6 Annual Report 2010 Combined Group Contracting Co. K.S.C.C. | 3 Mr. Abdul Rahman Mousa Al Ma’rouf Chairman, Managing Director & Chief Executive Officer Mr. Raad Khalaf Al Abdullah

H.H. Sheikh Sabah Al-Ahmad Al-Sabah The Amir of the State of Kuwait

H.H. Sheikh Nawaf Al-Ahmad Al-SabahThe Crown Prince of the State of Kuwait

H.H. Sheikh Nasser Al Mohammad Al-SabahThe Prime Minister of the State of Kuwait

4

5

Annual Report 2010

Combined Group Contracting Co. K.S.C.C. | 2

TABLE OF CONTENTS

Page

Chairman & Board of Directors 3

Achievements in 2010 4

Chairman, Managing Director and CEO’s Report 6

Economic Overview 9

Construction Industry 17

CGC Business Profile 27

CGC Financial Performance 34

CGC Stock Performance 38

Contact Details 43

Annual Report 2010


Economic Analysis

This section would cover a brief analysis of economies of all countries including Kuwait

in which CGC currently has operations which includes, Oman, Qatar, Saudi Arabia,

Syria, UAE and the Comoro Island.

Kuwait Economy

Economic growth gained momentum in the year 2010 compared to the previous year which was

subjective to global recessionary crises. The implementation of KD30bn ($104bn) government

development plan, as part of a five-year spending package approved in February 2010, is

expected to cushion the impact of decreased private spending. Subsequently, new government

regulatory initiatives and increase projected spending are likely to play a major role in pushing

Kuwait’s long term economic sustainability. Along with these incentives, Oil production and

prices witnessed recovery during the last few months of the year and is expected to touch pre -

global crises price levels.

Some of the major positive economic factors that influenced Combined Group Contracting

Company K.S.C.C. (“CGC”) operations are as follows:

Basis 2006 2007 2008 2009 2010e 2011f

Nominal GDP $ bn 101.6 114.6 148.8 109.5 129.3 142.8

Nominal GDP % y/y 24.9 10.6 22.7 -21.2 18.1 10.5

Real GDP % y/y 5.2 4.4 3.1 -2.9 3.0 4.5

Budget balance % GDP 17.7 28.6 6.9 20.4 15.0 13.0

Current account balance % GDP 44.6 36.8 40.5 25.6 34.8 40.6

Consumer prices % y/y 3 5.5 10.6 4.0 4.0 4.7

KWD/USD (end year) 0.289 0.273 0.276 0.287 0.287 -

CBK Discount rate (end year) % 6.25 6.26 3.75 3.00 2.50 -

Source: Central Bank of Kuwait, Ministry of Planning, GDP: Gross domestic Product, bn:Billion, CBK: Central

Bank of Kuwait, %y/y: Growth year on year percentage

� Kuwait’s GDP growth increased 18.1% during the year 2010 with population increasing

from 3.48 million in 2009 to 3.61 million in 2010, a growth of 3.7%. In the subsequent

year 2011, Kuwait’s GDP is anticipated to post a growth of 10.5% with an inflation rate

of 4.7% mainly driven by new government regulatory initiatives and increased projected

spending pushing the economy forward1

.

� Kuwait’s 2010/2011 budget was in line with dynamic government plans for a 33% rise in

expenditure, including a 66% rise in projects & maintenance. Spending on the latter saw

a growth from KD 1.3 bn to 2.1 bn thus positively influencing the construction sector.

� In February, CBK cuts its discount rate by 50 basis points to 2.5%, thus lowering interest

rates on loans and positively influencing the construction sector.

1 KUNA News

New government

regulatory

initiative &

increased

projected

spending are

likely to play a

major role in

pushing the

Kuwaiti

economy

forward.

Annual Report 2010


Industry Analysis

This section would cover a brief analysis of Industries of all countries including Kuwait



Kuwait Construction Industry

� Kuwait was among the top GCC countries in total construction contracts awarded during the

year 2010 behind Saudi and UAE in terms of size. The Total value of contracts awarded

during the year was USD 4,731 million which is 11 percent share among the GCC nations.

� Kuwait’s construction sector is experienced positive comeback in the year 2010 with higher

oil prices, high income, low inflation and low prices of construction materials. Additionally,

the government of Kuwait has increased capital spending with the five year development

plan on various infrastructure projects including roadways, first ring road, and parliament

extension building among others by the Kuwait government would boost real estate and

economic activity in the country.

� Demand for real estate in Kuwait is linked to the growth in population of both the Kuwaiti

and non Kuwaiti population. While percentage growth in the total population of the country

continues to increase at an average of 5-6%, expatriate population residing predominantly

for professional work purposes continue to dominate the nationwide demographics spurring

real estate demand in the long run.3

� With the current oil prices generate average of USD 80 per barrel in the year; public

revenues are expected to be higher as compared to last year. The government projected

budget deficit of KD 4.5 billion in FY 2011/2012 based upon an assumed oil price of USD 60

per barrel.

� Government expenditure on construction reached KD 2,088 million in 2010/2011 with an

increase of 94.9% of total expenditure. Total government expenditure reached to KD 16,310

million in same period from KD 11,251 million in 2009/2010. Public expenditure for the

2009-2010 to the previous year saw public spending to the construction sector grow at 7%.

3

PACI – Public Authority for Civil Information

6

8

10

13

21

31

38

42

47

6

Annual Report 2010


Mr. Abdul Rahman Mousa Al Ma’rouf

Chairman, Managing Director &

Chief Executive Officer

Mr. Raad Khalaf Al Abdullah

Vice-Chairman

Mr. Ahmad Mousa Al Ma’rouf

Board Member

Mr. Emad Ahmad Al Houti

Board Member

Mr. Ahmad Khalid Ahmad Al Homaizi

Board Member

Chairman & Board of Directors

7

Annual Report 2010


Mr. Abdul Rahman Mousa Al Ma’rouf

Chairman, Managing Director &


Mr. Raad Khalaf Al Abdullah

Vice-Chairman

Mr. Ahmad Mousa Al Ma’rouf

Board Member

Mr. Emad Ahmad Al Houti

Board Member

Mr. Ahmad Khalid Ahmad Al Homaizi

Board Member

Chairman & Board of Directors

8

Ach

hievemeents in 20010

Combineed Group Co

Annual R

ntracting Co

Report 2

o. K.S.C.C. |

2010

4

9

Annual Report 2010


5.85 5.74

8.66 8.69

8.11

8.84

2005 2006 2007 2008 2009 2010

Net Profit (KD Million)

97.6

88

133.08

106.97

94.15

101.52

2005 2006 2007 2008 2009 2010

Earnings Per Share "EPS" (KD fils)

45 50

96

126

117

135

2005 2006 2007 2008 2009 2010

Total Assets (KD Million)

13%

12%

12%

8%

7%

7%

2005 2006 2007 2008 2009 2010

Return on Average Assets

12

21

24

28

32

36

2005 2006 2007 2008 2009 2010

Shareholders Equity (KD Million)

58.8%

35.2%

38.7%

33.8%

27.4%

26.0%

2005 2006 2007 2008 2009 2010

Return on Average Equity

10

Annual Report 2010


Report of the Chairman,

Managing Director &


In the name of Allah, the most Gracious, the

most Merciful.

Respectable Shareholders,

I take great pleasure to welcome you to this

General Assembly meeting for the

Shareholders of Combined Group

Contracting Co. K.S.C.C. (“CGC”). I would like to thank our valuable shareholders for their

presence and for accepting our invitation to the General Assembly meeting of your Company. I

would also like to convey the warm greetings of my colleagues and the Members of the Board of

Directors who express their deep and sincere appreciation for your continued interest in

following the company's achievements and its progress across all fields where CGC & its

subsidiaries has its presence.

The year 2010 witnessed Kuwait economy recover, in light of the financial crises during the

previous year. Subsequently, the real estate sector and the construction sector in general

improved which was reflected in the growth in CGC revenues during the year 2010 in

comparison to the previous year. We continue to be among the top construction companies in

Kuwait and in line for future growth, we have undertaken various business strategies which

included taking steps to expand operations geographically and add new activities to the existing

scope of business activities. Also, strong financial position with patronage from our clients, local

and regional banks helps us leverage our resources towards the growth of the business.

CGC has won during the last 5 years, a number of projects which includes building construction,

infrastructure and oil related development projects. Total value of projects during the last 5

years was in excess of 500 million. CGC currently employs 5.569 employees within its various

divisions.

� Revenues for the year 2010 reached KD 117,580,650 from 2009 revenues of KD

110,580,366, an increase of 6.3%

� Operational performance of the company improved during the year wherein Gross

profit for the year 2010 was KD 15,371,279 from KD 14,179,196 in 2009, a growth of

8.4%

� Net Profit for the year 2010 was KD 8,835,540 from KD 8,114,507 in 2009, an increase of

8.9%. Net profit margins were marginally better at 7.51% in 2010 compared to 7.34% in

2009.

� Total Assets of the company in the year 2010 was KD 135,362,693 compared to KD

116,900,954 in 2009, an increase of 16%.

� The earnings per share (EPS) for the 12 months ending December 2010 was 101.52 fils

compared to the previous year EPS at 94.15 fils.

11

Annual Report 2010


As the economy recovers, we anticipate that demand for our existing services will grow

significantly. We are seeking to capture what we believe will be an immediate market

opportunity by expanding into regional construction sector.

Various milestones for the company during the year can be summarized as follows:

1) The Company has signed 12 contracts with government and private entities in Kuwait,

Qatar and Abu Dhabi amounting to KD 257.5 million including 9 contracts in Kuwait

amounting to KD 165 million, 1 contract in Qatar amounting to QR 1,045,000,000

equivalent to KD 82.6 million and 2 contracts in Abu Dhabi Branch amounting to AED

126,307,813 equivalent to KD 9.9 million.

2) The Company during the year has established a subsidiary “Syrian Combined Group

Contracting Company W.L.L.” in Syrian Arab Republic with share capital amounting to

SRL 15,000,000 equivalent to KD 92,000.

3) Established of an electromechanical department involved in execution of electrical

works such as power supply, street lighting and underground cabling etc. in line with

expansion of scope of construction services.

Dividends and Bonus Shares

In light of the operational and financial performance that the company witnessed during 2010,

the Board of Directors of the Company proposed to distribute cash dividends at 70% of the

nominal value of shares, which is equivalent to 70 fils/share as well as free distribution of bonus

shares at 10% of the paid up capital (10 shares for each 100 shares) to shareholders registered

in the company records as of the date of the general assembly meeting.

12

Annual Report 2010


Future Outlook

Despite the political seizure elsewhere in the Middle East region, 2011 should be the year of

continued development for Kuwait’s economy, as high oil prices, expansionary government

fiscal and monetary policies and continued normalization of the banking and financial sectors

help the region recover from the mild recession of 2009.

The year 2011 is set for the Kuwait’s 50th celebration of its National day and coincides with the

implementation of the five-year development plan (2009-2014). The approved development

plan would initiate projects such as the fourth refinery at Al Zour, development of new silk city

business hub, a causeway from Kuwait city to Subbiya, expansion of Kuwait airport, construction

of the new location of Kuwait University in Shaddadiya area, metro rail system and developing

new cities, spending on infrastructure, health and educational projects. All these projects are

expected to revive the construction industry in the coming years.

We are looking forward to increase our turnover for the coming year in line with the five year

governmental development plan. Subsequently we would continue to give attention to

improving margins of divisions and departments across all subsidiaries and branches in Kuwait

and outside Kuwait. CGC would also undertake marketing efforts and promote our

classifications with Central Tender Committee (CTC), Kuwait Oil Company (KOC), Kuwait National

Petroleum Company (KNPC) and Joint Operations. Furthermore CGC continues to be among the

top construction firms operating in Kuwait.

Finally, and on behalf of the board of directors and the management team, I would like to

convey my gratitude and appreciation to H.H. The Amir of Kuwait, H.H. The Crown Prince of

Kuwait, H.H. The Prime Minister of Kuwait, various Ministries and Government Bodies and to all

Companies, Organizations and Banks that supported us through the year 2010 along with a

special thanks to our Board of Directors, Staff and Employees, praying for their continued

advancement and success and we ask the Almighty to continue blessing us with the gift of

security and safety, and to guide us in further leading the cause for the continued progress of

the Country.

May peace and God's mercy and blessings be upon you.

Mr. Abdul Rahman Mousa Al Ma'rouf

Chairman, Managing Director and Chief Executive Officer

13

Annual Report 2010


Economic Analysis




Kuwait Economy











Basis 2006 2007 2008 2009 2010e 2011f

Nominal GDP $ bn 101.6 114.6 148.8 109.5 129.3 142.8

Nominal GDP % y/y 24.9 10.6 22.7 -21.2 18.1 10.5

Real GDP % y/y 5.2 4.4 3.1 -2.9 3.0 4.5




KWD/USD (end year) 0.289 0.273 0.276 0.287 0.287 -









.






1 KUNA News

New government

regulatory

initiative &

increased

projected

spending are

likely to play a

major role in

pushing the

Kuwaiti

economy

forward.

Annual Report 2010


Economic Analysis




Kuwait Economy











Basis 2006 2007 2008 2009 2010e 2011f

Nominal GDP $ bn 101.6 114.6 148.8 109.5 129.3 142.8

Nominal GDP % y/y 24.9 10.6 22.7 -21.2 18.1 10.5

Real GDP % y/y 5.2 4.4 3.1 -2.9 3.0 4.5




KWD/USD (end year) 0.289 0.273 0.276 0.287 0.287 -









.






1 KUNA News

New government

regulatory

initiative &

increased

projected

spending are

likely to play a

major role in

pushing the

Kuwaiti

economy

forward.

Annual Report 2010


Economic Analysis




Kuwait Economy











Basis 2006 2007 2008 2009 2010e 2011f

Nominal GDP $ bn 101.6 114.6 148.8 109.5 129.3 142.8

Nominal GDP % y/y 24.9 10.6 22.7 -21.2 18.1 10.5

Real GDP % y/y 5.2 4.4 3.1 -2.9 3.0 4.5




KWD/USD (end year) 0.289 0.273 0.276 0.287 0.287 -









.






1 KUNA News

New government

regulatory

initiative &

increased

projected

spending are

likely to play a

major role in

pushing the

Kuwaiti

economy

forward.

Annual Report 2010


Future Outlook

Despite the political seizure elsewhere in the Middle East region, 2011 should be the year of

continued development for Kuwait’s economy, as high oil prices, expansionary government

fiscal and monetary policies and continued normalization of the banking and financial sectors

help the region recover from the mild recession of 2009.

The year 2011 is set for the Kuwait’s 50th celebration of its National day and coincides with the

implementation of the five-year development plan (2009-2014). The approved development

plan would initiate projects such as the fourth refinery at Al Zour, development of new silk city

business hub, a causeway from Kuwait city to Subbiya, expansion of Kuwait airport, construction

of the new location of Kuwait University in Shaddadiya area, metro rail system and developing

new cities, spending on infrastructure, health and educational projects. All these projects are

expected to revive the construction industry in the coming years.

