ahli united bank b.s.c. a9-4.1.1 a9-4.1 · 28/09/2010 · ahli united bank b.s.c. (incorporated...

Prospectus dated 27 September 2010

Ahli United Bank B.S.C.(incorporated with limited liability in the Kingdom of Bahrain)

US$2,000,000,000Euro Medium Term Note Programme

Under the Euro Medium Term Note Programme described in this Prospectus (the “Programme”), Ahli United BankB.S.C. (the “Issuer”), subject to compliance with all relevant laws, regulations and directives, may from time to timeissue notes (the “Notes”) denominated in any currency agreed between the Issuer and the relevant Dealer (as definedbelow).

Notes may be issued in bearer or registered form (respectively “Bearer Notes” and “Registered Notes”). The aggregatenominal amount of Notes outstanding will not at any time exceed US$2,000,000,000 (or the equivalent in othercurrencies calculated as described in the Dealer Agreement defined herein), subject to increase as described herein.

The Notes may be issued on a continuing basis to one or more of the Dealers specified under “General Description ofthe Programme” and to any additional Dealer appointed under the Programme from time to time by the Issuer (each a“Dealer” and together the “Dealers”), which appointment may be for a specific issue or on an ongoing basis. Referencesin this Prospectus to the “relevant Dealer” shall, in the case of an issue of Notes being (or intended to be) subscribed bymore than one Dealer, be to all Dealers agreeing to subscribe such Notes.

Application has been made to the Financial Services Authority in its capacity as competent authority under the FinancialServices and Markets Act 2000 (the “FSMA”) (the “UK Listing Authority”) for Notes issued under the Programme forthe period of 12 months from the date of this Prospectus to be admitted to the official list of the UK Listing Authority(the “Official List”) and to the London Stock Exchange plc (the “London Stock Exchange”) for such Notes to beadmitted to trading on the London Stock Exchange’s Regulated Market (the “Market”).

References in this Prospectus to Notes being “listed” (and all related references) shall mean that such Notes have beenadmitted to the Official List and have been admitted to trading on the Market. The Market is a regulated market for thepurposes of the Directive 2004/39/EC of the European Parliament and of the Council on markets in financialinstruments. However, unlisted Notes may be issued pursuant to the Programme. The relevant Final Terms in respect ofthe issue of any Notes will specify whether or not such Notes will be listed on the Official List and admitted to tradingon the Market (or any other stock exchange).

Each Series (as defined in “Overview of the Programme — Method of Issue”) of Notes in bearer form will berepresented on issue by a temporary global note in bearer form (each a “temporary Global Note”) or a permanent globalnote in bearer form (each a “permanent Global Note”). Notes in registered form will be represented by registeredcertificates (each a “Certificate”), one Certificate being issued in respect of each Noteholder’s entire holding ofRegistered Notes of one Series. Global Notes and Certificates may be deposited on the issue date with a commondepositary on behalf of Euroclear Bank S.A./N.V. (“Euroclear”) and Clearstream Banking, société anonyme(“Clearstream, Luxembourg”). The provisions governing the exchange of interests in Global Notes for other GlobalNotes and definitive Notes are described in “Summary of Provisions Relating to the Notes while in Global Form”.

Tranches of Notes (as defined below) may be rated or unrated. Where a Tranche of Notes is rated, the applicablerating(s) will be specified in the relevant Final Terms. A rating is not a recommendation to buy, sell or hold notes andmay be subject to suspension, reduction or withdrawal at any time by the assigning rating organisation. Each ratingshould be evaluated independently of any other rating.

Prospective investors should have regard to the factors described under the section headed “Risk Factors” in thisProspectus.

Arranger

HSBC

DealersBarclays Capital BNP PARIBAS

BofA Merrill Lynch Commerzbank

Daiwa Capital Markets Europe Deutsche Bank

HSBC Lloyds TSB Corporate Markets

Mizuho International plc The Royal Bank of Scotland

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This Prospectus comprises a base prospectus for the purposes of Article 5.4 of Directive 2003/71/EC (the“Prospectus Directive”) and for the purpose of giving information with regard to the Issuer and itssubsidiaries and affiliates taken as a whole (the “AUB Group”) and the Notes which is necessary to enableinvestors to make an informed assessment of the assets and liabilities, financial position, profit and lossesand prospects of the Issuer.

The Issuer accepts responsibility for the information contained in this Prospectus. To the best of theknowledge of the Issuer (having taken all reasonable care to ensure that such is the case) the informationcontained in this Prospectus is in accordance with the facts and does not omit anything likely to affect theimport of such information.

This Prospectus has been prepared on the basis that, any offer of Notes in any Member State of the EuropeanEconomic Area which has implemented the Prospectus Directive (each, a “Relevant Member State”) will bemade pursuant to an exemption under the Prospectus Directive, as implemented in that Relevant MemberState, from the requirement to publish a prospectus for offers of Notes. Accordingly any person making orintending to make an offer in that Relevant Member State of Notes which are the subject of an offeringcontemplated in this Prospectus as completed by final terms in relation to the offer of those Notes may onlydo so in circumstances in which no obligation arises for the Issuer or any Dealer to publish a prospectuspursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of theProspectus Directive, in each case, in relation to such offer. Neither the Issuer nor any Dealer hasauthorised, nor do they authorise, the making of any offer of Notes in circumstances in which an obligationarises for the Issuer or any Dealer to publish or supplement a prospectus for such offer.

This Prospectus is to be read in conjunction with all documents which are incorporated herein by reference(see “Documents Incorporated by Reference”).

No person has been authorised to give any information or to make any representation other than thosecontained in this Prospectus in connection with the issue or sale of the Notes and, if given or made, suchinformation or representation must not be relied upon as having been authorised by the Issuer or any of theDealers or the Arranger (as defined in “Overview of the Programme”). Neither the delivery of this Prospectusnor any sale made in connection herewith shall, under any circumstances, create any implication that therehas been no change in the affairs of the Issuer since the date hereof or the date upon which this Prospectushas been most recently amended or supplemented, or that there has been no adverse change in the financialposition of the Issuer since the date hereof or the date upon which this Prospectus has been most recentlyamended or supplemented, or that any other information supplied in connection with the Programme iscorrect as of any time subsequent to the date on which it is supplied or, if different, the date indicated in thedocument containing the same.

In the case of any Notes which are to be admitted to trading on a regulated market within the EuropeanEconomic Area or offered to the public in a Member State of the European Economic Area in circumstanceswhich require the publication of a prospectus under the Prospectus Directive (2003/71/EC), the minimumspecified denomination shall be €50,000 (or its equivalent in any other currency as at the date of issue of theNotes).

The distribution of this Prospectus and the offering or sale of the Notes in certain jurisdictions may berestricted by law. Persons into whose possession this Prospectus comes are required by the Issuer, the Dealersand the Arranger to inform themselves about and to observe any such restriction. The Notes have not beenand will not be registered under the United States Securities Act of 1933, as amended (the “Securities Act”)and include Notes in bearer form that are subject to U.S. tax law requirements. Subject to certain exceptions,Notes may not be offered, sold or delivered within the United States or to U.S. persons. For a description ofcertain restrictions on offers and sales of Notes and on distribution of this Prospectus, see “Subscription andSale”.

This Prospectus does not constitute an offer of, or an invitation by or on behalf of the Issuer or the Dealersto subscribe for, or purchase, any Notes.

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To the fullest extent permitted by law, none of the Dealers or the Arranger accept any responsibility for thecontents of this Prospectus or for any other statement, made or purported to be made by the Arranger or aDealer or on its behalf in connection with the Issuer or the issue and offering of the Notes. The Arranger andeach Dealer accordingly disclaims all and any liability whether arising in tort or contract or otherwise (saveas referred to above) which it might otherwise have in respect of this Prospectus or any such statement.

Neither this Prospectus nor any financial statements are intended to provide the basis of any credit or otherevaluation and should not be considered as a recommendation by any of the Issuer, the Arranger or theDealers that any recipient of this Prospectus or any financial statements should purchase the Notes. Eachpotential purchaser of Notes should determine for itself the relevance of the information contained in thisProspectus and its purchase of Notes should be based upon such investigation as it deems necessary. Noneof the Dealers or the Arranger undertakes to review the financial condition or affairs of the Issuer during thelife of the arrangements contemplated by this Prospectus nor to advise any investor or potential investor inthe Notes of any information coming to the attention of any of the Dealers or the Arranger.

In connection with the issue of any Tranche (as defined in “Overview of the Programme — Method ofIssue”), the Dealer or Dealers (if any) named as the stabilising manager(s) (the “Stabilising Manager(s)”) (orany person acting on behalf of any Stabilising Manager(s)) in the applicable Final Terms may over-allotNotes or effect transactions with a view to supporting the market price of the Notes at a level higher than thatwhich might otherwise prevail. However, there is no assurance that the Stabilising Manager(s) (or any personacting on behalf of a Stabilising Manager) will undertake stabilisation action. Any stabilisation action maybegin on or after the date on which adequate public disclosure of the terms of the offer of the relevantTranche is made and, if begun, may be ended at any time, but it must end no later than the earlier of 30 daysafter the issue date of the relevant Tranche and 60 days after the date of the allotment of the relevant Tranche.Any stabilisation action or over-allotment must be conducted by the relevant Stabilising Manager(s) (or anyperson acting on behalf of any Stabilising Manager(s), in accordance with all applicable laws and rules.

In this Prospectus, unless otherwise specified or the context otherwise requires, references to “£”, “pounds”and “sterling” are to the lawful currency of the United Kingdom of Great Britain and Northern Ireland (the“United Kingdom”); references to “euro” and “€” are to the currency introduced at the start of the third stageof European Economic and Monetary Union pursuant to the Treaty establishing the European Community,as amended; references to “US dollars”, “US$” and “United States dollars” are to the lawful currency of theUnited States of America, its territories and possessions; references to “BD” and “Bahrain dinars” are to thelawful currency of the Kingdom of Bahrain; references to “ID” and “Iraqi dinars” are to the lawful currencyof the Republic of Iraq; references to “KD” and “Kuwaiti dinars” are to the lawful currency of the State ofKuwait; references to “EGP” and “Egyptian pound” are to the lawful currency of the Arab Republic ofEgypt; and references to “OMR” and “Omani rial” are to the lawful currency of the Sultanate of Oman. Forconvenience only, where financial information is set out in this Prospectus in United States dollars in respectof the Issuer’s subsidiaries or associates that do not report in United States dollars, the following exchangerates have been used:

For the For the six For the For theAs at six months months As at year ended As at year ended

30 June ended 30 ended 30 31 December 31 December 31 December 31 December2010 June 2010 June 2009 2009 2009 2008 2008

––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––Kuwaiti Dinar (KD) ............................ 0.2909 0.2893 0.2893 0.28719 0.28832 0.28719 0.28832Iraqi Dinar (ID).................................... 1168 1165.18 1165.18 1153 1158.56 1153 1158.56Egyptian Pound (EGP) ........................ 5.694 5.563 5.563 5.48675 5.5577 5.48675 5.5577Omani Riyal (OMR) ............................ 0.385 0.385 0.385 0.385 0.385 0.385 0.385Qatari Riyal (QR) ................................ 3.64 3.64 3.64 3.64 3.64 3.64 3.64

Such translations should not be construed as representing that Bahrain dinar, the Iraqi dinar, Kuwaiti dinar,Qatari riyal, the Egyptian pound or the Omani rial amounts referred to in this Prospectus have been or couldhave been converted into United States dollars at this or any other rate of exchange. All references to“Bahrain” or the “Kingdom” are to the Kingdom of Bahrain, all references to “Kuwait” are to the State ofKuwait, all references to “Egypt”, are to the Arab Republic of Egypt and all references to Oman are to theSultanate of Oman.

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NOTICE TO RESIDENTS IN THE KINGDOM OF BAHRAIN

Any offer of Notes in the Kingdom of Bahrain will be undertaken by way of private placement. Such offersare subject to the regulations of the Central Bank of Bahrain that apply to private offerings of securities andthe disclosure requirements and other protections that these regulations contain. This Prospectus is thereforeintended only for “accredited investors” (as defined in “Subscription and Sale – Kingdom of Bahrain”).

The Notes offered in the Kingdom of Bahrain may only be offered in registered form in minimumdenominations of US$100,000 (or its equivalent in any other currencies as at the date of issue of the Notes).

KINGDOM OF SAUDI ARABIA NOTICE

This Prospectus may not be distributed in the Kingdom of Saudi Arabia except to such persons as arepermitted under the Offers of Securities Regulations issued by the Capital Market Authority of the Kingdomof Saudi Arabia (the “Capital Market Authority”).

The Capital Market Authority does not make any representations as to the accuracy or completeness of thisProspectus, and expressly disclaims any liability whatsoever for any loss arising from, or incurred in relianceupon, any part of this Prospectus. Prospective purchasers of the Notes should conduct their own duediligence on the accuracy of the information relating to such Notes. If a prospective purchaser does notunderstand the contents of this Prospectus he or she should consult an authorised financial adviser.

FORWARD-LOOKING STATEMENTS

Certain statements in this Prospectus may constitute “forward-looking” statements which involve known andunknown risks, uncertainties and other factors which may cause the actual results, performance orachievements to be materially different from any future results, performance or achievements expressed orimplied by such forward-looking statements. When used in this Prospectus, such statements include wordssuch as “anticipates”, “plan”, “aims”, “expects” or other similar terminology.

These statements reflect current expectations regarding future events and operating performance and speakonly as of the date specified in respect of such statements or otherwise the date of this Prospectus. Forward-looking statements involve significant risks and uncertainties, should not be read as guarantees of futureperformance or results, and will not necessarily be accurate indications of whether or not such results willbe achieved. A number of factors could cause actual results to necessarily differ materially from the resultsdiscussed in the forward-looking statements, including, but not limited to, the factors discussed under “RiskFactors”. Although the Issuer believes the forward-looking statements contained in this Prospectus are basedon reasonable assumptions, there can be no assurance that actual results will be consistent with theseforward-looking statements. The Issuer is under no obligation to update or revise such forward-lookingstatements to reflect new events or circumstances, except as may be required by applicable law.

DOCUMENTS INCORPORATED BY REFERENCE

This Prospectus should be read and construed in conjunction with the following documents:

(i) the audited consolidated annual financial statements of the Issuer for the financial years ended 31December 2008 and 31 December 2009 together in each case with the audit report thereon; and

(ii) the unaudited interim condensed consolidated financial statements of the Issuer with the review reportthereon for the six months ended 30 June 2010,

in each case which have been previously published or are published simultaneously with this Prospectus andwhich have been approved by the Financial Services Authority or filed with it. Such documents shall bedeemed to be incorporated in, and form part of, this Prospectus, save that any statement contained in adocument which is deemed to be incorporated by reference herein shall be deemed to be modified orsuperseded for the purpose of this Prospectus to the extent that a statement contained herein modifies orsupersedes such earlier statement (whether expressly, by implication or otherwise). Any statement somodified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this

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Prospectus. Any documents themselves incorporated by reference in the documents incorporated byreference in this Prospectus shall not form part of this Prospectus.

Copies of documents deemed to be incorporated by reference in this Prospectus may be obtained from (i)the registered office of the Issuer, and/or (ii) the website of the Regulatory News Service operated by theLondon Stock Exchange at www.londonstockexchange.com/en-gb/pricesnews/marketnews.

SUPPLEMENTARY PROSPECTUS

If at any time the Issuer shall be required to prepare a supplementary prospectus pursuant to Section 87G ofthe FSMA, the Issuer will prepare and make available an appropriate amendment or supplement to thisProspectus which, in respect of any subsequent issue of Notes to be listed on the Official List and admittedto trading on the Market, shall constitute a supplementary prospectus as required by the UK ListingAuthority and Section 87G of the FSMA.

The Issuer has given an undertaking to the Dealers that if, at any time during the duration of the Programme,there is a significant new factor, material mistake or inaccuracy relating to information contained in thisProspectus which is capable of affecting the assessment of any Notes and whose inclusion in this Prospectusor removal is necessary for the purpose of allowing an investor to make an informed assessment of the assetsand liabilities, financial position, profits and losses and prospects of the Issuer, and the rights attaching to theNotes, the Issuer shall prepare an amendment or supplement to this Prospectus or publish a replacementProspectus for use in connection with any subsequent offering of the Notes and shall supply to each Dealersuch number of copies of such supplement hereto as such Dealer may reasonably request.

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TABLE OF CONTENTS

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OVERVIEW OF THE PROGRAMME ........................................................................................ 7

RISK FACTORS .......................................................................................................................... 12

TERMS AND CONDITIONS OF THE NOTES ........................................................................ 20

SUMMARY OF PROVISIONS RELATING TO THE NOTES WHILE IN GLOBAL FORM 43

USE OF PROCEEDS.................................................................................................................... 48

AHLI UNITED BANK B.S.C. .................................................................................................... 49

SELECTED FINANCIAL INFORMATION................................................................................ 71

TAXATION .................................................................................................................................. 72

SUBSCRIPTION AND SALE...................................................................................................... 73

FORM OF FINAL TERMS .......................................................................................................... 76

GENERAL INFORMATION ...................................................................................................... 87

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OVERVIEW OF THE PROGRAMME

The following overview does not purport to be complete and is taken from, and is qualified in its entirety by,the remainder of this Prospectus and, in relation to the terms and conditions of any particular Tranche ofNotes, the applicable Final Terms. Words and expressions defined in “Terms and Conditions of the Notes”below shall have the same meanings in this overview. The Issuer may agree with any Dealer that Notes maybe issued in a form other than that contemplated in “Terms and Conditions of the Notes” herein, in whichevent (in the case of listed Notes only) a supplement to this Prospectus, if appropriate, will be made availablewhich will describe the effect of the agreement reached in relation to such Notes.

Issuer Ahli United Bank B.S.C.

Description Euro Medium Term Note Programme.

Size Up to US$2,000,000,000 (or the equivalent in othercurrencies at the date of issue) aggregate nominal amount ofNotes outstanding at any one time. The Issuer may increasethe amount of the Programme in accordance with the termsof the amended and restated dealer agreement dated27 September 2010 (the “Dealer Agreement”).

Arranger HSBC Bank plc.

Dealers Barclays Bank PLCBNP ParibasCommerzbank AktiengesellschaftDaiwa Capital Markets Europe LimitedDeutsche Bank AG, London BranchHSBC Bank plcLloyds TSB Bank plcMerrill Lynch InternationalMizuho International plc The Royal Bank of Scotland plc

The Issuer may from time to time terminate the appointmentof any dealer under the Programme or appoint additionaldealers either in respect of one or more Tranches or in respectof the whole Programme. References in this Prospectus to“Permanent Dealers” are to the persons listed above asDealers and to such additional persons that are appointed asdealers in respect of the whole Programme (and whoseappointment has not been terminated) and references to“Dealers” are to all Permanent Dealers and all personsappointed as a dealer in respect of one or more Tranches.

Fiscal Agent and Registrar HSBC Bank plc.

Method of Issue The Notes will be issued on a syndicated or non-syndicatedbasis. The Notes will be issued in series (each a “Series”)having one or more issue dates and on terms otherwiseidentical (or identical other than in respect of the firstpayment of interest), the Notes of each Series being intendedto be interchangeable with all other Notes of that Series.Each Series may be issued in tranches (each a “Tranche”) onthe same or different issue dates. The specific terms of eachTranche (which will be completed, where necessary, with therelevant terms and conditions and, save in respect of the issue

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date, issue price, first payment of interest and nominalamount of the Tranche, will be identical to the terms of otherTranches of the same Series) will be completed in the finalterms (the “Final Terms”).

Issue Price Notes may be issued at their nominal amount or at a discountor premium to their nominal amount. Partly Paid Notes maybe issued, the issue price of which will be payable in two ormore instalments.

Form of Notes The Notes may be issued in bearer form only (“BearerNotes”), in bearer form exchangeable for Registered Notes(“Exchangeable Bearer Notes”) or in registered form only(“Registered Notes”). Each Tranche of Bearer Notes andExchangeable Bearer Notes will be represented on issue by atemporary Global Note if (i) definitive Notes are to be madeavailable to Noteholders following the expiry of 40 days aftertheir issue date or (ii) such Notes have an initial maturity ofmore than one year and are being issued in compliance withthe D Rules (as defined in “Selling Restrictions”), otherwisesuch Tranche will be represented by a permanent GlobalNote. Registered Notes will be represented by Certificates,one Certificate being issued in respect of each Noteholder’sentire holding of Registered Notes of one Series. Certificatesrepresenting Registered Notes that are registered in the nameof a nominee for one or more clearing systems are referred toas “Global Certificates”.

In accordance with Resolution 1 of 2004 in respect of“Directives Relating to the Prevention and Prohibition ofMoney Laundering at the Bahrain Stock Exchange” the issueof securities in bearer form by companies registered inBahrain and listed on the Bahrain Stock Exchange iscurrently prohibited. Notes issued in or to residents ofBahrain shall be in registered form.

Clearing Systems Clearstream, Luxembourg, Euroclear and, in relation to anyTranche, such other clearing system as may be agreedbetween the Issuer, the Fiscal Agent, the Registrar and therelevant Dealer.

Initial Delivery of Notes On or before the issue date for each Tranche, the Global Noterepresenting Bearer Notes or Exchangeable Bearer Notes orthe Certificate representing Registered Notes may bedeposited with a common depositary for Euroclear andClearstream, Luxembourg. Global Notes or Certificates mayalso be deposited with any other clearing system or may bedelivered outside any clearing system provided that themethod of such delivery has been agreed in advance by theIssuer, the Fiscal Agent and the relevant Dealer. RegisteredNotes that are to be credited to one or more clearing systemson issue will be registered in the name of nominees or acommon nominee for such clearing systems.

Currencies Subject to compliance with all relevant laws, regulations anddirectives, Notes may be issued in any currency agreedbetween the Issuer and the relevant Dealers.

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Maturities Subject to compliance with all relevant laws, regulations anddirectives, any maturity as may be agreed between the Issuerand the relevant Dealer(s) and as set out in the relevant FinalTerms. Unless otherwise permitted by then current laws,regulations and directives, Subordinated Notes will have amaturity of not less than five years.

Specified Denomination Definitive Notes will be in such denominations as may bespecified in the relevant Final Terms save that (i) in the caseof any Notes which are to be admitted to trading on aregulated market within the European Economic Area oroffered to the public in an EEA State in circumstances whichrequire the publication of a prospectus under the ProspectusDirective (2003/71/EC), the minimum specifieddenomination shall be €50,000 (or its equivalent in any othercurrency as at the date of issue of the Notes); and (ii) unlessotherwise permitted by then current laws and regulations,Notes (including Notes denominated in sterling) which havea maturity of less than one year and in respect of which theissue proceeds are to be accepted by the Issuer in the UnitedKingdom or whose issue otherwise constitutes acontravention of section 19 of the FSMA, will have aminimum denomination of £100,000 (or its equivalent inother currencies).

Fixed Rate Notes Fixed interest will be payable in arrear on the date or dates ineach year specified in the relevant Final Terms.

Floating Rate Notes Floating Rate Notes will bear interest determined separatelyfor each Series as follows:

(i) on the same basis as the floating rate under a notionalinterest rate swap transaction in the relevant SpecifiedCurrency governed by an agreement incorporating the2006 ISDA Definitions, as published by the InternationalSwaps and Derivatives Association, Inc. or

(ii) by reference to LIBOR, LIBID, LIMEAN orEURIBOR (or such other benchmark as may bespecified in the relevant Final Terms) as adjusted forany applicable margin.

Interest periods will be specified in the relevant Final Terms.

Zero Coupon Notes Zero Coupon Notes may be issued at their nominal amountor at a discount to it and will not bear interest.

Dual Currency Notes Payments (whether in respect of principal or interest andwhether at maturity or otherwise) in respect of DualCurrency Notes will be made in such currencies, and basedon such rates of exchange as may be specified in the relevantFinal Terms.

Index Linked Notes Payments of principal in respect of Index Linked RedemptionNotes or of interest in respect of Index Linked Interest Noteswill be calculated by reference to such index and/or formulaas may be specified in the relevant Final Terms.

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Interest Periods and Interest Rates The length of the interest periods for the Notes and theapplicable interest rate or its method of calculation maydiffer from time to time or be constant for any Series. Notesmay have a maximum interest rate, a minimum interest rate,or both. The use of interest accrual periods permits the Notesto bear interest at different rates in the same interest period.All such information will be set out in the relevant FinalTerms.

Redemption The relevant Final Terms will specify the basis forcalculating the redemption amounts payable. Unlesspermitted by then current laws and regulations, Notes(including Notes denominated in sterling) which have amaturity of less than one year and in respect of which theissue proceeds are to be accepted by the Issuer in the UnitedKingdom or whose issue otherwise constitutes acontravention of section 19 of the FSMA, must have aminimum redemption amount of £100,000 (or its equivalentin other currencies).

Redemption by Instalments The Final Terms issued in respect of each issue of Notes thatare redeemable in two or more instalments will set out thedates on which, and the amounts in which, such Notes maybe redeemed.

Other Notes Terms applicable to high interest Notes, low interest Notes,step-up Notes, step-down Notes, reverse dual currencyNotes, optional dual currency Notes, partly paid Notes andany other type of Note that the Issuer and any Dealer orDealers may agree to issue under the Programme will be setout in the relevant Final Terms and the supplementaryprospectus.

Optional Redemption The Final Terms issued in respect of each issue of Notes willstate whether such Notes may be redeemed prior to theirstated maturity at the option of the Issuer (either in whole orin part) and/or the holders, and if so the terms applicable tosuch redemption.

Status of Notes The Senior Notes will constitute unsubordinated andunsecured obligations of the Issuer and Subordinated Noteswill constitute subordinated obligations of the Issuer, all asdescribed in “Terms and Conditions of the Notes — Status”.

Negative Pledge Applicable to Senior Notes only. See “Terms and Conditionsof the Notes — Negative Pledge”.

Cross Default Applicable to Senior Notes only. See “Terms and Conditionsof the Notes — Events of Default”.

Early Redemption Except as provided in “Optional Redemption” above, Noteswill be redeemable at the option of the Issuer prior tomaturity only for tax reasons. See “Terms and Conditions ofthe Notes — Redemption, Purchase and Options”.

Withholding Tax All payments of principal and interest in respect of the Noteswill be made free and clear of withholding taxes of the

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Kingdom of Bahrain subject to customary exceptions(including the ICMA Standard EU Tax exemption TaxLanguage), all as described in “Terms and Conditions of theNotes — Taxation”.

Governing Law The Notes, except for Condition 3(b) and Condition 11(a),will be governed by, and construed in accordance with,English law. Condition 3(b) and Condition 11(a) of the Noteswill be governed by, and construed in accordance with, thelaws of the Kingdom of Bahrain.

Listing and admission to trading Application has been made to list Notes issued under theProgramme on the Official List and to admit them to tradingon the Market or as otherwise specified in the relevant FinalTerms and references to listing shall be construedaccordingly. As specified in the relevant Final Terms, a Seriesof Notes may be unlisted.

Ratings Tranches of Notes may be rated or unrated. Where a Trancheof Notes is rated, the applicable rating(s) will be specified inthe relevant Final Terms. A rating is not a recommendation tobuy, sell or hold Notes and may be subject to suspension,reduction or withdrawal at any time by the assigning ratingagency.

Notes denominated in a currency of a country thatsubsequently participates in the third stage of EuropeanEconomic and Monetary Union may be subject toredenomination, renominalisation and/or consolidation withother Notes then denominated in euro. The provisionsapplicable to any such redenomination, renominalisationand/or consolidation will be as specified in the relevant FinalTerms.

Selling Restrictions The United States, the European Economic Area (in respectof Notes having a specified denomination of less than€50,000 or its equivalent in any other currency as at the dateof the issue of the Notes), the United Kingdom, Japan, theKingdom of Saudi Arabia and the Kingdom of Bahrain. See“Subscription and Sale”.

Category 2 selling restrictions will apply for the purposes ofRegulation S under the United States Securities Act of 1933,as amended.

The Notes will be issued in compliance with U.S. Treas. Reg.§1.163-5(c)(2)(i)(D) (the “D Rules”) unless (i) the relevantFinal Terms states that Notes are issued in compliance withU.S. Treas. Reg. §1.163-5(c)(2)(i)(C) (the “C Rules”) or (ii)the Notes are issued other than in compliance with the DRules or the C Rules but in circumstances in which the Noteswill not constitute “registration required obligations” underthe United States Tax Equity and Fiscal Responsibility Act of1982 (“TEFRA”), which circumstances will be referred to inthe relevant Final Terms as a transaction to which TEFRA isnot applicable.

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RISK FACTORS

Prospective investors should consider carefully the risks set forth below and the other information containedin this Prospectus prior to making any investment decision with respect to the Notes. Each of the riskshighlighted below could have a material adverse effect on the business, operations, financial condition orprospects of the Issuer, which, in turn, could have a material adverse effect on the amount of principal andinterest which investors will receive in respect of the Notes. In addition, each of the risks highlighted belowcould adversely affect the trading price of the Notes or the rights of investors under the Notes and, as aresult, investors could lose some or all of their investment.

Prospective investors should note that the risks described below are not the only risks the Issuer faces. TheIssuer has described only those risks relating to its operations that it considers to be material. There may beadditional risks that it currently considers not to be material or of which it is not currently aware, and anyof these risks could have the effects set forth above.

Unless otherwise defined herein, terms used in this section shall have the same meaning as in “Terms andConditions of the Notes”.

Factors that may affect the Issuer’s ability to fulfil its obligations under or in connection with Notesunder the Programme

Economic, Political and Related Considerations

The Issuer is a bank, headquartered in The Kingdom of Bahrain, which is primarily and increasingly focusedon the financial markets of the six Gulf Cooperation Council (“GCC”) countries, particularly Bahrain,Kuwait and Qatar, as well as having operations in Egypt, Iraq, Libya and the United Kingdom. A significantpart of the Issuer’s assets are located within the GCC countries, including a majority of its loan assets, andthe Issuer derives a majority of its deposits from those countries. The substantial improvement in the Issuer’sfinancial performance since 2003 has been supported by the strong economic conditions in the Gulf regionduring that period against a background of relative political stability and continuously rising oil prices.However, there can be no assurance that the Issuer’s financial performance can be sustained in the future, orthat growth and stability in the Issuer’s main markets will continue. Investors should also note that theIssuer’s business and financial performance could be adversely affected by political, economic and relatedrisks both within and outside the GCC and the wider Middle East region because of the inter-relationshipswithin global financial markets.

