4 Commercial Bank of Kuwait BOARD OFDIRECTORS Abdul RazzakKhaledAlWazzan Ahmad Mohammed Al-Mishari Deputy Chairman Member Abdul FatahMohammedRafeeMarafie Secretary totheBoardandGMInvestments Fowzi Abdul Mohsen Al-Ateeqi Mohsen Abdul Fowzi Abdul MajeedHajiAlShatti Chairman &ManagingDirector Fouad IsmailDashti Member Member Khaled IbrahimAl-Raqum Sadek IbrahimMarafie Member Member

5 Annual Report 2008 offering contributionstovarious socialactivities. and supporting responsibilityby social corporate our of coreprinciples the become the bank of first choice for all customer segments, while maintaining to market’sstrive local we needs, customers’ our requirementsfor cater to the studying to committed teamwork professional a Through services. and products banking state-of-the-art with customers providing at aims that strategy business well-defined a under works Kuwait of Bank Commercial Al-Tijari ………….MyChoice

7 Annual Report 2008 8 Commercial Bank of Kuwait CHAIRMAN AND MANAGINGDIRECTOR’SMESSAGE years against any future impact of the global financial crisis as there are difficult times difficult are there as crisis financial global the of impact future any against years the over cushion prudent this built has Bank The requirements. regulatory above and in the general provision is Included KD 51.6 million that the Bank provisions.has with accumulated over general provisions of million loan 87.1 of KD and million provisions specific 197 of KD million 109.9 of KD total a has Bank the end, year the At precautionary measure. a as requirements regulatory the above and over provisions loan general additional of 25.6million KD taken conservatively and voluntarily has Bank the asset excellent, though is quality even provisions, these in Included portfolios. investment and loan the During 2008, the Bank made provisions for possible impairment of KD 57.7 million against ADDITIONAL VOLUNTARY PROVISIONS with provision coverageof 235%. non-performing loans of KD 44.1 million, only 1.7% of the post liberation loan portfolio, mainly to corporate clients. The Bank actively manages asset quality, with post liberation lending, selective through million 216 KD of or 10% by increased advances and Loans income ratioof17.58%. to cost efficient very a to leading 13% only by rose Expenses 18%. up commissions year corresponding the of ahead 24% or million which is 22% ahead of 2007. Thefinancial results of the Bank show an increase for 2008 operating income to KD 198 OPERATING INCOMEIS22%AHEADOFLASTYEAR share capital(40fils). nominal the of 40% of dividend cash a BoardDirectorsof The ofproposepayment the The Bank’s netprofitpershare wasKD100.7millionwithearnings of80.6fils. the Bankhasfollowedinrecent years. andthechallenging strategy conservative and prudent the reflect and institutions financial for environment conditions economic such turbulent given excellent are profits and results financial Bank’s the However, business. banking affected negatively that developments economic and financial of number a saw which 2008 of quarter last the The world economy, mired in a severe financial crisis, moved into a challenging arena in COMMERCIAL BANKOFKUWAIT –SUPERIORPERFORMANCEEVENINTOUGHTIMES the majorachievementsofBankduring2008. am Kuwait’sI and of performance Bank Commercial Directors’,of summary brief a of present to pleased Board the of behalf on and Bank the to support continuous your for thanks deepest our extend to like would I outset the at Shareholders, valued Our The profit before provisions rose to KD 163 million with interest income up 16% and fees and fees and 16% up income interest with and restructuring. rescheduling debt their on institutions financial been Kuwait major has certain advising Capital actively CBK as operations investment started Our has Co. clients. Investment CBK Tijari Al for subsidiary services unique and distinctive more providing to addition in market, local the in offerings product the and activities completed brokerage Bank’s the and sources income its diversify acquisition of Union Securities Brokerage to Company with the objective of strengthening 2008, in continued Bank The was KD2.4billionprudentlyallocatedtoalleconomicsectors. portfolio loan the 2008, of end the By companies. investment some to funds required in the productive & dynamic economic sectors. The Division was active in providing the Corporate Banking Division continued to expand its portfolio of credit facilities particularly and servicesspecificallytailored tocaterforallcustomers’needs. branch network in Kuwait Commercial Bank provides state-of-the-art banking products largestsecond the With 2009. locations in opened be to branches further securedfor been have New Street. Salem Al Fahed and Street in Sour branches Al three Mubarak, Abdulla opened Dahiyat Bank the 2008 During Kuwait. in network branch largest second the operate to continues Bank Commercial branches, With located conveniently people. 54 its and systems IT network, branch its in invest to continues Bank The REVIEW OF2008 of theCentralBankKuwait. capital a requirement12% with minimum the exceeds comfortably which 15.54%, of base ratio adequacy capital strong a has also Bank The standards. international and produceto continues Bank the 23.15%, of equity arethat returns excellent local above average on return a and 2.34% of assets average on return a With 2008. of end the at as million 497 KD were funds shareholders’ total and billion 4.3 KD were Totalassets TOP THE WORLD ANDLOCALFINANCIALINSTITUTIONS AMONG BANK THE RANK INDICATORS PERFORMANCE’S FINANCIAL OUR cash dividendsinthecomingyears. distributing continue to Bank the allow will and funds shareholders’ enhances further approximately transferred This 2008. at million 92 KD totals has which account retainedearnings the to million 47 KD Bank the provisions, general extra the to addition In RETAINED EARNINGSINCREASEDTOKD92MILLION activities safelyandhedgeagainstthefalloutsofanysuchfinancial business do to Bank economy.the Kuwait help Additionally,will provisions extra these the on crisis financial global the of effects future the predict to easy not it with ahead meltdown.

9 Annual Report 2008 10 Commercial Bank of Kuwait cultural events and sports activities. The Bank is a prominent participator and promoter centres and its contributions to social activities, awareness campaigns, educational and care social to donations Bank’sgenerous the through is this of demonstration clear A preserve Kuwait’s naturalresources. to environment the protecting and Kuwaitis for opportunities training and employment providing development, its in participating society, serve to resources and efforts its in 1960. From this starting point, the Bank has followed a balanced strategy of devoting Corporate Social responsibility has been one of the Bank’s CORPORATE SOCIALRESPONSIBILITY priorities since its establishment of percentage Kuwaitisationregulations.Governments the up brought the exceeding manpower,thereby that Bank’stotal the of 50% Kuwaitis over to manpower Kuwaiti 170 recruited Bank the graduates. 2008 fresh to During opportunities job excellent offering in efforts its continues Bank Commercial graduates, Kuwaiti for employer preferred a As skilled people. retain experienced and and motivate train, attract, to effort all exerts largely Bank depends The grow people. our and on expand to ability our and relationships about is Banking OUR TEAM credit cards alongwiththeintroduction ofanEMVcompliantATM switch. The Information Technology group saw the implementation of EMV compliant debit and trade. international provides advice to customers, particularly with regard to the changes in rules governing now TradeServices groups. Business the support to continues group Operations The strategic Bank’s the criteria. meet that opportunities expansion rewarding and acquisitions potential consider and study to continues Division The institutions. international a these with relationships banking certain suspend number of international banks and this helped to in mitigating the Bank’s decided risk exposures on Division the institutions, and safeguard to view a With protect strategy. the Bank from the negative effects of the financial crisis that expansion hit several financial regional Bank’s the support andcontinues to of 2008 half first the during active was Division Banking International assist inoffering thebestservicestocustomers. to methods technical and foreign by improving effectively cash management and efficiently requirements exchange basic client’s corporate fulfil to continues Treasury their extend and range ofwealthmanagementtoolsasapartTijariGlobalInvestment Solutions. clients worth net high new gain to continues Banking Private Tijari the challengesoffuture. the provide to to Bank’s rise to and remarkablerecordachievements this of requiredsustain leadership to team the management of senior bedrock our in the confidence are great have customers We to success. value and service best the deliver to and the energy achieving dedication, on professionalism, commitment to focussed our their goals of excellence. remain through Their tireless efforts, who objectives innovation and teamwork strategic employees Bank’s our and team senior the Al-Mutawa, management Jamal Mr. CEO & CGM our thank to like would we Finally, of ourcommitmenttoexcellenceinallfields. their thank our customers for their trust and confidence in our services, and we assure them for shareholders valued our thank to confidence and like continued support of Commercial Bank of also Kuwait. We would also would like to Directors of Board The sector inKuwait. and banking Commerce the to support of continuous their for Chamber agencies regulatory other all the and Industry Industry, and Commerce of of Ministry the Ministry Kuwait, the of Bank Finance, Central to thanks our extend to like also would We National Assemblyfortheirwisemanagementofthenation’s economicpolicies. and Ministers of Council the of members to Minister,and Prime the Highness His and Prince Crown the Highness His Amir, the Highness His to appreciation and gratitude sincere our express to wish we Directors, of Board the of behalf on and conclusion, In APPRECIATION fields, all true totheseprinciplesandcontinueprosper. in excellence demonstrate keep will We citizenship. to corporate and commitment statement, innovation, leadership, including mission clear a has Bank The protecting and shareholder value. storm the weather prudent, to for customers our need assisting the banking, see conservative we Kuwait, affected has downturn economic global The OUR VALUED SHAREHOLDERS presenting usually abroad, and Kuwait research papersontheissuesandtopicsdiscussed intheconference in organized seminars and conferences of Abdul MajeedHajiAlShatti Chairman &ManagingDirector 11 Annual Report 2008 REVIEW OFOPERATIONS better. The Division’s management initiated dialogue with a view to present a new new a present to view a with dialogue initiated management Division’s The better. customers our serve to potential their enhancing of objective the with degree high a to trained arestaff our of members All skills. their optimizing further to view a with them train to and recruits Retail new best very the support, attract to continues customer Division Banking of level highest the for reputation Bank’s the Maintaining Customer ServiceisourTop Priority activities andfestivalswiththeaimofbringingBankto thehear coordinate with the Bank’s Advertising and to Public Relations Department in continues a number of Division The products. its of marketing in used campaigns promotional RBD constantly evaluates its participation in, and the success of, diverse activities and Proactive InteractionwithCustomers through theBank’s website,www.cbk-online.com. upgraded and updated be to continue customers with year.channels Communication the during enhancement some witnessing offerings deposit other and Account First My Account, Lead its with needs customers’ all for cater to offerings product retail its develop and enhance to continue Bank The standards. brand contemporary the with line in branches of number a in architecture exterior and layout interior the improved the Bank operates the second largest local branch network in Kuwait. The Division has and Abdulla Al Mubarak District - bringing the total number of branches to 54. Notably, the year, the Division opened three new branches - Fahd Al Salem Street, Al Sour Street During customers. all to accessible easily branch services its keeping Kuwait its across network expanded Division Banking Retail strategy, expansion Bank’s the Within Expansion oftheBranchNetwork offerings whichcaterforall customers’segmentsandmeettheir requirements. product account and deposit various offer to continues Division The Kuwait. of Bank Central the by issued recently controls and instructions the with accordance in installment loans new offering in policy conservative its continued Division Banking Retail Bank’s customerbase. the expand to continuing in and public, the to services banking innovative bringing in management Division’s the and employees branches’ the all of efforts consolidated the to thanks 2008 in results remarkable achieved RBD customers. to services products banking and best the offering at aims which strategy general Bank’s the is effective within Division The workflow. the streamlining and performance our providing optimizing in role structural significant of number and administrative changes were a introduced a to the Division which contributed towards 2008, During play customers. our to to services continues banking distinctive (RBD) Division Banking Retail Superior BankingServices RETAIL BANKINGDIVISION t ofthecommunity. 15 Annual Report 2008 16 Commercial Bank of Kuwait marks ontheKuwaitimarket. in oil prices, nearing the US$ 30 a barrel mark, are expected to combine and leave their slide continuous recessiona worldwide and The operate. to continue to ability their on questions raised and institutions, financial major the of some on impact severe a had has This up. drying banks from funds new to access in resulting plummet, investment their of values the saw they as hit be to first werethe Kuwait in companies Investment in free-fall, particularlyafterSeptember2008. of the world economy. GCC stock markets, in common with global markets, have been markets everywhere - including Kuwait. This crisis had an negative effect on all sectors 2008 will be remembered as a year of global financial crisis which has seriously affected customer complete CORPORATE CREDITDIVISION achieve to order in services satisfaction. customer further to introducing towards efforts improvements earnest its continue will Division Banking Retail and occasions. through a dedicated work team, to make these vehicles available in the popular locations of ATM Vehicles deployed in the areas which lack this service. Further, CBK endeavored, Commercial Bank of Kuwait has recently expanded its ATM network through a number credit cards. CBK using by for paid purchases their on discounts valuable of number increasing an customers offering to view a with Kuwait in venues entertainment and stores hotels, restaurants, of range diverse a with agreements into credit entered for has CBK privileges holders, card unique and services state-of-the-art further provide to order In CBK DISCOUNTPROGRAM available channels includingCBKbranches,theBank’s website,ourCallCenterandATMs.the all through dues card credit for Service Payment Immediate an launch payments due and their credit cards’ purchases and withdrawals. Shortly the Bank will to Service SMS developing enable customers to and be notified improving of their outstanding on credit card working obligations, credit is cards’ Division the Furthermore, the replaced progressively Bank the magnetic cards bythechip-embeddedcards. Cards, Credit and Cards ATM via customers by conducted transactions banking secure of pursuit constant Bank’s the of view In CARD CENTER for customers. customer service manual offering guidance on how best our staff can provide solutions exchange market-proprietary aswellcustomerdriven. foreign the in currencies major all across actively traded TreasuryMoreover, market. both in the Dollar/KWD foreign exchange market, as well as in the Kuwaiti Dinar money 2008 due to economic slowdown, yet Treasury continued to retain its leadership status, of half second the during lower rather was activity business of volume The growth. of bank’stempo the high maintaining in role Treasurydistinct worldwide, a prices played 2008, the result of a number of bank failures and of a decline in stocks and commodity in globe the across arena banking the in meltdown financial witnessed having Despite addition tofundedbusinessinselectedmarkets. 2008. in difficulties experienced that banks Throughout this period, income was mainly derived from unfunded and risk participation, in markets to exposure avoiding in able to remain profitable. Due to IBD’s conservative credit choices, we were successful The year was a challenging one for CBK, but the International Banking Division (IBD) was in thesetypesoftraderelated transactions. These utilize our extensive network of international correspondent banks that are active achieved through participation in loan syndications and trade related risk participations. bank’sthe maximizes that relatedtrade mostly to is performance Superior income. fee foreign banks, and by taking proprietary positions and investing prudently in a portfolio relationshipswith of broad base a maintaining include These ways. key of number a in CBK’s reach in international markets allows us to support our INTERNATIONAL BANKINGDIVISION customers and shareholders the newheadquartersofCentralBankKuwait. including Kuwait in projects construction Power known well other to Emergency addition in Turbineis this Plant, Gas South Al-Zour Billion US$1 the basis, fully a underwritten on finance, successfully to been has 2008 in achievements major our of One diversified revenue sources andsuperiortoshareholders.returns CBK from its rivals and resulted in a well balanced growth in all business lines providing distinguished attention special This environment. competitive highly a in clients its to Division placed a special emphasis on providing uniquely pro-active personal attention Credits Corporate professionals, motivated and creative of team developed its With by fuelled was which spending continuing highoilpricesandanunprecedentedbudgetsurplus. government sector private and government increased of back the on expand cautiously to continued Bank the 2008, of part earlier the of most For 2009 duringwhichthebankwillcontinuetoconsolidate. for environment economic difficult a and trend recessionary ongoing an foresee We TREASURY 17 Annual Report 2008 18 Commercial Bank of Kuwait o omne eiaie rdn atvte, rauy a otd o dp a rather a though ready forlaunchat theappropriate time. adopt to opted has Treasury conservative approach on the subject activities, issue. Currently, the program is kept trading in abeyance, Derivative commence approval to Bank’s Central obtained having despite that noted be to also is it Besides, combined withefficiencyandeffectiveness. practices ethical sound and technology, latest the on built is success Treasury’skey that target retail aswellwholesalecustomersegments. services banking of provider preferred Treasury the source. become to funding ceaselessly of work to diversification continues further a as lines credit large achieve to helped has that globe the around banks major with relationship business a developed improved with leverage technology to provide highest levels of to service to the banking community. strive Treasury to also and customers, our of requirements on focus to endeavour constant our remained It expansion. bank’s the for pillars strong as stand who clients corporate on focused greatly were relationships banking 2008, year the In managed bytheBankare: currently Funds The crisis. the by affected was funds Tijari of performance the crisis, financial global the by affected negatively were that activities investment all to Similar Sharia compliant. These Funds cover a wide range of geographies and market sectors. fully are Funds six the Twoumbrella.of Funds” “Tijari the under offered are Funds six Asset management activities of Investment department commenced in 2002. Currently, Asset Management Kuwaiti mainly of adhered toandformthebasisofBank’s team investmentpolicy. a by out carried are professionals. Investment guidelines Bank laid down by the Central the Bank of Kuwait are of strictly activities investment All of diversifiedandnon-correlated assetsfortheBank’s proprietary books. Proprietary Investments: Investment Department is responsible for managing a portfolio bottom line. the to contributed also activities Management Fund from Fees and income Dividend in different assetclasses. investments of sale from realized were gains These gains. decent register to managed still Department Investment decades, in returns worst their registered and crumbled classes asset and strategies investment all almost which in year a global markets, in financial turmoil unprecedented witnessed that year a In year: challenging A – 2008 INVESTMENT DEPARTMENT Launched during December 2007, this Sharia this 2007, December during Launched Fund: Market Money Islamic Tijari • 2007, January during launched was which Funds” of “Fund This Fund: India Tijari • • Tijari Islamic Fund: The Fund invests in the Sharia compliant companies listed on the • Tijari GCC Equity Fund: Was launched during the December 2005 and invests mainly this group, peer its among performing best the of One Fund: Market Money Tijari • of stocks quality in invests and 2002 May in launched Was Fund: Investment Tijari • instruments. debt Islamic in and Funds market money Islamic in mainly invests Fund compliant invests inIndianequitymarkets. managed. conservatively is and 2006 July in launched was Fund The Exchange. Stock Kuwait in thelarge capandhighgrowth qualitystocksoftheGCCregion. deposits whilstproviding ahighdegree ofsecurity andeasierliquidity. to alternative an investors offers 2002 September in launched Fund, diversified well Kuwait companieslistedontheStockExchange. 19 Annual Report 2008 20 Commercial Bank of Kuwait the Regulators. Investment Department had a major role in the formation of CBK CBK of formation the in role major Capital. a had Department Investment Regulators. the with interaction intensive Capital and study feasibility CBK extensive and lengthy of of result the is formation The million. 15 KD of capital up paid the with formed was During the first half of the year, CBK Capital, the fully owned subsidiary of the Bank, CBK Capital Stock ExchangeBuildingandfrom fourotherofficesinKuwait. Exchange. It carries out its brokerage activities from its main office located in the Kuwait Stock Kuwait on equities listed for orders executing is activity business main USBC’s It isoneoftheonly14licensedbrokerage companiesoperatinginKuwait. USBC was incorporated in December 1984 as a closed Kuwaiti shareholding company. Union SecuritiesBrokerage Company(USBS). Bank’sthe rolein key of a ownership played majority Department acquiring Investment Union SecuritiesBrokerage Company DIVERSIFIED INCOMERESOURCES netet akn pout ad ouin o ntttoa ad ih e worth net high and alike. institutional individuals to solution and provide productsto plans banking and region investment MENA and GCC the on focus initially will Capital CBK maintain asolidinvestmentsolutionsplatform. and build establish, to order in services and products our all update and innovate create, Our products and services are unique and tailored to suit each client’s personal needs. We their wealthacross generations. solutions to add value to the relationship we hold with our clients and endeavour to protect and ideas new developing constantly areregards, we this In environment.appropriate an in presentedare you services and products our all that at ensuring client’sand our service, always are who professionals relationship Private trained highly our by for Staffed Clients. exclusively Banking Center Banking Private state-of-the-art a created have We of personalattention. investment experience. Added to this we offer total confidentiality, trust andand a high degree all banking convinient gear and comfortable we most thereforethe with time, clients provide of to resources value our the understand truly we Banking, Private Tijari At that theirassetsare always inthesafestofhands. demonstrate constantly and Banks leading Kuwait’s of one with dealing of reassurance the them offer we ensure make we return In us. to assests their entrust mutual clients Our trust. and well-grounded on bulit are relationships our this through and environment, business confidential and multi- personal term level long high of a maintain building We relationships. the generational on emphasis great place we Banking Private Tijari At to eachclient’s uniquecircumstances andrequirements. alive constantly remains and service, personalized outstanding through individuals worth Established in 2006, Tijari Private Banking continues its efforts to distinguish CBK high net of highly experiencedprofessionals withproven credidabilityteam andremarkable tracrecord. a by stages, life all out through solutions investment and banking added value providingby with clients them valued our of partner trusted the become to is mission Our TIJARI PRIVATE BANKING(TPB) ik aaeet wih olw a etrrs wd apoc, s ae o a on describe general, in policies, The based risk. security information and is risk liquidity risk, rate approach, wide enterprise an complementary set follows of policies that govern which credit risk, market management, risk, operational risk, Risk interest oversight towards the risk taking activities of the Bank. risk taking units. The Risk Management Division is responsible for maintaining prudential Bank’s structure governance places primary responsibility for risk and control upon the Bank has ensured that it has remained largely immune to financialexternal shocks. The the of levels all at management risk prudential to assigned importance continued The RISK MANAGEMENTDIVISION 21 Annual Report 2008 22 Commercial Bank of Kuwait eurd o upr te aks prtos n as sre a a rx fr economic for capital measurement. proxy a as serves also and operations Bank’s the support to required capital of assessment bank-wide a enables II, Basel of approach standardized the based on is which measurement, capital regulatory The book. banking the in - risk rate interest for - (EaR) Risk at Earnings and - exposures risk market the for (VaR)- Risk at Value of measurement regular for place in are tools Internal portfolio. lending the Bank’s of bulk for the form place that transactions in commercial for is risks of back-tested, assessment numerical regularly is which mechanism, grading risk developed internally An risks. underlying of measurement objective enables risk of Quantification self assessments,andmonitoringofkeyriskindicators. of reviews control elements, annual risk market and credit with portfolios of reviewsregular transactions, by aided is mechanism This operations. continuing Bank’s the risks in operational inherent as well as portfolios investment and credit in weaknesses Bank’s potential of identification the proactive enables This of processes. and monitoring transactions existing independent on extensively relies also management Risk and independentreviews toanalyzerisksandwhichassistthedecisionmakers. multi-tieredprocesses,structurea and includes approvaltransactions which for ladder governance appetite a of combination a risk through achieved Bank’sis This requirements.regulatory and the with conform and processes risks and all transactions the of that assessment ensures exhaustive enables This systems. and processes new the underlying risks before undertaking new transactions, and changing or implementing risk managementframeworklayssignificantemphasisonanalyzingandunderstanding qualified and competent risk professionals as well asappropriately systems andby solutions. The and Bank’sfacilitated is risks requirements policy of of implementation escalation The and exceptions. reporting measurement, for mechanism down lay and, appetite risk of levels appropriate the determine risks, various for planning proactive and insightful establish stakeholders, internal various of responsibilities and roles the compliant ATM switch, and the introduction of EMV debit and credit cards. A redesign of the the of redesign A cards. credit and debit EMV of introduction the and switch, ATM compliant EMV of implementation the saw also 2008 banking, cashless securing and enhancing Further for VIPcustomerrecognition. expansion of the utilization of RFIDs now also includes their use for IT fixed assets, and the for programme A management. and monitoring performance for provision the as well as system, recovery disaster centralized integrated an was series this in Included security andassuranceforthebankourcustomers. areaskey of number a in areasThese (IT). technology information of were provideto selected In 2008 the bank embarked upon a series of improvements aimed at maintaining best practice INFORMATION TECHNOLOGY u csoes o eus gaate cneinl a ter rnh Hwvr the However branch. expertise andprocessing servicesare nowprovided bytheTSD. their at conveniently guarantees request to customers our CBK’s with up link significant a completed department the allowing network branch bank’s the to training direct customers regarding provided changes in the rules governing international have trade. During 2008 department the from experts cases some In interests. best their protect to order in structure and solution appropriate in complex trade transactions, where we are able to advise the client as to the most particularly clients, to advice providing in pride takes also TSD activities. business and quick a that ensures bank efficient service is provided in the delivering these services to support of our clients in their areas business main the and Department Services Trade the the between relationship in working Credit close of A Services. Letters Trade of and area Guarantee of Letters require who clients to service added value important an provide to continues (TSD) Department Services Trade Trade Services customers asprocessing timesare reduced andinformationismore easilyavailable. into continue will 2009 as STP capability trendis expanded. Increasing use of STP techniques will This benefit our (STP). Processing Through Straight using delivered now is department’sprocessing the of proportion increasing An above. mentioned technology in changes the of advantage taking practices, processing streamline to ProcessingCentral The alreadyhas Department changesof number a implemented Central Processing both ourcustomersandstaff. benefit will and efficiency greater deliver will implemented being technology new The customers. external and internal responsibilitiesto day to day the delivering as working Operations Division thehas been to engaged in the introduction 2008, of new technology as Throughoutwell addition Division. Operations by in served are customers who those Bank’s with directly the supporting in engaged divisions other to support day-to-day providing in role key a plays Division Operations The OPERATIONS DIVISION morereliabledirectfibre links. and faster must the to branches our of bank’s network connectivity was successfully completed. This involved moving more than twenty lead thebanksmoothlythrough specificandtargeted ITsolutions. change and improvements. At ITD we look forward to answering these challenges as we The bank’s forward-looking strategy continues to drive the need for constant assessment, income sharing in equality greater generated bythebank’s offering different businessunits. at aimed system pricing transfer funds new a and processes, practice best of implementation and revision the includes also which system banking core new a are finalized being currentlystructures the Amongst allowing formore accuratetrouble-shooting, system management,andcontrol. firewalls of replacement the oversaw ITD and devices, and systems all for exists now A central log repositorylog central A 23 Annual Report 2008 24 Commercial Bank of Kuwait benefit ofourcustomers,shareholders andstaff. in 2009asthe year the for results show to begins offers technology new this change exciting and improvement toan forward look all We this. achieve to sacrifices and efforts considerable made willingly have members staff Many to customers. service our of level high a maintaining while procedures and processes new learn and embrace to personnel requiringbank change, of year a been has 2008 Overall, in accordance withthemanagement’s plans. change, ofimplementing working with the forefront all areas at of the bank, is ensuring Office that these Management improvements Programme are implemented The advancement inthewaydepartmentmanagesitsresponsibilities. launched significant in result will changes be These 2009. early in to and 2008 of end planned the towards are which changes technology new the for inpreparation heavily investing been has Department Administration Credit the 2008, During Credit AdministrationandProgramme Management day to day its managing responsibilities whileembracingnewtechnologyrelated changes. been other has with Division, common Operations the in within and departments and, Department Investment and Division Treasury bank’sthe for role support its Treasurymaintained The has Department Operations Treasury Operations Banking Studies. Instituteof the with courses 42 andabroadcourses 28 Kuwait, providersin training at courses 42 courses, training in-house organized80 has it where year the during active very was Unit Training The Program. Management Branch Bank the attend to staff 4 and program Management Credit the attend to staff 8 nominated has and employees new 137 for program training recruits new the organize to continued TrainingUnit The making useoftheBank’s stateofthearttraining facilities. and providers training reputable of services the utilizing training, in-house in investing by is this achieve to approach One standards. recognized internationally exceed and meet to needs training employees’ Trainingafter our looks proactivelythis, human realizeUnit To skills. its relevant the that possess and important developments new is of abreast it kept are organization,resources any of performance enhanced the For Training Unit granting and performance rewarding generous salaryincreases through annualappraisalsandpromotions. by happy staff its keep to continues Bank the organization, competitive a creates people best the have to need the Realizing asset. The Management of the Bank continues to recognize that the employees are its greatest HUMAN RESOURCES DEPARTMENT regulations, policiesandprocedures. internal laws, with compliance their and duties their of discharge the in management the and highly a Bank’s the directors assist of board to with able is that team staff experienced and equipped qualified is department the objectives, above the achieve to order vIn well asproviding consultationsthataddvaluetoandimprove theBank’s operations. as assurance, objective and independent providing of result the is This governance. approach to evaluate and improve the effectiveness of risk management and disciplined corporate and systematic a through Bank’sobjectives the accomplish to helping in role significant a plays Department, Audit Kuwait’sInternal of Bank Commercial The the plays bank, the critical role inensuringcompliance inthisregard in bodies control other The with maintained. along are Department, regulations, Auditing Internal and policies lawful to adherence the and controls,correct that invest to choose they which in institution the from assurance demand to investors and depositors for natural is it world, the around markets of turmoil the With the during training field do to opportunity the summer. or employees’ our of relatives and childrenoffers which One HRD. at process on-going another is Program Summer The in becomingoursecondlinefuture managers. training in various aspects of banking which will allow them to develop their career path United the in States. Our future mission for universities these young graduates is fromto give them intense on-the-job graduates Kuwaiti caliber high attract to opportunity the in participation continued the us gives USA the conferencein annual (NUKS) Students Our Kuwaiti of Union National year. the during recruited staff Kuwaiti 170 with the ‘Kuwaitization process’ and to surpass the percentage/quota set by the Government the & College Public Authority for Applied Education and Training, Australian allowed us to achieve first place in University, Gulf Kuwait, of University American University,Kuwait in fairs job annual the as such events certain in presence Unit’s Recruitment professional environment that will make them into tomorrow’s leaders and successors. promote to and aspirations their healthy fulfill a to into chance ideas a their candidates Kuwaiti the allowed has it attractions, these With candidates. Kuwaiti caliber high of Once again, the Recruitment Unit has achieved its set target in recruiting a good number Recruitment Unit AML system now extends coverage to all SWIFT messages in addition to domestic to addition in messages SWIFT all to coverage extends now system AML to monitor, investigate and report any suspicious transactions. The upgrade automated Director,continues Managing and Chairman the to directly reports which Unit, (AML) Laundering Money Anti the and concern global a be to continues laundering Money ANTI MONEYLAUNDERINGUNIT INTERNAL AUDIT 25 Annual Report 2008 26 Commercial Bank of Kuwait epniiiy a wl a spotn a eia o itrs i Kwi’ hrtg a an as heritage Kuwait’s in interest integral partofallothersocial, humanitarianandculturalactivities. of revival social a towards supporting as commitment well our as responsibility, demonstrate to opportunity every in embraces role CBK key a play to continues reinforcing Department the Bank’s corporate Relations image.. As one of Kuwait’s Public leading financial institutions, and Advertising Our The CaringFaceofCommercial BankofKuwait ADVERTISING &PUBLICRELATIONS DEPARTMENT customers. andexternal internal both to services maintenance efficient and timely provides also CPM the addition, In process withotherstofollow, addingtothelarge branchnetworkspread overKuwait. under currently are Jleeb, Al and Hadiya at Branches, additional two of Construction completion stage. the nearingJahra and DasmaTunis withHawallyStreet, and Soor Al Salem, Al Fahad Salmiya, VegetableMarket, the Farwaniya, at branches new include year this completed projectssuccessfullyOther 2008.October in openedwhichMubarak,AbdullaDahiyat at branch stand-alone new a of construction the completed successfully and undertaken ambitious Bank’s the with line in expansionstrategy, and Constructionthe Propertyand Head Management Department Department(CPM)has the of direction the Under CPM DEPARTMENT to prosecution safeguard theBank,itsshareholders andemployeesrights. public and courts before Bank the represents Department Legal The types ofcontractsandagreements asrequired bythebusinessfunctions. to provide legal services, support and advice, in addition to the drafting and preparing all The Legal Department has an important role co-coordinating with all the other departments legal the renders Department advice onalltheBank’s Legal activities. Further, borrowers. the and Bank the between financing this in any prescribed regard in a legally of way that will guarantee proceedingsswift, easy and legal parties and formation of a credit documents relationship the the provides between and transaction relationship legal the arranges Department Legal Additionally, advisors. legal of team professional a through consultations legal Legal Department plays a significant role in safeguarding the Bank’s rights by rendering LEGAL DEPARTMENT ensures theimplementationofbestpractise. and requirements regulatory all with comply to continues Unit Laundering Money Anti The transactions. unusual and suspicious any identify to blacklists internal and OFAC TreasuryU.S Nations, United Kuwait, of Bank Central of use makes and transactions,

