· System), in addition to the previously awarded certificate ISO 9001: 2008 (Quality Management System) which was awarded during 2010. accomplished during 2012: 8. In addition to

1

2

3

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 Jaber Al-Mubarak Al-Hamad Al-Sabah The Prime Minister of the State of Kuwait

4

GROWTH. Look beyond the boundaries.

PERFORMANCE. Stability defined.

17.40% revenue increase to KD 176.7 Mn

14.60% gross profit increase to KD 20.8 Mn

4.1% net profit increase to KD 10.7 Mn

Order book of KD 525.3 Mn

New project signings of KD 274.5 Mn

5

GROWTH. Look beyond the boundaries.













Operating projects worth KD 627.4 Mn

6

DIVERSITY. No limits.

CGC

Construction

Express Roads

Oil Water

and Electricity

Maintenance and Services

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Contents Page Chairman’s Message Board of Directors The Group Operational Review Economic and Industry Highlights Financial Review Stock Performance Contact Details 2012 Audited Financial Statements

7

DIVERSITY. No limits.

CGC

Construction

Express Roads

Oil Water

and Electricity

Maintenance and Services

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Contents Page Chairman’s Message Board of Directors The Group Operational Review Economic and Industry Highlights Financial Review Stock Performance Contact Details 2012 Audited Financial Statements

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13

14

21

25

30

36

40

43

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Chairman’s Message

In the name of Allah, the most Gracious, the most Merciful.

Dear Shareholders,

I’m glad to welcome you to this important forum, and special thanks to you all for accepting Combined Group Contracting Company (K.S.C.C.) Annual General Assembly Meeting invitation.

I’ll be honored to highlight the company’s activities and performance during the financial year 2012 presenting the major financial and operational indicators represented in the consolidated financial statements of the company, its subsidiaries and branches.

Moving towards the company’s vision of being in the top 10 amongst the contracting companies in the Gulf region, the company had maintained a stable operational and financial performance during 2012.

In line with the company’s development, expansion and growth policies, the following has been accomplished during 2012:

1. The installation and infrastructure preparation for the ERP project has been completed, alongside with the usage of the (SAP) software in the information technology applications, and the approval of using the (UCS) technology in monitoring the central servers of the company in order to automate all of the group’s operations and find fast and quick analysis of the data to maintain the speed and efficiency of carrying out the company’s operations.

2. Set up of a new branch in Dubai, United Arab Emirates, with a published license during April 2012, in order to cover the private work of installing and maintenance of the electro mechanical equipment, alongside with the painting and pigments operations. In

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addition, new activities are being added to the branch which includes; electrical wiring, concrete works, construction and maintenance of bridges, dams and roads.

3. The commercial registration of the company’s branch is Al Khubar in Saudi Arabia have been issued during the first quarter of 2012, and the branch has been located in the eastern province due to the presence of large scale projects and the main offices of Aramco and the Royal Commission of Jbail and Yanbu’u.

4. Startup of Emulsion production plant in Kuwait which is used in the adhesion of asphalt layers.

5. The company has been classified as 3rd class category for air condition workings from the Central Tenders Committee, to be added to the previous classifications i.e. 1st class category for infrastructure workings (roads and ducts), the 1st class category for construction and civil works, and the 2nd class category for electrical works which is considered to be the highest classification from the Central Tenders Committee.

6. The company has participated as a main sponsor in different exhibitions and conferences such as; 12th International Conference for Financial Institutions, Sustainability Ethics and Social Responsibility Conference, Design and Construction of Roads and Bridges Conference and Exhibition, and Kuwait International Exhibition for Asphalt.

7. Our subsidiary in Qatar, Combined Group Trading & Contracting Co. W.L.L., has been awarded the following certificates; ISO 14001:2004 (International Environmental Quality Management System), OHSAS 18001:2007 (Occupational Health and Safety Management System), in addition to the previously awarded certificate ISO 9001: 2008 (Quality Management System) which was awarded during 2010.

8. In addition to the agreements signed with Hyundai from South Korea, Arabtec from UAE, Flow tech from India and TEKAR from Turkey, we have signed Joint Venture Agreements and Memorandum of Understanding with companies from South Korea, China, India, Belgium, Spain, Turkey and the United Arab Emirates during 2012 such as; DAELIM, Daewoo and Samsung Engineering from South Korea, Trans Gulf Company from the UAE, BESIX and COFELY BESIX from Belgium, FCC, Ferrovial Agroman and Grupo Sanjose from Spain, and China Communication Construction Company Ltd. (CCCC) from China.

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Dear Shareholders,







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Board of Director’s

Mr. Abdul Rahman Mousa Al Ma’rouf- Chairman and Managing Director

Mr. RaadKhalaf Al Abdullah- Vice Chairman

Mr. Emad Ahmad Al Houti- Board Member

Mr. Ahmad Khalid Ahmad Al Homaizi- Board Member

Mr. Sulaiman Abdul Rahman Al Ma’rouf

Board Member

Mr. Ma’rouf Abdul Rahman Al Ma’rouf

Board Member

Mr. Mousa Ahmad Al Ma’rouf

Board Member

(K. S. C.)

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Dear Shareholders,







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addition, new activities are being added to the branch which includes; electrical wiring, concrete works, construction and maintenance of bridges, dams and roads.

3. The commercial registration of the company’s branch is Al Khubar in Saudi Arabia have been issued during the first quarter of 2012, and the branch has been located in the eastern province due to the presence of large scale projects and the main offices of Aramco and the Royal Commission of Jbail and Yanbu’u.

4. Startup of Emulsion production plant in Kuwait which is used in the adhesion of asphalt layers.

5. The company has been classified as 3rd class category for air condition workings from the Central Tenders Committee, to be added to the previous classifications i.e. 1st class category for infrastructure workings (roads and ducts), the 1st class category for construction and civil works, and the 2nd class category for electrical works which is considered to be the highest classification from the Central Tenders Committee.

6. The company has participated as a main sponsor in different exhibitions and conferences such as; 12th International Conference for Financial Institutions, Sustainability Ethics and Social Responsibility Conference, Design and Construction of Roads and Bridges Conference and Exhibition, and Kuwait International Exhibition for Asphalt.

7. Our subsidiary in Qatar, Combined Group Trading & Contracting Co. W.L.L., has been awarded the following certificates; ISO 14001:2004 (International Environmental Quality Management System), OHSAS 18001:2007 (Occupational Health and Safety Management System), in addition to the previously awarded certificate ISO 9001: 2008 (Quality Management System) which was awarded during 2010.

8. In addition to the agreements signed with Hyundai from South Korea, Arabtec from UAE, Flow tech from India and TEKAR from Turkey, we have signed Joint Venture Agreements and Memorandum of Understanding with companies from South Korea, China, India, Belgium, Spain, Turkey and the United Arab Emirates during 2012 such as; DAELIM, Daewoo and Samsung Engineering from South Korea, Trans Gulf Company from the UAE, BESIX and COFELY BESIX from Belgium, FCC, Ferrovial Agroman and Grupo Sanjose from Spain, and China Communication Construction Company Ltd. (CCCC) from China.

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Dear Shareholders,







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Board Member


Board Member


Board Member

10

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Financial Performance:

Revenues for the year 2012 improved by 17.4% to KD 176,762,831 from KD 150,608,398 in the previous year.

Operational performance of the company improved by 14.6% during the year as a result of the gross profit increasing to 20,817,052 from KD 18,167,827 in the previous year.

Net profit for the year improved by 4.1% to KD 10,697,218 from KD 10,272,656 in the previous year.

Total assets of the company in the year 2012 increased by 18.9% to KD 173,157,266 from KD 145,692,612 in the previous year.

The earnings per share (EPS) for the twelve month ending December 2012 is 96.70 fils compared to the previous year EPS at 95.63 fils. Operational Performance:

The Company has delivered the project of Construction, Completion and maintenance of interchanges on main Highways(Fahaheel Expresswayway)- connecting to south of Sabahiya and Mangaf Area (IC.6) - MPW (76 A) to Ministry of Public Works, Amounting to KD 27,650,000/-Tender No. RA/ 188.

The Company has delivered the project of Construction, Completion and maintenance of Roads, storm water Drains sanitary Sewer & other services Demarcation of (2131) plots for neighborhood (D), for Sabah Al Ahmed city Housing project, to the Public Authority for Housing Welfare amounting to KD 32,925,000/- Tender No. PAHW 855 – 2009/2010.

The Company has elementary delivered the project of General maintenance of highways in Kuwait to ministry of public works amounting to KD 3,000,000/-Tender No. RM/R/241.

The Company has elementary delivered the project of work services and infrastructure camp of the General Command of the Armed Forces in United Arab Emirates (Contract No. Acts -1-272-2009)Amounting to AED 69,050,091/- equivalent to KD 5.5 million. During the financial year 2012, the company has signed 7 contracts within the State of Kuwait with a total value of KD 266.8 million, and 2 contracts in Abu Dhabi with a total value of KD 7.7 million as follows:

State of Kuwait:

1. The company has signed a KD 738,750,000/- contract with Ministry of Public Works for the study, design, construction and completion of Sheikh Jaber Al Ahmad Bridge

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in alliance with the Korean Hyundai Engineering and Construction Co. and the CGC share is 21.47 % amounting to KD 158,622,000/-Tender No. RA/140.

2. Signing a contract amounting to KD 45,797,413/- with Ministry of Public Works for construction, completion and maintenance of roads and intersections on Middle part of Jahra Road – Tender No. RA/ 212.

3. The company signed a KD 35,890,000/- contract with Ministry of Electricity and Water for procurement, construction, completion and maintenance of (4 x 1600 mm Dia) Distilled water pipelines from Al- Zour plant distillation to Al- Zour water complex No II, Tender No. MEW/144 – 2010/2011.

4. Signing a contract for the construction of (Shurabad-Shajun) Road and constructing a bridge in Kulyab city in Tajikistanin Joint Venture with Tekar Teknik Arastirma Co. (Turkey). CGC has 70 % share of the contract value. The contract value is US $94,021,915/-, which is equivalent to KD26, 326,136/-, with CGC share of KD 18,428,295/- . This project is financed through the Islamic Development Bank and the Saudi Fund for Development and the Kuwait Fund for Arab Economic Development and others. The Owner of the project is Ministry of transportation in the Republic of Tajikistan.

5. The company signed a KD 3,390,000/-contract with Ministry of Health for construction, completion for O.P.D Laboratories, X Rays and Pharmacy Building at Al- Razi Hospital Tender No. H/GST/61/2011.

6. Signing a KD 3,000,000/-contract with Ministry of Public Works for General Maintenance for High Ways in the State of Kuwait. Tender No MD/R/262.

7. Signing a KD 1,660,000contract with Ministry of Public Works for Urgent & Miscellaneous Road Maintenance in Hawalli. Tender No. MD/R/255.

Abu Dhabi- UAE:

1. Abu Dhabi branch signed a contract with the Department of Municipal Affairs in Al Ain City Municipality – Abu Dhabi for Roads and infrastructure works for Al Daher (5)Area. The contract is amounting to AED 92,251,567/-which is equivalent to KD 7,000,000/-Tender No. 18/2011.

2. Abu Dhabi branch signed a contract with the General Command of the Armed Force in Abu Dhabi for the construction works of the asphalt road length of 12 KM in Shuwaib area, and 600 m asphalt road in Huwaylat area. The contract is amounting to AED 8,915,285/- which is equivalent to KD 686,477/- (Practice No. CMW-12006-C002).

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State of Kuwait:


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State of Kuwait:


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Abu Dhabi- UAE:



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State of Kuwait:


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Dividends:

In the light of the financial and operational performance witnessed by the company during 2012, the Board of Directors of the Company proposed to distribute cash dividends at 70% of the nominal value shares, which is equivalent to 70fils to the shareholders registered in the company’s records as of the date of the General Assembly Meeting.

Future Outlook:

We seek to accomplish the main objective of the group which is increasing growth rate in revenues and profits in the mother company and through all of our subsidiaries and branches inside and outside the State of Kuwait in order to improve the return on the shareholders equity and maintain our position as one of the top construction companies in Kuwait and the region.

Finally, and on behalf of the board of directors, 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 2012 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 and our people.

May peace and God’s mercy and blessings be upon us and help us in our steps to elevate the State of Kuwait.

Mr. Abdul Rahman Mousa Al Ma’rouf

Chairman and Managing Director

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Board Member


Board Member


Board Member

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Abu Dhabi- UAE:



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Dividends:

In the light of the financial and operational performance witnessed by the company during 2012, the Board of Directors of the Company proposed to distribute cash dividends at 70% of the nominal value shares, which is equivalent to 70fils to the shareholders registered in the company’s records as of the date of the General Assembly Meeting.

Future Outlook:

We seek to accomplish the main objective of the group which is increasing growth rate in revenues and profits in the mother company and through all of our subsidiaries and branches inside and outside the State of Kuwait in order to improve the return on the shareholders equity and maintain our position as one of the top construction companies in Kuwait and the region.

Finally, and on behalf of the board of directors, 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 2012 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 and our people.

May peace and God’s mercy and blessings be upon us and help us in our steps to elevate the State of Kuwait.

Mr. Abdul Rahman Mousa Al Ma’rouf

Chairman and Managing Director

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Board Member


Board Member


Board Member

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Abu Dhabi- UAE:



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مجلس اإلدارة

رئيس مجلس اإلدارة والعضو المنتدب –السيد/عبد الرحمن موسى المعروف

نائب رئيس مجلس اإلدارة –السيد / رعد خلف العبد هللا

عضو مجلس اإلدارة –السيد / عماد أحمد الحوطي

عضو مجلس اإلدارة –السيد/أحمد خالد أحمد الحميضي

السيد / سليمان عبد الرحمن المعروف

عضو مجلس اإلدارة

السيد / معروف عبد الرحمن المعروف


السيد / موسى أحمد المعروف


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Board Member


Board Member


Board Member

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Board Member


Board Member


Board Member

14

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ANNUAL REPORT 2012

The Group Structure

“As of 2012, our group had a total of 8 subsidiaries, 4 of which are located in the State of Kuwait and 4 are located outside of the State of Kuwait, and 5 branches all located outside the State of Kuwait”

Combined Group Contracting- K.S.C.

(The Mother Company)

Subsidiaries

Inside Kuwait Outside Kuwait

Combined International Real Estate Co. K.S.C.C

United Kingdom General Trading &

Contracting Co. W.L.L.

Combined Group Rocks Co. K.S.C.C

Al Marouf& Al Barjas Combined for

General Trading & Contracting Co.

W.L.L.

Combined Group Trading &

Contracting Co. W.L.L. (Qatar)

Combined Group Factories Co. W.L.L.

(Qatar)

Combined Group Contracting Co. W.L.L. (Oman)

Syrian Combined Group Contracting Co. W.L.L. (Syria)

Combined Group Contracting Co. (Abu

Dhabi- UAE)

Combined Group Contracting Co. (Bagdad- Iraq)

Combined Group Contracting Co. (Al

Khobar- KSA)

Combined Group Contracting Co. (Doha- Qatar)

Combined Group Contracting Co.

(Dubai-UAE)

Branches

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ANNUAL REPORT 2012

The Group

Since our inception in 1965, we had a clear vision of being one of the top ten contracting companies in the Gulf Region. With the hard work of our team, the group’s vision has been accomplished and we continue to move forward with the support of dedication, experience and knowledge.

Starting with 1 office and a paid up capital of KD 7,500 in 1965, our group has developed into a major player in the construction industry in the Gulf with 8 subsidiaries located inside and outside the State of Kuwait, 5 branches located outside the State of Kuwait, and a paid up capital of 10,629,366 as of December 31, 2012.

As of 2012, we had 9 business divisions operating in the mother company; Buildings, Closed Circuit Television System (CCTV), Electromechanical, Roads and Infrastructure, Service Center, Micro-tunneling, Oil Sector, EPC Oil & Gas and Supporting Services Oil and Gas.

In accordance with our growth and expansion strategy, we signed several joint venture agreements with various international companies spanning South Korea, India, China, Belgium, Spain and Turkey; in addition, we participated in the 12th International Conference for Financial Institutions, Design and Construction of Roads and Bridges Conference and Exhibition, and more.

Continuing our sound and stable financial performance, the year 2012 was no different.

Our revenues increased by 17.40% from the year 2011 reaching KD 176,762,831, similarly, the gross profit of the company increased by 14.60% from 2011 reaching KD 20,817,052.

