Corporate Sustainability Report Kuwait Finance House (KFH) Group of Companies 2010 Corporate Sustainability Report Kuwait Finance House (KFH) Group of Companies 2010 CEO Message

In an ever-changing world, we at repeatedly. This is taken from the principles, which are integrated KFH wish to continue to strengthen Holy Quran (2:30), when it is told to at the core of the KFH business our commitment in displaying a Adam for the reason of building the model. leading role working under Shariah land ((Behold, thy Lord said to the principles on the global stage. angel: I will create a vicegerent on With offices spanning three Striking the balance between the Earth)). We use the term “E’mar Al continents, we seek to put in sound traditions of Shariah with Ardh” to relate to the establishment motion economic, social and the elastic conditions of modern of all our projects which contribute environmental change to people’s markets, makes us unique, and to humanity. Examples of these lives. Through this report, we will indeed resilient, to the turbulence include our work in Durrat Al provide the reader with examples seen in the financial industry. Bahrain, Al Zour Chalets for of actions we have taken in 2010 people with disabilities; Muthanna from our head office in Kuwait, The overall strategy is clear and our Complex, our Addiction Treatment in addition to our subsidiaries in corporate values are the same as Hospital, and in our support of the Bahrain, Malaysia and Turkey. We when we first started: uphold Islamic Ministry of Health and Ministry of also will report on the achievements Shariah principles, support ongoing Education, to name a few. of our local subsidiaries, Al Salam initiatives in the global Islamic International Hospital, International financing industry and participate We have more than an economic Turnkey Systems and Aviation in assisting the socio-economic role to fulfill in society and we fully Lease and Finance Company endeavors of local communities. realize that how we do business (ALAFCO). I am proud that we are the first has a direct effect on the world Islamic Bank to release a Corporate around us. We also believe that Sustainability Report that is based by promoting the sustainability on international standards, and of our society we are ensuring wish to continue to see KFH break sustainability of KFH itself. It is this Sincerely, the boundaries for Islamic Banks on belief that leads us to take into the global stage, going above and account a range of social, ethical beyond stakeholder expectations. and environmental considerations. We look towards a better and Sustainability is not a new concept brighter future in Kuwait and Mohammed Sulaiman Al-Omar in the Islamic World. Throughout beyond, where we wish to play a the corridors of our KFH offices, you fundamental role in achieving just will hear the phrase “E’mar Al Ardh” that. Today we are championing the (“meaning developing the Land”) sustainable higher values of Shariah

4 I KFH Corporate Sustainability Report KFH Corporate Sustainability Report I 5 A Sustainable Vision The Spirit of for the State of Kuwait Sustainability

For 50 years, an Independent State of Kuwait has boomed from its "Murabaha" humble beginnings, demonstrating trade with national resilience and strength. markup or cost plus sale Considerable effort has been "Ijara" "Musharakah" made to fulfill various stipulations renting for profit and loss of the Millennium Development beneficial use sharing Goals over the last decade, where the State of Kuwait has made significant strides in achieving goals such as universal primary What sets "Mudharaba" education, promoting gender us apart: Other Shariah profit sharing contracts equality and a global partnership agreement Islamic for development. Today, the State Banking of Kuwait is heralded for its high standard of living, healthcare, and education and job opportunities.

Kuwait currently has a relatively "Salaam/ low unemployment rate of 1.6%, "Sukuk" Parallel Salaam" islamic bonds deferred sales coupled with a high literacy rate contracts "Istisna'a/ at 94%. All births since 1993 have Parallel opening, operating and terminating International Hospital and beyond, Istisna'a" been attended by skilled medical a business is simple. We also can we can play a part in achieving project professionals. The continued finance improve access to land developing a world class healthcare system sustainability of our nation’s a transparent and fair land market. keeping our population healthy progression is a priority for us, as a We can join in creating fair and and stimulating behavioral change. prosperous Kuwait is a prosperous equal opportunities in markets. We also consider ourselves KFH. stewards in Kuwait’s environment Kuwait Finance House is a Bank improvement opportunities so that Islamic ethics and morality, it is 2. Leveraging Kuwait’s natural In line with Kuwait’s Vision 2035 is protected for all the people living which operates under Shariah long-term sustainability of the land outlawed. resources and privileged reform agenda, KFH strives to in Kuwait and thus foster green principles. Islamic banking refers is promoted within the KFH Group. geographic position by go beyond economic initiatives, development in the region. to a system of banking consistent The cornerstone of Islamic banking continuously growing financial and strengthening skills of the Kuwaiti with religious law or “Shariah”, Islamic Finance and Economy is and finance is fairness and mutually business services in Kuwait, on the Kuwait Finance House is taking a people and improving quality of which is guided by Islamic Principles based on specific features. beneficial relationships. We at KFH road to becoming a specialized key step in exploring its alignment life. As outlined in the 2035 Vision, on Economics. We believe that provide services that exemplify financial hub. with sustainability principles, and • It is transparent: Islamic Shariah we wish to have a deeply humane the over-arching principles of those values. Islamic banking by it is our ambitious task that the allows all economic activities in the and tolerant society on the path Islam ring closely to ethical, social default has the ability to position 3. Developing human capital sustainability of our country is part framework of protecting public to making Kuwait a centre of and environmental values found itself with ethical values based and creating sustainable of our daily agenda of each day interest and safeguarding it. modern thought and dialogue. We in sustainability, making Islamic on the framework of Shariah. A professional opportunities we work. Back in 1977, we were number of services have been also wish to look forward in our Banking intrinsically aligned to • It is realistic: Islamic Finance fulfills in being part of the reform of the the pioneer bank operating in modernized and standardized implementation of Vision 2035, Corporate Sustainability Principles. all the needs of real life. This is why labor market making the private accordance with Islamic Shariah. to meet the various needs of and its comprehensive range of We have accomplished a critical we find that Islamic Shariah does sector employment welcoming Today, we are proud to be the First customers, while maintaining the reforms. This includes: review of our functions and not prohibit transactions except to Kuwaitis. We wish to change Islamic Bank to embark upon ethical boundaries embodied in initiatives in accordance with with those involving injustice. 1. Reviving Entrepreneurship in the dynamics of the labor market, globally-recognized corporate Global Reporting Initiative guidelines the tenets of the Islamic faith. Kuwait’s Economy, where KFH by motivating young Kuwaitis in sustainability reporting. to ensure our current initiatives • It is ethics based: Man may can help in reducing the red tape the professional world. Through are in line with globally accepted make profit from doing business. and making Kuwait a country where our subsidiaries like Al Salaam principles, and have identified However, when this runs against

6 I KFH Corporate Sustainability Report KFH Corporate Sustainability Report I 7 Doing What’s Right

requires us to look at five sustainability pillars to give us a focused view of our 2010 achievements and will allow us to measure future progress in So exactly how are we meeting KFH’s goals and aspirations. different? Our Customers Our Principles We continue to strive the bank’s role in innovation Kuwait Finance House (KFH) is a pioneer of the and service excellence by focusing on the quality banking phenomenon known as Islamic Finance of our products and services to our clients, enabling or Shariah compliant banking. We were the first maintained and long term relationships with Islamic bank established in the State of Kuwait and customers based on profit sharing, mutual trust today we are one of the foremost Islamic Financial Based on the principle that funds do not generate funds, unless Financing and understanding. By providing Shariah products Institutions in the world. In this report we discuss how they are coupled with an activity or work. to our clients, we believe that we are also adding our principles help us to become a more sustainable sustainability value to our business. bank.

Murabaha is used, whereby a Murabaha-based credit is opened Credit with the bank. The bank owns the commodity and then sells it to the customer by way of Murabaha. Our Deeds Our People Actively encourage entrepreneurs by funding small enterprises by Outside the scope of business, community We foster a safe, inclusive and stimulating working way of partnerships that end with ownership. Islamic bank loans development has long been a priority in KFH’s environment for our employees and remain Financing activities, where we want to make a positive committed to ensuring that our system of labor are extended to other banks without taking or giving interest. contribution to our society. These activities humble relations accompanies the bank’s organizational KFH, and touches upon our inherent principles. developments and contributes to building a mutual identity and culture. Qur’anic rule: “If the debtor is in difficulty, grant him time till it is easy Property for him to repay.” However if he is procrastinating, the bank applies Shariah rules to guarantee its right, but without resorting to interest.

Funds must be invested in lawful areas that achieve social and Our Environment economic development. Areas outlawed by Shariah must be Investment of funds We believe that mankind is the steward of his avoided. The capital is invested on a partnership basis between the environment. We aim to conduct our business so bank or entrepreneur and the capital provider. that negative impact to the nature surrounding us is minimized as much as possible by looking for ways to stimulate sustainable innovation and promote the use of our natural resources efficiently.

