burgan bank s.a.k. · balances with the central bank of kuwait 1,151 472 659 due from banks and...

Burgan Bank S.A.K. Interim Condensed Financial Information (Unaudited) for the Period Ended 31 March 2008

BURGAN BANK S.A.K.

The attached notes 1 to 13 form an integral part of this interim condensed financial information 3

Interim Condensed Income Statement (Unaudited) Period ended 31 March 2008 Three months ended 31 March

2008 2007 Notes KD 000s KD 000s

Interest income 46,233 39,158 Interest expense (33,372) (26,685) ───────── ───────── Net interest income 12,861 12,473 Fees and commissions income 5,191 4,654 Fees and commissions expense (363) (356) ───────── ─────────

Net fees and commissions income 4,828 4,298 Net gains from foreign currencies 1,929 443 Net gains on investment at fair value through income statement 3,444 1,385 Net gains on sale of investment available for sale 11,461 13,736 Dividend income 581 4,234 Other income 1,259 62 ───────── ───────── Operating income 36,363 36,631 Staff expenses (4,076) (3,476) Other expenses (2,766) (4,686) ───────── ───────── Operating profit before provisions 29,521 28,469 Provision for impairment of loans and advances (3,854) (5,169) ───────── ───────── Operating profit 25,667 23,300 Contribution to Kuwait Foundation for the Advancement of Sciences (KFAS) (231) (210) Zakat (252) - National labour support tax (NLST) (627) (555) ───────── ───────── Profit for the period 24,557 22,535 ═════════ ═════════ Fils Fils Basic earnings per share 7 26.0 25.6 ═════════ ═════════ Diluted earnings per share 7 25.9 25.6 ═════════ ═════════

BURGAN BANK S.A.K.

The attached notes 1 to 13 form an integral part of this interim condensed financial information 4

Interim Condensed Statement of Changes in Equity (Unaudited) Period ended 31 March 2008

Share capital

KD 000s

Share premium KD 000s

Treasury shares

KD 000s

Statutory reserve

KD 000s

Voluntary reserve

KD 000s

Treasury shares reserve

KD 000s

Investments revaluation

reserve KD 000s

Share based compensation

reserve KD 000s

Retained earnings KD 000s

Total KD 000s

───────── ───────── ───────── ───────── ───────── ───────── ───────── ───────── ───────── ───────── Balance at 31 December 2007 86,060 64,759 (297) 35,257 35,635 38,489 21,656 176 69,405 351,140 Investments available-for-sale: - Net fair valuation gains - - - - - - 1,165 - - 1,165 - Net transfer to income statement - - - - - - (11,461) - - (11,461) ───────── ───────── ───────── ───────── ───────── ───────── ───────── ───────── ───────── ───────── Net expense recognised directly in equity - - - - - - (10,296) - - (10,296) Profit for the period - - - - - - - - 24,557 24,557 ───────── ───────── ───────── ───────── ───────── ───────── ───────── ───────── ───────── ───────── Total recognised (expense) income for the period - - - - - - (10,296) - 24,557 14,261 Cash dividend paid (note 6) - - - - - - - - (51,583) (51,583) Bonus shares issued (note 6) 8,606 - - - - - - - (8,606) - Purchase of treasury shares - - (3,009) - - - - - - (3,009) Sale of treasury shares - - 2,372 - - (1,165) - - - 1,207 Share based compensation expense (note 12) - - - - - - - 122 - 122 ───────── ───────── ───────── ───────── ───────── ───────── ───────── ───────── ───────── ───────── Balance at 31 March 2008 94,666 64,759 (934) 35,257 35,635 37,324 11,360 298 33,773 312,138 ═════════ ═════════ ═════════ ═════════ ═════════ ═════════ ═════════ ═════════ ═════════ ═════════ Balance at 31 December 2006 86,060 64,759 (29,039) 27,502 27,880 1,870 31,353 36 49,733 260,154 Investments available-for-sale: - Net fair valuation gains - - - - - - 6,092 - - 6,092 - Net transfer to income statement - - - - - - (13,736) - - (13,736) ───────── ───────── ───────── ───────── ───────── ───────── ───────── ───────── ───────── ───────── Net expense recognised directly in equity - - - - - - (7,644) - - (7,644) Profit for the period - - - - - - - - 22,535 22,535 ───────── ───────── ───────── ───────── ───────── ───────── ───────── ───────── ───────── ───────── Total recognised (expense) / income for the period - - - - - - (7,644) - 22,535 14,891 Dividend paid (note 6) - - - - - - - - (39,636) (39,636) Purchase of treasury shares - - - - - - - - - - Sale of treasury shares - - 4 - - 1 - - - 5 Share based compensation expense (note 12) - - - - - - - 18 - 18 ───────── ───────── ───────── ───────── ───────── ───────── ───────── ───────── ───────── ───────── Balance at 31 March 2007 86,060 64,759 (29,035) 27,502 27,880 1,871 23,709 54 32,632 235,432 ═════════ ═════════ ═════════ ═════════ ═════════ ═════════ ═════════ ═════════ ═════════ ═════════

