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Chairman's Message

Dear Shareholders of Coast Investment and Development Co.

May the peace and blessings of Allah be upon you.

17/06/2020

It is My fellow members of the board of directors and my pleasure to meet with you and discuss the annual report of Coast Investment and Development Co. for the financial year ending on December 31ST, 2019.

The year 2019 has built upon the economic expansion of the past three years, and continued stability of financial markets.  However, downside risks to the outlook are elevated. Trade barriers and heightened geopolitical tensions, including trade related risks, could further disrupt supply chains and hamper confidence, investment, and growth.

Global  growth registered 3.1% in 2019, a decline from 3.6% in 2018.  Monetary policy has significantly eased almost simultaneously across advanced and emerging markets, which helped spur demand, however Central Banks are slowly running out of further ability to cut rates.  Particularly notable was the slowdown in manufacturing output across the world, which has a significant correlation to crude oil demand

Equity markets in the United States and Europe have lost some ground but are still well above the lows during the sell-off at the end of 2018.  Capital flows to emerging market economies have reflected the broader shifts in risk sentiment throughout the year, with investors lowering their exposure to equities as they approached record valuations.

In the United States, the economy maintained momentum throughout the year. Even though investment remained sluggish, employment and consumption were at record highs. The effects of the 2017 tax cuts were still supporting labor markets and consumption, however the effects are diminishing over time.

In the Euro Zone, weaker growth in foreign demand and a drawdown of inventories due to weak industrial production have kept a lid on growth since mid-2018. Activity is expected to pick up only modestly over into 2020, as external demand is projected to regain some modest momentum.

Crude oil prices ended 2019 on a high note due to improving sentiment, sparked in part by the announcement of a ‘phase one’ trade deal between the US and China. OPEC’s agreement to deepen production cuts in a bid to correct the supply glut was particularly important in keeping prices stable. The inclusion of Russia in the OPEC+ grouping had a significant impact on tapering global supply.

Kuwaiti Crude prices closed the year above $68 per barrel, an increase of 31% over 2018, after hitting a yearly high of $69.0 per barrel in December.  Prolonged geo-political tension between the US and Iran also continues to have a significant impact, raising the risk premium, insurance, and transportation costs.  In December, OPEC+ agreed to deepen production cuts by a further 0.5 million barrels per day, and have communicated a willingness to further cuts should the need arise.

Boursa Kuwait witnessed a very upbeat 2019 performance, with the All Shares Index up by 23.7%, whereas the Premier Market Index recorded a stunning 32.3% gain in 2019.  A large contributor to these gains was the upgrade of Boursa Kuwait by FTSE to ‘emerging status’ and the anticipated MSCI upgrade in 2020.  The resultant foreign capital inflows have also helped lift ailing volumes, particularly in the Premier Market.  Foreign ownership in Kuwaiti banks was the largest recipient of foreign direct investment during the year.

On the internal level, the return from associate companies has decreased, particularly the Kuwaiti-German company, which is a major investment for the company.  Accordingly, the company recorded a net profit of 586 thousand Kuwaiti dinars compared to 1.4 million Kuwaiti dinars in 2018. The total assets decreased by 1.75% and the shareholders’ equity decreased by 1.6%.  The company has strived to benefit from the rise in local share prices, while trying to reduce the negative impact of events in the region and the rest of the world.  The company is also still debt free, in good financial standing, and with no pending legal obligations, giving it the ability to recover its leading position in the Kuwaiti economy.  The appropriate investment approach and diversification policy of the current portfolio as well as strict risk management will benefit the company in 2020 and beyond.

On this occasion, I would like to extend my sincere appreciation to the shareholders of the company, the board of directors and all the staff at Coast for their continued and unwavering support.  We remain hopeful that Almighty Allah will continue to bestow more success on Coast in the future.

May Allah protect Kuwait and its people from all evil.