Many factors of Shariah compliant finance contribute to our success. It is safe to say that Islamic finance is in a relatively safer position compared with conventional finance, by virtue of being asset-backed. Therefore, the concept of sustainability is not new to Sharia compliant banking as scholars have long promoted the importance Using this report: of environmental conservation. Islamic banks can already tap into key sustainability values through their ethical orientation, where Islamic banks are not only responsible to their immediate shareholders, but owe a fiduciary duty Our sustainability pillars are denoted by their subscribed markers, which are used throughout the pages to society as a whole. of this Corporate Sustainability Report, showing exactly where they are applicable in our activities. To assist in navigating through the report, you will also find the following symbols:

Indicates reporting on our KFH subsidiary performance

Indicates Sector/Industry focus sections, with deeper analysis of our subsidiary’s performance

Indicates an employee interview

8 I KFH Corporate Sustainability Report KFH Corporate Sustainability Report I 9 Contents

Talking Business 19 Communication Channels 26 The Workplace 31 Community 39 Global Stewardship 46

10 I KFH Corporate Sustainability Report KFH Corporate Sustainability Report I 11 KFH through KFH becomes the major stakeholder of the years Al Salam Hospital Awards 2004 & Milestones 2010

• Award for Best Islamic Bank in Kuwait by Asiamoney Kuwait Finance House is KFH Turkey completed • KFH Turkey wins Most Innovative Product from Islamic established in the State of KFH new headquarters its first mass housing Kuwait, being the first bank Establishment of KFH Finance News complete and ready for project, Huzur Sitesi, and operating in accordance Malaysia business delivered the units to the with the Islamic Shariah • KFH Bahrain wins Best Investment Product for homeowners Principles Menatelecom

• Award for Best Islamic Real Estate Finance Provider by 1977 1986 1994 2005 Global Finance • Award for Best Islamic Finance bank in the GCC by Global Finance In recognition of its contributions to exports, Establishment of KFH • Award for Best Islamic Finance Bank in Kuwait by A total number of 10 ATMs the Istanbul Textile Research, the world’s Global Finance begin operation in State of & Apparel Exporters first Islamic investment Kuwait Association awarded KFH research arm • KFH Kuwait wins Citbank award for leadership and Turkey a gold medal excellence in electronic payments

• First of its kind, the Gold Investment Fund is launched 1987 1995 2007 which provides a Sukuk transaction of US$100 million • KFH Kuwait develops Al-Ousra card, displaying first of its kind creativity and flexibility targeted towards families

New head office KFH Turkey (Kuveyt Türk) is KFH Group Celebrate 20th • Kuwait Finance House (Malaysia) Berhad (KFHMB) construction begins to founded Anniversary and Offices appointed as the Mandated Lead Arranger for the accommodate ambitious open in USA and Germany proposed issuance of a two-year Ijarah Sukuk of USD100 growth plans KFH car showroom opens to import used cars million by the Nomura Group

• Award for Best Islamic covered card from 1980 1989 1997 Banker Middle East • Award for Best Consumer Internet Bank in Kuwait by Global Finance

• KFH selected among Safest Banks in the Middle East, Participate in establishment KFH Turkey becomes the of new banks and awarded by Global Finance first interest-free financial Expansion of KFH to companies in GCC institution to obtain the Australia through KFH countries, particularly Dubai • Best Islamic Bank Website in the Middle East ISO 9001-2001 Quality Malaysia Office Islamic Bank and Bahrain Certification in Europe Islamic Bank • Best Investment Bank 2010 from Banker Middle East

• Best Islamic Bank in the Middle East from EMEA Finance 1981 2000 2008 • Award for Outstanding Contribution to Islamic Finance by Failaka-Amanie Symposium

Establishment of KFH • Award for Best Islamic Research Company by Islamic Bahrain KFH Turkey establishes a Finance News Awards Poll KFH Turkey becomes among Project to provide more financial services branch the first private financial KFH Pioneers a deal residences in State of combining Islamic banks in Mannheim, Germany a • Award for Contribution to Islamic Finance Research by institutions to introduce Kuwait begins and conventional banks subsidiary in Dubai and a International Islamic Finance Forum telephone banking in financing of Airbus for Kazakhistan Legation. Emirates Airlines 1982 1992 2002 2009 12 I KFH Corporate Sustainability Report KFH Corporate Sustainability Report I 13 Total Branches: 230 Total ATMs: 397 Our Global

KFH Turkey Branches 161 Presence ATMs 170

KFH Board Committees KFH Board

Fatawa and Shariah Board Industry Sectors

Banking Business Units

KFH Kuwait Liquidity Management Muthanna Investment Financial Sector AREF Investment Group House Company KFH Bahrain Saudi Kuwait First Takaful Insuranc e Sharjah Islamic Bank Finance House KFH Turkey Company

KFH Malaysia Real Estate Al Enma’a Real Al Raya Global Real Sokouk Real Estate

Estate Company Estate Company Development Company

Al Nakheel United Baitak Real Estate

Real Estate Company Investment Company

IT International Turnkey Systems

Healthcare Al Salam Internationa l Hospital

Aviation ALAFCO Aviation Lease and Finance Company

Human Resources Human Investment Training Company

Energy Development KFH Bahrain Enterprises co. Branches 8 Islamic Research KFH Research ATMs 19

KFH Kuwait Branches 52 ATMs 186 KFH Malaysia Branches 9 ATMs 22

14 I KFH Corporate Sustainability Report KFH Corporate Sustainability Report I 15 Getting to know KFH and our subsidiaries Gross income by area Value Contribution

2% Payments to Governments 5% Community Investments 2010 ($ '000) KFH Turkey ITS Economic Value Generated 2,624,016 Al Salam Since the opening of our doors for business, we remain committed to Sharia principles Revenue 2,624,016 and values, continuously supporting the ongoing initiatives of the global financing KFH Malaysia Economic Value Distributed 774,849 industry. In the banking sector our activities include: KFH Bahrain Operating Costs 325,396 • Retail banking KFH Kuwait Employee wages & benefits 406,739 • Private banking 51% • Commercial banking Operating Payments to Governments 15,560 42% Costs Community Investments 26,660 • Real estate Employee wages • Credit and investment services Economic Value Retained 1,849,167 and benefits KFH Bahrain Economic Value Generated 200,756 Since its opening in 2002, KFH Bahrain is 93% owned by KFH Kuwait. Revenue 200,756 Its main activities are: Economic Value Distributed 176,888 • Banking services in compliance with Islamic Shariah Employee wages & benefits 36,942 • Management of investment accounts on profit sharing basis • Islamic finance contracts including retail services Community Investments 575 • Services and Communication Sectors Economic Value Retained 23,868 • Real estate investment USA Australia Bangladesh KFH Malaysia Our Global Investments UK Bahrain Canada Economic Value Generated 145,360 UAE Cayman Islands Revenue 145,360 KFH prioritizes predominantly local investment, Economic Value Distributed 73,913 100% owned since its opening in 2006. Turkey China with a total of 36% of our investments focused Its Main activities are: Operating Costs 38,287 Europe, in Kuwait. We also primarily concentrate our • Islamic finance products GCC Employee wages & benefits 32,317 investments in the Gulf States, with 18.9% of our • Investment in real estate Germany Payments to Governments 2,433 • Corporate finance total investment in Saudi Arabia and 10.6% in the Community Investments 876 Kingdom of Bahrain. In support of the potential of Economic Value Retained 71,447 Saudi Arabia emerging markets, we have invested in countries KFH Turkey such as Turkey (8.7%) and China (2.1%). In Economic Value Generated 360,733 distributing our investment as far as Canada and Revenue 360,733 Europe, we find strength in diversity, giving us a Economic Value Distributed 314,772 Opened in 1989, and known as Kuveyt-Turk, we currently have 62% ownership. Qatar Its main activities include: Kuwait Operating Costs 210,151 sustainable model for our assets. • Islamic banking and financial services Malaysia Employee wages & benefits 61,436 • Investment of funds on a profit/loss sharing basis Payments to Governments 42,530 • Real estate development Community Investments 655 Economic Value Retained 45,961 Al Salam International Hospital Training Economic Value Generated 97,199 Services Aviation Owned by KFH, the vision of Al Salam is to expand its leadership in the healthcare Residential Revenue 97,199 sector in the region, as a benchmark in healthcare industry. Al Salam has received Economic Value Distributed 84,139 the Accreditation Canada Certificate, meeting demands of Kuwait's Vision 2035 of Industry breakdown Operating Costs 47,558 achieving a world class healthcare system. Al Salam provides specialized medical care in: Real Estate Employee wages & benefits 35,326 • Surgical, critical care, dental Banking KFH is not just a bank. Though we are known as Payments to Governments 1,053 • Diabetes, hypertension and obesity a financial institution, with 28% dedicated to the Community Investments 201 • Obstetric Gynecology Private Equity sector, we broaden our scope of industry wisely. Economic Value Retained 17,037 • Maternal-child and pediatric healthcare Real Estate and residential investment total 20% International Turnkey Systems Leasing Economic Value Generated 86,865 IT of our share of industries we invest in, where Revenue 86,865 we focus a lot of our projects in the Middle East. Commodities/ Economic Value Distributed 76,418 97% owned by KFH, ITS is a specialized technical consultancy. Trade Finance Our interest in aviation has led us to numerous

Operating Costs 51,472 Its main activities are: Commercial accolades, in addition to our interest in energy, Employee wages & benefits 22,474 • Marketing and Development of hardware and software Investment private equity and health care. Diversified Payments to Governments 2,473 Health Care/ Energy/Oil/Gas Industry Economic Value Retained 10,447 Transport Equity Insurance Portfolios

16 I KFH Corporate Sustainability Report KFH Corporate Sustainability Report I 17 Talking Business

Our Shariah Commitment

Our Shariah Principles are what we stand for. They express what we value, what we believe in and what we aim for. Living through our Shariah Principles helps us to make decisions that stand the test of time. Our dedication to Doing What’s Right is the start of a continuous journey for Kuwait Finance House and Shariah inspired products & services our subsidiaries. Our mission is “To be the Leading Al Kheir Charity Card is a unique card to control expenses and help the poor. Every spend using the Al Kheir card adds a little to help a noble cause, as each time you make a Islamic Financial Institution in the World by Providing purchase, KFH donates 0.5% towards those in need to go to Haj and Ummra. This helps those fulfil their religious duty of visiting the Holy City of Mecca at least once in their lifetime. Competitive and Shariah Compliant Banking, With no pre-conditions, this card is available to anyone over 21 years of age. The card is fully flexible, where there is no need for credit history nor are there any salary restrictions.

