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Perseverance is one of humanity's more endearing qualities. The year 2001 tested us all to the limits. Stock markets the world over delivered dismal performance; the once all-powerful tech stocks continued their sharp downward spiral; oil prices endured a prolonged roller coaster ride; and the final blows were the numbing events of September 11 creating global grief and uncertainty in an already tumultuous economic environment.

All things considered, the home front weathered the storm quite admirably. The Kuwait Stock Market performed well, the index was up 27% for the year. Qatar, UAE and Saudi Arabia also delivered positive results among the Gulf Cooperation Council (GCC) markets. Egypt, a major regional market, continued in recession; its stock market posting a loss - the Hermes Index down by 31%.

The principal reasons behind the positive performance of the major GCC stock markets were improved profitability of local companies, buoyant oil prices for the preceding two years, and the gradual liberalisation across regional economies. Kuwait however, continued to have difficulties in passing laws that would integrate its economy with the rest of the world.

The year 2001 also highlighted the urgent need for local economies to accelerate their economic policy making. China's joining of the WTO in December 2001, and the successful launch of the Euro unequivocally confirms that globalisation and regional economic blocks are trends that our region has to deal with rapidly. The GCC, near East and North African countries embody tremendous potential of becoming a vibrant economic zone with large capital and population resources. The seeds for growth of our regional economies are being sown at this very moment.

Integration of banking, securities, and trade laws within the GCC and the swift implementation of these reforms would be a vital step forward. Although a series of announcements have been made, and intentions have been understood, the actual execution of these steps has been slow, rendering the results somewhat less successful than they could be. The GCC Custom Union, and the cross-listing of stocks in different markets are examples of sound concepts that have not been successfully implemented.

The year 2001 yielded a net profit of KD7.2 million versus KD6.0 million in 2000 - up 19%. A major profit source was the increased contribution of income from our core investment in subsidiaries and associated companies. Revenue for the year 2001 was KD47.4 million versus KD43.3 million in 2000 - up 9%. Expenses increased to KD37.3 million from KD33.2 million principally due to a decline in the value of investments following the events of September 11, 2001.

The increased profits of our subsidiaries and associated companies provide a strong and clear indication that supports the quality, diversification and stability of KIPCO's profit. Equity income from associated companies increased by 82% to KD15.8 million in 2000. The improved profitability of our core holdings was recognised by the stock market during 2001 with the market value of the investment in our listed subsidiaries and associated companies increasing by KD51.9 million to KD200.5 million - a 35% appreciation.

Looking forward to the future, we are confident that the clarity and depth of our strategy, our continued investment in people, technology, and processes, our readiness to adopt, and our market awareness will empower us to continue producing market leading performance and solid returns over the coming years for our shareholders.

On behalf of the Board of Directors, I would like to thank His Highness, the Amir of the State of Kuwait, Sheikh Jaber Al-Ahmed Al-Jaber Al-Sabah; and His Highness, the Crown Prince and Prime Minister, Sheikh Sa'ad Al-Abdullah Al-Salem Al-Sabah; and His Excellency, the First Deputy Prime Minister and Minister of Foreign Affairs, Sheikh Sabah Al-Ahmad Al-Jaber Al-Sabah, for their continuing support and guidance. I also wish to extend my gratitude to the company's shareholders for the trust they have invested in us.

Finally, on behalf of the Board, I would like to express my heartfelt appreciation to our staff for their tireless efforts to serve the company's best interests.

May God grant us continued success and prosperity.