private placement of 35,000,000 5.5% subordinated bonds ... · ‐oman.com prospectus private...

www.ahlibank‐oman.com Prospectus

Private Placement of 35,000,000 5.5% Subordinated Bonds

Issue Price of RO 1.005 per Bond (comprising a face value of RO 1.000 and Baizas 5 towards Issue expenses)

Issue Opens: December 12, 2010

Issue Closes: December 15, 2010

Issue Manager:

The Financial Corporation Co. SAOG P.O. Box 782, P.C. 131, Sultanate of Oman Tel: 24816655; Fax: 24816611

Issuer:

Ahli Bank SAOG P. O. Box 545, P.C. 116, Sultanate of Oman Tel: 24577000; Fax: 24568001

Collecting Bank:

Ahli Bank SAOG P. O. Box 545, P.C. 116, Sultanate of Oman Tel: 24577000; Fax: 24568001

Issuer’s Credit Rating: Fitch: BBB+ ; Capital Intelligence: BBB+

Legal Advisor:

Said Al Shahry Law Office PO Box 1288, PC 112 Ruwi, Sultanate of Oman Tel: 24603123 Fax: 24603400

Ahli Bank SAOG

P. O. Box 545, P.C. 116 Sultanate of Oman

Tel: 24577000 Fax: 24568001

Private Placement of Rial Omani Thirty Five Million subordinated, non‐convertible & unsecured Bonds

at an Issue Price of RO 1.005 per Bond

(comprising a face value of RO 1.000 and Baizas 5 towards Issue expenses)

Issue opens on: December 12, 2010

Issue closes on: December 15, 2010

This is an unofficial English version of the original Prospectus prepared in Arabic and approved by the Capital Markets Authority pursuant to the Administrative Order No. xx/2010 dated December xx, 2010. In the event of any conflict between the Arabic version and the English version, the Arabic version will prevail. Although every effort has been made in preparing this translation, none of the Issuer, the Issue Manager and the Legal Advisor shall be held responsible for any information interpreted differently from the approved Arabic Prospectus. The Capital Market Authority (CMA) assumes no responsibility for the accuracy and adequacy of the statements and information contained in this Prospectus nor shall it have any liability for any damage or loss resulting from the reliance upon or use of any part of the same by any person.

Issue Manager:

The Financial Corporation Co. SAOG P.O. Box 782, P.C. 131 Sultanate of Oman Tel: 24816655; Fax: 24816611

Issuer:

Ahli Bank SAOG P. O. Box 545, P.C. 116 Sultanate of Oman Tel: 24577000; Fax: 24568001

Registrar & Trustee:

Muscat Clearing and Depository Company SAOC P.O Box 952, Ruwi, PC 112, Sultanate of Oman Tel: 24822222; Fax: 24817491

Legal Advisor:

Said Al Shahry Law Office PO Box 1288, PC 112 Ruwi, Sultanate of Oman Tel: 24603123 Fax: 24603400

Prospectus: Ahli Bank Bond Issue

3

IMPORTANT NOTICE TO INVESTORS

The principal aim of this Prospectus is to present material information that may assist

investors to make an appropriate decision as to whether or not to invest in the securities

offered.

This Prospectus contains all material information and data and does not contain any

misleading information or omit any material information that would have positive or

negative impact on the decision of whether or not to invest in the offered securities.

The Board of Directors of Ahli Bank are jointly and severally responsible for the integrity

and adequacy of the information contained and confirm that to their knowledge due

diligence had been observed in the preparation of this Prospectus and further confirm that

no material information has been omitted, the omission of which would render this

Prospectus misleading.

All investors should examine and carefully review this Prospectus and make their own

independent investigation and examination of the financial conditions and affairs of the

Company in order to decide whether it would be appropriate to invest in the securities

offered by taking into consideration all the information contained in this Prospectus in its

context.

Notwithstanding the above, the potential investors are advised to seek independent advice

from their own investment and other professional advisors on the investment in the

offered securities and on the information contained in the Prospectus before deciding on

whether or not to invest in the securities offered.

It is noteworthy that no person has been authorized to make any statements or provide

information on the Issuer or the offered securities other than the persons whose names

are indicated herein and if any statement is made or information is provided, it should not

be relied upon by anyone.

The Capital Market Authority (CMA) assumes no responsibility for the accuracy and

adequacy of the statements and information contained in this Prospectus nor shall it have

any liability for any damage or loss resulting from the reliance upon or use of any part of

the same by any person.


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TABLE OF CONTENTS

SECTION PAGE No.

1. DEFINITIONS .................................................................................................................. 5

2. BOND ISSUE SUMMARY ................................................................................................ 7

3. CREDIT RATING ........................................................................................................... 11

4. RISK FACTORS AND MITIGANTS .................................................................................. 16

5. OBJECTIVES AND LICENSES ......................................................................................... 20

6. PURPOSE OF THE BOND ISSUE AND ISSUE EXPENSES ................................................ 23

7. TERMS AND CONDITIONS OF THE BOND ISSUE .......................................................... 24

8. RIGHTS AND RESPONSIBILITIES ................................................................................... 34

9. RELATED PARTY TRANSACTIONS ................................................................................ 37

10. HISTORICAL FINANCIAL PERFORMANCE ..................................................................... 40

11. PEER GROUP COMPARISON ........................................................................................ 47

12. CORPORATE SNAPSHOT, BUSINESS PLAN AND FUTURE STRATEGY ........................... 49

13. CORPORATE GOVERNANCE, BOARD OF DIRECTORS AND MANAGEMENT TEAM ..... 53

14. SUBSCRIPTION CONDITIONS AND PROCEDURES ........................................................ 62

15. UNDERTAKINGS .......................................................................................................... 69