At CGC, we always aim at improving the group’s image amongst our clients, our employees, and the environment we operate in.Hence we have been trusted to carry out highly technical projects such as the Fahaheel Expressway roads project for the Ministry of Public Works and the Sabah Al Ahmad Housing Project for the Public Authority of Housing Welfare.

15

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ANNUAL REPORT 2012

The Group Structure

“As of 2012, our group had a total of 8 subsidiaries, 4 of which are located in the State of Kuwait and 4 are located outside of the State of Kuwait, and 5 branches all located outside the State of Kuwait”

Combined Group Contracting- K.S.C.

(The Mother Company)

Subsidiaries

Inside Kuwait Outside Kuwait

Combined International Real Estate Co. K.S.C.C

United Kingdom General Trading &

Contracting Co. W.L.L.

Combined Group Rocks Co. K.S.C.C

Al Marouf& Al Barjas Combined for

General Trading & Contracting Co.

W.L.L.

Combined Group Trading &

Contracting Co. W.L.L. (Qatar)

Combined Group Factories Co. W.L.L.

(Qatar)

Combined Group Contracting Co. W.L.L. (Oman)

Syrian Combined Group Contracting Co. W.L.L. (Syria)

Combined Group Contracting Co. (Abu

Dhabi- UAE)

Combined Group Contracting Co. (Bagdad- Iraq)

Combined Group Contracting Co. (Al

Khobar- KSA)

Combined Group Contracting Co. (Doha- Qatar)

Combined Group Contracting Co.

(Dubai-UAE)

Branches

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ANNUAL REPORT 2012

The Group

Since our inception in 1965, we had a clear vision of being one of the top ten contracting companies in the Gulf Region. With the hard work of our team, the group’s vision has been accomplished and we continue to move forward with the support of dedication, experience and knowledge.

Starting with 1 office and a paid up capital of KD 7,500 in 1965, our group has developed into a major player in the construction industry in the Gulf with 8 subsidiaries located inside and outside the State of Kuwait, 5 branches located outside the State of Kuwait, and a paid up capital of 10,629,366 as of December 31, 2012.

As of 2012, we had 9 business divisions operating in the mother company; Buildings, Closed Circuit Television System (CCTV), Electromechanical, Roads and Infrastructure, Service Center, Micro-tunneling, Oil Sector, EPC Oil & Gas and Supporting Services Oil and Gas.

In accordance with our growth and expansion strategy, we signed several joint venture agreements with various international companies spanning South Korea, India, China, Belgium, Spain and Turkey; in addition, we participated in the 12th International Conference for Financial Institutions, Design and Construction of Roads and Bridges Conference and Exhibition, and more.

Continuing our sound and stable financial performance, the year 2012 was no different.

Our revenues increased by 17.40% from the year 2011 reaching KD 176,762,831, similarly, the gross profit of the company increased by 14.60% from 2011 reaching KD 20,817,052.

At CGC, we always aim at improving the group’s image amongst our clients, our employees, and the environment we operate in.Hence we have been trusted to carry out highly technical projects such as the Fahaheel Expressway roads project for the Ministry of Public Works and the Sabah Al Ahmad Housing Project for the Public Authority of Housing Welfare.

16

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ANNUAL REPORT 2012

The Group’s Shareholders

49% of our group’s shares are owned by Mr. Abdul Rahman Al Marouf and Mr. Ahmad Mousa Al Marouf. Mr. Abdul Rahman Al Marouf is a board member as well asthe Chairman& Managing Directorof the group.

10.30% of our group’s shares are owned by Mr. SulaimanKhalid Al Hamad who represents IFA (International Financial Advisors), which is a Kuwaiti Closed Shareholding Company incorporated by the Kuwaiti government on January 31, 1974.IFA’s main operations are related to investments.

5.50% of our group’s shares are owned by KAMCO which is a premier investment company based in the State of Kuwait with its operations starting in 1998.

The balance 35.20% of our group’s shares are owned by the public.

“As of December 31, 2012, our group had a paid up capital of KD 10,629,366 divided up into 106,293,660 shares of 100fils per share”

24.50%

24.50%

10.30% 5.50%

35.20% Abdul Rahman Al Marouf

Ahmad Mousa Al Marouf

Sulaiman Khalid Al Hamad- IFA

KAMCO

Others

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ANNUAL REPORT 2012

Quality and Safety Certificates

“At CGC, we always seek to provide a top quality level service to our clients, and we assure this activity by being certified by International and National credentials”

On January 13th 2004, we have obtained the ISO certification 9001: 2000 which has been updated on November 2009 to ISO 9001: 2008.

This certificate is valid till January 10th 2016.

In May 2009, the company has obtained the OHSAS 18001: 2007 certificate.

This certificate represents Occupational Health and Safety Management System (OHSAS).

The certificate is valid till May 14th 2015.

In May 2009, the company has obtained the ISO 14001: 2004.

This certificate represents Environmental Management Systems.


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ANNUAL REPORT 2012







24.50%

24.50%

10.30% 5.50%




KAMCO

Others

17

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ANNUAL REPORT 2012







24.50%

24.50%

10.30% 5.50%




KAMCO

Others

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ANNUAL REPORT 2012

Quality and Safety Certificates

“At CGC, we always seek to provide a top quality level service to our clients, and we assure this activity by being certified by International and National credentials”

On January 13th 2004, we have obtained the ISO certification 9001: 2000 which has been updated on November 2009 to ISO 9001: 2008.

This certificate is valid till January 10th 2016.

In May 2009, the company has obtained the OHSAS 18001: 2007 certificate.

This certificate represents Occupational Health and Safety Management System (OHSAS).


In May 2009, the company has obtained the ISO 14001: 2004.

This certificate represents Environmental Management Systems.


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ANNUAL REPORT 2012







24.50%

24.50%

10.30% 5.50%




KAMCO

Others

18

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ANNUAL REPORT 2012

Classifications

“In addition to our National and International certificates, we are classified by major companies and committees in Kuwait”

Central Tenders Committee

1. Category 1 for infrastructure works (Roads and Sewers), 2. Category 1 for civil construction works, 3. Category 2 for electrical works, 4. Category 3 for air conditioning works.

Kuwait Oil Company

1. Category 02A, 02B and 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 and 04C for mechanical engineering & plant installation

And maintenance for process plant piping, 4. Category 08 for plant maintenance and production facilities and 5. Category 15S for small engineering purchasing and construction contracts (EPS).

Kuwait National Petroleum Company

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 for plant installation 5. Category CEC 24 for petrol stations.

Al Khafji Joint Operations

1. CC-2 for major civil construction works, 2. CC- 4 for major asphalting and roads works, and as 3. MTS for skilled manpower supply services.

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ANNUAL REPORT 2012

Joint Venture and Memorandum of Understanding Agreements

“During financial year 2012, we have entered into 10 new JV and MOU agreements. Agreements were signed with different companies from South Korea, China, India, Belgium, Spain, Turkey and the UAE”

South Korea

Spain

Belgium

Seeking our mission,“To ensure that our customers receive cost effective services of the highest quality standards by preparing the required technical and economic plans, employing the latest innovative technologies and management techniques. To invest in and maintain a strategic partnership with our customers that will form the cornerstone of the company’s future” we have been involved in more joint venture and memorandum of understanding agreements with international high quality, construction related companies

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ANNUAL REPORT 2012

Joint Venture and Memorandum of Understanding Agreements

“During financial year 2012, we have entered into 10 new JV and MOU agreements. Agreements were signed with different companies from South Korea, China, India, Belgium, Spain, Turkey and the UAE”

South Korea

Spain

Belgium

Seeking our mission,“To ensure that our customers receive cost effective services of the highest quality standards by preparing the required technical and economic plans, employing the latest innovative technologies and management techniques. To invest in and maintain a strategic partnership with our customers that will form the cornerstone of the company’s future” we have been involved in more joint venture and memorandum of understanding agreements with international high quality, construction related companies

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ANNUAL REPORT 2012

United Arab Emirates

India

Turkey

China

When looking for a partnership agreement, we always approach the top players in the industry. In addition, we try to diverse across new regions to increase our global presence.

During the financial year 2012 we built relationships in new markets such as the European Union, through agreements with companies in Spain and Belgium.

Currently we have agreements with companies in Asia, Europe and the Middle East.

In the upcoming future, the management of CGC will look for more opportunities in different regions, and it will keep on moving towards reaching its expansion and growth plansplans.

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ANNUAL REPORT 2012

Operational Review

“Expertise across 9 different business divisions”

“We will always seek expansion, growth and improvement”

Buildings Construction of offices, apartment blocks, houses, local mosques, shopping malls, boundary walls and structures.

Executing cleaning works for storm water and sanitary networks in addition to taking video pictures of the existing networks by using CCTV based sewer monitoring systems.

Closed Circuit Television System (CCTV)

Executing electrical works such as power supply, street lighting, underground cabling, renewable energy resources, cathode protection, earthing& lighting as well as mechanical works such as HVAC, firefighting and plumbing, sewage and water supply.

Electromechanical

Constructing bridges, roads maintenance and repairs, paving works, resurfacing and milling & asphalt works, sanitary sewage networks and maintenance of water & gas networks, street lighting, traffic control system, warning signs, guide signs and road marking, chain link fencing and overhead sign gantries.

Roads and Infrastructure

Operating 2 asphalt plants, 3 ready mix concrete plants, an aggregate division, a garage and vehicles and equipment.

Service Center

Executing infrastructure sanitary and storm water networks for line depths and allowing them to cro

ss under minor and major roads.

Constructing bridges, roads maintenance and repairs, paving works, resurfacing and milling & asphalt works, sanitary sewage networks and maintenance of water & gas networks, street lighting, traffic control system, warning signs, guide signs and road marking, chain link fencing and over head sign gantries.

Micro-tunneling

Handling installation, testing and commissioning of pipelines, isolation cold cutting and removal of existing crude oil line, all associated civil works such as road crossings, valve pits, fencing, asphalted roadway paving and electrical, instrumentation and cathode protection.

Mechanical Works-

Oil Sector

An integrated engineering design system to develop and execute energy related projects, such as oil and gas.



EPC Oil & Gas

Engineering techniques and methods to help in planning and completing a project. Services provided include scaffolding solutions, drawings, trouble shooting, onsite dismantling and installation.

Supporting Services Oil & Gas

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ANNUAL REPORT 2012

United Arab Emirates

India

Turkey

China

When looking for a partnership agreement, we always approach the top players in the industry. In addition, we try to diverse across new regions to increase our global presence.

During the financial year 2012 we built relationships in new markets such as the European Union, through agreements with companies in Spain and Belgium.

Currently we have agreements with companies in Asia, Europe and the Middle East.

In the upcoming future, the management of CGC will look for more opportunities in different regions, and it will keep on moving towards reaching its expansion and growth plansplans.

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ANNUAL REPORT 2012

Operational Review

“Expertise across 9 different business divisions”

“We will always seek expansion, growth and improvement”

Buildings Construction of offices, apartment blocks, houses, local mosques, shopping malls, boundary walls and structures.

Executing cleaning works for storm water and sanitary networks in addition to taking video pictures of the existing networks by using CCTV based sewer monitoring systems.

Closed Circuit Television System (CCTV)

Executing electrical works such as power supply, street lighting, underground cabling, renewable energy resources, cathode protection, earthing& lighting as well as mechanical works such as HVAC, firefighting and plumbing, sewage and water supply.

Electromechanical

Constructing bridges, roads maintenance and repairs, paving works, resurfacing and milling & asphalt works, sanitary sewage networks and maintenance of water & gas networks, street lighting, traffic control system, warning signs, guide signs and road marking, chain link fencing and overhead sign gantries.

Roads and Infrastructure

Operating 2 asphalt plants, 3 ready mix concrete plants, an aggregate division, a garage and vehicles and equipment.

Service Center

Executing infrastructure sanitary and storm water networks for line depths and allowing them to cro



Micro-tunneling

Handling installation, testing and commissioning of pipelines, isolation cold cutting and removal of existing crude oil line, all associated civil works such as road crossings, valve pits, fencing, asphalted roadway paving and electrical, instrumentation and cathode protection.

Mechanical Works-

Oil Sector

An integrated engineering design system to develop and execute energy related projects, such as oil and gas.



EPC Oil & Gas

Engineering techniques and methods to help in planning and completing a project. Services provided include scaffolding solutions, drawings, trouble shooting, onsite dismantling and installation.

Supporting Services Oil & Gas

22

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ANNUAL REPORT 2012

2012 Projects

“During financial year 2012 we have been operating projects worth

KD 627,361,767”

The company is currently carrying out 28 different projects across segments such as construction, services &maintenance, water & electricity, highways, oil, infrastructure and roads.

Sector On going Projects Value New Projects Signings Total Value

Construction 121,396,368 158,622,000 280,018,368

Maintanance & Service 65,022,000 3,390,000 68,412,000

Water & Electricity 70,418,653 35,889,902 106,308,555

Highways 67,020,000 71,912,184 138,932,184

Oil 126,926,049 - 126,926,049

Infrastructure 147,379,702 - 147,379,702

Roads 29,198,995 - 29,198,995

Total 627,361,767 269,814,086 897,175,853

0

50,000,000

100,000,000

150,000,000

200,000,000

250,000,000

300,000,000Projects Value

New signings

On going Projects

17 | P a g e

ANNUAL REPORT 2012

2012 Revenue Analysis

During the financial year2012, the actual revenue generated from the projects amounted at KD 157,490,312 a 42.35% Y-O-Y increase from the 2011 collected revenue of KD 110,636,032, and other revenue for the financial year 2012 amounted at KD 19,272,519. Revenues from projects represented 89% of total revenue of KD 176,762,831for the financial year 2012.

The following chart shows the actual revenue billed from projects for the financial year 2012:

-

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

34,066,027

10,740,005

27,754,458 29,374,977

22,028,365

31,052,750

2,473,731 Construction

Services & Maintenance

Water & Electricity

Oil

Highways

Infrastructure

Roads

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ANNUAL REPORT 2012

2012 Order Book

The previous chart indicates the order book for the running projects in Kuwait as at the end of financial year 2011.

For Oil projects, 80% of the contracts signed were booked as revenue amounting to KD 101,375,915 and 20% of it remains as an order book with a value of KD 25,550,134.

55% of the Water & Electricity projects were booked as revenue amounting to KD 58,695,918, while the order book amounted to KD 47,612,637which comprised 45% of the total contract value.

Similar to the Oil contracts, the construction contracts have had 26% of the contract value billed amounting to KD 72,654,465 leaving an order book that comprised 74% of the total value amounting to KD 207,363,903.

Considered the division with the lowest order book, as 87% of the Services & Maintenance contracts have been billed for KD 59,244,327, leaving only 13% of the contract value unbilled amounting to KD 9,167,673.

The Highways contracts have an order book of 66% amounting to KD 92,310,709, with collected revenue of 34% amounting to KD 46,621,475.

For infrastructure and roads projects, they had 74% and 83% of total contacts value billed respectively amounting at KD 108,383,867 and KD 24,188,021.

0%

20%

40%

60%

80%

100%

80% 55%

26%

87%

34%

74% 83%

20% 45%

74%

13%

66%

26% 17%

Order Book

Booked Revenue

17 | P a g e

ANNUAL REPORT 2012




-

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

34,066,027

10,740,005

27,754,458 29,374,977

22,028,365

31,052,750



Water & Electricity

Oil

Highways

Infrastructure

Roads

23

16 | P a g e

ANNUAL REPORT 2012

2012 Projects

“During financial year 2012 we have been operating projects worth

KD 627,361,767”

The company is currently carrying out 28 different projects across segments such as construction, services &maintenance, water & electricity, highways, oil, infrastructure and roads.

Sector On going Projects Value New Projects Signings Total Value

Construction 121,396,368 158,622,000 280,018,368

Maintanance & Service 65,022,000 3,390,000 68,412,000

Water & Electricity 70,418,653 35,889,902 106,308,555

Highways 67,020,000 71,912,184 138,932,184

Oil 126,926,049 - 126,926,049

Infrastructure 147,379,702 - 147,379,702

Roads 29,198,995 - 29,198,995

Total 627,361,767 269,814,086 897,175,853

0

50,000,000

100,000,000

150,000,000

200,000,000

250,000,000

300,000,000Projects Value

New signings

On going Projects

17 | P a g e

ANNUAL REPORT 2012




-

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

34,066,027

10,740,005

27,754,458 29,374,977

22,028,365

31,052,750



Water & Electricity

Oil

Highways

Infrastructure

Roads

18 | P a g e

ANNUAL REPORT 2012

2012 Order Book








0%

20%

40%

60%

80%

100%

80% 55%

26%

87%

34%

74% 83%

20% 45%

74%

13%

66%

26% 17%

Order Book

Booked Revenue

17 | P a g e

ANNUAL REPORT 2012




-

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

34,066,027

10,740,005

27,754,458 29,374,977

22,028,365

31,052,750



Water & Electricity

Oil

Highways

Infrastructure

Roads

24

19 | P a g e

ANNUAL REPORT 2012

Economic and Industry Highlights

Due to theeconomic, industrial and cultural changes taking place in Kuwait, we will outline important variations in the Kuwaiti economy and industry related to our activities.