We are looking forward to increase our turnover for the coming year in line with the five year

governmental development plan. Subsequently we would continue to give attention to

improving margins of divisions and departments across all subsidiaries and branches in Kuwait

and outside Kuwait. CGC would also undertake marketing efforts and promote our

classifications with Central Tender Committee (CTC), Kuwait Oil Company (KOC), Kuwait National

Petroleum Company (KNPC) and Joint Operations. Furthermore CGC continues to be among the

top construction firms operating in Kuwait.

Finally, and on behalf of the board of directors and the management team, I would like to

convey my gratitude and appreciation to H.H. The Amir of Kuwait, H.H. The Crown Prince of

Kuwait, H.H. The Prime Minister of Kuwait, various Ministries and Government Bodies and to all

Companies, Organizations and Banks that supported us through the year 2010 along with a

special thanks to our Board of Directors, Staff and Employees, praying for their continued

advancement and success and we ask the Almighty to continue blessing us with the gift of

security and safety, and to guide us in further leading the cause for the continued progress of

the Country.

May peace and God's mercy and blessings be upon you.

Mr. Abdul Rahman Mousa Al Ma'rouf

Chairman, Managing Director and Chief Executive Officer

14

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15

Annual Report 2010


Oman Economy

� The Omani economy is expected to grow by around 5% per year in both 2010 and 2011.

The growth would be driven by government’s spending incentives in the oil and non oil

sector under the first 8 year development plan towards the infrastructure, industry and

tourism sectors.

� Since 2008, Increased investments in hydrocarbon production, and enhanced oil

recovery techniques at Oman’s aging oil fields has led to higher output which is

expected to increase by 6% in 2010. Moreover, the year 2011 should see further

increases in output with real hydrocarbon output forecasted to rise by 4%.

� Consumer price inflation (CPI) was estimated at an average of 3.3% in 2010 which

witnessed a change from 1 .7% in January to 4.2% in October. Rising food prices driven

by global commodity prices has led to the rise which is expected to further increase CPI

to an average of 5% for the year 2011.

� Government spending is expected to rise by 7-10% in 2010 and 2011 which is currently

supported by higher oil production and prices giving a favorable fiscal position. Budget

surplus is estimated at 6% of GDP in 2010 and 8% of GDP in 2011. The current account

balance is also expected to witness surpluses in 2010 and 2011, as the impact of high oil

prices on export revenues offsets strong growth in imports.

� The Omani stock market has performed well over the past 2 years with the main price

index is up 50% from its low of March 2009, and rose by 6% in 2010.

Annual Report 2010


Qatar Economy

� Economic growth in Qatar till date is largely dependent on government’s investments in

the oil and gas sectors. The government continuous to remains committed to

diversifying revenues from hydrocarbons sector and increasing investments from the

private sector which should help support Qatar’s medium term growth prospects. The

government’s winning bid to host the 2022 World Cup comes at the right time when the

bulk of investments into LNG projects are due to be completed in 2011. The hosting of

2022 World Cup would additionally drive higher spending and foreign direct

investments within the country.

� Real GDP is expected to increase 17% in 2010 and further 14% in 2011, following 8.6%

growth in 2009 which would be led by the oil and gas sector which will bring total LNG

production to 77 million tonnes per year in 2011 which is approximately 1 .9 million

barrels of oil equivalent per day, more than double Qatar’s crude oil output. Output

from the hydrocarbon sector is expected to rise by 23% in 2010 and 17% in 2011.

� The government plans to spend over $100 bn over several years to upgrade and expand

the country’s infrastructure, including infrastructure to host the World Cup. The

education, health, financial, residential, and transportation sectors are set to be among

the main beneficiaries of government spending. Real non-oil GDP growth is expected at

11% in 2010 and forecasted at 10% in 2011, compared to an average of 13% per year

between 2001 and 2008.

� Although oil prices declined in 2009, the country witnessed a budget surplus of 13% of

GDP, led by rising investment revenues. The budget for FY2010/ 2011 earmarked a 25%

increase in public spending which has prompted rising issuance of sovereign bonds.

Qatar’s overall sovereign debt still remains low at 14% of GDP.

� The Doha Stock Market in 2010 witnessed a relatively good year for Qatari equities with

the Doha general index gaining 24% over the previous year.

16

Annual Report 2010


Qatar Economy

� Economic growth in Qatar till date is largely dependent on government’s investments in

the oil and gas sectors. The government continuous to remains committed to

diversifying revenues from hydrocarbons sector and increasing investments from the

private sector which should help support Qatar’s medium term growth prospects. The

government’s winning bid to host the 2022 World Cup comes at the right time when the

bulk of investments into LNG projects are due to be completed in 2011. The hosting of

2022 World Cup would additionally drive higher spending and foreign direct

investments within the country.

� Real GDP is expected to increase 17% in 2010 and further 14% in 2011, following 8.6%

growth in 2009 which would be led by the oil and gas sector which will bring total LNG

production to 77 million tonnes per year in 2011 which is approximately 1 .9 million

barrels of oil equivalent per day, more than double Qatar’s crude oil output. Output

from the hydrocarbon sector is expected to rise by 23% in 2010 and 17% in 2011.

� The government plans to spend over $100 bn over several years to upgrade and expand

the country’s infrastructure, including infrastructure to host the World Cup. The

education, health, financial, residential, and transportation sectors are set to be among

the main beneficiaries of government spending. Real non-oil GDP growth is expected at

11% in 2010 and forecasted at 10% in 2011, compared to an average of 13% per year

between 2001 and 2008.

� Although oil prices declined in 2009, the country witnessed a budget surplus of 13% of

GDP, led by rising investment revenues. The budget for FY2010/ 2011 earmarked a 25%

increase in public spending which has prompted rising issuance of sovereign bonds.

Qatar’s overall sovereign debt still remains low at 14% of GDP.

� The Doha Stock Market in 2010 witnessed a relatively good year for Qatari equities with

the Doha general index gaining 24% over the previous year.

17

Annual Report 2010


Saudi Arabia Economy

� Government support and rebound in oil prices helped the Saudi economy recover from

the global financial crisis. Real GDP rose 0.6% in 2009 which came despite 8% decline in

hydrocarbon sector output. Real growth is expected to grow by 4.2% in 2010 and is

expected to see a similar increase in year 2011.

� The government’s USD 386 billion public sector investment program (2010-2014)

equivalent to the country’s GDP in 2009 focuses on the housing, transportation and

education sectors and is expected to lead the growth within the non oil sector.

� The hydrocarbon sector remains the key to the economy’s potential to long-term

wealth-generation with multi-billion dollar investments undertaken within the sector in

2009 and subsequently saw increase in crude production capacity to 12.5 million barrels

per day (mbpd) from 8.2 mbpd.

� Real hydrocarbon sector output (excluding refining and gas processing) is forecasted to

by 5% in 2011, as higher oil prices would trigger increase in production capacity within

the Organization of the Petroleum Exporting Countries (OPEC).

� Inflation within the country remains high in 2010 increasing to 6.1% in August resultant

of rising food prices. Forecasted increases in food prices and relatively strong economic

growth rates are forecasted to additionally increase inflation through 2011.

� In 2009, the country witnessed a decline of 21.1% in GDP as a result of falling oil

revenues and higher government spending. However, the year 2010 witnessed growth

on account of higher oil prices and revenues. Subsequently, a 7% budget-on-budget

spending increase has been announced for 2011 in line with the government’s medium-

term development plans for the economy.

� The Saudi Tadawul Stock exchange albeit volatility during the year, saw the all shares

index climb by 8% during 2010.

Annual Report 2010


UAE Economy

� Real GDP is forecasted to expand by 3.6% in 2011 in comparison to a growth of 2%

witnessed in 2010. The growth in GDP would be driven by the hydrocarbon sector with

sector output (excluding refining and gas processing) forecasted to rise by 5% in 2011

compared to a growth of 2% in 2010. Hydrocarbon revenues accounts for one-third of

real GDP.

� However, previous years weaknesses exposed within the finance, real estate, and

construction sectors are likely to remain and affect economic growth over the next few

years and limit any momentum gained from growth in areas such as trade, tourism and

business services.

� In the non-oil sector, growth of 2% is expected in 2010 for reasons described above

which is forecasted to increase to 3% in 2011, compared to the average of 13% per year

seen between 2001 and 2009.

� Among the seven emirates of UAE, Abu Dhabi is expected to expand at a robust rate of

4-5% per year while Dubai still burdened with high debt servicing costs and weak asset

prices would expand at a much lower rate.

� Consumer price inflation (CPI) stood at 0.9% in 2010, the lowest since ten years.

Although rising food prices is source of concern, their impact on inflation is likely to be

offset by weak housing rental costs, which are of much greater importance for the

overall CPI.

� The announcement of USD 14 billion debt rescheduling agreement between Dubai

World and its creditors in 2010 provided some clarity on the impact of the financial

crises. However, uncertainty still remains on ‘Dubai Inc’s’ ability to repay as well as the

need for other corporate restructurings.

� The Dubai Stock index dropped 10% in 2010 which was affected by weak real estate

markets and high debt levels within the country.

18

Annual Report 2010


UAE Economy





real GDP.




business services.










overall CPI.







19

Annual Report 2010


Syria Economy

� According to the International Monetary Fund, Syria's economy in 2010 is expected to

witness a real GDP growth at 5%. This is resultant of the improvement in Syria's foreign

political relations with regional countries and the western world which created an

upside potential to its investment framework and business environment.

� Syria’s oil sector is estimated to grow marginally in the year 2010 by 0.2% in real terms

while the country’s average crude oil production rose by 3.1% in the first nine months of

2010.

� Syria's tourism and related sectors witnessed growth during the year 2010 with number

of visitors to Syria in the first nine months of 2010 reaching 6.6 million, up by 46%

compared to the previous year.

� Inflationary levels in 2010 remained in the low single-digit inflation rate due to policies

adopted by the central bank of Syria to adopt monetary easing strategies to spur

economic growth through cuts in reserves requirement and indicative interest rates.

� Syria's economic outlook depends on various factors which include global and regional

recovery, loans extensions by local banks, private/public sector projects and impact of

further reforms on the country's business infrastructure.

� The Damascus Securities Exchange (DSE) saw marginal increase in prices and attracted

new listings during the first ten months of 2010 that resulted in significant increase in

DSE's market capitalization.

Annual Report 2010


UAE Economy





real GDP.




business services.










overall CPI.







20

Annual Report 2010


Comoro Island Economy

� The Comoros islands comprises of four main islands of Njazidja (formerly Grand

Comore), Mwali (formerly Mohéli), Nzwani (formerly Anjouan) and Mayotte. Comoro’s

population in 2008 was estimated to be about 652 thousand. The demographics of the

population of Comoros are similar to that of many developing countries, wherein the

largest proportion of the population (41.92%) is in age group of population below 15

years. As of 2008, males accounted for approx 49% of the total population.

� Gross Domestic Product (GDP) of the country in 2008 amounted to over US$ 355 million

at current market prices. The country’s economy is dominated by the services sector

and agriculture. According to the World Bank, the services sector contributed to over 50

percent of the GDP, whilst agriculture, hunting, forestry and fishing contributed to over

30% percent of the GDP.

� The tourism sector which is relatively underdeveloped has been identified by the

government as a priority growth sector. According to the World Travel & Tourism

Council (WTTC), Comoros' travel and tourism economy in 2007 directly and indirectly

impacted the country which accounted for 6.8 percent of GDP and 5.5 percent of total

employment (9,000 jobs).

� During 2007 and 2008, there was a growth in foreign direct investments (FDI) towards

businesses in Comoros. The period witnessed FDI Inflow totaling € 16.2 million

compared to a yearly average of € 0.7 million during the period 2001-2006.

� Remittances from migrants represent the largest source of external funding. As per a

2008 report by Asian Development Bank (ADB), the annual inward remittances from

Comorians working abroad were approx. € 73 million. A large part of the remittances

are spent on domestic consumption.

� The government has taken continuous efforts to improve the country’s worldwide

standing with efforts being directed towards improving the public enterprises.

Additionally, the government has requested the assistance of the International Finance

Corporation, a member of the World Bank group, to develop a coherent strategy to

reform the public sector enterprises in the country.

Annual Report 2010































Annual Report 2010































21

Annual Report 2010


Industry Analysis

This section would cover a brief analysis of Industries of all countries including Kuwait



Kuwait Construction Industry

� Kuwait was among the top GCC countries in total construction contracts awarded during the

year 2010 behind Saudi and UAE in terms of size. The Total value of contracts awarded

during the year was USD 4,731 million which is 11 percent share among the GCC nations.

� Kuwait’s construction sector is experienced positive comeback in the year 2010 with higher

oil prices, high income, low inflation and low prices of construction materials. Additionally,

the government of Kuwait has increased capital spending with the five year development

plan on various infrastructure projects including roadways, first ring road, and parliament

extension building among others by the Kuwait government would boost real estate and

economic activity in the country.

� Demand for real estate in Kuwait is linked to the growth in population of both the Kuwaiti

and non Kuwaiti population. While percentage growth in the total population of the country

continues to increase at an average of 5-6%, expatriate population residing predominantly

for professional work purposes continue to dominate the nationwide demographics spurring

real estate demand in the long run.3

� With the current oil prices generate average of USD 80 per barrel in the year; public

revenues are expected to be higher as compared to last year. The government projected

budget deficit of KD 4.5 billion in FY 2011/2012 based upon an assumed oil price of USD 60

per barrel.

� Government expenditure on construction reached KD 2,088 million in 2010/2011 with an

increase of 94.9% of total expenditure. Total government expenditure reached to KD 16,310

million in same period from KD 11,251 million in 2009/2010. Public expenditure for the

2009-2010 to the previous year saw public spending to the construction sector grow at 7%.

3

PACI – Public Authority for Civil Information

22

Sou

�

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Report 2

o. K.S.C.C. |

ing a growth

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million which

in a sub-sec

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2010

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ctor that

ly 2010.

23

Annual Report 2010


� The growth in credit facilities towards real estate segment recorded a compound annual

growth rate (“CAGR”) of 20% between the years 2005 to 2010. During the same period, the

construction sector witnessed a CAGR of 17.9%. The development of the real estate and

construction sector is closely tied to the availability of sufficient financing and credit

facilities available in the country.

