NIG Prospectus - London Stock Exchange

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:17 pm – mac5 – 3776 Intro : 3776 IntroNIG SUKUK LTD(incorporated as an exempted company in the Cayman Islands with limited liability)US$1,500,000,000Trust Certificate Issuance ProgrammeUnder the trust certificate issuance programme described in this Base Prospectus (the Programme), NIG Sukuk Ltd (in its capacity asissuer, the Issuer and, in its capacity as trustee, the Trustee), subject to compliance with all relevant laws, regulations and directives, mayfrom time to time issue trust certificates (the Trust Certificates) in any currency agreed between the Issuer and the relevant Dealer (asdefined below).Trust Certificates may only be issued in registered form. The maximum aggregate face amount of all Trust Certificates from time to timeoutstanding under the Programme will not exceed US$1,500,000,000 (or its equivalent in other currencies calculated as described in theProgramme Agreement described herein), subject to increase as described herein.The Trust Certificates may be issued on a continuing basis to one or more of the Dealers (each a Dealer and together the Dealers)specified under “General Description of the Programme” and any additional Dealer appointed under the Programme from time to timeby the Issuer, which appointment may be for a specific issue or on an ongoing basis. References in this Base Prospectus to the relevantDealer shall, in the case of an issue of Trust Certificates being (or intended to be) subscribed by more than one Dealer, be to all Dealersagreeing to subscribe to such Trust Certificates.The Trust Certificates will be limited recourse obligations of the Issuer. An investment in Trust Certificates issued under theProgramme involves certain risks. For a discussion of these risks, see “Risk Factors”.Each Series (as defined herein) of Trust Certificates issued under the Programme will be constituted by (i) a master trust deed (the MasterTrust Deed) dated 13 August 2007 entered into between the Issuer, the Trustee, National Industries Group Holding Company S.A.K. (NIG)and Citicorp Trustee Company Limited as delegate of the Trustee (in such capacity, the Delegate) and (ii) a supplemental trust deed (theSupplemental Trust Deed) in relation to the relevant Series. Trust Certificates of each Series confer on the holders of the Trust Certificatesfrom time to time (the Certificateholders) the right to receive certain payments (as more particularly described herein) arising from theassets of a trust declared by the Trustee in relation to the relevant Series (the Trust) over certain assets including, in particular, the rights,benefits and entitlements of NIG Sukuk Ltd in and to the Mudarabah Assets of the relevant Series (the Relevant Mudarabah Assets) asset out in (i) a master mudarabah agreement (the Master Mudarabah Agreement) dated 13 August 2007 entered into between theIssuer, the Trustee and National Industries Group Holding Company S.A.K. (in its capacity as mudarib, the Mudarib) and (ii) a supplementalmudarabah agreement (the Supplemental Mudarabah Agreement) for the relevant Series (such assets being referred to as the TrustAssets for the relevant Series).Application has been made to the Financial Services Authority in its capacity as competent authority under the Financial Services andMarkets Act 2000 (the UK Listing Authority) for Trust Certificates issued under the Programme during the period of 12 months from thedate of this Base Prospectus to be admitted to the official list of the UK Listing Authority (the Official List) and to the London StockExchange plc (the London Stock Exchange) for such Trust Certificates to be admitted to trading on the London Stock Exchange’s GiltEdged and Fixed Interest Market.References in this Base Prospectus to Trust Certificates being listed (and all related references) shall mean that such Trust Certificateshave been admitted to trading on the London Stock Exchange’s Gilt Edged and Fixed Interest Market and having been admitted to theOfficial List. The London Stock Exchange’s Gilt Edged and Fixed Interest Market is a regulated market for the purposes of Directive93/22/EEC (the Investment Services Directive).Notice of the aggregate face amount of Trust Certificates and any other terms and conditions not contained herein which are applicableto each Series of Trust Certificates will be set out in a final terms supplement (the applicable Final Terms) which, with respect to TrustCertificates to be listed on the London Stock Exchange, will be delivered to the UK Listing Authority and the London Stock Exchange.The Programme provides that Trust Certificates may be listed or admitted to trading, as the case may be, on such other or further stockexchanges or markets as may be agreed between the Issuer, NIG and the relevant Dealer. The Issuer may also issue unlisted TrustCertificates and/or Trust Certificates not admitted to trading on any market.The Issuer and NIG may agree with any Dealer that Trust Certificates may be issued with terms and conditions not contemplated by theTerms and Conditions of the Trust Certificates herein, in which event a supplemental Base Prospectus, if appropriate, will be madeavailable which will describe the effect of the agreement reached in relation to such Trust Certificates.BNP PARIBASNBK CapitalJoint ArrangersWestLB AGCitiStandard Chartered BankDealersBNP PARIBASGulf International Bank B.S.C.Kuwait Financial Centre S.A.K.Noor Financial Investment Company K.S.C.C.WestLB AGCitiHSBCNBK CapitalStandard Chartered BankThe date of this Base Prospectus is 13 August 2007.

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:17 pm – mac5 – 3776 Intro : 3776 IntroThis Base Prospectus comprises a base prospectus for the purposes of Article 5.4 of Directive2003/71/EC (the Prospectus Directive).The Issuer and NIG accept responsibility for the information contained in this Base Prospectus. Tothe best of the knowledge of each of the Issuer and NIG (each having taken all reasonable care toensure that such is the case) the information contained in this Base Prospectus is in accordancewith the facts and does not omit anything likely to affect the import of such information.This Base Prospectus should be read and construed together with any amendments orsupplements hereto and, in relation to any Series of Trust Certificates, should be read andconstrued together with the applicable Final Terms.Copies of Final Terms will be available from the registered office of the Issuer and the specifiedoffice set out below of the Principal Paying Agent (as defined below) save that, if the relevant TrustCertificates are neither admitted to trading on a regulated market in the European Economic Areanor offered in the European Economic Area in circumstances where a prospectus is required to bepublished under the Prospectus Directive, the applicable Final Terms will only be obtainable by aCertificateholder holding one or more Trust Certificates and such Certificateholder must produceevidence satisfactory to the Issuer or, as the case may be, the Principal Paying Agent as to itsholding of such Trust Certificates and identity.The Dealers and the Delegate have not independently verified the information contained herein.Accordingly, no representation, warranty or undertaking, express or implied, is made and noresponsibility or liability is accepted by the Dealers and the Delegate as to the accuracy orcompleteness of the information contained in this Base Prospectus or any other informationprovided by the Issuer or NIG in connection with the Programme. No Dealer nor the Delegateaccepts any liability in relation to the information contained in this Base Prospectus or any otherinformation provided by the Issuer and NIG in connection with the Programme.No person is or has been authorised by the Issuer or NIG to give any information or to make anyrepresentation not contained in or not consistent with this Base Prospectus or any otherinformation supplied in connection with the Programme or the Trust Certificates and, if given ormade, such information or representation must not be relied upon as having been authorised bythe Issuer, NIG, the Trustee, the Delegate or any of the Dealers.Neither this Base Prospectus nor any other information supplied in connection with theProgramme or any Trust Certificates (a) is intended to provide the basis of any credit or otherevaluation or (b) should be considered as a recommendation by the Issuer, NIG, the Trustee, theDelegate or any of the Dealers that any recipient of this Base Prospectus or any other informationsupplied in connection with the Programme or any Trust Certificates should purchase any TrustCertificates. Each investor contemplating purchasing any Trust Certificates should make its ownindependent investigation of the financial condition and affairs, and its own appraisal of thecreditworthiness, of the Issuer and NIG. Neither this Base Prospectus nor any other informationsupplied in connection with the Programme or the issue of any Trust Certificates constitutes anoffer or invitation by or on behalf of the Issuer, NIG, the Trustee, the Delegate or any of the Dealersto any person to subscribe for or to purchase any Trust Certificates.No comment is made or advice given by the Issuer, NIG, the Trustee, the Delegate or the Dealersin respect of taxation matters relating to any Trust Certificates or the legality of the purchase ofTrust Certificates by an investor under applicable or similar laws.EACH PROSPECTIVE INVESTOR IS ADVISED TO CONSULT ITS OWN TAX ADVISER, LEGALADVISER AND BUSINESS ADVISER AS TO TAX, LEGAL, BUSINESS AND RELATED MATTERSCONCERNING THE PURCHASE OF TRUST CERTIFICATES.Neither the delivery of this Base Prospectus nor the offering, sale or delivery of any TrustCertificates shall in any circumstances imply that the information contained herein concerning theIssuer or NIG is correct at any time subsequent to the date hereof or that any other information2

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:17 pm – mac5 – 3776 Intro : 3776 Introsupplied in connection with the Programme is correct as of any time subsequent to the dateindicated in the document containing the same. The Delegate and the Dealers expressly do notundertake to review the financial condition or affairs of the Issuer or NIG during the life of theProgramme or to advise any investor in the Trust Certificates of any information coming to theirattention.The Trust Certificates have not been and will not be registered under the United States SecuritiesAct of 1933, as amended (the Securities Act). Subject to certain exceptions, Trust Certificates maynot be offered, sold or delivered within the United States or to U.S. persons, see “Subscriptionand Sale”.This Base Prospectus does not constitute an offer to sell or the solicitation of an offer to buy anyTrust Certificates in any jurisdiction to any person to whom it is unlawful to make the offer orsolicitation in such jurisdiction. The distribution of this Base Prospectus and the offer or sale ofTrust Certificates may be restricted by law in certain jurisdictions. The Issuer, NIG, the Trustee, theDelegate and the Dealers do not represent that this Base Prospectus may be lawfully distributed,or that any Trust Certificates may be lawfully offered, in compliance with any applicable registrationor other requirements in any such jurisdiction, or pursuant to an exemption available thereunder,or assume any responsibility for facilitating any such distribution or offering. In particular, no actionhas been taken by the Issuer, NIG, the Trustee, the Delegate or the Dealers which is intended topermit a public offering of any Trust Certificates or distribution of this Base Prospectus in anyjurisdiction where action for that purpose is required. Accordingly, no Trust Certificates may beoffered or sold, directly or indirectly, and neither this Base Prospectus nor any advertisement orother offering material may be distributed or published in any jurisdiction, except undercircumstances that will result in compliance with any applicable laws and regulations. Persons intowhose possession this Base Prospectus or any Trust Certificates may come must informthemselves about, and observe, any such restrictions on the distribution of this Base Prospectusand the offering and sale of Trust Certificates. In particular, there are restrictions on the distributionof this Base Prospectus and the offer or sale of Trust Certificates in the United States, theEuropean Economic Area (including the United Kingdom), Kuwait, the United Arab Emirates, theKingdom of Saudi Arabia, the Kingdom of Bahrain, Dubai International Financial Centre, Malaysia,Hong Kong and the Cayman Islands, see ‘’Subscription and Sale’’.This Base Prospectus includes forward-looking statements. All statements other than statementsof historical facts included in this Base Prospectus may constitute forward-looking statements.Forward-looking statements generally can be identified by the use of forward-looking terminology.such as “may”, “will”, “expect”, “intend”, “estimate”, “anticipate”, “believe”, “continue” or similarterminology. Although NIG believes that the expectations reflected in its forward-lookingstatements are reasonable at this time, there can be no assurance that these expectations willprove to be correct.Certain Publicly Available InformationCertain statistical data and other information appearing in this Base Prospectus have beenextracted from independent public sources identified in this Base Prospectus. Each of the Issuerand NIG confirms that such information has been accurately reproduced and that, so far as it isaware and is able to ascertain from information published by the relevant sources, no facts havebeen omitted which would render the reproduced information inaccurate or misleading.All references in this document to US dollars, US$ and $ are to the lawful currency of the UnitedStates of America, references to £ and Sterling are to the lawful currency of the United Kingdomand references to KD and Kuwaiti dinar are to the lawful currency of Kuwait. All references toeuro and € refer to the currency introduced at the start of the third stage of European economicand monetary union pursuant to the Treaty establishing the European Community, as amended.3

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:17 pm – mac5 – 3776 Intro : 3776 IntroNOTICE TO UK RESIDENTSThe Trust Certificates represent interests in a collective investment scheme (as defined inthe Financial Services and Markets Act 2000 (the FSMA)) which has not been authorised,recognised or otherwise approved by the Financial Services Authority. Accordingly, thisBase Prospectus is not being distributed to, and must not be passed on to, the generalpublic in the United Kingdom.The distribution in the United Kingdom of this Base Prospectus, any Final Terms and anyother marketing materials relating to the Trust Certificates (A) if effected by a person who isnot an authorised person under the FSMA, is being addressed to, or directed at, only thefollowing persons: (i) persons who are Investment Professionals as defined in Article 19(5)of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (theFinancial Promotion Order) and (ii) persons falling within any of the categories of personsdescribed in Article 49 (High net worth companies, unincorporated associations, etc) of theFinancial Promotion Order and (B) if effected by a person who is an authorised person underthe FSMA, is being addressed to, or directed at, only the following persons: (i) personsfalling within one of the categories of Investment Professional as defined in Article 14(5) ofthe Financial Services and Markets Act 2000 (Promotion of Collective Investment Schemes)(Exemptions) Order 2001 (the Promotion of CISs Order), (ii) persons falling within any of thecategories of person described in Article 22 (High net worth companies, unincorporatedassociations, etc.) of the Promotion of CISs Order and (iii) any other person to whom it mayotherwise lawfully be made in accordance with the Promotion of CISs Order. Persons of anyother description in the United Kingdom may not receive and should not act or rely on thisBase Prospectus, any Final Terms or any other marketing materials in relation to the TrustCertificates.Potential investors in the United Kingdom are advised that all, or most, of the protectionsafforded by the United Kingdom regulatory system will not apply to an investment in theTrust Certificates and that compensation will not be available under the United KingdomFinancial Services Compensation Scheme.Any individual intending to invest in any investment described in this Base Prospectusshould consult his professional adviser and ensure that he fully understands all the risksassociated with making such an investment and that he has sufficient financial resourcesto sustain any loss that may arise from such investment.CAYMAN ISLANDS NOTICENo invitation may be made to any member of the public of the Cayman Islands to subscribefor the Trust Certificates.4

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:17 pm – mac5 – 3776 Intro : 3776 IntroTABLE OF CONTENTSRisk Factors.................................................................................................................... 6Structure Diagram and Cashflows.................................................................................. 16General Description of the Programme ........................................................................ 18Form of the Trust Certificates ........................................................................................ 24Applicable Final Terms .................................................................................................... 26Terms and Conditions of the Trust Certificates .............................................................. 33Use of Proceeds ............................................................................................................ 56Description of the Issuer................................................................................................ 57Selected Financial Information and Financial Review .................................................... 59Description of National Industries Group Holding Company S.A.K. .............................. 63Summary of the Principal Transaction Documents ........................................................ 87Taxation .......................................................................................................................... 93Subscription and Sale .................................................................................................... 95General Information........................................................................................................ 100Financial Information ...................................................................................................... F-15

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:18 pm – mac5 – 3776 Section 01 : 3776 Section 01NIG’s insurance policies may not be adequate and do not cover damage and losses arising fromacts of terrorism and related eventsNIG maintains insurance policies covering both its assets and employees in line with generalbusiness practices in the relevant industries and jurisdictions in which it operates, with policyspecifications and insured limits which NIG believes are adequate. Risks insured against includefire, lightning, flood, theft, vandalism and public liability. There are, however, certain types of losses(such as from wars, acts of terrorism or acts of God, business interruption, property risks and thirdparty (public) liability) that generally are not insured because they are either uninsurable or noteconomically insurable. NIG has purchased an industrial insurance policy but, should an uninsuredloss or a loss in excess of insured limits occur, NIG could lose capital invested in the relevantproperty, as well as anticipated future revenue and, in the case of debt that is with recourse toNIG, NIG may remain liable for financial obligations related to the relevant property. There can beno assurance that any such loss will not adversely affect NIG’s existing operations and therebyhave a material adverse effect on its business, financial condition, operating results and futureprospects and/or its ability to comply with the obligations under the Transaction Documents.Further, since the attacks on the United States on 11 September 2001, many insurance companieshave substantially increased their premiums. Insurance companies are also seeking to excludeinsurance risks and claims relating to terrorism or related activity. As a result, NIG’s insurancepolicies do not cover damages and losses arising from acts of terrorism or related events.Certain risks in relation to competition faced by NIGAs a holding company, NIG only faces limited direct competition which principally occurs whenNIG is seeking to make new investments. At the level of the Core Operating Businesses, however,NIG faces different levels of competition in each of the different business areas in which it isengaged. For example, the National Industries Company for Building Materials (K.S.C.C.)experiences a range of levels of competition in relation to its different businesses and products.The level of competition that NIG faces in each of its Core Operating Businesses may increase ordecrease over time, which could have an effect on NIG’s business, results or operations andfinancial condition.Any failure of NIG’s communications and information systems could adversely affect itsbusiness, including, in particular, its investment businessNIG’s business is dependent upon its communications and information systems and those of itskey service providers for forecasting its liquidity requirements, monitoring the performance of itsinvestments, making investment decisions and maintaining reliable accounting and processingdata. Any failure in, or interruption of, such systems could have a material adverse effect on NIG’sbusiness, results of operations and financial condition.NIG relies on its financial, accounting and other data processing systems especially in connectionwith the confirmation or settlement of transactions and the recording or accounting oftransactions. Any external information security breach or internal problem with security protectioncould materially interrupt NIG’s investment business or cause disclosure or modification ofsensitive or confidential information. Any such failure could result in material financial loss,regulatory actions, breach of client contracts, reputational harm or legal liability, any of which couldhave a material adverse effect on NIG’s business, results of operations and financial condition.The risk management procedures of NIG may be ineffectiveNIG has established risk management procedures in relation to the standard business risks that itfaces, including liquidity risk, market risk and currency risk. There is a risk that these proceduresmay fail or prove ineffective in certain circumstances, including the occurrence of presentlyunforeseen events, and this could have a material adverse effect on the business, results ofoperations and financial condition of NIG.8

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:18 pm – mac5 – 3776 Section 01 : 3776 Section 01Any employee fraud, misconduct or improper practice could adversely affect NIGFraud, misconduct or improper practice by the employees of NIG could expose the relevantcompany and NIG to the risk of direct or indirect financial loss and damage to its reputation.NIG’s facilities could be exposed to catastrophic events, including terrorist attacks or war, overwhich NIG has no controlNIG’s facilities may be exposed to effects of natural disasters and other potentially catastrophicevents, such as major accidents, armed conflicts, hostilities and terrorist attacks. Althoughconstructed, operated and maintained to withstand certain of these occurrences, NIG’s facilitiesmay not be adequately protected in all circumstances. There can be no assurance that any suchoccurrences will not adversely affect NIG’s existing operations and thereby have a materialadverse effect on its business, financial condition, operating results and future prospects and/orits ability to comply with its obligations under the Transaction Documents.Foreign exchange risk exposureTo the extent that NIG’s revenues and costs are earned or incurred in different currencies, NIG willbecome subject to being adversely affected by exchange rate fluctuations. NIG may seek toreduce this risk through foreign currency hedging arrangements. There can be no assurance thatNIG will either be able to enter into such hedging arrangements or, if it does, that the hedgingarrangements will adequately protect it against all exchange rate fluctuations.NIG is subject to joint venture risksNIG may expand its operations in the future through jointly controlled entities and associatedcompanies. Co-operation and agreement among NIG’s joint venture partners on its existing or anyfuture projects are important factors for the smooth operation and financial success of suchprojects. NIG’s joint venture partners may (i) have economic or business interests or goals that areinconsistent with those of NIG, (ii) be unable or unwilling to fulfil their obligations under therelevant joint venture or other agreements or (iii) experience financial or other difficulties. Further,NIG may not be able to control the decision-making process of the joint ventures withoutreference to the joint venture partners especially if it does not have majority control of the jointventure.Factors relating to emerging marketsNIG has the majority of its operations and interests in the Middle East, including Kuwait.Specific risks in the Middle East that may have a material impact on the business carried on byNIG, its operating results, its cash flows and its financial condition include:• political and social instability;• general downturn in economic conditions;• external acts of warfare, civil clashes and terrorist activity;• natural disasters;• governments’ actions or interventions, including tariffs, protectionism and subsidies; and• regulatory, taxation and legal structure changes.Any unexpected changes in the political, social, economic or other conditions in countries in whichNIG carries on business may have a material adverse effect on NIG’s business, financial conditionand results of operations and may adversely affect NIG’s plans for international expansion andinvestment.9

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:18 pm – mac5 – 3776 Section 01 : 3776 Section 01It is not possible to predict the occurrence of events or circumstances such as or similar to thoseoutlined above or the impact of such occurrences and no assurance can be given that NIG wouldbe able to sustain its current profit levels if such events or circumstances were to occur.Political, Economic and Related ConsiderationsKuwait has enjoyed significant economic growth and relative political stability. There can be noassurance that such growth or stability will continue. Moreover, while the Kuwaiti government’spolicies have generally resulted in improved economic performance, there can be no assurancethat such level of performance can be sustained. NIG may also be adversely affected generally bypolitical and economic developments in or affecting Kuwait.No assurance can be given that the Kuwaiti government will not implement regulations or fiscal ormonetary policies, including policies, regulations, or new legal interpretations of existingregulations, relating to or affecting taxation, interest rates or exchange controls, or otherwise takeactions which could have a material adverse effect on NIG’s business, financial conditions, resultsof operations or prospects or which could adversely affect the market price and liquidity of theTrust Certificates.NIG’s business may be affected if there are geo-political events that prevent NIG from deliveringits services. It is not possible to predict the occurrence of events or circumstances such as orsimilar to a war or the impact of such occurrences and no assurance can be given that NIG wouldbe able to sustain its current profit levels if such events or circumstances were to occur. A generaldownturn or instability in certain sectors of the Kuwaiti or regional economy could have an adverseeffect on NIG’s business, financial condition, results of operations or prospects.Building materials businesses are cyclical in natureOne of NIG’s core businesses comprises the manufacture and sale of building material productsfor the construction industry. The regional construction industry has been cyclical and subject toseasonal fluctuations, experiencing volatility in revenues, profitability and asset values resultingfrom changes in the supply of and demand for construction products and related services. Thedemand for construction products and related services is influenced by regional economicconditions, developments in international trade and exchange fluctuations, embargoes and strikes,among other factors. There can be no assurance that any economic downturn will not adverselyaffect NIG’s existing operations and thereby have a material adverse effect on its business,financial condition, operating results and future prospects and/or its ability to comply with theobligations under the Transaction Documents.Certain risks in relation to BI Group plcBI Group experiences a range of levels of competition in relation to its different businesses andproducts. The level of competition that BI Group faces may increase or decrease over time, whichcould have an effect on BI Group's business, results of operations and financial condition. Inaddition, historically, BI Group’s wholly owned subsidiary, George Wilson Industries wassignificantly reliant on one of its customers, Transco, although the extent of this reliance has beenreduced as a result of the deregulation of the UK market in recent years. BI Group facilities maybe exposed to effects of natural disasters or other potentially catastrophic events. There can be noassurance that any such occurrences will not adversely affect BI Group’s existing operations andthereby have a material adverse effect on its business, financial condition, operating results andfuture prospects. BI Group believes that it has an appropriate level of insurance against majorinsurable categories of risk, including the most likely causes of material damage and businessinterruption.10

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:18 pm – mac5 – 3776 Section 01 : 3776 Section 01NIG incurs significant risks in implementing new business investment decisionsInvestment by NIG in new businesses involves a number of significant risks including:• limited capital resources: an acquired business may have limited financial resources andmay be unable to meet its financial obligations;• limited operating history: an acquired business may have a limited operating history,narrower product lines and smaller market shares than established business, which couldrender them more vulnerable to competitors’ actions and market conditions, as well as togeneral economic downturns;• limited information: generally, little public information exists about the businesses in whichNIG invests and NIG must rely on the ability of its senior management to obtain adequateinformation to evaluate the potential returns from the proposed investment. Any failure toobtain all material information could result in the investment underperforming or being lossmaking;• dependence on senior management: certain businesses in which NIG invests may dependon a small management group and the loss of any one of these could significantly adverselyimpact the acquired business and therefore NIG;• other risks: these include the risk that the acquired businesses may not have predictableoperating results, may experience or be parties to litigation and may require significant newcapital to support their operations, finance their expansion or maintain their competitiveposition.As a result of the above factors, investments made by NIG may not perform as expected and thiscould have a material adverse effect on the business, results of operations and financial conditionof NIG.Stock Market VolatilityBeing an investment holding company, a substantial amount of NIG’s revenue is derived from itsinvestment portfolio which includes shares in quoted and unquoted companies as well as local andinternational managed funds. NIG is exposed to stock market volatility in relation to its listedinvestments which could have an adverse effect on the results of its operations and financialcondition of NIG.Risk factors relating to the Trust CertificatesAbsence of secondary market/limited liquidityThere is no assurance that a market for the Trust Certificates of any Series will develop or, if it doesdevelop, that it will continue for the life of such Trust Certificates. Accordingly, a Certificateholdermay not be able to find a buyer to buy its Trust Certificates readily or at prices that will enable theCertificateholder to realise a desired yield. The market value of the Trust Certificates may fluctuateand a lack of liquidity, in particular, can have a severe adverse effect on the market value of theTrust Certificates. Accordingly, the purchase of the Trust Certificates is suitable only for investorswho can bear the risks associated with a lack of liquidity in the Trust Certificates and the financialand other risks associated with an investment in the Trust Certificates.The Trust Certificates are limited recourse obligationsRecourse to NIG Sukuk Ltd in respect of each Series of Trust Certificates is limited to the TrustAssets of that Series and proceeds of such Trust Assets are the sole source of payments on therelevant Trust Certificates. Upon occurrence of a Dissolution Event or early dissolution pursuant toCondition 11.2 or 11.3, the sole rights of each of the Issuer, the Trustee, the Delegate and the11

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:18 pm – mac5 – 3776 Section 01 : 3776 Section 01Certificateholders of the relevant Series of Trust Certificates will be against the Issuer and NIG toperform their respective obligations under the Transaction Documents. Certificateholders willotherwise have no recourse to any assets of the Trustee, the Delegate, NIG, the relevant Dealer,the Issuer and the Principal Paying Agent or any affiliate of any of the foregoing entities in respectof any shortfall in the expected amounts due under the relevant Trust Assets. NIG is obliged tomake certain payments under the Transaction Documents directly to the Issuer, and the Trusteeand the Delegate will have direct recourse against NIG to recover payments due to the Issuer fromNIG pursuant to the Transaction Documents. There can be no assurance that the net proceeds ofthe realisation of, or enforcement with respect to, the Trust Assets will be sufficient to make allpayments due in respect of the Trust Certificates of the relevant Series. No Certificateholder shallbe entitled to proceed directly against the Issuer, the Obligor or the Mudarib, unless (i) theDelegate, having become bound so to proceed, fails to do so within 30 days of becoming so boundand such failure is continuing and (ii) the relevant Certificateholder (or such Certificateholdertogether with the other Certificateholders who propose to proceed directly against the Issuer, theObligor or the Mudarib) holds at least one-fifth of the aggregate face amount of the TrustCertificates then outstanding. Furthermore, under no circumstances shall any Certificateholder,the Trustee or the Delegate have any right to cause the sale or other disposition of any of the TrustAssets except pursuant to the Transaction Documents and the sole right of the Trustee, theDelegate and the Certificateholders against NIG shall be to enforce the obligation of NIG toperform its obligations under the Transaction Documents.Risk factors relating to taxationTaxation risks on paymentsPayments made by NIG to the Issuer under the Transaction Documents or by the Issuer in respectof the Trust Certificates could become subject to taxation. The Transaction Documents require NIGto pay additional amounts in the event that any withholding or deduction is required by Kuwaiti lawto be made in respect of payments made by it to the Issuer which are intended to fund PeriodicDistribution Amounts and Dissolution Amounts. Condition 12 provides that the Issuer is requiredto pay additional amounts in respect of any such withholdings or deductions imposed by theCayman Islands in certain circumstances. In the event that the Issuer fails to gross-up for any suchwithholding or deduction on payments due in respect of the Trust Certificates to Certificateholders,NIG has, pursuant to the Master Trust Deed, unconditionally and irrevocably undertaken(irrespective of the payment of any fee), as a continuing obligation, to pay to the Issuer (for thebenefit of the Certificateholders) an amount equal to the liabilities of the Issuer in respect of anyand all additional amounts required to be paid in respect of the Trust Certificates pursuant toCondition 12 in respect of any withholding or deduction in respect of any tax as set out in thatCondition. Such tax gross-up commitment would be contractually valid under Kuwaiti law.However, tax gross-up commitments are not binding upon the Kuwaiti tax authorities. If NIG failedto honour its commitment to gross-up tax claims the Issuer would have a valid cause of actionagainst NIG to be indemnified for the tax claim.EU Savings DirectiveUnder EC Council Directive 2003/48/EC on the taxation of savings income, Member States arerequired, from 1 July 2005, to provide to the tax authorities of another Member State details ofcertain payments paid by a person within its jurisdiction to an individual resident in that otherMember State. However, for a transitional period, Belgium, Luxembourg and Austria are insteadrequired (unless during that period they elect otherwise) to operate a withholding system inrelation to such payments (the ending of such transitional period being dependent upon theconclusion of certain other agreements relating to information exchange with certain othercountries). A number of non-EU countries and territories including Switzerland have agreed toadopt similar measures (a withholding system in the case of Switzerland) with effect from thesame date.12

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:18 pm – mac5 – 3776 Section 01 : 3776 Section 01If, following implementation of this Directive, a payment were to be made or collected through aMember State which has opted for a withholding system and an amount of, or in respect of taxwere to be withheld from that payment, neither the Issuer nor any Paying Agent nor any otherperson would be obliged to pay additional amounts with respect to any Trust Certificate as a resultof the imposition of such withholding tax. If a withholding tax is imposed on payment made by aPaying Agent following implementation of this Directive, the Issuer will be required to maintain aPaying Agent in a Member State that will not be obliged to withhold or deduct tax pursuant to theDirective.Risk factors relating to enforcementKuwaiti bankruptcy lawAny claims or rights by or on behalf of Certificateholders will rank pari passu, without anypreference, with the other unsecured obligations of NIG. In the event of NIG’s insolvency, Kuwaitibankruptcy law may adversely affect NIG’s ability to perform its obligations under the TransactionDocuments to which it is a party and, consequently, the Issuer’s ability to make payments toCertificateholders. There is little precedent to predict how the claims against NIG on behalf ofCertificateholders would be resolved in the case of the bankruptcy of NIG. Any claims by or onbehalf of the Certificateholders under the Transaction Documents will be subordinated to certainlegally prescribed priority claims (including in respect of the cost of legal proceedings incurred forthe preservation, sale and distribution of the property of NIG, any amounts due to the government(including but not limited to any taxes or fees) and all salary and other payments due to employeesfor the six month period immediately prior to the bankruptcy) and to the claims of any securedcreditors.Change of lawThe structure of the issue of the Trust Certificates under the Programme is based on English law,Kuwaiti law and administrative practices in effect as at the date of this Base Prospectus. Noassurance can be given as to the impact of any possible change to English law, Kuwaiti law oradministrative practices after the date of this Base Prospectus, nor can any assurance be given asto whether any such change could adversely affect the ability of the Issuer to make paymentsunder any Trust Certificates or of the Issuer and NIG to comply with their respective obligationsunder the Transaction Documents.Enforcement riskUltimately the payments under the Trust Certificates are dependent upon NIG making paymentsin the manner contemplated under the Transaction Documents. If NIG fails to do so, it may benecessary to bring an action against NIG to enforce its obligations which could be both timeconsuming and costly. NIG has irrevocably agreed to certain documentation being governed byEnglish law and to the courts of England having exclusive jurisdiction to settle disputes.Any disputes which may arise out of or in connection with the Transaction Documents governedby English law may be finally settled under the Rules of the London Court of InternationalArbitration in London, England. Kuwait and the United Kingdom are both signatories to the 1958New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the NewYork Convention). Accordingly, any arbitration decision awarded in one of the signatory countriesis enforceable in Kuwait without re-examining the substantive merits of the claim subject tosatisfaction of the enforcement conditions established under the New York Convention andpursuant to Kuwait’s Enactment of the Civil & Commercial Procedures Law, which includes,among other issues, the prohibition against any violation of morality or public order in Kuwait asdetermined by Kuwaiti courts in their own discretion (the Enforcement Conditions). Accordingly,subject to the Enforcement Conditions, any arbitral decision awarded pursuant to the TransactionDocuments will be enforceable in the State of Kuwait. Kuwait courts are likely to decline13

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:18 pm – mac5 – 3776 Section 01 : 3776 Section 01jurisdiction to adjudicate disputes that litigants agree to arbitrate, provided that the subject matterof the dispute is arbitratable.Enforcement of a foreign arbitration award or a foreign judgment in Kuwait requires the filing of anenforcement action in the Kuwaiti courts. The procedures before Kuwaiti courts, including anenforcement action, can take a relatively long time before the Kuwaiti court issues a final and nonappealablejudgment. In addition, the formal system of reporting court decisions in Kuwait is notsimilar to, and is less efficient than, systems of reporting court decisions in the United Kingdom.These factors can sometimes create judicial uncertainty.Any foreign judgment may be enforceable in Kuwait as long as it complies with certainenforcement conditions in addition to the further requirement that the judgment has beenrendered in a foreign jurisdiction in accordance with the same conditions as those provided for inthe laws of that jurisdiction in respect of the execution of judgments and orders entered in Kuwait.There are no known instances of the English courts enforcing Kuwaiti judgments, while there arecontradicting precedents by the Kuwaiti Court of Cassation with respect to enforcement ofEnglish court judgments. Judicial precedent in Kuwait has no binding effect on subsequentdecisions. Therefore, there can be no assurance whether an English court judgment would beenforced in Kuwait.Claims for specific enforcementIn the event that NIG fails to perform its obligations under any Transaction Document, the potentialremedies available to the Trustee and the Delegate include obtaining an order for specificenforcement of the relevant obligations or a claim for damages. There is no assurance that a courtwill provide an order for specific enforcement which is a discretionary matter.The amount of damages which a court may award in respect of a breach will depend upon anumber of possible factors including an obligation on the Trustee and the Delegate to mitigate anyloss arising as a result of the breach. No assurance is provided on the level of damages which acourt may award in the event of a failure by NIG to perform its obligations as set out in theTransaction Documents.Additional risksCredit ratings may not reflect all risksOne or more independent credit rating agencies may assign credit ratings to the Trust Certificates.The ratings may not reflect the potential impact of all risks related to the transaction structure, themarket, the additional factors discussed above or any other factors that may affect the value of theTrust Certificates. A credit rating is not a recommendation to buy, sell or hold securities and maybe revised or withdrawn by the rating agency at any time.Suitability of investmentsThe Trust Certificates may not be a suitable investment for all investors. Each potential investor inTrust Certificates must determine the suitability of that investment in light of its owncircumstances. In particular, each potential investor should:(a)(b)have sufficient knowledge and experience to make a meaningful evaluation of the TrustCertificates, the merits and risks of investing in the Trust Certificates and the informationcontained in this Base Prospectus;have access to, and knowledge of, appropriate analytical tools to evaluate, in the context ofits particular financial situation, an investment in the Trust Certificates and the impact theTrust Certificates will have on its overall investment portfolio;14

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:18 pm – mac5 – 3776 Section 01 : 3776 Section 01(c)(d)(e)have sufficient financial resources and liquidity to bear all of the risks of an investment in theTrust Certificates, including where the currency of payment is different from the potentialinvestor’s currency;understand thoroughly the terms of the Trust Certificates and be familiar with the behaviourof any relevant indices and financial markets; andbe able to evaluate (either alone or with the help of a financial adviser) possible scenariosfor economic and other factors that may affect its investment and its ability to bear theapplicable risks.Trust Certificates subject to early dissolution by the IssuerAn early dissolution feature of any Trust Certificate is likely to limit its market value. During anyperiod when the Issuer may elect to dissolve Trust Certificates, the market value of those TrustCertificates generally will not rise substantially above the dissolution amount payable. This alsomay be true prior to any dissolution period.Sharia RulesThe Transaction Documents have been reviewed by Sharia advisors who believe that theTransaction Documents are in compliance with Sharia. However, each investor must make his owninvestigation, in conjunction with its own Sharia advisors where appropriate, when determiningwhether the Certificates are an appropriate investment for it.15

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:18 pm – mac5 – 3776 Section 02 : 3776 Section 02STRUCTURE DIAGRAM AND CASHFLOWSSet out below is a simplified structure diagram and description of the principal cash flowsunderlying each Series of Trust Certificates issued. Potential investors are referred to the terms andconditions of the Trust Certificates and the detailed descriptions of the relevant TransactionDocuments set out elsewhere in this document for a fuller description of certain cash flows andfor an explanation of the meaning of certain capitalised terms used below.Structure DiagramMudarib(NIG)Master MudarabahAgreement andSupplementalMudarabah AgreementProceedsProfit AmountsObligor(NIG)Purchase andSale UndertakingDeedsExercise PriceNIG Sukuk LtdIssuer/TrusteeMaster TrustDeed andSupplementalTrust DeedProceedsPeriodic DistributionAmounts andDissolution AmountCertificateholdersCashflowsPayments by the Certificateholders and the IssuerOn the Issue Date of each Series of Trust Certificates, the relevant Certificateholders will pay theissue price in respect thereof to the Issuer and the Issuer will pay an equivalent amount to theMudarib pursuant to the Mudarabah Agreement. Such amount will constitute the capital of therelevant Mudarabah and the Mudarib will invest that capital in the business activities of NIG in16

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:18 pm – mac5 – 3776 Section 02 : 3776 Section 02accordance with an agreed investment plan prepared by the Mudarib and scheduled to therelevant Supplemented Mudarabah Agreement.Periodic Payments by the MudaribOn each Periodic Distribution Date, the Mudarib will distribute the distributable profit generatedby the relevant Mudarabah to both NIG Sukuk Ltd and the Mudarib in accordance with the relevantpre-agreed profit-sharing percentages. NIG Sukuk Ltd will apply its share of the distributable profitgenerated by the relevant Mudarabah on each Periodic Distribution Date to pay the PeriodicDistribution Amount due to the Certificateholders by the Issuer under the Trust Certificates.Dissolution PaymentsOn the Maturity Date, NIG Sukuk Ltd will have the right to require the Obligor to purchase therelevant Mudarabah Assets and the price paid by the Obligor is intended to fund the DissolutionAmount payable by the Issuer under the Trust Certificates.The Trust may be dissolved prior to the Maturity Date for a number of reasons including (i) defaultor the imposition of Taxes or (ii) in certain cases where so specified in the applicable Final Terms,at the option of the Issuer. In any such case the Dissolution Amount will be funded by requiringthe Obligor to purchase the relevant Mudarabah Assets and pay the relevant price to or to theorder of the Issuer (pursuant to the terms of the Purchase Undertaking and the Sale Undertaking).17

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:18 pm – mac5 – 3776 Section 03 : 3776 Section 03GENERAL DESCRIPTION OF THE PROGRAMMEThe following is an overview of the principal features of the Programme. This overview does notcontain all of the information that an investor should consider before investing in Trust Certificatesand is qualified in its entirety by the remainder of this Base Prospectus and the applicable FinalTerms. Each investor should read the entire Base Prospectus and the applicable Final Termscarefully, especially the risks of investing in the Trust Certificates issued under the Programmediscussed under “Risk Factors.”Words and expressions defined in “Form of the Trust Certificates” and “Terms and Conditions ofthe Trust Certificates” shall have the same meanings in this general description. In particular, theexpressions “Trust Deed” and “Mudarabah Agreement” mean, in relation to each Series, theMaster Trust Deed when read together with the relevant Supplemental Trust Deed and the MasterMudarabah Agreement when read together with the relevant Supplemental MudarabahAgreement, respectively.The Programme provides a facility for the issuance of Trust Certificates in Series. The terms andconditions governing each Series of Trust Certificates will be the “Terms and Conditions of theTrust Certificates” as described herein, as modified or supplemented by the applicable Final Terms.The following is an overview of the principal features of the Trust Certificates.On the occasion of each issuance of Trust Certificates, the Issuer will receive contributions fromthe Certificateholders representing the proceeds of the Trust Certificates in the amount specifiedin the relevant Supplemental Trust Deed.The Issuer (acting in its capacity as Trustee) has agreed, on each occasion on which TrustCertificates of a Series are issued, to pay an equivalent amount to the proceeds of such issue, tothe Mudarib, pursuant to the Mudarabah Agreement. Under the Mudarabah Agreement, theMudarib will apply such proceeds as capital of the mudarabah (the Mudarabah). The relevantMudarabah will commence on the Issue Date of the relevant Series of Trust Certificates and willend on (a) the later of the Maturity Date and the date on which the relevant Series of TrustCertificates is redeemed in full or (b) in the event that the relevant Series of the Trust Certificatesis redeemed in full prior to its Maturity Date, on the day immediately following such redemption.The capital of each Mudarabah will be invested by the Mudarib in accordance with an investmentplan prepared by the Mudarib and scheduled to the relevant Supplemental Mudarabah Agreement(the Investment Plan). The relevant Investment Plan will permit certain investments to be madein NIG’s general business activities and will specify the anticipated net return on the capitalinvested.The relevant Investment Plan and the terms of the relevant Mudarabah Agreement willcontemplate that the Mudarabah will generate distributable profit which shall be distributed by theMudarib on each Periodic Distribution Date in the relevant pre-agreed proportions. In theMudarabah Agreement, the Mudarib will acknowledge that the Trustee is entering into theMudarabah Agreement on the basis of the projected return set out in the relevant Investment Planand will confirm that, in its view, the relevant projected return is attainable, although it will not inany way guarantee such projected return.In relation to each Series, (i) if the distributable profit payable to the Trustee is greater than therelevant Periodic Distribution Amount, the Mudarib shall be entitled to such excess distributableprofit for its own account by way of incentive fees for acting as the Mudarib and (ii) if suchdistributable profit is less than the relevant Periodic Distribution Amount, the Mudarib shall, as aseparate and independent obligation, undertake to provide Sharia compliant funding to ensure thatsuch payments may be made. The Mudarib will be repaid such Sharia compliant funding from anyfunds that may be available on the next succeeding Periodic Distribution Date for the same Series,in accordance with the priority of payments in Condition 5.2.18

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:18 pm – mac5 – 3776 Section 03 : 3776 Section 03The Obligor has agreed to purchase the Trustee’s rights, benefits and entitlements in and to theRelevant Mudarabah Assets on the relevant Maturity Date or, as the case may be, on the relevantDissolution Date pursuant to a purchase undertaking deed dated on or about 13 August 2007executed by the Obligor (the Purchase Undertaking), to be supplemented, at the time of eachsuch purchase, by a Sale Agreement (each a Sale Agreement) substantially in the form annexedto the Purchase Undertaking and containing the specific terms applicable to the relevant purchase.In addition, in any case where the Issuer is entitled to require the redemption of the TrustCertificates of any Series, the Obligor has the right to purchase the Trustee’s rights, benefits andentitlements in and to the Relevant Mudarabah Assets on the relevant Distribution Date pursuantto a sale undertaking deed dated on or about 13 August 2007 executed by the Issuer (the SaleUndertaking), to be supplemented, at the time of each such purchase, by a Sale Agreement (eacha Sale Agreement) substantially in the form annexed to the Sale Undertaking and containing thespecific terms applicable to the relevant purchase. The price payable by the Obligor pursuant toeach Sale Agreement will be an amount equal to (a) the Aggregate Face Amount (as specified inthe applicable Final Terms) of the relevant Series of Trust Certificates, (b) the amount of accruedand payable but unpaid Periodic Distribution Amounts on such date (including any additionalamounts payable pursuant to Condition 12 and (c) all amounts due to the Mudarib in respect ofany Sharia compliant funding advanced by it (but which has not been repaid) pursuant to the termsof the Mudarabah Agreement. The Trustee will distribute the proceeds of sale of the Issuer’srights, benefits and entitlements in and to the Relevant Mudarabah Assets to Certificateholders ofthe relevant Series in the manner provided in the Conditions or as otherwise specified in theapplicable Final Terms.Pursuant to the Trust Deed the Issuer (acting in its capacity as Trustee) will declare a trust (a Trust)over all of its rights, benefits and entitlements in and to the Relevant Mudarabah Assets and eachof the other Transaction Documents (other than in relation to any representations given to theIssuer by the Obligor or the relevant Mudarib pursuant to any of the other Transaction Documents)and any amounts it may have deposited in the Transaction Account for the relevant Series of TrustCertificates, subject to the terms of the relevant Supplemental Trust Deed.The Issuer will act as trustee in respect of the Trust Assets for the benefit of Certificateholders ofeach Series in accordance with the Trust Deed and the Conditions. Under the Master Trust Deed,the Issuer will, with effect from and including the date of the Master Trust Deed and save in certainlimited respects only, unconditionally and irrevocably delegate all of the present and future duties,powers, trusts, authorities and discretions vested in the Trustee under the Trust Deed to theDelegate.Following the distribution of the relevant Trust Assets to the Certificateholders of any Series inaccordance with the Conditions and the Trust Deed, the Trustee shall not be liable for any furthersums, and accordingly those Certificateholders may not take any action against the Trustee or anyother person to recover any such sum in respect of the relevant Trust Certificates or the relevantTrust Assets.The Trustee shall not be bound in any circumstances to take any action to enforce or to realise suchTrust Assets or take any action against NIG under any Transaction Documents unless directed orrequested to do so by the relevant Certificateholders in accordance with the Conditions, and thenonly to the extent indemnified and/or secured to its satisfaction.No Certificateholder shall be entitled to proceed directly against NIG unless (i) the Trustee, havingbecome bound so to proceed, fails to do so within 30 days of becoming so bound and such failureis continuing and (ii) the relevant Certificateholder (together with the other Certificateholders ofthe same Series who propose to proceed directly against NIG) holds at least one-fifth of theaggregate face amount of the relevant Series of Trust Certificates then outstanding.The foregoing is subject to the following: in relation to each Series after enforcing or realising theTrust Assets and distributing the net proceeds of the Trust Assets in accordance with Condition5.2, the obligations of the Trustee in respect of the Trust Certificates shall be satisfied and no19

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:18 pm – mac5 – 3776 Section 03 : 3776 Section 03and any other Dealers appointed in accordance with theProgramme Agreement.Certain Restrictions:Delegate:Principal Paying Agent,Calculation Agent and TransferAgent:Paying Agent and Registrar:Each issue of Trust Certificates denominated in a currency inrespect of which particular laws, guidelines, regulations,restrictions or reporting requirements apply will only beissued in circumstances which comply with such laws,guidelines, regulations, restrictions or reporting requirementsfrom time to time (see “Subscription and Sale”). Theproceeds of any issue of Trust Certificates will not beaccepted in the United Kingdom.Citicorp Trustee Company LimitedCitibank N.A., London BranchCitigroup Global Markets Deutschland AG & Co. KGaAProgramme Size:Distribution:Currencies:Maturities:Issue Price:Form of Trust Certificates:Status:Periodic Distributions:Up to US$1,500,000,000 (or its equivalent in other currenciescalculated as described in the Programme Agreement)outstanding at any time. The Issuer and NIG may increase theamount of the Programme in accordance with the terms ofthe Programme Agreement.Trust Certificates may be distributed by way of private orpublic placement and in each case on a syndicated or nonsyndicatedbasis.Subject to any applicable legal or regulatory restrictions, anycurrency agreed between the Issuer, NIG and the relevantDealer.The Trust Certificates will have such maturities as may beagreed between the Issuer, NIG and the relevant Dealer,subject to such minimum or maximum maturities as may beallowed or required from time to time by the relevant centralbank (or equivalent body) or any laws or regulationsapplicable to the Issuer or the relevant Specified Currency.Trust Certificates may only be issued on a fully-paid basis andat an issue price which is at par.The Trust Certificates will be issued in registered form asdescribed in “Form of the Trust Certificates”.Each Trust Certificate will evidence an undivided beneficialownership interest of the Certificateholders in the TrustAssets of the relevant Series, will be a limited recourseobligation of the Issuer and will rank pari passu, without anypreference or priority, with all other Trust Certificates of therelevant Series issued under the Programme.Certificateholders are entitled to receive Periodic DistributionAmounts calculated on the basis specified in the applicableFinal Terms.21

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:18 pm – mac5 – 3776 Section 03 : 3776 Section 03Redemption of Trust Certificates:Denomination of Trust Certificates:Dissolution Events:Optional Dissolution:Withholding Tax:Trust Certificates shall be redeemed at the DissolutionAmount specified in the applicable Final Terms.The Trust Certificates will be issued in such denominations asmay be agreed between the Issuer, NIG and the relevantDealer save that the minimum denomination of each TrustCertificate will be such amount as may be allowed or requiredfrom time to time by the relevant central bank (or equivalentbody) or any laws or regulations applicable to the relevantSpecified Currency, see “Certain Restrictions” above, andsave that the minimum denomination of each Trust Certificateadmitted to trading on a regulated market within theEuropean Economic Area or offered to the public in aMember State of the European Economic Area incircumstances which require the publication of a prospectusunder the Prospectus Directive will be €50,000 (or, if the TrustCertificates are denominated in a currency other than euro,the equivalent amount in such currency).Upon the occurrence of any Dissolution Event, the TrustCertificates may be redeemed on the Dissolution Date at 100per cent. of their face amount and the relevant ReturnAccumulation Period may be adjusted accordingly. SeeCondition 14.If so specified in the applicable Final Terms, a Series of TrustCertificates may be dissolved prior to its Maturity Date in thecircumstances set out in Condition 11.2 and Condition 11.3.All payments by the Mudarib under the MudarabahAgreement shall be made without withholding or deductionfor, or on account of, any taxes, levies, imposts, duties, fees,assessments or governmental charges of whatever natureimposed or levied by or on behalf of any Relevant Jurisdiction.In the event that any such withholding or deduction is made,the Mudarib will be required to pay additional amounts sothat the Issuer will receive the full amounts that it would havereceived in the absence of such withholding or deduction.All payments in respect of Trust Certificates by the Issuershall be made without withholding or deduction for, or onaccount of, any taxes, levies, imposts, duties, fees,assessments or governmental charges of whatever natureimposed or levied by or on behalf of any Relevant Jurisdiction.In the event that any such withholding or deduction is made,the Issuer will, save in the limited circumstances provided inCondition 12, be required to pay additional amounts so thatthe holders of the Trust Certificates will receive the fullamounts that they would have received in the absence ofsuch withholding or deduction.Negative Pledge:Cross Default:The Purchase Undertaking contains a negative pledge givenby the Obligor. See “Summary of the Principal TransactionDocuments”.The Purchase Undertaking contains a cross default provisionin relation to the Obligor. See “Summary of the PrincipalTransaction Documents”.22