1. Population and Real Estate Activity in Kuwait (2008-2012)

Since 2008, the population of the State of Kuwait increased at aCAGR (Compound Annual Growth Rate) of 2.52% increasing from 3.44 million (2008) to 3.80 million (2012). Similarly, the monthly average real estate sales increased at a CAGR of 13.84% increasing from KD 156 million (2008) to KD 262 million (2012). Throughout the 5 years period (2008-2012), the average monthly sales and the rate of population were proportionally related except for 2009 when the average monthly sales fell down by 30.13% from 2008, and this was due to the global financial crisis which took place during the last quarter of 2008 and it affected 2009 directly.

2. Banking Credit Facilities and Development Projects

Despite the global financial crisis which began in late 2008, the local banks in Kuwait continued to support economic, cultural and social developments by maintaining the credit facilities provided by them for different sectors of the economy. During financial year 2007/2008 the total credit facilities issued by the banks amounted at KD 21,359.5 million increasing at a CAGR of 5.03% to KD 25,995.3 million in financial year 2011/2012.

156

109

166

225

262

3.2

3.3

3.4

3.5

3.6

3.7

3.8

3.9

-

50

100

150

200

250

300

2008 2009 2010 2011 2012

Monthly Average Real EstateSales (KD mn)

Population

18 | P a g e

ANNUAL REPORT 2012

2012 Order Book








0%

20%

40%

60%

80%

100%

80% 55%

26%

87%

34%

74% 83%

20% 45%

74%

13%

66%

26% 17%

Order Book

Booked Revenue

25

19 | P a g e

ANNUAL REPORT 2012

Economic and Industry Highlights

Due to theeconomic, industrial and cultural changes taking place in Kuwait, we will outline important variations in the Kuwaiti economy and industry related to our activities.

1. Population and Real Estate Activity in Kuwait (2008-2012)

Since 2008, the population of the State of Kuwait increased at aCAGR (Compound Annual Growth Rate) of 2.52% increasing from 3.44 million (2008) to 3.80 million (2012). Similarly, the monthly average real estate sales increased at a CAGR of 13.84% increasing from KD 156 million (2008) to KD 262 million (2012). Throughout the 5 years period (2008-2012), the average monthly sales and the rate of population were proportionally related except for 2009 when the average monthly sales fell down by 30.13% from 2008, and this was due to the global financial crisis which took place during the last quarter of 2008 and it affected 2009 directly.

2. Banking Credit Facilities and Development Projects

Despite the global financial crisis which began in late 2008, the local banks in Kuwait continued to support economic, cultural and social developments by maintaining the credit facilities provided by them for different sectors of the economy. During financial year 2007/2008 the total credit facilities issued by the banks amounted at KD 21,359.5 million increasing at a CAGR of 5.03% to KD 25,995.3 million in financial year 2011/2012.

156

109

166

225

262

3.2

3.3

3.4

3.5

3.6

3.7

3.8

3.9

-

50

100

150

200

250

300

2008 2009 2010 2011 2012

Monthly Average Real EstateSales (KD mn)

Population

18 | P a g e

ANNUAL REPORT 2012

2012 Order Book








0%

20%

40%

60%

80%

100%

80% 55%

26%

87%

34%

74% 83%

20% 45%

74%

13%

66%

26% 17%

Order Book

Booked Revenue

26

20 | P a g e

ANNUAL REPORT 2012

Total development expenditure increased from KD 938 million in 2007/2008 to KD 2,410 million in 2011/2012, increasing at a CAGR of 26.59%.

Spending on water and electricity projects witnessed the largest growth throughout the 5 year period increasing at a CAGR of 27.15% from KD 467mn in 2007/2008 to KD 1,220mn in 2011/2012. In addition, spending on communication witnessed the lowest growth and the lowest spending with a CAGR of 0.85% for the 5 years period, with only KD 30mn spent on communication projects during financial year 2011/2012.

-

500

1,000

1,500

2,000

2,500

3,000

-

5,000.0

10,000.0

15,000.0

20,000.0

25,000.0

30,000.0

2007/2008 2008/2009 2009/2010 2010/2011 2011/2012

Credit facilities (Mn)

Total Development Expenditure(Mn)

-

200

400

600

800

1,000

1,200

1,400

2007/08 2008/09 2009/10 2010/11 2011/12

KD M

n

Development Expenditure Spending

Public Works

Electricity and Water

Communications

Other

21 | P a g e

ANNUAL REPORT 2012

3. Major Monetary Developments in 2012

Consumer Price Index The average inflation for the financial year 2012 was recorded at 2.9% falling

from an average of 4.8% inflation rate during financial year 2011. The major components that caused inflationary pressure during 2012 were clothing and footwear, and housing services. Oil Market Oil is considered to be the most important natural resource for the State of Kuwait as the country’s budget and financial stability depends heavily on it as shown below:

For the period between financial year 2008- H1 2012, oil revenues represented an average of 93% of total revenues, whilst 7% of the revenues were generated from other activities and sources.

-

5,000

10,000

15,000

20,000

25,000

30,000

2008 2009 2010 2011 H1 2012

Oil Revenues (KD Mn)

Non Oil Revenues (KD Mn)

0246

Consumer Price Index (m/m change %)

CPI

93%

7%

Oil revenues

Non oil revenues

27

20 | P a g e

ANNUAL REPORT 2012

Total development expenditure increased from KD 938 million in 2007/2008 to KD 2,410 million in 2011/2012, increasing at a CAGR of 26.59%.

Spending on water and electricity projects witnessed the largest growth throughout the 5 year period increasing at a CAGR of 27.15% from KD 467mn in 2007/2008 to KD 1,220mn in 2011/2012. In addition, spending on communication witnessed the lowest growth and the lowest spending with a CAGR of 0.85% for the 5 years period, with only KD 30mn spent on communication projects during financial year 2011/2012.

-

500

1,000

1,500

2,000

2,500

3,000

-

5,000.0

10,000.0

15,000.0

20,000.0

25,000.0

30,000.0

2007/2008 2008/2009 2009/2010 2010/2011 2011/2012

Credit facilities (Mn)

Total Development Expenditure(Mn)

-

200

400

600

800

1,000

1,200

1,400

2007/08 2008/09 2009/10 2010/11 2011/12

KD M

n

Development Expenditure Spending

Public Works

Electricity and Water

Communications

Other

21 | P a g e

ANNUAL REPORT 2012

3. Major Monetary Developments in 2012

Consumer Price Index The average inflation for the financial year 2012 was recorded at 2.9% falling

from an average of 4.8% inflation rate during financial year 2011. The major components that caused inflationary pressure during 2012 were clothing and footwear, and housing services. Oil Market Oil is considered to be the most important natural resource for the State of Kuwait as the country’s budget and financial stability depends heavily on it as shown below:

For the period between financial year 2008- H1 2012, oil revenues represented an average of 93% of total revenues, whilst 7% of the revenues were generated from other activities and sources.

-

5,000

10,000

15,000

20,000

25,000

30,000

2008 2009 2010 2011 H1 2012

Oil Revenues (KD Mn)

Non Oil Revenues (KD Mn)

0246

Consumer Price Index (m/m change %)

CPI

93%

7%

Oil revenues

Non oil revenues

28

22 | P a g e

ANNUAL REPORT 2012

Economic Freedom Index Ranking: Mena: 7 World: 71

Credit Ratings: S&P: AA-/Stable/A-1+ Moody’s: Aa2/ Negative Fitch: AA/Stable/F1+ EIU: A/Stable

Human Development Index: 0.77/1

Human Development Index Rank: 47/169

Ease of Doing Business: 67/183

Global Competitiveness: 34/124

High oil prices indicate a strong and stable Kuwaiti economy, and it enables an increasein government spending and improves monetary developments.

After the huge drop in oil prices during the financial crisis in late 2008, 2012 was a good year for oil prices to bounce back up and reenter the $120 per barrel levels. The year started off with a huge jump for oil due to unstable political situation in Iran and Libya. During the first quarter of the year, the Kuwaiti export crude price reached its peak at $124 level, retracing back to a low of $88 on June 22nd, and then rebounding back up to the $108 level during October- December. Other Economic Indicators

020406080

100120140

Jan Feb MidMar

EndMar

April MidMay

EndMay

June July MidAug

MidSep

MidOct

Nov Dec

Kuwait Export Crude (PB) $


23 | P a g e

ANNUAL REPORT 2012

4. Major Construction Developments in 2012

The value of the construction industry was valued at USD 2.4bn during financial

year 2011, It is expected that the construction industry will comprise an average of 1.8%-2%

of GDP (Gross Domestic Product) over the next 3 years, USD 168bn is the total estimated value for planned projects in Kuwait over the

next 3 years, The industry value is forecasted to grow steadily in the upcoming years reaching

USD 3.2bn, The Kuwaiti government plans to invest USD 25bn in power infrastructure

(electricity and water projects), Due to the financial crisis, the construction industry in Kuwait only grew at 1%

growth rate for the past five years, and due to the slight recovery from the crisis and in addition to economic changes in the country, forecasts indicate that the industry will grow at a CAGR of 7.5% till 2016,

Other key projects on the anvil include $108 Bn infrastructure investments, $ 700 Mn Kuwait International Airport redevelopment and $ 1.8 Bn of planned housing projects

The estimated project market breakdown is indicated below:

31%

31%

16%

7% 7% 4%

4% Rail

Construction

Roads and Bridges

Power plants

Oil & gad

Airports

Ports

23 | P a g e

ANNUAL REPORT 2012











31%

31%

16%

7% 7% 4%

4% Rail

Construction

Roads and Bridges

Power plants

Oil & gad

Airports

Ports

29

22 | P a g e

ANNUAL REPORT 2012

Economic Freedom Index Ranking: Mena: 7 World: 71

Credit Ratings: S&P: AA-/Stable/A-1+ Moody’s: Aa2/ Negative Fitch: AA/Stable/F1+ EIU: A/Stable

Human Development Index: 0.77/1

Human Development Index Rank: 47/169

Ease of Doing Business: 67/183

Global Competitiveness: 34/124

High oil prices indicate a strong and stable Kuwaiti economy, and it enables an increasein government spending and improves monetary developments.

After the huge drop in oil prices during the financial crisis in late 2008, 2012 was a good year for oil prices to bounce back up and reenter the $120 per barrel levels. The year started off with a huge jump for oil due to unstable political situation in Iran and Libya. During the first quarter of the year, the Kuwaiti export crude price reached its peak at $124 level, retracing back to a low of $88 on June 22nd, and then rebounding back up to the $108 level during October- December. Other Economic Indicators

020406080

100120140

Jan Feb MidMar

EndMar

April MidMay

EndMay

June July MidAug

MidSep

MidOct

Nov Dec



23 | P a g e

ANNUAL REPORT 2012











31%

31%

16%

7% 7% 4%

4% Rail

Construction

Roads and Bridges

Power plants

Oil & gad

Airports

Ports

23 | P a g e

ANNUAL REPORT 2012











31%

31%

16%

7% 7% 4%

4% Rail

Construction

Roads and Bridges

Power plants

Oil & gad

Airports

Ports

30

24 | P a g e

ANNUAL REPORT 2012

Financial Review

“As of financial year 2012, our total assets increased at a CAGR of 8.34% from financial year 2008, and our fixed assets increased by 3.87% for the same period”

CGC total assets reached a value of KD 173,157,266 as of December 31, 2012, an 18.85% Year on Year (Y-O-Y) increase from financial year2011,similarly, the company’s fixed assets witnessed a 3.22% Y-O-Y increase from financial year 2011 increasing to KD 17,452,069.

Due from customer from contract work make the predominant part of the overall asset increase with a total increase of KD 20.5 million followed by cash and cash equivalents that increased by KD 5.7 million. This is the positive impact of major projects that have gone live towards the end of the year.

0

20,000,000

40,000,000

60,000,000

80,000,000

100,000,000

120,000,000

140,000,000

160,000,000

180,000,000

2008 2009 2010 2011 2012

Total Assets

25 | P a g e

ANNUAL REPORT 2012

“We have increased our capital during the financial year 2012 by KD 966,30 reaching KD 10,629,366. Further our earnings per share increased to 96.70fils as at December 31, 2012”

As of December 31, 2012, total liabilities amounted at KD 128,669,072 representing 74.31% of total assets, whilst total equity amounted at KD 44,488,194 representing 25.69% of total assets.

85.00

90.00

95.00

100.00

105.00

110.00

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

2008 2009 2010 2011 2012

Capital

EPS

0

20,000,000

40,000,000

60,000,000

80,000,000

100,000,000

120,000,000

140,000,000

2008 2009 2010 2011 2012

97,980,361 85,290,116

98,987,163 105,095,120

128,669,072

27,686,729 31,610,838 36,375,530 40,597,492 44,488,194

Total Liabilities

Total Equity

24 | P a g e

ANNUAL REPORT 2012

Financial Review




0

20,000,000

40,000,000

60,000,000

80,000,000

100,000,000

120,000,000

140,000,000

160,000,000

180,000,000

2008 2009 2010 2011 2012

Total Assets

31

24 | P a g e

ANNUAL REPORT 2012

Financial Review




0

20,000,000

40,000,000

60,000,000

80,000,000

100,000,000

120,000,000

140,000,000

160,000,000

180,000,000

2008 2009 2010 2011 2012

Total Assets

25 | P a g e

ANNUAL REPORT 2012

“We have increased our capital during the financial year 2012 by KD 966,30 reaching KD 10,629,366. Further our earnings per share increased to 96.70fils as at December 31, 2012”

As of December 31, 2012, total liabilities amounted at KD 128,669,072 representing 74.31% of total assets, whilst total equity amounted at KD 44,488,194 representing 25.69% of total assets.

85.00

90.00

95.00

100.00

105.00

110.00

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

2008 2009 2010 2011 2012

Capital

EPS

0

20,000,000

40,000,000

60,000,000

80,000,000

100,000,000

120,000,000

140,000,000

2008 2009 2010 2011 2012

97,980,361 85,290,116

98,987,163 105,095,120

128,669,072

27,686,729 31,610,838 36,375,530 40,597,492 44,488,194

Total Liabilities

Total Equity

24 | P a g e

ANNUAL REPORT 2012

Financial Review




0

20,000,000

40,000,000

60,000,000

80,000,000

100,000,000

120,000,000

140,000,000

160,000,000

180,000,000

2008 2009 2010 2011 2012

Total Assets

32

26 | P a g e

ANNUAL REPORT 2012

“The company’s operating revenue reached KD 176,762,831 during financial year 2012 – a 17.40% increase from financial year 2011”

The percentage of operating costs to operating revenue decreased from 91.03% in 2008 to 88.22% in 2012, resulting in an increase in the gross profit margin of the company. The improvement in the gross profit margins indicates that the management of the company has achieved one of its main objectives - maintaining profitability.

0

20,000,000

40,000,000

60,000,000

80,000,000

100,000,000

120,000,000

140,000,000

160,000,000

180,000,000

200,000,000

2008 2009 2010 2011 2012

Operating Revenue

91.03%

87.18%

86.93%

87.94% 88.22%

8.97% 12.82%

13.07% 12.06%

11.78% 0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

90.00%

100.00%

2008 2009 2010 2011 2012

Operating cost % of revenue

Gross Profit %

27 | P a g e

ANNUAL REPORT 2012

Financial Ratios

Profitability Ratios

“The company’s ability to generate earnings by the control of operating and non-operating expenses is evident from its relatively stable margins in what is a very competitive environment for contracting operations”

“Stable return on assets with a slight decrease in return on equity”

0%

2%

4%

6%

8%

10%

12%

14%

2008 2009 2010 2011 2012

Gross Margin

Net Profit Margin

0%

5%

10%

15%

20%

25%

30%

35%

2008 2009 2010 2011 2012

8% 7% 7% 7% 7%

34%

27% 26% 27% 25%

Return on Assets

Return on Equity

33

26 | P a g e

ANNUAL REPORT 2012

“The company’s operating revenue reached KD 176,762,831 during financial year 2012 – a 17.40% increase from financial year 2011”

The percentage of operating costs to operating revenue decreased from 91.03% in 2008 to 88.22% in 2012, resulting in an increase in the gross profit margin of the company. The improvement in the gross profit margins indicates that the management of the company has achieved one of its main objectives - maintaining profitability.