Financing and Investment Products to Exceed Charity donations have never been easier. With the click of a button, our clients can give the Expectations of Our Customers, to Motivate back to society by giving those in need online on kfh.com. From the banking services menu, customers can select a standing order of the amount desired to a list of government Our Employees and to Meet the Objectives of Our approved charity accounts provided. Shareholders” Our Corporate Values state that we: KFH Malaysia (KFHMB) introduced an innovative new product for 2011 for Personal Financing-i Hajj and Umrah, which 1) Uphold Islamic principles and values among all was designed for Muslim customers to facilitate their pilgrimage. It makes it more convenient for Muslims to realize their dream of visiting the House of Allah, and fulfilling the fifth pillar of Islam. The KFH Personal Financing-i Hajj and Umrah activities of the organization package offers attractive rates and financing options to cater to different needs. A high maximum financing limit of USD$ 33,000 will enable customers and their immediate family members to perform the pilgrimage with options to include 2) Support ongoing initiatives of the global Takaful premium and personal expenditure in the financing amount. End-to-end Shariah-based Takaful products and services are provided at competitive rates by our reputable Takaful Islamic financing industry partners. KFHMB also collaborates with reputable partners to enable customers and their immediate family members to perform their pilgrimages at reasonable prices. KFHMB has a full range of Shariah-based products and services provided 3) Participate in and assisting the socio- to the business sector as well as retail customers. These include KFH Gold Account-i, KFH Automobile Ijarah-i and KFH Home Financing-i, among others. This is in line with their parent company’s aspiration to be innovative in providing quality economic endeavors of local communities as a and tailor-made Shariah-based products and services. responsible corporate citizen ALAFCO Aviation Lease and Finance In the writing of this sustainability report, we Company (K.S.C.C) is an emergent provider of innovative Sharia-based commercial engaged with our stakeholders to identify the most aircraft leasing products, which means that all our financings are Islamic, involve ethical material topics we can report on today. investing and are equity related, that is, solely using the genuine asset or the cash-flow it In doing so, we have also set ambitious goals generates. ALAFCO has pursued a strategy of organic growth to for the future. We are excited to embark on become a leading leasing company globally. Shariah and Islamic Finance principles set the this path towards economic, social and definitive rules of conduct in the Company’s dealings, and as such, ALAFCO is committed to high standards of corporate governance, business integrity and professionalism in all environmental change, using our Shariah principles its activities. ALAFCO has risen rapidly into the niche of a reputable lessor of commercial Ahmad A. Alzabin aircraft whose focus on value has earned the trust of 18 airlines to date in Asia, Africa the to guide us there. Chairman, Alafco Middle East and Europe.

18 I KFH Corporate Sustainability Report KFH Corporate Sustainability Report I 19 Investing differently Supporting our national economies

It is important to us that countries of our operations benefit and prosper from our activities. We maintain a healthy and mutually- beneficial relationship between us and the countries we work in. This starts at home, in Kuwait, and beyond.

Supporting Kuwait In 2010, the Kuwaiti economy witnessed a number of developments: the most distinctive being an economic recovery, regaining its growth pace in 2010-2011 after witnessing a decline in 2009. KFH supported the Kuwaiti national economy by financing over USD $ 1.8 billion in a variety of markets.

We are confident that investing our assets in line with Shariah principles will keep financial woes at bay, as the recent credit crisis brought Diyar Al-Muharraq KFH Bahrain are underway in creating affordable housing increased socially responsible investing. Our compliance with Shariah principles is a key and integral feature of our activities and is intended to in the Kingdom of Bahrain. The project is planned to provide 5,000 units of provide “peace-of-mind” investment for the investors in order to promote housing for residents in Bahrain and is expected to be completed in 4 years. wholesome Islamic intent. This facilitates the Bahraini Government’s Economic Vision 2030 which targets providing 50,000 social/affordable housing units over the next five Negative screening is the practice where an investor seeks to avoid investing in years. The Prime location of Diyar boasts a 10 minute ride from the airport companies that are involved in sectors or practices deemed unethical and irresponsible. In negatively screening against practices, say for example gambling, we are able to directly and 20 minutes from the capital. The project, targeted at Bahraini citizens ensure that the sustainability of our society and family wellbeing are upheld. with a combined household income of BD900, also includes those eligible for housing aid by Bahrain’s Ministry of Housing, and even provides an increased The Shariah Way: Our Policy on Investments. Any investment activities in KFH is guided by the “Fatwa” (ruling) and advice is issued by the Shariah Board when evaluating housing space of 237 m2 compared to the national average of 170m2. investment decisions. The Shariah Board is an independent body overseeing all Shariah matters and provides views and ruling in relation to the fund’s investment activities based The vision of the project is to: on the rules and principles of Shariah. This division also periodically inspects the investment Abdulhakeem Yaqoob activities of KFH to ensure that the actual implementation of the investments is in compliance • Create a fully integrated mixed-use community for the future of Bahrain, Al-Khayyat with Shariah rules and principles. where residents live, work and entertain in a sustainable environment. Managing Director/CEO As a rule of thumb, the following activities are classified as non Shariah compliant and thus KFH Bahrain • To become a leading investment zone on an individual and a corporate we are not involved in companies that are linked to the following: level. • Financial services based on “riba” (interest) • Conventional insurance • Provide the opportunity for Bahraini citizens to own and live in affordable • Stock broking or share trading in Shariah non-approved securities housing units that meet their demand. • Gambling • Become a symbol of progress and pride for the residents and people of • Manufacture or sale of non-halal products Bahrain. • Entertainment activities non-permissible by Shariah • Other products or services deemed non-permissible and/or ambiguous Supporting local fisherman. Diyar Al Muharraq, being a community for all the All equity investments, with this in mind, must thus adhere to the following criterion: people of Bahrain has fully funded the construction of the Ras Raya Harbor in Samaheej, a million dollar project which was carried out for the benefit of the 1. If the intention is to control and to convert the invested company, the companies must clean up all interest bearing debt or borrowing within a three year grace period. local fishermen. The Ras Raya Harbor is now a modern and fully-equipped fishing harbor the serves the local fishermen of Muharraq, Galali and Al Deir 2. Companies we are invested in, must not deal in interest, neither earned interest, nor expense interest. areas covering an area of 100,000 square meters and houses nearly 200 fishing boats and 60 dhows. Empowering the local community and mixing 3. Common stock and Islamic finance tools must be the only source of fund or finance to the invested companies. tradition with the contemporary, the harbor functions under the Bahrain Fisherman Society.

20 I KFH Corporate Sustainability Report KFH Corporate Sustainability Report I 21 Pavilion Project financed by KFH has resulted in a six-star lifestyle mixed-used real estate development. Located centrally in the Golden Triangle of Kuala Lampur, the Pavilion is the largest retail mall in the country, attracting tourists and the local community. It houses the Pavilion Crystal Fountain, a new national landmark, which is the Tallest Liuli Crystal Fountain in Malaysia endorsed by The Malaysia Book of Records.

In the Kingdom of Saudi Arabia, KFH is responsible for two big real estate projects through Baitek Real Estate Company and Saudi Kuwait Finance House. Projects located in Dammam and Jeddah provide middle and upper income housing solution. With a land bank in excess of 2,200 km2 thus ensuring the optimum use of green spaces for local community.

22 I KFH Corporate Sustainability Report KFH Corporate Sustainability Report I 23 An Interview with Al Ansari Zakaria Position: Dealer | Department: Treasury Department, KFH Kuwait

What made you choose to work at KFH?

I got five job offers after graduating and I selected KFH because I felt that I got the perfect role fit in treasury which is my preferred career ambition. The Graduate ‘Forsa’ training program is very systematic and world class and gave me the right capability to perform and sustain my role in the banking domain. Moreover, the exposure to other countries and leading banks as part of the international placement scheme in place at KFH are a boon to my career and the diverse ideas thrown around in KFH contribute to its sustainability and longevity.

Do you feel you can take your career as far as you want in KFH?

