al Dar Asset Management Company K.S.C. (Closed) Annual Report 2005
capital. This reserve is not available for distribution on the shareholders but may be used to secure
appropriation of profit to shareholders up to 5% of paid up capital in such years where the profit
of the company do not allow such percentage of appropriation. When the balance of the reserve
exceeds half of share capital, the general assembly is permitted to utilise amounts in excess of half of
the share capital in aspects seen appropriate for the benefits of the Company and its shareholders.
14. voluntary reserve
In accordance with the Company’s Articles of Association, a percentage of Company’s net profit before
Kuwait Foundation for Advancement of Science share and Board of Directors remuneration for the
year as proposed by the Board of Directors and approved by the General Assembly is transferred to
voluntary reserve. Such annual transfer may be discontinued by resolution of the General Assembly
based on the proposal from the Board of Directors. The Board of Directors proposed a transfer of
10% of net profit for the period ended 31 December 2005 to voluntary reserve.
15. Income from financial investments at fair value – through profit and loss
Period from 6 April 2004 till
31 December 2005
Changes in fair value 6,141,579
Cash dividends 386,927
Realized gain 3,565,100
10,093,606
48
Notes to the Financial Statements For the period from 6 April 2004 (date of incorporation) till 31 December 2005
(All amounts are in Kuwaiti Dinars unless otherwise stated)
16. Available for sale investments income
Period from 6 April 2004 till
31 December 2005
Realized gain 242,486
Cash dividends 126,737
369,223
17. Investment services’ revenue
Period from 6 April 2004 till
31 December 2005
Underwriting fees 8,295,975
Funds management, real estate and financial portfolios fees 4,225,383
Subscription Fees 64,685
12,586,043
18. Investment properties’ revenue
Period from 6 April 2004 till
31 December 2005
Change in fair value 1,479,126
Realized gain 293,398
1,772,524
49
Notes to the Financial Statements For the period from 6 April 2004 (date of incorporation) till 31 December 2005
(All amounts are in Kuwaiti Dinars unless otherwise stated)
Al Dar Asset Management Company K.S.C. (Closed) Annual Report 2005
19. General and administrative expenses
General and administrative expenses include an amount of KD 50,000 represent company’s
establishment expenses which was charged to the income statement for the period in accordance
with Article (10) of the Articles of Association of the Company.
20. Earnings per share
Earning per share is calculated based on the net profit for the period and the weighted average
number of ordinary outstanding shares during the period. The calculation of earning per share is
as follows:
Period from 6 April 2004 till
31 December 2005
Net profit for the period 23,488,060
Number of shares (shares) 200,000,000
Earnings per share (Fils) 117.44
21. Proposed dividends
The Board of Directors proposed the dividends of bonus share with 90% of the paid up capital, which
will increase company’s capital from KD 20,000,000 to KD 38,000,000. This proposal is subject to the
approval of the shareholders’ General Assembly and the public authorities.
50
Notes to the Financial Statements For the period from 6 April 2004 (date of incorporation) till 31 December 2005
(All amounts are in Kuwaiti Dinars unless otherwise stated)
22. Related parties’ transactions
Related parties represent company’s shareholders who have represented in the board, members of
the Board of Directors and Senior Management. In the normal course of business and by the approval
of Company’s management, the Company entered into transactions with related parties during the
period ended 31 December 2005.
The related parties transactions and balances are as follows:
Period from 6 April 2004 till
31 December 2005
Purchase of associate company 785,129
Purchase of available for sale investments 2,387,800
Purchase of investment properties 9,947,213
Purchase of land under development 2,279,437
Wakala investments 35,171,150
Wakala investments income 505,946
Subscription fees 550,000
Investment management fees 189,015
Purchase investments at fair value through profit and loss 5,586,881
Wakalla and Murabaha payable 4,300,000
Finance cost 48,060
Board of Directors remuneration 110,000
The balance due to the Parent Company as at 31 December 2005 amounted to KD 3,553,519 -
credit balance.
51
Notes to the Financial Statements For the period from 6 April 2004 (date of incorporation) till 31 December 2005
(All amounts are in Kuwaiti Dinars unless otherwise stated)
Al Dar Asset Management Company K.S.C. (Closed) Annual Report 2005
23. Financial risk management
In the ordinary course of business, the Company is exposed to several financial risks. These risks are
managed based on the approved policies from the Board of Directors.