BURGAN BANK S.A.K.

The attached notes 1 to 13 form an integral part of these interim condensed financial information 5

Interim Condensed Statement of Cash Flows (Unaudited) Period ended 31 March 2008 Three months ended 31 March

2008 2007 Note KD 000s KD 000s Operating activities Profit for the period 24,557 22,535 Adjustments:

Net gains on investment at fair value through income statement

(3,164)

(1,385)

Net gains on sale of investment available for sale (11,741) (13,736) Provision for impairment of loans and advances 3,854 5,169 Dividend income (581) (4,234) Depreciation 462 575 Provision for share based compensation 122 18 ───────── ─────────

Operating profit before changes in operating assets and liabilities

13,509

8,942

Changes in operating assets and liabilities: Treasury bills and bonds 12,839 (19,463) Due from banks and other financial institutions (305,441) (57,915) Loans and advances to customers (85,878) (6,649) Government debt bonds - 1,198 Other assets (8,439) (7,004) Due to banks 107,583 225,457 Due to other financial institutions 167,205 (70,592) Certificates of deposit - (33,000) Deposits from customers 121,405 646,269 Other liabilities (744) 12,467 ───────── ─────────

Net cash from operating activities 22,039 699,710 ───────── ───────── Investing activities Purchase of investment securities (182,546) (92,442) Sale of investment securities 196,708 110,592 Net additions to property and equipment (396) (529) Dividends received 581 4,234 ───────── ───────── Net cash from investing activities 14,347 21,855 ───────── ───────── Financing activities Other borrowed funds 33,075 - Purchase of treasury shares (3,009) - Sale of treasury shares 1,207 5 Cash dividends paid (51,583) (39,636) ───────── ───────── Net cash used in financing activities (20,310) (39,631) ───────── ───────── Net increase in cash and cash equivalents 16,076 681,934 Cash and cash equivalents at 1 January 431,190 302,044 ───────── ───────── Cash and cash equivalents at 31 March 4 447,266 983,978 ═════════ ═════════

BURGAN BANK S.A.K. Notes to the Interim Condensed Financial Information (Unaudited) At 31 March 2008

