Final Results

European Islamic Investment Bank plc

Results for the year ended 31 December 2011

The Board of European Islamic Investment Bank plc ("EIIB", the "Bank" or the "Company") announces its audited results for the year ended 31 December 2011.

For further information, please contact:

EIIB plc Tel: +44 (0)20 7847 9900

Zulfi Caar Hydari, CEO

Keith McLeod, Finance Director & Deputy CEO

Westhouse Securities Tel: +44 (0)20 7601 6100

Antonio Bossi

Highlights

Our year at a glance

·; HBG Holdings, a leading MENA area private equity firm, took strategic stake in the Bank

·; Zulfi Caar Hydari appointed Chief Executive

·; Abdallah Y. Al-Mouallimi appointed Chairman

·; Strategic realignment resulting in London office staff reduction of approximately 50% and run rate cost reduction of approximately 40%

·; Transformational investment in Rasmala, a leading Investment Bank and Asset Manager in the MENA region with $600m of Assets Under Management, completed in January 2012

·; EIIB now strategically and geographically positioned to offer international investors unrivalled access to outstanding opportunities in the fast developing markets of the MENA region

How we performed

·; Total operating income rose by 95% from £5.0m in 2010 to £9.7m

·; Loss before tax of £8.5m (2010 £6.7m) including provision of £9.7m relating to Arcapita

·; Profit before tax of £1.2m, excluding Arcapita provision

·; One-off profit before tax on TriTech disposal of £12.0m

·; Strong balance sheet

- Net Asset Value of 7.5 pence per share

- Cash and short term deposits of 5.7 pence per share

CHAIRMAN'S STATEMENT:

2011 was a year of major change for both MENA and EIIB. We now look to the future with confidence and a clear sense of purpose.

I have accepted to Chair the European Islamic Investment Bank (EIIB or the Bank) and to be part of the next stage in its development. I take this responsibility with humility and an appreciation of the challenges and opportunities associated with seeking to build a specialised investment bank, bridging the divide between the developed economies of the West and OECD and the long term growth markets of the Middle East and North Africa.

Market developments

Shareholders will appreciate that events within our principal markets and the global economy over the last year have been turbulent.

Starting in Tunisia, the turmoil that swept several countries in the Middle East brought about new realities and challenges. The region continues to experience the tensions inherent in rapid socio-political development, however, we believe that this new era will also serve to accelerate economic development. As governments increasingly support entrepreneurship and job creation, significant investment and wealth creation opportunities will arise.

Macroeconomic markets experienced another year of little or no growth in the developed economies and a series of financial shocks from the ongoing euro zone crisis. Market confidence was, and remains, fragile.

Our business

EIIB was not immune to the challenges these factors created.

The Bank's performance in 2011 was mixed. Total operating income rose 95% from £5.0m to £9.7m but losses before tax also increased 28% from £6.7m to £8.5m. The underlying profit for the year, excluding the large provision in relation to Arcapita of £9.7m, was £1.2m.

Despite the difficult circumstances, this level of performance is clearly disappointing. During the year, management acted promptly to improve the existing business and to undertake a thorough review of the Bank's strengths, weaknesses, opportunities and threats.

In January 2011 HBG Holdings made a strategic investment in the Bank. HBG is a private equity investor with significant experience in adding value to businesses in MENA and a wide network of relationships with leading investors in the region. In May, two representatives of HBG, Michael Willingham-Toxvaerd and Zulfi Caar Hydari were appointed to the Board of EIIB.

In December 2011, Mr Hydari was appointed Chief Executive, charged with enacting our strategy. His report on the following pages gives further details of the already excellent progress made in achieving our aims and building real value for our shareholders. His report also reflects a strategic review that was conducted and which identified a number of immediate measures that were taken, and more yet to be taken, to right size the business. A clear business plan was developed to build on our strengths and develop a market leading asset management and financing business, spanning London and the MENA region.

Outstanding prospects

I accepted the role of Chairman of EIIB in January 2012 with a sense of commitment and responsibility.