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:18 pm – mac5 – 3776 Section 03 : 3776 Section 03FORM OF THE TRUST CERTIFICATESThe Trust Certificates of each Series will be in registered form. Trust Certificates will be issuedoutside the United States in reliance on Regulation S under the U.S. Securities Act of 1933, asamended.Each Series of Trust Certificates will initially be represented by a global trust certificate inregistered form (a Global Trust Certificate). Global Trust Certificates will be deposited with acommon depositary (the Common Depositary) for Euroclear Bank S.A./N.V. (Euroclear) andClearstream Banking, société anonyme (Clearsteam, Luxembourg) and will be registered in thename of a nominee for the Common Depositary. Persons holding beneficial interests in GlobalTrust Certificates will be entitled or required, as the case may be, under the circumstancesdescribed below, to receive physical delivery of definitive Trust Certificates in fully registered form.Payments of any amount in respect of the Global Trust Certificates will, in the absence of provisionto the contrary, be made to the person shown on the Register (as defined in Condition 2.2) as theregistered holder of the Global Trust Certificates. None of the Issuer, the Trustee, the Delegate, anyPaying Agent or the Registrar will have any responsibility or liability for any aspect of the recordsrelating to or payments or deliveries made on account of beneficial ownership interests in theGlobal Trust Certificates or for maintaining, supervising or reviewing any records relating to suchbeneficial ownership interests.Payment of any amounts in respect of Trust Certificates in definitive form will, in the absence ofprovision to the contrary, be made to the persons shown on the Register on the relevant RecordDate (as defined in Condition 1.1) immediately preceding the due date for payment in the mannerprovided in that Condition.Interests in a Global Trust Certificate will be exchangeable (free of charge), in whole but not in part,for definitive Trust Certificates only upon the occurrence of an Exchange Event. The Issuer willpromptly give notice to Certificateholders in accordance with Condition 17 if an Exchange Eventoccurs. For these purposes, Exchange Event means that (i) a Dissolution Event (as defined inCondition 14) has occurred and is continuing or (ii) the Issuer has been notified that both Euroclearand Clearstream, Luxembourg have been closed for business for a continuous period of 14 days(other than by reason of holiday, statutory or otherwise) or have announced an intentionpermanently to cease business or have in fact done so and, in any such case, no successorclearing system is available. In the event of the occurrence of an Exchange Event, Euroclear and/orClearstream, Luxembourg (acting on the instructions of any holder of an interest in such GlobalTrust Certificate) may give notice to the Registrar requesting exchange and, in the event of theoccurrence of an Exchange Event as described in (ii) above, the Delegate may also give notice tothe Registrar requesting exchange. Any such exchange shall occur not later than 10 days after thedate of receipt of the first relevant notice by the Registrar.For so long as any of the Trust Certificates is represented by a Global Trust Certificate held onbehalf of Euroclear and/or Clearstream, Luxembourg each person (other than Euroclear orClearstream, Luxembourg) who is for the time being shown in the records of Euroclear or ofClearstream, Luxembourg as the holder of a particular face amount of such Trust Certificates (inwhich regard any certificate or other document issued by Euroclear or Clearstream, Luxembourgas to the face amount of such Trust Certificates standing to the account of any person shall beconclusive and binding for all purposes save in the case of manifest error) shall be treated by theIssuer, the Trustee, the Delegate and their respective agents as the holder of such face amount ofsuch Trust Certificates for all purposes other than with respect to any payment on such faceamount of such Trust Certificates, for which purpose the registered holder of the relevant GlobalTrust Certificate shall be treated by the Issuer, the Trustee, the Delegate and their respectiveagents as the holder of such face amount of such Trust Certificates in accordance with and subjectto the terms of the relevant Global Trust Certificate and the expressions Certificateholder andholder of Trust Certificates and related expressions shall be construed accordingly.24

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:18 pm – mac5 – 3776 Section 03 : 3776 Section 03Any reference herein to Euroclear and/or Clearstream, Luxembourg shall, whenever the contextso permits, be deemed to include a reference to any additional or alternative clearing systemspecified in the applicable Final Terms.25

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:18 pm – mac5 – 3776 Section 04 : 3776 Section 04APPLICABLE FINAL TERMSSet out below is the form of Final Terms which will be completed for each Series of TrustCertificates issued under the Programme.[Date]NIG Sukuk LtdIssue of [Aggregate Face Amount of Series] [Title of Trust Certificates]under theUS$1,500,000,000Trust Certificate Issuance ProgrammePART A – CONTRACTUAL TERMSTerms used herein shall be deemed to be defined as such for the purposes of the Conditions setforth in the Base Prospectus dated 13 August 2007 which constitutes a base prospectus for thepurposes of the Prospectus Directive (Directive 2003/71/EC) (the Prospectus Directive). Thisdocument constitutes the Final Terms of the Trust Certificates described herein for the purposesof Article 5.4 of the Prospectus Directive and must be read in conjunction with the BaseProspectus. Full information on the Issuer, National Industries Group Holding Company S.A.K. andthe offer of the Trust Certificates is only available on the basis of a combination of these Final Termsand the Base Prospectus. The Base Prospectus is available for viewing at the registered office ofthe Issuer at c/o P.O. Box 417, Safat, 13005, Kuwait and the Principal Paying Agent at 21st Floor,Citigroup Centre, Canada Square, Canary Wharf, London E14 5LB and copies may be obtainedfrom those offices.[Include whichever of the following apply or specify as “Not Applicable” (N/A). Note that thenumbering should remain as set out below, even if “Not Applicable” is indicated for individualparagraphs or subparagraphs. Italics denote directions for completing the Final Terms.][When adding any other final terms or information consideration should be given as to whethersuch terms or information constitute “significant new factors” and consequently trigger the needfor a supplement to the Base Prospectus under Article 16 of the Prospectus Directive.][The proceeds of any issue of Trust Certificates should not be accepted in the United Kingdom.]1. Issuer and Trustee: NIG Sukuk Ltd2. Obligor and Mudarib: National Industries Group Holding Company S.A.K.(NIG)3. Series Number: [ ]4. Specified Currency: [ ]5. Aggregate Face Amount of Series: [ ]6. Issue Price: 100 per cent. of the Aggregate Face Amount7. Specified Denominations: [ ](this means the minimum[ ]integral amount in which(N.B. If an issue of Trust Certificates is (i) NOT admittedtransfers can be made)to trading on an European Economic Area exchange;and (ii) only offered in the European Economic Area incircumstances where a prospectus is not required tobe published under the Prospectus Directive, the€50,000 minimum denomination is not required.)8. (a) Issue Date: [ ]26

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:18 pm – mac5 – 3776 Section 04 : 3776 Section 04(b)Return AccrualCommencement Date:[Issue Date][specify other]9. Maturity Date: [Specify date or (for Floating Periodic Distribution TrustCertificates) Periodic Distribution Date falling in ornearest to the relevant month and year.]10. Periodic Distribution Amount Basis: [[ ] per cent. Fixed Periodic Distribution Amount][[specify reference rate] +/- [ ] per cent. FloatingPeriodic Distribution Amount]11. Dissolution Basis: Dissolution at par(further particulars specified below)12. Change of Periodic Distribution [Specify details of any provision for convertibility ofBasis:Trust Certificates into another Periodic Distributionbasis.] [Not Applicable]13. Call Options: [Not Applicable][Optional Dissolution (Call)][further particulars specified below]14. Status: Unsubordinated15. Method of distribution: [Syndicated/Non-syndicated]PROVISIONS RELATING TO PERIODIC DISTRIBUTIONS PAYABLE16. Fixed Periodic Distribution [Applicable/Not Applicable]Provisions:(If not applicable, delete the remaining sub-paragraphsof this paragraph)(a) Rate[(s)]: [ ] per cent. per annum [payable [annually/semiannually/quarterly/monthly]in arrear](b) Periodic Distribution Date(s): [[ ] in each year up to and including the Maturity Date][specify other](c) Fixed Amount(s): [ ] per Trust Certificate of [ ] Specified Denomination[and [ ] per Trust Certificate of [ ] SpecifiedDenomination](d) Broken Amount(s): [ ](Insert particulars of any initial or final broken PeriodicDistribution Amounts which do not correspond withthe Fixed Amount(s) specified under paragraph 16(c))(e) Day Count Fraction: [30/360 or Actual/Actual (ICMA) or [specify other]](f) Determination Date(s): [ ] in each year[Insert regular periodic distribution dates, ignoringissue date or maturity date in the case of a long orshort first or last return accumulation periodN.B. This will need to be amended in the case ofregular periodic distribution dates which are not ofequal durationN.B. Only relevant where Day Count Fraction isActual/Actual (ICMA)]27

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:18 pm – mac5 – 3776 Section 04 : 3776 Section 04(g)Other terms relating tothe method of calculatingFixed PeriodicDistributions:[Not Applicable/give details]17. Floating Periodic Distribution [Applicable/Not Applicable]Provisions:(If not applicable, delete the remaining sub-paragraphsof this paragraph)(a) Specified Periodic[ ] [Not Applicable]Distribution Dates:(Specified Period and Specified Periodic DistributionDates are alternatives. If the Business Day Conventionis the Floating Rate Convention, insert “NotApplicable”)(b) Specified Period: [ ] [Not Applicable](Specified Period and Specified Periodic DistributionDates are alternatives. A Specified Period, rather thanSpecified Periodic Distribution Dates, will only berelevant if the Business Day Convention is the FloatingRate Convention. Otherwise, insert “Not Applicable”)(c) Business Day Convention: [Floating Rate Convention / Following Business DayConvention / Modified Following Business DayConvention / Preceding Business Day Convention /[specify other]](d)(e)Additional BusinessCentre(s):Manner in which theRate(s) is/are to bedetermined:[Not Applicable/give details][Screen Rate Determination (Condition 8.3 applies)/specify other](f) Screen Rate Determination: [Applicable/Not Applicable](If not applicable, delete the remaining sub-paragraphsof this paragraph)(i) Reference Rate: [For example, LIBOR or EURIBOR](ii) Periodic Distribution [ ]Determination Date: (Second London business day prior to the start of eachReturn Accumulation Period if LIBOR (other thanSterling or euro LIBOR), first day of each ReturnAccumulation Period if Sterling LIBOR and the secondday on which the TARGET System is open prior to thestart of each Return Accumulation Period if EURIBORor euro LIBOR)(iii) Relevant Screen Page: [For example, Reuters [LIBOR01/EURIBOR01]](iv) Relevant Time: [For example, 11.00 a.m. London time](g) Margin: [ ](h) Day Count Fraction: [Actual/365Actual/365 (Fixed)Actual/365 (Sterling)Actual/36028

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:18 pm – mac5 – 3776 Section 04 : 3776 Section 0430/36030E/360Other](See Condition 8 for alternatives)(i) Calculation Agent: [Principal Paying Agent] [specify other](j)Other terms relating tothe method of calculatingFloating PeriodicDistributions:[Not Applicable] [give details]PROVISIONS RELATING TO DISSOLUTION18. Optional Dissolution (Call): [Applicable/Not Applicable](If not applicable, delete the remaining sub-paragraphsof this paragraph)(a) Optional Dissolution Amount: [Final Dissolution Amount] [[ ] per Trust Certificate of [ ]Specified Denomination] [specify other](b) Optional Dissolution Date: [Any Periodic Distribution Date] [specify other](c) Notice period (if other [ ]than as set out in theConditions):19. Final Dissolution Amount: [ ] per Trust Certificate [ ] of SpecifiedDenomination] [specify other]20. Early Dissolution Amount (Tax): [Final Dissolution Amount] [[ ] per Trust Certificate of[ ] Specified Denomination] [specify other]21. Dissolution Amount pursuant to [ ] per Trust Certificate of [ ] SpecifiedCondition 14:Denomination] [specify other]GENERAL PROVISIONS APPLICABLE TO THE TRUST CERTIFICATES22. Form of Trust Certificates: Global Trust Certificate exchangeable for TrustCertificates in definitive registered form in the limitedcircumstances specified in the Global Trust Certificate23. Additional Financial Centre(s): [ ](Note that this item relates to the place of payment andnot Return Accumulation Period end dates, to whichitem 17(d) relates)PROVISIONS IN RESPECT OF THE TRUST ASSETS24. Trust Assets: [Condition 5.1 applies] [specify other]25. Details of Transaction Account: NIG Sukuk Ltd Transaction Account No: [ ] with[ ] for Series No.: [1/2/3 etc]26. Other Transaction Document [ ]Information:(a) Supplemental Trust Deed: Supplemental Trust Deed dated [ ] between theIssuer, the Trustee, NIG and the Delegate29

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:18 pm – mac5 – 3776 Section 04 : 3776 Section 04(b) Supplemental Mudarabah Supplemental Mudarabah Agreement dated [ ]Agreement:between the Issuer, the Trustee and the Mudarib(c) [other Series specific [ ]requirements to beadded when TransactionDocuments drafted](d) Late Payment Percentage: [ ] per cent. per annum(For the purpose of Clause3.5 of the PurchaseUndertaking Deed)27. Other final terms: [Not Applicable/give details](When adding any other final terms considerationshould be given as to whether such terms constitute“significant new factors” and consequently trigger theneed for a supplement to the Base Prospectus underArticle 16 of the Prospectus Directive)DISTRIBUTION28. (a) If syndicated, names of [Not Applicable/give names]Managers:(b) Date of Subscription [ ]Agreement:29. If non-syndicated, name of [ ]relevant Dealer:30. Additional selling restrictions: [Not Applicable/give details][LISTING AND ADMISSION TO TRADING APPLICATIONThese Final Terms comprise the final terms required to list and have admitted to trading the issueof Trust Certificates described herein pursuant to the US$1,500,000,000 Trust Certificate IssuanceProgramme of NIG Sukuk Ltd]RESPONSIBILITYEach of the Issuer and NIG accepts responsibility for the information contained in these FinalTerms. To the best of the knowledge and belief of each of the Issuer and NIG (having taken allreasonable care to ensure that such is the case) the information contained in these Final Terms isin accordance with the facts and does not omit anything likely to affect the import of suchinformation. [[ ] has been extracted from [ ]. Each of the Issuer and NIG confirms that suchinformation has been accurately reproduced and that, so far as it is aware and is able to ascertainfrom information published by [ ], no facts have been omitted which would render the reproducedinformation inaccurate or misleading.]Signed on behalf of NIG Sukuk Ltd (the Issuer)By: 1111111111111111113Duly authorisedSigned on behalf of National Industries Group Holding Company S.A.K.By: 1111111111111111113Duly authorised30

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:18 pm – mac5 – 3776 Section 04 : 3776 Section 04PART B – OTHER INFORMATION1. LISTING AND ADMISSION TO TRADING(i) Listing: [London] [specify other] [None](ii) Admission to trading: [Application has been made for the Trust Certificates tobe admitted to trading on [ ] with effect from [ ]][Not Applicable](iii) Estimate of total[ ]expenses related toadmission to trading:2. RATINGSRatings:The Trust Certificates to be issued have been rated:[S & P: [ ]][Moody’s: [ ]][Fitch: [ ]][[Other]: [ ]](The above disclosure should reflect the ratingallocated to Trust Certificates of the type being issuedunder the Programme generally or, where the issuehas been specially rated, that rating)3. NOTIFICATIONThe Financial Services Authority [has been requested to provide/has provided] the [namesof competent authorities of host Member States] with a certificate of approval attesting thatthe Base Prospectus has been drawn up in accordance with the Prospectus Directive.4. INTERESTS OF NATURAL AND LEGAL PERSONS INVOLVED IN THE ISSUE[Save for any fees payable to the [Managers/Dealer], so far as each of the Issuer and NIG isaware, no person involved in the issue of the Trust Certificates has an interest material tothe offer. – Amend as appropriate if there are other interests.]5. YIELD (Fixed Periodic Distribution Trust Certificates only)Indication of yield: [ ]The yield is calculated at the Issue Date on the basis ofthe Issue Price. It is not an indication of future yield.6. OPERATIONAL INFORMATION(i) ISIN Code: [ ](ii) Common Code: [ ]31

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:18 pm – mac5 – 3776 Section 04 : 3776 Section 04(iii)Any clearing system(s)other than Euroclear BankS.A./N.V. and ClearstreamBanking, société anonymeand the relevantidentification number(s):[Not Applicable/give name(s) and number(s)](iv) Delivery: Delivery [against/free of] payment(v) Names and addresses of [ ]additional Paying Agent(s)(if any):32

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:18 pm – mac5 – 3776 Section 05 : 3776 Section 05TERMS AND CONDITIONS OF THE TRUST CERTIFICATESThe following is the text of the Terms and Conditions of the Trust Certificates, which will beendorsed on each Trust Certificate in definitive registered form issued under the Programme andwill apply to each Global Trust Certificate. The applicable Final Terms in relation to any series of TrustCertificates may specify other terms and conditions which shall, to the extent so specified or tothe extent inconsistent with the following Terms and Conditions, replace or modify the followingTerms and Conditions for the purpose of such Trust Certificates.NIG Sukuk Ltd (in its capacity as issuer, the Issuer and, in its capacity as trustee, the Trustee) hasestablished a programme (the Programme) for the issuance of up to US$1,500,000,000 inaggregate face amount of Trust Certificates.Trust Certificates issued under the Programme are issued in series (each a Series). The final termsfor this Trust Certificate (or the relevant provisions thereof) are set out in Part A of the Final Termsattached to or endorsed on this Trust Certificate which supplement these Terms and Conditions(the Conditions) and may specify other terms and conditions which shall, to the extent sospecified or to the extent inconsistent with the Conditions, replace or modify the Conditions forthe purposes of this Trust Certificate. References to the applicable Final Terms are to Part A ofthe Final Terms (or the relevant provisions thereof) attached to or endorsed on this Trust Certificate.Each of the Trust Certificates will represent an undivided beneficial ownership (real ownership)interest in the Trust Assets which are held by the Trustee on trust (the Trust) for, inter alia, thebenefit of the registered holders of the Trust Certificates pursuant to (i) a Master Trust Deed (theMaster Trust Deed) dated 13 August 2007 and made between the Issuer, the Trustee, NationalIndustries Group Holding Company S.A.K. (NIG) and Citicorp Trustee Company Limited (theDelegate) and (ii) a supplemental trust deed (the Supplemental Trust Deed and, together withthe Master Trust Deed, the Trust Deed) having the details set out in the applicable Final Terms.In these Conditions, references to Trust Certificates shall be references to the Trust Certificateswhich are the subject of the applicable Final Terms.Payments relating to the Trust Certificates will be made pursuant to an agency agreement datedon or about 13 August 2007 (the Agency Agreement) made between the Issuer, the Trustee, theDelegate, NIG, Citibank N.A., London Branch in its capacities as principal paying agent (in suchcapacity, the Principal Paying Agent, which expression shall include any successor), calculationagent (in such capacity, the Calculation Agent, which expression shall include any successor) andas a transfer agent (in such capacity, the Transfer Agent, which expression shall include anysuccessor) and Citigroup Global Markets Deutschland AG & Co. KGaA as a paying agent (in suchcapacity and together with the Principal Paying Agent, the Paying Agents, which expression shallinclude any successor) and registrar (in such capacity, the Registrar, which expression shallinclude any successor). The Paying Agents, the Calculation Agent, the Registrar and the TransferAgent are together referred to in these Conditions as the Agents.Subject as set below, copies of the documents set out below are available for inspection andobtainable free of charge during normal business hours at the specified office for the time beingof the Principal Paying Agent. The holders of the Trust Certificates (the Certificateholders) areentitled to the benefit of, are bound by, and are deemed to have notice of, all the provisions of thedocuments set out below:(a)(b)a master mudarabah agreement between the Issuer, the Trustee and National IndustriesGroup Holding Company S.A.K. (in such capacity, the Mudarib) dated on or about 13 August2007 (the Master Mudarabah Agreement);the supplemental mudarabah agreement (the Supplemental Mudarabah Agreement and,together with the Master Mudarabah Agreement, the Mudarabah Agreement) having thedetails set out in the applicable Final Terms;33

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:18 pm – mac5 – 3776 Section 05 : 3776 Section 05(c) a purchase undertaking deed entered into by the Obligor dated on or about 13 August 2007(the Purchase Undertaking), containing the form of sale agreement (the Sale Agreement)to be executed by the Obligor, the Issuer and the Trustee on the Maturity Date or, as thecase may be, the relevant Dissolution Date;(d)(e)(f)(g)(h)(i)(j)a sale undertaking deed entered into by the Issuer dated on or about 13 August 2007 (theSale Undertaking) containing the form of sale agreement (the Sale Agreement) to beexecuted by the Obligor, the Issuer and the Trustee on the relevant Dissolution Date;the Trust Deed;the Agency Agreement;a corporate services agreement between Walkers SPV Limited (as provider of corporateservices to the Issuer) and the Issuer dated on or about 13 August 2007 (the CorporateServices Agreement);a programme agreement between the Issuer, the Trustee, NIG and the Dealers dated on orabout 13 August 2007 (the Programme Agreement);a costs undertaking deed entered into by NIG dated on or about 13 August 2007 (the CostsUndertaking); andthe applicable Final Terms.The statements in the Conditions include summaries of, and are subject to, the detailed provisionsof the Trust Deed and the Agency Agreement.Each initial Certificateholder, by its acquisition and holding of its interest in a Trust Certificate, shallbe deemed to authorise and direct the Issuer (acting as trustee on behalf of the Certificateholders)to enter into each Transaction Document to which it is a party, subject to the terms and conditionsof the Trust Deed and these Conditions and to pay the sums paid by it in respect of its TrustCertificates to the Mudarib for investment in accordance with the Investment Plan (as definedbelow). Such amount will constitute the capital of the mudarabah constituted by the MudarabahAgreement. The Mudarib will invest such capital in accordance with an investment plan preparedby the Mudarib and scheduled to the Supplemental Mudarabah Agreement (the InvestmentPlan). The Investment Plan will permit certain investments to be made in NIG’s business activities.1. INTERPRETATION1.1 DefinitionsWords and expressions defined in the Trust Deed and the Agency Agreement or used in theapplicable Final Terms shall have the same meanings where used in the Conditions unlessthe context otherwise requires or unless otherwise stated and provided that, in the eventof inconsistency between any such document and the applicable Final Terms, the applicableFinal Terms will prevail. In addition, in these Conditions the following expressions have thefollowing meanings:Calculation Agent means the Principal Paying Agent or such other Person specified in theapplicable Final Terms as the party responsible for calculating the Periodic DistributionAmount and/or such other amount(s) as may be specified in the applicable Final Terms inaccordance with Condition 8;Dissolution Amount means, as appropriate, the Final Dissolution Amount, the EarlyDissolution Amount (Tax), the Optional Dissolution Amount (Call), the Dissolution Amountfor the purposes of Condition 14 or such other amount in the nature of a redemption amountas may be specified in, or determined in accordance with the provisions of, the applicableFinal Terms;34

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:18 pm – mac5 – 3776 Section 05 : 3776 Section 05Dissolution Date means, as the case may be, (a) following the occurrence of a DissolutionEvent (as defined in Condition 14), the date on which the Trust Certificates are dissolved inaccordance with the provisions of Condition 14, (b) the date on which the Trust Certificatesare dissolved in accordance with the provisions of Condition 11.2, or (c) the OptionalDissolution Date (Call);Extraordinary Resolution has the meaning given in Schedule 4 to the Master Trust Deed;Payment Business Day means:(a)(b)a day on which banks in the relevant place of surrender of the Certificate ofRegistration (as defined in Condition 2.2) are open for presentation and payment ofregistered securities and for dealings in foreign currencies; andin the case of payment by transfer to an account:(i)(ii)if the currency of payment is euro, a TARGET Settlement Day and a day onwhich dealings in foreign currencies may be carried on in each (if any) AdditionalFinancial Centre; orif the currency of payment is not euro, any day which is a day on which dealingsin foreign currencies may be carried on in the principal financial centre of thecurrency of payment and in each (if any) Additional Financial Centre;Periodic Distribution Amount means, in relation to a Trust Certificate and a ReturnAccumulation Period, the amount of profit distribution payable in respect of that TrustCertificate for that Return Accumulation Period which amount may be a Fixed Amount, aBroken Amount or an amount otherwise calculated in accordance with Condition 7 orCondition 8;Person means any individual, company, corporation, firm, partnership, joint venture,association, organisation, state or agency of a state or other entity, whether or not havingseparate legal personality;Rate means the rate or rates (expressed as a percentage per annum) representing a definedshare of the profits distributable by the Trustee in respect of the Trust Certificates specifiedin the applicable Final Terms or calculated or determined in accordance with the provisionsof these Conditions and/or the applicable Final Terms;Rating Agencies means the rating agencies, each of which has assigned a credit rating tothe Trust Certificates, and their successors, and each a Rating Agency;Record Date means, in the case of the payment of a Periodic Distribution Amount, the datefalling on the fifteenth day before the relevant Periodic Distribution Date and, in the case ofthe payment of a Dissolution Amount, the date falling two Payment Business Days beforethe Maturity Date or Dissolution Date, as the case may be, or other due date for paymentof the relevant Periodic Distribution Amount;Reference Banks means the principal London office of each of four major banks engaged inthe London or Eurozone inter-bank market selected by or on behalf of the Issuer, providedthat once a Reference Bank has first been selected by or on behalf of the Issuer, suchReference Bank shall not be changed unless it ceases to be capable of acting as such;Relevant Date means, in relation to any payment, whichever is the later of (a) the date onwhich the payment in question first becomes due and (b) if the full amount payable has notbeen received in the principal financial centre of the currency of payment by the PrincipalPaying Agent on or prior to such due date, the date on which the full amount has been soreceived;35

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:18 pm – mac5 – 3776 Section 05 : 3776 Section 05Relevant Jurisdiction means the Cayman Islands and Kuwait or, in either case, any politicalsubdivision or authority thereof or therein having the power to tax;Relevant Screen Page means the page, section or other part of a particular informationservice (including, without limitation, the Reuter Money 3000 Service) specified as theRelevant Screen Page in the applicable Final Terms, or such other page, section or other partas may replace it on that information service or such other information service, in each case,as may be nominated by the Person providing or sponsoring the information appearing therefor the purpose of displaying rates or prices comparable to the Reference Rate;Return Accumulation Period means the period from (and including) a Periodic DistributionDate (or the Return Accumulation Commencement Date) to (but excluding) the next (or first)Periodic Distribution Date;Stock Exchange means, in relation to the Trust Certificates, the stock exchange orexchanges (if any) on which the Trust Certificates are for the time being quoted or listed;Subsidiary means, in relation to any Person (the first Person) at any particular time, anyother Person (the second Person):(a)(b)whose affairs and policies the first Person controls or has the power to control,whether by ownership of share capital, contract, the power to appoint or removemembers of the governing body of the second Person or otherwise; orwhose financial statements are, in accordance with applicable law and generallyaccepted accounting principles, consolidated with those of the first Person;TARGET Settlement Day means any day on which the Trans-European Automated Real-Time Gross Settlement Express Transfer (TARGET) System (the TARGET System) is open;Taxes means any taxes, levies, imposts, duties, fees, assessments or other charges ofwhatever nature imposed or levied by or on behalf of any Relevant Jurisdiction, and allinterest, penalties or similar liabilities with respect thereto;Transaction Account means the account in the Issuer’s name, details of which arespecified in the applicable Final Terms;Transaction Documents means the Mudarabah Agreement, the Purchase Undertaking, theSale Undertaking, the Trust Deed, the Costs Undertaking, the Agency Agreement, theCorporate Services Agreement, the Programme Agreement, any Subscription Agreement(as defined in the Programme Agreement) and any Sale Agreement;Treaty means the Treaty establishing the European Communities, as amended; andTrust Assets means the assets, rights and/or cash described in Condition 5.1.1.2 InterpretationIn these Conditions:(a)(b)any reference to face amount shall be deemed to include the Dissolution Amount, anyadditional amounts (other than relating to Periodic Distribution Amounts) which maybe payable under Condition 12, and any other amount in the nature of face amountspayable pursuant to these Conditions;any reference to Periodic Distribution Amounts shall be deemed to include anyadditional amounts in respect of profit distributions which may be payable underCondition 12 and any other amount in the nature of a profit distribution payablepursuant to these Conditions;36

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:18 pm – mac5 – 3776 Section 05 : 3776 Section 05(c)(d)references to Trust Certificates being “outstanding” shall be construed in accordancewith the Master Trust Deed; andany reference to a Transaction Document shall be construed as a reference to thatTransaction Document as amended and/or supplemented up to and including theIssue Date.2. FORM, DENOMINATION AND TITLE2.1 Form and DenominationThe Trust Certificates are issued in registered form in the Specified Denominations and, inthe case of Trust Certificates in definitive form, are serially numbered.For so long as any of the Trust Certificates is represented by a Global Trust Certificate heldon behalf of Euroclear Bank S.A./N.V. (Euroclear) and/or Clearstream Banking, sociétéanonyme (Clearstream, Luxembourg), each person (other than Euroclear or Clearstream,Luxembourg) who is for the time being shown in the records of Euroclear or of Clearstream,Luxembourg as the holder of a particular face amount of such Trust Certificates (in whichregard any certificate or other document issued by Euroclear or Clearstream, Luxembourgas to the face amount of such Trust Certificates standing to the account of any person shallbe conclusive and binding for all purposes save in the case of manifest error) shall be treatedby the Issuer, the Trustee, the Delegate, NIG and the Agents as the holder of such faceamount of such Trust Certificates for all purposes other than with respect to payment inrespect of such Trust Certificates, for which purpose the registered holder of the Global TrustCertificate shall be treated by the Issuer, the Trustee, the Delegate, NIG and any Agent asthe holder of such face amount of such Trust Certificates in accordance with and subject tothe terms of the relevant Global Trust Certificate and the expressions Certificateholder andholder in relation to any Trust Certificates and related expressions shall be construedaccordingly.Trust Certificates which are represented by a Global Trust Certificate will be transferable onlyin accordance with the rules and procedures for the time being of Euroclear andClearstream, Luxembourg, as the case may be.References to Euroclear and/or Clearstream, Luxembourg shall, whenever the context sopermits, be deemed to include a reference to any additional or alternative clearing systemspecified in the applicable Final Terms.2.2 Register2.3 TitleThe Registrar will maintain a register (the Register) of Certificateholders in respect of theTrust Certificates in accordance with the provisions of the Agency Agreement. In the caseof Trust Certificates in definitive form, a certificate of registration (each a Certificate ofRegistration) will be issued to each Certificateholder in respect of its entire registeredholding of Trust Certificates.The Issuer, the Trustee, the Delegate, NIG and the Agents may (to the fullest extentpermitted by applicable laws) deem and treat the person in whose name any outstandingTrust Certificate is for the time being registered (as set out in the Register) as the holder ofsuch Trust Certificate or of a particular face amount of the Trust Certificates for all purposes(whether or not such Trust Certificate or face amount shall be overdue and notwithstandingany notice of ownership thereof or of trust or other interest with regard thereto, and anynotice of loss or theft or any writing thereon), and the Issuer, the Trustee, the Delegate, NIGand the Agents shall not be affected by any notice to the contrary.37

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:18 pm – mac5 – 3776 Section 05 : 3776 Section 05All payments made to such registered holder shall be valid and, to the extent of the sumsso paid, effective to satisfy and discharge the liability for moneys payable in respect of suchTrust Certificate or face amount.3. TRANSFERS OF TRUST CERTIFICATES AND ISSUE OF CERTIFICATES3.1 TransfersSubject to Conditions 3.4 and 3.5, a Trust Certificate may be transferred in whole or in anamount equal to the Specified Denomination or any integral multiple thereof by depositingthe Certificate of Registration issued in respect of that Trust Certificate, with the form oftransfer on the back duly completed and signed, at the specified office of the Registrar.3.2 Delivery of new Certificates of RegistrationEach new Certificate of Registration to be issued upon transfer of Trust Certificates will,within five business days of receipt by the Registrar of the duly completed form of transferendorsed on the relevant Certificate of Registration, be mailed by uninsured mail at the riskof the holder entitled to the Trust Certificate to the address specified in the form of transfer.For the purposes of this Condition, business day shall mean a day on which banks are openfor business in the city in which the specified office of the Registrar is located.Where some but not all of the Trust Certificates in respect of which a Certificate ofRegistration is issued are to be transferred, a new Certificate of Registration in respect ofthe Trust Certificates not so transferred will, within five business days of receipt by theRegistrar of the original Certificate of Registration, be mailed by uninsured mail at the riskof the holder of the Trust Certificates not so transferred to the address of such holderappearing on the Register or as specified in the form of transfer.3.3 Formalities free of chargeRegistration of transfer of Trust Certificates will be effected without charge by or on behalfof the Issuer and the Registrar but upon payment (or the giving of such indemnity as theIssuer and the Registrar may reasonably require) in respect of any tax or other governmentalcharges which may be imposed in relation to such transfer.3.4 Closed periodsNo Certificateholder may require the transfer of a Trust Certificate to be registered during theperiod of 15 days ending on a Periodic Distribution Date, the Maturity Date, a DissolutionDate or any other date on which any payment of the face amount or payment of any profitin respect of a Trust Certificate falls due.3.5 RegulationsAll transfers of Trust Certificates and entries on the Register will be made subject to thedetailed regulations concerning the transfer of Trust Certificates scheduled to the MasterTrust Deed. A copy of the current regulations will be mailed (free of charge) by the Registrarto any Certificateholder who requests one.4. STATUS AND LIMITED RECOURSE4.1 StatusEach Trust Certificate evidences an undivided beneficial ownership interest in the TrustAssets subject to the terms of the Trust Deed and these Conditions and is a limited recourse38

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:18 pm – mac5 – 3776 Section 05 : 3776 Section 05obligation of the Issuer. Each Trust Certificate ranks pari passu, without any preference orpriority, with all other Trust Certificates.4.2 Limited RecourseProceeds of the Trust Assets are the sole source of payments on the Trust Certificates. TheTrust Certificates do not represent an interest in any of the Issuer, the Trustee, the Delegate,NIG, any of the Agents or any of their respective affiliates. Accordingly, Certificateholderswill have no recourse to any assets of the Issuer (other than the Trust Assets), the Trustee(including, in particular other assets comprised in other trusts, if any), the Obligor or theMudarib (to the extent that each of them fulfils all of its obligations under the relevantTransaction Documents to which it is a party), the Delegate, the Agents or any of theirrespective affiliates in respect of any shortfall in the expected amounts from the TrustAssets.Each of the Obligor and the Mudarib is obliged to make payments under the relevantTransaction Documents to which it is a party directly to the Issuer and the Delegate, for andon behalf of the Certificateholders, and the Issuer and the Delegate will have direct recourseagainst the Obligor and the Mudarib to recover payments due to the Issuer from the Obligorand the Mudarib pursuant to such Transaction Documents.The net proceeds of the realisation of, or enforcement with respect to, the Trust Assets maynot be sufficient to make all payments due in respect of the Trust Certificates. If, followingdistribution of such proceeds, there remains a shortfall in payments due under the TrustCertificates, subject to Condition 15, no Certificateholder will have any claim against theIssuer, the Trustee, the Delegate, the Agents, the Obligor or the Mudarib (to the extent thateach fulfils all of its obligations under the relevant Transaction Documents to which it is aparty) or any of their affiliates or other assets in respect of such shortfall and any unsatisfiedclaims of the Certificateholders shall be extinguished. In particular, no Certificateholder willbe able to petition for, or join any other person in instituting proceedings for, thereorganisation, liquidation, winding up or receivership of the Issuer, the Trustee, the Obligoror the Mudarib (to the extent that each fulfils all of its obligations under the relevantTransaction Documents to which it is a party), or any of their affiliates as a consequence ofsuch shortfall or otherwise.4.3 Agreement of CertificateholdersBy purchasing the Trust Certificates, each Certificateholder agrees that notwithstandinganything to the contrary contained herein or in any other Transaction Document:(a)(b)no payment of any amount whatsoever shall be made by any of the Issuer or theTrustee or any of their respective agents on their behalf except to the extent funds areavailable therefor from the Trust Assets and further agrees that no recourse shall behad for the payment of any amount owing hereunder or under any other TransactionDocument, whether for the payment of any fee or other amount hereunder or anyother obligation or claim arising out of or based upon any Transaction Document,against any of the Issuer or the Trustee to the extent the Trust Assets have beenexhausted following which all obligations of the Issuer and the Trustee shall beextinguished; andprior to the date which is one year and one day after the date on which all amountsowing by the Issuer under the Transaction Documents have been paid in full, it will notinstitute against, or join with any other person in instituting against, the Issuer or theTrustee any bankruptcy, reorganisation, arrangement or liquidation proceedings orother proceedings under any bankruptcy or similar law.39

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:18 pm – mac5 – 3776 Section 05 : 3776 Section 055. THE TRUST5.1 Trust AssetsUnless otherwise specified in the Mudarabah Agreement and the applicable Final Terms, theTrust Assets will comprise:(a)(b)(c)(d)the rights, title, interest and benefit, present and future, of NIG Sukuk Ltd in, to andunder the Mudarabah Assets;the rights, title, interest and benefit, present and future, of NIG Sukuk Ltd in, to andunder the Transaction Documents;all monies standing to the credit of the Transaction Account; andany other assets, rights, cash or investments as may be specified in the applicableFinal Terms,and all proceeds of the foregoing.5.2 Application of Proceeds from the Trust AssetsPursuant to the Trust Deed, the Trustee holds the Trust Assets for and on behalf of theCertificateholders. On each Periodic Distribution Date, or on any Dissolution Date, thePrincipal Paying Agent, notwithstanding any instructions to the contrary from the Trustee,will apply the monies standing to the credit of the Transaction Account in the following orderof priority:(a)(b)(c)(d)(e)(f)(g)first, to the Delegate or any appointee thereof in respect of all amounts owing to itunder the Transaction Documents in its capacity as Delegate or such appointee;second, unless the payment is made on the Maturity Date or any Dissolution Date, tothe Mudarib to repay any Sharia compliant funding advanced by it to the Issuer on anyprevious Periodic Distribution Date to the extent that such funds have not been repaid;third, to the Principal Paying Agent for application in or towards payment pari passuand rateably of all Periodic Distribution Amounts due and unpaid;fourth, unless the payment is made on the Maturity Date or any Dissolution Date, tothe Mudarib by way of incentive fee in accordance with the Mudarabah Agreement;fifth, only if such payment is made on the Maturity Date or any Dissolution Date, tothe Mudarib to repay any Sharia compliant funding advanced by it to the Issuer on anyprevious Periodic Distribution Date to the extent that such funds have not been repaid;sixth, only if such payment is made on the Maturity Date or any Dissolution Date, tothe Principal Paying Agent in or towards payment pari passu and rateably of theDissolution Amount; andseventh, only if such payment is made on the Maturity Date or any Dissolution Date,to the Mudarib by way of incentive fee in accordance with the Mudarabah Agreement.6. COVENANTSThe Issuer has covenanted in the Master Trust Deed that, inter alia, for so long as any TrustCertificate is outstanding, it will not (without the prior written consent of the Delegate):(a)incur any indebtedness in respect of borrowed money whatsoever, or give anyguarantee in respect of any obligation of any person or issue any shares (or rights,40

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:18 pm – mac5 – 3776 Section 05 : 3776 Section 05warrants or options in respect of shares or securities convertible into or exchangeablefor shares) other than the Trust Certificates issued under the Programme;(b)(c)(d)(e)(f)(g)(h)(i)(j)(k)secure any of its present or future indebtedness for borrowed money by any lien,pledge, charge or other security interest upon any of its present or future assets,properties or revenues (other than those arising by operation of law);sell, lease, transfer, assign, participate, exchange or otherwise dispose of, or pledge,mortgage, hypothecate or otherwise encumber (by security interest, lien (statutory orotherwise), preference, priority or other security agreement or preferentialarrangement of any kind or nature whatsoever or otherwise or permit such to occuror suffer such to exist), any part of its interest in any of the Trust Assets exceptpursuant to any Transaction Documents;use the proceeds of the issue of the Trust Certificates for any purpose other than asset out in the applicable Final Terms;amend or agree to any amendment of any Transaction Document to which it is a party,or its memorandum and articles of association, in a manner which is prejudicial to therights of holders of outstanding Trust Certificates (it being accepted that an increasein the aggregate face amount of the Programme will not be prejudicial to such rights)without (i) the prior approval of the Delegate or the Certificateholders by way ofExtraordinary Resolution and (ii) first notifying the Rating Agencies of the proposedamendments and subsequently providing the Rating Agencies with copies of therelevant executed amended Transaction Documents;exercise its option under the Purchase Undertaking except in its capacity as Trustee;act as trustee in respect of any trust other than the Trust corresponding to a Series ofTrust Certificates issued from time to time pursuant to the Programme;have any subsidiaries or employees;redeem any of its shares or pay any dividend or make any other distribution to itsshareholders;put to its directors or shareholders any resolution for or appoint any liquidator for itswinding up or any resolution for the commencement of any other bankruptcy orinsolvency proceeding with respect to it; andenter into any contract, transaction, amendment, obligation or liability other than theTransaction Documents to which it is a party or any permitted amendment orsupplement thereto or as expressly permitted or required thereunder or engage in anybusiness or activity other than:(i)(ii)(iii)as provided for or permitted in the Transaction Documents;the ownership, management and disposal of Trust Assets as provided in theTransaction Documents; andsuch other matters which are incidental thereto.7. FIXED PERIODIC DISTRIBUTION PROVISIONS7.1 ApplicationThis Condition 7 is applicable to the Trust Certificates only if the Fixed Periodic DistributionProvisions are specified in the applicable Final Terms as being applicable.41

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:18 pm – mac5 – 3776 Section 05 : 3776 Section 057.2 Periodic Distribution AmountA Periodic Distribution Amount for the Trust Certificates, representing a defined share of thedistributable profit of the Mudarabah, will be payable in respect of the Trust Certificates andbe distributable by the Issuer to the Certificateholders in accordance with these Conditions.7.3 Determination of Periodic Distribution AmountExcept as provided in the applicable Final Terms, the Periodic Distribution Amount payablein respect of each Trust Certificate for any Return Accumulation Period shall be the FixedAmount and, if the Trust Certificates are in more than one Specified Denomination, shall bethe Fixed Amount in respect of the relevant Specified Denomination. Payments of PeriodicDistribution Amount on any Periodic Distribution Date may, if so specified in the applicableFinal Terms, amount to the Broken Amount so specified.Except in the case of Trust Certificates in definitive form where a Periodic DistributionAmount or Broken Amount is specified in the applicable Final Terms, such PeriodicDistribution Amount shall be calculated by applying the Rate to each SpecifiedDenomination, multiplying such sum by the applicable Day Count Fraction, and rounding theresultant figure to the nearest sub-unit of the relevant Specified Currency, half of any suchsub-unit being rounded upwards or otherwise in accordance with applicable marketconvention.Day Count Fraction means, in respect of the calculation of a Periodic Distribution Amountin accordance with this Condition 7.3:(a)if “Actual/Actual (ICMA)” is specified in the applicable Final Terms:(i)(ii)in the case of Trust Certificates where the number of days in the relevant periodfrom (and including) the most recent Periodic Distribution Date (or, if none, theReturn Accumulation Commencement Date) to (but excluding) the relevantpayment date (the Accrual Period) is equal to or shorter than the DeterminationPeriod during which the Accrual Period ends, the number of days in such AccrualPeriod divided by the product of (A) the number of days in such DeterminationPeriod and (B) the number of Determination Dates (as specified in the applicableFinal Terms) that would occur in one calendar year; orin the case of Trust Certificates where the Accrual Period is longer than theDetermination Period during which the Accrual Period ends, the sum of:(A)(B)the number of days in such Accrual Period falling in the DeterminationPeriod in which the Accrual Period begins divided by the product of (x) thenumber of days in such Determination Period and (y) the number ofDetermination Dates that would occur in one calendar year; andthe number of days in such Accrual Period falling in the nextDetermination Period divided by the product of (x) the number of days insuch Determination Period and (y) the number of Determination Datesthat would occur in one calendar year; and(b)if “30/360” is specified in the applicable Final Terms, the number of days in the periodfrom (and including) the most recent Periodic Distribution Date (or, if none, the ReturnAccumulation Commencement Date) to (but excluding) the relevant payment date(such number of days being calculated on the basis of a year of 360 days with 12 30-day months) divided by 360.In the Conditions:42

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:18 pm – mac5 – 3776 Section 05 : 3776 Section 05Determination Period means each period from (and including) a Determination Date to (butexcluding) the next Determination Date (including, where either the Return AccrualCommencement Date or the final Periodic Distribution Date is not a Determination Date, theperiod commencing on the first Determination Date prior to, and ending on the firstDetermination Date falling after, such date); andsub-unit means, with respect to any currency other than euro, the lowest amount of suchcurrency that is available as legal tender in the country of such currency and, with respectto euro, one cent.7.4 Payment in ArrearSubject to Condition 7.5, Condition 11.2, Condition 11.3 and Condition 14 below, and unlessotherwise specified in the applicable Final Terms, each Periodic Distribution Amount will bepaid in respect of the relevant Trust Certificates in arrear on each Periodic Distribution Date.7.5 Cessation of Profit EntitlementNo further amounts will be payable on any Trust Certificate from and including the MaturityDate or, as the case may be, the Dissolution Date.8. FLOATING PERIODIC DISTRIBUTION PROVISIONS8.1 ApplicationThis Condition 8 is applicable to the Trust Certificates only if the Floating Periodic DistributionProvisions are specified in the applicable Final Terms as being applicable.8.2 Periodic Distribution AmountA Periodic Distribution Amount for the Trust Certificates, representing a defined share of thedistributable profit of the Mudarabah, will be payable in respect of the Trust Certificates andbe distributable by the Issuer to the Certificateholders in accordance with these Conditions.Such Periodic Distribution Amounts will be payable in arrear on either:(a)(b)the Specified Periodic Distribution Date(s) in each year specified in the applicable FinalTerms; orif no Specified Periodic Distribution Date(s) is/are specified in the applicable FinalTerms, each date (each such date, together with each Specified Periodic DistributionDate, a Periodic Distribution Date) which falls the number of months or other periodspecified as the Specified Period in the applicable Final Terms after the precedingPeriodic Distribution Date or, in the case of the first Periodic Distribution Date, afterthe Return Accumulation Commencement Date.Such Periodic Distribution Amounts will be payable in respect of each Return AccumulationPeriod.If a Business Day Convention is specified in the applicable Final Terms and (x) if there is nonumerically corresponding day in the calendar month in which a Periodic Distribution Dateshould occur or (y) if any Periodic Distribution Date would otherwise fall on a day which isnot a Business Day, then, if the Business Day Convention specified is:(A)in any case where Specified Periods are specified in accordance with Condition 8.2(b)above, the Floating Rate Convention, such Periodic Distribution Date (a) in the case of(x) above, shall be the last day that is a Business Day in the relevant month and theprovisions of (ii) below shall apply mutatis mutandis or (b) in the case of (y) above, shallbe postponed to the next day which is a Business Day unless it would thereby fall into43

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:18 pm – mac5 – 3776 Section 05 : 3776 Section 05the next calendar month, in which event (i) such Periodic Distribution Date shall bebrought forward to the immediately preceding Business Day and (ii) each subsequentPeriodic Distribution Date shall be the last Business Day in the month which falls theSpecified Period after the preceding applicable Periodic Distribution Date occurred; or(B)(C)(D)the Following Business Day Convention, such Periodic Distribution Date shall bepostponed to the next day which is a Business Day; orthe Modified Following Business Day Convention, such Periodic Distribution Dateshall be postponed to the next day which is a Business Day unless it would therebyfall into the next calendar month, in which event such Periodic Distribution Date shallbe brought forward to the immediately preceding Business Day; orthe Preceding Business Day Convention, such Periodic Distribution Date shall bebrought forward to the immediately preceding Business Day.In these Conditions, Business Day means a day which is both:(a)(b)a day on which commercial banks and foreign exchange markets settle payments andare open for general business (including dealing in foreign exchange and foreigncurrency deposits) in London and any Additional Business Centre specified in theapplicable Final Terms; andeither (i) in relation to any sum payable in a Specified Currency other than euro, a dayon which commercial banks and foreign exchange markets settle payments and areopen for general business (including dealing in foreign exchange and foreign currencydeposits) in the principal financial centre of the country of the relevant SpecifiedCurrency (if other than London and any Additional Business Centre) or (ii) in relation toany sum payable in euro, a TARGET Settlement Day.8.3 Screen Rate DeterminationIf Screen Rate Determination is specified in the applicable Final Terms as the manner inwhich the Rate(s) is/are to be determined, the Rate applicable to the Trust Certificates foreach Return Accumulation Period will be determined by the Calculation Agent on thefollowing basis:(a)(b)(c)if the Reference Rate specified in the applicable Final Terms is a composite quotationor customarily supplied by one entity, the Calculation Agent will determine theReference Rate which appears on the Relevant Screen Page as of the Relevant Timeon the relevant Periodic Distribution Determination Date;in any other case, the Calculation Agent will determine the arithmetic mean of theReference Rates which appear on the Relevant Screen Page as of the Relevant Timeon the relevant Periodic Distribution Determination Date;if, in the case of (a) above, such rate does not appear on that page or, in the case of(b) above, fewer than two such rates appear on that page or if, in either case, theRelevant Screen Page is unavailable, the Calculation Agent will:(i)(ii)request each of the Reference Banks to provide a quotation of the ReferenceRate at approximately the Relevant Time on the Periodic DistributionDetermination Date to prime banks in the London or Eurozone interbankmarket, as the case may be, in an amount that is representative for a singletransaction in that market at that time; anddetermine the arithmetic mean of such quotations; and44

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:18 pm – mac5 – 3776 Section 05 : 3776 Section 05(d)if fewer than two such quotations are provided as requested, the Calculation Agentwill determine the arithmetic mean of the rates quoted by major banks in the principalfinancial centre of the Specified Currency, selected by the Calculation Agent, atapproximately 11.00 a.m. (local time in the principal financial centre of the SpecifiedCurrency) on the first day of the relevant Return Accumulation Period for loans in theSpecified Currency to leading European banks for a period equal to the relevant ReturnAccumulation Period and in an amount that is representative for a single transactionin that market at that time,and the Rate for such Return Accumulation Period shall be the sum of the Margin and therate or (as the case may be) the arithmetic mean so determined; provided, however, that ifthe Calculation Agent is unable to determine a rate or (as the case may be) an arithmeticmean in accordance with the above provisions in relation to any Return Accumulation Period,the Rate applicable to the Trust Certificates during such Return Accumulation Period will bethe sum of the Margin and the rate or (as the case may be) the arithmetic mean lastdetermined in relation to the Trust Certificates in respect of a preceding ReturnAccumulation Period.8.4 Cessation of Profit EntitlementNo further amounts will be payable on any Trust Certificate from and including the MaturityDate or, as the case may be, the Dissolution Date.8.5 Calculation of Periodic Distribution AmountThe Calculation Agent will, as soon as practicable after the time at which the Rate is to bedetermined in relation to each Return Accumulation Period, calculate the PeriodicDistribution Amount payable in respect of each Trust Certificate for such ReturnAccumulation Period. The Periodic Distribution Amount will be calculated by applying theRate applicable to the relevant Return Accumulation Period to the face amount (in the caseof a Trust Certificate in global form) or Specified Denomination (in the case of a TrustCertificate in individual registered form) of such Trust Certificate during such ReturnAccumulation Period, multiplying the product by the relevant Day Count Fraction androunding the resultant figure to the nearest sub-unit of the Specified Currency (half a subunitbeing rounded upwards).Day Count Fraction means, in respect of the calculation of a Periodic Distribution Amountin accordance with this Condition 8:(a)(b)(c)(d)(e)if “Actual/365” or “Actual/Actual” is specified in the applicable Final Terms, the actualnumber of days in the Return Accumulation Period divided by 365 (or, if any portion ofthat Return Accumulation Period falls in a leap year, the sum of (A) the actual numberof days in that portion of the Return Accumulation Period falling in a leap year dividedby 366 and (B) the actual number of days in that portion of the Return AccumulationPeriod falling in a non-leap year divided by 365);if “Actual/365 (Fixed)” is specified in the applicable Final Terms, the actual number ofdays in the Return Accumulation Period divided by 365;if “Actual/365 (Sterling)” is specified in the applicable Final Terms, the actual numberof days in the Return Accumulation Period divided by 365 or, in the case of a PeriodicDistribution Date falling in a leap year, 366;if “Actual/360” is specified in the applicable Final Terms, the actual number of days inthe Return Accumulation Period divided by 360;if “30/360” “360/360” or “Bond Basis” is specified in the applicable Final Terms, thenumber of days in the Return Accumulation Period divided by 360 (the number of days45