Particulars 2005 2006 2007 2008 2009 2010 CAGR

Personal Facilities 5,138 6,052 7,093 7,866 8,386 8,456 10.5%

Construction 770 1,070 1,367 1,674 1,724 1,756 17.9%

% Change 0.3 0.39 0.28 0.22 0.03 0.02 -

Real Estate 2,539 3,288 5,002 5,966 6,597 6,478 20.6%

Other 3,382 4,524 6,676 8,160 8,400 8,514 20.3%

Total 11,827 14,934 20,137 23,666 25,107 25,204 16.3%

Source: Central Bank of Kuwait

� The Kuwaiti government undertook an ambitious 5 year development plan valued at KD

30bn (USD 102bn) to improve power, water, metro, housing, roads and healthcare

infrastructure sectors within the country. The five-year development plan would be

undertaken with the help of private sector expertise through public-private partnership

(PPP) schemes. In addition, the development plan covers both oil and non-oil investment

sectors and equates to more than KD 7bn a year. To facilitate private expertise and

participation, the Kuwaiti government enacted a new body, the Partnerships Technical

Bureau (PTB), to push through build-own-operate transfer (BOT) and public-private

partnership (PPP) schemes. The table below shows the value of construction projects

including the five year development plan segregated sector wise;

Particulars Projects Value($ Bn) Under

Construction

Construction 105 183.4 8.8

Infrastructure(including transport) 40 26.8 3.6

Water & Waste 24 3.8 1.5

Power 37 23.3 6.5

Refineries 13 33 0.4

Source: MEED, MEED Projects

� The five year plan comprises of a total of 32 projects, including a $ 7bn metro system, the

country’s first independent water and power plant (IWPP) at Al-Zour North, a $3bn tourist

development on Failaka Island and the redevelopment of Kuwait airport among others.

� Some of the major residential and commercial and projects currently undertaken within the

country are as follows:

24

Annual Report 2010


Particulars Value(US$ Million) Status

Bubiyan Island 6,000 Ongoing

Failaka Island Development 3,300 Ongoing

Jaber Ahmed Al Jaber Al Sabah Hospital 1,200 Ongoing

Khairan Residential City 20,000 Ongoing

Sabah AL Ahmad Future City 27,000 Ongoing

Kuwait University City 3,500 Ongoing

Madinat Al Hareer 130,000 Ongoing

GCC Rail Network 30,000 Ongoing

Kuwait International Airport Expansion 21,000 Ongoing

Kuwait Metropolitan RTS 7,000 Ongoing

Bubiyan Island Port-Phase 2 13,000 Ongoing

Bubiyan Island Port-Phase 3 1,400 Ongoing

Jaber Al Ahmed Al Sabah Bridge 3,500 Ongoing

Kuwait National Rail Network 10,000 Ongoing

Security Border 12,000 Ongoing

Source: Zawya Research

25

Annual Report 2010


UAE Construction Sector Overview

� The UAE is among the largest construction

market in the GCC with USD 457bn

construction projects in the pipeline,

representing a 36% share of the GCC

construction market.

� Business Monitor International forecasted

a real value growth of 3 % for UAE’s

construction industry in 2010.

� Government budgets and foreign direct investments are being redirected to major

infrastructure schemes with the UAE government assigning USD 3bn, about a third of its

2010 budget, towards development of infrastructure projects, particularly roads, railways,

utilities, power and waste management facilities. Further, Abu Dhabi announced that it is

planned to invest USD 15bn on infrastructure development between 2009 and 2012.

Subsequently, Abu Dhabi’s Department of Transport unveiled a five-year plan for the

development of the emirate’s transport network, including the country’s first high-speed

railway between Dubai and Abu Dhabi

� In line with the above objective, the Dubai Electricity and Water Authority (DEWA) have

undertaken plans to source financing for infrastructure investments while funds were raised

by the government through partial disinvestment of Abu Dhabi’s integrated water and

power plants (IWPPs).

� Total value of private and public projects planned or underway in the UAE amounts to USD

958 bn. Some of the major projects are provided in the table below:

Examples of major projects Value (USD bn)

Transport

Dubai Metro 7.6

Abu Dhabi International Airport expansion 6.8

Al Maktoum International Airport 3.3

Energy and Utility

Masdar City, Abu Dhabi 22

Hassyan IWPP 8.6

Gas processing facilities, Abu Dhabi 7

IGCC plant, Dubai 6

Oil storage terminal in Fujairah 5.5

Residential

Arab Canal Project 11

Abu Dhabi residential housing fund 5.5

Festival City Dubai 4.7

Oqyana development, Dubai World 3.5

26

Annual Report 2010


Saudi Arabia construction Industry

� The KSA construction sector

accounts for a major share of the

economy with KSA’s share of GCC

construction market at 38%

� The sector’s share of non-oil GDP is

forecast to reach a historic 10% by

the end of 2010.The construction

sector is driven by demand and

developments undertaken to

construct housing facilities for

around 76% of Saudis who do not

own homes. Furthermore a

shortage of two million homes is expected by 2015 with an estimated five million houses

would be required by 2020. These factors would support the growth in the construction

sector in the year 2010 and 2011 as the country’s housing problem is addressed:

� Driven by a fast growing population, expanding industrial base and heightened government

spending, contracts awarded in 2010 and 2011 are forecast to reach USD 64 bn and USD 86

bn respectively with government undertaking investments in infrastructure developments

as it seeks to reduce its reliance on the oil industry. Subsequently, the government has plans

to improve its rail network, investing an estimated USD 25bn and adding 3,900km of track

through three major railway projects.

� In April 2010, the construction of the first private airport was announced and is expected to

be completed by 2014. Also, the government recently announced plans to invest USD 53bn

in water projects over the coming 15 years. Additionally, in response to power shortage

concerns, the government has announced plans to spend USD 80bn on increasing its power

generation capacity and transmission network over the next 10 years.


Transport

Jeddah Monorail 5.6

King Abdulaziz International airport 4.8

Jeddah airport 2.4

Energy and Utility

20,000 megawatts (MW) increase in power capacity 80

2,400MW power plant in Rabigh 4

Medina water and 1,700MW power plant 3.7

Power station and a desalination plant (Jubail-Yanbu) 3.4

Multi district projects

King Abdullah Economic City 40

Tabuk Economic City 30

Jazan Economic City 30

Ras al-Zour Economic City 25

Knowledge Economic City 8

27

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Report 2

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28

Annual Report 2010


Oman Construction Industry

� Oman’s economy was estimated to grow by 3% in real terms in 2010 benefiting from high

crude oil prices and ongoing government spending. All sectors within the economy

benefited from this growth including the real estate and construction sectors. The Omani

construction industry is expected to touch OR 1.57bn by 2013 with 2.7% yearly annual

increase.

� Oman Government’s Vision 2020 including diversification programs have been embarked

upon in the country by encouraging sectors such as tourism and government investment in

infrastructure.

� All sectors will benefit from this growth including real estate and construction. This is mainly

as the government will continue to spend on infrastructure projects aiming for diversifying

the economy.

� Total value of contracts awarded in 2010 within the Sultanate of Oman amounted to US$

4,723 million. A major project which involves expansion of Muscat International Airport to

increase the passenger capacity by 7 million to a total capacity of 12 million passengers is

being initiated. The project allows for three additional phases that could increase the

capacity of the airport to 48 million passengers by 2050.

� On the infrastructure front, the government of Oman had initiated contracts amounting to

US$ 130 million to enhance infrastructure services within the capital Muscat and other

places such as Wilayat of Sohar. Additionally, the Government has also invested US$ 42

million on 190 housing units in Yeti village near Al Hisn Heights in addition to a substantial

investment in studying the traffic and infrastructure needs of Muscat until 2025.


Transport

Muscat International Airport – Passenger Terminal 1.8

Duqm Port 20

Energy & Utility

Water supply system to Hij Village 0.15

Water supply system to Soqrah & Al Kahel 0.15

Kish Gas fields pipeline 12

Iron Ore Pellet Plant 1

Multidistrict Projects

Blue City Resort 20

29

Annual Report 2010


Syria Construction Industry

� The real estate sector in Syria has witnessed steady performance in 2010, on the back of

demand for both commercial and residential space and few reforms aimed at stimulating

investments within the sector. Real estate ventures scheduled for completion in the next

few years amount to more than US$ 2 billion.

� The market has attracted regional investors in the past few years, and has benefited from

the excess liquidity at hand in the region following the sharp rise in global oil prices, which

concurred with the gradual liberalization of Syria's centrally planned economy. Various gulf

developers unveiled plans to launch major residential, commercial and office complexes in

the undersupplied market, with a focus on the areas surrounding the capital city.

� The regulatory framework has improved, with several laws and regulations introduced in an

aim to facilitate and attract investments in construction and real estate.

� Majid Al Futtaim Properties also announced in May 2010 that it would invest in the

proposed Mall of Syria, to be located on the outskirts of Damascus. The Mall of Syria is

expected to have a gross leasable area of 200,000 square meters and is due to open in 2014.

Palymra-SODIC, the new venture between the Egyptian developer, Sixth of October

Development & Investment Company (SODIC), and Palmyra Real Estate Development

Company, a subsidiary of the MAS Group, plans a 500,000 square meter mixed-used

commercial and residential development to be established in Yaafour in the first half of

2011.

� The Syrian Government adopted a 5- year Plan governing the country's economic policy for

the next five years with aims at improving the overall investment framework. The Plan

targets an annual real GDP growth of 5.7% per annum over the next five years, hinging over

Syrian Pound “SYP” 4.3 trillion in cumulative investments, of which SYP 2 trillion by the

public sector and SYP 2.3 trillion by the private sector. An area of strategic importance is

infrastructure, with significant government investments in power and water sectors, in

addition to roads, airports and ports.

Examples of major projects Sector Project Value USD Mn

Infrastructure

National Cargo Railway Network Infrastructure 4,300

Damascus Metro - Green Line Infrastructure 1,600

Residential & Commercial

MAF - Khams Shamat Mixed Use 1,000

Bena Properties - Taj Halab Mixed Use 600,

National Investment Center - Assal Complex Mixed Use -

Qatari Diar - Ibn Hani Resort Mixed Use 350

Amusement center in Homs Leisure 22

Mall in Homs Commercial 75

Sama City Residential 100

30

Annual Report 2010


Comoro Island Industry

� Comoro Island Industry is mainly agricultural based with a portion of its agricultural goods

produced earmarked for exports. The country’s geographic location and natural beauty

gives it the potential to develop into a major tourism Industry.

� The real estate market in Comoros is relatively undeveloped. Most people own land and

property with few houses rented and vacancy rate is very low. Most residential properties

are villas and townhouses. Additionally the construction costs are relatively high with all

materials imported mainly from UAE.

� The country’s real GDP grew at a CAGR of 0.5% during 2006-08 with the slow growth of the

economy linked to lack of foreign direct investment.

� Subsequently, the government is actively seeking foreign participation in certain key sectors

to expand the economy. Currently, Comoro Island has received sizable funding and foreign

direct investments in the banking sectors which saw the creation of a new bank and

development in the tourism sector with the construction of new hotels. Subsequently, the

government in this regard has opened its economy to private construction contractors for

development of Infrastructure projects related to roadways, water and electricity facilities,

ports, tourism and ecotourism infrastructure and telecommunications.

Project Name Description

1. Expansion of El Maaroof Hospital

El Maaroof is the main hospital of the

country is the National Hospital. In 2007,

the hospital had more than 500 staff. A new

plan for developing the hospital would

involve the construction of eight new blocks

that will house intensive care and metrnity

units. The Abu Dhabi Fund for development

and the Islamic Development Bank have

granted Euro 3.6 million and Euro 0.4

million respectively for financing the plan

2. Grande Comore Corniche (Moroni Beach Front)

A spectacular beachfront land of 6.8

hectares at the center of Moroni Corniche

will include a combination of touristic and

business facilities such as 4 star hotel,

offices, marina quay, coffee shops,

restaurants, a traditional souk and a

complex of furnished apartments.

3. Jannet Al Kamar:

Includes freehold concessions on a

beautiful 1,260-hectare land located

directly on the beach front

Annual Report 2010







































3. Jannet Al Kamar:




Annual Report 2010







































3. Jannet Al Kamar:




Annual Report 2010







































3. Jannet Al Kamar:




Annual Report 2010







































3. Jannet Al Kamar:




31

Annual Report 2010


CGC Business Profile

Combined Group Contracting Company K.S.C.C. is a publicly listed

Kuwaiti company specialized in various aspects within the

construction industry including Roads, Infrastructure, Bridges,

Expressways, Buildings, Housing projects, Oil pipelines, operation and

Maintenance of Sanitary treatment plants, Petrochemical Industry

projects, Mechanical works and Industrial Plants.

The company has a proven record concerning the quality and delivery time of the projects it

contracted and has developed strong relations with major suppliers and subcontractors in the

local construction market.

The company stands in a highly advantageous position, it has the latest technology in the field of

construction including but not limited to planning, scheduling, procurement, cost control,

accounting, drafting (C.A.D), CPM programming and store keeping.

The experience, equipment, human resources and information available to the company puts it

in a highly advantageous position and as a valuable asset to any local/foreign company planning

to execute construction contracts in the Kuwait market as partners, joint ventures, or in

consortiums etc. In addition, it also offer its services and experience to Joint Venture partners

outside Kuwait having had experience executing projects in Europe, Asia, Africa & the GCC.

Major Activities

1) General contracting activities including

construction, mechanical and sanitary

works for buildings, roads and bridges.

2) Production and Trade of various

constructions and building materials

namely Asphalt, Concrete & Aggregate.

3) Related construction works such as

painting and decorating works.

Vision & Mission

Our ultimate mission is to attain

customers’ satisfaction, increase

shareholders’ value and serve the

society. We begin with a reason and

faith as its continuation. We believe

in what we do not see and allow faith

to see what we believe in. We walk by

faith.

3232

33

S Subsidiaries

Combined Grou

Annual Re

p Contracting Co.eport

2010

. K.S.C.C. |

29

Syria

Comoro Island

s

M uwait

Oman

Comoro Co

mbined Group Co. C.S.C.C.

In 2009, CGC established the company with

the parQcipaQon

of the government of Com

oro in

this Com

oro registered com

pany. CG

C ho

lds 51% stake in the firm w

ith rem

aining 49%

stake

held by others.

Combined Group

ContracQn

g Co

mpany U.V.V.

The company w

as established in 2010 in Syria. CG

C ho

lds a 100%

stake in the Syrian com

pany

which is involved in diXerent type of con

strucQon

proYects in Syria.

1. Com

bined InternaQon

al Real Estate Com

pany \ M.S.C.C ]

Muwait

In 2007, CGC acquire

d a 100%

equity stake of Aalie United

Real Estate Co

mpany which later changed its nam

e in 2008

to Com

bined InternaQon

al Real Estate Co

mpany, operaQn

g in

the real estate developm

ent segment.

.

C ombined

Group

ContracQn

g Co

mpany

U.V.V.

CGC acquire

d a 70% equity stake in this

Omani registered company.

.

1 .Co

mbined Group

Trading and

ContracQn

g Co

. U.V.V.

The company was established in Novem

ber

2005 in Qatar. CGC ho

lds a 49% stake in the

Qatari compa

ny which is involved

in

diXe

rent type of con

strucQon

proYects in

the State of Qatar.

