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As in 2003, this was a good year for our Group, the Kuwaiti economy and the regional economy as a whole. We expected the underlying market factors prevalent in 2003 to continue to hold sway, with sustained high oil prices and buoyant stock markets. This expectation proved correct, and as a result national economies have had bumper years throughout the region.

For the KIPCO Group 2004 was again a record year, and the outlook for another record in 2005 appears bright indeed; we expect to be able to look back in years to come and say that 2003 and 2004 were the beginning of the good times for our Group. For a company and its shareholders the "bottom line" measure of operating performance is the net profit for the year. When we wrote to you at this time last year announcing a net profit of KD 18 million (increased from KD 6 million in 2002) we assured you that we expected this growth to continue, and net profits to improve further. It is therefore extremely gratifying to present a set of Financial Statements that show a net profit of KD 25 million.

All the Group companies made a significant contribution to this year's results and did so because of the increasing size of predictable and sustainable operating income streams. Burgan Bank led the charge with net profits increasing by 45 per cent compared to 2003; while Wataniya Telecom’s net profits grew by 21 per cent versus 2003; and United Gulf Bank continued to improve its performance, recording a 19.6 per cent jump in net income from its 2003 level. Gulf Insurance Company continued its solid and stable net profit growth, delivering a 5 per cent increase in net profit when compared to 2003. Showtime achieved important financial milestones on its path to becoming a leading Pay TV operator in the Middle East and North Africa.

This growth in profit naturally resulted in increased dividend payouts from our core operating companies. The dividend from core operating companies to KIPCO consequently increased to KD 18.4 million, an increase of 62 per cent compared to 2003.

Burgan Bank’s renaissance has continued in 2004. What is noteworthy is the fact that the Bank has begun to put in healthy roots in the way it operates its business. One example of these roots is the corporate governance policies, procedure and controls put in place in 2004. This places Burgan Bank at the forefront of banks in Kuwait – and perhaps the GCC countries – in championing best business practice and adopting the Basel II requirement. The introduction of the fair process system is another example of building a bank with deep roots in developing, nurturing and rewarding its staff, who are the real engine of the Bank.

The Year 2004 for Wataniya could be described as a year when the Company was able to sustain profitable growth, despite launching operations in Iraq and Algeria. It is worth noting that despite being a five years-old company Wataniya has, in addition to starting a Kuwait operation, launched operations in three other countries and won licences in four countries during the same period, in Tunisia, Iraq, Algeria, and the Maldives. This regionalisation initiative resulted in a growth of its customer base by 96 per cent when compared to the previous year, providing an opportunity to some serve 2.6 million customers.

United Gulf Bank of Bahrain entered its Silver Jubilee year delivering historical levels of income and profitability. The regionalisation initiative of the Bank continued during 2004 with Algeria Gulf Bank formally opening its doors for business. The Bank signed a MOU with Bank of Baghdad (BoB) to take a 25 per cent stake in the capital increase. BoB is the second largest private bank in Baghdad with 19 operating branches. UGB received initial approval from the Central Bank of Syria for forming a new US$ 30 million capitalised commercial bank, subject to final regulatory and other approvals, to own a 24 per cent stake and manage the bank. Syrian investors will be offered 51 per cent of the bank, while other Kuwaiti investors will own 25 per cent.

In the insurance sector, the total volume of the life and health markets has again increased significantly, and Gulf Insurance Company’s dominance in these markets has generated good returns. In fact, this pattern of profits based on business models rather than market trends is nowhere seen more clearly than in KIPCO itself, where the record profits have been made despite the market continuing to undervalue the shares of Group companies.

As you will see when you read the CEO's report, 2004 was a year of many significant achievements for the Group. These represent the fulfilment of much planning, they represent the materialisation of expectations and they represent the realisation of long-nurtured strategies for the Group. Important as these achievements were, we know that greater advances – impacting both the quantum and the quality of the profits – will happen in 2005; events such as the Initial Public Offerings for SADAFCO and for Showtime will generate excellent returns for the Group.

We would like to thank His Highness, the Amir of the State of Kuwait, Sheikh Jaber Al Ahmed Al Jaber Al Sabah, His Highness, the Crown Prince Sheikh Sa'ad Al Abdullah Al Salem Al Sabah, and His Excellency the Prime Minister, Sheikh Sabah Al Ahmad Al Jaber Al Sabah for their continuing support and guidance. Once more we wish to thank the Company's shareholders for the faith they have shown in entrusting this Group to our care. We also wish to recognise – and record our great thanks for – the tireless efforts of the staff of the Company in striving to best serve the Company's interests. May God continue to grant us success and prosperity.