Issuer may be adversely affected by conditions in the global financial markets

Since 2008, global credit markets have declined markedly, resulting in reduced liquidity, greater volatility,widening of credit spreads and lack of price transparency in credit markets. Any worsening of general globaleconomic conditions or any change in investment markets, including, but not limited to, change in interestrates, exchange rates and returns from investments may affect the Issuer and could materially adverselyaffect its business, financial condition and results of operations, which would affect its ability to perform itsobligations in respect of the Notes issued under the Programme.

Risks Related to the Issuer’s Business

In the course of its business activities, the Issuer is exposed to a variety of risks, the most significant of whichare credit risk, market risk, operational risk and liquidity risk (each of which is described below). Whilst theIssuer believes it has implemented the appropriate policies, systems and processes to control and mitigatethese risks, investors should note that any failure to adequately control these risks could result in adverseeffects on the Issuer’s financial condition and reputation.

A9-3.1

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Credit Risk

Risks arising from adverse changes in the credit quality and recoverability of loans and amounts due fromcounterparties are inherent in a wide range of the Issuer’s businesses, principally in its lending andinvestment activities. Credit risks could arise from a deterioration in the credit quality of specific borrowers,issuers and counterparties of the Issuer, or from a general deterioration in local or global economicconditions, or from systematic risks within the financial systems. Such credit risks could affect therecoverability and value of the Issuer’s assets and require an increase in the Issuer’s provisions for theimpairment of loans, securities and other credit exposures.

Market Risk

The most significant market risks to which the Issuer is exposed are interest rate, foreign exchange and bondand equity price risks associated with its trading, investment and asset and liability management activities.Changes in interest rate levels, yield curves and spreads may affect the interest rate margin realised betweenthe Issuer’s lending and investment activities and its borrowing costs, and the values of assets that aresensitive to interest rate and spread changes. Changes in foreign exchange rates may affect the values ofassets and liabilities denominated in foreign currencies and the income from foreign exchange dealing.Changes in bond and equity prices may affect the values of the Issuer’s investment and trading portfolios. Itis difficult to predict changes in economic and market conditions accurately and to anticipate the effects thatsuch changes could have on the Issuer’s financial performance and business operations.

Operational Risk

The Issuer faces a risk of losses resulting from fraud, errors by employees, failure to document transactionsproperly or to obtain proper internal authorisation, failure to comply with regulatory requirements andconduct of business rules, systems and equipment failures, natural disasters or the failure of external systems(for example, those of the Issuer’s counterparties or vendors). Although the Issuer has implemented riskcontrols and loss mitigation strategies, and substantial resources are devoted to developing efficientprocedures and to staff training, it is not possible to eliminate entirely each of the operational risks. TheIssuer therefore remains exposed to operational risk that could negatively impact its business and results ofoperations. Notwithstanding anything in this risk factor, this risk factor should not be taken as implying thateither the Issuer or the Group will be unable to comply with its obligations as a company with securitiesadmitted to the Official List or, where applicable, as a supervised firm regulated by the Financial ServicesAuthority.

Liquidity Risk

Liquidity risk could arise from the inability of the Issuer to anticipate and provide for unforeseen decreasesor changes in funding sources which could have adverse consequences on the Issuer’s ability to meet itsobligations when they fall due. The Issuer obtains the majority of its funding from retail sources, primarilyfrom private depositors in the GCC, Egypt, Iraq and the United Kingdom, as well as from the inter-bankmarket and term financing facilities. As at 30 June 2010, approximately 70 per cent. of total liabilities werederived from GCC sources, comprising primarily customer and inter-bank deposits. Whilst the highproportion of deposits from GCC sources may protect the Issuer from any sudden change in internationalsentiment towards the Middle East region, it nevertheless contributes to the risk of a geographicallyconcentrated depositor base. A failure to diversify the Issuer’s depositor base beyond the Middle East couldexpose the Issuer to potential economic, political and cultural changes in that area which, in turn, could havea material adverse effect on the Issuer’s financial performance and business operations.

Impact of Regulatory Changes

The Issuer is subject to the laws, regulations, administrative actions and policies in each of the GCCcountries in which it operates and in Egypt, Iraq, Libya and the United Kingdom. These regulations maylimit the Issuer’s activities and changes in supervision and regulation, in particular in the GCC countries inwhich it operates, could materially adversely affect the Issuer’s business, the products or services offered,

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the value of its assets, and its financial condition. Although the Issuer works closely with its regulators andcontinually monitors the regulatory environment in which it operates, future changes in regulation, fiscal orother policies which materially adversely affect the Issuer’s business, the value of its assets and its financialcondition cannot be predicted and are beyond the control of the Issuer.

Ownership and Legal Status

The Government of Kuwait (through the Public Institution for Social Security) owns 18.78 per cent. of theIssuer’s ordinary shares, Social Insurance Organization (an amalgam of the Pension Fund Commission andthe General Organization for Social Insurance) owns 10.18 per cent., Tamdeen Investment Company (theinvestment vehicle of certain private Kuwaiti investors) owns 8.91 per cent., whilst Sh. Shalim Sabah Al-Nasser Al-Sabah owns 5.49 per cent and Al Mazaya Company B.S.C. (c) owns 5.01 per cent. There can beno assurance however that the Issuer’s shareholders will continue to maintain the existing levels of theirownership of the shares of the Issuer.

Factors that are considered material for the purpose of assessing the market risk associated with the Notesissued under the Programme.

Notes may not be a suitable investment for all investors

Each prospective investor in any Notes must determine the suitability of that investment in light of its owncircumstances. In particular, each prospective investor should:

(i) have sufficient knowledge and experience to make a meaningful evaluation of the relevant Notes, themerits and risks of investing in the relevant Notes and the information contained or incorporated byreference in this Prospectus or any applicable supplement;

(ii) have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of itsparticular financial situation, an investment in the relevant Notes and the impact such investment willhave on its overall investment portfolio;

(iii) have sufficient financial resources and liquidity to bear all of the risks of an investment in the relevantNotes, including where principal or interest is payable in one or more currencies, or where thecurrency for principal or interest payments is different from the prospective investor’s currency;

(iv) understand thoroughly the terms of the relevant Notes and be familiar with the behaviour of anyrelevant indices and financial markets; and

(v) be able to evaluate (either alone or with the help of a financial adviser) possible scenarios foreconomic, interest rate and other factors that may affect its investment and its ability to bear theapplicable risks.

Some Notes are complex financial instruments and such instruments may be purchased as a way to reducerisk or enhance yield with an understood, measured, appropriate addition of risk to their overall portfolios.A potential investor should not invest in Notes which are complex financial instruments unless it has theexpertise (either alone or with the help of a financial adviser) to evaluate how the Notes will perform underchanging conditions, the resulting effects on the value of such Notes and the impact this investment will haveon the potential investor’s overall investment portfolio.

Risks related to the structure of a particular issue of Notes

A wide range of Notes may be issued under the Programme. A number of these Notes may have featureswhich contain particular risks for prospective investors. Set out below is a description of certain suchfeatures:

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Notes subject to optional redemption by the Issuer

An optional redemption feature is likely to limit the market value of Notes. During any period when theIssuer may elect to redeem Notes, the market value of those Notes generally will not rise substantially abovethe price at which they can be redeemed. This also may be true prior to any redemption period.

The Issuer may be expected to redeem Notes when its cost of borrowing is lower than the interest rate on theNotes. At those times, an investor generally would not be able to reinvest the redemption proceeds at aneffective interest rate as high as the interest rate on the Notes being redeemed and may only be able to do soat a significantly lower rate. Prospective investors should consider reinvestment risk in light of otherinvestments available at that time.

Index Linked Notes and Dual Currency Notes

The Issuer may issue Notes with principal or interest determined by reference to an index or formula, tochanges in the prices of securities or commodities, to movements in currency exchange rates or other factors(each, a “Relevant Factor”). In addition, the Issuer may issue Notes with principal or interest payable in oneor more currencies which may be different from the currency in which the Notes are denominated.Prospective investors should be aware that:

(i) the market price of such Notes may be volatile;

(ii) they may receive no interest;

(iii) payment of principal or interest may occur at a different time or in a different currency than expected;

(iv) the amount of principal payable at redemption may be less than the nominal amount of such Notes oreven zero;

(v) a Relevant Factor may be subject to significant fluctuations that may not correlate with changes ininterest rates, currencies or other indices;

(vi) if a Relevant Factor is applied to Notes in conjunction with a multiplier greater than one or containssome other leverage factor, the effect of changes in the Relevant Factor on principal or interest payablelikely will be magnified; and

(vii) the timing of changes in a Relevant Factor may affect the actual yield to investors, even if the averagelevel is consistent with their expectations. In general, the earlier the change in the Relevant Factor, thegreater the effect on yield.

The historical experience of an index should not be viewed as an indication of the future performance of suchindex during the term of any Index Linked Notes. Accordingly, prospective investors should consult theirown financial and legal advisers about the risks entailed by an investment in any Index Linked Notes and thesuitability of such Notes in light of their particular circumstances.

Partly-paid Notes

The Issuer may issue Notes where the issue price is payable in more than one instalment. Failure to pay anysubsequent instalment could result in an investor losing all of its investment.

Variable rate Notes with a multiplier or other leverage factor

Notes with variable interest rates can be volatile investments. If they are structured to include multipliers orother leverage factors, or caps or floors, or any combination of those features or other similar related features,their market values may be even more volatile than those for securities that do not include those features.

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Inverse Floating Rate Notes

Inverse Floating Rate Notes have an interest rate equal to a fixed rate minus a rate based upon a referencerate such as LIBOR. The market values of such Notes typically are more volatile than market values of otherconventional floating rate debt securities based on the same reference rate (and with otherwise comparableterms). Inverse Floating Rate Notes are more volatile because an increase in the reference rate not onlydecreases the interest rate of the Notes, but may also reflect an increase in prevailing interest rates, whichfurther adversely affects the market value of these Notes.

Fixed/Floating Rate Notes

Fixed/Floating Rate Notes may bear interest at a rate that the Issuer may elect to convert from a fixed rate toa floating rate, or from a floating rate to a fixed rate. The Issuer’s ability to convert the interest rate will affectthe secondary market and the market value of such Notes since the Issuer may be expected to convert therate when it is likely to produce a lower overall cost of borrowing. If the Issuer converts from a fixed rate toa floating rate, the spread on the Fixed/Floating Rate Notes may be less favourable than then prevailingspreads on comparable Floating Rate Notes tied to the same reference rate. In addition, the new floating rateat any time may be lower than the rates on other Notes. If the Issuer converts from a floating rate to a fixedrate, the fixed rate may be lower than then prevailing rates on its Notes.

Notes issued at a substantial discount or premium

The market values of securities issued at a substantial discount or premium to their nominal amount tend tofluctuate more in relation to general changes in interest rates than do prices for conventional interest-bearingsecurities. Generally, the longer the remaining term of the securities, the greater the price volatility ascompared to conventional interest-bearing securities with comparable maturities.

The Issuer’s obligations under Subordinated Notes are subordinated

The Issuer’s obligations under Subordinated Notes will be unsecured and subordinated and will rank juniorin payment to unsubordinated liabilities (including all deposits) in the event of the forced liquidation of theIssuer. Although Subordinated Notes may pay a higher rate of interest than comparable Notes which are notsubordinated, there is a risk that an investor in Subordinated Notes will lose all or some of his investmentshould the Issuer become insolvent.

Reliance on Euroclear and Clearstream

Notes issued under the Programme will be represented on issue by one or more Global Notes that may bedeposited with a common depositary for Euroclear and Clearstream, Luxembourg (each as defined under“Form of the Notes”). Except in the circumstances described in each Global Note, investors will not beentitled to receive Notes in definitive form. Each of Euroclear and Clearstream, Luxembourg and theirrespective direct and indirect participants will maintain records of the beneficial interests in each Global Noteheld through it. While the Notes are represented by a Global Note, investors will be able to trade theirbeneficial interests only through the relevant clearing systems and their respective participants.

While the Notes are represented by Global Notes, the Issuer will discharge its payment obligation under theNotes by making payments through the relevant clearing systems. A holder of a beneficial interest in aGlobal Note must rely on the procedures of the relevant clearing system and its participants to receivepayments under the Notes. The Issuer has no responsibility or liability for the records relating to, orpayments made in respect of, beneficial interests in any Global Note.

Holders of beneficial interests in a Global Note will not have a direct right to vote in respect of the Notes sorepresented. Instead, such holders will be permitted to act only to the extent that they are enabled by therelevant clearing system and its participants to appoint appropriate proxies.

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Risks related to Notes generally

Set out below is a brief description of certain risks relating to the Notes generally:

EU Savings Directive

Under European Council Directive 2003/48/EC on the taxation of savings income (the ‘‘Directive’’), asamended, EU Member States are required to provide to the tax authorities of another Member State detailsof payments of interest (and similar income) paid by a person within its jurisdiction to an individual residentor certain limited types of entity established in that other Member State. However, for a transitional period,Luxembourg and Austria may instead impose a withholding system in relation to such payments, (subject toa procedure whereby on meeting certain conditions, the beneficial owner of the interest or other income mayrequest that no tax be withheld) unless during that period they elect otherwise. A number of non-EUcountries and territories including Switzerland have adopted similar measures.

If a payment were to be made or collected through a Member State which has opted for a withholding systemand an amount of, or in respect of, tax were to be withheld from that payment pursuant to the Directive orany law implementing or complying with, or introduced in order to conform to the Directive, neither theIssuer nor any Paying Agent nor any other person would be obliged to pay additional amounts with respectto any Note as a result of the imposition of such withholding tax. The Issuer is required to maintain a PayingAgent in a Member State that is not obliged to withhold or deduct tax pursuant to the Directive.

Meetings of Noteholders

The Notes contain provisions for calling meetings of Noteholders to consider matters affecting their interestsgenerally. These provisions are governed by Bahraini law and permit defined majorities to bind allNoteholders including Noteholders who did not attend and vote at the relevant meeting and Noteholders whovoted in a manner contrary to the majority.

Change of law

The Terms and Conditions of the Notes are (subject to limited exceptions) based on English law in effect asat the date of issue of the relevant Notes. No assurance can be given as to the impact of any possible judicialdecision or change to English law or administrative practice after the date of issue of the relevant Notes.

Integral multiples of less than €50,000

In relation to any issue of Notes which have a denomination consisting of the minimum SpecifiedDenomination of €50,000 plus a higher integral multiple of another smaller amount, it is possible that theNotes may be traded in amounts in excess of €50,000 (or its equivalent) that are not integral multiples of€50,000 (or its equivalent). In such a case a Noteholder who, as a result of trading such amounts, holds aprincipal amount of less than the minimum Specified Denomination will not receive a definitive Note inrespect of such holding (should definitive Notes be printed) and would need to purchase a principal amountof Notes such that it holds an amount equal to one or more Specified Denominations.

If definitive Notes are issued, holders should be aware that definitive Notes which have a denomination thatis not an integral multiple of the minimum Specified Denomination may be illiquid and difficult to trade.

Risks related to the market generally

Set out below is a brief description of certain market risks, including liquidity risk, exchange rate risk,interest rate risk and credit risk:

The secondary market generally

Notes may have no established trading market when issued, and one may never develop. If a market doesdevelop, it may not be liquid. Therefore, investors may not be able to sell their Notes easily or at prices that

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will provide them with a yield comparable to similar investments that have a developed secondary market.This is particularly the case for Notes that are especially sensitive to interest rate, currency or market risks,are designed for specific investment objectives or strategies or have been structured to meet the investmentrequirements of limited categories of investors. These types of Notes generally would have a more limitedsecondary market and more price volatility than conventional debt securities. Illiquidity may have a severelyadverse effect on the market value of Notes.

Exchange rate risks and exchange controls

The Issuer will pay principal and interest on the Notes in the Specified Currency. This presents certain risksrelating to currency conversions if an investor’s financial activities are denominated principally in a currencyor currency unit (the “Investor’s Currency”) other than the Specified Currency. These include the risk thatexchange rates may significantly change (including changes due to devaluation of the Specified Currency orrevaluation of the Investor’s Currency) and the risk that authorities with jurisdiction over the Investor’sCurrency may impose or modify exchange controls. An appreciation in the value of the Investor’s Currencyrelative to the Specified Currency would decrease (1) the Investor’s Currency-equivalent yield on the Notes,(2) the Investor’s Currency equivalent value of the principal payable on the Notes and (3) the Investor’sCurrency equivalent market value of the Notes.

Government and monetary authorities may impose (as some have done in the past) exchange controls thatcould adversely affect an applicable exchange rate. As a result, investors may receive less interest or principalthan expected, or no interest or principal.

Interest rate risks

Investment in Fixed Rate Notes involves the risk that subsequent changes in market interest rates mayadversely affect the value of Fixed Rate Notes.

Credit ratings may not reflect all risks

One or more independent credit rating agencies may assign credit ratings to an issue of Notes. The ratingsmay not reflect the potential impact of all risks related to structure, market, additional factors discussedabove, and other factors that may affect the value of the Notes. Each rating agency may have different criteriafor evaluating risk and, therefore, ratings should be evaluated independently for each rating agency. A creditrating is not a recommendation to buy, sell or hold securities and may be revised or withdrawn by the ratingagency at any time.

Legal investment considerations may restrict certain investments

The investment activities of certain investors are subject to legal investment laws and regulations, or reviewor regulation by certain authorities. Each prospective investor should consult its legal advisers to determinewhether and to what extent (1) Notes are legal investments for it, (2) Notes can be used as collateral forvarious types of borrowing and (3) other restrictions apply to its purchase or pledge of any Notes. Financialinstitutions should consult their legal advisers or the appropriate regulators to determine the appropriatetreatment of Notes under any applicable risk-based capital or similar rules.

Enforcing foreign judgments in Bahrain

Under the Conditions of the Notes, the courts of England have exclusive jurisdiction to settle any disputearising from the Notes. Enforcement of an English judgment in other jurisdictions will be subject to the lawsand procedures of those jurisdictions. There is currently no reciprocity in enforcement of judgments betweenEngland and the Kingdom of Bahrain.

Enforcement of Interest Provisions

In the event that proceedings are brought against the Issuer in the Kingdom of Bahrain, certain provisions ofBahraini law would apply, including Article 76 of the Bahraini Law of Commerce (No. 7 of 1987) (“Article

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76”) which provides that Bahraini courts are to enforce contractual rates of interest, unless they exceed thelegally prescribed maximum rate of interest. No rate has been prescribed as a maximum rate of interest andas a result the courts in the Kingdom of Bahrain have discretion, having regard to custom and practice, todetermine the legally prescribed maximum rate. Accordingly there is a risk that a Bahraini court mightenforce interest on any Notes at the lower of the applicable contractual rate and the maximum rate which itconsiders to be the then current legally prescribed maximum rate of interest. Such an estimate by a Bahrainicourt could be challenged.

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TERMS AND CONDITIONS OF THE NOTES

The following is the text of the terms and conditions (the “Conditions”) that, subject to completion andamendment and as supplemented or varied in accordance with the provisions of Part A of the relevant FinalTerms, shall be applicable to the Notes in definitive form (if any) issued in exchange for the Global Note(s)representing each Series. Either (i) the full text of these terms and conditions together with the relevantprovisions of Part A of the Final Terms or (ii) these Conditions as so completed, amended, supplemented orvaried (and subject to simplification by the deletion of non-applicable provisions), shall be endorsed on suchBearer Notes or on the Certificates relating to such Registered Notes. All capitalised terms that are notdefined in these Conditions will have the meanings given to them in Part A of the relevant Final Terms. Thosedefinitions will be endorsed on the definitive Notes or Certificates, as the case may be. References in theConditions to “Notes” are to the Notes of one Series only, not to all Notes that may be issued under theProgramme.

The Notes are issued pursuant to an amended and restated agency agreement (as amended or supplementedas at the Issue Date, the “Agency Agreement”) dated 27 September 2010 between Ahli United Bank B.S.C.(the “Issuer”), HSBC Bank plc as fiscal agent and the other agents named in it and with the benefit of anamended and restated deed of covenant (as amended or supplemented as at the Issue Date, the “Deed ofCovenant”) dated 27 September 2010 executed by the Issuer in relation to the Notes. The fiscal agent, thepaying agents, the registrar, the transfer agents and the calculation agent(s) for the time being (if any) arereferred to below respectively as the “Fiscal Agent”, the “Paying Agents” (which expression shall include theFiscal Agent), the “Registrar”, the “Transfer Agents” and the “Calculation Agent(s)”. The Noteholders (asdefined below), the holders of the interest coupons (the “Coupons”) relating to interest bearing Notes inbearer form and, where applicable in the case of such Notes, talons for further Coupons (the “Talons”) (the“Couponholders”) and the holders of the receipts for the payment of instalments of principal (the “Receipts”)relating to Notes in bearer form of which the principal is payable in instalments are deemed to have noticeof all of the provisions of the Agency Agreement applicable to them.

As used in these Conditions, “Tranche” means Notes which are identical in all respects.

Copies of the Agency Agreement and the Deed of Covenant are available for inspection at the specifiedoffices of each of the Paying Agents, the Registrar and the Transfer Agents.

1 Form, Denomination and Title

The Notes are issued in bearer form (“Bearer Notes”, which expression includes Notes that are specified tobe Exchangeable Bearer Notes), in registered form (“Registered Notes”) or in bearer form exchangeable forRegistered Notes (“Exchangeable Bearer Notes”) in each case in the Specified Denomination(s) shownhereon provided that in the case of any Notes which are to be admitted to trading on a regulated marketwithin the European Economic Area or offered to the public in a Member State of the European EconomicArea in circumstances which require the publication of a Prospectus under the Prospectus Directive, theminimum Specified Denomination shall be €50,000 (or its equivalent in any other currency as at the date ofissue of the relevant Notes).

All Registered Notes shall have the same Specified Denomination. Where Exchangeable Bearer Notes areissued, the Registered Notes for which they are exchangeable shall have the same Specified Denominationas the lowest denomination of Exchangeable Bearer Notes.

This Note is a Fixed Rate Note, a Floating Rate Note, a Zero Coupon Note, an Index Linked Interest Note,an Index Linked Redemption Note, an Instalment Note, a Dual Currency Note or a Partly-Paid Note, acombination of any of the foregoing or any other kind of Note, depending upon the Interest andRedemption/Payment Basis shown hereon.

Bearer Notes are serially numbered and are issued with Coupons (and, where appropriate, a Talon) attached,save in the case of Zero Coupon Notes in which case references to interest (other than in relation to interest

A13-4.4

A13-4.11

A13-4.8

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due after the Maturity Date), Coupons and Talons in these Conditions are not applicable. Instalment Notesare issued with one or more Receipts attached.

Registered Notes are represented by registered certificates (“Certificates”) and, save as provided in Condition2(c), each Certificate shall represent the entire holding of Registered Notes by the same holder.

Title to the Bearer Notes and the Receipts, Coupons and Talons shall pass by delivery. Title to the RegisteredNotes shall pass by registration in the register that the Issuer shall procure to be kept by the Registrar inaccordance with the provisions of the Agency Agreement (the “Register”). Except as ordered by a court ofcompetent jurisdiction or as required by law, the holder (as defined below) of any Note, Receipt, Coupon orTalon shall be deemed to be and may be treated as its absolute owner for all purposes, whether or not it isoverdue and regardless of any notice of ownership, trust or an interest in it, any writing on it (or on theCertificate representing it) or its theft or loss (or that of the related Certificate) and no person shall be liablefor so treating the holder.

In these Conditions, “Noteholder” means the bearer of any Bearer Note and the Receipts relating to it or theperson in whose name a Registered Note is registered (as the case may be), and “holder” (in relation to aNote, Receipt, Coupon or Talon) means the bearer of any Bearer Note, Receipt, Coupon or Talon or theperson in whose name a Registered Note is registered (as the case may be) and capitalised terms have themeanings given to them hereon, the absence of any such meaning indicating that such term is not applicableto the Notes.

2 Exchanges of Exchangeable Bearer Notes and Transfers of Registered Notes

(a) Exchange of Exchangeable Bearer Notes

Subject as provided in Condition 2(f), Exchangeable Bearer Notes may be exchanged for the samenominal amount of Registered Notes at the request in writing of the relevant Noteholder and uponsurrender of each Exchangeable Bearer Note to be exchanged, together with all unmatured Receipts,Coupons and Talons relating to it, at the specified office of any Transfer Agent; provided, however,that where an Exchangeable Bearer Note is surrendered for exchange after the Record Date (asdefined in Condition 7(b)) for any payment of interest, the Coupon in respect of that payment ofinterest need not be surrendered with it. Registered Notes may not be exchanged for Bearer Notes.Bearer Notes of one Specified Denomination may not be exchanged for Bearer Notes of anotherSpecified Denomination. Bearer Notes that are not Exchangeable Bearer Notes may not be exchangedfor Registered Notes.

(b) Transfer of Registered Notes

One or more Registered Notes may be transferred upon the surrender (at the specified office of theRegistrar or any Transfer Agent) of the Certificate representing such Registered Notes to betransferred, together with the form of transfer endorsed on such Certificate, (or another form oftransfer substantially in the same form and containing the same representations and certifications (ifany), unless otherwise agreed by the Issuer), duly completed and executed and any other evidence asthe Registrar or Transfer Agent may reasonably require. In the case of a transfer of part only of aholding of Registered Notes represented by one Certificate, a new Certificate shall be issued to thetransferee in respect of the part transferred and a further new Certificate in respect of the balance ofthe holding not transferred shall be issued to the transferor. All transfers of Notes and entries on theRegister will be made subject to the detailed regulations concerning transfers of Notes scheduled tothe Agency Agreement. The regulations may be changed by the Issuer, with the prior written approvalof the Registrar and the Noteholders. A copy of the current regulations will be made available by theRegistrar to any Noteholder upon request.

(c) Exercise of Options or Partial Redemption in Respect of Registered Notes

In the case of an exercise of an Issuer’s or Noteholders’ option in respect of, or a partial redemptionof, a holding of Registered Notes represented by a single Certificate, a new Certificate shall be issued

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to the holder to reflect the exercise of such option or in respect of the balance of the holding notredeemed. In the case of a partial exercise of an option resulting in Registered Notes of the sameholding having different terms, separate Certificates shall be issued in respect of those Notes of thatholding that have the same terms. New Certificates shall only be issued against surrender of theexisting Certificates to the Registrar or any Transfer Agent. In the case of a transfer of RegisteredNotes to a person who is already a holder of Registered Notes, a new Certificate representing theenlarged holding shall only be issued against surrender of the Certificate representing the existingholding.

(d) Delivery of New Certificates

Each new Certificate to be issued pursuant to Conditions 2(a), (b) or (c) shall be available for deliverywithin three business days of receipt of the request for exchange, form of transfer or Exercise Notice(as defined in Condition 6(e)) and surrender of the Certificate for exchange. Delivery of the newCertificate(s) shall be made at the specified office of the Transfer Agent or of the Registrar (as the casemay be) to whom delivery or surrender of such request for exchange, form of transfer, Exercise Noticeor Certificate shall have been made or, at the option of the holder making such delivery or surrenderas aforesaid and as specified in the relevant request for exchange, form of transfer, Exercise Notice orotherwise in writing, be mailed by uninsured post at the risk of the holder entitled to the newCertificate to such address as may be so specified, unless such holder requests otherwise and pays inadvance to the relevant Agent (as defined in the Agency Agreement) the costs of such other methodof delivery and/or such insurance as it may specify. In this Condition (d), “business day” means a day,other than a Saturday or Sunday, on which banks are open for business in the place of the specifiedoffice of the relevant Transfer Agent or the Registrar (as the case may be).

(e) Exchange Free of Charge

Exchange and transfer of Notes and Certificates on registration, transfer, partial redemption orexercise of an option shall be effected without charge by or on behalf of the Issuer, the Registrar orthe Transfer Agents, but upon payment of any tax or other governmental charges that may be imposedin relation to it (or the giving of such indemnity as the Registrar or the relevant Transfer Agent mayrequire).

(f) Closed Periods

No Noteholder may require the transfer of a Registered Note to be registered or an ExchangeableBearer Note to be exchanged for one or more Registered Note(s) (i) during the period of 15 daysending on the due date for redemption of, or payment of any Instalment Amount in respect of, thatNote, (ii) during the period of 15 days before any date on which Notes may be called for redemptionby the Issuer at its option pursuant to Condition 6(d), (iii) after any such Note has been called forredemption or (iv) during the period of seven days ending on (and including) any Record Date. AnExchangeable Bearer Note called for redemption may, however, be exchanged for one or moreRegistered Note(s) in respect of which the Certificate is simultaneously surrendered not later than therelevant Record Date.

3 Status of Senior Notes and Status of Subordinated Notes

(a) Status of Senior Notes

The Senior Notes (being those Notes that specify their Status as Senior only) and the Receipts andCoupons relating to them constitute direct, unconditional, unsubordinated and (subject to Condition4) unsecured obligations of the Issuer and shall at all times rank pari passu and without any preferenceamong themselves and (save for certain obligations required to be preferred by law) equally with allother unsecured (other than subordinated obligations, if any) of the Issuer.

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(b) Status of Subordinated Notes

The Subordinated Notes (being those Notes that specify their status as Subordinated) and the Receiptsand Coupons relating to them constitute subordinated obligations of the Issuer and rank pari passuand without any preference among them. In the event of the forced liquidation of the Issuer for thepurposes of Article 156 of the Central Bank of Bahrain and Financial Institutions Law (“forcedliquidation”), the payment obligations of the Issuer under the Subordinated Notes shall rank afterunsubordinated and unsecured creditors of the Issuer but pari passu with all other subordinatedobligations of the Issuer that are not expressed by their terms to rank junior to the Subordinated Notesand in priority to the claims of all shareholders of the Issuer (including the holders of all preferenceshares of the Issuer). The Issuer shall execute such instruments and do such acts as may be requiredby the laws of the Kingdom of Bahrain to ensure the effectiveness of such ranking.

4 Negative Pledge

(a) Restriction

So long as any of the Senior Notes, Receipts or Coupons remain outstanding the Issuer will not createor permit to subsist and will procure that no Subsidiary will create or permit to subsist any mortgage,charge, pledge, lien or other form of encumbrance or security interest (“Security”) upon the whole orany part of its undertaking, assets or revenues present or future to secure any Relevant Debt, or anyguarantee of or indemnity in respect of any Relevant Debt unless, at the same time or prior thereto,the Issuer’s obligations under the Senior Notes, Receipts and Coupons (A) are secured equally andrateably therewith or benefit from a guarantee or indemnity in substantially identical terms thereto, asthe case may be, or (B) have the benefit of such similar security, guarantee, indemnity or otherarrangement as shall be approved by an Extraordinary Resolution (as defined in the AgencyAgreement) of the Senior Noteholders.

