Message from the Chairman

Dear Shareholders,

What was yesterday just a vision is today a reality. When we look closely at companies that have grown much faster than their competitors, we note that all of them have challenged the accepted wisdom in their industry and very clearly defined the course they intended to pursue. The more powerful the vision, the more it energizes a company. Future successes are no longer based solely on past achievements. In today’s increasingly complex world, it’s crucial to constantly identify new paths for growth. Kaufman & Broad is the story of a dream that has been fulfilled and a developer-builder that has set new industry standards for quality and innovation. Kaufman & Broad’s results demonstrate the validity of the growth strategy announced six years ago during the IPO.
This strategy is based on a number of fundamental choices:

competitive positioning
The first key to success was to choose the most competitive positioning in the real estate market. Based on the conviction that the French want to own their own homes, the Company decided to focus on the housing market.
The offering targets mainly move-up buyers who use the sale of the property they already own to finance their new purchase and thus have a lower affordability ratio than first-time buyers.
Result: Kaufman & Broad has doubled its revenues in five years.

an effective business model
Kaufman & Broad’s business model derives its effectiveness from the Company’s ability to skillfully manage every link in the real estate chain, from finding land to delivering the finished product. While the Company’s main talent is the ability to identify premium quality land, its stringent management criteria require it to obtain a building permit and begin selling the properties before a purchase is completed. Strict control procedures at every step of the process have made it possible to achieve results without taking unnecessary risk.
Result: Kaufman & Broad has maintained a high level of profitability, year after year, since the initial public offering.

effective regional development
Kaufman & Broad’s understanding of sociological developments and demographic trends has enabled it to adapt to changes in demand. Once the Company had established itself as a leading developer-builder in the Ile-de-France region, it took stock of the major migratory flows taking place throughout the country. The population is moving to the outskirts of large urban centers and to certain regions, notably the Mediterranean and Atlantic shores,which offer both an inviting climate and the charms of seaside living. In light of these trends, the Company has developed its presence in regions outside the Paris area, through both organic growth and the acquisition of respected local developer-builders that meet its stringent criteria.
Result: Kaufman & Broad has established a solid presence in all high-potential cities.

a strong brand
In a highly fragmented industry, Kaufman & Broad gradually developed into a powerful brand that derives its strength from an ability to listen to customers and enhance the product and service portfolios.
In terms of space, comfort and lighting, Kaufman & Broad homes have become an industry benchmark.
The success of its showrooms in Paris, Lyon, Marseille and Nice demonstrates an ability to meet the expectations of customers,who increasingly want to personalize their homes.
The Company has also pioneered in the use of online services, creating an extranet to keep in touch with customers while their homes are being built.
Result: Kaufman & Broad has the best reputation for quality in France.

The choices that have driven the Company’s success are clear proof of its capacity for anticipation and innovation. They also provide it with a significant competitive edge with regard to future market developments.

fast-growing demand for housing
Demand for housing is strong and lasting.
In addition to the shortfall that has built up over the years, there is the added need for new housing adapted to demographic and sociological trends.
The breakup of family units is creating new lifestyles. With today’s rising divorce rate, the number of single-parent households is constantly increasing. At the same time, there is a desire for independence, both among young people who want to move out of their parents’ home at an earlier age and among couples who want to maintain separate living quarters.
Changes in the behavior of seniors have created new mobility patterns. As they reach retirement age, some want to live in a sunnier climate or closer to their families, while others, anticipating a possible loss of self-sufficiency, are moving to apartments that are better adapted to their needs, more secure and closer to city centers.

Lastly, France appeals to many Northern Europeans who are buying vacation or retirement homes in the country.

a targeted offering
In a market that will continue to see sustained demand, the Company’s selective positioning in terms of regions, customers and products should strengthen its leadership in its core housing business.
Whether for single-family homes or apartments, Kaufman & Broad’s expertise and ongoing commitment to innovation enable it to satisfy a full range of customer aspirations.

promising growth drivers
The corporate property market is once again trending favorably and Kaufman & Broad is taking advantage of the upswing in demand from institutional investors, which is intensifying.
Student residence halls and business traveller accommodations represent solid growth drivers over the medium term. All the major cities in France have large unmet needs for student housing. As a result, the Company is building student residences in Lyon, Marseille and Toulouse. Corporate decentralization and greater personal mobility have also created new demand for apartment hotels around major metropolitan areas.

Kaufman & Broad’s presence in leading French cities, its understanding of these markets and its land portfolio also provide an obvious opportunity for the Company to become a major player in the assisted living facilities segment.

In view of these powerful trends,what are the challenges facing the real estate industry with respect to the environment and the principles of sustainable development?

While these challenges involve additional costs that customers are not always willing to pay, they remain an imperative for everyone.

Kaufman & Broad’s Environmental Charter expresses the Company’s commitment to environmental stewardship.

This commitment begins with the selection of partners capable of complying with these criteria and continues with environmental protection advice given to customers upon delivery of their homes.

Kaufman & Broad’s vision of the future is supported by attention to detail and to everyday concerns, both with regard to customers and within the Company.

This vision is also supported by its core values of excellence, innovation and trust, which have driven its past success and will continue to guide its future development.