I am really excited on the opportunities given to me and I am looking Diverse views from forward to a great career here with KFH. I view the KFH human capital development process gives me and my peers multiple opportunities to innovate and contribute to the growth of the bank. The transparent and open culture gives us free access to the top management giving the right amount of exposure and builds me confidence during early years of my career.

What do you think is the key factor in KFH’s sustainability?

The key factor contributing to KFH sustainability is the close family like environment and the business model based on Islamic Principles. Globally, Islamic financial products are of high demand and has withstood the economic volatility, which I see in my highly intensive treasury experience. KFH What sustainability initiatives would you like to see in KFH in the future?

I expect KFH to contribute to the Kuwait Development Plan through the right kind of investments for developing real estate, public utility and health care. I hope KFH will contribute to the sustainability and prosperity of Kuwait as a nation as well. In the coming years, KFH is facing increased competition and should get ahead in through innovative products, improved efficiency and developing human capital.

24 I KFH Corporate Sustainability Report KFH Corporate Sustainability Report I 25 Comunication Channels

Putting our customers first Feedback mechanisms at KFH Kuwait

Initiated by the customer:

1) Comments Box 2) Call Centre

3) Dedicated Fax Number 4) KFH Online

5) Interactive Voice Response (IVR)

All customer complaints are directed to respective business units for resolution. Customer care keeps a track of these complaints which are directed to the respective business units for resolution, where they must keep up to speed with the service-level timelines. In ensuring the optimal customer service quality KFH undergoes a Process redesign to review every customer facing process and implement recommendations to reduce effort, improve process speed/cost and remove any redundancies. Once the complaint is resolved, KFH asks for reported feedback on their level of satisfaction on the complaint resolution.

Initiated by us:

1) Customer Care Questionnaire

A traditional way of doing things, our customer satisfaction surveys are done periodically using both external and internal resources using a carefully thought out We continuously strive to meet their needs outside the scope of customer care questionnaire. Using a sample, the customer care form is distributed banking, finding innovative and sound sustainable methods in their and captured in our in-house database and subsequently analyzed for follow-up action. implementation. 2) Mystery Shopper

Mystery shopper visits are conducted annually, covering all branches, show-rooms Customer Satisfaction. Our Trust and Satisfaction variables are routinely checked and other service locations hired by us to use our retail and commercial banking every two months using the methodology presented by an internationally recognized facilities. These mystery shoppers are carefully selected to represent KFH’s targeted customer segments. After the interaction with KFH, our mystery shoppers are given a tailored questionnaire to answer the level of service quality based on a variety of aspects, capturing the actual interaction directly at the point of KFH Customer contact. The answers are logged and audited and are finally sent to the appropriate management for further action, bringing a unique angle to improving our services to our customers.

research company. KFH Kuwait can state that we are progressively improving our leading position in customer satisfaction. KFH Online Interactive Dedicated Fax Connecting to customers @ International Turnkey Systems Voice Number Response The methods used by ITS are two-fold: Customer Call Centre Annually, face-to-face interviews and questionnaires are conducted. In Care "Alo Baitek" 2008/2009, this yielded a “Satisfactory” result from their customers. The Questionnaire results for 2010/2011 are ongoing…

Daily, customers can click onto the Online Questionnaire to provide up to the Addressing Customer minute insight on what they think. It was a “Satisfactory” result for 2010 overall. Comments Mystery Box Satisfaction Shopper at KFH Kuwait

26 I KFH Corporate Sustainability Report KFH Corporate Sustainability Report I 27 Reaching out to talk Sector Focus We search to go above and beyond the call of duty and want to bridge the gap between business and customer. In doing so we hope to foster a sustainable relationship that will put us on the right Al Salam International Hospital path in being the most preferred provider for Shariah banking and services.

Just call us for Shari’a advice. We’re more than just a bank. Through this initiative spread through general word-of-mouth by our skilled Shari’a Compliance team, KFH customers are able to call our Shariah Compliance department seeking islamically-sound advice on questions that go beyond the scope of banking.

Sign language training. In order improve our services to people with speaking and hearing disabilities, we launched a training course where our employees from branches, direct sales, commercial finance and automobile services were invited for Al Salam International’s Quality Improvement Program aims to provide a coordinated, training on sign language. The course consisted of two levels, which totaled 75 hours objective and systematic approach to organization-wide performance improvement of training time. activities and coordinate the accreditation projects. The quality improvement program provides a mechanism to plan and measure the processes and outcomes Coaching our communicators. Being the face of KFH, every customer of patient care and organizational operations. Data is systematically collected for interaction point is visited by a team of coaching communication experts on a monitoring and improvement priorities. Findings are utilized in evaluating processes periodic basis to provide coaching and monitoring on behavior. that may benefit patient outcomes, identify opportunities for providing professional/ personal growth and to evaluate operations. Mr. Ufuk Uyan CEO, CSR KFH Turkey Dimensions:

• Client-Centered Services: putting clients and families first.

• Appropriateness: The degree to which the care provided is relevant to the patient’s clinical needs, given the current state of knowledge.

• Availability: The degree to which appropriate care is available to meet the patient’s needs.

• Accessibility : Providing timely and equitable services.

• Timeliness: The degree to which the care is provided to the patient at the most beneficial or necessary time.

• Safety: The degree to which the risk of an intervention and the risk in the care environment are reduced for the patient and others, including the health care provider - keeping people safe. Harnessing the web by using variety of inventive modes of communication has proven successful: • Work life: Supporting wellness in the work environment.

• Continuity of services: Experienced coordinated and seamless services provided over Twitter: @KFHGroup Our twitter account has thousands of followers, surpassing time. any other bank in the region to date. This regular feedback with the customer stimulates our ability to meet their needs and answer their queries interacting on an • Effectiveness: Doing the right thing to achieve the best possible results, given the current state of knowledge. instantaneous and effective platform.

• Efficiency: Making the best use of resources to achieve the projected outcomes. www.facebook.com/KuwaitFinanceHouse has members, where they can • Efficacy: The degree to which the care of the patient has been shown to accomplish the create discussion boards, post photographs and write on our wall. In 2010, KFH desired or projected outcome(s). hosted the Facebook Ramadan competition, being the first Bank to implement such an event that attracted more than 16,000 people. Draws were set by Ministry of • Respect and Caring: The degree to which a patient, or designee, is involved in his or her own care decisions, and to which those providing services do so with sensitivity and Commerce, with iPhone prizes given out. respect for the patient’s needs, expectations, and individual differences. The App Store already has a family of KFH applications, available free of cost. KFH • Prevention/Early Detection: The degree to which the risk of an intervention and the risk “Your Home” was introduced and was a pioneering iPhone application, the first of its in the care environment are reduced for the patient and others, including the health care provider. kind in the region. The app provides our customers with detailed branch information, the ability to check their balance and latest transactions, a currency converter, the Customer satisfaction surveys are used to provide maximum patient satisfaction Kuwait Stock Exchange Ticker and access to the latest promotions. through different methods such as arranging focus groups with regular rounds and direct interview surveys for patient satisfaction and opinion; written survey KFH Qur’an App was launched in Ramadhan gaining 350,000 downloads in four forms which are available all over the hospital; suggestion boxes fixed in all hospital months since its launch. The App serves Muslim users with the ability to read and premises; online surveys through the website, direct mails for inpatients, direct phone listen to the Holy Quran in a simple and interactive way, keeping the beauty of the line for suggestion and complaints and a committee for survey analysis. Othmani font with an easy-to-use directory of Soura & Ayah.

28 I KFH Corporate Sustainability Report KFH Corporate Sustainability Report I 29 The Workplace

Leveling the playing field Women in KFH Malaysia

We are continuing to level the playing field as the private Our first female Chief Executive was sector becomes more professionalized and service appointed in 2010 by KFH Malaysia. Puan oriented. Hiring the younger generation locally, as well Jamelah Jamaluddin is responsible for the bank’s as empowering women tops our agenda of achieving a operations in Malaysia and the Asia Pacific. sustainable and healthy workforce. This marks her second tenure at KFH, where she served as the bank’s deputy chief executive officer since 2005, steering the corporate investment Our Graduate Scheme in Kuwait only recruits young Kuwaitis, which banking division. An experienced Islamic banker, having been in the financial industry for 25 years, goes hand in hand with Kuwait’s Vision 2035 to increase the youth in the Puan Jamelah will play a pivotal role as the new workforce. In 2010, of all employees in our Kuwait office, we had 62% CEO of the Bank, in delivering the strategy for the Kuwaiti nationals. In our other offices KFH Bahrain had 92% Bahraini Bank’s operations in Malaysia and in the Asia- nationals employed, KFH Malaysia had 99% Malaysian nationals Pacific region. in the workforce, and KFH Turkey had a total of 99% Turkish nationals.