Notwithstanding the uncertainties inherent in the MENA region's current socio-political developments, I believe that the economic strengths and market fundamentals of the region offer outstanding short, medium and long term opportunities for those with the skills, expertise and on-the-ground networks to identify and capitalise on them.

EIIB's business is based on the avoidance of uncertainty, speculation and unfair enrichment or exploitation; principles that are equally relevant in MENA and Western markets. Good banking can also be successful banking, and EIIB has a clear and credible plan to do both.

I look forward to reporting on our progress in my second annual report to shareholders in 2013.

Abdallah Y. Al-Mouallimi

Chairman

CHIEF EXECUTIVE BUSINESS REVIEW:

The Middle East and North Africa offer outstanding value creation and business opportunities to the informed investor. We are positioning EIIB to offer unrivalled Islamic financing and asset management services to those wishing to invest in the region or access its investment funding.

Markets of opportunity

Some of the most vibrant and fastest growing economies in the world are to be found in the countries of the Middle East and North Africa (MENA). The countries of the Gulf Cooperation Council (GCC), in particular, are benefiting from a sustained boom in oil and natural gas revenues.

The region has over half of all known global oil and gas reserves, and is home to some 5% of the world's population. It is not homogenous and it is not one society. Different countries are at different stages of economic, social and political development. However, together the MENA region is an emerging market of outstanding potential.

Within the region, the GCC countries represent a growing economic and trading hub. Their GDP is expected to reach $2trn in less than 10 years and rates of growth across the region far exceed those of developed economies.

It is a region in transition. In 2011 the Arab Spring started in Tunisia. Civil unrest and populist uprisings rapidly spread to other countries in the region. No countries were altogether immune, but most continued their own, more measured, process of transformation and gradual empowerment. This process of social and political development will continue.

The Arab Spring also represents a process of economic transformation, unleashing entrepreneurship and opportunities. We believe that these emerging markets will continue to develop strongly for the foreseeable future.

The global macroeconomic environment in 2011 was depressed, with a general decline in capital markets activity that significantly impacted regional investor sentiment and overall business confidence. However, we believe that the markets have now adjusted and are at a level that is well positioned for future growth.

Taken together, we believe these factors create outstanding opportunities.

Transforming EIIB

It was against this backdrop that EIIB embarked on a journey of significant transformation.

In January 2011, HBG Holdings, a leading private equity firm operating in MENA, became the bank's largest shareholder. This change in shareholding coincided with the previous Board's decision to approve the revaluation of TriTech which resulted in a controversial bonus for the management team. These developments precipitated significant Board changes in the first half of the year, followed by my appointment as Chief Executive before year end and the appointment of Abdallah Al-Mouallimi as Chairman in early 2012.

HBG is an active investor, dedicated to helping its businesses grow. In the current economic environment our first task was to address the Bank's cost base and adopt a more focused approach to the business.

Business focus and resource allocation

In the last quarter of 2011 we began re-structuring the Bank.

Initially this involved reducing non-core staff, exiting our position in the Turath Quoted Equity Fund and closing one of the Bank's offices. The result was a 50% reduction in staff and a near 40% reduction in the Bank's ongoing cost base.

We carried out a detailed strategic review of the Bank's market position and concluded that its geographic orientation and network, and listed platform were significant sources of strength and opportunity. MENA has one of the fastest growing consumer markets in the world and its oil and gas reserves make the region a key component of the global economy. We believe the MENA region is a rising power in emerging markets and see significant opportunities for enhancing the Bank's competitive position at a time when the market is fragmented and many of our competitors are weakened as a result of excessive property exposure, the credit crunch and the subsequent world economic downturn.

We therefore established a clear goal of positioning EIIB as a catalyst for consolidation in the MENA asset management industry and to achieve a market leading position, with at least $3bn (£1.87bn) of assets under management, by 2016.

We see EIIB as one of a select group of listed firms with a powerful network of business relationships able to offer international investors quoted access to the MENA region's outstanding investment opportunities and abundant investment capital.