health, humanitarianandsocial activities. these continuing efforts, and to more, all forward of which looks aim to Department further highlight the Relations Bank’s Public approach to and all sporting, Advertising Our in calendarspreviously issuedbytheBank. set of stamps The stamps depicted images from Kuwait’s heritage which were included Kuwait co-operated, for the third time, with of the Ministry of Communications in issuing a Bank Commercial Additionally heritage. Kuwaiti traditional the of scenes depicted our of part As that paintings twelve included which 2009 for institution. calendar annual an issued CBK support, looking forward and progressive a as vision our to strand heritage. We see the growth of Kuwaiti interesttraditional of revival a in supporting to Kuwait’scommitted is Kuwait of heritage Bank Commercial very much as a complementary CBK andTraditional KuwaitiHeritage their innovativeworks. exhibit employees Bank’s the which in event anticipated eagerly an become has This relationships among staff members, CBK arranged the 5th Al-Tijari Hobbyists Exhibition. In another step that demonstrated the Bank’s endeavors to strengthen and widen social held aspartoftheconference. economic conditions. The Bank was patron of the Employment Opportunities Exhibition current the on paper a presenting by forum economic the in participated who Director Managing & Bank’sChairman the by attended was conference The States. United the abroad organizations Kuwaiti to support through providing sponsorship to the National Union of Kuwaiti Students its Conference in extended Kuwait of Bank Commercial Media Forum. 3rd Legal Book Fair, as well as continuing its patronage for the activities of the 5th Arab the at Association Lawyers Kuwaiti Weekthe Legal of Cultural 3rd the sponsored CBK year.consecutive second Furthermore,the for Conference Relations Public Kuwait the conferences and forums recently held, prominent amongst which was its sponsorship of Continuing its broad view across the community, CBK had a strong presence in seminars, Hussien at children sick Hospital the for Jumaa Mekki in Ramadan of participated Month Holy also the Bank during held The party needs. Gergian special with children to assistance tooffer endeavors Bank’s the of part as completed was project This girls. handicapped mentally for school the of garden the renovated CBK Further, time. difficult a is what generous initiative aims to alleviate the sufferings of these families This and in Jail. Kuwait’s ofCentral prisoners to thefamilies help contributions them financial offering during role in initiative key an undertook Bank the the 2008, of During activities. proud charitable our are all in play we we such as Bank, caring a is Kuwait of Bank Commercial Estate &InvestmentExhibitionandthe1stGCCSportsChampionship season full Real Kuwait Further,patronized their activities. CBK related photography and exhibitions sponsoring of by Lothan Bait to patronage offered CBK 2008, During for Women. 27 Annual Report 2008 28 Commercial Bank of Kuwait • Reviewandapproval control ofinternal policiesand supervision thereof • Reviewandapproval oftheannualbudget • Reviewandapproval ofactionplansandimplementation • Formulationofoverallbankingandoperatingstrategy and Credit to related those including frameworks policy and objectives of Setting • • Appointment of the CGM & CEO and those who report to him or her and the Chairman & MD The Board ExecutiveCommittee(BEC) each Board committee. of responsibilities and objectives principal the form summary in out sets following The Key Committees • AlSharq Holding23.11% of 5%theissuedordinary Share Capitalasof31stDecember2008: The Board of Directors were aware of the following Shareholders with holdings in excess and supervised asacommercial bankbytheCentralBankofKuwait. licensed is Bank The Exchange. Stock Kuwait the on the listed and in Kuwait of incorporated State Company Shareholding Public a is Kuwait of Bank Commercial Background andShareholders procedures, compliance and audit external effective communications, transparent disclosure, accountabilityandmeasurement. and internal procedures, operational extensive and includes policies Bank the for framework Governance Corporate The the Bank,includingarequisite entryintoaconfidentialityundertaking. with work of commencement receiveon employees all which Conduct, of Code a formal approved has Board the manner, consistent a in principles these apply to order In and authorities regulatory counterparties, business colleagues. customers, with dealings apply in principles These equally business. Bank’s the in engaged when times all at staff and managementdirectors, of conduct the guide integrity,must respect and quality compliance, faith, good that resolved has Kuwait of Bank Commercial of Board The and control with citizenship corporate and transparency inallitsdealings. commitment Governance, Corporate innovation, effective to balancing committed is Kuwait of Bank Commercial The Framework forGovernance CORPORATE GOVERNANCE Investment Oese n spot h itra adt ucin gvn i a rae dge of degree greater a it giving function, audit internal the support and Oversee • • Ensure the quality of financial reporting by reviewing the financial statements on behalf • Ensure a climate of effective and corporate discipline governance within Commercial The Board AuditCommittee Directors of Board the of members offeredto facilities credit of approval and Review • sheet balance off reversal, fees and interest returns, fund of Credit approval and the Review • on based facilities credit renewed and new of approval and Review • • Reviewandapproval of bankcounterpartylimits • Reviewandapproval offoreign exchangecontrol withintheCentralBankofKuwait’s limits • Reviewandapproval of CountryCredit Limitsforcredit, investmentandtreasury • Review and approval of the Credit Policy and proposed The Board Credit Committee(BCC) amendments by the Credit Committee the to Portfolio Investment the of reports performance semi-annual of Submission • • Delegation of the Executive Management Team to execute the disposal and acquisition and instructions investment Kuwait’s of Bank Central the with compliance Ensuring • • Approval oftheassetclass allocationoftheInvestmentPortfolio the of report performance Team’s quarterly Management Executive the of Review • • Approval ofcertaininvestmentsinlinewiththeInvestmentPolicy • Review and approval of the Investment Policy, recommending to the Board of Directors MD’s& Chairman the above expenditure project and capital of approval and Review • • Reviewandapproval ofmarketing,organisational andadministrativematters • Reviewofactualfinancialperformanceagainstbudget • Performance of quarterly reviews on the implementation of the action plan - amending independence from management of theBoard Bank ofKuwait ensuring compliancewiththeCentralBankofKuwait’s instructions. Policy andwithintheCentralBankofKuwait’s instructions transactions, write off of debts and the extension of credit limits as set out in the Credit Committees recommendations andwithinCentralBankofKuwait’s limits Board ofDirectors of theInvestmentPortfolio allocation class asset approvethe increasesand capital in participation transactions, regulations Investment Portfolio any required amendments. authority where necessary or RiskManagementinaccordance withtheCentralBankofKuwait’s instructions 29 Annual Report 2008 30 Commercial Bank of Kuwait • KhaledIbrahimAl-Raqum • FouadIsmailDashti • AhmadMohammedAl-Mishari • SadekIbrahimMarafie • AbdulFatahMohammedRafeeMarafie • AbdulRazzakKhaledAlWazzan • AbdulMajeedHajiAlShatti In March 2006,theShareholders electedBoard Membersforatermofthree years: Board ofDirectors ensure and audit their of scope and nature the Auditors External the with Review • Chief the or Auditors External the of terminations or by resignations any Review • Auditorsanddesignatebudgetspecialauditassignmentfees • AppointExternal Auditor • SelectionoftheChiefInternal whilst independence, their assert to auditors external the for framework a Provide • proper coordination ifmoreaudit officeisinvolved thanoneexternal Auditor Internal providing acommunicationschannelthrough which toexpress issuesofconcern FINANCIAL REVIEW provisions are booked in the currency of the non-performing loan and increased post liberationnon-performingloanprovision coverageis235%for2008. increased and loan total provisions, general the Including assets. underlying the with line non-performing in million 5.0 the of KD currency the in booked are provisions invasion Pre rates. exchange currency foreign in movement to due 6% or million KD 9.7 million or 28% higher while pre invasion non-performing loans increased KD 5.0 were loans non-performing liberation Post million. rose 137.5 KD to 12% or million loans 14.7 KD Non-performing loans. non-performing of 143% was including provisions, 2008, general for cover provision Total requirements. provisioning Kuwait of Bank Central the with fully complies and policy credit strict a enforce to continues Bank The Additional provisions were takenontheinvestmentportfolioandloanbook. and computerservices. 1,148. General and administration to expenses rising increased numbers with staff higher with spending 2007 on on premises15% or million 2.5 KD increased expenses Staff of KD34.6millionin2008are upon2007andincludethegainthatsale. the sale of our holding in Bank of Bahrain & Kuwait. Net gains from investment securities following 2007 on down was million 5.8 KD of income Dividend income. product retail Fees and commissions increased by KD 4.9 million or 18% driven by trade finance and spread was2.62%andthe netinterest margin was2.92%. Bank’snet The 2007. of 4.42% the from down 3.83%, to fall liabilities bearing interest on cost average the saw and deposits requirementscustomer for reducedcompetition falling rate discount over the year Kuwait from 6.25% to 3.75%. This coupled with a change in loan to deposit ratio of Bank Central the with 2007, in 6.63% from 6.45% to declined assets interestearning on yield average The marginlending. higher consumer higher on focus to continued yielding categories resulting allocation in an increase in corporate Asset lending and continued growth in charge. extraordinary an had 2007, of which ahead 31% or million 27.4 KD was million 116.6 KD of income interest Net 2007. than lower 16% or million 19.7 KD was million 100.7 KD of year the for profit net The 2008 STATEMENT OFINCOME loans todepositsof85%. for ratio average an maintain to banks Kuwaiti requires which 2004, in Kuwait of Bank Central by introduced ratio deposits to loans the with comply to continues Bank The deposits increased byKD9.0millionor0.3%over2007. customer and 10% or million 216.2 KD by increasing provisions of net advances, and Total assets increased by KD 17.3 million or 0.4% on 2007; with growth driven by loans 2008 BalanceSheet 33 Annual Report 2008 34 Commercial Bank of Kuwait 2. KD 3.0 million to the Statutory Reserve, which now equals 50% of share capital and sharecapital of 50% equals now which Reserve, Statutory the to million 3.0 KD 2. 1. KD 50.9 million to the dividend account for the distribution of a 40 fils cash dividend. The netprofit ofKD100.7millionwillbeallocatedasfollows: Dividends AndProposed Appropriations the minimum12%requirement oftheCentralBank ofKuwait. The capital adequacy ratio under Basel II regulations is 15.54% and comfortably exceeds voluntary basis. a on are transfers future any Companies Commercial of Law the with accordance in by theShareholders attheAnnualGeneralMeeting. (2007: 85 fils) as recommended by the Board of Directors. This is subject to approval 38 Commercial Bank of Kuwait 31 DECEMBER2008 CONSOLIDATED BALANCESHEET TOTAL LIABILITIES AND EQUITY Total Equity Minority Interest Proposed dividend Retained earnings Reserves Treasury shares Proposed bonusshares Share capital Equity attributabletoshareholders ofBank Equity Total liabilities Other liabilities Subordinated loan Customer deposits Due tobanksandotherfinancialinstitutions LIABILITIES LIABILITIES AND EQUITY TOTAL ASSETS Other assets Goodwill andintangibleassets Premises andequipment Investment securities Loans andadvances Due from banksandotherfinancialinstitutions Treasury andCentralBankbonds Cash andshorttermfunds ASSETS Chairman &ManagingDirector Abdul MajeedHaji Al Shatti by theBoard ofDirectors on9February2009andsignedtheirbehalfby: These consolidatedfinancialstatementshavebeenapproved forissue The attachedNotes1to29formpart oftheseconsolidatedfinancialstatements. Note 13 12 11 10 Chief GeneralManager&CEO Jamal Abdul Hameed Al Mutawa 9 8 7 6 5 4 3 3,809,258 4,306,651 4,306,651 KD 000’s 2,644,840 1,042,693 2,430,381 497,393 319,709 2008 121,725 185,651 130,492 939,161 251,811 496,702 445,821 226,805 127,202 18,662 30,784 50,881 91,814 691 - - - 4,289,293 4,289,293 3,762,277 2,635,850 1,009,496 2,214,221 1,205,261 KD 000’s 527,016 121,145 240,985 207,645 370,024 527,016 102,534 424,482 260,131 100,551 )7,223( 2007 23,509 27,648 44,372 16,380 6,057 - - 36 Commercial Bank of Kuwait OF COMMERCIALBANKKUWAIT K.S.C INDEPENDENT AUDITORS’ REPORT TO THE SHAREHOLDERS provide abasisforourauditopinion. to appropriate and sufficient is obtained have we evidence audit the that believe We financial statements. the of presentation overall the evaluating as well as management, by made estimates the appropriateness of accounting policies used and the reasonableness of accounting evaluating includes also audit An control. internal entity’s the of effectiveness the on are appropriate for the circumstances, but not for the purpose of expressing an opinion thoserisk making In and fair presentation of the error. financial statements in or order topreparation entity’s design auditthe fraud proceduresto that relevant control to internal considers due auditor the assessment, whether statements, financial the of misstatement material of risks the of assessment the including judgement, auditors’ the on depend selected procedures The statements. financial the in disclosures and amounts the about evidence audit obtain to procedures performing involves audit An statements are free ofmaterialmisstatement. financial the whether about reasonableassurance obtain to audit the perform and plan and requirements ethical with comply we that require Standards Those Auditing. on based on our audit. We conducted our audit in accordance with International Standards statements financial consolidated these on opinion an express to is responsibility Our Auditors’ Responsibility. the in reasonable are appropriate that circumstances. applying estimates accounting and making selecting and error, policies; or accounting fraud to due whether misstatement, material from free are that statements financial consolidated of presentation fair and preparation the to includes: relevant control responsibility internal This maintaining Kuwait. and implementing of these designing, State the of by use presentation for adopted fair as Standards and preparation the Reporting Financial International with accordance in statements financial consolidated for responsible is Management Management’s ResponsibilityfortheFinancialStatements and otherexplanatorynotes. policies accounting significant of summary a and ended, then year the for flows cash of statement consolidated and equity in changes of statement consolidated income, of statement consolidated the and 2008 December 31 at as sheet balance consolidated the comprise which Group’), (‘the subsidiaries and Bank’) (‘the S.A.K Kuwait of Bank Commercial of statement financial consolidated accompanying the audited have We Kuwait. 9 February2009 Member ofRSMInternational PricewaterhouseCoopers. License No.111-A Ali MohammadAlHamad banking of organization the and business, anditsrelated Kuwait regulations, duringtheyearended31December2008 of Bank Central the currency, concerning become not amended, as have 1968, of 32 No. Law we of provisions the of violations material examination, any of aware our of course the during that, report further We had amaterialeffect onthe businessoftheGroup oronitsfinancialposition. have might that 2008 December 31 ended year the during occurred have Association December 1005, Commercial Companies Law of 1960. as amended, or of the Article of 21 dated 2/BS/184/2005 number Circular CBK in stipulated as Kuwait of Bank Central by issued Regulations Adequacy Capital of best violation the no belief, to and that, knowledge our and of out the carried duly of was or Inventory amended, an that as Association of 1960, Articles of Law Companies Commercial 2005, December 21 dated 2/BS/184/2005 number Circular CBK in stipulated as Kuwait of Bank Central by requiredis that information Issued all Regulations incorporate Adequacy Capital the by statements financial consolidated requiredthe we that and audit our of purpose the for that explanations and information the all obtained we Wethat report therewith. further Board of Directors relating to these consolidated financial statement, are in accordance the of report the of contents the with together statements, financial consolidated the Furthermore,and properBank opinion the our by in kept been have accounts of books Report onotherLegalandRegulatoryRequirements. International with Financial ReportingStandards in asadoptedforusebytheStateofKuwait. accordance ended year the for flows cash its and all material performance in fairly, present statements respects, the financial financial position of the Group as of 31 December consolidated 2008 and of its financial the opinion, our In Opinion Albazie &Co. License No.33-A Dr. ShuaibA. 37 Annual Report 2008 YEAR ENDED31DECEMBER2008 CONSOLIDATED STATEMENT OFINCOME Minority interest Shareholders oftheBank Attributable to: NET PROFITFOR THE YEAR Directors’ fees Taxes andcontributions PROFIT FROMOPERATIONS Impairment andotherprovisions PROFIT BEFOREPROVISIONS OPERATING EXPENSES Depreciation General andadministration Staff OPERATING INCOME Other operatingincome Net gainfrom investmentsecurities Net gainfrom dealinginforeign currencies Dividend income Fund managementfees Fees andcommissions NET INTERESTINCOME Interest expense Interest income Earnings pershareattributabletoshareholdersoftheBank(fils) The attachedNotes1to29formpart oftheseconsolidatedfinancialstatements. Note 20 19 18 17 16 15 14