Salary Grade Ratio Assistant Director- Chief Officer 3.4 : 1 Age distribution across KFH Assistant/Senior Manager 1.5 : 1 ITS Associate/Senior Executive 0.6 : 1 Al Salam Non-Executive 0.9 : 1 Average 1.5 : 1 KFH Turkey Less than 30 Male : Female salary ratio for KFH 30 –50 KFH Malaysia Malaysia 50+ KFH Bahrain KFH Kuwait

0% 20%40% 60%80% 100% In hiring our staff, we continuously seek to empower women and provide them with competitive benefits. We have an Equality in salary, where in KFH Kuwait, our men and women have absolutely no difference in their salary for their respective grades. We Meet Mrs Eiman Al- value all our employees equally and appreciate their efforts throughout all employee Humaidan, our female categories. This is why we make sure that all our treated equally, regardless of their gender. board member at KFH

Kuwait. The only female Male:Female ratio across KFH board member of an Islamic Bank in Kuwait. ITS Mother of three, Eman Al Salam holds a Bachelor’s degree KFH Turkey Male in Computer Science and KFH Malaysia Female Statistics from Kuwait KFH Bahrain University. She is currently KFH Kuwait an acting Secretary- 0% 10%20% 30%40% 50%60% 70%80% 90% 100% General at the Ministerial decree and has work experience in

the fields of journals and information technology. She holds chairmanship and memberships in a variety of Kuwait’s committees and is a member of several boards for public benefit, such as the Autism Society of Kuwait and was a founding member of the Kuwaiti Association for Quality and Excellence. She has been honored with several awards, including recently when she was honored by Sheikh Nawaf Al-Ahmad Al-Jabar Al- Sabah as the “First Female Leader in the Arab and Islamic World”

KFH employees participate in traditional pearl diving trip, Kuwait City

30 I KFH Corporate Sustainability Report KFH Corporate Sustainability Report I 31 Keeping track of our progress: performance data

We keep our books in order, and keep the status of our people in the workplace constantly updated and checked throughout our operations worldwide and sector-wide.

Breakdown of workforce by contract

KFH Kuwait KFH KFH KFH Al Salam ITS Total Bahrain Malaysia Turkey Full-time 2204 267 588 2837 880 2419 9195 Part-time 0 1 0 0 50 6 Total 2204 268 588 2837 885 2419 9201

Breakdown of workforce by age

KFH Kuwait KFH KFH KFH Al Salam ITS Total Bahrain Malaysia Turkey Less than 30 758 141 139 1509 223 928 3698 30 – 50 1220 119 393 1309 566 1402 5009 50+ 226 7 26 19 91 89 458

Gender breakdown in workforce

KFH Kuwait KFH KFH Malaysia KFH Al Salam ITS Total Bahrain Turkey Male 1801 183 276 2436 282 2107 7085 Female 403 84 282 401 598 312 2080

32 I KFH Corporate Sustainability Report KFH Corporate Sustainability Report I 33 An Interview with Adel Al Were Position: Deputy Manager General Services | Department: Human Resource & Services, KFH Kuwait

How is KFH different from other organizations you have worked with? Being a small country which is a close community of families, Kuwait values Trust, Loyalty and Truthfulness as the key characteristics that are important to the sustainability. Kuwait Finance House upholds these virtues and the entire KFH Family feeling is the bonding factor that will ensure KFH sustainability in the long run.

Name a key memory from your time at KFH During the period of emergency at the start of 1990’s, KFH demonstrated commitment to its employees by distributing gas masks and was the first bank in the world to do so. I played a key role in finding these gas masks, and was happy to use my military background to attain them. It displayed how KFH cares for its employees as members of a family.

Do you think KFH gives employees the right recognition for their work? I do. KFH recognizes the efforts of the employees through an appraisal system and reward scheme with different kinds of rewards including appreciation letters, gifts and bonus awards. I myself started my career Diverse views from here as Security Manager, but a patient attitude I quickly gained recognition of my leadership skills, where I now lead many functions including Security Systems, Procurement, Maintenance, Cleaning and Communication.

What advice do you have for those starting their career? Be patient, and be open, as you never know where your career will take you. For me, I started my career with the Armed Forces, in the elite Amiri Brigade, where I rose to rank of Amiri Brigade Commander after graduating from General and Staff College, Levenworth, Kansas. After my different roles in the Military Attaché in Paris, I continued to acquire skills and can speak German, English and French apart from Arabic. Now at KFH, I am able to apply the skills in leadership and communication in my job KFH day in and day out. What sustainability initiatives would you like to see in KFH in the future? KFH philosophy is based on Islamic principles is of one sustainable family built on the pillars of Trust, Loyalty and Truthfulness. I wish to see this continue and for our unity in the workplace to grow.

34 I KFH Corporate Sustainability Report KFH Corporate Sustainability Report I 35 Investing within Sector Focus Making sure that our employees are getting the most out of their International Turnkey Systems job is a fundamental part of strengthening KFH’s commitment to its people. We wish to inspire, promote and motivate our staff so they reach their full potential

Breakdown of employees by category In 2010, Senior Management there were Middle Management

Executive

Consultants 2.8 0% 20%40% 60%80% 100% number of sick days on average per Employee benefits given in 2010 employee in both Annual Leave KFH Kuwait and KFH Health Insurance Malaysia Social Security for Nationals

0% 20%40% 60%80% 100% Maternity Leave Mohammed Al Fouzan Chairman, International Turnkey Systems Employee benefits. Our full-time employees enjoy a 15% bonus every year. We also cover 100% of their healthcare insurance and dental, and 50% of the healthcare insurance of their family (wife and up to 3 children). We provide transport allowance to Grade 3 and above, and housing allowance for Grade 13 and above. For our Kuwaitis, we cover their pensions.

Up to A total of In 2010, Career appraisals. All KFH Kuwait’s employees who have worked over 6 months with us 97% are given an annual performance appraisal review using a 7 Tier Grading System, as well as a training needs analysis for the upcoming year. The approach to determine the need for training of employees 45% more 25% is done using an Oracle System where Managers provide their inputs. The rate of participation of all goods and of workforce were given than from managers was above 90%, which is higher than the previous three years. Such processes is represented career & supplies were support our staff throughout their career, tailoring to their specific needs and gives us a great picture of their progress. in formal joint performance obtained from half management reviews in 2010, local sources, a of the senior Training. At KFH Kuwait our training programs include self-study, in-house training, external management learning, coaching and e-learning. Our employees have access to a wide range of tools and worker health compared with 43% increase are local skill sets, ranging from complex financial modelling to soft skills such as “thinking on your feet”. In and safety since 2006. 79% in 2008. nationals, total, KFH Kuwait invested in excess of $1m on staff training alone in 2010, excluding eLearning committees. an increase of initiatives and on the job training. 34% in 2007. Mr Khaled AlSaeid KFH Kuwait KFH Bahrain KFH Malaysia KFH Turkey Al Salam ITS CEO International Turnkey Average hours of training 10 - 30 10 - 30 10 - 30 30+ 10 - 30 10 - 30 Systems per employee Employees receiving 100% 100% 100% 100% 100% 97% annuals performance Total number of training hours per employee broken down by category reviews

Senior Management 4 Middle Management 11 Lower Management 13 Consultants 20 2010 Survey Staff Satisfaction at Al Salam International Hospital Contract Labor/Junior Staff 16 • 53% of staff plan to continue employment for more than five years • 86% of staff agreed and strongly agreed Hospital Accreditation is an added value • 87% agreed and strongly agreed that they maintain a good working relationship with other staff • 67% agreed that policies are clearly communicated to staff

36 I KFH Corporate Sustainability Report KFH Corporate Sustainability Report I 37 Community

On the right path Giving back

Making sure that our employees are getting the most out of their Giving to charity is preached by every religion of the world, and job is a fundamental part of strengthening KFH’s commitment to its is an essential component in KFH’s beliefs and thinking process. people. We wish to inspire, promote and motivate our staff so they This spirit of kindness and well wishing resonates in our company reach their full potential. culture, where we truly understand the meaning of Zakat: growth and purification.

Zakat House works closely, hand in hand with KFH, through KFH donations. Giving a donation of KD3.4 million (more than $12 million USD), Zakat house is able to continue to provide help for the disadvantaged as it has been doing so since 1982. Zakat House activities includes giving monthly financial aid, soft loans, health security and insurance, social assistance and cash donations, all to the underprivileged in Kuwait. Zakat House also hosts numerous activities in the Holy Month of Ramadan, and has projects outside of Kuwait such as sponsoring scholars, orphans and building mosques, schools, water wells and development centers.

Our Shariah training given to new joiners ensures our employees at all levels are exposed and aware of subjects at the heart of KFH’s business model. In our Kuwait office, we also give our people the chance to achieve “Certified Islamic Banker” status.

The Shariah curriculum offered by KFH in 2010, where at least once a year each employee must attend one Basic Understanding course.

Course Name Mandatory for

Basic Shariah All employees

Basic Shariah II All employees

Shariah Advance Retail, Commercial, Corporate, Investment, Credit Management & Finance

We have our own KFH Shariah-specific materials, “Fatwa” in the form of textbooks, which are available anytime for our employees, our customers and any of our stakeholders with detailed explanations on topics such as transactions, currency exchange, Zakat, insurance and a range of financial instruments.