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:18 pm – mac5 – 3776 Section 05 : 3776 Section 05to be calculated on the basis of a year of 360 days with 12 30-day months (unless (A)the last day of the Return Accumulation Period is the 31st day of a month but the firstday of the Return Accumulation Period is a day other than the 30th or 31st day of amonth, in which case the month that includes that last day shall not be considered tobe shortened to a 30-day month, or (B) the last day of the Return Accumulation Periodis the last day of the month of February, in which case the month of February shall notbe considered to be lengthened to a 30-day month)); and(f)if “30E/360” or “Eurobond Basis” is specified in the applicable Final Terms, thenumber of days in the Return Accumulation Period divided by 360 (the number of daysto be calculated on the basis of a year of 360 days with 12 30-day months, withoutregard to the date of the first day or last day of the Return Accumulation Period unless,in the case of the final Return Accumulation Period, the Maturity Date is the last dayof the month of February, in which case the month of February shall not be consideredto be lengthened to a 30-day month).8.6 Calculation of Other AmountsIf the applicable Final Terms specifies that any other amount is to be calculated by theCalculation Agent, the Calculation Agent will, as soon as practicable after the time or timesat which any such amount is to be determined, calculate the relevant amount. The relevantamount will be calculated by the Calculation Agent in the manner specified in the applicableFinal Terms.8.7 PublicationThe Calculation Agent will cause each Rate and Periodic Distribution Amount determined byit, together with the relevant Periodic Distribution Date, and any other amount(s) required tobe determined by it together with any relevant payment date(s) to be notified to the PayingAgents and each listing authority, stock exchange and/or quotation system (if any) by whichthe Trust Certificates have then been admitted to listing, trading and/or quotation as soon aspracticable after such determination but (in the case of each Rate, Periodic DistributionAmount and Periodic Distribution Date) in any event not later than the first day of therelevant Return Accumulation Period. Notice thereof shall also promptly be given to theCertificateholders. The Calculation Agent will be entitled to recalculate any PeriodicDistribution Amount (on the basis of the foregoing provisions) without notice in the event ofan extension or shortening of the relevant Return Accumulation Period.8.8 Notifications, etc. to be finalAll notifications, opinions, determinations, certificates, calculations, quotations anddecisions given, expressed, made or obtained for the purposes of the provisions of thisCondition by the Calculation Agent will (in the absence of wilful default, bad faith or manifesterror) be binding on the Issuer, the Trustee, the Delegate, the Principal Paying Agent and allCertificateholders (in the absence as referred to above). No liability to the Issuer, the Trustee,the Delegate, NIG, the Principal Paying Agent or the Certificateholders shall attach to theCalculation Agent in connection with the exercise or non-exercise by it of its powers, dutiesand discretions under this Condition.9. PAYMENTPayment of Dissolution Amounts and Periodic Distribution Amounts will be made by transferto the registered account (as defined below) of a Certificateholder or by cheque drawn on abank that processes payments in the Specified Currency mailed to the registered addressof a Certificateholder if it does not have a registered account. Payments of DissolutionAmounts will only be made against surrender of the relevant Certificate of Registration at46

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:18 pm – mac5 – 3776 Section 05 : 3776 Section 05the specified office of the Registrar or the Principal Paying Agent. Dissolution Amounts andPeriodic Distribution Amounts will be paid to the Certificateholder shown on the Register atthe close of business on the relevant Record Date.For the purposes of this Condition, a Certificateholder’s registered account means theaccount in the Specified Currency maintained by or on behalf of such Certificateholder witha bank that processes payments in the Specified Currency, details of which appear on theRegister at the close of business on the relevant Record Date, and a Certificateholder’sregistered address means its address appearing on the Register at that time.All such payments will be made subject to any fiscal or other laws and regulations applicablein the place of payment, but without prejudice to the provisions described in Condition 12.Where payment is to be made by transfer to a registered account, payment instructions (forvalue the due date or, if that is not a Payment Business Day, for value the first following daywhich is a Payment Business Day) will be initiated and, where payment is to be made bycheque, the cheque will be mailed, on the Payment Business Day preceding the due datefor payment or, in the case of a payment of face amounts if later, on the Payment BusinessDay on which the relevant Certificate of Registration is surrendered at the specified officeof the Registrar or the Principal Paying Agent.Unless otherwise specified in the applicable Final Terms, Certificateholders will not beentitled to any payment for any delay after the due date in receiving the amount due if thedue date is not a Payment Business Day, if the Certificateholder is late in surrendering itsCertificate of Registration (if required to do so) or if a cheque mailed in accordance with thisCondition arrives after the due date for payment.If the amount of any Dissolution Amount or Periodic Distribution Amount is not paid in fullwhen due, the Registrar will annotate the Register with a record of the amount of suchDissolution Amount or Periodic Distribution Amount in fact paid.10. AGENTS10.1 Agents of IssuerIn acting under the Agency Agreement and in connection with the Trust Certificates, theAgents act solely as agents of the Issuer and (to the extent provided therein) the Trustee anddo not assume any obligations towards or relationship of agency or trust for or with any ofthe Certificateholders.10.2 Specified OfficesThe names of the initial Agents and their initial specified offices are set out below. The Issuerreserves the right at any time to vary or terminate the appointment of any Agent and toappoint additional or other Agents provided, however, that:(a)(b)(c)(d)there will at all times be a Principal Paying Agent;there will at all times be a Registrar;so long as any Trust Certificates are admitted to listing, trading and/or quotation on anylisting authority, stock exchange and/or quotation system, there will at all times be aPaying Agent and a Transfer Agent having its specified office in such place (if any) asmay be required by the rules of such listing authority, stock exchange and/or quotationsystem; andthere will at all times be a Paying Agent in a Member State of the European Union thatis not obliged to withhold or deduct tax pursuant to European Council Directive47

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:18 pm – mac5 – 3776 Section 05 : 3776 Section 052003/48/EC on the taxation of savings income or any law implementing or complyingwith, or introduced to conform to, such Directive.Notice of any termination or appointment and of any changes in specified offices will begiven to the Certificateholders promptly by the Issuer in accordance with Condition 17.11. CAPITAL DISTRIBUTIONS OF TRUST11.1 Scheduled DissolutionUnless the Trust Certificates are redeemed earlier, each Trust Certificate will be redeemedon the Maturity Date at its Final Dissolution Amount together with any accrued and payablebut unpaid Periodic Distribution Amount payable. Upon payment in full of such amounts andthe termination of the Trust, the Trust Certificates shall cease to represent interests in theTrust Assets and no further amounts shall be payable in respect thereof and the Issuer andthe Trustee shall have no further obligations in respect thereof.11.2 Early Dissolution for Tax ReasonsThe Trust Certificates may be redeemed at the option of the Issuer in whole, but not in part:(a)(b)at any time (if the Floating Periodic Distribution Provisions are not specified in theapplicable Final Terms as being applicable); oron any Periodic Distribution Date (if the Floating Periodic Distribution Provisions arespecified in the applicable Final Terms as being applicable),on giving not less than 30 nor more than 60 days’ notice to the Certificateholders inaccordance with Condition 17 (which notice shall be irrevocable), at their Early DissolutionAmount (Tax), together with Periodic Distribution Amounts accrued (if any) to the DissolutionDate, if:(i)(ii)(A) the Issuer has or will become obliged to pay additional amounts as provided orreferred to in Condition 12 as a result of any change in, or amendment to, the laws orregulations of a Relevant Jurisdiction or any change in the application or officialinterpretation of such laws or regulations, which change or amendment becomeseffective on or after the Issue Date and (B) such obligation cannot be avoided by theIssuer taking reasonable measures available to it; or(A) the Issuer has received notice from the Mudarib that it has or will become obligedto pay additional amounts pursuant to the terms of the Mudarabah Agreement as aresult of any change in, or amendment to, the laws or regulations of a RelevantJurisdiction or any change in the application or official interpretation of such laws orregulations, which change or amendment becomes effective on or after the IssueDate and (B) such obligation cannot be avoided by the Mudarib taking reasonablemeasures available to it,provided, however, that no such notice of dissolution shall be given earlier than:(A)where the Trust Certificates may be dissolved at any time, 90 days prior to the earliestdate on which the Issuer would be obliged to pay such additional amounts if apayment in respect of the Trust Certificates were then due or (in the case of (ii) above)the Mudarib would be obliged to pay such additional amounts if a payment to theIssuer under the Mudarabah Agreement was then due; or(B) where the Trust Certificates may be dissolved only on a Periodic Distribution Date, 60days prior to the Periodic Distribution Date occurring immediately before the earliestdate on which the Issuer would be obliged to pay such additional amounts if apayment in respect of the Trust Certificates were then due or (in the case of (ii) above)48

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:18 pm – mac5 – 3776 Section 05 : 3776 Section 05the Mudarib would be obliged to pay such additional amounts if a payment to theIssuer under the Mudarabah Agreement was then due.Prior to the publication of any notice of dissolution pursuant to this paragraph, the Issuershall deliver to the Delegate (a) a certificate signed by two directors of the Issuer, which shallbe binding on the Certificateholders, stating that the Issuer is entitled to effect suchdissolution and setting forth a statement of facts showing that the conditions precedent in(i) and (ii) above to the right of the Issuer so to redeem have occurred, and (b) an opinion ofindependent legal advisers of recognised standing to the effect that the Issuer or, as thecase may be, the Mudarib has or will become obliged to pay such additional amounts as aresult of such change or amendment. Upon the expiry of any such notice as is referred to inthis Condition 11.2, the Issuer shall be bound to redeem the Trust Certificates. Upon suchredemption, the Trust will be dissolved and the Trust Certificates shall cease to representinterests in the Trust Assets and no further amounts shall be payable in respect thereof andthe Issuer and the Trustee shall have no further obligations in respect thereof.11.3 Dissolution at the Option of the IssuerIf the Optional Dissolution (Call) option is specified in the applicable Final Terms as beingapplicable, the Trust Certificates may be redeemed in whole but not in part on any OptionalDissolution Date at the relevant Optional Dissolution Amount together with PeriodicDistribution Amounts accrued (if any) to the Optional Dissolution Date on the Issuer givingnot less than 30 nor more than 60 days’ notice to the Certificateholders in accordance withCondition 17 (which notice shall be irrevocable and shall oblige the Issuer to redeem theTrust Certificates on the relevant Optional Dissolution Date). Upon such redemption, theTrust will be dissolved and the Trust Certificates shall cease to represent interests in the TrustAssets and no further amounts shall be payable in respect thereof and the Issuer and theTrustee shall have no further obligations in respect thereof.11.4 No Other Optional Early DissolutionThe Issuer shall not be entitled to redeem the Trust Certificates, and the Trustee shall not beentitled to dissolve the Trust, otherwise than as provided in Conditions 11.1, 11.2 and 11.3above.11.5 CancellationAll Trust Certificates which are redeemed will forthwith be cancelled and destroyed andaccordingly may not be held, reissued or resold.12. TAXATIONAll payments in respect of the Trust Certificates shall be made without withholding ordeduction for, or on account of, any Taxes, unless the withholding or deduction of the Taxesis required by law. In such event, the Issuer will pay to the Certificateholders additionalamounts so that the full amount which otherwise would have been due and payable underthe Trust Certificates is received by parties entitled thereto, except that no such additionalamount shall be payable to any Certificateholder:(a)(b)who is liable for such Taxes in respect of such Trust Certificate by reason of havingsome connection with any Relevant Jurisdiction other than the mere holding of suchTrust Certificate; orwhere such withholding or deduction is imposed on a payment to an individual and isrequired to be made pursuant to European Council Directive 2003/48/EC on thetaxation of savings income or any law implementing or complying with, or introducedin order to conform to, such Directive; or49

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:18 pm – mac5 – 3776 Section 05 : 3776 Section 05(c)(d)where the Certificate of Registration is required to be presented for payment and ispresented for payment by or on behalf of a Certificateholder who would be able toavoid such withholding or deduction by presenting the relevant Certificate ofRegistration to another Paying Agent in a Member State of the European Union; orwhere the relevant Certificate of Registration is required to be presented for paymentand is surrendered for payment more than 30 days after the Relevant Date except tothe extent that the relevant Certificateholder would have been entitled to suchadditional amount if it had surrendered the relevant Certificate of Registration on thelast day of such period of 30 days.13. PRESCRIPTIONThe rights to receive distributions in respect of the Trust Certificates will be forfeited unlessclaimed within periods of 10 years (in the case of Dissolution Amounts) and five years (in thecase of Periodic Distribution Amounts) from the Relevant Date in respect thereof.14. DISSOLUTION EVENTSIf any of the following events occurs and is continuing (each, a Dissolution Event):(a)(b)(c)(d)(e)default is made in the payment of the Dissolution Amount on the date fixed forpayment thereof, or default is made in the payment of any Periodic DistributionAmount on the due date for payment thereof and, in the case of any PeriodicDistribution Amount only, such default continues for a period of seven days; orthe Issuer fails duly to perform or comply with any of the obligations expressed to beassumed by it in the Transaction Documents; oran NIG Event (as defined in the Purchase Undertaking) occurs; orthe Issuer repudiates any Transaction Document or does or causes to be done any actor thing evidencing an intention to repudiate any Transaction Document; orat any time it is or will become unlawful for the Issuer (by way of insolvency orotherwise) to perform or comply with any of its obligations under the TransactionDocuments or any of the obligations of the Issuer under the Transaction Documentsare not or cease to be legal, valid, binding and enforceable,then the Delegate shall give notice of the occurrence of such Dissolution Event to theCertificateholders in accordance with Condition 17 with a request to such holders to indicateif they wish the Trust Certificates to become immediately due and payable, provided,however, that in the case of the event described in (b) above, such notice may only be givenif the Delegate is of the opinion that the event is materially prejudicial to the interests of theCertificateholders. If so requested in writing by Certificateholders representing not less thanone-fifth in face amount of the Trust Certificates for the time being outstanding or by anExtraordinary Resolution of the Certificateholders or if the Delegate decides in its discretionthe Delegate may (subject to, in any such case, being indemnified and/or secured to itssatisfaction) give notice to the Issuer, NIG and the Certificateholders in accordance withCondition 17 that the Trust Certificates are to be redeemed at the Dissolution Amount on thedate specified in such notice. Upon payment in full of such amounts, the Trust will bedissolved and the Trust Certificates shall cease to represent interests in the Trust Assets andno further amounts shall be payable in respect thereof and the Issuer and the Trustee shallhave no further obligations in respect thereof.For the purpose of (a) above, amounts shall be considered due in respect of the TrustCertificates (including for the avoidance of doubt any amounts calculated as being payable50

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:18 pm – mac5 – 3776 Section 05 : 3776 Section 05or the Mudarib shall be to enforce their respective obligations under the TransactionDocuments.15.5 Limited recourseConditions 15.2, 15.3 and 15.4 are subject to this Condition 15.5. After distributing all of theproceeds of the Trust Assets in accordance with Condition 5.2, the obligations of the Issuerin respect of the Trust Certificates shall be satisfied and no Certificateholder may take anyfurther steps against the Issuer to recover any further sums in respect of the TrustCertificates and the right to receive any such sums unpaid shall be extinguished. Inparticular, no Certificateholder shall be entitled in respect thereof to petition or to take anyother steps for the winding-up of the Issuer nor shall any of them have any claim in respectof the trust assets of any other trust established by the Issuer.16. REPLACEMENT OF CERTIFICATES OF REGISTRATIONShould any Certificate of Registration be lost, stolen, mutilated, defaced or destroyed it maybe replaced at the specified office of the Registrar upon payment by the claimant of theexpenses incurred in connection with the replacement and on such terms as to evidenceand indemnity as the Issuer may reasonably require. Mutilated or defaced Certificates ofRegistration must be surrendered before replacements will be issued.17. NOTICESAll notices to the Certificateholders will be valid if:(a)(b)published in a daily newspaper (which will be in a leading English language newspaperhaving general circulation) in the Gulf region and a daily newspaper having generalcirculation in London (which is expected to be the Financial Times) approved by theDelegate; ormailed to them by first class pre-paid registered mail (or its equivalent) or (if posted toan overseas address) by airmail at their respective addresses in the Register.The Issuer shall also ensure that notices are duly given or published in a manner whichcomplies with the rules and regulations of any stock exchange or other relevant authority onwhich the Trust Certificates are for the time being listed. Any notice shall be deemed to havebeen given on the day after being so mailed or on the date of publication or, if so publishedmore than once or on different dates, on the date of the first publication.Until such time as any definitive Trust Certificates are issued, there may, so long as theGlobal Trust Certificate representing the Trust Certificates is held in its entirety on behalf ofEuroclear and/or Clearstream, Luxembourg, be substituted for such publication in suchnewspaper(s) the delivery of the relevant notice to Euroclear and/or Clearstream,Luxembourg for communication by them to the Certificateholders and, in addition, for solong as any Trust Certificates are listed on a stock exchange or are admitted to trading byanother relevant authority and the rules of that stock exchange or relevant authority sorequire, such notice will be published in a daily newspaper of general circulation in the placeor places required by those rules. Any such notice shall be deemed to have been given tothe Certificateholders on the day after the day on which the said notice was given toEuroclear and/or Clearstream, Luxembourg.Notices to be given by any Certificateholder shall be in writing and given by lodging thesame with the Principal Paying Agent. Whilst any of the Trust Certificates are represented bythe Global Trust Certificate, such notice may be given by any holder of a Trust Certificate tothe Principal Paying Agent through Euroclear and/or Clearstream, Luxembourg, as the case52

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:18 pm – mac5 – 3776 Section 05 : 3776 Section 05may be, in such manner as the Principal Paying Agent and Euroclear and/or Clearstream,Luxembourg, as the case may be, may approve for this purpose.18. MEETINGS OF CERTIFICATEHOLDERS, MODIFICATION, WAIVER, AUTHORISATIONAND DETERMINATION18.1 The Master Trust Deed contains provisions for convening meetings of Certificateholders toconsider any matter affecting their interests, including the modification or abrogation byExtraordinary Resolution of any of these Conditions or any of the provisions of the TrustDeed. The quorum at any meeting for passing an Extraordinary Resolution will be one ormore Certificateholders, proxies or representatives holding or representing in the aggregatenot less than a majority in face amount of the Trust Certificates for the time beingoutstanding, or at any adjourned such meeting one or more Certificateholders, proxies orrepresentatives present whatever the face amount of the Trust Certificates held orrepresented by him or them except that any meeting the business of which includes themodification of certain provisions of the Trust Certificates (including modifying the MaturityDate, reducing or cancelling any amount payable in respect of the Trust Certificates oraltering the currency of payment of the Trust Certificates or amending certain covenantsgiven by the Issuer in the Master Trust Deed), the quorum shall be one or more personspresent holding or representing not less than 75 per cent. in aggregate face amount of theTrust Certificates for the time being outstanding, or at any adjourned such meeting one ormore persons present holding or representing not less than 25 per cent. in aggregate faceamount of the Trust Certificates for the time being outstanding. To be passed, anExtraordinary Resolution requires a majority in favour consisting of not less than threequartersof the persons voting on a show of hands or, if a poll is duly demanded, a majorityof not less than three-quarters of the votes cast on such poll and, if duly passed, will bebinding on all Certificateholders, whether or not they are present at the meeting andwhether or not voting.18.2 The Delegate may agree, without the consent or sanction of the Certificateholders, to anymodification of, or to the waiver or authorisation of any breach or proposed breach of, any ofthese Conditions or any of the provisions of the Trust Deed or determine, without any suchconsent or sanction as aforesaid, that any Dissolution Event or Potential Dissolution Event(as defined below) shall not be treated as such, which in any such case is not, in the opinionof the Delegate, materially prejudicial to the interests of the Certificateholders or may agree,without any such consent as aforesaid, to any modification which, in its opinion, is of aformal, minor or technical nature or to correct a manifest error or an error which is, in theopinion of the Delegate, proven. In this Condition 18, Potential Dissolution Event means anevent which, with the giving of notice, lapse of time, determination of materiality orfulfilment of any other applicable condition (or any combination of the foregoing), wouldconstitute a Dissolution Event.18.3 In connection with the exercise by it of any of the powers, trusts, authorities and discretionsvested in it (including, without limitation, any modification, waiver, authorisation ordetermination), the Delegate shall have regard to the general interests of theCertificateholders as a class (but shall not have regard to any interests arising fromcircumstances particular to individual Certificateholders (whatever their number) and, inparticular but without limitation, shall not have regard to the consequences of any suchexercise for individual Certificateholders (whatever their number) resulting from their beingfor any purpose domiciled or resident in, or otherwise connected with, or subject to thejurisdiction of, any particular territory or any political sub-division thereof) and the Delegateshall not be entitled to require, nor shall any Certificateholder be entitled to claim from theDelegate or any other person, any indemnification or payment in respect of any taxconsequence of any such exercise upon individual Certificateholders except to the extentprovided in Condition 12.53

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:18 pm – mac5 – 3776 Section 05 : 3776 Section 0518.4 Any modification, abrogation, waiver, authorisation or determination shall be binding on allthe Certificateholders and shall be notified by the Issuer to the Certificateholders as soon aspracticable thereafter in accordance with Condition 17.19. INDEMNIFICATION AND LIABILITY OF THE DELEGATE19.1 The Trust Deed contains provisions for the indemnification of the Delegate in certaincircumstances and for its relief from responsibility, including provisions relieving it fromtaking action unless indemnified and/or secured to its satisfaction.19.2 The Delegate makes no representation and assumes no responsibility for the validity,sufficiency or enforceability of the obligations of the Obligor or the Mudarib under anyTransaction Document and shall not under any circumstances have any liability or be obligedto account to the Certificateholders in respect of any payment which should have beenmade by the Obligor or the Mudarib, but is not so made, and shall not in any circumstanceshave any liability arising from the Trust Assets other than as expressly provided in theConditions or in the Trust Deed.19.3 Each of the Delegate and the Trustee is exempted from (i) any liability in respect of any lossor theft of the Trust Assets or any cash, (ii) any obligation to insure the Trust Assets or anycash and (iii) any claim arising from the fact that the Trust Assets or any cash are held by oron behalf of the Trustee or on deposit or in an account with any depository or clearingsystem or are registered in the name of the Trustee or its nominee, unless such loss or theftarises as a result of default or misconduct of the Delegate or the Trustee, as the case maybe.19.4 Subject to Condition 14 and Condition 15, the Delegate waives any right to be indemnifiedby the Certificateholders in circumstances where the Trust Assets are insufficient therefor.20. CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999No rights are conferred on any person under the Contracts (Rights of Third Parties) Act 1999to enforce any term of the Conditions, but this does not affect any right or remedy of anyperson which exists or is available apart from that Act.21. GOVERNING LAW AND SUBMISSION TO JURISDICTIONThe Trust Deed is governed by, and will be construed in accordance with, English law.The Issuer has in the Trust Deed irrevocably and unconditionally agreed that the courts ofEngland are to have exclusive jurisdiction to settle any dispute which may arise out of or inconnection with the Trust Deed (Proceedings) and has accordingly submitted to theexclusive jurisdiction of the English courts. This submission is made for the benefit of theDelegate and the Certificateholders and shall not limit the right of any of them to takeProceedings in any other court of competent jurisdiction, nor shall the taking of Proceedingsin one or more jurisdictions preclude the taking of Proceedings in any other jurisdiction(whether concurrently or not).The Issuer has also agreed to waive any objection to the Proceedings on the grounds thatthey are an inconvenient or inappropriate forum.Without limiting the rights of the Certificateholders under this Condition, any dispute arisingfrom or connected with the Trust Certificates (including any dispute regarding the existence,validity or termination of the Trust Certificates (each a Dispute)) may be referred by anyCertificateholder to arbitration in London in accordance with the rules of the London Courtof International Arbitration (the Rules), the Rules being incorporated into this Condition byreference. The number of arbitrators shall be three and the arbitration shall be conducted inEnglish. Any arbitration award so made shall be binding.54

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:18 pm – mac5 – 3776 Section 05 : 3776 Section 05The Issuer has in the Trust Deed appointed an agent for service of process and hasundertaken that, in the event of such agent ceasing so to act or ceasing to be registered inEngland, it will appoint another person approved by the Delegate as its agent for service ofprocess in respect of any Proceedings or Disputes. Nothing herein shall affect the right toserve process in any manner permitted by law.55

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:18 pm – mac5 – 3776 Section 05 : 3776 Section 05USE OF PROCEEDSThe proceeds of each Series of Trust Certificates issued under the Programme will be applied bythe Issuer as the capital of the Mudarabah to be invested by the Mudarib in accordance with therelevant Investment Plan.56

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:19 pm – mac5 – 3776 Section 06 : 3776 Section 06DESCRIPTION OF THE ISSUERGeneralNIG Sukuk Ltd, a Cayman Islands exempted company with limited liability, was incorporated on 13June 2007 under the Companies Law (as revised) of the Cayman Islands with companyregistration number 189273. The Issuer has been established as a special purpose vehicle for thesole purpose of issuing Trust Certificates under the Programme and entering into the transactionscontemplated by the Transaction Documents. The registered office of the Issuer is at 87 MaryStreet, George Town, Grand Cayman, KY1-9002, Cayman Islands, and its telephone number is +1345 945 3727.The authorised share capital of the Issuer is US$50,000 consisting of 5,000,000 ordinary sharesof US$0.01 each, 1,000 of which have been issued. All of the issued shares (the Shares) are fullypaidand are held by Walkers SPV Limited, a licensed trust company in the Cayman Islands, asshare trustee (the Share Trustee) under the terms of a charitable declaration of trust (theDeclaration of Trust) dated 26 June 2007 under which the Share Trustee holds the Shares in trustuntil the Termination Date (as defined in the Declaration of Trust). Prior to the Termination Date, thetrust is an accumulation trust, but the Share Trustee has the power to benefit the Certificateholdersor Qualified Charity (as defined in the Declaration of Trust). It is not anticipated that any distributionwill be made whilst any Trust Certificate is outstanding. Following the Termination Date, the ShareTrustee will wind up the trust and make a final distribution to charity. The Share Trustee has nobeneficial interest in, and derives no benefit (other than its fee for acting as Share Trustee) from,its holding of the Shares.Business of the IssuerThe Issuer has no prior operating history or prior business and will not have any substantialliabilities other than in connection with the Trust Certificates to be issued under the Programme.The Trust Certificates are the obligations of the Issuer alone and not the Share Trustee.The objects for which the Issuer is established are set out in the Memorandum of Association ofthe Issuer as adopted on 13 June 2007.Financial StatementsSince the date of incorporation, no financial statements of the Issuer have been prepared. TheIssuer is not required by Cayman Islands law, and does not intend, to publish audited financialstatements.Directors of the IssuerThe Directors of the Issuer are as follows:Name:1112Principal Occupation:11111111112John Cullinane Director, Walkers SPV LimitedDerrie Boggess Director, Walkers SPV LimitedDavid Egglishaw Director, Walkers SPV LimitedThe business address of the Directors is 87 Mary Street, George Town, Grand Cayman, KY1-9002,Cayman Islands.There are no potential conflicts of interest between the private interests or other duties of theDirectors listed above and their duties to the Issuer.57

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:19 pm – mac5 – 3776 Section 06 : 3776 Section 06The AdministratorWalkers SPV Limited will also act as the corporate administrator of the Issuer (in such capacity,the Corporate Administrator). The office of the Corporate Administrator will serve as the generalbusiness office of the Issuer. Through the office, and pursuant to the terms of a corporate servicesagreement to be entered into between the Issuer and the Corporate Administrator (the CorporateServices Agreement), the Corporate Administrator will perform in the Cayman Islands variousadministrative functions on behalf of the Issuer, including communications with shareholders andthe general public, and the provision of certain clerical, administrative and other services untiltermination of the Corporate Services Agreement. In consideration of the foregoing, the CorporateAdministrator will receive various fees payable by the Issuer at rates agreed upon from time totime, plus expenses. The terms of the Corporate Services Agreement provide that the Issuer mayterminate the appointment of the Corporate Administrator by giving one month’s notice to theCorporate Administrator and terminate without notice upon the happening of any certain statedevents, including any breach by the Corporate Administrator of its obligations under the CorporateServices Agreement. In addition, the Corporate Services Agreement provides that the CorporateAdministrator shall be entitled to retire from its appointment by giving at least one month’s noticein writing provided that a replacement acceptable to the Issuer has been appointed.The Corporate Administrator will be subject to the overview of the Issuer’s Board of Directors. TheCorporate Services Agreement may be terminated (other than as stated above) by either theIssuer or the Corporate Administrator giving the other party at least three months’ written notice.The Corporate Administrator’s principal office is 87 Mary Street, George Town, Grand Cayman,KY1-9002, Cayman Islands.The Directors of the Issuer are all employees or officers of the Corporate Administrator. The Issuerhas no employees and is not expected to have any employees in the future.58

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:19 pm – mac5 – 3776 Section 06 : 3776 Section 06SELECTED FINANCIAL INFORMATION AND FINANCIAL REVIEWThe following information has been derived from, and should be read in conjunction with, and isqualified in its entirety by reference to, the consolidated financial statements of NIG and the otherinformation included elsewhere in this Base Prospectus.The following table sets out selected consolidated financial information of NIG for the years ended31 December 2006, 2005 and 2004 as extracted from NIG’s audited consolidated financialstatements. NIG prepares its financial statements in accordance with International FinancialReporting Standards issued by the International Accounting Standards Board.31 December200611112200511112200411112(KD’000)Selected balance sheet data:Investment in associates ........................................................ 125,912 120,911 62,628Available for sale investments ................................................ 426,399 368,451 125,048Total non-current assets .......................................................... 598,065 528,064 249,913Investments at fair value through statement of income ........ 456,165 386,741 222,825Short term deposits ................................................................ 248,758 34,993 14,007Total current assets ................................................................ 859,079 580,896 301,599Total non current assets .......................................................... 598,06511112528,06411112249,91311112Total assets ............................................................................ 1,457,144111121,108,96011112551,51211112Equity attributable to shareholders of the parent company .... 721,783 623,632 291,812Retained earnings.................................................................... 260,404 247,777 103,758Minority interests .................................................................... 111,0571111249,8781111223,98511112Total equity ............................................................................ 832,84011112673,51011112315,79711112Long-term borrowings ............................................................ 79,710 98,141 45,593Total non-current liabilities ...................................................... 137,264 128,990 108,835Short-term borrowings ............................................................ 403,185 212,084 82,990Total current liabilities .............................................................. 487,04011112306,46011112126,88011112Total equity and liabilities .................................................... 1,457,144111121,108,96011112551,51211112Selected statement of income data:Sales ........................................................................................ 99,741(1) 104,740 106,987Cost of sales............................................................................ (76,018) (82,185) (88,835)Gross profit.............................................................................. 23,723 22,555 18,152Profit from operations .......................................................... 105,579 176,076 59,170Profit for the year .................................................................. 146,66011112208,1361111246,54011112Net profit for the year .......................................................... 141,994 198,554 44,27711112 11112 1111211112 11112 11112Selected ratios:Return on average assets (%) ................................................ 11.10 23.90 8.50Return on average equity (%).................................................. 18.90 40.10 15.00Current ratio (Times)................................................................ 1.76 1.90 2.38Total debt to total equity (Times) ............................................ 0.67 0.56 0.61Notes:(1) This amount represents Sales for the eleven months ended 30 November 2006 whereas the comparative information for2004 and 2005, respectively, represents Sales for the twelve months ended 31 December 2004 and 31 December 2005,respectively. The reason for this is because during 2006, NIG decided to change the annual accounting period of itsforeign subsidiaries, in order to ensure that NIG can file its consolidated financial statements with the Dubai FinancialMarket (the DFM) within the necessary time period subsequent to the end of each financial year.59

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:19 pm – mac5 – 3776 Section 06 : 3776 Section 06FINANCIAL REVIEWThe following discussion and analysis should be read together with the consolidated financialstatements of NIG included elsewhere in this Base Prospectus. References in this section to2006, 2005 and 2004 are to the 12 month periods ending on 31 December in each year.NIG is a holding company engaged in a range of businesses including: the building materials,specialist engineering, petrochemicals, financial services, utilities and oil and gas services sectors.NIG also holds certain strategic and financial investments.NIG’s revenues are principally derived from (i) realised gains made on the sale of investments(including investments in associated companies) and unrealised gains through marking to markettrading investments and (ii) its dividend income from investments.Key Factors affecting ProfitIncome from InvestmentsNIG’s investment securities are categorised for accounting purposes as investments at fair valuethrough the statement of income (FVTPL) and as available for sale investments. FVTPLinvestments include trading investments which are investments acquired principally with a viewto short-term sale. FVTPL investments are recorded at fair value on acquisition, excludingtransaction costs. In addition, unsold FVTPL financial assets are re-valued at fair value at eachaccounting end date with the unrealised gains or losses so arising also being recorded through theincome statement.Available for sale investments are recorded at fair value on acquisition, plus transaction costs thatare directly attributable to the acquisition. Available for sale investments are re-valued at fair valueexcept for those investments for which fair value cannot be reliably measured, which aremeasured at cost less impairment. Unrealised gains or losses are recognised in the statement ofincome on the sale or impairment of the relevant asset. Changes in the fair value of available forsale investments are recognised in equity.NIG’s results during the period under review have been significantly impacted by gains made inrelation to certain investments. In particular, in 2006, NIG sold 28 per cent. of its 100 per cent.owned subsidiary Ikarus Industrial Petroleum Company SAK, for a consideration of KD 64.140million resulting in a profit of KD 34.258 million. In the same year, NIG also sold 9 per cent. out ofits 80 per cent. owned subsidiary Denham Investment Ltd. for a consideration of KD 17.487 millionresulting in a profit of KD14.264 million. NIG also realised a profit of KD 21.083 million in 2006 onthe sale of its shares in its subsidiary National Industries Company for Building Materials SAK,which represents the difference between the book value amounting to KD 18.494 million and thefair value amounting to KD 39.577 million of the distributed shares. This distribution diluted NIG’sholding in the subsidiary from 74 per cent. to 51 per cent. Finally, in 2006, NIG sold its 100 percent. owned subsidiary Bunyan Al Mashrik Co. KSCC for a consideration of KD 7.387 millionresulting in no profit or loss in the consolidated statement of income.In 2005, NIG disposed of Newage Transmission Limited, a wholly owned subsidiary located in theUnited Kingdom, for a cash consideration of KD 532 thousand resulting in a net loss of KD 1.264million. In the same year, NIG also disposed of Blanson, the trading division of BI Plastic, and NIG’s50 per cent. interest in Perry Barromedical Inc. for a net combined cash consideration of KD 1.117million resulting in a net loss of KD 213 thousand. Finally, NIG disposed of a 1 per cent. stake inits 52 per cent. owned subsidiary Noor Financial Investment Company KSC for a consideration ofKD 564 thousand which resulted in a profit of KD 24 thousand.In 2004, NIG disposed of a 75 per cent. stake in its wholly owned subsidiary Rotalac PlasticLimited for a deferred cash consideration of KD 322 thousand which resulted in a net loss (beforeany goodwill write-off) of KD 78 thousand. The remaining 25 per cent. was transferred to available60

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:19 pm – mac5 – 3776 Section 06 : 3776 Section 06for sale investments as the Group no longer had significant influence. Further, NIG also disposedof 66.5 per cent. of its stake in its 97.5 per cent. owned subsidiary, Kuwait Privatization ProjectHolding Company for a net cash consideration of KD 14.346 million which resulted in a profit ofKD 275 thousand and the remaining 31 per cent. was transferred to investment in associates. Inthe same year NIG also disposed of a 0.8 per cent. stake in its 75 per cent. owned subsidiary,National Industries Company for Building Materials SAK for a net cash consideration of KD 780thousand which resulted in a profit of KD 542 thousand. Finally, NIG disposed of 47.65 per cent.stake in its wholly owned subsidiary Noor Financial Investment Company for a net cashconsideration of KD 15.943 million which resulted in a profit of KD 441 thousand.Share of profits in associates and joint venturesFor accounting purposes, associated companies are those companies over which NIG exercisessignificant influence but does not control the financial and operating decisions. In general,significant influence exists when NIG holds between 20 per cent. and 50 per cent. of the votingrights of the relevant company. The consolidated financial statements of NIG for 2004, 2005, and2006 include NIG’s share of the results and assets and liabilities of the associates using the equitymethod of accounting from the date of commencement of significant influence until the date suchinfluence effectively ceases.The following table sets out the share of associates’ assets and liabilities and revenue and profitfor each of the years ended 31 December 2006, 2005 and 2004.200611112200511112200411112(KD’000)Share of associates’ assets and liabilitiesAssets .................................................................................... 144,865 140,308 71,436Liabilities ................................................................................ 18,953 19,397 8,808Share of associates’ revenue and profitRevenue.................................................................................. 23,765 23,510 11,133Profit ...................................................................................... 9,522 15,193 5,152In 2006, investment in quoted associates with a carrying value of KD 77,587 thousand (comparedto KD 75,580 thousand in 2005 and KD 58,954 thousand in 2004) had a fair value of KD 152,215thousand (compared to KD 179,747 thousand in 2005 and KD 147,299 thousand in 2004).In 2005, NIG sold 4 per cent. of its stake in its 20 per cent. owned associate, Kuwait National RealEstate Investment and Services Company KSC, for a cash consideration of KD 4,131 thousandresulting in a profit of KD 2,302 thousand. In the same year NIG also disposed of 3 per cent. of its31 per cent. owned associate, Kuwait Privatization Project Holding Company, for a cashconsideration of KD 4,597 thousand resulting in a profit of KD 2,910 thousand. Finally, in 2005 NIGsold 35 per cent. of its investment in Mabanee Company SAK for a cash consideration of KD95,550 thousand, resulting in a profit of KD 70,286 thousand.In 2004, NIG sold 2 per cent. of its stake in its 22 per cent. owned associate Kuwait CementCompany for a cash consideration of KD 5,575 thousand which resulted in a net profit of KD 3,481thousand. In the same year NIG sold 1.6 per cent. of its stake in its 49 per cent. owned associateMabanee Company, for a cash consideration of KD 2,483 thousand which resulted in a net profitof KD 1,706 thousand.Statement of Income for 2006, 2005 and 2004Net ProfitsNIG’s net profit in 2006 amounted to KD 141.994 million compared to KD 198.554 million in 2005and KD 44.277 million in 2004.61

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:19 pm – mac5 – 3776 Section 06 : 3776 Section 06SalesNIG’s sales amounted to KD 99.741 million in 2006 compared to KD 104.740 million in 2005 andKD 106.987 million in 2004.In order to ensure that NIG can file its consolidated financial statements with the DFM within thenecessary time period subsequent to the end of each financial year, during 2006, NIG decided tochange the annual accounting period of its foreign subsidiaries for the purpose of consolidation to30 November 2006, whereas in the previous year it was 31 December 2005. Consequently, during2006 NIG consolidated the foreign subsidiaries for the eleven months ended 30 November 2006whereas in the comparative information for 2004 and 2005, respectively, these subsidiaries havebeen consolidated for the year ended 31 December 2004 and 31 December 2005, respectively.Income from investments and profit on partial disposal of associatesNIG’s income from investments amounted to KD 90.772 million in 2006 compared to KD 173.076million in 2005 and KD 54.017 million in 2004. In addition, NIG’s profit on partial disposal ofassociates amounted to KD 559 thousand in 2006 compared to KD 72.124 million in 2005 and KD5.187 million in 2004. See “Key Factors affecting Profit” above.Share of profits of associates and joint venturesNIG’s share of profits from associates and joint ventures amounted to KD 9.522 million in 2006compared to KD 15.193 million in 2005 and KD 5.152 million in 2004. See “Key Factors affectingProfit” above.Net profit/(loss) on disposal of subsidiaries/businessesNIG’s net profit on the disposal of subsidiaries/businesses amounted to KD 69.605 million in 2006compared to a net loss of KD 2,357 million in 2005 and a net profit of KD 560 thousand in 2004.See “Key Factors affecting Profit” above.ExpensesNIG’s total expenses in 2006 amounted to KD 55.621 million compared to KD 72.800 million in2005 and KD 39.417 million in 2004.Finance costsFinance costs were KD 30.990 million in 2006 compared to KD 18.735 million in 2005 and KD10.193 million in 2004.General, administrative and other expensesGeneral, administrative and other expenses were KD 16.815 million in 2006 compared to KD28.079 million in 2005 and KD 13.163 million in 2004.Distribution costsDistribution costs were KD 6.556 million in 2006, KD 7.014 million in 2005 and KD 6.956 million in2004.62

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:19 pm – mac5 – 3776 Section 07 : 3776 Section 07DESCRIPTION OF NATIONAL INDUSTRIES GROUP HOLDING COMPANY S.A.K.BACKGROUND AND HISTORYNational Industries Group Holding Company S.A.K. (NIG or the Company) is the largest listedinvestment holding company on the Kuwait Stock Exchange (KSE) in terms of total assets andshareholders’ equity. NIG’s two largest shareholders are Public Institute of Social Security andKuwait Cement Company SAK, holding respectively 5 per cent. and 8 per cent. of the totaloutstanding shares of NIG.NIG was incorporated in 1961 as a closed Kuwaiti shareholding company in accordance with theCommercial Companies Law (Law No. 15/1960 of Kuwait). NIG’s initial paid up capital was 20million rupees (the equivalent of approximately KD 1.5 million).NIG was established to participate in developing Kuwait’s infrastructure and promote its industrialadvancement through the development of the building materials industry in Kuwait. NIG’sfounding shareholders included the Government of Kuwait (the Government). NIG was maderesponsible for the operation of two manufacturing plants owned by the Government since 1955,one producing cement based products and the other producing bricks and limestone basedproducts. In 1962, NIG diversified into the manufacturing of pipes and fittings for water andsewage through the incorporation of Kuwait Asbestos Industries Company KSCC.NIG was instrumental in the development of Kuwait’s industrial base in the 1960s and 1970sthrough its participation in the establishment and development of companies such as KuwaitCement Company SAK and Kuwait Metal Pipes Industries SAK and Contracting and MarineServices Company KSCC as well as Gulf Cables Company KSCC. NIG’s rate of growth acceleratedin the 1960s and its production capacity and turnover expanded significantly in the mid-1970s withthe establishment of two complexes which continue to constitute its principal operations in thebuilding materials sector today: Sulaibiya complex which specialises in cement based productsand the Mina Abdullah complex which specialises in limestone based products and plastics.In the 1970s, NIG diversified into the production of household goods such as washing detergentsunder licence from Henkel (Germany) as well as the production of automotive batteries. Otherindustries in which it became involved in the 1970s included tyre production and fibre glass. Thisbroad spread of businesses was consistent with NIG’s public sector ownership and its role infostering the process of industrialisation in Kuwait.Also during the 1970s NIG’s operations extended to other Arab Gulf Co-operation Council (GCC)countries, particularly Saudi Arabia and the United Arab Emirates (UAE). It was a foundingshareholder in Saudi Sand Lime Bricks & Building Materials Company (a Saudi Arabian company),Gulf Gravel Company (a UAE company) and the National Quarries Company (a UAE company).By the 1980s, NIG had established itself as a broad based industrial conglomerate with a strategyof identifying sectors for development both nationally and regionally in other GCC countries. Itsexpansion involved extending its product range through adding new plants at the Mina Abdullahcomplex for the production of plastic pipes and fittings and aerated concrete blocks.Following its decision to draw back from certain sectors of the national economy, the KuwaitiGovernment divested its ownership of NIG through the flotation of its 51 per cent. shareholding,on the KSE in 1995. At the same time, NIG embarked on a strategy of industrial specialisationwhile divesting of some of its less profitable non-core operations through disposals and plantclosures.In March 1996, NIG acquired BI Group plc (BI Group), a London Stock Exchange listed specialistengineering group with operations in the US, Europe, the UK, the Middle East and the Far East ata purchase price of approximately £101 million. BI Group develops specialist engineering solutionsin a number of sectors including oil and gas, medical instruments, aerospace, plastics and metals.In 1997, NIG made a complementary acquisition when it purchased Cortworth plc and integrated63

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:19 pm – mac5 – 3776 Section 07 : 3776 Section 07its management with that of BI Group. Since acquiring these two businesses, NIG has disposedof certain non-core businesses while committing further resources to the development of its corebusinesses.In September 1998, in partnership with a number of Middle Eastern investors, NIG committedUS$19.8 million in equity capital for a 15 per cent. stake in Saudi International PetrochemicalsCompany SJSC (SIPCHEM). This company was established in Saudi Arabia for the purpose ofinvesting in three major petrochemical projects for the production of butandiol, methanol andacetic acid in the Jubail industrial area in Saudi Arabia at a total estimated cost of US$725 million.In 2000, NIG also acquired an 8 per cent. stake in National Industrialisation Company (Tasnee) inSaudi Arabia for KD 3.4 million.In April 2003, NIG changed its name to National Industries Group Holding Company S.A.K. and itsformal status changed to that of a holding company. NIG decided to change its status to that of aholding company since the articles of association of a holding company include more activities andoffer NIG more flexibility.In June 2006, NIG was listed on the Dubai Financial Market (the DFM). It is considering furtherlistings on stock exchanges within the GCC, including the Doha Stock Exchange.As at 31 December 2006, NIG’s consolidated total assets were approximately KD 1,457 million,and its consolidated shareholders’ equity was approximately KD 722 million. NIG’s marketcapitalisation was KD 1,482 million as at 31 December 2006.For the year ended 31 December 2006, consolidated net profit attributable to NIG’s shareholderswas KD 135 million. NIG achieved significant growth in net income during the four-year period from1 January 2003 to 31 December 2006, with income attributable to its shareholders increasingfrom KD 26 million to KD 135 million, corresponding to a compounded annual growth rate of 104per cent.As at 31 December 2006, NIG had approximately 3,622 employees including 1,633 employed byits building materials operations, 1,807 by its specialist engineering operations, 52 by its financialservices company and 45 at its head office.The registered office of NIG is located at Al Jahra Street crossing the Airport Road, Al Shuwaikh,Kuwait. Its commercial registration number with the Ministry of Commerce is 8392. Its telephonenumber is 00965-4849466.NIG BUSINESS ACTIVITIESNIG is a holding company and operates through its shareholdings in a portfolio of fully or partlyowned companies. It segregates its investments in companies into two main categories:(i) investments in Core Operating Businesses; and (ii) other Investments.NIG’s investment in Core Operating Businesses consists of holdings in companies that are inmajority owned and controlled by NIG. NIG undertakes its Core Operating Businesses in sixindustries which are: (i) building materials; (ii) specialist engineering; (iii) petrochemicals;(iv) financial services; (v) utilities; and (vi) oil and gas services.Other Investments in turn consist of Strategic Investments and Financial Investments. StrategicInvestments include long term investments in companies operating in industries in which NIG isactively involved, yet holds a minority stake. Financial Investments are investments where NIG hasno or limited operating involvement and a minority stake.64

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:19 pm – mac5 – 3776 Section 07 : 3776 Section 07NIG’s Core Operating Businesses, principal Strategic Investments and principal FinancialInvestments are described further below.NIGCore Operating BusinessesInvestmentsBuildingMaterialsSpecialistEngineeringPetrochemicalsFinancialServicesUtilitiesOil and GasServicesStrategicInvestmentsFinancialInvestmentsCore Operating Businesses• Building Materials: NIG is the largest manufacturer of building materials and relatedproducts in Kuwait. NIG owns and operates 14 factories through its 51 per cent. ownedsubsidiary company, National Industries Company for Building Materials (K.S.C.C.) (NICBM).The products of these factories include insulation aerated concrete blocks, sand lime bricks,plastic pipes and fittings, rocks from its quarries, quick and hydrated lime, cladding mortars,ready mixed concrete, tiles and curbstones, concrete pipes and manholes and interlock tiles.• Specialist Engineering: NIG owns a number of industrial companies engaged in specialistengineering, plastics and metals operating in the United Kingdom (UK), Continental Europeand the United States of America (US). The specialist-engineering group of companies areowned by the BI Group which in turn is owned through intermediate holding companies inthe UK, Guernsey and Bahrain.• Petrochemicals: NIG, through its 72 per cent. owned subsidiary company Ikarus PetroleumIndustries Company KSCC (Ikarus), is engaged in the development of, and investment in,local and regional petroleum and petrochemical ventures.• Financial Services: NIG, through its 51 per cent. owned subsidiary Noor FinancialInvestment Company KSCC (Noor), is engaged in investment and financial activitiesprimarily in Kuwait, the Middle East, Asia and other emerging markets.• Utilities: In 2006 NIG established a 100 per cent. owned subsidiary, Combined NationalIndustries Company for Energy KSCC, to focus on the utility industry, in particular, water,wastewater and power generation, in the GCC region and adjacent countries. In 2005, NIGestablished Denham Investment Ltd. in order to acquire 28.6 per cent. of Karachi ElectricSupply Company Ltd in Pakistan (KESC).• Oil and Gas Services: NIG, through its wholly owned subsidiary, Proclad Group LLC(Proclad) and its ten companies, provides services, including engineering andmanufacturing, to the oil and gas industry using state of the art machinery and technology.Investments (Strategic and Financial Investments)As at 31 December 2006, NIG’s investments in associates, joint ventures and other investmentswere valued at KD 1,008.8 million and included:• Investments in associates: These holdings include Kuwait Cement Company SAKC, EasternUnited Petroleum Services Company KSCC, Marsa Alam Holding Company KSCC, KuwaitNational Real Estate Investment and Services Company KSCC and Kuwait PrivatisationProject Holding Company SAKC.65

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:19 pm – mac5 – 3776 Section 07 : 3776 Section 07• Available for sale investments: These include petrochemical and steel projects in GCCcountries, as well as holdings in international and local managed funds and quoted andunquoted equity participations. These holdings include Saudi International PetroleumCorporation, National Petrochemical Industrialisation Company and Dana Gas.• Investments at fair value through statement of income: These include participations in bothlocal and international managed funds as well as shares in quoted and unquoted companies,all of which are held on a short-term basis with a view to sale.For management purposes, for each of the years ended 2004 until 2006, NIG’s primary format forreporting segment information has been through the following business segments; (a) Financialand Strategic Investments (including Petrochemicals, Utilities and Financial Services), (b) BuildingMaterials and (c) Specialist Engineering (including Oil and Gas Services).The table below shows a segmental analysis for NIG’s three business areas as at and for the yearsending 31 December 2006, 2005 and 2004:Strategic and FinancialInvestments (includingSpecialist EngineeringPetrochemicals, Utilities(including Oil andand Financial Services) Building Materials Gas Services) Total11111111344 11111111344 11111111344 111111113442004 2005 2006 2004 2005 2006 2004 2005 2006 2004 2005 2006112 112 112 112 112 112 112 112 112 112 112 112(KD thousand)Revenues .............................. 60,874 188,202 100,294 26,489 31,062 30,138 77,808 71,661 66,737 165,171 290,925 197,169Profit (loss) ............................ 64,052 248,474 162,583 6.898 8,955 8,108 (14,860) (28,432) 4,045 56,090 228,997 174,736Assets .................................... 434,081 1,024,572 1,343,968 21,298 23,400 39,407 94,562 59,622 72,537 549,941 1,107,594 1,455,912Liabilities ................................ (7,077) (14,954) (26,433) (7,597) (7,905) (8,808) (27,733) (25,323) (23,240) (42,407) (48,182) (58,481)NIG’s operating businesses and strategic and financial investments are described in detail under“NIG Business Activities” below.RECENT DEVELOPMENTSOn 19 May 2007 Noor, as a 25 per cent. participant in the ADP Consortium, which also includesAeroports de Paris Management, Joannou & Paraskevaides Ltd., J&P Avax, Abu Dhabi InvestmentCompany and Edgo, signed a contract with the Jordanian Government for the construction,management and operation of the new Queen Alia International Airport in Jordan for a period of25 years, including the construction of a new terminal.On 28 May 2007, Noor signed a Memorandum of Understanding with the Syrian Ministry of Oil tolead an international alliance that will build and operate a refinery in the Dir-al-Zur region of Syriafor U.S.$1.5 billion. Noor proposes to establish a new company in Syria by the end of 2007, toorganise all of the financial, economic, technical and legal aspects of the refinery project. Noorintends to undertake a public offering of 49 per cent. of the shares in the new company in Syriaand other Arab markets.NIG is in the process of building a new head office in Kuwait, which is due to be completed inAugust 2007. The total cost of the new office is expected to be around KD 500,000. NIG intendsto implement a new integrated IT system for its new head office that will service all of NIG’sdiverse operations through one centralised system.On 4 August 2007, NIG announced its preliminary results for the six months ended 30 June 2007.The announcement disclosed an increase in net income from KD 74,584,000 for the six monthsended 30 June 2006 to KD158,086,000 for the six months ended 30 June 2007. The final resultsfor the six months ended 30 June 2007 are expected to be published by NIG on or after 18 August2007.66