0

20,000,000

40,000,000

60,000,000

80,000,000

100,000,000

120,000,000

140,000,000

160,000,000

180,000,000

200,000,000

2008 2009 2010 2011 2012

Operating Revenue

91.03%

87.18%

86.93%

87.94% 88.22%

8.97% 12.82%

13.07% 12.06%

11.78% 0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

90.00%

100.00%

2008 2009 2010 2011 2012

Operating cost % of revenue

Gross Profit %

27 | P a g e

ANNUAL REPORT 2012

Financial Ratios

Profitability Ratios

“The company’s ability to generate earnings by the control of operating and non-operating expenses is evident from its relatively stable margins in what is a very competitive environment for contracting operations”

“Stable return on assets with a slight decrease in return on equity”

0%

2%

4%

6%

8%

10%

12%

14%

2008 2009 2010 2011 2012

Gross Margin

Net Profit Margin

0%

5%

10%

15%

20%

25%

30%

35%

2008 2009 2010 2011 2012

8% 7% 7% 7% 7%

34%

27% 26% 27% 25%

Return on Assets

Return on Equity

34

28 | P a g e

ANNUAL REPORT 2012

Liquidity Ratios

“The company’s ability to meet its short term obligations and indicates the financial health of the business”

Although there was a slight fall in the current ratio and quick ratio during the financial year of 2012 compared with 2009, 2010 and 2011, the company’s financial position was relatively stable. Currently, the current ratio stands at 1.47 and quick ratio at 1.26.

Risk Ratios

“Also called financial leverage ratios, and they are related to the extent to which a firm relies on debt and other modes of temporary financing rather than equity”

1.42

1.78 1.72 1.60

1.47

1.15

1.47 1.48 1.27 1.26

2008 2009 2010 2011 2012

Current Ratio

Quick Ratio

0.78 0.73 0.73 0.72 0.74

3.54

2.70 2.72 2.59 2.89

-

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

2008 2009 2010 2011 2012

Debt/ Total Assets

Debt/ Total Equity

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Turnover Ratios

“Measure the efficiency of the company in employing its assets. These ratios are based on the relationship between the levels of activity represented by the revenues and operating costs to different types of assets”

Asset turnover increased from 0.91 in 2009 to 1.11 in 2012, resulting in three continuous years of improving usage of total assets.

After a major fall to 2.83 in 2010, the receivable turnover increased to 4.91 in 2011. This resulted in receivables collection decreasing from 128 days in 2010 to 74 days in 2012.

The inventory turnover in 2012 increased to 6.38 times compared to 5.35 in 2010, and 6.20 in 2011 which resulted in a decrease in the number of days it takes to use inventory from 59 days in 2010, and 57 days in 2011, to 45 days in 2012.

6.89

3.98

2.83 3.58

4.91

9.18

12.27

5.35 6.20 6.38

1.34 0.91 0.93 1.07 1.11

-

2.00

4.00

6.00

8.00

10.00

12.00

14.00

2008 2009 2010 2011 2012

Receivable Turnover

Inventory Turnover

Total Assets Turnover

35

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ANNUAL REPORT 2012

Liquidity Ratios

“The company’s ability to meet its short term obligations and indicates the financial health of the business”

Although there was a slight fall in the current ratio and quick ratio during the financial year of 2012 compared with 2009, 2010 and 2011, the company’s financial position was relatively stable. Currently, the current ratio stands at 1.47 and quick ratio at 1.26.

Risk Ratios

“Also called financial leverage ratios, and they are related to the extent to which a firm relies on debt and other modes of temporary financing rather than equity”

1.42

1.78 1.72 1.60

1.47

1.15

1.47 1.48 1.27 1.26

2008 2009 2010 2011 2012

Current Ratio

Quick Ratio

0.78 0.73 0.73 0.72 0.74

3.54

2.70 2.72 2.59 2.89

-

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

2008 2009 2010 2011 2012

Debt/ Total Assets

Debt/ Total Equity

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Turnover Ratios

“Measure the efficiency of the company in employing its assets. These ratios are based on the relationship between the levels of activity represented by the revenues and operating costs to different types of assets”

Asset turnover increased from 0.91 in 2009 to 1.11 in 2012, resulting in three continuous years of improving usage of total assets.

After a major fall to 2.83 in 2010, the receivable turnover increased to 4.91 in 2011. This resulted in receivables collection decreasing from 128 days in 2010 to 74 days in 2012.

The inventory turnover in 2012 increased to 6.38 times compared to 5.35 in 2010, and 6.20 in 2011 which resulted in a decrease in the number of days it takes to use inventory from 59 days in 2010, and 57 days in 2011, to 45 days in 2012.

6.89

3.98

2.83 3.58

4.91

9.18

12.27

5.35 6.20 6.38

1.34 0.91 0.93 1.07 1.11

-

2.00

4.00

6.00

8.00

10.00

12.00

14.00

2008 2009 2010 2011 2012

Receivable Turnover

Inventory Turnover

Total Assets Turnover

36

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Stock Performance

Stock Snapshot Market Kuwait Stock Exchange Sector Industrial Sector Ticker CGC Stock Number 635 Listing Date 23/01/2006 Paid up Capital KD 10,629,366 Share Par Value 100 Kuwaiti Fils Issued Shares 106,293,660 Shares Treasury Stock 100,353 Shares Shares Outstanding 106,193,307 Shares

CGC Index Performance

For the period of January 2012- Mid April 2012, our stock moved in parallel with the market and the sector, and we had a slightly outperformed the market index and the sector index during April. The stock reached its peak during the first week of May, and then started to decline till mid June 2012. It maintained a low below the other two indicators for about 6 months from June- November before starting to bounce back. Our stock closed the FINANCIAL YEAR 2012 near the market and the sector index, indicating our resilience and ability to recover from a slump and the belief of the market in our company.

40

50

60

70

80

90

100

110

120

Jan

Feb

Mar Ap

r

May

June July

Aug

Sep

Oct

Nov De

c

Market Index

CGC Index

Sector Index

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CGC Stock Performance and Disclosures

Note Date Announcement 1 04/01/2012 Signing a 3 year contract amounting at KD 26,326,136for

the Kulyab- Kalaikhum Road- Package B (Shurabad- AnjirobiPoyon Section) Package C (AnjirobiPoyon- Shagon Section) Construction project, and the construction of bridge in Kulyab City in JV with TekarTekninArastirma Co. (Turkey), CGC has a 70% share of the contract value.

2 14/01/2012 Signing the preliminary stage of Officer’s Villas for Abu Dhabi’s gate of the General Command of the Armed Force in Abu Dhabi construction works contract valued at KD 945,000 for 3 month with contract number (CMW-11021-C001).

3 16/02/2012 Signing contract number (MD/R/255) with the Ministry if Public Works for Urgent & Miscellaneous Road Maintenance in Hawalli valued at KD 1,660,000.

4 07/03/2012 Signing contract (MD/R/262) with the Ministry of Public Works for General Maintenance Works for High Ways in the State of Kuwait valued at KD 3,000,000, the duration of the contract is 730 days.

5 27/03/2012 CGC announced earning of KD 10,155,846 for the year ended 31st December 2011 compared to the previous year earning of KD 8,893,965. The earnings per share (EPS) valued at 105.20 fils in 2011 compared to the previous year of 92.27 fils. Subsequently, the Board of Directors recommended a distribution of 70% cash dividends and 10% bonus share for the year 2011.

-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

-

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

Jan

Feb

Mar Ap

r

May

June July

Aug

Sep

Oct

Nov De

c

CGC Price

Volume Traded

1

2

3

4

5 6

7

8 9

10

11

12

13

14

15

16

17

18

37

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ANNUAL REPORT 2012

Stock Performance

Stock Snapshot Market Kuwait Stock Exchange Sector Industrial Sector Ticker CGC Stock Number 635 Listing Date 23/01/2006 Paid up Capital KD 10,629,366 Share Par Value 100 Kuwaiti Fils Issued Shares 106,293,660 Shares Treasury Stock 100,353 Shares Shares Outstanding 106,193,307 Shares

CGC Index Performance

For the period of January 2012- Mid April 2012, our stock moved in parallel with the market and the sector, and we had a slightly outperformed the market index and the sector index during April. The stock reached its peak during the first week of May, and then started to decline till mid June 2012. It maintained a low below the other two indicators for about 6 months from June- November before starting to bounce back. Our stock closed the FINANCIAL YEAR 2012 near the market and the sector index, indicating our resilience and ability to recover from a slump and the belief of the market in our company.

40

50

60

70

80

90

100

110

120

Jan

Feb

Mar Ap

r

May

June July

Aug

Sep

Oct

Nov De

c

Market Index

CGC Index

Sector Index

31 | P a g e

ANNUAL REPORT 2012








-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

-

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

Jan

Feb

Mar Ap

r

May

June July

Aug

Sep

Oct

Nov De

c

CGC Price

Volume Traded

1

2

3

4

5 6

7

8 9

10

11

12

13

14

15

16

17

18

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ANNUAL REPORT 2012








-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

-

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

Jan

Feb

Mar

Ap

r

May

Jun

e

July

Au

gSe

p

Oct

No

v

Dec

CGC Price

Volume Traded

1

2

3

4

5 6

7

8 9

10

11

12

13

14

15

16

17

18

38

32 | P a g e

ANNUAL REPORT 2012

6 04/04/2012 Signing contract (RE/212) with the Ministry of Public Works for construction, completion and maintenance of roads and intersections on central part of Jahra Road, the contract was valued at KD 45,797,412 and its duration is 1186 days.

7 10/05/2012 CGC announced 1st Quarter earnings of KD 3,061,677 compared to previous year's 1st quarter earnings of KD 2,960,680. Corresponding, the earnings per share (EPS) for the 1st quarter of 2012 valued at 31.71 fils compared to 30.68 fils in the 1st quarter of 2011.

8 17/05/2012 The Annual General Assembly Meeting was held and approved the increase of the company’s capital from KD 9,663,060 to KD 10,629,366, and the approval of increasing the board members to 7, and a distribution of 70% cash dividends and 10% bonus shares.

9 03/07/2012 The company received a letter of intent for tender number RM/R/267 for Emergency and Urgent Maintenance and Miscellaneous Works for Highways in the State of Kuwait amounting at KD 2,000,000 with duration of 24 months.

10 21/07/2012 The Abu Dhabi branch signed a contract with the General Command of the Armed Force in Abu Dhabi for the construction works of the asphalt road length of 12 KM. The contract was valued at KD 686,477 and for duration of 6 months.

11 25/07/2012 The Abu Dhabi branch signed a contract with the Department of Municipal Affairs Al Ain City Municipality in Abu Dhabi for the roads and infrastructure works for Al Daher (5) area. The contract was valued at KD 7,000,000 and duration of 18 months.

12 09/08/2012 On 9 August, the company announced earnings of KD 1,021,668 for the three months period ended 30/06/2012 with half year earnings at KD 4,083,345compared to previous year three months earnings for the period ended 30/06/2011 at KD 1,379,534 with the six months earnings at KD 4,340,214. The earnings per share (EPS) for the 2nd quarter 2012 was 9.62 fils with 6 months EPS at 38.45 fils compared to the previous year 2nd quarter EPS at 12.99 fils and six months EPS 40.87 fils in 2011.

13 10/09/2012 CGC announced that it was the lowest bidder for tender (18/2011/2012) for Designing, Construction and Maintenance of the Pipeline to transport treated water from Ministry of Public Works in Sulaibyia to Kuwait Institute for Scientific Research in Kabd. The contract amounted to KD 1,180,000.

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ANNUAL REPORT 2012

14 22/09/2012 The company signed a KD 35,889,902 contract with the Ministry of Electricity and Water for procurement, construction, completion and maintenance of 4 distilled water pipelines. The contract was valued at KD 35,889,902 and with duration of 24 months.

15 12/11/2012 On 12 November, the company announced earnings of KD 1,850,070 for the three months period ended 30th September 2012 with nine month earnings at KD 5,933,415 compared to previous years three months earnings for the period ended 30th September 2011 at KD 2,287,675 with the nine months earnings at KD 6,627,889. The earnings per share (EPS) for the 3rd quarter 2012 was 17.42 fils with 9 months EPS at 55.87 fils compared to the previous year 3rd quarter EPS at 21.54 fils and nine months EPS at 62.41 fils in 2011.

16 14/11/2012 The company signed a KD 738,750,000 contract with the Ministry of Public Works for Sheikh Jaber Al Ahmad Bridge in consortium with Hyundai Co., the duration of the contract is 5 years and CGC share is 21.5%.

17 15/12/2012 The company’s subsidiary, Barges General Trading and Contracting Co., has acquired the lowest bid price in tender (RB/49/2010/2011) for the Ministry of Education amounting at KD 3,200,000 with duration of 18 months.

18 29/12/2012 The company signed a KD 3,390,000 contract with the Ministry of Health for construction, completion, handing over and defect liabilities for the O.P.D laboratories, X Ray and pharmacy building at Al Razi Hospital. The duration of the contract is 16 months.

39

32 | P a g e

ANNUAL REPORT 2012

6 04/04/2012 Signing contract (RE/212) with the Ministry of Public Works for construction, completion and maintenance of roads and intersections on central part of Jahra Road, the contract was valued at KD 45,797,412 and its duration is 1186 days.

7 10/05/2012 CGC announced 1st Quarter earnings of KD 3,061,677 compared to previous year's 1st quarter earnings of KD 2,960,680. Corresponding, the earnings per share (EPS) for the 1st quarter of 2012 valued at 31.71 fils compared to 30.68 fils in the 1st quarter of 2011.

8 17/05/2012 The Annual General Assembly Meeting was held and approved the increase of the company’s capital from KD 9,663,060 to KD 10,629,366, and the approval of increasing the board members to 7, and a distribution of 70% cash dividends and 10% bonus shares.

9 03/07/2012 The company received a letter of intent for tender number RM/R/267 for Emergency and Urgent Maintenance and Miscellaneous Works for Highways in the State of Kuwait amounting at KD 2,000,000 with duration of 24 months.

10 21/07/2012 The Abu Dhabi branch signed a contract with the General Command of the Armed Force in Abu Dhabi for the construction works of the asphalt road length of 12 KM. The contract was valued at KD 686,477 and for duration of 6 months.

11 25/07/2012 The Abu Dhabi branch signed a contract with the Department of Municipal Affairs Al Ain City Municipality in Abu Dhabi for the roads and infrastructure works for Al Daher (5) area. The contract was valued at KD 7,000,000 and duration of 18 months.

12 09/08/2012 On 9 August, the company announced earnings of KD 1,021,668 for the three months period ended 30/06/2012 with half year earnings at KD 4,083,345compared to previous year three months earnings for the period ended 30/06/2011 at KD 1,379,534 with the six months earnings at KD 4,340,214. The earnings per share (EPS) for the 2nd quarter 2012 was 9.62 fils with 6 months EPS at 38.45 fils compared to the previous year 2nd quarter EPS at 12.99 fils and six months EPS 40.87 fils in 2011.

13 10/09/2012 CGC announced that it was the lowest bidder for tender (18/2011/2012) for Designing, Construction and Maintenance of the Pipeline to transport treated water from Ministry of Public Works in Sulaibyia to Kuwait Institute for Scientific Research in Kabd. The contract amounted to KD 1,180,000.

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ANNUAL REPORT 2012

14 22/09/2012 The company signed a KD 35,889,902 contract with the Ministry of Electricity and Water for procurement, construction, completion and maintenance of 4 distilled water pipelines. The contract was valued at KD 35,889,902 and with duration of 24 months.

15 12/11/2012 On 12 November, the company announced earnings of KD 1,850,070 for the three months period ended 30th September 2012 with nine month earnings at KD 5,933,415 compared to previous years three months earnings for the period ended 30th September 2011 at KD 2,287,675 with the nine months earnings at KD 6,627,889. The earnings per share (EPS) for the 3rd quarter 2012 was 17.42 fils with 9 months EPS at 55.87 fils compared to the previous year 3rd quarter EPS at 21.54 fils and nine months EPS at 62.41 fils in 2011.

