September 21, 2017
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Message from the CEO

Steady Steps Towards Sustaining our Market Leadership

 

Despite the economic challenges in 2016, KAMCO continued to build on its strong leadership position by primarily focusing on developing its core competencies in asset management and investment banking. With our clients’ abiding faith and confidence, we are committed to efficiently providing superior products and prudent services, which earn us the trust of our valued stakeholders year after year. This is in line with our corporate vision to not only develop and progress within our sector, but also sustain growth while exceeding market expectations. We have further maintained our operational growth through strategic partnerships, capitalizing on opportunities, and utilizing our wealth of expertise and cognizance.

The Company was ranked among the top 15 international lead managers and book runners in the GCC and MENA bond markets, as well as the first in Kuwait according to Bloomberg’s Europe, Middle East and Africa fixed income league tables for Q1 of 2016.

Our strong track record, comprehensive services, and client-oriented approach have always distinguished us from our competitors. We owe this to our professional and dedicated team of experts who consistently exceed client expectations in that respect. This has further cemented our reputation as a trustworthy and reliable firm.

KAMCO also expanded its offerings upon receiving an approval from the Capital Markets Authority (CMA) for the initial launch of a new fund, the KAMCO Islamic Equity Fund (KIEF), to cater to a wider range of clients looking to invest in a Shariah-compliant fund. We collaborated with Wellington Management International Limited, an experienced global investment service provider. The Fund enables us to open a gateway to our MENA investors into international markets. The Fund has been undergoing fundraising since the beginning of 2017.                 

Furthermore, as part of its 2020 Vision to be the preferred regional full-fledged investment banking provider, KAMCO inaugurated its new headquarter in the Dubai International Financial Centre (DIFC), which will provide new opportunities for development and growth on a regional and international scale.

KAMCO ended the year with around USD 10.4 billion in assets under management (AUM) that continues to be one of the highest in the region despite market conditions. The Company also completed investment banking transactions that included three bond issuances at a total value close to USD 1 billion, achieving a new track record of 92 completed transactions at a total value around USD 14 billion (as of December 31, 2016).

 

Step One: Sustaining Leadership and Growth Opportunities for Our Clients

In 2016, KAMCO embarked on its regional and international real estate investment plan, targeting ambitious properties across identified core investment values, providing sustainable returns to shareholders. The aim is to provide new, diverse and innovative income generating asset streams to sustain long-term value to clients and stakeholders.

It goes without saying that one notable milestone within this plan was the acquisition of the General Electric’s (“GE”) Global Operation Center building located in Cincinnati in Ohio, US, for a total value of USD 113 million, establishing KAMCO’s presence in the international real estate market.

Categorized as a Class “A” trophy property, the GE Global Operation Center building is a 12-story office tower housing GE’s Global Operation Center, located within The Banks “Work, Live, Play” mixed-use development area in downtown Cincinnati. The property was leased to GE starting from October 2016.

Another landmark acquisition was the 16,500 square meters commercial property in the Saudi capital, Riyadh. The property, rented by one of the leading retail companies in the region, achieved the objective of increasing revenue while achieving targeted returns for investors within the KAMCO Real Estate Yield Fund (KREYF).

These acquisitions take the Company a step further in providing income-generating investment tools to ensure that we progressively deliver higher rates of returns to investors.

KREYF, KAMCO’s US Dollar-dominated flagship product in the real estate space, was able to increase its size by 251%, returning 10.4%, since inception. The Fund distributed a total 4% to investors during the year. By end of year, KREYF had exceeded the mandated benchmark of 5.17% by 16 basis points. This came as a result of an active fund management strategy and a geographically-diversified real estate portfolio with streamlined returns. The ascending performance during the year was translated into a 56% upsurge in AUM as the fund attracted medium to long-term performance-chasing investors seeking new investment opportunities in the Gulf real estate market.