2. Com

bined Group

Rocks Com

pany M.S.C.C.

CGC acquire

d a 80% equity stake in th

is Muw

aiQ registered

company.

'. U

nited Mingdo

m General Trading a

ContracQn

g Co

. \

U.V.V.

In 2008, CGC acquire

d a 99% equity stake in

this MuwaiQ

registered com

pany..

2 .Co

mbined Group

4actories Com

pany U

.V.V.

Qatar

CGC acquire

d 49% equity stake in th

is Qatari

registered com

pany.

Qatar

p. 29

34

Maj

As of

Qua

Qua

have

cert

or Sharehold

f 31 December

ality & Saf

ality & Safety

e undertake

ifications. Cu

1. Since 13

been up

2. ISO 1400

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32.85%

hmed Mousa

arouf, 24.50%

Other

Ahmed

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ll remain a c

ensure and

have the foll

2004, CGC ha

ovember 200

vironmental

%

rs, 32.85%

Mousa

f 24.50%

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challenge an

bring about

owing certif

as obtained

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nd a commit

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the ISO cert

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nt Systems h

Abdul Ra

Al-Marouf,

K

KA

Annual R

ntracting Co

ment for CG

fety systems

tification 90

th validity til

has been obt

ahman

24.50%

Sulaim

Al-Ham

KAMCO, 5.65%

hman

24.50%

Sulaiman

Al-

Hamad, 1

AMCO, 5.93

Report 2

o. K.S.C.C. |

GC. Subseque

s and corres

01 : 2000 w

l 11th

Januar

tained in Ma

man Khalid

mad, 10.00%

%

Khalid

-

12.22%

3%

2010

30

ently we

sponding

which has

ry 2013.

ay 2009.

35

Annual Report 2010


3. OHSAS 18001 : 2007 Occupational Health & Safety Management system (“OHSAS”) has

been obtained in May 2009.

Thus, CGC is devoted to continuing improvement and innovation, as these results in optimizing

operations, reducing costs and increasing health and safety which is the basis on which CGC

builds, to exceed its customers' expectation.

Classifications Provider Classification Degree

1. Central Tenders

Committee, Kuwait

1) Category 1 for Infrastructure works (Road & Sewers)

2) Category 1 for Civil Construction Works

3) Category 2 for Electrical Works

2. Kuwait Oil Company

1) Category 02A, 02B & 02C for Pipelines and Associated

Works for Pipelines of all diameters, Manifolds and

Maintenance.

2) Category 03 for Domestic Water, Air and Gas mains up to

4" diameter.

3) Category 04A, 04B & 04C for Mechanical Engineering &

Plant Installation & Maintenance for Process Plant Piping.

4) Category 08 for Plant Maintenance and Production

Facilities

5) Category 15 S for small engineering purchasing,

construction (EPC) contracts.

3. Kuwait National

Petroleum Company (KNPC)

1) Category CEC 01 for Civil Works

2) Category CEC 03 for Piping, Valves and associated works

3) Category CEC 04 for Roads and Dye Works

4) Category CEC 05 Plant Installation

5) Category CEC 24 for Petrol Stations

4. Joint Operations (Al-

Khafji) Classification

1) Category CC-2 for big civil construction works

2) Category CC-4 for major asphalting & Road Works

3) Category CC-2 for skilled manpower supply services

36

Annual Report 2010


Joint Venture Agreements and Consortium Agreements

In line with diverse operations undertaken by CGC in the field of construction, the Company has

signed several joint venture and consortium agreements with specialists and contractors from

around the world. Details of few are as follows:

1. Hyundai Engineering Construction Company (Korea)

Is a major construction company incorporated in 1947 in south

Korea and is involved in civil engineering and construction

businesses. The company is involved in 5 business segments

namely a) civil engineering segment, which constructs roads,

bridges, harbors, b) railways; construction segment, which

constructs commercial buildings, office buildings and factories;

c) housing segment, which is engaged in the redevelopment,

rebuilding and remodeling, as well as marketing of residential

buildings; d) plant segment, which provides energy plants,

petrochemical plants and environment plants construction

services, and e)power generation segment, which is involved in

power transmission and power generation businesses

2. China Railways Shisiju Group Corporation (China)

Incorporated under the approval of the Ministry of

Construction, China and governed by the State, undertakes and

implement construction projects. It is qualified as main

contractor for the construction of railways, highways, municipal

civic works, building and architecting works, water and

hydroelectricity projects.

3. Arabtec Construction L.L.C.

Arabtec is a leading construction company established in the

United Arab Emirates. Since its launch in 1975, it has executed a

diverse and far-reaching portfolio of major construction

projects in all sectors of real estate and infrastructure. The

company encompasses an array of state-of-the-art equipment

as well as a multinational team of more than 52,000 highly

qualified staff.

37

H l t L V l f P j ts

Remaining Value of Projects KD 64.47 Million

s KD

Remaining Value of Projects KD 23.09 Million

l L l f

KD 10.14 Million

H nsRemaining Value of Projects KD 64.47 Million

"

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201

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38

Annual Report 2010


CGC Financial Performance

The Financial Analysis covered in this section is used to evaluate the financial operating

efficiency of CGC. The level and historical trends of ratios presented below are used to make

inferences about the financial condition and operations of the company in 2010 by

benchmarking to previous year’s performance. Financial ratios are categorized based on the

purpose of each ratio, i.e. Profitability Ratios, Growth Ratios, Liquidity Ratios, Risk Ratios and

Turnover Ratios.

Profitability Ratios

Profitability ratios are used to assess a business’s ability to generate earnings as compared to its

expenses and other relevant costs incurred during the year.

A: Annualized figures from the 21 months financials

The Return on Average Assets (ROAA) and Return on Average Equity (ROAE) was lower in the

year 2009 and 2010 on account of tight market conditions witnessed due to recessionary

conditions in 2009. Better utilization of assets is expected in the coming years with large scale

projects been initiated in the Middle East region especially in Kuwait and Saudi Arabia. The

ROAA declined from 8% in 2008 to 7% in 2009 and 2010 with the highest ROAA recorded in

2006/2007 at 12%. Likewise, return on average equity ratio decreased from 34% in 2008 to 26%

in 2010. The highest ROAE of 39% was also witnessed in 2007.

Shareholders received 10% in bonus share during 2010 for the fiscal year ended 31 December

2009. Consequently, the company's capital increased from KD 7.98 million to KD 8.78 million.

Retained Earnings increased by more than KD 3 million. The total shareholders' equity increased

to KD 36.37 million as of 31 December 2010 which was an increase of 15 % from the previous

year.

12% 12%8% 7% 7%

35%39%

34%

27% 26%

A2006 2007 2008 2009 2010

Return on Assets Return on Equity

39

Annual Report 2010


Growth Ratios

Growth Ratios or growth rates are used to understand how fast a company is growing.


Revenues and Net profits saw fluctuations during the last five years with the year 2009 affected

by the global recessionary crises which affected construction activities leading to decline in

revenues and net profits during the year. However, the year 2010 saw revival of regional

economies which reflected positively in CGC’s revenues which increased by 6% while net profits

increased by 9% in 2010. Revenue booked during 2010 reached KD 117 million, an increase of

KD 17 million from KD 100 million witnessed in 2009.

Liquidity Ratios (times)

The Liquidity Ratios measures the ability of the company to meet its short term obligations and

indicates the financial health of the business.


The company's liquidity position improved marginally in 2009. However, in 2010, the current

ratio considerably declined to 1.72 on account of increase in loans and credit facilities during the

year. The quick ratio position has marginally improved in 2010 to 1.48 times compared to

previous year.

-24%

136%

19%

-26%

6%12%

51%

0.4%

-6.6%

8.9%

A2006 2007 2008 2009 2010

Revenues Growth Net Income Growth

1.491.27 1.42

1.78 1.72

0.96

0.94

1.15

1.47 1.48

A2006 2007 2008 2009 2010

Current Ratio Quick Ratio

40

Annual Report 2010


Risk Ratios

Risk ratios, also called Financial Leverage Ratios are related to the extent to which a firm relies

on debt and other modes of temporary financing rather than equity.


The Debt/Total Assets Ratio of 0.57 in 2010 indicate the dependence on non-equity financing as

a substantial source of funds to carry out operations of CGC. The Debt/Total Equity Ratio stood

at 2.12 times in 2010, an increase from 1.96 in the previous year, mainly due to the increase in

outstanding debts.

Turnover Ratios

Turnover ratios are constructed to measure the efficiency of the company in employing its assets.

These ratios are based on the relationship between the levels of activity, represented by

revenues or operating costs in relation to different levels of assets.


The total asset turnover ratio increased marginally during 2010. This was predominantly on

account of the KD 21 million increases in accounts receivables.

1.41

3.03 2.96

1.96 2.12

0.58

0.75 0.65

0.53

0.57

A2006 2007 2008 2009 2010

Debt/Total Equity Debt/Total Assets

5.28

3.512.81

1.68 1.29

11.95

9.18

12.27

5.35 6.20

1.11

1.71

1.34

0.910.93

A2006 2007 2008 2009 2010

Receivable Turnover

Inventory Turnover

Total Assets Turnover

41

Annual Report 2010


The Receivables turnover ratio decreased during 2010 to 1.29 times, an increase in number of

days for collection period at 280 days compared to previous year at 1.68 times or 215 days in

2009.

Inventory Turnover Ratio expresses the time needed for the inventory to be replaced. Number

of days it takes to sell off inventory which was derived from the inventory turnover ratio has

increased from 29 days in 2008 to 58 days in 2010.

Price/Earning (PE) Ratio

Price/Earning (“P/E”) ratios also called the earnings multiple, is a measure of the price paid for a

share relative to the annual net income earned by the firm per share. Subsequently, sector P/E

refer to an average of all firms P/E’s within the sector.

In 2010, the P/E Ratio of the Company increased to 19.95 from 12.44 in 2009. However, the

average services sector P/E and average Kuwait stock exchange P/E declined in 2010 to 9.25 and

19.78 respectively. The Services sector mainly contains companies which cannot be considered

as ‘True Comparables’, as the sector contains companies that are involved in Food, Logistics,

Telecom, Drilling services and Hotels among others. CGC stock P/E fared better during 2010

after the crash witnessed in the year 2008.

9.42

13.82

11.25

7.78

9.60

5.10

35.92

17.4

12.44

19.78

9.25

19.95

KSE (Trailing) Service Sector (Trailing) CGC

2007 2008 2009 2010

42

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38

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43

Annual Report

2010

Combined Group Contracting Co. K.S.C.C. |

39

The Stock performance during 2010 was resultant of several factors including economic and market conditions, operation performance and

company's disclosures. Disclosures of 2010 that impacted CGC's Stock price are listed in the graph above and mentioned as follows.

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44

Annual Report 2010


1. The first disclosure for the year 2010 was made on 9th February wherein the Company

announced that it has signed a KD 32,985,000 contract with Public Authority for Housing

Welfare (PAHW) for construction, completion and maintenance of roads, Infrastructure

services to identify 2,131 Plots for Block (D) and 1,950 for Block (E) and Transformers

(Type 4) and (Type 2) and Project at Sabah Al Ahmad City for a duration of 750 days

(Contract Number PAHW/C/1145-2009/2010).

2. On 11th March the Company announced that it’s branch in Abu Dhabi has signed AED

73,807,813 equivalent to KD 5.8 million contract with the Department of Municipal

Affairs (Al Ain Municipality – Abu Dhabi) for dualling of road from Al Shuaibah

Roundabout to Al Qisais Project for a duration of 270 days (Contract Number 03/2009).

3. On 23rd

March the Company announced earnings of KD 8,194,745 for the year ended

31st

December.2009 compared to the previous year earning of KD 8,495,784. The

earning per share (EPS) was 103.67 fils in 2010 compared to the previous year of 106.97

fils. Subsequently, the Board of Directors recommended a distribution of 65% cash

dividends and 10% bonus shares for the year 2009.

4. On 3rd

April the company announced that it has received a letter of Acceptance from

Tamouh Investment Company L.L.C.,Abu Dhabi concerning award of the contract for

sector 2 and 3 Infrastructure works at Reem Island Development, Abu Dhabi, UAE to a

joint venture partnership between Combined Group Contracting Co. Abu Dhabi Branch

and Abu Dhabi Land General Contracting L.L.C.. The value of the contract is AED

521,650,210 equivalent to KD 41.2 million with the duration being 18 month (Contract

Number RI/Sectors 2&3/Infra/ 049/10).

5. On 14th

April, the Company announced that it has signed a KD 7,650,000 contract with

the Ministry of Public works for construction, completion and maintenance of the

interchanges of the main highways (Al Fahaheel Expressway) connecting to South

Sabahiya and Al Mangaf areas. The duration of the contract is 720 days (Contract

Number RA/188).

6. On 9th

May, the Company announced that it’s branch in Abu Dhabi has signed AED

52,500,000 equivalent to KD 4.2 million contract with Al Ain Farms for Livestock

Production for extension of Al Foha Cows Diary Farm Civil Works Project in Abu Dhabi.

The duration of the contract is 6 months with the maintenance period being 12 months.

7. On 16th

May, the Company announced 1st

.Quarter earnings of KD 2,400,364 compared

to previous year’s 1st

.quarter earning of KD 2,739,176. Correspondingly, the earning per

share (EPS) for the 1st

.Ouarter of 2010 was 30.24 fils compared to 34.62 fils in the

1st

.quarter of 2009.

8. On 17th

May, the Annual General Assembly Meeting was held and approved the

distribution of 65% cash dividends and the distribution of 10% bonus shares.

9. On 12th

June, the Company announced that it has signed a KD 1,326,000 contract with

the Ministry of Public Works for emergency maintenance of roads in Al Ahmadi

Governorate. The duration of the contract is 730 days (Contract Number RA/232).

Annual Report 2010


10. On 13th June, the Company announced that it has signed a KD 1,231,500 contract with

Ministry of Public Works for emergency maintenance of roads in Farwanya Governorate.

The duration of the contract is 730 days (Contract Number RA/230).

11. On 19th June, the Company announced that it’s subsidiary Company in Qatar has signed

Qatari Riyal (QR) 1,045,000,000 equivalent to KD 82.6 million contract with National

Property Development Company in Qatar for Lusail Infrastructure Development Project

for north residential and west water front areas in Lusail City in Qatar. The duration of

the contract is 3 years (Contract Number 37852/NLH-NPD-LIP).

12. On 4th August, the Company announced that it has signed a KD 29,485,464 contract with

Public Authority for Applied Education and Training (PAAET) for construction and

maintenance of Labs and Workshops for second extension of the college of technology–

Shuwaikh. The duration of the contract is 1,095 days (Contract Number PA/AFA/

114/2008-2009).