23.1 Credit risk
Credit risk is the risk that one party to a financial instrument may fail to discharge an obligation on
maturity date and cause the other party to incur a financial loss. Wakala, cash & cash equivalents are
considered the most of the assets exposed to credit risk. The company mitigate this risk by dealing
with strong credit rating banks & financial institutions.
23.2 Foreign currency risk
Represented in the risk of fluctuations in foreign exchange rates that may adversely affect the cash
flows of the company or values of assets and liabilities in foreign currencies. Most of the company’s
transaction in local currency, so it’s not exposed to this risk.
The company manages this risk through concentration of its business transactions in the local currency
& monitoring on a periodic basis the exchange rate.
23.3 Liquidity risk
Liquidity risk is the risk that the Company may unable to meet its financial commitments when
they mature. The management mitigates this risk by diversifying its finance sources and assets
managements while taking into consideration the retention of sufficient balance of cash and other
high liquid items.
The following table, summarize the maturities of assets and liabilities for the company. The maturities
of assets and liabilities were determined based on the period from the balance sheet date to the
contractual maturity date.
52
Notes to the Financial Statements For the period from 6 April 2004 (date of incorporation) till 31 December 2005
(All amounts are in Kuwaiti Dinars unless otherwise stated)
The maturity analysis of financial assets and liabilities as of 31 December 2005 is as follows:
Within 3 months
From 3 months
to 1 yearFrom 1
to 5 yearsMore than
5 years Total
Assets
Cash at bank and financial institutions
97,096 - - - 97,096
Wakala investments - 3,928,778 8,503,496 - 12,432,274
Investments at fair value through profit and loss 6,909,281 - 21,747,069 - 28,656,350
Receivables & other debit balances
11,893,468 480,587 - - 12,374,055
Investments available for sale
- - 2,215,632 - 2,215,632
Investment properties - - 4,561,771 - 4,561,771
Advance payment to purchase real estate
- - 4,533,506 - 4,533,506
Property and equipment - - 122,904 - 122,904
Intangible assets - - 16,704 - 16,704
18,899,845 4,409,365 41,701,082 - 65,010,292
Liabilities
Payables and other credit balances
- 963,343 - - 963,343
Wakala payables - 5,065,404 11,505,539 - 16,570,943
Due to the parent company - 3,553,519 - - 3,553,519
Employee’s end of service indemnity
- - - 18,995 18,995
- 9,582,266 11,505,539 18,995 21,106,800
Net liquidity gap 18,899,845 (5,172,901) 30,195,543 (18,995) 43,903,492
53
Notes to the Financial Statements For the period from 6 April 2004 (date of incorporation) till 31 December 2005
(All amounts are in Kuwaiti Dinars unless otherwise stated)
Al Dar Asset Management Company K.S.C. (Closed) Annual Report 2005
23.4 Market risk
Market risk is the risk that the value of a financial instrument will fluctuate as a result of changes in
market prices, whether those changes are caused by factors specific to a financial instrument, or its
issuer, or factors affecting all securities traded in the market.
The company is exposed to market risk with respects to its investments. The company continuously
monitors developments in the markets and analyses the operations and financial performance of
investees to manage this risk.
23.5 Fair values of financial instruments
Fair value is the amount for which an asset could be exchanged or a liability settled between
knowledgeable willing parties in an arm’s length transaction. The estimated fair value of financial
instruments carried at amortised cost approximates their book values.
24. Geographical distribution of assets and liabilities
31 December 2005
Assets Liabilities
Kuwait 55,509,789 21,106,800
GCC 9,095,277 -
Other Arab countries - -
USA 59,002 -
Europe 346,224 -
65,010,292 21,106,800
54
Notes to the Financial Statements For the period from 6 April 2004 (date of incorporation) till 31 December 2005
(All amounts are in Kuwaiti Dinars unless otherwise stated)
25. Contingent liabilities and commitments
31 December 2005
Unpaid capital commitments for contracts to develop lands 10,517,656
26. Off balance sheet items
The Company manages portfolios and financial funds for others and the balances of these portfolios
are not included in the balance sheet of the Company. The net assets of these managed portfolios
amounted to KD 567,037,829 as of 31 December 2005.
27. Zakat
Based on Board of Directors proposal, the company deducted Zakat amounted to KD 730,995
from the voluntary reserve. This proposal is subject to the approval of the General Assembly of
the shareholders.
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