6

1. Incorporation and registration Burgan Bank S.A.K. (the ‘Bank’) is a public shareholding company incorporated in the State of Kuwait by Amiri Decree dated 27 December 1975 and listed on the Kuwait Stock Exchange. It is registered as a Bank with the Central Bank of Kuwait. The Bank’s address is P.O. Box 5389, Safat 12170, State of Kuwait. It is engaged in all banking activities. The Bank is 51.47% owned subsidiary of Kuwait Projects Company Holding K.S.C. (the “Parent Company”) which is listed on the Kuwait Stock Exchange. These interim condensed financial information have been approved for issue by the Board of Directors on 9 April 2008. 2. Basis of presentation The interim condensed financial information of the Bank have been prepared in accordance with International Accounting Standard (IAS) 34: Interim Financial Reporting, except as noted below. The accounting policies used in the preparation of the interim condensed financial information are consistent with those used in the preparation of the annual financial statements for the year ended 31 December 2007. The annual financial statements for the year ended 31 December 2007 were prepared in accordance with the regulations of the State of Kuwait for financial services institutions regulated by the Central Bank of Kuwait. These regulations require adoption of all International Financial Reporting Standards (IFRS) except for the IAS 39 requirement for collective provision, which has been replaced by the Central Bank of Kuwait’s requirement for a minimum general provision as described below. The impairment provision for credit facilities complies in all material respects with the specific provision requirements of the Central Bank of Kuwait and IFRS. In March 2007, the Central Bank of Kuwait issued a circular amending the basis of making minimum general provisions on facilities changing the rate from 2% to 1% for cash facilities and 0.5% for non cash facilities. The required rates were to be applied effective from 1 January 2007 on the net increase in facilities, net of certain restricted categories of collateral during the reporting period. The general provision in excess of the present 1% for cash facilities and 0.5% for non cash facilities would be retained as a general provision until further directive from the Central Bank of Kuwait is issued. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results of the three months period ended 31 March 2008 are not necessarily indicative of the results that may be expected for the year ending 31 December 2008. For further information, refer to the financial statements and notes thereto included in the Bank’s annual report for the year ended 31 December 2007. 3. Recoveries of provisions Under the terms of Amiri Decrees No. 32 of 1992 and No. 41 of 1993 as amended, relating to resident Kuwaiti customers’ debts existing at 1 August 1990 sold to the Central Bank of Kuwait there were provisions no longer required as at 31 March 2008 amounting to KD 10,000 (31 December 2007: KD 8,453,000, 31 March 2007:Nil). Provisions no longer required will be determined at the year-end and will be ceded to the Central Bank of Kuwait depending on the situation at that time. The estimation of provisions no longer required, if any, will be made on a basis consistent with that adopted at 31 December 2007 and in accordance with the instructions of the Central Bank of Kuwait.


7

4. Cash and cash equivalents

31 March

2008 KD 000s

Audited 31 December

2007 KD 000s

31 March

2007 KD 000s

Cash in hand and on current account with banks & other financial institutions (OFI’s) 31,841

11,723

46,998

Balances with the Central Bank of Kuwait 1,151 472 659 Due from banks and OFIs maturing within 30 days 414,274 418,995 936,321 447,266 431,190 983,978 5. Other borrowed funds

Effective Interest rate

31 March

2008 KD 000s

Audited 31 December

2007 KD 000s

31 March

2007 KD 000s

Medium term USD borrowing due 2009

LIBOR + 0.375% 41,816 42,998 45,540

Medium term USD borrowing due 2009

LIBOR + 0.300 % 13,275 - -

Medium term EURO borrowing due 2009

EURIBOR + 0.525% 20,982 - -

Fixed rate KD bond due 2007 5.875% - - 30,000 76,073 42,998 75,540 6. Equity a) The authorised, issued and fully paid up share capital of the Bank comprises 946,664,333 shares of 100 fils

each. b) Treasury shares

31 March

2008

Audited 31 December

2007

31 March

2007 Number of shares held 915,008 695,030 67,870,869

Percentage of shares held 0.10 % 0.08 % 7.89 %

Cost KD 000s 934 297 29,035

Market value KD 000s 1,171 695 55,654 Reserves equivalent to the cost of the treasury shares held are not available for distribution. c) Dividend At the annual general meeting of the shareholders held on 24 March 2008, a 10% bonus shares for 2007 (2006: nil) and a cash dividend for 2007 of 60 fils per share (2006:50 fils per share) amounting to KD 51,583,327 was approved and paid (2006: KD 39,636,230). This resulted in an increase in the number of authorised and issued shares by 86,060,393 shares and share capital by KD 8,606 thousand.


8

7. Earnings per share Basic earnings per share is computed by dividing the profit for the period by the weighted average number of shares outstanding during the period less treasury shares. Diluted earnings per share is computed by dividing the profit for the period by the weighted average number of ordinary shares outstanding during the period plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares. The computation of basic and diluted earnings per share is as follows: Three months ended 31 March