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:19 pm – mac5 – 3776 Section 07 : 3776 Section 07STRATEGYStrategies for Core Operating BusinessIn 2006, NIG adopted a new seven year growth-oriented strategy focussed on the developmentof its six Core Operating Businesses through its subsidiary companies. This new strategy wasdeveloped following a strategic study undertaken by Booz Allen Hamilton, a leading internationalconsultancy services firm specifically for strategic consultancy, and aims to increase NIG’s shareof assets in its Core Operating Businesses from approximately 30 per cent. as at 31 December2006 to approximately 50 to 70 per cent. by 2013.To this end, NIG seeks to achieve the following strategic goals in each of the following CoreOperating Businesses:Building MaterialsNIG intends to grow its sales of building materials by continuing to develop a new range ofproducts to appeal to changing customer preferences, by acquiring other building materialcompanies with a complementary product range and by exporting its high value added productsto other GCC countries. In addition, NIG intends to increase production capacity in specific sectorsof its building materials division to meet increased demand for specific products.Specialist EngineeringDuring 2005, BI Group restructured its businesses to increase the profitability of its corebusinesses, which lead to the disposal of a certain non core business. BI Group is currentlyfocusing on its core businesses such as the engineering division, plastic division and metalsdivision.PetrochemicalsIkarus intends to pursue acquisitions, joint ventures and alliances in sectors which arecomplementary to its petrochemical operations.Financial ServicesNoor develops innovative strategies to ensure it offers its clients a wide range of financial services.Noor continuously monitors new technologies and markets to be integrated or developed inassociation with NIG’s subsidiaries and associate companies.UtilitiesCombined National Industries Company for Energy KSCC intends to focus on the utility industryin the GCC region, the wider Middle East and Asia in order to capitalise on investmentopportunities in the water and power generation sectors. Specifically, NIG expects the demand forelectricity to grow over the next ten years and accordingly expects governments to invest inincreasing their electricity generation capacity.Oil and Gas ServicesProclad’s strategy lies in providing cost effective and competitive services to the oil and gasindustry both locally and globally through its ten subsidiaries. NIG believes that Proclad’scompetitive advantage lies in the fact that it provides an integrated corrosion resistant solution, byoffering a supply of metal pipes and cladding as well as offering maintenance and refurbishingservices.67

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:19 pm – mac5 – 3776 Section 07 : 3776 Section 07Strategies for Strategic and Financial InvestmentsIn addition to a growing focus on the development of its Core Operating Businesses, NIG’s newstrategy also outlines the following industries as potential areas for strategic or financialinvestment:• telecoms;• real estate;• media; and• steel.As part of its new strategy, NIG intends to proactively source new investment opportunities in theabove mentioned sectors. Investments will be actively managed and monitored in order to ensuretheir value is maximised, either through disposal, retention or an increase in investment therein.Over time, a Financial Investment may develop into a Strategic Investment for NIG, and in turn,may become integrated into one of NIG’s existing Core Operating Businesses. By the same logic,a sector where NIG has Strategic or Financial Investment(s) may grow to become a CoreOperating Business.At the same time, NIG is in the process of restructuring its investment in some industrialbusinesses by reducing its shareholding to retain a material minority stake. This is perceived as aprofitable means of participating in industrial growth driven by private sector investment withouthaving to exercise day to day managerial control. NIG typically maintains its involvement in thestrategic development of such companies by retaining the right to appoint a certain number ofdirectors to the board of directors of such companies.General strategiesIn addition to specifically expanding its six Core Operating Business, NIG also has the followinggeneral strategies:Capitalise on privatisation in KuwaitNIG intends to participate in any privatisation programme which the Government may implementin the future and which is relevant to NIG’s business activities. Electricity generation, waterproduction, port facilities, material handling and logistics and environmental industries constituteimportant areas of activity for NIG’s future growth and all are expected to be part of the futureprivatisation programme in Kuwait. NIG intends to make acquisitions in these strategic industrieswhich will enable it to create new specialised companies and divisions in Kuwait to serve as aplatform for its future operations in the GCC and beyond.Participate in regional joint venturesNIG intends to participate in consortia established to operate infrastructure projects tendered tothe private sector by governments in the GCC region under concession type arrangements.Implement new cost cutting initiativesNIG continues to seek new opportunities to reduce its cost base and enhance its financialperformance.COMPETITION AND COMPETITIVE ADVANTAGESAs a holding company, NIG only faces limited direct competition which principally occurs whenNIG is seeking to make new investments. At the level of the Core Operating Businesses, however,68

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:19 pm – mac5 – 3776 Section 07 : 3776 Section 07NIG faces different levels of competition in each of the different business areas in which it isengaged.Core Operating BusinessesBuilding MaterialsNICBM experiences a range of levels of competition in relation to its different businesses andproducts, as described further below under “Facilities”. Management of NIG believes thatNICBM’s principal competitive advantages in the building materials sector in Kuwait are:• NICBM’s history as a former majority Government-owned sector manufacturing companyestablishes a strong reputation, providing an easily recognised brand name and franchise.• NICBM has the largest production capacity in Kuwait, reflecting the Government’s originalintention to develop a building materials fabrication capacity with national scope. NICBM, asa result, enjoys economies of scale not available to its smaller domestic competitors.NICBM is also the only domestic manufacturer of certain of its product lines.• NICBM’s products (with the exception of very recent new products) have receivedGovernment approval, and in certain cases, Government tenders refer to NICBM productsby name as tender standards.• NICBM offers its customers a “one stop” service: NICBM believes it has a wider range ofproducts than any of its domestic competitors. Customers of NICBM are able to purchasetheir many building material requirements from one discrete supplier.Specialist EngineeringBI Group is the parent company of an international group of specialist engineering companies.BI Group’s principal competitive advantage is achieved by concentrating upon higher added valueproducts and activities. BI Group recognises the overriding importance of first class quality andcustomer service.PetrochemicalsNIG believes a competitive advantage will be achieved by strategically investing, sponsoring anddeveloping petrochemical projects.Financial ServicesThrough Noor, NIG believes its competitive advantage will be achieved by following a diversifiedinvestment strategy with major investments in private equity and direct investments in capitalmarkets and providing a broad range of financial services, which includes advisory services,underwriting, term financing, and syndications.UtilitiesNIG believes its competitive advantage will be achieved through the Combined National IndustriesCompany for Energy KSCC and The Karachi Electric Supply Corporation Limited which will focuson the utility industry to capitalise on the investment opportunities in the water and powergeneration sectors.69

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:19 pm – mac5 – 3776 Section 07 : 3776 Section 07Oil and Gas ServicesNIG believes it has a competitive advantage in the provision of oil and gas services becauseProclad Group has a world-wide sales and delivery network enabling customers to place a singleorder specifying multiple different delivery points.Strategic and Financial InvestmentsNIG’s management believe that NIG’s principal competitive advantages in its Investment businessare as follows:• NIG has a well-defined and clear strategy that allows it to focus on its areas of corecompetency, avoiding dilution of effort. NIG’s management has significant expertise in itschosen areas of operation.• NIG has established a consistent track record since its incorporation in 1961 of identifyingsuccessful investment opportunities.• NIG insists upon the application of rigorous quality standards in all of its operations.• NIG enjoys stability in its leadership and management, with members of the Board ofDirectors serving an average of over 20 years, which provides a level of consistency andencourages employee and customer loyalty.GROUP STRUCTUREThe chart below summarises the current group structure of NIG, its subsidiaries and associatedcompanies as at 31 March 2007.Unless otherwise specified by a percentage ownership, all companies listed below are whollyownedby NIG:National Industries Group Company S.A.KLocal SubsidiariesNational Industries Companyfor Building Materials SAKC (51%)National LandTransport Company SAKCIkarus Industial PetroleumCompany SAKC (72%)Noor Financial InvestmentCompany KSCC (51%)Loloah National IndustriesTrading Company WLL 100%D&B Kuwait for Economic &Management Consulting KSCCCombined NationalIndustries Company for Energy KSCCAssociatesKuwait PrivatizationProject Holding CompanySAKC (28%)Kuwait Cement CompanySAKC (25%)Kuwait National RealEstate Investment andServices CompanyKSCC (16%)Marsa Alam KSCC(20%)Al Rayah InternationalReal Estate KSCC(20%)Eastern UnitedPetroleum ServicesKSCC (20%)Kuwait CeramicFactory Company WLL(49%)DenhamInvestmentLtd. (71%)NICHolding(Guernsey)LimitedNI Group(Bahrain) ECNIC Holding(UK) PLCBI GroupPlcForeignSubsidiariesNIG GuernseyLimitedProcladGroup LLCGW/GasDivisionGas & Oil Field Services Company WLLKuwait Rocks CompanySAKC (38%)KES Power Ltd(40%)70

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:19 pm – mac5 – 3776 Section 07 : 3776 Section 07NIG undertakes its businesses through ownership of interests in companies which are classifiedas either holdings in: (i) Core Operating Businesses or (ii) Investments.NIG’s Core Operating Businesses are further classified in one of six core industries: (i) buildingmaterials; (ii) specialist engineering; (iii) petrochemicals; (iv) financial services; (v) utilities; and (vi)oil and gas services and are listed in the table below together with NIG’s ownership percentagein each Core Operating Business.Core Industry1111112Core Operating Business111111111111Ownership11111Building Material National Industries Company for Building Materials KSCC 51%Specialist Engineering BI Group plc, which is wholly owned by NIC Holding UK,which is owned by NIG Guernsey Ltd which is owned byNIG Group Bahrain (NIGG), a Bahrain holding companyowned by NIG..................................................................... 100%Petro-chemicals Ikarus Petroleum Industries Company KSCC .................... 72%Financial Services Noor Financial Investment Company KSCC ...................... 51%UtilitiesCombined National Industries Company for EnergyKSCC .................................................................................. 100%Oil & Gas Services Proclad Group LLC.............................................................. 100%Investments are classified as either Strategic or Financial Investments, and are in turn classifiedas either investment in subsidiaries, associated companies or joint ventures. A summary of NIG’sStrategic Investments is presented below.Ownership Effectivethrough1111111NIG ownership1111111Names of companies in which NIG owns interest in andclassifies as Strategic InvestmentsKuwait Cement Company (KCC).............................................. NIG 25.179%Mabanee Company SAK.......................................................... NIG 17%Kuwait Rocks Company .......................................................... NICBM 38%Industrial Bank of Kuwait ........................................................ Global portfolio 4.5%Global Investment House ........................................................ KFC 5%Egyptian Kuwaiti Holding Company ........................................ NIG 5.421%Dana Gas PJSC ...................................................................... NIG 2.326%Jordan Telecommunications Company .................................... Noor &NIG 10%Kuwait National Real Estate Investment and ServicesCompany KSCC .................................................................. NIG 15.533%Kuwait Privatisation Project Company SAKC .......................... NIG 27.693%Al Raya International Real Estate KSCC .................................. NIG & NICBM 23%Marsa Alam KSCC .................................................................. NIG 20%United Stainless Steel KSCC .................................................. NIG 10%Bayan Holding Company KSCC .............................................. NIG 6.182%The following section describes the different companies in which NIG has an interest.CORE OPERATING BUSINESSESBuilding MaterialsOverviewNIG’s building materials manufacturing activities are carried on by NICBM.The principal objective of NICBM is to provide complementary products to meet the demands ofhousing and infrastructure projects in Kuwait. The strategic development of NICBM is guided by afocus on core business activities and a streamlined organisation.71

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:19 pm – mac5 – 3776 Section 07 : 3776 Section 07NICBM manufactures building materials and concrete pipes for infrastructure uses. NICBM alsoproduces plastic pipes and fittings and extracts rocks from its quarries. Production is carried out intwo groups of factories in Kuwait. These are the Mina Abdullah Port factory complex and theSulaibiya factory complex.The Mina Abdullah Port factory complex contains the following main facilities:• Autoclaved aerated concrete block (AAC) factory (also known as Gas aerated concreteblocks);• Sand lime bricks factory;• PVC factory;• Quarry (located nearby at Al Ahmedi area);• Lime factory;• Plaster and wall covering and cladding factory;• High density polyethylene (HDPE) factory;• Polypropylene factory; and• Paint factory.The Sulaibiya factory complex contains the following main facilities:• Ready mix factory;• Tiles and curbstones factory;• Concrete pipes factory;• Interlock tiles factory; and• Sand washing station.In August 2006, NICBM announced its plans to construct a KD 20 million porcelain and ceramicfactory in the Mina Abdullah Port factory complex. The factory is expected to be operational by theend of 2007 and will have a production capacity of 10 million square metres of porcelain andceramics per annum. The production of the new factory is principally intended for export,particularly to Europe and the US.NICBM’s customer base consists of large construction companies (including Governmentappointed contractors on Government projects), wholesalers and private individuals. Limited salesare also made directly to the Government.In 2006, approximately 70 per cent. of NICBM’s sales were made to private sector companies inKuwait, approximately 23 per cent. to Government entities in Kuwait and the balance wasexported. Of the private sector sales in Kuwait, approximately 47 per cent. were made to largeconstruction companies, approximately 22 per cent. were made to wholesalers and the balancewere made to individuals.72

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:19 pm – mac5 – 3776 Section 07 : 3776 Section 07The following table sets out some key figures for NICBM as at and for the years ended 31December 2006, 2005 and 2004:200611112005111120041111(KD million)Total Assets ............................................................................ 125.9 65.3 40.1Total Liabilities ........................................................................ 37.8 20.2 7.6Total Shareholders’ Equity ...................................................... 88.1 45.1 32.6Sales ........................................................................................ 30.1 31.1 26.5Gross Profit.............................................................................. 10.0 11.1 8.8Net Earnings ............................................................................ 9.8 12.3 7.9StrategyNICBM’s strategy is to maintain its existing dominant position in Kuwait’s building materials sectorand to establish a substantial presence in other GCC countries. Management is committed tomaintaining sufficient manufacturing capacity against the risk that investment returns maydiminish in the future.NICBM’s growth strategy in its core business has three components:• Horizontal growth – investing in new factories to serve the local market with new productlines. Examples include a current study on the feasibility of ceramics and porcelainproduction and on steel billets production.• Vertical growth – increasing capacity in existing product lines to meet local demand inKuwait and regional demand in the GCC region. Examples include the recent expansion incapacity for gas aerated concrete blocks and small diameter high density polyethylene.Reducing industrial costs by increasing in house production of specialised products is partof this strategy.• Regional growth – increasing capacity in other growing markets. The recent expansionalongside a local partner in Riyadh and in Jeddah, Saudi Arabia of autoclaved aeratedconcrete blocks and slabs and also in a plant in the UAE serve as examples of this strategyin operation.NICBM also intends to engage in real estate development as a means of distributing its buildingmaterials that is additional to its existing channels. NIG does not intend that real estatedevelopment will be entered into to generate a purely financial return, other than the impendingredevelopment of the current NIG head office site which is due to be completed in August 2007.Corporate StructureThe principal shareholder in NICBM is NIG with a 51 per cent. shareholding. NIG appoints threemembers of the five member board of directors and the general assembly elects the remainingtwo members, with each director serving a term of three years. Once established, the board ofdirectors decides upon the appointment of the chairman, vice chairman and the managing director(the chairman is also appointed as managing director). The current chairman was reappointed fora further three-year term on 6 March 2005. The chairman of the board of directors is also themanaging director. The general manager is responsible for the day-to-day management of NICBMthrough a team of executive managers.The remaining shares are owned by various private sector individuals, none with a shareholdinggreater than five per cent. NICBM’s shares are traded on the “industrial” section of the KSE.NICBM is therefore regulated as a listed company by the KSE.73

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:19 pm – mac5 – 3776 Section 07 : 3776 Section 07Specialist EngineeringIn 1996, NIG acquired BI Group, a listed company in the UK, which is the parent company for agroup of specialist engineering companies. BI Group has manufacturing and stockist operations inthe UK, Continental Europe and the US. NIG’s ownership in the BI Group is ultimately heldthrough NIG Group Bahrain EC (NIGG), a Bahrain holding company.The operational activities of the BI Group are focused on three divisions: Engineering; Plastics; andMetals. The following table sets out a revenue breakdown of each of BI Group’s divisions for theyears ended 31 December 2006, 2005 and 2004.31 December11111111111111234200411112005111120061111(£ thousand)Engineered products .............................................................. 57,353 51,239 45,563Plastics .................................................................................... 24,906 17,413 13,390Metals...................................................................................... 37,290111142,570111150,5741111Total ........................................................................................ 119,549 1111111,222 1111109,5271111Engineering DivisionThe Engineering division includes the following companies, each of which are wholly owned by BIGroup:• George Wilson Industries (GWI): GWI manufactures new gas meters and gas regulatorsand rebuilds, repairs, and recalibrates old meters in accordance with standards set by theregulators in each of its markets. GWI gas meters are used in residential, commercial andindustrial buildings.• GMT GmbH (GMT): GMT manufactures new gas meters and regulators in Germany for usein residential, commercial and industrial properties as well as providing products to GWI forcalibration, completion and onward sale.• Diamond H Controls (Diamond H): Diamond H supplies ISO 9001 certified control andswitching equipment products used in household gas appliances. Diamond H has anotherfactory based in Long Gang, China, which manufactures products for Diamond H Controlsas well as sourcing and manufacturing components for third parties and other companieswithin NIG.• Prestige Industrial: Prestige Industrial services, the industrial and craft bakeware industrysupplying new and re-glazed baking trays, and ancillary equipment such as trolleys and flattrays.• Prestige Medical: Prestige Medical manufactures autoclaves which are sold into the dental,podiatry, beauty, medical, tattoo and other sectors principally in the UK but also around theworld.Plastics DivisionThe Plastics division includes the following companies, each of which are wholly owned by BIGroup:• BI Composites (BIC): BIC manufactures components for the Automotive, Off-highway andspecialist vehicle sectors in the UK. Products are manufactured using Polyurethane andComposite Technologies, applied in plastic injection moulding (PIM), Vacuum Forming,Polyurathane Mouldings (self skinning), Structural Reaction injection moulding (SRIM) and74

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:19 pm – mac5 – 3776 Section 07 : 3776 Section 07Resin Transfer Moulding (RTM). BIC holds TS16949 and ISO 9001 certification as well asvarious other customer quality accreditations. Major customers include Bentley Motors,Land Rover, JCB, LTI, Aston Martin and Dennis Eagle. Products include door panels,armrests, headrests, handles, consoles, vehicle hoods, body panels and load floors.• Cinpres Gas Injection (CGI): CGI is the leading worldwide provider of equipment,technology and customer support services for gas assisted moulding. CGI sells equipmentand licenses around the World. Gas assisted moulding is an important process for leadingcar manufacturers in Europe, the US and the Far East as well as to consumer, electronic andother sectors.Metals DivisionThe Metals division consists of the UCB companies wholly owned by BI Group (except for thestockist in Italy which is 60 per cent. owned by BI Group). These consist of four foundries (locatedin the UK, Spain and Czech Republic) and eleven stockist/machinists located in the UK, Germany,France, Spain, Sweden, Austria, Czech Republic, Italy and the USA. The division manufactures,sells and distributes mehanite continuous cast iron bars. Together the UCB businesses representEurope’s largest producer of continuous cast iron bars. The properties of continuous cast iron barsmake it ideal for hydraulic, pneumatic, machinery, machine tool and many other applications. UCBcompanies serve the automotive, glass, oil & gas, machine tool and many other industry sectorswith their branded ‘Unibar’ products.PetrochemicalsIn 1996, NIG established Ikarus (formerly known as the National Company for Cement Industries).Ikarus is 72 per cent. owned by NIG and its objective is to engage in the development of aninvestment in local and regional petroleum and petrochemicals ventures.As at 31 December 2006, Ikarus had equity investments in companies listed on the KSE with avalue of approximately KD 25 million. In addition, Ikarus holds a direct equity interest in thefollowing companies:Saudi International Petrochemical Company (SIPCHEM)SIPCHEM was founded in Saudi Arabia in September 1998 and in November 2006 had a fully paidup share capital of US$533 million. Ikarus and the Al-Zamil Group are the largest shareholders,with Ikarus holding 8 per cent. of the issued shares. Other shareholders in SIPCHEM include ArabInvestment Company, Dubai Investment Company, Arab Petroleum Investments Corporation andAl Guoriar Investment Company. SIPCHEM was formed to pursue the production of the followingmajor petrochemicals: butandiol, methanol and acetic acid, vinyl acetate monomer and carbonmonoxide.National Industrialisation Company (Tasnee)Ikarus has a 5 per cent. stake in Tasnee, which was established in 2000 in Saudi Arabia to operatein the petrochemical sector. The principal shareholders of this company are the NationalManufacturing Company (Saudi Arabia), Gulf Investment Company (Saudi Arabia) and Ikarus.Tasnee operates a US$526 million, 500,000 tonnes per year propane dehydrogenation andpolypropylene plant in Jubail, Saudi Arabia. Production began in June 2004.Tasnee has increasedits shareholders’ equity in order to finance its forthcoming projects, which include the constructionof an ethylene and polyolefin complex as well as a methanol and acetic acid complex.75

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:19 pm – mac5 – 3776 Section 07 : 3776 Section 07StrategyIkarus plans to maximize value for its shareholders by strengthening the companies in which it hasan interest through close involvement in all strategic decisions of such companies. To achieve this,Ikarus intends to put in place a management team with extensive operation and commercialexperience in the petroleum and petrochemical industry.Together with NIG, Ikarus has identified a number of regional strategic partners capable ofassisting Ikarus in the implementation and achievement of its long term investment plans, whichreflect its established investment criteria. Currently, Ikarus intends to concentrate on investing inmajority interests in start-up and greenfield projects or in interests of not less than 15 per cent. inlarge and mature operations with stable cash flows.Financial ServicesNoor is a Kuwaiti investment company, engaged in investment and financial activities primarily inKuwait, the Middle East, Asia and other emerging markets. Noor was established as the financialarm of NIG and NIG retains a total of 51 per cent. interest in Noor.Noor currently follows a diversified investment strategy with major investments in private equityand direct investments in capital markets. Noor provides a broad range of financial services, whichincludes advisory services, underwriting and syndications. Noor actively invests in local capitalmarkets and also diversifies its investments through international capital markets, which includeGCC countries and emerging markets such as Pakistan, China and India. Noor also has limitedexposure in Europe and the US.NIG appoints all of the five members of the board of directors.Noor divides its operations into the following three areas:Corporate FinanceThe Corporate Finance department provides a variety of products and services. The activitiesundertaken by the department include:• Investment Strategy & Implementation;• Mergers & Acquisition Advisory;• Valuations;• Hedging & Risk Management;• Capital Raising (Conventional/Islamic);• Local/Foreign Listing;• Long-term Financial Planning;• Innovative Structuring;• Underwriting;• Syndication; and• Placement.The Corporate Finance department is responsible for attracting, establishing and maintainingrelationships with clients in developing and executing their direct investment and divestiturestrategies, as well as for Noor’s proprietary book. The geographic focus of the business is in theMiddle East and Asia, including Pakistan, China and India.76

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:19 pm – mac5 – 3776 Section 07 : 3776 Section 07Local InvestmentsThe Local Investments department is responsible for managing proprietary and client portfolios ofquoted and unquoted securities, real estate and funds in Kuwait. The department is alsoestablishing its own locally focused fund products to market in Kuwait. Noor closely monitorseconomic and financial developments in Kuwait in order to be best placed to actively executeperformance enhancing local investment strategies. The department is comprised of a number ofexperienced local portfolio and fund managers.The Local Investment department actively supports the local Kuwaiti economy by creatinginvestment funds and financing companies to promote local business.International InvestmentsThe International Investments department at Noor is responsible for managing proprietary andclient portfolios of quoted and unquoted securities, real estate and funds that are invested globally.The investments are primarily held in equity funds.The department follows a conservative investment strategy. The main objective is to achievecapital growth through positive returns over the medium term. The fund selection process isresearch driven, underpinned by detailed analysis using both qualitative and quantitativetechniques.The International Investments department has a mandate to invest in managed and alternativeinvestment products, which include the following:• Prime Quality Marketable Securities;• Private Equity Funds;• Real Estate Funds;• Hedge Funds; and• Derivatives and Structured Products.The following table sets out some key figures for Noor as at and for the years ended 31 December2006, 2005 and 2004:200611112005111120041111(KD million)Total Assets ............................................................................ 168.5 114.7 32.6Total Liabilities ........................................................................ 108.4 50.7 51.1Total Shareholders’ Equity ...................................................... 60.1 64 32.5Net Earnings ............................................................................ 15.6 14.9 0.9Market Capitalisation .............................................................. 130 N/A N/AUtilitiesNIG established Combined National Industries for Energy KSCC in 2006 with a share capital of KD50 million. Combined National Industries for Energy KSCC’s objective is to focus on the utilityindustry in the GCC region, the wider Middle East and Asia.NIG owns 100 per cent. of Combined National Industries for Energy KSCC and is planning to puttogether a management team consisting of some of the leading figures in the energy and utilitiessector in the region.77

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:19 pm – mac5 – 3776 Section 07 : 3776 Section 07Combined National Industries for Energy KSCC intends to concentrate on power generationthrough independent power plants and independent water power plants, together with water(mainly desalination) and wastewater and other utility related projects such as district cooling.Combined National Industries for Energy KSCC hopes to capitalise on the investmentopportunities in the water sector and the power generation sector. In particular, NIG expects thedemand for electricity to grow over the next ten years and accordingly expects governments toinvest in increasing their electricity generation capacity.Oil and Gas ServicesProclad is a specialised engineering, designing, manufacturing and project management companyand has provided services to multinational and regional operators and contractors in the oil, gasand power generation industries through its facilities located in Europe, the Middle East and theFar East for over 30 years. NIG acquired a 100 per cent. stake in Proclad when it acquired BI Groupin 1996.Proclad provides the oil, gas and power generation industries with the concept of turnkey withservices offered from the level of oil or gas wells up to the storage tanks’, including the processeswhich take place in between. Proclad’s principal activity is therefore the manufacture and supplyof clad pipe, bends, elbows, flanges and all associated clad piping products.Proclad’s strategy lies in providing cost effective and competitive services to the oil and gasindustry. Proclad believes its competitive advantage lies in the fact that it provides an integratedcorrosion resistant solution, by offering a total packaged supply of pipes.Within the Proclad group, there are six UK based companies, a company based in the UAE and acompany based in China. It also has two companies established in Singapore where it can havebetter access to international markets. Proclad is also in the process of building a factory in JebalAli, in the UAE.STRATEGIC AND FINANCIAL INVESTMENTSThe composition of NIG’s investments as at 31 December 2006, 2005 and 2004 was as follows:200611112005111120041111(KD million)Investments in joint-ventures (1) ................................................ 285 253 762Investments in associated companies .................................... 125,912 120,911 62,628Available-for-sale investments.................................................. 426,399 368,451 125,048Investments at fair value through statement of income ........ 456,165 386,741 222,825Murabaha and wakala investments (2) ...................................... 57,608 – –Investment properties (3) .......................................................... 267 2,267 2,556Notes:(1) This represents a joint venture in Mexico with the specialist engineering group in the UK, which manufactures gasmetres.(2) These investments pay a return of between 6 and 8.5 per cent. per annum and mature during 2007.(3) This represents properties in the UK.NIG classifies its investments as strategic investments and financial investments. Strategicinvestments are usually investments made in one of the industries of the operating businessesand in which NIG will take active involvement, for example by having a representative on the boardof directors of such company. In comparison, NIG will have limited or no involvement in theoperation of its financial investments. Such investments are usually in funds or debt and otherfinancial market products. Strategic investments may be accounted for as associates (where NIGhas significant influence but not control) or certain available for sale investment securities.78

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:19 pm – mac5 – 3776 Section 07 : 3776 Section 07Financial investments may be accounted for as available for sale investments or as investments atfair value through the statement of income. Investments at fair value through the statement ofincome are initially recognised at cost, being the fair value of the consideration given excludingtransaction costs. These investments are either “held for trading” or designated as investmentsat fair value through the statement of income when acquired. Held for trading investments areacquired principally for the purpose of selling or repurchasing them in the near term or are a partof a portfolio of identified financial instruments that are managed together and for which there isevidence of a recent actual pattern of short term profit taking. After initial recognition, investmentsat fair value through statement of income are re-measured at fair value and changes in fair valueare recognised in the consolidated statement of income.Available for sale investments are those investments that are designated as available for sale orare not classified as another type of investment. NIG’s policy is that unrealised changes in the fairvalue of available for sale investments are booked in shareholders’ equity as cumulative changesin fair value until realised, when the realised gain (or loss) is booked in the profit and loss account.Strategic InvestmentsNIG’s principal strategic investments are:Kuwait Cement Company (KCC)In 1968 NIG acquired a 22 per cent. stake in KCC, a company listed on the KSE, and the largestcement company in Kuwait. KCC’s production plant was commissioned in 1972 with an initialgrinding capacity of approximately 300,000 tonnes per annum, which has since increased to 2million tonnes per annum. KCC has embarked on a reverse integration project to produce clinkerwith a production capacity equivalent to 1.8 million tonnes per annum at a cost of US$142 million,which is now operational. The objective of the clinker is to harness the natural resources availablefor clinker production in Kuwait and reduce dependency on raw material imports.Mabanee Company SAK (Mabanee)In 1994, NIG acquired 100 per cent. of Mabanee’s shares from the Kuwait Investment Authoritywith a view to participating in the construction and contract management sector. Pursuant to theacquisition, Mabanee’s capital was increased to KD 30 million. In 2005, NIG sold 51.5 per cent. ofits holding through a rights issue and new management was put in place to steer Mabaneetowards more value added activities in real estate development.In 2004 and 2005, NIG sold 36.6 per cent. of the shares in Mabanee, leaving it with a holding of17 per cent. The aggregate profit realised on the sale was approximately KD 73 million.Kuwait Rocks Company (KRC)In 1996, NIG acquired 38 per cent. of KRC, which is one of the leading Kuwaiti companies dealingin the import and sale of gravel and rocks. KRC has been successful in marketing Gabro gravel androcks in Kuwait, and has concluded several long term contracts to supply governmental projects,particularly those related to building roads.Industrial Bank of Kuwait (IBK)In 1973, NIG acquired a 4.5 per cent. stake in the Industrial Bank of Kuwait (IBK). IBK wasestablished in 1973 with the primary goal of promoting industrial development in Kuwait byinitiating projects and investments in promising sectors, financing new and existing projects inKuwait and the Gulf region (especially where Kuwaiti interests are involved) and bringing newtechnology to Kuwait.79

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:19 pm – mac5 – 3776 Section 07 : 3776 Section 07Global Investment HouseIn 1998, NIG acquired a 5 per cent. stake in Global Investment House. Global Investment Houseis a Kuwait investment company that was established in 1998 with a paid up capital of KD 27.8million. Global Investment House is involved in local initial public offerings, portfolio and fundmanagement in the GCC markets, brokerage services, corporate finance projects, securities andforeign exchange trading, as well as international initial public offerings.Egyptian Kuwaiti Holding Company (EKHC)In 1997, NIG acquired a 5.25 per cent. stake in EKHC. EKHC’s shares are listed on the KSE. Itoperates as a venture capital and buyout company, and has investments in several small tomedium size companies.Dana Gas PJSC (Dana Gas)In 2005, NIG acquired 2.3 per cent of Dana Gas PJSC, which was one of the first regional privatesector natural gas resource enterprises to be established in the Gulf. It holds assets andcontractual entitlements to a private sector integrated natural gas supply chain in the Gulf. Inaddition to commencing the operation of its existing assets, Dana Gas plans to expand itsbusiness by pursuing natural gas opportunities throughout the Gulf as well as the wider MiddleEast and North Africa region.Jordan Telecommunications CompanyIn 2006, NIG acquired 10 per cent. of Jordan Telecom, which is currently listed on the AmmanStock market. France Telecom owns 51 per cent. of Jordan Telecom.Other investments in this category include:% owned1111CompanyKuwait National Real Estate Investment and Services Company KSCC........................ 16Kuwait Privatisation Project Company SAKC.................................................................. 28Al Raya International Real Estate KSCC ........................................................................ 23Marsa Alam KSCC .......................................................................................................... 20United Stainless Steel KSCC.......................................................................................... 10Bayan Holding Company KSCC ...................................................................................... 6.2Most strategic investments are included in the accounts as available for sale investments.However, there are a few investments in the trading portfolio which might be regarded asstrategic. These include the holdings in Al Ahlia Insurance Co, Global Investment House,Contracting & Marine Services Co and Livestock Transport & Trading Co.Available for sale investmentsAvailable for sale investments may be categorised by NIG as strategic or financial. As at 31December 2006, available for sale investments included quoted and unquoted equity holdings ofKD 350.4 million and KD 76.0 million in managed funds. The managed funds are diversified over135 different funds and investments. No single investment exceeds KD 1.8 million, other than thesingle largest investment of KD 3.4 million. NIG has a wide spread of investments withoutsignificant sector or geographical concentrations.80

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:19 pm – mac5 – 3776 Section 07 : 3776 Section 07As at 31 December 2006, NIG’s available for sale investments were as follows:(KD ‘000)11112International managed funds.......................................................................................... 75,990Valued based on fund manager valuation reportUnquoted equity participations ...................................................................................... 141,866Valued based on NIG’s share of net assets of the company; noting any items in thebalance sheet which might negatively affect its fair valueQuoted shares................................................................................................................ 208,543Valued based on bid price11112Total .............................................................................................................................. 426,39911112Significant available for sale holdings of equity investments include Mabanee, IBK, GlobalInvestment House, EKHC and:• Boubyan International Industries Holding Company – This company was established byBoubyan Petrochemical Co (BPC) at the end of July 2004 to invest in industrial companiesin Kuwait and abroad. BPC holds 20 per cent. and NIG holds 10 per cent.• Bawabet Al Kuwait Holding Company – This is a Kuwaiti company that was formed to holdan investment in a new fertiliser plant in Egypt. NIG holds a 10 per cent. stake.• Kuwait-Jordan Holding Company – In the fourth quarter of 2004, NIG acquired a KD 3.15million stake in this newly formed company. The total capital of the company is KD 30million. Other shareholders include Kuwait Investment Co, Kuwait Pipe Industries & OilServices Co, National Investment Co and National Bank of Kuwait.Financial investmentsNIG’s financial investments can be categorised as both available for sale and investments at fairvalue through statement of income. Available for sale investments are described above.Investments at fair value through statement of income at 31 December 2006 comprised:(KD ‘000)11112Quoted shares................................................................................................................ 268,924Local funds .................................................................................................................... 153,305Valued based on NAV published; primarily open ended funds. Investment classis listed companies in KSEInternational managed portfolios and funds .................................................................. 33,936Valued based on portfolio and fund manager valuation11112Total .............................................................................................................................. 456,16511112Equity investmentsNIG’s equity investments are categorised as Financial Investments. The sector percentagebreakdown of NIG’s equity investments (however classified) at 31 December 2006 was as follows:Per cent.11112Banks.............................................................................................................................. 32Investment companies .................................................................................................. 19Insurance........................................................................................................................ 5Real estate .................................................................................................................... 18Services.......................................................................................................................... 6Industrial ........................................................................................................................ 12Others ............................................................................................................................ 881

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:19 pm – mac5 – 3776 Section 07 : 3776 Section 07NIG’s principal strategic investments outside Kuwait as at 31 December 2006 were as follows:Country ofYear ofOperations111112Stake (%)111112investment111112InvestmentSaudi International Petrochemical Company(SIPCHEM) ............................................................ Saudi Arabia 8.00 1999National Industrialisation Company (Tasnee) ............ Saudi Arabia 5.00 2000Egyptian Kuwait Holding Company .......................... Egypt 5.25 1997Kuwait Syrian Holding Company .............................. Syria 10.00 2002Iraq Holding Company .............................................. Kuwait 4.2 2003Kuwait Jordan Holding Company .............................. Jordan 10.00 2004Jordan Telecom ........................................................ Jordan 10.00 2006Dana Gas .................................................................. UAE 2.3 2005Karachi Electric Supply Company.............................. Pakistan 28.6 2005Investment Policies and Risk ManagementIn 2004, NIG, in co-operation with KPMG, implemented a complete set of investment policies,which include guidance and procedures for risk management. These are closely followed for bothlocal and international investments. Investment reports are presented to the InvestmentCommittee at their weekly meetings. The Investment Committee is committed to complying withNIG’s defined investment thresholds and approval protocols.MAJOR SHAREHOLDERSAs at 31 December 2006, NIG’s share capital was KD 107 million comprising 1,070.3 millionshares of 100 fils nominal value each. NIG benefits from a strong and stable shareholder base.Approximately 30 per cent. of NIG’s shares are held by major institutional investors, 29 per cent.are held by prominent Kuwaiti trading families, including the Al-Khorafi, Al Rabia, Al-Rashid, Al-Saad, Al-Fulaij and Behbehani groups whilst the rest are largely held by the general public. Theshares of NIG are traded on both the KSE and the DFM.The only two shareholders who own in excess of 5 per cent. of the total outstanding shares areKuwait Cement Company (8 per cent.) and Public Institute of Social Security (5 per cent.).INSURANCENIG believes that it has all the necessary insurance policies for the operation of its businesses andthat each of its subsidiaries (whether local or international) which need insurance cover havesatisfactory cover.INFORMATION TECHNOLOGY (IT)Currently, NICBM’s IT department also services NIG’s IT requirements. NIG is in the process ofconstructing a new head office in Kuwait and intends to provide a new integrated IT system forthis office. NIG expect to invest up to US$1 million on this system in the next six months. Thissystem will also improve NIG’s back-up systems, which will be located both in a separate buildingto the head office and off-site.REGULATIONNIG is committed to complying with the requirements of the numerous regulatory bodies whichimplement the laws and regulations which apply to NIG, including the KSE, the Dubai FinancialMarket and the Ministry of Commerce and Industry.82

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:19 pm – mac5 – 3776 Section 07 : 3776 Section 07INTERNAL AUDITInternal audit functions are performed by NIG’s central internal audit unit. This unit hasimplemented an audit manual which applies to each of NIG’s subsidiaries, unless that subsidiaryhas outsourced its internal audit function to a local audit firm (which, in order to ensureindependence, cannot be NIG’s usually appointed external audit firm), which is the case for NICBMand Noor. Each subsidiary’s accounts are reviewed by NIG’s internal audit unit on a quarterly basis.The findings of the internal audit unit are reported to the board of directors on a quarterly basis. Inaccordance with the KSE’s requirements, NIG submits its unconsolidated interim financialstatements within 45 days of the end of the relevant financial period. Each of NIG’s subsidiarieshas its own compliance procedures. NIG’s compliance procedures are approved by the Ministry ofCommerce and reviewed by the Central Bank of Kuwait on a yearly basis.DIRECTORS, MANAGEMENT AND EMPLOYEESThe following chart sets out the management structure of NIG:Board of DirectorsGreen Field InvestmentsChairman & Managing DirectorGeneral ManagerInternalAuditHuman Resources&AdminstrationGroup FinancialControllerDirectInvestmentsLocalInvestmentsInformationTechnologyShareRegistryPrivate EquityInvestmentsInternationalInvestmentsHumanResourcesFinancialAccountingLocalSubsidiariesManagedInvestmentsPrivate EquityInvestmentsAdministrationManagementAccountingForeignSubsidiariesEquityInvestmentsManagedInvestmentsTreasuryAssociatesCash/BankPayrollNIG’s articles of association provide that it shall be managed by a board of directors consisting ofnine members elected by the shareholders at the general assembly meeting. The term of boardmembership is three years, subject to renewal. The board may appoint directors, including thechairman, to serve as managing directors of NIG whose duties and responsibilities are determinedby the board.The current chairman of the board of directors is also the managing director. A general managerreports to the managing director and is responsible for the day-to-day management of theCompany through a team of executive managers.The board of directors has one committee, the investment committee which consists of threedirectors. The Investment Committee develops, monitors and enforces the investment strategy ofNIG and any potential investments by NIG’s subsidiaries which exceed US$50 million must beapproved by the Investment Committee.83

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:19 pm – mac5 – 3776 Section 07 : 3776 Section 07Board of DirectorsThe table below lists the members of NIG’s board of directors:Name111Position1111Saad Mohammed Al-SaadChairman and managing directorSulaiman Hamad Al-DalaliDeputy chairmanAli Morad BehbehaniDirectorSalah Khalid Al-FulaijDirectorMaha Khalid Al-GhunaimDirectorHusam Fawzi Al-KharafiDirectorAbdul Aziz Ibrahim Al-Rabiah DirectorFahed Mizied Al-RajaanDirectorKhalid Abdul Mohsen Al-Rashed DirectorMr. Saad Mohamed Al-Saad. Mr. Al-Saad became chairman and managing director of NIG in2004. In 1973 he was appointed as deputy chairman and managing director of NIG. Prior to thathe was a member of the board of Kuwait National Petroleum Company (1971-1975). Mr. Al-Saadis also a director of a number of NIG’s associated companies including Kuwait Cement Company,Saudi Sand Line Bricks and Building Materials Company and Gulf Cable and Electrical IndustriesCo. Mr. Al-Saad obtained a bachelor’s degree in business from Cairo University in 1968.Mr. Sulaiman Hamad Al-Dalali. Mr. Al-Dalali was elected as deputy chairman of NIG in 2004. Heis the chairman and managing director of Ahlia Insurance Company since 1999. Also at present,Mr. Al-Dalali is a board member of three companies, which are Kuwait Financial Centre-Kuwait,Arab Life Insurance Company-Lebanon and Arab & Accident Insurance Company-Jordan. Hegraduated with a degree in business from Cairo University in 1968.Mr. Ali Morad Behbehani. Mr. Behbehani was elected to the board of NIG in 1996. He is the vicepresident of Morad Yousef Behbehani and a director of Kuwait Insurance Company and KuwaitNational Cinema Company. Mr. Behbehani holds a bachelor’s degree in English literature fromKuwait University.Mr. Salah Khalid Al-Fulaij. Mr. Al-Fulaij was elected to the board of NIG in 1995. He is vicepresident of Khalid Al Fulaij & Sons Company which is involved in banking, real estate andinvestments. Mr. Al-Fulaij is also vice president of Sulaiman Al-Fulaij Trading and ContractingCompany. Mr. Al-Fulaij has been a director of Gulf Bank, the second largest bank in Kuwait, since1992. He graduated with a degree in business administration and economics from Emporia StateUniversity in the United States in 1979.Mrs. Maha Khalid Al-Ghunaim. Mrs. Al-Ghunaim was elected to the Board of NIG in 1996. Mrs.Al-Ghunaim is a specialist in investment management and sits on the boards of various investmentfunds. She is currently a director of Industrial Bank of Kuwait (1999) and is Chairman and ManagingDirector of Global Investment House. Mrs. Al-Ghunaim graduated from San Francisco StateUniversity with a BSc in mathematics.Mr. Husam Fawzi Al-Kharafi. Mr. Al-Kharafi was elected to the board of NIG in 2007. In addition,he has been chairman of Noor Financial Investment Company since 2005 and a member of theboard of National Real Estate Company since 2004. He was a member of the board of MabaneeCompany from 1998 to 2005 and Harf Company from 1999 to 2004. Mr. Al-Kharafi has heldnumerous positions in M.A. Al-Kharafi & Sons WLL Kuwait and has been the assistant generalmanager since 2002.Mr. Abdul Aziz Ibrahim Al-Rabiah. Mr Al-Rabiah was elected to the board of NIG in 1979. He hasbeen general manager of Mohammed Abdullah Al-Rabiah & Partners Company since 1981. He wasalso a director of Kuwait Cement Company (1992-1998) and Kuwait Pipe Industries & Oil Services84

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:19 pm – mac5 – 3776 Section 07 : 3776 Section 07Co. (1980-1992). Mr. Al-Rabiah graduated with a degree in accounting from Kuwait University in1975.Mr. Fahed Mizied Al-Rajaan. Mr Al-Rajaan was elected to the Board of NIG in 1996. Mr. Al-Rajaanwas chairman and managing director of the Kuwait Real Estate Consortium and director generalof the Social Security Department in Kuwait, a position he still holds. Mr. Al-Rajaan is also chairmanof the London branch of the United Bank of Kuwait, and of Wafra Investment Advisory Group andaboard member of the International Investor, Kuwait. Mr. Al-Rajaan graduated with a degree inbusiness administration from the American University in Washington D.C.Mr. Khalid Abdul Mohsen Al-Rashed. Mr. Al-Rashed was elected to the board of NIG in 1996.Mr. Al-Rashed is a director of a number of Kuwaiti companies including Kuwait OilfieldMaintenance Center Co., Tanima Trading and Contracting Co., the Gulf Travel Agency and SteamcoShipping Agency. Mr. Al-Rashed graduated with a degree in management and marketing fromWestern Oregon State College in 1983.The business address of each of the foregoing persons is PO Box 417, Safat 13005, State ofKuwait. There are no potential conflicts of interest between the duties of the members of theboard of directors to NIG and their private interests or other duties.Executive ManagementThe executive management team of NIG is responsible for running the daily operations of thecompany. The current members of the team are:Mr. Ahmed Mohammed Hassan. Mr Hassan has been with NIG since 1977. He was promotedto his current position as NIG’s General Manager – Group Finance Manager in 1998. He is currentlya board member of NICBM. He holds a graduate degree in Accounting from Ain Shams University.Mr. Reyadh Salem Al Edrissi. Mr Al Edrissi joined NIG in 1999 as a Deputy Manager forPetrochemical Projects. At present he is the Executive Manager for Petrochemical Projects. He isa board member of several companies such as Eastern United Petroleum Services, SIPCHEM, andSajaa Gas. He holds a Masters degree in Chemical Engineering from Kuwait University and aBachelor in Chemical Engineering from Newcastle University.Mr. Mubasher Hussien Sheikh. Mr Sheikh has been employed by NIG since 2001. He has beenpromoted to Group Financial Controller in 2005. Previously he was an Audit Manager in GrantThornton International from 1996. He is currently a board member in KESC and member of theboard of management of Proclad Group LLC. He graduated with a degree in Mathematics andStatistics from Punjab University, Pakistan and is a Chartered Certified Accountant UK (FCCA).Mr. Faisal Abdel Aziz Al Nassar. Mr Al Nassar joined NIG in 2005 as the Executive Manager forCorporate affairs. Earlier he worked in the Tax Department in the Ministry of Finance and he alsoworked for the State Audit Bureau. He graduated from Kuwait University with a Bachelor degreein Accounting 1998.85

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:19 pm – mac5 – 3776 Section 07 : 3776 Section 07EmployeesAs at 31 December 2006, NIG and its consolidated subsidiaries employed 1,815 full time staff inKuwait and 1,807 internationally.The following table sets out the number of employees in each Core Operating Business as at31 December 2006.Building Specialist Financial Oil andMaterials Engineering Petrochemicals Services Utilities Gas Services111112 111112 111112 111112 111112 111112Number ofEmployees.................. 1,733 1,310 8 64 14 49386

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:19 pm – mac5 – 3776 Section 08 : 3776 Section 08SUMMARY OF THE PRINCIPAL TRANSACTION DOCUMENTSThe following is a summary of certain provisions of the principal Transaction Documents and isqualified in its entirety by reference to the detailed provisions of the principal TransactionDocuments. Copies of the Transaction Documents will be available for inspection at the offices ofthe Principal Paying Agent (as defined in the Conditions).The Master Trust Deed, as supplemented by each Supplemental Trust DeedThe Master Trust Deed will be entered into on or around 13 August 2007 between NIG, the Issuer,the Trustee and the Delegate and will be governed by English law. A Supplemental Trust Deedbetween the same parties will be entered into on the Issue Date of each Series of TrustCertificates and will also be governed by English law.Upon issue of the Global Trust Certificate initially representing the Trust Certificates of any Series,the Master Trust Deed and the relevant Supplemental Trust Deed shall together constitute the Trustdeclared by the Trustee in relation to such Series.The Trust Assets in respect of each Series of Trust Certificates comprise (unless otherwisespecified in the relevant Supplemental Trust Deed), inter alia, the Issuer’s rights in, to and underthe Mudarabah Assets, its rights under the Transaction Documents and any amounts it may havedeposited in the relevant Transaction Account.The Master Trust Deed specifies that, on or after the relevant Maturity Date or, as the case maybe, Dissolution Date of a Series of Trust Certificates, the rights of recourse in respect of TrustCertificates shall be limited to the amounts from time to time available and comprising the relevantTrust Assets of that Series, subject to the priority of payments set out in the Master Trust Deed,the relevant Supplemental Trust Deed, the relevant Trust Certificates and the Conditions. TheCertificateholders have no claim or recourse against the Issuer or the Trustee in respect of anyamount which is or remains unsatisfied and any unsatisfied amounts will be extinguished.Pursuant to the Master Trust Deed, the Trustee and the Delegate will, in relation to each Series ofTrust Certificates, inter alia:(a)(b)(c)(d)(e)(f)in the case of the Trustee, hold the Trust Assets;in the case of the Delegate, enforce the Trust Assets including, insofar as it is able, takingall reasonably necessary steps to enforce each of the Purchase Undertaking, the MudarabahAgreement and any other relevant Transaction Document if NIG shall have at any time failedto perform its obligations under it;in the case of the Delegate, collect and invest the proceeds of the Trust Assets inaccordance with the terms of the Master Trust Deed and, if applicable, the terms of therelevant Supplemental Trust Deed;in the case of the Delegate, distribute the proceeds of any enforcement of the Trust Assets,as described in the Master Trust Deed;in the case of the Trustee, maintain proper books of account in respect of the relevant Trust;andin each case, take such other steps as are reasonably necessary to ensure that theCertificateholders of each Series receive the distributions to be made to them in accordancewith the Transaction Documents.In the Master Trust Deed the Delegate also undertakes that, inter alia:(a)it may or shall, upon being directed to do so by an Extraordinary Resolution or by the holdersof at least one-fifth of the aggregate face amount of the Trust Certificates then in issue87

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:19 pm – mac5 – 3776 Section 08 : 3776 Section 08(subject, in each case, to being indemnified and/or secured to its satisfaction), enforce theobligations of NIG under the Master Trust Deed, the Purchase Undertaking, the MudarabahAgreement and any other Transaction Document to which NIG is a party; and(b)following the occurrence of a Dissolution Event in respect of any Series of Trust Certificatesand subject to Condition 14, it shall (i) promptly upon becoming aware of the same, notifythe Certificateholders of the occurrence of such Dissolution Event and (ii) take all such stepsas are necessary to enforce the obligations of NIG under the Master Trust Deed, thePurchase Undertaking, the Mudarabah Agreement and any other Transaction Document.A Transaction Account will be established in respect of each Series of Trust Certificates. Moniesreceived in the Transaction Account in respect of each Series will, inter alia, comprise (i) paymentsfrom the Mudarib immediately prior to each Periodic Distribution Date and (ii) amounts receivedfrom the Obligor under a Sale Agreement executed pursuant to the Purchase Undertaking or theSale Undertaking (see “Summary of the Principal Transaction Documents – Purchase Undertaking”and “– Sale Undertaking” below). The Master Trust Deed provides that all monies credited to theTransaction Account in respect of each Series will be applied in the order of priority set out inCondition 5.2.Mudarabah AgreementThe Master Mudarabah Agreement will be entered into on or around 13 August 2007 between theIssuer, the Trustee and the Mudarib and will be governed by English law. A SupplementalMudarabah Agreement between the same parties will be entered into on the Issue Date of eachSeries of Trust Certificates and will also be governed by English law.Pursuant to the Mudarabah Agreement the proceeds of the issue of the relevant Series of TrustCertificates will be applied as the capital of the relevant Mudarabah. The relevant Mudarabah willcommence on the Issue Date of the relevant Series of Trust Certificates and will end on (a) thelater of the Maturity Date and the date on which the relevant Series of Trust Certificates isredeemed in full or (b) in the event that all of the relevant Series of the Trust Certificates isredeemed prior to the Maturity Date, on the day immediately following such redemption. Therelevant capital shall be invested in accordance with an Investment Plan prepared by the Mudariband scheduled to the relevant Supplemental Mudarabah Agreement. The relevant Investment Planwill permit certain investments to be made in NIG’s business activities and will specify theanticipated net return on the capital.The Mudarabah Agreement will provide that the distributable profit generated by the relevantMudarabah will be distributed by the Mudarib to both the Rab al-Maal and the Mudarib inaccordance with the relevant pre-agreed profit-sharing percentages.Under the terms of the Mudarabah Agreement, the Mudarib will acknowledge that NIG Sukuk Ltdis entering into the relevant Supplemental Mudarabah Agreement on the basis of the projectedreturn set out in the relevant Investment Plan and will confirm that, in its view, the projected returnis attainable although it will not in any way guarantee such projected return. If the distributableprofit payable to NIG Sukuk Ltd is greater than the relevant Periodic Distribution Amount, theMudarib shall be entitled to such excess distributable profit for its own account by way of incentivefees for acting as Mudarib. If the distributable profit payable to NIG Sukuk Ltd is less than therelevant Periodic Distribution Amount, the Mudarib shall, as a separate and independentobligation, undertake to provide Sharia compliant funding to ensure that such payments may bemade. The Mudarib will be repaid such Sharia compliant funding from any funds that may beavailable on the next succeeding Periodic Distribution Date in accordance with the priority ofpayments set out in Condition 5.2.The Mudarib shall perform its duties under the Mudarabah Agreement in accordance with allapplicable laws and regulations, with the degree of skill and care that it would exercise in respectof its own assets.88