13. On 15th August, the Company announced earnings of KD 2,134,366 for the three month

period ended 30.06.2010 with half year earnings at KD 4,534,730 compared to previous

year three month earnings for the period ended 30.06.2009 at KD 2,088,411 with the six

months earning at KD 4,827,587. The earnings per share (EPS) for the 2nd

. Quarter 2010

was 24.34 fils, with 6 months EPS at 51.81 fils compared to the previous year 2nd

.

Quarter EPS at 23.99 fils and six months EPS 55.47 fils in 2009.

14. On 24th August, the Company announced that it has signed a KD 26,859,000 contract

with Kuwait Oil Company for construction of flowlines and associated works in south

east Kuwait areas. The duration of the contract is 48 months (Contract Number 45575).

15. On 16th September, the Company announced that it has signed a KD 39,370,000

contract with Ministry of Public Works for construction, completion and maintenance of

the interchanges of the main highways (sixth ring road) connecting to new housing area

at south Jahra, area numbers 1,3,4,5 and 7. The duration of the contract is 1,095 days

(Contract Number RA/184 ).

16. On 12th October, the Company announced that in consortium with Hyundai it will

execute 20% of Sheikh Jaber Al Ahmad Bridge Project (main bridge – Sabbiya). The agent

of Hyundai (Abdulla Hamad Al Sager Co.) was the lowest bidder for the sum of KD

738,750 million. The duration of the contract is 5 years (Contract Number RA/140).

17. On 1st November, the Company announced that it has signed KD 3,095,000 contract

with Ministry of Public Works for construction, completion, maintenance of roads,

sewers and other services in Al Bedaa Area. The duration of the contract is 540 days

(Contract Number RA/191).

18. On 4th November, the Company announced that it has received a letter of Intent for

tender number MOE/37 for construction, completion and maintenance of 5 main fresh

water lines (1,600 mm. Diameter) from Mina Abdulla Water Gathering Center Project

amounting to KD 37,598,359 with the Ministry of Electricity and Water. The duration of

the contract is 2 years.

45

Annual Report 2010


10. On 13th June, the Company announced that it has signed a KD 1,231,500 contract with

Ministry of Public Works for emergency maintenance of roads in Farwanya Governorate.

The duration of the contract is 730 days (Contract Number RA/230).

11. On 19th June, the Company announced that it’s subsidiary Company in Qatar has signed

Qatari Riyal (QR) 1,045,000,000 equivalent to KD 82.6 million contract with National

Property Development Company in Qatar for Lusail Infrastructure Development Project

for north residential and west water front areas in Lusail City in Qatar. The duration of

the contract is 3 years (Contract Number 37852/NLH-NPD-LIP).

12. On 4th August, the Company announced that it has signed a KD 29,485,464 contract with

Public Authority for Applied Education and Training (PAAET) for construction and

maintenance of Labs and Workshops for second extension of the college of technology–

Shuwaikh. The duration of the contract is 1,095 days (Contract Number PA/AFA/

114/2008-2009).

13. On 15th August, the Company announced earnings of KD 2,134,366 for the three month

period ended 30.06.2010 with half year earnings at KD 4,534,730 compared to previous

year three month earnings for the period ended 30.06.2009 at KD 2,088,411 with the six

months earning at KD 4,827,587. The earnings per share (EPS) for the 2nd

. Quarter 2010

was 24.34 fils, with 6 months EPS at 51.81 fils compared to the previous year 2nd

.

Quarter EPS at 23.99 fils and six months EPS 55.47 fils in 2009.

14. On 24th August, the Company announced that it has signed a KD 26,859,000 contract

with Kuwait Oil Company for construction of flowlines and associated works in south

east Kuwait areas. The duration of the contract is 48 months (Contract Number 45575).

15. On 16th September, the Company announced that it has signed a KD 39,370,000

contract with Ministry of Public Works for construction, completion and maintenance of

the interchanges of the main highways (sixth ring road) connecting to new housing area

at south Jahra, area numbers 1,3,4,5 and 7. The duration of the contract is 1,095 days

(Contract Number RA/184 ).

16. On 12th October, the Company announced that in consortium with Hyundai it will

execute 20% of Sheikh Jaber Al Ahmad Bridge Project (main bridge – Sabbiya). The agent

of Hyundai (Abdulla Hamad Al Sager Co.) was the lowest bidder for the sum of KD

738,750 million. The duration of the contract is 5 years (Contract Number RA/140).

17. On 1st November, the Company announced that it has signed KD 3,095,000 contract

with Ministry of Public Works for construction, completion, maintenance of roads,

sewers and other services in Al Bedaa Area. The duration of the contract is 540 days

(Contract Number RA/191).

18. On 4th November, the Company announced that it has received a letter of Intent for

tender number MOE/37 for construction, completion and maintenance of 5 main fresh

water lines (1,600 mm. Diameter) from Mina Abdulla Water Gathering Center Project

amounting to KD 37,598,359 with the Ministry of Electricity and Water. The duration of

the contract is 2 years.

46

Annual Report 2010


19. On 10th November, the Company announced earnings of KD 2,872,960 for the three

month period ended 30th

September 2010 with nine months earnings at KD 7,407,690

compared to previous year three month earnings for the period ended 30th

September.2009 at KD 1,969,111 with the nine months earning at KD 6,796,698. The

earnings per share (EPS) for the 3rd

. Quarter 2010 was 32.77 fils with 9 months EPS at

84.59 fils compared to the previous year 3rd

. Quarter EPS at 22.62 fils and nine months

EPS 78.09 fils in 2009.

20. On 16th December, the Company announced that it was the lowest bidder for tender

number RFP-2218 for removal of abandoned crude oil pipelines in south and east

Kuwait areas. The contract amounted to KD 2,799,584 with Kuwait Oil Company. The

duration of the contract is 20 months.

21. On 18th December, the Company announced that it has signed a KD 3,000,000 contract

with Ministry of Public Works for general maintenance of highways in Kuwait. The

duration of the contract being 1,095 days (Contract Number RA/241).

47

Annual Report 2010


Contact Details

Combined Group Contracting Company – Main Office

Address: Block No. 2 , Plot No. 284

Al Ardiya Industrial , State of Kuwait

Mailing Address : P.O. Box:4819, Safat 13049 , Kuwait

Telephone: (965) 22254545

Fax: (965) 24344610 - (965) 24344686

Email: [email protected]

Website: www.cgc-kw.com

Services Center (Garage & Asphalt & Concrete plants)

Address: Industrial Area, Big Contractors Area,

Sulaibiah, State of Kuwait

Telephone: (965) 24674896 - (965) 24674897 - (965) 24674898 – (965) 24677674

Fax: (965) 24677673

Subsidiaries inside the State of Kuwait

Combined International Real Estate Company – K.S.C. (Closed)


Al Ardiya Industrial, State of Kuwait

Mailing Address : P.O. Box: 4819, Safat 13049 , Kuwait

Telephone: (965) 22254545

Fax: (965) 24344610

United Kingdom General Trading and Contracting Company - W.L.L



Mailing Address : P.O. Box:4819, Safat 13049 , Kuwait

Telephone: (965) 22254545

Fax: (965) 24344610

Combined Group Rocks Company – K.S.C. (Closed)

Address: Fahed Al Salem Street

Kuwait City , State of Kuwait

Mailing Address : P.O. Box:21912, Safat 13080, Kuwait

Telephone: (965) 22478530 – (965) 22478531

Fax: (965) 22478532

48

Annual Report 2010


Al Barjas Group for Trading & Contracting Company – W.L.L.

Abdul-Rahman Mousa Al-Marouf & Partners

Address: Block No. 2, Plot No. 284


Mailing Address : P.O. Box: 4819, Safat 13049, Kuwait

Telephone: (965) 22254545

Fax: (965) 24344610

Subsidiaries outside the State of Kuwait

Combined Group Trading & Contracting Company – W.L.L. – Qatar

Address: Doha- Third Ring Road, Al-Hilal Al-Gharbi – 41, Doha

Telephone: (974) 44520520

Fax: (974) 44664999 – (974) 44666771

Combined Group Factories Company – W.L.L. – Qatar

Address: Doha- Third Ring Road, Al-Hilal Al-Gharbi – 41, Doha

Telephone: (974) 44520520

Fax: (974) 44664999 – (974) 44666771

Combined Group Contracting Company – W.L.L. – Muscat – Oman

Address: Muscat Governorate – Bousher – Northen Al Khuwair

Telephone: (968) 24783387

Fax: (986) 24708671

Syrian Combined Group Contracting Company – W.L.L. – Syrian Arab Republic

Address: Damascus – Al-Shalan, Opposite Fast Meal Chickens – Samadi & Attar Building – T 1

Telephone: (963) 114445001

Fax: (963) 114445003

Comoros Combined Group Company – C.S.C.C. – Comoros Island

Address: Grand Comore, Route Oasis, Ancient Batimet Idi Engineering, Moroni

Telephone: (269) 3209896

Fax: (269) 3276745

49

Annual Report 2010


Branches outside the State of Kuwait

Combined Group Contracting Company – Iraq Branch

Address: Baghdad, Al-Wahda Area No. 906 - Al-Watheq Square Near Coral Palace Hotel

Telephone: (964-1) 7190782

Combined Group Contracting Company – Abu Dhabi Branch "UAE"

Address: Abu Dhabi – Airport Street – UAE, Heris of Mohammad Ahmad Al-Otaiba Building.

Telephone: (9712) 4454255

Fax: (9712) 4436994

Combined Group Contracting Company – C.S.C. – Al Khobhar Branch "KSA"

Address: Al-Khobhar City – Kingdom of Saudi Arabia

Telephone: (966) 503264871

50

Consolidated Financial Statements for the Year Ended December 31, 2010

withIndependent Auditors’ Report

51

COMBINED GROUP CONTRACTING COMPANY - K.S.C. (CLOSED) AND SUBSIDIARIES STATE OF KUWAIT

CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010

WITHINDEPENDENT AUDITORS’ REPORT

52

COMBINED GROUP CONTRACTING COMPANY - K.S.C. (CLOSED) AND SUBSIDIARIES STATE OF KUWAIT

CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010

WITHINDEPENDENT AUDITORS’ REPORT

CONTENTS

Independent Auditors’ Report Pages

Consolidated statement of financial position 3Consolidated statement of income 4Consolidated statement of comprehensive income 5Consolidated statement of changes in shareholders’ equity 6Consolidated statement of cash flows 7 - 8

Notes to consolidated financial statements 9 – 37

55565758

59-60

61-89

53

INDEPENDENT AUDITORS’ REPORT

The Shareholders Combined Group Contracting Company - K.S.C. (Closed) State of Kuwait

Report on the consolidated financial statementsWe have audited the accompanying consolidated financial statements of Combined Group Contracting Company - K.S.C. (Closed) (the Parent Company) and subsidiaries (the Group), which comprise the consolidated statement of financial position as of December 31, 2010, and the consolidated statements of income, comprehensive income, changes in equity and cash flows for the year then ended and a summary of significant accounting policies and other explanatory notes.

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

Auditors’ responsibilityOur responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity's preparation and fair presentation of the consolidated 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 evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

54

-2-

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OpinionIn our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Combined Group Contracting Company - K.S.C. (Closed) as of December 31, 2010, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards.

Report on other Legal and Regulatory RequirementsAlso in our opinion, the consolidated financial statements include the disclosures required by the Commercial Companies Law and the Parent Company’s Articles of Association, and we obtained the information We required to perform our audit. In addition, 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 Parent Company’s books. According to the information available to us, there were no contraventions during the year ended December 31, 2010 of either the Commercial Companies Law or of the Parent Company’s Articles of Association which might have materially affected the Group’s financial position or results of its operations.

Ali Al-Rukhayes Licence No. 72-A

Member of the International Group of Accounting Firms

State of Kuwait March 20, 2011

Dr. Shuaib A. Shuaib Licence No. 33-A

RSM Albazie & Co.

55

COMBINED GROUP CONTRACTING COMPANY - K.S.C. (CLOSED) AND SUBSIDIARIES CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS OF DECEMBER 31, 2010 (All amounts are in Kuwaiti Dinars)

3

Note 2010 2009 ASSETS

Fixed assets 3 14,632,274 14,945,881 Investment in an unconsolidated subsidiary 4 1 50,000 Right of utilization of leasehold land 5 126,229 134,479

Current assets: Spare parts and materials 6 16,938,513 15,749,850 Gross amount due from customers for contract work 7 9,606,639 14,294,358 Accounts receivable and other debit balances 8 86,266,726 65,138,643 Investments at fair value through income statement 9 2,461,745 1,873,642 Term deposits 10 - 2,022,490 Cash and cash equivalents 11 5,330,566 2,691,611

Total current assets 120,604,189 101,770,594 Total assets 135,362,693 116,900,954

SHAREHOLDERS’ EQUITY AND LIABILITIESShareholders’ equity:

Capital 12 8,784,600 7,986,000 Treasury shares 13 (91,347) (619,897)Treasury shares reserve 1,181,231 543,086 Statuary reserve 14 5,103,940 5,103,940 Voluntary reserve 15 1,817,340 1,817,340 Foreign currency translation adjustments (25,874) 31,189 Retained earnings 19,315,990 16,401,105 Equity attributable to shareholders of the Parent Company 36,085,880 31,262,763 Non-controlling interests 289,650 348,075

Total shareholders’ equity 36,375,530 31,610,838

Accounts payable and other credit balances – long term 16 21,965,773 23,383,098 Long term loans – Non current portion 17 2,333,866 1,005,694 Provision for end of service benefits 18 4,647,215 3,636,714

Current liabilities: Gross amount due to customers for contract work 7 2,834,494 -Accounts payable and other credit balances 16 52,975,599 38,860,627 Long term loans – Current portion 17 2,221,776 75,204 Short term loans and credit facilities 19 7,642,949 9,842,877 Due to banks 20 4,365,491 8,485,902

Total current liabilities 70,040,309 57,264,610 Total shareholders’ equity and liabilities 135,362,693 116,900,954

The accompanying notes (1) to (36) form an integral part of the consolidated financial statements

Abdul Rahman M. Al-Marouf Rae’ed Khalaf Al-Abdullah Chairman & Managing Director Vice Chairman

56

COMBINED GROUP CONTRACTING COMPANY - K.S.C. (CLOSED) AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME YEAR ENDED DECEMBER 31, 2010 (All amounts are in Kuwaiti Dinars)

4

Note 2010 2009 Operating revenue 117,580,650 110,580,366 Operating costs (102,209,371) (96,401,170) Gross profit 21 15,371,279 14,179,196

General and administrative expenses 22 (4,781,819) (3,566,996)Provision for doubtful debts 8 (130,603) (360,847)Impairment loss for investment in unconsolidated

subsidiary 4 (49,999) -Gain on sale of investment in an associate - 189,796 Net investment gain (loss) 23 468,103 (72,347)Other income 24 410,061 216,872 Depreciation and amortization (572,624) (508,300)Finance charges (1,418,204) (1,276,515)Zakat and donations (46,186) (165,512)Profit for the year before contribution to Kuwait Foundation for

the Advancement of Sciences, National Labor Support Tax, contribution to Zakat and Board of Directors remuneration 9,250,008 8,635,347