(b) Definitions

For the purposes of this Condition, “Relevant Debt” means any present or future indebtedness in theform of, or represented by, bonds, notes, debentures, loan stock or other securities that are for the timebeing, or are capable of being, quoted, listed or ordinarily dealt in on any stock exchange, automatedtrading system, over-the-counter or other securities market.

For the purposes of these Conditions, “Subsidiary” means any entity whose financial statements arerequired in accordance with applicable law or generally accepted accounting principles to beconsolidated in the consolidated financial statements of the Issuer.

5 Interest and other Calculations

(a) Interest on Fixed Rate Notes

Each Fixed Rate Note bears interest on its outstanding nominal amount from and including theInterest Commencement Date at the rate per annum (expressed as a percentage) equal to the Rate ofInterest, such interest being payable in arrear on each Interest Payment Date. The amount of interestpayable shall be determined in accordance with Condition 5(h).

(b) Interest on Floating Rate Notes and Index Linked Interest Notes

(i) Interest Payment Dates

Each Floating Rate Note and Index Linked Interest Note bears interest on its outstandingnominal amount from and including the Interest Commencement Date at the rate per annum(expressed as a percentage) equal to the Rate of Interest, such interest being payable in arrearon each Interest Payment Date. The amount of interest payable shall be determined inaccordance with Condition 5(h). Such Interest Payment Date(s) is/are either shown hereon as

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Specified Interest Payment Dates or, if no Specified Interest Payment Date(s) is/are shownhereon, Interest Payment Date shall mean each date which falls the number of months or otherperiod shown hereon as the Interest Period after the preceding Interest Payment Date or, in thecase of the first Interest Payment Date, after the Interest Commencement Date.

(ii) Business Day Convention

If any date referred to in these Conditions that is specified to be subject to adjustment inaccordance with a Business Day Convention would otherwise fall on a day that is not aBusiness Day, then, if the Business Day Convention specified is (A) the Floating Rate BusinessDay Convention, such date shall be postponed to the next day that is a Business Day unless itwould thereby fall into the next calendar month, in which event (x) such date shall be broughtforward to the immediately preceding Business Day and (y) each subsequent such date shall bethe last Business Day of the month in which such date would have fallen had it not been subjectto adjustment, (B) the Following Business Day Convention, such date shall be postponed to thenext day that is a Business Day, (C) the Modified Following Business Day Convention, suchdate shall be postponed to the next day that is a Business Day unless it would thereby fall intothe next calendar month, in which event such date shall be brought forward to the immediatelypreceding Business Day or (D) the Preceding Business Day Convention, such date shall bebrought forward to the immediately preceding Business Day.

(iii) Rate of Interest for Floating Rate Notes

The Rate of Interest in respect of Floating Rate Notes for each Interest Accrual Period shall bedetermined in the manner specified hereon and the provisions below relating to either ISDADetermination or Screen Rate Determination shall apply, depending upon which is specifiedhereon.

(A) ISDA Determination for Floating Rate Notes

Where ISDA Determination is specified hereon as the manner in which the Rate ofInterest is to be determined, the Rate of Interest for each Interest Accrual Period shall bedetermined by the Calculation Agent as a rate equal to the relevant ISDA Rate. For thepurposes of this sub-paragraph (A), “ISDA Rate” for an Interest Accrual Period meansa rate equal to the Floating Rate that would be determined by the Calculation Agentunder a Swap Transaction under the terms of an agreement incorporating the ISDADefinitions and under which:

(x) the Floating Rate Option is as specified hereon;

(y) the Designated Maturity is a period specified hereon; and

(z) the relevant Reset Date is the first day of that Interest Accrual Period unlessotherwise specified hereon.

For the purposes of this sub-paragraph (A), “Floating Rate”, “Calculation Agent”,“Floating Rate Option”, “Designated Maturity”, “Reset Date” and “Swap Transaction”have the meanings given to those terms in the ISDA Definitions.

(B) Screen Rate Determination for Floating Rate Notes

(x) Where Screen Rate Determination is specified hereon as the manner in which theRate of Interest is to be determined, the Rate of Interest for each Interest AccrualPeriod will, subject as provided below, be either:

(1) the offered quotation; or

(2) the arithmetic mean of the offered quotations,

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(expressed as a percentage rate per annum) for the Reference Rate which appearsor appear, as the case may be, on the Relevant Screen Page as at either 11.00 a.m.(London time in the case of LIBOR or Brussels time in the case of EURIBOR)on the Interest Determination Date in question as determined by the CalculationAgent. If five or more of such offered quotations are available on the RelevantScreen Page, the highest (or, if there is more than one such highest quotation, oneonly of such quotations) and the lowest (or, if there is more than one such lowestquotation, one only of such quotations) shall be disregarded by the CalculationAgent for the purpose of determining the arithmetic mean of such offeredquotations.

(y) If, in the case of clause (1) immediately above, no such offered quotation appearson the Relevant Screen Page, or, in the case of clause (2) immediately above,fewer than three such offered quotations appear on the Relevant Screen Page, ineach case as at the time specified above, then, subject as provided below, theCalculation Agent will request, if the Reference Rate is LIBOR, the principalLondon office of each of the Reference Banks or, if the Reference Rate isEURIBOR, the principal Euro-zone office of each of the Reference Banks, toprovide the Calculation Agent with its offered quotation (expressed as apercentage rate per annum) for the Reference Rate if the Reference Rate isLIBOR, at approximately 11.00 a.m. (London time), or if the Reference Rate isEURIBOR, at approximately 11.00 a.m. (Brussels time) on the InterestDetermination Date in question in an amount that is representative for a singletransaction in that market at that time. If two or more of the Reference Banksprovide the Calculation Agent with such offered quotations, the Rate of Interestfor such Interest Period shall be the arithmetic mean of such offered quotations asdetermined by the Calculation Agent.

(z) If the Calculation Agent is, in accordance with the preceding paragraph, obligedto request Reference Banks for offered quotations and if paragraph (y) aboveapplies and the Calculation Agent determines that fewer than two ReferenceBanks are providing such offered quotations, then, subject as provided below, theRate of Interest shall be:

(I) the arithmetic mean of the rates per annum (expressed as a percentage) ascommunicated to (and at the request of) the Calculation Agent by theReference Banks or any two or more of them, at which such banks wereoffered, if the Reference Rate is LIBOR, at approximately 11.00 a.m.(London time) or, if the Reference Rate is EURIBOR, at approximately11.00 a.m. (Brussels time) on the relevant Interest Determination Date,deposits in the Specified Currency for a period equal to that which wouldhave been used for the Reference Rate by leading banks in, if theReference Rate is LIBOR, the London inter-bank market or, if theReference Rate is EURIBOR, the Euro-zone inter-bank market, as the casemay be, in each case in an amount that is representative for a singletransaction in the relevant market at the relevant time; or

(II) if fewer than two of the Reference Banks provide the Calculation Agentwith such offered rates, the offered rate for deposits in the SpecifiedCurrency for a period equal to that which would have been used for theReference Rate, or the arithmetic mean of the offered rates for deposits inthe Specified Currency for a period equal to that which would have beenused for the Reference Rate, at which, if the Reference Rate is LIBOR, atapproximately 11.00 a.m. (London time) or, if the Reference Rate isEURIBOR, at approximately 11.00 a.m. (Brussels time), on the relevantInterest Determination Date, any one or more major banks in the principal

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25


financial centre of the Specified Currency (which bank or banks is or arein the opinion of the Fiscal Agent suitable for such purpose) informs theCalculation Agent it is quoting to leading banks in, if the Reference Rateis LIBOR, the London inter-bank market or, if the Reference Rate isEURIBOR, the Euro-zone inter-bank market, as the case may be,

provided that, if the Rate of Interest cannot be determined in accordance with theforegoing provisions of this paragraph, the Rate of Interest shall be determined asat the last preceding Interest Determination Date (though substituting, where adifferent Margin or Maximum or Minimum Rate of Interest is to be applied to therelevant Interest Accrual Period from that which applied to the last precedingInterest Accrual Period, the Margin or Maximum or Minimum Rate of Interestrelating to the relevant Interest Accrual Period, in place of the Margin orMaximum or Minimum Rate of Interest relating to that last preceding InterestAccrual Period).

If the Reference Rate from time to time in respect of Floating Rate Notes isspecified hereon in the relevant Final Terms as being other than LIBOR orEURIBOR, the Rate of Interest in respect of such Notes will be determined asprovided hereon.

(iv) Rate of Interest for Index Linked Interest Notes

The Rate of Interest in respect of Index Linked Interest Notes for each Interest Accrual Periodshall be determined in the manner specified hereon and interest will accrue by reference to anIndex or Formula as specified hereon.

(c) Zero Coupon Notes

Where a Note the Interest Basis of which is specified to be Zero Coupon is repayable prior to theMaturity Date and is not paid when due, the amount due and payable prior to the Maturity Date shallbe the Early Redemption Amount of such Note, as calculated in accordance with Condition 6(b). Asfrom the Maturity Date, the Rate of Interest for any overdue principal of such a Note shall be a rateper annum (expressed as a percentage) equal to the Amortisation Yield (as described in Condition6(b)(i)).

(d) Dual Currency Notes

In the case of Dual Currency Notes, if the rate or amount of interest falls to be determined by referenceto a Rate of Exchange or a method of calculating Rate of Exchange, the rate or amount of interestpayable shall be determined in the manner specified hereon.

(e) Partly Paid Notes

In the case of Partly Paid Notes (other than Partly Paid Notes which are Zero Coupon Notes), interestwill accrue as aforesaid on the paid-up nominal amount of such Notes and otherwise as specifiedhereon.

(f) Accrual of Interest

Interest shall cease to accrue on each Note on the due date for redemption unless, upon duepresentation, payment is improperly withheld or refused, in which event interest shall continue toaccrue (both before and after judgment) to the Relevant Date (as defined in Condition 8) at the Rateof Interest in the manner provided in this Condition 5.

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(g) Margin, Maximum/Minimum Rates of Interest, Instalment Amounts and Redemption Amountsand Rounding

(i) If any Margin is specified hereon (either (x) generally, or (y) in relation to one or more InterestAccrual Periods), an adjustment shall be made to all relevant Rates of Interest, in the case of(x), or the Rates of Interest for the specified Interest Accrual Periods, in the case of (y),calculated in accordance with (b) above by adding (if a positive number) or subtracting theabsolute value (if a negative number) of such Margin subject always to the next paragraph.

(ii) If any Maximum or Minimum Rate of Interest, Instalment Amount or Redemption Amount isspecified hereon, then any Rate of Interest, Instalment Amount or Redemption Amount shall besubject to such maximum or minimum, as the case may be

(iii) For the purposes of any calculations required pursuant to these Conditions (unless otherwisespecified), (x) all percentages resulting from such calculations shall be rounded, if necessary,to the nearest one hundred-thousandth of a percentage point (with halves being rounded up),(y) all figures shall be rounded to seven significant figures (with halves being rounded up) and(z) all currency amounts that fall due and payable shall be rounded to the nearest unit of suchcurrency (with halves being rounded up), save in the case of yen, which shall be rounded downto the nearest yen. For these purposes “unit” means the lowest amount of such currency that isavailable as legal tender in the country of such currency.

(h) Calculations

The amount of interest payable per Calculation Agent in respect of any Note for any Interest AccrualPeriod shall be equal to the product of the Rate of Interest, the Calculation Agent specified herein, andthe Day Count Fraction for such Interest Accrual Period, unless an Interest Amount (or a formula forits calculation) is applicable to such Interest Accrual Period, in which case the amount of interestpayable per Calculation Amount in respect of such Note for such Interest Accrual Period shall equalsuch Interest Amount (or be calculated in accordance with such formula). Where any Interest Periodcomprises two or more Interest Accrual Periods, the amount of interest payable in respect of suchInterest Period shall be the sum of the amounts of interest payable in respect of each of those InterestAccrual Periods. In respect of any other period for which interest is required to be calculated, theprovisions above shall apply save that the Day Count Fraction shall be for the period for which interestis required to be calculated.

(i) Determination and Publication of Rates of Interest, Interest Amounts, Final RedemptionAmounts, Early Redemption Amounts, Optional Redemption Amounts and Instalment Amounts

The Calculation Agent shall, as soon as practicable on such date as the Calculation Agent may berequired to calculate any rate or amount, obtain any quotation or make any determination orcalculation, determine such rate and calculate the Interest Amounts for the relevant Interest AccrualPeriod, calculate the Final Redemption Amount, Early Redemption Amount, Optional RedemptionAmount or Instalment Amount, obtain such quotation or make such determination or calculation, asthe case may be, and cause the Rate of Interest and the Interest Amounts for each Interest AccrualPeriod and the relevant Interest Payment Date and, if required to be calculated, the Final RedemptionAmount, Early Redemption Amount, Optional Redemption Amount or any Instalment Amount to benotified to the Fiscal Agent, the Issuer, each of the Paying Agents, the Noteholders, any otherCalculation Agent appointed in respect of the Notes that is to make a further calculation upon receiptof such information and, if the Notes are listed on a stock exchange and the rules of such exchange orother relevant authority so require, such exchange or other relevant authority as soon as possible aftertheir determination but in no event later than (i) the commencement of the relevant Interest Period, ifdetermined prior to such time, in the case of notification to such exchange of a Rate of Interest andInterest Amount, or (ii) in all other cases, the fourth Business Day after such determination. Whereany Interest Payment Date or Interest Period Date is subject to adjustment pursuant to Condition5(b)(ii), the Interest Amounts and the Interest Payment Date so published may subsequently be

27


amended (or appropriate alternative arrangements made by way of adjustment) without notice in theevent of an extension or shortening of the Interest Period. If the Notes become due and payable underCondition 10, the accrued interest and the Rate of Interest payable in respect of the Notes shallnevertheless continue to be calculated as previously in accordance with this Condition but nopublication of the Rate of Interest or the Interest Amount so calculated need be made. Thedetermination of any rate or amount, the obtaining of each quotation and the making of eachdetermination or calculation by the Calculation Agent(s) shall (in the absence of manifest error) befinal and binding upon all parties.

(j) Definitions

In these Conditions, unless the context otherwise requires, the following defined terms shall have themeanings set out below:

“Business Day” means:

(i) in the case of a currency other than euro, a day (other than a Friday, Saturday or Sunday) onwhich commercial banks and foreign exchange markets settle payments in the principalfinancial centre for such currency; and/or

(ii) in the case of euro, a day on which the TARGET system is operating (a “TARGET BusinessDay”); and/or

(iii) in the case of a currency and/or one or more Business Centres, a day (other than a Friday,Saturday or a Sunday) on which commercial banks and foreign exchange markets settlepayments in such currency in the Business Centre(s) or, if no currency is indicated, generallyin each of the Business Centres.

“Day Count Fraction” means, in respect of the calculation of an amount of interest on any Note forany period of time (from and including the first day of such period to but excluding the last) (whetheror not constituting an Interest Period or Interest Accrual Period, the “Calculation Period”):

(i) if “Actual/Actual” or “Actual/Actual — ISDA” is specified hereon, the actual number of daysin the Calculation Period divided by 365 (or, if any portion of that Calculation Period falls in aleap year, the sum of (A) the actual number of days in that portion of the Calculation Periodfalling in a leap year divided by 366 and (B) the actual number of days in that portion of theCalculation Period falling in a non-leap year divided by 365);

(ii) if “Actual/365 (Fixed)” is specified hereon, the actual number of days in the Calculation Perioddivided by 365;

(iii) if “Actual/365 (Sterling)” is specified hereon, the actual number of days in the CalculationPeriod divided by 365 or, in the case of an Interest Payment Date falling in a leap year, 366;

(iv) if “Actual/360” is specified hereon, the actual number of days in the Calculation Period dividedby 360;

(v) if “30/360”, “360/360” or “Bond Basis” is specified hereon, the number of days in theCalculation Period divided by 360, calculated on a formula basis as follows:

Day Count Fraction = [360 x (Y2 -Y1)] + [30 x (M2 -M1)] + (D2 -D1)––––––––––––––––––––––––––––––––––––––

360

where:

“Y1” is the year, expressed as a number, in which the first day of the Calculation Period falls;

“Y2” is the year, expressed as a number, in which the day immediately following the last dayincluded in the Calculation Period falls;

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“M1” is the calendar month, expressed as a number, in which the first day of the CalculationPeriod falls;

“M2” is the calendar month, expressed as number, in which the day immediately following thelast day included in the Calculation Period falls;

“D1” is the first calendar day, expressed as a number, of the Calculation Period, unless suchnumber would be 31, in which case D1 will be 30; and

“D2” is the calendar day, expressed as a number, immediately following the last day includedin the Calculation Period, unless such number would be 31 and D1 is greater than 29, in whichcase D2 will be 30;

(vi) if “30E/360” or “Eurobond Basis” is specified hereon, the number of days in the CalculationPeriod divided by 360 calculated on a formula basis as follows:


360

where:




“M2” is the calendar month, expressed as a number, in which the day immediately followingthe last day included in the Calculation Period falls;

“D1” is the first calendar day, expressed as a number, of the Calculation Period, unless suchnumber would be 31, in which case D1 will be 30; and

“D2” is the calendar day, expressed as a number, immediately following the last day includedin the Calculation Period, unless such number would be 31, in which case D2 will be 30;

(vii) if “30E/360 (ISDA)” is specified hereon, the number of days in the Calculation Period dividedby 360, calculated on a formula basis as follows:


360

where:




“M2” is the calendar month, expressed as a number, in which the day immediately followingthe last day included in the Calculation Period falls;

“D1” is the first calendar day, expressed as a number, of the Calculation Period, unless (i) thatday is the last day of February or (ii) such number would be 31, in which case D1 will be 30;and

29


“D2” is the calendar day, expressed as a number, immediately following the last day includedin the Calculation Period, unless (i) that day is the last day of February but not the MaturityDate or (ii) such number would be 31, in which case D2 will be 30;

(viii) if “Actual/Actual-ICMA” is specified hereon,

(a) if the Calculation Period is equal to or shorter than the Determination Period duringwhich it falls, the number of days in the Calculation Period divided by the product of (x)the number of days in such Determination Period and (y) the number of DeterminationPeriods normally ending in any year; and

(b) if the Calculation Period is longer than one Determination Period, the sum of:

(x) the number of days in such Calculation Period falling in the Determination Periodin which it begins divided by the product of (1) the number of days in suchDetermination Period and (2) the number of Determination Periods normallyending in any year; and

(y) the number of days in such Calculation Period falling in the next DeterminationPeriod divided by the product of (1) the number of days in such DeterminationPeriod and (2) the number of Determination Periods normally ending in any year;

where:

“Determination Period” means the period from and including a Determination Date inany year to but excluding the next Determination Date; and

“Determination Date” means the date(s) specified as such hereon or, if none is sospecified, the Interest Payment Date(s).

“Euro-zone” means the region comprising of member states of the European Union that adopt the euroas the single currency in accordance with the Treaty establishing the European Community, asamended.

“Interest Accrual Period” means the period beginning on and including the Interest CommencementDate and ending on but excluding the first Interest Period Date and each successive period beginningon and including an Interest Period Date and ending on but excluding the next succeeding InterestPeriod Date.

“Interest Amount” means:

(i) in respect of an Interest Accrual Period, the amount of interest payable per Calculation Amountfor that Interest Accrual Period and which, in the case of Fixed Rate Notes, and unlessotherwise specified hereon, shall mean the Fixed Coupon Amount or Broken Amount specifiedhereon as being payable on the Interest Payment Date ending the Interest Period of which suchInterest Accrual Period forms part; and

(ii) in respect of any other period, the amount of interest payable per Calculation Amount for thatperiod.

“Interest Commencement Date” means the Issue Date or such other date as may be specified hereon.

“Interest Determination Date” means, with respect to a Rate of Interest and Interest Period, the datespecified as such hereon or, if none is so specified, (i) the first day of such Interest Accrual Period ifthe Specified Currency is Sterling or (ii) the day falling two TARGET Business Days prior to the firstday of such Interest Accrual Period if the Specified Currency is euro or (iii) the day falling twoBusiness Days in London for the Specified Currency prior to the first day of such Interest Period ifthe Specified Currency is neither Sterling nor euro.

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“Interest Period” means the period beginning on (and including) the Interest Commencement Dateand ending on (but excluding) the first Interest Payment Date and each successive period beginningon (and including) an Interest Payment Date and ending on (but excluding) the next succeedingInterest Payment Date.

“Interest Period Date” means each Interest Payment Date unless otherwise specified hereon.

“ISDA Definitions” means the 2006 ISDA Definitions, as published by the International Swaps andDerivatives Association, Inc., unless otherwise specified hereon as at the date on which agreement isreached to issue the first Tranche of Notes.

“Rate of Interest” means the rate of interest payable from time to time in respect of this Note and thatis either specified or calculated in accordance with the provisions hereon.

“Reference Banks” means, in the case of a determination of LIBOR, the principal London office offour major banks in the London inter-bank market and, in the case of a determination of EURIBOR,the principal Euro-zone office of four major banks in the Euro-zone inter-bank market, in each caseselected by the Calculation Agent or as specified hereon.

“Reference Rate” means the rate specified as such hereon.

“Relevant Screen Page” means such page, section, caption, column or other part of a particularinformation service as may be specified hereon.

“Specified Currency” means the currency specified as such hereon or, if none is specified, thecurrency in which the Notes are denominated.

“TARGET System” means the Trans-European Automated Real-Time Gross Settlement ExpressTransfer (known as TARGET 2) System which was launched on 19 November 2007 or any successorthereto.

(k) Calculation Agent

For so long as any Note is outstanding (as defined in the Agency Agreement) for which a CalculationAgent is required by its terms, the Issuer will procure that there will at all times be one or moreCalculation Agents serving in respect of such Notes. Where more than one Calculation Agent isappointed in respect of the Notes, references in these Conditions to the Calculation Agent shall beconstrued as each Calculation Agent performing its respective duties under the Conditions. If theCalculation Agent is unable or unwilling to act as such or if the Calculation Agent fails duly toestablish the Rate of Interest for an Interest Period or Interest Accrual Period or to calculate anyInterest Amount, Instalment Amount, Final Redemption Amount, Early Redemption Amount orOptional Redemption Amount, as the case may be, or to substantially comply with any other materialrequirement, the Issuer shall appoint a leading bank or financial institution engaged in the inter-bankmarket (or, if appropriate, money, swap or over-the-counter index options market) that is most closelyconnected with the calculation or determination to be made by the Calculation Agent (acting throughits principal London office or any other office actively involved in such market) to act as such in itsplace. The Calculation Agent may not resign its duties without a successor having been appointed asaforesaid.

6 Redemption, Purchase and Options

(a) Redemption by Instalments and Final Redemption

(i) Unless previously redeemed, purchased and cancelled as provided in this Condition 6, eachNote that provides for Instalment Dates and Instalment Amounts shall be partially redeemed oneach Instalment Date at the related Instalment Amount specified hereon. The outstandingnominal amount of each such Note shall be reduced by the Instalment Amount (or, if suchInstalment Amount is calculated by reference to a proportion of the nominal amount of such

31


Note, such proportion) for all purposes with effect from the related Instalment Date, unlesspayment of the Instalment Amount is improperly withheld or refused on presentation of therelated Receipt, in which case, such amount shall remain outstanding until the Relevant Daterelating to such Instalment Amount.

(ii) Unless previously redeemed, purchased and cancelled as provided below, each Note shall befinally redeemed on the Maturity Date specified hereon at its Final Redemption Amount(which, unless otherwise provided, is its nominal amount) or, in the case of a Note fallingwithin paragraph (i) above, its final Instalment Amount.

(b) Early Redemption

(i) Zero Coupon Notes

(A) The Early Redemption Amount payable in respect of any Zero Coupon Note, the EarlyRedemption Amount of which is not linked to an index and/or a formula, uponredemption of such Note pursuant to Condition 6(c) or upon it becoming due andpayable as provided in Condition 10 shall be the Amortised Face Amount (calculated asprovided below) of such Note unless otherwise specified hereon.

(B) Subject to the provisions of sub-paragraph (C) below, the Amortised Face Amount ofany such Note shall be the scheduled Final Redemption Amount of such Note on theMaturity Date discounted at a rate per annum (expressed as a percentage) equal to theAmortisation Yield (which, if none is shown hereon, shall be such rate as would producean Amortised Face Amount equal to the issue price of the Notes if they were discountedback to their issue price on the Issue Date) compounded annually.

(C) If the Early Redemption Amount payable in respect of any such Note upon itsredemption pursuant to Condition 6(c) or upon it becoming due and payable as providedin Condition 10 is not paid when due, the Early Redemption Amount due and payablein respect of such Note shall be the Amortised Face Amount of such Note as defined insub-paragraph (B) above, except that such sub-paragraph shall have effect as though thedate on which the Note becomes due and payable were the Relevant Date. Thecalculation of the Amortised Face Amount in accordance with this sub-paragraph shallcontinue to be made (both before and after judgment) until the Relevant Date, unless theRelevant Date falls on or after the Maturity Date, in which case the amount due andpayable shall be the scheduled Final Redemption Amount of such Note on the MaturityDate together with any interest that may accrue in accordance with Condition 5(c).

Where such calculation is to be made for a period of less than one year, it shall be madeon the basis of the Day Count Fraction shown hereon.

(ii) Other Notes

The Early Redemption Amount payable in respect of any Note (other than Notes described in(i) above), upon redemption of such Note pursuant to Condition 6(c) or upon it becoming dueand payable as provided in Condition 10, shall be the Final Redemption Amount unlessotherwise specified hereon.

(c) Redemption for Taxation Reasons

The Notes may be redeemed at the option of the Issuer in whole, but not in part on any InterestPayment Date (if this Note is either a Floating Rate Note or an Index Linked Note) or, at any time (ifthis Note is neither a Floating Rate Note nor an Index Linked Note), on giving not less than 30 normore than 60 days’ notice to the Noteholders (which notice shall be irrevocable), at their EarlyRedemption Amount (as described in Condition 6(b) above) (together with interest accrued to the datefixed for redemption), if (i) the Issuer has or will become obliged to pay additional amounts as

32


provided or referred to in Condition 8 as a result of any change in, or amendment to, the laws orregulations of the Kingdom of Bahrain or any political subdivision or any authority thereof or thereinhaving power to tax, or any change in the application or official interpretation of such laws orregulations, which change or amendment becomes effective on or after the date on which agreementis reached to issue the first Tranche of the Notes, and (ii) such obligation cannot be avoided by theIssuer taking reasonable measures available to it; provided that no such notice of redemption shall begiven earlier than 90 days prior to the earliest date on which the Issuer would be obliged to pay suchadditional amounts were a payment in respect of the Notes then due. Prior to the publication of anynotice of redemption pursuant to this Condition 6(c), the Issuer shall deliver to the Fiscal Agent (x) acertificate signed by two duly authorised officers of the Issuer stating that the Issuer is entitled toeffect such redemption and setting forth a statement of facts showing that the conditions precedent tothe right of the Issuer so to redeem have occurred and (y) an opinion of independent legal advisers ofrecognised standing to the effect that the Issuer has or will become obliged to pay such additionalamounts as a result of such change or amendment.

(d) Redemption at the Option of the Issuer

If Call Option is specified hereon, the Issuer may, on giving not less than 15 nor more than 30 days’irrevocable notice to the Noteholders (or such other notice period as may be specified hereon) redeem,all or, if so provided, some, of the Notes on any Optional Redemption Date, provided that in the caseof Subordinated Notes, an Optional Redemption Date may not fall on or before the fifth anniversaryof the Issue Date of the first Tranche of such Subordinated Notes. Any such redemption of Notes shallbe at the relevant Optional Redemption Amount together with interest accrued to the date fixed forredemption. Any such redemption or exercise must relate to Notes of a nominal amount at least equalto the Minimum Redemption Amount to be redeemed specified hereon and no greater than theMaximum Redemption Amount to be redeemed specified hereon.

All Notes in respect of which any such notice is given shall be redeemed on the date specified in suchnotice in accordance with this Condition.

In the case of a partial redemption, the notice to Noteholders shall also contain the certificate numbersof the Bearer Notes, or in the case of Registered Notes shall specify the nominal amount of RegisteredNotes drawn and the holder(s) of such Registered Notes, to be redeemed, which shall have been drawnin such place and in such manner as may be fair and reasonable in the circumstances, taking accountof prevailing market practices, subject to compliance with any applicable laws and stock exchange orother relevant authority requirements.

(e) Redemption at the Option of Noteholders

If Put Option is specified hereon, the Issuer shall, at the option of the holder of any such Note, uponthe holder of such Note giving not less than 15 nor more than 30 days’ notice to the Issuer (or suchother notice period as may be specified hereon) redeem such Note on the Optional RedemptionDate(s) at its Optional Redemption Amount together with interest accrued to the date fixed forredemption.

To exercise such option, the holder must deposit (in the case of Bearer Notes) such Note (togetherwith all unmatured Receipts and Coupons and unexchanged Talons) with any Paying Agent or (in thecase of Registered Notes) the Certificate representing such Note(s) with the Registrar or any TransferAgent at its specified office, together with a duly completed option exercise notice (“ExerciseNotice”) in the form obtainable from any Paying Agent, the Registrar or any Transfer Agent (asapplicable) within the notice period. No Note or Certificate so deposited and option exercised may bewithdrawn (except as provided in the Agency Agreement) without the prior consent of the Issuer.

(f) Partly Paid Notes

Partly Paid Notes will be redeemed, whether at maturity, early redemption or otherwise, in accordancewith the provisions of this Condition and the provisions specified hereon.

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(g) Purchases

The Issuer and any of its subsidiaries may at any time purchase Notes (provided that all unmaturedReceipts and Coupons and unexchanged Talons relating thereto are attached thereto or surrenderedtherewith) in the open market or otherwise at any price, provided that in the case of SubordinatedNotes, the Issuer may not purchase any such Subordinated Notes on or before the fifth yearanniversary of the Issue Date of the first Tranche of such Subordinated Notes.

(h) Cancellation

All Notes purchased by or on behalf of the Issuer or any of its subsidiaries may be surrendered forcancellation, in the case of Bearer Notes, by surrendering each such Note together with all unmaturedReceipts and Coupons and all unexchanged Talons to the Fiscal Agent and, in the case of RegisteredNotes, by surrendering the Certificate representing such Notes to the Registrar and, in each case, if sosurrendered, shall, together with all Notes redeemed by the Issuer, be cancelled forthwith (togetherwith all unmatured Receipts and Coupons and unexchanged Talons attached thereto or surrenderedtherewith). Any Notes so surrendered for cancellation may not be reissued or resold and theobligations of the Issuer in respect of any such Notes shall be discharged.