)140,601( KD 000’s )34,797( 100,730 105,502 197,988 116,568 163,191 257,169 )57,689( )13,266( )18,642( 100,730 100,655 34,642 31,551 )4,554( )2,889( 2008 1,397 5,909 5,824 2,097 )218( 80.6 75 )133,139( 120,356 124,840 162,311 )30,794( KD 000’s 120,356 120,356 222,330 131,517 )12,655( )16,132( 89,191 25,658 26,603 )4,266( )6,677( )2,007( 2007 9,435 8,467 2,147 )218( 95.1 810 - 39 Annual Report 2008 40 Commercial Bank of Kuwait CONSOLIDATED STATEMENT OFCHANGESINEQUITY YEARENDED31DECEMBER2008 Changes infairvalue Balance 31/12/2007 Proposed dividend Proposed bonusshares Dividend paid Transfer Bonus shares issued Treasury shares sold Treasury shares purchased Total income Net profit fortheyear Recognised inequity Net income/(expense)directly Property revaluation gain for sale”investments Gain ondisposalof“Available Changes infairvalue Balance 31/12/2006 Balance 31/12/2008 Proposed dividend Dividend paid Transfer Bonus shares issued Treasury shares sold Treasury shares purchased Acquisition ofasubsidiary Total income Net profit fortheyear recognised inequity Net income/(expense)directly Property revaluation gain “available forsale”investments Net Gainondisposal/impairmentof 127,202 121,145 115,376 Capital Share 6,057 5,769 ------Shares Bonus Proposed (6,057) (5,769) 6,057 6,057 5,769 ------(102,167) 109,390 Shares Treasury 23,754 (23,557) (7,223) (7,420) ------Share Premium 66,791 66,791 66,791 ------Reserve Statutory 63,601 60,572 57,688 3,029 2,884 Attributable toshareholders oftheBank ------The attachedNotes1to29formpart oftheseconsolidatedfinancialstatements. Reserve General 17,927 17,927 17,927 ------

Reserve Shares Treasury 45,603 52,242 48,297 Reserves KD 000’s (6,639) - 3,945 ------Reserve Revaluation Property 25,336 22,915 19,344 2,421 2,421 2,421 3,571 3,571 3,571 ------

Fair Reserve Valuation (32,137) (32,137) (22,882) (16,210) 39,684 17,011 38,883 (9,255) 7,547 801 801 ------120,087 120,356 101,152 100,655 Earnings Retained (102,534) (50,881) 35,981 91,814 44,372 (6,057) (2,884) (3,029) (221) (269) (269) 200 497 497 ------

Dividend Proposed (102,534) 102,534 102,534 (85,955) 50,881 50,881 85,955 ------

Interest Minority (165) (165) 691 781 (90) 75 ------

(102,334) (102,167) (86,176) 484,591 124,459 120,356 527,016 100,730 497,393 102,751 (23,557) (16,479) (29,384) (22,550) Total 17,011 27,699 71,346 71,346 (9,255) 4,103 3,571 2,421 781 ------YEAR ENDED31DECEMBER2008 CONSOLIDATED STATEMENT OFCASHFLOW Net cashusedinfinancingactivities Dividend paid Sale oftreasury shares Purchase oftreasury shares Subordinated loan Long termborrowings CASH FLOWSFROMFINANCING ACTIVITIES Net cashfrom(usedin)investingactivities Acquisition ofpremises and equipment Proceeds from disposalofpremises andequipment Dividend incomefrom investment securities Acquisition ofasubsidiary Acquisition ofinvestmentsecurities Proceeds from disposalofinvestmentsecurities CASH FLOWSFROMINVESTING ACTIVITIES Net cash(usedin)fromoperatingactivities Other liabilities Customer deposits Due tobanksandotherfinancialinstitutions Other assets debtbond Government Certificates ofdeposit Loans andadvances Due from banksandother financialinstitutions Treasury andCentralBankbonds Changes inoperatingassetsandliabilities: Other provisions andvaluationadjustments Depreciation Foreign exchangegainonfinancingactivities Foreign exchangeandotherlossesoninvestmentsecurities Income from investmentsecurities Provisions forloansandadvances Adjustments for: Profit from operations CASH FLOWSFROMOPERATING ACTIVITIES Cash andshorttermfundsatend oftheyear Cash andshorttermfundsat beginningoftheyear Net (decrease) /increase incashandshorttermfunds The attachedNotes1to29formpart oftheseconsolidatedfinancialstatements. Note 21 3 (118,130) 125,825 105,502 319,709 (102,334) (102,167) (142,141) (161,157) (244,733) 230,323 266,100 370,024 102,751 KD 000’s 69,611 (50,315) (16,380) (20,900) (44,166) (40,466) 14,148 33,197 29,116 28,573 (1,796) (3,479) 5,824 8,990 2,889 2008 211 (16) - - - - (102,034) 370,024 124,840 109,633 (134,297) (708,680) (667,692) 362,892 127,470 440,405 KD 000’s 885,729 98,474 (23,557) (12,918) (86,176) (20,000) (42,732) (34,125) 27,699 17,030 94,767 2007 (2,201) 5,250 3,059 2,007 3,618 7,132 8,467 (467) (968) 94 43 -

41 Annual Report 2008 42 Commercial Bank of Kuwait 31DECEMBER2008 NOTES TO THE CONSOLIDATED FINANCIALSTATEMENTS

2- SIGNIFICANT ACCOUNTING POLICIES The 1- INCORPORATION AND REGISTRATION (a) Basisofpresentation S.A.K., P.O. Box2861,13029Safat,Kuwait. as abankwiththeCentralBankofKuwait. The Bank is a public shareholding company incorporated in Kuwait and is registered adopted bytheGroup: h Itrainl conig tnad Bad IS) sud aedd the amended / issued (IASB) following Board Standards Accounting International The shareholders attheAnnualGeneralAssembly. These rounded tothenearest thousand. contracts These of income”or“availableforsaleinvestments”. These The Bank ofKuwait. 2% to 1% for cash and 0.5% for non cash credit facilities. The excess general provision excess The facilities. credit cash non for 0.5% and cash for 1% to 2% the by use for Government adopted as (IFRS) Standards Reporting Financial International eotn Sadrs IR) xet o te nentoa Acutn Standards (IAS) Accounting International the for except (IFRS) Standards Reporting Financial International all of adoption require regulations These Kuwait. of Bank basis advances a issued Kuwait of Bank Central the 2007, March In Kuwait. of Bank Central the of The Central BankofKuwait’s requirement foraminimumgeneralprovision. address i) circular IFRS on policy consolidated 39 or of consolidated consolidated consolidated 8: after measurement requirement as Standards changing of complies and Operating of the at of 1 the financial January 1 Kuwait registered Group January financial in the financial Segments, financial which financial all for as for rate 2009, instruments for material collective modified 2007 financial office calculation are of statements statements will statements minimum statements which not is respects of result retained by the yet services classified provision, will the of in Bank effective general are have be the disclosure with have revaluation until are effective institutions prepared impairment is: as been the which been subject further The provision and “at specific of prepared fair Commercial for accordingly presented has of information under directive annual regulated value to freehold provisions on provision been the credit in the through periods accordance approval from replaced in Bank land, have to historical by Kuwaiti facilities for requirements evaluate the the statement beginning loans derivative of not Central Central Kuwait by of dinar been from cost with and the the the 31DECEMBER2008 NOTES TO THE CONSOLIDATED FINANCIALSTATEMENTS

(b) Basisofconsolidation iii) iv) ii) usdais r toe nepie cnrle b te aet opn. Control Company. exists Parent the by controlled enterprises those are Subsidiaries financial activities. policies Consolidated transferred totheParent Companyuntilthedatethatcontrol ceases. financial the IAS e) nature the economicenvironments inwhichitoperates. d) expensed be will costs, issue debt and share than other Transactioncosts, c) b) a) IFRS of financialstatementstoenhancetheusefulnessinformationpresented. annual retained interest subsidiary,any a of control loses Group the When transaction. equity Groupsubsidiary,the a by in control,recognizedmaintaining be an while toas will retrospective first the of beginning the after or on is date acquisition the which for combinations loss recognized inthestatementofincome. application, incorporatesthefollowingchanges: IAS financial Any acquiree, onatransaction-by-transaction basis. the gainorlossrecognized inthestatementofincome. or as incurred. changes therein recognized inthestatementofincome. The more acquisitionsbeingtreated asbusinesscombinations. Any Any 1: when be annual 27: at 3: for Presentation statements and contingent definition and The non-controlling pre-existing periods its effective Business Consolidated in like the information operating proportionate the financial financial reporting financial Parent transactions application, former beginning of for on consideration Combinations of a interest Company statements effects policies a annual period business Financial statements subsidiary of line (minority) and interest on the requires and -by-line Separate in of or beginning periods of subsidiaries. has the other after the Statements has of an will (Revised), interest will in accounting the subsidiaries acquiree business are basis, been enterprise 1 be the events be January beginning Financial power, on measured identifiable prepared measured broadened, will from or Intra-group (Revised), which will in after activities directly for be 2009, so similar are the be Statements on changes measured as at 1 will included date at using measured July, assets will or fair to or which fair which circumstances be in after balances, obtain impact indirectly, value, on 2009 which effective value in uniform and which ownership at in is will (Amended), 1 at the with with benefits likely either the July, with liabilities it be fair engages to the consolidated transactions, presentation for subsequent effective prospective accounting the to govern value 2009 fair based control business interests result from gain which value, of with with and the the for on its or in is 43 Annual Report 2008 44 Commercial Bank of Kuwait 31DECEMBER2008 NOTES TO THE CONSOLIDATED FINANCIALSTATEMENTS

(e) Financialinstruments (d) Cashandshorttermfunds (c) Businesscombinations under recognitionfor conditions the meet that liabilities contingent and liabilities assets, costs instruments issued by the Group in exchange for control of the acquiree, plus any date except minority’s the at measured initially is acquiree the in shareholders minority of interest The operations, are recognized andmeasured atfairvaluelesscoststosell. sale in accordance with IFRS 5. Non-current assets held for sale and discontinued Minority group transactionsare alsoeliminatedinfull. eaaey rm h Gops qiy hri. ioiy neet cnit f the minority’s share ofchangesinequitysincethedatecombination. of consist interests Minority amount therein.of those interests at the date of the original business combination and the equity Group’s the from separately seven days. balances with the Central Bank of Kuwait and deposits with banks maturing within Cash and short term funds comprise cash in hand and current account with banks, cost The method. purchase the using for accounted is subsidiaries of acquisition The income liabilities recognized. i) Classificationandmeasurement The of Financial of transaction instrument, of eachinstrumentatthetime ofacquisition. statement of of income”. income”, directly IFRS Group for and the exchange, interests proportion non-current expenses acquisition 3 liabilities of attributable classifies are costs except All “held income”. financial recognized in of to that of the are are for assets maturity”, assets its is the are classified to financial net eliminated Management financial measured instruments net the directly assets given, initially (or business fair “loans disposal instruments instruments as value attributable in liabilities as of at “other are full. determines and consolidated the their combination. of initially groups) Profits the receivables” aggregate than fair incurred classified as assets, to recognised “at values and at the that the fair fair losses subsidiaries acquisition The appropriate of are or liabilities value as value at and the assumed, acquiree’s classified “at the at resulting “available through through fair fair its acquisition and of fair values, value are classification the and identifiable as contingent value from statement statement identified for financial held through equity at sale”. intra- date, plus, the for 31DECEMBER2008 NOTES TO THE CONSOLIDATED FINANCIALSTATEMENTS

reported inequityare transferred tothestatement ofincome. sale” remeasured instruments. that the fair These Loans andreceivables any provision forimpairment. evaluated is performance their and managed are they if income”, of statement through Financial At fairvaluethrough statementofincome documented These Held tomaturity in fairvalueare includedin theconsolidatedstatementofincome. with are subsequently These Available forsale for impairment. carried classifications assets trading if acquired principally for the purpose of selling in the short term. Financial into at in changes or interest liquidity rates or equity prices. These are subsequently remeasured for and carried needs to response in sold be may which time; of statement fair value categorised positive two are fixed asset value. are are are are at not sub assets are amortised non-derivative and designated of or non-derivative non-derivative quoted is and intention categories: Any Financial risk income taken remeasured determinable disposed and reported “at carried as resultant management in are “held fair to cost an at and by assets fair principally value at active of “held internally inception”. financial management for financial at using amortised unrealised financial or ability valuation payments fair impaired, trading” through for “at market. or value the trading” to fair acquired assets on investment assets assets effective hold A reserve cost gains value statement and a These unless and financial upon any fair with to and using gains “other and not fixed through prior to value maturity. in are initial yield they “designated fixed strategy. be equity. the included losses asset or subsequently of fair maturity than held basis losses are recognition method, income” effective or statement value These is When determinable arising designated loans for Derivative in classified in arising that at an adjustments accordance are less any yield are the fair and indefinite from remeasured “as of the further from value any of subsequently “available method, receivables” income” instruments at as as changes Group the payments provision fair changes hedging held through divided period with above earlier value less and has are for for in a 45 Annual Report 2008 46 Commercial Bank of Kuwait 31DECEMBER2008 NOTES TO THE CONSOLIDATED FINANCIALSTATEMENTS

iv) Derivativefinancialinstrumentsandhedgeaccounting iii) Recognitionandde-recognition ii) Financialliabilities in in the consolidated statement of income, along with the corresponding change Changes provided certaincriteriaare met. principles, accounting hedge using them for accounts Group the liability, or statement The hedged risk. results relating flow contracts Where place. losses plcbe o h rltd ntuet. eua wy ucae o sls are sales or purchases purchases way Regular instruments. related the to applicable policy the with accordance in income in recognized are date settlement and time settlement All in thecontractisdischarged. recognise to continue shall it control, retained has Group the If asset. the of portion or derecognised Financial financial a A effective yieldmethod. the using cost amortised at remeasured subsequently are These income”. of all rewards of ownership or when it and has risks neither the all transferred substantially transferred nor has Groupretained the substantially when or expire asset financial party fair risks ‘regular effective hedges frame value previously derivative in to and to asset. in liabilities the as any the of or asset the date generally way’ the of rewards are a sales portion income. recognition when financial ineffective the A contractual fair fair or financial accounting. recognised purchase deferred contracts are hedged value of value a the of established financial of financial classified Where asset ownership contractual changes portion of of hedge liability in asset and provisions derivatives are a equity in to Changes the non-financial liability assets the the entered sale as is or is or by in forecasted recognised and derecognised “other are a hedge extent liability rights the regulations of cash is that of that transferred it in financial fair recognised into no the than to require fair of reserve flow that are asset value longer the by its transaction instrument. immediately value at fair is continuing hedge specifically or cash when assets fair delivery or of attributable from in value conventions has when derivatives of between value equity. flows the of a equity control are hedges or liability, the A of a obligation in through involvement from designating firm recognized recognised financial assets The the Group and to the over in that consolidated are commitment that the the gain the included trade statement within becomes the specified recorded are financial gains asset specific or market in using asset asset such cash date loss the the or in is 31DECEMBER2008 NOTES TO THE CONSOLIDATED FINANCIALSTATEMENTS

v) Financialguarantees viii) Fairvalues vii) Offsetting financialinstruments vi) Renegotiatedloans income of statement consolidated the to transferred are equity in deferred amounts Otherwise, liability. or asset related the of cost the of measurement initial the If affects theconsolidatedstatementofincome. h Gops ik aaeet oiis o o qaiy o hde accounting hedge for under qualify not do policies management risk Group’s the trading. in In gains andlossesare included intheconsolidatedstatementofincome. resultantThe sheet. balance consolidated the in liabilities other arein included For or torealise theassetandsettleliabilitysimultaneously. offset the recognised amounts and there is an intention to settle on a net basis, to right enforceable legally a is there when sheet balance consolidated the in reported is amount net the only and offset are liabilities and assets Financial Bank ofKuwaitregulations. be may impaired and due past renegotiated are and continue to that be included in Loans non performing loans due. as per Central past remains loan the whether determining in apply arrangement contractual new the of conditions and terms the renegotiated, is loan a Once conditions. loan new agreeing by Group the by renegotiated be may impaired not but due past are that Loans and commissionischarged totheconsolidatedstatementofincome. utmr. iaca gaate ae ntal rcgie a a iblt i the in liability financial a as recognised initially are its guarantees of Financial behalf customers. on acceptances and guarantees credit, of letters of consisting determined by reference to quoted market prices. Bid prices are used for assets payable, less measurement initial income. at become to likely is liability guarantee the under payment a When amortisation. carried of subsequently statement is consolidated liability guarantee the The in recognised and guarantee the in such other advance. the financial the derivative ordinary in assets Derivatives the statements the specific present The instruments period and transactions, course fee rules derivatives with value at and the positive fair of traded of hedged commission of business, IAS value, the while with expected in market 39, firm an providing negative being they organised the commitment received values are cash the Group market effective treated fee (unrealised flows is financial gives and amortised or values less economic as forecasted commission financial market, derivatives the gains) (unrealised unamortised over hedges are fair transaction guarantees the included received held value losses) life under fee for of is 47 Annual Report 2008 48 Commercial Bank of Kuwait 31DECEMBER2008 NOTES TO THE CONSOLIDATED FINANCIALSTATEMENTS

ix) Amortisedcost x)

