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Kuwait International Bank K.S.C.

Interim Condensed Financial Information

For the period ended 30 June 2010(Unaudited)

Deloitte.111 111111111

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JIIII i.!J ERNST&YOUNGErn st & YoungAI Ai ban, AI Osaimi & PartnersP.O. Box 74 Safat13 00 1 Safat , Kuwai tBaitak Tower, 18-21st FloorSafat SquareAhme d AI Jaber St reet

Tel : 2245 2880/22 95 5000Fax: 2245 6419Email: jluy(ait @kw.ey.c_olI)

Deloitte & ToucheAI-Fahad, AI Wazzan & Co.

Fahad AI-Salem Street

Salhiya Complex, Entrance 2

P.O. Box 23049, Safat 13091

Kuwait City, Kuwait

Tel: +965 22438060

Fax:+965 22452080

www.deloitte .com

Ahmed AI-Jaber Street

Dar AI-Awadi Complex

i h Floor, P.O. Box 20174

Safat 13062

Sharq - Kuwait

Telephone : +96522408844

Facsimile: +965 22408855

REPORT ON REVIEW OF INTERIM CONDENSED FINANCIAL INFORMATION TO THE BOARD OFDIRECTORS OF KUWAIT INTERNATIONAL BANK K.S.C.

IntroductionWe have reviewed the accompanying interim condensed statement of financial position of Kuwait International BankK.S.C. ("the Bank") as at 30 June 20 I0 and the related interim condensed statements of income and comprehensive incomefor the three month and six month periods then ended, and the related interim condensed statements of changes inshareholders' equity and cash flows for the six month period then ended. The management of the Bank is responsible forthe preparation and presentation of this interim condensed financial information in accordance with the basis ofpresentation set out in note 2. Our responsibility is to express a conclusion on this interim condensed financial informationbased on our review.

Scope of ReviewWe conducted our review in accordance with International Standard on Review Engagements 2410, "Review of InterimFinancial Information Performed by the Independent Auditor of the Entity". A review of interim financial informationconsists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analyticaland other review procedures. A review is substantially less in scope than an audit conducted in accordance withInternational Standards on Auditing and consequently does not enable us to obtain assurance that we would become awareofall significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

ConclusionBased on our review, nothing has come to our attention that causes us to believe that the accompanying interim condensedfinancial information is not prepared, in all material respects , in accordance with the basis of presentation set out in note 2.

Report on other Legal and Regulatory RequirementsFurthermore, based on our review, the interim condensed financial information is in agreement with the books of account ofthe Bank. We further report that, to the best of our knowledge and belief, we have not become aware of any materialviolations of the Commercial Companies ' Law of 1960, as amended, or of the Articles of Association of the Bank duringthe period ended 30 June 2010 that might have had a material effect on the business of the Bank or on its financial position.

We further report that, during the course of our review, to the best of our knowledge and belief, we have not become awareof any material violations of the provisions of Law No. 32 of 1968, as amended, concerning currency, the Central Bank ofKuwait and the organization of banking business, and its related regulations, during the six-month period ended 30 June2010.

',- :\--~WALi-E~-iiitSAIMILICENCE NO. 68 AOF ERNST & YOUNGAL AIBAN, AL OSAIMI & PARTNERS

13 July 2010Kuwait

--JASSIM AHMAD AL-FAHADLICENCE NO. 53 ADELOITTE & TOUCHEAL-FAHAD, AI-WAZZAN & CO.

Kuwait International Bank K.S.C.INTERIM CONDENSED STATEMENT OF FINANCIAL POSITION(UNAUDITED)30 June 2010

(Audited)30 June 31 December 30 June

2010 2009 2009Note KD'OOO KD 'OOO KD'OOO

ASSETSCash and balances with banks and financial institutions 5,145 4,302 3,324Due from banks and other financial institutions 3 303,573 267,160 278,767Financing receivables 739,367 761,893 724,311Loans and advances 3,561 2,546 2,099Investment securities 55,799 61,022 61,916Investment in associates 4 4,800 4,800 9,546Investment properties 5,950 5,970 6,409Other assets 4,967 5,374 4,800Property and equipment 26,702 27,269 14,844