5

SECTION 1

DEFINITIONS

Agency Agreement The agreement between the Issuer and MCDC for MCDC to

act as the Trustee

Ahli Bank / Bank / Issuer/Company Ahli Bank SAOG, Sultanate of Oman

Allotment Date The date on which the Bank allots Bonds to the applicants

who have submitted valid Applications which have been

accepted by the Issue Manager. The Allotment Date for the

proposed Bond Issue of the Bank is deemed to be the next

day of closing of subscription

Articles Articles of Association of the Issuer, as may be amended from

time to time in accordance with the provisions as contained

therein

Board / Board of Directors Issuer’s Board of Directors elected in accordance with the

Articles

Bonds 35,000,000 Bonds with a face value of RO 1.000 (Rial Omani

One) and issued at a price of RO 1.005 (Rial Omani One and

Baizas Five) per Bond aggregating to RO 35,175,000 (Rial

Omani Thirty Five Million and One Hundred and Seventy Five

Thousand) to be issued hereunder

Bondholder A holder of a Bond issued by the Issuer pursuant to this Issue

Bondholders’ Resolution A resolution passed at a meeting of Bondholders duly

convened and held in accordance with the provisions of the

Trust Deed and in accordance with the applicable provisions

of the CCL

Business Day A day on which banks and the Registrar are open for business

in Oman

CBO Central Bank of Oman

CCL Commercial Companies Law of Oman as contained in Royal

Decree 4/74 and the amendments thereto

CMA Capital Market Authority of Oman

CMA Law Capital Market Law of Oman as contained in Royal Decree

80/98

Conditions The terms and conditions of the issue of Bonds as set out in

Section 7 of this Prospectus

Director Means a member of the Board of Directors

Event of Default Any of the events described in Condition 21 of Section 7 of

this Prospectus

Face Value RO 1.000 per Bond


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Financial Year The financial year of the Issuer commencing on 1st January

and ending on 31st December or as may be amended by the

Shareholders in accordance with the Issuer’s Articles of

Association

Interest Payment Record Dates

Interest semi‐annual, on 15th December & 15th June each

year starting from allotment date. The interest payments shall

be made to the Bondholders whose names appear on the

Register as of the relevant record date. Interest cheques (or

electronic payments) will be mailed by registered mail to

respective Bondholders within one week of the respective

Interest Payment Record Dates.

Issue Price RO 1.005 per Bond including Baizas 5 towards issue expenses

Laws of Oman The laws of Oman in the form of Royal Decrees, Ministerial

Decisions and CMA and CBO Regulations as the same may

have been, or may from time to time be enacted, amended or

re‐enacted or issued

MCDC/Registrar Muscat Clearing and Depository Company SAOC, P.O. Box

952, Ruwi, Postal Code 112, Oman

MOCI Ministry of Commerce and Industry of Oman

MSM Muscat Securities Market

Oman The Sultanate of Oman

Prospectus Means this Prospectus

Register The Register to be maintained by the Registrar in which

information relating to the Bonds and the Bondholders shall

be recorded

Regulations Means regulations issued pursuant to the Laws of Oman

Rial Omani or RO Omani Rial, which is the lawful currency of Oman

Section Section of this Prospectus

Shares Ordinary Shares of the Issuer of nominal value of 100 Baizas

(Baizas one hundred each)

Shareholders The shareholders of the Issuer

Trust Deed The trust deed being entered into between the Issuer and

MCDC for the purpose of this Bond issue

Trustee MCDC or any successor body thereto and includes all persons

who may be appointed trustee under the terms of the Trust

Deed to act for and on behalf of the Bondholders as their

representative


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SECTION 2

BOND ISSUE SUMMARY

The following constitutes the summary (the “Summary”) of the essential characteristics of, and risks

associated with, the Issuer and the Bonds. This Summary should be read as an introduction to this

Prospectus. It does not purport to be complete and is taken from, and is qualified in its entirety by,

the remainder of this Prospectus. Any decision by an investor to invest in the Bonds should be based

on consideration of this Prospectus as a whole.

Issuer: Ahli Bank SAOG

Commercial Registration No: 1558560

Registered Office Postal Address: P.O. Box 545, P.C: 116, Mina Al Fahal, Sultanate of Oman

Credit Rating Long term rating: ‐ Fitch: BBB+ (August 2010) ‐ Capital Intelligence: BBB+ (July 2010)

Instrument offered Unsecured Non‐Convertible Subordinated Bonds (Tier II Capital)

Tenor of the Bonds 7 years

Call option The issuer has an option to redeem the Bonds at the end of 5 years from the allotment date

Interest rate 5.5% per annum of the face value of the Bond

Interest payment record dates Interest semi‐annual, on 15th December & 15th June each year starting from allotment date

Number of Bonds 35,000,000 (Thirty Five Million) Bonds

Face Value of the Bond Rial 1.000 each

Issue Expense Rial 0.005 per Bond

Issue Price Rial 1.005 per Bond including Baizas 5 towards issue expenses payable in full on subscription

Minimum and Maximum Subscription Application must be for a minimum of 100,000 bonds and in multiples of 1000 thereafter. There is no maximum limit on subscription.


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Security The Bonds will constitute direct, unconditional, subordinated and unsecured obligations of the Issuer, ranking pari passu without any preference among themselves and equally with all other existing and future unsecured and subordinated obligations of the Issuer save for such obligations that may be preferred by provisions of law that are mandatory and of general application

Proposed Investors The table below shows the names of the proposed investors for subscription of this issue.

