Board of Directors' Reports: 2012 | 2011 | 2010 | 2009 | 2008 | 2007 | 2006 | 2005 | 2004 | 2003 | 2002 | 2001

Dear Shareholder,
It is no surprise that with national budget surpluses being swelled by high oil prices, the entire Middle East and North Africa region enjoyed an extremely favourable business climate during 2006. For perhaps the first time in living memory, sustained prosperity is also being matched by economic and political reforms, diversification from oil, privatization of stateowned companies, an increasing use of private sector and foreign capital and a focus on using budget surpluses to fund major infrastructure projects.

As a result of this climate, our region is witnessing a period of unprecedented economic growth. Despite regional conflict and significant losses for individual investors in local stock markets, this meant that 2006 was another year of opportunity for your company.

We are extremely pleased to report that our core operating companies were fully able to exploit these favourable business conditions and create substantial returns for our shareholders. As you have seen in the financial section of this Review, each of our core companies had a record year in 2006. This has allowed KIPCO itself to report another record year. During 2006, our profit increased by 32% and our revenue by 35%.

We are also very pleased to report that KIPCO’s reputation among the global investment community is now firmly established. This can be measured by the overwhelming response during 2006 to our debut Euro Medium Term Note programme which was heavily over-subscribed. This success was due largely to the efforts of our management team who spent many long hours visiting investors and making presentations about KIPCO’s financial position and business strategy. The time spent doing this in North America, Europe and Asia has created a worldwide reputation for KIPCO, a fundamental shift in our investor base and reduced the Company’s borrowing costs.

During 2006, we also increased our holdings in our core operating companies: we increased our stake in Wataniya by 5% to a total of 32%, our share of Burgan Bank by 1% to a total of 38% and our holding in United Gulf Bank by 2% to a total of 76%. We took this step because we have confidence in the earnings predictability of these companies. In other words, by increasing our holdings in our core operations, we are investing in our own success.

In 2006, we strengthened our central management team, our internal processes and systems in internal audit, information gathering and data-sharing to improve and streamline the relationship between KIPCO and its operating companies. As part of this process, we have tasked our management teams to seek greater synergy and deliver more opportunities for cross-selling between our businesses.

The regionalization of our business also continued in 2006. Our existing companies made further acquisitions and holdings in countries such as Syria, Egypt, Libya, Qatar and Iraq. This regionalization of our business and the long-term potential it represents, is an example of the way our companies are constantly seeking new opportunities to expand their geographical reach and build new revenue streams.

Looking ahead to 2007, we believe all our businesses are well-placed to deliver further growth and increase their revenue during the year. We believe our growing regionalization, the strength of our brands and the increasing synergy between our companies will provide the basis for this growth during the next 12 months.

We would like to thank His Highness, the Amir of the State of Kuwait, Sheikh Sabah Al-Ahmad Al-Jaber Al-Sabah, His Highness, the Crown Prince Sheikh Nawaf Al-Ahmad Al-Jaber Al-Sabah and His Highness the Prime Minister Sheikh Nasser Al-Mohammad Al-Ahmad Al-Sabah for their continuing support and guidance.

We would also like to thank you, our shareholder, for the support and trust you have placed in your Board of Directors and our management team during the last 12 months. We are certain you will also join me in thanking the employees of KIPCO and our operating companies for all their hard work during 2006.

May God continue to grant us success and prosperity.