7 Payments and Talons

(a) Bearer Notes

Payments of principal and interest in respect of Bearer Notes shall, subject as mentioned below, bemade against presentation and surrender of the relevant Receipts (in the case of payments ofInstalment Amounts other than on the due date for redemption and provided that the Receipt ispresented for payment together with its relative Note), Notes (in the case of all other payments ofprincipal and, in the case of interest, as specified in Condition 7(f)(vi)) or Coupons (in the case ofinterest, save as specified in Condition 7(f)(vi)), as the case may be, at the specified office of anyPaying Agent outside the United States by a cheque payable in the relevant currency drawn on, or, atthe option of the holder, by transfer to an account denominated in such currency with, a Bank. “Bank”means a bank in the principal financial centre for such currency or, in the case of euro, in a city inwhich banks have access to the TARGET System.

(b) Registered Notes

(i) Payments of principal (which for the purposes of this Condition 7(b) shall include finalInstalment Amounts but not other Instalment Amounts) in respect of Registered Notes shall bemade against presentation and surrender of the relevant Certificates at the specified office ofany of the Transfer Agents or of the Registrar and in the manner provided in paragraph (ii)below.

(ii) Interest (which for the purpose of this Condition 7(b) shall include all Instalment Amountsother than final Instalment Amounts) on Registered Notes shall be paid to the person shown onthe Register at the close of business on the fifteenth day before the due date for payment thereof(the “Record Date”). Payments of interest on each Registered Note shall be made in therelevant currency by cheque drawn on a Bank and mailed to the holder (or to the first-namedof joint holders) of such Note at its address appearing in the Register. Upon application by theholder to the specified office of the Registrar or any Transfer Agent before the Record Date,such payment of interest may be made by transfer to an account in the relevant currencymaintained by the payee with a Bank.

(c) Payments in the United States

Notwithstanding the foregoing, if any Bearer Notes are denominated in US dollars, payments inrespect thereof may be made at the specified office of any Paying Agent in New York City in the samemanner as aforesaid if (i) the Issuer shall have appointed Paying Agents with specified offices outside

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the United States with the reasonable expectation that such Paying Agents would be able to makepayment of the amounts on the Notes in the manner provided above when due, (ii) payment in full ofsuch amounts at all such offices is illegal or effectively precluded by exchange controls or othersimilar restrictions on payment or receipt of such amounts and (iii) such payment is then permitted byUnited States law, without involving, in the opinion of the Issuer, any adverse tax consequence to theIssuer.

(d) Payments Subject to Laws

All payments are subject in all cases to any applicable fiscal or other laws, regulations and directivesbut without prejudice to the provisions of Condition 8. No commission or expenses shall be chargedto the Noteholders or Couponholders in respect of such payments.

(e) Appointment of Agents

The Fiscal Agent, the Paying Agents, the Registrar, the Transfer Agents and the Calculation Agentinitially appointed by the Issuer and their respective specified offices are listed below. The FiscalAgent, the Paying Agents, the Registrar, Transfer Agents and the Calculation Agent(s) act solely asagents of the Issuer and do not assume any obligation or relationship of agency or trust for or with anyNoteholder or Couponholder. The Issuer reserves the right at any time to vary or terminate theappointment of the Fiscal Agent, any other Paying Agent, the Registrar, any Transfer Agent or theCalculation Agent(s) and to appoint additional or other Paying Agents or Transfer Agents, providedthat the Issuer shall at all times maintain (i) a Fiscal Agent, (ii) a Registrar in relation to RegisteredNotes, (iii) a Transfer Agent in relation to Registered Notes, (iv) one or more Calculation Agent(s)where the Conditions so require, (v) such agents as may be required by any stock exchange on whichthe Notes may be listed and (vi) a Paying Agent with a specified office in a European Union memberstate that will not be obliged to withhold or deduct tax pursuant to any law implementing EuropeanCouncil Directive 2003/48/EC or any other Directive implementing the conclusions of the ECOFINCouncil meeting of 26-27 November 2000.

In addition, the Issuer shall forthwith appoint a Paying Agent in New York City in respect of anyBearer Notes denominated in US dollars in the circumstances described in paragraph (c) above.

Notice of any such change or any change of any specified office shall promptly be given to theNoteholders.

(f) Unmatured Coupons and Receipts and unexchanged Talons

(i) Upon the due date for redemption of Bearer Notes which comprise Fixed Rate Notes (otherthan Dual Currency Notes or Index Linked Notes), such Bearer Notes should be surrenderedfor payment together with all unmatured Coupons (if any) relating thereto, failing which anamount equal to the face value of each missing unmatured Coupon (or, in the case of paymentnot being made in full, that proportion of the amount of such missing unmatured Coupon thatthe sum of principal so paid bears to the total principal due) shall be deducted from the FinalRedemption Amount, Early Redemption Amount or Optional Redemption Amount, as the casemay be, due for payment. Any amount so deducted shall be paid in the manner mentionedabove against surrender of such missing Coupon within a period of 10 years from the RelevantDate for the payment of such principal (whether or not such Coupon has become void pursuantto Condition 9).

(ii) Upon the due date for redemption of any Bearer Note comprising a Floating Rate Note, DualCurrency Interest Note or Index Linked Note, unmatured Coupons relating to such Note(whether or not attached) shall become void and no payment shall be made in respect of them.

(iii) Upon the due date for redemption of any Bearer Note, any unexchanged Talon relating to suchNote (whether or not attached) shall become void and no Coupon shall be delivered in respectof such Talon.

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(iv) Upon the due date for redemption of any Bearer Note that is redeemable in instalments, allReceipts relating to such Note having an Instalment Date falling on or after such due date(whether or not attached) shall become void and no payment shall be made in respect of them.

(v) Where any Bearer Note that provides that the relative unmatured Coupons are not to becomevoid upon the due date for redemption of those Notes is presented for redemption without allunmatured Coupons, and where any Bearer Note is presented for redemption without anyunexchanged Talon relating to it, redemption shall be made only against the provision of suchindemnity as the Issuer may require.

(vi) If the due date for redemption of any Note is not a due date for payment of interest, interestaccrued from the preceding due date for payment of interest or the Interest CommencementDate, as the case may be, shall only be payable against presentation (and surrender ifappropriate) of the relevant Bearer Note or Certificate representing it, as the case may be.Interest accrued on a Note that only bears interest after its Maturity Date shall be payable onredemption of such Note against presentation of the relevant Note or Certificate representingit, as the case may be.

(g) Talons

On or after the Interest Payment Date for the final Coupon forming part of a Coupon sheet issued inrespect of any Bearer Note, the Talon forming part of such Coupon sheet may be surrendered at thespecified office of the Fiscal Agent in exchange for a further Coupon sheet (and if necessary anotherTalon for a further Coupon sheet) (but excluding any Coupons that may have become void pursuantto Condition 9).

(h) Non-Business Days

If any date for payment in respect of any Note, Receipt or Coupon is not a business day, the holdershall not be entitled to payment until the next following business day nor to any interest or other sumin respect of such postponed payment. In this paragraph, “business day” means a day (other than aFriday, Saturday or a Sunday) on which banks and foreign exchange markets are open for business inthe relevant place of presentation, in such jurisdictions as shall be specified as “Financial Centres”hereon and:

(i) (in the case of a payment in a currency other than euro) where payment is to be made bytransfer to an account maintained with a bank in the relevant currency, on which foreignexchange transactions may be carried on in the relevant currency in the principal financialcentre of the country of such currency; or

(ii) (in the case of a payment in euro) which is a TARGET Business Day.

8 Taxation

All payments of principal and interest by or on behalf of the Issuer in respect of the Notes, the Receipts andthe Coupons shall be made free and clear of, and without withholding or deduction for, any taxes, duties,assessments or governmental charges of whatever nature imposed, levied, collected, withheld or assessed byor within the Kingdom of Bahrain or any authority therein or thereof having power to tax, unless suchwithholding or deduction is required by law. In that event, the Issuer shall pay such additional amounts asshall result in receipt by the Noteholders and the Couponholders of such amounts as would have beenreceived by them had no such withholding or deduction been required, except that no such additionalamounts shall be payable with respect to any Note, Receipt or Coupon:

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(a) Other connection

to, or to a third party on behalf of, a holder who is liable to such taxes, duties, assessments orgovernmental charges in respect of such Note, Receipt or Coupon by reason of his having someconnection with the Kingdom of Bahrain other than the mere holding of the Note, Receipt or Coupon or

(b) Presentation more than 30 days after the Relevant Date

presented (or in respect of which the Certificate representing it is presented) for payment more than30 days after the Relevant Date except to the extent that the holder of it would have been entitled tosuch additional amounts on presenting it for payment on the last day of such period of 30 days or

(c) Payment to individuals

where such withholding or deduction is imposed on a payment to an individual and is required to bemade pursuant to European Council Directive 2003/48/EC or any other Directive implementing theconclusions of the ECOFIN Council meeting of 26-27 November 2000 on the taxation of savingsincome or any law implementing or complying with, or introduced in order to conform to, suchDirective or

(d) Payment by another Paying Agent

(except in the case of Registered Notes), presented for payment by or on behalf of a holder who wouldhave been able to avoid such withholding or deduction by presenting the relevant Note, Receipt orCoupon to another Paying Agent in a Member State of the European Union.

As used in these Conditions, “Relevant Date” in respect of any Note, Receipt or Coupon means thedate on which payment in respect of it first becomes due or (if any amount of the money payable isimproperly withheld or refused) the date on which payment in full of the amount outstanding is madeor (if earlier) the date on which notice is duly given to the Noteholders that, upon further presentationof the Note (or relative Certificate), Receipt or Coupon being made in accordance with the Conditions,such payment will be made, provided that payment is in fact made upon such presentation. Referencesin these Conditions to (i) “principal” shall be deemed to include any premium payable in respect ofthe Notes, all Instalment Amounts, Final Redemption Amounts, Early Redemption Amounts, OptionalRedemption Amounts, Amortised Face Amounts and all other amounts in the nature of principalpayable pursuant to Condition 6 or any amendment or supplement to it, (ii) “interest” shall be deemedto include all Interest Amounts and all other amounts payable pursuant to Condition 5 or anyamendment or supplement to it and (iii) “principal” and/or “interest” shall be deemed to include anyadditional amounts that may be payable under this Condition.

If the Issuer becomes subject at any time to any taxing jurisdiction other than the Kingdom of Bahrainor any political subdivision or any authority thereof or therein having power to tax, references in theseConditions to the Kingdom of Bahrain shall be construed as references to the Kingdom of Bahrainand/or such other jurisdiction.

9 Prescription

Claims against the Issuer for payment in respect of the Notes, Receipts and Coupons (which for this purposeshall not include Talons) shall be prescribed and become void unless made within 10 years (in the case ofprincipal) or five years (in the case of interest) from the appropriate Relevant Date in respect of them.

10 Events of Default

(a) Senior Notes

If any of the following events (“Events of Default”) occurs and is continuing, the holder of any Notemay give written notice to the Fiscal Agent at its specified office that such Senior Note is immediately

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repayable, whereupon the Early Redemption Amount of such Senior Note together (if applicable) withaccrued interest to the date of payment shall become immediately due and payable, unless such eventof default shall have been remedied prior to the receipt of such notice by the Fiscal Agent:

(i) Non-Payment

Default is made for more than 14 days (in the case of interest) or seven days (in the case ofprincipal) in the payment on the due date of interest or principal in respect of any of the Notesor

(ii) Breach of Other Obligations

The Issuer does not perform or comply with any one or more of its other obligations in theNotes which default is incapable of remedy or is not remedied within 30 days after notice ofsuch default shall have been given to the Fiscal Agent at its specified office by any Noteholderor

(iii) Cross-Default

(A) any other present or future indebtedness of the Issuer or any Material Subsidiary for or inrespect of moneys borrowed or raised becomes due and payable prior to its stated maturity byreason of any actual or potential default, event of default or the like (howsoever described), or(B) any such indebtedness is not paid when due or, as the case may be, within any applicablegrace period, or (C) the Issuer or any Material Subsidiary fails to pay when due any amountpayable by it under any present or future guarantee for, or indemnity in respect of, any moneysborrowed or raised provided that the aggregate amount of the relevant indebtedness, guaranteesand indemnities in respect of which one or more of the events mentioned above in thisparagraph (iii) have occurred equals or exceeds US$10,000,000 or its equivalent (on the basisof the middle spot rate for the relevant currency against the US dollar as quoted by any leadingbank on the day on which this paragraph operates) or

(iv) Enforcement Proceedings

A distress, attachment, execution or other legal process is levied, enforced or sued out on oragainst any part of the property, assets or revenues of the Issuer or any Material Subsidiary forthe payment of any sum in excess of US$10,000,000 and is not discharged or stayed within 90days or

(v) Security Enforced

Any mortgage, charge, pledge, lien or other encumbrance, present or future, created or assumedby the Issuer or any Material Subsidiary in relation to all or a material part of the undertakingor assets of any of them becomes enforceable and any step is taken to enforce it (including thetaking of possession or the appointment of a receiver, administrative receiver, administrator,manager or other similar person) or

(vi) Insolvency

The Issuer or any Material Subsidiary is (or is, or could be, deemed by law or a court to be)insolvent or bankrupt or unable to pay its debts, stops, suspends or threatens to stop or suspendpayment of all or a material part of its debts, proposes or makes a general assignment or anarrangement or composition with or for the benefit of the relevant creditors in respect of any ofsuch debts or a moratorium is agreed or declared or comes into effect in respect of or affectingall or any part of the debts of the Issuer or any Material Subsidiary or

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(vii) Winding-up

An order is made or an effective resolution passed for the winding-up or dissolution oradministration of the Issuer or any of its Material Subsidiaries, or the Issuer or any of itsMaterial Subsidiaries shall apply or petition for a winding-up or administration order in respectof itself or ceases or threatens to cease to carry on all or substantially all of its business oroperations, in each case except for the purpose of and followed by a reconstruction,amalgamation, reorganisation, merger or consolidation (i) on terms approved by anExtraordinary Resolution (as defined in the Agency Agreement) of the Noteholders or (ii) inthe case of a Material Subsidiary, whereby the undertaking and assets of the MaterialSubsidiary are transferred to or otherwise vested in the Issuer or another Subsidiary or

(viii) Nationalisation

Any step is taken by any person with a view to the seizure, compulsory acquisition,expropriation or nationalisation of all or a material part of the assets of the Issuer or anyMaterial Subsidiary or

(ix) Illegality

It is or will become unlawful for the Issuer to perform or comply with any one or more of itsobligations under any of the Notes or

(x) Analogous Events

Any event occurs that under the laws of any relevant jurisdiction has an analogous effect to anyof the events referred to in any of the foregoing paragraphs.

For the purposes of this Condition 10(a):

a “Material Subsidiary” is a Subsidiary the book value of the assets of which exceeds 5 percent. of the book value of the consolidated assets of the Issuer and its Subsidiaries, taken as awhole, or the revenues of which exceed 5 per cent. of the consolidated revenues of the Issuerand its Subsidiaries, taken as a whole and, for these purposes:

(A) the book value of the assets and the revenues of each Subsidiary which is, or might be,a Subsidiary shall be determined by reference to its then most recently audited annualfinancial statements (consolidated if the same are prepared) or, if none, its then mostrecent annual management accounts; and

(B) the book value of the consolidated assets and the consolidated revenues of the Issuer andits Subsidiaries, taken as a whole, shall be determined by reference to the Issuer’s thenmost recently audited consolidated annual financial statements,

all as more fully set out in the Agency Agreement. A report by two duly authorised officers ofthe Issuer that in their opinion a Subsidiary is or is not or was or was not at any particular timeor through any particular period a Subsidiary shall (in the absence of manifest or proven error)be conclusive and binding on the parties.

(b) Subordinated Notes

If any of the following events occur and is continuing:

(i) default is made in the payment of any principal in respect of any Subordinated Note for a periodof seven days or more or any interest in respect of any Subordinated Note for a period of 14days or more, in each case after the due date for the same; or

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(ii) the Issuer becomes insolvent, a petition is made by a creditor of the Issuer for a declaration ofbankruptcy in respect of the Issuer or the dissolution of the Issuer is agreed by its shareholdersor ordered by an order of the competent court, or administration of the Issuer is assumed byCBB under its statutory powers;

then, in the case of Condition 10(b)(i), the holder of such Subordinated Note, may at its discretion,and subject to any applicable laws, without further notice, institute proceedings for the forcedliquidation of the Issuer and/or prove in any forced liquidation of the Issuer but may take no otheraction in respect of such default, and, in the case of Condition 10(b)(ii), any Subordinated Noteholder,in its discretion, may give notice to the Issuer and the Registrar that the Subordinated Notes areimmediately due and payable (and the Subordinated Notes shall thereby become so due andrepayable) at their principal amount together with accrued interest and/or prove in the forcedliquidation of the Issuer.

11 Meetings of Noteholders and Modifications

(a) Meetings of Noteholders

The Agency Agreement contains provisions for convening meetings of Noteholders to consider anymatter affecting their interests, including the sanctioning by Extraordinary Resolution (as defined inthe Agency Agreement) of a modification of any of these Conditions. Such a meeting may beconvened by Noteholders holding not less than 10 per cent. in nominal amount of the Notes for thetime being outstanding. The quorum for any meeting convened to consider an ExtraordinaryResolution shall be two or more persons holding or representing a clear majority of the nominalamount of the Notes for the time being outstanding, or at any adjourned meeting two or more personsholding or representing Noteholders whatever the nominal amount of the Notes held or represented,unless the business of such meeting includes consideration of proposals, inter alia, (i) to amend thedates of maturity or redemption of the Notes, any Instalment Date or any date for payment of interestor Interest Amounts on the Notes, (ii) to reduce or cancel the nominal amount of, or any InstalmentAmount of, or any premium payable on redemption of, the Notes, (iii) to reduce the rate or rates ofinterest in respect of the Notes or to vary the method or basis of calculating the rate or rates or amountof interest or the basis for calculating any Interest Amount in respect of the Notes, (iv) if a Minimumand/or a Maximum Rate of Interest, Instalment Amount or Redemption Amount is shown hereon, toreduce any such Minimum and/or Maximum, (v) to vary any method of, or basis for, calculating theFinal Redemption Amount, the Early Redemption Amount or the Optional Redemption Amount,including the method of calculating the Amortised Face Amount, (vi) to vary the currency orcurrencies of payment or denomination of the Notes, or (vii) to modify the provisions concerning thequorum required at any meeting of Noteholders or the majority required to pass the ExtraordinaryResolution, or (viii) to modify the provisions regarding the status of the Notes referred to in Condition3, in which case the resolution must be approved by persons holding or representing not less than 75per cent. in nominal amount of the Notes for the time being outstanding. Any ExtraordinaryResolution duly passed shall be binding on Noteholders (whether or not they were present at themeeting at which such resolution was passed) and on all Couponholders.

These Conditions may be amended, modified or varied in relation to any Series of Notes by the termsof the relevant Final Terms in relation to such Series.

(b) Modification and Waiver

The parties to the Agency Agreement may agree, without the consent of the Noteholders, to (i) anymodification of any provision of the Agency Agreement which is of a formal, minor or technicalnature or is made to correct a manifest error and (ii) any other modification, and any waiver orauthorisation of any breach or proposed breach, of any provision of the Agency Agreement which isin the opinion of such parties not materially prejudicial to the interests of the Noteholders. Any suchmodification, authorisation or waiver shall be binding on the Noteholders.

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12 Replacement of Notes, Certificates, Receipts, Coupons and Talons

If a Note, Certificate, Receipt, Coupon or Talon is lost, stolen, mutilated, defaced or destroyed, it may bereplaced, subject to applicable laws, regulations and stock exchange or other relevant authority regulations,at the specified office of the Fiscal Agent (in the case of Bearer Notes, Receipts, Coupons or Talons) and ofthe Registrar (in the case of Certificates) or such other Paying Agent or Transfer Agent, as the case may be,as may from time to time be designated by the Issuer for the purpose and notice of whose designation is givento Noteholders, in each case on payment by the claimant of the fees and costs incurred in connectiontherewith and on such terms as to evidence, security and indemnity (which may provide, inter alia, that ifthe allegedly lost, stolen or destroyed Note, Certificate, Receipt, Coupon or Talon is subsequently presentedfor payment or, as the case may be, for exchange for further Coupons, there shall be paid to the Issuer ondemand the amount payable by the Issuer in respect of such Notes, Certificates, Receipts, Coupons or furtherCoupons) and otherwise as the Issuer may require. Mutilated or defaced Notes, Certificates, Receipts,Coupons or Talons must be surrendered before replacements will be issued.

13 Further Issues

The Issuer may from time to time without the consent of the Noteholders or Couponholders create and issuefurther notes having the same terms and conditions as the Notes (so that, for the avoidance of doubt,references in the conditions of such notes to “Issue Date” shall be to the first issue date of the Notes) and sothat the same shall be consolidated and form a single series with such Notes, and references in theseConditions to “Notes” shall be construed accordingly.

14 Notices

Notices to the holders of Registered Notes shall be mailed to them at their respective addresses in theRegister and deemed to have been given on the fourth weekday (being a day other than a Friday, Saturdayor a Sunday) after the date of mailing. Notices to the holders of Bearer Notes shall be valid if published ina daily newspaper of general circulation in London (which is expected to be the Financial Times). If any suchpublication is not practicable, notice shall be validly given if published in another leading daily Englishlanguage newspaper with general circulation in Europe. Any such notice shall be deemed to have been givenon the date of such publication or, if published more than once or on different dates, on the date of the firstpublication as provided above.

Couponholders shall be deemed for all purposes to have notice of the contents of any notice given to theholders of Bearer Notes in accordance with this Condition.

15 Currency Indemnity

Any amount received or recovered in a currency other than the currency in which payment under the relevantNote, Coupon or Receipt is due (whether as a result of, or of the enforcement of, a judgment or order of acourt of any jurisdiction, in the insolvency, winding-up or dissolution of the Issuer) by any Noteholder orCouponholder in respect of any sum expressed to be due to it from the Issuer shall only constitute a dischargeto the Issuer, as the case may be, to the extent of the amount in the currency of payment under the relevantNote, Coupon or Receipt that the recipient is able to purchase with the amount so received or recovered inthat other currency on the date of that receipt or recovery (or, if it is not practicable to make that purchaseon that date, on the first date on which it is practicable to do so). If the amount received or recovered is lessthan the amount expressed to be due to the recipient under any Note, Coupon or Receipt, the Issuer, shallindemnify it against any loss sustained by it as a result. In any event, the Issuer shall indemnify the recipientagainst the cost of making any such purchase. For the purposes of this Condition, it shall be sufficient for theNoteholder or Couponholder, as the case may be, to demonstrate that it would have suffered a loss had anactual purchase been made. These indemnities constitute a separate and independent obligation from theIssuer’s other obligations, shall give rise to a separate and independent cause of action, shall applyirrespective of any indulgence granted by any Noteholder or Couponholder and shall continue in full forceand effect despite any other judgment, order, claim or proof for a liquidated amount in respect of any sumdue under any Note, Coupon or Receipt or any other judgment or order.

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16 Contracts (Rights of Third Parties) Act 1999

No person shall have any right to enforce any term or condition of the Notes under the Contracts (Rights ofThird Parties) Act 1999.

17 Governing Law and Jurisdiction

(a) Governing Law

The Notes, the Receipts, the Coupons and the Talons are governed by, and shall be construed inaccordance with, English law, save that Condition 3(b) and Condition 11(a) are governed by, and shallbe construed in accordance with, the laws of the Kingdom of Bahrain.

(b) Jurisdiction

The courts of England are to have jurisdiction to settle any disputes that may arise out of or inconnection with the Notes and any legal action or proceedings arising out of or in connection with theNotes (“Proceedings”) may be brought in such courts. The Issuer irrevocably submits to thejurisdiction of such courts and waives any objection to Proceedings in such courts on the ground ofvenue or on the ground that the Proceedings have been brought in an inconvenient forum. Thesesubmissions are made for the benefit of Noteholders and shall not affect the right of any Noteholderto take Proceedings in any other court of competent jurisdiction nor shall the taking of Proceedings inone or more jurisdictions preclude the taking of Proceedings in any other jurisdiction (whetherconcurrently or not).

(c) Process agent

The Issuer irrevocably appoints Ahli United Bank (UK) PLC at 35 Portman Square, London W1H6LR to receive, for it and on its behalf, service of process in any Proceedings in England. Such serviceshall be deemed completed on delivery to such process agent (whether or not it is forwarded to andreceived by the Issuer). If for any reason such process agent ceases to be able to act as such or nolonger has an address in London, the Issuer irrevocably agrees to appoint a substitute process agentacceptable to Noteholders and shall immediately notify Noteholders of such appointment. Nothingshall affect the right to serve process in any manner permitted by law.

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SUMMARY OF PROVISIONS RELATING TO THE NOTES WHILE IN GLOBAL FORM

Initial Issue of Notes

Global Notes and Certificates may be delivered on or prior to the original issue date of the Tranche to aCommon Depositary.

Upon the initial deposit of a Global Note with a common depositary for Euroclear and Clearstream,Luxembourg (the “Common Depositary”) or registration of Registered Notes in the name of any nomineefor Euroclear and Clearstream, Luxembourg and delivery of the relative Global Certificate to the CommonDepositary, Euroclear or Clearstream, Luxembourg will credit each subscriber with a nominal amount ofNotes equal to the nominal amount thereof for which it has subscribed and paid.

Notes that are initially deposited with the Common Depositary may also be credited to the accounts ofsubscribers with (if indicated in the relevant Final Terms) other clearing systems through direct or indirectaccounts with Euroclear and Clearstream, Luxembourg held by such other clearing systems. Conversely,Notes that are initially deposited with any other clearing system may similarly be credited to the accounts ofsubscribers with Euroclear, Clearstream, Luxembourg or other clearing systems.

Relationship of Accountholders with Clearing Systems

Each of the persons shown in the records of Euroclear, Clearstream, Luxembourg or any other clearingsystem (“Alternative Clearing System”) as the holder of a Note represented by a Global Note or a GlobalCertificate must look solely to Euroclear, Clearstream, Luxembourg or any such Alternative Clearing System(as the case may be) for his share of each payment made by the Issuer to the bearer of such Global Note orthe holder of the underlying Registered Notes, as the case may be, and in relation to all other rights arisingunder the Global Notes or Global Certificates, subject to and in accordance with the respective rules andprocedures of Euroclear, Clearstream, Luxembourg, or such Alternative Clearing System (as the case maybe). Such persons shall have no claim directly against the Issuer in respect of payments due on the Notes forso long as the Notes are represented by such Global Note or Global Certificate and such obligations of theIssuer will be discharged by payment to the bearer of such Global Note or the holder of the underlyingRegistered Notes, as the case may be, in respect of each amount so paid.

Exchange

Temporary Global Notes

Each temporary Global Note will be exchangeable, free of charge to the holder, on or after its ExchangeDate:

(i) if the relevant Final Terms indicates that such Global Note is issued in compliance with the C Rulesor in a transaction to which TEFRA is not applicable (as to which, see “Overview of the Programme -Selling Restrictions”), in whole, but not in part, for the Definitive Notes defined and described below;and

(ii) otherwise, in whole or in part upon certification as to non-U.S. beneficial ownership in the form setout in the amended and restated Agency Agreement dated 27 September 2010 (the “AgencyAgreement”) for interests in a permanent Global Note or, if so provided in the relevant Final Terms,for Definitive Notes.

Each temporary Global Note that is also an Exchangeable Bearer Note will be exchangeable for RegisteredNotes in accordance with the Conditions in addition to any permanent Global Note or Definitive Notes forwhich it may be exchangeable and, before its Exchange Date, will also be exchangeable in whole or in partfor Registered Notes only.

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Permanent Global Notes

Each permanent Global Note will be exchangeable, free of charge to the holder, on or after its Exchange Datein whole but not, except as provided under “— Partial Exchange of Permanent Global Notes”, in part forDefinitive Notes or, in the case of (i) below, Registered Notes:

(i) if the permanent Global Note is an Exchangeable Bearer Note, by the holder giving notice to theFiscal Agent of its election to exchange the whole or a part of such Global Note for Registered Notes;and

(ii) otherwise, (1) if the permanent Global Note is held on behalf of Euroclear or Clearstream,Luxembourg or an Alternative Clearing System and any such clearing system is closed for businessfor a continuous period of 14 days (other than by reason of holidays, statutory or otherwise) orannounces an intention permanently to cease business or in fact does so or (2) if principal in respectof any Notes is not paid when due, by the holder giving notice to the Fiscal Agent of its election forsuch exchange.

In the event that a Global Note is exchanged for Definitive Notes, such Definitive Notes shall be issued inSpecified Denomination(s) only. A Noteholder who holds a principal amount of less than the minimumSpecified Denomination will not receive a definitive Note in respect of such holding and would need topurchase a principal amount of Notes such that it holds an amount equal to one or more SpecifiedDenominations.

Permanent Global Certificates

If the Final Terms state that the Notes are to be represented by a permanent Global Certificate on issue, thefollowing will apply in respect of transfers of Notes held in Euroclear or Clearstream, Luxembourg or anAlternative Clearing System. These provisions will not prevent the trading of interests in the Notes within aclearing system whilst they are held on behalf of such clearing system, but will limit the circumstances inwhich the Notes may be withdrawn from the relevant clearing system.

Transfers of the holding of Notes represented by any Global Certificate pursuant to Condition 2(b) may onlybe made in part:

(i) if the relevant clearing system is closed for business for a continuous period of 14 days (other than byreason of holidays, statutory or otherwise) or announces an intention permanently to cease businessor does in fact do so; or

(ii) if principal in respect of any Notes is not paid when due; or

(iii) with the consent of the Issuer,

provided that, in the case of the first transfer of part of a holding pursuant to (i) or (ii) above, the RegisteredHolder has given the Registrar not less than 30 days’ notice at its specified office of the Registered Holder’sintention to effect such transfer.

Partial Exchange of Permanent Global Notes

For so long as a permanent Global Note is held on behalf of a clearing system and the rules of that clearingsystem permit, such permanent Global Note will be exchangeable in part on one or more occasions (1) forRegistered Notes if the permanent Global Note is an Exchangeable Bearer Note and the part submitted forexchange is to be exchanged for Registered Notes, or (2) for Definitive Notes (i) if principal in respect ofany Notes is not paid when due or (ii) if so provided in, and in accordance with, the Conditions (which willbe set out in the relevant Final Terms) relating to Partly Paid Notes.

