Kuwait Finance House Financial & Business Analysis 1998 "A year of growth and increased profitability, with further investment in products, network and information technology"

Exchange Rate as at 31 August 1999 1 KD = 3.28 US D Financial Trends

Ownership and Legal Status

Kuwait Finance House K.S.C. (KFH) is a public shareholding company incorporated in Kuwait, engaged principally in providing banking services, the purchase and sale of properties, leasing, project construction for its own account as well as for third parties, and other trading activities without practising usury. Its main aim is to develop and promote Islamic banking world-wide. KFH has a subsidiary, Al-Enma’a Real Estate Company (closed) (AERE), a Kuwaiti closed shareholding company, engaged in real estate inside and outside Kuwait. Results below relate to both KFH and AERE. Total share capital at 31 December 1998 was KD53.584 million.

The Year in Brief

Total Assets at year end were up by 5.57% to KD1.669 billion (1997: KD1.581 billion), while depositors’ balances were up by 6.50% to KD1.262 billion (1997: KD1.185 billion. Shareholders’ equity grew by 17% to KD150 million (1997: KD128 million. Total revenues for the year amounted to KD132 million, an increase of KD10 million, or 8%. After deducting expenses and provisions, profit before distributions was up by KD13 million or 15% to KD102 million (1997: KD89 million).

Business Highlights

• Corporate strategy is to fulfil the mission as a global Islamic financial institution, providing financial products and banking services according to the Shari’a, using the most contemporary teqniques and systems.

• During the year, KFH organised the Fifth Islamic Jurisprudence Seminar under the supervision of the Fatwa and Shari’a Supervisory Board. Eminent Islamic scholars and jurists participated in this gathering to discuss important developments in Islamic Banking.

• All departments concentrated on direct investments both locally and abroad. Domestically, 26% of the capital of newly formed Gulf Investment House was invested, together with 30% of Aref Investment Company, 27% of Ayan for Ijara and Investments and 35% of Markets and marketing Services Company. Internationally, 10% of the capital of International Ijara and Investment Company was invested. The KFH Lease Fund for the US market was launched with a capital of US$40 million.

• In difficult trading conditions, KFH commercial departments increased business, all meeting revenue targets. Co-operation with local and international agents has been strengthened, and further service improvements introduced. A total of four new companies were established - two in the UAE and one each in Germany and the US.

• Availability of housing in Kuwait has been a primary concern of KFH over many years. A number of successful real estate projects were developed during the year, partially addressing the national housing problem.

• Customer satisfaction surveys indicated a level of 96%. This high level was partially in response to customer-tailored initiatives such as the Foreign Currencies Savings Account and expanding the Drive-in ATM service. KFH is still the only institution in the country to offer this facility. The KFH ATM network now totals 60 outlets, with 22 integrated in branches, three fast-service machines and 35 operating independently. Other improvements include modern banking services such as Tele-Banking and the Home Bank and Fast Payment systems.

• Practical staff training was undertaken, and a total of 201 individual and group training courses were held, including training abroad, covering 1067 employees.

• Significant improvements were made to information technology, particularly in state-of-the-art decision support systems. A central customer database was commissioned, and the communications network upgraded.  The KFH Internet Web site now provides banking, investment and commercial services online, with consequently greater exposure both locally and world-wide.