16 14/11/2012 The company signed a KD 738,750,000 contract with the Ministry of Public Works for Sheikh Jaber Al Ahmad Bridge in consortium with Hyundai Co., the duration of the contract is 5 years and CGC share is 21.5%.

17 15/12/2012 The company’s subsidiary, Barges General Trading and Contracting Co., has acquired the lowest bid price in tender (RB/49/2010/2011) for the Ministry of Education amounting at KD 3,200,000 with duration of 18 months.

18 29/12/2012 The company signed a KD 3,390,000 contract with the Ministry of Health for construction, completion, handing over and defect liabilities for the O.P.D laboratories, X Ray and pharmacy building at Al Razi Hospital. The duration of the contract is 16 months.

40

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ANNUAL REPORT 2012

Contact Details

Subsidiaries inside the State of Kuwait

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) 24674897 - (965) 24674898 – (965) 24677674 Fax: (965) 24677673 Email:[email protected]

Combined International Real Estate Company- K.S.C. (Closed) 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 United Kingdom General Trading and Contracting Company- W.L.L. 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

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ANNUAL REPORT 2012

Combined Group Rocks Company- K.S.C. (Closed) Address: Area No. 5, Plot No. 85, Unit 11, Floor 6 Al Eqaila, Al Bairaq Mall, State of Kuwait Mailing Address : P.O. Box:21912, Safat 13080, Kuwait Telephone: (965) 23824191 Fax: (965) 23824189 Al Marouf and Al Barjas Combined for General Trading & Contracting Co. W.L.L. Abdul-Rahman Mousa Al-Marouf & Partners 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

Subsidiaries outside the State of Kuwait

Combined Group Trading & Contracting Company W.L.L. (Qatar) Address:Nuaija Area No. 44- E- Ring Road- Doha, Qatar Telephone:(974) 44520520 Fax: (974) 44664999 – (974) 44666771 Combined Group Factories Company W.L.L. (Qatar) Address: Nuaija Area No. 44- E- Ring Road- Doha, Qatar Telephone: (974) 44520450 Fax:(974) 44666771 Combined Group Contracting Company W.L.L. (Muscat, Oman) Address: Muscat Governorate – Bousher – Northern 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

41

34 | P a g e

ANNUAL REPORT 2012

Contact Details

Subsidiaries inside the State of Kuwait

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) 24674897 - (965) 24674898 – (965) 24677674 Fax: (965) 24677673 Email:[email protected]

Combined International Real Estate Company- K.S.C. (Closed) 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 United Kingdom General Trading and Contracting Company- W.L.L. 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

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ANNUAL REPORT 2012

Combined Group Rocks Company- K.S.C. (Closed) Address: Area No. 5, Plot No. 85, Unit 11, Floor 6 Al Eqaila, Al Bairaq Mall, State of Kuwait Mailing Address : P.O. Box:21912, Safat 13080, Kuwait Telephone: (965) 23824191 Fax: (965) 23824189 Al Marouf and Al Barjas Combined for General Trading & Contracting Co. W.L.L. Abdul-Rahman Mousa Al-Marouf & Partners 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

Subsidiaries outside the State of Kuwait

Combined Group Trading & Contracting Company W.L.L. (Qatar) Address:Nuaija Area No. 44- E- Ring Road- Doha, Qatar Telephone:(974) 44520520 Fax: (974) 44664999 – (974) 44666771 Combined Group Factories Company W.L.L. (Qatar) Address: Nuaija Area No. 44- E- Ring Road- Doha, Qatar Telephone: (974) 44520450 Fax:(974) 44666771 Combined Group Contracting Company W.L.L. (Muscat, Oman) Address: Muscat Governorate – Bousher – Northern 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

42

36 | P a g e

ANNUAL REPORT 2012

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: Plot M-36, Mussafah Al Sanaiya, Abu Dhabi Telephone: (9712) 6121999 Fax: (9712) 6121900 Combined Group Contracting Company C.S.C. (Al Khobhar Branch, KSA) Address: Al Khobhar City, Prince Faisal Bin Fahad Al Bandria- Salah Tower (G 501), KSA Telephone: (966) 38675414 Fax: (966) 38675413 Combined Group Contracting Company (Doha Branch, Qatar) Address: Nuaijia Area No. 44-E- Ring Road- Doha- Qatar Telephone: (974) 44520520 Fax: (974)44664999 Combined Group Contracting Company (Dubai Branch, UAE) Address: Al Muteena Street, Mahmoud Radwan Mohamed, Radwan Building, Office No. 401 Telephone: (9714) 2551602 Fax: (9714)2551603

43

for the Year Ended December 31, 2012with

Independent Auditors’ Report

Consolidated Financial Statements

44

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

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2012 WITH

INDEPENDENT AUDITORS’ REPORT

45


CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2012 WITH

INDEPENDENT AUDITORS’ REPORT

46


CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2012

WITH INDEPENDENT AUDITORS’ REPORT

CONTENTS

Independent Auditors’ Report Pages

Consolidated statement of financial position 3 Consolidated statement of income 4 Consolidated statement of comprehensive income 5 Consolidated statement of changes in shareholders’ equity 6 Consolidated statement of cash flows 7 - 8 Notes to consolidated financial statements 9 – 40

INDEPENDENT AUDITORS’ REPORT The Shareholders Combined Group Contracting Company - K.S.C. (Closed) State of Kuwait Report on the consolidated financial statements We 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, 2012, 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 statements Management 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’ responsibility Our 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.

49505152

53-54

55-86

47


CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2012

WITH INDEPENDENT AUDITORS’ REPORT

CONTENTS

Independent Auditors’ Report Pages

Consolidated statement of financial position 3 Consolidated statement of income 4 Consolidated statement of comprehensive income 5 Consolidated statement of changes in shareholders’ equity 6 Consolidated statement of cash flows 7 - 8 Notes to consolidated financial statements 9 – 40

INDEPENDENT AUDITORS’ REPORT The Shareholders Combined Group Contracting Company - K.S.C. (Closed) State of Kuwait Report on the consolidated financial statements We 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, 2012, 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 statements Management 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’ responsibility Our 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.

48

-2- We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Combined Group Contracting Company - K.S.C. (Closed) and it’s subsidiaries as of December 31, 2012, 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 Requirements Also in our opinion, the consolidated financial statements include the disclosures required by the Companies Law No. 25 of 2012 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, 2012 of either the Companies Law or No. 25 of 2012 and 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 28, 2013

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

RSM Albazie & Co.

COMBINED GROUP CONTRACTING COMPANY - K.S.C. (CLOSED) AND SUBSIDIARIES CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS OF DECEMBER 31, 2012 (All amounts are in Kuwaiti Dinars)

3

Note 2012 2011

ASSETS Fixed assets 3 17,452,069 16,907,212 Investment in unconsolidated subsidiaries 4 93,001 318,001 Investment available for sale 5 700,000 - Right of utilization of leasehold land 6 109,729 117,979 Current assets:

Spare parts and materials 7 21,476,601 25,783,366 Gross amount due from customers for contract work 8 36,770,126 16,224,073 Accounts receivable and other debit balances 9 80,375,134 76,265,407 Investments at fair value through income statement 10 2,306,264 2,141,996 Term deposits 11 280,000 - Cash and cash equivalents 12 13,594,342 7,934,578

Total current assets 154,802,467 128,349,420 Total assets 173,157,266 145,692,612

SHAREHOLDERS’ EQUITY AND LIABILITIES

Shareholders’ equity:

Capital 13 10,629,366 9,663,060 Treasury shares 14 (64,374) (64,374) Treasury shares reserve 1,266,488 1,266,488 Statutory reserve 15 5,314,683 5,103,940 Voluntary reserve 16 1,817,340 1,817,340 Foreign currency translation adjustments (90,850) (44,747) Retained earnings 23,929,756 22,449,325 Equity attributable to shareholders of the Parent

Company

42,802,409

40,191,032 Non-controlling interests 1,685,785 406,460

Total shareholders’ equity 44,488,194 40,597,492 Accounts payable and other credit balances – long term 17 13,864,910 17,658,311 Long term loans – Non current portion 18 3,137,392 1,577,798 Provision for end of service benefits 19 6,264,662 5,413,063 Current liabilities:

Gross amount due to customers for contract work 8 304,687 5,073,029 Accounts payable and other credit balances 17 80,956,929 64,810,672 Long term loans – Current portion 18 5,702,361 2,022,175 Short term loans and credit facilities 20 9,632,760 7,305,746 Due to banks 21 8,805,371 1,234,326

Total current liabilities 105,402,108 80,445,948 Total shareholders’ equity and liabilities 173,157,266 145,692,612

The accompanying notes (1) to (37) form an integral part of the consolidated financial statements

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


3

Note 2012 2011







Company

42,802,409







49

-2- We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Combined Group Contracting Company - K.S.C. (Closed) and it’s subsidiaries as of December 31, 2012, 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 Requirements Also in our opinion, the consolidated financial statements include the disclosures required by the Companies Law No. 25 of 2012 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, 2012 of either the Companies Law or No. 25 of 2012 and 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 28, 2013

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

RSM Albazie & Co.


3

Note 2012 2011







Company

42,802,409








3

Note 2012 2011







Company

42,802,409







50

COMBINED GROUP CONTRACTING COMPANY - K.S.C. (CLOSED) AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 2012 (All amounts are in Kuwaiti Dinars)

4

Note 2012 2011 Operating revenue 176,762,831 150,608,398 Operating costs (155,945,779) (132,440,571) Gross profit 22 20,817,052 18,167,827 Other income 23 201,864 186,238 Gain on sale of fixed assets 851,285 231,017 Group`s share of results from unconsolidated subsidiary

(23,918) -

General and administrative expenses 24 (7,024,088) (5,572,666) Provision for doubtful debts 9 (1,219,910) (990) Net investment income (loss) 25 164,268 (319,749) Depreciation and amortization (857,644) (708,201) Finance charges (1,587,020) (1,131,984) Zakat and donations (53,342) (80,698) 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

11,268,547 10,770,794 Contribution to Kuwait Foundation for the

Advancement of Sciences (KFAS) 26

(100,686) (100,313) National Labor Support Tax (NLST) 27 (291,892) (253,318) Contribution to Zakat 28 (108,751) (94,507) Board of directors’ remuneration 32 (70,000) (50,000) Net profit for the year 10,697,218 10,272,656 Attributable to: Shareholders of the Parent Company 10,268,493 10,155,846 Non-controlling interests 428,725 116,810 10,697,218 10,272,656 Earnings per share attributable to shareholders of

the Parent Company (fils) 29

96.70

95.63


COMBINED GROUP CONTRACTING COMPANY - K.S.C. (CLOSED) AND SUBSIDIARIES CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED DECEMBER 31, 2012 (All amounts are in Kuwaiti Dinars)

5

2012 2011

Net profit for the year 10,697,218 10,272,656 Other comprehensive income Foreign currency translation adjustments (46,103) (18,873) Other comprehensive loss for the year (46,103) (18,873) Total comprehensive income for the year 10,651,115 10,253,783 Attributable to: Shareholders of the Parent Company 10,222,390 10,136,973 Non-controlling interests 428,725 116,810 Total comprehensive income for the year 10,651,115 10,253,783


51

COMBINED GROUP CONTRACTING COMPANY - K.S.C. (CLOSED) AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 2012 (All amounts are in Kuwaiti Dinars)

4

Note 2012 2011 Operating revenue 176,762,831 150,608,398 Operating costs (155,945,779) (132,440,571) Gross profit 22 20,817,052 18,167,827 Other income 23 201,864 186,238 Gain on sale of fixed assets 851,285 231,017 Group`s share of results from unconsolidated subsidiary

(23,918) -

General and administrative expenses 24 (7,024,088) (5,572,666) Provision for doubtful debts 9 (1,219,910) (990) Net investment income (loss) 25 164,268 (319,749) Depreciation and amortization (857,644) (708,201) Finance charges (1,587,020) (1,131,984) Zakat and donations (53,342) (80,698) 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

11,268,547 10,770,794 Contribution to Kuwait Foundation for the

Advancement of Sciences (KFAS) 26

(100,686) (100,313) National Labor Support Tax (NLST) 27 (291,892) (253,318) Contribution to Zakat 28 (108,751) (94,507) Board of directors’ remuneration 32 (70,000) (50,000) Net profit for the year 10,697,218 10,272,656 Attributable to: Shareholders of the Parent Company 10,268,493 10,155,846 Non-controlling interests 428,725 116,810 10,697,218 10,272,656 Earnings per share attributable to shareholders of

the Parent Company (fils) 29

96.70

95.63


COMBINED GROUP CONTRACTING COMPANY - K.S.C. (CLOSED) AND SUBSIDIARIES CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED DECEMBER 31, 2012 (All amounts are in Kuwaiti Dinars)

5

2012 2011

Net profit for the year 10,697,218 10,272,656 Other comprehensive income Foreign currency translation adjustments (46,103) (18,873) Other comprehensive loss for the year (46,103) (18,873) Total comprehensive income for the year 10,651,115 10,253,783 Attributable to: Shareholders of the Parent Company 10,222,390 10,136,973 Non-controlling interests 428,725 116,810 Total comprehensive income for the year 10,651,115 10,253,783


52

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ts

COMBINED GROUP CONTRACTING COMPANY - K.S.C. (CLOSED) AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2012 (All amounts are in Kuwaiti Dinars)

7

2012 2011 Cash flows from operating activities 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 11,268,547 10,770,794

Adjustments for: Provision for doubtful debts 1,219,910 990 Group’s share of results from unconsolidated subsidiary 23,918 - Gain on sale of fixed assets (851,787) (231,017) Interest income (85,787) (25,687) Net investments (income) loss (164,268) 319,749 Depreciation and amortization 5,412,733 4,984,219 Finance charges 1,587,020 1,131,984 Provision for end of service indemnity 1,293,864 1,094,932

19,704,150 18,045,964 Changes in operating assets and liabilities: Spare parts and materials 4,361,431 (8,844,853) Gross amount due from / to customers for contract work (25,014,082) (4,378,899) Accounts receivable and other debit balances (3,480,071) 9,656,227 Accounts payable and other credit balances 9,811,536 7,367,389 Cash generated from operating activities 5,382,964 21,845,828 Payment of Kuwait Foundation for the Advancement of Sciences (106,026) (92,012) Payment of National Labor Support Tax (255,891) (207,791) Payment of Zakat (94,507) (66,915) Board of Directors’ remuneration paid (50,000) (50,000) Paid for end of service indemnity (442,515) (329,084) Net cash generated from operating activities 4,434,025 21,100,026 Cash flows from investing activities Paid for purchase of fixed assets (6,088,469) (7,639,768) Proceeds from sale of fixed assets 762,493 619,878 Paid for purchase of Investment available for sale (365,000) - Net change in cash at portfolio (67,177) - Paid for purchase of investments at fair value through income statement - (355,879) Proceeds from sale of investments at fair value through income statement - 284,612 Net movement on term deposits (280,000) - Interest income received 85,787 32,916 Cash dividend received 75,124 71,267 Net cash used in investing activities (5,877,242) (6,986,974)

53

COMBINED GROUP CONTRACTING COMPANY - K.S.C. (CLOSED) AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2012 (All amounts are in Kuwaiti Dinars)

7

2012 2011 Cash flows from operating activities 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 11,268,547 10,770,794

Adjustments for: Provision for doubtful debts 1,219,910 990 Group’s share of results from unconsolidated subsidiary 23,918 - Gain on sale of fixed assets (851,787) (231,017) Interest income (85,787) (25,687) Net investments (income) loss (164,268) 319,749 Depreciation and amortization 5,412,733 4,984,219 Finance charges 1,587,020 1,131,984 Provision for end of service indemnity 1,293,864 1,094,932

19,704,150 18,045,964 Changes in operating assets and liabilities: Spare parts and materials 4,361,431 (8,844,853) Gross amount due from / to customers for contract work (25,014,082) (4,378,899) Accounts receivable and other debit balances (3,480,071) 9,656,227 Accounts payable and other credit balances 9,811,536 7,367,389 Cash generated from operating activities 5,382,964 21,845,828 Payment of Kuwait Foundation for the Advancement of Sciences (106,026) (92,012) Payment of National Labor Support Tax (255,891) (207,791) Payment of Zakat (94,507) (66,915) Board of Directors’ remuneration paid (50,000) (50,000) Paid for end of service indemnity (442,515) (329,084) Net cash generated from operating activities 4,434,025 21,100,026 Cash flows from investing activities Paid for purchase of fixed assets (6,088,469) (7,639,768) Proceeds from sale of fixed assets 762,493 619,878 Paid for purchase of Investment available for sale (365,000) - Net change in cash at portfolio (67,177) - Paid for purchase of investments at fair value through income statement - (355,879) Proceeds from sale of investments at fair value through income statement - 284,612 Net movement on term deposits (280,000) - Interest income received 85,787 32,916 Cash dividend received 75,124 71,267 Net cash used in investing activities (5,877,242) (6,986,974)

54

COMBINED GROUP CONTRACTING COMPANY - K.S.C. (CLOSED) AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (CONTD.) YEAR ENDED DECEMBER 31, 2012 (All amounts are in Kuwaiti Dinars)

8

2012 2011 Cash flows from financing activities Proceeds from sale of treasury shares - 125,246 Paid for purchase of treasury shares - (13,016) Finance charges paid (1,587,020) (1,131,984) Cash dividends paid (6,700,338) (6,065,249) Net movement on long term loan 5,239,780 (955,669) Net movement on short term loans and credit facilities 2,328,014 (337,203) Net movement on due to banks 7,571,045 (3,131,165) Net cash generated from (used in) financing activities 6,851,481 (11,509,040) Net increase in cash and cash equivalents 5,408,264 2,604,012 Cash and cash equivalents from the newly consolidated subsidiary 251,500 - Cash and cash equivalents at the beginning of the year 7,934,578 5,330,566 Cash and cash equivalents at the end of the year (Note 12) 13,594,342 7,934,578


COMBINED GROUP CONTRACTING COMPANY - K.S.C. (CLOSED) AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2012 (All amounts are in Kuwaiti Dinars)

9

1. Incorporation and objectives of the Parent Company The Combined Group Trading and Contracting Company - Suleiman Khaled Abdul-Latif Al-Hamad

and Partners 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).