Contribution to Kuwait Foundation for the Advancement of Sciences (KFAS) 25 (92,012) (86,656)

National Labor Support Tax (NLST) 26 (206,041) (302,775)Contribution to Zakat 27 (66,415) (81,409)Board of directors’ remuneration 31 (50,000) (50,000)Net profit for the year 8,835,540 8,114,507

Attributable to: Shareholders of the Parent Company 8,893,965 8,194,745 Non-controlling interests (58,425) (80,238)

8,835,540 8,114,507 Earnings per share attributable to shareholders of the Parent

Company (fils) 28 101.52 94.15


57

COMBINED GROUP CONTRACTING COMPANY - K.S.C. (CLOSED) AND SUBSIDIARIES CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME YEAR ENDED DECEMBER 31, 2010 (All amounts are in Kuwaiti Dinars)

5

2010 2009 Net profit for the year 8,835,540 8,114,507

Other comprehensive income Foreign currency translation adjustments (57,063) 49,599 Other comprehensive (loss) income for the year (57,063) 49,599 Total comprehensive income for the year 8,778,477 8,164,106

Attributable to: Shareholders of the Parent Company 8,836,902 8,244,344 Non-controlling interests (58,425) (80,238)Total comprehensive income for the year 8,778,477 8,164,106


58

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59

COMBINED GROUP CONTRACTING COMPANY - K.S.C. (CLOSED) AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS YEAR ENDED DECEMBER 31, 2010 (All amounts are in Kuwaiti Dinars)

7

2010 2009 Cash flows from operating activitiesProfit for the year before contribution to Kuwait Foundation for the Advancement of

Sciences, National Labor Support Tax, contribution to Zakat and Board of Directors remuneration 9,250,008 8,635,347

Adjustments for: Provision for doubtful debts 130,603 360,847 Gain on sale of investment in an associate - (189,796)

Impairment loss for investment in unconsolidated subsidiary 49,999 -Gain on sale of fixed assets (205,724) (137,405)Interest income (58,951) (116,155)Net investment (gain) loss (468,103) 72,347 Depreciation and amortization 5,106,186 4,799,731 Finance charges 1,418,204 1,276,515 Provision for end of service indemnity 1,269,517 628,911

16,491,739 15,330,342 Changes in operating assets and liabilities: Spare parts and materials (1,188,663) 307,014 Gross amount due from / to customers for contract work 7,522,213 29,085,084 Accounts receivable and other debit balances (25,223,147) (22,667,594)Accounts payable and other credit balances 16,707,923 4,950,471 Due to an associate - (152,196)Cash generated from operating activities 14,310,065 26,853,121 Payment of Kuwait Foundation for the Advancement of Sciences (86,656) (88,850)Payment of National Labor Support Tax (313,084) (220,773)Payment of Zakat (81,409) (95,853)Board of Directors’ remuneration paid (50,000) (50,000)Paid for end of service indemnity (259,016) (227,936)Net cash generated from operating activities 13,519,900 26,169,709

Cash flows from investing activitiesPaid for purchase of fixed assets (5,538,292) (5,035,514)Proceeds from sale of fixed assets 959,687 427,158 Proceeds from sale of investment in associate - 396,000 Paid for purchase of investments at fair value through income statement (716,042) (297,421) Proceeds from sale of investments at fair value through income statement 578,490 184,830 Net movement on term deposits 2,022,490 2,688,460 Interest income received 72,217 116,155 Dividend received 17,552 26,420 Net cash used in investing activities (2,603,898) (1,493,912)

60

COMBINED GROUP CONTRACTING COMPANY - K.S.C. (CLOSED) AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (CONTD.) YEAR ENDED DECEMBER 31, 2010 (All amounts are in Kuwaiti Dinars)

8

2010 2009 Cash flows from financing activitiesProceeds from sale of treasury shares 1,166,695 -Finance charges paid (1,418,204) (1,276,515)Cash dividends paid (5,180,480) (7,226,481)Net movement on non-controlling interests - 71,804 Net movement on long term loan 3,474,744 (70,974)Net movement on short term loans and credit facilities (2,199,928) (8,439,721)Shareholders’ payable 537 (496,259)Net movement on due to banks (4,120,411) (6,033,225)Net cash used in financing activities (8,277,047) (23,471,371)Net increase in cash and cash equivalents 2,638,955 1,204,426 Cash and cash equivalents at beginning of the year 2,691,611 1,487,185 Cash and cash equivalents at end of the year (Note 11) 5,330,566 2,691,611


61

COMBINED GROUP CONTRACTING COMPANY - K.S.C. (CLOSED) AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2010 (All amounts are in Kuwaiti Dinars)

9

1. Incorporation and objectives of the Parent Company

The Parent Company was incorporated pursuant to an Articles of Association of a Limited Liability Company, duly authenticated at the Ministry of Justice - Department of Real Estate Registration and Documentation under Ref. No. 215/B/Vol.4 on November 15, 1965.

According to a Limited Liability Company amendment Articles of Association, authenticated at the Ministry of Justice - Department of Real Estate Registration and Documentation under Ref. No. 6218/Vol.1 dated September 19, 2005, the following was considered:

1. Transfer the legal entity of Combined Group Trading and Contracting Company - Suleiman Khaled Abdul-Latif Al-Hamad and Partners – W.L.L. to Kuwaiti Shareholding Company.

2. According to Article No. (2) of the amendment Articles of Association; the Company’s name become: “Combined Group Contracting Company - K.S.C. (Closed)” (previously Combined Group Trading and Contracting Company – Suleiman Khaled Abdul-Latif Al-Hamad and Partners).

The Parent Company is registered in the commercial register under Ref. No. 13595 dated 19/09/2005.

The main objectives for which the Parent Company was established are as follows:

1. Carry out general contracting, mechanical works, health engineering works, construction work of building, ways, bridges and managing, controlling them and their related works.

2. Manufacturing, producing and importing of various building materials (after the approval of Public Authority for Industry).

3. Trading, packing and packaging cement, sand and related materials. 4. Ready-mix works. 5. Manufacturing and executing the dye works and decorations that are necessary to execute the

civil works (after the approval of Public Authority for Industry). 6. Asphalt production. 7. Purchasing and importing the equipments and tools that are necessary to execute the Parent

Company’s objectives. 8. Owning the transportation intermediaries that are necessary for the Parent Company’s

activities.9. Representation of the companies and enter tenders that have same purposes. 10. Investing the excess funds available with the Parent Company in portfolios and funds managed

by specialized companies.

The Parent Company may have an interest to associate itself with institutions practicing similar to its own or which it may assist the Parent Company anyway in achieving its objectives in Kuwait or abroad, or may establish, participate in or acquire these institutions or have them affiliated to it.

The registered Parent Company’s address is P.O. Box 4819 Safat, 13049 State of Kuwait and located in Ardiya area, Block No. 2, building No. 284.

62


10

At December 31, 2010, the Group had 5,569 employees (2009 – 4,283 employees).

The consolidated financial statements were authorized for issue by the Board of Directors of the Parent Company on March 20, 2011. The Shareholders’ General Assembly has the power to amend these consolidated financial statements after issuance.

2. Significant accounting policies

The accompanying consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards issued by the International Accounting Standards Board (IASB). Significant accounting policies are summarized as follows:

a) Basis of preparation:

The consolidated financial statements are presented in Kuwaiti Dinars and are prepared under the historical cost convention, except that, investments at fair value through income statement are stated at their fair value. The accounting policies applied by the Group are consistent with those used in the previous year, except for the changes due to implementation of the following new and amended International Financial Reporting Standards effective January 1, 2010:

IAS 1 (amendment), ‘Presentation of financial statements’. The amendment is part of the IASB’s annual improvements project published in April 2009. The amendment provides clarification that the potential settlement of a liability by the issue of equity is not relevant to its classification as current or non current. By amending the definition of current liability, the amendment permits a liability to be classified as non-current (provided that the entity has an unconditional right to defer settlement by transfer of cash or other assets for at least 12 months after the accounting period) notwithstanding the fact that the entity could be required by the counterparty to settle in shares at any time. It did not have a material impact on the Group's consolidated financial statements.

IFRS 2 (amendments), ‘Group cash-settled and share-based payment transactions’.In addition to incorporating IFRIC 8, ‘Scope of IFRS 2’, and IFRIC 11, ‘IFRS 2 – Group and treasury share transactions’, the amendments expand on the guidance in IFRIC 11 to address the classification of group arrangements that were not covered by that interpretation. The new guidance did not have a material impact on the Group’s consolidated financial statements.

Revised IFRS 3IFRS 3 introduces significant changes in the accounting for business combinations occurring after the effective date. Changes affect the valuation of non-controlling interest, the accounting for transaction costs, the initial recognition and subsequent measurement of a contingent consideration and business combinations achieved in stages. These changes will impact the amount of goodwill recognized, the reported results in the period that an acquisition occurs and future reported results. It did not have a material impact on the Group's consolidated financial statements.

63


11

IFRS 5 (amendment), ‘Measurement of non-current assets (or disposal groups) classified as held-for-sale’. The amendment is part of the IASB’s annual improvements project published in April 2009. The amendment provides clarification that IFRS 5 specifies the disclosures required in respect of non-current assets (or disposal groups) classified as held for sale or discontinued operations. It also clarifies that the general requirement of IAS 1 still apply, particularly paragraph 15 (to achieve a fair presentation) and paragraph 125 (sources of estimation uncertainty) of IAS 1. It did not have a material impact on the Group's consolidated financial statements.

IAS 7 Statement of Cash Flows:The amendment is part of the IASB’s annual improvements project published in April 2009. The amendment explicitly states that only expenditure that results in recognizing an asset can be classified as a cash flow from investing activities. It did not have a material impact on the Group's consolidated financial statements.

IFRIC 17, ‘Distribution of non-cash assets to owners’ (effective for annual periods beginning on or after on or after 1 July 2009). The interpretation is part of the IASB’s annual improvements project published in April 2009. This interpretation provides guidance on accounting for arrangements whereby an entity distributes non-cash assets to shareholders either as a distribution of reserves or as dividends. IFRS 5 has also been amended to require that assets are classified as held for distribution only when they are available for distribution in their present condition and the distribution is highly probable. It did not have a material impact on the Group's consolidated financial statements.

Amended IAS 27 Consolidated and Separate Financial Statements IAS 27 requires that a change in the ownership interest of a subsidiary (without loss of control) is accounted for as a transaction with owners in their capacity as owners. Therefore, such transactions will no longer give rise to goodwill, nor will they give rise to gains or losses. Furthermore, the amended standard changes the accounting for losses incurred by the subsidiary as well as the loss of control of a subsidiary. The changes by IFRS 3 and IAS 27 will affect future acquisitions or loss of control of subsidiaries and transactions with non-controlling interest. It did not have a material impact on the Group's consolidated financial statements.

IAS 38 (amendment), ‘Intangible Assets’. The amendment is part of the IASB’s annual improvements project published in April 2009 and the Group adopted IAS 38 (amendment) from the date IFRS 3 (revised) is adopted. The amendment clarifies guidance in measuring the fair value of an intangible asset acquired in a business combination and it permits the grouping of intangible assets as a single asset if each asset has similar useful economic lives. The amendment did not result in a material impact on the Group consolidated financial statements.

Standards and interpretations issued but not effectiveThe following IASB Standards and Interpretations have been issued but are not yet effective, and have not been adopted by the Group:

64


12

IFRS 9 Financial Instruments:The standard, which will be effective for annual periods beginning on or after January 1, 2013, specifies how an entity should classify and measure its financial assets. It requires all financial assets to be classified entirely based on the entity’s 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

Others

Amendments to IFRS 1 - Limited Exemption from Comparative Disclosures for First time Adopters

Amendments to IFRS 7 - Disclosures - Transfers of Financials Assets IAS 24(revised in 2009) - Related Party Disclosures Amendments to IAS 32 - Classification of Rights Issues Amendments to IFRIC 14 - Prepayments of a Minimum Funding Requirement IFRIC 19 - Extinguishing Financial Liabilities Equity Instruments

These amendments are not expected to have any impact on the Group consolidated financial statements.

The preparation of consolidated financial statements in conformity with International Financial Reporting Standards requires management to make judgments, estimates and assumptions in the process of applying the Group’s accounting policies. Significant accounting judgments, estimates and assumptions are disclosed in Note 2(x).

b) Basis of consolidation:

The consolidated financial statements include the financial statements of Combined Group Contracting – K.S.C. (Closed) (the Parent Company) and its following subsidiaries:

Ownership percentage

Name of the subsidiary Country of

incorporation 2010 2009 Combined Group for Trading and Contracting Co. –W.L.L. Qatar 49% 49% Combined International Real Estate Company – K.S.C.

(Closed) Kuwait 100% 100% Combined Group Contracting Company – K.S.C. Oman 70% 70% Combined Group Factories - W.L.L. Qatar 49% 49% Combined Group Rocks Company – K.S.C.C. Kuwait 100% 100%

65


13

During the year ended December 31, 2010 it was approved by the department of control companies in state of Qatar to amendment the percentage of dividends of profit or loss for Combined Group – W.L.L.(state of Qatar) (subsidiary) to be 75% for the Parent Company of the profit or loss from the subsidiary results and holding the same percentage of the subsidiary capital 49%.

Subsidiaries are those enterprises controlled by the Parent Company. Control exists when the Parent Company has the power, directly or indirectly, to govern the financial and operating policies of an enterprise so as to obtain benefits from its activities. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control effectively commences until the date that control effectively ceases. Inter-company balances and transactions, including inter-company profits and unrealized profits and losses are eliminated on consolidation. Consolidated financial statements are prepared using uniform accounting policies for like transactions and other events in similar circumstances.

Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the Group’s equity therein. Non-controlling interests consist of the amount of those interests at the date of the original business combination and the non-controlling shareholders' share of changes in equity since the date of the combination. Losses applicable to the non-controlling interest in excess of the non-controlling interest in the subsidiary’s equity are allocated against the interests of the Group except to the extent that the non-controlling shareholders has a binding obligation and is able to make an additional investment to cover the losses.

c) 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 the consolidated statement of income. 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 consolidated statement of income 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.

66


14

Land is not depreciated. The cost of properties and other fixed assets is depreciated on a straight-line basis over the estimated useful lives at the following annual rates:

Depreciationrate

Buildings 5%Vehicles, trucks and bulldozers 25%Machinery and equipment 12 1/2% - 20% Asphalt factories and asphalt scrap and spread out unit and

central mixers 12 ½% Computer equipment, furniture and decorations 25%Constructions 25%

Certain fixed assets used in certain projects are depreciated over the period of respective contracts.