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:19 pm – mac5 – 3776 Section 08 : 3776 Section 08Other than its share of distributable profit from the Mudarabah and any incentive fee, the Mudaribshall not be entitled to receive any fee for acting as Mudarib.The Mudarib will agree in the Mudarabah Agreement that all payments by it under the MudarabahAgreement will be made without any deductions or withholding for or on account of any taximposed by Kuwait unless required by law and without set-off or counterclaim and, in the eventthat there is any deduction, withholding, set off or counterclaim, the Mudarib shall pay alladditional amounts as will result in the receipt by the Issuer of such net amounts as would havebeen received by it if no withholding, deduction, set-off or counterclaim had been made.Purchase UndertakingThe Purchase Undertaking will be executed on or around 13 August 2007 by the Obligor and willbe governed by English law.The Obligor will irrevocably undertake in favour of NIG Sukuk Ltd (whether in its capacity as Issueror Trustee) and the Delegate to purchase all of the NIG Sukuk Ltd’s rights, benefits andentitlements in and under the Relevant Mudarabah Assets for each Series of Trust Certificates onthe relevant Maturity Date or, if earlier, on the Dissolution Date of the relevant Series of TrustCertificates. The price payable by the Obligor shall be equal to the outstanding face amount of therelevant Series of Trust Certificates plus any accrued but unpaid Periodic Distribution Amounts onsuch date plus all amounts due to the Mudarib in respect of any Sharia compliant fundingadvanced by it (but which has not been repaid) pursuant to the terms of the MudarabahAgreement.The specific terms applicable to each such sale will be confirmed in a Sale Agreement, to beexecuted by the Issuer (including in its capacity as trustee) and the Obligor on the Dissolution Dateor, as the case may be, the Maturity Date of the relevant Series of Trust Certificates. The form ofeach such Sale Agreement is appended to the Purchase Undertaking and each such SaleAgreement will be governed by Kuwaiti law.In the Purchase Undertaking, the Obligor will undertake that, until the Trust Certificates have beenredeemed in accordance with the Conditions, it shall ensure that no indebtedness of, or anyGuarantee of indebtedness given by, it or any of its Subsidiaries will be subject to anyEncumbrance, other than a Permitted Encumbrance, upon, or with respect to, any of the presentor future business, undertaking, assets or revenues (including any uncalled capital) of the Obligoror any of its Subsidiaries unless the Obligor shall, in the case of the creation of the Encumbrance,before or at the same time and, in any other case, promptly, take any and all action necessary toensure that:(i)(ii)all amounts payable by it under the Transaction Documents are secured by the Encumbranceequally and rateably with the indebtedness; orsuch other Encumbrance or other arrangement (whether or not it includes the giving of anEncumbrance) is provided as shall be approved by the Certificateholders by an ExtraordinaryResolution or by the Delegate.For these purposes:Encumbrance means(i)(ii)a mortgage, charge, pledge, lien or other encumbrance securing any obligation of anyperson,any arrangement under which money or claims to, or the benefit of, a bank or other accountmay be applied, set off or made subject to a combination of accounts so as to effectdischarge of any sum owed or payable to any person or (iii) any other type of preferentialarrangement (including any title transfer and retention arrangement) having a similar effect.89

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:19 pm – mac5 – 3776 Section 08 : 3776 Section 08Guarantee means, in relation to any indebtedness of any person, any obligation of another personto pay such indebtedness following demand or claim on that person including (without limitation):(a)(b)(c)(d)any obligation to purchase such indebtedness;any obligation to extend financing, to purchase or subscribe shares or other securities or topurchase assets or services in order to provide funds for the payment of such indebtedness;any indemnity against the consequences of a default in the payment of such indebtedness;andany other agreement to be responsible for such indebtedness.Permitted Encumbrance means:(i)(ii)(iii)any Encumbrance in respect of any indebtedness or Guarantee, provided that the aggregateoutstanding amount secured thereby shall not at any time exceed an amount equal to 5 percent. of the aggregate of the share capital and reserves of NIG and its Subsidiaries, asprovided in its most recent audited consolidated accounts or the most recent un-auditedpublished reviewed consolidated interim financial statements;any Encumbrance created or outstanding with the prior written approval of the Delegate orof an Extraordinary Resolution of the Certificateholders; and/orany lien arising by operation of law and in the normal course of business, if such lien isdischarged within 90 days of arising.A Subsidiary of a company or corporation shall be construed as a reference to any company orcorporation:(a)(b)(c)which is controlled, directly or indirectly, by the first-mentioned company or corporation; ormore than half the issued share capital of which is beneficially owned, directly or indirectly,by the first-mentioned company or corporation; orwhich is a subsidiary of another subsidiary of the first-mentioned company or corporation,and, for these purposes, a company or corporation shall be treated as being controlled by anotherif that other company or corporation is able to direct its affairs and/or to control the compositionof its board of directors or equivalent body.In addition, the Obligor has agreed that each of the following events will constitute an NIG Event:(a)(b)(c)NIG (acting in any capacity) fails to pay any amount payable pursuant to any TransactionDocument; orNIG (acting in any capacity) fails to perform or observe any of its covenants and/orobligations under any Transaction Document for a period of 30 days after notice is given toNIG by the Delegate to remedy such breach (except where such failure is, in the opinion ofthe Trustee, not capable of remedy when no such notice shall be required); orany indebtedness of NIG, or any guarantee or indemnity given by NIG in respect ofindebtedness of others, is not paid when due or within any originally applicable grace periodor becomes due and payable prior to its specified maturity (and, in the case of a guaranteeor indemnity, is called) provided that it shall not constitute an NIG Event unless theaggregate amount (or its equivalent in U.S. dollars) of such indebtedness, guarantee orindemnity, either alone or when aggregated with all other indebtedness, guarantee orindemnity which shall remain unpaid or unsatisfied, as the case may be, shall be more thanUS$10,000,000; or90

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:19 pm – mac5 – 3776 Section 08 : 3776 Section 08(d)(e)(f)(g)(h)(i)(j)NIG takes any corporate action or other steps are taken or legal proceedings are started forits winding-up, nationalisation, dissolution, administration or re-organisation (whether byway of voluntary arrangement, scheme of arrangement or otherwise) or for the appointmentof a liquidator, receiver, administrator, administrative receiver, conservator, custodian,trustee or similar officer of it or of any substantial part or all of its revenues and assets savefor the purposes of reorganisation on terms approved by the Delegate or by an ExtraordinaryResolution; orNIG ceases to carry on the whole or a substantial part of its business save for the purposesof reorganisation on terms previously approved by the Delegate or an ExtraordinaryResolution; orNIG is unable to pay its debts as they fall due, commences negotiations with its creditorsas a whole or any one or more classes of its creditors with a view to the generalreadjustment or rescheduling of its indebtedness or makes a general assignment for thebenefit of or a composition with its creditors; orany execution or distress is levied against, or an encumbrancer takes possession of, thewhole or any substantial part of the property, undertaking or assets of NIG or any eventoccurs which under the laws of any jurisdiction has a similar or analogous effect; orNIG fails to comply with or pay any sum or sums which in aggregate amount to not less thanUS$10,000,000 due from it under any final non-appealable judgment or any final nonappealableorder made or given by any court of competent jurisdiction and such failurecontinues for a period of 30 days next following the service by the Delegate on NIG of noticerequiring the same to be paid/remedied; orby or under the authority of any government or governmental body, (A) the management ofNIG is wholly or partially displaced or the authority of NIG in the conduct of its business iswholly or partially curtailed or (B) all or a majority of the issued shares of NIG or the wholeor any part of its revenues or assets is seized, nationalised, expropriated or compulsorilyacquired; orat any time it is or becomes unlawful for NIG (acting in any capacity) to perform or complywith any or all of its obligations under or in respect of the Transaction Documents or any ofthe material (in the opinion of the Delegate) obligations of NIG (acting in any capacity)thereunder are not or cease to be legal, valid, binding and enforceable,provided, however, that (except in the case of paragraph (a), (c), (d), (e), (f) and (h) above), suchevent will only constitute an NIG Event if the Delegate has certified in writing to the Issuer thatsuch event, in the opinion of the Delegate, is materially prejudicial to the interests ofCertificateholders.For this purpose, the winding-up, dissolution or administration of a company or corporationshall be construed so as to include any equivalent or analogous proceedings under the law of thejurisdiction in which such company or corporation is incorporated or any jurisdiction in which suchcompany or corporation carries on business including the seeking of liquidation, winding-up,reorganisation, dissolution, administration, arrangement, adjustment, protection or relief ofdebtors.The Obligor will agree in the Purchase Undertaking that all payments by it under the PurchaseUndertaking will be made without any deduction or withholding for or on account of tax unlessrequired by law and without set-off or counterclaim and, in the event that there is any deduction,withholding, set off or counterclaim, the Obligor shall pay all additional amounts as will result inthe receipt by the Issuer of such net amounts as would have been received by it if no withholding,deduction, set-off or counterclaim had been made.91

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:19 pm – mac5 – 3776 Section 08 : 3776 Section 08The payment obligations of the Obligor under the Purchase Undertaking are and will be direct,unconditional, unsecured and general obligations of the Obligor and shall rank at least pari passuwith all other unsecured, unsubordinated and general obligations of the Obligor.Sale UndertakingThe Sale Undertaking will be entered into on or around 13 August 2007 by the Issuer in favour ofNIG and will be governed by English law.Pursuant to the Sale Undertaking, subject to the Issuer being entitled to redeem the relevantSeries of Trust Certificates pursuant to Condition 11.2 or 11.3, NIG may, by exercising its optionunder the Sale Undertaking and serving notice on the Issuer no later than 60 days prior to therelevant Dissolution Date, oblige the Trustee to sell all the Trustee’s rights, benefits andentitlements in and to the Relevant Mudarabah Assets on the relevant Dissolution Date. The pricepayable by NIG will be an amount equal to the outstanding face amount of the relevant Series ofTrust Certificates plus any accrued but unpaid Periodic Distribution Amounts on such date plus allamounts due to the Mudarib in respect of any Sharia compliant funding advanced by it (but whichhas not been repaid) pursuant to the terms of the Mudarabah Agreement.The specific terms applicable to each such sale will be confirmed in a Sale Agreement, to beexecuted by the Issuer (including in its capacity as Trustee) and the Obligor on the Dissolution Dateor, as the case may be, the Maturity Date of the relevant Series of Trust Certificates. The form ofeach such Sale Agreement is appended to the Purchase Undertaking and each such SaleAgreement will be governed by Kuwaiti law.Costs UndertakingThe Costs Undertaking will be entered into on or about 13 August 2007 by NIG and will begoverned by English law. Pursuant to the Costs Undertaking, NIG will undertake to pay certainfees and expenses of, and indemnify against certain losses of, among others, the Delegate, thePrincipal Paying Agent, the Transfer Agent, the Calculation Agent and the Registrar.92

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:19 pm – mac5 – 3776 Section 08 : 3776 Section 08TAXATIONThe following is a general description of certain tax considerations relating to the Trust Certificates.It does not purport to be a complete analysis of all tax considerations relating to the TrustCertificates. Prospective purchasers of Trust Certificates should consult their tax advisers as to theconsequences under the tax laws of the country of which they are resident for tax purposes ofacquiring, holding and disposing of Trust Certificates and receiving payments of profit, face amountand/or other amounts under the Trust Certificates. This summary is based upon the law as in effecton the date of this Base Prospectus and is subject to any change in law that may take effect aftersuch date.KuwaitThe following summary of the anticipated tax treatment in Kuwait in relation to the payments onthe Trust Certificates is based on the taxation law and practice in force at the date of this BaseProspectus, and does not constitute legal or tax advice and prospective investors should be awarethat the relevant fiscal rules and practice and their interpretation may change. Prospectiveinvestors should consult their own professional advisers on the implications of subscribing for,buying, holding, selling, redeeming or disposing of Trust Certificates and the receipt of any PeriodicDistribution Amounts and other payments (whether or not on a winding-up) with respect to suchTrust Certificates under the laws of the jurisdictions in which they may be liable to taxation.Income tax is levied on the net income and capital gains of any foreign “corporate entity” thatconducts business in Kuwait. In practice, the Department of Income Tax does not collect tax fromKuwaiti companies whose capital is wholly owned by Kuwaiti or Gulf Co-operation Council (GCC)nationals.A foreign “corporate entity” would not be considered as conducting business in Kuwait by reasononly of the holding of the Trust Certificates, receiving any payments under the Trust Certificates orreceiving any capital gain on the disposal thereof.Individuals are not subject to any Kuwaiti income tax on their income or capital gains.For the purposes of this section, the term “corporate entity” includes a partnership. The term“foreign corporate entity” would not include a corporate entity established in one of the countriescomprising the GCC whose owners comprise only nationals of the GCC states. The GCC statesare Kuwait, Saudi Arabia, Bahrain, Qatar, Oman and the United Arab Emirates.Cayman IslandsThere are no income, corporation, capital gains or other taxes in effect in the Cayman Islands onthe basis of present legislation. The Issuer has applied for and expects to obtain an undertakingfrom the Governor in Cabinet of the Cayman Islands, pursuant to the Tax Concessions Law (asrevised) of the Cayman Islands, that for a period of 20 years from the date of grant of thatundertaking no law which is enacted in the Cayman Islands imposing any tax to be levied onprofits, income, gains or appreciation shall apply to the Issuer or its operations and, in addition,that no tax to be levied on profits, income, gains or appreciations which is in the nature of estateduty or inheritance tax shall be payable on or in respect of the shares, debentures or otherobligations (which includes the Trust Certificates) of the Issuer or by way of the withholding inwhole or part of any relevant payment. No capital or stamp duties are levied in the Cayman Islandson the issue, transfer or redemption of Trust Certificates. However, an instrument transferring titleto such Trust Certificates, if brought to or executed in the Cayman Islands, would be subject toCayman Islands stamp duty. An annual registration fee is payable by the Issuer to the CaymanIslands Registrar of Companies which is calculated by reference to the nominal amount of itsauthorised capital. At current rates, this annual registration fee is approximately US$575. Theforegoing is based on current law and practice in the Cayman Islands and this is subject to changetherein.93

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:19 pm – mac5 – 3776 Section 08 : 3776 Section 08EU Savings DirectiveUnder EC Council Directive 2003/48/EC on the taxation of savings income, Member States arerequired to provide to the tax authorities of another Member State details of payments of interest(or similar income, which may include Periodic Distribution Amounts) paid by a person within itsjurisdiction to an individual resident in that other Member State. However, for a transitional period,Belgium, Luxembourg and Austria are instead required (unless during that period they electotherwise) to operate a withholding system in relation to such payments (the ending as of suchtransitional period being dependent upon the conclusion of certain other agreements relating toinformation exchange with certain other countries). A number of non-EU countries and territoriesincluding Switzerland have adopted similar measures (a withholding system in the case ofSwitzerland) with effect from the same date.94

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:19 pm – mac5 – 3776 Section 09 : 3776 Section 09SUBSCRIPTION AND SALEThe Dealers have, in a programme agreement (the Programme Agreement) dated on or around13 August 2007, agreed with the Issuer and NIG a basis upon which they or any of them may fromtime to time agree to purchase Trust Certificates. Any such agreement will extend to those mattersstated under “Terms and Conditions of the Trust Certificates”. In the Programme Agreement, eachof the Issuer and NIG has agreed to reimburse the Dealers for certain of their expenses inconnection with the establishment and any future update of the Programme and the issue of TrustCertificates under the Programme.United StatesThe Trust Certificates have not been and will not be registered under the Securities Act and maynot be offered or sold within the United States or to, or for the account or benefit of, U.S. personsexcept in accordance with Regulation S under the Securities Act or pursuant to an exemption fromthe registration requirements of the Securities Act. Each Dealer has represented and agreed thatit has offered and sold any Trust Certificates, and will offer and sell any Trust Certificates (a) as partof their distribution at any time and (b) otherwise until 40 days after the completion of thedistribution of all Trust Certificates of the Series of which such Trust Certificates are a part asdetermined and certified as provided below, only in accordance with Rule 903 of Regulation Sunder the Securities Act. Each Dealer who purchases Trust Certificates of a Series (or in the caseof a sale of a Series of Trust Certificates issued to or through more than one Dealer, each of suchDealers as to the Trust Certificates of such Series to be purchased by or through it or, in the caseof a syndicated issue, the relevant Lead Manager) shall determine and certify to the PrincipalPaying Agent the completion of the distribution of the Trust Certificates of such Series. On thebasis of such notification or notifications, the Principal Paying Agent has agreed to notify suchDealer/Lead Manager of the end of the distribution compliance period with respect to such Series.Each Dealer has also agreed that, at or prior to confirmation of sale of Trust Certificates, it will havesent to each distributor, dealer or person receiving a selling concession, fee or other remunerationthat purchases Trust Certificates from it during the distribution compliance period a confirmationor notice to substantially the following effect:“The Securities covered hereby have not been registered under the U.S. Securities Act of1933, as amended (the Securities Act), and may not be offered or sold within the UnitedStates or to, or for the account or benefit of, U.S. persons (i) as part of their distribution atany time or (ii) otherwise until 40 days after the completion of the distribution of theSecurities as determined and certified by the relevant Dealer, in the case of a nonsyndicatedissue, or the Lead Manager, in the case of a syndicated issue, and except ineither case in accordance with Regulation S under the Securities Act. Terms used abovehave the meanings given to them by Regulation S.”Terms used in this sub-section have the meanings given to them by Regulation S.Each Dealer has represented and agreed, and each further Dealer appointed under the Programmewill be required to represent and agree, that it, its affiliates or any persons acting on its or theirbehalf have not engaged and will not engage in any directed selling efforts with respect to anyTrust Certificate, and it and they have complied and will comply with the offering restrictionsrequirement of Regulation S.European Economic AreaIn relation to each Member State of the European Economic Area which has implemented theProspectus Directive (each, a Relevant Member State), each Dealer has represented and agreed,and each further Dealer appointed under the Programme will be required to represent and agree,that with effect from and including the date on which the Prospectus Directive is implemented inthat Relevant Member State (the Relevant Implementation Date) it has not made and will not95

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:19 pm – mac5 – 3776 Section 09 : 3776 Section 09make an offer of Trust Certificates which are the subject of the offering contemplated by the BaseProspectus as completed by the final terms in relation thereto to the public in that RelevantMember State, except that it may, with effect from and including the Relevant ImplementationDate, make an offer of such Trust Certificates to the public in that Relevant Member State:(a)(b)if the final terms in relation to the Trust Certificates specify that an offer of those TrustCertificates may be made other than pursuant to Article 3(2) of the Prospectus Directive inthat Relevant Member State (a Non-exempt Offer), following the date of publication of aprospectus in relation to such Trust Certificates which has been approved by the competentauthority in that Relevant Member State or, where appropriate, approved in anotherRelevant Member State and notified to the competent authority in that Relevant MemberState, provided that any such prospectus has subsequently been completed by the finalterms contemplating such Non-exempt Offer, in accordance with the Prospectus Directive,in the period beginning and ending on the dates specified in such prospectus or final terms,as applicable;at any time to legal entities which are authorised or regulated to operate in the financialmarkets or, if not so authorised or regulated, whose corporate purpose is solely to invest insecurities;(c) at any time to any legal entity which has two or more of (i) an average of at least 250employees during the last financial year; (ii) a total balance sheet of more than €43,000,000and (iii) an annual net turnover of more than €50,000,000, as shown in its last annual orconsolidated accounts;(d)(e)at any time to fewer than 100 natural or legal persons (other than qualified investors asdefined in the Prospectus Directive) subject to obtaining the prior consent of the relevantDealer or Dealers nominated by the Issuer for any such offer; orat any time in any other circumstances falling within Article 3(2) of the Prospectus Directive,provided that no such offer of Notes referred to in (b) to (e) above shall require the Issuer or anyDealer to publish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement aprospectus pursuant to Article 16 of the Prospectus Directive.For the purposes of this provision, the expression an offer of Trust Certificates to the public inrelation to any Trust Certificates in any Relevant Member State means the communication in anyform and by any means of sufficient information on the terms of the offer and the Trust Certificatesto be offered so as to enable an investor to decide to purchase or subscribe the Trust Certificates,as the same may be varied in that Member State by any measure implementing the ProspectusDirective in that Member State and the expression Prospectus Directive means Directive2003/71/EC and includes any relevant implementing measure in each Relevant Member State.United KingdomEach Dealer has represented and agreed, and each further Dealer appointed under the Programmewill be required to represent and agree, that:(a)(b)it has only communicated or caused to be communicated and will only communicate orcause to be communicated an invitation or inducement to engage in investment activity(within the meaning of Section 21 of the FSMA) received by it in connection with the issueor sale of any Trust Certificates in circumstances in which Section 21(1) of the FSMA doesnot apply to the Issuer or NIG; andit has complied and will comply with all applicable provisions of the FSMA with respect toanything done by it in relation to any Trust Certificates in, from or otherwise involving theUnited Kingdom.96

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:19 pm – mac5 – 3776 Section 09 : 3776 Section 09KuwaitEach Dealer has represented and agreed, and each further Dealer appointed under the Programmewill be required to represent and agree, that the Trust Certificates have not been and will not beoffered, sold or promoted or advertised by it in the State of Kuwait other than in compliance withthe Decree Law No. 31 of 1990, as amended, and the Ministerial Order No. 113 of 1992, asamended governing the issue, offering and sale of securities.In particular, each Dealer has agreed that, and each further Dealer appointed under Programmewill be required to agree that, no private or public offering of the Trust Certificates may be madein Kuwait, no agreement relating to the sale of any Trust Certificates may be concluded in Kuwaitand no marketing or solicitation or inducement activities may be used to offer or market any TrustCertificates in Kuwait.United Arab EmiratesEach Dealer has acknowledged and agreed, and each further Dealer appointed under theProgramme will be required to represent and agree, that:(a)(b)the Trust Certificates to be issued under the Programme have not been and will not bepublicly offered, sold or promoted or advertised by it in the United Arab Emirates other thanin compliance with any laws applicable in the United Arab Emirates governing the issue,offering and sale of securities; andthe information contained in this Base Prospectus does not constitute an offer of securitiesin the United Arab Emirates in accordance with the Commercial Companies Law (FederalLaw No. 8 of 1986 (as amended)) or otherwise and is not intended to be a public offer andthe information contained in this Base Prospectus is not intended to lead to the conclusionsof any contract of whatsoever nature within the territory of the United Arab Emirates.Kingdom of Saudi ArabiaEach Dealer has acknowledged, and each further Dealer appointed under the Programme will berequired to acknowledge, that the Trust Certificates may only be offered and sold in the Kingdomof Saudi Arabia in accordance with the Offer of Securities Regulations issued by the Board of theSaudi Capital Markets Authority in 2004, as amended (the Regulations).The Regulations state that if securities are offered to no more than 60 offerees in the Kingdom ofSaudi Arabia and the minimum consideration payable is not less than the US$ equivalent of SaudiRiyals 1 million per offeree, such offer of securities shall be deemed to be an exempt offer for thepurposes of the Regulations, but is subject to the following restrictions on secondary marketactivity:(a)(b)(c)(d)A Saudi Investor (the transferor) who has acquired Trust Certificates pursuant to this exemptoffer may not offer or sell Trust Certificates to any person (referred to as a transferee) unlessthe price to be paid by the transferee for such Trust Certificates equals or exceeds SR1million.If the provisions of paragraph (a) cannot be fulfilled because the price of the Trust Certificatesbeing offered or sold to the transferee has declined since the date of the original exemptoffer, the transferor may offer or sell the Trust Certificates to the transferee if their purchaseprice during the period of the original exempt offer was equal to or exceeded SR1 million.If the provisions of paragraphs (a) and (b) cannot be fulfilled, the transferor may offer or sellTrust Certificates if he/she sells his entire holding of Trust Certificates to one transferee.The provisions of paragraphs (a), (b) and (c) shall apply to all subsequent transferees of theTrust Certificates.97

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:19 pm – mac5 – 3776 Section 09 : 3776 Section 09Kingdom of BahrainEach Dealer has represented, warranted and undertaken, and each further Dealer appointed underthe Programme will be required to represent, warrant and undertake, that it has not offered andwill not offer Trust Certificates to the Public (as defined in Articles 142-146 of the CommercialCompanies Law (decree Law No. 21/2001) of Bahrain) in Bahrain.Dubai International Financial CentreEach Dealer has represented and agreed, and each further Dealer appointed under the Programmewill be required to represent and agree, that it has not offered and will not offer Trust Certificatesto any person in the Dubai International Financial Centre unless such offer is (a) deemed to be an“Exempt Offer” in accordance with the Offered Securities Rules of the Dubai Financial ServicesAuthority (the Rules); and (b) made only to persons of a type specified in the Rules.MalaysiaEach Dealer has acknowledged and each further Dealer appointed under the Programme will berequired to acknowledge, that the offer of Trust Certificates in Malaysia can only be made toinvestors specified in Schedules 2, 3 and 5 of the Securities Commission Act 1993 (i.e.,sophisticated investors, e.g. unit trust schemes, licensed dealers, closed-end funds, fundmanagers, licensed financial institutions, licensed offshore banks, licensed insurance companies,corporations with total net assets exceeding ten million Malaysian ringgit or its equivalent inforeign currencies, statutory bodies and pension funds).Hong KongEach Dealer has represented and agreed, and each further Dealer appointed under the Programmewill be required to represent and agree, that:(a)(b)it has not offered or sold and will not offer or sell in Hong Kong, by means of any document,any Trust Certificates other than (i) to persons whose ordinary business is to buy or sellshares on debentures (whether as principal or agent); or (ii) in other circumstances which donot result in the document being an offer to the public within the meaning of the CompaniesOrdinance (Cap. 32) (the CO); or (iii) to “professional investors” within the meaning of theSecurities and Futures Ordinance (Cap. 571) (the SFO) and any rules made under the SFO;or (iv) in other circumstances which do not result in the document being a “prospectus”which do not constitute an offer to the public within the meaning of the CO; andit has not issued or had in its possession for the purposes of issue, and will not issue or havein its possession for the purposes of issue (in each case whether in Hong Kong orelsewhere), any advertisement, invitation or document relating to any Trust Certificates,which is directed at, or the contents of which are likely to be accessed or read by, the publicin Hong Kong (except if permitted to do so under the laws of Hong Kong) other than withrespect to any Trust Certificates which are or are intended to be disposed of only to personsoutside Hong Kong or only to “professional investors” within the meaning of the SFO andany rules made under the SFO.Cayman IslandsEach Dealer has represented and agreed, and each further Dealer appointed under the Programmewill be required to represent and agree, that it shall not make any invitation to the public in theCayman Islands to subscribe for any Trust Certificates.98

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:19 pm – mac5 – 3776 Section 09 : 3776 Section 09GeneralEach Dealer has agreed, and each further Dealer appointed under the Programme will be requiredto agree, that it will (to the best of its knowledge and belief) comply with all applicable securitieslaws and regulations in force in any jurisdiction in which it purchases, offers, sells or delivers TrustCertificates or possesses or distributes this Base Prospectus and will obtain any consent, approvalor permission required by it for the purchase, offer, sale or delivery by it of Trust Certificates underthe laws and regulations in force in any jurisdiction to which it is subject or in which it makes suchpurchases, offers, sales or deliveries and none of the Issuer, NIG and any other Dealer shall haveany responsibility therefor.None of the Issuer, NIG and any of the Dealers represents that Trust Certificates may at any timelawfully be sold in compliance with any applicable registration or other requirements in anyjurisdiction, or pursuant to any exemption available thereunder, or assumes any responsibility forfacilitating any such sale.With regard to each Series, the relevant Dealer will be required to comply with any additionalrestrictions agreed between the Issuer, NIG and the relevant Dealer and set out in the applicableFinal Terms.99

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:19 pm – mac5 – 3776 Section 09 : 3776 Section 09GENERAL INFORMATIONAuthorisationThe establishment of the Programme and the issue of Trust Certificates have been duly authorisedby a resolution of the Board of Directors of the Issuer dated 18 July 2007. The Issuer has obtainedall necessary consents, approvals and authorisations in the Cayman Islands in connection with theissue and performance of the Trust Certificates. The entry into the Transaction Documents to whichit is a party (other than any supplemental documents specific to a particular Series) was authorisedby the Board of Directors of NIG on 21 July 2007.Listing of Trust CertificatesIt is expected that each Series of Trust Certificates which is to be admitted to the Official List andto trading on the London Stock Exchange’s Gilt Edged and Fixed Interest Market will be admittedseparately as and when issued, subject only to the issue of a Global Trust Certificate initiallyrepresenting the Trust Certificates of such Series. Application has been made to the UK ListingAuthority for Trust Certificates issued under the Programme to be admitted to the Official List andto the London Stock Exchange for such Trust Certificates to be admitted to trading on the LondonStock Exchange’s Gilt Edged and Fixed Interest Market. The listing of the Programme in respect ofTrust Certificates is expected to be granted on or before 16 August 2007.Documents AvailableFor the period of 12 months following the date of this Base Prospectus, copies of the followingdocuments will, when published, be available for inspection from the registered office of theIssuer and from the specified office of the Paying Agent for the time being in London:(a)(b)(c)(d)(e)(f)(g)the Memorandum and Articles of Association of the Issuer;the consolidated audited financial statements of NIG in respect of the financial years ended31 December 2005 and 31 December 2006. NIG currently prepares audited consolidatedaccounts on an annual basis;the most recently published consolidated audited annual financial statements of NIG andthe most recently published consolidated unaudited interim financial statements (if any) ofNIG. NIG currently prepares unaudited consolidated interim accounts on a quarterly basis;the Programme Agreement, the Master Trust Deed, the Master Mudarabah Agreement, theAgency Agreement, the Purchase Undertaking, the Sale Undertaking and the forms of theGlobal Trust Certificate and the Trust Certificates in definitive form;each Supplemental Trust Deed and Supplemental Mudarabah Agreement in relation to TrustCertificates which are admitted to listing, trading and/or quotation by any listing authority,stock exchange and/or quotation system;a copy of this Base Prospectus;any future offering circulars, prospectuses, information memoranda and supplementsincluding Final Terms (save that a Final Terms relating to a Trust Certificate which is neitheradmitted to trading on a regulated market in the European Economic Area nor offered in theEuropean Economic Area in circumstances where a prospectus is required to be publishedunder the Prospectus Directive will only be available for inspection by a holder of such TrustCertificate and such holder must produce evidence satisfactory to the Issuer and thePrincipal Paying Agent as to its holding of Trust Certificates and identity) to this BaseProspectus and any other documents incorporated herein or therein by reference; and100

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:19 pm – mac5 – 3776 Section 09 : 3776 Section 09(h)in the case of each issue of Trust Certificates which is listed on the London Stock Exchangesubscribed pursuant to a subscription agreement, the subscription agreement (or equivalentdocument).Clearing SystemsThe Trust Certificates have been accepted for clearance through Euroclear and Clearstream,Luxembourg (which are the entities in charge of keeping the records). The appropriate CommonCode and ISIN for each Series of Trust Certificates allocated by Euroclear and Clearstream,Luxembourg will be specified in the applicable Final Terms. If the Trust Certificates are to clearthrough an additional or alternative clearing system the appropriate information will be specified inthe applicable Final Terms.The address of Euroclear is Euroclear Bank SA/NV, 1 Boulevard du Roi Albert II, B-1210 Brussselsand the address of Clearstream, Luxembourg is Clearstream Banking, 42 Avenue JF Kennedy, L-1855 Luxembourg.Significant or Material ChangeThere has been no significant change in the financial or trading position of NIG and its subsidiariessince 31 March 2007 and there has been no material adverse change in the financial position orprospects of NIG and its subsidiaries since 31 December 2006.There has been no significant change in the financial or trading position of the Issuer and nomaterial adverse change in the financial position or prospects of the Issuer, in each case, since thedate of its incorporation.LitigationNone of the Issuer or NIG (including any of its subsidiaries) is or has been involved in anygovernmental, legal or arbitration proceedings (including any such proceedings which are pendingor threatened of which the Issuer or NIG is aware) in the 12 months preceding the date of thisdocument which may have or have in such period had a significant effect on the financial positionor profitability of the Issuer or NIG (including any of its subsidiaries).AuditorsThe auditors of NIG are Grant Thornton Anwar Al-Qatami and Co., certified accountants, who haveaudited NIG’s accounts, without qualification, in accordance with IFRS (as implemented in Kuwait)for each of the two financial years ended on 31 December 2006. The auditors of NIG have nomaterial interest in NIG.Dealers transacting with NIGCertain of the Dealers and their affiliates have engaged, and may in the future engage, ininvestment banking and/or commercial banking transactions with, and may perform services for,NIG (and its affiliates) in the ordinary course of business.101

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10 : 3776 Section 10FINANCIAL INFORMATIONAuditor’s review report in respect of the interim financial statements of NationalIndustries Group Holding Company S.A.K. for the three months ended 31 March 2007 F-2Interim financial statements of National Industries Group Holding Company S.A.K.for the three months ended 31 March 2007.................................................................. F-3Auditors’ report in respect of the consolidated financial statements of NationalIndustries Group Holding Company S.A.K. for the year ended 31 December 2006...... F-13Consolidated financial statements of National Industries Group Holding CompanyS.A.K. for the year ended 31 December 2006 .............................................................. F-15Auditors’ report in respect of the consolidated financial statements of NationalIndustries Group Holding Company S.A.K. for the year ended 31 December 2005...... F-48Consolidated financial statements of National Industries Group Holding CompanyS.A.K. for the year ended 31 December 2005 .............................................................. F-49F-1

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10a : 3776 Section 10aReview reportTo the board of directors ofNational Industries Group Holding – SAKKuwaitReport on review of interim consolidated financial informationIntroductionWe have reviewed the accompanying consolidated balance sheet of National Industries GroupHolding (A Kuwaiti Shareholding Company) (“the parent company”) and subsidiaries (“the group”),as of 31 March 2007 and the related consolidated statements of income, changes in equity andcash flows for the three-month period then ended. The parent company’s directors are responsiblefor the preparation and presentation of this interim consolidated financial information inaccordance with International Accounting Standard 34, “Interim Financial Reporting”. Ourresponsibility is to express a conclusion on this interim consolidated financial information basedon our review.Scope of ReviewWe conducted our review in accordance with International Standard on Review Engagements2410, “Review of Interim Financial Information Performed by the Independent Auditor of theEntity.” A review of interim consolidated financial information consists of making inquiries,primarily of persons responsible for financial and accounting matters, and applying analytical andother review procedures. A review is substantially less in scope than an audit conducted inaccordance with International Standards on Auditing and consequently does not enable us toobtain assurance that we would become aware of all significant matters that might be identifiedin an audit. Accordingly, we do not express an audit opinion.ConclusionBased on our review, nothing has come to our attention that causes us to believe that theaccompanying interim consolidated financial information is not prepared, in all material respects,in accordance with International Accounting Standard 34, “Interim Financial Reporting”.Report on review of other legal and regulatory requirementsBased on our review, the interim consolidated financial information is in agreement with the booksof the parent company. We further report that, to the best of our knowledge and belief, noviolations of the Commercial Companies Law of 1960 nor of the articles of association of theparent company, as amended, have occurred during the period that might have had a materialeffect on the business of the group or on its financial position.Abdullatif M. Al-Aiban (CPA)(Licence No. 94-A)of Grant Thornton – Anwar Al-Qatami & Co.Abdullatif A.H. Al-Majid(Licence No. 70-A)of Allied AccountantsMoores Rowland InternationalKuwait1 May 2007F-2

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10a : 3776 Section 10aConsolidated statement of incomeThree Threemonths monthsended 31 ended 31March 2007 March 2006Note (Unaudited)111112(Unaudited)111112KD ‘000 KD ‘000Sales .................................................................................. 28,734 19,533Cost of sales ...................................................................... (23,391)111112(15,410)111112Gross profit ...................................................................... 5,343 4,123Investments income .......................................................... 3 74,899 2,638Share of profits of associates ............................................ 3,450 3,240Other operating income...................................................... 802 161Distribution costs................................................................ (1,583) (1,019)General, administrative and other expenses ...................... (4,738)111112(4,340)111112Profit from operations...................................................... 78,173 4,803Finance costs...................................................................... (10,213) (6,074)Profit on partial disposal of associate ................................ – 559Profit on partial disposal of subsidiaries ............................ – 30,226Impairment in value of goodwill ........................................ (1,250) –Gain on foreign exchange .................................................. 717111112135111112Profit for the period .......................................................... 67,427 29,649Taxation .............................................................................. (172) (73)Provision for contribution to Kuwait Foundation for theAdvancement of Sciences .............................................. (662) (448)Provision for Directors’ remuneration ................................ (50) (50)Provision for National Labour Support Tax .......................... (1,318)111112(1,624)111112Net profit for the period .................................................. 65,225 11111227,454111112Attributable to:Shareholders of the parent ................................................ 59,788 28,560Minority interest ................................................................ 5,437111112(1,106)11111265,225 27,454111112 111112111112 111112Earnings per share attributable to the shareholders of theparent company .............................................................. 4 54 Fils 11111233 Fils111112The notes set out on pages 8 to 13 form an integral part of this interim consolidated financialinformation.F-3

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10a : 3776 Section 10aConsolidated balance sheet31 March 31 Dec. 31 March2007 2006 2006Note (Unaudited)111112(Audited)111112(Unaudited)111112KD ‘000 KD ‘000 KD ‘000AssetsNon-current assetsGoodwill ................................................................ 12,371 13,586 9,843Property, plant and equipment .............................. 32,441 31,465 28,656Investment in associates ...................................... 145,954 125,912 120,936Investment in joint ventures .................................. – 285 255Investment properties............................................ – 267 2,282Available for sale investments .............................. 5 482,663 426,399 352,140Deferred tax .......................................................... 152111112151111112–111112Total non-current assets...................................... 673,581111112598,065111112514,112111112Current assetsInventories ............................................................ 24,286 23,960 22,541Accounts receivable and other assets .................. 65,898 56,330 130,791Murabaha and wakala investments ...................... 51,785 57,608 –Investments at fair value through statement ofincome .............................................................. 6 544,923 456,165 388,445Short-term deposits .............................................. 182,965 248,758 35,258Bank balances and cash ........................................ 25,97511111216,25811111223,062111112Total current assets ............................................ 895,832111112859,079111112600,097111112Total assets .......................................................... 1,569,413 1111121,457,144 1111121,114,209111112Equity and liabilitiesEquity attributable to shareholders of theparent companyShare capital ........................................................ 107,033 107,033 74,674Treasury shares...................................................... (45,212) (56,378) (40,968)Reserves................................................................ 8 265,977 264,315 115,446Cumulative changes in fair value .......................... 137,592 146,409 186,729Retained earnings .................................................. 320,310111112260,404111112273,596111112785,700 721,783 609,477Minority interest .................................................. 110,896111112111,05711111268,867111112Total equity .......................................................... 896,596 111112832,840 111112678,344111112Non-current liabilitiesBonds payable and Musharka bonds .................... 45,857 45,857 17,550Long-term borrowings .......................................... 79,245 79,710 82,237Leasing creditors .................................................. 34 59 1,035Deferred tax .......................................................... – – 766Provisions .............................................................. 11,61611111211,63811111211,810111112Total non-current liabilities ................................ 136,752111112137,264111112113,398111112Current liabilitiesAccounts payable and other liabilities.................... 55,034 52,203 51,824Bonds payable........................................................ – – 35,000Short-term borrowings .......................................... 454,629 403,185 229,826Due to banks ........................................................ 26,40211111231,6521111125,817111112Total current liabilities ........................................ 536,065111112487,040111112322,467111112Total equity and liabilities .................................. 1,569,413 1111121,457,144 1111121,114,209111112The notes set out on pages 8 to 13 form an integral part of this interim consolidated financialinformation.F-4

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10a : 3776 Section 10aConsolidated statement of changes in equityEquity attributable to shareholders of the parent company11112111111311112111121111211112111121111211112CumulativeShare Treasury Reserves changes in Retained Sub- Minoritycapital 11112 shares 11112 (Note 8) 11112 fair value 11112 earnings 11112 Total 11112 interest 11112 Total11112KD ‘000 KD ‘000 KD ‘000 KD ‘000 KD ‘000 KD ‘000 KD ‘000 KD ‘000Balance at 1 January 2007 .............................................................. 107,033 11112 (56,378) 11112 264,315 11112 146,409 11112 260,404 11112 721,783 11112 111,057 11112 832,84011112Changes in fair value of available for sale investments...................... – – – 19,163 – 19,163 5,406 24,569Share of fair value adjustment in associates...................................... – – – 2,716 – 2,716 – 2,716Realised on sale of available for sale investments ............................ – – – (30,696) – (30,696) – (30,696)Transfer of excess depreciation.......................................................... – – (118) – 118 – – –Profit on disposal of treasury shares.................................................. – – 1,790 – – 1,790 – 1,790Currency translation differences ........................................................ – 11112 – 11112 (10) 11112 – 11112 – 11112 (10) 11112 – 11112 (10)11112Net income/(expense) recognised directly in equity .......................... – – 1,662 (8,817) 118 (7,037) 5,406 (1,631)Net profit for the period .................................................................... – 11112 – 11112 – 11112 – 11112 59,788 11112 59,788 11112 5,437 11112 65,22511112Total recognised income/(expense) for the period ...................... – – 1,662 (8,817) 59,906 52,751 10,843 63,59411112 11112 11112 11112 11112 11112 11112 11112Purchase of treasury shares .............................................................. – (982) – – – (982) – (982)Disposal of treasury shares................................................................ – 11,391 – – – 11,391 – 11,391Issue of shares to staff by utilizing treasury shares .......................... – 757 – – – 757 – 757Dividend paid to minority by the subsidiary ...................................... – – – – – – (11,064) (11,064)Investment made by minority shareholders ...................................... – – – – – – 60 6011112 11112 11112 11112 11112 11112 11112 11112– 11,166 – – – 11,166 (11,004) 16211112 11112 11112 11112 11112 11112 11112 11112Balance at 31 March 2007................................................................ 107,033 (45,212) 265,977 137,592 320,310 785,700 110,896 896,59611112 11112 11112 11112 11112 11112 11112 11112Balance at 1 January 2006 .............................................................. 74,674 (16,800) 115,639 202,342 247,777 623,632 49,878 673,51011112 11112 11112 11112 11112 11112 11112 11112Changes in fair value of available for sale investments...................... – – – (14,876) – (14,876) (1,487) (16,363)Realised on partial disposal of associate............................................ – – – (141) – (141) – (141)Share of fair value adjustment in associates...................................... – – – 13,906 (2,583) 11,323 – 11,323Realised on sale of available for sale investments ............................ – – – (14,502) – (14,502) (5,696) (20,198)Transfer of excess depreciation.......................................................... – – (2) – 2 – – –Currency translation differences ........................................................ – – (41) – – (41) 1 (40)11112 11112 11112 11112 11112 11112 11112 11112Net expense recognised directly in equity ........................................ – (43) (15,613) (2,581) (18,237) (7,182) (25,419)Net profit/(loss) for the period ............................................................ – – – – 28,560 28,560 (1,106) 27,45411112 11112 11112 11112 11112 11112 11112 11112Total recognised income/(expense) for the period ...................... – – (43) (15,613) 25,979 10,323 (8,288) 2,03511112 11112 11112 11112 11112 11112 11112 11112Purchase of treasury shares .............................................................. – (24,168) – – – (24,168) – (24,168)Transfer on partial disposal of subsidiary .......................................... – – (150) – 150 – 17,834 17,834Dividend paid to minority by the subsidiary ...................................... – – – – – – (1,683) (1,683)Investment made by minority shareholders ...................................... – – – – – – 11,236 11,236Share issue expenses incurred by subsidiary on increase of capital – – – – (310) (310) (110) (420)11112 11112 11112 11112 11112 11112 11112 11112– (24,168) (150) – (160) (24,478) 27,277 2,79911112 11112 11112 11112 11112 11112 11112 11112Balance at 31 March 2006................................................................ 74,674 (40,968) 115,446 186,729 273,596 609,477 68,867 678,34411112 11112 11112 11112 11112 11112 11112 11112The notes set out on pages 8 to 13 form an integral part of this interim consolidated financial information.F-5

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10a : 3776 Section 10aConsolidated statement of cash flowsThree Threemonths monthsended 31 ended 31March March2007 2006(Unaudited) (Unaudited)11111 11111KD ‘000 KD ‘000OPERATING ACTIVITIESProfit for the period .................................................................................. 67,427 29,649Adjustments for:Depreciation of property, plant and equipment ...................................... 1,185 908Profit on disposal of property, plant and equipment .............................. (108) –Impairment in value of goodwill.............................................................. 1,250 –Share of profits of associates ................................................................ (3,450) (3,240)Dividend income from available for sale investments ............................ (1,377) (656)Profit on partial disposal of associate .................................................... – (559)Profit on sale of available for sale investments ...................................... (25,913) (20,402)Profit on partial disposal of subsidiaries ................................................ – (30,226)Net provisions (released)/charged .......................................................... (22) 277Finance costs .......................................................................................... 10,213 6,074Interest income ...................................................................................... (3,880) (474)11111 11111Operating profit/(loss) before changes in operating assets and liabilities .. 45,325 (18,649)Changes in operating assets and liabilities:Inventories ............................................................................................ (326) 1,189Accounts receivable and other assets .................................................... (2,764) 48,327Investments at fair value through statement of income ........................ (103,951) 7,732Accounts payable and other liabilities .................................................... 2,429 5,52811111 11111Cash (used in)/from operations .................................................................. (59,287) 44,127Taxation paid .............................................................................................. (101) (11)KFAS contribution paid................................................................................ (1,607) –National Labour Support Tax paid................................................................ (4,299) –11111 11111Net cash (used in)/from operating activities ........................................ (65,294) 44,11611111 11111F-6

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10a : 3776 Section 10aConsolidated statement of cash flows (continued)NoteThree Threemonths monthsended 31 ended 31March March2007 2006(Unaudited) (Unaudited)11111 11111KD ‘000 KD ‘000INVESTING ACTIVITIESPurchase of property, plant and equipment ............................ (973) (1,119)Proceeds from sale of property, plant and equipment............ 383 –Purchase of available for sale investments.............................. (70,550) (36,808)Investment in associated companies ...................................... (5,262) –Proceeds from partial disposal of associate............................ – 914Proceeds on realisation of wakala investments ...................... 4,500 –Proceeds from sale of available for sale investments ............ 37,846 36,504Dividend income received from available for sale investments 629 656Interest income received ........................................................ 4,402 43911111 11111Net cash (used in)/from investing activities ...................... (29,025) 58611111 11111FINANCING ACTIVITIESFinance lease payments.......................................................... (24) (112)Net decrease in long-term borrowings.................................... (465) (15,904)Net increase in short-term borrowings.................................... 51,444 17,742Dividend paid to shareholders of the parent .......................... (24) (89)Finance costs paid .................................................................. (9,400) (5,681)Purchase of treasury shares.................................................... (982) (24,168)Proceed from sales of treasury shares .................................. 12,619 –(Decrease)/increase in minority interest.................................. (11,004) 9,43011111 11111Net cash from/(used in) financing activities ...................... 42,164 (18,782)11111 11111Net increase in cash and cash equivalents ............................ (52,155) 25,920Translation difference .............................................................. 6 511111 11111(52,149) 25,925Cash and cash equivalents at beginning of the period............ 255,972 26,57811111 11111Cash and cash equivalents at end of the period ................ 7 203,823 52,50311111 1111111111 11111The notes set out on pages 8 to 13 form an integral part of this interim consolidated financialinformation.F-7

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10a : 3776 Section 10aNotes to the interim consolidated financial information31 March 20071 Incorporation and ActivitiesNational Industries Group Holding – SAK (‘the parent company’) was incorporated in 1961 as aKuwaiti shareholding company in accordance with the Commercial Companies Law in the State ofKuwait and in April 2003, its status was transformed to a ‘Holding Company’. The parentcompany’s shares are traded on the Kuwait Stock Exchange.The main objectives of the parent company are as follows:– Owning stocks and shares in Kuwaiti or non-Kuwaiti shareholding companies and shares inKuwaiti or non-Kuwaiti limited liability companies and participating in the establishment of,lending to and managing of these companies and acting as a guarantor for these companies.– Lending money to companies in which it owns 20% or more of the capital of the borrowingcompany, along with acting as guarantor on behalf of these companies.– Owning industrial equities such as patents, industrial trade marks, royalties, or any otherrelated rights, and franchising them to other companies or using them within or outside theState of Kuwait.– Owning real estate and moveable property to conduct its operations within the limits asstipulated by law.– Employing excess funds available with the company by investing them in investment andreal estate portfolios managed by specialised companies.The address of the parent company’s registered office is PO Box 417, Safat 13005, State of Kuwait.The board of directors of the parent company approved this interim consolidated financialinformation for issue on 1 May 2007.2 Significant accounting policiesBasis of presentationThis interim consolidated financial information of the group has been prepared in accordance withInternational Accounting Standard 34, “Interim Financial Reporting”. The accounting policies usedin the preparation of the interim consolidated financial information are consistent with those usedin the preparation of the annual audited consolidated financial statements for the year ended 31December 2006.Operating results for the period are not necessarily indicative of the results that may be expectedfor the year ending 31 December 2007.The interim consolidated financial information has been presented in Kuwaiti Dinars (KD) which isthe functional currency of the parent company.F-8

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10a : 3776 Section 10a3 Investments incomeThree Threemonths monthsended 31 ended 31March March2007 2006(Unaudited)11111(Unaudited)11111KD ‘000 KD ‘000Dividend income:– From investments at fair value through statement of income............ 4,510 6,182– From available for sale investments .................................................... 1,377 656Profit on sale of available for sale investments ...................................... 25,913 20,402Realised gain on investments at fair value through statement ofincome ................................................................................................ 5,954 330Unrealised gain on investments at fair value through statement ofincome ................................................................................................ 32,351 (25,879)Income from wakala and murabaha investments .................................. 914 –Interest income ...................................................................................... 3,880111119471111174,899 2,63811111 1111111111 111114 Earnings per share attributable to the shareholders of the parent companyEarnings per share is calculated by dividing the net profit for the period attributable to theshareholders of the parent by the weighted average number of shares outstanding during theperiod as follows:Three Threemonths monthsended 31 ended 31March March2007 2006(Unaudited) (Unaudited)111111 111111Net profit for the period attributable to the shareholders of theparent company (KD ‘000) ............................................................ 59,788 28,560111111 111111Weighted average number of shares outstanding during the period(excluding treasury shares) .......................................................... 1,111,313,450 878,001,401111111 111111Earnings per share ............................................................................ 54 Fils 33 Fils111111 111111The weighted average number of shares outstanding during the previous period has been adjustedto reflect the bonus shares issued during the year ended 31 December 2006.F-9

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10a : 3776 Section 10a5 Available for sale investments31 March 31 Dec. 31 March2007 2006 2006(Unaudited)11111(Audited)11111(Unaudited)11111KD ‘000 KD ‘000 KD ‘000Managed funds.................................................................. 96,715 75,990 60,283Unquoted equity participations.......................................... 131,815 141,866 156,065Quoted shares .................................................................. 254,13311111208,54311111135,79211111482,663 11111426,399 11111352,140111116 Investments at fair value through statement of income31 March 31 Dec. 31 March2007 2006 2006(Unaudited)11111(Audited)11111(Unaudited)11111KD ‘000 KD ‘000 KD ‘000Held for trading:Quoted shares .................................................................. 324,32811111268,92411111203,79211111Designated on initial recognition:Local funds ........................................................................ 174,067 153,305 160,696International managed portfolios and funds ...................... 46,5281111133,9361111123,95711111220,59511111187,24111111184,65311111544,923 11111456,165 11111388,445111117 Cash and cash equivalents31 March 31 Dec. 31 March2007 2006 2006(Unaudited)11111(Audited)11111(Unaudited)11111KD ‘000 KD ‘000 KD ‘000Murabaha and wakala investments – maturing withinthree months ................................................................ 21,285 22,608 –Short-term deposits .......................................................... 182,965 248,758 35,258Bank balances and cash .................................................... 25,975 16,258 23,062Due to banks .................................................................... (26,402)11111(31,652)11111(5,817)11111203,823 11111255,972 1111152,50311111F-10