As per the issued letter from the Department of Shareholding Companies No.202 dated June 7, 2012 and as per the Extraordinary General Assembly meeting held on May 17, 2012 the following have been approved: 1. Approval of the proposal of the Board of Directors by increasing the Company's capital from KD

9,664,060 to KD 10,629,366 which amounted to KD 966,306 through the distribution of bonus shares equal to 9,663,060 shares with the percentage of 10% of the Company capital by 10 shares for every 100 shares, to be allocated to the existing shareholders in the Company’s records on the date of the General Assembly Meeting.

2. Amended Articles No. (5) from the Article of Incorporation and article No. (6) from Article of Association of the Parent Company to be the following: “The Company’s Capital is KD 10,629,366 distributed over 106,293,660 shares with value of 100 fils for share and all shares are in cash and in kind” (Note 13).

The Parent Company is registered in the commercial register under Ref. No. 13595 dated September 19, 2005. The main objectives for which the Parent Company was established are as follows: a) Carry out general contracting, mechanical works, health engineering works, construction work

of building, ways, bridges and managing, controlling them and their related works.

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

c) Trading, packing and packaging cement, sand and related materials.

d) Ready-mix works.

55

COMBINED GROUP CONTRACTING COMPANY - K.S.C. (CLOSED) AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (CONTD.) YEAR ENDED DECEMBER 31, 2012 (All amounts are in Kuwaiti Dinars)

8

2012 2011 Cash flows from financing activities Proceeds from sale of treasury shares - 125,246 Paid for purchase of treasury shares - (13,016) Finance charges paid (1,587,020) (1,131,984) Cash dividends paid (6,700,338) (6,065,249) Net movement on long term loan 5,239,780 (955,669) Net movement on short term loans and credit facilities 2,328,014 (337,203) Net movement on due to banks 7,571,045 (3,131,165) Net cash generated from (used in) financing activities 6,851,481 (11,509,040) Net increase in cash and cash equivalents 5,408,264 2,604,012 Cash and cash equivalents from the newly consolidated subsidiary 251,500 - Cash and cash equivalents at the beginning of the year 7,934,578 5,330,566 Cash and cash equivalents at the end of the year (Note 12) 13,594,342 7,934,578



9

1. Incorporation and objectives of the Parent Company The Combined Group Trading and Contracting Company - Suleiman Khaled Abdul-Latif Al-Hamad

and Partners 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).

As per the issued letter from the Department of Shareholding Companies No.202 dated June 7, 2012 and as per the Extraordinary General Assembly meeting held on May 17, 2012 the following have been approved: 1. Approval of the proposal of the Board of Directors by increasing the Company's capital from KD

9,664,060 to KD 10,629,366 which amounted to KD 966,306 through the distribution of bonus shares equal to 9,663,060 shares with the percentage of 10% of the Company capital by 10 shares for every 100 shares, to be allocated to the existing shareholders in the Company’s records on the date of the General Assembly Meeting.

2. Amended Articles No. (5) from the Article of Incorporation and article No. (6) from Article of Association of the Parent Company to be the following: “The Company’s Capital is KD 10,629,366 distributed over 106,293,660 shares with value of 100 fils for share and all shares are in cash and in kind” (Note 13).

The Parent Company is registered in the commercial register under Ref. No. 13595 dated September 19, 2005. The main objectives for which the Parent Company was established are as follows: a) Carry out general contracting, mechanical works, health engineering works, construction work

of building, ways, bridges and managing, controlling them and their related works.

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

c) Trading, packing and packaging cement, sand and related materials.

d) Ready-mix works.

56


10

e) Manufacturing and executing the dye works and decorations that are necessary to execute the

civil works (after the approval of Public Authority for Industry).

f) Asphalt production.

g) Purchasing and importing the equipments and tools that are necessary to execute the Parent Company’s objectives.

h) Owning the transportation intermediaries that are necessary for the Parent Company’s activities.

i) Representation of the companies and enter tenders that have same purposes.

j) 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. On November 29, 2012, a Decree Law No. 25 of 2012 was issued in the Official Gazette promulgating the Companies Law was passed, the Company will be in compliance with the law during six months from the date of issuance according to the Executive Regulations.

At December 31, 2012, the Group had 6,582 employees (2011 – 6,373 employees). The consolidated financial statements were authorized for issue by the Board of Directors of the Parent Company on March 28, 2013 The Shareholders’ General Assembly has the power to amend these consolidated financial statements after issuance.

2. Significant accounting policies

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

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, 2012:


11

IFRS 7: Financial Instruments - Disclosures - Enhanced Derecognition Disclosure Requirements (Amendment) (effective July 1, 2011) The amendment requires additional disclosure about financial assets that have been transferred but not derecognized to enable the user of the Group’s consolidated financial statements to understand the relationship with those assets that have not been derecognized and their associated liabilities. In addition, the amendment requires disclosures about continuing involvement in derecognized assets to enable the user to evaluate the nature of, and risks associated with, the entity’s continuing involvement in those derecognized assets. The adoption of this amendment did not have any material impact on the consolidated financial position or performance of the Group. 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 (s).

Standards and interpretations issued but not effective The following IASB Standards and Interpretations have been issued but are not yet effective, and have not been adopted by the Group: IAS 1 Presentation of items of other comprehensive income The amendments to IAS 1 require items of other comprehensive income to be grouped into two categories: (a) Items that will not be reclassified, subsequently to consolidated statement of income. (b) Items that may be reclassified to consolidated statement of income when specific

conditions are met. The amendments are effective for annual periods beginning on or after July 1, 2012. IAS 16 Property, plant and equipment The amendments to IAS 16 clarity that spare parts, stand-by equipment and servicing equipment should be classified as property, plant and equipment when they meet the definition of property, plant and equipment in IAS 16 and as inventories, otherwise if they meet definition of inventories as per IAS 2. The amendments are effective for annual periods beginning on or after January 1, 2013. Amendments to IFRS 7 and IAS 32 offsetting financial assets and financial liabilities and the related disclosures. The amendments to IAS 32 clarify the meaning of “currently has a legally enforceable right of set off” and “simultaneous realization and settlement”. These are effective for annual periods beginning on or after January 1, 2014.

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IFRS 7: Financial Instruments - Disclosures - Enhanced Derecognition Disclosure Requirements (Amendment) (effective July 1, 2011) The amendment requires additional disclosure about financial assets that have been transferred but not derecognized to enable the user of the Group’s consolidated financial statements to understand the relationship with those assets that have not been derecognized and their associated liabilities. In addition, the amendment requires disclosures about continuing involvement in derecognized assets to enable the user to evaluate the nature of, and risks associated with, the entity’s continuing involvement in those derecognized assets. The adoption of this amendment did not have any material impact on the consolidated financial position or performance of the Group. 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 (s).

Standards and interpretations issued but not effective The following IASB Standards and Interpretations have been issued but are not yet effective, and have not been adopted by the Group: IAS 1 Presentation of items of other comprehensive income The amendments to IAS 1 require items of other comprehensive income to be grouped into two categories: (a) Items that will not be reclassified, subsequently to consolidated statement of income. (b) Items that may be reclassified to consolidated statement of income when specific

conditions are met. The amendments are effective for annual periods beginning on or after July 1, 2012. IAS 16 Property, plant and equipment The amendments to IAS 16 clarity that spare parts, stand-by equipment and servicing equipment should be classified as property, plant and equipment when they meet the definition of property, plant and equipment in IAS 16 and as inventories, otherwise if they meet definition of inventories as per IAS 2. The amendments are effective for annual periods beginning on or after January 1, 2013. Amendments to IFRS 7 and IAS 32 offsetting financial assets and financial liabilities and the related disclosures. The amendments to IAS 32 clarify the meaning of “currently has a legally enforceable right of set off” and “simultaneous realization and settlement”. These are effective for annual periods beginning on or after January 1, 2014.

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The amendments to IFRS 7 require entities to disclose information about rights of offset and related arrangements for financial instruments under an enforceable master netting agreement or similar arrangement. The amendments are effective for annual periods beginning on or after January 1, 2013. IFRS 9 Financial Instruments: The standard, which will be effective for annual periods beginning on or after January 1, 2015, 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 IFRS 11 Joint Arrangements (issued in May 2011) The new Standard requires a party to a joint arrangement to determine the type of joint arrangement in which it is involved by assessing its rights and obligations and then account for those rights and obligations in accordance with that type of joint arrangement. Joint arrangements are either joint operations or joint ventures: - In a joint operation, parties have rights to the assets, and obligations for the liabilities,

relating to the arrangement. Joint operators recognise their assets, liabilities, revenue and expenses in relation to their interest in the joint operation.

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

IFRS 11 is effective for annual periods beginning on or after 1 January 2013. IFRS 10 Consolidated Financial Statements (issued in May 2011) The new Standard identifies the principles of control, determines how to identify whether an investor controls an investee and therefore must consolidate the investee, and sets out the principles for the preparation of consolidated financial statements. It introduces a single consolidation model that identifies control as the basis for consolidation for all types of entities, where control is based on whether an investor has power over the investee, exposure/rights to variable returns from its involvement with the investee and the ability to use its power over the investee to affect the amount of the returns. This standard is effective for annual periods beginning on or after 1 January 2013.


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IFRS 12 Disclosure of Interests in Other Entities (issued in May 2011) The new Standard combines, enhances and replaces the disclosure requirements for subsidiaries, joint arrangements, associates and unconsolidated structured entities. It requires extensive disclosure of information that enables users of financial statements to evaluate the nature of, and risks associated with, interests in other entities and the effects of those interests on the entity’s financial position, financial performance and cash flows. IFRS 12 is effective for annual periods beginning on or after 1 January 2013. IFRS 13 Fair Value Measurement (issued in May 2011) The new Standard defines fair value, sets out in a single IFRS a framework for measuring fair value and requires disclosures about fair value measurements. IFRS 13 applies when other IFRSs require or permit fair value measurements. It does not introduce any new requirements to measure an asset or a liability at fair value, change what is measured at fair value in IFRS or address how to present changes in fair value. The new requirements are effective for annual periods beginning on or after 1 January 2013. These amendments and standards are not expected to have any impact on the Group consolidated financial statements.

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 2012

2011 Combined Group for Trading and Contracting Co. –

W.L.L.

Qatar 49%

49%

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

Kuwait

96%

96% Combined Group Factories Company - W.L.L. Qatar 49% 49% Combined Group Rocks Company – K.S.C.C. Kuwait 67% 80% Al Marouf and Al Barjas Combined for General Trading

and Contracting Company - Abdul Rahman Mousaa Al Marouf and Partner's - W.L.L.

Kuwait

90%

- During the year ended December 31, 2010 it was approved by the department of control companies in state of Qatar to amend 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 results of subsidiary and holding the same percentage of the subsidiary capital 49%.

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IFRS 12 Disclosure of Interests in Other Entities (issued in May 2011) The new Standard combines, enhances and replaces the disclosure requirements for subsidiaries, joint arrangements, associates and unconsolidated structured entities. It requires extensive disclosure of information that enables users of financial statements to evaluate the nature of, and risks associated with, interests in other entities and the effects of those interests on the entity’s financial position, financial performance and cash flows. IFRS 12 is effective for annual periods beginning on or after 1 January 2013. IFRS 13 Fair Value Measurement (issued in May 2011) The new Standard defines fair value, sets out in a single IFRS a framework for measuring fair value and requires disclosures about fair value measurements. IFRS 13 applies when other IFRSs require or permit fair value measurements. It does not introduce any new requirements to measure an asset or a liability at fair value, change what is measured at fair value in IFRS or address how to present changes in fair value. The new requirements are effective for annual periods beginning on or after 1 January 2013. These amendments and standards are not expected to have any impact on the Group consolidated financial statements.

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:



incorporation 2012

2011 Combined Group for Trading and Contracting Co. –

W.L.L.

Qatar 49%

49%

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

Kuwait

96%

96% Combined Group Factories Company - W.L.L. Qatar 49% 49% Combined Group Rocks Company – K.S.C.C. Kuwait 67% 80% Al Marouf and Al Barjas Combined for General Trading

and Contracting Company - Abdul Rahman Mousaa Al Marouf and Partner's - W.L.L.

Kuwait

90%

- During the year ended December 31, 2010 it was approved by the department of control companies in state of Qatar to amend 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 results of subsidiary and holding the same percentage of the subsidiary capital 49%.

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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 shareholder's share of changes in equity since the date of the combination. Non-controlling interests are measured at either fair value, or at its proportionate interest in the identifiable assets and liabilities of the acquiree, on a transaction-by-transaction basis. A change in the ownership interest of a subsidiary, without a change of control, is accounted for as an equity transaction. Losses are attributed to the non-controlling interest even if that results in a deficit balance. If the Group loses control over a subsidiary, it: - Derecognises the assets (including goodwill) and liabilities of the subsidiary - Derecognises the carrying amount of any non-controlling interest. - Derecognises the cumulative translation differences, recorded in equity. - Recognises the fair value of the consideration received. - Recognises the fair value of any investment retained. - Recognises any surplus or deficit in profit or loss - The Parent Company’s share of components previously recognised in other

comprehensive to profit or loss or retained earnings as appropriate. c) Financial instruments

Financial assets and financial liabilities carried on the consolidated statement of financial position include accounts receivable, investments, cash and cash equivalents, term deposits, accounts payable and credit facilities. 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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c.1) Cash and cash equivalents:

Cash and cash equivalents include 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.

c.2) Accounts receivable:

Accounts receivable 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 trade 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 accounts receivable. 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 a trade receivable is uncollectible, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited in the consolidated statement of income.

c.3) Investments:

The Group classifies its investments at fair value through income statement,. The classification depends on the purpose for which the investments 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 the reporting period

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c.1) Cash and cash equivalents:

Cash and cash equivalents include 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.

c.2) Accounts receivable:

Accounts receivable 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 trade 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 accounts receivable. 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 a trade receivable is uncollectible, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited in the consolidated statement of income.

c.3) Investments:

The Group classifies its investments at fair value through income statement,. The classification depends on the purpose for which the investments 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 the reporting period

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Investments available for sale: Investments available for sale are non-derivative financial assets that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of the investment within 12 months from the end of the reporting period. Purchases and sales of investments are recognized on settlement date – the date on which an asset is delivered to or by the Group. Investments are initially recognized at fair value plus transaction costs for all financial assets not carried at fair value through income statement. After initial recognition, investments at fair value through income statement and investments available for sale are subsequently carried at fair value. The fair values of quoted investments are based on current bid prices. If the market for an investment is not active (and for unlisted securities), the Group / Company establishes fair value by using valuation techniques. These include the use of recent arm’s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, and option pricing models refined to reflect the issuer’s specific circumstances. Realized and unrealized gains and losses from investments at fair value through income statement are included in the consolidated statement of income. Unrealized gains and losses arising from changes in the fair value of investments available for sale are recognized in cumulative changes in fair value in consolidated statement of other comprehensive income. Where investments available for sale could not be measured reliably, these are stated at cost less impairment losses, if any. When an investment available for sale is disposed off or impaired, any prior fair value earlier reported in other comprehensive income is transferred to the consolidated statement of income. An investment (in whole or in part) is derecognized either when: the contractual rights to receive the cash flows from the investment have expired; or the Group has transferred its rights to receive cash flows from the investment and either (a) has transferred substantially all the risks and rewards of ownership of the investment, or (b) has neither transferred nor retained substantially all the risks and rewards of the investment, but has transferred control of the investment. Where the Group has retained control, it shall continue to recognize the investment to the extent of its continuing involvement in the investment.