2008 2007 KD KD Profit for the period 24,557,000 22,535,000 ══════════ ══════════ Shares Shares Weighted average number of the Bank’s issued and fully paid up shares 946,664,333 946,664,333 Less: Weighted average number of treasury shares (851,187) (67,874,489) ────────── ────────── Weighted average number of shares, less treasury shares, outstanding during the period 945,813,146 878,789,844 Effect of dilution due to employee share option plan 1,369,206 972,568 Effect of dilution due to discounted share purchase plan 321,280 82,371 ────────── ────────── Weighted average number of shares, less treasury shares, outstanding during the period adjusted for the effect of dilution 947,503,632 879,844,783 ══════════ ══════════ Basic earnings per share (fils) 26.0 25.6 ══════════ ══════════ Diluted earnings per share (fils) 25.9 25.6 ══════════ ══════════ Earning per share for prior period have been restated for the effect of bonus shares issued during the current period. 8. Segmental analysis Primary segment information: The Bank is organised into two main business segments: • Banking : incorporating private customer current accounts, business current accounts savings, deposits,

investment products, credit and debit cards, consumer and housing loans, overdrafts, Commercial loans and other credit facilities

• Treasury and investment banking: incorporating money market, foreign exchange, treasury bills and bonds, investments and fund management.

Segment results include revenue and expenses directly attributable to each particular segment as the Bank does not have any inter-segment charges.


9

8. Segmental analysis (continued)

Banking KD 000’s

Treasury and investment

banking KD 000’s

Total KD 000’s

Three months ended 31 March 2008 Operating income 15,588 20,775 36,363 ───────── ───────── ───────── Segment result before provisions 12,297 19,629 31,926 Provision for impairment of loans and advances (1,782) (2,072) (3,854) ───────── ───────── ───────── Segment result 10,515 17,557 28,072 ───────── ───────── Unallocated costs (3,515) ───────── Profit for the period 24,557 ═════════

Assets 1,575,811 1,661,258 3,237,069 ═════════ ═════════ ═════════

Liabilities 1,224,022 1,700,909 2,924,931 ═════════ ═════════ ═════════

Banking

KD 000’s

Treasury and investment

banking KD 000’s

Total KD 000’s

Three months ended 31 March 2007 Operating income 12,586 24,045 36,631 ──────── ──────── ────────

Segment result before provisions 9,733 22,840 32,573 Provision for impairment of loans and advances (4,583) (586) (5,169) ──────── ──────── ────────

Segment result 5,150 22,254 27,404 ──────── ──────── Unallocated costs (4,869) ────────

Profit for the period 22,535 ════════

Assets 1,010,445 1,955,649 2,966,094 ════════ ════════ ════════

Liabilities 1,559,113 1,171,549 2,730,662 ════════ ════════ ════════

9. Contingent liabilities There is a lawsuit against the Bank demanding it to pay an amount of KD 20 million plus interest. The Bank has launched a counter lawsuit requesting the appointment of an expert. The Bank has recently entered into an irrevocable settlement agreement with the counterparty according to which, both parties have agreed to suspend the legal proceedings and consequently legal cases shall be dropped upon the fulfilment of certain specified terms in the agreement. The fulfilment of the specified terms in the agreement is currently in the process.


10

10. Transactions with related parties The Bank has entered into transactions with certain related parties (Parent Company, directors and key management personnel of the Bank and entities controlled, jointly controlled or significantly influenced by such parties) who were customers of the Bank during the period. The terms of these transactions are approved by the Bank’s management. The balances and transaction are as follows:

Parent company KD 000s

Others KD 000s

31 March 2008

KD 000s

Audited 31 December

2007 KD 000s

31 March

2007 KD 000s

Balance sheet Due from banks and other financial institutions -

61,261

61,261 46,105 63,822

Loans and advances to customers - 4,327 4,327 1,873 1,750 Investment securities 4,616 - 4,616 7,327 - Investment securities managed by a related party -

17,670

17,670 17,610 5,857

Due to banks - 17,912 17,912 9,711 2,020 Due to other financial institutions - 20,689 20,689 16,475 26,614 Deposits from customers 136,985 - 136,985 160,704 400,947 Income statement Interest income - 722 722 5,471 1,282 Interest expense 1,191 1,049 2,240 8,121 1,251 Dividend income 392 13 405 3,221 - Fees and commissions income 16 40 56 377 72 Fees and commissions expense - 111 111 3,366 2 Off balance sheet items Acceptances - 89 89 - 49 Letters of credit - 269 269 218 717 Letters of guarantee - 3,085 3,085 3,366 4,568