Delivery of Notes

On or after any due date for exchange the holder of a Global Note may surrender such Global Note or, in thecase of a partial exchange, present it for endorsement to or to the order of the Fiscal Agent. In exchange for

44


any Global Note, or the part thereof to be exchanged, the Issuer will (i) in the case of a temporary GlobalNote exchangeable for a permanent Global Note, deliver, or procure the delivery of, a permanent GlobalNote in an aggregate nominal amount equal to that of the whole or that part of a temporary Global Note thatis being exchanged or, in the case of a subsequent exchange, endorse, or procure the endorsement of, apermanent Global Note to reflect such exchange or (ii) in the case of a Global Note exchangeable forDefinitive Notes or Registered Notes, deliver, or procure the delivery of, an equal aggregate nominal amountof duly executed and authenticated Definitive Notes and/or Certificates, as the case may be. In thisProspectus, “Definitive Notes” means, in relation to any Global Note, the definitive Bearer Notes for whichsuch Global Note may be exchanged (if appropriate, having attached to them all Coupons and Receipts inrespect of interest or Instalment Amounts that have not already been paid on the Global Note and a Talon).Definitive Notes will be security printed and Certificates will be printed in accordance with any applicablelegal and stock exchange requirements in or substantially in the form set out in the Schedules to the AgencyAgreement. On exchange in full of each permanent Global Note, the Issuer will, if the holder so requests,procure that it is cancelled and returned to the holder together with the relevant Definitive Notes.

Exchange Date

“Exchange Date” means, in relation to a temporary Global Note, the day falling after the expiry of 40 daysafter its issue date and, in relation to a permanent Global Note, a day falling not less than 60 days, or in thecase of an exchange for Registered Notes five days, or in the case of failure to pay principal in respect of anyNotes when due 30 days, after that on which the notice requiring exchange is given and on which banks areopen for business in the city in which the specified office of the Fiscal Agent is located and in the city inwhich the relevant clearing system is located.

Amendment to Conditions

The temporary Global Notes, permanent Global Notes and Global Certificates contain provisions that applyto the Notes that they represent, some of which modify the effect of the terms and conditions of the Notesset out in this Prospectus. The following is a summary of certain of those provisions:

Payments

No payment falling due after the Exchange Date will be made on any Global Note unless exchange for aninterest in a permanent Global Note or for Definitive Notes or Registered Notes is improperly withheld orrefused. Payments on any temporary Global Note issued in compliance with the D Rules before theExchange Date will only be made against presentation of certification as to non-U.S. beneficial ownershipin the form set out in the Agency Agreement. All payments in respect of Notes represented by a Global Notewill be made against presentation for endorsement and, if no further payment falls to be made in respect ofthe Notes, surrender of that Global Note to or to the order of the Fiscal Agent or such other Paying Agent asshall have been notified to the Noteholders for such purpose. A record of each payment so made will beendorsed on each Global Note, which endorsement will be prima facie evidence that such payment has beenmade in respect of the Notes. Condition 7(e)(vi) and Condition 8(d) will apply to the Definitive Notes only.

For the purpose of any payments made in respect of a Global Note, the relevant place of presentation shallbe disregarded in the definition of “business day” set out in Condition 7(h) (Non-Business Days).

All payments in respect of Notes represented by a Global Certificate will be made to, or to the order of, theperson whose name is entered on the Register at the close of business on the Clearing System Business Dayimmediately prior to the date for payment, where Clearing System Business Day means Monday to Fridayinclusive except 25 December and 1 January.

Prescription

Claims against the Issuer in respect of Notes that are represented by a permanent Global Note will becomevoid unless it is presented for payment within a period of 10 years (in the case of principal) and five years(in the case of interest) from the appropriate Relevant Date (as defined in Condition 8).

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Meetings

The holder of a permanent Global Note or of the Notes represented by a Global Certificate shall (unless suchpermanent Global Note or Global Certificate represents only one Note) be treated as being two persons forthe purposes of any quorum requirements of a meeting of Noteholders and, at any such meeting, the holderof a permanent Global Note shall be treated as having one vote in respect of each integral currency unit ofthe Specified Currency of the Notes. All holders of Registered Notes are entitled to one vote in respect ofeach integral currency unit of the Specified Currency of the Notes comprising such Noteholder’s holding,whether or not represented by a Global Certificate.

Cancellation

Cancellation of any Note represented by a Global Note that is required by the Conditions to be cancelled (otherthan upon its redemption) will be effected by reduction in the nominal amount of the relevant Global Note.

Purchase

Notes represented by a permanent Global Note may only be purchased by the Issuer or any of its subsidiariesif they are purchased together with the rights to receive all future payments of interest and InstalmentAmounts (if any) thereon.

Issuer’s Option

Any option of the Issuer provided for in the Conditions of any Notes while such Notes are represented by apermanent Global Note shall be exercised by the Issuer giving notice to the Noteholders within the timelimits set out in and containing the information required by the Conditions, except that the notice shall notbe required to contain the serial numbers of Notes drawn in the case of a partial exercise of an option andaccordingly no drawing of Notes shall be required. In the event that any option of the Issuer is exercised inrespect of some but not all of the Notes of any Series, the rights of accountholders with a clearing system inrespect of the Notes will be governed by the standard procedures of Euroclear, Clearstream, Luxembourg orany other clearing system (as the case may be).

Noteholders’ Options

Any option of the Noteholders provided for in the Conditions of any Notes while such Notes are representedby a permanent Global Note may be exercised by the holder of the permanent Global Note giving notice tothe Fiscal Agent within the time limits relating to the deposit of Notes with a Paying Agent set out in theConditions substantially in the form of the notice available from any Paying Agent, except that the noticeshall not be required to contain the serial numbers of the Notes in respect of which the option has beenexercised, and stating the nominal amount of Notes in respect of which the option is exercised and at thesame time presenting the permanent Global Note to the Fiscal Agent, or to a Paying Agent acting on behalfof the Fiscal Agent, for notation.

Events of Default

Each Global Note in respect of Senior Notes provides that the holder may cause such Global Note, or aportion of it, to become due and repayable in the circumstances described in Condition 10 by stating in thenotice to the Fiscal Agent the nominal amount of such Global Note that is becoming due and repayable. Ifprincipal in respect of any Note is not paid when due, the holder of a Global Note or Registered Notesrepresented by a Global Certificate may elect for direct enforcement rights against the Issuer under the termsof an amended and restated deed of covenant executed as a deed by the Issuer on 27 September 2010 (the“Deed of Covenant”) to come into effect in relation to the whole or a part of such Global Note or one or moreRegistered Notes in favour of the persons entitled to such part of such Global Note or such Registered Notes,as the case may be, as accountholders with a clearing system. Following any such acquisition of direct rights,the Global Note or, as the case may be, the Global Certificate and the corresponding entry in the register keptby the Registrar will become void as to the specified portion or Registered Notes, as the case may be.

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However, no such election may be made in respect of Notes represented by a Global Certificate unless thetransfer of the whole or a part of the holding of Notes represented by that Global Certificate shall have beenimproperly withheld or refused.

Notices

So long as any Notes are represented by a Global Note and such Global Note is held on behalf of a clearingsystem, notices to the holders of Notes of that Series may be given by delivery of the relevant notice to thatclearing system for communication by it to entitled accountholders in substitution for publication as requiredby the Conditions or by delivery of the relevant notice to the holder of the Global Note. Any notice deliveredto such clearing system shall be deemed to have been given to the holders of Notes on the second day afterthe day on which the said notice was given to that clearing system.

Partly Paid Notes

The provisions relating to Partly Paid Notes are not set out in this Prospectus, but will be contained in therelevant Final Terms and thereby in the Global Notes. While any instalments of the subscription moneys duefrom the holder of Partly Paid Notes are overdue, no interest in a Global Note representing such Notes maybe exchanged for an interest in a permanent Global Note or for Definitive Notes (as the case may be). If anyNoteholder fails to pay any instalment due on any Partly Paid Notes within the time specified, the Issuer mayforfeit such Notes and shall have no further obligation to their holder in respect of them.

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USE OF PROCEEDS

The net proceeds from the issue of each Tranche of Notes will be applied by the Issuer for general corporatepurposes. If in respect of any particular issue, there is a particular identified use of proceeds, this will bestated in the applicable Final Terms.

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AHLI UNITED BANK B.S.C.

History and Development

Ahli United Bank B.S.C. (“AUB” or the “Bank”) was established as a bank in Bahrain on 31 May 2000following a merger between The United Bank of Kuwait PLC (“UBK”) and Al-Ahli Commercial BankB.S.C. (“ACB”) pursuant to which UBK and ACB each became wholly owned subsidiaries of AUB. AUBwas originally incorporated in Bahrain as a closed company and was converted on 12 July 2000 to a publicshareholding company by Amiri Decree Law 16/2000. UBK and ACB were incorporated in 1966 and 1977and have been operating from their bases in the UK and Bahrain respectively. UBK was rebranded in 2002and currently operates under a new brand name of AUB-UK. In the year 2000, ACB changed its status froma public shareholding company to a closed shareholding company and was renamed as Ahli United Bank(Bahrain) B.S.C. (c) (“AUBB”). AUBB merged with the Commercial Bank of Bahrain and the merged entity,which continued to operate as an independent Bahrain based bank was subsequently integrated into AUB in2005, to streamline operations and improve capital efficiency. The Bank operates under a retail bankinglicence issued by the Central Bank of Bahrain (“CBB”) and is registered under commercial registrationnumber 46348. The registered office of the Bank is Ahli United Bank B.S.C., Building 2495, Road 2832,Al Seef District, 428, P.O. Box 2424, Manama, Kingdom of Bahrain and its telephone number is (+973) 17585858.

AUB and its network of subsidiaries and associated companies (the “AUB Group” or the “Group”) form abanking group providing (i) retail banking, (ii) corporate banking, treasury and investment and (iii) privatebanking and wealth management services and (iv) Islamic banking services under the “Al Hilal” brand name.

The AUB Group’s parent company, AUB, is based in Bahrain and the Group has an operating presence ineach of Egypt, Iraq, Kuwait, Libya, Oman, Qatar and the United Kingdom. Provided below is a list of theBank’s shareholdings in each of its principal subsidiaries and associated companies as at 30 June 2010:

% of Nominal Country ofThe Company’s Name Ownership Incorporation Consolidated––––––––––––––––––––––––––––––––––––––––– –––––––––––– –––––––––––– ––––––––––––

1 Ahli United Bank (UK) PLC (AUB-UK) ................ 100.0 The United YesKingdom

2 Ahli United Bank (Egypt) S.A.E (AUB Egypt)* .... 79.6 Arab Republic Yesof Egypt

3 Kuwait and Middle East Financial Investment Company (KSCC) (KMEFIC)** .......................... 75.2 State of Kuwait Yes

4 Ahli United Bank K.S.C. “AUBK” (formerly “Bank of Kuwait & Middle East”) ........ 74.9 State of Kuwait Yes

5 Commercial Bank of Iraq PSC (CBIQ) *** ............ 54.8 Republic of YesIraq

6 Legal & General Gulf B.S.C. (c) ............................ 50.0 Kingdom of No – EquityBahrain Accounted

7 United Bank for Commerce & Investment LSA .... 40.0 Libyan Arab No – Equity(UBCI).................................................................... Republic Accounted

8 Ahli Bank QSC (ABQ) .......................................... 36.4 State of No – EquityQatar Accounted

9 Ahli Bank SAOG (AB SAOG) ................................ 35.0 Sultanate of No – EquityOman Accounted

* Increased to 85.1% in July 2010.

** Includes AUBK’s 50.1% shareholding in KMEFIC.

*** AUB has launched a tender offer in July 2010 to increase its shareholding up to 60%. The tender offer is ongoing at the date of thisprospectus.

As at 30 June 2010, the AUB Group, through its subsidiaries and associates, operated through a network of130 branches and employed 3,276 people across its network of branches and representative offices.

A9-5.1.1

A9-4.1.1

A9-4.1.2

A9-4.1.3

A9-4.1.4

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Overview and Strategy

The Bank has a presence in four out of the six Gulf Corporation Council (“GCC”) markets together withEgypt, Iraq, Libya and the United Kingdom. The Bank is continuously assessing and seeking to expand inthe GCC and to acquire complementary banking platforms in identified secondary markets in the MiddleEast and North Africa (“MENA”) region in order to act as a preferred regional and international intermediaryfor its clients. The AUB Group’s presence in the United Kingdom services the need of its Gulf clients thereand continues to be one of its key preferred overseas markets for investments and acquisition of secondaryresidences. Besides ready accessibility to Organisation for Economic Co-operation and Development(OECD) markets, the Group’s diverse geographical footprint also provides a conduit to tapping cross borderbusiness and/or investment flows within the MENA region.

The Bank aims to develop a diversified financial services group centred on commercial banking, investmentbanking, private banking, asset management and life insurance with an enhanced Sharia’a compliantbusiness focus and contribution. In April 2010, the Bank of Kuwait and the Middle East was fully convertedinto a Sharia’a compliant Islamic banking institution and has been re-branded as Ahli United Bank K.S.C.(“AUBK”). AUB is progressively increasing the number of its fully dedicated Islamic branches under the Al-Hilal brand and currently has 9 branches; 5 in Bahrain and 4 in Qatar (2008: 6 branches in total).

Legal & General Gulf B.S.C. (c) represents AUB’s joint venture with the United Kingdom based Legal &General Group and offers life insurance products and services. Commercial operations began in 2009 inBahrain and it is intended to expand the joint ventures into other regional markets in a phased manner,subject to regulatory and business considerations. The joint venture initiative is in line with AUB Group’sstrategy of being a comprehensive financial services provider within its operating markets. The whollyowned subsidiary of this joint venture, Legal & General Gulf Takaful B.S.C (c), offers Takaful insuranceproducts.

The Bank will also continue to develop further existing partnerships with internationally recognised assetmanagement entities (such as Mellon Global Investors, Henderson Global Investors and Frank Russell) inorder to expand its asset management business and investment banking and wholesale financial products andservices. In each of its business areas, the Bank aims to achieve stable and sustainable earnings, to enhanceoperational competitiveness, sustain a high quality of customer service and to maximise cost efficiencies,within a strong risk management framework. The Bank believes that it is well placed to offer acomprehensive range of services to a wide customer base in the MENA region, focusing on the sameoperating market together with linkages to OECD markets.

Summary Financial Information

Financial information in this section is derived from the financial statements referred to in “DocumentsIncorporated by Reference”.

The consolidated financial statements of the Group are prepared in accordance with International FinancialReporting Standards (IFRS) and in conformity with Bahrain Commercial Companies Law and the CentralBank of Bahrain and Financial Institutions Law. The financial statements of the Group's subsidiaries, AhliUnited Bank (Egypt) S.A.E and Commercial Bank of Iraq PSC, are prepared in accordance with theaccounting principles generally accepted in the respective countries and in conformity with the instructionsfor preparation of financial statements by the respective Central Banks. The financial statements for theGroup's subsidiaries, Ahli United Bank (UK) PLC, Ahli United Bank K.S.C., Kuwait and Middle EastFinancial Investment Company K.S.C., Ahli Bank Q.S.C., Ahli Bank S.A.O.G and Legal & General GulfB.S.C.(c), are each prepared in accordance with IFRS as adopted by the respective jurisdictions and also inconformity with respective regulatory requirements.

For the year ended 31 December 2009, AUB’s consolidated net profit attributable to the Bank’s equityshareholders was US$ 200.7 million (2008: US$ 255.7 million), a drop of 21.5%, as a result of prudentprovisioning for loan losses and contingencies of US$ 228.1 million (2008: US$ 98.6 million) in order toensure adequate mitigation of identified risks. This included provisioning of US$ 171.5 million whichrepresented 90% of the Bank’s exposure to specified impaired Saudi corporate assets. Total operating income

50


increased by 4.6% to US$ 696.4 million from US$ 665.5 million in 2008, supported by a 15.7% increase innet interest income to US$ 466.6 million (2008: US$ 403.1 million). As at 31 December 2009, total assetswere maintained at US$ 23.6 billion (2008: US$ 23.6 billion) with loans and advances conservatively placedat US$ 13.3 billion (2008: US$ 13.6 billion). The Bank has pursued a risk averse and conservative stance inresponse to global and regional economic instability while focusing on its liquidity base. As a consequenceof this policy, customers’ deposits were maintained at US$ 13.2 billion (2008: US$ 13.2 billion) whilewholesale bank & financial institutional deposits rose by 7.7% to US$ 5.5 billion (2008: US$ 5.2 billion).The stability of customer deposits facilitated a prepayment of US$ 400 million out of a US$ 1.2 billionsyndicated loan in August 2009, ahead of its final maturity date, to reduce interest charges. The effectivenessof the cost discipline measures and an increase in staff productivity levels has resulted in the reduction ofcost to income ratio to 34.2% (2008: 39.1%). The financial performance for the year ended 31 December2009 represented a return on average shareholders’ equity of 9.6% (2008: 11.4%.). As at 31 December 2009,equity attributable to the Bank’s equity shareholders increased to US$ 2.2 billion (2008: US$ 2.0 billion).

For the six months ended 30 June 2010, AUB’s consolidated net profit attributable to the Bank’s equityshareholders was US$ 135.9 million (30 June 2009: US$ 143.5 million), representing a decrease of 5.3%,compared to the six months ended 30 June 2009. Total operating income decreased by 12.9% to US$ 358.9million for the six months ended 30 June 2010 (30 June 2009: US$ 412.2 million). However, net interestincome rose by 6.6% to US$ 239.2 million (30 June 2009: US$ 224.3 million) when compared to the sixmonths ended 30 June 2009, as a result of careful management of funding costs, resulting in improvingmargins, and prudent deployment of liquidity in risk assets. Fees and other income (excluding gains on a saleof non-trading investments) decreased by 23.9% to US$ 120.2 million compared to the six months ended 30June 2009 (30 June 2009: US$ 158.0 million). Loans and advances grew by 5.0% (an increase of US$ 0.7billion) over the year ended 31 December 2009, to US$ 14.0 billion funded by a 7.7% growth in customerdeposits (an increase of US$ 1.0 billion). Total deposits grew by US$ 1.4 billion (an increase of 7.6%) overthe year ended 31 December 2009, to US$ 20.2 billion, as the Bank continued to focus on ensuring adequateliquidity under current operating conditions. As at 30 June 2010, total assets amounted to US$ 25.1 billion(31 December 2009: US$ 23.6 billion), representing an increase of 6.4% compared to the previous period.The financial performance for the six months ended 30 June 2010 represented a return on averageshareholders’ equity of 6.1% (30 June 2009: 7.0%). As at 30 June 2010, shareholders’ equity attributable tothe Bank’s shareholders remained at US$ 2.2 billion.

Share Capital and Shareholders

In July 2001, the Bank conducted a US$ 157 million initial public offering and, in December 2002 the Bankraised US$ 248 million by way of a rights issue. In January 2005, the Bank issued 1,000 million non-cumulative partly convertible Class A preference shares, resulting in net proceeds to the Bank of US$ 443million. As per the terms of issue of the Class A preference shares (“Class A preference shares”), 577.5million ordinary shares were issued, on 1 January 2008, upon conversion of 50% of Class A preferenceshares, including the bonus adjustment for the years 2005 and 2006. The non-cumulative convertible ClassB preference shares (“Class B preference shares”) were authorised for issuance to the employees of the Bankand Ahli United Bank (UK) PLC, in five annual tranches over a five-year period commencing 1 January 2005at prices determined by the Board of Directors within set parameters. The Class B preference shares aremandatorily convertible into an equivalent number of ordinary shares adjusted for any bonus share issues onthe conversion date of each tranche. In December 2007, the Bank raised US$374 million by way of a rightsissue.

As at 31 December 2009, AUB’s authorised share capital was US$ 2,312,500,000 comprising 8,000,000,000ordinary shares with a par value of US$ 0.25 each; 1,000,000,000 non-cumulative partly convertible ClassA preference shares with a par value of US$ 0.25 each and 250,000,000 non-cumulative fully convertibleClass B preference shares with a par value of US$ 0.25 each. The Class B shares are authorised for issuanceto the employees of the Bank under an Employee Share Purchase Plan in one or more tranches. As at 31December 2009, the Bank held issued and fully paid ordinary share capital of 4,781.0 million shares of US$0.25 each (2008: 4,506.3 million shares of US$ 0.25 each), and 25.3 million non-cumulative convertibleClass B preference shares of US$ 0.25 each (2008: 68.4 million non-cumulative convertible Class Bpreference shares). The Group held 3 million treasury shares (2008: nil) at a cost of US$ 1.7 million.

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During 2009, the Bank issued 47.0 million ordinary shares of US$ 0.25 each upon conversion of the trancheII of Class B preference shares and 227.6 million ordinary shares of US$ 0.25 each as a bonus issue. TheAnnual General Assembly of Shareholders meeting, held on 18 March 2009, approved a bonus share issueof 5% (1 ordinary share for every 5 shares held) (2008: 10%) resulting in an increase in the ordinary sharecapital by US$ 56.9 million (2008: US$ 102.4 million) comprising 227.6 million (2008: 409.6 million)ordinary shares of US$ 0.25 each. The convertible portion of all issued and outstanding Class B preferenceshares are automatically adjusted by these bonus share issues upon their conversion into ordinary sharesunder the terms of the respective issues.

During the first half of 2010, the Bank fully issued the treasury stock of 3 million shares. On 1 January 2010,52.7 million ordinary shares were issued on conversion of tranche-III of the Class B preference shares,adjusted to take into account bonus shares, dividends and the 2007 rights issue.

Consequently, as at 30 June 2010, the Bank held issued and fully paid ordinary share capital of 4,907.9million shares of US$ 0.25 each.

The Bank has a number of institutional and corporate shareholders in the GCC. As at 30 June 2010, theGovernment of Kuwait, through the Public Institution for Social Security, is the largest shareholder with a18.78% stake and the Social Insurance Organization of Bahrain holds 10.18%.

The table below shows details of the Bank’s ordinary shareholders, as at 31 August 2010, being the mostrecent date that such information was practically available.

Issuedordinary

shares––––––––––

(%)

1- Public Institution for Social Security (Kuwait) .................................................................. 18.782- Social Insurance Organization (Bahrain) ............................................................................ 10.183- Tamdeen Investment Company .......................................................................................... 8.914- Sh. Salim Sabah Al-Nasser Al-Sabah ................................................................................ 5.495- Al Mazaya Company B.S.C. (c) ........................................................................................ 5.01Other Shareholders (i.e. each holding less than 5%) ............................................................ 51.63

––––––––––Total ........................................................................................................................................ 100.00

––––––––––––––––––––

AUB Group Structure

The diagram below shows the Bank’s shareholdings in each of its principal subsidiaries and associatedcompanies, as at 30 June 2010:

AUB

AUB-UK AUBK AUBE(Egypt)*+

ABQ*

CBIQ^ AB SAOG* UBCI* (Libya)L&G Gulf BSC

(c) (Joint Venture)KMEFIC

100% 74.9% 79.6% 36.4%

5 5 5 5

A9-6.1

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* AUB has management services agreement

+ AUB increased its stake to 85.1% through the second tender offer which concluded in July 2010.

^ AUB has launched a tender offer in July 2010 to acquire an additional holding of up to 11%. The tender offer is ongoing as at the date ofthis Prospectus.

Ahli United Bank (UK) PLC

The United Bank of Kuwait PLC was incorporated in the United Kingdom in June 1966 by a number ofKuwaiti institutions in order to facilitate the expansion of business between institutions in Kuwait and theglobal financial markets, and to provide clients with practical financial advice and assistance while in theUnited Kingdom. In January 2003, the Bank was renamed Ahli United Bank (UK) PLC (“AUB-UK”). AUBowns 100% of the shares in AUB-UK, which provides a wide range of banking operations and services forthe Bank’s clients in the United Kingdom and with linkages from and to the MENA region. AUB-UKprovides accessibility for AUB Group’s clientele in the MENA region through its presence in the UK and itsrelationships in the OECD.

AUB-UK, a FSA regulated entity, aims to provide a UK-style service practice with an understanding of thespecial needs and demands of offshore investors and clients through its expertise in specialised commercialbanking areas, retail banking, commercial finance, property finance, private banking and Islamic Bankingproducts. In addition to its head office in London, AUB-UK has a branch in Guernsey. AUB-UK was ratedA- (stable) by Fitch in September 2009.

For the six months ended 30 June 2010, AUB-UK’s net profit attributable to the bank’s equity shareholderswas US$ 9.2 million (for the six months ended 30 June 2009: US$ 1.1 million). As at 30 June 2010, totalassets amounted to US$ 2.3 billion (31 December 2009: US$ 2.0 billion).

Ahli United Bank K.S.C.

Ahli United Bank K.S.C (“AUBK”), previously known as Bank of Kuwait and the Middle East (“BKME”),was the first bank to be established in Kuwait in the early 1940s, at a time when Kuwait and the region werestarting to benefit from oil revenues. AUBK provides a full range of commercial and retail banking servicesand as at 30 June 2010, it had 26 branches in Kuwait. AUBK achieved a net profit of KD 14.3 million (US$49.6 million) in 2009, a reduction of 72.2% as compared to a net profit of KD 51.4 million (US$ 178.3million) in 2008. AUBK had total assets of KD 2.3 billion (US$ 8 billion) as at 31 December 2009 ascompared to total assets of KD 2.2 billion (US$ 7.7 billion) as at 31 December 2008.

AUB initially acquired a 15% stake in BKME in March 2001. Through subsequent acquisitions, this stakewas increased to 48% in August 2002. On 8 August 2005, after an additional acquisition of shares and sharebuy-back, AUB’s effective holding in BKME increased to 74.9% and BKME was fully consolidated from afinancial and management perspective into the AUB Group in accordance with International FinancialReporting Standards (“IFRS”). On 1 April 2010, BMKE was converted into a fully Sharia’a compliantIslamic institution. This has added an important dimension to the AUB Group range of products andservices. Post conversion, BKME has been rebranded as Ahli United Bank K.S.C. AUBK was rated A-(stable) by Fitch in September 2010 and A- (stable) by Capital Intelligence in July 2010.

For the six months ended 30 June 2010, AUBK’s consolidated net profit attributable to the bank’s equityshareholders was KD 12.7 million (US$43.9 million) (30 June 2009: KD 14.3 million (US$49.4 million)).As at 30 June 2010, total assets amounted to KD 2.6 billion (US$ 8.9 billion) (31 December 2009: KD 2.3billion (US$ 8.0 billion)).

Kuwait and Middle East Financial Investment Company K.S.C.

Kuwait and Middle East Financial Investment Company K.S.C. (“KMEFIC”) was established in 1984 as a“Kuwaiti Closed Shareholding Company” and was listed on the Kuwait Stock Exchange (“KSE”) in 1997.KMEFIC is a registered broker dealer on the KSE with operations in Kuwait, Oman, United Arab Emiratesand Jordan. It has also secured a brokerage licence through its associate to operate in Saudi Arabia as part ofits plans to expand its brokerage, corporate advisory and asset management business across the MENA

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region. In addition to broker dealer activities in the Gulf region, KMEFIC is engaged in providing wealthmanagement services and provides investment advice and funds for equity, real estate and venture capital inboth the regional and international markets. KMEFIC’s client base represents a broad range of local andinternational investors, including individual, corporate and institutional clients.

KMEFIC has introduced new and innovative products and services to the market with services such as Wa’adForward Trading and Alawsat.com, an online stock trading service covering both local and internationalmarkets.

KMEFIC is a subsidiary of AUBK. AUB has a nominal holding of 75.2% in KMEFIC.

KMEFIC’s results reflected a consolidated net loss of KD 9.4 million (US$ 32.6 million) in the year ended31 December 2009 as a result of very challenging business conditions, compared to a KD 3.9 million profit(US$ 13.5 million) in the previous year. As at 31 December 2009, KMEFIC’s total assets amounted to KD86.2 million (US$ 300.1 million) a decrease of 9.3% compared to the previous year.

As at 31 December 2009, KMEFIC had a paid up capital of KD 26.4 million (US$ 91.9 million) and had KD690 million (US$ 2.4 billion) of assets under management.

As a result of continuing low market volumes, for the six months ended 30 June 2010, KMEFIC’sconsolidated net loss attributable to the bank’s equity shareholders was KD 3.5 million (US$ 12.1 million)(30 June 2009: net loss of KD 3.6 million (US$ 12.4 million)). As at 30 June 2010, total assets amounted toKD 70.7 million (US$ 243.0 million) (31 December 2009: KD 86.2 million (US$ 300.1 million)).

Ahli Bank Q.S.C.

In August 2004, AUB acquired a 40% stake in Ahli Bank Q.S.C. (“ABQ”) (formerly Al-Ahli Bank of QatarQ.S.C., an entity engaged in retail, commercial, treasury and private banking businesses) in a transactionwhich increased ABQ’s equity from US$ 88 million to US$ 240 million. The investment puts the AUB Groupin a position to benefit from the inherent growth potential in the Qatari economy. In addition to the purchaseof ABQ shares, AUB has entered into a ten-year (renewable) management agreement pursuant to which AUBoversees the management and provides technical and marketing support to ABQ. As a part of theGovernment of Qatar’s decision to reinforce the share capital of all listed Qatari Banks, the Qatar InvestmentAuthority (QIA) acquired a 9.1% stake in ABQ in 2009 and 2010 by way of capital increases thereby dilutingAUB’s shareholding in ABQ to 36.4%.

ABQ’s first-ever fully dedicated Al Hilal Islamic Banking Services branch was launched in 2006 to offer afull range of Islamic banking solutions. ABQ was rated A- (stable) by Fitch in September 2010 and A-(stable) by Capital Intelligence in June 2009. As at 30 June 2010, ABQ had 21 branches in Qatar.

ABQ achieved a consolidated net profit of QR300.5 million (US$ 82.6 million) in the year ended 31December 2009, a decrease of 29.4% compared to the previous year. As at 31 December 2009, ABQ’s totalassets amounted to QR18.4 billion (US$ 5.1 billion), an increase of 3.6%, compared to the previous year.

For the six months ended 30 June 2010, ABQ’s consolidated net profit attributable to the bank’s equityshareholders was QR185.6 million (US$51.0 million) (30 June 2009: QR171.6 million (US$47.1 million)).As at 30 June 2010, total assets amounted to QR17.7 billion (US$4.9 billion) (31 December 2009: QR18.4billion (US$ 5.1 billion)).