TOTAL ASSETS 1,149,864 1,140,336 1,106,016

LIABILITIES AND SHAREHOLDERS' EQUITYLIABILITIESDue to banks and other financial institutions 5 260,554 232 ,513 223,579Depositors' accounts 688,974 713,284 700,899Other liabilit ies 22,349 21,336 19,782

TOTAL LIABILITIES 971,877 967,133 944,260

"--SHAREHOLDERS' EQUITYShare capital 103,732 103,732 103,732Share premium 49,480 49,480 49,480Treasury shares (45,234) (45,234) (45,234)Other reserves 70,009 65,225 53,778

TOTAL SHAREHOLDERS' EQUITY 177,987 173,203 161,756

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 1,149,864 1,140,336 1,106,016

She~~ah:Chairman

The attached notes 1 to 13 form part of the interim condensed financial information.

2

Kuwait International Bank K.S.C.INTERIM CONDENSED STATEMENT OF INCOME (UNAUDITED)For the period ended 30 June 2010

Three months ended 30 June Six months ended 30 June2010 2009 2010 2009

Note KD'O OO KD'OOO KD'OOO KD'OOOINCOMEMurabaha and other Islamic fmancing

income 11,127 13,745 21,704 26,175Estimated distribution to depositors 6 (3,702) (5,026) (7,648) (12,748)

Net financing income 7,425 8,719 14,056 13,427Investment income 325 150 1,398 2,213Share ofloss from associate (234) (234)Net fees and commission income 884 649 1,595 1,329Net gain from foreign exchange 176 223 250 63

8,810 9,507 17,299 16,798

EXPENSESStaff costs (2,723) (2,948) (5,395) (5,848)General and administrative expenses (795) (766) (1,528) (1,526)Depreciation (823) (504) (1,657) (992)Unrealized loss on financial assets at

fair value through statement ofincome (1,460)

Reversal (impairment loss) and otherprovisions 430 (7,394) (2,061) (12,741)

Reversal of impairment loss 820 820

(3,911) (10,792) (12,101) (20,287)

OPERATING PROFIT (LOSS)BEFORE DEDUCTIONS 4,899 (1,285) 5,198 (3,489)

Provision for National Labor SupportTax (122) (130)

Zakat (42) (42)

PROFIT (LOSS) FOR THE PERIOD 4,735 (1,285) 5,026 (3,489)

BASIC AND DILUTED EARNINGS7

(LOSS) PER SHARE (FILS) 5.07 (1.38) 5.38 (3.74)

The attached notes 1 to 13 form part of the interim condense d financial information.

3

Kuwait International Bank K.S.C.INTERIM CONDENSED STATEMENT OF COMPREHENSIVE INCOME(UNAUDITED)For the period ended 30 June 2010

Three months ended 30 June2010 2009

KD'OOO KD 'OOO

Six months ended 30 June2010 2009

KD '000 KD '000

Profit (loss) for the period

Other comprehensive (loss) incomeNet unrealised (loss) gain on financial assets

available -for-saleShare of comprehensive income of associate

Other comprehensive (loss) income for theperiod included directly in equity

Total comprehensive income (loss) for theperiod

4,735

(793)

(793)

3,942

(1,285)

218180

398

(887)

5,026

(242)

(242)

4,784

(3,489)

247180

427

(3,062)

The attached notes 1 to 13 form part of the interim condensed financial information .

4

f

Kuwait International Bank K.S.C .INTERIM CONDENSED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)For the period ended 30 June 2010

Res erves

Treasury FairShare Share Treasury Statutory Voluntary shares Accumulated valuation Revaluation Totalcapita l premium shares reserve reserve reserve loss reserve surp lus reserves TotalKD'OOO KD'OOO KD'OOO KD'OOO KD'OOO KD'OOO KD 'OOO KD'OOO KD'OOO KD'OOO KD'OOO

