Gulf Bank issues statement on external audit results

The audit was made to identify the real size of the loss incurred by the Bank, after the statement dated 26/10/2008 about a loss sustained by it as a result of dealing, for the account of its customers, in financial derivatives.

The Chairman highlighted that the External Auditors' Report covered testing of the Bank's trading transactions in financial derivatives, for its own, and third party account, and trading in other financial instruments, as well as auditing the loans portfolio, and investment portfolio, and determining the provisions necessary therefore.

The Chairman stated that the External Auditors' Report concluded that the Bank's total loss amounted to KD375m, comprising the Bank's losses in financial derivatives for its customers' account, trading in financial instruments, as well as the provisions of loan and investment portfolios.

As Gulf Bank's Board of Directors is keenly desirous to continue the Bank's normal banking activity, being one of the important units of the banking system, the Board of Directors has made the following resolutions:

1: Recommending the Bank's capital increase by 1250 million shares, i.e. by 100% of the Bank's capital as of end of September 2008, at a nominal value of 100 Fils per share, and an issue premium of 200 Fils, thus achieving for the Bank an increase of KD375m in shareholders' equity, brining it back to its position as of end of September 2008.

The Chairman stated that the Board of Directors has specified the issue premium of 200 Fils per share, so as to encourage the existing shareholders to subscribe to the capital increase.

2: Priority in subscription shall be given to the existing shareholders, pro rata their capital holdings. Kuwait Investment Authority (KIA) will cover the increase in the number of shares in which no subscription is made by the Bank's shareholders.

3: Commencing, with effect from today, the actions necessary to hold an Ordinary and Extraordinary General Assembly Meeting, as soon as possible, to implement the resolution recommending the Bank's capital increase.

The Chairman stated that the Bank's Board of Directors has resigned, whereby the resignation shall come into effect upon finalizing the capital increase. Thereafter, an Ordinary General Assembly shall convene to elect a new Board of Directors.

In conclusion, the Chairman expressed his thanks and appreciation for the support the Bank receives from CBK to overcome this crisis, and restore the Bank's pre-crisis conditions.