No. of Board members or

executive staff

31 March 2008

KD 000s

Audited 31 December

2007 KD 000s

31 March 2007

KD 000s Board members Loans and advances to customers 1 200 344 294 Deposits from customers 7 2,393 1,546 1876 Executive staff Loans and advances to customers 5 109 77 110 Deposits from customers 5 249 53 273 Commitments and contingencies 4 5 4 4 Key management compensation Remuneration paid or accrued in relation to "key management" (deemed for this purpose to comprise Directors in relation for their committee service, the Chief Executive Officer and other Senior Officers) are as follows: Three months ended 31 March

2008 2007 KD 000s KD 000s

Short term employee benefits – including salary & bonus 221 209 Accrual for end of service indemnity 35 35 Accrual for cost of long term incentive rights 28 25 ───────── ───────── Total compensation to 'key management' 284 269 ═════════ ═════════


11

11. Off balance sheet financial instruments

Financial instruments with contractual amounts representing credit risk

31 March 2008

KD 000s

Audited 31 December

2007 KD 000s

31 March

2007 KD 000s

Acceptances 104,405 78,218 78,751 Letters of credit 121,747 150,615 80,677 Letters of guarantee 302,855 290,775 295,483 529,007 519,608 454,911 Irrevocable undrawn commitments to extend credit 280,152 208,783 139,563 12. Share Based Compensation The Bank operates two share based compensation plans for its employees, namely a discounted share purchase plan (DSPP) and an employee share option scheme (ESOP). The DSPP scheme is available for all bank employees who have completed a minimum of one year employment with the Bank and is subject to meeting a certain performance condition. Eligible employees under the DSPP can purchase bank shares at a predetermined discount with a lock-in period of 5 years. The ESOP scheme is available only for employees who hold certain specified posts within the Bank. Eligible employees are granted the option to purchase a predetermined number of the Bank’s shares at a specified exercise price; the exercise of the option is subject to meeting certain performance conditions; and the option is valid for 5 years from the date of its grant. The fair value of the options is estimated using a Black-Scholes option pricing model, taking into account the terms and conditions upon which the options were granted. The number of shares allowed to be granted per issue under both schemes is not to exceed 5,000,000 shares in total and not to exceed 10% of total share capital on a single issue or on a 10 years cumulative basis. 13. Derivatives In ordinary course of business the Bank enters into various types of transactions that involve derivative financial instruments. A derivative financial instrument is a financial contract between two parties where payments are dependent upon movements in price of one or more underlying financial instruments, reference rate or index. The table below shows the notional amounts of derivatives outstanding as of the balance sheet date analysed by the term to maturity. The notional amount of a derivative’s underlying asset, reference rate or index is the basis upon which changes in the value of derivatives are measured. The notional amounts indicate the volume of transactions outstanding at the period / year end and are not indicative of either market or credit risk. The net (negative) / positive fair value of the derivative instruments as at 31 March 2008 is KD 000’s (2,593) (31 December 2007: KD 000’s (4,089), 31 March 2007: KD 000’s 185) and is included in the carrying amount of the (other liabilities) /other assets.


12

13. Derivatives (continued) 31 March 2008 Notional amounts by term to maturity

Notional amount

Total KD 000s

Within 1 year

KD 000s

Over 1 year

KD 000s Derivatives held for trading (non-qualifying hedges) Forward foreign exchange contracts 109,814 109,814 - Interest rate swap 26,550 - 26,550 136,364 109,814 26,550 31 December 2007 Notional amounts by term to maturity

Notional amount Total

KD 00’s

Within 1 year

KD 000s

Over 1 year

KD 000s Derivatives held for trading (non-qualifying hedges) Forward foreign exchange contracts 124,901 124,901 - Interest rate swap 27,300 - 27,300 152,201 124,901 27,300 31 March 2007 Notional amounts by term to maturity

Notional amount Total

KD 000s

Within 1 year

KD 000s

Over 1 year

KD 000s Derivatives held for trading (non-qualifying hedges) Forward foreign exchange contracts 91,257 91,257 - Interest rate swap - - - 91,257 91,257 -

burgan bank s.a.k. · balances with the central bank of kuwait 1,151 472 659 due from banks and...

Documents