Balance as at 31 December 2009 (audited) 103,732 49,480 (45,234) 22,633 16,550 4,846 (8,235) 9,584 19,847 65,225 173,203Profit for the period - - - - - - 5,026 - 5,026 5,026Other comprehensive loss for the period - - - - - (242) - (242) (242)

To tal comprehensive income (loss) for theperiod - - - - 5,026 (242) - 4,784 4,784

Transfer for incremental deprec iation - - - - - 574 - (574)

Balance as at 30 June 2010 103, 732 49,480 (45,234) 22,633 16,550 4,846 (2,635) 9,342 19,273 70,009 177,987--

Balance as at 31 December 2008 (audited) 94,302 49,480 (45,234) 22,633 16,550 4,846 9,430 4,455 8,356 66,270 164,8 18Loss for the period - - - (3,489) - (3,489) (3,489)Other comprehensive income for the period - - - 427 427 427

Total comprehensive (loss) income for theperiod - - - - - (3,489) 427 (3,062) (3,062)

Issue of bonus shares 9,430 - - - (9,430) - (9,430)

Balance as at 30 June 2009 103,732 49,480 (45,234) 22,633 16,550 4,846 (3,489) 4,882 8,356 53,778 161,756


5

Kuwait International Bank K.S.C.INTERIM CONDENSED STATEMENT OF CASH FLOWS (UNAUDITED)For the period ended 30 June 2010

OPERATING ACTIVITIESProfit (loss) for the periodAdjustments for:Dividend incomeNet gain from foreign exchangeNet gain from investment securiti esShare of loss from associateDepreciationUnrealized loss on financial assets at fair value through statement

of incomeImpairment loss and other provisionsReversal of impairment loss

Operating profit before changes in operating assets and liabilitiesChanges in operating assets and liabiliti es:Due from banks and other fmancial institutionsFinancing receivablesLoans and advancesOther assetsDue to banks and other financial institutionsDepositors' accountsOther liabilities

Net cash used in operating activities

INVESTI NG ACTIVITIESPurchase of investment securitiesProceeds from sale of investment securitie sPurchase of property and equipmentDividend income received

Net cash from investing activities

DECREASE IN CASH AND CASH EQUIVALENTS

Cash and cash equivalents at beginning of the period

CASH AND CASH EQUI VALENTS AT END OF THE PERIOD


Note KD'OOO KD 'OOO

5,026 (3,489)

(1,351) (2,124)(250) (63)

(44)234

1,657 992

1,4602,061 12,741

(820)

8,603 7,427

(53,143) (85,514)21,691 (19,143)

(724) 297407 4,249

28,041 (39,549)(24,310) 64,629

2,984 662

(16,451) (66,942)

(205)217 1,500

(1,070) (958)1,351 2,124

498 2,461

(15,953) (64,481)

251,466 259,004

8 235,513 194,523


6

Kuwait International Bank K.S.C.NOTES TO INTERIM CONDENSED FINANCIAL INFORMATION (UNAUDITED)30 June 2010

1 CORPORATE INFORMATION

Kuwait International Bank K.S.C ("the Bank") is a pub lic shareholding Company incorporated in State of Kuwaiton 13 May 1973 as a specialized bank and was registered with the Central Bank of Kuwait as an Islamic bank on1 July 2007.

The Bank is engaged principally in providing Islamic banking services, the purchase and sale of properties,leasing, and other trading activities. Trading activities are conducted on the basis of purchasing variouscommodities and selling them on murabaha at negotiated book margin which can be settled in cash or oninstallment credit basis.

The registered office of the Bank is at West Tower - Joint Banking Center, P.O. Box 22822, Safat 13089,Kuwait.

This interim condensed financial information has been approved for issue by the Board of Directors on 13 July2010 .

2 BASIS OF PREPARATION

The interim condensed financial information has been prepared in accordance with International AccountingStandard (lAS) 34 "Interim Financial Reporting" except as noted below.

The accounting policies used in the preparation of the interim condensed financial information are consistent withthose used in the preparation of the annual financial statements for the year ended 31 December 2009 which areprepared in accordance with International Financial Reporting Standards (IFRS) as adopted in the State of Kuwaitfor financial institutions regulated by the Central Bank of Kuwait. These regulations require adoption of all IFRSexcept for the lAS 39 requirement for collective provision, which has been replaced by the Central Bank ofKuwait' s requirement for a minimum general provision.