Commercial Bank of Iraq PSC

In December 2005, the Bank acquired a 49% shareholding in Commercial Bank of Iraq PSC (“CBIQ”),which is one of the largest private banks in Iraq for 50 billion Iraqi dinars (US$ 34.1 million). As a result ofthis acquisition, the capital base of CBIQ increased to ID60 billion (US$ 41 million). AUB has received thenecessary regulatory approvals, including the approval from the Central Bank of Iraq to increase its stake inCBIQ to 75%. AUB has launched a tender offer in July 2010 to increase its shareholding up to 60%. Thetender offer is ongoing at the date of this Prospectus.

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CBIQ was established in 1992 and has ten branches (nine in Baghdad and one in Basra) as at 30 June 2010.CBIQ provides commercial banking services. Its main branch and headquarters are currently located at AlSadoun Street, a major commercial avenue in Baghdad.

Despite prevailing security conditions in Iraq, CBIQ has maintained a consistent track record of profitableperformance since the AUB investment. For the year ended 31 December 2008 CBIQ’s net profit wasID4.263 billion (US$ 3.7 million) and as at 31 December 2008 CBIQ had total assets of ID204.7 billion(US$ 177.5 million). The audited financial statements for the year ended 31 December 2009 are in theprocess of being formalised.

The Bank considers that the Iraqi market has considerable banking potential and this investment will positionthe Bank to be able to build up its operations in Iraq once the security situation stabilises. The Bank aims toprovide a range of products and services to meet the requirements of both local customers and those ofregional and international companies seeking to establish their operations in Iraq.

Ahli United Bank (Egypt) S.A.E.

Ahli United Bank (Egypt) S.A.E. (“AUB Egypt”) is a leading retail and commercial bank incorporated inEgypt. During 2006, the AUB Group acquired a 54.0 % shareholding in Delta International Bank S.A.E.(“DIB”), 31.5% directly by AUB, 17.5% by AUB’s subsidiary in Kuwait (AUBK) and 5% by AUB’sassociate in Qatar (ABQ), for US$ 174.5 million, based on a price of EGP 37 per share. In May 2007 thename of DIB was changed to Ahli United Bank (Egypt) S.A.E. On 17 January 2010, AUB increased its directshareholding in AUB Egypt from 35.3% to 79.6% through a mandatory dual tender offer process. In July2010, AUB concluded a second tender offer through which it increased its direct stake to 85.1%.

AUB Egypt was established in 1978 and as at 30 June 2010 it had 27 branches in Egypt providing retail andcommercial banking services. Its main branch and headquarters are located in the World Trade Centre inCairo.

Pursuant to a share purchase agreement dated 18 November 2006, in addition to providing the IFC Facility(as defined in “Funding and Capital”), the International Finance Corporation, the private sector arm of theWorld Bank Group (the “IFC”), acquired a 10% equity stake in AUB Egypt.

For the year ended 31 December 2009, AUB Egypt’s net profit was EGP 162.5 million (US$ 29.2 million)as compared to EGP 183.1 million (US$ 32.9 million) for the year ended 31 December 2008 and at 31December 2009 AUB Egypt had total assets of EGP 7.7 billion (US$ 1.4 billion) as compared to EGP 7.3billion (US$ 1.4 billion) as at 31 December 2008.

The Bank considers that the Egyptian banking market has considerable potential for retail and corporatebanking growth. The Bank aims to take advantage of these domestic growth opportunities and offers a rangeof products and services to meet the requirements of both local customers and AUB’s customers located inGCC countries carrying out business in Egypt as well as the large expatriate Egyptian communities workingin countries where AUB operates including the Gulf and Libya where AUB has recently acquired anassociate 40% stake in United Bank for Commerce & Investment (UBCI).

For the six months ended 30 June 2010, AUB Egypt’s consolidated net profit attributable to the Bank’s equityshareholders was EGP 75.6 million (US$ 13.6 million), (30 June 2009: EGP 107.3 million (US$ 19.3million)], as at 30 June 2010, total assets amounted to EGP 8.9 billion (US$ 1.6 billion) and as at 31December 2009: EGP 7.6 billion (US$ 1.4 billion).

Ahli Bank S.A.O.G.

In December 2007, AUB acquired a 35% shareholding in Ahli Bank S.A.O.G. (formerly Alliance HousingBank S.A.O.G., the first private sector housing bank in the GCC) (“AB SAOG”) in Oman.

Ahli Bank SAOG was established in 1997 and as at 30 June 2010 had 12 branches across Oman. Ahli BankSAOG specialises in providing mortgage loans, consumer loans and savings accounts to its customers inOman. Its main branch and headquarters are located in Mina Al Fahal in Muscat.

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For the year ended 31 December 2009, Ahli Bank SAOG’s net profit was OMR8.5 million (US$ 22.1million). As at 31 December 2009 Ahli Bank SAOG had total assets of OMR 616.1 million (US$ 1.6 billion).

For the six months ended 30 June 2010, Ahli Bank SAOG’s net profit attributable to the Bank’s equityshareholders was OMR6.8 million (US$ 17.7 million) and for the six month ended 2009: OMR3.4 million(US$ 8.8 million). As at 30 June 2010, total assets amounted to OMR 643.8 million (US$ 1.7 billion) and asat 31 December 2009: OMR616.1 million (US$ 1.6 billion).

Legal & General Gulf B.S.C. (c)

Legal & General Gulf B.S.C. (c) was incorporated in the Kingdom of Bahrain as a joint venture of AUB andLegal & General Group PLC to provide conventional life and health insurance products in the Kingdom ofBahrain. Legal & General Gulf Takaful B.S.C. (c), was established as a 100% subsidiary of Legal & GeneralGulf B.S.C. (c) to carry out the Family Takaful business. Takaful is the Islamic Sharia’a compliant form ofinsurance. Legal & General Gulf B.S.C. (c), being in its start up phase, recorded a net loss of US$ 3.3 millionduring 2009, its first year of operations. The joint venture initiatives are in line with AUB Group’s objectiveof being a comprehensive financial services provider within its operating markets.

For the first half of 2010, Legal & General Gulf B.S.C. (c) recorded a consolidated loss of US$ 1.6 million.(annual loss of US$ 3.3 million for the year 2009).

United Bank of Commerce and Investment (Libya)

United Bank for Commerce and Investment was established in 2007 following the merger of three nationalbanks in Libya. In March 2010 AUB obtained a strategic 40% shareholding in United Bank for Commerceand Investment in Libya, (“UBCI”) which complements the Group’s expanded presence in Egypt and opensa new market for the AUB Group.

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Business Overview

AUB’s operations are divided into three business divisions, arranged across the AUB Group on a functionalbasis, rather than by group company. These divisions are: Retail Banking; Corporate Banking, Treasury andInvestments; and Private Banking and Wealth Management.

CorporateBanking, PrivateTreasury Banking

Retail and and WealthBanking Investments Management Total

––––––––––– ––––––––––– ––––––––––– –––––––––––(US$ thousands)

Year ended 31 December 2009Operating income ............................................ 190,918 454,971 50,497 696,386Provision for loan loss and contingencies – net 36,784 191,261 91 228,136

––––––––––– ––––––––––– ––––––––––– –––––––––––Net operating income ...................................... 154,134 263,710 50,406 468,250Operating expense .......................................... 104,276 109,264 24,310 237,850

––––––––––– ––––––––––– ––––––––––– –––––––––––Profit before tax .............................................. 49,858 154,446 26,096 230,400Income tax expense (credit) ............................ 1,882 (390) 2,822 4,314

––––––––––– ––––––––––– ––––––––––– –––––––––––Net profit for the year...................................... 47,976 154,446 23,274 226,086Less: Attributable to non-controlling interests 25,368........................................................................ –––––––––––

Net profit attributable to the bank’s equityshareholders .................................................. 200,718

––––––––––––––––––––––Year ended 31 December 2008Operating income ............................................ 196,326 406,602 62,605 665,533Provision for loan loss and contingencies - net 37,135 62,065 (575) 98,625


––––––––––– ––––––––––– ––––––––––– –––––––––––Profit before tax .............................................. 61,258 217,663 27,534 306,455Income tax expense (credit) ............................ 1,680 (7,679) 2,712 (3,287)

––––––––––– ––––––––––– ––––––––––– –––––––––––Net profit for the year...................................... 59,578 225,342 24,822 309,742

–––––––––––Less: Attributable to non-controlling interests 54,019

–––––––––––Net profit attributable to the bank’s equityshareholders .................................................. 255,723

––––––––––––––––––––––Six months ended 30 June 2010Operating income ............................................ 80,582 251,472 26,874 358,928Provision for loan loss and contingencies – net 4,042 75,675 481 80,198

––––––––––– ––––––––––– ––––––––––– –––––––––––Net operating income ...................................... 76,540 175,797 26,393 278,730Operating expenses ........................................ 46,698 61,742 13,206 121,646

––––––––––– ––––––––––– ––––––––––– –––––––––––Profit before tax .............................................. 29,842 114,055 13,187 157,084Income tax expense (credit) ............................ 1,510 4,222 1,391 7,123

––––––––––– ––––––––––– ––––––––––– –––––––––––Net profit for the period .................................. 28,332 109,833 11,796 149,961



––––––––––––––––––––––

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CorporateBanking, PrivateTreasury Banking

Retail and and WealthBanking Investments Management Total

––––––––––– ––––––––––– ––––––––––– –––––––––––(US$ thousands)

Six months ended 30 June 2009Operating income ............................................ 99,163 283,776 29,301 412,240Provision for loan loss and contingencies - net 16,204 112,020 (248) 127,976


––––––––––– ––––––––––– ––––––––––– –––––––––––Profit before tax .............................................. 34,172 116,109 17,166 167,447Income tax expense (credit) ............................ 772 (2,481) 1,504 (205)

––––––––––– ––––––––––– ––––––––––– –––––––––––Net profit for the period .................................. 33,400 118,590 15,662 167,652



––––––––––––––––––––––

Retail Banking

The Retail Banking division principally handles individual customers’ deposits and provides currentaccounts, savings plans, savings certificates, time deposits (both treasury deposits and call deposits), loans(consumer, mortgage, holiday and auto loans), credit card products, on-line and SMS banking. The Bank’sclient base includes affluent individuals and institutions in the GCC countries, who are looked after by thePremium Banking unit. With a strong regional and international network spanning the GCC countries, Egypt,Iraq, Libya and the UK, AUB offers customers a wealth of local knowledge, experience and support acrossvarious markets. AUB continues to extend its provision of services and to build local relationships in orderto provide convenient cross border banking that meets its customers’ banking needs, both in their homecountry and country of residence. For example, UK banking requirements of Gulf nationals, expatriates andlocal customers are met through AUB-UK’s office in London.

The MyGlobal Clients facility has been developed to provide access to the AUB network and services fromany location, supported by dedicated relationship managers with in-depth knowledge of local markets tomeet customer requirements. During 2009, the Retail Banking services were further strengthened with thelaunch of MyGlobal consolidated statement, which provided customers with a single view of all theirrelationships across the AUB network.

The Retail Banking division focuses on improving its market share by expanding its customer base andincreasing the amount of revenue generated by its existing customer base by improving its customer serviceand cross selling other banking products and financing solutions. In 2009, one of its flagship products, theMyHassad Savings, an incentivised saving product, was relaunched and now offers over 6,000 prizesannually with a prize pool amounting to BD10 million (US$ 27 million), the largest in the Gulf region.

In Bahrain, the Bank’s lending to retail customers is subject to strict CBB guidelines. The Bank’s creditpolicy for consumer loans states that retail credit customers must be employed in the Kingdom by a“preferred” employer, their salary must be at least BD200 per month (equivalent to US$ 531) and they mustpass an “affordability” credit assessment. Furthermore, the term of the loan cannot exceed seven years andthe monthly instalment must not exceed 50% of the customer’s monthly salary.

The Retail Banking division aligns and customises its products and services to meet the demands andrequirements of each of the customer segments in which it offers services and products. The Mortgage Loanand Auto Loan products, which were launched in 2002 and 2005 respectively, continue to be popular withcustomers.

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In addition, the Retail Banking division in Bahrain was further strengthened with the successful launch ofBanc assurance which compliments the Takaful life Insurance products that are offered through a jointventure with the UK based Legal & General group (see “AUB Group Structure”). The Banc Assuranceproduct range covers customer requirements through various life stages from saving for children to financingretirement.

All back end processes at branch-level have now been centralised at a centralised processing unit, whichenables branches to focus on providing enhanced service delivery. A full service contact centre was alsoestablished in April 2005 to answer inbound customer service calls and to increase sales through outboundcalls. These initiatives are expected to lead to a reduction in the processing activities at the individualbranches which will allow cost savings and improve service delivery and customer satisfaction. To furtherenhance customer satisfaction and improve turnaround times, the division has implemented several otherinitiatives to increase the efficiency of operations across its branch network, including centralisation of creditprocessing and collections.

During 2009, new Euro Mastercard Visa (“EMV”) chip based cards were launched and all existing debitcards were replaced with the new EMV cards. In addition, AUB’s continued commitment in the field of e-commerce has led to successful partnerships with the Government of Bahrain, where AUB Bahrain providesonline payment systems for services provided by the government departments.

In order to address future challenges on lending across the region, operations have been reviewed to identifyavenues that will ensure sustained growth going forward. New products and services are being put togetheras part of the plan to increase the asset portfolio such as consumer loans with variable rates which wouldcapitalise on low inter-bank rates. The introduction of a new packaged bundled product known as MyGlobalhas also been developed to grow assets and liabilities across the network and to meet the Bank’s objectivesof increasing low cost liabilities and broadening customer relationships.

The Bank launched an SMS banking service to provide real-time account and other related information tocustomers via the mobile phone network. As part of its strategy to enhance the scope of its eBankinginitiatives, the SMS banking initiatives, together with expansion of the branches, ATM network and thecontact centre are designed to offer seamless service delivery throughout all of the markets in which the AUBGroup operates and form the basis for continuing service enhancement.

The Bank continues to improve its customer service through technology-driven solutions such as theimplementation of the first ever online trading solution offered by a regional bank in the GCC. Based on thetelephone and internet banking platforms that it operates directly, this new service enables customers to tradeonline on four regional stock exchanges as well as the New York Stock Exchange.

Development of the Islamic banking franchise will continue to be a key area of focus. AUB Kuwait, sinceits conversion to an Islamic bank, now provides a full range of Sharia’a compliant products. In Bahrain, thedistribution of Al-Hilal Islamic services was further extended in 2009 with the introduction of Islamicwindows in selected conventional branches. In addition, two new Islamic branches were opened in Bahrain,increasing the total number of Islamic branches in Bahrain to five. Islamic banking services are alsoexpanding in Qatar where selected conventional branches are being converted to provide Al-Hilal Islamicservices. A Sharia’a compliant MyHassad savings offering is planned to be introduced throughout AUB’sIslamic banking network (see “Islamic finance”).

Corporate Banking and Treasury

Corporate Banking and Treasury is responsible for the Bank’s capital intensive activities in risk assetgeneration and funding both regionally and internationally and includes Corporate and Trade Finance,Treasury, Commercial Property Finance as well as Acquisition Finance and Specialised Finance. TheCorporate Banking and Treasury division principally handles loans and other credit facilities, deposit andcurrent accounts for corporate and institutional customers and provides money market, trading and treasuryservices, as well as being responsible for the management of the AUB Group’s funding.

The Corporate and Trade Finance department mainly covers trade-related lending activities in the Bank andcommercial lending.

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The Treasury Department is an important component of the Bank’s regional strategy and actively deals inforeign and regional currency and interest rate products, both on a proprietary basis and for customers. TheAUB Group’s proprietary trading is subject to strictly monitored limits which are imposed by the AUBGroup Assets and Liabilities Committee (“GALCO”).

Most of the AUB Group’s Commercial Property Finance is in the United Kingdom.

The Acquisition Finance division is based in London and provides senior and mezzanine debt, primarilythrough the syndicated loan market, where the Bank acts as arranger or a syndicate member.

The Specialised Finance team aims to acquire high quality, liquid, United Kingdom and Western Europeanloans and bonds in order to provide asset diversification in the Bank’s own portfolio and for onwarddistribution to clients in the Gulf.

Private Banking and Wealth Management

The Private Banking and Wealth Management division generally includes the low-capital intensive sectorsof the Group’s business, principally servicing high net worth clients, offering private banking services(investment products, trust services and real estate investment services), asset management services, realestate fund management services and Islamic Finance products. The ‘Exclusiv’ brand was launched to defineand distinguish the Bank’s exclusive range of services and the Bank continues to develop strategic allianceswith world-class brands enabling the Bank to offer discounts to its clients. These developments have beeninstrumental to the growth in assets under management.

Strategic alliances with Mellon Global Investments (a mutual fund provider) and Henderson Global Investors(a specialist in international real estate fund management) were established in June 2001. These alliancesenable the group to provide a wider range of products in the areas of asset management and real estate fundmanagement to its institutional and high net worth clients in the Gulf and other regions. Products managedby these entities are marketed and sold to the Group’s clients with an “AUB wrapper”.

In 2005 the Bank announced the launch of its partnership with Russell Investment Group which has enabledthe Bank to deliver multi-manager services to pan-Gulf private banking clients.

Given the uncertainty and volatility prevailing in 2009, AUB’s strategy focused on evaluating markets andproducts with an investment perspective beyond short-term fluctuations in financial markets. This wascarried out by enhancing the process of investor risk profiling and by introducing innovative products toaddress the broader scope of investor risk appetite. With a prudent risk management approach, AUB’sdiscretionary portfolio management mandate delivered a strong investment performance for its institutionalinvestors. The AUB Al-Hilal Islamic Index and AUB wealth management product offering has been accordedglobal recognition. This index, which has the key attributes of exclusive geographical coverage, Sharia’acompliant screening and a strong risk control mechanism, provides a major platform for delivering numerousproducts that meet investors’ needs across the risk return spectrum.

As at 31 December 2009, client funds under management amounted to US$ 4.2 billion (2008: US$ 5.4billion), a net decrease of 22%, compared to the previous year. AUB was awarded the prestigious “BestPrivate Bank in Bahrain” award by Euromoney in 2010.

Islamic Finance

The AUB Group offers a number of Islamic Banking products, including “Manzil” (a Sharia’a compliantmortgage product) which was introduced in 1997 to help the Bank’s clients purchase residential property inaccordance with their religious beliefs. Manzil differs from a conventional “interest-bearing” mortgage byemploying two accepted methods of Islamic finance, Murabaha and Ijara, both widely used in the Muslimworld and approved by the Bank’s Sharia’a Board. This innovative product was the first of its type to beoffered by a United Kingdom-based and regulated bank (AUB-UK) and was issued specifically to helpMuslims purchase property within the United Kingdom. By using traditional Islamic techniques, the Bankhas been able to help its clients purchase their own properties. Many of these clients were first time buyerswho only felt able to buy a property once an acceptable alternative to an interest-bearing mortgage becameavailable. The Bank has subsequently made its Manzil product available to its Gulf based clients.

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During 2006, the Bank increased its focus on Islamic Banking and formed a new Sharia’a Board withprominent Islamic scholars from Bahrain, Kuwait and Qatar. The Bank also installed a new integrated ITsystem dedicated to processing Islamic banking products. Continued focus on the development of theSharia’a compliant business segment initiated the conversion of AUBK, AUB’s 74.9% owned subsidiary inKuwait, into an Islamic banking institution from 1 April 2010 adding an important dimension to the Group’sproduct offerings and services.

Islamic banking services were formally established under the Group brand name, “Al-Hilal”, and a corepackage of Sharia’a compliant products are now available for the Bank’s corporate, commercial andconsumer customers.

AUB is progressively increasing the number of its fully dedicated Islamic branches under the Al-Hilal brandand currently has 9 branches; 5 in Bahrain and 4 in Qatar (2008: 6 branches in total).

Islamic banking products are offered by the Bank both through its Retail Banking division and its PrivateBanking and Wealth Management division as well as through the Wholesale Treasury Function. The Bankalso offers family Takaful insurance products through Legal & General Gulf Takaful B.S.C. (c), as part ofthe joint venture with Legal & General Gulf B.S.C. (c). In 2010, AUBK launched the Al-Hassad Islamicsavings account which, apart from the regular features of a Sharia’a compliant savings account, also offersa unique Sharia’a based prize scheme.

Loan Portfolio

The AUB Group’s loan portfolio is diversified between wholesale and retail lending and by sector asillustrated in the table below.

Private sector loans are largely made up of consumer loans in Bahrain and Kuwait and residential mortgagesin the United Kingdom. As described under “Retail Banking”, all retail loans are subject to an assignment ofsalary, which is typical for the GCC region. The Bank’s loan portfolio is spread across a range of economicsectors. There are no significant credit concentrations to individual obligors: the 20 largest non-bankexposures represented only 25.2% of the Bank’s total loan portfolio for the year ended 31 December 2009.

Inter-bank lending made by AUB has been steadily decreasing since the Bank’s formation in 2000, as liquidresources have been moved into higher yielding assets. Inter-bank loans are generally only made by the Bankto highly rated counterparties in Europe or the US, although the Bank also has some exposure to the largerregional banks in the GCC and the MENA region.

The following table provides a breakdown of the AUB Group’s total loan portfolio by industry sector, as at31 December 2008 and 2009:

Percentage PercentageAs at 31 of As at 31 of

December Total Loan December Total Loan2009 Portfolio 2008 Portfolio

–––––––––– –––––––––– –––––––––– ––––––––––(US$ (US$

thousands) (%) thousands) (%)

Consumer/personal.......................................... 4,130,925 30.2 4,877,669 35.0Real Estate ...................................................... 3,272,198 23.9 3,336,675 24.0Trading, manufacturing and services .............. 3,316,917 24.3 3,044,852 21.9Banks and other Financial Institutions............ 831,265 6.1 987,376 7.0Construction .................................................. 890,749 6.5 889,251 6.4Government/Public Sector ............................ 436,369 3.2 245,686 1.8Others ............................................................ 785,771 5.8 540,960 3.9

–––––––––– –––––––––– –––––––––– ––––––––––13,664,194 100.0 13,922,469 100

Less: Impairment Allowance for loan losses (364,195) (290,249)–––––––––– ––––––––––13,299,999 13,632,220

–––––––––– –––––––––––––––––––– ––––––––––

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The following table provides a geographic breakdown of the AUB Group’s total loan portfolio as at 31December 2008 and 2009:

Percentage PercentageAs at 31 of As at 31 of

December Total Loan December Total Loan2009 Portfolio 2008 Portfolio

–––––––––– –––––––––– –––––––––– ––––––––––(US$ (US$

thousands) (%) thousands) (%)

GCC countries ................................................ 11,104,185 81.3 11,652,479 83.7United Kingdom.............................................. 670,695 4.9 817,492 5.4Europe (excluding United Kingdom).............. 782,021 5.7 545,329 3.9United States of America ................................ 2,698 0.0 2,480 0.0Asia (excluding GCC countries) .................... 64,923 0.5 83,087 0.6Rest of the world (including Arab Republicof Egypt)........................................................ 1,039,672 7.6 821,602 6.4

–––––––––– –––––––––– –––––––––– ––––––––––13,664,194 100.0 13,922,469 100.0

Less: Impairment Allowance for loan losses (364,195) (290,249)–––––––––– ––––––––––13,299,999 13,632,220

–––––––––– –––––––––––––––––––– ––––––––––

Funding and Capital

Short Term Funding

The Bank’s short term funding comes from a variety of sources, including on-shore deposits in Bahrainidinars, Kuwaiti Dinars, deposits from high-net-worth individuals and GCC institutions and inter-bankbalances and certificates of deposit. Inter-bank deposits are sourced from a variety of United Kingdom,Middle Eastern and other international banks. As at 31 December 2009: 76.7% of customer deposits wereterm deposits, with the remainder of customer deposits being on demand (16.8%) and savings (6.5%).

Long Term Funding

In October 2006, the Bank entered into a US$ 1.2 billion syndicated deposit facility. On 31 August 2009,AUB prepaid US$ 400 million of the facility ahead of the contractual maturity date of 31 October 2009 whilethe maturity of the balance was extended for two more years pursuant to a commitment secured earlier inSeptember 2008. This syndicated deposit facility agreement was signed by the Bank with 51 internationalbanks arranged by ABN Amro, BNP Paribas, Commerzbank, Lloyds TSB and Mizuho Corporate Bank. Atthe time of signing, the facility was the largest syndicated financing deal by a financial institution in theMiddle East.

AUB-UK also has a long term loan facility of US$ 150 million, which is due to be repaid in September 2012.

In November 2006, the Bank entered into a US$ 200 million convertible subordinated loan facilityagreement with IFC (the “IFC Facility”), which is due to be repaid in December 2016. At the date of signing,this was IFC’s largest such investment in the Middle East and North Africa.

In addition, the Bank enjoys strong support from its shareholders. The Bank’s balance sheet expansion hasbeen funded by rights issues in July 2001, December 2002, December 2007 and by a partly convertiblepreference shares issue in December 2004 which concluded in January 2005. (see “Share Capital andShareholders”).

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Sources of Funding

The following table shows the sources of AUB’s funding as at 31 December 2008 and 2009 and as at 30 June2010:

As at As at 31 As at 3130 June December December

2010 2009 2008–––––––––– –––––––––– ––––––––––

(US$ thousands)

Deposits from Banks and other Financial Institutions ...... 5,954,825 5,549,518 5,153,514Deposits from Customers .................................................. 14,258,025 13,241,266 13,178,079Term Debt .......................................................................... 942,923 950,054 1,350,000Other Liabilities ................................................................ 755,347 649,498 882,781Subordinated Loans .......................................................... 617,787 602,216 623,576Equity - Attributable to Bank’s equity shareholders ........ 2,198,125 2,213,523 1,995,435Non-controlling Interests .................................................. 355,282 367,908 399,342

–––––––––– –––––––––– ––––––––––Total .................................................................................. 25,082,314 23,573,983 23,582,727

–––––––––– –––––––––– –––––––––––––––––––– –––––––––– ––––––––––

Maturity Profile of Deposits

The maturity profile of the Bank’s deposits as at 31 December 2009 was as follows:

Over Over 1Up to 1 1-3 3 Months Year Over 5month Months to 1 Year to 5 Years Years Total

––––––––– ––––––––– ––––––––– ––––––––– ––––––––– –––––––––(US$ thousands)

Deposits from banks andother financial institutions .. 2,698,810 2,177,202 597,473 76,033 – 5,549,518

Customer Deposits ................ 2,424,477 1,420,246 2,262,632 4,367,792 2,766,119 13,241,266––––––––– ––––––––– ––––––––– ––––––––– ––––––––– –––––––––

Total ...................................... 5,123,287 3,597,448 2,860,105 4,443,825 2,766,119 18,790,784––––––––– ––––––––– ––––––––– ––––––––– ––––––––– –––––––––––––––––– ––––––––– ––––––––– ––––––––– ––––––––– –––––––––

As at 31 December 2009, 26.5 % of the Group’s deposits were denominated in US dollars, with the balanceprincipally denominated in Bahraini dinars, Kuwaiti dinars, Egyptian pounds, sterling and euros alignedprincipally to the business requirements in the respective jurisdiction, where AUB has an operating presence.

Risk Management

The AUB Group promotes a strong risk management culture through a comprehensive set of processesdesigned effectively to identify, measure, monitor and control risk exposures. Risks in the AUB Group aremanaged centrally by an independent risk management function, headed by the Deputy Group ChiefExecutive Officer: Risk, Legal and Compliance, with responsibility for credit, market, operational, liquidityand legal and compliance risks. Key decisions are taken at the committee level under authorities delegatedby AUB’s Board of Directors and the directors of the other members of the AUB Group. The Board ofDirectors and senior management are involved in the establishment of all risk processes and the periodicoversight and guidance of the risk management function. The Board of Directors reviews and approves atleast annually the Bank’s key Risk Management policies. The Risk Management processes are subject toadditional scrutiny, periodically as applicable, by independent internal and external auditors and the Bank’sregulators which help further strengthen the risk management practices. The risk management controlprocess is based on detailed policies and procedures that encompass:

• business line accountability for all risks taken. Each business line is responsible for developing a planthat includes adequate risk/return parameters, as well as risk acceptance criteria;

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• a credit function that understands, monitors and independently controls each credit relationshipensuring that the appropriate approval authorities are obtained and a uniform risk managementstandard including risk ratings have been correctly assigned to each and every credit relationship;

• product and business policies, which are clearly understood, monitored and are in agreement with theoverall credit policy and the Board approved risk framework;

• the ongoing assessment of portfolio credit risk and approval of new products; and

• an integrated limits structure that permits management to control exposures and monitor theassumption of risk against predetermined approved tolerances. The Board of Directors establishesglobal limits for each major type of risk which are sub-allocated to individual business units.

The risk management function is not responsible for eliminating risks that are embedded in any bankingbusiness, but aims to effectively manage these risks with the objective of earning competitive returns overthe degree of assumed risk. Risk is financially evaluated as the potential impact on income and asset value,taking into consideration changes in political, economic and market conditions, and the creditworthiness ofthe Bank’s clients.

The risk management function relies on the competence, experience and dedication of its professional staff,sound risk management policies and procedures, and ongoing investment in technology and training.

Credit Risk

Credit risk is the risk of potential financial loss due to the failure of a counter party to perform according toagreed terms. It arises principally from lending, trade finance and treasury activities. The credit process isconsistent for all forms of credit risk to a single obligor. Overall exposure is evaluated on an ongoing basisto ensure a broad diversification of credit risk. Potential concentrations by country, product, industry, andrisk grade are regularly reviewed to avoid excessive exposure and ensure a broad diversification.

Credit risk within the Group is actively managed by a rigorous process from initiation to approval todisbursement. All day-to-day management is in accordance with well-defined credit policies and procedures(“CP&P”) that details all credit approval requirements and are designed to identify at an early stageexposures which require more detailed review and closer monitoring. If an asset is considered unrecoverable,a mandatory write-off takes place. This is conducted by a risk management process which is completelyindependent in reporting terms from the asset generating departments.

CP&P includes a robust risk rating system that apportions the credit portfolio by level of risk in order tomonitor credit quality, enable assessment of pricing, and assist in the prompt identification of problemexposures. Management of material problem exposures is vested with special exposure groups in therespective Group operating entities, all of which report to the Group Risk Management area. All exposuresare subject to quarterly and, in certain cases, monthly reviews.

