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

Dear shareholder,

The continuing problems of the Western economies have created a high degree of uncertainty and trepidation throughout the world. Each day seems to bring further bad news as the impact of sovereign debt, austerity measures and fears of depression erode investor confidence. But while the West suffers, Asia and the MENA region continue to grow.

Although the political changes that have swept through parts of our region over the last year have caused significant disruption – and may continue to do so for some time – the medium-term outlook for the region remains very positive. The MENA region may not be entirely unaffected by the West’s financial crisis, but supported by continued global demand for our natural resources, so far the region is proving resilient to the current downturn in Western economies.

As a company with interests in most of the countries within our region, we are exposed to some risk from the political upheavals that have shaken the area in the last year. However, as a consequence of our sector and geographical diversification, this risk is to be expected, and therefore, managed. We can report that we have no major concerns for any of our regional investments, but remain vigilant and alert to potential threats - and conversely - opportunities.

In Kuwait, the political situation of the last 12 months had a negative impact on the stock market and investor confidence. However, we have been encouraged by the modest progress of the country’s announced KD 30 billion (US$ 108 billion) development plan during the year. Obviously, we would like much faster approval and implementation of the plan, but the political imperatives required to make it a success, seem to be driving it forwards. The next 12 months are likely to see further progress of the plan, with tenders being awarded for major infrastructure and development projects. KIPCO companies operate in most of the sectors that can expect to benefit from the plan and as a result, we expect to see a positive impact in 2012.

A major highlight of the last 12 months was the successful launch of our KD 80 million (US$ 290 million) bond issue – the largest ever by a corporate in Kuwait. The issue was important for three reasons. First, the bond allowed us to continue our strategy of regularly raising money in the debt markets to diversify our investor base. Second, the bond has provided funds to improve your company’s financial flexibility. Third, and strategically perhaps most important, the bond went some way to answering the demands of our local capital market – a market which has been lying dormant since the global economic crisis began.

Another highlight of 2011 for your company was the formation of our new pensions and savings operation.This company will answer the need among regional consumers for low-risk methods of funding their retirement and launch in selected markets during the second half of this year.

We are delighted to report that despite difficult economic conditions in 2011, we recorded our twentieth consecutive year of profitability by achieving a profit of KD 30 million (US$ 107.7 million). Your company’s total revenues for the year were KD 351 million (US$ 1.26 billion), while our total consolidated assets reached KD 5.8 billion (US$ 21 billion) from KD 5.67 billion (US$ 20 billion) in 2010. Although our profits are down compared to last year, this is due to the significant transaction gains we made in 2010. A growth in our operating company profits, combined with a lower level of provisions, largely offset our lack of transaction gains this year, but not enough to give us an increase in year-on-year profits.

As a result, we are proposing to pay a cash dividend of 20 fils (20 per cent) and a 5 per cent stock dividend for 2011, subject to approval by our General Assembly.

We remain cautiously optimistic about the prospects for 2012. However, this optimism is tempered by the knowledge that the on-going financial problems of the Western economies could begin to impact the growth trends of Asia and MENA. If this does happen, then clearly, everyone is likely to be affected and it could be some time before sustained growth begins to return. But we believe that the fundamental strengths of your company will allow us to weather this storm and may even allow us to seize opportunities as they arise. We have a proven track record of identifying opportunities that others have missed and we are ideally placed to do so if the regional economy is affected by a worsening global situation.

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 Jaber Al-Mubarak Al-Hamad Al-Sabah for their continuing support and guidance.

We would also like to thank you, our shareholder, for the support and trustyou have placed in your Board of Directors and management during the last 12 months. We are sure you will also join us in thanking the employees of KIPCO and our operating companies for the commitment and contribution they made during 2011. On behalf of our shareholders, we would like to thank Mr Al Ayyar and his management team for the results they achieved during 2011.

May God continue to grant us success and prosperity.