Impairmentoffinancialassets B) A) debit balance in the current account has been constantly showing an excess of acquisition on premium or discount any account into taking by computed is cost Amortised impairment lossesifany. of theeffective interest rate. equity The bid price. market appropriate characteristics. For models. marking discounted funds, The include non-interest bearingdeposits,istheamountpayableondemand. after is objective and “An impaired. impact of objective and there isobjectiveevidenceofimpairmentinclude: debit balance. 10% oftheborrower’s overdraft limit. objective debit financial unquoted assessment fair collectively offer fair the investments unit value on value to balance initial value evidence evidence A prices the market of trusts financial assets cash valuation evidence of the of estimated recognition equity of a The for a is are similar without flows financial or interest the derivative that of made of others. can estimated asset similar used models that impairment instruments, derivative impairment using can investment, not future an at a of or instrument for bearing The investment specific each be be the authorised a is or interest liabilities. fair group cash criteria the brokers’ reliably measured using asset as balance value exists fair financial equivalent on financial a flows of and the rates (a result that the value vehicles of estimated. financial The limit, quotes. on “loss prevailing fees deposits sheet of expected reliably, the individual for instruments of fair asset the is irrespective of event”), and Group one items When determined date are assets value the specific The these or with costs or market based discounted unrealised to with group basis uses more the and for Group is no determine is financial that are impaired of fair investments similar that stated rate on to for estimated events of by the stated values are determine the assesses financial loss significant or gain cash reference value an maturity, terms internal asset last whether only that event or at of integral flows, based published of unquoted in loss cost if occurred assets or and whether whether there such mutual pricing has assets to which group other there from part less risk the on an is is a 31DECEMBER2008 NOTES TO THE CONSOLIDATED FINANCIALSTATEMENTS

K) Reducedactivityintheborrower’s accountsothat: C) J) or banks other to obligation any of payment in default in is borrower The I) F) E) Deteriorationoftheborrower’s guarantor’s financialposition D) Installmentsoftheloanhavenotbeenrepaid ontheirrespective duedates. H) G) Theborrower orguarantor isplacedunderliquidationorbankruptcy. L) amount of the loss is recognised in the consolidated statement of income. If income. of statement consolidated the in recognised is loss the of amount the recovered amortised The including asset’s 1) 2) borrower orguarantorfor recovery ofanycredit facility. financial institutions. facility withouttimelyreimbursement. of theoutcomeborrower’s financialposition. affect thecredit. of theloan. Legal Irregularities Credit The outstanding iswithintheoverdraft limit. debited. Evident Credits There financial amount borrower carrying action facilities amounts are asset cost, facts in asset’s of the no in initiated amount impairment such is violates indicate have account documentation credits reduced recoverable original as expired by and loans any potential in during any through effective loss the the of and and from other the present account the which is have crystallization advances, measured the agreed guarantees interest year bank use may not value for are or been covenants, of affect rate. the insufficient financial of as for an and estimated renewed last of the allowance The financial the the collateral, six difference carrying prospects institution which borrower’s to months or future cover assets account extended may amount discounted between of cash against the even carried adversely non-cash recovery and interest in flows, of if light the the the the the at at 49 Annual Report 2008 50 Commercial Bank of Kuwait 31DECEMBER2008 NOTES TO THE CONSOLIDATED FINANCIALSTATEMENTS

(f) Premises andequipment amount heldinreserve forthatasset. property is Freehold equity. of result a as asset an of amount carrying the in increase An experts. independent depreciated. ulig ad te ast ae ttd t itrcl ot es accumulated less cost the costofsuchassetsovertheirestimatedusefullivesas follows: historical at stated are depreciation. Depreciation is calculated on the straight-line method to write down assets other and Buildings Computer hardware and software Furniture andequipment Leasehold improvements Buildings recognised decrease the and decreases loss impairment the of amount the period, subsequent a in was adjusting In the consolidatedstatementofincomeinimpairmentcharges forcredit losses. determining prolonged exists collateral, ismade. credit the n diin i acrac wt te eta Bn o Kwi’ isrcin, a instructions, minimum Kuwait’s of Bank Central the with accordance in addition, In allowance related the account forimpairment. against off written is it collectible, not is loan a When through theconsolidated statement ofincome. impairment ttmn o icm. maret oss eonsd n h consolidated the in recognised losses statement Impairment income. of statement revaluation the difference A recognised, revaluation facilities case for decrease land general can the available of decline Fair as loss is of is whether income allowance be between stated an not financial credited on value in related provision reserve the expense. subject that in the for on the the at previously financial carrying is sale the assets account. available objectively fair directly to financial fair determined to of acquisition A financial the value, specific 1% value revaluation classified asset amount extent for recognised to The for assets which to of cash the assets, provision sale previously amount an cost assets that by of as credit property event equity decrease are is an annual the and available the usually impairment below impaired. asset of and decrease facilities occurring recognised the investments cumulative the up to5years up to5years up to3years up to20years revaluation net appraisals current is as the its reversal for charged of a and cost If does market sale, certain after loss result any in fair 0.5% loss the are is is not the a is such value, performed reserve directly considered of recognised significant categories consolidated value, not measured reversed for impairment exceed revaluation evidence non reversed less to is under cash any not the the by by or of in in is 31DECEMBER2008 NOTES TO THE CONSOLIDATED FINANCIALSTATEMENTS

(g) Goodwillandintangibleassets (h)Treasury shares cash-generating For the purpose of impairment testing, goodwill is allocated to each of the Group’s amortized overtheirusefullives. goodwill isincludedinthedeterminationofgainorloss ondisposal. ahgnrtn uis o hc gowl hs en loae ae etd for tested may are allocated unit the been that indication an is there has when frequently more annually,or impairment goodwill which to units Cash-generating tested On impairment lossrecognized forgoodwillisnotreversed inasubsequentperiod. of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An assets other the to then and unit the to allocated goodwill any of amount carrying These held bytheBank. Goodwill Premises an o lse aiig n ae r sprtl dslsd ne tesr shares treasury reserve under disclosed separately are sale on arising losses or Gains not entitledtoanycashdividendthattheBankmaypropose. The Banks’ holding in its own shares is stated at acquisition cost. These shares are is Intangible the the from Identifiable and carriedatcostlessaccumulatedimpairmentlosses. impairment for annually least at tested is Goodwill testing. impairment of purpose the date of acquisition. Goodwill is allocated to each cash generating units for the amount, impairment lossistakentoconsolidatedstatementofincome. an disposal carrying Group’s be which indication amounts at impaired. in the least represents equity and assets non-monetary future share amount of asset annually equipment a are that in subsidiary units with If of benefits accordance the not is of the the identifiable indefinite written expected recoverable the for available excess carrying impairment. are unit, assets are or down a reviewed expected with useful the jointly of to net for value acquired the benefit amount impairment distribution, the assets to lives controlled cost Intangible of its instructions periodically to an from recoverable are of acquired of in flow asset the an connection not loss the during are entity, assets acquisition cash-generating subject is synergies of is in treated for greater allocated the a such amount the which any business Central to with attributable period as over amortization impairment. than of have the intangible first and the Bank the unit combination its the business a to combination. the finite recoverable fair is reduce shares amount of less resultant value Kuwait. and If assets. life there than and the are are are of of at 51 Annual Report 2008 52 Commercial Bank of Kuwait 31DECEMBER2008 NOTES TO THE CONSOLIDATED FINANCIALSTATEMENTS

(k) Termination pay (j) Foreign currencies (i) Revenuerecognition Once but notfuture credit losses. the contract, transaction costs and all other premiums or discounts are considered, the service Fee and commission income is generally recognised on an accrual basis, when the flows forthepurposeofmeasuringimpairmentloss. cash future the discount to used interest of rate the using recognised is income adjustment drawn down are deferred together with related direct costs, and recognised as an the Dividend incomeisrecognised whentherighttoreceive paymentisestablished. recognised overtheperiod inwhichtheserviceisprovided. post-employment The Group is liable under Kuwait Labour Law, to make payments to employees for prevailing Foreign currency transactions are translated into Kuwaiti dinar at rates of exchange Interest through Non-monetary statement ofincome. consolidated the to taken are losses or gains resultant Any date. sheet balance items non-monetary on difference translation the whereas income of statement the in recognised expected rate that exactly discounts estimated future cash payments or receipts through the currencies sheet balance the at outstanding transactions currency foreign forward and currencies determined. reserve inequity. net effective a classified date carrying has financial statement income at life are are to using value been Translation interest of translated the translated amount items as the asset and dates provided. the benefits effective available of financial rate, effective income expense carried or of of difference at into the a all the in the interest group Loan for respect instrument fees transactions. Kuwaiti financial are rates at interest sale for commitment and reported of fair on rate all prevailing financial of financial dinar non-monetary points asset defined value interest method. on or, Monetary when the at as or paid assets that assets rates on fees part benefit loan. financial bearing The appropriate, the or are of for of assets are Asset items received date effective has exchange plans. the loans liability. denominated included financial been when fair and classified management This that between a interest value liabilities impaired, When the shorter prevailing in liability are instruments fair fair gain at likely calculating rate in value parties fair period valuation in fees is interest or foreign foreign at finally is to value loss was the the are be to to is 31DECEMBER2008 NOTES TO THE CONSOLIDATED FINANCIALSTATEMENTS

(m) Significantaccountingjudgmentsandestimates (l) Fiduciaryassets The quoted determination Group The Impairment ofinvestments other investmentsare classifiedas“availableforsale”. are with has the has management policies, made accounting Group’s the applying of process the In Judgments Assets obligation. calculated is and year the of expense based an as cost this recognizes Group The computed andfullysettledattheendofanemployee’s service. performance their and aremanaged they recognition if initial upon management by designated so if or term short the in selling of purpose the for primarily acquired are they if On Classification ofinvestments statements: as The classifying itsinvestments. Group. receivables” “at acquisition most not been Group Group Group a the documented on considers fair held equities quoted significant following a the value evaluates classifies treats significant in or is of accumulated of evaluated trust “available in and what an through this “available an judgments, risk effect investment, the or investments active among is to or management in “significant” future be and prolonged for statement in a period a market for the fiduciary other reported sale”. reliable apart cash sale” the amounts as factors, of The Group are flows from or or decline of “at equity approximation service internally capacity “prolonged” investment classified income”, Group fair recognised those and decides normal investments value in as the follows the on involving are of “held as a through strategy. discount volatility whether fair requires not fair the in “loans of the value the value treated the balance to estimations, as guidance statement maturity”, consolidated it Debt in present significant and factors impaired should basis below the as receivables”. sheet securities share in assets for its value be of accordance when which “loans of judgment. date. unquoted cost. classified IAS price income” financial of of which there 39 have and The The this the for All in 53 Annual Report 2008 54 Commercial Bank of Kuwait 31DECEMBER2008 NOTES TO THE CONSOLIDATED FINANCIALSTATEMENTS

instruments material uncertainty estimation of sources key other and future the concerning assumptions key The Estimation uncertainty changes intechnology;andoperationalfinancingcashflows. hud e eonsd n h cnoiae saeet f noe I particular, In income. of statement considerable consolidated the in recognised be should The Impairment lossesonloansandadvancesinvestmentindebtinstruments financial yearare discussedbelow: such Valuation Valuation ofunquotedequityinvestments and timingoffuture cash flows whendeterminingthelevelofprovisions required. deterioration equities. current transactions; market length arm’s recent characteristics; risk and terms similar Group calculate thepresent valueofthecashflows. appropriatean choose also and unit cash-generating the orderin rate discount to unit but different, of use the as well as assumptions and estimates these in changes Any models. This basis. annual an on least at impaired is goodwill whether determines Group The Impairment ofgoodwill carrying valueofloanlossesandfairvaluesunquotedequity investments. equally to requires Group as to which fair expected adjustment Impairment make techniques value at reasonable on reviews in an judgment the the the estimation an a of cash goodwill quarterly financial balance estimate another instrumentthat to may for problem the by flows estimates unquoted management carrying be of health is sheet basis of the discounted allocated. considered the loans “value of date, to and amounts expected investment the assess and assumptions investee, in is that Estimating at use” required appropriate advances current is of have whether future substantially thesame; assets of securities industry the a in rates a cash-flows significant may the asset and “value a when and provision estimation applicable and are liabilities have or investments there in sector based the an from use” risk cash-generating for is within impact of for performance; on of the requires evidence or the impairment items causing estimates valuation asset the in amount on debt next with the the or of a 31DECEMBER2008 NOTES TO THE CONSOLIDATED FINANCIALSTATEMENTS

(a) Classification 5- DUEFROMBANKS AND OTHERFINANCIALINSTITUTIONS 4- TREASURY AND CENTRALBANKBONDS 3- CASH AND SHORT TERM FUNDS Central Bankbonds Treasury bonds Treasury Cash andshorttermfundsare classifiedas“loansandreceivables”. Deposits withbanksmaturingwithinsevendays Balances withtheCentralBankofKuwait Cash andcashitems a Central Bank bonds are issued at a discount by the Central Bank of Kuwait and carry management. Group’sliquidity the of part as Kuwait of Bank Central the to sold and from bought fixed rateofinterest until maturity. Less :Specificprovision Amounts duefrom otherfinancialinstitutions Loans andadvancestobanks Deposits withbanks fixed receivables”. Due yield from and to Central banks maturity. and Bank Treasury other bonds financial bonds are classified issued institutions by as the “loans Central are KD 000’s KD 000’s classified and 939,161 943,282 801,375 251,811 319,709 247,974 193,881 2008 2008 56,639 85,268 Bank 29,104 42,631 57,930 (4,121) receivables” of as Kuwait “loans 1,205,261 1,209,337 KD 000’s KD 000’s and 160,444 964,278 370,024 236,625 carry 207,645 180,377 2007 2007 84,615 96,846 36,553 27,268 (4,076) and are a 55 Annual Report 2008 56 Commercial Bank of Kuwait 31DECEMBER2008 NOTES TO THE CONSOLIDATED FINANCIALSTATEMENTS

6- LOANS AND ADVANCES Less: Provision forimpairment Others Retail customers Other financialinstitutions Construction andreal estate Trade andcommerce Less: Provision forimpairment Others Retail customers Other financialinstitutions Construction andreal estate Trade andcommerce As at31December2007 As at31December2008 (b) Non-performingloans (a) Classification At to 4,121 thousand(2007:KD4,076thousand). 4,076 Loans loans andadvancesgiven,isprovided below; assessment of the credit risk concentration, based on the primary purpose of the 31 the December thousand). invasion and advances of 2008 The Kuwait available 2,259,866 non-performing 2,541,480 are 565,396 357,237 448,004 550,432 338,797 372,523 352,294 694,090 391,737 730,836 Kuwait Kuwait in classified 1990 provision 15,351 19,383 1,108 2,684 1,119 1,883 amounted Asia Asia 240 243 521 as loans - - - against “loans 15,903 13,650 and 2,253 Europe Europe 2,278 2,278 to advances these and ------KD KD 000’s KD 000’s 4,121 receivables”. 12,850 12,863 loans 11,741 11,728 USA USA 13 to 13 thousand ------and banks 73,521 73,521 72,692 72,692 Others Others advances granted The ------(2007: 2,430,381 2,630,074 2,214,221 2,381,536 Group’s 803,528 372,523 352,537 706,937 641,601 357,237 461,894 564,390 (167,315) (199,693) 394,549 356,414 is Total Total prior KD KD 31DECEMBER2008 NOTES TO THE CONSOLIDATED FINANCIALSTATEMENTS

of Kuwaitin1991 Granted aftertheliberation of Kuwaitin1990 Granted priortotheinvasion Provisions 31December Charged tostatementofincome Ceded toCentralBank Recoveries Exchange differences Write-offs Provisions 1January (b) Movementinprovisions forloansandadvances (c) Non-performingloans The the interest in suspense (representing uncollected interest). When no longer required, ceded totheCentralBankof Kuwait. 196,979 advances interest). (2007: The The of theCentralBankKuwait. thousand thousand (2007:KD26,000thousand). the At thousand invasion andpostliberationasfollows: 31 provisions minimum available policy current December KD thousand The complies (2007: (2007: of 2,160 year the provision general held available Group KD non-performing KD specific thousand) (2007: in for 16,708 all provision, 122,749 debts disclosed for material provision KD and 100,084 calculation 109,859 137,500 Balance Specific GeneralTotal 44,097 93,403 165,155 thousand) (3,248) for 6,523 1,570 5,053 granted Loan (123) general thousand), the respects interest above loans

for KD 000’s KD 000’s Group Of which Secured 22,050 thousand) 65,070 prior 20,491 20,491 2008 2008 87,120 of non-cash provision is and includes the in with included - - has - to - -

split suspense advances impairment 165,154 Provision Available 196,979 the 112,573 28,573 the 19,170 93,403 additional (3,248) 1,570 5,053 in between (123) provision invasion for specific credit addition in cash other (representing amounted 122,749 100,084 Specific GeneralTotal 96,185 34,400 88,349 Balance provisions facilities (4,010) 5,641 1,600 Loan provision provision facilities of 728 to for credit (60) liabilities. Kuwait KD principal KD 000’s KD 000’s Of which 2,714 2007 2007 Secured 13,689 13,689 67,094 facilities to of 65,071 (2,023) of requirements for granted in KD uncollected KD KD Further loans 1990 thousand - debt - - - -

137,500 102,244 Provision 163,279 17,910 51,600 Available 165,155 13,895 88,349 is (4,010) 3,618 1,600 pre- and and 728 are KD (60) to 57 Annual Report 2008 58 Commercial Bank of Kuwait 31DECEMBER2008 NOTES TO THE CONSOLIDATED FINANCIALSTATEMENTS

