Overcoming Boursa Kuwait Boursa obstacles. 2020 Annual Report Accelerating ambition. 2020Annual Report Contact us Boursa Kuwait Mubarak Al Kabeer Street, AlSharq, Kuwait P.O. Box 22235 Safat, 13083 Kuwait T: +965 22992000 F: +965 22440476 Investor Relations If you are seeking more information, please contact Boursa Kuwait’s Investor Relations Department at [email protected] Boursa Kuwait – 2020 Annual Report His Highness His Highness Sheikh Mishal Al-Ahmed Al-Jaber Al Sabah Sheikh Nawaf Al-Ahmad Al-Jaber Al-Sabah The Crown Prince of the State of Kuwait The Amir of the State of Kuwait 1 Boursa Kuwait – 2020 Annual Report Overview 2 Boursa Kuwait – 2020 Annual Report 3 Boursa Kuwait – 2020 Annual Report Table of Contents Overview Corporate governance General market statistics 5 Corporate governance report 36 At a glance 6 Corporate sustainability 54 Our history 8 Year in review 10 Consolidated financial statements Independent auditors’ report 66 Strategic review Consolidated statement of income 70 Statement from the Chairman 14 Consolidated statement of comprehensive income 71 Statement from the Chief Executive Officer 16 Consolidated statement of financial position 72 Our strategy 18 Consolidated statement of changes in equity 73 Board of Directors 20 Consolidated statement of cash flow 74 Notes to the consolidated financial statements 75 Financial review Financial overview 26 Market overview 28 4 Boursa Kuwait – 2020 Annual Report General Market Statistics (KD) 2019 2020 Change All-Share Index 6,282 5,546 -11.7% Number of Trading Days 250 242 -3.2% Number of Trades 1,543,128 2,318,050 50.2% Volume of Traded Shares (Million) 39,047 52,095 33.4% Value of Traded Shares (Million) 7,938 10,752 35.4% Average Daily Traded Value (KD Million) 31.8 44.4 39.6% Market Capitalization (KD Million) 35,798 32,220 -10.0% Number of Listed Companies 175 171 -2.3% Number of Brokerage Companies 11 10 -9.1% Real Estate Investment Trusts (Traded) 0 1 – 5 Boursa Kuwait – 2020 Annual Report At a glance A pivotal role in capital markets stablished in 2014, Boursa Kuwait is the operator of the Kuwait Stock Exchange, the national stock market of Vision Kuwait. Since 2016, it has been responsible for driving engagement, growth and innovation in the Kuwaiti We are working to develop a strong and efficient financial market capital market, while supporting the Capital Markets with liquidity and transparency that can effectively put issuers and Authority, issuers, investors and various other key stakeholders. investors in touch with one another for investment opportunities E and high returns on investment to create a developed capital Since its inception, Boursa Kuwait has played a pivotal role in the market that is a pioneer in the region. development of Kuwait’s capital market and the diversification of the national economy, in line with the goals of New Kuwait Vision 2035. Mission Guided by a mission-driven strategy that focuses on developing To develop an effective and fair platform for trading with high the market in line with international standards, Boursa Kuwait has transparency, one that is able to provide financial and investment successfully introduced innovative investment tools, reinforced services efficiently for all, with a focus on excellence in each transparency and restructured the market to increase its service we provide. competitiveness and liquidity. The company’s market developments and enhancements have Core values contributed to the reclassification of the Kuwaiti capital market Professionalism to “Emerging Market” status in the world’s top three indices, We adhere to widely accepted, proven international standards strengthening Kuwait’s position as a leading financial center in in our work. We deal with our customers, colleagues and all the region. stakeholders in an utmost professional manner. A trailblazer in Kuwaiti privatization, Boursa Kuwait underwent Accountability a privatization process over two stages, the first in February We take responsibility for our performance in the eyes of all, ready 2019, when a 44% equity stake was awarded to a group of to be held accountable for our individual actions and to receive Kuwaiti investment companies and an international exchange in commensurate rewards for our hard work and achievements. early 2019. Client impact In December 2019, the privatization process was finalized after We are results-oriented and strive to make a difference. We create the initial public offering of the Capital Markets Authority’s sustainable impact with our work in our industry and communities, 50% stake in the company was offered to Kuwaiti citizens, while delivering on our sustainability commitments. with an oversubscription rate of 850% making Boursa Kuwait the only stock exchange in the Middle East owned by the private Prudence sector. We continuously strive to achieve sustainable profits and returns for everyone and are committed to taking prudent steps, stemming In September 2020, Boursa Kuwait self-listed on the Premier from our understanding of the risk factors that our organization Market, and is one of the government entities in Kuwait to and our clients are exposed to. Our diligence in managing these successfully undergo privatization. factors mitigates risks. 