Our monthly Shariah newsletter is distributed to our employees, featuring the bank’s latest news and Shariah achievements. Supporting Pakistan Flood Relief with KFH Kuwait donating a total of $2 million Human Rights. In KFH we adhere to the laws that protect our people. We are USD. This helped impacted families in Pakistan whose homes and lives were completely compliant with national labor laws. In Kuwait, the Kuwait Labor Law in devastated by one of the worst floods in modern history. KFH Turkey provided on the the Private Sector (Law no.38/1964), includes special interest in the Human Rights ground support by sending staff members to areas in need in Pakistan. Committee (HRC) at the National Assembly. The same applies to all our subsidiaries who ensure full compliance with local labor laws.

38 I KFH Corporate Sustainability Report KFH Corporate Sustainability Report I 39 Country Focus Local Outreach

KFH Malaysia We have continued our work in support of the health and prosperity of our social fabric, actively participating in local community life, offering support to the most important issues in health, education and safety.

15 Emergency centers costing approximately KD 1.5 million (more than $5 million USD) began development in 2010, with some opening that year.

Al Zour is a construction of chalets specifically made for people with special needs that started in 2010 costing KFH KD 1 million (more than $3.5 million USD).

Puan Jamelah Jamaluddin CEO, KFH Malaysia Putra Mosque, Malaysia

Ramadhan, the month of giving at KFH Malaysia

• Contributed ihram garments to Malaysian male pilgrims who are performing Hajj was given by KFH Malaysia in 2010. Representing KFH Malaysia at the event was Chief Executive Officer, Puan Jamelah Jamaluddin, who presented the Bank’s contribution of 15,000 pairs of ihram garments worth over $130,000.

• Contributed to the Ziarah Ramadan Programme with over US$ 36,000 in conjunction with His Royal Highness Tengku Muhammad Faris Petra, the Regent of Kelantan. Handover ceremonies were held at 10 selected mosques in 10 districts in Kelantan, where His Royal Highness Tengku Muhammad Faris presented a cash donation of approximately $65 to each of the 500 eligible recipients. Identified as severely disadvantaged, these include wheelchair- Promoting healthy living in Bahrain with KFH Bahrain’s sponsorship of the bound and chronically-ill patients. celebration of the 20th anniversary of the Bahrain Diabetes Society, which was held under the patronage of HRH Prince Khalifa bin Salman Al Khalifa, • Hosted ‘Breaking of Fast’ for 220 youths from poor families of Baitul Hasanah the Prime Minister of Bahrain. As part of the celebrations, an international Klang, Kuala Selangor and Hulu Selangor. Puan Jamelah Jamaluddin, the Chief conference and exhibition aimed to increase the level of awareness and Executive Officer, was present to hand over gifts and packets of money for Hari highlight the latest developments in combating diabetes. KFH-Bahrain’s Raya. Seventy employees from KFH Malaysia were also present to attend to the participation in this occasion stems from its strong belief in promoting the young guests. Selected by Lembaga Zakat Selangor, the children reside at a Bahraini society, especially medical institutions and initiatives that care for hostel under the administration of the body, where they receive proper care and the well being of Bahraini people. The Bank is particularly interested in support. organizations like the Bahrain Diabetes Society, which are striving to provide a high level of awareness and health care for those who are suffering from Total breakdown of KFH Malaysia’s community involvement in 2010 diabetes. The high incidence of diabetes found in the Kingdom can have significant repercussions, both on the social and economic level. Charitable Activities Funds US$ KFH Bahrain also supported Think Pink Bahrain’s initiative to install a state-of- Underprivileged community 386,720 the-art MRI scanning facility to assist the Salmaniya Medical Complex in their Education 733,454 fight against breast cancer. KFH-Bahrain’s support will contribute towards Islamic-related activities 862,800 the civil works in both the Radiology MRI room and Oncology Simulator Environment 12,635 room. Currently, advanced MRI scanning treatment is limited in Bahrain and upon purchasing this equipment; Salmaniya Medical Complex will be able to Medical support 729,324 provide advanced breast cancer screening and diagnosis free of charge for all Employees Community Programme 44,571 women in the Kingdom. Total 2,769,504

40 I KFH Corporate Sustainability Report KFH Corporate Sustainability Report I 41 Local Outreach Sector Focus Al Salam International Hospital (SIH)

Al Salam’s Community Service Strategy is to promote health and environment awareness through community interaction to raise society standards. The goal is to involve the community through interactive methods.

Strategic Objectives

1. Planting the basis of a healthy life and awareness in the young generation

2. Focusing a great amount of attention on the core of the family, the woman

3. Educating the mother on the essentials of raising a child as a newborn and life’s early stages

4. Educating the family on how to shift lifestyle from unhealthy to healthy habits

5. Educating medical workforce along with community members on the ethics that should be expected

KFH employee contributes to charitable activities, Kuwait City 6. Encouraging and promoting the compliance to safety, security, and health guidelines

Local programmes and campaigns are long-running in KFH. Numerous 7. Reallocating the community’s energy towards being proactive instead of reactive local programmes are set up annually which benefit the local community. A round-up of 2010’s events include: 8. Energy conservation d starting with SIH as an example to lead the way

• Sponsorship of the Kuwait Parental Care Society’s Disabled Care Week 2010 highlights • Support of the College of Administrative Sciences on Renewal of Accreditation School trips and invites with five of Kuwait’s biggest schools • Support of “House of Abdullah Care of Children” charity event with the American Bilingual School, Kuwait Employee welfare: monthly strategic management & planning lecture; nurses day celebration • Youth India Kuwait Sports Day Instructions to turn off all unnecessary energy consuming equipment or apparatus in • Sponsorship of International Islamic Centre and activities of Islamic Finance Club hospital • Printing of books and brochures with the Kuwait Society for Traffic Safety 1000+ students have been checked free of charge • Material support for patients at the Sabah Al Nasser Health Centre Ramadhan and your health newsletter • Sponsorship of Deaf Bowling tournament hosted in the United Arab Emirates • Support for students of Kuwait University to attend the World Environment Awareness of Diabetes and Hypertension “The Silent Killer” Conference 2010 in Dubai Al-Sheikh Jazzem El-Mehalhal lecture on “Ethics of Medical Practice.” • Sponsorship of Kuwait-Syrian Journalists Campaign on “how to prevent or decrease the incidence of complications?” • Program for restructuring the workforce and executive in a Career Opportunities forum “Don’t smoke your life away” campaign

• Support of small-business owners in Kuwait Elderly care program and exibition • Sponsorship of Gulf Run, Kuwait Monthly antenatal and postnatal educational courses, free of charge for mother • Young Arab Leaders Forum “Building the Next Generation of Leaders”, Bahrain “Healthy Day” at Global Investment Company • Fourth GCC Islamic Conference of Charity • Bahrain International Book Fair Sponsorship • Hosting “Leaders for Excellence Conference” at the University of Bahrain • Sponsoring the traditional pearl diving trip for second consecutive year

42 I KFH Corporate Sustainability Report KFH Corporate Sustainability Report I 43 An Interview with Mariam Dr Bibi Position: Consultant and Chief Obstetrics & Gynecologist Department: Human Recourse & Services, Al Salam International Hospital

Has working for Al Salam met your expectations?

Of course. I started my medical career 40 years ago when medical facilities in Kuwait were still at their infancy. It was limited, and I actively participated in the development of the Kuwaiti Health Sector which has resulted in its current high standards. Al Salam is definitely one of the leading hospitals in the country, giving the highest priority of medical services, with international accreditation.

Do you think that women are empowered in the workforce at Al Diverse views from Salam? As the Chief Member of Maternity and Child Care, Al Salam has valued my views and judgment throughout my career. At present, I am building on the current initiatives such as the baby Friendly Office and have introduced the First Trimester Scanning which identifies prenatal abnormalities.

How are patients treated differently at Al Salam?

We use consultants in our hospital for all check-ups and procedures to ensure the best treatment for our customer. This method has made a great difference in obtaining constructive feedback and putting our KFH patients at ease.

What sustainability initiatives would you like to see in Al Salam in the future?

Being an important player in the health sector, I think it would be fantastic to keep the quality of service at the hospital and I believe that the hospital should expand into new branches to respond to all clients needs.

44 I KFH Corporate Sustainability Report KFH Corporate Sustainability Report I 45 Global Stewardship

Looking towards Managing our emissions the future of energy Calculating emissions is the first step towards their mitigation and reduction. In a climate threatened by climate change and depleting ozone layer, now, more than ever, must we must fully exercise our The future of energy supply is in our generation’s hands. Throughout role as stewards of the Earth. our operations, we strive to be part of the solution and not the problem, advocating that the low cost production of alternative Our carbon footprint energy in relation to fossil fuel makes it a highly promising The urgency to address global warming, backed by accumulating scientific evidence, investment sector. With the Middle East and North Africa being one has garnered international attention. The United Nations Framework Convention for of the world’s richest regions in solar and wind energies, the outlook Climate Change has stimulated significant global efforts in mitigating greenhouse gas indeed looks promising. emissions and adapting to climate change. The ultimate objective is to prevent human interference of the climate system that could be deemed “dangerous” by stabilizing greenhouse gas concentrations and adapt naturally to climate change. There is thus Teaming up with Bloomberg New Energy Finance, a leader in providing a new paradigm required from countries and indeed, companies, to meet future independent analysis, data and news in clean energy, KFH Kuwait hosted a demands of energy. workshop in June 2010 on renewable energy, which discussed topics such as global By calculating KFH’s carbon footprint based on our electricity consumption, we have investment, policy and technology trends and the implications of renewable in the addressed our biggest source of greenhouse gas emissions. Now that the size of our Middle East. respective carbon footprints are known, we can begin the path towards measuring our success in energy conservation in the global context.