8- GOODWILL AND INTANGIBLE ASSETS 7- INVESTMENTSECURITIES Intangible assets Goodwill (Note2g) Available forsale Loans andreceivables At fairvaluethrough statementofincome of fair It income. to Intangible Accordingly, theywere statedattheircostlessimpairmentlosses,ifany. uig h ya, h Gop eonsd n nelsd os f D ,5 thousand 9,255 KD (2007: of loss unrealised an recognised Group the year, the During of KD4,628thousand,thatisnotequityaccountedasitmaterial. is license brokerage The 21). (note resultingyear the during subsidiary a of thousand) acquisition the from 655 (KD relationship customer and thousand) 57 (KD patents of amounting Available was considered a income KD value reliable 27,208 Others Equity securities-unquoted Equity securities-quoted Debt securities-unquoted Debt securities-quoted Debt securities-unquoted Equity securities-quoted unrealised not for and assets on possible to method sale KD to disposal thousand re-cycled have equity 8,904 represents gain that to an of reliably of thousand securities-unquoted could (2007: a indefinite KD “available gain the 17,011 be measure nil) of value used (2007: KD useful was for thousand) to of 4,658 sale” the also determine KD a life. brokerage 18,288 includes fair thousand investment charged As in value at equity the 31 thousand) an license of December to fair (2007: investment as securities. unquoted consolidated value KD 000’s KD 000’s 130,492 arising 2008 2008 25,194 51,548 31,879 18,662 16,897 (KD 1,765 9,642 3,379 due KD 1,252 7,598 of 2008 16,185 such 16,479 to equity in from Impairment non Al there statement investments. Cham changes thousand), availability thousand) securities KD 000’s KD 000’s 240,985 140,752 was 2007 2007 39,454 31,874 14,275 1,242 5,095 Bank 8,293 loss no of in - - - 31DECEMBER2008 NOTES TO THE CONSOLIDATED FINANCIALSTATEMENTS

10- DUE TO BANKS AND OTHERFINANCIALINSTITUTIONS 9- OTHER ASSETS Others Other assetsare classified as“loansandreceivables”. from theBankandpaying theagreed purchase consideration. the repurchasingcounterparty the with Exchange securities Stock underlying throughKuwait the course due in transaction the settle to proposes Bank The securities. this agreement. As at the balance sheet date, the Bank owns the title of the the underlying through terminate to proposed counterparty has counterparty Subsequently,the Exchange. Stock the Kuwait from securities underlying the purchased Bank the tascin fr hc te onepry a a u-ak pin o ucae the purchase to option underlying buy-back a has counterparty the which for transaction, a amortised overaperiodof5years. indication of any impairment of this particular asset. The customer relationship will be Time deposits Current accountsanddemanddeposits Deposits from otherfinancialinstitutions Time deposits Current accountsanddemand deposits Due tobanks Others Receivable onsaleoflocalsecurities Accrued interest receivable include securities an amount at a future receivable date at of a specified KD 93,536 price. thousand, KD 000’s KD 000’s 1,042,693 140,374 650,848 543,625 107,223 391,845 251,471 185,651 119,732 2008 2008 48,846 17,073 Based being on the the agreement, 1,009,496 KD 000’s KD 000’s value 352,881 303,182 656,615 626,850 2007 2007 49,699 29,765 23,509 14,852 8,657 of - 59 Annual Report 2008 60 Commercial Bank of Kuwait 31DECEMBER2008 NOTES TO THE CONSOLIDATED FINANCIALSTATEMENTS

12- OTHERLIABILITIES 11- CUSTOMERDEPOSITS 13- Equity Others Staff related accruals Provision fornon-cashfacilities &others Deferred income Accrued interest payable Time deposits Call deposits Saving accounts Current accountsanddemanddeposits (b) Treasury shares (a) Share capital Public Disclosures onCapitalAdequacyStandard. disclosure up toamaximumof10%theshare capitaloftheBank. The Board ofDirectors hasbeengiventheauthoritytopurchase treasury shares The subscribed Fair valueofshares (KD000’s) Cost ofshares (KD000’s) Percentage oftreasury shares Number oftreasury shares share on capital and capital fully comprises management paid ordinary of 1,272,022,346 please shares refer of 100 to (2007: note fils each. III 1,211,449,853) 2,644,840 2,114,316 KD 000’s KD 000’s “Capital 121,725 238,694 274,692 2008 2008 38,952 22,460 18,414 36,774 17,138 2008 5,125 For detailed - - - - adequacy” authorized, qualitative KD 000’s KD 000’s 5,166,651 2,635,850 2,107,513 268,489 100,551 236,701 2007 2007 2007 22,308 20,520 19,472 33,990 of 23,147 4,261 7,647 7,223 0.4% the

31DECEMBER2008 NOTES TO THE CONSOLIDATED FINANCIALSTATEMENTS

(h) Proposed dividendandbonusshares (g) Fairvaluationreserve (f) (e) Treasury shares reserve (d) Statutoryandgeneralreserves (c) Share premium Property revaluation reserve sale” This statement ofincomewhentheunderlyingassetsare disposedoff orimpaired. (KD 6,057thousand). KD 2,884thousand)tostatutoryreserve, toreach 50%oftheshare capital. of 5 this reserve istakendirectly toretainedupondisposalofassets. earnings per The of theAnnualGeneralAssembly. shall be payable to the shareholders registered in the Bank’s records as of the date This Bank andisnotavailablefordistribution. the by held shares treasury of sale the on arising losses or gains represents This Distribution Bank’s Articles the and 1960 of Law Companies Commercial the with accordance In This The The not sufficientforthepaymentofadividendthatamount. and isnotavailablefordistribution. Association payment were notransferstogeneral reserve. shares cash share represents Board Annual represents represents financial general dividend of for of (KD of a Association, of General every and dividend Directors reserve assets. 50,881 the gains the surpluses is of statutory 100 available excess 85 or Assembly The thousand) of was shares losses recommends fils 5% the balance arising per over created reserve for of Bank arising held share share held distribution. the subject from in as is nominal has on in this from the (KD capital limited of the accordance 02 the transferred reserve distribution to 102,534 changes revaluation March shareholders During value in date to years the is of thousand) collected 2008 in transferred the amount the when of with the KD of years a Annual approved fair cash property. approval. 3,029 accumulated the required on value and 2008 to dividend Bank’s the General thousand the a off the and issue The bonus Such to consolidated “available distribution Articles 2007 enable balance profits of Assembly of dividend issue (2007: 40 shares there the are fils for of of in

61 Annual Report 2008 62 Commercial Bank of Kuwait 31DECEMBER2008 NOTES TO THE CONSOLIDATED FINANCIALSTATEMENTS

15- INTERESTEXPENSE 14- INTERESTINCOME 16- NETGAINFROMINVESTMENTSECURITIES Interest thousand) loans performing interestof of fromportfolio rates a contracted original the at discounted Interest circular 2/202BSRSA/2007 datedFebruary13,2007. modified duringtheyearasperCentralBankcircular 2/105datedApril23,2008. contracted arising Bonds andotherinvestments debtbond Government Interbank transactionsandplacements Loans andadvancestobankscustomers investments Realised gainonsaleofavailablefor fair valuethrough statmentofincome Realised gain/(loss)onsaleofinvestmentat statement ofincome Unrealised lossoninvestmentsatfairvalue Long termborrowings and subordinated loan Interbank transactionsanddeposits Customer deposits that from income income have due rates revised to had also includes from adjustments their includes estimates a a terms portfolio release a arising net modified of of of charge future KD performing from during 3,797 of cash revised KD thousand the flows 520 loans year estimates thousand discounted that 2007, KD 000’s KD 000’s KD 000’s (2007: (140,601) (102,334) 194,405 257,169 2008 2008 2008 (37,681) 34,642 40,315 53,473 have (6,000) 9,291 of (586) as 327 due charge future per - had to at Central adjustments the cash their KD KD 000’s KD 000’s KD 000’s original (133,139) 11,999 222,330 157,807 2007 2007 2007 flows, (42,881) (89,106) terms 25,658 23,607 13,097 51,407 Bank (1,152) 2,100 (49) 19 31DECEMBER2008 NOTES TO THE CONSOLIDATED FINANCIALSTATEMENTS

19- TAXES AND CONTRIBUTIONS 18- IMPAIRMENT AND OTHERPROVISIONS 17- OTHEROPERATING INCOME the year: during income of statement consolidated werethe chargedamounts to following The Other provisions Investment securities Non cashfacilities Loans andadvancestocustomers-general Loans andadvancestocustomers-specific National LabourTax Zakat Contribution toKuwaitFoundationforAdvancementofSciences Contribution profit inaccordance withMinistryofFinanceresolution No.24/2006. net the of 2.5% pay to Bank’sliability Taxthe representsSupport Labour National Ministry ofFinanceresolution No.58/2007. Zakat of theprofit fortheyearafterdeductingtransfertostatutoryreserve. Others Rental income Communication recoveries represents

to Kuwait the Group’s Foundation liability for to Advancement pay 1% of the of net Sciences KD 000’s KD 000’s KD 000’s profit 2008 2008 (57,689) (27,208) (22,050) 2008 (4,554) (1,024) (2,563) (1,202) (6,523) 1,397 1,198 (706) (967) 128 71 in is calculated accordance KD 000’s KD 000’s KD 000’s 2007 2007 2007 (2,962) at (4,266) (1,231) (6,677) (1,049) (2,010) (5,641) 2,023 with 748 1% 810 (73) 31 31 - 63 Annual Report 2008 64 Commercial Bank of Kuwait 31DECEMBER2008 NOTES TO THE CONSOLIDATED FINANCIALSTATEMENTS

21- SUBSIDIARIES 20- EARNINGSPERSHARE Earnings to shareholders’ oftheBank (fils) pershareEarnings attributable retroactive adjustmentrelating tothebonusshares issued. (numbers in000’s) Less: shares (numbersin000’s) Weighted of theBank(KD000’s) Net a) b)

The was increased to80%for a totalpurchase considerationofKD21,730thousand. Brokerage consideration of KD 13,853 thousand. 13,853 KD of consideration Investment Brokerage CompanyK.S.C(Closed)atthedateofacquisitionare shownbelow: with anauthorizedandsubscribedcapitalofKD15,000thousand. In n eray 08 te ak curd 1 o te qiy f no Securities Union of equity the of 51% acquired Bank the 2008, February In profit Weighted December fair for per average values the share Company Company year average 2007, of assigned attributable for authorised the the K.S.C. K.S.C. of year to Bank own identifiable to and (Closed) (Closed) ended shareholders’ shares incorporated subscribed 31 engaged In April 2008, the percentage of holding of percentage the 2008, April In assets held engaged December a and in 100% in investment liabilities 2007 brokerage 1,248,580 1,272,022 owned 100,655 2008 (23,442) was 80.6 of banking subsidiary, Union 99.8 services, fils Securities activities, 1,272,022 1,266,106 120,356 2007 before for (5,916) Tijari 95.1 a 31DECEMBER2008 NOTES TO THE CONSOLIDATED FINANCIALSTATEMENTS

22- RELATEDPARTYTRANSACTIONS to repayable are members related and personnel management key directors, to issued loans The Deposits Credit cards Loans Executive Management Deposits Credit cards Loans Board ofDirectors sheet dateare asfollows: During did n usatal te ae em icuig neet ae ad oltrl a those as collateral, prevailing and rates interest including terms made same customers were the transactions substantially were Such on owners) business. of principal course ordinary the are in Group they the of which of companies and families Cash outflowonacquisition Cash andcashequivalentsinthesubsidiary Cost ofacquisition Bank the by Goodwill arisingonacquisition acquired assets net of Value Minority interest Net assets Liabilities Identified intangibleassets Development cost Property andequipment Other operatingassets Investments Cash andcashequivalents Assets 8.75 not the involve %). at within year the The more same certain 4 loans years than time given Executives Directors/ Number of related and the 14 14 for 9 7 1 1 have are normal comparable parties collateralised Members Related Number of interest 2008 31 16 amount 6 1 3 2 (directors rates transactions KD 000’s Amount in 34,908 5,464 of 298 511 by of 13 11 risk. and real-estate 4.50 The Executives Directors/ Number of officers % with 12 10 balances 5 6 2 to 1 unrelated 7.75 and of Members Related Number of the 2007 % equities. 32 15 at 8 1 4 2 (2007: Group, the parties KD 000’s KD 000’s Amount in balance The 20,900 21,730 19,965 24,956 25,242 21,050 5.00 34,333 (4,991) 1,765 2,256 their and (830) (286) 851 376 238 108 925 830 73 fair 7 3 % 65 Annual Report 2008 66 Commercial Bank of Kuwait 31DECEMBER2008 NOTES TO THE CONSOLIDATED FINANCIALSTATEMENTS

23- FAIR VALUES OFFINANCIAL ASSETS AND LIABILITIES 24- FINANCIALINSTRUMENTS Fair Underlying exchanged or settled between knowledgeable parties in an arm’s length transaction. the Fair operations orundertakeatransactiononadverseterms. without concern any intention, or need, to liquidate, curtail materially the scale of its carrying valueofsuchfinancialinstrumentsgenerallyapproximates theirfairvalue. prevailing (a) Strategyinusingfinancialinstruments The transactionsincludedintheconsolidatedstatementofincome 50,370 thousand). value Termination benefits Post employmentbenefits Short-term benefits Key managementcompensation: Interest expense Interest income As funds both retail GroupThe interestraise to seeks also margins through commercialto lending and liquidity tomeettheGroup’s needs. financial balance The other commitmentssuchasletters ofcredit andperformance andotherbonds. Group’s value values of a use these commercial borrowers fixed in interest is the sheet of of instruments high the consolidated collaterals and financial interest definition amount quality loans rates floating with bank, bearing instruments a and for including at assets as of range balance the rates which debts fair at advances 31 Group’s of value at financial and December an derivatives. with credit a sheet also fair asset, for is but similar activities ratings. the brings interest various assets at the liability presumption fair 2008 It credit Bank with accepts Such values are margin and periods is or also KD it principally risk exposures liabilities financial KD 000’s the have 55,649 deposits while 2008 enters and and that (1,293) associated 2,228 (219) (17) (73) been residual seeks the maintaining instrument related

thousand not into involve from Group estimated are asfollows: represented guarantees to inherent maturity. customers to invest not (2007: the is could sufficient KD 000’s only a 2007 use going using these 2,577 risks. The (342) (950) and on- KD (37) (14) be on of at

31DECEMBER2008 NOTES TO THE CONSOLIDATED FINANCIALSTATEMENTS

(b) Overallriskmanagement mentioned below: management volatility policies (i) CREDITRISK and culture management risk manage strong a maintain to is Group the of strategy The The Disclosures onCapitalAdequacy Standard. risk-based the with associated risks and returns between relationship the recognises Group The of theGroup’s strategicobjectives. A) Credit riskconcentration B) Maximum exposure to credit risk before collateral held or other credit enhancements enhancements credit other or held collateral before risk credit to exposure Maximum B) For counterparties. Adequacy Standard. Capital on Disclosures Public the of risk”, Credit - management IV(b),”Risk note specific with transactions limiting exposures, credit monitoring by risk credit control to obligation Credit Group’s use h floig al rpeet te aiu cei rs epsr a the at enhancements. credit exposure other and collateral risk any of account credit taking without date maximum sheet balance the represents table following The significant portionofassetssubjecttocredit risk,isgiveninnote6. The detailed and of the risk and credit lines financial counterparties, practices risk/reward and risk is functions earnings qualitative the of risk management cause risk business. instruments concentration to that the please volatility. ensure relationship disclosure one other and The measures party refer that and party Group continually For the within on to to the within detailed to a note Group the continuously management financial are incur credit loans and IV, based assessing is a qualitative “Risk across not financial instrument risk and on subject measurement reviews management”, of the advances, each risks loss. the specific disclosure to will of its form large creditworthiness The fail the risk which Group type to an asset please Group’s management of discharge integral on of the valuation form attempts the risks refer Public major part risk the an as to of 67 Annual Report 2008 68 Commercial Bank of Kuwait 31DECEMBER2008 NOTES TO THE CONSOLIDATED FINANCIALSTATEMENTS

Others Letters ofguarantee Letters ofcredit Acceptances Credit exposurerelatingtooffbalancesheetitems Other assets Debt securities Loans andadvances-Retail Loans andadvances-Corporate Due from banksandOFIs Treasury andCentralBankbonds Cash andshorttermfunds Credit exposurerelatingtoonbalancesheetitems C) Collateralandothercredit enhancements Disclosures onCapitalAdequacyStandard. enhancements For acceptability oftypescollateralandvaluationparameters. of the regarding implemented assessment are counterparty.Guidelines the an of risk credit on the depends required collateral of type and amount The The that any represent without beingfunded. terminate expireor will commitments these of requirements,many cash since amount of commitments to extend credit does not necessarily represent future collateral funds primary detailed the are purpose credit or available qualitative please other risk, of security refer assuming to off a disclosure to balance customer note is of that VI no sheet the on as “ value. Credit amounts required. the financial However, risk collateral are mitigation”, The instruments 6,323,995 1,979,195 1,122,408 2,257,551 KD 000’s KD 000’s 4,344,800 fully 562,471 252,065 943,282 251,811 319,709 185,651 372,523 2008 2008 42,251 14,273 contractual the advanced and total of other is contractual the to 6,007,698 1,795,035 1,021,150 2,024,299 1,209,337 4,212,663 KD 000’s KD 000’s amounts and 658,198 357,237 207,645 370,024 ensure 2007 2007 36,265 79,422 23,509 20,612 Public credit that 31DECEMBER2008 NOTES TO THE CONSOLIDATED FINANCIALSTATEMENTS

Loans andadvances-Retail Loans andadvances-Banks Loans andadvances-Corporate As at31December2007 Loans andadvances-Retail Loans andadvances-Banks Loans andadvances-Corporate As at31December2008 Standard grade Good grade Superior grade D) Credit qualityofcredit exposure grading grading for corporate customers. The parameters that are considered internal while an risk and banks of assessment the for agencies rating credit of ratings external the uses Group The credit. of extension the with associated factors The Group’s risk grading system is a systematic methodology for analysing risk financial standard gradesare determinedonthefollowingbasis: of 1 to 10 with 1 being the best risk and 10 being bad. The superior, good and scale a follows system The applicable. where risk, country and arrangements and advancesbyclass,gradestatus. The following table represents the credit risk exposure by credit quality of loans the information customers

113,649 13,782 85,763 Superior 99,867 87,033 1,270 Neither pastduenorimpaired grade and - - include management, 1,659,370 1,506,961 1,309,221 1,880,681 Grades7&8 Grades5&6 Grades1to4 347,994 372,523 grade Good 2,155 1,197 financial Internal facility Standard condition grade 484,615 632,790 140,431 492,359 563,295 78,680 structure, - - KD 000’s and BelowBBBandunrated RatingBBB RatingsAAA,AA&A performance, Past duebut not impaired collateral 0 -90days 42,712 41,443 9,346 1,465 External 7,881 1,269 - - and quality Impaired support 126,825 141,621 125,856 114,971 11,644 7,778 4,076 4,121 of Fair valueof collateral 16,203 44,302 44,302 16,203 - - - - 69 Annual Report 2008 70 Commercial Bank of Kuwait 31DECEMBER2008 NOTES TO THE CONSOLIDATED FINANCIALSTATEMENTS

Others Banks andfinancialinstitutions Construction andreal estate Trade andcommerce Government sector Industry Others USA Europe Asia Kuwait Geographic sector E) Concentrationoffinancialassetsandoff balancesheetitems F) Financialinstrumentswithcontractualornotionalamountsthatare subjecttocredit risk to asset, financial In A to The underlying financialinstruments,reference rateorindex. where The of derivativesare measured The year endandare notindicativeofeithermarketorcredit risk. consolidated statementofincome. the derivative manage The maturity. fair valuationgain notional table ordinary reference payments instruments, below its financial amounts course exposure rate notional are shows or of together 4,140,986 1,125,682 1,715,269 4,140,986 3,125,468 instrument dependent or indicate index 673,558 374,667 251,810 905,787 business to 11,931 97,800 Assets loss the amount fluctuations KD 000’s and positive of - with the 2008 the the is is upon is volume the the a derivatives Bank 1,602,919 Off Balance 1,979,195 1,979,195 the 172,607 427,260 477,570 774,426 217,525 financial and 127,332 notional in 16,443 53,295 89,013 Sheet basis movements interest amount uses of negative upon

transactions derivative contract amounts held for and of which in 1,099,132 4,041,272 4,041,272 a fair 2,710,544 2,033,091 foreign 207,150 933,212 527,339 339,984 207,646 derivative’s Assets 16,200 price trading 8,246 between analysed financial changes values outstanding KD 000’s exchange of 2007 is one of taken instruments two by in underlying Off Balance derivative 1,795,035 1,795,035 1,412,138 the the or 319,380 537,837 483,723 230,346 Sheet 382,617 71,478 21,508 39,833 91,210 parties at to rates. value more term the the 31DECEMBER2008 NOTES TO THE CONSOLIDATED FINANCIALSTATEMENTS