To achieve this we decided to strengthen our on-the-ground presence in the key markets of Saudi Arabia, Egypt, Oman and the United Arab Emirates. We also decided that most non-core, stand alone legacy assets would be divested in an orderly manner.

The Rasmala acquisition

EIIB's shareholder base represents a largely untapped source of contacts, introductions and investment opportunities. The financial power and the extent of our investor network is an outstanding asset and it was through this unique capability that we were able to identify and, in January 2012, acquire a strategic stake in Rasmala Holdings Limited (Rasmala).

Rasmala is a leading investment bank operating in MENA. It has approximately $600m of Assets Under Management, a highly credible performance track record and a strong management team. Rasmala also has a prominent shareholder base of over 50 highly rated investors including Deutsche Bank AG, H.H. Sheikh Saud Bin Saqr Al Qassemi (Ruler of Ras Al-Khaimah), H.H. Sheikh Mansour bin Zayed Al Nahyan, Diwan of Royal Court Pension Fund of Oman, Bank Muscat, SAMBA Financial Group, and a prominent group of private investors from the Kingdom of Saudi Arabia.

The acquisition of a strategic stake in Rasmala is transformational for EIIB. It clearly demonstrates the credibility of our revised business model: creating shareholder value by adding scale, geographic representation, broader product capabilities and significant assets under management, at a price that represents historically unprecedented value.

The combination of Rasmala's strong regional franchise and EIIB's London presence creates a powerful partnership, ideally positioned to seize current opportunities in the region.

Our buy and build strategy

The Rasmala transaction is the first step in the transformation of EIIB.

We now have one of the largest MENA platforms in our sector, with over 100 people in the region and a new set of shareholders primarily from Saudi Arabia, Oman and the UAE.

The market is currently weak and fragmented, offering outstanding opportunities for us, as informed investors, to enact a dynamic and value enhancing buy and build strategy. Our UK listed status and strong liquid balance sheet position us ideally to capitaliseon growth opportunities as they arise.

Share price performance

2011 was a marginally positive year for EIIB in terms of share price performance. Our share price increased by 18% from 3.05 pence on 31 December 2010 to 3.60 pence on 31 December 2011, outperforming the FTSE AIM Index which decreased by 26% over the same period.

There are several reasons for the lack of significant appreciation in EIIB's share price but two key factors should be noted. Firstly, we believe the market did not fully appreciate the strength of our balance sheet and secondly, the Bank has not, to date, been able to build a recurring revenue business.

We have reviewed and conservatively valued the balance sheet assets. The Bank retains a strong and highly liquid balance sheet with a Capital Adequacy ratio of 78% as at year end 2011. Cash and short term Deposits represented 5.7 pence per share at 31 December 2011.

Regarding the second point, our strategy of focusing on building a market leading asset management business will generate a more stable fee based revenue stream in the future.

We believe that the strength of our balance sheet combined with our focused business model and the Rasmala acquisition will lead the market to recognise the value of the EIIB unique business, resulting in a significant re-rating of our share price.

Meanwhile, we are looking at a number of options for distributing capital to shareholders. The Bank is constrained in this regard by the absence of distributable reserves, however all options are being considered.

Prospects for 2012

EIIB made significant progress in 2011. It was the year when we started laying the foundations for future growth. Despite the political turmoil in the MENA region and therefore inherent downside risks, there are reasons to be optimistic. Most importantly oil revenues remain high and economic growth is expected to average 3.6% in 2012. We are therefore cautiously optimistic and believe the recent developments in our business have put us in a strong position to expand our footprint and market share further.

In 2012 our main focus will be to manage the post acquisition integration of Rasmala. This transaction has transformed EIIB into one of the region's leading asset managers and we will draw from the broad competencies of the regional platform that we have acquired. We will also continue to invest in our people and networks and strengthen our market access and deal flow.