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

d) Impairment of assets:

At the end of each reporting period, the Group reviews the carrying amounts of its 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 Group 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 reflects 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 consolidated statement of income, 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 recognized for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognized immediately in the consolidated statement of income, 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.

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15

e) Investments in associates:

Associates are those enterprises in which the Group has significant influence, but not control, over the financial and operating policy decisions. The consolidated financial statements include the Group’s share of the results and assets and liabilities of associates under the equity method of accounting 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 equity method, investments in associates are carried in the consolidated statement of financial position at cost as adjusted for post-acquisition changes in the Group’s share of the net assets of the associate, less any impairment in the value of individual investments.

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

f) Right of utilization:

Right of utilization is stated at cost, and is amortized over the expected economic life which is estimated to be twenty years.

g) Spare parts and materials:

Spare parts and materials are not for resale and are valued at average cost, after providing allowances for any obsolete or slow moving items.

h) Gross amount due from / to customers for contract work:

Gross amount due from / to customers for contract work represents net cost and recognized profits less recognized losses and progress billings for contracts under construction. Costs include materials, direct wages and appropriate share of indirect costs. When progress billings exceed costs and realized profits (less realized losses), such excess is included under liabilities.

i) Receivables:

Receivables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method, less provision for impairment. A provision for impairment of receivables is established when there is objective evidence that the Group 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 difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. 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 consolidated statement of income. When receivables are uncollectible, it is written off against the allowance account for receivables. Subsequent recoveries of amounts previously written off are credited in the consolidated statement of income.

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16

j) Investments:

The Group classifies its financial assets as investments investments at fair value through income statement. The classification depends on the purpose for which the financial assets were acquired and is determined at initial recognition by the management.

Investments at fair value through income statement: This category has two sub-categories: investments held for trading, and those designated at fair value through statement of income 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 designated and effective as a hedging instrument.

An investment is designated by the management on initial recognition if such designation eliminates 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 from the end of reporting period.

k) Cash and cash equivalents:

Cash and cash equivalents includes cash in hand, deposits held at call with banks and other short-term highly liquid investments with original maturities of three months or less that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

l) Capital:

Ordinary shares are classified as equity.

m) Treasury shares:

Treasury shares consist of the Parent Company’s own shares that have been issued, subsequently reacquired by the Group and not yet reissued or canceled. The treasury shares are accounted for using the cost method. Under the cost method, the weighted average cost of the shares reacquired is charged to a contra equity account. When the treasury shares are reissued, gains are credited to a separate account in shareholders’ equity (treasury shares reserve) which is not distributable. Any realized losses are charged to the same account to the extent of the credit balance on that account. Any excess losses are charged to retained earnings then reserves.

69


17

Gains realized subsequently on the sale of treasury shares are first used to offset any recorded losses in the order of reserves, retained earnings and the treasury shares reserve account. No cash dividends are paid on these shares. The issue of bonus shares increases the number of treasury shares proportionately and reduces the average cost per share without affecting the total cost of treasury shares.

Where any Group's company purchases the Parent Company’s equity share capital (treasury shares), the consideration paid, including any directly attributable incremental costs is deducted from equity attributable to the Parent Company’s equity holders until the shares are cancelled or reissued. Where such shares are subsequently reissued, any consideration received, net of any directly attributable incremental transaction costs, is included in equity attributable to the Parent Company’s equity holders.

n) Borrowings:

Borrowings are initially recognized at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortized cost. Any difference between proceeds (net of transaction costs) and the redemption value is recognized in the consolidated statement of income over the period of the borrowings using the effective interest method.

Fees paid on the establishment of loan facilities are recognized as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalized as a pre-payment for liquidity services and amortized over the period of the facility to which it relates.

o) Borrowing costs:

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization.

All other borrowing costs are recognized in consolidated statement of income in the period in which they are incurred.

p) Provision for end of service benefits:

Provision is made for amounts payable to employees under the Kuwaiti and Qatari Labor Law and employee contracts. This liability, which is unfunded, represents the amount payable to each employee as a result of involuntary termination at the end of the reporting period and approximates the present value of the final obligation.

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18

q) Payables:

Accounts payable are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method.

r) Revenue recognition:

Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the Group’s activities. Revenue is shown net of returns, rebates and discounts and after eliminating sales within the Group.

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

Construction revenueRevenue from construction contracts is recognized in accordance with the percentage of completion method of accounting measured by reference to the percentage that actual costs incurred to date bear to total estimated costs for each contract. Profit is only recognized when the contract reaches a point where the ultimate profit can be estimated with reasonable certainty. Claims, variation orders and incentive payments are included in the determination of contract profit when approved by contract owners. Anticipated losses on contracts are recognized in full as soon as they become apparent.

Where the outcome of a construction contract cannot be estimated reliably, contract revenue is recognized to the extent of contract costs incurred that it is probable will be recoverable. Contract costs are recognized as expenses in the period in which they are incurred.

Services incomeRevenues from vehicles, machinery, garage and factory are recognized when services are rendered to the Group’s customers.

Interest incomeInterest income is recognized, when earned on a time apportionment basis.

Dividends incomeDividends are recognized when the Group’s right to receive payment is established.

Investments gainGain 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 the sale.

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19

s) 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 at the end of the 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 the consolidated statement of income for the period. Translation differences on non-monetary items such as equity investments which are classified as investments at fair value through income statement 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 the other comprehensive income.

The assets and liabilities of the foreign subsidiary are translated into Kuwaiti Dinars at rates of exchange prevailing at the statement of financial position date. 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 differences arising on translation are recognized directly in the other comprehensive income. Such translation differences are recognized in profit or loss in the period in which the foreign operation is disposed off.

t) Financial instruments:

Financial assets and financial liabilities carried on the consolidated statement of financial position include cash and cash equivalent, accounts receivable, investments, accounts payable and credit facilities. The accounting policies on recognition and measurement of these items are disclosed in the respective accounting policies found in this Note.

Financial instruments are classified as liabilities or equity in accordance with the substance of the contractual arrangement. Interest, dividends, gains, and losses relating to a financial instrument classified as a liability are reported as expense or income. Distributions to holders of financial instruments classified as equity are charged directly to equity. Financial instruments are offset when the Group 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.

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20

u) Provisions:

A provision is recognized when the Group 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.

v) Contingencies:

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

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

w) Segment reporting:

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker is identified as the person being responsible for allocating resources, assessing performance and making strategic decisions regarding the operating segments.

x) Critical accounting estimates and judgments:

The Group makes judgments, estimates and assumptions concerning the future. The preparation of consolidated 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 consolidated financial statements and the reported amounts of revenue and expenses during the year. Actual results could differ from the estimates.

a) Judgments: In the process of applying the Group’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 consolidated financial statements.

(i) Revenue Recognition: Revenue is recognized to the extent it is probable that the economic benefits will flow to the Group 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.

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21

(ii) Determination of contract cost: Determination of costs which are directly related to the specific contract or attributable to the contract activity in general requires significant judgment. The determination of contract cost has a significant impact upon revenue recognition in respect of long term contracts. The Group follows guidance of IAS 11 for determination of contract cost and revenue recognition.

(iii) Provision for doubtful debts and inventory: The determination of the recoverability of the amount due from customers and the marketability of the inventory and the factors determining the impairment of the receivable and inventory involve significant judgment.

(iv) Classification of investments: On acquisition of an investment, the Group decides whether it should be classified as "at fair value through statement of income”, "available for sale" or “held to maturity”. The Group follows the guidance of IAS 39 on classifying its investments.

The Group classifies investments as “at fair value through statement of income” if they are acquired primarily for the purpose of short term profit making or if they are designated at fair value through statement of income at inception, provided their fair values can be reliably estimated. All other investments are classified as "available for sale".

b) Estimates and assumptions: The key assumptions concerning the future and other key sources of estimating uncertainty at the end of the reporting period 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) Long term contracts: Revenue from long term contracts is recognized in accordance with the percentage of completion method of accounting measured by reference to the percentage that actual costs incurred to date bear to total estimated costs for each contract. The revenue recognition as per the above criteria should correspond to the actual work completed. The determination of estimated costs and the application of percentage of completion method involve estimation. Further, the budgeted cost and revenue should consider the claims and variations pertaining to the contract.

(ii) Provision for doubtful debts and inventory: The extent of provision for doubtful debts and inventories involves estimation process. Provision for doubtful debts is made when there is an objective evidence that the Group will not be able to collect the debts. Bad debts are written off when identified. The carrying cost of inventories is written down to their net realizable value when the inventories are damaged or become wholly or partly obsolete or their selling prices have declined. 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 and inventory are subject to management approval.

74

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75


23

4. Investment in an unconsolidated subsidiary

During the year ended December 31, 2008, the Group invested in equity of 99% in United Kingdom General Trading and Contracting Company - W.L.L., State of Kuwait. During the year ended December 31, 2010, the Parent Company impaired the investment balance with keeping residual value at KD 1 (the subsidiary had not yet commenced business activities).

5. Right of utilization of leasehold land

2010 2009Cost:Balance at January 1 165,000 165,000Balance at December 31 165,000 165,000

Accumulated amortization: Balance at January 1 30,521 22,271Charge for the year 8,250 8,250Balance at December 31 38,771 30,521

Net book value at December 31 126,229 134,479

6. Spare parts and materials

2010 2009Spare parts and lubricants 487,234 471,280Materials at sites 16,533,170 15,442,069

17,020,404 15,913,349Provision for spare parts and slow moving items (81,891) (81,891)Stock taking differences - (81,608)

16,938,513 15,749,850

7. Gross amount due from / to customers for contract work

a) Gross amount due from customers for contract work2010 2009

Contract costs incurred to date plus recognized profits 210,667,425 267,331,375Progress billings (201,060,786) (253,037,017)

9,606,639 14,294,358

b) Gross amount due to customers for contract work2010 2009

Contract costs incurred to date plus recognized profits (914,854) -Progress billings 3,749,348 -

2,834,494 -

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24

8. Accounts receivable and other debit balances

2010 2009Ministries and Government agencies 38,065,765 30,753,381Companies and institutions 8,087,350 2,156,154Trade receivables 1,069,190 970,452Other receivables 935,973 1,053,525Total receivables (a) 48,158,278 34,933,512Provision for doubtful debts (b) (4,766,504) (1,186,685)

43,391,774 33,746,827Due from a related party ( Note 29) 1,693 178,231Contract retentions (c) 27,595,878 21,308,180Advance payments for contracts 6,740,273 5,209,002Advances for purchase of fixed assets 1,323,842 1,295,860Prepaid expenses 4,162,979 2,434,067Refundable deposits 233,949 310,748Letters of credit 2,363,249 349,636Accrued income 7,229 20,495Advance for incorporation of companies 445,860 285,597

86,266,726 65,138,643

The fair values of accounts receivable and other debit balances approximated their carrying values as at December 31, 2010.

a) Receivables:

As of December 31, 2010, receivables amounting to KD 2,172,542 (2009 - KD 2,098,174) were impaired and provided for as provision for doubtful debts. The individually impaired receivables mainly relate to unexpectedly difficult economic situations. The ageing of receivables is as follows:

2010 20091 to 3 months 37,732,016 23,079,4683 to 12 months 3,487,216 8,569,185Over 1 year 6,939,046 3,284,859

48,158,278 34,933,512

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25

b) Provision for doubtful accounts

The movement of the provision for doubtful debts is as follows:

2010 2009Balance at beginning of the year 1,186,685 825,838Provision for the year 130,603 360,847Transferred from provision for maintenance projects 3,894,132 -Utilized during the year (444,916) -Balance at end of the year 4,766,504 1,186,685

c) Contract retentions:Balance represents the retentions held on the contracts of the amounts withheld by the owners of contracts for the implementation of those contracts and are deducted by 5% to 20% of the value of work done and paid for the Group after the maintenance and guarantee period and achievement and to merit from 1 to 5 years.

d) The other classes within accounts receivable and other debit balances do not contain impaired assets. The Group does not hold any collateral as security.

9. Investments at fair value through income statement

2010 2009Investment funds 704,525 564,325Investment portfolio 1,757,220 1,309,317

2,461,745 1,873,642

The carrying amounts of the above investments are classified as follows:

2010 2009Held for trading 1,757,220 1,309,317Designated at fair value 704,525 564,325

2,461,745 1,873,642

The movement during the year is as follows:

2010 2009Balance at beginning of the year 1,873,642 1,859,818Additions 716,042 297,421Disposals (586,336) (221,003)Unrealized gain (loss) from changes in fair value (Note 23) 458,397 (62,594)Balance at end of the year 2,461,745 1,873,642

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26

10. Term deposits

Term deposits earn annual interest rates at 1.75% per annum as at December 31, 2009, these deposits have a maturity 181 days.

11. Cash and cash equivalents

2010 2009Short term deposits 2,069,635 -Cash on hand and at banks 3,260,931 2,691,611

5,330,566 2,691,611

The effective interest rate on short term deposits varies from 1.9% to 2.8 % per annum, these deposits have a maturity 90 days.

There is no material difference between the fair value and the carrying value of cash and cash equivalents as at December 31, 2010.

12. Capital

The authorized, issued and fully paid-up capital consists of 87,846,000 shares (2009 – 79,860,000 shares) of 100 fils each and all shares are in cash and in kind.

13. Treasury shares

2010 2009Number of treasury shares (shares) 131,346 810,315Percentage of issued shares (%) 0.015% 1.015%Market value (KD) 262,692 987,111Cost (KD) 91,347 619,897

14. Statutory reserve

As required by the Commercial Companies Law and the Parent Company's Articles of Association, 10% of profit for the year attributable to shareholders of the Parent Company before contribution to Kuwait Foundation for the Advancement of Sciences (KFAS), National Labour Support Tax (NLST), contribution to Zakat and Board of Directors remuneration is transferred to compulsory 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. Such annual transfer was discontinued to statutory reserve as the reserve reached 50% of capital.

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27

15. Voluntary reserve

As required by the Parent Company’s Articles of Association, 10% of profit for the year attributable to shareholders of the Parent Company before contribution to Kuwait Foundation for the Advancement of Sciences (KFAS), National Labour Support Tax (NLST), contribution to Zakat and Board of Directors remuneration is transferred to the voluntary reserve. Such annual transfers may be discontinued by a resolution at the shareholders’ ordinary general assembly based on a proposal from the Board of Directors.

Based on a decision from shareholders’ general assembly in prior years, transfer to voluntary reserve was discontinued.