Allotment of Bonds The Bonds will be allotted on the next day of closing of subscription, as per table below. Validity of the allotment shall be subject to the approval of all relevant authorities.

If any of the investors withdraws or does not subscribe to the full amount, the Board of Directors shall allocate the unsubscribed Bonds to one or more of the other investors subject to their maximum bonds commitment.

In the event the Bond Issue is not subscribed in full by the proposed Investors the Board of Directors may accept subscription only to the extent it is subscribed and accordingly the Bond issue size will be reduced.

Use of Proceeds Proceeds of the issue will be utilised to ‐ Fund the overall financing requirements of the Bank

in line with its growth plan Reduce dependence on large institutional funds Bridge the maturity gap in the long term buckets

expected to arise because of projected funding to large infrastructure/ government/ quasi government projects

Increase single obligor limits of the Bank and thus enable it to participate in large project financing

To meet the Tier II capital requirements of the Bank, which shall be governed by the Central Bank of Oman’s rules and regulations

Listing The Bonds shall be listed and traded in the Muscat Securities Market

Trustee Muscat Clearing and Depository Company SAOC


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Issue Manager

The Financial Corporation Co. SAOG (FINCORP) P.O. Box 782, Al Hamriya. P.C. 131 Sultanate of Oman Email: [email protected] Tel: 24816655 Fax: 24816611

Auditor KPMGP.O. Box 641 Postal Code 112 Ruwi, Sultanate of Oman Tel: 24709181 Fax: 24700839

Legal Advisor Said Al Shahry Law OfficePO Box 1288, PC 112 Ruwi, Sultanate of Oman Email: [email protected] Tel: 24603123 Fax: 24603400

Collecting Bank Ahli Bank SAOG

Table showing names of proposed investors, number of bonds undertaking and proposed allotment of bonds:

Sl. Name of the Investor Undertaking amount Proposed Allotment

Million Bonds Million Bonds

1 Public Authority for Social Insurance (PASI) 6.000 3.850

2 MoD PF (10%) 3.500 2.250

3 Oman Fisheries 1.000 0.640

4 Vision Insurance 0.400 0.260

5 National Life & General Insurance 0.500 0.320

6 Dr. Abdulla Abbas 0.500 0.320

7 Rashid Al Rajhi 2.000 1.280

8 The Financial Corporation Co. SAOG (FINCORP) 3.000 1.930

9 Port Services Corporation 3.000 1.930

10 Oman Arab Bank SAOC 1.500 0.960

11 Abdul Kader Ahmed Askalan 0.300 0.200

12 Oman Qatar Insurance 0.400 0.260

13 Oman Investment Fund 5.000 3.210

14 Oman Re‐insurance 0.500 0.320

15 Ahli United Bank Money Market Fund 0.500 0.320

16 Oman LNG 0.575 0.370

17 Bank Muscat –Staff Saving 0.500 0.320

18 Civil Service Pension Fund 10.000 6.420

19 Engr. Mohsin Mohammed Al Sheikh 0.300 0.200

20 Diwan of Royal Court Pension Fund 3.000 1.930

21 Malallah Ali Mohammed Al Lawati 12.000 7.710

Total 54.475 35.000


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The issue of the Bonds was authorized by:

1. The CBO vide their letter No. BDD/CBS/AB/2010/6331 dated August 11, 2010 approving the

Issue; and

2. The Shareholders of the Issuer at an Extra‐ordinary General Meeting held on December 1, 2010

approving the Issue of Bonds.


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SECTION 3

CREDIT RATING

Credit Rating of the Issuer

Fitch Fitch Ratings is dual‐headquartered in New York and London, with 50 offices worldwide. Fitch

Ratings’ global expertise, built on a foundation of local market experience, spans capital markets in

over 150 countries. Fitch Ratings is widely recognized by investors, issuers, and bankers for its

credible, transparent and timely coverage. Fitch Ratings is a part of the Fitch Group, which is a

majority‐owned subsidiary of Fimalac, S.A., an international business support services group

headquartered in Paris, France.

Fitch’s Issuer Rating:

Long Term Short Term Financial Strength / Outlook

Fitch Rating BBB + F2 Stable

Fitch Ratings – Definitions

The following rating scale applies to Issuer ratings:

Long Term Ratings

Investment Grade

AAA Highest credit quality. ‘AAA’ ratings denote the lowest expectation of credit risk. They are assigned

only in case of exceptionally strong capacity for payment of financial commitments. This capacity is

highly unlikely to be adversely affected by foreseeable events.

AA Very high credit quality. ‘AA’ ratings denote expectations of very low credit risk. They indicate very

strong capacity for payment of financial commitments. This capacity is not significantly vulnerable

to foreseeable events.

A High credit quality. ‘A’ ratings denote expectations of low credit risk. The capacity for payment of

financial commitments is considered strong. This capacity may, nevertheless, be more vulnerable to

changes in circumstances or in economic conditions than is the case for higher ratings.


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BBB Good credit quality. ‘BBB’ ratings indicate that there are currently expectations of low credit risk.

The capacity for payment of financial commitments is considered adequate but adverse changes in

circumstances and economic conditions are more likely to impair this capacity. This is the lowest

investment grade category.

The modifiers “+” or “‐” may be appended to a rating to denote relative status within major rating

categories.

Speculative Grade BB Speculative. ‘BB’ ratings indicate that there is a possibility of credit risk developing, particularly as

the result of adverse economic change over time; however, business or financial alternatives may

be available to allow financial commitments to be met. Securities rated in this category are not

investment grade.