In addition to the Group Risk Management function, credit risk is overseen by the Group Risk Committee(“GRC”) which is charged with the overall day-to-day responsibility for all matters relating to group creditrisk. GRC’s responsibilities include the following:

• formulating and implementation of credit policies and monitoring compliance;

• acting as a credit approval body for credits within its delegated authority;

• recommending to the Executive Committee all policy issue changes related to credit risk as well ascredits falling outside its discretion;

• determining appropriate pricing and security guidelines for all risk asset products;

• reviewing the ongoing risk profile of the Group as a whole and by individual business sectors andcountries; and

64


• ensuring the adequacy of specific and collective impairment provisions and making appropriaterecommendations to the Executive Committee.

Loan Loss

The Bank will classify an exposure as substandard or doubtful when there is an unacceptably highprobability of default. In accordance with CBB guidelines, a loan is placed on non-accrual if interest orprincipal is overdue by 90 days or more. Provisions against commercial loans are assessed according to theexpected loss in the event of default, after taking into consideration any collateral that may have beenprovided by the borrower. Similar arrangements are in place across the AUB Group, in line with local CentralBank guidelines.

Market Risk

Market risk is the risk that adverse movements in market risk factors, including foreign exchange rates,interest rates, credit spreads, commodity prices and equity prices, will reduce the Bank’s income or the valueof its portfolios.

Given the Group’s ongoing low risk strategy, aggregate market risk levels are low relative to the size of theBank’s balance sheet. The Group utilises Value-at-Risk (“VaR”) models to assist in estimating potentiallosses that may arise from adverse market movements in addition to other quantitative and non-quantitativerisk management techniques.

The Group calculates VaR using a one-day holding period at a confidence level of 95%, which takes intoaccount the actual correlations observed historically between different markets and rates.

Liquidity Risk

Liquidity risk is the risk of being unable to meet the Bank’s cash commitments without having to raise fundsat unreasonable prices or sell assets on a forced basis. The AUB Group measures its liquidity risk byestimating the AUB Group’s potential liquidity and funding requirements under different stress scenarios.The AUB Group’s liquidity management policies and procedures are designed to ensure that funds areavailable under all circumstances to meet the funding requirements of the AUB Group, not only underadverse conditions, but at sufficient levels to capitalise on opportunities for business expansion.

As at 31 December 2009, loans and advances constituted 56.4 % of the Bank’s total assets (compared to 57.8% as at 31 December 2008). In addition, liquid assets (cash and balances with central banks, treasury billsand bonds, trading securities and inter-bank deposits) comprised 18.6 % of the Bank’s total assets as at 31December 2009 (compared to 19.2 % in 2008). AUB’s inter-bank exposure is primarily extended toinvestment grade financial institutions based in Europe, North America, the GCC and the MENA region.

The Bank’s liquidity position is strengthened by its large portfolio of investment securities, which constituted16.5 % of the Bank’s consolidated total assets as at 31 December 2009 (compared to 14.2 % as at 31December 2008). Of these investment securities, 90.1 % related to quoted instruments (mainly governmentbonds, floating rate notes and certificates of deposit).

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The table below summarises the maturity profile of the Group’s financial liabilities (including interest) basedon contractual undiscounted repayment obligations as at 31 December 2009 and 31 December 2008:

Onemonth to Over three Over one

Up to one three months to year to Over fivemonth months one year five years years Undated Total

––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– –––––––––(US$ thousands)

As at 31 December 2009Deposits from banksand other financialinstitutions .................... 2,703,005 2,186,070 607,357 80,995 – – 5,577,427

Customers’ deposits........ 6,578,603 3,326,044 3,048,317 345,943 20,191 – 13,319,098Term debts ...................... 175 350 1,575 1,018,358 – – 1,020,458Subordinated liabilities .. 53 4,297 21,980 105,417 596,135 – 727,882

––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– –––––––––Total ................................ 9,281,836 5,516,761 3,679,229 1,550,713 616,326 – 20,644,865

––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– –––––––––Credit related commitmentsand contingencies ........ 467,256 407,799 893,934 653,572 159,125 – 2,581,686

––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– –––––––––Derivatives - net outflow – 111 (2,519) (38,818) (11,284) – (52,510)

––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– –––––––––As at 31 December 2008Deposits from banksand other financialinstitutions .................... 2,289,461 2,019,675 651,760 239,018 – – 5,199,914

Customers’ deposits........ 7,262,921 3,143,222 2,498,449 403,181 239 – 13,308,012Term debts ...................... 413 8,084 403,713 1,246,624 – – 1,658,834Subordinated liabilities .. 91 181 4,112 108,380 538,476 – 651,240

––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– –––––––––Total ................................ 9,552,886 5,171,162 3,558,034 1,997,203 538,715 – 20,818,000

––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– –––––––––Credit related commitmentsand contingencies ........ 569,844 627,703 1,296,146 824,035 149,477 – 3,467,205

––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– –––––––––Derivatives - net outflow (1,436) (775) (9,608) (105,818) (97,503) – (214,690)

––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– –––––––––

Operational Risk

Operational risk is the risk of potential financial loss or reputational damage as a result of a breakdown incommunications, information or legal/compliance issues, internal systems or procedural failures, humanerror, natural disaster, internal or external fraud, business interruption, management failure or inadequatestaffing.

No material losses occurred as a result of operational risks in either of the years ended 31 December 2008or 31 December 2009 or in the period from 1 January 2010 to 30 June 2010. Given the nature of these risks,there can, however, be no assurance that these risks can be totally eliminated. The AUB Group mitigates itsoperational risk through its effective monitoring and control procedures, the key elements of which arequalified, well-trained personnel, clear authorisation levels, reliable technology, establishment of a riskculture and independent financial management and reporting.

Operational risk is managed by the Group Operational Risk Committee, which reviews operational riskindicators from the AUB Group’s different departments and consolidates incidents into a central database forindependent monitoring and identification of potential areas of weakness. In addition, the AUB Group hasadopted an ongoing Operational Risk Self-Assessment (“ORSA”) process in accordance with industry bestpractice. Assessments are made of the operational risks facing each function within the Bank and these arereviewed regularly to monitor significant changes. Operational risk loss data is collected and reported tosenior management on a regular basis.

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In addition, the AUB Group’s internal audit function regularly evaluates operational procedures and theORSA reports and advises Senior Management and the Board of Directors as to potential issues.Additionally, the AUB Group maintains adequate insurance coverage and disaster recovery/businesscontinuity contingency plans are in place, and tested periodically through off-site data storage and back-upsystems.

Risk, Legal & Compliance, Finance, Operations and Information Technology

In addition to the three business units described above, the AUB Group has support divisions covering risk,legal and compliance, finance operations and information technology. The AUB Group also has a StrategicDevelopment function, which is an integral part of the AUB Group function and is responsible for evaluationof opportunities beside execution and ongoing assessments of the Bank’s expansion through mergers andacquisitions.

The Bank’s IT strategy is to achieve a uniform platform where feasible across all AUB Group entities toenable the leveraging of the experience and expertise gained by the AUB Group IT function. The Group ITSteering Committee oversees the IT function of the AUB Group including development and implementationof a common IT strategy. The Bank carefully selects tested systems with proven and suitable supportinfrastructures and keeps proprietary development to a minimum.

Regulatory Capital

The CBB Basel II Guidelines, based upon the BIS Revised Framework – “International Convergence ofCapital Measurement and Capital Standards”, were introduced on 1 January 2008. Basel II is structuredaround three ‘pillars’: Pillar I – Minimum Capital Requirements; Pillar II – the Supervisory Review Processand the Internal Capital Adequacy Assessment Process (ICAAP); and Pillar III - Market Discipline.

Pillar I deals with the basis for the computation of the regulatory capital ratio. It defines the various classesand the calculation of Risk Weighted Assets in respect of credit risk, market risk and operational risk, as wellas deriving the regulatory capital base. The capital adequacy ratio is then calculated as the ratio of the Bank’sregulatory capital to its total Risk Weighted Assets. All Bahrain incorporated banks are currently required tomaintain a minimum capital adequacy ratio of 12% at a consolidated level. In addition, the Central Bank ofBahrain requires banks to maintain an additional 0.5% buffer above the minimum capital adequacy ratio.

The Group ensures that each subsidiary maintains sufficient capital levels for their respective legal andcompliance purposes.

Pillar II involves the process of supervisory review of a financial institution’s risk management frameworkand its capital adequacy. Accordingly, this involves both, the Bank and its regulators taking a view onwhether additional capital should be held against risks not covered in Pillar I. Part of the Pillar II process isthe Internal Capital Adequacy Assessment Process (ICAAP), which is the Bank’s self assessment of risks notcaptured by Pillar I.

As part of the CBB’s Pillar II guidelines, each bank is required to be individually reviewed and assessed bythe CBB with the intention of setting individual minimum capital adequacy ratios. The CBB is currently inthe process of individually assessing the financial strength and risk management practices of each institution.Until finalised, the Bank will be required to continue to maintain a 12% minimum capital adequacy ratio.

The third pillar is related to market discipline and requires the Bank to publish detailed qualitative andquantitative information of its risk management and capital adequacy policies and processes to complementthe first two pillars and the associated supervisory review process. The disclosures in this report are inaddition to the disclosures set out in the audited consolidated financial statements of the Group for the yearended 31 December 2009.

The regulatory capital adequacy ratio of the Bank was 15.1% as of 31 December 2009 (31 December 2008:13.8%) which is above the regulatory minimum requirement of 12.0%. This figure includes a tier 1component of 10.9% (2008: 9.0 %).

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The risk asset ratio, calculated in accordance with the capital adequacy guidelines, under Basel II, approvedby the Central Bank of Bahrain, for the Group, is disclosed under Pillar III Table 1, which is included in theAnnual Report.

Rating

As at 30 June 2010 AUB had the following credit ratings:

Standard & Poor’s: ‘A-’

Fitch Ratings, Inc.: long term rating of ‘A-’

Capital Intelligence Ltd: ‘A’

Board of Directors

Set out below is a list of the members of the board of directors of AUB, together with a description of theprincipal activities performed by each of them outside AUB:

FAHAD AL-RAJAAN, Chairman and Chairman of the Executive Committee; Non-ExecutiveDirector

Director since 30 July 2000, holds a BA in Business Administration from the American University ofWashington D.C., 1975. Director General, The Public Institution for Social Security (Kuwait); Chairman,Ahli United Bank (UK) plc; Chairman, Wafra Investment Advisory Group (New York); Board Member,National Industries Group (Kuwait); Chairman, Ahli United Bank (Egypt) S.A.E.

HAMAD A. AL MARZOUQ, Deputy Chairman and Member of the Executive Committee;Executive Director

Director since 30 July 2000, holds a MBA in Finance & International Business from Clairmont GraduateSchool, 1987, and a BS in Industrial & System Engineering from University of Southern California, 1985.Chairman & Managing Director, Ahli United Bank K.S.C. Kuwait; Chairman, Kuwait Banking AssociationKuwait; Deputy Chairman, Ahli United Bank (UK) PLC.; Deputy Chairman, Ahli United Bank (Egypt)S.A.E.; Deputy Chairman, Ahli Bank Q.S.C. Qatar; Deputy Chairman, Ahli Bank S.A.O.G. Oman; DeputyChairman, Commercial Bank of Iraq, Iraq; Deputy Chairman, United Bank for Commerce & InvestmentL.S.C., Libya; Board Member, Kuwait & Middle East Financial Investment Company Kuwait; BoardMember, Middle East Financial Investment Company Kingdom of Saudi Arabia; Board Member, Institute ofBanking Studies Kuwait; Board Member, Public Authority for Higher Education & Training, Kuwait.

RASHID ISMAIL AL-MEER, Deputy Chairman, and Member of the Executive Committee; Non-Executive Director

Director since 29 March 2003, holds a High Diploma in Statistics from the University of Alexandria-Egypt,1973 and a B.Com from Baghdad University, Iraq, 1969. Director, Ahli United Bank (UK) plc; Director,Social Insurance Organisation & Member of Investment Committee; Director, (Deputy Chairman), EsteradInvestment Co. and Member of the Board Investment Committee; Deputy Chairman of the Board ofDirectors, Solidarity Islamic Insurance & Assurance Co. and Chairman of Audit Committee; FormerlyDirector General, Pension Fund Commission; Formerly, Asst. Undersecretary for Financial Affairs, Ministryof Finance & National Economy; Formerly, Asst. Undersecretary for Economic Affairs, Ministry of Finance& National Economy. Formerly, Director of Investment, Various Positions, Central Bank of Bahrain;Formerly, Head of Statistics Section, Ministry of Health.

A9-9.1

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MOHAMMED AL-GHANIM, Director and Member of the Audit Committee; Independent Non-Executive Director

Director since 29 March 2003, holds a degree in Business Administration from Kuwait University, 1993.Vice Chairman and Managing Director, Fouad Alghanim & Sons Group of Companies, Kuwait; Chairman,AlGhanim Industrial Company KSC, Kuwait; Board Member, Tamdeen Real Estate Company KSCC,Kuwait; Member, Supervisory Board, Jet Alliance Holding AG, Austria.; Chairman, Fluor Kuwait Co. KSC,Kuwait.

ABDULLA MH AL-SUMAIT, Director and Member of the Audit Committee; Non-ExecutiveDirector

Director since 16 May 2001, holds a B.A. in Law from Kuwait University, 1976. Head of Legal Department,The Public Institution for Social Security, (Kuwait); Director, Kuwait Commercial Facilities Company;Director, Ahli United Bank (Egypt) SAE.

MOHAMMED SALEH BEHBEHANI, Director and Member of the Executive Committee;Independent Non-Executive Director

Director since 30 July 2000, Partner & President, Mohammad Saleh & Reza Yousuf Behbehani Co.; Partner,Mohammad Saleh Behbehani & Co. W.L.L.; Partner & President, Shereen Travels, Kuwait.; Partner,Behbehani Bros., W.L.L, Bahrain.; President, Shereen Real Estate Co.; Chairman, Maersk Kuwait Co.W.L.L.; Chairman, Kuwait Insurance Co. S.A.K.; Partner & President, Behbehani Jeep Motors Co. W.L.L.;President, Shereen Investment Co.; Chairman, Maersk Logistics Co. W.L.L.; Vice Chairman, UnitedBeverage Co.; Board & Executive Committee Member, Ahli United Bank, K.S.C.; President, Shereen MotorCo.W.L.L.; President, Behbehani Automall Co. W.L.L.; Partner, Al Mulla & Behbehani Motor Co. W.L.L.;Former Dy. Chairman, Al Ahli Bank of Kuwait K.S.C.; Former Director, Swiss Kuwaiti Bank.; FormerDirector, UBAF (Hong Kong) Limited.; Director, Purchase & Imports, Public Works Dept., Govt. of Kuwait.

MOHAMMED JASSIM AL-MARZOUK, Director and Member of the Executive Committee; Non-Executive Director

Director since 27 March 2006, holds a Bachelor of Commerce from Kuwait University, 1991. Chairman &CEO, Tamdeen Real Estate Co. Kuwait; Board Member, Fateh Al Khear Holding Co., Kuwait; BoardMember, Global Omani Development & Investment Co. , Oman; Board Member of Al Maalem Holding Co,Bahrain; Chairman, Tamdeen Bahraini Real Estate Co, Bahrain; Former Deputy Chairman, TamdeenShopping Centres Co. Kuwait; Former Board Member Bank of Kuwait & The Middle East, Kuwait; FormerDeputy Chairman, Tamdeen Investment Co, Kuwait; Former Board Member, Al Ahli Bank of Kuwait;Former Board Member, Kuwait National Cinema Co, Kuwait ; Former Board Member, Arab FinancialConsulting Co, Kuwait; Former Chief of Executive Staff , Real Estate Investment Fund, Kuwait; FormerBoard Member, The Public Warehousing Co., Kuwait.

HERSCHEL POST, Director and Chairman of the Audit Committee; Independent Non-ExecutiveDirector

Director since 25 December 2001, holds a Financial Adviser from The Chartered Institute of Bankers, 2000,a B.A. & M.A. (Rhodes Scholar) from Oxford University, a L.L.B from Harvard Law School, 1966 and aBachelor of Arts from Yale University, 1961. Director and Chairman of the Audit Committee, Ahli UnitedBank (UK) plc; Director and Chairman of the Audit Committee, Ahli United Bank (Egypt) SAE.; Directorand Chairman of the Audit Committee, Ahli United Bank KSC, Kuwait ; Director and Chairman of the AuditCommittee, Kuwait & Middle East Financial Investment Company (KMEFIC). Director Euroclear SA/NV& Euroclear plc; Director and Chairman of the Audit Committee, Euroclear UK and Ireland Ltd; Director,Investors Capital Trust plc.; Director and Chairman of the Audit Committee, Threadneedle AssetManagement Holdings S.A.R.L.; Trustee, Earthwatch Institute (Europe). Former Deputy Chairman of theLondon Stock Exchange; Former CEO and Deputy Chairman, Coutts & Co.; Former Chief Operating officer,Lehman Brothers International Ltd.; Former Director, Christie’s International Limited;

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TURKI BIN MOHAMMED AL-KHATER, Board of Director and Member of the Audit Committee;Independent Non-Executive Director

Director since 29 July 2009, holds a BSC in Economics & Social Science from Portland State University,U.S.A., 1982. President, General Retirement and Social Insurance Authority, Qatar; Board Member, MasrafAl-Rayan, Qatar; Chairman of Dlala Holding Co, Qatar.

ADEL A. EL-LABBAN, Board of Director and Executive Committee Member; Executive Director

Director since 30 July 2000, holds a Masters in Economics from the American University, Cairo, 1980,Bachelors in Economics from American University, Cairo, 1977 and a General Certificate of Education fromLondon University, 1973. Group Chief Executive Officer and Managing Director – Ahli United Bank BSC,Bahrain; Director - Ahli United Bank (UK) PLC; Director Ahli United Bank KSC, Kuwait; Director - AhliBank QSC, Qatar; Director - Ahli United Bank (Egypt) SAE, Egypt; Director - Ahli Bank SAOG, Oman;Director - Commercial Bank of Iraq, Iraq; Director - Kuwait & Middle East Financial Investment Co.(KMEFIC), Kuwait; Director Middle East Financial Investment Co. (MEFIC), Saudi Arabia; Director -United Bank for Commerce & Investment L.S.C., Libya; Board Member - Bahrain Stock Exchange, Bahrain;Director - Bahrain Association of Banks, Bahrain; Formerly: Chief Executive Officer and Director of theUnited Bank of Kuwait PLC, UK; Managing Director - Commercial International Bank of Egypt, (Egypt);Chairman - Commercial International Investment Company, Egypt; Vice President, Corporate Finance -Morgan Stanley, USA; Assistant Vice President- Arab Banking Corporation, Bahrain.

There are no potential conflicts of interest between the duties to AUB of any of the directors listed above andhis private interests and/or other duties.

The business address of each of the directors of AUB is c/o Ahli United Bank B.S.C., Building 2495, Road28, Al Seef District 428, P.O. Box 2424, Manama, Kingdom of Bahrain.

Employees

The Bank’s Human Resources department focuses on attracting and retaining top class talent and iscommitted to encouraging career growth based on merit. Emphasis is placed on quality training as a valuabletool for efficiency and team building with an ongoing commitment to develop younger, promising andtalented staff to assume greater responsibilities. Efforts are also being made to integrate and develop anorganisation-wide approach to reinforcing existing customer commitment, service and loyalty. Businessguidelines include the support of cross-business initiatives and planning integrated solutions and trainingprogrammes to best manage expanding business.

As at 30 June 2010, AUB, together with its subsidiaries and associates, had a total of 3,276 employees.

The table below shows the spread of AUB’s, together with its subsidiaries’ and associates’ employees acrossthe members of the AUB Group as at 30 June 2010.

Number ofEmployees

––––––––––AUB ........................................................................................................................................ 623AUB - UK................................................................................................................................ 91AUB Egypt .............................................................................................................................. 684AUBK ...................................................................................................................................... 626KMEFIC .................................................................................................................................. 195ABQ ........................................................................................................................................ 393CBIQ........................................................................................................................................ 178AB SAOG................................................................................................................................ 237UBCI........................................................................................................................................ 249

––––––––––Total ........................................................................................................................................ 3,276

––––––––––––––––––––

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SELECTED FINANCIAL INFORMATION

The following table sets out certain summary consolidated financial information for Ahli United Bank B.S.C.as at and for the years ended 31 December 2008 and 2009 and as at and for the six months ended 30 June2009 and 2010:

As at and for the As at and for the year ended six months ended

31 December 30 June––––––––––––––––––– –––––––––––––––––––

2009 2008 2010 2009–––––––– –––––––– –––––––– ––––––––

US$ millionIncome Statement HighlightsNet Interest income ...................................................... 466.6 403.1 239.2 224.4Fee and Other income .................................................. 229.8 262.4 119.7 187.9Provisions for loan losses and contingencies .............. 228.1 98.6 80.2 128.0Operating expenses ...................................................... 237.9 260.5 121.6 116.8Net profit for the year/period ...................................... 226.1 309.7 150.0 167.7Net profit after tax attributable to Bank’s equityshareholders................................................................ 200.7 255.7 135.9 143.5

HighlightsTotal assets .................................................................. 23,574.0 23,582.7 25,082.3 25,850.7Loans and advances...................................................... 13,300.0 13,632.2 13,967.5 13,120.4Non-trading Investments .............................................. 3,898.6 3,353.6 4,213.5 3,741.2Investments in associates and joint venture ................ 537.1 534.9 575.6 520.2Deposits ........................................................................ 18,790.8 18,331.0 20,212.9 20,622.6Term debts .................................................................... 950.1 1,350.0 942.9 1,350.0Subordinated liabilities ................................................ 602.2 623.6 617.8 603.8Shareholders equity* .................................................... 2,213.5 1,995.4 2,198.1 2,169.1

ProfitabilityNet Interest margin ...................................................... 2.4% 2.2% 2.3% 2.3%Cost/income.................................................................. 34.2% 39.1% 33.9% 28.3%

Return on average assets .............................................. 0.9% 1.3% 0.6%*** 0.7%***Return on average equity ............................................ 9.6% 11.4% 6.1%*** 7.0%***

CapitalCapital adequacy** ...................................................... 15.1% 13.8% 14.2% 14.1%Shareholders’ equity/Total assets ................................ 9.4% 8.5% 8.8% 8.4%

LiquidityLoans and advances/Total assets .................................. 56.4% 57.8% 55.7% 50.8%Loans and advances/Deposits ...................................... 70.8% 74.4% 69.1% 63.6%

Asset Quality IndicatorsNon performing loans/Gross Loans ............................ 2.8% 1.9% 3.0% 2.7%Loan loss reserve/Non performing loans .................... 94.8% 111.5% 106.0% 113.9%

Notes:

* Attributable to the Ahli United Bank B.S.C. ’s equity shareholders

** Under BASEL II

*** Not annualised

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TAXATION

General

The comments below are of a general nature based on current Bahraini and United Kingdom law andHM Revenue and Customs’ published practice and are not intended to be exhaustive. They assume that theIssuer is not UK resident nor acting through a permanent establishment in the United Kingdom.

Prospective purchasers of Notes are advised to consult their tax advisers as to the consequences, under thetax laws of the countries of their respective citizenship, residence or domicile of a purchase of Notes,including, but not limited to, the consequences of receipt of payments under the Notes and their disposal orredemption.

Bahrain

Except for certain taxes imposed on oil companies, Bahrain currently has no income, corporation or capitalgains tax and no estate duty, inheritance tax or gift tax. Under existing Bahraini laws, payments under theNotes will not be subject to taxation in Bahrain, no withholding will be required on such payments to anyholder of Notes and gains derived from the sale of Notes will not be subject to Bahraini income, corporationor capital gains tax. In the event of the imposition of any such withholding, the Issuer has undertaken togross-up any payments subject to such withholding, as described under Condition 8.

United Kingdom

On the basis that interest on the Notes is not expected to have a United Kingdom source, there should be noUnited Kingdom withholding tax imposed on payments of interest by the Issuer on the Notes.

Persons in the United Kingdom (i) paying interest to or receiving interest on behalf of another person whois an individual, or (ii) paying amounts due on redemption of any Notes which constitute deeply discountedsecurities as defined in Chapter 8 of Part 4 of the Income Tax (Trading and Other Income) Act 2005 to orreceiving such amounts on behalf of another person who is an individual, may be required to provide certaininformation to HM Revenue and Customs regarding the identity of the payee or person entitled to the interestand, in certain circumstances, such information may be exchanged with tax authorities in other countries.However, in relation to amounts payable on the redemption of such Notes HM Revenue and Customspublished practice indicates that HM Revenue and Customs’ will not exercise its power to obtain informationwhere such amounts are paid or received on or before 5 April 2008. If, however, reporting obligations underthe European Council Directive on the taxation of savings income apply to a payment (as to which seebelow), the information on the amounts payable on redemption of such Notes, together with other discountedNotes, will have to be provided to HM Revenue and Customs.

EU Savings Directive

Under European Council Directive 2003/48/EC on the taxation of savings income (the “Directive”, asamended) EU Member States are required to provide to the tax authorities of other Member States details ofpayments of interest (and similar income) paid by a person to an individual or to certain other persons inanother Member State. However, for a transitional period, Austria and Luxembourg may instead impose awithholding system in relation to such payments (subject to a procedure whereby, on meeting certainconditions, the beneficial owner of the interest or other income may request that no tax be withheld) unlessduring such period they elect otherwise. A number of non-EU countries and territories have adopted similarmeasures to the Directive.

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SUBSCRIPTION AND SALE

Summary of Dealer Agreement

Subject to the terms and on the conditions contained in the Dealer Agreement between the Issuer, thePermanent Dealers and the Arranger, the Notes will be offered on a continuous basis by the Issuer to thePermanent Dealers. However, the Issuer has reserved the right to sell Notes directly on its own behalf toDealers that are not Permanent Dealers. The Notes may be resold at prevailing market prices, or at pricesrelated thereto, at the time of such resale, as determined by the relevant Dealer. The Notes may also be soldby the Issuer through the Dealers, acting as agents of the Issuer. The Dealer Agreement also provides forNotes to be issued in syndicated Tranches that are jointly and severally underwritten by two or more Dealers.

The Issuer will pay each relevant Dealer a commission as agreed between them in respect of Notessubscribed by it. The Issuer has agreed to reimburse the Arranger for certain of its expenses incurred inconnection with the establishment of the Programme and the Dealers for certain of their activities inconnection with the Programme. The commissions in respect of an issue of Notes on a syndicated basis willbe stated in the relevant Final Terms.

The Issuer has agreed to indemnify the Dealers against certain liabilities in connection with the offer and saleof the Notes. The Dealer Agreement entitles the Dealers to terminate any agreement that they make tosubscribe Notes in certain circumstances prior to payment for such Notes being made to the Issuer.

United States

The Notes have not been and will not be registered under the U.S. Securities Act of 1933 as amended (the“Securities Act”) and may not be offered or sold within the United States or to, or for the account or benefitof, U.S. persons except in certain transactions exempt from the registration requirements of the SecuritiesAct. Terms used in this paragraph have the meanings given to them by Regulation S under the Securities Act.

Notes in bearer form having a maturity of more than one year are subject to U.S. tax law requirements andmay not be offered, sold or delivered within the United States or its possessions or to a United States person,except in certain transactions permitted by U.S. tax regulations. Terms used in this paragraph have themeanings given to them by the U.S. Internal Revenue Code and regulations thereunder.

Each Dealer has agreed that, except as permitted by the Dealer Agreement, it will not offer, sell or deliverthe Notes of any identifiable Tranche, (i) as part of their distribution at any time or (ii) otherwise until 40days after completion of the distribution of such Tranche as determined, and certified to the Issuer, by theFiscal Agent, or in the case of Notes issued on a syndicated basis, the Lead Manager, within the United Statesor to, or for the account or benefit of, U.S. persons, and it will have sent to each dealer to which it sells Notesduring the distribution compliance period a confirmation or other notice setting forth the restrictions onoffers and sales of the Notes within the United States or to, or for the account or benefit of, U.S. persons.

In addition, until 40 days after the commencement of the offering, an offer or sale of Notes within the UnitedStates by any dealer (whether or not participating in the offering) may violate the registration requirementsof the Securities Act.

European Economic Area

In relation to each Member State of the European Economic Area which has implemented the ProspectusDirective (each, a “Relevant Member State”), each Dealer has represented, warranted and agreed, and eachfurther Dealer appointed under the Programme will be required to represent, warrant and agree, that witheffect from and including the date on which the Prospectus Directive is implemented in that RelevantMember State (the “Relevant Implementation Date”) it has not made and will not make an offer of Noteswhich are the subject of the offering contemplated by this Prospectus as completed by the final terms inrelation thereto to the public in that Relevant Member State except that it may, with effect from and includingthe Relevant Implementation Date, make an offer of such Notes to the public in that Relevant Member State:

73


(i) at any time to legal entities which are authorised or regulated to operate in the financial markets or, ifnot so authorised or regulated, whose corporate purpose is solely to invest in securities;

(ii) at any time to any legal entity which has two or more of (a) an average of at least 250 employeesduring the last financial year; (b) a total balance sheet of more than €43,000,000 and (c) an annual netturnover of more than €50,000,000, as shown in its last annual or consolidated accounts;

(iii) at any time to fewer than 100 natural or legal persons (other than qualified investors as defined in theProspectus Directive) subject to obtaining the prior consent of the relevant Dealer or Dealersnominated by the Issuer for any such offer; or

(iv) at 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 (ii) to (iv) above shall require the Issuer or any Dealer topublish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuantto Article 16 of the Prospectus Directive.

For the purposes of this provision, the expression an “offer of Notes to the public” in relation to any Notesin any Relevant Member State means the communication in any form and by any means of sufficientinformation on the terms of the offer and the Notes to be offered so as to enable an investor to decide topurchase or subscribe the Notes, as the same may be varied in that Member State by any measureimplementing the Prospectus Directive in that Member State and the expression “Prospectus Directive”means Directive 2003/71/EC and includes any relevant implementing measure in each Relevant MemberState.