The interim condensed financial information does not contain all information and disclosures required for fullfinancial statements prepared in accordance with the IFRS. For more details please refer to the financialstatements for the year ended 31 December 2009. In the opinion of management, all adjustments consisting ofnormal recurring accruals considered necessary for a fair presentation have been included .

Operating results for the period ended 30 June 2010 are not necessarily indicative of the results that may beexpected for the financial year ending 31 December 2010. For more details please refer to the financial statementsand its related disclosures for the year ended 31 December 2009.

3 DUE FROM BANKS AND OTHER FINANCIAL INSTITUTIONS

Tawarruq transactions with Central Bank of KuwaitMurabaha finance with other banks and financial institutions

contractual maturi ty of 90 days or lessMurabaha finance with other banks and financial institutions

contractual maturity of more than 90 days


2010 2009 2009KD'OOO KD'OOO KD 'OOO

145,353 84, 179 33,127

85,015 162,985 158,072

73,205 19,996 87,568

303,573 267,160 278,767

7


4 INVESTMENT IN ASSOCIATES

The Bank holds an equity interest of approximately 50% in Financial Group of Kuwait KSCC (FGK) which isclassified as investment in associate. During the years 2005 and 2006 , the Bank wrote down the value of thisinvestment to KD Nil. During the three-month period ended 30 June 2010, Bank has written off the investmentamounting to KD 5,572 thousand which was fully provided in previous years . The Bank retains a provision ofKD 521 thousand (31 December 2009 : KD 6,093 thousand and 30 June 2009 : KD 5,960 thousand) as reliablefinancial information about its financial position as 000 June 2010 is not available.

5 DUE TO BANKS AND OTHER FINANCIAL INSTITUTIONS


2010 2009 2009KD'OOO KD 'OOO KD 'OOO

Murabaha payable 251,359 227 ,641 187,598Current and call accounts from banks and other financial

institutions 9,195 4,872 15,981Term financing 20,000

260,554 232,513 223,579

6 ESTIMATED DISTRIBUTION TO DEPOSITORS

The distribution to depositors is estimated based on judgment, and is not an indicative rate of distribution of profitto depositors for the period ended 30 June 20 10, or for the year ending 31 December 20 IO.

The actual profit to be distributed to depositors will be determined by the Board of Directors of the Bank inaccordance with the Bank's Articles of Association, based on the annual audited results for the year ending 31December 2010.

7 BASIC AND DILUTED EARNINGS (LOSS) PER SHARE

Earnings (loss) per share is computed by dividing the profit (loss) for the period attributable to the shareholdersby the weighted average number of shares outstanding during the period as follows:

Three months ended 30 June2010 2009


Profit (loss) for the period (KD ' 000)

Weighted average number of sharesoutstanding (shares '000)

Basic and diluted profit (loss) per share(fils)

4,735

933,689

5.07

8

(1,285)

933,689

(1.38)

5,026

933,689

5.38

(3,489)

933 ,689

(3.74)


8 CASH AND CASH EQUIVALENTS

Cash and balances with banks and financial institutions

Tawarruq transactions with Central Bank ofKuwaitMurabaha finance with other banks and financial institutions

less than 90 days


2010 2009 2009strooo KD'OOO KD 'OOO

5,145 4,302 3,324

145,353 84,179 33,127

85,015 162,985 158,072

235,513 251,466 194,523

9 RECOVERY OF PROVISIONS

Under the terms of Arniri Decree Nos. 32 of 1992,41 of 1993 and subsequent amendments, there were no cedableprovisions as at 30 June 2010 which are no longer required , and should any arise during the remainder of the year,they will be ceded to the Central Bank of Kuwait depending on the situation at the year end. The identification ofprovision no longer required, if any, will be made on a basis consistent with that adopted at 31 December 2009and in accordance with the instructions of the Central Bank of Kuwait.