B Highly speculative. ‘B’ ratings indicate that significant credit risk is present, but a limited margin of

safety remains. Financial commitments are currently being met; however, capacity for continued

payment is contingent upon a sustained, favorable business and economic environment.

CCC, CC, C High default risk. Default is a real possibility. Capacity for meeting financial commitments is solely

reliant upon sustained, favorable business or economic conditions. A ‘CC’ rating indicates that

default of some kind appears probable. ‘C’ ratings signal imminent default.

D Indicates an entity or sovereign that has defaulted on all of its financial obligations. Default

generally is defined as one of the following:

Failure of an obligor to make timely payment of principal and/or interest under the contractual

terms of any financial obligation;

The bankruptcy filings, administration, receivership, liquidation or other winding‐up or

cessation of business of an obligor;

The distressed or other coercive exchange of an obligation, where creditors were offered

securities with diminished structural or economic terms compared with the existing obligation.

Issuers will be rated 'D' upon a default. Defaulted and distressed obligations typically are rated

along the continuum of 'C' to 'B' ratings categories, depending upon their recovery prospects and

other relevant characteristics.

Default is determined by reference to the terms of the obligations' documentation. Fitch will assign

default ratings where it has reasonably determined that payment has not been made on a material


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obligation in accordance with the requirements of the obligation's documentation, or where it

believes that default ratings consistent with Fitch's published definition of default are the most

appropriate ratings to assign.

Short Term Ratings

F1 Highest short‐term credit quality. Indicates the strongest intrinsic capacity for timely payment of financial commitments.

F2 Good short‐term credit quality. Good intrinsic capacity for timely payment of financial commitments.

F3 Fair short‐term credit quality. The intrinsic capacity for timely payment of financial commitments is adequate.

B Speculative short‐term credit quality. Minimal capacity for timely payment of financial commitments, plus heightened vulnerability to near term adverse changes in financial and economic conditions.

C High short‐term default risk. Default is a real possibility.

D Default. Indicates a broad‐based default event for an entity, or the default of all short‐term obligations.

Notes: The modifiers “+” or “‐” may be appended to a rating to denote relative status within major rating

categories. Gradation may be used among the ratings from A to E: i.e. A/B, B/C, C/D, and D/E.

Capital Intelligence (CI)

CI has been providing credit analysis and ratings since 1985, and now rates over 400 Banks,

Corporates and Financial Instruments (Bonds & Sukuk) in 39 countries. A specialist in emerging

markets, CI’s geographical coverage includes the Middle East, the wider Mediterranean region,

Central and Eastern Europe, South Asia, South‐East Asia, the Far East, and North and South Africa.

CI’s Issuer Rating:

L / Term S / Term Financial Strength / Outlook

CI Rating BBB+ A2 BBB /Stable


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CI Ratings – Definitions

Long Term Ratings

Investment Grade

AAA The highest credit quality. Exceptional capacity for timely fulfillment of financial obligations

and most unlikely to be affected by any foreseeable adversity. Extremely strong financial condition

and very positive non‐financial factors.

AA Very high credit quality. Very strong capacity for timely fulfillment of financial obligations.

Unlikely to have repayment problems over the long term and unquestioned over the short and

medium terms. Adverse changes in business, economic and financial conditions are unlikely to

affect the institution significantly.

A High credit quality. Strong capacity for timely fulfillment of financial obligations. Possesses many

favourable credit characteristics but may be slightly vulnerable to adverse changes in business,

economic and financial conditions.

BBB Good credit quality. Satisfactory capacity for timely fulfillment of financial obligations.

Acceptable credit characteristics but some vulnerability to adverse changes in business, economic

and financial conditions. Medium grade credit characteristics and the lowest investment grade

category.

"+" and "‐" signs indicate that the strength of a particular bank is, respectively, slightly greater or less than that of similarly rated peers.

Speculative Grade

BB Speculative credit quality. Capacity for timely fulfillment of financial obligations is vulnerable to

adverse changes in internal or external circumstances. Financial and/or non‐financial factors do not

provide significant safeguard and the possibility of investment risk may develop.

B Significant credit risk. Capacity for timely fulfillment of financial obligations is very vulnerable to adverse changes in internal or external circumstances. Financial and/or nonfinancial factors provide weak protection; high probability for investment risk exists.

C Substantial credit risk is apparent and the likelihood of default is high. Considerable uncertainty as to the timely repayment of financial obligations. Credit is of poor standing with financial and/or non‐financial factors providing little protection.

RS Regulatory supervision. The obligor is under the regulatory supervision of the authorities due to its weak financial condition. The likelihood of default is extremely high without continued external support.


15

SD Selective default. The obligor has failed to service one or more financial obligations but CI believes that the default will be restricted in scope and that the obligor will continue honouring other financial commitments in a timely manner.

D The obligor has defaulted on all, or nearly all, of its financial obligations.

Short‐Term Ratings

Investment Grade

A1 Superior credit quality. Highest capacity for timely repayment of short‐term financial obligations that is extremely unlikely to be affected by unexpected adversities.

A2 Very strong capacity for timely repayment but may be affected slightly by unexpected adversities.

A3 Strong capacity for timely repayment that may be affected by unexpected adversities.

Speculative Grade

B Adequate capacity for timely repayment that could be seriously affected by unexpected adversities.

C Inadequate capacity for timely repayment if unexpected adversities are encountered in the short term.

RS Regulatory supervision. The obligor is under the regulatory supervision of the authorities due to its weak financial condition. The likelihood of default is extremely high without continued external support.

SD Selective default. The obligor has failed to service one or more financial obligations but CI believes that the default will be restricted in scope and that the obligor will continue honouring other financial commitments in a timely manner.