The KAMCO Investment Fund (KIF), which invests in select companies listed on the Boursa Kuwait, was the second best performing fund in Kuwait during 2016, achieving a net return of 4.75% in comparison to the weighted index, which ended the year with a negative performance of -0.42%. KIF has also significantly outperformed the benchmark indices over the trailing three and five year periods, registering a return of -12.27% in the three-year period and 0.17% in the five-year period, in comparison to a negative performance of -16.07% in the three-year and -6.29% in the five-year benchmark indices.

 

Step Two: Contributing to the Diversification of the Local Economy

At KAMCO, we strive towards developing the private sector and Kuwaiti economy through an array of market and investment opportunities. This includes bond and sukuk issuances, which we consider to be yet another building block in supporting the sustainability of Kuwait’s capital markets and the diversification of the local economy. We value our Investment Banking and Wealth Management teams in consistently undertaking roles in key transactions, while putting forth their experience and credibility to deliver the best possible outcome for our clients. The teams provide customized and comprehensive financial services, assisting existing and new clients in reaching their distinct objectives, through a wide range of investment tools that few firms in the GCC can match. 

The key to the Wealth Management team’s success is the personalized services that adapt to present and future conditions with an aim to grow asset values even in challenging and volatile markets. Recognized as innovative since establishment, we are known for our enduring client relationship skills across market cycles and generations, with an approach that is grounded  on experience that guides and supports clients through times of prosperity and uncertainty.

As a result, our Wealth Management team was active in initiating and raising funds for various KAMCO products as well as external mandates. In addition to raising capital for KREYF and KAMCO MENA Plus Fixed Income Fund (KMPFIF), the team successfully closed Burgan Bank’s Tier 2 bond issuance, Gulf Bank’s Tier 2 bond issuance and the Kuvyet Turk’s Sukuk issuance.

 

2016 Investment Banking highlights:

• Joint Lead Manager in Burgan Bank’s bond issuance of KD 100 million

• Joint Lead Manager in Gulf Bank’s bond issuance of KD 100 million

• Joint Lead Manager and Bookrunner in Kuvyet Türk’s Tier 2 capital-boosting Sukuk issuance of USD 350 million

• Buy-side advisor in Qurain Petrochemical Industries Company’s acquisition of a 27% stake in National Petroleum Services Company (NAPESCO)

• Sell-side advisor to the shareholders of an Egyptian pharmaceutical company in the sale of a 80% equity stake for EGP 303 million

• Buy-side advisor to acquire a 30% equity stake in a private medical equipment company operating in Kuwait

 

Step Three: Market Recognitions

The diligent work of our Asset Management team to grow and maintain KAMCO’s AUM over the years, along with the successful transactions executed by our Investment Banking and Wealth Management teams, have played key roles in raising KAMCO’s profile and further strengthening its prominent position in the local and regional markets.

We have strategically positioned ourselves as the preferred choice for both public and private sectors in the market. In addition, we continued to invest in the local debt capital markets to support its growth. Our continued increase in expertise earned us many market accolades for our achievements.

In 2016, KAMCO received six awards and rankings. The positive performance of KREYF earned it the “Best Real Estate Fund - Kuwait” during 2016 by the International Finance Awards (IFM). KAMCO was also awarded the “Asset Manager of the Year - Kuwait” by Global Investor, the “Best Investment Management Company - Kuwait” from the World Finance magazine, the “Best Wealth Management Company – Kuwait” by IFM, and the “Best Bond Issuance of the Year - GCC” by the Global Business Outlook, a UK based business publication, in recognition of KAMCO’s pioneering efforts in debt capital markets as one of the top tier lead managers locally and regionally.

KAMCO was ranked among the top 15 international lead managers and bookrunners in GCC and MENA Bonds, and the first in Kuwait according to Bloomberg. The rankings, based on actual funds raised during Q1 2016, accounted for the total volume and market share of all transactions executed during that period. Bloomberg’s quarterly fixed income league tables ranked KAMCO as the tenth in the GCC and the thirteenth in the MENA region for managing the issuance of bonds and sukuks.