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10a : 3776 Section 10a8 ReservesGain onSale oftreasuryForeigncurrencyShare Statutory General Revaluation shares translationpremium1111reserve1111reserve1111reserve1111reserve1111reserve1111Total1111KD ‘000 KD ‘000 KD ‘000 KD ‘000 KD ‘000 KD ‘000 KD ‘000Balance at31 December 2006 .......... 152,691 85,334 25,621 350 800 (481) 264,315Transfer of excessdepreciation ...................... – – – (118) – – (118)Currency translationdifferences ........................ – – – 2 – (12) (10)Profit on disposal oftreasury shares .................. –1111–1111–1111–11111,7901111–11111,7901111Balances at31 March 2007.................. 152,691 85,334 25,621 234 2,590 (493) 265,9771111 1111 1111 1111 1111 1111 1111Balance at31 December 2005 .......... 28,234 61,270 25,159 322 236 418 115,639Transfer of excessdepreciation ...................... – – – (2) – – (2)Currency translationdifferences ........................ – – – 2 – (43) (41)Transfer on partialdisposal ofsubsidiary .......................... –1111(150)1111–1111–1111–1111–1111(150)1111Balances at31 March 2006.................. 28,234 61,120 25,159 322 236 375 115,4461111 1111 1111 1111 1111 1111 11119 Segmental analysisThe group’s primary format for reporting segment information is business segments and the groupprimarily operates in three business segments: investment, building materials and specialistengineering. The segment information are as follows:Investment Building materials Specialist engineering Total11112111112 11112111112 11112111112 1111211111231 March 31 March 31 March 31 March 31 March 31 March 31 March 31 March200711112200611112200711112200611112200711112200611112200711112200611112KD ‘000 KD ‘000 KD ‘000 KD ‘000 KD ‘000 KD ‘000 KD ‘000 KD ‘000Segment revenue ...................... 78,349 111125,878 111127,502 111127,438 1111220,348 1111211,554 11112106,199 24,870Less:Investments income.................. (74,899) (2,638)Share of profits of associates.... (3,450) (3,240)Unallocated sales ...................... 8841111254111112Sales as per consolidatedstatement of income ................ 28,734 1111219,53311112Segment profit .......................... 74,681 1111233,891 111121,642 111121,658 11112601 1111273 1111276,924 35,622Finance costs ............................ (10,213) (6,074)Unallocated income .................. 7161111210111112Profit for the period as perconsolidated statement ofincome ...................................... 67,427 29,64911112 11112F-11

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10a : 3776 Section 10a10 General assemblyThe annual general assembly held on 4 April 2007 approved the financial statements and proposeddividends of 70 Fils cash per share and 10% bonus shares for the year ended 31 December 2006.11 Related party transactionsRelated party transactions are entered on terms approved by the group’s management. Significantrelated party transactions and balances included in the consolidated financial statements are asfollows:Three Threemonths monthsended 31 ended 31March March2007 2006(Unaudited)11111(Unaudited)11111KD ‘000 KD ‘000Balance sheetDue from associates and joint ventures ................................................ 11,288 26,420Due from Key management personnel .................................................. 312 577Income statementProfit on partial disposal of subsidiaries.................................................. – 9,800Purchase of raw materials.................................................................... 1,983 1,851Compensation of key management personnel of the groupShort term employee benefits ................................................................ 567 431End of service benefits .......................................................................... 33 11112 Contingent liabilitiesThere have been no significant changes in the contingent liabilities subsequent to 31 December2006.13 Fiduciary assetsOne of the subsidiaries of the group manages portfolios on behalf of related and third parties, andmaintains securities in fiduciary accounts which are not reflected in the group’s balance sheet.Assets under management at 31 March 2007 amounted to KD16,433 thousand (31 December2006: KD10,974 thousand and 31 March 2006 KD7,632 thousand) of which assets managed onbehalf of related parties amounted to KD9,842 thousand (31 December 2006: KD5,438 thousand).14 Capital commitmentsAt the balance sheet date the group had commitments for the purchase of investments and theacquisition of property, plant and equipment totalling KD58,835 thousand (31 December 2006:KD57,092 thousand and 31 March 2006: KD20,158 thousand).F-12

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10b : 3776 Section 10bIndependent auditors’ reportTo the shareholders ofNational Industries Group Holding – SAKKuwaitReport on the Financial StatementsWe have audited the accompanying consolidated financial statements of National Industries GroupHolding (A Kuwaiti Shareholding Company) (“the parent company”) and subsidiaries (“the group”),which comprise the consolidated balance sheet as at 31 December 2006, and the relatedconsolidated statements of income, changes in equity and cash flows for the year then ended, anda summary of significant accounting policies and the explanatory notes.Management’s Responsibility for the Financial StatementsThe parent company’s management is responsible for the preparation and fair presentation ofthese consolidated financial statements in accordance with International Financial ReportingStandards. This responsibility includes: designing, implementing and maintaining internal controlrelevant to the preparation and fair presentation of consolidated financial statements that are freefrom material misstatement, whether due to fraud or error; selecting and applying appropriateaccounting policies; and making accounting estimates that are reasonable in the circumstances.Auditors’ ResponsibilityOur responsibility is to express an opinion on these consolidated financial statements based onour audit. We conducted our audit in accordance with International Standards on Auditing. Thosestandards require that we comply with ethical requirements and plan and perform the audit toobtain reasonable assurance whether the consolidated financial statements are free from materialmisstatement.An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the consolidated financial statements. The procedures selected depend on theauditors’ judgment, including the assessment of the risks of material misstatement of theconsolidated financial statements, whether due to fraud or error. In making those riskassessments, the auditor considers internal control relevant to the entity’s preparation and fairpresentation of the financial statements in order to design audit procedures that are appropriatein circumstances, but not for the purpose of expressing an opinion on the effectiveness of theentity’s internal control. An audit also includes evaluating the appropriateness of accountingpolicies used and the reasonableness of accounting estimates made by management, as well asevaluating the overall presentation of the financial statements.We believe that the audit evidence we have obtained is sufficient and appropriate to provide abasis for our audit opinion.OpinionIn our opinion, the consolidated financial statements present fairly, in all material respects, thefinancial position of the group as at 31 December 2006 and the results of its operations and itscash flows for the year then ended in accordance with International Financial Reporting Standards.Report on Other Legal and Regulatory RequirementsFurthermore, in our opinion proper books of account have been kept by the parent company andthe consolidated financial statements, together with the contents of the report of the parentcompany’s board of directors relating to these consolidated financial statements, are inaccordance therewith. We further report that we obtained all the information and explanations thatF-13

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10b : 3776 Section 10bwe required for the purpose of our audit and that the consolidated financial statements incorporateall information that is required by the Commercial Companies Law of 1960, as amended, and bythe parent company’s articles of association, that an inventory was duly carried out and that, to thebest of our knowledge and belief, no violations of the Commercial Companies Law, as amended,nor of the articles of association have occurred during the year that might have had a materialeffect on the business of the group or on its financial position.Anwar Y. Al-Qatami, F.C.C.A.(Licence No. 50-A)of Grant Thornton – Anwar Al-Qatami & Co.Abdullatif A.H. Al-Majid(Licence No. 70-A)of Allied AccountantsMoores Rowland InternationalKuwait10 February 2007F-14

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10b : 3776 Section 10bConsolidated statement of incomeYear ended Year31 Dec. ended 31Note 200611111Dec. 200511111KD ‘000 KD ‘000Sales ........................................................................................ 99,741 104,740Cost of sales............................................................................ (76,018)11111(82,185)11111Gross profit ............................................................................ 23,723 22,555Income from investments ...................................................... 4 90,772 173,009Share of profits of associates and joint ventures.................... 9,522 15,193Other operating income .......................................................... 4,943 412Distribution costs .................................................................... (6,566) (7,014)General, administrative and other expenses .......................... (16,815)11111(28,079)11111Profit from operations .......................................................... 5 105,579 176,076Profit on partial disposal of associates .................................... 11 559 72,124Net profit/(loss) on disposal of subsidiaries/businesses.......... 6 69,605 (2,357)Finance costs .......................................................................... (30,990) (18,735)Impairment in value of property, plant and equipment .......... – (1,709)Impairment in value of goodwill .............................................. 9 (1,250) (13,086)Gain/(loss) on foreign exchange .............................................. 3,157 (1,865)Provision for onerous property leases and dilapidations ........ – (2,129)Product development costs written off .................................. –11111(183)11111Profit for the year .................................................................. 146,660 208,136Taxation .................................................................................. 7 428 (2,439)Contribution to Kuwait Foundation for the Advancement ofSciences .............................................................................. (1,828) (2,362)Directors’ remuneration .......................................................... (200) (200)National Labour Support Tax.................................................... (3,066)11111(4,581)11111Net profit for the year .......................................................... 141,994 11111198,55411111Attributable to:Shareholders of the parent.................................................. 134,991 189,517Minority interest .................................................................. 7,003111119,03711111141,994 198,55411111 1111111111 11111Earnings per share attributable to the shareholders of theparent .................................................................................. 8 146 Fils 11111235 Fils11111The notes set out on pages 9 to 33 form an integral part of these consolidated financial statementsF-15

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10b : 3776 Section 10bConsolidated balance sheet31 Dec. 31 Dec.Note 200611112200511112KD ‘000 KD ‘000AssetsNon-current assetsGoodwill........................................................................................ 9 13,586 9,776Property, plant and equipment .................................................... 10 31,465 26,406Investment in associates.............................................................. 11 125,912 120,911Investment in joint ventures ........................................................ 12 285 253Investment properties .................................................................. 13 267 2,267Available for sale investments...................................................... 14 426,399 368,451Deferred tax.................................................................................. 15 15111112–11112Total non-current assets ............................................................ 598,06511112528,06411112Current assetsInventories.................................................................................... 16 23,960 23,730Accounts receivable and other assets ........................................ 17 56,330 126,720Murabaha and wakala investments.............................................. 18 57,608 –Investments at fair value through statement of income.............. 19 456,165 386,741Short-term deposits...................................................................... 248,758 34,993Bank balances and cash .............................................................. 16,258111128,71211112Total current assets .................................................................... 859,07911112580,89611112Total assets ................................................................................ 1,457,144 111121,108,96011112Equity and liabilitiesEquity attributable to shareholders of the parent companyShare capital ................................................................................ 20 107,033 74,674Treasury shares ............................................................................ 21 (56,378) (16,800)Reserves ...................................................................................... 23 264,315 115,639Cumulative changes in fair value.................................................. 146,409 202,342Retained earnings ........................................................................ 260,40411112247,77711112721,783 623,632Minority interest ........................................................................ 111,0571111249,87811112Total equity ................................................................................ 832,84011112673,51011112Non-current liabilitiesBonds payable and Musharaka bonds.......................................... 24 45,857 17,527Long-term borrowings .................................................................. 25 79,710 98,141Leasing creditors .......................................................................... 59 1,028Deferred tax.................................................................................. 15 – 761Provisions .................................................................................... 26 11,6381111211,53311112Total non-current liabilities........................................................ 137,26411112128,99011112Current liabilitiesAccounts payable and other liabilities .......................................... 27 52,203 42,249Bonds payable .............................................................................. 24 – 35,000Short-term borrowings ................................................................ 28 403,185 212,084Due to banks ................................................................................ 29 31,6521111217,12711112Total current liabilities................................................................ 487,04011112306,46011112Total equity and liabilities ........................................................ 1,457,144 1,108,96011112 1111211112 11112The notes set out on pages 9 to 33 form an integral part of these consolidated financial statements.F-16

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10b : 3776 Section 10bConsolidated statement of changes in equityEquity attributable to shareholders of the parent company1111111111111111111111111341111111111111111111111111Staff CumulativeShare Treasury bonus Reserves changes in Retained Sub- Minoritycapital shares shares (Note 23) fair value earnings Total interest Total11111 11111 11111 11111 11111 11111 11111 11111 11111KD ‘000 KD ‘000 KD ‘000 KD ‘000 KD ‘000 KD ‘000 KD ‘000 KD ‘000 KD ‘000Balance at 1 January 2006.................................. 74,674 (16,800) – 115,639 202,342 247,777 623,632 49,878 673,510Changes in fair value of available for saleinvestments ...................................................... – – – – (40,275) – (40,275) (1,025) (41,300)Share of fair value adjustment in associates ........ – – – – 9,992 (2,583) 7,409 – 7,409Impairment in value of available for saleinvestments ...................................................... – – – – 1,173 – 1,173 – 1,173Realised on sale of available for saleinvestments ...................................................... – – – – (25,733) – (25,733) (6,292) (32,025)Realised on partial disposal of associates ............ – – – – (141) – (141) – (141)Transfer of excess depreciation ............................ – – – (12) – 12 – – –Currency translation differences ............................ – – – (859) – – (859) 10 (849)Donation for the year 2005 (Note 30).................... – – – – – (5,000) (5,000) – (5,000)11111 11111 11111 11111 11111 11111 11111 11111 11111Net expense recognised directly in equity ............ – – – (871) (54,984) (7,571) (63,426) (7,307) (70,733)Net profit for the year ............................................ – – – – – 134,991 134,991 7,003 141,99411111 11111 11111 11111 11111 11111 11111 11111 11111Total recognised (expense)/income for the year – – – (871) (54,984) 127,420 71,565 (304) 71,26111111 11111 11111 11111 11111 11111 11111 11111 11111Issue of bonus shares (Note 30) .......................... 7,467 – – – – (7,467) – – –Transfer on disposal of subsidiaries ...................... – – – (2,614) (949) 2,614 (949) 51,170 50,221Distributing shares of subsidiary (Note 30) .......... – – – – – (39,577) (39,577) – (39,577)Issue of shares to staff by utilizing treasuryshares (Note 22) ................................................ – 1,059 – – – – 1,059 – 1,059Loss on issue of shares to staff (Note 22) ............ – – – (62) – – (62) – (62)Cash dividend to shareholders of the parentcompany (Note 30) ............................................ – – – – – (42,913) (42,913) – (42,913)Issue of shares (Note 20) ...................................... 24,892 – – 124,457 – – 149,349 – 149,349Purchase of treasury shares .................................. – (45,264) – – – – (45,264) – (45,264)Disposal of treasury shares .................................. – 4,627 – – – – 4,627 – 4,627Profit on disposal of treasury shares .................... – – – 626 – – 626 226 852Transfer to reserves .............................................. – – – 27,140 – (27,140) – – –Investment made by minority shareholders .......... – – – – – – – 11,880 11,880Dividend paid to minority by the subsidiary .......... – – – – – – – (1,683) (1,683)Share issue expenses incurred by subsidiaryon increase of capital ........................................ – – – – – (310) (310) (110) (420)11111 11111 11111 11111 11111 11111 11111 11111 1111132,359 (39,578) – 149,547 (949) (114,793) 26,586 61,483 88,06911111 11111 11111 11111 11111 11111 11111 11111 11111Balance at 31 December 2006 ............................ 107,033 (56,378) – 264,315 146,409 260,404 721,783 111,057 832,84011111 11111 11111 11111 11111 11111 11111 11111 11111F-17

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10b : 3776 Section 10bConsolidated statement of changes in equity (Continued)Equity attributable to shareholders of the parent company1111111111111111111111111341111111111111111111111111Staff CumulativeShare Treasury bonus Reserves changes in Retained Sub- Minoritycapital shares shares (Note 23) fair value earnings Total interest Total11111 11111 11111 11111 11111 11111 11111 11111 11111KD ‘000 KD ‘000 KD ‘000 KD ‘000 KD ‘000 KD ‘000 KD ‘000 KD ‘000 KD ‘000Balance at 1 January 2005 as previouslyreported ............................................................ 70,618 (1,075) 500 93,078 12,452 116,239 291,812 23,985 315,797Adjustment arising from application ofrevised IAS 39 .................................................. – – – – 12,481 (12,481) – – –11111 11111 11111 11111 11111 11111 11111 11111 11111Balance at 1 January 2005 as restated.............. 70,618 (1,075) 500 93,078 24,933 103,758 291,812 23,985 315,79711111 11111 11111 11111 11111 11111 11111 11111 11111Changes in fair value of available for saleinvestments ...................................................... – – – – 165,952 – 165,952 9,697 175,649Share of fair value adjustment in associates ........ – – – – 11,533 – 11,533 – 11,533Impairment in value of available for saleinvestments ...................................................... – – – – 999 – 999 – 999Realised on sale of available for sale investments – – – – (393) – (393) – (393)Realised on partial disposal of associates ............ – – – – (682) – (682) – (682)Transfer of excess depreciation ............................ – – – (11) – 11 – – –Currency translation differences ............................ – – – (1,359) – – (1,359) (10) (1,369)11111 11111 11111 11111 11111 11111 11111 11111 11111Net (expense)/income recognised directly in equity – – – (1,370) 177,409 11 176,050 9,687 185,737Net profit for the year ............................................ – – – – – 189,517 189,517 9,037 198,55411111 11111 11111 11111 11111 11111 11111 11111 11111Total recognised (expense)/income for the year – – – (1,370) 177,409 189,528 365,567 18,724 384,29111111 11111 11111 11111 11111 11111 11111 11111 11111Transfer to retained earnings on adoptionof IFRS: 2 .......................................................... – – (500) – – 500 – – –Issue of staff bonus shares .................................. 500 – – 1,825 – – 2,325 – 2,325Transfer on disposal of subsidiary ........................ – – – (12) – 12 – 540 540Issue of bonus shares .......................................... 3,556 – – – – (3,556) – – –Cash dividend to shareholders of the parentcompany ............................................................ – – – – – (21,079) (21,079) – (21,079)Purchase of treasury shares .................................. – (24,839) – – – – (24,839) – (24,839)Sale of treasury shares.......................................... – 9,114 – – – – 9,114 – 9,114Profit on sale of treasury shares .......................... – – – 236 – 496 732 536 1,268Transfer to reserves .............................................. – – – 21,882 – (21,882) – – –Investment made by minority shareholders .......... – – – – – – – 7,520 7,520Dividend paid to minority by the subsidiary .......... – – – – – – – (1,427) (1,427)11111 11111 11111 11111 11111 11111 11111 11111 111114,056 (15,725) (500) 23,931 – (45,509) (33,747) 7,169 (26,578)11111 11111 11111 11111 11111 11111 11111 11111 11111Balance at 31 December 2005 ............................ 74,674 (16,800) – 115,639 202,342 247,777 623,632 49,878 673,51011111 11111 11111 11111 11111 11111 11111 11111 11111The notes set out on pages 9 to 33 form an integer part of the consolidated financial statements.F-18

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10b : 3776 Section 10bConsolidated statement of cash flowsYear Yearended ended31 Dec. 31 Dec.200611112200511112KD ‘000 KD ‘000OPERATING ACTIVITIESProfit for the year...................................................................................... 146,660 208,136Adjustments:Depreciation of property, plant and equipment ...................................... 4,640 4,518(Profit)/loss on disposal of property, plant and equipment .................... (1,228) 6Impairment in value of property, plant and equipment .......................... – 1,709Impairment in value of goodwill.............................................................. 1,250 13,086Share of profits of associates and joint ventures .................................. (9,522) (15,193)Income from murabaha and wakala investments .................................. (2,139) (236)Dividend income from available for sale investments ............................ (4,081) (2,477)Profit on sale of available for sale investments ...................................... (42,353) (13,793)Impairment in value of available for sale investments............................ (1,173) 999Profit on partial disposal of associates .................................................. (559) (72,124)Net (profit)/loss on disposal of subsidiaries/businesses ........................ (69,605) 2,357Reorganisation, redundancy, guarantee and other costs........................ – 3,678Cost of share based payments .............................................................. – 2,325Net provisions charged .......................................................................... 105 3,062Finance costs .......................................................................................... 30,990 18,735Interest income ...................................................................................... (8,403) (1,619)Operating profit before changes in operating assets and liabilities ............ 44,58211112153,16911112Changes in operating assets and liabilities:Inventories ................................................................................................ (230) 3,003Accounts receivable and other assets .................................................... 74,578 (10,174)Investments at fair value through statement of income ........................ (59,988) (163,916)Accounts payable and other liabilities .................................................... 6,893111125,45111112Cash from/(used in) operations .................................................................. 65,835 (12,467)Payment of reorganisation, redundancy, guarantee and other costs ........ – (992)Taxation paid .............................................................................................. (345) (420)KFAS contribution paid................................................................................ (244) (1,195)Directors’ remuneration paid ...................................................................... (200) (120)National labour support tax paid ................................................................ (282)11112(2,522)11112Net cash from/(used in) operating activities ........................................ 64,764 (17,716)11112 1111211112 11112F-19

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10b : 3776 Section 10bConsolidated statement of cash flows (continued)Year Yearended ended31 Dec. 31 Dec.Note 200611112200511112KD ‘000 KD ‘000INVESTING ACTIVITIESPurchase of property, plant and equipment ............................ (8,822) (4,720)Proceeds from sale of property, plant and equipment............ 2,347 982Cash invested on acquisition of subsidiaries/businesses........ (4,500) –Net cash inflow on disposal of subsidiaries ............................ 81,627 532Proceeds from sale of investment property............................ 1,588 –Investment in associated companies ...................................... (5,591) (57,612)Proceeds from partial disposal of associates .......................... 914 16,774Dividend received from associates ........................................ 5,553 3,692Murabaha and wakala investments maturing after threemonths .................................................................................... (35,000) –Proceeds on realisation of wakala investment ........................ 1,275 3,038Purchase of available for sale investments.............................. (172,820) (91,988)Proceeds from sale of available for sale investments ............ 78,822 28,032Dividend income received from available for sale investments 4,081 2,477Interest income received ........................................................ 5,893111121,61911112Net cash used in investing activities .................................. (44,633)11112(97,174)11112FINANCING ACTIVITIESProceeds from issue of shares................................................ 141,412 –Bonds paid .............................................................................. (35,000) –Finance lease payments.......................................................... (1,510) (1,058)Proceeds from issue of musharaka bonds.............................. 28,479 –Net increase in long-term borrowings .................................... 21,637 62,548Net increase in short-term borrowings.................................... 151,033 119,094Dividend paid .......................................................................... (42,764) (20,969)Finance costs paid .................................................................. (31,624) (16,615)Purchase of treasury shares.................................................... (37,407) (24,839)Proceeds from sale of treasury shares .................................. 5,479 10,382Increase in minority interest.................................................... 9,430111125,96611112Net cash from financing activities ...................................... 209,16511112134,50911112Net increase in cash and cash equivalents ............................ 229,296 19,619Translation difference .............................................................. 98111123911112229,394 19,658Cash and cash equivalents at beginning of the year .............. 26,578111126,92011112Cash and cash equivalents at end of the year .................. 29 255,972 26,57811112 1111211112 11112The notes set out on pages 9 to 33 form an integral part of these consolidated financial statements.F-20

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10b : 3776 Section 10bNotes to the consolidated financial statements31 December 20061 Incorporation and ActivitiesNational Industries Group Holding – SAK (‘the parent company’) was incorporated in 1961 as aKuwaiti shareholding company in accordance with the Commercial Companies Law in the State ofKuwait and in April 2003, its status was transformed to a ‘Holding Company’. The parentcompany’s shares are traded on the Kuwait Stock Exchange and Dubai Financial Market.The main objectives of the parent company are as follows:– Owning stocks and shares in Kuwaiti or non-Kuwaiti shareholding companies and shares inKuwaiti or non-Kuwaiti limited liability companies and participating in the establishment of,lending to and managing of these companies and acting as a guarantor for these companies.– Lending money to companies in which it owns 20% or more of the capital of the borrowingcompany, along with acting as guarantor on behalf of these companies.– Owning industrial equities such as patents, industrial trade marks, royalties, or any otherrelated rights, and franchising them to other companies or using them within or outside theState of Kuwait.– Owning real estate and moveable property to conduct its operations within the limits asstipulated by law.– Employing excess funds available with the company by investing them in investment andreal estate portfolios managed by specialised companies.The address of the parent company’s registered office is PO Box 417, Safat 13005, State of Kuwait.The board of directors of the parent company approved these consolidated financial statementsfor issue on 10 February 2007.2 Significant Accounting PoliciesBasis of preparationThe consolidated financial statements of the group are prepared in accordance with InternationalFinancial Reporting Standards issued by the International Accounting Standards Board (IASB).The consolidated financial statements are prepared under the historical cost convention modifiedto include the revaluation of freehold and leasehold properties, and the measurement at fair ofinvestment securities and investment properties.The accounting policies used are consistent with those used in the previous year.IASB Standard issued but not yet effectiveThe following IASB Standard has been issued but not yet effective, and has not yet been adoptedby the group.IFRS 7 Financial Instruments: DisclosuresThe application of IFRS 7, which will be effective for the year ending 31 December 2007 will resultin amended and additional disclosures relating to financial instruments.F-21

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10b : 3776 Section 10bBasis of consolidationThe consolidated financial statements incorporate the financial statements of the parent company,National Industries Group Holding – SAK and of its subsidiary companies, for the years ended 31December 2006 and 2005. During the year the group decided to change the annual accountingperiod of the foreign subsidiaries for the purpose of consolidation to 30 November 2006 whereasin the previous year it was 31 December 2005. Consequently, during the year the group hasconsolidated the foreign subsidiaries for the eleven months ended 30 November 2006 whereas inthe comparative information these subsidiaries have been consolidated for the year ended 31December 2005.Necessary adjustments are made for the effects of significant transactions or other events thatoccur between the reporting date of the subsidiaries and 31 December 2006, the reporting dateof the parent company. The details of the significant subsidiary companies are set out in Note 3 tothe consolidated financial statements.Subsidiaries are those enterprises controlled by the parent company. Control exists when theparent company has the power, directly or indirectly, to govern the financial and operating policiesof an enterprise so as to obtain benefits from its activities. The financial statements ofsubsidiaries, other than those that are considered not material to the financial statements of theparent company, are included in the consolidated financial statements from the date that controleffectively commences until the date that control effectively ceases.All significant inter-company balances and transactions are eliminated on consolidation.Minority interest represents the portion of profit or loss and net assets not held by the Group andis presented separately in the consolidated statement of income and within equity in theconsolidated balance sheet, separately from the equity attributable to the shareholders of theparent company.RevenueRevenue is recognised to the extent that it is probable that the economic benefits will flow to thegroup and the revenue can be reliably measured. The following specific recognition criteria mustalso be met before revenue is recognised.SalesSales represent the value of goods and services supplied during the year excluding value addedtax or other sales taxes. Sales and profits between subsidiary undertakings are eliminated.Dividend incomeDividend income is recognised when the shareholders’ right to receive payment is established.Interest incomeInterest income is recognised on a time proportionate basis, taking into consideration the principaloutstanding and the interest rate applicable.Finance costsFinance costs are calculated and recognised on a time proportionate basis taking into account theprincipal loan balance outstanding and the interest rate applicable.Finance costs that are directly attributable to the acquisition and construction of an asset thatnecessarily takes a substantial period of time to get ready for its intended use or sale arecapitalised as part of the cost of that asset. Capitalisation of borrowing costs ceases whenF-22

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10b : 3776 Section 10bsubstantially all the activities necessary to prepare the asset for its intended use or sale arecomplete. Other finance costs are recognised as an expense in the period in which they areincurred.Development costsExpenditure on development activities which are not expected to generate future economicbenefits are written off as incurred. Development costs are carried forward only if specific criteriaare met. Such development costs carried forward are amortised over their estimated useful liveson a straight line basis and are subject to regular impairment review.Share-based PaymentCertain employees of the company receive remuneration in the form of share-based paymenttransactions, whereby the employees render services in exchange for shares (“equity settledtransactions”).Equity-settled transactionsThe cost of equity-settled transactions with employees is measured under the intrinsic valuemethod. Under this method, the cost is determined by comparing the period end market value ofthe company’s shares with the issue price. The cost of equity settled transactions is recognised,together with a corresponding increase in equity, over the period in which the performanceconditions are fulfilled, ending on the date on which the shares vest.GoodwillGoodwill represents the excess of the cost of an acquisition over the fair value of the netidentifiable assets acquired at the date of acquisition. Goodwill is measured at cost lessimpairment losses. Goodwill is tested for impairment, annually or more frequently if events orchanges in circumstances indicate that the carrying value may be impaired. For the purpose ofimpairment testing, goodwill is allocated to cash generating units.Property, plant and equipment and depreciationProperty, plant and equipment are stated at cost/valuation less accumulated depreciation andimpairment losses. Depreciation is calculated to write off the cost or valuation, less the estimatedresidual value of property, plant and equipment, on a straight-line basis over their estimated usefullives as follows:Freehold propertyLong leasehold propertyShort leasehold propertyProperty on leasehold landPlant and machineryMotor vehiclesFurniture and equipmentLower of 50 years or remaining useful lifeLower of 50 years or remaining lease termLease term4 to 20 years1 to 15 years2 to 10 years4 to 10 yearsAny increase arising on revaluation is credited directly to shareholders’ equity as “revaluationreserve” except to the extent where the increase reverses a revaluation decrease related to thesame asset for which a decrease in valuation has previously been recognised as an expense, it iscredited to the consolidated statement of income. Any decrease in the net carrying amount arisingon revaluation is charged directly to the consolidated statement of income, or charged to therevaluation reserve to the extent that the decrease is related to an increase for the same assetwhich was previously recorded as a credit to the revaluation surplus.F-23

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10b : 3776 Section 10bDepreciation on the re-valued properties is charged to the consolidated statement of income overtheir remaining estimated useful lives and an amount equivalent to the excess depreciation chargerelating to the increase in carrying amount is transferred each year from the revaluation reserve toretained earnings.No depreciation is provided on freehold land. Properties in the course of construction forproduction or administrative purposes, are carried at cost, less any recognised impairment loss.Depreciation of these assets, on the same basis as other property assets, commences when theassets are ready for their intended use.Investment in associatesAn associate is a company over which the group has significant influence usually evidenced byholding of 20% to 50% of the voting power of the investee company. The consolidated financialstatements include the group’s share of the associates results using the equity method ofaccounting.Under the equity method, investment in an associate is initially recognised at cost and adjustedthereafter for the post-acquisition change in the group’s share of net assets of the investee. Thegroup recognises in the consolidated statement of income its share of the total recognised profitor loss of the associate from the date the influence or ownership effectively commenced until thedate that it effectively ceases. Distributions received from an associate reduce the carryingamount of the investment. Adjustments to the carrying amount may also be necessary forchanges in the group’s share in the associate, arising from changes in the associates equity thathave not been recognised in the associate’s statement of income. The group’s share of thosechanges is recognised directly in equity. The financial statements of the associates are preparedeither to the reporting date of the parent company or to a date not earlier than three months ofthe parent company’s reporting date, using consistent accounting policies.Unrealised gains on transactions with associates are eliminated to the extent of the group’s sharein the associate. Unrealised losses are also eliminated unless the transaction provides evidenceof impairment in the asset transferred. An assessment for impairment of investments inassociates is performed when there is an indication that the asset has been impaired, or thatimpairment losses recognised in prior years no longer exist.Investment in joint venturesInvestment in joint ventures are accounted for under the equity method of accounting. A jointventure is an undertaking in which the group has a long-term interest and over which it exercisesjoint control. Under the equity method of accounting, the initial investment is recorded at cost andthe carrying amount is increased or decreased to recognise the group’s share of profits or lossesand other changes in equity of the joint venture. Distributions received from joint ventures reducethe carrying amount of the investment.Investment propertiesInvestment properties are initially recorded at cost, being the purchase price and any directlyattributable expenditure for a purchased investment property, or at fair value at the date of transferif the property was transferred from another category of assets. Subsequent to initial recognition,investment properties are re-measured to fair value on an individual basis based on an externalvaluation by an independent valuer. Changes in fair value are taken to the consolidated statementof income.Investment properties are derecognised when either they have been disposed of or when theinvestment property is permanently withdrawn from use and no future economic benefit isexpected from its disposal. Any gains or losses on the retirement or disposal of an investmentproperty are recognised in the statement of income in the year of retirement or disposal.F-24

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10b : 3776 Section 10bTransfers are made to investment property when, and only when, there is a change in use,evidenced by the end of owner occupation, commencement of an operating lease to another partyor completion of construction or development. Transfers are made from investment propertywhen, and only when, there is a change in use, evidenced by commencement of owneroccupation or commencement of development with a view to sale.Investment securitiesThe group classifies investment securities upon initial recognition into following categories:i. Investments at fair value through statement of incomeii.Available for sale investmentsInvestments at fair value through statement of incomeInvestments at fair value through statement of income are initially recognised at cost, being thefair value of the consideration given, excluding transaction costs. These investments are either“held for trading” or “designated” as such on initial recognition.Held for trading investments are acquired principally for the purpose of selling or repurchasingthem in the near term or are a part of a portfolio of identified financial instruments that aremanaged together and for which there is evidence of a recent actual pattern of short term profittaking. Designated investments are those investments which are initially designated asinvestments at fair value through statement of income.After initial recognition, investments at fair value through statement of income are re-measured atfair value and changes in fair value are recognised in the consolidated statement of income.Available for sale investmentsAvailable for sale investments are initially recognised at cost, being the fair value of theconsideration given, plus transaction costs that are directly attributable to the acquisition.After initial recognition, available for sale investments are re-measured at fair value except forinvestments whose fair value cannot be reliably measured, which are measured at cost lessimpairment.Unrealised gain or loss on re-measurement of available for sale investments to fair value isrecognised directly in equity in “cumulative changes in fair value” account until the investment isderecognised or determined to be impaired, at which time the cumulative gain or loss previouslyrecognised in equity is recognised in the consolidated statement of income.Fair valuesFor investments traded in organised financial markets, fair value is determined by reference tostock exchange quoted market bid prices at the close of business on the balance sheet date.For investments where there is no quoted market price, a reasonable estimate of fair value isdetermined by using valuation techniques. The group uses a variety of methods and makesassumptions that are based on market conditions existing at each balance sheet date. Valuationtechniques used include the use of comparable recent arm’s length transactions, discounted cashflow analysis and other valuation techniques commonly used by market participants.Trade and settlement date accountingAll “regular way” purchases and sales of financial assets are recognised on the trade date, i.e. thedate that the group commits to purchase or sell the asset. Regular way purchases or sales areF-25

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10b : 3776 Section 10bpurchases or sales of financial assets that require delivery of assets within the time framegenerally established by regulation or convention in the market place concerned.Recognition and derecognition of financial assets and liabilitiesA financial asset or a financial liability is recognised when the group becomes a party to thecontractual provisions of the instrument. A financial asset (in whole or in part) is derecognisedeither when the group has transferred substantially all the risk and rewards of ownership or whenit has neither transferred nor retained substantially all the risks and rewards and when it no longerhas control over the asset or a proportion of the asset. A financial liability is derecognised whenthe obligation specified in the contract is discharged, cancelled or expired.Impairment of financial assetsAn assessment is made at each balance sheet date to determine whether there is objectiveevidence that a specific financial asset may be impaired. If such evidence exists, any impairmentloss is recognised in the consolidated statement of income. Impairment is determined as follows:(a)(b)For assets carried at fair value, impairment is the difference between cost and fair value; andFor assets carried at cost, impairment is the difference between cost and the present valueof future cash flows discounted at the current market rate of return for a similar financialasset.Reversal of impairment losses recognised in prior years is recorded when there is an indicationthat the impairment losses recognised for the financial asset no longer exist or have decreasedand the decrease can be related objectively to an event occurring after the impairment wasrecognised. Except for reversal of impairment losses related to equity instruments classified asavailable for sale, all other impairment reversals are recognised in the consolidated statement ofincome to the extent the carrying value of the asset does not exceed its amortised cost at thereversal date. Impairment reversals in respect of equity instruments classified as available for saleare recognised in the cumulative changes in fair value reserve in equity.Impairment of non-financial assetsThe group assesses at each reporting date whether there is an indication that an asset may beimpaired. If any such indication exists, or when annual impairment testing for an asset is required,the group makes an estimate of the asset’s recoverable amount. An asset’s recoverable amountis the higher of an asset’s or cash-generating unit’s fair value less costs to sell and its value in useand is determined for an individual asset, unless the asset does not generate cash inflows that arelargely independent of those from other assets or groups of assets and then its recoverableamount is assessed as part of the cash-generating unit to which it belongs. Where the carryingamount of an asset (or cash-generating unit) exceeds its recoverable amount, the asset (or cashgeneratingunit) is considered impaired and is written down to its recoverable amount byrecognising impairment loss in the consolidated income statement. In assessing value in use, theestimated future cash flows are discounted to their present value using a discount rate thatreflects current market assessments of the time value of money and the risks specific to the asset(or cash-generating unit). In determining fair value less costs to sell an appropriate valuation modelis used. These calculations are corroborated by available fair value indicators.An assessment is made at each reporting date as to whether there is any indication that previouslyrecognised impairment losses may no longer exist or may have decreased. If such indicationexists, the group makes an estimate of recoverable amount. A previously recognised impairmentloss is reversed only if there has been a change in the estimates used to determine the assetsrecoverable amount since the last impairment loss was recognised. If that is the case, the carryingamount of the asset is increased to its recoverable amount.F-26

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10b : 3776 Section 10bTaxationDeferred taxation is provided in respect of all temporary differences. Deferred tax assets arerecognised in respect of unutilised tax losses when it is probable that the loss will be used againstfuture profits.InventoriesInventories are valued at the lower of cost and net realisable value. In respect of finished goodsand work-in-progress, cost includes all direct costs of production and an appropriate proportion ofproduction overheads. Cost of raw materials, consumables and spare parts is calculated using theweighted average cost method and provision is taken for slow moving and obsolete items.Murabaha and wakala investmentsThese investments are financial assets originated by the group and are stated at amortised cost.Treasury sharesTreasury shares are stated at cost as a deduction within shareholders’ equity and they are notentitled to cash dividends.Gains or losses resulting from the trading in treasury shares are taken directly to shareholders’equity under “Gain on sale of treasury shares reserve”. Should the reserve fall short of any lossesfrom the sale of treasury shares, the difference is charged to retained profits then reserves,subsequent to this, should profits arise from sale of treasury shares an amount is transferred toreserves then retained profits equal to the loss previously charged to these accounts.Bonds payable and Musharaka bondsBonds are carried on the balance sheet at their principal amount, net of directly related costs ofissuing the bonds to the extent that such costs have not been amortised. These costs areamortised through the statement of income over the life of the bonds using the effective cost ratemethod.Finance cost is charged as an expense as it accrues, with unpaid amounts included in otherliabilities.Leasing and hire purchaseAssets acquired under finance leases and hire purchase arrangements are capitalised and therelated liabilities, excluding finance charges, are included in liabilities. Finance charges in respectof such liabilities are charged to the consolidated statement of income. Operating lease rentals arewritten off on a straight-line basis over the lease period.Tawarruq facilities and wakala payablesTawarruq facilities and wakala payables represent Islamic financing arrangements, whereby thegroup receives funds for the purpose of financing its investment activities and they are stated atamortised cost.ProvisionsProvisions are recognised when the group has a present obligation (legal or constructive) resultingfrom a past event and the costs to settle the obligation are both probable and reliably measurable.F-27

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10b : 3776 Section 10bFor the parent company and the local subsidiaries the provision for staff indemnity is computedbased on employees’ accumulated periods of service at the balance sheet date in accordance withthe Kuwait labour law for the private sector and the companies’ bye-laws.Provision for land fill expensesProvision for land fill expenses is calculated based on the expected cost which is required torestore the leased sites, used by the group for extracting raw materials for its operations, to itsoriginal condition.PensionsContributions are paid to both defined benefit and defined contribution pension schemes inaccordance with the recommendations of independent actuaries and advisers.Defined contribution schemesContributions to defined contribution schemes are charged to the consolidated statement ofincome on an accrual basis.Defined benefit schemesIn respect of defined benefit schemes a defined benefit liability (or asset) is recognised in theconsolidated balance sheet and it is calculated as the present value of the defined benefitobligation using the projected unit credit method plus any unrecognised actuarial gains or lossesless any past service cost not recognised less the market value of the plan assets.Pension expense is charged to the consolidated statement of income and is calculated as theaggregate of current service cost (using the projected unit credit method), an interest cost on thediscounted defined benefit obligation, the expected return on plan assets, recognised actuarialgains and losses, recognised past service costs and the effect of curtailments or settlements.Defined benefit schemes (continued)Actuarial gains or losses are recognised as income or expense if the net cumulative unrecognisedactuarial gains or losses at the end of the previous reporting period exceeded the greater of:– 10% of the present value of the defined benefit obligations; and– 10% of the fair value of plan assets.The portion of actuarial gains and losses recognised, is the excess determined above, divided bythe expected average remaining service lives of scheme employees of 18 years.Fiduciary assetsAssets held in a trust or fiduciary capacity are not treated as assets of the group and, accordingly,they are not included in these consolidated financial statements.Foreign currenciesFunctional and presentation currencyThe consolidated financial statements are presented in Kuwaiti Dinars, which is the parentcompany’s functional and presentational currency. Each entity in the group determines its ownfunctional currency and items included in the financial statements of each entity are measuredusing that functional currency.F-28

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10b : 3776 Section 10bTransactions and balancesTransactions in foreign currencies are initially recorded in the functional currency rate of exchangeruling at the date of the transaction.Monetary assets and liabilities denominated in foreign currencies are retranslated at the functionalcurrency rate of exchange ruling at the balance sheet date. All differences are taken to “foreignexchange gain/loss” in the consolidated statement of income.Non-monetary items that are measured in terms of historical cost in a foreign currency aretranslated using the exchange rates as at the dates of the initial transactions. Non-monetary itemsmeasured at fair value in a foreign currency are translated using the exchange rates at the datewhen the fair value was determined. Any goodwill arising on the acquisition of a foreign operationand any fair value adjustments to the carrying amounts of assets and liabilities arising on theacquisition are treated as assets and liabilities of the foreign operations and translated at closingrate.Group companiesAs at the reporting date, the assets and liabilities of foreign subsidiaries are translated into theparent company’s presentation currency (the Kuwaiti Dinars) at the rate of exchange ruling at thebalance sheet date, and their statements of income are translated at the weighted averageexchange rates for the year. Exchange differences arising on translation are taken directly toforeign exchange translation reserve within equity. On disposal of a foreign entity, the deferredcumulative amount recognised in equity relating to the particular foreign operation is recognisedin the consolidated statement of income.JudgmentsIn the process of applying the group’s accounting polices, management has made the followingjudgements, apart from those involving estimations, which have the most significant effect in theamounts recognised in the consolidated financial statements:Classification of investmentsManagement decides on acquisition of an investment whether it should be classified as held fortrading, designated as at fair value through statement of income or available for sale.The group classifies investments as trading if they are acquired primarily for the purpose of makinga short term profit by the dealers.Classification of investments (continued)Classification of investments as designated at fair value through statement of income depends onhow management monitor the performance of these investments. When they are not classifiedas held for trading but have readily available reliable fair values and the changes in fair values arereported as part of statement of income in the management accounts, they are classified asdesignated at fair value through statement of income.All other investments are classified as available for sale.Impairment of investmentsThe group treats available for sale equity investments as impaired when there has been asignificant or prolonged decline in the fair value below its cost or where other objective evidenceof impairment exists. The determination of what is “significant” or “prolonged” requiresconsiderable judgement. The group treats “significant” generally as 25% and “prolonged” asgreater than one year. In addition, the group evaluates other factors, including normal volatility inF-29

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10b : 3776 Section 10bshare price for quoted equities and the future cash flows and the discount factors for unquotedequities.Estimation uncertaintyThe key assumptions concerning the future and other key sources of estimation uncertainty at thebalance sheet date, that have a significant risk of causing a material adjustment to the carryingamounts of assets and liabilities within the next financial year are discussed below:Valuation of unquoted equity investmentsValuation of unquoted equity investments is normally based on one of the following:• recent arm’s length market transactions;• current fair value of another instruments that is substantially the same; or• the expected cash flow discounted at current rates applicable for items with similar termsand risk characteristics;• other valuation models.The determination of the cash flows and discount factors for unquoted equity investmentsrequires significant estimation. There are certain investments where this estimation cannot bereliably determined and as a result available for sale investments with a carrying amount ofKD50,242 thousand (2005: KD26,261 thousand) are carried at cost.Impairment of goodwillThe group determines whether goodwill is impaired at least on an annual basis. This requires anestimation of the value in use of the cash generating units to which the goodwill is allocated.Estimating the value in use requires the group to make an estimate of the expected future cashflows from the cash generating unit and also to choose a suitable discount rate in order tocalculate the present value of those cash flows.Pension liabilities/assetPension assumptions are detailed in Note 31 and the pension expense for the year is sensitive tosuch assumptions and to the basis and period of spreading the actuarial deficit.Cash and cash equivalentsCash and cash equivalents included in the consolidated statement of cash flows consist of cashon hand and demand deposits and short term highly liquid investments maturing within threemonths from the date of inception.F-30

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10b : 3776 Section 10b3 Subsidiary companiesThe significant consolidated subsidiaries as at 31 December 2006 and 2005 are as follows:Country ofPercentageregistration11111111ownership1111111111200611112200511112% %NI Group (Bahrain) EC .......................................... Bahrain 100 100NIC Holdings (Guernsey) Limited ........................ Guernsey 100 100NIG (Guernsey) Limited........................................ Guernsey 100 100NIC Holdings (UK) Plc .......................................... United Kingdom 100 100BI Group Plc ........................................................ United Kingdom 100 100National Land Transport Company – SAK (Closed) Kuwait 100 100Loloah National Industries Trading Company– WLL [formerly Luluat Al Nasrullah TradingCompany – WLL] ................................................ Kuwait 100 100D & B Kuwait for Economic & ManagementConsulting – KSC (Closed) .................................. Kuwait 100 –Combined National Industries Company forEnergy – KSC (Closed) ........................................ Kuwait 100 –Gas & Oil Field Services Co. – WLL .................... Kuwait 100 –Ikarus Industrial Petroleum Company – SAK(Closed) [formerly National Company for CementIndustries – SAK (Closed)].................................... Kuwait 72 100Denham Investment LTD .................................... Cayman Islands 71 80National Industries Company for BuildingMaterials – SAK (Closed) .................................... Kuwait 51 74Noor Financial Investment Company– KSC (Closed) .................................................... Kuwait 51 51National Company for Ready Mix Concrete– SAK (Closed)...................................................... Kuwait – 100a. NIG (Guernsey) Limited is the ultimate European holding company of the UK trading groupand owns 100% of NIC Holdings (UK) Plc which in turn owns 100% of BI Group Plc.b. Certain minority shareholdings in the above subsidiary companies are held on behalf of theparent company by third party nominees.4 Income from investments200611112200511112KD ‘000 KD ‘000Dividend income:– From investments at fair value through statement of income ................ 10,796 7,720– From available for sale investments ........................................................ 4,081 2,477Profit on sale of available for sale investments .......................................... 42,353 13,793Impairment in value of available for sale investments................................ (1,173) (999)Realised gain on investment at fair value through statement of income .. 5,324 68,491Unrealised gain on investment at fair value through statement of income 18,849 79,672Income from wakala and murabaha investments ...................................... 2,139 236Interest income .......................................................................................... 8,403111121,6191111290,772 173,00911112 1111211112 11112F-31

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10b : 3776 Section 10b5 Profit from operationsProfit from operations is stated after charging:200611112200511112KD ‘000 KD ‘000Depreciation................................................................................................ 4,640 4,518Staff costs .................................................................................................. 28,201 1111239,088111126 Disposal of subsidiaries/businessesSignificant disposals during 2006:a. The parent company sold 28%, out of its 100% owned subsidiary Ikarus IndustrialPetroleum Company SAK (Closed), for a consideration of KD 64,140 thousand resulting in aprofit of KD34,258 thousand.b. The parent company sold 9%, out of its 80% owned subsidiary Denham Investment Ltd. fora consideration of KD17,487 thousand resulting in a profit of KD14,264 thousand.c. The parent company realised a profit of KD21,083 thousand on distribution of shares of thesubsidiary National Industries Company for Building Materials – SAK (Closed), whichrepresents the difference between the carrying value amounting to KD18,494 thousand andthe fair value amounting to KD39,577 thousand of the distributed shares. Further thisdistribution has diluted the group’s holding in the subsidiary from 74% to 51%.d. The parent company sold its 100% owned subsidiary Bunyan Al Mashrik Co. – KSCC [formerly named National Company for Readymix Concrete – SAK (Closed)]; for aconsideration of KD7,387 thousand resulting in no profit or loss in the consolidatedstatement of income.Significant disposals during 2005:a. The group disposed Newage Transmission Limited, a wholly owned subsidiary located in theUnited Kingdom, for a cash consideration of KD532 thousand resulting in a loss of KD1,264thousand.b. The group disposed Blanson trading division of BI Plastic and the group’s 50% interest inPerry Barromedical Inc. for a net combined cash consideration of KD1,117 thousandresulting in a loss of KD213 thousand.c. Provision of KD904 thousand has been made for pension obligations relating to businessesdisposed of in the United Kingdom.d. The group disposed 1% of its stake in its 52% owned subsidiary Noor Financial InvestmentCompany – KSC (Closed) for a consideration of KD564 thousand which resulted in a profitof KD24 thousand.F-32

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10b : 3776 Section 10b7 Taxation200611112200511112KD ‘000 KD ‘000Current tax expenseCurrent year charge .................................................................................... 395 337Over provided in prior years........................................................................ – (25)Deferred tax (credit)/expenseCurrent year (credit)/charge ........................................................................ (823)111122,12711112(428) 111122,439111128 Earnings per share attributable to the shareholders of the parentEarnings per share is calculated by dividing the net profit for the year attributable to theshareholders of the parent by the weighted average number of shares outstanding during the yearas follows:2006 20051211112 1211112Net profit for the year attributable to the shareholders of the parent(KD ‘000) ...................................................................................... 134,991 189,5171211112 1211112Weighted average number of shares outstanding during the year(excluding treasury shares) .......................................................... 921,856,357 806,815,5781211112 1211112Earnings per share attributable to the shareholders of theparent .......................................................................................... 146 Fils 235 Fils1211112 12111121211112 1211112The weighted average number of ordinary shares outstanding during the year ended 31 December2005 has been restated due to the issue of bonus shares during the year.9 Goodwill200611112200511112KD ‘000 KD ‘000Balance at 1 January .................................................................................. 9,776 25,060Additions .................................................................................................... 3,802 109Disposals and other adjustments .............................................................. 28 (171)Impairment in value .................................................................................... (1,250) (13,086)Foreign exchange adjustment .................................................................... 1,23011112(2,136)1111213,586 111129,77611112F-33

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10b : 3776 Section 10b10 Property, plant and equipmentProperty Leasedon Furniture plant, PropertyFreehold Leasehold leasehold Plant and Motor and machinery under con- Total Totalproperty 11111 property 11111 land 11111 machinery 11111 vehicles 11111 equipment 11111 & vehicles 11111 struction 11111 2006 11111 200511111KD ‘000 KD ‘000 KD ‘000 KD ‘000 KD ‘000 KD ‘000 KD ‘000 KD ‘000 KD ‘000 KD ‘000Cost or valuationAt 1 January.................................... 7,021 2,525 30,751 58,006 6,590 6,309 2,124 1,203 114,529 118,940Foreign exchange adjustments ...... 818 268 – 2,619 9 – 310 – 4,024 (4,871)Additions/transfers .......................... 837 – 2,357 4,632 1,112 209 – (325) 8,822 4,720Write offs ........................................ – – (728) (3,046) – – – – (3,774) –Disposals/transfers.......................... (598) – – (3,979) (217) (27) (69) – (4,890) (4,260)Acquisitions .................................... 98 – – 13 – – – – 111 –Reclassification .............................. – 11111 – 11111 – 11111 783 11111 – 11111 – 11111 (783) 11111 – 11111 – 11111 –11111At 31 December.............................. 8,176 11111 2,793 11111 32,380 11111 59,028 11111 7,494 11111 6,491 11111 1,582 11111 878 11111 118,822 11111 114,52911111Accumulated depreciation andimpairment lossesAt 1 January .................................. 1,407 677 28,767 44,458 6,076 5,122 1,616 – 88,123 86,492Foreign exchange adjustments ...... 176 123 – 1,888 12 7 201 – 2,407 (2,488)Charge for the year ........................ 469 32 321 3,100 392 262 64 – 4,640 4,518On write offs .................................. – – (728) (3,046) – – – – (3,774) –Impairment in value ........................ – – – – – – – – – 1,709Relating to disposals ...................... (188) – – (3,569) (190) (24) (68) – (4,039) (2,108)Reclassification .............................. 56 11111 (56) 11111 – 11111 407 11111 – 11111 – 11111 (407) 11111 – 11111 – 11111 –11111At 31 December.............................. 1,920 11111 776 11111 28,360 11111 43,238 11111 6,290 11111 5,367 11111 1,406 11111 – 11111 87,357 11111 88,12311111Net book valueAt 31 December.............................. 6,256 11111 2,017 11111 4,020 11111 15,790 11111 1,204 11111 1,124 11111 176 11111 878 11111 31,465 11111 26,40611111F-34