6 Boursa Kuwait – 2020 Annual Report Total Revenue (KD) Total Assets (KD) 22,170,674 104,160,464 56.10% 187.78% Total Operating Expenses (KD) Total Liabilities (KD) 10,360,218 13,425,992 45.91% 228.05% Net Profit (KD) Total Equity (KD) 28,000,952 52,804,073 191.93% 64.49% 31.49% 30.93% urpton ee are n tran oon ota u(KD) 22,170,674 21.55% 16.03% learn ettleent an epotor ellaneou ee 7 Boursa Kuwait – 2020 Annual Report Our history The trading history of Kuwait is an illustrious one, going back to the beginning of the 20th century, when the shares of the Arabian Boats Company Limited were traded in 1911. Since then, the Kuwaiti capital market has made considerable gains, getting reclassified as an Emerging Market by the world’s leading index providers. Kuwait capital market history – 1950s till 2010 1970 Law No. (32) was issued to regulate stock trading for Kuwaiti shareholding companies. 1972 Integration of securities trading section. 1976 Ministerial Resolution No. (61) issued to organize dealing in Kuwaiti joint stock company 1950s shares. 1990 Establishment of public shareholding Trading at the Kuwait Stock companies. Initial Public Offerings (IPOs): Exchange (KSE) was interrupted for • 1952 Shares of National Bank of 1977 28 months due to the Iraqi invasion Kuwait The first stock exchange was of Kuwait, which reduced the • 1954 Shares of Kuwait National inaugurated and referred to number of listed companies from Cinema Co. as the Kuwait Stock Exchange. 54 to 28 companies. 1962 1982 2008 Law No. (37) – first law to organize “Black Monday” record losses in The global financial crisis heavily the stock market in Kuwait for unofficial Souk Al-Manakh, an over- affected Kuwait stock market. The companies established abroad. the-counter exchange crash due to capital market collapsed. Though failures in settlement. the indices recovered in 2009, it took five years to get past their pre- 1983 crisis levels. An Amiri Decree was issued concerning 2010 the reorganization of the exchange as February an independent financial institution. Law No. 7 of 2010 regarding the Establishment of the Capital Markets Authority and Regulating 1987 Securities Activities was issued on KSE have assigned Kuwait Clearing the 21st. Company (KCC) to undertake the responsibility of a clearing chamber for transactions made among traders. 8 Boursa Kuwait – 2020 Annual Report Boursa Kuwait history – from establishment till 2020 2019 April-October • Updated rulebook • Launch of MD 3.1 – Trade-at-last – Closing auction order 2014 – Off-market trades automation April – Short selling & SLB • Founded on by the Capital Markets – Intentional crossing Authority Commissioners’ Council. 2017 – Amendment • The establishment of Boursa May – Tender offers – Security swaps Kuwait marked the first step in • Launched trading efficiency’s MD 1 – REITs privatizing the Kuwaiti Stock – Tick size Exchange, the first stock market – T+3 settlement cycle June in the GCC, which was founded – Corporate actions • MSCI announcement of conditionally in 1983. – Static price limit reclassifying Kuwait to Emerging Market. • Launch trading rulebook (full rulebook) February-December • Announce plans of market segmentation 2015 • FEB: Partial privatization (Consortium • BCG’s five year transitional September won a tender to acquire 44% – PIFSS 6%) strategy was approved by Boursa • FTSE Russell announcement of reclassifying • OCT-DEC: 50% Public Offering subscription Kuwait’s Board of Directors. Kuwait to Emerging Market. • DEC: Confirmation of Kuwait’s inclusion to MSCI EM Indices 2016 2018 2020 April April February Formally assumed responsibility for • Updated rulebook • Launch of BK Main 50 Kuwait’s stock market operations. • Launched MD 2 July – Market segmentation October • Acquisition of additional 16.67% – Listing rules The Capital Markets Authority (CMA) of Kuwait Clearing Company – Analyst conferences awarded the exchange license to – Bilingual disclosures September Boursa Kuwait enabling independent – Market cap indices • Listing of Boursa Kuwait in operation of the exchange. – Dynamic circuit breakers the Premier Market. September – Index circuit breakers November • CIP web-based portal was • Kuwait’s inclusion into MSCI launched for timely disclosures October-November • Launch of Boursa