United Kingdom

Each Dealer has represented, warranted and agreed, and each further Dealer appointed under the Programmewill be required to represent, warrant and agree, that:

(i) in relation to any Notes which have a maturity of less than one year, (a) it is a person whose ordinaryactivities involve it in acquiring, holding, managing or disposing of investments (as principal or agent)for the purposes of its business and (b) it has not offered or sold and will not offer or sell any Notesother than to persons whose ordinary activities involve them in acquiring, holding, managing ordisposing of investments (as principal or agent) for the purposes of their businesses or who it isreasonable to expect will acquire, hold, manage or dispose of investments (as principal or agent) forthe purposes of their businesses where the issue of the Notes would otherwise constitute acontravention of section 19 of the Financial Services and Markets Act 2000 (the “FSMA”) by theIssuer;

(ii) it has only communicated or caused to be communicated and will only communicate or cause to becommunicated any invitation or inducement to engage in investment activity (within the meaning ofsection 21 of the FSMA received by it in connection with the issue or sale of any Notes incircumstances in which section 21(1) of the FSMA does not apply to the Issuer; and

(iii) it has complied and will comply with all applicable provisions of the FSMA with respect to anythingdone by it in relation to such Notes in, from or otherwise involving the United Kingdom.

Japan

The Notes have not been and will not be registered under the Financial Instruments and Exchange Act ofJapan (the “Financial Instruments and Exchange Act”). Accordingly, each of the Dealers has represented,warranted and agreed, and each further Dealer appointed under the Programme will be required to represent,warrant and agree, that it has not, directly or indirectly, offered or sold and will not, directly or indirectly,offer or sell any Notes in Japan or to, or for the benefit of, any resident of Japan (which term as used hereinmeans any person resident in Japan, including any corporation or other entity organised under the laws ofJapan), or to others for re-offering or re-sale, directly or indirectly, in Japan or to, or for the benefit of, anyresident in Japan except pursuant to an exemption from the registration requirements of, and otherwise in

74


compliance with, the Financial Instruments and Exchange Act and other relevant laws and regulations ofJapan.

Kingdom of Saudi Arabia

Any investor in the Kingdom of Saudi Arabia or who is a Saudi person (a “Saudi Investor”) who acquiresNotes pursuant to the offering should note that the offer of Notes is a limited offer under Article 11 of the“Offer of Securities Regulations” as issued by the Board of the Capital Market Authority resolution number2-11-2004 dated 4 October 2004 and amended by the Board of the Capital Market Authority resolutionnumber 1-28-2008 dated 18 August 2008 (the “KSA Regulations”).

Each Dealer has represented, warranted and agreed, and each further Dealer appointed under the Programmewill be required to represent, warrant and agree, that any offer of Notes to a Saudi Investor will comply withthe KSA Regulations. The offer of Notes shall not therefore constitute a “public offer” pursuant to theKSA Regulations, but is subject to the restrictions on secondary market activity under Article 17 of theKSA Regulations. Any Saudi Investor who has acquired Notes pursuant to a limited offer may not offer orsell those Notes to any person unless the offer or sale is made through an authorised person appropriatelylicensed by the Saudi Arabian Capital Market Authority and:

(a) the Notes are offered or sold to a “Sophisticated Investor” (as defined in Article 10 of theKSA Regulations);

(b) the price to be paid for the Notes in any one transaction is equal to or exceeds Saudi Riyal 1 millionor an equivalent amount; or

(c) the offer or sale is otherwise in compliance with Article 17 of the KSA Regulations.

Kingdom of Bahrain

Each Dealer has represented, warranted and agreed, and each further Dealer appointed under the Programmewill be required to represent, warrant and agree, that it has not offered, and will not offer, Notes to (i) thepublic (as defined in Articles 142-146 of the Commercial Companies Law (Decree Law No. 21/2001) of theKingdom of Bahrain) or (ii) any person in the Kingdom of Bahrain who is not an “accredited investor”. Forthis purpose, an “accredited investor” means:

(a) an individual holding financial assets (either singly or jointly with a spouse) of US$1,000,000 ormore;

(b) a company, partnership, trust or other commercial undertaking which has financial assets available forinvestment of not less than US$1,000,000; or

(c) a government, supranational organisation, central bank or other national monetary authority or a stateorganisation whose main activity is to invest in financial instruments (such as a state pension fund).

General

These selling restrictions may be modified by the agreement of the Issuer and the Dealers following a changein a relevant law, regulation or directive. Any such modification will be set out in the Final Terms issued inrespect of the issue of Notes to which it relates or in a supplement to this Prospectus.

No representation is made that any action has been taken in any jurisdiction that would permit a publicoffering of any of the Notes, or possession or distribution of this Prospectus or any other offering materialor any Final Terms, in any country or jurisdiction where action for that purpose is required.

Each Dealer has agreed that it will, to the best of its knowledge, comply with all relevant securities laws,regulations and directives in each jurisdiction in which it purchases, offers, sells or delivers Notes or has inits possession or distributes this Prospectus, any other offering material or any Final Terms and neither theIssuer nor any other Dealer shall have responsibility therefor.

75


FORM OF FINAL TERMS

The form of Final Terms that will be issued in respect of each Tranche, subject only to the deletion of non-applicable provisions, is set out below:

Final Terms dated [�]

Ahli United Bank B.S.C.

Issue of [Aggregate Nominal Amount of Tranche] [Title of Notes]under the

US$2,000,000,000 Euro Medium Term Note Programme

Part A — Contractual Terms

Terms used herein shall be deemed to be defined as such for the purposes of the Conditions set forth in theProspectus dated 27 September 2010 [and the supplemental Prospectus dated [�]] which [together]constitute[s] a prospectus for the purposes of the Prospectus Directive (Directive 2003/71/EC) (the“Prospectus Directive”). This document constitutes the Final Terms of the Notes described herein for thepurposes of Article 5.4 of the Prospectus Directive and must be read in conjunction with such Prospectus [asso supplemented]. Full information on the Issuer and the offer of the Notes is only available on the basis ofthe combination of these Final Terms and the Prospectus. The Prospectus [and the supplemental Prospectus][is] [are] available for viewing at the website of the Regulatory News Service operated by the London StockExchange plc at www.londonstockexchange.com/en-gb/pricenews/marketnews.

The following alternative language applies if the first tranche of an issue which is being increased was issuedunder a Prospectus with an earlier date.

Terms used herein shall be deemed to be defined as such for the purposes of the Conditions (the“Conditions”) set forth in the Prospectus dated 27 September 2010 [and the supplemental Prospectus dated[�]]. This document constitutes the Final Terms of the Notes described herein for the purposes of Article 5.4of the Prospectus Directive (Directive 2003/71/EC) (the “Prospectus Directive”) and must be read inconjunction with the Prospectus dated [current date] [and the supplemental Prospectus dated [�]], which[together] constitute[s] a prospectus for the purposes of the Prospectus Directive, save in respect of theConditions which are extracted from the Prospectus dated [original date] [and the supplemental Prospectusdated [�]] and are attached hereto. Full information on the Issuer and the offer of the Notes is only availableon the basis of the combination of these Final Terms and the [Prospectuses] dated [original date] and [currentdate] [and the supplemental Prospectuses dated [�] and [�]]. The [Prospectuses] [and the supplementalProspectuses] are available for viewing at the website of the Regulatory News Service operated by theLondon Stock Exchange plc at www.londonstockexchange.com/en-gb/pricenews/marketnews.

[Include whichever of the following apply or specify as “Not Applicable” (N/A). Note that the numberingshould remain as set out below, even if “Not Applicable” is indicated for individual paragraphs or sub-paragraphs. Italics denote guidance for completing the Final Terms.]

[When completing final terms or adding any other final terms or information consideration should be givenas to whether such terms or information constitute “significant new factors” and consequently trigger theneed for a supplement to the Prospectus under Article 16 of the Prospectus Directive.]

1 Issuer: Ahli United Bank B.S.C.

2 [(i)] Series Number: [�]

[(ii) Tranche Number: [�]

(If fungible with an existing Series,details of that Series, including the dateon which the Notes become fungible).]

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3 Specified Currency or Currencies: [�]

4 Aggregate Nominal Amount of Notes: [�]

[(i)] Series: [�]

[(ii) Tranche: [�]]

5 Issue Price: [�] per cent. of the Aggregate Nominal Amount [plusaccrued interest from [insert date](if applicable)]

6 (i) Specified Denominations: [�][€50,000 and integral multiples of €[�] in excessthereof up to and including €[�]. Note that notes indefinitive form will be issued with a denominationabove €[�]]

(ii) Calculation Amount: [�]

7 [(i)] Issue Date: [�]

[(ii)] Interest Commencement Date: [Specify/Issue Date/Not Applicable]

8 Maturity Date: [Specify date or (for Floating Rate Notes) InterestPayment Date falling in or nearest to the relevantmonth and year]

9 Interest Basis: [[�] per cent. Fixed Rate]

[[Specify reference rate] +/- [�] per cent. FloatingRate]

[Zero Coupon]

[Index Linked Interest]

[Other (specify)]

(further particulars specified below)

10 Redemption/Payment Basis: [Redemption at par]

[Index Linked Redemption]

[Dual Currency]

[Partly Paid]

[Instalment]

[Other (specify)]

[(N.B. If the Final Redemption Amount is less than100 per cent. of the nominal value, the Notes willconstitute derivative securities for the purposes of theProspectus Directive and the requirements of AnnexXII to the Prospectus Directive Regulation No.809/2004 will apply and the Issuer will prepare andpublish a supplement to the Prospectus]

A13-4.9

A13-4.13

A13-4.1

A13-4.5

77


11 [Specify details of any provision for convertibility of Notes into another interest or redemption/paymentbasis]

12 Put/Call Options: [Investor Put]

[Issuer Call] [(further particulars specified below)]

13 (i) Status of the Notes: [Senior]/[Dated/Perpetual]/Subordinated]

(ii) [�] [and [�], respectively]](N.B. Only relevant where Board (or similar)authorisation is required for the particular tranche ofNotes)

14 Method of distribution: [Syndicated/Non-syndicated]

Provisions relating to Interest (if any) Payable

15 Fixed Rate Note Provisions [Applicable/Not Applicable](If not applicable, delete the remaining sub-paragraphs of this paragraph)

(i) Rate[(s)] of Interest: [�] per cent. per annum [payable [annually/semi-annually/quarterly/monthly/other (specify)] in arrear]

(ii) Interest Payment Date(s): [�] in each year [adjusted in accordance with [specifyBusiness Day Convention and any applicableBusiness Centre(s) for the definition of “BusinessDay”]/not adjusted

(iii) Fixed Coupon Amount[(s)]: [�] per Calculation Amount

(iv) Broken Amount(s): [�] per Calculation Amount payable on the InterestPayment Date falling [in/on] [�]

(v) Day Count Fraction: [30/360/Actual/Actual ([ICMA]/ISDA)/other]

(vi) Determination Dates: [�] in each year (insert regular interest paymentdates, ignoring issue date or maturity date in the caseof a long or short first or last coupon. N.B. onlyrelevant where Day Count Fraction is Actual/Actual(ICMA))

(vii) [Not Applicable/Give details]

16 Floating Rate Note Provisions [Applicable/Not Applicable](If not applicable, delete the remaining sub-paragraphs of this paragraph)

(i) Interest Period(s): [�]

(ii) Specified Interest Payment Dates: [�]

(iii) First Interest Payment Date [�]

(iv) Interest Period Date: [�]

Change of Interest or Redemption/Payment Basis:

A13-4.8

Other terms relating to the methodof calculating interest for FixedRate Notes:

Date Board approval for issuance ofNotes obtained:

78


(Not applicable unless different from Interest PaymentDate)

(v) Business Day Convention: [Floating Rate Convention/Following Business DayConvention/Modified Following Business DayConvention/Preceding Business Day Convention/other (give details)]

(vi) Business Centre(s): [�]

(vii) [Screen Rate Determination/ISDA Determination/other (give details)]

(viii) [�]

(ix) Screen Rate Determination:

– Reference Rate: [�]

– Interest Determination Date(s): [�]

– Relevant Screen Page: [�]

(x) ISDA Determination:

– Floating Rate Option: [�]

– Designated Maturity: [�]

– Reset Date: [�]

(xi) Margins: [+/-] [�] per cent. per annum

(xii) Minimum Rate of Interest: [�] per cent. per annum

(xiii) Maximum Rate of Interest: [�] per cent. per annum

(xiv) Day Count Fraction: [�]

(xv) [�]

17 Zero Coupon Note Provisions [Applicable/Not Applicable](If not applicable, delete the remaining sub-paragraphs of this paragraph)

(i) Amortisation Yield: [�] per cent. per annum

(ii) [�]

18 [Applicable/Not Applicable](If not applicable, delete the remaining sub-paragraphs of this paragraph)

(i) Index/Formula/Other variable: [Give or annex details]

A13-4.8

Index-Linked Interest Note/othervariable-linked interest Note Provisions

Any other formula/basis ofdetermining amount payable:

Fall back provisions, roundingprovisions, denominator and anyother terms relating to the methodof calculating interest on FloatingRate Notes, if different from thoseset out in the Conditions:

Party responsible for calculatingthe Rate(s) of Interest and InterestAmount(s) (if not the [Agent]):

Manner in which the Rate(s) ofInterest is/are to be determined:

79


(ii) [�]

(iii) [�]

(iv) Interest Determination Date(s): [�]

(v) [�]

(vi) Interest Period(s): [�]

(vii) Specified Interest Payment Dates: [�]

(viii) Business Day Conventions: [Floating Rate Business Day Convention/FollowingBusiness Day Convention/Modified FollowingBusiness Day Convention/Preceding Business DayConvention/other (give details)]

(ix) Business Centre(s): [�]

(x) Minimum Rate of Interest: [�] per cent. per annum

(xi) Maximum Rate of Interest: [�] per cent. per annum

(xii) Day Count Fraction: [�]

19 Dual Currency Note Provisions [Applicable/Not Applicable](If not applicable, delete the remaining sub-paragraphs of this paragraph)

(i) [Give details]

(ii) [�]

(iii) [�]

(iv) [�]

Provisions relating to Redemption

20 Call Option [Applicable/Not Applicable](If not applicable, delete the remaining sub-paragraphs of this paragraph)

(i) Optional Redemption Date(s): [�]

Party responsible for calculatingthe Rate(s) of Interest and/orInterest Amount(s) (if not the[Agent]):

Person at whose option SpecifiedCurrency(ies) is/are payable:

Provisions applicable wherecalculation by reference to Rate ofExchange impossible orimpracticable:

Party responsible for calculating theRate(s) of Interest and/or InterestAmount(s) (if not the [Agent]):

Rate of Exchange/method ofcalculating Rate of Exchange:

Provisions for determining Couponwhere calculation by reference toIndex and/or Formula and/or othervariable is impossible orimpracticable or otherwise disrupted:

Provisions for determining Couponwhere calculated by reference toIndex and/or Formula and/or othervariable:

80


(ii) [�] per Calculation Amount

(iii) If redeemable in part:

(a) Minimum Redemption Amount: [�] per Calculation Amount

(b) Maximum Redemption Amount: [�] per Calculation Amount

(iv) Notice period: [�]

21 Put Option [Applicable/Not Applicable](If not applicable, delete the remaining sub-paragraphs of this paragraph)

(i) Optional Redemption Date(s): [�]

(ii) [�] per Calculation Amount

(iii) Notice period: [�]

22 Final Redemption Amount of each Note [�] per Calculation Amount

[If the Final Redemption Amount is linked to anunderlying reference or security, the Notes willconstitute derivative securities for the purposes of theProspectus Directive and the requirements of AnnexXII to the Prospectus Directive Regulation No.809/2004 will apply and the Issuer will prepare andpublish a supplement to the Prospectus which shallconstitute a supplementary prospectus pursuant toProspectus Rule 3-4 and section 87(6) of the FSMA.]

(i) Index/Formula/variable: [Give or annex details]

(ii) [�]

(iii) [�]

(iv) Determination Date(s): [�]

Optional Redemption Amount(s) ofeach Note and method, if any, ofcalculation of such amount(s):

Party responsible for calculatingthe Final Redemption Amount (ifnot the [Agent]):

Provisions for determining FinalRedemption Amount wherecalculated by reference to Indexand/or Formula and/or othervariable:

In cases where the Final Redemptionamount is Index-Linked or othervariable-linked:

Optional Redemption Amount(s)of each Note and method, if any,of calculation of such amount(s):

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(v) [�]

(vi) Payment Date: [�]

(vii) Minimum Final Redemption Amount: [�] per Calculation Amount

(viii) Maximum Final Redemption Amount: [�] per Calculation Amount

23 Early Redemption Amount

[�]

General provisions applicable to the Notes

24 Form of Notes: [Bearer Notes/Exchangeable Bearer Notes/Registered Notes:

[Delete as appropriate]

[Temporary Global Note exchangeable for aPermanent Global Note which is exchangeable forDefinitive Notes in the limited circumstancesspecified in the Permanent Global Note]

[Temporary Global Note exchangeable for DefinitiveNotes on [�] days’ notice*]

[Permanent Global Note exchange for DefinitiveNotes in the limited circumstances specified in thePermanent Global Note]

[Registered Notes]

25 [Not Applicable/Give details. Note that thisparagraph relates to the date and place of payment,and not interest period end dates, to which sub-paragraphs 16(iv) and 18(ix) relate]

26 [Yes/No. If yes, give details]

A13-4.4

Provisions for determining FinalRedemption Amount wherecalculation by reference to Indexand/or Formula and/or othervariable is impossible orimpracticable or otherwisedisrupted:

Talons for future Coupons or Receipts tobe attached to Definitive Notes (and dateson which such Talons mature):

Financial Centre(s) or other specialprovisions relating to Payment Dates:

Early Redemption Amount(s) of eachNote payable on redemption for taxationreasons or on event of default or otherearly redemption and/or the method ofcalculating the same (if required or ifdifferent from that set out in theConditions):

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27 [Not Applicable/Give details]

28 [Not Applicable/Give details]

29 [Not Applicable/The provisions set out below] apply]

30 Consolidation provisions: [Not Applicable/The provisions set out below] apply]

31 Other final terms: [Not Applicable/Give details]

(When adding any other final terms considerationshould be given as to whether such terms constitute a“significant new factor” and consequently trigger theneed for a supplement to the Prospectus under Article16 of the Prospectus Directive.)

Distribution

32 (i) If syndicated, names of Managers: [Not Applicable/Give names]

(ii) Stabilising Manager(s) (if any): [Not Applicable/Give names]

33 If non-syndicated, name of Dealer: [Not Applicable/Give name]

34 U.S. Selling Restrictions: [Reg. S Compliance Category:

[TEFRA C/TEFRA D/TEFRA Not Applicable]

35 Additional selling restrictions: [Not Applicable/Give names]

* If a Global Note is exchangeable for Definitive Notes at the option of the Noteholders, the Notes may onlybe issued in principal amounts of at least the Specified Denomination (or if more than one SpecifiedDenomination, the lowest Specified Denomination) provided in paragraph 6 and integral multiples thereof.

Purpose of Final Terms

These Final Terms comprise the final terms required for issue and admission to trading on the London StockExchange plc’s EEA Regulated Market of the Notes described herein pursuant to the US$2,000,000,000Medium Term Note Programme of Ahli United Bank B.S.C.

Responsibility

The Issuer accepts responsibility for the information contained in these Final Terms. [[(Relevant third partyinformation) has been extracted from (specify source)]. The Issuer confirms that such information has beenaccurately reproduced and that, so far as it is aware, and is able to ascertain from information published by[�], no facts have been omitted which would render the reproduced information inaccurate or misleading.]

Signed on behalf of the Issuer:

By: ..........................................................Duly authorised

A9-1.1

A9-1.2

A13-1.1

A13-1.2

A9-13.2

A13-7.4

Redenomination, renominalisation andreconventioning provisions:

Details relating to Instalment Notes;amount of each instalment, date on whicheach payment is to be made:

Details relating to Partly Paid Notes:amount of each payment comprising theIssue Price and date on which eachpayment is to be made and consequences(if any) of failure to pay, including anyright of the Issuer to forfeit the Notes andinterest due on late payment:

83


Part B — Other Information

1 Listing

(i) Admission to trading: Application has been made by the Issuer (or on itsbehalf) for the Notes to be admitted to trading on[specify relevant regulated market] with effect from[�].] [Application is expected to be made by theIssuer (or on its behalf) for the Notes to be admitted totrading on [specify relevant regulated market] witheffect from [�].] [Not Applicable.]

(Where documenting a fungible issue need to indicatethat original Notes are already admitted to trading.)

(ii) [�]

2 Ratings

Ratings The Notes to be issued have been rated:

[S&P: [�]]

[[Fitch: [�]]

[[Other]: [�]]

(The above disclosure should reflect the ratingallocated to Notes of the type being issued under theProgramme generally or, where the issue has beenspecifically rated, that rating.)

3 [Interests of Natural and Legal Persons involved in the [Issue/Offer

Need to include a description of any interest, including conflicting ones, that is material to theissue/offer, detailing the persons involved and the nature of the interest. May be satisfied by theinclusion of the following statement:

“So far as the Issuer is aware, no person involved in the offer of the Notes has an interest material tothe offer.”

[(When adding any other description, consideration should be given as to whether such mattersdescribed constitute “significant new factors” and consequently trigger the need for a supplement tothe Prospectus under Article 16 of the Prospectus Directive.)]]

4 [Reasons for the Offer, Estimated Net Proceeds and Total Expenses

[(i) [Reasons for the offer: [�]

(See [“Use of Proceeds”] wording in Prospectus: ifreasons for offer different from making profit and/orhedging certain risks will need to include thosereasons here.)]

[(ii)] Estimated net proceeds: [�]

(If proceeds are intended for more than one use willneed to split out and present in order of priority. If

A13-3

A13-6.1

A13-5.1

Estimate of total expenses relatedto admission to trading:

84


proceeds insufficient to fund all proposed uses stateamount and sources of other funding.)

[(iii)] Estimated total expenses: [�]

([If the Notes are derivative securities for whichAnnex XII of the Prospectus Directive Regulationapplies it is] only necessary to include disclosure ofnet proceeds and total expenses at (ii) and (iii) abovewhere disclosure is included at (i) above.)]*

5 [Fixed Rate Notes only — YIELD

Indication of yield: [�]

The yield is calculated at the Issue Date on the basisof the Issue Price. It is not an indication of futureyield.]

6 [Index-Linked or other variable-linked Notes only — PERFORMANCE OF INDEX/FORMULA/OTHER VARIABLE AND OTHER INFORMATION CONCERNING THEUNDERLYING

Need to include details of where past and future performance and volatility of the index/formula/othervariable can be obtained. Where the underlying is an index need to include the name of the index anda description if composed by the Issuer and if the index is not composed by the Issuer need to includedetails of where the information about the index can be obtained. Where the underlying is not an indexneed to include equivalent information. Include other information concerning the underlying requiredby Paragraph 4.2 of Annex XII of the Prospectus Directive Regulation.] *

[(When completing this paragraph, consideration should be given as to whether such mattersdescribed constitute “significant new factors” and consequently trigger the need for a supplement tothe Prospectus under Article 16 of the Prospectus Directive.)]

The Issuer [intends to provide post-issuance information [specify what information will be reportedand where it can be obtained]] [does not intend to provide post-issuance information]*.

7 [Dual Currency Notes only — PERFORMANCE OF RATE[S] OF EXCHANGE

Need to include details of where past and future performance and volatility of the relevant rate[s] canbe obtained.]*

[(When completing this paragraph, consideration should be given as to whether such mattersdescribed constitute “significant new factors” and consequently trigger the need for a supplement tothe Prospectus under Article 16 of the Prospectus Directive.)]

8 Operational Information

ISIN Code: [�]

Common Code: [�]

[Not Applicable/Give name(s) and number(s) [andaddress(es)]]

Delivery: Delivery [against/free of] payment

A13-4.2

A13-4.10

Any clearing system(s) other thanEuroclear Bank S.A./N.V. as operator ofthe Euroclear System and ClearstreamBanking, société anonyme and the relevantaddress(es) and identification number(s):

85


a

Name and address of initial Paying Agent(s): [�]

Note:

* Required for derivative securities to which Annex XII to the Prospectus Directive Regulation applies.

A13-5.2

Names and addresses of additional Paying[�] Agent(s) (if any):

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GENERAL INFORMATION

(1) The listing of the Notes on the Official List will be expressed as a percentage of their principal amount(exclusive of accrued interest). It is expected that each Tranche of the Notes which is to be admittedto the Official List and subject only to the issue of a temporary or permanent Global Note (or one ormore Certificates) in respect of each Tranche. The listing of the Programme in respect of the Notesexpected to be granted on or before 29 September 2010. Prior to official listing and admission totrading, however, dealings will be permitted by the London Stock Exchange in accordance with itsrules. Transactions on the Market will normally be effected for delivery on the third working day afterthe day of the transaction. However, unlisted Notes may be issued pursuant to the Programme.

(2) The Issuer has obtained all necessary consents, approvals and authorisations in the Kingdom ofBahrain in connection with the establishment of the Programme, and the issue and performance of theNotes under the Programme. The update of the Programme and the issue and performance of Notesunder the Programme were authorised by a resolution of the Board of Directors of the Issuer passedon 27 March 2006 and a resolution of the shareholders of the Issuer passed on 27 March 2006.

(3) There has been no significant change in the financial or trading position of the Issuer or of the AUBGroup since 30 June 2010 and no material adverse change in the prospects of the Issuer or of the AUBGroup since 31 December 2009.

(4) Neither the Issuer nor any of its subsidiaries is or has been involved in any governmental, legal orarbitration proceedings (including any such proceedings which are pending or threatened of which theIssuer is aware) during the 12 months preceding the date of this Prospectus which may have, or hashad in the recent past, significant effects on the financial position or profitability of the Issuer or theAUB Group.

(5) Each Note having a maturity of more than one year, Receipt, Coupon and Talon will bear thefollowing legend: “Any United States person who holds this obligation will be subject to limitationsunder the United States income tax laws, including the limitations provided in Sections 165(j) and1287(a) of the Internal Revenue Code”.

(6) Notes have been accepted for clearance through the Euroclear and Clearstream, Luxembourg systems(which are the entities in charge of keeping the records). The Common Code, the InternationalSecurities Identification Number (ISIN) and (where applicable) the identification number for anyother relevant clearing system for each Series of Notes will be set out in the relevant Final Terms.

The address of Euroclear is 1 Boulevard du Roi Albert II, B-1210 Brussels, Belgium and the addressof Clearstream, Luxembourg is 42 Avenue JF Kennedy L-1855 Luxembourg. The address of anyalternative clearing system will be specified in the applicable Final Terms.

(7) The issue price and the amount of the relevant Notes will be determined, before filing of the relevantFinal Terms of each Tranche, based on the prevailing market conditions. The Issuer does not intend toprovide any post-issuance information in relation to any issues of Notes.

(8) The Issuer confirms that any third party information in this Prospectus has been accurately reproducedand that as far as the Issuer is aware and is able to ascertain from information published by that thirdparty, no facts have been omitted which would render the information reproduced inaccurate ormisleading.

(9) For so long as Notes may be issued pursuant to this Prospectus, the following documents (andcertified English translations where the documents in question are not in English) will be available,during usual business hours on any weekday (Fridays, Saturdays and public holidays excepted), forinspection at the registered office of the Issuer:

(i) the Agency Agreement (which includes the form of the Global Notes and Global Certificate,the definitive Bearer Notes, the Certificates, the Coupons, the Receipts and the Talons);

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(ii) the Dealer Agreement;

(iii) the Deed of Covenant;

(iv) the Issuer’s Memorandum and Articles of Association;

(v) the audited consolidated financial statements of the Issuer for the years ended 31 December2008 and 31 December 2009, respectively, and the unaudited interim condensed consolidatedfinancial statements of the Issuer for the six months ended 30 June 2010;

(vi) each Final Terms (save that Final Terms relating to a Note which is neither admitted to tradingon a regulated market within the European Economic Area nor offered in the EuropeanEconomic Area in circumstances where a prospectus is required to be published under theProspectus Directive will only be available for inspection by a holder of such Note and suchholder must produce evidence satisfactory to the Issuer and the Issuing and Paying Agent as toits holding of Notes and identity); and

(vii) a copy of this Prospectus together with any Supplement to this Prospectus or furtherProspectus.

This Prospectus and any Final Terms for Notes that are listed on the Official List and admitted totrading on the Market will be published on the website of the Regulatory News Service operated bythe London Stock Exchange at www.londonstockexchange.com/en-gb/pricesnews/marketnews.

(10) The consolidated financial statements of the Issuer as of and for the years ended 31 December 2009and 31 December 2008 were audited in accordance with International Standards on Auditing by Ernst& Young, Bahrain, independent auditors, as stated in their reports incorporated by reference herein.

(11) The total expenses related to the trading of the Programme are expected to be £2,975. A13-6.1

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REGISTERED OFFICE OF THE ISSUER

Ahli United Bank B.S.C.Building 2495

Road 2832Al Seef District 428

P.O. Box 2424Manama

Kingdom of Bahrain

ARRANGER

HSBC Bank plc8 Canada SquareLondon E14 5HQUnited Kingdom

DEALERS

Barclays Bank PLC BNP Paribas5 The North Colonnade 10 Harewood Avenue

Canary Wharf London NW1 6AALondon E14 4BB United KingdomUnited Kingdom

Commerzbank Aktiengesellschaft Daiwa Capital Markets Europe LimitedKaiserstraße 16 (Kaiserplatz) 5 King William Street

60311 Frankfurt am Main London EC4N 7AXFederal Republic of Germany United Kingdom

Deutsche Bank AG, London Branch HSBC Bank plcWinchester House 8 Canada Square

1 Great Winchester Street London E14 5HQLondon EC2N 2DB United Kingdom

United Kingdom

Lloyds TSB Bank plc Merrill Lynch International25 Gresham Street 2 King Edward Street

London EC2V 7AE London EC1A 1HQUnited Kingdom United Kingdom

Mizuho International plc The Royal Bank of Scotland plcBracken House 135 Bishopsgate

One Friday Street London EC2M 3URLondon EC4M 9JA United Kingdom

United Kingdom

FISCAL AGENT, REGISTRAR, TRANSFER AGENT AND PRINCIPAL PAYING AGENT

HSBC Bank plc8 Canada SquareLondon E14 5HQUnited Kingdom

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AUDITORS OF THE ISSUER

Ernst & YoungP.O. Box 140

14th Floor, The TowerSheraton Commercial Complex

ManamaKingdom of Bahrain

LEGAL ADVISERS

To the Issuer as to English law

Slaughter and MayOne Bunhill Row

London EC1Y 8YYUnited Kingdom

To the Dealers as to English law To the Dealers as to Bahraini law

Linklaters LLP Hatim S. Zu’ bi & PartnersOne Silk Street Bab E1 Bahrain Building

London EC2Y 8HQ Suite Number 1United Kingdom 1st Floor

150 Government AvenueManama 315

Kingdom of Bahrain

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