KFH Kuwait KFH Bahrain KFH Malaysia KFH Turkey Al Salam Hospital

Electricity consumption (Kwh) 3,267,482 806, 226 2,832,020 11,521,811 3,000,000

Total CO2 emissions (kg)* 2,638,448 717,623 1,577,463 4,987,123 2,422,460

Total CO2 emitted per FTE (kg CO2) 1,197 2,687 2,682 1, 757 2,752 Al Salam International Hospital’s Green Strategy started in 2010, seeing improvements in its facilities without disruption patient services. Employed Ozone friendly chillers were installed in our offices in Kuwait to ensure our an Astec Re-Ply Roofing system, state-of-the-art technology where hospital emissions contain no ozone depleting substances found in refrigerants. This goes in staff and customers were unaware of the drastic changes happening on the line with The Montreal Protocol on Substances That Deplete the Ozone Layer and the rooftop. Sustainability was a key driving force in implementing this system, as it national phase-out of CFCs and HCFCs. is renewable and thus reduced maintenance costs over time and increased its overall life cycle. Hospital was able to dramatically reduce surface temperatures of the roof, averaging 14 C difference, which translated into a cooler indoor

working environment and thus reduced energy usage of air conditioners. To Diyyar Al Muharraq Goes Green at KFH Bahrain. In keeping with their vision, strategies are implemented to minimize top it off, the indoor air quality was improved, making the hospital environment the environmental impact of construction, while establishing the foundation for a sustainable future: more comfortable for our patients, their visitors and the staff. • Compliance with the internationally recognized Green Building Rating System for New Construction (LEED- NC) in the issuance of building permits. Al Salam hospital have also made significant strides in efficient water management, where the plumbing design was revised in 2010 with pressure • Solar orientation of buildings is being carefully considered along with the potential use of solar and wind energy. regulating values being installed in all areas of the hospital wherever applicable. The use of technologies such as solar thermal water heathers, solar powered streetlights and a smart grid for monitoring and optimizing energy consumption is also being considered. • Gold sponsor for this third edition of the Energy & Water Conservation Expo 2010. The Expo is aimed at identifying energy and water conservation techniques that could be used in the commercial and industrial sector. • Construction by third party developers is subject to adherence to the development guidelines that focus on waste reduction, where there are plans to introduce a centralized waste collection/separation/removal and Our KFH Bahrain office is housed in the highly resource efficient Bahrain World recycling concept. Trade Center. This LEED-certified building features three wind turbines which • First reclamation project in Bahrain with a continuous monitoring program, which is regularly submitted to the can result in up to 15% of energy savings of electricity consumption per year. government environmental bodies for review. In addition the building also incorporates special solar glass which contributes • Promoting biodiversity in the landscapes with trees and networks of paths community connectivity. to reduced air temperature in the building, a district cooling system, energy- • Use of Xeriscape planting techniques to promote water efficiency, where selective irrigation techniques are saving fluorescent lighting and a sustainable water drainage system. used on plants which are grouped together according to their water demand. • Low maintenance targets with energy efficient, low consumption electrical items such as pumps for drainage, potable water, irrigation and sewage to reduce overall electricity impact.

46 I KFH Corporate Sustainability Report KFH Corporate Sustainability Report I 47 Paper consumption in our Kuwait offices has seen an increase, but we will make up for this by ensuring more is recycled. The total paper consumption per Full-Time Using our resources wisely Employee (FTE) for 2010 was 24 kg.

Paper Paper Paper consumed Re-distributed Recycled Re-distributed Our role as stewards of the earth which KFH does not want to take (tonnes) (tonnes)

lightly, especially considering our regional environmental sensitivity. 2009 49.9 15,350 30.7% We must sustain our earth’s natural resources for many generations 2010 to come. 2010 52.7 20, 750 39.4% Paper consumed Annual water consumption

KFH KFH KFH KFH Turkey Al Salam Bahrain Malaysia Hospital Kuwait Paper consumption in KFH worldwide

Water (liters) 47,278,390 9,000,000 4,183,000 49,540,000 9,539,200 KFH Kuwait KFH Bahrain KFH Malaysia KFH Turkey Al Salam Hospital

Water consumption per 21, 451 33, 708 7,113 17, 462 10,840 Paper consumption (kg) 53, 000 16,000 22,000 168,000 26,125 FTE (liters) Paper consumption per FTE 24 60 37 59 30 The majority of our operations and investments are situated in the Middle East, a (kg) water-scarce region. In addressing this critical factor, KFH puts reducing water consumption a main concern in ensuring our sustainability.

Breakdown of annual water consumption in KFH Kuwait’s branches 2010 Annual tree planting in Kuala Lumpur, has been kicked started by KFH Malaysia 7,000,000 to celebrate 53 years of Malaysian Independence. Trees can act as carbon 6,000,000 sinks, absorbing and locking away carbon dioxide, the main greenhouse gas 5,000,000 responsible for climate change. Trees also help cleanse the air by intercepting

ers 4,000,000 airborne particles and can reduce urban-city heat by absorbing pollutants such

on Lit as carbon monoxide, sulfur dioxide and nitrogen dioxide.

illi 3,000,000 M 2,000,000

1,000,000

0 r m m er as ya ce an ah li li ee ll ifan diya arak ffi liyah nd th iya bh Jahra li lmi Salwa Bayan Ka Haitan ub Al Feha Sa Al Shab Al bdu Khaitan Al Gasir Al ndalous Al Fa Al Ar Al Al Ad Al Al Sa Al Al Ahmadi Al Gadsiya Al Salhiyat ah Sa ah Al Al Kha Al Fahaheel Main O Al A ll Sabah Al Sa ah Al M Sabah Al Nas arak Al Khab ll bdu arak A Al arak Fahad Al Ahmad A ub ub bdu M M A

State of Kuwait Ministry of Electricity & Water awarded KFH for outstanding achievements in its energy savings program for 2009 and 2010 Palm trees by the beach, Malaysia

48 I KFH Corporate Sustainability Report KFH Corporate Sustainability Report I 49 Our Stakeholder Strategy Engagement Plan

How we engage Sustainability priorities Actions

Kuwaiti Government • Regular correspondence with the • Contributing to the national 1) Establish sustainability-focused government ministries economy linkage with ministries Our vision in corporate responsibility is to embark on positive economic, social and environmental • Investment in the national • Positive contributions to Vision 2) Discuss sustainibilty issues change by using our Shariah principles to guide the way. Based on our findings in consolidating economy 2035 and writing this Corporate Sustainability Report, we understand we need to improve on our • Meeting national laws and sustainability performance. Our long-term plan is presented here. regulations Customers • Range of feedback mechanisms • Satisfaction in products and 1) Conduct and report results on initiated either by KFH or the services customer satisfaction surveys, customer • Quality in customer care including customers of key Our Business Our Our Our Our initiatives such as affordable • Use of latest technological trends • Efficient branches and technology Principles Customers People Deeds Environment to facilitate dialogue housing • Shariah product innovation • Customer satisfaction surveys 2) Include feedback from the • Competitive rates and charges survey when developing annual • Branch expansion Ambition To be the leading Create a Be an employer Uphold reputation Be the leading sustainability initiatives related to Islamic Bank balanced of choice in our positive bank in the region customer services in Coroprate dialogue between impact to society in conservation 3) Establish a dedicated customer care unit Sustainability KFH and its customer base Employees • Regular career appraisals leading • Job satisfaction 1) Conduct employee engagement to training schedules • Career longevity, lifelong learning and satisfaction survey • Regular team meetings • Fair compensations and 2) Introduce an employee-initiated feedback mechanism scheme 2011 Goals Increase number Improvement Increase number Develop diverse Increase promotions of subsidaries of customer of women in products and awareness • Pleasant working environment reported on in satisfaction score workforce, with services that can in renewable Investors/ Shareholders • Board of Director’s meetings • Confidence in KFH in handling 1) Continued investment in diverse next CSR report focus on senior create indirect energy business, customers, suppliers and industries and economies Develop Shariah • Ongoing correspondence positions economic investments employees 2) Annual Corporate Sustainability Create a KFH financial services impacts • Net annual returns Reporting Group policy education Establish a CSR Promote • Shariah Compliance on Corporate through use of Committee reduction • Supply management in regular • Continued support and fair 1) Look to create dialogue Responsibility social-media, for the group in electricity Suppliers ordering and feedback treatment mechanisms to further video and other to promote consumption Train our • Efficiency in product/service usage understand expectations modern mediums sustainability and suggestions to improve employees Decrease sustainability on corporate Engage in Social office paper sustainability skills Media Networks consumption per Rating Agencies/ • Compliance to regulations and • Transparency 1) Continued annual and corporate submissions sustainability reporting to increase FTE Regulatory Authorities • Compliance • Support State Audit Bureau 2) Regular contact and dialogue involvement and dialogue on CSR NGOs • Awareness of expectations and • Sound environmentally-friendly 1) Look to establish dialogue regular donations, sponsorships, practices and investment mechanism to obtain their issues inaugurations and support in • Continued investment in feedback on KFH sustainability society community initiatives Shariah Board • Regular board meetings and • Compliance 1) Stimulate Shariah product and correspondence service creativity that meet global Finally, we wish to create a univeral CSR system to be used across KFH to faciliate in tracking • Continued improvement in products and services sustainability objectives and gathering our corporate sustainabilty indicators across our subsidiaries. This will improve the • Representation of Shariah on efficiency, completeness and accuracy in future reporting. global platform

