Moody's changes GIC's deposit rating's outlook to stable, downgrades FSR

This follows the recent upgrade of the Kuwait
government bond ratings to Aa3 from A2, denoting the government's enhanced capacity to provide support.

In addition, the bank's short-term foreign currency deposit rating was upgraded to P-1 from P-2, in light of the continued strengthening of the country's fiscal and external positions, as well as its significantly improved systemic liquidity position. Combined with continued structural reforms and very large net asset positions, Kuwait's very healthy liquidity position alleviates any potential concerns regarding timeliness of support that may have existed in the past, resulting in GIC's P-1
short-term rating.

At the same time Moody's has downgraded GIC's financial strength rating (FSR) to D+ with a stable outlook.

GIC's foreign currency deposit and debt ratings reflect the application of Moody's rating methodology for government-related issuers ("GRIs"). Please refer to Moody's Rating Methodology entitled "The Application of Joint Default Analysis to Government-Related Issuers" published in April 2005, and to Moody's Special Comment entitled "Rating Impact of GRI
Methodology for Non Depository Financial Institutions in the EMEA Region", published in June 2005.

In accordance with Moody's GRI rating methodology, GIC's foreign currency deposit ratings reflect the following inputs: (i) Baseline credit assessment of 10; (ii) local currency bond rating of the Kuwaiti government; (iii) Medium dependence; and (iv) High support.

In downgrading the bank's FSR to D+ Moody cites its increased risk profile over the past three years reflected in the fact that income streams have become increasingly dependent on more volatile revenue sources. Net of funding costs and excluding extraordinary income, (i) Hedge Funds, (ii) Equity investments available for sale, and (iii) investments in projects and equity participations accounted for 75% of
GIC's operating income as of Sept 2006. The fact that such a large portion of the bank's operating income was generated by the "high beta" side of GIC's operations indicates the bank's potentially high earnings volatility. Moody's also notes that GIC may need to diversify its business lines in order to mitigate risk and potential earnings
volatility.

In addition, despite its high level of reported regulatory capital, GIC's large investments in projects and affiliates deplete the level of the
bank's free capital. Though we recognise that this is a result of the bank's business focus, such low levels of free capital constrain its FSR.

At the same time, the bank's FSR is supported by (i) GIC's high-grade and well diversified bond portfolio, (ii) excellent liquidity enabling good short-term debt repayment ability, and (iii) exceptional operating efficiency. In addition, given the high likelihood of shareholder and government support, the bank's foreign currency deposit ratings are well
placed within the A range.

Headquartered in Kuwait City, GIC reported total assets of USD8.208 billion as of 30 September 2006.