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10b : 3776 Section 10bA full independent valuation of all freehold properties held by NIC Holding (Guernsey) and NIG(Guernsey) Limited was obtained as at 1 January 1999 and the valuation was incorporated into theconsolidated financial statements. The directors of the group consider that there has been nosignificant change in the market value since the last valuation of these properties.Property on leasehold land, plant and machinery with a net book value of KD1,271 thousand aresecured against the Musharaka bonds (see Note 24).Property under construction represents the cost incurred on the expansion of one of thesubsidiaries existing factories and the construction of a new office building for the samesubsidiary. This amount will be transferred to the appropriate asset categories when the assets areready for their intended use.11 Investment in associatesThe significant associates of the group as at 31 December 2006 and 2005 are as follows:Percentageownership111122311112200611112200511112Kuwait Ceramic Factory Company – WLL ................................................ 49% 49%Kuwait Rocks Company – SAK (Closed)...................................................... 38% 38%KES Power Ltd. .......................................................................................... 40% 40%Kuwait Privatization Project Holding Company – SAK (Closed) .................. 28% 28%Al Raya International Real Estate – KSC (Closed) ...................................... 23% 23%Kuwait Cement Company – SAK (Closed) .................................................. 22% 22%Marsa Alam Holding Company – KSC (Closed) .......................................... 20% 20%Eastern United Petroleum Services Company – KSC (Closed) .................. 20% 20%Kuwait National Real Estate Investment and Services Company– KSC (Closed) ........................................................................................ 16% 16%All of the above associates are registered in Kuwait except for KES Power Ltd., which is registeredin the Cayman Islands.Significant influence in Kuwait National Real Estate Investment and Services Company – KSC(Closed) is demonstrated by representation of two directors of the group on the board of directorsof each of the investee’s.Disposal during 2005:a. The group disposed 4% of its stake in its 20% owned associate, Kuwait National Real EstateInvestment and Services Company – KSC (Closed), for a cash consideration of KD4,131thousand resulting in a profit of KD2,302 thousandb. The group disposed 3% of its stake in its 31% owned associate, Kuwait Privatization ProjectHolding Company – SAK (Closed), for a cash consideration of KD4,597 thousand resulting ina profit of KD2,910 thousand.c. The group disposed 35% of its investment in, Mabanee Company SAK (Closed), for a cashconsideration of KD95,550 thousand, resulting in a profit of KD70,286 thousand.F-35

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10b : 3776 Section 10bShare of associates’ assets and liabilities:200611112200511112KD ‘000 KD ‘000Assets ........................................................................................................ 144,865 140,308Liabilities .................................................................................................... 18,953 19,397Share of associates’ revenue and profit:Revenue ...................................................................................................... 23,765 23,510Profit............................................................................................................ 9,522 15,193Investment in quoted associates with a carrying value of KD77,587 thousand (2005: KD75,580thousand) have a fair value of KD152,215 thousand (2005: KD179,747 thousand).12 Investment in joint venturesCountry ofregistration11112112200611112200511112KD ‘000 KD ‘000Greco Mexican Gas Meter Joint venture (50%) .. Mexico 285 25313 Investment properties200611112200511112KD ‘000 KD ‘000At 1 January................................................................................................ 2,267 2,556Disposal ...................................................................................................... (2,155) –Change in fair value .................................................................................... (130) –Foreign exchange adjustment .................................................................... 28511112(289)11112267 111122,2671111214 Available for sale investments200611112200511112KD ‘000 KD ‘000Managed funds .......................................................................................... 75,990 54,042Unquoted equity participations .................................................................. 141,866 148,861Quoted shares ............................................................................................ 208,54311112165,54811112426,399 11112368,4511111215 Deferred tax asset/(liability)200611112200511112KD ‘000 KD ‘000Deferred tax on losses................................................................................ – 532Other timing differences ............................................................................ 15111112(1,293)11112151 11112(761)11112F-36

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10b : 3776 Section 10b16 Inventories200611112200511112KD ‘000 KD ‘000Finished goods and work-in-progress ........................................................ 13,774 12,328Raw materials and consumables ................................................................ 8,900 9,615Spare parts.................................................................................................. 2,814 2,864Goods in transit .......................................................................................... 612 1,413Others ........................................................................................................ 61111221111226,106 26,222Provision for obsolete and slow moving inventories .................................. (2,146)11112(2,492)1111223,960 1111223,7301111217 Accounts receivable and other assets200611112200511112KD ‘000 KD ‘000Net trade receivables .................................................................................. 19,515 16,737Proceeds due on partial disposal of investment in associate .................... – 86,000Proceed due on sale of investments .......................................................... 12,787 14,006Due from associates .................................................................................. 2,736 1,913Due from joint venture................................................................................ 498 372Prepayments .............................................................................................. 3,115 1,882Advance payments to acquire investments................................................ 3,806 –Due from Kuwait Clearing Company .......................................................... 4,455 –Due from investment brokerage companies .............................................. 1,566 –Interest receivable on fixed deposits.......................................................... 2,510 –Income receivable on murabaha and wakala investments ........................ 864 –Accrued income .......................................................................................... 580 –Other assets .............................................................................................. 3,898111125,8101111256,330 11112126,7201111218 Murabaha and wakala investmentsThese investments carry a profit rate ranging from 6% – 8.5% per annum and will mature duringthe year 2007.19 Investments at fair value through statement of income200611112200511112KD ‘000 KD ‘000Held for trading:Quoted shares ............................................................................................ 268,92411112185,41211112Designated on initial recognition:Local funds.................................................................................................. 153,305 177,105International managed portfolios and funds .............................................. 33,9361111224,22411112187,24111112201,32911112456,165 11112386,74111112F-37

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10b : 3776 Section 10bQuoted shares with a fair value of KD23,361 thousand (2005: Nil) are secured against bank loans.20 Share capitalFollowing approval at the general assembly held on 14 November 2005, during the year the parentcompany increased the share capital to KD99,566 thousand by the issuance of 248,913,736shares at a nominal value of 100 fils per share and a premium of 500 Fils per share.Following approval of the general assembly held on 24 April 2006, the parent company issued74,674,120 bonus shares amounting to KD7,467 thousand.As of 31 December 2006 the issued and fully paid share capital of the parent company was madeup of 1,070,329,064 shares of 100 Fils each. (2005: 746,741,208 shares).21 Treasury sharesAt 31 December 2006 the group held 59,547,444 (2005 : 18,332,955) of its treasury sharesequivalent to 5.56% (2005 : 2.46%) of the shares issued. The treasury shares are stated at cost,and the market value as at 31 December 2006 amounted to KD75,030 thousand (2005 : KD29,699thousand). Reserves equivalent to the cost of the investment in treasury shares have beenearmarked as non-distributable.22 Staff sharesDuring the year the parent company issued 701,750 shares to its senior management as bonusshares by utilizing its treasury shares. The carrying amount and market value of these sharesissued amounted to KD1,059 thousand and KD997 thousand respectively and the resultant lossof KD62 thousand was debited to the gain on sale of treasury shares reserve account.F-38

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10b : 3776 Section 10b23 ReservesGain onSale of Foreigntreasury currencyShare Statutory General Revaluation shares translationpremium11111reserve11111reserve11111reserve11111reserve11111reserve11111Total11111KD ‘000 KD ‘000 KD ‘000 KD ‘000 KD ‘000 KD ‘000 KD ‘000Balances at 31 December2004 .............................. 26,409 41,099 23,460 375 – 1,735 93,078Transfer of excessdepreciation .................. – – – (11) – – (11)Currency translationdifferences .................... – – – (42) – (1,317) (1,359)Issue of staff bonus shares 1,825 – – – – – 1,825Transfer on disposal ofsubsidiaries .................... – (12) – – – – (12)Profit on disposal oftreasury shares .............. – – – – 236 – 236Transfer to reserves .......... –1111120,183111111,69911111–11111–11111–1111121,88211111Balances at 31 December2005 .............................. 28,234 61,270 25,159 322 236 418 115,639Transfer of excessdepreciation .................. – – – (12) – – (12)Currency translationdifferences .................... – – – 40 – (899) (859)Transfer on disposal ofsubsidiaries .................... – (1,870) (744) – – – (2,614)Loss on issue of staffbonus shares ................ – – – – (62) – (62)Issue of shares .................. 124,457 – – – – – 124,457Profit on disposal oftreasury shares .............. – – – – 626 – 626Transfer to reserves .......... –1111125,934111111,20611111–11111–11111–1111127,14011111Balances at 31 December2006 .............................. 152,691 1111185,334 1111125,621 11111350 11111800 11111(481) 11111264,31511111Statutory reserveIn accordance with the Commercial Companies Law and the parent company’s articles ofassociation, 10% of the profit for the year is to be transferred to statutory reserve. The parentcompany may resolve to discontinue such annual transfer when the reserve totals 50% of the paidup share capital. Distribution of the statutory reserve is limited to the amount required to enablethe payment of a dividend of 5% of paid-up share capital to be made in years when retainedearnings are not sufficient for the distribution of a dividend of that amount.24 Bonds payable and Musharaka bondsBonds payableThe bonds payable at 31 December 2005, included in current liabilities, were fully redeemed attheir principal amount on 2 December 2006. On 6 May 2004, the parent company issuedunsecured floating rate bonds of U.S. Dollar 60,000 thousand (equivalent to KD17,378 thousand at31 December 2006 and KD17,527 thousand at 31 December 2005) at face value. The bonds whichmature in May 2009, bear interest at 0.90% per annum above LIBOR for 6 months U.S. Dollardeposits and payable semi-annually in arrears.Musharaka bonds:During October 2006 the subsidiary, National Industries Company for Building Materials enteredinto an Islamic financing arrangement whereby the company issued secured Musharaka bonds(Sukuk Al-Musharaka) of US Dollars 100,000 thousand (KD28,479 thousand) at an issue price ofF-39

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10b : 3776 Section 10b100% of their principal amount which are due in 4 equal semi-annual instalments commencingfrom April 2010 and ending in October 2011. The certificates carry a cost rate of LIBOR plus 1%per annum which should be distributed semi-annually to the certificate holders. The Islamicfinancing arrangement is secured by four of the company’s factories (see Note 10).25 Long-term borrowingsCurrency Interest rate Security111121212 1111212200611112200511112KD ‘000 KD ‘000Kuwaiti Dinars........................................ 7.00% – 7.50% Unsecured – 30,000US Dollars.............................................. 6.17% – 6.72% Unsecured 75,292 66,891Sterling .................................................. 5.00% – 6.5% Unsecured 744 756Long-term portion of loans in Sterling .. 4.00% – 7.5% Secured 1,815 –Long-term portion of loans in Euro........ 4.3% – 5.55% Secured 1,859111124941111279,710 1111298,14111112During December 2006 the parent company obtained an unsecured syndicated term loan of USDollar 200,000 thousand (KD57,928 thousand) from foreign banks. The loan which matures afterthree years in December 2009, bears interest at 0.80% above LIBOR payable in semi-annually inarrears.The Sterling loan is secured against property, plant and equipment with a book value of KD339thousand (2005: KD143 thousand) and inventories and debtors with book values totalling toKD1,645 thousand (2005: KD1,182 thousand).The Euro loans are secured against property, plant and equipment with a book value of KD670thousand (2005 : KD633 thousand).26 Provisions200611112200511112KD ‘000 KD ‘000Provision for staff indemnity ...................................................................... 4,405 3,676Provision for land-fill expenses .................................................................. 550 652Provision for rental property – amount due in more than one year .......... 6,116 5,452Provision for amounts payable under guarantees ...................................... – 1,249Pension liabilities (see Note 31).................................................................. 567111125041111211,638 1111211,53311112The provision for rental property relates to onerous property rental costs (net of estimated rentreceivable) and dilapidations obligations which are payable over various periods upto 2017.F-40

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10b : 3776 Section 10b27 Accounts payable and other liabilities200611112200511112KD ‘000 KD ‘000Trade payables ............................................................................................ 13,033 11,499Accrued interest.......................................................................................... 2,257 2,891Dividend payable ........................................................................................ 1,088 939Leasing creditors – amount due in less than one year .............................. 124 665Provision for rental property – amount due in less than one year.............. 1,335 1,423National labour support tax ........................................................................ 7,365 4,581Kuwait Foundation for the Advancement of Sciences ................................ 3,946 2,362Corporation tax of foreign subsidiaries ...................................................... 183 –Other accruals ............................................................................................ 8,754 13,476Donations payable ...................................................................................... 6,365 –Due to investment brokerage companies .................................................. 1,060 –Other liabilities ............................................................................................ 6,693111124,4131111252,203 1111242,2491111228 Short-term borrowingsCurrency Interest rate Security 200611112200511112KD ‘000 KD ‘000Conventional loansKuwaiti Dinars ................................ 7% – 8% Unsecured 146,525 102,450Kuwaiti Dinars ................................ 8.25% Secured 20,000 –US Dollars ...................................... 5.87% – 7.62% Unsecured 214,648 77,706Sterling .......................................... 5.55% – 6.8% Unsecured 20,945 20,503Sterling – current portion .............. 4.00% – 7.50% Secured 510 504Euro – current portion.................... 5.00% – 5.55% Unsecured 231 172Euro .............................................. 4.3% Unsecured 32611112–11112403,18511112201,33511112Islamic financing arrangementsTawarruq facilities .......................... – 10,919Less: deferred cost........................ –11112(170)11112–1111210,74911112Total .............................................. 403,185 11112212,08411112Kuwaiti Dinars loans amounting to KD20,000 thousand are secured by investments at fair valuethrough statement of income (see note 19).29 Cash and cash equivalents200611112200511112KD ‘000 KD ‘000Murabaha and wakala investments – maturing within three months ........ 22,608 –Short term deposits .................................................................................... 248,758 34,993Bank balance and cash .............................................................................. 16,258 8,712Due to banks .............................................................................................. (31,652)11112(17,127)11112255,972 1111226,57811112F-41

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10b : 3776 Section 10b30 Proposed dividendSubject to the requisite consent of the relevant authorities and approval from the generalassembly, the board of directors have proposed to distribute the following dividends for the yearended 31 December 2006 to the shareholders of record as of the date of the general assembly:a – Cash dividend of 70 Fils per share (2005: 60 Fils per share);– bonus shares of 10% (2005: 10%) of paid-up share capital;bThe following distributions for the year ended 31 December 2005 to the shareholders ofrecord on the date of the general assembly, were approved at the general assembly held on24 April 2006 and were subsequently distributed.– cash dividend of 60 Fils per share amounting to KD42,913 thousand;– bonus shares of 10% of paid-up share capital amounting to KD7,467 thousand;– one share of the subsidiary, National Industries Company for Building Materials – SAK(Closed) for every 10 shares held in the parent company.cFurther the shareholders, at the general assembly held on 24 April 2006, approved anamount of KD5,000 thousand to be distributed as donations from the profit for the yearended 31 December 2005.31 Defined benefit pensions schemesThe group has defined benefit pension schemes for the employees of certain subsidiaries in theUnited Kingdom. The following disclosures cover all the schemes on an aggregated basis. Theschemes are closed to new members and are not accruing further benefits. Actuarial calculationshave been made in order to determine pension liabilities and pension expenses in connection withthe group’s defined benefit pension schemes. The following assumptions have been used incalculating the liabilities and expenses incurred:200611112200511112Discount rate at 30 November.................................................................... 5.20% 4.90%Expected return on plan assets .................................................................. 6.20% 5.70%Future salary increases .............................................................................. N/A N/AFuture pension increases ............................................................................ 2.70% 2.70%Consolidated statement of income200611112200511112KD ‘000 KD ‘000Interest cost................................................................................................ 1,410 1,613Expected return on assets.......................................................................... (1,243) (1,453)Actuarial loss .............................................................................................. 231 510Loss on curtailments and settlements ...................................................... –1111297211112Net annual charge included in general and administrative expenses ........ 398 111121,64211112The actuarial loss of the schemes in excess of 10% of the present value of the defined benefitobligations are being charged as an expense over periods up to 18 years.F-42

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10b : 3776 Section 10bA reconciliation of the movement in the liability/ (asset) for defined benefit pension schemeappears as follows:Consolidated balance sheet200611112200511112KD ‘000 KD ‘000Brought forward liability/(asset) .................................................................. 504 (666)Consolidated statement of income (net) .................................................... 398 1,642Contributions .............................................................................................. (404) (491)Increase in unrecognisable asset................................................................ 6 6Foreign exchange adjustment .................................................................... 63111121311112Carried forward liability (Note 26) .............................................................. 567 1111250411112Reconciliation of consolidated balance sheet liability200611112200511112KD ‘000 KD ‘000Present value of obligations........................................................................ 32,830 30,363Fair value of plan assets ............................................................................ (26,842) (23,013)Net plan deficit............................................................................................ 5,988 7,350Unrecognised actuarial losses .................................................................... (5,760) (7,142)Unrecognisable asset.................................................................................. 3391111229611112Net liability recognised in the consolidated balance sheet (Note 26) ........ 567 1111250411112Changes in the present value of the defined benefit obligation200611112200511112KD ‘000 KD ‘000Opening defined benefit obligation ............................................................ 30,363 36,421Interest cost................................................................................................ 1,410 1,613Actuarial (losses)/gains................................................................................ (1,502) 3,326Liabilities extinguished on settlement ........................................................ – (5,594)Benefits paid .............................................................................................. (1,173) (1,079)Foreign exchange adjustment .................................................................... 3,73211112(4,324)11112Closing defined benefit obligation .............................................................. 32,830 1111230,36311112F-43

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10b : 3776 Section 10bChanges in the fair value of the plan assets200611112200511112KD ‘000 KD ‘000Opening fair value of plan assets................................................................ 23,013 27,734Expected return .......................................................................................... 1,243 1,453Actuarial gains ............................................................................................ 400 1,893Assets distributed on settlements.............................................................. – (4,195)Contributions by employer.......................................................................... 404 491Benefits paid .............................................................................................. (1,173) (1,079)Foreign exchange adjustment .................................................................... 2,95511112(3,284)11112Closing fair value of plan assets ................................................................ 26,842 1111223,01311112The fair value of the plan assets, category is as follows:200611112200511112KD ‘000 KD ‘000Plan assets:Equities ...................................................................................................... 13,070 9,382Bonds ........................................................................................................ 13,524 13,267Other assets .............................................................................................. 248111123641111226,842 1111223,0131111232 Risk managementCredit riskThe group is exposed to credit risk in respect of losses that would be recognised if counter partiesfail to perform as contracted. The group’s exposure to credit risk is primarily in respect of bankbalances, short-term deposits and accounts receivable and other assets. The group’s bankbalances and short-term deposits are placed with high credit quality financial institutions, whilstaccounts receivable and other assets are presented net of appropriate provisions.Interest rate riskThe group’s short-term deposits earn interest at an average rate of 6.75% (2005 : 4.25%) perannum. The bank balances earn interest at an average rate of 2.5% (2005: 2.5%) per annum. Thedue to banks are repayable upon demand and bear average interest rate of 1.5% (2005: 1.5%) perannum over the Central Bank of Kuwait and Bank of England discount rate. Lease creditors bearinterest at fixed rates and the average rate during the year was 6.5% (2005 : 6.5%). The group isalso exposed to interest rate risk on bonds payable, long-term borrowing and short-termborrowings (see notes 24, 25 and 28).Market riskMarket risk is the risk that the value of a financial instrument will fluctuate as a result of changesin market prices, whether those changes are caused by factors specific to the individual security,or its issuer, or factors affecting all securities traded in the market.The group is exposed to market risk with respect to its investments.The group limits market risk by maintaining a diversified portfolio and by continuous monitoring ofdevelopments in local and international equity and bond markets. In addition, the group activelyF-44

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10b : 3776 Section 10bmonitors the key factors that affect stock and bond market movements, including analysis of theoperational and financial performance of investees.Liquidity riskLiquidity risk is the risk that the group will be unable to meet its liabilities when they fall due. Tolimit this risk, management has arranged diversified funding sources, manages assets withliquidity in mind, and monitors liquidity on a daily basis.33 Segmental analysisFor management purposes the group’s primary format for reporting segment information isbusiness segments, with secondary information reported geographically.Business segmentsThe parent company and local subsidiaries primarily operate in two business segments:investment and building materials. The investment activities are both in and outside Kuwait. Thebuilding materials activities of the group are conducted wholly within the State of Kuwait.The major overseas subsidiary companies of the group principally operate in one businesssegment, the specialist engineering sector, the activities of which are conducted overseas,principally in Europe and the Americas.Revenue, profit for the year, total assets, total liabilities and net assets of the group are analysedby business activity as follows:Investment Building materials Specialist engineering Total11112111112 11112111112 11112111112 11112111112200611112200511112200611112200511112200611112200511112200611112200511112KD ‘000 KD ‘000 KD ‘000 KD ‘000 KD ‘000 KD ‘000 KD ‘000 KD ‘000Segment revenue ...................... 100,294 11112188,202 1111230,138 1111231,062 1111266,737 1111271,661 11112197,169 290,925Less:Income from investments ........ (90,772) (173,009)Share of profits of associatesand joint ventures.................. (9,522) (15,193)Unallocated sales ...................... 2,866111122,01711112Sales, per consolidatedstatement of income ................ 99,741 11112104,74011112Segment profit/(loss) ................ 162,583 11112248,474 111128,108 111128,955 111124,045 11112(28,432) 11112174,736 228,997Less:Finance costs ............................ (30,990) (18,735)Unallocated income/(expenses) 2,91411112(2,126)11112Profit for the year, perconsolidated statement ofincome .................................. 146,660 11112208,13611112Segment assets ........................ 1,343,968 1,024,572 39,407 23,400 72,537 59,622 1,455,912 1,107,594Segment liabilities .................... (26,433) (14,954)11112 11112(8,808) (7,905)11112 11112(23,240) (25,323)11112 11112(58,481) (48,182)Segment net assets .................. 1,317,535 111121,009,618 1111230,599 1111215,495 1111249,297 1111234,299 111121,397,431 1,059,412Unallocated assets .................... 1,230 1,366Loans and other unallocatedliabilities ................................ (519,964) (334,741)Bonds and Musharaka bondspayable .................................. (45,857) (52,527)11112 11112Net assets, per consolidatedbalance sheet ........................ 832,840 11112673,51011112F-45

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10b : 3776 Section 10b33 Segmental analysis (continued)Property, plant and equipment of the group are primarily utilised by the building materials segmentand the specialist engineering segment. The additions and depreciation relating to property, plantand equipment by business segment, in which the assets are used, are as follows:Building SpecialistInvestment111112materials engineering Unallocated111112 111112 111112Total111112KD ‘000 KD ‘000 KD ‘000 KD ‘000 KD ‘000At 31 December 2006Additions to property, plant and equipment 39 2,006 6,775 2 8,822Depreciation .............................................. 46 1,773 2,641 180 4,640At 31 December 2005Additions to property, plant and equipment 186 1,920 2,614 - 4,720Depreciation .............................................. 46 1,600 2,684 188 4,518Goodwill capitalised along with the impairment in value relate to the specialist engineeringsegment.Geographical segmentsA segmental analysis of total assets employed and sales by geographical location, are as follows:Assets11112111112Sales11111211112200611112200511112200611112200511112KD ‘000 KD ‘000 KD ‘000 KD ‘000Kuwait .................................................................. 1,014,225 825,494 33,004 33,079Outside Kuwait .................................................... 442,91911112283,4661111266,7371111271,661111121,457,144 111121,108,960 1111299,741 11112104,74011112Additions to property, plant and equipment and goodwill by geographical area in which the assetsare located, are as follows:200611112200511112KD ‘000 KD ‘000Kuwait ........................................................................................................ 5,732 2,106Outside Kuwait............................................................................................ 6,892111122,7231111212,624 111124,82911112F-46

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10b : 3776 Section 10b34 Related party transactionsRelated party transactions are entered on terms approved by the group’s management. Significantrelated party transactions and balances included in the consolidated financial statements are asfollows:200611112200511112KD ‘000 KD ‘000Balance sheetDue from associates and joint ventures (see note 17) .............................. 3,234 2,285Due from Key management personnel ...................................................... 312 539Income statementProfit on partial disposal of subsidiaries .................................................... 2,904 –Purchase of raw materials........................................................................ 8,248 7,157Compensation of key management personnel of the groupShort term employee benefits .................................................................... 3,338 6,338End of service benefits .............................................................................. 511 879Cost of share based payments .................................................................. 58 1,25435 Contingent liabilitiesAt 31 December 2006 the group had contingent liabilities in respect of outstanding bankguarantees amounting to KD1,774 thousand (2005: KD328 thousand).36 Fiduciary assetsOne of the subsidiaries of the group manages portfolios on behalf of related and third parties, andmaintains securities in fiduciary accounts which are not reflected in the group’s balance sheet.Assets under management at 31 December 2006 amounted to KD10,974 thousand (31 December2005 : KD7,745 thousand) of which assets managed on behalf of related parties amounted toKD5,438 thousand (31 December 2005 : KD1,544 thousand).37 Capital commitmentsAt the balance sheet date the group had commitments for the purchase of investments and theacquisition of property, plant and equipment totalling KD57,092 thousand (2005: KD16,966thousand).38 Fair value of financial instrumentsFair value represents amounts at which an asset could be exchanged or a liability settled on anarm’s length basis. In the opinion of the group’s management, except for certain available for saleinvestments which are carried at cost less impairment for reasons specified in Note 2 to thefinancial statements (under the heading “Estimation uncertainty”) the carrying amounts offinancial assets and liabilities as at 31 December 2006 and 2005 approximate their fair values.39 Comparative amountsCertain comparative amounts have been reclassified in order to conform with the presentation forthe current year. Such reclassifications do not affect previously reported net profit or equity.F-47

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10c : 3776 Section 10cAuditors’ reportTo the shareholders ofNational Industries Group Holding – SAKKuwaitWe have audited the accompanying consolidated balance sheet of National Industries GroupHolding (A Kuwaiti Shareholding Company) “the parent company” and Subsidiaries “the group” asat 31 December 2005, and the related consolidated statements of income, changes in equity andcash flows for the year then ended. These consolidated financial statements are the responsibilityof the parent company’s management. Our responsibility is to express an opinion on theseconsolidated financial statements based on our audit.We conducted our audit in accordance with International Standards on Auditing. Those standardsrequire that we plan and perform the audit to obtain reasonable assurance about whether theconsolidated financial statements are free of material misstatement. An audit includes examining,on a test basis, evidence supporting the amounts and disclosures in the consolidated financialstatements. An audit also includes assessing the accounting principles used and significantestimates made by management, as well as evaluating the overall financial statementpresentation. We believe that our audit provides a reasonable basis for our opinion.In our opinion, the consolidated financial statements present fairly, in all material respects, thefinancial position of National Industries Group Holding – SAK and Subsidiaries as at 31 December2005, and the results of its operations and its cash flows for the year then ended in accordancewith International Financial Reporting Standards.Furthermore, in our opinion proper books of account have been kept by the parent company andthe consolidated financial statements, together with the contents of the report of the board ofdirectors relating to these consolidated financial statements, are in accordance therewith. Wefurther report that we obtained all the information and explanations that we required for thepurpose of our audit and that the consolidated financial statements incorporate all information thatis required by the Commercial Companies Law of 1960, as amended, and by the parent company’sarticles of association, that an inventory was duly carried out and that, to the best of ourknowledge and belief, no violations of the Commercial Companies Law, as amended, nor of theparent company’s articles of association have occurred during the year ended 31 December 2005that might have had a material effect on the business of the group or on its financial position.Anwar Y. Al-Qatami, F.C.C.A.(Licence No. 50-A)of Grant Thornton – Anwar Al-Qatami & Co.Abdullatif A.H. Al-Majid(Licence No. 70-A)of Allied AccountantsKuwait18 March 2006F-48

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10c : 3776 Section 10cConsolidated statement of incomeRestatedYear Yearended ended31 Dec. 31 Dec.Note 200511112200411112KD ‘000 KD ‘000Sales ........................................................................................ 104,740 106,987Cost of sales............................................................................ (82,185)11112(88,835)11112Gross profit ............................................................................ 22,555 18,152Income from investments ...................................................... 4 173,009 54,017Share of profits of associates and joint ventures.................... 15,193 5,152Profit on disposal of investment properties ............................ – 161Change in fair value of investment properties ........................ – 1,544Other operating income .......................................................... 412 263Distribution costs .................................................................... (7,014) (6,956)General, administrative and other expenses .......................... (22,106)11112(13,163)11112Profit from operations .......................................................... 5 182,049 59,170Profit on partial disposal of associates .................................... 11 72,124 5,187Net (loss)/profit on disposal of subsidiaries/businesses.......... 6 (2,357) 560Finance costs .......................................................................... (18,735) (10,193)Impairment in value of property, plant and equipment .......... (1,709) –Loss on revaluation of freehold property ................................ – (307)Amortisation of goodwill ........................................................ – (2,174)Impairment in value of goodwill .............................................. 9 (13,086) (2,422)(Loss)/gain on foreign exchange .............................................. (1,865) 921Provision for onerous property leases and dilapidations ........ (2,129) (1,345)Provision for doubtful debts .................................................... (2,295) (1,262)Product development costs written off .................................. (183) (629)Reorganisation, redundancy, guarantee and other costs ........ (3,678)11112(966)11112Profit for the year .................................................................. 208,136 46,540Taxation .................................................................................. 7 (2,439) (902)Contribution to Kuwait Foundation for the Advancement ofSciences .............................................................................. (2,362) (424)Directors’ remuneration .......................................................... (200) (120)National Labour Support Tax.................................................... (4,581)11112(817)11112Net profit for the year .......................................................... 198,554 1111244,27711112Attributable to:Shareholders of the parent.................................................. 189,517 42,217Minority interest .................................................................. 9,037111122,06011112................................................................................................ 198,554 1111244,27711112Earnings per share attributable to the shareholders of theparent .................................................................................. 8 257 Fils 58 Fils11112 1111211112 11112The notes set out on pages 9 to 34 form an integral part of these consolidated financial statementsF-49

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10c : 3776 Section 10cConsolidated balance sheetRestated31 Dec. 31 Dec.Note 200511112200411112KD ‘000 KD ‘000AssetsNon-current assetsGoodwill........................................................................................ 9 9,776 25,060Property, plant and equipment .................................................... 10 26,406 32,448Investment in associates.............................................................. 11 120,911 62,628Investment in joint ventures ........................................................ 12 253 762Investment properties .................................................................. 13 2,267 2,556Available for sale investments...................................................... 14 368,451 125,048Deferred tax.................................................................................. 15 –111121,41111112Total non-current assets ............................................................ 528,06411112249,91311112Current assetsInventories .................................................................................. 16 23,730 26,733Accounts receivable and other assets ........................................ 17 126,720 30,546Wakala investment ...................................................................... 18 – 2,802Investments at fair value through statement of income.............. 19 386,741 222,825Short-term deposits...................................................................... 34,993 14,007Bank balances and cash .............................................................. 8,712111124,68611112Total current assets .................................................................... 580,89611112301,59911112Total assets ................................................................................ 1,108,960 551,51211112 1111211112 11112Equity and liabilitiesEquity attributable to shareholders of the parent companyShare capital 746,741,208 issued and fully paid shares of100 Kuwaiti Fils each (31 December 2004 : 706,182,103) ...... 20 74,674 70,618Treasury shares ............................................................................ 21 (16,800) (1,075)Staff bonus shares ...................................................................... 22 – 500Reserves ...................................................................................... 23 115,639 93,078Cumulative changes in fair value.................................................. 202,342 24,933Retained earnings ........................................................................ 247,77711112103,75811112623,632 291,812Minority interest ........................................................................ 49,8781111223,98511112Total equity ................................................................................ 673,510 11112315,79711112Non-current liabilitiesBonds payable .............................................................................. 24 17,527 52,685Long-term borrowings .................................................................. 25 98,141 45,593Leasing creditors .......................................................................... 1,028 2,086Deferred tax.................................................................................. 15 761 –Provisions .................................................................................... 26 11,533111128,47111112Total non-current liabilities........................................................ 128,99011112108,83511112Current liabilitiesAccounts payable and other liabilities .......................................... 27 42,249 32,117Bonds payable .............................................................................. 24 35,000 –Short-term borrowings ................................................................ 28 212,084 82,990Due to banks ................................................................................ 29 17,1271111211,77311112Total current liabilities................................................................ 306,46011112126,88011112Total equity and liabilities ........................................................ 1,108,960 551,51211112 1111211112 11112The notes set out on pages 9 to 34 form an integral part of these consolidated financial statements.F-50

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10c : 3776 Section 10cConsolidated statement of changes in equityEquity attributable to shareholders of the parent company1111111111111111111111111341111111111111111111111111Staff CumulativeShare Treasury bonus Reserves changes in Retained Sub- Minoritycapital shares shares (Note 23) fair value earnings Total interest Total11111 11111 11111 11111 11111 11111 11111 11111 11111KD ‘000 KD ‘000 KD ‘000 KD ‘000 KD ‘000 KD ‘000 KD ‘000 KD ‘000 KD ‘000Balance at 1 January 2005 as previouslyreported ............................................................ 70,618 (1,075) 500 93,078 12,452 116,239 291,812 23,985 315,797Adjustment arising from application of revisedIAS 39 (Note 2) .................................................. – – – – 12,481 (12,481) – – –11111 11111 11111 11111 11111 11111 11111 11111 11111Balance at 1 January 2005 as restated.............. 70,618 (1,075) 500 93,078 24,933 103,758 291,812 23,985 315,79711111 11111 11111 11111 11111 11111 11111 11111 11111Changes in fair value of available for saleinvestments ...................................................... – – – – 165,952 – 165,952 9,697 175,649Share of fair value adjustment in associates ........ – – – – 11,533 – 11,533 – 11,533Impairment in value of available for saleinvestments ...................................................... – – – – 999 – 999 – 999Realised on sale of available for sale investments – – – – (393) – (393) – (393)Realised an partial disposal of associates ............ – – – – (682) – (682) – (682)Transfer of excess depreciation ............................ – – – (11) – 11 – – –Currency translation differences ............................ – – – (1,359) – – (1,359) (10) (1,369)11111 11111 11111 11111 11111 11111 11111 11111 11111Net income/(expense) recognised directly inequity ................................................................ – – – (1,370) 177,409 11 176,050 9,687 185,737Net profit for the period ........................................ – – – – – 189,517 189,517 9,037 198,55411111 11111 11111 11111 11111 11111 11111 11111 11111Total recognised income/(expense) for theperiod ................................................................ – – – (1,370) 177,409 189,528 365,567 18,724 384,29111111 11111 11111 11111 11111 11111 11111 11111 11111Transfer to retained earnings on adoption ofIFRS: 2 (Note 2) ................................................ – – (500) – – 500 – – –Issue of staff bonus shares (Note 22) .................. 500 – – 1,825 – – 2,325 – 2,325Transfer on disposal of subsidiary ........................ – – – (12) – 12 – 540 540Issue of bonus shares .......................................... 3,556 – – – – (3,556) – – –Cash dividend to shareholders of the parentcompany ............................................................ – – – – – (21,079) (21,079) – (21,079)Purchase of treasury shares .................................. – (24,839) – – – – (24,839) – (24,839)Sale of treasury shares.......................................... – 9,114 – – – – 9,114 – 9,114Profit on sale of treasury shares .......................... – – – 236 – 496 732 536 1,268Transfer to reserves .............................................. – – – 21,882 – (21,882) – – –Investment made by minority shareholders .......... – – – – – – – 7,520 7,520Dividend paid to minority by the subsidiary .......... – – – – – – – (1,427) (1,427)11111 11111 11111 11111 11111 11111 11111 11111 111114,056 (15,725) (500) 23,931 – (45,509) (33,747) 7,169 (26,578)11111 11111 11111 11111 11111 11111 11111 11111 11111Balance at 31 December 2005 ............................ 74,674 (16,800) – 115,639 202,342 247,777 623,632 49,878 673,51011111 11111 11111 11111 11111 11111 11111 11111 11111F-51

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10c : 3776 Section 10cConsolidated statement of changes in equity (Continued)Equity attributable to shareholders of the parent company1111111111111111111111111341111111111111111111111111Staff CumulativeShare Treasury bonus Reserves changes in Retained Sub- Minoritycapital shares shares (Note 23) fair value earnings Total interest Total11111 11111 11111 11111 11111 11111 11111 11111 11111KD ‘000 KD ‘000 KD ‘000 KD ‘000 KD ‘000 KD ‘000 KD ‘000 KD ‘000 KD ‘000Balance at 1 January 2004 as previouslyreported ............................................................ 61,407 (8,303) 500 86,956 22,229 102,628 265,417 8,245 273,662Adjustment arising from application of revisedIAS 39 (Note 2) .................................................. – – – – 5,779 (5,779) – – –11111 11111 11111 11111 11111 11111 11111 11111 11111Balance at 1 January 2004 as restated.............. 61,407 (8,303) 500 86,956 28,008 96,849 265,417 8,245 273,66211111 11111 11111 11111 11111 11111 11111 11111 11111Changes in fair value of available for saleinvestments ...................................................... – – – – 5,742 – 5,742 24 5,766Share of fair value adjustment in associates ........ – – – – (234) – (234) – (234)Realised on sale of available for sale investments – – – – (8,352) (892) (9,244) – (9,244)Impairment in value of available for saleinvestments ...................................................... – – – – 968 (231) 737 – 737Transfer of excess depreciation ............................ – – – (12) – 12 – – –Surplus on revaluation of freehold property .......... – – – 180 – – 180 – 180Currency translation differences ............................ – – – 2,561 – – 2,561 5 2,56611111 11111 11111 11111 11111 11111 11111 11111 11111Net income/(expense) recognised directly inequity ................................................................ – – – 2,729 (1,876) (1,111) (258) 29 (229)Net profit for the period ........................................ – – – – – 42,217 42,217 2,060 44,27711111 11111 11111 11111 11111 11111 11111 11111 11111Total recognised income/(expense) for theperiod ................................................................ – – – 2,729 (1,876) 41,106 41,959 2,089 44,04811111 11111 11111 11111 11111 11111 11111 11111 11111Transfer on disposal of subsidiary ........................ – 2,041 – (1,168) (1,199) 1,168 842 14,922 15,764Transfer on disposal of investment property ........ – – – (113) – 113 – – –Issue of bonus shares .......................................... 9,211 – – – – (9,211) – – –Cash dividend to shareholders of the parent ........ – – – – – (20,914) (20,914) – (20,914)Purchase of treasury shares .................................. – (6,819) – – – – (6,819) – (6,819)Sale of treasury shares.......................................... – 12,006 – – – – 12,006 – 12,006Loss on sale of treasury shares ............................ – – – (183) – (496) (679) – (679)Dividend paid to minority by the subsidiary .......... – – – – – – – (1,271) (1,271)Transfer to reserves .............................................. – – – 4,857 – (4,857) – – –11111 11111 11111 11111 11111 11111 11111 11111 111119,211 7,228 – 3,393 (1,199) (34,197) (15,564) 13,651 (1,913)11111 11111 11111 11111 11111 11111 11111 11111 11111Balance at 31 December 2004 ............................ 70,618 (1,075) 500 93,078 24,933 103,758 291,812 23,985 315,79711111 11111 11111 11111 11111 11111 11111 11111 11111The notes set out on pages 9 to 34 form an integer part of the consolidated financial statements.F-52

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10c : 3776 Section 10cConsolidated statement of cash flowsRestatedYear Yearended ended31 Dec. 31 Dec.200511112200411112KD ‘000 KD ‘000OPERATING ACTIVITIESProfit for the year...................................................................................... 208,136 46,540Adjustments:Depreciation of property, plant and equipment ...................................... 4,518 4,905Loss/(profit) on disposal of property, plant and equipment .................... 6 (153)Impairment in value of property, plant and equipment .......................... 1,709 –Loss on revaluation of freehold property ................................................ – 307Amortisation of goodwill ........................................................................ – 2,174Impairment in value of goodwill.............................................................. 13,086 2,422Share of profits of associates and joint ventures .................................. (15,193) (5,152)Profit on disposal of investment properties............................................ – (161)Change in fair value of investment properties ........................................ – (1,544)Income from wakala investment ............................................................ (236) –Dividend income from available for sale investments ............................ (2,477) (2,335)Profit on sale of available for sale investments ...................................... (13,793) (12,000)Impairment in value of available for sale investments............................ 999 914Reversal of impairment in value of available for sale investments ........ – (3,666)Profit on partial disposal of associates .................................................. (72,124) (5,187)Net loss/(profit) on disposal of subsidiaries/businesses ........................ 2,357 (560)Reorganisation, redundancy, guarantee and other costs........................ 3,678 966Cost of share based payments .............................................................. 2,325 –Net provisions charged .......................................................................... 3,062 1,886Finance costs .......................................................................................... 18,735 10,193Interest income ...................................................................................... (1,619)11112(190)11112Operating profit before changes in operating assets and liabilities ............ 153,169 39,359Changes in operating assets and liabilities:Inventories ............................................................................................ 3,003 138Accounts receivable and other assets .................................................... (10,174) 2,222Investments at fair value through statement of income ........................ (163,916) (48,766)Accounts payable and other liabilities .................................................... 5,451111121,13611112Cash used in operations ............................................................................ (12,467) (5,911)Payment of reorganisation, redundancy, guarantee and other costs ........ (992) (777)Taxation paid .............................................................................................. (420) (156)KFAS contribution paid................................................................................ (1,195) (55)Directors’ remuneration paid ...................................................................... (120) (120)National labour support tax paid ................................................................ (2,522)11112(31)11112Net cash used in operating activities .................................................... (17,716) (7,050)11112 1111211112 11112F-53

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10c : 3776 Section 10cConsolidated statement of cash flows (continued)RestatedYear Yearended ended31 Dec. 31 Dec.Note 200511112200411112KD ‘000 KD ‘000INVESTING ACTIVITIESPurchase of property, plant and equipment ............................ (4,720) (4,709)Proceeds from sale of property, plant and equipment............ 982 929Cash invested on acquisition of subsidiaries/businesses........ – (1,003)Net cash inflow on disposal of subsidiaries ............................ 532 30,975Proceeds from sale of investment properties ........................ – 1,022Investment in associated companies ...................................... (57,612) (8,511)Proceeds from partial disposal of associates .......................... 16,774 8,013Proceeds on reduction of capital in associated company ...... – 575Dividend received from associates ........................................ 3,692 5,917Wakala investment .................................................................. – (2,802)Proceed on realisation of wakala investment.......................... 3,038 –Purchase of available for sale investments.............................. (91,988) (41,763)Proceeds from sale of available for sale investments ............ 28,032 30,202Dividend income received from available for sale investments 2,477 2,335Interest income received ........................................................ 1,6191111219011112Net cash (used in)/from investing activities ...................... (97,174)1111221,37011112FINANCING ACTIVITIESFinance lease payments.......................................................... (1,058) 1,399Proceeds from issue of bonds ................................................ – 17,685Net increase in long-term borrowings .................................... 62,548 16,359Net increase/(decrease) in short-term borrowings .................. 119,094 (26,755)Dividend paid .......................................................................... (20,969) (20,796)Finance costs paid .................................................................. (16,615) (10,045)Purchase of treasury shares.................................................... (24,839) (6,819)Proceeds from sale of treasury shares .................................. 10,382 11,327Increase/(decrease) in minority interest .................................. 5,96611112(1,271)11112Net cash from/(used in) financing activities ...................... 134,50911112(18,916)11112Net increase/(decrease) in cash and cash equivalents............ 19,619 (4,596)Translation difference .............................................................. 3911112911111219,658 (4,505)Cash and cash equivalents at beginning of the year .............. 6,9201111211,42511112Cash and cash equivalents at end of the year .................. 29 26,578 6,92011112 1111211112 11112The notes set out on pages 9 to 34 form an integral part of these consolidated financial statements.F-54

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10c : 3776 Section 10cNotes to the consolidated financial statements31 December 20051 Incorporation and ActivitiesNational Industries Group Holding – SAK (‘the parent company’) was incorporated in 1961 as aKuwaiti shareholding company in accordance with the Commercial Companies Law in the State ofKuwait and in April 2003, its status was transformed to a ‘Holding Company’. The parentcompany’s shares are traded on the Kuwait Stock Exchange.The main objectives of the parent company are as follows:– Owning stocks and shares in Kuwaiti or non-Kuwaiti shareholding companies and shares inKuwaiti or non-Kuwaiti limited liability companies and participating in the establishment of,lending to and managing of these companies and acting as a guarantor for these companies.– Lending money to companies in which it owns 20% or more of the capital of the borrowingcompany, along with acting as guarantor on behalf of these companies.– Owning industrial equities such as patents, industrial trade marks, royalties, or any otherrelated rights, and franchising them to other companies or using them within or outside theState of Kuwait.– Owning real estate and moveable property to conduct its operations within the limits asstipulated by law.– Employing excess funds available with the company by investing them in investment andreal estate portfolios managed by specialised companies.The address of the parent company’s registered office is PO Box 417, Safat 13005, State of Kuwait.The board of directors of the parent company approved these consolidated financial statementsfor issue on 18 March 2006.2 Significant Accounting PoliciesBasis of preparationThe consolidated financial statements of the group are prepared in accordance with InternationalFinancial Reporting Standards issued by the International Accounting Standards Board (IASB).The consolidated financial statements are prepared under the historical cost convention modifiedto include the revaluation of freehold and leasehold properties, and the measurement at fair ofinvestment securities and investment properties.The consolidated financial statements have been presented in Kuwaiti Dinars.Basis of preparation (continued)In 2003 and 2004, International Accounting Standards Board (IASB) issued a series of newInternational Financial Reporting Standards (IFRS) and revised International Accounting Standards(IAS). The new IFRS and revised IAS became effective for annual periods beginning 1 January2005. All new IFRS and revised IAS have been adopted by the group but have either no orinsignificant impact except for IFRS 2 : “Share-based Payment”, IFRS 3: “Business Combination”and IAS 39 : “Financial instruments, recognition and measurement”.The adoption of revised IAS 1 : “Presentation of financial statements” has resulted inamendments to presentation of minority interest. Minority interest is now presented withinequity.F-55

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10c : 3776 Section 10cThe accounting polices used are consistent with those used in the previous year except asdiscussed below.Effect of change in accounting policiesIFRS 2 ‘Share-based Payment’The revised accounting policy for share-based payment transactions is described below under“Share based payment”. The main impact of IFRS 2 on the group is the recognition of an expenseand a corresponding entry to equity for the staff bonus shares scheme described in Note 22.The adoption of the revised policy for share based payments resulted in:– A transfer of KD500 thousand from “staff bonus shares” account to retained earningsrepresenting an amount equal to the nominal value of the 5,000,000 unvested shares at 1January 2005 which was previously appropriated from retained earnings to “staff bonusshares” account.– a decrease in the current year profit by KD2,325 thousand (31 December 2004 : Nil) due toan increase in the employee benefits expense charged to general and administrativeexpenses with a corresponding increase in equity.IFRS 3 “Business combinations and IAS 36 “Impairment of assets”.The group has adopted IFRS 3 “Business Combinations” and revised IAS 36 “Impairment ofAssets” and consequently changed its accounting policy for goodwill. The adoption of IFRS 3 andIAS 36 (revised) has resulted in the Group ceasing annual goodwill amortisation and commencingtesting for impairment at the cash generating unit level annually (unless an event occurs during theyear which requires goodwill to be tested more frequently) from 1 January 2005.IAS 39 “Financial Instruments: Recognition and Measurement”In accordance with the transitional provisions of the revised IAS 39, the group reclassified certain“trading investments” to “available for sale investments” which were carried at 31 December2004 at KD26,413 thousand and the remaining “trading investments” were reclassified into“investments at fair value through statement of income”.The reclassification from “trading investments” to “available for sale investments” resulted in,changes in fair value of trading investments amounting to KD12,481 thousand at 31 December2004 and KD5,779 thousand at 31 December 2003 previously reported in the consolidatedstatement of income being recorded in ‘cumulative changes in fair value’ within equity at 1January 2005 and 1 January 2004 respectively. Further this reclassification resulted in a decreasein the net profit for the year attributable to the shareholders of the parent by KD34,041 thousand(a decrease in net profit for the previous year attributable to the shareholders of the parent byKD6,702 thousand) with a corresponding change in “cumulative changes in fair value” account.The above changes have been accounted for with retrospective effect and the comparatives havebeen restated accordingly.Basis of consolidationThe consolidated financial statements incorporate the financial statements of the parent company,National Industries Group Holding – SAK, and of its subsidiary companies for the year ended 31December 2005 and 2004. The details of the significant subsidiary companies are set out in Note3 to the consolidated financial statements.Subsidiaries are those enterprises controlled by the parent company. Control exists when theparent company has the power, directly or indirectly, to govern the financial and operating policiesF-56

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10c : 3776 Section 10cof an enterprise so as to obtain benefits from its activities. The financial statements ofsubsidiaries, other than those that are considered not material to the financial statements of theparent company, are included in the consolidated financial statements from the date that controleffectively commences until the date that control effectively ceases.All significant inter-company balances and transactions are eliminated on consolidation.RevenueRevenue is recognised to the extent that it is probable that the economic benefits will flow to thegroup and the revenue can be reliably measured. The following specific recognition criteria mustalso be met before revenue is recognised.SalesSales represent the value of goods and services supplied during the year excluding value addedtax or other sales taxes. Sales and profits between subsidiary undertakings are eliminated.Dividend incomeDividend income is recognised when the shareholders’ right to receive payment is established.Interest incomeInterest income is recognised on a time proportionate basis, taking into consideration the principaloutstanding and the interest rate applicable.Finance costsFinance costs are calculated and recognised on a time proportionate basis taking into account theprincipal loan balance outstanding and the interest rate applicable.Development costsExpenditure on development activities which are not expected to generate future economicbenefits are written off as incurred. Development costs are carried forward only if specific criteriaare met. Such development costs carried forward are amortised over their estimated useful liveson a straight line basis and are subject to regular impairment review.Share-based PaymentCertain employees (including managing director) of the company receive remuneration in the formof share-based payment transactions, whereby the employees render services in exchange forshares (“equity settled transactions”).Equity-settled transactionsThe cost of equity-settled transactions with employees is measured under the intrinsic valuemethod. Under this method, the cost is determined by comparing the period end market value ofthe company’s shares with the issue price. The cost of equity settled transactions is recognised,together with a corresponding increase in equity, over the period in which the performanceconditions are fulfilled, ending on the date on which the shares vest.GoodwillGoodwill represents the excess of the cost of an acquisition over the fair value of the netidentifiable assets acquired at the date of acquisition. Goodwill is measured at cost lessF-57

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10c : 3776 Section 10cimpairment losses. Goodwill is tested for impairment, annually or more frequently if events orchanges in circumstances indicate that the carrying value may be impaired. For the purpose ofimpairment testing, goodwill is allocated to cash generating units.Property, plant and equipment and depreciationProperty, plant and equipment are stated at cost/valuation less accumulated depreciation andimpairment losses. Depreciation is calculated to write off the cost or valuation, less the estimatedresidual value of property, plant and equipment, on a straight-line basis over their estimated usefullives as follows:Freehold propertyLong leasehold propertyShort leasehold propertyProperty on leasehold landPlant and machineryMotor vehiclesFurniture and equipmentLower of 50 years or remaining useful lifeLower of 50 years or remaining lease termLease term4 to 20 years1 to 15 years2 to 10 years4 to 10 yearsAny increase arising on revaluation is credited directly to shareholders’ equity as “revaluationreserve” except to the extent where the increase reverses a revaluation decrease related to thesame asset for which a decrease in valuation has previously been recognised as an expense, it iscredited to the consolidated statement of income. Any decrease in the net carrying amount arisingon revaluation is charged directly to the consolidated statement of income, or charged to therevaluation reserve to the extent that the decrease is related to an increase for the same assetwhich was previously recorded as a credit to the revaluation surplus.Depreciation on the re-valued properties is charged to the consolidated statement of income overtheir remaining estimated useful lives and an amount equivalent to the excess depreciation chargerelating to the increase in carrying amount is transferred each year from the revaluation reserve toretained earnings.No depreciation is provided on freehold land. Properties in the course of construction forproduction or administrative purposes, are carried at cost, less any recognised impairment loss.Depreciation of these assets, on the same basis as other property assets, commences when theassets are ready for their intended use.Investment in associatesThe group’s investment in associates is accounted for under the equity method of accounting. Anassociate is an entity in which the group has between 20% to 50% of the voting power or overwhich it exercises significant influence. Under the equity method of accounting, the initialinvestment is recorded at cost and the carrying amount is increased or decreased to recognise thegroup’s share of profit or loss and other changes in the equity of the associated companies.Distributions received from the associated companies reduce the carrying amount of theinvestment.Investment in joint venturesInvestment in joint ventures are accounted for under the equity method of accounting. A jointventure is an undertaking in which the group has a long-term interest and over which it exercisesjoint control. Under the equity method of accounting, the initial investment is recorded at cost andthe carrying amount is increased or decreased to recognise the group’s share of profits or lossesand other changes in equity of the joint venture. Distributions received from joint ventures reducethe carrying amount of the investment.F-58