10 RELATED PARTIES

These represent transactions with certain related parties (associates, major shareholders , directors, executiveofficers and key management of the Bank, close members of their families and companies which they control orover which they are able to exercise significant influence) who were customers of the Bank during the period. Theterms of these transactions are approved by the Bank's management.

In the normal course of business , directors , executive officers and parties related to them have deposits with thebank and credit facilities granted to them by the Bank. The balances and transactions with related parties includedin the interim condensed financial information are as follows:

KeyAssociates management Total

BalancesFinancing receivables and loans and advancesDeposits

TransactionsEstimated distribution to depositors

2,733

10

229652

30 June2010

KD'OOO

2293,385

(Audited)31 December

2009KD'OOO

2534,448

16

30 June2009

KD 'OOO

162726

Compensation to key management personnel:Three months ended 30 June

2010 2009KD'OOO EJ)'OOO


KD'OOO EJ)'OOO

Short-term benefits

Post-employment benefits

305

47

9

402

43

578

97677

81


11 COMMITMENTS AND CONTINGENT LIABILITIES

Acceptances

Letters of credit

Letters of guarantee

Commitments to extend credit

Capital commitments

(Audited)30 JUlie 31 December 30 June

2010 2009 2009KD'OOO KD'OOO KD'OOO

7,945 3,674 6,950

1,210 1,771 3,038

49,583 46,187 45,604

51,408 51,262 70,338

1,455 1,439 1,435

12 SEGMENT INFORMATION

The Bank's operating segments are determined based on the reports reviewed by the General Manager that areused for strategic decisions. These segments are strategic business units that offer different products and services.They are managed separately since the nature of the products and services, class of customers and marketingstrategies of these segments are different.

These operating segments meet the criteria for reportable segments and are as follows:

• Commercial and international- comprising of range of banking services and investment products to corporatecustomers providing commodity and real estate murabaha finance, Ijara and wakala facilities;

• Retail - comprising of range of banking services and 'investment products to individual customers, providingcommodity and real estate murabaha finance, Ijara and wakala facilities;

• Treasury, Fund Management and Institutional Banking - comprising of liquidity management, correspondentbanking, clearing, murabaha investments, exchange of deposits with banks and financial institutions ;

• Investment Management - comprising of investment in associates and other investments.

Management monitors the operating segments separately for the purpose of making decisions about resourceallocation and performance assessment.

The Bank measures the performance of operating segments through measure of segment revenue and results inmanagement and reporting system.

Segment assets principally comprise of all assets and segment liabilities comprise of all liabilities that areattributable to the segment.

The following table presents revenue, profit (loss) for the period, total assets and total liabilities informationregarding the Bank 's reportable segment.

10


12 SEGMENT INFORMATION (continued)

Treasury, FundCommercial Management and

and Institutional InvestmentInternational Retail Banking Management Others Total

KD'OOO KD 'OOO KD'OOO KD'OOO KD'OOO KD'OOO

30 June 2010

Revenue 6,321 5,173 4,428 (268) 1,645 17,299

Profit (loss) for the period 2,425 2,536 4,210 (1,254) (2,891) 5,026

Total assets 647,031 115,095 308,718 45,460 33,560 1,149,864

Total liabilities 73,957 332,078 543,493 22,349 971,877

30 June 2009

Revenue 5,292 3,869 2,415 1,928 3,294 16,798

(Loss) / profit for the period (2,498) 408 2,092 (4,591) 1,100 (3,489)

Total assets 641,398 104,051 282,092 56,852 21,623 1,106,016

Total liabilities 87,604 287,976 548,897 19,783 944,260

13 CAPITAL ADEQUACY

The Bank is required to comply with Capital Adequacy Regulation for Islamic banks issued by CBK as stipulatedin CBK circular no. 2/RBA/44/2009 dated 15 June 2009.

The Bank's regulatory capital adequacy ratio as at 30 June 2010 was 23.54% based on the following capitalstructure and risk-weighted assets:

Tier 1 capital

Tier 2 capital

Total risk weighted assets

Capital adequacy ratio

11

KD'OOO

141,864

18,271

680,152

23.54

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