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

c.4) Accounts payable

Trade payables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non - current liabilities.

c.5) Borrowings

Borrowings are recognized initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortized cost; any difference between the 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.

d) Fixed assets:

The initial cost of fixed assets comprises its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use. Expenditures incurred after the of 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. 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.

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

c.4) Accounts payable

Trade payables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non - current liabilities.

c.5) Borrowings

Borrowings are recognized initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortized cost; any difference between the 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.

d) Fixed assets:

The initial cost of fixed assets comprises its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use. Expenditures incurred after the of 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. 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.

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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:

Depreciation rate

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.

e) Impairment of assets: At the end of financial year, the Group reviews the carrying amounts of its tangible 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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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) Capital:

Ordinary shares are classified as equity Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction from the proceeds.

j) 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. 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.

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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) Capital:

Ordinary shares are classified as equity Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction from the proceeds.

j) 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. 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.

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k) 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.

l) 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.

m) 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 revenue Revenue 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.


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Service income Revenues from vehicles, machinery, garage and factory are recognized when services are rendered to the Group’s customers.

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

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

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

n) 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.

o) 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.

67


21

Service income Revenues from vehicles, machinery, garage and factory are recognized when services are rendered to the Group’s customers.

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

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

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

n) 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.

o) 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.

68


22

p) Contingencies:

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

q) 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.

r) Dividend distribution

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

s) 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.

(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.


23

(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”. 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.

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.

69


23

(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”. 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.

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.

70


24

(iii) Impairment of non-financial assets

An impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs to sell and its value in use. The fair value less costs to sell calculation is based on available data from binding sales transactions in an arm’s length transaction of similar assets or observable market prices less incremental costs for disposing of the asset. The value in use calculation is based on a discounted cash flow model. The cash flows are derived from the budget for the next five years and do not include restructuring activities that the Group is not yet committed to or significant future investments that will enhance the asset’s performance of the cash generating unit being tested. The recoverable amount is most sensitive to the discount rate used for the discounted cash flow model as well as the expected future cash inflows and the growth rate used for extrapolation purposes.

71

COMB

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0 3,

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7,24

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201

5.

72


26

Depreciation charge for the year was allocated as follows:

2012 2011 Operating costs 4,555,089 4,276,018 Other 849,394 699,951 5,404,483 4,975,969

4. Investment in unconsolidated subsidiaries

The movement on the investment in an unconsolidated subsidiaries during the year as follows:

2012 2011 Balance at beginning of the year 318,001 1 Transfer from receivables and other debit balances - 500,038 Disposals - (182,038) Newly consolidated subsidiary (225,000) - Balance at end of the year 93,001 318,001

Investment in unconsolidated subsidiaries in represent as follows:

The financial statements of those subsidiaries were not consolidated since they are not material to the consolidated financial statements.

5. Investment available for sale This represents investments in unquoted local shares .It was not possible to reliably measure the fair value of unquoted investment due to non availability of a reliable method that could be used to determine the fair value of such investments. Accordingly, they were stated at their cost.

6. Right of utilization of leasehold land

2012 2011 Cost: Balance at January 1 165,000 165,000 Balance at December 31 165,000 165,000

Accumulated amortization: Balance at January 1 47,021 38,771 Charge for the year 8,250 8,250 Balance at December 31 55,271 47,021

Net book value at December 31 109,729 117,979



incorporation 2012

2011 United Kingdom General Trading and Contracting

Company - W.L.L.

Kuwait 99%

99%

Al Marouf and Al Barjas Combined for General Trading and Contracting Company - Abdul Rahman Mousaa Al Marouf and Partner's - W.L.L.

Kuwait

-

90% Combined Group Syrian for Contracting Co. - W.L.L. Syria 100% 100%


27

7. Spare parts and materials

2012 2011 Spare parts and lubricants 476,387 474,706 Materials at sites 21,082,105 25,390,551 21,558,492 25,865,257 Provision for spare parts and slow moving items (81,891) (81,891) 21,476,601 25,783,366

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

a) Gross amount due from customers for contract work 2012 2011

Contract costs incurred to date plus recognized profits 373,198,645 231,549,908 Progress billings (336,428,519) (215,325,835)

36,770,126 16,224,073 b) Gross amount due to customers for contract work 2012 2011

Contract costs incurred to date plus recognized profits (8,814,319) (38,315,026) Progress billings 9,119,006 43,388,055

304,687 5,073,029 9. Accounts receivable and other debit balances

2012 2011 Ministries and Government agencies 27,988,872 24,803,780 Companies and institutions 4,940,996 8,913,471 Trade receivables 2,121,503 1,396,854 Other receivables 783,802 892,344 Total receivables (a) 35,835,173 36,006,449 Provision for doubtful debts (b) (5,820,562) (4,600,652) 30,014,611 31,405,797 Contract retentions (c) 25,162,727 28,118,831 Advance payments for contracts 16,054,934 10,268,607 Advances for purchase of fixed assets 1,284,652 1,273,203 Prepaid expenses 6,067,363 2,865,750 Advance payments for purchase of investment available for sale -

335,000

Letters of credit 680,428 1,554,302 Refundable deposits 656,876 346,977 Due from related parties (Note 30) 353,634 96,940 Advance for incorporation of company 99,909 - 80,375,134 76,265,407

73


27

7. Spare parts and materials

2012 2011 Spare parts and lubricants 476,387 474,706 Materials at sites 21,082,105 25,390,551 21,558,492 25,865,257 Provision for spare parts and slow moving items (81,891) (81,891) 21,476,601 25,783,366

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

a) Gross amount due from customers for contract work 2012 2011

Contract costs incurred to date plus recognized profits 373,198,645 231,549,908 Progress billings (336,428,519) (215,325,835)

36,770,126 16,224,073 b) Gross amount due to customers for contract work 2012 2011

Contract costs incurred to date plus recognized profits (8,814,319) (38,315,026) Progress billings 9,119,006 43,388,055

304,687 5,073,029 9. Accounts receivable and other debit balances

2012 2011 Ministries and Government agencies 27,988,872 24,803,780 Companies and institutions 4,940,996 8,913,471 Trade receivables 2,121,503 1,396,854 Other receivables 783,802 892,344 Total receivables (a) 35,835,173 36,006,449 Provision for doubtful debts (b) (5,820,562) (4,600,652) 30,014,611 31,405,797 Contract retentions (c) 25,162,727 28,118,831 Advance payments for contracts 16,054,934 10,268,607 Advances for purchase of fixed assets 1,284,652 1,273,203 Prepaid expenses 6,067,363 2,865,750 Advance payments for purchase of investment available for sale -

335,000

Letters of credit 680,428 1,554,302 Refundable deposits 656,876 346,977 Due from related parties (Note 30) 353,634 96,940 Advance for incorporation of company 99,909 - 80,375,134 76,265,407

74


28

The fair values of accounts receivable and other debit balances approximated their carrying values as of December 31, 2012.

a) Receivables:

Trade receivables that are less than one year past due are not considered impaired. The ageing analysis of these trade receivables is as follows:

2012 2011

1 to 3 months 8,820,502 5,569,952 3 to 12 months 23,319,918 24,379,108 Over 1 year 3,694,753 6,057,389

35,835,173 36,006,449 b) Provision for doubtful debts: The movement of the provision for doubtful debts is as follows: 2012 2011

Balance at beginning of the year 4,600,652 4,766,504 Provision for the year 1,219,910 990 Utilized during the year - (166,842) Balance at end of the year 5,820,562 4,600,652

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 to the Group after the maintenance and guarantee period.

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.

10. Investments at fair value through income statement 2012 2011 Investment funds 539,272 617,517 Investment portfolio 1,766,992 1,524,479 2,306,264 2,141,996 The carrying amounts of the above investments are classified as follows: 2012 2011 Held for trading 1,766,992 1,524,479 Designated at fair value 539,272 617,517 2,306,264 2,141,996


29

The movement during the year is as follows: 2012 2011 Balance at beginning of the year 2,141,996 2,461,745 Additions - 355,879 Disposals - (186,251) Net change on cash at portfolio 67,177 - Unrealized gain (loss) from changes in fair value (Note 25) 97,091 (489,377) Balance at end of the year 2,306,264 2,141,996

11. Term deposits The effective interest rate on term deposit is 2.750% per annum, this deposits mature within 4

years. 12. Cash and cash equivalents

2012 2011 Cash on hand and at banks 8,310,300 6,831,632 Short term deposits 5,284,042 1,102,946 13,594,342 7,934,578

The effective interest rate on short term deposits is ranging from 0.625% to 1% per annum (2011-

0.0379%) these deposit have a maturity 90 days (2011 – 31 days). There is no material difference between the fair value and the carrying value of cash and cash

equivalents as of December 31, 2012. 13. Capital

The authorized, issued and fully paid-up capital consists of KD 10,629,366 (2011 – KD 9,663,060 shares) distributed to 106,293,660 shares (2011 – 96,630,600 shares) of 100 fils each and all shares are in cash and in kind (Note 1).

14. Treasury shares

2012 2011 Number of treasury shares (shares) 100,353 91,230 Percentage of issued shares (%) 0.094% 0.094% Market value (KD) 146,515 144,143 Cost (KD) 64,374 64,374

75


28

The fair values of accounts receivable and other debit balances approximated their carrying values as of December 31, 2012.

a) Receivables:

Trade receivables that are less than one year past due are not considered impaired. The ageing analysis of these trade receivables is as follows:

2012 2011

1 to 3 months 8,820,502 5,569,952 3 to 12 months 23,319,918 24,379,108 Over 1 year 3,694,753 6,057,389

35,835,173 36,006,449 b) Provision for doubtful debts: The movement of the provision for doubtful debts is as follows: 2012 2011

Balance at beginning of the year 4,600,652 4,766,504 Provision for the year 1,219,910 990 Utilized during the year - (166,842) Balance at end of the year 5,820,562 4,600,652

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 to the Group after the maintenance and guarantee period.

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.

10. Investments at fair value through income statement 2012 2011 Investment funds 539,272 617,517 Investment portfolio 1,766,992 1,524,479 2,306,264 2,141,996 The carrying amounts of the above investments are classified as follows: 2012 2011 Held for trading 1,766,992 1,524,479 Designated at fair value 539,272 617,517 2,306,264 2,141,996


29

The movement during the year is as follows: 2012 2011 Balance at beginning of the year 2,141,996 2,461,745 Additions - 355,879 Disposals - (186,251) Net change on cash at portfolio 67,177 - Unrealized gain (loss) from changes in fair value (Note 25) 97,091 (489,377) Balance at end of the year 2,306,264 2,141,996

11. Term deposits The effective interest rate on term deposit is 2.750% per annum, this deposits mature within 4

years. 12. Cash and cash equivalents

2012 2011 Cash on hand and at banks 8,310,300 6,831,632 Short term deposits 5,284,042 1,102,946 13,594,342 7,934,578

The effective interest rate on short term deposits is ranging from 0.625% to 1% per annum (2011-

0.0379%) these deposit have a maturity 90 days (2011 – 31 days). There is no material difference between the fair value and the carrying value of cash and cash

equivalents as of December 31, 2012. 13. Capital

The authorized, issued and fully paid-up capital consists of KD 10,629,366 (2011 – KD 9,663,060 shares) distributed to 106,293,660 shares (2011 – 96,630,600 shares) of 100 fils each and all shares are in cash and in kind (Note 1).

14. Treasury shares

2012 2011 Number of treasury shares (shares) 100,353 91,230 Percentage of issued shares (%) 0.094% 0.094% Market value (KD) 146,515 144,143 Cost (KD) 64,374 64,374

76


30

15. 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 statutory reserve. The Parent Company may resolve to discontinue such annual transfers when the reserve equals 50% of the capital. This reserve is not available for distribution except in cases stipulated by Law and the Parent Company's Articles of Association. Amount of KD 210,743 was transferred to statutory reserve since the statutory reserve had reached 50% of the capital.

16. 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. 17. Accounts payable and other credit balances

2012 2011 Contract advances 29,791,475 29,676,828 Suppliers 16,353,206 14,023,003 Accrued expenses 14,589,180 10,029,017 Contractors 9,944,861 7,766,445 Accrued leave and bonus 9,236,455 7,597,577 Retentions payable 7,720,526 6,143,119 Provision for maintenance projects (a) 2,404,017 3,254,017 Provision for penalty (b) 2,128,914 2,128,914 Other payables 1,810,406 1,225,099 National Labor Support Tax payable 289,319 253,318 Payable to Kuwait Foundation for Advancement of Sciences 104,700 100,313 Zakat share payable 73,778 94,507

Board of Directors’ remuneration payable 70,000 50,000 Dividends payable to shareholders 57,418 78,802 Deposits for others 247,584 27,413 Unearned revenue - 20,611 94,821,839 82,468,983

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.


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b) Provision for penalty represents penalty expected on execution of the Parent Company’s

projects with Government agencies.

Trade payables are non-interest bearing. There is no material difference between the fair value and the carrying value of accounts payable and other credit balances as of December 31, 2012.

18. Long-term loans

Long-term loans are summarized as follows:

Current portion

Non-current portion

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 carries an interest rate of 3.5% per annum over the Central Bank of Kuwait discount rate.

76,860 753,859 830,719 Loan from local bank for financing the purchase of fixed assets guaranteed by a formal mortgage of the Parent company factories on Salibya industry area; and repayable on monthly installments for the period of 5 years until March 1, 2017, carries an interest rate of 4% per annum over the Central Bank of Kuwait discount rate.

600,000 1,850,000 2,450,000 Loan from local bank repayable in monthly installments and deducted 15% of the value of payments received for projects maturing in August 30, 2014, carries an interest rate of 2% per annum over the Central Bank of Kuwait discount rate.

750,000 533,533 1,283,533 Loans from Gulf banks repayable in monthly installments and deducted 4% of the value of payments received for projects and carries an interest rate ranging from 7.5% to 7.75% and maturing in the year 2013 in return and guaranteed by partners and mortgage of the buildings, machinery and equipments of a subsidiary with Qatar Riyal 39,941,000

4,275,501 - 4,275,501 Balance as of December 31, 2012 5,702,361 3,137,392 8,839,753 Balance as of December 31, 2011 2,022,175 1,577,798 3,599,973

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15. 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 statutory reserve. The Parent Company may resolve to discontinue such annual transfers when the reserve equals 50% of the capital. This reserve is not available for distribution except in cases stipulated by Law and the Parent Company's Articles of Association. Amount of KD 210,743 was transferred to statutory reserve since the statutory reserve had reached 50% of the capital.

16. 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. 17. Accounts payable and other credit balances

2012 2011 Contract advances 29,791,475 29,676,828 Suppliers 16,353,206 14,023,003 Accrued expenses 14,589,180 10,029,017 Contractors 9,944,861 7,766,445 Accrued leave and bonus 9,236,455 7,597,577 Retentions payable 7,720,526 6,143,119 Provision for maintenance projects (a) 2,404,017 3,254,017 Provision for penalty (b) 2,128,914 2,128,914 Other payables 1,810,406 1,225,099 National Labor Support Tax payable 289,319 253,318 Payable to Kuwait Foundation for Advancement of Sciences 104,700 100,313 Zakat share payable 73,778 94,507

Board of Directors’ remuneration payable 70,000 50,000 Dividends payable to shareholders 57,418 78,802 Deposits for others 247,584 27,413 Unearned revenue - 20,611 94,821,839 82,468,983

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.


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b) Provision for penalty represents penalty expected on execution of the Parent Company’s

projects with Government agencies.

Trade payables are non-interest bearing. There is no material difference between the fair value and the carrying value of accounts payable and other credit balances as of December 31, 2012.