D The obligor has defaulted on all, or nearly all, of its financial obligations.

Notes: "+" and "‐" signs indicate that the strength of a particular bank is, respectively, slightly greater or less than that of similarly rated peers.


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SECTION 4

RISK FACTORS AND MITIGANTS

Investors may note that the risks and mitigating factors mentioned below are not exhaustive and

constitute Ahli Bank’s opinion based on its current knowledge and the information available with it.

The actual risks and the impact of such risks could be materially different from those mentioned

herein.

General Risks

a) Economic Risk

Risk:

The Bank’s performance is primarily dependent on the economic environment of Oman in

which it operates. Any sustained change in the economic environment could have an impact on

the Bank’s underlying performance.

Mitigants:

The Bank is run by experienced management which is supervised and guided by various

committees of the Board, each with defined authority and responsibility. The Bank adopts a

conservative credit policy and has strong operational and risk based internal controls.

b) Change in Regulations

Risk:

The Bank is under the supervision of CBO, CMA and MOCI in Oman. Any sustained change in the

prevailing regulatory climate could have an impact on the Bank’s underlying performance.

Mitigants:

In line with the previous policies of the Omani regulatory authorities, any changes in regulations

are expected to maintain a healthy banking sector and the Bank has a well‐experienced and

stable management and infrastructure to adapt to such changes.


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Specific Risks

a) Competition

Risk:

The Bank faces competition from other commercial and specialised banks in Oman. This could

result in increased pressure on business volumes as well as margins with a consequent impact

on profitability.

Mitigants:

The Bank takes proactive steps to meet the challenges of competition.

b) Credit Risk

Risk:

Credit risk is the risk that counter party to a financial instrument will fail to perform according to

the terms and conditions of the contract thus causing the Bank to incur a financial loss.

Mitigants:

The Bank has clear parameters and limits on assessment and mitigation of credit and

concentration risks. The bank has clearly laid out credit policies, which document, inter alia, the

assessment of the payment ability and past history of the borrower and lay down specific

standards for collaterals. The policies also lay down concentration limits on the basis of CBO

regulations. Concentration limits are monitored on various parameters, including geography

and industry. The credit approval and administration procedures are also clearly laid down and

the implementation of such procedures is ensured through adequate internal controls,

including Internal Audits. Periodic credit review processes are in place to ensure continuing

compliance with the policies.

The Bank strictly follows the CBO guidelines and instructions on classification of Non Performing

Loans and maintains adequate provisions in case of a loss. There is also a General Portfolio

provision which is created on the entire Loans portfolio on the basis of CBO guidelines. These

robust credit policies and provisioning policies put the Bank in a comfortable position to address

any Credit Risks.


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c) Liquidity Risk

Risk:

Liquidity risk is the risk that the Bank will encounter difficulty in its maturing obligations to a

counterparty.

Mitigants:

The Bank’s policies are designed to ensure that even under severely adverse conditions, the

Bank will be in a position to meet its obligations. The Bank’s Asset Liability Committee (ALCO)

meets periodically to review and monitor various relevant measures against target positions.

The Bank also maintains significant investments in liquid instruments issued by Governments

and banks principally for liquidity reasons. The Bank also has standby lines of credit to meet its

obligations at any given time, if the need arises.

d) Interest rate risk

Risk:

Interest rate risk arises from the possibility that changes in interest rates will affect the value of

underlying financial instruments. The Bank is exposed to interest rate risk as a result of

mismatches or gaps in the amounts of assets and liabilities and off statement of financial

position instruments that mature or re‐price in a given period.

Mitigants:

The Bank’s overall goal is to manage interest rate sensitivity so that movements in interest rates

do not adversely affect the Bank’s net interest income. Interest rate risk is measured as the

potential volatility in net interest income caused by changes in market interest rates. The Bank

manages this risk by matching or hedging the re‐pricing profile of assets and liabilities through

various risk management strategies.

e) Foreign Exchange Risk

Risk:

Foreign exchange risk is the risk that the foreign currency positions taken by the Bank may be

adversely affected due to volatility in foreign exchange rates.


19

Mitigants:

The responsibility for management of foreign exchange risk rests with the treasury department

of the Bank. Foreign exchange risk management is ensured through regular measurement and

monitoring of open foreign exchange positions. Treasury takes every possible measure to cover

open positions created by customer transactions.

Instruments used to mitigate this risk are foreign exchange spot, forwards, deposits, etc. These

instruments help to insulate the Bank against losses that may arise due to significant

movements in foreign exchange rates. All foreign exchange exposures are centrally managed by

the Bank’s Treasury and are daily marked to market. Limits have been assigned with respect to

overnight open exposures, stop loss and authorised currencies to monitor and control foreign

exchange exposures.

f) Redemption Risk:

While the Bonds have a maturity of seven years from the Allotment Date, the Bank will have a

call option to redeem the Bonds at the end of five years and hence the investors will face the

risk of early redemption.


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SECTION 5

OBJECTIVES AND LICENSES

Overview

The Bank was set up in May 1997 as Alliance Housing Bank (AHB), Oman’s first private sector

housing bank. It was reconstituted with its new identity as Ahli Bank SAOG on January 5, 2008,

following its strategic partnership with Ahli United Bank (AUB), a leading regional commercial bank

and International Finance Corporation (IFC), a member of the World Bank Group.

The Bank is fully transformed into and licensed by the CBO as a commercial bank and currently

provides a wide range of products and services in corporate, retail, investment and private banking

through its Head Office and 12 Branches.

