CHAIRMAN'S STATEMENT

By the grace of The Almighty, I am pleased to present to our Shareholders the European Islamic Investment Bank Plc's ("EIIB‟ or "Bank‟ or "Company‟) results for the six months ended 30 June 2011.
The first half of 2011 witnessed dramatic changes in EIIB‟s operating environment. Civil unrest and discontent surfaced in a number of EIIB‟s target markets, causing significant concern amongst investors, and a sustained flight to quality.

Notwithstanding this, I am pleased to announce that the Bank returned a net income of £11.8m. The standout result in EIIB‟s first half was the timely exit of the TriTech investment, representing oil and gas assets situated in Texas which were sold in June 2011. This represents the first disposal from EIIB‟s Private equity portfolio, generating an estimated unleveraged net Internal Rate of Return of at least 35% for EIIB. I wish to acknowledge our Partners in TriTech, especially the Al Rajhi Group who played a key role in the success of this venture.

Looking back to the start of 2011, in January the Bank welcomed HBG as a significant new shareholder; HBG is a private equity investor with significant knowledge of the GCC and a track record of adding value to financial services companies. In May, two representatives of HBG, Michael Willingham-Toxvaerd and Zulfi Caar Hydari were appointed to the Board of EIIB.

At the same time as these appointments, I accepted the resignations of two of my fellow Directors, namely Salman Abbasi and George Morton, and was notified that Yusef Abu Khadra had decided not to put himself forward for re-election at the Bank‟s Annual General Meeting (AGM). In addition, Director Yaser Alsharifi was not re-elected at the Bank‟s AGM. Salman, Yusef and George had been Directors of the Bank since its inception, and I wish to record my gratitude, for their contribution over the years.

After leading the bank for 16 months EIIB‟s Chief Executive Officer, Subhi Benkhadra, has recently left the bank. Whilst the Board is going through the process of appointing a new CEO, Keith McLeod will continue in his role as Deputy Chief Executive officer and Finance Director, supported by the Board and the rest of the management team.

Following a period of review and consultation, the Board has determined that the existing staff incentive scheme does not fully align the interests of both staff and shareholders and hence no new bonuses will be allocated under the scheme for 2011. A revised scheme for 2012 and future years which will align stakeholder interests, and incorporate recent FSA Remuneration Code directives is under consideration.

The implementation of the Bank‟s focus on Investment Management, Banking and Financial Services is continuing apace. A further £3.1m was deployed into quoted equities via the Turath Quoted Equities Fund. In addition, the Bank was successful in attracting an additional £19.3m of deposits during the period.

Turning to our remaining Private Equity portfolio, our investment in DiamondCorp has reached an advantaged stage with the development of the Lace mine, which necessitated the extraction of a bulk sample. In June, DiamondCorp undertook a further capital issue in order to fund the extraction of the bulk sample, raising £3.5m at a price of 13 pence per share. EIIB has maintained a holding at just over 26% by investing £0.9m in July 2011. As at 30 June 2011, EIIB‟s stake was revalued from 8.5 pence per share to 13 pence per share, generating a profit of £2.2m.

I can also announce our exit from the Aston Martin exposure that had been written down in the Bank‟s books. After careful review of the ultimate recoverability of the financing facility provided to Aston Martin, the Board decided that it was in the Bank‟s best interests to exit the facility. The full amount of the facility was sold to third parties, achieving an average price of 96 pence in the pound. An impairment provision of 25 pence in the pound, which had been raised against this exposure in 2009, was consequently reversed resulting in a profit of £3.2m, which was recognised in the first half of 2011.
In terms of recent exposure, in January 2011 EIIB invested £3.0m in a real estate development in Bodrum, Turkey called Carian Bay. Carian Bay is a luxury hospitality and residential waterside development in a desirable location within one of EIIB‟s target investment markets. The transaction was opportunistic, providing EIIB with valuable future real estate development and investment capabilities in Turkey. I am excited about the potential for this project, and anticipate being able to share further good news about the development in due course.

In summary, the record profit achieved by the Bank in the first half of the year, showcases EIIB‟s ability to source and develop successful Private Equity investments. This forms a core component of the Bank‟s strategy and I am confident that with the support of our Shareholders and our Team, the Bank can build on this success in the years ahead.

Shabir Randeree
Chairman