16. Accounts payable and other credit balances

2010 2009Contract advances 28,929,510 19,608,397Accrued leave 7,405,724 6,841,146Accrued expenses 7,348,897 3,849,125Provision for maintenance projects (a) 4,304,017 9,482,086Contractors 8,552,968 7,617,169Suppliers 8,139,933 5,488,673Retentions payable 6,277,735 4,284,865Provision for penalty (b) 2,128,914 4,068,914Other payables 1,355,257 422,947National Labor Support Tax payable 206,041 302,775Payable to Kuwait Foundation for Advancement of Sciences 92,012 86,656Zakat share payable 66,415 81,409

Board of Directors’ remuneration payable 50,000 50,000Unearned revenue 31,048 -Deposits for others 29,613 36,812Dividends payable to shareholders 23,288 22,751

74,941,372 62,243,725

a) Provision for maintenance projects represents estimated expenses at percentage ranging from 1.5% to 3% from total executed work for the in-progress and completed projects.

b) Provision for penalty represents penalty expected on executing of the Parent Company’s projects with Government agencies.

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28

17. Long-term loans

Long-term loans are summarized as follows:

Currentportion

Non-currentportion Total

Loan from local bank guaranteed by a formal mortgage on Ardiya land and its construction, and is repayable in monthly installments for the period of 15 years until March 27, 2020 after a grace period of one year, and bears an interest rate of 3.5% per annum over the Central Bank of Kuwait discount rate. 76,860 925,476 1,002,336Loan from local bank guaranteed repayable in monthly installments for the period of 2 years until September 30, 2012, and bears an interest rate of 2.5% per annum over the Central Bank of Kuwait discount rate.

571,429 428,571 1,000,000Loans from Gulf banks repayable in monthly installments and deducted 18% of the value of payments received for projects and bears an interest rate ranging from 8% to 9.5% and maturing in the years 2011 and 2013 in return and guaranteed by partners and mortgage of the buildings, machinery and equipments of a subsidiary with Qatar Riyal 47,516,000.

1,573,487 979,819 2,553,306Balance as of December 31, 2010 2,221,776 2,333,866 4,555,642Balance as of December 31, 2009 75,204 1,005,694 1,080,898

18. Provision for end of service benefits

2010 2009Balance at beginning of the year 3,636,714 3,235,739Charge for the year 1,269,517 628,911Paid during the year (259,016) (227,936)Balance at end of the year 4,647,215 3,636,714

19. Short-term loans and credit facilities

Short term loans and credit facilities represent advance payments by the banks against construction contracts, which are to be settled by deducting 10% to 15% from the amounts to be received for the completed work. These loans carry interest rate ranging from 2% to 5.25% per annum over the Central Bank of Kuwait discount rate (2009 – from 2% to 5.25%).

Short term loans and credit facilities for the Parent Company and subsidiaries are secured by personal guarantees of partners and money transfer order for the revenue from projects to the banks.

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20. Due to banks

Due to banks represent overdrafts which carry interest rate ranging from 2% to 5.25% per annum over the Central Bank of Kuwait discount rate (2009 – from 2% to 5.25%). These balances are due upon demand.

Due to banks for the Parent Company and subsidiaries are secured by personal guarantees of partners and money transfer order for the revenue from projects to the banks.

21. Gross profit

2010 2009

Projects

Vehicles,machinery &

garage

Asphalt factories and central mixers

Eliminations of inter- divisional

transactions Total TotalOperating

revenue 127,928,094 8,752,607 6,909,141 (26,009,192) 117,580,650 110,580,366Operating

Costs (113,629,212) (7,901,825) (6,687,526) 26,009,192 (102,209,371) (96,401,170)14,298,882 850,782 221,615 - 15,371,279 14,179,196

22. General and administrative expenses

2010 2009Staff costs 2,847,538 2,159,465Rent 346,218 203,868Professional fees 206,163 68,443Travel expenses 84,410 77,493Bank charges 80,759 73,705Other 1,216,731 984,022

4,781,819 3,566,996

23. Net investment gain (loss)

2010 2009Unrealized gain (loss) from changes in fair value of the investments

at fair value through income statement (Note 9) 458,397 (62,594)Realized loss on sale of investments at fair value through statement

of income (7,846) (36,173)Dividend income 17,552 26,420

468,103 (72,347)

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24. Other income

2010 2009 Gain on sale of fixed assets 205,724 137,405Physical count differences 81,608 (81,608)Tenders income 65,787 -Interest income 58,951 116,155Legal compensation 6,460 -Foreign currency exchange (loss) gain (10,369) 30,870Miscellaneous income 1,900 14,050

410,061 216,872

25. Contribution to Kuwait Foundation for the Advancement of Sciences (KFAS)

Contribution to Kuwait Foundation for the Advancement of Sciences is calculated at 1% of the profit for the year attributable to equity holders of the Parent Company before contribution to KFAS, NLST, Zakat and Board of director’s remuneration and after deducting its share of income from shareholding subsidiaries and associates and transfer to Statuary reserve.

26. National Labor Support Tax (NLST)

National Labor Support Tax is calculated at 2.5% of the Profit for the year attributable to equity holders of the Parent Company before contribution to KFAS, NLST, Zakat and Board of director’s remuneration and after deducting its share of income from listed shareholding subsidiaries and associates, dividends from Kuwaiti listed Shareholding Companies.

27. Contribution to Zakat

Contribution to Zakat is calculated at 1% of the Profit for the year attributable to equity holders of the Parent Company before contribution to KFAS, NLST, Zakat and Board of director remuneration after deducting its share of income from shareholding subsidiaries and associates in accordance with Ministry of Finance resolution No. 58/2007 effective December 10, 2007.

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28. Earnings per share

There were no potential dilutive ordinary shares. Earnings per share is computed based on profit for the year attributable to the parent Company’s shareholders and the weighted average number of outstanding during the year as follows:

2010 2009Net profit for the year attributable to the parent company's

shareholders 8,893,965 8,194,745

Number of shares outstanding : Shares Shares Number of issued shares at beginning of the year 79,860,000 79,860,000 Add: Bonus shares 7,986,000 7,986,000 Less : Weighted average number of treasury shares (241,289) (810,315)Weighted average number of outstanding shares 87,604,711 87,035,685 Earnings per share (Fils) 101.52 94.15

According to the International Accounting Standard 33 “Earnings per share” requirements, earnings per share for the year ended December 31, 2009 was 103.67 fils / per share and had been restated due to the effect of the bonus shares for the year ended December 31, 2009 (Note 31).

29. Related party disclosures

The Group has entered into various transactions with related parties in the normal course of its business. Related parties consist of parties directly related to the shareholders and the associate. Terms and conditions of such balances and transactions are approved by the Group’s management. balances and transactions with related parties consist of:

2010 2009

Consolidated statement of financial position: Accounts receivable and other debit balances (Note 8) 1,693 178,231

2010 2009Consolidated statement of income:

Operating revenue - 105,183Operating costs - 118,837

2010 2009Key management compensation:

Salaries and other short term benefits 1,054,629 463,988 Terminal benefits 34,493 20,978

1,089,122 484,966

Related party transactions are subject to the approval of parent shareholders’ annual general assembly.

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30. Staff costs

Staff costs for the year ended December 31, 2010 amounted to KD 14,567,758 (December 31, 2009 – KD 11,412,736).

31. General Assembly

The Parent Company’s Board of director’s meeting held on March 20, 2011 approved the distribution of cash dividends of 70 fills per share and bonus shares of 10 shares for every 100 shares and remuneration for Board of Directors of KD 50,000 for the year ended December 31, 2010. This suggestion is subject to approval from shareholders’ General Assembly Meeting.

The shareholders’ general assembly held on May 17, 2010 approved the distribution of cash dividends of 65 fills per share and bonus shares of 10 shares for every 100 shares and remuneration for Board of Directors of KD 50,000 for the year ended December 31, 2009.

32. Contingent liabilities and claims

A) At the date of consolidated statement of financial position, the Group was contingently liable in respect of the following:

2010 2009Letters of credit 20,191,552 8,147,890Performance guarantees 93,174,902 47,535,958Guarantees for advance payments 29,259,864 32,642,453Guarantees for bids 18,933,615 18,597,200Guarantees for retentions 10,857,146 7,745,879Other guarantees 4,266,958 4,119,293

176,684,037 118,788,673

B) At the date of consolidated statement of financial position, certain lawsuits were in progress for and against the Parent Company. In the opinion of management, the outcome of these lawsuits will be favorable and accordingly no provisions were provided against these contingencies.

C) The Parent Company has a claim from a governmental agency for executing work amounting to KD 2,430,000 and this claim was submitted to Administrative Judiciary in the Supreme Court which was then transferred to the Experts Department. Expert report is received and the verdict is issued in the favor of the Parent Company at December 27, 2009 by amount of KD 76,989 along with legal interest of 7% from April 15, 1990. Both parties appealed and the case is still pending in the court.

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33. Geographical distribution

Segment revenue, operating cost have been allocated over the geographical location as follows (based on customers’ location/ revenue sources):

2010

State of Kuwait

Gulf Countries

Non-controllinginterests Total

Operating revenue 73,526,722 44,053,928 - 117,580,650Operating costs (62,757,224) (39,452,147) - (102,209,371)Gross profit 10,769,498 4,601,781 - 15,371,279Segment results 7,017,518 1,818,022 58,425 8,893,965Segment assets 98,814,696 36,547,997 - 135,362,693Segment liabilities 64,576,267 34,410,896 - 98,987,163

2009

State ofKuwait

GulfCountries

Non-controllinginterests Total

Operating revenue 85,712,825 24,867,541 - 110,580,366Operating costs (72,982,381) (23,418,789) - (96,401,170)Gross profit 12,730,444 1,448,752 - 14,179,196Segment results 9,173,580 (1,059,073) 80,238 8,194,745Segment assets 102,337,558 14,563,396 - 116,900,954Segment liabilities 66,824,971 18,465,145 - 85,290,116

34. Financial risk management

In the normal course of business, the Group uses primary financial instruments such as cash and cash equivalents, receivables, investments, payables and credit facilities and as a result, is exposed to the risks indicated below. The Group currently does not use derivative financial instruments to manage its exposure to these risks.

Interest rate risk: Financial instruments are subject to the risk of changes in value due to changes in the rates of interest. The effective interest rates and the periods in which interest bearing financial assets and liabilities are mentioned in the respective notes.

The following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables held constant, of the Group’s profit through the impact on floating rate borrowings.

2010Increase / (Decrease)

in interest rate Balance

Effect on consolidated

income statement Long term loans ±50 basis points 4,555,642 ±22,778Short term loans and credit facilities ±50 basis points 7,642,949 ±38,215Due to banks ±50 basis points 4,365,491 ±21,827

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2009Increase / (Decrease)

in interest rate Balance

Effect on consolidated

income statement Long term loans ±50 basis points 1,080,898 ±5,404Short term loans and credit facilities ±50 basis points 9,842,877 ±49,214Due to banks ±50 basis points 8,485,902 ±42,430

Credit risk: Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. Financial assets which potentially subject the Group to credit risk consist principally of cash at banks and term deposits and accounts receivable. The Group’s cash is placed with high credit rating local banks and receivables are presented net of allowance for doubtful debts. Credit risk with respect to receivables is limited due to the large number of customers and their dispersion across different industries.

The Group’s maximum exposure arising from default of the counter-party is limited to the carrying amount of cash at banks and receivables.

Foreign currency risk: The Group incurs foreign currency risk on transactions that are denominated in a currency other

than the Kuwaiti Dinar. The Group may reduce its exposure to fluctuations in foreign exchange rates through the use of derivative financial instruments. The Group ensures that the net exposure is kept to an acceptable level, by dealing in currencies that do not fluctuate significantly against the Kuwaiti Dinar.

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

Maturity table for financial liabilities:

20101-3

months 3-12

months 1-5

yearsOver 5 years Total

Accounts payable and other credit balances 34,352,917 18,622,682 21,965,773 - 74,941,372

Long term loans 18,990 2,202,786 1,609,242 724,624 4,555,642Short term loans and credit facilities - 7,642,949 - - 7,642,949Due to banks - 4,365,491 - - 4,365,491

34,371,907 32,833,908 23,575,015 724,624 91,505,454

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2009

1-3 months3-12

months1-5

yearsOver 5 years Total

Accounts payable and other credit balances 13,018,829 25,841,798 23,383,098 - 62,243,725

Long term loans 18,990 56,214 281,070 724,624 1,080,898Short term loans and credit facilities - 9,842,877 - - 9,842,877Due to banks - 8,485,902 - - 8,485,902

13,037,819 44,226,791 23,664,168 724,624 81,653,402

Equity price risk Equity price risk is the risk that fair values of equities decrease as the result of changes in level of

equity indices and the value of individual stocks.

The following table demonstrates the sensitivity to a reasonably possible charge in equity indices as a result of change in fair value of investments at fair value through income statement, for which the Group had exposure as at December 31, 2010

2010 2009

Market Index

Change in equity

price %

Effect on consolidatedstatement of

income

Change in equity

price %

Effect on consolidatedstatement of

income Manager portfolio report ±5% ±87,861 ±5% ±65,466Manager investment fund report ±5% ±35,226 ±5% ±28,216

Fair value of financial instruments Fair value is defined as the amount at which the instrument could be exchanged between knowledgeable willing parties in an arm's length transaction, other than in a forced or liquidation sale. Fair values are obtained from current bid prices, discounted cash flow models and other models as appropriate. At December 31, the fair values of financial instruments approximate their carrying amounts.

Effective January 1, 2009, the Group adopted the amendment to IFRS 7 for financial instruments that are measured in the statement of financial position at fair value, this requires disclosure of fair value measurements by level of the following fair value measurement hierarchy: Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices). Level 3: Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs).

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The following table presents the Group’s assets that are measured at fair value at December 31, 2010:

Assets Level 1 Level 2 Total Investments at fair value

through income statement 1,757,220 704,525 2,461,745

The fair value of financial instruments traded in active markets is based on quoted market prices at the end of reporting period. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis. The quoted market price used for financial assets held by the Group is the current bid price. These instruments are included in level 1. Instruments included in level 1 comprise primarily traded equity investments classified as trading securities or available-for-sale.

The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. These valuation techniques maximize the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.

If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.

35. Capital risk management

The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going 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 Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares, sell assets to reduce debt, repay loans or obtain additional loans.

Consistent with others in the industry, the Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital resources. Net debt is calculated as total borrowings less cash and cash equivalents. Total capital resources are calculated as total equity plus net debt.

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For the purpose of capital risk management, the total capital resources consist of the following components:

2010 2009Due to banks 4,365,491 8,485,902Long term loans 4,555,642 1,080,898Short term loans and credit facilities 7,642,949 9,842,877Less : term deposits - (2,022,490)Less : cash and cash equivalents (5,330,566) (2,691,611)Net debt 11,233,516 14,695,576Total shareholder's equity 36,375,530 31,610,838

47,609,046Total capital resources 46,306,414

36. Comparative figures

Certain of the prior year figures have been reclassified to conform to the current year presentation.

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Documents

6 Annual Report 2010 Combined Group Contracting Co. K.S.C.C. | 3 Mr. Abdul Rahman Mousa Al Ma’rouf Chairman, Managing Director & Chief Executive Officer Mr. Raad Khalaf Al Abdullah