Dear Shareholders,

It gives us a great pleasure to present our report for the year 2006 covering the achieved objectives, business results, profit & loss accounts as declared in the Balance Sheet of the Company.

During the year 2006, the company achieved its highest ever sales and registered AED 613 Million. This has been achieved despite the adverse conditions faced by the company in Iraq, which hampered our exports in the tender market. However, We achieved a qualitative shift in the private sector sales amounting AED 308 Million with a growth rate of over 36.5 % over 2005. The Company's operational performance has been the best till date and it registered highest-ever operational profits amounting AED 103.3 Million with an increase of AED 27.6 Million over 2005 by rate of 36.5. This increase of operational profits has been the result of the high sales volume of private sector as mentioned above.

In real monetary terms, the company achieved over AED 10 Million profits through investments in the stock market, as the company's total strategic investments portfolio reached AED 145 Million. The current market value of the portfolio equals its purchase price meaning that the investment security has not been affected in purchase value against the market value. However, the fall in strategic investments portfolio valuation at the end of year 2006 as compared to the end of 2005 resulted in valuation reduction of AED 35.9 Million. Thus, the net reduction of investment value after deducting the collected profit will be AED 25 Million. This has influenced the net profit of the year, bringing it to AED 67 Million.

The Board of Directors is of the opinion that the German Operations has achieved its strategic objectives of entry into European Union Market by obtaining the European Health Regulatory accreditations as the company was awarded EUGMP certification for its plants in UAE, enabling exports to the European Union Market. Accordingly, the Board has resolved to offload the Germany Plant and transfer manufacturing process to the UAE where from the direct export will be made to Germany and European Union..

As a part of its strategic vision, the company has identified SMS Company in India, one of the largest producers of Ranitidine in the world, for investment and by the beginning of 2007, the company would have acquired 12.2% of SMS Company for US$ 6.8 Million (AED 25 Million). This investment is expected to have synergistic effect, as Julphar will obtain primary materials at competitive prices. This company has been approved by the FDA and is currently exporting APIs to the USA. In accordance with a special agreement, Julphar will also have the right to sell these shares after one year as of 05/02/2007.

During the year 2006, we have initiated construction of two new integrated state-of-the-art plants, Julphar 8 & Julphar 9 that are intended to produce Antibiotic powder filling injectables and ointments. The construction has stared in October 2006 and is expected completion by 2007. The plant will be ready for commercial production by 2008 and the yearly production capacity for each factory will be 25 Million units (totaling 50 Million). Both factories will be equipped with capabilities of producing products that can be exported to USA and Europe. About AED 120 Million has been earmarked for both factories. These new facilities will boost the company's sales by another AED 210 Million, within 3 years of commencement of commercial production.

Along with the above investments, the company is also planning for construction of two more plants by April 2007. These projects will be specialized for production of Biotech products. Julphar 10 will be a specialized plant for producing bulk raw material for Biotechnology products whereas Julphar 11 will be producing finished biotechnology products. The management has signed technical know-how contracts for producing raw materials on the 2nd of November 2006 and the two plants are expected to be completed by June 2009.

The installed capacity of these projects will be 37 Million units of Biotech products annually. With in three years from commencement of commercial production, additional sales amounting AED 457 Million will be achieved from these facilities

In another major development, The Government of Ras Al Khaimah, the major shareholder in Julphar (presently holding 24 % of the capital) has allotted extra land, free of charge, measuring 2 Million sq. ft. for the new plants. It is worth mentioning that the recent grant is in addition to the existing Julphar's constructed factory land of 2 Million sq. ft. which was also a grant from RAK Government. On behalf of the Company shareholders, we heartily express our thanks and gratitude to H.H. Sheikh Saqr Bin Mohamed Al Qasimi, Ruler of Ras Al Khaimah and H.H. Sheikh Saud Bin Saqr Al Qasimi, Crown Prince Deputy Ruler who have been of great support in founding Julphar in Ras Al Khaimah where medical products are exported all over the world.

H.E. Humaid Al Qattami (UAE Minister of Health) paid his first visit to Julphar plants in June 2006 after assuming his position. During the course of meetings with the honorable minister, various issues relating to the Company and the interests of Ministry, including welfare of the patients, were discussed. Upon these meetings with the Minister, the Company sponsored the Ministry of Health's conference for performance development as well as to evolve new strategy of the Ministry for the coming years. The Company also sponsored a program titled " HOW IS HEALTH?" on Abu Dhabi TV and many other programs of Ministry of Health. The minister responded to the company's request to study prices adjustment of some of the Company products due to the high cost of raw materials. The company requested for registration of the Company pharmacies under subsidiary company and also the support of the ministry in registration of the Company pharmaceuticals in other countries, especially in GCC.

In response to the rights issue for the year 2006 which was 10 % of the increased shares, at value of AED 1.75, the company's shares were oversubscribed, despite non-subscription of major shareholders like ACDEMA and the Islamic Bank. However, the Government of RAK subscribed the shares that were not subscribed by ACDEMA and Islamic Bank and as a gesture of goodwill and confidence, allocated 8 million shares from the same to the company's agents at the same rate.

In similar fashion, the Company intends to assign about 8 Million shares in 2007 to pharmacists and physicians in all countries in appreciation of their efforts and trust that has been reposed with the company. This will strengthen the relation between the Company and those competent shareholders of pharmacists, physicians and agents.

The second phase of subscription for the shares shall began on 8th of April 2007 and the formal offer to subscribe to the increase of 20 % of increased capital shall be made, on the basis of number of shares held on 29th of March 2007. The unsubscribed shares will be allotted for those desiring to acquire the same. The subscription period will be open from 8th to 19th of April 2007.

We hope the Company has achieved its objectives, particularly the increase of sales and operation profits' constant improvement. Accordingly seek your approval to the Balance Sheet and Income Statement of the year 2006.

Finally, I wish to thank all our shareholders and stakeholders for their continuous support to Julphar in its endeavors and efforts.

Sheikh Faisal Bin Saqr Al Qasimi

Chairman and Member of Board of Directors