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10c : 3776 Section 10cInvestment propertiesInvestment properties are initially recorded at cost, being the purchase price and any directlyattributable expenditure for a purchased investment property, or at fair value at the date of transferif the property was transferred from another category of assets. Subsequent to initial recognition,investment properties are re-measured to fair value on an individual basis based on an externalvaluation by an independent valuer. Changes in fair value are taken to the consolidated statementof income.InvestmentsThe group has adopted the revised IAS 39 from 1 January 2005, and reclassified its investmentspreviously categorised as trading and available for sale into the following two categories;i. Investments at fair value through statement of incomeii.Available for sale investmentsInvestments at fair value through statement of incomeInvestments at fair value through statement of income are initially recognised at cost, being thefair value of the consideration given, excluding transaction costs. These investments are either“held for trading” or “designated” as such on initial recognition.Held for trading investments are acquired principally for the purpose of selling or repurchasingthem in the near term or are a part of a portfolio of identified financial instruments that aremanaged together and for which there is evidence of a recent actual pattern of short term profittaking. Designated investments are those investments which are initially designated asinvestments at fair value through statement of income.After initial recognition, investments at fair value through statement of income are re-measured atfair value and changes in fair value are recognised in the consolidated statement of income.Available for sale investmentsAvailable for sale investments are initially recognised at cost, being the fair value of theconsideration given, plus transaction costs that are directly attributable to the acquisition.After initial recognition, available for sale investments are re-measured at fair value except forinvestments whose fair value cannot be reliably measured, which are measured at cost lessimpairment.Unrealised gain or loss on re-measurement of available for sale investments to fair value isrecognised directly in equity in “cumulative changes in fair value” account until the investment isderecognised or determined to be impaired, at which time the cumulative gain or loss previouslyrecognised in equity is recognised in the consolidated statement of income.Fair valuesFor investments traded in organised financial markets, fair value is determined by reference tostock exchange quoted market bid prices at the close of business on the balance sheet date.For investments where there is no quoted market price, a reasonable estimate of fair value isdetermined by using valuation techniques. The group uses a variety of methods and makesassumptions that are based on market conditions existing at each balance sheet date. Valuationtechniques used include the use of comparable recent arm’s length transactions, discounted cashflow analysis and other valuation techniques commonly used by market participants.F-59

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10c : 3776 Section 10cTrade and settlement date accountingAll “regular way” purchases and sales of financial assets are recognised on the trade date, i.e. thedate that the group commits to purchase or sell the asset. Regular way purchases or sales arepurchases or sales of financial assets that require delivery of assets within the time framegenerally established by regulation or convention in the market place concerned.Recognition and derecognition of financial assets and liabilitiesA financial asset or a financial liability is recognised when the group becomes a party to thecontractual provisions of the instrument. A financial asset (in whole or in part) is derecognisedeither when the group has transferred substantially all the risk and rewards of ownership or whenit has neither transferred nor retained substantially all the risks and rewards and when it no longerhas control over the asset or a proportion of the asset. A financial liability is derecognised whenthe obligation specified in the contract is discharged, cancelled or expired.Impairment of financial assetsAn assessment is made at each balance sheet date to determine whether there is objectiveevidence that a specific financial asset, or group of similar assets, may be impaired. If suchevidence exists, the estimated recoverable amount of that asset is determined and anyimpairment loss based on the net present value of future anticipated cash flows is recognised inthe consolidated statement of income.TaxationDeferred taxation is provided in respect of all temporary differences. Deferred tax assets arerecognised in respect of unutilised tax losses when it is probable that the loss will be used againstfuture profits.InventoriesInventories are valued at the lower of cost and net realisable value. In respect of finished goodsand work-in-progress, cost includes all direct costs of production and an appropriate proportion ofproduction overheads. Cost of raw materials, consumables and spare parts is calculated using theweighted average cost method and provision is taken for slow moving and obsolete items.Wakala investmentsWakala investments are financial assets originated by the group and are stated at amortised cost.Treasury sharesTreasury shares are stated at cost as a deduction within shareholders’ equity and they are notentitled to cash dividends.Gains or losses resulting from the trading in treasury shares are taken directly to shareholders’equity under “Gain on sale of treasury shares reserve”. Should the reserve fall short of any lossesfrom the sale of treasury shares, the difference is charged to retained profits then reserves,subsequent to this, should profits arise from sale of treasury shares an amount is transferred toreserves then retained profits equal to the loss previously charged to these accounts.Bonds payableBonds payable are stated at their principal amount. Interest is charged as an expenses as itaccrues, with unpaid amounts included in other liabilities.F-60

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10c : 3776 Section 10cLeasing and hire purchaseAssets acquired under finance leases and hire purchase arrangements are capitalised and therelated liabilities, excluding finance charges, are included in liabilities. Finance charges in respectof such liabilities are charged to the consolidated statement of income. Operating lease rentals arewritten off on a straight-line basis over the lease period.Tawarruq facilities and wakala payablesTawarruq facilities and wakala payables represent Islamic financing arrangements, whereby thegroup receives funds for the purpose of financing its investment activities and they are stated atamortised cost.ProvisionsProvisions are recognised when the group has a present obligation (legal or constructive) resultingfrom a past event and the costs to settle the obligation are both probable and reliably measurable.For the parent company and the local subsidiaries the provision for staff indemnity is computedbased on employees’ accumulated periods of service at the balance sheet date in accordance withthe Kuwait labour law for the private sector and the companies’ bye-laws.Provision for land fill expensesProvision for land fill expenses is calculated based on the expected cost which is required torestore the leased sites, used by the group for extracting raw materials for its operations, to itsoriginal condition.PensionsContributions are paid to both defined benefit and defined contribution pension schemes inaccordance with the recommendations of independent actuaries and advisers.Defined contribution schemesContributions to defined contribution schemes are charged to the consolidated statement ofincome on an accrual basis.Defined benefit schemesIn respect of defined benefit schemes a defined benefit liability (or asset) is recognised in theconsolidated balance sheet and it is calculated as the present value of the defined benefitobligation using the projected unit credit method plus any unrecognised actuarial gains or lossesless any past service cost not recognised less the market value of the plan assets.Pension expense is charged to the consolidated statement of income and is calculated as theaggregate of current service cost (using the projected unit credit method), an interest cost on thediscounted defined benefit obligation, the expected return on plan assets, recognised actuarialgains and losses, recognised past service costs and the effect of curtailments or settlements.Actuarial gains or losses are recognised as income or expense if the net cumulative unrecognisedactuarial gains or losses at the end of the previous reporting period exceeded the greater of:– 10% of the present value of the defined benefit obligations; and– 10% of the fair value of plan assets.The portion of actuarial gains and losses recognised, is the excess determined above, divided bythe expected average remaining service lives of scheme employees of 18 years.F-61

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10c : 3776 Section 10cFiduciary assetsAssets held in a trust or fiduciary capacity are not treated as assets of the group and, accordingly,they are not included in these consolidated financial statements.Foreign currenciesThe assets and liabilities of overseas subsidiary undertakings are translated into Kuwaiti Dinars atthe closing exchange rates on the balance sheet date. Gains and losses arising on thesetranslations are taken to reserves, net of exchange differences arising on related foreign currencyborrowings. The income statements of overseas subsidiary undertakings are consolidated at theaverage rates of exchange for the year.Foreign currency transactions of the Kuwaiti companies are translated into Kuwaiti Dinars at therates ruling when they occurred. Monetary assets and liabilities of Kuwaiti companiesdenominated in foreign currencies are translated into Kuwaiti Dinars using the rate of exchangeruling at the balance sheet date, and exchange differences arising are dealt with in theconsolidated statement of income.JudgmentsIn the process of applying the group’s accounting polices, management has made the followingjudgements, apart from those involving estimations, which have the most significant effect in theamounts recognised in the consolidated financial statements:Classification of investmentsManagement decides on acquisition of an investment whether it should be classified as held fortrading, designated as at fair value through statement of income or available for sale.The group classifies investments as trading if they are acquired primarily for the purpose of makinga short term profit by the dealers.Classification of investments as designated at fair value through statement of income depends onhow management monitor the performance of these investments. When they are not classifiedas held for trading but have readily available reliable fair values and the changes in fair values arereported as part of statement of income in the management accounts, they are classified asdesignated at fair value through statement of income.All other investments are classified as available for sale.Impairment of investmentsThe group treats available for sale equity investments as impaired when there has been asignificant or prolonged decline in the fair value below its cost or where other objective evidenceof impairment exists. The determination of what is “significant” or “prolonged” requiresconsiderable judgement. The group treats “significant” generally as 25% and “prolonged” asgreater than one year. In addition, the group evaluates other factors, including normal volatility inshare price for quoted equities and the future cash flows and the discount factors for unquotedequities.Estimation uncertaintyThe key assumptions concerning the future and other key sources of estimation uncertainty at thebalance sheet date, that have a significant risk of causing a material adjustment to the carryingamounts of assets and liabilities within the next financial year are discussed below:F-62

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10c : 3776 Section 10cValuation of unquoted equity investmentsValuation of unquoted equity investments is normally based on one of the following:• recent arm’s length market transactions;• current fair value of another instruments that is substantially the same; or• the expected cash flow discounted at current rates applicable for items with similar termsand risk characteristics;• other valuation models.The determination of the cash flows and discount factors for unquoted equity investmentsrequires significant estimation. There are certain investments where this estimation cannot bereliably determined and as a result available for sale investments with a carrying amount ofKD26,261 thousand (2004: KD5,718 thousand) are carried at cost.Impairment of goodwillThe group determines whether goodwill is impaired at least on an annual basis. This requires anestimation of the value in use of the cash generating units to which the goodwill is allocated.Estimating the value in use requires the group to make an estimate of the expected future cashflows from the cash generating unit and also to choose a suitable discount rate in order tocalculate the present value of those cash flows. Note 9 contain the information about theassumptions and their risk factors relating to goodwill impairment.Pension liabilities/assetPension assumptions are detailed in note 31 and the pension expense for the year is sensitive tosuch assumptions and to the basis and period of spreading the actuarial deficit.Cash and cash equivalentsCash and cash equivalents included in the consolidated statement of cash flows consist of bankbalances and cash, due to banks and short-term deposits maturing within three months from thedate of inception.F-63

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10c : 3776 Section 10c3 Investment in subsidiariesThe significant consolidated subsidiaries of the parent company as at 31 December 2005 and2004 are as follows:Country ofPercentageregistration11111111ownership1111111111200511112200411112% %NI Group (Bahrain) EC .......................................... Bahrain 100 100NIC Holdings (Guernsey) Limited ........................ Guernsey 100 100NIG (Guernsey) Limited........................................ Guernsey 100 100NIC Holdings (UK) Plc .......................................... United Kingdom 100 100BI Group Plc ........................................................ United Kingdom 100 100Noor Financial Investment Company– KSC (Closed) ................................................ Kuwait 51 52Ikarus Industrial Petroleum Company– SAK (Closed) [formerly National Companyfor Cement Industries – SAK (Closed)] ............ Kuwait 100 100National Company for Ready Mix Concrete– SAK (Closed) ................................................ Kuwait 100 100National Land Transport Company – SAK (Closed) Kuwait 100 100Luluat Al Nasrullah Trading Company – WLL........ Kuwait 100 100National Industries Company for BuildingMaterials – SAK (Closed).................................. Kuwait 74 74Denham Investment LTD .................................... Cayman Islands 80 –a. NIG (Guernsey) Limited is the ultimate European holding company of the UK trading groupand owns 100% of NIC Holdings (UK) Plc which in turn owns 100% of BI Group Plc.b. Certain minority shareholdings in the above subsidiary companies are held on behalf of theparent company by third party nominees.c. During the year the group established Denham Investment LTD, to primarily acquire 28.6%of “Karachi Electric Supply Corporation Ltd – Pakistan”, through a special purpose entity,incorporated in the Cayman Islands named KES Power LTD (see note 11 b).4 Income from investments200511112200411112KD ‘000 KD ‘000Dividend income:– From investments at fair value through statement of income................ 7,720 4,939– From available for sale investments........................................................ 2,477 2,335Profit on sale of available for sale investments .......................................... 13,793 12,000Impairment in value of available for sale investments................................ (999) (914)Reversal of impairment in value of available for sale investments ............ – 3,666Income from investments at fair value through statement of income ...... 148,163 31,801Income from wakala investment ................................................................ 236 –Interest income .......................................................................................... 1,6191111219011112173,009 54,01711112 1111211112 11112F-64

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10c : 3776 Section 10c5 Profit from operationsProfit from operations is stated after charging:200511112200411112KD ‘000 KD ‘000Depreciation................................................................................................ 4,518 4,905Staff costs .................................................................................................. 39,088 1111231,102111126 Disposal of subsidiaries/businessesSignificant disposals during 2005:a. During the year the group disposed Newage Transmission Limited, a wholly ownedsubsidiary located in the United Kingdom, for a cash consideration of KD532 thousandresulting in a loss of KD1,264 thousand.b. During the year the group disposed Blanson trading division of BI Plastic and the group’s50% interest in Perry Barromedical Inc. for a net combined cash consideration of KD1,117thousand resulting in a loss of KD213 thousand.c. Provision of KD904 thousand has been made for pension obligations relating to businessesdisposed of in the United Kingdom both in the current and prior years and this has beenincluded in the loss on disposal of subsidiaries/business in the consolidated statement ofincome.d. During the year the group disposed 1% of its stake in its 52% owned subsidiary NoorFinancial Investment Company – KSC (Closed) for a consideration of KD564 thousand whichresulted in a profit of KD24 thousand.Significant disposals during 2004:a. During January 2004, the group disposed 75% of its stake in its wholly owned subsidiaryRotalac Plastics Limited for a deferred cash consideration of KD322 thousand. The net losson disposal before goodwill write off was KD78 thousand and the related goodwill write offwas KD620 thousand. The remaining investment of 25% in the former subsidiary wastransferred to available for sale investments as the group has no significant influence.b. During April and May 2004, the group disposed 66.5% of its stake in its 97.5% ownedsubsidiary, Kuwait Privatization Project Holding Company – SAK (Closed) for a net cashconsideration of KD14,346 thousand resulting in a profit of KD275 thousand. The remaininginvestment in the former subsidiary was transferred to investment in associates. The resultsof the former subsidiary up to 31 March 2004 have been incorporated in the consolidatedstatement of income.c. During August 2004, the group disposed 0.8% of its stake in its 75% owned subsidiary,National Industries Company for Building Materials – SAK (Closed) for a net cashconsideration of KD780 thousand which resulted in a profit of KD542 thousand.d. During December 2004, the group disposed 47.65% of its stake in its wholly ownedsubsidiary, Noor Financial Investment Company – KSC (Closed) for a net cash considerationof KD15,943 thousand which resulted in a profit of KD441 thousand.F-65

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10c : 3776 Section 10c7 Taxation200511112200411112KD ‘000 KD ‘000Current tax expenseCurrent year charge .................................................................................... 337 212Over provided in prior years........................................................................ (25) (27)Deferred tax expenseCurrent year charge .................................................................................... 2,12711112717111122,439 11112902111128 Earnings per share attributable to the shareholders of the parentEarnings per share is calculated by dividing the net profit for the year attributable to theshareholders of the parent by the weighted average number of shares outstanding during the yearas follows:2005 Restated1111122004111112Net profit for the year attributable to the shareholders of theparent (KD ‘000) ............................................................................ 189,51711111242,217111112Weighted average number of shares outstanding during the year(excluding treasury shares) .......................................................... 737,059,348111112729,375,772111112Earnings per share attributable to the shareholder of theparent .......................................................................................... 257 Fils 58 Fils111112 111112111112 111112The weighted average number of ordinary shares outstanding during the year ended 31 December2004 has been restated due to the issue of bonus shares during the year.9 Goodwill200511112200411112KD ‘000 KD ‘000Balance at 1 January .................................................................................. 25,060 25,265Additions .................................................................................................... 109 3,254Disposals .................................................................................................... (171) (872)Amortisation................................................................................................ – (2,090)Impairment in value .................................................................................... (13,086) (2,422)Foreign exchange adjustment .................................................................... (2,136)111121,925111129,776 1111225,06011112The annual impairment review was based on value in use of certain businesses which wascalculated using a discount rate of 5.0%. As a result of this review goodwill has been impaired inrespect of certain subsidiaries located in the United Kingdom.The amortisation charge for the previous year included in the consolidated statement of incomealso comprises of KD84 thousand which relates to amortisation of goodwill on investment in jointventures.F-66

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10c : 3776 Section 10c10 Property, plant and equipmentProperty Leasedon Furniture plant, PropertyFreehold Leasehold leasehold Plant and Motor and machinery under con- Total Totalproperty 11111 property 11111 land 11111 machinery 11111 vehicles 11111 equipment 11111 & vehicles 11111 struction 11111 2005 11111 200411111KD ‘000 KD ‘000 KD ‘000 KD ‘000 KD ‘000 KD ‘000 KD ‘000 KD ‘000 KD ‘000 KD ‘000Cost or valuationAt 1 January .................................. 8,373 2,820 30,496 60,810 6,478 5,988 3,628 347 118,940 113,624Foreign exchange adjustments ...... (1,018) (321) – (3,061) (14) – (457) – (4,871) 3,332Additions/transfers .......................... 666 26 255 2,286 282 337 12 856 4,720 4,709Disposals ........................................ (1,000) – – (3,036) (156) (16) (52) – (4,260) (3,490)Revaluation adjustments ................ – – – – – – – – – (127)Acquisitions .................................... – – – – – – – – – 2,640Reclassification .............................. – – – 1,007 – – (1,007) – – –Transferred to investment properties – 11111 – 11111 – 11111 – 11111 – 11111 – 11111 – 11111 – 11111 – 11111 (1,748)11111At 31 December.............................. 7,021 11111 2,525 11111 30,751 11111 58,006 11111 6,590 11111 6,309 11111 2,124 11111 1,203 11111 114,529 11111 118,94011111Accumulated depreciation andimpairment lossesAt 1 January .................................. 1,376 493 28,439 43,181 5,938 4,868 2,197 – 86,492 82,651Foreign exchange adjustments ...... (206) (69) – (1,949) (8) – (256) – (2,488) 1,650Charge for the year ........................ 272 253 328 3,013 235 270 147 – 4,518 4,905Impairment in value ........................ – – – 1,709 – – – – 1,709 –Relating to disposals ...................... (35) – – (1,889) (89) (16) (79) – (2,108) (2,714)Reclassification .............................. – 11111 – 11111 – 11111 393 11111 – 11111 – 11111 (393) 11111 – 11111 – 11111 –11111At 31 December.............................. 1,407 11111 677 11111 28,767 11111 44,458 11111 6,076 11111 5,122 11111 1,616 11111 – 11111 88,123 11111 86,49211111Net book valueAt 31 December.............................. 5,614 11111 1,848 11111 1,984 11111 13,548 11111 514 11111 1,187 11111 508 11111 1,203 11111 26,406 11111 32,44811111F-67

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10c : 3776 Section 10cThe revaluation adjustments in the previous year arose due to the valuation of certain freeholdproperties at their fair values, before being transferred to investment properties (see note 13).A full independent valuation of all freehold properties held by NIC Holding (Guernsey) and NIG(Guernsey) Limited was obtained as at 1 January 1999 and the valuation was incorporated into theconsolidated financial statements. The directors of the group consider that there has been nosignificant change in the market value since the last valuation of these properties.Property under construction represents the cost incurred on the expansion of one of thesubsidiaries existing factories and the construction of a new office building for the samesubsidiary. This amount will be transferred to the appropriate asset categories when the assets areready for their intended use.11 Investment in associatesThe significant associates of the group as at 31 December 2005 and 2004 are as follows:Percentageownership1111223411112200511112200411112Kuwait Ceramic Factory Company – WLL ................................................ 49% 49%Kuwait Rocks Company – SAK (Closed)...................................................... 38% 38%Karachi Electric Supply Corporation Ltd. .................................................... 29% –Kuwait Privatization Project Holding Company – SAK (Closed) .................. 28% 31%Kuwait Cement Company – SAK (Closed) .................................................. 22% 20%Al Raya International Real Estate – KSC (Closed) ...................................... 23% –Marsa Alam Holding Company – KSC (Closed) .......................................... 20% 20%Eastern United Petroleum Services Company – KSC (Closed) .................. 20% 20%Kuwait National Real Estate Investment and Services Company– KSC (Closed) ........................................................................................ 16% 20%Mabanee Company – SAK (Closed) ............................................................ 16% 47%All of the above associates are registered in Kuwait except for Karachi Electric Supply CorporationLtd. which is registered in PakistanSignificant influence in Mabanee Company – SAK (Closed) and Kuwait National Real EstateInvestment and Services Company – KSC (Closed) is demonstrated by representation of twodirectors of the group on the board of directors of each of the investee’s.Acquisitions and disposal during 2005:a. During May 2005 the group invested an amount of KD4,721 thousand to participate in theestablishment of Al Rayah International Real Estate – KSC (Closed), which will engageprincipally in real estate management activities. A major part of the investment was financedthrough a Tawarruq financing arrangement agreed with a local Islamic financial institutionand is secured against that facility (see note 28).b. During November 2005 the group invested an amount of KD36,554 to participate inacquiring 28.6% of Karachi Electric Supply Corporation Ltd (KESC) (see also Note 3c). Thegroup’s management has provisionally assessed that the group’s share of the fair value ofthe net assets of the investee is equal to the investment made. KESC is principally engagedin the generation, transmission and distribution of electric energy to industrial and otherconsumers.c. During the year the group also invested a total amount of KD8,259 thousand to participatein the capital increase of its associates, Kuwait Privatization Project Holding Company – KSC(Closed) and Marsa Alam Holding Company – SAK (Closed).F-68

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10c : 3776 Section 10cd. During the 4th quarter of 2005 the group disposed 4% of its stake in its 20% ownedassociate, Kuwait National Real Estate Investment and Services Company – KSC (Closed),for a cash consideration of KD4,131 thousand resulting in a profit of KD2,302 thousande. During the 4th quarter of 2005 the group disposed 3% of its stake in its 31% ownedassociate, Kuwait Privatization Project Holding Company – SAK (Closed), for a cashconsideration of KD4,597 thousand resulting in a profit of KD2,910 thousand.f. During the 4th quarter of 2005 the group disposed 35% of its investment in, MabaneeCompany SAK (Closed), for a cash consideration of KD95,550 thousand, resulting in a profitof KD70,286 thousand. During December 2005 out of the total sales proceeds the groupreceived an amount of KD9,550 thousand, and the balance due, amounting to KD 86,000thousand has been shown under accounts receivable & other assets as at the balance sheetdate. Subsequent to the balance sheet date the group received KD38,220 thousand out ofthe amount due and the balance amount is due to be received by the end of the 1st quarterof 2006.Disposal during 2004:a. During the previous year the group disposed 2% of its stake in its 22% owned associate,Kuwait Cement Company – SAK (Closed), for a cash consideration of KD5,575 thousandresulting in a profit of KD3,481 thousand.b. During the previous year the group disposed a total of 1.6% of its stake in its 49% ownedassociate, Mabanee Company – SAK for a cash consideration of KD2,438 thousand resultingin a profit of KD1,706 thousand.Share of associates’ assets and liabilities:2005KD ‘00011112Assets .......................................................................................................................... 140,308Liabilities ........................................................................................................................ 19,397Share of associates’ revenue and profit:Revenue.......................................................................................................................... 23,510Profit .............................................................................................................................. 15,193Investment in quoted associates with a carrying value of KD75,580 thousand have a fair value ofKD179,747 thousand.12 Investment in joint venturesCountry ofregistration1111211112200511112200411112KD ‘000 KD ‘000Perry Baromedical Inc. (50%) (see note 6 b) ...... United States – 512Greco Mexican Gas Meter Joint venture (50%) .. Mexico 2531111225011112253 1111276211112Included above is goodwill on joint ventures amounting to KD Nil at 31 December 2005 (2004 :KD512 thousand).F-69

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10c : 3776 Section 10c13 Investment properties200511112200411112KD ‘000 KD ‘000At 1 January................................................................................................ 2,556 –Transferred from property, plant and equipment ........................................ – 1,748Change in fair value .................................................................................... – 1,544Disposal ...................................................................................................... – (861)Foreign exchange adjustment .................................................................... (289)11112125111122,267 111122,55611112The group’s management reviewed the values of the investment properties at 31 December 2005based on the most recent professional advice and the carrying value approximates the fair value.At the beginning of the previous year, certain freehold properties located outside Kuwait weretransferred at their fair value of KD1,748 thousand from property, plant and equipment toinvestment properties, since they were no longer occupied significantly by the group.14 Available for sale investments2005 Restated11112200411112KD ‘000 KD ‘000Managed funds .......................................................................................... 54,042 45,014Unquoted equity participations .................................................................. 148,861 43,007Quoted shares ............................................................................................ 165,5481111237,02711112368,451 11112125,0481111215 Deferred tax (liability)/asset200511112200411112KD ‘000 KD ‘000Deferred tax on losses................................................................................ 532 3,878Other timing differences ............................................................................ (1,293)11112(2,467)11112(761) 111121,4111111216 Inventories200511112200411112KD ‘000 KD ‘000Finished goods and work-in-progress ........................................................ 12,328 15,200Raw materials and consumables ................................................................ 9,615 10,530Spare parts.................................................................................................. 2,864 2,808Goods in transit .......................................................................................... 1,413 607Others ........................................................................................................ 21111221111226,222 29,147Provision for obsolete and slow moving inventories .................................. (2,492)11112(2,414)1111223,730 1111226,73311112F-70

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10c : 3776 Section 10c17 Accounts receivable and other assets200511112200411112KD ‘000 KD ‘000Net trade receivables .................................................................................. 16,737 19,786Proceeds due on partial disposal of investment in associate (see Note 11f) 86,000 –Proceed due on sale of investments .......................................................... 14,006 –Due from associates .................................................................................. 1,913 714Due from joint venture................................................................................ 372 –Dividend income receivable from investments .......................................... 11 168Prepayments .............................................................................................. 1,882 2,679Other assets .............................................................................................. 5,799111127,19911112126,720 1111230,54611112Accounts receivables and other assets do not include any amount due after more than one year.(2004: KD1,306 thousand was due after more than one year).18 Wakala investmentThe wakala investment contract which carried a profit rate of 8.5% per annum matured during theyear and earned an income of KD236 thousand which has been recognised in the consolidatedstatement of income.19 Investments at fair value through statement of income2005 Restated11112200411112KD ‘000 KD ‘000Held for trading:Quoted shares ............................................................................................ 185,4121111280,77811112Designated on initial recognition:Local funds ................................................................................................ 177,105 123,627International managed portfolios and funds .............................................. 24,2241111218,42011112201,32911112142,0471111220 Share capital386,741 222,82511112 1111211112 11112The shareholders extraordinary general assembly held on 14 November 2005 approved anincrease in the paid up share capital by 248,913,736 shares by way of an issue of shares duringthe year 2006, at par value of 100 Fils per share and premium of 500 Fils per share.21 Treasury sharesAt 31 December 2005 the group held 18,332,955 (2004 : 2,245,196) of its treasury sharesequivalent to 2.46% (2004 : 0.32%) of the shares issued. The treasury shares are stated at cost,and the market value as at 31 December 2005 amounted to KD29,699 thousand (2004 : KD1,044thousand). Reserves equivalent to the cost of the investment in treasury shares have beenearmarked as non-distributable.F-71

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10c : 3776 Section 10c22 Staff bonus sharesThe parent company operates a staff bonus shares scheme to reward the performance of itssenior executive employees. On 30 April 2003 the annual general assembly approved the issue ofbonus shares of KD500 thousand to the senior management of the parent company, to bedistributed over the period of five years according to the conditions and restrictions stipulated inthe staff incentive scheme. According to the scheme the shares are granted to the employees asbonus shares at Nil value.During the first quarter the parent company issued 5,000,000 shares to its senior management asbonus shares at nil value under its staff incentive scheme. The market value of these shares issuedamounted to KD2,325 thousand for which an expense was charged to the current year results witha corresponding increase in equity. Subsequently the nominal value of shares issued amountingKD500 thousand was credited to capital and the excess of KD1,825 thousand was credited to theshare premium account.23 ReservesGain onSale of Foreigntreasury currencyShare Statutory General Revaluation shares translationpremium11111reserve11111reserve11111reserve11111reserve11111reserve11111Total11111KD ‘000 KD ‘000 KD ‘000 KD ‘000 KD ‘000 KD ‘000 KD ‘000Balances at 31 December2003 .............................. 26,409 37,754 23,116 285 183 (791) 86,956Transfer of excessdepreciation .................. – – – (12) – – (12)Surplus on revaluation offreehold property .......... – – – 180 – – 180Currency translationdifferences .................... – – – 35 – 2,526 2,561Transfer on disposal ofsubsidiaries .................... – (901) (267) – – – (1,168)Transfer on disposal ofinvestment property ...... – – – (113) – – (113)Loss on sale of treasuryshares ............................ – – – – (183) – (183)Transfer to reserves .......... –111114,2461111161111111–11111–11111–111114,85711111Balances at 31 December2004 .............................. 26,409 41,099 23,460 375 – 1,735 93,078Transfer of excessdepreciation .................. – – – (11) – – (11)Currency translationdifferences .................... – – – (42) – (1,317) (1,359)Issue of staff bonus shares 1,825 – – – – – 1,825Transfer on disposal ofsubsidiaries .................... – (12) – – – – (12)Profit on sale of treasuryshares ............................ – – – – 236 – 236Transfer to reserves .......... –1111120,183111111,69911111–11111–11111–1111121,88211111Balances at 31 December2005 .............................. 28,234 1111161,270 1111125,159 11111322 11111236 11111418 11111115,63911111Statutory reserveIn accordance with the Commercial Companies Law and the parent company’s articles ofassociation, 10% of the profit for the year is to be transferred to statutory reserve. The parentcompany may resolve to discontinue such annual transfer when the reserve totals 50% of the paidup share capital. Distribution of the statutory reserve is limited to the amount required to enablethe payment of a dividend of 5% of paid-up share capital to be made in years when retainedearnings are not sufficient for the distribution of a dividend of that amount.F-72

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10c : 3776 Section 10c24 Bonds payableDue after more than one year:On 6 May 2004, the parent company issued unsecured floating rate bonds of U.S. Dollar 60,000thousand (equivalent to KD17,527 thousand at 31 December 2005 and KD17,685 thousand at 31December 2004) at face value. The bonds which mature in May 2009, bear interest at 0.90% perannum above LIBOR for 6 months U.S. Dollar deposits and payable semi-annually in arrears.Due within one year:The parent company issued KD35,000 thousand, unsecured bonds on 3 December 2001 at anissue price of 100%. The bonds bear interest at 6.25% per annum, payable semi annually inarrears, and mature in December 2006. At 31 December 2005 the bond payable was reclassifiedunder current liabilities as it is maturing within 12 months from the balance sheet date.25 Long-term borrowingsCurrency Interest rate Security111121212 1111212200511112200411112KD ‘000 KD ‘000Kuwaiti Dinars........................................ 7.00% – 7.50% Unsecured 30,000 40,000US Dollars.............................................. 4.96% – 5.30% Unsecured 66,891 5,187Sterling .................................................. 5.50% Unsecured 756 –Long-term portion of loans in Euro........ 5.00% – 5.55% Secured 494111124061111298,141 1111245,59311112During July 2005 the parent company obtained an unsecured syndicated term loan of US Dollar225,000 thousand (KD65,725 thousand) from local and foreign banks. The loan has a one yeargrace period and is then repayable in 5 equal semi annual instalments commencing from June2006 and it carries interest at 1.15% above six-month LIBOR payable semi annually.As at 31 December 2005 a loan denominated in Kuwaiti Dinar amounting to KD10,000 thousandwas reclassified to short-term borrowings as it is maturing within 12 months from the balancesheet date.The Euro loans are secured against property, plant and equipment with a book value of KD633thousand (2004 : KD712 thousand).26 Provisions200511112200411112KD ‘000 KD ‘000Provision for staff indemnity ...................................................................... 3,676 3,436Provision for land-fill expenses .................................................................. 652 590Provision for rental property - amount due in more than one year ............ 5,452 5,111Provision for amounts payable under guarantees ...................................... 1,249 –Pension liabilities/(assets) (see Note 31) .................................................... 50411112(666)1111211,533 111128,47111112The provision for rental property relates to onerous property rental costs (net of estimated rentreceivable) and dilapidations obligations which are payable over various periods upto 2017.F-73

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10c : 3776 Section 10c27 Accounts payable and other liabilities200511112200411112KD ‘000 KD ‘000Trade payables ............................................................................................ 11,499 15,969Accrued interest.......................................................................................... 2,891 771Dividend payable ........................................................................................ 939 829Leasing creditors - amount due in less than one year................................ 665 323Provision for rental property – amount due in less than one year.............. 1,423 594National labour support tax ........................................................................ 4,581 2,522Kuwait Foundation for the Advancement of Sciences ................................ 2,362 1,195Corporation tax............................................................................................ – 108Other accruals ............................................................................................ 13,476 5,250Other liabilities ............................................................................................ 4,413111124,5561111242,249 1111232,1171111228 Short-term borrowingsCurrency Interest rate Security 200511112200411112KD ‘000 KD ‘000Conventional loansKuwaiti Dinars ................................ 5.69% - 8.50% Unsecured 102,450 42,750US Dollars ...................................... 2.91% - 6.07% Unsecured 77,706 15,917Sterling .......................................... 2.50% - 5.50% Unsecured 20,503 23,290Sterling .......................................... 4.00% - 7.50% Secured 504 889Euro – current portion.................... 5.00% - 5.55% Secured 1721111214411112201,3351111282,99011112Islamic financing arrangementsGross amount:– Tawarruq facilities– Kuwaiti Dinar ...................... 7.00% - 8.00% Secured 5,936 –– Tawarruq facilities– US Dollars .......................... 6.00% Unsecured 2,983 –– Wakala payable– Kuwaiti Dinar ...................... 6.25% Unsecured 2,00011112–1111210,919 –Less: deferred cost........................ (170)11112 1111210,74911112–11112Total .............................................. 212,084 1111282,99011112The Sterling loan is secured against property, plant and equipment, inventories and debtors (seenote 29).One of the above Tawarruq facilities amounting to KD4,301 thousand is secured by an investmentin associate carried at KD4,721 thousand (see note 11a).F-74

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10c : 3776 Section 10c29 Cash and cash equivalents200511112200411112KD ‘000 KD ‘000Short-term deposits .................................................................................... 34,993 14,007Bank balance and cash .............................................................................. 8,712 4,686Due to banks .............................................................................................. (17,127)11112(11,773)1111226,578 111126,92011112Due to banks amounting to KD622 thousand (2004: KD1,148 thousand) along with the short-termSterling loan of KD504 thousand (2004: KD889 thousand) (see note 28) are secured againstproperty, plant and equipment with a book value of KD143 thousand (2004: KD1,774 thousand) andinventories and debtors with book values totalling to KD1,182 thousand (2004: KD262 thousand).30 Proposed dividendSubject to the requisite consent of the relevant authorities and approval from the generalassembly, the board of directors have proposed to distribute the following dividends for the yearended 31 December 2005 to the shareholders of record as of the date of the general assembly:– cash dividend of 60 Fils per share (2004: 30 Fils per share);– bonus shares of 10% (2004 : 5%) of paid-up share capital;– one share of the subsidiary, National Industries Company for Building Materials – SAK(Closed) for every 10 shares held in the parent company.The proposed cash dividend of 30 Fils per share and the proposed bonus shares of 5% for theyear ended 31 December 2004 were approved by the annual general assembly held on 4 May2005. Subsequently the proposed cash dividend was paid and bonus shares were issued.31 Defined benefit pensions schemesThe group has defined benefit pension schemes for the employees of certain subsidiaries in theUnited Kingdom. The following disclosures cover all the schemes on an aggregated basis. Actuarialcalculations have been made in order to determine pension liabilities and pension expenses inconnection with the group’s defined benefit pension schemes. The following assumptions havebeen used in calculating the liabilities and expenses incurred:200511112200411112Discount rate at 31 December.................................................................... 4.90% 5.30%Expected return on plan assets .................................................................. 5.70% 6.30%Future salary increases .............................................................................. N/A N/AFuture pension increases ............................................................................ 2.70% 2.70%Consolidated statement of income200511112200411112KD ‘000 KD ‘000Current service cost.................................................................................... – 111Interest cost................................................................................................ 1,613 1,732Expected return on assets.......................................................................... (1,453) (1,585)Actuarial loss .............................................................................................. 510 347Loss on curtailments and settlements ...................................................... 9721111235311112Net annual charge included in general and administrative expenses ........ 1,642 1111295811112F-75

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10c : 3776 Section 10cThe actuarial loss of the schemes in excess of 10% of the present value of the defined benefitobligations are being charged as an expense over periods up to 18 years.A reconciliation of the movement in the liability/asset for defined benefit pension scheme appearsas follows:Consolidated balance sheet200511112200411112KD ‘000 KD ‘000Brought forward asset ................................................................................ (666) (1,172)Consolidated statement of income (net) .................................................... 1,642 958Contributions .............................................................................................. (491) (391)Increase in unrecognisable asset................................................................ 6 7Foreign exchange adjustment .................................................................... 1311112(68)11112Carried forward liability/(asset) (Note 26).................................................... 504 11112(666)1111231 Defined benefit pensions schemes (continued)Reconciliation of consolidated balance sheet liability/asset200511112200411112KD ‘000 KD ‘000Present value of obligations........................................................................ 30,363 36,421Fair value of plan assets ............................................................................ (23,013) (27,734)Net plan deficit............................................................................................ 7,350 8,687Unrecognised actuarial losses .................................................................... (7,142) (9,681)Unrecognisable asset.................................................................................. 2961111232811112Net liability/(asset) recognised in the consolidated balance sheet (Note 26) 504 11112(666)1111232 Risk managementCredit riskThe group is exposed to credit risk in respect of losses that would be recognised if counter partiesfail to perform as contracted. The group’s exposure to credit risk is primarily in respect of bankbalances, short-term deposits and accounts receivable and other assets. The group’s bankbalances and short-term deposits are placed with high credit quality financial institutions, whilstaccounts receivable and other assets are presented net of appropriate provisions.Interest rate riskThe group’s short-term deposits earn interest at an average rate of 4.25% (2004 : 4%) per annumand have a term of no longer than three months. The bank balances earn interest at an averagerate of 2.5% (2004: 2.5%) per annum. The due to banks are repayable upon demand and bearaverage interest rate of 1.5% (2004: 1.5%) per annum over the Central Bank of Kuwait and Bankof England discount rate. Lease creditors bear interest at fixed rates and the average rate duringthe year was 6.5% (2004 : 6.5%). The group is also exposed to interest rate risk on bonds payable,long-term borrowing and short-term borrowings (see notes 24, 25 and 28).F-76

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10c : 3776 Section 10cMarket riskMarket risk is the risk that the value of a financial instrument will fluctuate as a result of changesin market prices, whether those changes are caused by factors specific to the individual security,or its issuer, or factors affecting all securities traded in the market.The group is exposed to market risk with respect to its investments.The group limits market risk by maintaining a diversified portfolio and by continuous monitoring ofdevelopments in local and international equity and bond markets. In addition, the group activelymonitors the key factors that affect stock and bond market movements, including analysis of theoperational and financial performance of investees.Liquidity riskLiquidity risk is the risk that the group will be unable to meet its liabilities when they fall due. Tolimit this risk, management has arranged diversified funding sources, manages assets withliquidity in mind, and monitors liquidity on a daily basis.33 Segmental analysisFor management purposes the group’s primary format for reporting segment information isbusiness segments, with secondary information reported geographically.Business segmentsThe parent company and local subsidiaries primarily operate in two business segments:investment and building materials. The investment activities are both in and outside Kuwait. Thebuilding materials activities of the group are conducted wholly within the State of Kuwait.The major overseas subsidiary companies of the group principally operate in one businesssegment, the specialist engineering sector, the activities of which are conducted overseas,principally in Europe and the Americas.F-77

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10c : 3776 Section 10cRevenue, profit for the year, total assets, total liabilities and net assets of the group are analysedby business activity as follows:Investment Building materials Specialist engineering Total11112111112 11112111112 11112111112 11112111112200511112200411112200511112200411112200511112200411112200511112200411112KD ‘000 KD ‘000 KD ‘000 KD ‘000 KD ‘000 KD ‘000 KD ‘000 KD ‘000Segment revenue ...................... 188,2021111260,8741111231,0621111226,4891111271,6611111277,80811112290,925 165,171Less:Income from investments ........ (173,009) (54,017)Share of profits of associatesand joint ventures.................. (15,193) (5,152)Profit on disposal of investmentproperties .............................. – (161)Change in fair value ofinvestment properties .......... – (1,544)Unallocated sales ...................... 2,017111122,69011112Sales, per consolidatedstatement of income ............ 104,740 11112106,98711112Segment profit/(loss) ................ 248,4741111264,052111128,955111126,89811112(28,432) (14,860)11112 11112228,997 56,090Less:Finance costs ............................ (18,735) (10,193)Unallocated income/(expenses) (2,126) 64311112 11112Profit for the year, perconsolidated statement ofincome .................................. 208,136 1111246,54011112Segment assets ........................ 1,024,572 434,081 23,400 21,298 59,622 94,562 1,107,594 549,941Segment liabilities .................... (14,954) (7,077)11112 11112(7,905) (7,597)11112 11112(25,323) (27,733)11112 11112(48,182) (42,407)Segment net assets .................. 1,009,618 427,004 15,495 13,701 34,299 66,829 11112 11112 11112 11112 11112 111121,059,412 507,534Unallocated assets .................... 1,366 1,571Loans and other unallocatedliabilities .................................... (334,741) (140,623)Bonds payable .......................... (52,527) (52,685)11112 11112Net assets, per consolidatedbalance sheet ........................ 673,510 11112315,79711112Property, plant and equipment of the group are primarily utilised by the building materials segmentand the specialist engineering segment. The additions and depreciation relating to property, plantand equipment by business segment, in which the assets are used, are as follows:Building SpecialistInvestment111112materials engineering Unallocated111112 111112 111112Total111112KD ‘000 KD ‘000 KD ‘000 KD ‘000 KD ‘000At 31 December 2005Additions to property, plant and equipment 186 1,920 2,614 – 4,720Depreciation .............................................. 46 1,600 2,684 188 4,518At 31 December 2004Additions to property, plant and equipment 17 2,792 1,889 11 4,709Depreciation .............................................. 28 1,608 3,081 188 4,905Goodwill capitalised along with the impairment in value relate to the specialist engineeringsegment.F-78

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10c : 3776 Section 10cGeographical segmentsA segmental analysis of total assets employed and sales by geographical location, are as follows:Assets1111223411112Sales1111223411112200511112200411112200511112200411112KD ‘000 KD ‘000 KD ‘000 KD ‘000Kuwait .................................................................. 825,494 374,267 33,079 29,179Outside Kuwait .................................................... 283,46611112177,2451111271,6611111277,808111121,108,960 11112551,512 11112104,740 11112106,98711112Additions to property, plant and equipment and goodwill by geographical area in which the assetsare located, are as follows:200511112200411112KD ‘000 KD ‘000Kuwait ........................................................................................................ 2,106 2,820Outside Kuwait............................................................................................ 2,723111125,143111124,829 111127,96311112F-79

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10c : 3776 Section 10c34 Analysis of consolidated income statementThe consolidated statement of income is analysed between continuing and discontinuingoperations as follows:Restated200511111111111111111111200411111111111111111111Continuing Discontinued Continuing Discontinuedoperations11111operations11111Total11111operations11111operations11111Total11111KD ‘000 KD ‘000 KD ‘000 KD ‘000 KD ‘000 KD ‘000Sales.......................................... 100,909 3,831 104,740 99,402 7,585 106,987Cost of sales.............................. (78,366)11111(3,819)11111(82,185)11111(81,430)11111(7,405)11111(88,835)11111Gross profit .............................. 22,543 12 22,555 17,972 180 18,152Income from investments ........ 173,009 – 173,009 52,199 1,818 54,017Share of profits of associatesand joint ventures...................... 15,193 – 15,193 5,152 – 5,152Profit on disposal of investmentproperties .................................. – – – 161 – 161Change in fair value ofinvestment properties .............. – – – 1,544 – 1,544Other operating income ............ 412 – 412 285 (22) 263Distribution costs ...................... (6,878) (136) (7,014) (6,536) (420) (6,956)General, administrative andother expenses.......................... (22,067)11111(39)11111(22,106)11111(12,595)11111(568)11111(13,163)11111Profit from operations ............ 182,212 (163) 182,049 58,182 988 59,170Profit on partial disposal ofassociates.................................. 72,124 – 72,124 5,187 – 5,187Net profit/(loss) on disposal ofsubsidiaries/businesses ............ 24 (2,381) (2,357) 560 – 560Finance costs ............................ (18,735) – (18,735) (10,146) (47) (10,193)Impairment in value of property,plant and equipment.................. (1,709) – (1,709) – – –Loss on revaluation of freeholdproperty .................................... – – – (307) – (307)Amortisation of goodwill .......... – – – (2,174) – (2,174)Impairment in value of goodwill (13,013) (73) (13,086) (2,307) (115) (2,422)(Loss)/gain on foreign exchange (1,865) – (1,865) 921 – 921Provision for onerous propertyleases and dilapidations ............ (2,129) – (2,129) (1,345) – (1,345)Provision for doubtful debts ...... (2,295) – (2,295) (1,262) – (1,262)Product development costswritten off .................................. (183) – (183) (629) – (629)Reorganisation, redundancy,guarantee and other costs ........ (3,678)11111–11111(3,678)11111(966)11111–11111(966)11111Profit for the year .................... 210,753 (2,617) 208,136 45,714 826 46,54011111 11111 11111 11111 11111 11111Discontinued operations disclosed in 2005 relate to the disposal of Blanson Trading Division, PerryBaromedical Inc. and Newage Transmission limited.The 2004 discontinued operations relate to Blanson trading Division, Perry Baromedical Inc.,Newage Transmission Limited and Kuwait Privatization Project Holding Company – KSC (Closed).F-80

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10c : 3776 Section 10c35 Related party transactionsRelated party transactions are entered on terms approved by the group’s management. Significantrelated party transactions and balances included in the consolidated financial statements are asfollows:200511112200411112KD ‘000 KD ‘000Balance sheetDue from associates and joint ventures (see note 17) .............................. 2,285 714Due from Key management personnel ...................................................... 539 175Purchase of raw materials........................................................................ 7,157 6,196Compensation of key management personnel of the groupShort term employee benefits .................................................................... 6,338 3,528End of service benefits .............................................................................. 879 530Cost of share based payments .................................................................. 1,254 –36 Contingent liabilitiesAt 31 December 2005 the group had contingent liabilities in respect of outstanding bankguarantees amounting to KD328 thousand (2004: KD415 thousand).A foreign subsidiary of the group has guaranteed the leasing liability and overdraft of a joint ventureof £1,600 thousand (KD806 thousand) [2004: £1,700 thousand (KD965 thousand)].37 Fiduciary assetsOne of the subsidiaries of the group manages portfolios on behalf of related and third parties, andmaintains securities in fiduciary accounts which are not reflected in the group’s balance sheet.Assets under management at 31 December 2005 amounted to KD7,745 thousand (31 December2004 : Nil) of which assets managed on behalf of related parties amounted to KD1,544 thousand(31 December 2004 : Nil).38 Capital commitmentsAt the balance sheet date the group had commitments for the purchase of investments and theacquisition of property, plant and equipment totalling KD16,966 thousand (2004: KD11,010thousand).39 Fair value of financial instrumentsFair value represents amounts at which an asset could be exchanged or a liability settled on anarm’s length basis. In the opinion of the group’s management, except for certain available for saleinvestments which are carried at cost less impairment for reasons specified in Note 2 to thefinancial statements (under the heading “Estimation uncertainty”) the carrying amounts offinancial assets and liabilities as at 31 December 2005 and 2004 approximate their fair values.40 Comparative amountsCertain comparative amounts have been reclassified in order to conform with the presentation forthe current year primarily on adoption of IAS 1, 32 and 39 (see Note 2). Except as explained in Note2, such reclassifications do not affect previously reported net profit or equity.F-81

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:21 pm – mac5 – 3776 Section 11 : 3776 Section 11ISSUER AND TRUSTEENIG Sukuk Ltd87 Mary StreetGeorge TownGrand Cayman, KY1-9002Cayman IslandsOBLIGOR, MUDARIB AND NIGNational Industries Group Holding Company S.A.K.P.O. Box 417Safat, 13005, KuwaitAl Jahra Street crossing the Airport RoadAl ShuwaikhKuwuaitDELEGATECiticorp Trustee Company Limited14th Floor, Citigroup CentreCanada SquareCanary WharfLondon E14 5LBUnited KingdomPRINCIPAL PAYING AGENT, CALCULATION AGENT ANDTRANSFER AGENTCitibank N.A., London Branch21st Floor, Citigroup CentreCanada SquareCanary WharfLondon E14 5LBUnited KingdomPAYING AGENT AND REGISTRARCitigroup Global Markets Deutschland AG & Co. KGaAReuterweg 1660323 Frankfurt am MainGermanyAUDITORSTo NIGGrant ThorntonSouq Al-Kabeer buildingBlock A, 9th FloorSafat 130 30Kuwait

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:21 pm – mac5 – 3776 Section 11 : 3776 Section 11LEGAL ADVISERSTo the Issueras to Cayman Islands lawWalkers (Dubai) LLP5th Floor, The Exchange BuildingDubai International Finance CentreDubaiUnited Arab EmiratesTo NIGas to Kuwaiti lawAl Sarraf & Al-RuwayehSalhiya ComplexGate 1, 3rd FloorKuwaitTo the Dealersas to Kuwait lawThe Law Office of Bader Saud Al-Bader & PartnersP.O. Box 64046Shuwaikh BKuwaitTo the Dealers and the Delegateas to English lawAllen & Overy LLPOne Bishops SquareLondon E1 6AOUnited KingdomDEALERSBNP ParibasCitigroup Global Markets Limited10 Harewood Avenue Citigroup CentreLondon NW1 6AACanada SquareUnited KingdomCanary WharfLondon E14 5LBUnited KingdomGulf International Bank B.S.C.Al-Dowali BuildingPalace AvenuePO Box 1017ManamaKingdom of BahrainHSBC Bank plc8 Canada SquareLondon E14 5HQUnited KingdomKuwait Financial Centre S.A.K. Noor Financial Investment Company K.S.C.C.P.O. Box 23444Al-Kharafi Tower, 11th FloorSafat 13095Osama Bin Munques St., QiblaKuwait P.O. Box 3311, Safat 13034KuwaitStandard Chartered BankWatani Investment Company K.S.C. (closed)6 Battery Road, #03-00 Dar Al Awadi TowerSingapore 049909Ahmad Al Jaber Street, SharqPO Box 4950 Safat13050 KuwaitWestLB AGHerzogstrasse1540217 DüsseldorfGermany

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:21 pm – mac5 – 3776 Section 11 : 3776 Section 11printed by eprintfinancial.comtel: + 44 (0) 20 7613 1800 document number 3776