Bank Objectives

As per Article 4 of the Articles of Association of the Bank, the main objectives of the Bank are as

under:

1) To carry on the business of banking in all its fields, and to transact and to do all matters and things incidental thereto, or which may, at any time hereafter at any place, where the Bank shall carry on business, be usual in connection with the business of banking or dealing in money or securities for money.

2) To play the role of underwriter, originator or intermediary for the issue of shares and loan debentures, to play the role of custodian, manager and trustee of trust agreements related to investment and bonds and to participate in any other manner in capital and stock markets, especially in investment, trading, underwriting new issues of bonds in regional and international capital markets with main emphasis on capital debt markets.

3) To carry on business of conventional financing.

4) To act as executors and trustees of wills, settlements and trust deeds of all kinds made by customers and others and to undertake and execute trusts of all kinds.

5) To deal with all types of bank notes, coins, currencies, receive and to deposit any monies in current accounts, term deposits, savings accounts and receive precious articles and financial documents for deposit in safe custody.

6) To issue and negotiate bank guarantees and letters of credit, cheque payments, money orders and all other negotiable documents and their collection.

7) To advance and lend money on real, personal and mixed securities, on cash, credit or other accounts, on policies, bonds, debentures, bills of exchanges, promissory notes, letters of credit or other obligations, or on the deposit of title deeds, merchandise, bills of sale and landing, delivery orders, warehousemen’s and certificates, notes, dock warrants, or other mercantile or tokens, bullion, stocks and shares.


21

8) To settle negotiable cheques and to borrow funds and repay debts from any resources and with any other parties and using any financial instruments including but not limited to deposit certificates, loan debentures, loan bonds convertible into shares and bonds whether of medium term, limited term or floating term bonds with or without security.

9) To establish and distribute banking investment products

10) To sell and buy gold bullion and foreign currencies, to lend against them and to carry on all banking treasury business activities.

11) To establish and acquire companies of different status, to establish branches or acquire banks and other companies or to participate in banks and other companies' capital inside or outside the Sultanate of Oman or to enter into partnership with companies and organizations transacting activities similar to those transacted by the Bank.

12) To play the role of financial consultant in respect of financial investment and generally to carry on all financial business transactions, brokerage deals, financial operations, agency business and to provide financial consultancy services to its corporate customers inside or outside the Sultanate of Oman.

13) To subscribe to the shares of manufacturing projects, to invest the bank’s funds in any investments, to own and sell such investments, to dispose thereof in any other manner and to carry on such business activities as an owner company or as an investor in accordance with the applicable laws in the Sultanate of Oman.

14) To lend monies and to extend credit and financial facilities

15) Providing housing loans or such other loans as may be permitted by the Central Bank of Oman to Omani nationals, GCC nationals or any other nationals as may be permitted by the applicable laws of Oman for the purposes of purchase, construction, development, completion, expansion, repair or maintenance of private homes in the Sultanate of Oman or in such other places or countries as may be permitted by the Central Bank of Oman.

16) To encourage saving schemes and mobilize deposits to be employed by the Bank for the purposes of its objectives.

17) To attract local and foreign capital to contribute in financing construction projects in the Sultanate of Oman, arranging or obtaining local or international loans for the Bank and/ or local real estate projects and the acceptance of foreign deposits and external loans, provided that such activities comply with the regulations stipulated by the Government of the Sultanate of Oman for this purpose.

18) To own land through purchases or appropriation for the purpose of development and/or resale.

19) To carry out the business of housing finance, banking and services related to the acceptance of time deposits, provided that such deposits are not connected in any way to direct credit facilities extended to depositors if such facilities are outside the scope of the Bank's specialty.

20) To carry out banking business and services to customers and others, provided that these be within the limits that enable the Bank to control the loans and credit facilities and to ensure that they are used for the purposes for which they were extended or within the limits that enable the Bank to benefit from banking business and services.


22

21) To finance either directly or whilst acting as agents for the Government or any third party social housing projects and other projects aimed at providing homes for low and medium income Omani nationals and for such other groups of persons as the Government of Oman may wish to encourage to own their properties in Oman.

22) To acquire, negotiate and to receive public and private funds.

23) To grant monies in consideration of guarantees in‐kind or personal or mixed either in cash or by making credit to accounts or in consideration of bills, debentures, promissory notes or any other obligations or in consideration of title deed deposits.

24) To issue bonds and certificates and different type of securities after obtaining the approval of the Central Bank of Oman.

25) To finance or assist in financing the sale of houses, buildings, flats, either furnished or otherwise, by way of hire purchase or deferred payment or similar transactions and to institute, enter into, carry on, or assist in financing the sale and maintenance of any such houses, buildings, flats, furnished or otherwise as aforesaid, upon any term whatsoever in accordance with the Central Bank of Oman regulations as existing from time to time and subject to the prior approval of the Central Bank of Oman.

26) To acquire and discount, hire purchase or other agreements or any rights therein (whether proprietary or contractual) and generally to carry on business and to act as financiers, traders in securities and commission agents or in any other capacity in Oman and to sell, barter, exchange, pledge, make advances upon or otherwise deal in properties, houses, buildings, flats furnished or otherwise as aforesaid subject to first obtaining the Central Bank of Oman's approval.

27) To act as insurance agents, intermediaries or financial advisors for the benefit of its customers and to advise, sell and procure the sale of such services to its customers subject to the Central Bank of Oman's and other necessary regulatory approvals.

Licences and Approvals

The Company obtained and maintains valid licences and memberships from the relevant authorities

in order to pursue the activities for which it has been incorporated which are as follows:

Authority Purpose of Licence/

Licence No.