Our Investment Research team reaffirmed their leadership status locally and regionally in the past year and once again played a crucial role in providing extensive analyses in facilitating the investment decision process within the company. The team provided insightful valuation, financial analysis and forward looking outlook reports, which were well received, cited by external media, and used for internal strategy formulation.  Recognized as one of the top research houses, the Team has succeeded in maintaining its reputation as a thought leader in Kuwait and the region. The team has issued numerous financial analyses, economic and market outlook reports, sector-specific reports, equity research, periodic market analysis reports that assess the performance of GCC and broader MENA markets. Our research continues to be published in highly sourced financial networks such as Reuters, Bloomberg, Capital IQ and FactSet, keeping our investors, clients and other stakeholders well acquainted with the latest updates in the market. We have also penned a Memorandum of Understanding with The Business Year (TBY), an international publishing firm of annual economic reviews on over 25 emerging markets, to collaborate on The Business Year: Kuwait 2017.

 

Step Four: Expanding Our Footprint

Building on its worthy record of accomplishments, KAMCO opened its new headquarter in Dubai International Financial Centre (DIFC), United Arab Emirates, after it has successfully established a robust reputation for solid performance through its conservative investment philosophy, level of transparency, as well as innovative products and services in Kuwait’s dynamic investment industry.

DIFC’s stable platform makes it the ideal hub for KAMCO to access emerging markets in the Middle East, Africa and South Asia (MEASA). With its existing operations in the United Arab Emirates, KAMCO’s DIFC office will strengthen the firm’s presence in the area while granting access to a larger base of potential regional and international clients.

 

Step Five: Adopting Best Practices

Reflecting our firm commitment to higher compliance standards, our Compliance and Anti-Money Laundering Department worked diligently to ensure that all requirements have been met to the recent regulations introduced in the Executive Bylaws of Law No. (7) of 2010 and its Amendments regarding the Establishment of the Capital Markets Authority (CMA) and Regulating Securities Activities.

 The Team rigorously follows up with the authorities to fully comprehend and expedite the process in order to meet all necessary regulations. In addition to that, KAMCO formed a designated committee to ensure timely and complete compliance with the new CMA law requirements and its related executive regulations.

As a result, KAMCO received praise from the regulatory bodies, including the CMA, recognizing KAMCO among the leading ten local companies in committing to transparency and applying the standards of corporate governance, as well as ensuring direct and continued communication with shareholders and investors and various media outlets.

Besides the latter, our team is also extensively and actively involved, both directly and indirectly, in assisting regulators formulate new policies and procedures that support the investment community.

KAMCO also joined the 1,000 firms which follow into the CFA Institute Asset Manager Code of Professional Conduct, which outlines the ethical and professional responsibilities of firms that manage assets on behalf of clients. For investors, the code provides a benchmark of ethical conduct they should expect from asset managers and offers a higher level of confidence in firms that adopt the code.

Over the past years, we have gained investor confidence by implementing a stern criteria and professional ethics towards our clients and their assets. Our compliance with the CFA Institute Asset Manager Code of Professional Conduct is another representation of our commitment to placing the interests and needs of our clients above all else.

 

Step Six: Commitment… Empowerment… Responsibility

As a leading investment company, we believe in our duty towards improving our community, whether it is by enhancing the local business and economic environment in which we operate, or by arming younger generations with the knowledge and experience that allows them to continue building on our achievements today.

Committing to educating and informing investors about key market trends, industry insights and international economic overview in line with the company’s core strategies, KAMCO collaborated with Gulf Bank in an event for high-net-worth individuals to provide them with in-depth insights into the real estate medium-term outlook. The event also highlighted some of the necessary tools and innovative products that help investors make informed decisions, adding value to their investment strategies.

