NIG Prospectus - London Stock Exchange

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:19 pm – mac5 – 3776 Section 06 : 3776 Section 06FINANCIAL REVIEWThe following discussion and analysis should be read together with the consolidated financialstatements of NIG included elsewhere in this Base Prospectus. References in this section to2006, 2005 and 2004 are to the 12 month periods ending on 31 December in each year.NIG is a holding company engaged in a range of businesses including: the building materials,specialist engineering, petrochemicals, financial services, utilities and oil and gas services sectors.NIG also holds certain strategic and financial investments.NIG’s revenues are principally derived from (i) realised gains made on the sale of investments(including investments in associated companies) and unrealised gains through marking to markettrading investments and (ii) its dividend income from investments.Key Factors affecting ProfitIncome from InvestmentsNIG’s investment securities are categorised for accounting purposes as investments at fair valuethrough the statement of income (FVTPL) and as available for sale investments. FVTPLinvestments include trading investments which are investments acquired principally with a viewto short-term sale. FVTPL investments are recorded at fair value on acquisition, excludingtransaction costs. In addition, unsold FVTPL financial assets are re-valued at fair value at eachaccounting end date with the unrealised gains or losses so arising also being recorded through theincome statement.Available for sale investments are recorded at fair value on acquisition, plus transaction costs thatare directly attributable to the acquisition. Available for sale investments are re-valued at fair valueexcept for those investments for which fair value cannot be reliably measured, which aremeasured at cost less impairment. Unrealised gains or losses are recognised in the statement ofincome on the sale or impairment of the relevant asset. Changes in the fair value of available forsale investments are recognised in equity.NIG’s results during the period under review have been significantly impacted by gains made inrelation to certain investments. In particular, in 2006, NIG sold 28 per cent. of its 100 per cent.owned subsidiary Ikarus Industrial Petroleum Company SAK, for a consideration of KD 64.140million resulting in a profit of KD 34.258 million. In the same year, NIG also sold 9 per cent. out ofits 80 per cent. owned subsidiary Denham Investment Ltd. for a consideration of KD 17.487 millionresulting in a profit of KD14.264 million. NIG also realised a profit of KD 21.083 million in 2006 onthe sale of its shares in its subsidiary National Industries Company for Building Materials SAK,which represents the difference between the book value amounting to KD 18.494 million and thefair value amounting to KD 39.577 million of the distributed shares. This distribution diluted NIG’sholding in the subsidiary from 74 per cent. to 51 per cent. Finally, in 2006, NIG sold its 100 percent. owned subsidiary Bunyan Al Mashrik Co. KSCC for a consideration of KD 7.387 millionresulting in no profit or loss in the consolidated statement of income.In 2005, NIG disposed of Newage Transmission Limited, a wholly owned subsidiary located in theUnited Kingdom, for a cash consideration of KD 532 thousand resulting in a net loss of KD 1.264million. In the same year, NIG also disposed of Blanson, the trading division of BI Plastic, and NIG’s50 per cent. interest in Perry Barromedical Inc. for a net combined cash consideration of KD 1.117million resulting in a net loss of KD 213 thousand. Finally, NIG disposed of a 1 per cent. stake inits 52 per cent. owned subsidiary Noor Financial Investment Company KSC for a consideration ofKD 564 thousand which resulted in a profit of KD 24 thousand.In 2004, NIG disposed of a 75 per cent. stake in its wholly owned subsidiary Rotalac PlasticLimited for a deferred cash consideration of KD 322 thousand which resulted in a net loss (beforeany goodwill write-off) of KD 78 thousand. The remaining 25 per cent. was transferred to available60