Interest rateswaps FX forward contracts Notional balance-2007 Interest rateswaps FX forward contracts Notional balance-2008 (ii) MARKETRISK A) Interest raterisk Market risk”,ofthePublicDisclosures onCapitalAdequacyStandard. interest instruments Market disclosure on the market risk please refer to note IV(c), note to refer please risk market the on disclosure interest onitsinterest bearingassetsandliabilitiesare asfollows: The rate risk”,ofthePublicDisclosures onCapitalAdequacyStandard. Interest - management IV(e),”Risk note to refer please risk rate interest the on neet ae ik rss rm h dfeec i rpiig auiis f assets of and maturities repricing in difference the from arises risk rate Interest reviewing liabilities by setting up a tolerance limit. The exposure is regularly measured by one year. The Group manages the risk by matching the repricing of assets and liabilities. Group’s risk rates, is the will the foreign interest risk The fluctuate risk to majority exchange that the sensitivity value Fair the (445) (455) set due (11) 10 30 41 of fair

tolerance 115,459 rates to 163,563 115,459 the 163,563 Month Up to1 value position changes Group’s and - - or limit. equity the 7,890 3,727 Months 1 to3 7,890 3,727 and assets in For future - - the

prices. the detailed and KD 000’s market 58,961 cash 58,961 range Months 3 to12 For liabilities “ qualitative flows - - - - Risk management - management Risk of detailed variables effective of Year Over 1 350 reprice 350 213 213 the qualitative - - disclosure financial such 230,764 119,186 rate 230,414 119,399 within Total 213 350 as of

71 Annual Report 2008 72 Commercial Bank of Kuwait 31DECEMBER2008 NOTES TO THE CONSOLIDATED FINANCIALSTATEMENTS

LIABILITIES ASSETS LIABILITIES ASSETS Total interestratesensitivegap Other liabilities Subordinated loan Customer deposits Due tobanksandOFIs Other assets Premises andequipment Investment securities Loans andadvances Due from banksandOFIs Treasury andCentralBankbonds Cash andshorttermfunds Total interestratesensitivegap Other liabilities Customer deposits Due tobanksandOFIs Other assets Goodwill andintangibleassets Premises andequipment Investment securities Loans andadvances Due from banksandOFIs Treasury and CentralBankbonds Cash andshorttermfunds As at31December2007 As at31December2008 1,934,429 1,173,243 2,807,238 1,977,138 3,013,419 1,171,186 1,842,233 1,198,974 2,231,870 872,809 468,891 758,403 341,489 638,869 407,024 291,886 28,403 51,452 Month Up to1 Month Up to1 2,783 7,960 2,759 9,001 4,390 2,784 - - - - (103,218) 331,520 364,668 237,587 467,886 (256,935) 119,766 675,581 158,178 167,639 334,712 835,059 578,124 16,380 79,492 36,273 65,270 1,596 9,720 Months 1 to3 Months 1 to3 1,300 2,677 7,826 220 - - - -

- (152,076) 959,049 860,959 806,973 613,242 151,401 (306,260) 507,329 201,266 182,835 129,486 710,923 404,663 28,211 81,640 Months 3 to12 Months 3 to12 97,411 5,296 8,823 2,328 2,391 8,311 679 KD 000’s KD 000’s ------75,377 78,512 23,913 43,636 10,963 42,171 40,111 22,242 14,590 1 Year Over 1 Year Over 3,135 1,496 1,639 2,060 1,515 5,339 545 ------113,162 261,441 152,180 111,571 219,683 397,778 268,489 231,902 418,983 268,274 Sensitive Non-Interest Sensitive Non-Interest (52,628) (73,010) 44,380 18,662 30,784 27,823 27,648 28,535 95,373 33,916 8,657 264 7 - - - 3,762,277 2,635,850 4,289,293 2,214,221 1,205,261 4,306,651 2,430,381 2,644,840 1,042,693 3,809,258 1,009,496 100,551 240,985 207,645 185,651 130,492 939,161 251,811 319,709 121,725 370,024 16,380 23,509 27,648 18,662 30,784 Total Total Interest rate of Effective Interest rate of Effective 4 –10 0 –6 6 –7 6 –8 5 –6 3 -5 0 -5 0 -5 3 -5 4 -5 4 -9 6 -7 2 -4 0 -4 % % 6 ------31DECEMBER2008 NOTES TO THE CONSOLIDATED FINANCIALSTATEMENTS

Others -liabilities Others -assets Japanese Yen Sterling Pound UAE Dirham Swiss Franc Saudi Riyal Euro US Dollar Net assets(liabilities) Other currencies US Dollar Kuwaiti Dinar Over repricing gapis: B) Currency risk due Currency h tbe eo smaie te ru’ epsr t frin currency foreign sheet financialinstrumentsat carrying amounts,categorisedbycurrency. to balance off and Group’s exposureon the are table Group’sthe in Included risk. rate the exchange summarises below table The qualitative detailed For currencies. other in risks manage to used also are transactions Hedging controls. managerial and technological through monitoring regularly currency in exposure Net currency. functional its as Dinar Kuwaiti with entity, Kuwaiti The - Marketrisk”,ofthePublicDisclosures onCapitalAdequacyStandard. currencies asat31December : a period Group to changes Impact onstatementofincome is risk of disclosure had managed one 8,710 is 8,596 the 110 the year, in 4 following risk foreign on 2008 by the the that setting impact 17,420 17,192 currency significant exchange the 220 8 overall value on risk the KD 000’s of net rates. limits refer statement a exposures financial to by The Impact onstatementofincome note KD 000’s the 2008 Group of (1,851) 1,833 instrument 8,069 8,195 IV(c),”Risk Board (735) (132) denominated 506 338 342 (52) 609 39 (11) income - views of 2007 Directors based management will itself KD 000’s in fluctuate 16,390 16,137 (1,470) 1,217 2007 foreign on 1,912 as (328) 954 323 686 and the 139 68 71 (6) 5 a 73 Annual Report 2008 74 Commercial Bank of Kuwait 31DECEMBER2008 NOTES TO THE CONSOLIDATED FINANCIALSTATEMENTS

Other assets Investment securities Loans andadvances Due from banks&otherfinancialinstitutions Treasury &CentralBankbonds Cash andshorttermfunds ASSETS Other assets Investment securities Loans andadvances Due from banksandOFIs Treasury and CentralBankbonds Cash andshorttermfunds ASSETS Contingent liabilities Net onbalancesheetfinancialposition Other liabilities Subordianted loan Customer deposits Due tobanks&otherfinancialinstitutions LIABILITIES Contingent liabilities Net onbalancesheetfinancialposition Other liabilities Customer deposits Due tobanksandOFIs LIABILITIES As at31December2007 As at31December2008

1,230,947 2,023,468 2,362,396 1,303,312 2,787,051 2,219,162 2,542,164 1,943,953 Kuwaiti dinar Kuwaiti dinar 884,552 424,655 961,878 102,889 251,811 124,867 127,981 207,645 712,068 788,419 518,696 174,281 97,206 33,822 54,500 80,714 80,453 7,590 - 1,409,959 1,310,514 1,279,684 1,090,941 1,312,768 1,487,496 1,520,937 860,521 193,213 875,962 181,651 172,371 211,842 163,277 820,995 (97,191) 24,330 75,115 US dollar US dollar 16,380 15,568 39,309 35,115 26,827 19,061 33,441 - - KD 000’s KD 000’s Other currencies Other currencies 125,219 251,313

125,057 185,621 234,722 198,544 (52,769) 41,167 18,006 13,191 36,903 31,014 73,695 33,606 58,426 32,466 8,699 4,264 5,700 1,037 495 776 189 351 - - - 2,214,221 1,205,261 2,635,850 4,261,645 3,762,277 1,979,795 3,809,258 2,644,840 1,042,693 2,430,381 4,140,986 1,009,496 1,795,035 240,985 207,645 331,728 121,725 939,161 251,811 319,709 130,492 370,024 100,551 499,368 23,509 16,380 69,432 Total Total 31DECEMBER2008 NOTES TO THE CONSOLIDATED FINANCIALSTATEMENTS

As at31December2007 As at31December2008 Others Qatari Riyal UAE Dirham Saudi Riyal Bahraini Dinar Euro US Dollar Others Qatari Riyal UAE Dirham Saudi Riyal Bahraini Dinar Euro US Dollar The variables heldconstantisshownbelow: C) Equity price risk C) Equitypricerisk effect The For result all othervariablesheldconstant, isasfollows: The effect on equity due to reasonable possible changes in equity indices, with Capital on Adequacy Standard. Disclosure Public the of risk”, Market - management IV(c),”Risk Equity detailed equity of on price changes profit price qualitative risk and is in risk equity, the the exposure Impact onstatmentofincome Impact onstatmentofincome level risk disclosure as that of @ 1% @ 1% 19 15 (19) a 1 2 3 5 (1) 5 1 3 7 1 1 5 equity - result the arises on fair of indices the from strengthening value equity @ 2% @ 2% 30 10 (38) 38 (2) 11 14 10 4 6 3 2 6 1 1 - and the KD 000’s KD 000’s of price the the Bank’s value equities risk in 1,128 currency investment 391 267 275 @ 1% @ 1% 729 please of 8 8 ------individual decrease Impact onequity Impact onequity refer rate, portfolio. 2,257 1,458 stocks. to with 783 @ 2% @ 2% 534 as 550 16 16 note ------the all 75 Annual Report 2008 76 Commercial Bank of Kuwait 31DECEMBER2008 NOTES TO THE CONSOLIDATED FINANCIALSTATEMENTS

Other assets Goodwill andintangibleassets Premises andequipment Investment securities Loans andadvances Due from banksandOFIs Treasury andCentralBankbonds Cash andshorttermfunds ASSETS As at31December2008 As at31December2007 As at31December2007 Bahrain StockExchange Kuwait StockExchange Bahrain StockExchange Kuwait StockExchange (iii) LIQUIDITYRISK A) Standard. Adequacy Capital on Disclosures Public the of risk”, Liquidity - management more grading which may cause certain sources of funding to dry up immediately. For down credit or disruptions market from arise can risk funding Liquidity requirements.its meet to unable be will institution an that risk the is risk Liquidity The unusual The type. different of and term uncertain of often is transacted business since liabilities the maturity contractual the to date sheet balance the at period remaining the of basis the ensure thatadequateliquidity ismaintainedatalltimes. Group’s detailed table contractual However for date below Groups deposit disclosure and summarises the maturities do 1,790,068 to retention management not 178,701 570,450 407,027 251,138 319,706 63,046 ever Month Up to1 Impact onstatmentofincome on take liquidity the completely of + - - - account history @ 1% 83 75 assets maturity - - 863,192 525,434 334,712 Months 1 to3 2,611 constantly risk 387 and 45 and of 3 - - profile match control the + 562,117 385,545 172,550 the - 166 150 liabilities Months 3 to6 @ 2% 2,392 1,344 effective KD 000’s availability 286 of - - the monitors KD 000’s the please - - - maturities Group’s 383,680 373,394 have Months 6 to12 10,286 maturities refer of its + been ------668 309 the 729 assets @ 1% maturity to of 575,558 707,594 - Impact onequity 18,662 30,784 66,057 14,586 1 Year Over liquid their note 1,947 as determined and indicated assets - - IV(d),“Risk funds. profile liabilities. 4,306,651 2,430,381 1,336 1,458 + 185,651 130,492 939,161 251,811 319,709 - 18,662 30,784 618 Total @ 2% and It - on by to is 31DECEMBER2008 NOTES TO THE CONSOLIDATED FINANCIALSTATEMENTS

Net liquiditygap Other liabilities Subordinated loan Customer deposits Due tobanksandOFIs LIABILITIES Other assets Premises andequipment Investment securities Loans andadvances Due from banksandOFIs Treasury andCentralBankbonds Cash andshorttermfunds ASSETS Net liquiditygap Other liabilities Customer deposits Due tobanksandOFIs LIABILITIES Contingent Liabilities Contingent Liabilities As at31December2007 As at31December2008 As at31December2007 As at31December2008 (b) Contractualexpirybymaturity 2,222,533 1,460,417 2,276,205 1,441,739 1,562,758 (432,465) (713,447) 699,833 179,301 323,989 468,858 Month Up to1 180,235 245,367 792,316 205,523 370,024 62,283 42,150 15,063 Month Up to1 Month Up to1 - - 457,327 331,519 546,726 Months 1 to3 675,582 119,768 464,163 308,221 370,271 141,647 823,761 Months 1 to3 Months 1 to3 89,399 79,493 39,431 6,040 6,532 1,600 1,390 80 - - - 417,021 324,226 589,385 113,037 259,408 449,080 182,126 172,364 396,483 189,547 327,987 297,715 Months 3 to6 Months 3 to6 Months 3 to6 85,845 6,950 7,546 2,505 KD 000’s KD 000’s KD 000’s 118 732 - - - 688,486 553,546 536,733 758,807 650,259 205,261 332,322 423,695 111,664 247,919 272,016 Months 6 to12 Months 6 to12 11,567 Months 6 to12 19,087 5,246 2,790 5,010 - - - - - 831,617 665,726 409,134 773,439 697,264 296,555 58,178 40,165 40,354 41,868 1 Year Over 1 Year Over 16,380 27,648 61,486 43,668 1 Year Over 1,633 1,514 1,551 - - - - 2,644,840 3,762,277 2,635,850 4,289,293 3,809,258 1,042,693 2,214,221 1,205,261 1,009,496 1,979,195 1,795,035 497,393 121,725 100,551 207,645 370,024 527,016 240,985 Total Total 16,380 23,509 27,648 Total 77 Annual Report 2008 78 Commercial Bank of Kuwait 31DECEMBER2008 NOTES TO THE CONSOLIDATED FINANCIALSTATEMENTS

26- SEGMENTAL ANALYSIS 25- OPERATIONAL RISK Other liabilities Subordinated loan Customer deposits Due tobanksandOFIs Other liabilities Customer deposits Due tobanksandOFIs UNDISCOUNTED LIABILITIES UNDISCOUNTED LIABILITIES As at31December2007 As at31December2008 (c) Contractualundiscountedrepayment obligationsbymaturity (a) Bybusinessunits Where appropriate, riskismitigatedbywayofinsurance. The people andsystems,orfromevents. external Operational risk is the risk of loss resulting from inadequate or failed internal processes, n mngn ter prtoa rss Te epo itra cnrl ehius to techniques control internal reduce employ They risks. operational their managing and Vf,Rs mngmn - prtoa rs” o te ulc icoue o Capital on Disclosures Public the Adequacy Standard. of risk”, Operational - management IV(f),”Risk For The and other domesticactivities. detailed business Group investment their likelihood qualitative operates and support banking in or disclosure three 1,443,354 2,224,431 1,462,072 2,278,861 impact 700,076 units 793,357 activities, 42,150 62,283 Month Up to1 Month Up to1 business have - to on tolerable 335,882 828,360 679,057 142,771 462,826 120,676 which primary Months 1 to3 Months 1 to3 operational 6,040 6,532 segments 228 is responsibility levels segmented 332,738 456,099 263,641 184,912 427,851 Months 3 to6 Months 3 to6 87,932 6,950 7,546 namely 231 KD 000’s KD 000’s risk within control banking, 282,155 257,705 559,422 577,111 19,440 between 11,976 Months 6 to12 Months 6 to12 5,010 5,246 the for 467 identifying, Bank’s please brokerage 40,165 42,022 40,354 international 64,364 22,402 1,797 1,668 1 Year Over 1 Year Over risk refer - - assessing 2,673,193 3,833,067 2,664,143 1,047,199 appetite. 3,811,013 1,013,941 services to 100,551 121,725 23,328 Total Total note and 31DECEMBER2008 NOTES TO THE CONSOLIDATED FINANCIALSTATEMENTS

Liabilities &Equity Assets Net profit fortheyear Impairment andotherprovisions Total revenues Non interest income Interest income 29- COMPARATIVE FIGURES 28- CAPITAL ADEQUACY 27- OFFBALANCESHEETITEMS the annualreport. in thecurrent year. Certain are Kuwait as stipulated in CBK Circular number 2/BS/184/2005 dated 21 December 2005 of Bank Central by issued Regulations Adequacy Capital to relating disclosures The (c) Legalclaims (b) Fiduciaryassets (a) Financialinstrumentswithcontractualamounts which KD3,109thousand(2007:2,371thousand)hasbeen provided. for and Group the against existed claims legal certain date sheet balance the At thousand (2007:KD194,751thousand). The funded. being without terminate contracts these futurerequirementcases cash many in the as represent necessarily not does commitment the of amount contractual total and n h nra cus o bsns te ru mks omtet t extend to that commitments assuming makes risk credit the Grouprepresent amounts contracted the The customers. to business credit of course normal the In included B) Bygeographicsector l bsns i cnutd rm uat Gorpi sget information segment Geographic Kuwait. relating tolocationofassets isgiveninnote24(b)(i)(E). from conducted is business All of Group trustee, the the amounts under prior manages the year the net are amounts “Public investment asset fully 4,283,394 4,224,620 Domestic (57,689) 329,112 250,491 97,055 78,621 advanced Disclosures value have KD 000’s and International been of 2008 23,257 82,031 which 3,675 9,487 2,809 6,678 money and reclassified on - 4,306,651 4,306,651 Capital that 100,730 338,599 257,169 at market 81,430 (57,689) Total 31 any December to Adequacy funds collateral conform 4,265,106 4,114,573 Domestic 116,588 297,108 214,169 70,941 (6,677) as 2008 Standard” with investment is International 174,720 KD 000’s 10,341 24,187 of 2007 3,768 2,179 8,161 the is no presentation KD - value. section 4,289,293 4,289,293 manager 127,020 120,356 307,449 222,330 73,120 (6,677) Total The of 79 Annual Report 2008 80 Commercial Bank of Kuwait 31DECEMBER2008 PUBLIC DISCLOSURESONCAPITAL ADEQUACY STANDARD II- Capitalstructure I- Subsidiariesandsignificantinvestments of understandable disclosure frameworkthatenhancescomparability. pieces disclosure key and consistent a assess provides and these risks to to exposure bank’s licensed Moreover, participants a about information market process. allow and review enable adequacy shall supervisory capital requirements above the the complement and to is requirements disclosures these of purpose The 2005. 21, December on 2/BS/184/2005 No. Circular through issued II Standard-Basel Adequacy Capital on regulations and rules Kuwait of Bank Central with accordance in The following detailed qualitative and quantitative public disclosures are being provided Al SafatTakaful InsuranceCo. base” ratherthanas“riskweightedexposure”. 14.62%) if the investment in an insurance entity was taken as “deduction from capital (2007: 15.54% against as 14.61%) (2007: 15.52% been have would ratio capital The h ageae mut f oa itrs i a isrne niy wih s rdt risk credit is which entity,weighted: insurance an in interest total of amount aggregate The (Closed) -(100%owned)engagedininvestmentbankingactivities. (80% owned) engaged in brokerage services and Al Tijari - Investment Company (Closed) K.S.C. K.S.C. Company Brokerage Securities Union subsidiaries, two has Bank The capital adequacy regulations apply to The Commercial Bank of Kuwait S.A.K. The of itsownshares. 0.4%) or 5,166,651 2007: December (31 nil held Bank the 2008, December 31 at As 2007: December (31 1,272,022,346 of 1,211,449,853) authorised, subscribed and fully paid ordinary comprises shares of 100 fils each. capital Share – Capital Share NAME Country Ownership%KD000’s Kuwait 2008 10.00% 547 Kuwait Country Ownership%KD000’s 10.00% 2007 275 31DECEMBER2008 PUBLIC DISCLOSURESONCAPITAL ADEQUACY STANDARD

a. Tier1capital: The BankhasthefollowingcomponentsofTier1and2capital base: b. Tier2capital. oftotalcredit riskweighted assets) auditors) ofexternal 4. Subordinated loan 3. Generalprovisions (subject toamaximumof1.25% 2. Fairvaluereserve (45% onlywiththeconcurrence 1. Assetrevaluation reserve (45%only) 9.Goodwill 8.Minorityinterests inconsolidated subsidiaries 7.Ownshare reserve 6.Retainedearnings 5.Generalreserve 4.Statutoryreserve 3.Share premium 2.Proposed bonusshares 1.Paid-upshare capital 12. Bank’s ownshares 11. Surpluscapitalfrom insurance companies 10. Significantminorityinvestmentsinbankingentities Total eligiblecapital Total tier2capital Total tier1capital

127,202 KD 000’s KD 000’s 407,029 (4,835) (1,765) 45,603 91,814 17,927 63,601 66,791 457,132 2008 2008 50,103 35,305 11,401 3,397 691 - - - - KD 000’s KD 000’s 361,883 121,145 442,793 2007 2007 52,242 44,372 17,927 60,572 66,791 80,910 (7,223) 16,380 36,360 17,858 10,312 6,057 - - - - 81 Annual Report 2008 82 Commercial Bank of Kuwait 31DECEMBER2008 PUBLIC DISCLOSURESONCAPITAL ADEQUACY STANDARD 12. 11. 10. 9. 8. 7. 6. 5.ClaimsonMDBs 4. 3. 2.Claimsonsovereigns 1. a. Credit risk III- Capitaladequacy measuring economiccapitalforeachrisktypeandonanenterprise-wide basis. for framework a of introduction through enhanced been has capital of assessment Internal requirements. adequacy capital of appraisal includes necessarily initiative strategic any of evaluation addition, In limits. floor internal higher against adequacy capital its monitors the Bank The times. of all at capital operations adequate by supported are future Bank and present the that ensure to and adequacy capital for reporting and assessing planning, for framework a place in has of Bank Bank The Kuwait. Central to reporting adequacy capital the with conjunction in out carried is adequacy capital of Assessment risk. operational and risk market risk, credit for charge capital of computation for adopted been has Approach Standardised The A) Capitalrequirement RHLs eligiblefor35%RW Claims onsecuritisedassets org.Claims oninternational Other assets Past dueexposure Regulatory retail Claims oncorporates Claims onbanks Claims onPSEs Cash items 1,394,543 2,523,177 1,521,580 6,342,115 exposures Gross 411,207 280,909 170,215 26,795 13,689 - - - - assets weighted Net 2,754,710 1,087,415 KD 000’s 731,561 371,501 548,716 2008 12,779 2,738 ------requirement Capital 130,490 330,565 87,787 44,580 65,846 1,533 329 ------6,106,677 3,024,406 1,744,655 exposures Gross 592,832 390,481 304,491 29,310 20,502 - - - - - assets weighted Net 2,863,394 1,296,475 KD 000’s 2007 672,392 592,832 284,210 17,485 - - - - - requirement Capital - - 343,607 155,577 80,687 71,140 34,105 2,098 ------31DECEMBER2008 PUBLIC DISCLOSURESONCAPITAL ADEQUACY STANDARD