Our corporate social responsibility (CSR) programs in 2016 focused on empowering the youth and lending our support to initiatives in the fields of health, education and the environment. It is crucial for companies to implement and monitor their social duties to contribute towards achieving a more sustainable economy. Our active engagement in the local community positively influences and develops the upcoming generation to exercise their abilities to better society as a whole. Employee engagement in KAMCO’s internal and external initiatives have developed and enhanced existing and new relationships with other colleagues, clients and members of the community.

 

Step Seven: Strengthening Our Team

In 2016, KAMCO remained a talent development institution recognized as one of the best employers that places high priority on recruitment and retention of talented staff. We continued to enrich talents on a day-to-day basis through innovative ways of training in line with our business strategy. The results came in an 85% engagement rate, above the average engagement in leading investment companies. KAMCO also continues to strive to achieve the mandated Kuwaitization level, having incorporated proactive policies that support this initiative while maintaining the standards of the company.

We organized multiple innovation workshops, productivity seminars and training courses that focused on strengthening organizational culture and leadership skills, such as “7 Habits of Highly Effective People”, FranklinCovey’s “The 5 Choices to Extraordinary Productivity” and KFAS’s Innovation Challenge Program. These programs were provided by leading trainers including FranklinCovey, Euromoney, Ernst and Young and ShiftIn Partners.

We also successfully executed the first of its kind K-Offsite program in which we developed our new vision, mission and core values, followed by the K-Strategy Execution Program. KAMCO also took part in the ongoing Global Management Challenge, the world’s biggest strategy and management competition comprising 500,000 participants from over 30 countries.

Another initiative was the Private Banking workshop held in collaboration with Euromoney Learning Solutions, which focused on the full range of services that clients may wish to obtain from private banking.

 

Step Eight: Performance in 2017 and Beyond

KAMCO continued to deliver on its strategy to further build its leadership position and sustain its operations moving forward. Despite economic volatility, 2016 was a good year for the Company.

In 2017, KAMCO will continue to focus on growing quality funds and assets under management. The Investment Banking activities are expected to perform reasonably well, as market conditions stabilize and present new opportunities, and particularly in the nascent debt capital markets and regional transactions, thanks to our renowned track record with local capabilities and regional presence through our DIFC office. Our asset management services are also expected to continue growing, with a focus on increasing market share in the region as well.

We will also focus on enhancing our interface with our clients, through which technology will play a major role. Investment firms and service providers who are focused on achieving a sophisticated level of product and service delivery will be better positioned in a competitive market.

Locally, CMA regulations have been evolving with higher standards of corporate governance and transparency, supporting the development of Boursa Kuwait by introducing new products and services. Kuwait’s economic position is quite strong, with high sovereign ratings and minimal debt. The forecasted public budget deficit and shy increase in oil prices are balanced on another hand with a government commitment to delivering infrastructure and development projects, more specifically with an aim to involve the private sector. With the government projects put into action, we predict a positive outlook for 2017.

With such a background, KAMCO is well positioned to grab local and regional opportunities, thanks to a culturally diversified team of professionals, strong market knowledge and experience, and most importantly, a client-centric business model seeking high-returns assets with minimal risks.

Going forward, we will continue to keep development, innovation, and client needs at the forefront of our strategy. I would like to express my deepest gratitude to our dedicated team who have been at the core of shaping KAMCO into what it is today. I would like to thank the Board of Directors and executive committee for placing their trust in the management’s strategy over the years. I would also like to thank the executive management team for their great efforts, which generated many milestones for us over the past year. I am grateful for our revered shareholders and clients for their continuous support and faith in our products and services. Lastly, I would like to commend Kuwait’s market regulators, government officials, and organizations for being instrumental in the development of the capital markets and economic structure of Kuwait. It is a pleasure for me to share our successes and I look forward to continuously growing KAMCO with you all.

 

Faisal Mansour Sarkhou

Chief Executive Officer