Issue Date Expiry Date

MOCI 1558560 09.06.1997 ‐*

CBO Commercial Banking

License 26.12.2007 Ongoing

* Renewed every five years


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SECTION 6

PURPOSE OF THE BOND ISSUE AND ISSUE EXPENSES

Purpose

The purpose of the issue will be to ‐

Fund the overall financing requirements of the Bank in line with its growth plan

Reduce dependence on large institutional funds

Bridge the maturity gap in the long term buckets expected to arise because of projected funding to large infrastructure/ government/ quasi government projects

Increase single obligor limits of the Bank and thus participate in large project financing.

To meet the Tier II capital requirements of the Bank, which shall be governed by the Central Bank of Oman’s rules and regulations

The Estimated Issue Expenses

The total costs of the subordinated debt issue are estimated at RO 175,000/‐. The details of the

issue expenses estimates are given in the following table:

Details Expense (RO)

Advertising, Promotion, Printing of prospectus, forms, Rating etc. 75,000

CMA listing and prospectus approval fee 4,500

Issue Management/legal/trustee fees 50,000

Mis. Expenses /Contingency 45, 500

Total estimated issue expenses 175,000

The issue expenses are collected @ 5 Baizas per Bond. In case the actual issue expenses exceed the

collected amount, the excess shall be borne by the Bank.


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SECTION 7

TERMS AND CONDITIONS OF THE BOND ISSUE

1. The Issue

The Bonds will be created and issued by the Bank which is incorporated and registered as a

Company in the Commercial Register maintained by the MOCI (C.R. No 1558560) and as a

Commercial Bank in Oman. The Issue is governed and has been made pursuant to the

Articles and the Laws of Oman.

2. Nominal Value & Issue Price

Each Bond shall have a nominal value of RO 1.000 (Rial Omani One) and the Issue Price of

RO 1.005 (Rial Omani One and Baizas Five) and is inclusive of Baizas 5 (Baizas Five) as Issue

Expenses.

3. Allotment and issue of Bonds

The allotment of Bonds is deemed to be made on the next day of closing of subscription.

Validity of the allotment shall be subject to the approval of all relevant authorities.

4. Redemption

The Bonds shall be redeemed in full, by way of cheque, or electronic transfer at the Issuer’s

discretion, to be made out in favour of the then registered holders thereof, on the

redemption date or the call option date. The redemption date of the Bonds shall be 7

(Seven) years from the Allotment Date or the date on which the bank exercises its call

option, which shall be at end of 5 years from the Allotment Date or later, subject to the

approvals of the EGM and CBO. The Bonds are not redeemable at the initiative of the

Bondholder or without the consent of the CBO, in case of the call option.

5. Call Option

Subject to the approval of the CBO, the Bank will have a call option to redeem the Bonds at

the end of 5 (Five) years.

6. Title

The MCDC shall act as the Registrar and transfer agent with respect to the Bonds and shall

also act as the Trustee in accordance with the terms of a Trust Deed which shall be entered

into by and between the Bank and the Trustee. The title to the Bonds passes on the

recordation of the transfer in the Bondholders Register maintained by the MCDC. The


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registered owner of the Bonds save as otherwise required by the Laws of Oman will be

treated as the absolute owner of the Bonds for all purposes.

7. Interest payments

Interest on the Bonds shall accrue with effect from the Allotment Date (i.e. one day after

the closing of subscription). All further interest payments shall take place semi‐annually in

arrears. Those payments will be made to the Bondholders whose names appear on the

Register on the designated Interest Payment Record Dates shown below.

Interest Payment Record Dates

15th December

15th June

The first interest payment record date will be 15th June 2011.

The interest payments shall be made to the Bondholders whose names appear on the

Register as of the relevant record date. Interest payments shall be made by cheque or

electronic transfer, at the discretion of the Issuer to the Bondholders. Interest cheques (or

electronic payments) will be mailed by registered mail to respective Bondholders within one

week of the respective Interest Payment Record Date.

8. Interest rate

Interest shall be calculated on the Face Value of the Bond at an interest rate of 5.5% (Five

and a half percent) per annum. The interest rate shall remain fixed at the aforesaid rate for

the entire tenor of the Bond. Interest calculation shall be made on the basis of the number

of days in an interest period and a 365 (Three Hundred and Sixty Five) day year.

9. Default interest

In the event that any interest payable by the Issuer under conditions 7, 8 and 21 of this

terms and conditions is not paid on the due‐date or otherwise in the manner provided by

conditions 7, 8 and 21, the Issuer shall pay default interest at the rate of 1% p.a. (One

percent per annum) over and above the applicable rate of interest on the overdue sum from

the date of default up to the date of actual certification by the Issuer to the Trustee that

payments have been made. So long as the default continues, the default interest shall

continue to accrue on the same basis and shall be compounded annually.

10. Listing on the MSM

The Bonds shall be listed on the MSM. The Issue Manager shall complete all the formalities

relating to the listing of the Bonds on the MSM.


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11. Registration of Transfers

The administration of registration of transfers of Bonds shall be maintained by MCDC, the

transfer agent which is normally responsible for maintaining the register of Shares, bonds

and other listed securities of all companies listed on the MSM. MCDC will act as the

Registrar to the Bonds and maintain a register setting out the names and addresses, the

number of Bonds held and the bank account details of the Bondholders.

12. Trading and transferability of Bonds and restrictions on transferability

The Registrar will maintain a separate register of Bondholders, in which it will record

transfers of Bonds that take place through trading on the MSM. Transfers may be made for

a minimum of one Bond and transfer of any fractional Bond shall not be allowed.