50 I KFH Corporate Sustainability Report KFH Corporate Sustainability Report I 51 GRI Index Our

Reporting Key Performance Indicator Pages Level Approach Direct economic value generated and distributed, including revenues, operating costs, employee compensation, donations and other EC1 12 community investments, retained earnings and payments to capital This corporate sustainability report gives an overview of KFH’s providers and governments performance from its main office across its subsidiaries. This is the first Procedures for local hiring and proportion of senior management hired 26, 27, EC7 Corporate Sustainability Report KFH has published. Economic from local community at locations of significant operation 31 Development and impact of infrastructure investments and services 34, 35, Content and Materiality EC8 provided primarily for public benefit through commercial, in-kind, or pro- 36, 37, The report content was developed after careful consideration and bono engagement 38 identification of the most important topics and related indicators by Understanding and describing significant indirect economic impacts, 2, 6, 17, EC9 undergoing an iterative process using the Principles of materiality, including the extent of impacts 18 stakeholder inclusiveness, sustainability context and guidance as defined Total workforce by employment type, employment contract, and region, 26, 27, in GRI 3 Guidelines. Performing a materiality analysis based on stakeholder LA1 broken down by gender 28 expectations and sustainability priorities, and subsequently reporting on Benefits provided to full-time employees that are not provided to the most material Key Performance Indicators. LA3 32 temporary or part-time employees, by major operations Data collection Rates of injury, occupational diseases, lost days, and absenteeism, and LA7 32 total number of work-related fatalities by region We used tailor-made questionnaires to identify and consequently gather Labor Average hours of training per year per employee by gender, and by the data required to meet the standards of GRI. These were distributed to LA10 31, 32 employee category the relevant departments in each of the KFH offices as part of this report. The departments were: Human Resources, Financial Control, Shariah Percentage of employees receiving regular performance and career LA12 32 development reviews Compliance, Marketing & Communications, Strategy & Investment and Facility. We are confident that the overall reliability of the data is robust LA14 Ratio of basic salary of men to women by employee category 27 but recognize that some is subject to some degree of uncertainty due to judgments and estimation methods used. Monetary figures were EN1 Materials used by weight or volume 45 converted to United States Dollars ($) using conversion rates as of EN2 Percentage of materials used that are recycled input materials 45 31/12/2010. EN4 Indirect energy consumption by primary energy source 43 Completeness and Boundaries

Initiatives to provide energy-efficient or renewable energy based The report covers all banking operations in KFH Kuwait in addition to local Environment EN6 products and services, and reductions in energy requirements as a result 42, 44 operations in KFH Bahrain, KFH Malaysia and KFH Turkey. The report also of these initiatives covers KFH subsidiaries in the State of Kuwait, Al Salaam International EN8 Total water withdrawal by source 44 Hospital and International Turnkey Systems. Due to the differences of data EN16 Total direct and indirect greenhouse gas emissions by weight 43 available for each of the subsidiaries, it was difficult to consolidate all the results and figures given, as such subsidiaries were reported separately. EN19 Emissions of ozone-depleting substances by weight 43 Product Practices related to customer satisifaction, including results of surveys 22, 23, Global Reporting Initiative PR5 measuring customer satisfaction Responsibility 24, 47 The Global Reporting Initiative (GRI) has developed sustainability reporting Policies with specific environmental and social components applied to 15, 16, guidelines that aim to increase transparency and accountability of FS1 business lines 43 economic, environmental and social performance. We support the GRI Processes for improving staff competency to implement the and we believe that a B grade applies to our CSR 2010. We have FS4 environmental and social policies and procedures as applied to business 33 additionally reported on performance indicators specific to our line of work, Product & Service lines financial services, using the GRI’s Financial Services Sector Supplement Impact Percentage of assets subject to positive and negative environmental and (FSSS). FS11 16 social screening Assurance Initiatives to improve access to financial services for disadvantaged FS14 25 people All financial numbers in the sustainability report are based on audited Percentage and total number of significant investment agreements and financial statements found in our 2010 annual reports. We have submitted Human Rights HR1 contacts incorporating human rights concerns, or that have undergone 33 our sustainability report to GRI for transparency check where we have an human rights screening approved application level. We understand the importance of assurance Nature, scope, and effectiveness of any programs and practices of corporate sustainability reports and aim to have our reports audited in Society SO1 that assess and manage the impacts of operations on communities, 17 future. including entering, operating, and exiting

Full Reporting Partial Reporting

52 I KFH Corporate Sustainability Report KFH Corporate Sustainability Report I 53 Special Thanks KFH extends special thanks to those who have directly and indirectly contributed to the successful preparation of the KFH Corporate Sustainability Report 2010 including,

Project Management Fahad Khaled Al-Mukhaizeem, Head of Strategic Planning / Marketing & PR Departments - KFH Kuwait Momtaz M. Saif, Sustainability Project Manager / Strategic Performance Manager - KFH Kuwait

KFH Kuwait Adel Abdullah Al-Were, Deputy Manager General Services Adel Saboba, Economic Researcher Ahmed Al-Nori, Manager Compensation & Manpower Planning Ahmed Al-Rashid, Creative Supervisor Dawood Sami Al-Jarrah, Sharia’a Auditor Houssam Q. AlKhatib, Service Quality Manager Imad R. Mirza, Development & Training Manager Khaled Al-Otaibi, Business Development Khaled Al-Sayer, Digital Marketing Supervisor Mohammed M. Al-Musalam, Senior Strategy Officer Salahuddin Ahmed, Investment Manager Zakaria Al-Ansari, Dealer Ziad Salameh, Corporate Marketing Manager

KFH Turkey Gökhan ENGÜL - Corporate Communication

KFH Bahrain Adnan Shakoor Malik, Head of Strategic Planning & Governance Ahmed Khalifa Khalfan, Assistant Manager Corporate Communications

KFH Malaysia Akmal Baqi Mohamed Ariff, Head, Corporate Communications Division Hajjah Rumaizah Dato’ Abu Bakar, Corporate Communications Division Fazidah Zakaria, Corporate Communications

KFH Research Ltd. Baljeet Kaur Grewal, Managing Director Tursina Yaacob, Director

Al Salam International Hospital Aliaa El Sayed Sawsen Sobhi, Marketing & PR Department Secretary Dr Mariam Bibi, Consultant & Chief of Obs & Gyne

International Turnkey Systems Dr. Costas G. Constantinidis, AGM Muhammed Asif, Accounting Manager

Ernst & Young sustainability assurance advisors to Kuwait Finance House Group

54 I KFH Corporate Sustainability Report KFH Corporate Sustainability Report I 55 Glossary

Carbon dioxide A greenhouse gas associated with global climate change, expressed as CO2.

Carbon Footprint The total amount of greenhouse gases produced due to anthropogenic activities. It is the sum of all emissions of carbon dioxide, which were induced by your activities in a given time frame.

CSR Corporate Sustainability Reporting/Report

Economic Value Distributed Includes payments to suppliers, employee wages and benefits, payments to providers of capital, payments to governments and community investment.

Economic Value Generated Net sales plus revenues from financial investments and sales of assets.

Economic Value Retained Calculated as Economic value generated less Economic value distributed.

Equator Principles Voluntary set of standards for determining, assessing and managing social and environmental risk in project financing.

Full-Time Employee (FTE) Total number of full time employees working in KFH as of 31/12/2010.

Global Reporting Iniative GRI is a network of many international partners that has developed a framework for sustainability reporting, in particular sustainability reporting guidelines, sector supplements and protocols.

Greenhouse Gas Greenhouse gases are gases in the atmosphere that absorb and emit radiation within the thermal infrared range. This process is the fundamental cause of the greenhouse effect, where the planet is warmed by the atmosphere.

Kg CO2 Total kilograms of carbon dioxide.

Montreal Protocol An international treaty designed to protect the ozone layer by phasing out the production of a number of substances believed to be responsible for ozone depletion.

Ozone-friendly Not containing chemicals that are destructive to the ozone layer.

Ozone Layer A layer in the earth’s stratosphere at an altitude of about 10 km (6.2 miles) containing a high concentration of ozone, which absorbs most of the ultraviolet radiation reaching the earth from the sun.

56 I KFH Corporate Sustainability Report KFH Corporate Sustainability Report I 57 Kuwait Finance House P. O. Box 24989 Safat 13110 Kuwait Tel: 22445050 Fax:22455135 Cable: BAITMAL KT [email protected] www.kfh.com

58 I KFH Corporate Sustainability Report Kuwait Finance House (KFH) Group of Companies