IV- Riskmanagement Total c. Operationalrisk Total 5. Options 4. Commoditiesrisk 3. Foreign exchangerisk 2. Equitiespositionrisk 1. Interest ratepositionrisk b. Marketrisk (a) RiskGovernance B) Capitalratios 2. Tier1capitalratio 1. Total capitalratio o apoa o srtge ad oiis Te or La Cmite BC is for responsible (BLC) mainly is which Committee Bank the Loan of authority Board approving credit apex The the policies. and strategies of approval for purposes. The Board of Directors through its committees has the overall authority reporting and approval for management executive involving the and Directors of Board the committees of hierarchy a includes framework management risk The and thecentralrole itmaintainswithintheBank. the factors which reflect the independent nature ofamongst Risk Management’sare operations committees executive Bank’s the of all in membership permanent and divisions, direct indirector internal other reportingwith arrangements or lines Risk Management division for overseeing each of these risks. The absence of any credit, of control the within assigned are personnel for Specific risks. operational and liquidity market, strategies recommending and monitoring assessing, for dedicated and independent an function is reporting to the Bank Chief General Manager & the CEO. The division of is responsible division Management Risk The 6,499,622 exposures Gross 147,351 10,156 2,558 7,598 - - - 2,941,818 assets weighted Net Risk KD 000’s 175,276 2008 11,832 10,127 1,705 - - - requirement Capital 353,018 21,033 1,215 1,420 205 - - - 6,248,920 exposures Gross 126,944 15,299 7,006 8,293 2008 13.84% 15.54% - - - KD 000’s 3,028,263 assets weighted Net Risk 2007 149,147 11,053 15,722 4,669 - - - requirement Capital 11.95% 363,391 2007 14.62% 1,326 17,898 1,886 560 - - -

83 Annual Report 2008 84 Commercial Bank of Kuwait 31DECEMBER2008 PUBLIC DISCLOSURESONCAPITAL ADEQUACY STANDARD (b) Credit Risk Credit risk is monitored through a system of independent credit appraisals, macro appraisals, credit independent of system a through monitored is risk Credit general rules forhedgetransactions. other of and method thereafter and hedge, inception of at effectiveness establishment hedge determining for guidelines down lays which on policy hedging related the by governed is effectiveness hedge of measurement The circumstances. certain under hedging for need the address also policies risk The continuously keptaware ofpositionsthereby enablinginformeddecision-making. are Board the the and management executive including the that authorities ensures BEC various the and ALCO to risks of reporting Periodical appetite. risk Bank’sthe within maintained are risks that ensuring and monitoring for continuous based) risk as well as (nominal limits internal place in put have policies The instruments. or products new of introduction to prior parameters pre-determined of set a of analysis comprehensiverequire also policies The regulations. external as well as internal and, conditions economic past expectations, strategies, future performance, business on based risks various for planning detailed to cater regularly.updated arereviewedand general, that in policies policies, risk risk The various by supported are management risk of objectives a The management. risk on risks management wide bank for risk measure framework sound wide a to for guidelines enterprise detailed provides and formal which policy, a manner has holistic Bank a the basis, in consolidated risks manage to order In the to adherence and related Bank regulatory requirements. the by taken provisions of control and evaluation overall the for responsible is Committee Provisioning The issues. investment all for committee decision-making level executive an is Committee Investment The committee whereby it has high risk level oversight over the risk management process. related a of role of the performs reviewalso ALCO The positions, exceptions. of approval currency and policies foreign and adequacy capital risk, rate framework which broadly covers balance sheet structure, maturity profile, interest Liability Committee (ALCO) is responsible for the overall asset liability management Asset The limits. certain within issues relatedcredit all consider to empowered is which body making decision management executive Creditthe The is Committee policies pertainingtoriskmanagement. specific as well as strategies bankwide of approval include These management. for Bank the of the authority the of beyond matters executive authority other and apex investments approving the is (BEC) Committee Executive Board The management the thereof. amendments and policy credit of the approving and reviewing for level also and authority the beyond proposals credit all approving 31DECEMBER2008 PUBLIC DISCLOSURESONCAPITAL ADEQUACY STANDARD

(c) MarketRisk whose fairvaluesare directly derivedfrom market parameters. equities and foreign of exchange that portfolios are actively in traded, as well evident as in is other positions Bank the for exposure risk Market prices. commodity and rates interest prices, security rates, exchange foreign as such factors related market in movements adverse from resulting loss for potential the is risk Market probability ofdefault,lossgivendefaultandexposure atdefault. portfolio level is facilitated with the introduction of an infrastructure for computing established for for credit concentrations and creditalso quality. tools are Creditlimits risk measurementInternal including at reviews. independent and management analysis portfolio grading, risk risk credit for infrastructure the which establishes policy management risk credit the by supplemented is policy credit The which includeindividuallendinglimit. Retail lending is strictly controlled by applicable Central Bank of Kuwait guidelines due giving credit policy is carried out to calibrate with regulatory and business requirements. after made are decisions the of update requirements.reviewand creditpolicy Continuous credit to consideration all and criteria lending establish that guidelines provides policy credit The exposures. geographical and ratings sovereign of terms in diversification portfolio adequate ensure to place in limits country monitored.Therearealso arecontinuously segments these exposuresto and sectors risk higher perceived for stipulated been have limits exposure level the risk profile of the borrower. Apart from individual lending limits, broader portfolio Appropriate risk analysis ensures that the limits approved are commensurate with any singlecustomershallnotexceed15%ofthebank’s capitalbase. Kuwait norms for credit concentration i.e. the maximum limit for credit exposure of of Bank Central to according exposures to applied are limits lending wise group scale of 1 to 10 with 1 a being follows the system best The risk applicable. and where 10 risk, being country and bad. arrangements Maximum support counterparty/ and collateral structure, facility management, and performance, information financial of and quality condition financial include customers the grading risk while factors risk associated with analyzing the extension for of credit. methodology The systematic parameters that a are considered is system grading risk Bank’s The after undertaken are approval toeffectively monitor/control levels theexistingcredit portfolio. portfolio and individual the at reviews comprehensive addition, In decisions. credit their making in authorities approving the assist to risks credit inherent the of evaluation credit objective an provide to order in approval to prior proposals credit of review detailed cover appraisals credit Independent limits. analysis of the credit portfolio, grading of counterparties and monitoring of concentration 85 Annual Report 2008 86 Commercial Bank of Kuwait 31DECEMBER2008 PUBLIC DISCLOSURESONCAPITAL ADEQUACY STANDARD (d) LiquidityRisk ute, h Bn’ lqiiy oiy eurs ht rpr iudt pann is scenario on planning based performed liquidity are tests proper stress that that and conducted requires periodically policy liquidity Bank’s the Further, funds andcorrelations withmacro-economic variables. short-term in trends behavioural deposits, core identify patterns, rollover discern to periodically conducted is analysis liability-side detailed A funding. of sources thereby time-bands specific within diversified maturing available deposits making restrictto attempt that fromdeposits of concentration also and customer single a limits of introduction limits. the through enhanced regulatory further is management the risk Liquidity to adherence continued ensure to limits pre-determined on based generated are alerts internal risk, liquidity over control greater have to order In ratio. deposit to loan as such limits absolute as well as reports gap on based mismatches cumulative allowable maximum the for place in set are Limits assets quickly andwithminimallossinvalue. liquidate to ability the affect that conditions market in or changes recognize address to failure the from arise also can or and decreases sources funding manage unplanned in changes to theinability It includes losses. significant incurring without due become they as obligations its meet to Bank’sinability the Liquidity risk is the current and prospective risk to earnings and capital arising from Bank ofKuwait. Central areby investments down laid guidelines restrictedand limits stipulated to individual as well forsuch as capacity limits investment overall bank’s the Further, topre-approved categories. aresubject and categories asset pre-defined under classified are Investments limits. concentration and limits loss stop limit, size portfolio absolute as such levels tolerance internal through are daily portfolio monitored trading the in risks Equity mitigants. appropriate recommend and independent risks major the to identify to order in approval subject to prior Management areRisk by review proposals Investment enforced. strictly are limits as well as stop-loss limits. Over-night regulatory limits that include overall absolute arethroughlimits monitoredcurrency-wiserisks daily Foreignabsolute exchange results toverifyitsrobustness. and equity trading positions. The VaR model is back-tested annually against actual are in place for maximum tolerance that is allowed separately for foreign exchange that limits internal against measuredVaR percentile.is 99th the at period holding 10-day a over loss possible maximum the computes and days business 1250 of (VaR) measures. VaR is based on historical simulation over the observation period The risks. Bank also assesses the exchange market risk throughforeign internally developed Valueand at Risk equity the control to place in are limits risk Market 31DECEMBER2008 PUBLIC DISCLOSURESONCAPITAL ADEQUACY STANDARD

(f) OperationalRisk (e) Interest RateRisk risk management policy lays down general guidelines for insurance management insurance for guidelines general down lays policy management risk Insurance coverage provides partial mitigation for operational risk. The operational critical processes andsystems. A and aims to ensure that business continuity is achieved with minimal disruption events. to risk operational of impact bankwide disaster recovery and plan is frequency prepared to on tackle any unforeseen information contingencies provides reportingchannels, fromincidence principally consolidated data, loss maintained Internally risks. of transfer prudent facilitates system this into integrated is which procedures.management bankwide Insurance throughreviewof and workshops, and assessments self control including methods assessment of range a using by factors external arise as well that as system error, events human processes, risk inadequate through minimizing on focused is management risk Operational Bank’s activities.Thedefinitiondoesnotincludestrategicor reputational risks. the of aspects all from litigation to exposure the includes also It contracts. and laws, with comply to failure from documents of formulation the in diligence due of resultinglack and obligations contractual loss of risk the is which risk, legal includes definition The events. external from or people and systems processes, failed or inadequate from resulting loss of risk the as defined is risk Operational pre-defined circumstances. certain under analysed be to required is equity of value economic risk. In the addition, this for appetite Bank’s the define that limits internal atrisk against measured are these and IRSM Earnings the to shocks rate bands. pre-defined applying by time computed are maturity/repricing pre-defined in liabilities ofassets and distribution the reflects which (IRSM) monitor sensitivity an rate of interest help the with monitored is risk This risk. rate interest to exposure is limited there hence, and year one within mature Bank the of liabilities and assets of majority The book. banking the in exposuresBank’s the for guidelines minimum the down lays policy management risk rate interest policy.The management risk market the with accordance in managed is book trading the in risk rate Interest risk andbasisrisk. options risk, curve yield risk, repricing are risk rate interest of sources major The liabilities. and assets its of value market the on and Bank’sprofits the on impact adverse an have may that rates interest in changes from arises risk rate Interest framework. analyses. A detailed contingency plan also forms part of the liquidity management 87 Annual Report 2008 88 Commercial Bank of Kuwait 31DECEMBER2008 PUBLIC DISCLOSURESONCAPITAL ADEQUACY STANDARD V- Creditexposures Bad –100%provision Doubtful –50%provision Substandard –20%provision discretion ofmanagement Special mention-at Category &provision required and non-performingfacilitiesasfollows: and performing corporate for applied accordingly forretail, are principles and rules specific facilities and sovereign between differentiate provisioning specific to pertaining regulations Kuwait of Bank Central The standards. accounting applicable the relevant in accordance with Central Bank of Kuwait regulations on provisioning as well as the with computed are provisions accordance general and Specific in regulations. Kuwait of defined Bank Central are exposures impaired and due Past rate loans of income. floating statement and the to taken is fixed impairment from arising for loss of amount rate respectively.The interest current and rate interest effective original the on recoverablebased amount discounted fromcollateral, and guarantee recoverable amount, being the present value of expected future cash flows, including the and amount carrying the between difference the is provision the of amount The if impairment loan due. for amounts all collect to able be not will Bank provisionthe that evidence objective is there risk credit to subject are receivables and Loans authority theBLC. decisions made at lower levels of the hierarchy are reviewed by the highest approval credit facility(ies) considered is in place for making suitable credit decisions. All credit formal a includes also credit approval hierarchy designed policy on the basis of amount/tenor other creditfeatures of the The etc. requirements margin requirements, documentation decisions, credit various for process approval criteria, lending the policies pertaining to different lending areas. Among others, the credit policy defines The credit policy of the Bank lays down the general lending standards as well as specific insurer, definition of policy limits and deductibles, policy reviews andhandling claims. reviews policy anddeductibles, limits policy of definition insurer, of risk credit policies, insurance structuring in considered be to factors including under legalaction 12 monthsandmore andclients 6 monthsandlessthan12 3 monthsandlessthan6 Not exceeding3months Consumer &installmentloans Irregularity period More than365days 181-365 days 91-180 days Upto 90days Others excludingsovereign loans 31DECEMBER2008 PUBLIC DISCLOSURESONCAPITAL ADEQUACY STANDARD

claims onbanks,intoshort-termandlong-termexposures. of case in classified, further are which claims of categories different for applicable are notations mapping Separate regulations. the in out different laid as for ratings issue weights public risk stipulated of application involves process mapping The into translated specific are risk weights in ratings line with issue the mapping public process defined in The the same Fitch. regulations. and are Poor regulations & the Standard Moody’s, under ECAIs permissible The standard. adequacy capital the to pertaining regulations and rules Kuwait of Bank Central with accordance in are External Credit Assessment Institutions (ECAIs) used for capital adequacy computation take intoaccountanypossibleloan-lossesinfuture duetobusinesscycleeffects. portfolio provision is to make the general provision more forward looking and also to economic sector, group of watch list accounts, country risk etc. The rationale behind as such criteria certain on based identified are portfolios Such portfolios. certain on made is provision general additional represent which provision portfolio provision, general required the from Apart regulations. has these with provision accordance in specific taken, been no where facilities, credit non-cash for 0.5% and facilities credit cash the of 1% at carried be to has provision general minimum addition, In 89 Annual Report 2008 90 Commercial Bank of Kuwait 31DECEMBER2008 PUBLIC DISCLOSURESONCAPITAL ADEQUACY STANDARD 12. 11. 10. 9. 8. 7. 6. 5.ClaimsonMDBs 4. 3. 2.Claimsonsovereigns 1. 12. 11. 10. 9. 8. 7. 6. 5.ClaimsonMDBs 4. 3. 2.Claimsonsovereigns 1. (b) Average gross credit exposures (a) Gross credit exposures

RHLs eligiblefor35%RW org.Claims oninternational RHLs eligiblefor35%RW Claims onsecuritisedassets org.Claims oninternational Claims onsecuritisedassets Other assets Past dueexposure Regulatory retail Claims oncorporates Claims onbanks Claims onPSEs Cash items Other assets Past dueexposure Regulatory retail Claims oncorporates Claims onbanks Claims onPSEs Cash items 6,284,709 1,035,301 2,774,842 1,681,162 6,342,115 1,394,543 2,523,177 1,521,580 exposures Total gross exposures Total gross 400,779 288,318 411,207 280,909 170,215 21,147 78,597 26,795 13,689 4,563 ------4,362,920 1,320,049 1,009,574 1,145,302 4,338,545 1,296,001 1,288,325 exposures gross Funded KD 000’s KD 000’s exposures gross Funded 398,254 280,909 170,215 973,784 388,432 288,318 2008 2008 24,928 13,689 20,525 78,597 4,563 ------1,946,164 1,478,841 1,513,603 1,979,195 exposures gross Unfunded exposures gross Unfunded 392,837 376,278 61,517 12,347 74,494 12,953 1,867 622 ------5,113,864 2,506,928 1,329,630 6,106,677 3,024,406 1,744,655 exposures Total gross exposures Total gross 504,283 389,270 330,158 592,832 390,481 304,491 31,406 29,310 22,189 20,502 ------4,311,642 1,620,290 1,365,289 3,659,832 1,362,767 1,030,889 KD 000’s KD 000’s exposures gross Funded exposures gross Funded 2007 2007 592,832 378,928 304,491 504,283 378,139 330,158 29,310 31,406 20,502 22,190 ------1,144,162 1,454,034 1,795,035 1,404,116 exposures gross Unfunded exposures gross Unfunded 298,741 379,366 11,131 11,553 ------31DECEMBER2008 PUBLIC DISCLOSURESONCAPITAL ADEQUACY STANDARD

2.Claimsonsovereigns 1. 12. 11. 10. 9. 8. 7. 6. 5.ClaimsonMDBs 4. 3. 12. 11. 10. 9. 8. 7. 6. 5.ClaimsonMDBs 4. 3. 2.Claimsonsovereigns 1. (c) Total credit exposures bygeographicsector by geographicalsector Percentage ofcredit exposure by geographicalsector Percentage ofcredit exposure As at31December2007 As at31December2008 RHLs eligiblefor35%RW Claims onsecuritisedassets org.Claims oninternational RHLs eligiblefor35%RW Claims onsecuritisedassets org.Claims oninternational Cash items Other assets Past dueexposure Regulatory retail Claims oncorporates Claims onbanks Claims onPSEs Other assets Past dueexposure Regulatory retail Claims oncorporates Claims onbanks Claims onPSEs Cash items 4,319,027 1,382,285 2,385,846 2,974,563 4,816,209 411,207 146,382 280,909 170,215 499,479 390,481 101,309 304,491 Kuwait AsiaEurope USAOthersTotal Kuwait AsiaEurope USAOthersTotal 25,676 13,689 19,394 29,310 70.7% 75.9% ------1,108,284 1,160,684 1,427,215 1,329,473 47,843 72,020 24,614 18.3% 23.4% 3,438 1,119 1,108 ------255,704 186,986 291,085 279,252 89,484 17,121 18,260 2,782 4.4% 4.8% KD 000’s KD 000’s ------13,934 9,394 4,212 1,251 3,931 6,038 7,892 0.2% 0.2% 4 ------59,956 54,238 72,036 72,036 5,718 1.0% 1.1% ------2,523,177 1,521,580 1,394,543 6,106,677 3,024,406 1,744,655 6,342,115 280,909 170,215 411,207 592,832 390,481 304,491 100.0% 13,689 26,795 20,502 29,310 100% ------91 Annual Report 2008 92 Commercial Bank of Kuwait 31DECEMBER2008 PUBLIC DISCLOSURESONCAPITAL ADEQUACY STANDARD (d) Fundedcredit exposures bygeographicsector 2.Claimsonsovereigns 1. 12. 11. 10. 9. 8. 7. 6. 5.ClaimsonMDBs 4. 3. 12. 11. 10. 9. 8. 7. 6. 5.ClaimsonMDBs 4. 3. 2.Claimsonsovereigns 1. exposure bygeographical sector credit funded of Percentage exposure bygeographicalsector credit funded of Percentage As at31December2007 As at31December2008 RHLs eligiblefor35%RW Claims onsecuritisedassets org.Claims oninternational RHLs eligiblefor35%RW Claims onsecuritisedassets org.Claims oninternational Cash items Other assets Past dueexposure Regulatory retail Claims oncorporates Claims onbanks Claims onPSEs Other assets Past dueexposure Regulatory retail Claims oncorporates Claims onbanks Claims onPSEs Cash items 1,307,791 1,001,288 2,886,336 1,570,451 3,339,665 499,479 398,254 143,710 280,909 170,215 378,928 304,491 29,310 23,809 13,689 Kuwait AsiaEurope USAOthersTotal Kuwait AsiaEurope USAOthersTotal 19,394 84,283 66.9% 76.5% ------1,178,861 1,081,119 891,113 900,438 72,020 24,614 27.3% 20.6% 1,108 3,438 1,119 4,768 ------102,750 228,881 193,500 109,050 17,121 18,260 2,782 3,518 5.3% 2.5% KD 000’s KD 000’s ------13,543 9,068 4,212 1,247 3,609 6,038 7,505 0.2% 0.3% ------8,496 5,718 2,778 0.2% 0.0% 224 224 ------4,311,642 1,620,290 1,365,289 1,320,049 1,009,574 1,145,302 4,362,920 592,832 378,928 304,491 398,254 280,909 170,215 100.0% 24,928 13,689 20,502 29.310 100% ------31DECEMBER2008 PUBLIC DISCLOSURESONCAPITAL ADEQUACY STANDARD