18. Long-term loans

Long-term loans are summarized as follows:

Current portion

Non-current portion

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 carries an interest rate of 3.5% per annum over the Central Bank of Kuwait discount rate.

76,860 753,859 830,719 Loan from local bank for financing the purchase of fixed assets guaranteed by a formal mortgage of the Parent company factories on Salibya industry area; and repayable on monthly installments for the period of 5 years until March 1, 2017, carries an interest rate of 4% per annum over the Central Bank of Kuwait discount rate.

600,000 1,850,000 2,450,000 Loan from local bank repayable in monthly installments and deducted 15% of the value of payments received for projects maturing in August 30, 2014, carries an interest rate of 2% per annum over the Central Bank of Kuwait discount rate.

750,000 533,533 1,283,533 Loans from Gulf banks repayable in monthly installments and deducted 4% of the value of payments received for projects and carries an interest rate ranging from 7.5% to 7.75% and maturing in the year 2013 in return and guaranteed by partners and mortgage of the buildings, machinery and equipments of a subsidiary with Qatar Riyal 39,941,000

4,275,501 - 4,275,501 Balance as of December 31, 2012 5,702,361 3,137,392 8,839,753 Balance as of December 31, 2011 2,022,175 1,577,798 3,599,973

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19. Provision for end of service benefits

2012 2011 Balance at beginning of the year 5,413,063 4,647,215 Charge for the year 1,293,864 1,094,932 Effect of consolidation of a subsidiary 250 - Paid during the year (442,515) (329,084) Balance at end of the year 6,264,662 5,413,063

20. 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 4.5% to 5.25% per annum (2011 – from 4.5% 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.

21. Due to banks

Due to banks represent overdrafts which carry interest rate ranging from 4.5% to 5.25% per annum (2011 – from 4.5% 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.

22. Gross profit 2012 2011

Projects

Vehicles, machinery &

garage

Asphalt factories and central mixers

Eliminations of inter- divisional

transactions

Total

Total Operating revenue 192,274,844 11,180,196 12,617,110 (39,309,319) 176,762,831 150,608,398 Operating Costs (172,414,747) (11,206,683) (11,633,668) 39,309,319 (155,945,779) (132,440,571) Gross profit 19,860,097 (26,487) 983,442 - 20,817,052 18,167,827

23. Other income 2012 2011 Interest income 85,787 25,687 Sales of scrap 103,383 10,462 Foreign exchange (loss) gain (3,058) 832 Tenders income - 68,010 Miscellaneous income 15,752 81,247 201,864 186,238


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24. General and administrative expenses

2012 2011 Staff costs 3,769,473 2,985,999 Bonus 748,447 687,497 Rent 528,842 468,280 Professional fees 165,749 209,701 Travel expenses 105,659 51,477 Bank charges 176,774 146,139 Other 1,529,144 1,023,573 7,024,088 5,572,666

The Bonus is payable to Managing Director, which represents 6% of the net 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, which was calculated according to the decision of the Board of Directors held on March 19, 2012.

25. Net investment income (loss)

2012 2011 Unrealized gain (loss) from changes in fair value of the

investments at fair value through income statement (Note 10) 97,091

(489,377) Realized gain on sale of investments at fair value through

statement of income -

98,361 Portfolio management fees (7,947) - Cash dividend 75,124 71,267 164,268 (319,749)

26. 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 Statutory reserve.

27. 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.

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24. General and administrative expenses

2012 2011 Staff costs 3,769,473 2,985,999 Bonus 748,447 687,497 Rent 528,842 468,280 Professional fees 165,749 209,701 Travel expenses 105,659 51,477 Bank charges 176,774 146,139 Other 1,529,144 1,023,573 7,024,088 5,572,666

The Bonus is payable to Managing Director, which represents 6% of the net 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, which was calculated according to the decision of the Board of Directors held on March 19, 2012.

25. Net investment income (loss)

2012 2011 Unrealized gain (loss) from changes in fair value of the

investments at fair value through income statement (Note 10) 97,091

(489,377) Realized gain on sale of investments at fair value through

statement of income -

98,361 Portfolio management fees (7,947) - Cash dividend 75,124 71,267 164,268 (319,749)

26. 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 Statutory reserve.

27. 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.

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28. 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.

29. 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:

2012 2011

Net profit for the year attributable to the parent company's shareholders 10,268,493 10,155,846

Number of shares outstanding : Shares Shares Number of issued shares at beginning of the year 96,630,600 96,630,600 Add: Bonus shares 9,663,060 9,663,060 Less : Weighted average number of treasury shares (100,353) (94,812) Weighted average number of outstanding shares 106,193,307 106,198,848 Earnings per share (Fils) 96.70 95.63 According to the International Accounting Standard 33 “Earnings per share” requirements, earnings per share for the year ended December 31, 2011 was 105.20 fils / per share and had been restated due to the effect of the bonus shares for the year ended December 31, 2011 (Note 32).

30. 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:

Consolidated statement of financial position: 2012 2011 Accounts receivable and other debit balances (Note 9) 353,634 96,940

Consolidated statement of income: 2012 2011 Key management compensation: Salaries and other short term benefits 1,702,420 1,325,562 Terminal benefits 25,827 51,797

1,728,247 1,377,359 Related party transactions are subject to the approval of parent shareholders’ annual general assembly.


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31. Staff costs Operating cost for the year ended December 31, 2012 includes staff cost amounted to KD

19,364,736 (December 31, 2011 – KD 18,371,446). 32. General Assembly The Parent Company’s Board of directors meeting held on March 28, 2013 suggested the

distribution of cash dividends of 70 fils per share and remuneration for Board of Directors of KD 70,000 for the year ended December 31, 2012. This suggestion is subject to approval from shareholders’ General Assembly Meeting.

The shareholders’ general assembly held on May 17, 2012 approved the distribution of cash

dividends of 70 fils per share and bonus shares of 10 shares for every 100 shares (Note 29) and remuneration for Board of Directors of KD 50,000 for the year ended December 31, 2011.


dividends of 70 fils 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.

33. Capital commitments As of the date of consolidated statement of financial position, the Group has capital commitments in respect of the following:

2012 2011

Purchase of investment available for sale 400,000 665,000 Purchase of land in state of Qatar 538,208 538,208

938,208 1,203,208 34. Contingent liabilities and claims

A) At the date of consolidated statement of financial position, the Group was contingently liable in

respect of the following:

2012 2011 Letters of credit 48,113,835 39,846,193 Performance guarantees 109,259,479 102,091,602 Guarantees for advance payments 39,967,289 32,691,514 Guarantees for bids 7,605,717 13,491,080 Guarantees for retentions 14,762,935 12,430,174 Other guarantees 5,173,588 5,613,431

224,882,843 206,163,994

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28. 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.

29. 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:

2012 2011

Net profit for the year attributable to the parent company's shareholders 10,268,493 10,155,846

Number of shares outstanding : Shares Shares Number of issued shares at beginning of the year 96,630,600 96,630,600 Add: Bonus shares 9,663,060 9,663,060 Less : Weighted average number of treasury shares (100,353) (94,812) Weighted average number of outstanding shares 106,193,307 106,198,848 Earnings per share (Fils) 96.70 95.63 According to the International Accounting Standard 33 “Earnings per share” requirements, earnings per share for the year ended December 31, 2011 was 105.20 fils / per share and had been restated due to the effect of the bonus shares for the year ended December 31, 2011 (Note 32).

30. 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:

Consolidated statement of financial position: 2012 2011 Accounts receivable and other debit balances (Note 9) 353,634 96,940

Consolidated statement of income: 2012 2011 Key management compensation: Salaries and other short term benefits 1,702,420 1,325,562 Terminal benefits 25,827 51,797

1,728,247 1,377,359 Related party transactions are subject to the approval of parent shareholders’ annual general assembly.


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31. Staff costs Operating cost for the year ended December 31, 2012 includes staff cost amounted to KD

19,364,736 (December 31, 2011 – KD 18,371,446). 32. General Assembly The Parent Company’s Board of directors meeting held on March 28, 2013 suggested the

distribution of cash dividends of 70 fils per share and remuneration for Board of Directors of KD 70,000 for the year ended December 31, 2012. This suggestion is subject to approval from shareholders’ General Assembly Meeting.


dividends of 70 fils per share and bonus shares of 10 shares for every 100 shares (Note 29) and remuneration for Board of Directors of KD 50,000 for the year ended December 31, 2011.


dividends of 70 fils 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.

33. Capital commitments As of the date of consolidated statement of financial position, the Group has capital commitments in respect of the following:

2012 2011

Purchase of investment available for sale 400,000 665,000 Purchase of land in state of Qatar 538,208 538,208

938,208 1,203,208 34. Contingent liabilities and claims

A) At the date of consolidated statement of financial position, the Group was contingently liable in

respect of the following:

2012 2011 Letters of credit 48,113,835 39,846,193 Performance guarantees 109,259,479 102,091,602 Guarantees for advance payments 39,967,289 32,691,514 Guarantees for bids 7,605,717 13,491,080 Guarantees for retentions 14,762,935 12,430,174 Other guarantees 5,173,588 5,613,431

224,882,843 206,163,994

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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 accounted against these contingencies.

35. Segment information

The Group is organized into functional divisions to manage its various lines of business. The Group operates mainly in the State of Kuwait and outside. For the purposes of segment reporting, the Group's management has decided its products and services into the following segments: - State of Kuwait segment. - Gulf Countries segment.

Details of the above segments, which constitute the segment information, are as follows:

2012

State of Kuwait

Gulf Countries

Non-controlling interests

Total

Operating revenue 141,748,189 35,014,642 - 176,762,831 Operating costs (125,966,439) (29,979,340) - (155,945,779) Gross profit 15,781,750 5,035,302 - 20,817,052 Segment results 12,535,195 656,306 (2,494,283) 10,697,218 Segment assets 141,740,265 31,417,001 - 173,157,266 Segment liabilities 100,792,969 27,876,103 - 128,669,072

2011

State of Kuwait

Gulf Countries


Total

Operating revenue 108,317,249 42,291,149 - 150,608,398 Operating costs (93,411,092) (39,029,479) - (132,440,571) Gross profit 14,906,157 3,261,670 - 18,167,827 Segment results 9,895,498 260,348 116,810 10,272,656 Segment assets 111,153,899 34,538,713 - 145,692,612 Segment liabilities 73,057,821 32,037,299 - 105,095,120

36. Financial risk management In the normal course of business, the Group uses primary financial instruments such as accounts

receivable, investments, cash and cash equivalents, term deposits, account payable 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.


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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.

2012 Increase / (Decrease)

in interest rate Balance

Effect on consolidated

income statement Long term loans ±50 basis points 8,839,753 ±44,199 Short term loans and credit facilities ±50 basis points 9,632,760 ±48,164 Due to banks ±50 basis points 8,805,371 ±44,027




income statement Long term loans ±50 basis points 3,599,973 ±18,000 Short term loans and credit facilities ±50 basis points 7,305,746 ±36,529 Due to banks ±50 basis points 1,234,326 ±6,172 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 and cash equivalents, term deposits 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.

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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 accounted against these contingencies.

35. Segment information

The Group is organized into functional divisions to manage its various lines of business. The Group operates mainly in the State of Kuwait and outside. For the purposes of segment reporting, the Group's management has decided its products and services into the following segments: - State of Kuwait segment. - Gulf Countries segment.

Details of the above segments, which constitute the segment information, are as follows:

2012

State of Kuwait

Gulf Countries


Total

Operating revenue 141,748,189 35,014,642 - 176,762,831 Operating costs (125,966,439) (29,979,340) - (155,945,779) Gross profit 15,781,750 5,035,302 - 20,817,052 Segment results 12,535,195 656,306 (2,494,283) 10,697,218 Segment assets 141,740,265 31,417,001 - 173,157,266 Segment liabilities 100,792,969 27,876,103 - 128,669,072

2011

State of Kuwait

Gulf Countries


Total

Operating revenue 108,317,249 42,291,149 - 150,608,398 Operating costs (93,411,092) (39,029,479) - (132,440,571) Gross profit 14,906,157 3,261,670 - 18,167,827 Segment results 9,895,498 260,348 116,810 10,272,656 Segment assets 111,153,899 34,538,713 - 145,692,612 Segment liabilities 73,057,821 32,037,299 - 105,095,120

36. Financial risk management In the normal course of business, the Group uses primary financial instruments such as accounts

receivable, investments, cash and cash equivalents, term deposits, account payable 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.


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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.




income statement Long term loans ±50 basis points 8,839,753 ±44,199 Short term loans and credit facilities ±50 basis points 9,632,760 ±48,164 Due to banks ±50 basis points 8,805,371 ±44,027




income statement Long term loans ±50 basis points 3,599,973 ±18,000 Short term loans and credit facilities ±50 basis points 7,305,746 ±36,529 Due to banks ±50 basis points 1,234,326 ±6,172 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 and cash equivalents, term deposits 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.

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Maturity table for financial liabilities:

2012

1-3

months 3-12

months 1-5

years Over 5 years Total

Accounts payable and other credit balances 27,372,650 53,584,280 13,864,909 - 94,821,839

Long term loans 4,597,104 1,120,615 2,815,180 306,854 8,839,753 Short term loans and credit facilities 3,234,894 6,397,866 - - 9,632,760 Due to banks 2,157,316 6,648,055 - - 8,805,371 37,361,964 67,750,816 16,680,089 306,854 122,099,723

2011

1-3 months 3-12

months 1-5



Long term loans 18,990 2,003,185 930,034 647,764 3,599,973 Short term loans and credit facilities - 7,305,746 - - 7,305,746 Due to banks - 1,234,326 - - 1,234,326 28,928,050 46,444,869 18,588,345 647,764 94,609,028

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 of December 31, 2012:

2012 2011

Market Index

Change in

equity price %

Effect on consolidated statement of

income

Change in equity

price %


income Investment portfolio ±5% ±88,350 ±5% ±76,224 Investment funds ±5% ±26,964 ±5% ±30,876

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, except that it was not possible to reliably measure the fair value of most of the available-for-sale investments as indicated in (Note 5).


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The Group had measured fair value, which 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). The following table presents the Group’s assets that are measured at fair value as of December 31, 2012: Assets Level 1 Level 2 Total Investments at fair value through

income statement

1,766,992

539,272

2,306,264 The following table presents the Group’s assets that are measured at fair value as of December 31, 2011: Assets Level 1 Level 2 Total Investments at fair value through

income statement

1,524,479

617,517

2,141,996 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.

37. 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.

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Maturity table for financial liabilities:

2012

1-3

months 3-12

months 1-5



Long term loans 4,597,104 1,120,615 2,815,180 306,854 8,839,753 Short term loans and credit facilities 3,234,894 6,397,866 - - 9,632,760 Due to banks 2,157,316 6,648,055 - - 8,805,371 37,361,964 67,750,816 16,680,089 306,854 122,099,723

2011

1-3 months 3-12

months 1-5



Long term loans 18,990 2,003,185 930,034 647,764 3,599,973 Short term loans and credit facilities - 7,305,746 - - 7,305,746 Due to banks - 1,234,326 - - 1,234,326 28,928,050 46,444,869 18,588,345 647,764 94,609,028

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 of December 31, 2012:

2012 2011

Market Index

Change in

equity price %


income

Change in equity

price %


income Investment portfolio ±5% ±88,350 ±5% ±76,224 Investment funds ±5% ±26,964 ±5% ±30,876

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, except that it was not possible to reliably measure the fair value of most of the available-for-sale investments as indicated in (Note 5).


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The Group had measured fair value, which 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). The following table presents the Group’s assets that are measured at fair value as of December 31, 2012: Assets Level 1 Level 2 Total Investments at fair value through

income statement

1,766,992

539,272

2,306,264 The following table presents the Group’s assets that are measured at fair value as of December 31, 2011: Assets Level 1 Level 2 Total Investments at fair value through

income statement

1,524,479

617,517

2,141,996 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.

37. 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.

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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. For the purpose of capital risk management, the total capital resources consist of the following components:

2012 2011 Due to banks 8,805,371 1,234,326 Long term loans 8,839,753 3,599,973 Short term loans and credit facilities 9,632,760 7,305,746 Less : term deposits (280,000) - Less : cash and cash equivalents (13,594,342) (7,934,578) Net debt 13,403,542 4,205,467 Total shareholder's equity 44,488,194 40,597,492 Total capital resources 57,891,736 44,802,959

Documents

· System), in addition to the previously awarded certificate ISO 9001: 2008 (Quality Management System) which was awarded during 2010. accomplished during 2012: 8. In addition to