CHAIRMAN’S STATEMENT

In the name of Allah, the Most Gracious, the Most Merciful
To the shareholders of the European Islamic Investment Bank plc

I present to our shareholders the European Islamic Investment Bank Plc’s (‘EIIB’ or ‘Bank’) results for 2009.

2009 has been another extraordinary year for global financial markets with capitalisation and liquidity concerns affecting a large number of financial institutions.  Liquidity, increased provisioning levels, exposure to the Real Estate sector and low real returns on Money Market activities were themes which characterised the Islamic financial markets during this period.

The Board of EIIB recognised at an early stage that 2009 would be a challenging year and I am pleased to report that the Bank has remained highly liquid; (+361% vs. the FSA minimum of -5%). This coupled with the strong capital position (£132.9m vs. the FSA minimum of £13.6m) has meant that the Bank has been better positioned than most to weather the storm.

The overall result for the year of a loss of £22.2m, whilst disappointing, is broadly in line with the result at the end of the first half of the year.  Operating Profit on continued operations before tax, fair value losses, impairments and oil & gas activity declined from £4.3m in 2008, to a loss of £4.0m in 2009. The move from profit to loss was primarily driven by the unprecedented decline in market yields, indeed at the operating level, core Operating Expenses (excluding fair value adjustments, impairment provisions and operating expenses on oil and gas activities) remained static at £7.8m between 2008 and 2009.

Islamic Capital Markets experienced a significant recovery during the second half of 2009, after a subdued first half.  A number of high quality entities, e.g. Petronas, GE Capital Corp, Islamic Development Bank, Tourism Development and Investment Company and International Finance Corporation successfully issued Sukuk during this period, proving that investors retained an appetite for well rated issuers. Unfortunately events in Dubai towards the end of the year had a materially negative impact on market sentiment, causing the recovery to largely stall.

The Bank continues to actively manage its exposures to Ahmad Hamad Algosaibi and Brothers Company and Saad Golden Belt 1 Sukuk.  Events at these enterprises have been the subject of much debate and speculation in the media and after careful consideration the Directors’ have concluded that the timeframe, and ultimate recovery of these amounts are highly uncertain and have therefore decided to increase provisions against these exposures up to £13.4m.

The Bank’s Private Equity capability has continued its development during 2009, reflecting the surge of potential investment opportunities which have arisen as the Bank has become recognised as an investor of choice.  The Board has maintained its careful and prudent approach to the valuation of Private Equity investments, as we believe that this is the only way to develop a credible long term track record of investment performance.  With this in mind, the Board has decided to provide £5.1m against the investments in DiamondCorp Plc and TriTech.

During the last quarter of 2009, the Bank undertook a capital reduction and tender offer. The transaction was conducted to provide some liquidity for smaller shareholders who wished to realise some or all of their investment in the Bank.  The capital reduction and tender were successfully concluded in December 2009.

As noted in my Interim Statement, during the third quarter of 2009, the Bank received a number of approaches from third parties who were interested in a business combination with EIIB.  The Board determined that the approaches did not make strategic sense, nor did they fairly reflect the value of EIIB, hence the discussions were terminated.

On 30 December 2009 the Pan-European Islamic Real Estate Fund was sold to ED Limited, a Cayman Islands registered company.  The disposal of this entity effectively concluded the disposal of the property portfolio originally acquired in 2007 by its subsidiary The House Limited, and hence, the loss (£7.1m) accounted for in the Interim income statement was reversed in the second half of 2009.

As I noted in my Interim Statement, Mr. John Weguelin, decided to stand down as CEO of EIIB in August 2009. An extensive search process is currently underway to find a replacement CEO; whilst this process is taking longer than the Board would like, it is obviously vital to ensure that the right person is found for this key role. In the meantime, on behalf of the Board, I would like to take this opportunity to thank Mr Keith McLeod for his continuing diligent and professional stewardship of the Bank during this transitional period.

The strategic review of the Bank’s activities referred to in my interim statement has made substantial progress. The new CEO will be charged with refining and concluding the Bank’s new strategic development, as well as delivering the strategic vision.

I am excited about the Bank’s prospects as it moves into this next phase of development.  There will be many fresh challenges ahead, but I am confident that EIIB will start to deliver the building blocks required to construct a long term profitable future.