We will actively seek out growth opportunities in areas where we are strong by building our capabilities. We will strengthen our presence in existing markets where there are opportunities for growth but also investigate the possibility of enlarging our presence elsewhere in MENA. Finally, we will evaluate and improve our overall branding and investor communication efforts to reflect the new realities.

Acknowledgements

I would like to thank all our stakeholders for their invaluable support and our Board for their leadership and guidance in setting the future direction of EIIB. I would also like to thank the outgoing Chairman Shabir Randeree for his stewardship and welcome Abdallah Al-Mouallimi as the new Chairman. I have worked with Mr Al-Mouallimi for many years and believe we are very fortunate to have him at EIIB. I would also like to thank the management team for their hard work and dedication in promoting the long term interests of the business.

I am excited by the prospects for EIIB in the coming year. I believe 2012 will be a watershed year and look forward to sharing further developments with you in due course.

Zulfi Caar Hydari

Chief Executive Officer

MANAGEMENT ANALYSIS AND DISCUSSION:

In 2011 we started the process of transforming EIIB's structure, capabilities, focus and scale. That process will continue in 2012 with the integration of Rasmala.

Introduction

EIIB bridges the gap between the financial markets of the MENA region and those of Western and OECD countries. It delivers products and services across asset classes to the wholesale, institutional and ultra high net worth individual markets.

The Bank's competitive position is significantly enhanced by its geographic footprint which includes offices in the world's pre-eminent financial centre, London, and the MENA countries of Saudi Arabia, Egypt, Oman and the United Arab Emirates.

EIIB is authorised by the Financial Services Authority (FSA) and is listed on the UK Alternative Investment Market within the London Stock Exchange. Our activities are now also regulated by the relevant regulators in Saudi Arabia, Egypt, Oman and the United Arab Emirates.

The Bank adheres to the key principles of Islamic banking, based on the avoidance of interest, uncertainty, speculation and unjust enrichment or unfair exploitation.

The Bank's Sharia'a Supervisory Board (SSB) is tasked with ensuring that all products and services are structured to reflect these principles.

Our business model - 2011 in context

Historically EIIB has been organised in three business lines:

·; Banking including deposit taking, financing, treasury services, structured products and trading in securities;

·; Investment management covering quoted equities, private equity and real estate; and

·; Financial services, including corporate finance, custody, trust and fund administration and business advisory services.

The Bank has maintained a strong balance sheet based on limited leverage and a high degree of liquidity. As at 31 December 2011 the balance sheet showed net cash excess of 42% (versus the minimum recommended -5%).

EIIB was scaled and staffed for organic growth across a broad range of services. However, in the post 2008 macroeconomic downturn this approach has lacked critical mass or sufficient focus to generate steady or growing income streams.

The Bank's highly liquid balance sheet, relatively small Assets under Management (the Turath Quoted Equity Fund (TQEF Fund) was only launched in 2010 with $25m in seed capital) and high cost base meant that the Bank's future success depended on the performance and realisation of certain Private Equity investments. However, despite some successful investments, such as TriTech, which generated significant returns, the Bank's Private Equity investments were also of limited scale and lacked a clear sector or geographic focus where our regional network could add value.

Our business model - 2012 and the future

Following the strategic review of the business undertaken in Q4 2011 the decision was taken to refine EIIB's business model, concentrating on achieving scale and focus through buying and building market leadership in the uniquely favourable market conditions currently existing in the MENA region.

This entails the exit of legacy Private Equity assets and the development of the Bank as a specialist asset management and financing business.

The strategic review also concluded that the TQEF Fund, launched in 2010's difficult markets, was unlikely to generate sufficient organic growth or returns and should also be liquidated.

EIIB's future strategy aims to:

·; maintain tight control of costs;

·; deploy our assets into higher yielding products such as Trade Finance and Leasing;

·; build our deposit base, utilising our Banking licence more effectively;

·; manage our capital and liquidity more effectively;

·; grow the proportion of ongoing, annuity type, income from business lines such as Asset Management;

·; grow our Assets Under Management to $3bn by 2016; and

·; develop our product and geographic capabilities by acquisition and outsourcing as appropriate.

