BOARD OF DIRECTORS REPORT

Dear shareholder,

Since the global financial crisis of 2008, the world has been facing very volatile political and economic circumstances. While creating challenges, these circumstances have also resulted in opportunities.

KIPCO – with its highly experienced management team, prudent internal practices and long-term strategy of portfolio diversification – has been adept at navigating this terrain, and we have been able to successfully push our businesses forward.

At last year’s Shafafiyah Investors’ Forum, we predicted that our performance in 2019 would be in line with the positive results of the first quarter of the year. Our net profit for 2019 increased 6% to KD 30 million (US$ 99 million), compared to KD 28.3 million (US$ 93.4 million) the year before.

KIPCO’s total revenue from continuing operations for the year came to KD 766 million (US$ 2.53 billion) compared to KD 774 million (US$ 2.55 billion) in 2018. Subject to approval by our General Assembly, we are proposing to pay shareholders a cash dividend of 10 fils (10%) per share, as well as the Board of Directors’ remuneration of KD 220,000 and Executive Management remuneration of KD 3,818,000. It is worthy to note that the regulatory authorities have registered no penalties against the company.

An important business highlight for KIPCO in 2019 is the successful share capital increase, which was 17% oversubscribed and raised around KD 95.08 million (US$ 313.7 million) in equity. This resulted in an approximate 29.3% raise in KIPCO’s former issued share capital, bringing the capital to KD 200 million (US$ 660 million).

KIPCO also issued a seven-year US$ 500 million (KD 151 million) bond. The demand of US$ 3.6 billion on the order book was KIPCO’s largest ever in international debt capital markets, representing a seven-fold oversubscription.

The year 2019 saw the inauguration of The Late Salwa Sabah   Al Ahmad Al Sabah Stem Cell and Umbilical Cord Center. KIPCO Group is proud to have built this facility, the Gulf region’s first stem cell bank and research center, through a KD 7 million (US$ 23 million) donation made by Masharee Al Khair Charity Organization on behalf of the Group.

In 2019, Burgan Bank issued US$ 500 million in Perpetual Tier 1 Capital Securities to international debt capital markets, with a yield of 5.75%, The securities saw strong demand from a diverse investor base, in a testament to the strength of Kuwait’s financial market and Burgan’s credit story.

Early in the year, Gulf Insurance Group was given a fifth extension to its contract with the Ministry of Health to provide health insurance to retirees, ‘Afya’. In May, the company was awarded the new ‘Afya’ two-year contract, worth KD 307.8 million (US$ 1.02 billion).

Over the last twelve months, OSN has continued to offer new channels and a stellar programming line-up, making the TV viewing experience truly extraordinary for its clients. Revenue is expected to increase with the closing of major piracy sources, especially as OSN’s exclusive content is now available for the first time in 25 countries in the region, thanks to our OTT platform, WAVO (now rebranded OSN Streaming).

Our real estate arm, United Real Estate, received the construction permits for Hessah Towers, the residential 40-floor twin-towers being constructed in Hessah Al Mubarak District. The buildings are scheduled to be completed in 2022 and approximately 50% of the apartments have been sold. URC also signed a deal with Marriott International to bring the iconic St. Regis brand to Marrakech, as part of the real estate company’s Assoufid development project.

Following the completion of the legal execution of the merger with Global Investment House, KAMCO was rebranded KAMCO Invest. The merger, the largest in Kuwait’s investment sector, resulted in profits of KD 7.2 million (US$ 23.7 million) for KAMCO Invest and created a larger, stronger and more resilient entity that can support government and private sector development plans.

With the economic uncertainty that has emerged with the onset of the COVID-19 pandemic, each of our Group companies in its particular sector is evaluating the situation and is preparing to mitigate the impact, in order to be prepared once business restrictions are lifted.

As a Group, we stand by the steps that the Government of Kuwait has taken to ensure the safety of everyone living in the country, and we are confident that the measures it has put in place to protect and support the local economy will ease the impact on local businesses.

We 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 Sabah Al-Khalid Al-Hamad Al-Sabah, for their continued support and guidance. We would like to thank you, our shareholders, for the support and trust you have placed in your Board of Directors and management during the last 12 months. We would also like to thank all the employees of KIPCO and its operating companies for the contribution they made during the year.

On behalf of our shareholders, we thank the management for the results they achieved during 2019. May God continue to grant us success and prosperity.