(e) Unfundedcredit exposures bygeographicsector 12. 11. 10. 9. 8. 7. 6. 5.ClaimsonMDBs 4. 3. 12. 11. 10. 9. 8. 7. 6. 5.ClaimsonMDBs 4. 3. 2.Claimsonsovereigns 1. 2.Claimsonsovereigns 1. exposure bygeographicalsector credit unfunded of Percentage exposure bygeographical sector credit unfunded of Percentage As at31December2007 As at31December2008 RHLs eligiblefor35%RW Claims onsecuritisedassets org.Claims oninternational RHLs eligiblefor35%RW Claims onsecuritisedassets org.Claims oninternational Other assets Past dueexposure Regulatory retail Claims oncorporates Claims onbanks Claims onPSEs Other assets Past dueexposure Regulatory retail Claims oncorporates Claims onbanks Claims onPSEs Cash items Cash items 1,432,691 1,404,112 1,476,544 1,384,558 11,553 17,026 74,494 12,953 Kuwait AsiaEurope USAOthersTotal Kuwait AsiaEurope USAOthersTotal 79.8% 74.6% 1,867 2,672 ------

248,354 260,246 217,171 248,354 43,075 13.8% 13.1% ------62,204 62,204 170,202 85,966 84,236 3.5% 8.6% KD 000’s KD 000’s ------0.0% 0.0% 391 326 322 387 4 4 ------71,812 51,460 51,460 71,812 3.6% 2.9% ------1,404,116 1,513,603 1,795,035 1,979,195 379,366 376,278 74,494 12,953 11,553 1,867 100% 100% ------93 Annual Report 2008 94 Commercial Bank of Kuwait 31DECEMBER2008 PUBLIC DISCLOSURESONCAPITAL ADEQUACY STANDARD (f) Total credit exposures byresidual maturity 12. 11. 10. 9. 8. 7. 6. 5.ClaimsonMDBs 4. 3. 12. 11. 10. 9. 8. 7. 6. 5.ClaimsonMDBs 4. 3. 2.Claimsonsovereigns 1. 2.Claimsonsovereigns 1. exposures byresidual maturity credit total of Percentage exposures byresidual maturity credit total of Percentage As at31December2007 As at31December2008 RHLs eligiblefor35%RW Claims onsecuritisedassets org.Claims oninternational RHLs eligiblefor35%RW Claims onsecuritisedassets org.Claims oninternational Other assets Past dueexposure Regulatory retail Claims oncorporates Claims onbanks Claims onPSEs Other assets Past dueexposure Regulatory retail Claims oncorporates Claims onbanks Claims onPSEs Cash items Cash items 1,551,579 1,524,300 408,238 214,636 631,542 170,215 246,559 469,654 683,817 105,677 14,012 80,758 16,453 29,310 25.4% 24.0% 4,899 Month Up to1 Month Up to1 109 ------1,126,804 910,836 609,757 161,930 203,059 468,206 363,852 77,810 19,957 36,305 14.9% Months 1 to3 Months 1 to3 21,513 65,288 17.8% 5,077 4,886 ------919,849 148,750 465,463 215,867 119,993 476,868 247,191 919,158 13,689 70,065 69,954 Months 3 to6 Months 3 to6 15.1% 14.5% 5,324 5,843 ------KD 000’s KD 000’s ------

1,156,016 1,456,325 120,235 710,161 258,034 714,577 601,896 59,457 Months 6 to12 Months 6 to12 81,582 49,563 18.2% 23.8% 7,774 8,300 355 407 ------1,268,088 1,615,837 514,261 379,211 664,711 354,808 753,550 52,285 98,907 49,821 10,973 1 Year Over 1 Year Over 20.8% 25.5% 5,341 28 29 ------6,106,677 3,024,406 1,744,655 1,394,543 2,523,177 1,521,580 6,342,115 592,832 390,481 304,491 411,207 280,909 170,215 26,795 13,689 20,502 Total Total 29,310 100% 100% ------

31DECEMBER2008 PUBLIC DISCLOSURESONCAPITAL ADEQUACY STANDARD

(g) Fundedcredit exposures byresidual maturity 2.Claimsonsovereigns 1. 12. 11. 10. 9. 8. 7. 6. 5.ClaimsonMDBs 4. 3. 12. 11. 10. 9. 8. 7. 6. 5.ClaimsonMDBs 4. 3. 2.Claimsonsovereigns 1. exposures byresidual maturity credit funded of Percentage exposures byresidual maturity credit funded of Percentage As at31December2007 As at31December2008 RHLs eligiblefor35%RW Claims onsecuritisedassets org.Claims oninternational RHLs eligiblefor35%RW Claims onsecuritisedassets org.Claims oninternational Cash items Other assets Past dueexposure Regulatory retail Claims oncorporates Claims onbanks Claims onPSEs Other assets Past dueexposure Regulatory retail Claims oncorporates Claims onbanks Claims onPSEs Cash items 1,371,344 1,278,933 374,414 617,667 170,215 246,559 339,151 636,110 105,677 29,310 11,476 21,371 80,758 14,428 31.8% 29.3% Month Up to1 Month Up to1 3,032 109 ------540,565 190,906 208,955 330,210 331,697 818,583 21,513 65,288 Months 1 to3 Months 1 to3 77,810 19,957 72,303 36,305 12.5% 18.8% 1,711 2,493 ------123,443 208,211 172,548 622,134 591,171 119,993 238,875 189,547 13,689 70,065 69,954 Months 3 to6 Months 3 to6 13.5% 14.4% 3,215 3,765 KD 000’s KD 000’s ------117,524 274,997 806,066 467,530 245,119 423,693 10,287 59,457 81,582 49,563 Months 6 to12 Months 6 to12 10.7% 18.7% 4,910 5,702 355 407 ------1,206,703

971,533 513,762 376,942 296,040 352,540 465,448 14,590 98,907 43,636 10,973 22.5% 27.7% 5,341 1 Year Over 1 Year Over 28 29 ------1,009,574 1,145,302 1,320,049 4,311,642 1,620,290 1,365,289 4,362,920 280,909 170,215 398,254 304,491 592,832 378,928 13,689 29,310 24,928 20,502 Total Total 100% 100% ------95 Annual Report 2008 96 Commercial Bank of Kuwait 31DECEMBER2008 PUBLIC DISCLOSURESONCAPITAL ADEQUACY STANDARD 12. 11. 10. 9. 8. 7. 6. 5.ClaimsonMDBs 4. 3. 12. 11. 10. 9. 8. 7. 6. 5.ClaimsonMDBs 4. 3. 2.Claimsonsovereigns 1. 2.Claimsonsovereigns 1. (h) Unfundedcredit exposures byresidual maturity exposures byresidual maturity credit unfunded of Percentage exposures byresidual maturity credit unfunded of Percentage As at31December2007 As at31December2008 RHLs eligiblefor35%RW Claims onsecuritisedassets org.Claims oninternational RHLs eligiblefor35%RW Claims onsecuritisedassets org.Claims oninternational Other assets Past dueexposure Regulatory retail Claims oncorporates Claims onbanks Claims onPSEs Other assets Past dueexposure Regulatory retail Claims oncorporates Claims onbanks Claims onPSEs Cash items Cash items 180,235 130,503 245,367 193,265 47,707 33,824 13,875 10.0% 12.4% 2,025 1,867 2,536 Month Up to1 Month Up to1 ------370,271 278,060 308,221 259,251 89,627 12,153 33,642 20.6% 15.6% 2,584 3,175 Months 1 to3 Months 1 to3 ------297,715 237,993 327,987 257,252 57,644 25,307 43,319 16.6% 16.6% 2,078 2,109 Months 3 to6 Months 3 to6 KD 000’s KD 000’s ------688,486 435,164 247,747 650,259 469,458 178,203 34.8% 36.2% 2,711 2,864 2,598 Months 6 to12 Months 6 to12 ------368,671 296,555 288,102 409,134 37,695 20.7% 16.5% 2,269 2,268 6,185 1 Year Over 1 Year Over 499 ------

1,795,035 1,404,116 1,513,603 1,979,195 379,366 376,278 74,494 12,953 11,553 1,867 100% 100% Total Total ------31DECEMBER2008 PUBLIC DISCLOSURESONCAPITAL ADEQUACY STANDARD

12. 11. 10. 9. 8. 7. 6. 5.ClaimsonMDBs 4. organizations 3.Claimsoninternational 2.Claimsonsovereigns 1. (j) Generalprovision andprovisions charged tostatementofincomebystandard portfolio 12. 11. 10. 9. 8. 7. 6. 5.ClaimsonMDBs 4. 3. 2.Claimsonsovereigns 1. (i) Impaired loansbystandard portfolio RHLs eligiblefor35%RW Claims onsecuritisedassets Other assets Past dueexposure Regulatory retail Claims oncorporates Claims onbanks Claims onPSEs Cash items RHLs eligiblefor35%RW Claims onsecuritisedassets org.Claims oninternational Other assets Past dueexposure Regulatory retail Claims oncorporates Claims onbanks Claims onPSEs Cash items 141,621 11,644 53,164 72,692 4,121 Debt Gross ------(116,693) (32,396) (72,692) Provision Specific KD 000’s (7,484) (4,121) 87,120 15,107 66,746 2008 Provision General 5,267 ------KD 000’s ------2008 24,928 20,768 Debt Net 4,160 of Income Statement 29,775 28,995 ------780 ------126,825 46,011 67,802 Debt Gross 8,936 4,076 Provision General 65,070 55,628 ------9,442 (106,323) (29,420) (67,802) Provision Specific KD 000’s (4,076) (5,025) 2007 KD 000’s 2007 ------of Income Statement 20,502 16,591 Debt Net 3,911 5,628 4,120 1,508 ------97 Annual Report 2008 98 Commercial Bank of Kuwait 31DECEMBER2008 PUBLIC DISCLOSURESONCAPITAL ADEQUACY STANDARD 65,070 thousand)isrelated toKuwait. General provision as at 31 December 2008 amounting to KD 87,120 thousand (2007: KD Others USA Europe Asia Kuwait (l) Movementinprovisions (k) Impaired loansandprovisions bygeographicsector Provisions 31December Statement ofincome Ceded toCentralBank Recoveries Exchange differences Write-offs Provisions 1January 116,693 106,323 141,620 Specific (3,248) 72,692 11,741 50,546 7,077 1,569 5,095 2,278 4,363 Debt Gross (123) 87,120 22,050 65,070 KD 000’s General (116,693) 2008 KD 000’s (72,692) (11,741) (25,619) 2008 Provision Specific (2,278) (4,363) - - - - 171,393 203,813 29,127 (3,248) 24,927 24,927 1,569 5,095 (123) Debt Net Total - - - - 106,323 101,973 Specific 126,825 40,838 Debt Gross (4,010) 6,330 67,802 11,844 1,600 2,253 4,088 490 (60) General KD 000’s 65,070 KD 000’s 2007 (2,023) 67,093 (106,323) Provision Specific 2007 (67,802) (11,844) (20,336) (2,253) (4,088) - - - - 171,393 169,066 20,502 20,502 4,307 (4,010) 1,600 Debt Net Total 490 (60) - - - - 31DECEMBER2008 PUBLIC DISCLOSURESONCAPITAL ADEQUACY STANDARD

(m) Credit exposures afterCRMandCCF 12. 11. 10. 9. 8. 7. 6. 5.ClaimsonMDBs 4. 3. 2.Claimsonsovereigns 1. VI- Creditriskmitigation o te ups o cptl dqay optto, h mi tp fr guarantor for type main the computation, adequacy capital of purpose the For standard.adequacy capital regulationsand rules concerning Kuwait of Bank Central include computation adequacy capital collateral in the form of cash for and shares as well as used guarantees in accordance with the mitigation risk credit The policy. credit the in down laid etc. requirements eligibility, margin on conditions specific to Acceptable collateral includes cash, bank guarantees, shares, real estate etc. subject acceptable margin requirements. differential stipulating shares of purpose the the for categorize grades different into to collateral as Division Management Risk by is analysis conducted annual independent An objectivity. ensure to divisions business the of independent department a by handled is process This exposure. the than currency different a in is collateral the where cases in also and collateral share for required is documentation, revaluing the collateral revaluation, depends on the type of collateral. of Specifically, daily revaluation basis and insurance, custodial requirements etc. According frequencyto the credit policy, the remargining,frequency of collateral, and of valuation collateral for guidelines down lays management which includes, minimum coverage requirement Bank for different categories the of policy credit The capital adequacycomputationprocess. the for used been has sheet, off-balance or sheet on-balance whether netting, No RHLs eligiblefor35%RW Claims onsecuritisedassets org.Claims oninternational Other assets Past dueexposure Regulatory retail Claims oncorporates Claims onbanks Claims onPSEs Cash items Rated Exposures Credit Exposures afterCRM 551,436 551,436 KD 000’s 2008 ------Unrated Exposures 3,330,510 1,157,140 650,549 374,037 669,231 281,880 170,215 13,769 13,689 - - - - Rated Exposures Credit Exposures afterCRM 823,332 823,332 KD 000’s 2007 ------Unrated Exposures 3,286,293 1,341,893 592,832 378,947 619,808 304,633 18,870 29,310 - - - - - 99 Annual Report 2008 100 Commercial Bank of Kuwait 31DECEMBER2008 PUBLIC DISCLOSURESONCAPITAL ADEQUACY STANDARD 12. 11. 10. 9. 8. 7. 6. 5.ClaimsonMDBs 4. 3. 2.Claimsonsovereigns 1. 12. 11. 10. 9. 8. 7. 6. 5.ClaimsonMDBs 4. 3. 2.Claimsonsovereigns 1. follows: areas standardportfolio by collateral eligible creditexposurewith collateralised The adequacy. capital for used mitigation risk credit the of bulk the forming collateral of type major the formed shares quoted local and ratings acceptable with banks is counterparty As at31December2007 As at31December2008 RHLs eligiblefor35%RW Claims onsecuritisedassets organizationsClaims oninternational RHLs eligiblefor35%RW Claims onsecuritisedassets organizationsClaims oninternational Other assets Past dueexposure Regulatory retail Claims oncorporates Claims onbanks Claims onPSEs Cash items Other assets Past dueexposure Regulatory retail Claims oncorporates Claims onbanks Claims onPSEs Cash items 6,106,677 3,024,406 1,744,655 6,342,115 1,394,543 2,523,177 1,521,580 Exposures Total gross Exposures Total gross 592,832 390,481 304,491 411,207 280,909 170,215 20,502 26,795 13,689 29,310 ------Exposures Collateralised Exposures Collateralised 1,310,011 1,169,081 1,120,656 907,228 349,250 17,105 36,428 46,005 2,420 KD 000’s KD 000’s ------1,117,600 Collaterals Financial Collaterals Financial 792,716 786,419 691,348 385,309 11,532 29,411 1,632 4,665 ------Guarantees Bank Guarantees Bank ------31DECEMBER2008 PUBLIC DISCLOSURESONCAPITAL ADEQUACY STANDARD

VII- Capitalrequirementformarketrisk IX- Equityposition VIII- Operationalrisk 5. Options 4. Commoditiesrisk 3. Foreign exchangerisk 2. Equitypositionrisk 1. Interest ratepositionrisk The capitalrequirement formarketriskexposure isasfollows: the standardized approach. under computed is exposure risk market entire the chargefor capital The portfolio. The present market risk exposure comprises of foreign exchange and equity trading last published bid price. The fair value for unquoted investments areinvestments unquoted for value fair The price. bid published last by determined investments in mutual funds, unit trusts or similar investment vehicles are based on for value fair The prices. market quoted referenceto by determined are values Fair adjustments earlier reported inequityare transferred tothestatementofincome. value fair prior any impaired, or off disposed is investment sale” for from arising loss or changes in gain fair value taken resultant to the fair any valuation reserve in with equity. value When the “available fair at for carried are “available These as sale”. classified are book banking the in securities investment Equity gain control ofthatentity. institutions where the Bank expects to develop a business relationship or ultimately financial in taken are holdings equity Strategic units. issued outstanding the of 5% comply with regulations that require the Bank as fund manager to hold at a minimum to taken are Bank the by managed funds the in holdings Certain income. dividend and gains capital of expectation the with taken are holdings equity of majority The pertaining to andregulations capital adequacystandard. rules Kuwait of Bank Central the in defined as line business each for income gross average the to factors beta and relevant the lines applying business eight into activities Bank’s the segregating involves primarily which thousand) 17,905 KD (2007: thousand 21,033 KD to amounted that charge The Bank uses the standardised approach for computation of operational risk capital KD 000’s 2008 1,215 1,420 205 - - - KD 000’s 2007 1,886 1,326 560 - - - 101 Annual Report 2008 102 Commercial Bank of Kuwait 31DECEMBER2008 PUBLIC DISCLOSURESONCAPITAL ADEQUACY STANDARD Available forsale 6. Capitalrequirements 5. 45%ofitem(4)includedinTier2capital sheetbutnotthrough profit andlossaccount 4. Total unrealised gains(net)recognised inthebalance investmentsecurities 3. Cumulativerealised gains (net)arisingfrom salesof -Equitysecurities-unquoted -Equitysecurities-quoted 2. Type andnature ofinvestmentsecuritiesavailableforsale 1. Value ofinvestmentdisclosedinthebalancesheet are asfollows: The quantitative information related to equity investment securities in banking book “prolonged” declineinthefairvaluebelowitscost. “available for sale” equity holdings as impaired when there has been “significant” or treats Bank brokers’ The or appropriate quotes. models other valuation flows, cash discounted expected the on investment, similar a of value market the to reference KD 000’s (2,775) 39,301 51,548 31,879 83,427 2008 83,427 9,678 - KD 000’s 172,626 140,752 172,626 2007 35,905 31,874 18,345 16,157 23,093 31DECEMBER2008 PUBLIC DISCLOSURESONCAPITAL ADEQUACY STANDARD

X- Interestrateriskinthebankingbook Other currencies US dollars Kuwaiti dinars Over a period of one year, the impact on net interest income based on repricing gaps is: on based income interest net on impact the year, one of period a Over exposure. underlying the of characteristics repricing / maturity the reflect which policy the in time-bands. The classification of the assets and liabilities is based on guidelines laid pre-defined into liabilities and assets all classifies which (IRSM) monitor sensitivity interest rate risk in the banking book involves monthly generation of the interest rate and divisions in the context of interest rate risk management. Ongoing monitoring of committees various of responsibilities the defines clearly also policy The place. in rate risk planning, reporting and hedging. Variousinterest interest for rate risk limits guidelines are also down put lays policy The Bank. the of policy management risk rate interest the by governed is book banking the in management risk rate Interest + - + - 8,710 8,596 @ 1% 110 Impact onearnings 4 KD 000’s 2008 + - + 17,192 - 17,420 @ 2% 220 8 + - 8,069 8,195 + - (735) @ 1% 609 Impact onearnings KD 000’s 2007 + - 16,137 16,390 + - (1,470) 1,217 @ 2% 103 Annual Report 2008 104 Commercial Bank of Kuwait Branch Network Yarmouk West Mishref Vegetable Market Traders Mall Sulaibikhat South Surra(AlSalam) Souk Sharq Souk Salmiya Soor Street Sixth RingRoad Shuwaikh Sharq Salwa Salmiya Salhiya Sabahiya Sabah AlSalem Rumaithiya Rai Ras AlSalmiya Rabia Qurain Omariya Naeem Ministries Complex Mansouriya Labor Unit Kuwait FreeZone Khaldiya Kheitan Jahra Jabriya Jaber AlAli Hawalli AlMohalab Hawalli BeirutStreet Hawalli Farwaniya Fahaheel -AJYAL Fahaheel Fahed AlSalem East Ahmadi Dhow Tower Dasma Daher Bneid AlGar Ardhiya Andalus Ali SabahAlSalem Airport (Customs) Airport (Arrival) Airport (Departure) Abu Halaifa Abdulla MubarakStreet Abdulla MubarakArea Mubarak Al-Kabir(H.O.) 25352181 25379272 24838667 22990053 24870989 22990055 22421893 25737327 22990182 /4 24344044 24814643 22454879 22990051 25734514 22465208 23618732 22990054 25623726 22990045 25719574 24719131 25440037 24711465 24571776 22474150 22573990 24344044 24610061 /00 24841128 24745994 24552447 25330793 23849883 22640230 22621901 22630696 22990027 23913904 /3 23911308 22990009 23980254 22412011 22990102 /22990108 23830724 /5 22990052 24885381 22990036 23280661 24712099 24746492 24746492 23720408 22438190 22990059 /22990152 22411001 /50 Tel. 25352182 25379277 24817859 22475018 24877318 22990356 22421845 25737326 22418997 24345382 24837952 22454869 25610780 25727053 22463492 23613069 22990354 25654902 22990329 25719570 24719677 25440035 24723487 24571797 22474151 22573880 24335856 24610062 24810549 24745584 24551580 25334632 23840191 22640606 22621904 22616451 24723493 23913905 23915935 22990011 23980434 22411961 22990025 23830726 22562675 24887316 24889129 23280662 24712088 24741951 24741951 23720449 22404826 22990193 22464870 Fax