Rasmala acquisition

The Rasmala deal, announced in January 2012, is the first step towards the realisation of our strategy and represents a transformation in EIIB's structure, capabilities and scale.

Rasmala was established in 2005 and has offices in the United Arab Emirates, Saudi Arabia, Oman and Egypt. Its shareholders include prominent regional investors, management and Deutsche Bank. It is headquartered in Dubai and regulated by the Dubai Financial Services Authority. Over 100 staff offer specialist fund management, corporate finance and brokerage services.

Rasmala's 14 fund management professionals represent one of the largest and most experienced asset management teams in the MENA region, with some $600m in Assets Under Management. Their record of superior performance is based on local expertise, in-depth regional economic analysis, robust sector and theme selection, and rigorous stock analysis.

Rasmala is AA rated by Standard and Poor's and the firm and its funds have been multiple award winners.

Key Funds

·; Arabian Markets Growth Equity Fund

·; Rasmala GCC Fixed Income Fund

·; Rasmala Palestine Equity Fund

·; Rasmala Global Sukuk Fund

Discretionary Portfolio Mandates

·; Equity Portfolios in MENA, GCC and Single Countries

·; GCC Fixed Income Portfolios

·; Sukuk Portfolios

·; Money Market Portfolios

·; Murabaha Portfolios

·; Sharia'a Compliant Portfolios

·; Balanced Portfolios

Rasmala integration and expansion

EIIB is now positioned to integrate Rasmala and become a leading financial services company specialising in the GCC, Levant and North Africa region with strong distribution capabilities, privileged deal flow, long term investor relationships and Islamic financing capability.

A number of key appointments have already been made to the Rasmala Board and post-acquisition rationalisations are expected to yield an approximate 10% reduction in overall headcount. EIIB has secured a significant reduction in Rasmala's existing funding costs and a programme to build combined centres of operational excellence has been initiated. The first example of this has been the transfer of EIIB's Sukuk Fund Manager to Rasmala in Dubai. Further integration of operations will follow.

A planned business expansion programme for 2012 will include:

·; a strong focus on developing the regional Asset Management business;

·; the launch of a range of new products including a Sukuk fund launch;

·; the launch of Trade Finance and Leasing products with seed capital provided by EIIB;

·; the introduction of a new Incentive scheme for Retail Distribution channels;

·; the expansion of existing products such as Rasmala's Palestine Equity Fund which is forecast to grow by 200% due to matched funding from the Palestine Investment fund; and

·; the expansion of our regional distribution capability.

Future developments

As part of our strategy, we will continue to participate, albeit selectively, in consolidation opportunities in the Middle East financial services sector through joint ventures and targeted acquisitions.

Financial results for 2011

EIIB had a mixed 2011 with total operating income rising 95% from £5.0m to £9.7m but losses before tax also increasing from £6.7m to £8.5m. The underlying profit before tax for the year excluding the Arcapita provision was £1.2m.

Capital Adequacy

EIIB had total assets of £159m at 31 December 2011 (£182m at 31 December 2010) and a minimum regulatory capital requirement thereon of £13.7m (31 December 2010: £12.7m). The Base Capital at December 2011 stood at £66.3m (31 December 2010: £79.6m) which is 4.8 times (31 December 2010: 6.3) the required minimum.

Liquidity

EIIB's balance sheet remains highly liquid. As at 31 December 2011, the net cash excess (calculated as a percentage of deposits) is +20% (31 December 2010: +19%) in the 8 days and under category, and +42% (31 December 2010: +70%) in the 1 month and under category, against recommended minimum of 0% and -5% respectively.

Liquidity is managed on a day to day basis by the Head of Treasury and Capital Markets. The liquidity ratio has declined since year end to more efficient levels in line with the Bank's more active investment strategy. 

Review of individual investments in 2011

Arcapita

One of the largest legacy exposures held by the Bank is a financing facility provided to Arcapita, a bank based in Bahrain. The facility of $30m, dating from 2007, formed part of a $1.1bn syndicated loan facility which was due for repayment in April 2012. Arcapita defaulted on its payment obligations and, subsequent to 31 December 2011, announced that it had filed for Chapter 11 protection in the USA. The Directors have determined that a 50% provision against this facility would be prudent at this time, resulting in a total charge of $15m (£9.7m) in 2011.

TriTech

In June 2011, TriTech I LLC accepted an offer from JGC Energy Development (USA) Inc to purchase all of TriTech's oil and gas assets in Texas. The disposal generated a one-time profit of £12.0m which was recognised in 2011, this was in addition to the fair value gain of £20.8m recognised in 2010.

DiamondCorp

EIIB holds a 23% stake in DiamondCorp. DiamondCorp had a disappointing second half of 2011. Whilst operating results indicate that the Lace mine investment has been substantially de-risked, it is not clear that the company will be able to source the funding required to bring the mine to full production. The Bank did not participate in the last round of fundraising and the Board has decided that the Bank's investment should be valued at 5 pence per share, resulting in a write down of £2.3m in 2011.

Turath Quoted Equity Fund

As a result of significant market volatility, and the repositioning of the Bank's strategy, the Board took the decision in October 2011 to exit the Bank's investment in the Turath Quoted Equity Fund. The closure, which resulted in a realised loss of £2.4m, released £13.6m of seed capital from the fund for future investment.

Aston Martin

As announced at the Interim stage, the Bank successfully exited its Aston Martin exposure during the first half. The sale, to third parties, achieved an average price of 98 pence in the pound, and consequently the previously raised impairment provision of 25 pence in the pound was reversed, resulting in a profit of £3.2m.

Risk factors

EIIB's business involves the taking of risk in return for reward. Our regional focus on MENA offers opportunities for outstanding returns but exposes us to a number of emerging market social, political and economic risks.

The effective management of risk is an essential part of our business and a key element in good corporate governance. Strong risk management is fundamental to EIIB's culture.

In terms of the Corporate Governance Code, the Board is responsible for risk. A Risk Appetite and Tolerance Policy set the parameters for risk taking. Systems and controls are in place to identify, measure, monitor and manage risk.

The responsibility for managing risks lies with senior management. The Risk Department facilitates this process and monitors the effectiveness of the Bank's risk management processes.

The Board Risk Committee (BRC) has overall responsibility for ensuring the Bank's Risk Policies are implemented.

Key Elements

The key elements of our robust risk management framework are:

·; setting the Risk Management strategy and philosophy;

·; defining the business risk appetite and tolerances;

·; identification and quantification of risks;

·; evaluation of identified risks;

·; managing identified risks;

·; risk reporting to support the on-going management of risks and the effectiveness of the risk solutions; and

·; business continuity planning.

Key risks

The Bank is exposed mainly to credit risk, market risk, operational risk and liquidity risk.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2011

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 2011

Zulfi Caar Hydari Keith McLeod

Chief Executive Officer Finance Director and Deputy Chief Executive Officer

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2011

CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2011

1. Segmental information

The Bank focuses on MENA markets and for 2011 centred on the following three core businesses.

(a) Banking - encompassing deposit taking, provision of financing, treasury services, structured products and trading in securities

(b) Investment Management - EIIB provides Institutional Asset Management and Private Wealth Management services to private and institutional clients in the MENA region

(c) Financial Services - including corporate finance, brokerage and business advisory services

These core business lines were the Group's strategic business units ("SBU"). Each SBU offers different products and services, and was managed separately based on the Group's management and internal reporting structure. SBU activities are monitored by the Bank's management committees and the Board which is provided with internal management reports on a monthly basis.

Information regarding the results of each reportable segment is included below. Performance is measured based on segment profit before tax and is reviewed by Group executive management and the board of directors. Segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.

The financial information included within this document does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2011 were approved by the directors on 23 April 2012. The report of the auditors on these accounts was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not include a statement under section 498 of the Companies Act 2006.