Bondholders may sell their Bonds, or acquire additional Bonds, through the MSM by placing

either a sell order, or a buy order, through any MSM registered stockbroker. Trading

through the MSM, as well as settlements and transfers through that market shall be

governed under the rules applicable to trading of corporate bonds issued by MSM and the

Laws of Oman.

The buyer shall provide his/her details to his/her broker who will in turn provide the buyer’s

details to the Registrar of the Bond in the buyer’s name. Bonds may be pledged, donated or

bequeathed by notifying the Registrar to facilitate all necessary formalities.

MCDC will effect the registration of transfer of any Bonds. Any charges levied by the

Registrar shall be borne by the buyer and the seller of the Bonds in accordance with the

regulations. All transfers of Bonds and entries on the register of the Bondholders as

maintained by the Registrar will be made subject to the regulations concerning transfer of

Bonds.

13. Variation of rights

The terms and conditions attaching to the Bonds shall be capable of amendment under the

following circumstances:

13.1 In the event that any term or condition thereof needs to be amended in order to comply

with the Laws of Oman, or change in the Laws of Oman, or any regulation of CBO, the CMA,

the CBO, the MSM, or MOCI, the Issuer shall be entitled to enforce such change or

amendment forthwith, on condition that each holder of the Bond shall be duly notified by

registered mail of such amendment, within 14 days.

13.2 In the event that the Issuer intends proposing any other amendment or variation to the

terms and conditions attaching to the Bonds, it shall call a meeting of Bondholders for such


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purpose, who shall be entitled to consider, and vote upon such variation or amendment by

way of formal meeting to be held, other than as specifically provided for herein, in

accordance with procedures similar to that applying to general meetings of shareholders of

public companies under the CCL and the Laws of Oman.

14. Meetings of the Bondholders, modifications and waiver

The Trust Deed contains provision for convening meetings of Bondholders as per the CCL

that considers matters affecting their interest as proposed by the Issuer, including the

modification of any of these conditions or any provisions of the Trust Deed. Any such

modification may be made if sanctioned by a Bondholders’ resolution as provided for in the

Trust Deed.

14.1 The resolutions of the Bondholders’ general meeting shall not be valid unless such meeting

is attended by, personally or by proxy, a number of Bondholders representing at least two‐

thirds of the Bonds of a certain issue. Failing such quorum, a second meeting shall be

convened to discuss the same agenda. The date of the second meeting shall be notified to

the Bondholders in the same manner followed with regard to the first meeting at least one

week prior to the date set for the second meeting. A quorum representing one‐third of the

Bonds shall be sufficient for the second meeting, provided such second meeting is held

within one month from the date of the first meeting. However, a resolution to extend the

redemption period of the bonds or reduce the rate of interest or the principal debt or the

securities or in way prejudice the rights of the Bondholders, shall not be adopted unless the

meeting is attended by Bondholders who represent two‐third of the bonds. Resolutions

shall be adopted by two‐thirds majority of the Bonds represented at the meeting.

14.2 In all circumstances, voting shall take place by way of a poll, in terms whereof each Bond

shall represent 1 (One) vote. Resolutions shall be adopted by a two‐thirds majority of the

Bonds represented at the meeting through Bondholders present in person or by proxy.

14.3 Notwithstanding any other matters on which a Bondholders’ Resolution would be required,

Bondholders’ Resolution will be required in case of any proposal made by the Issuer to:

i) modify the call option, or the dates on which interest is payable in respect of the Bonds

or the maturity of the Bonds except pursuant to the call option

ii) reduce or cancel the principal amount or interest on the Bonds or modify the date of

payment in respect of the Bonds

iii) change the currency of payment of the Bonds

iv) sanction the exchange or substitution of the Bonds for, or the conversion of the Bonds

into, notes, debentures, debenture stock or other obligations or securities of the Issuer

or any other body corporate formed or to be formed


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14.4 The Trustee may agree as per the powers vested in it by the Trust Deed without the consent

of the Bondholders, to (i) any modification of any of the provisions of the Trust Deed which

is of a formal, minor or technical nature or is made to correct a manifest error, and (ii) any

other modification (except as mentioned in the Trust Deed), and any waiver or

authorisation of any breach or proposed breach, of any of the provisions of the Trust Deed

which does not, in the sole the opinion of the Trustee materially prejudice the interests of

the Bondholders. Any such modification, authorisation or waiver shall be binding on the

Bondholders and, if the Trustee so requires, shall be notified by the Issuer to the

Bondholders as soon as is reasonably practicable. In the event that the Issuer fails to notify

the Bondholders within a week, the Trustee shall be at liberty to notify the Bondholders.

14.5 In connection with the exercise of its functions (including but not limited to those in relation

to any proposed modification, authorisation or waiver) the Trustee shall have regard to the

interests of the Bondholders as a class and shall not have regard to the consequences of

such exercise for individual Bondholders and the Trustee shall not be entitled to require, nor

shall any Bondholder be entitled to claim from the Issuer any indemnification or payment in

respect of any tax consequences of any such individual Bondholders.

15. Further Issues

The Issuer shall be at liberty from time to time to make further issues of bonds or any other

debt, equity or hybrid (a combination of debt and equity) instrument including debt

instruments ranking in priority to the Bonds in accordance with the CCL and the Laws of

Oman.

16. Security & Bondholder’s Claim over the Assets

The Bonds will be unsecured and subordinated to the senior debt. Articles 85, 86 and 87 of

the Banking Law of 2000 set out the priority of payments on the liquidation of a bank.

Assets held by the Bank in a fiduciary capacity are excluded from the general pool of assets

and must be distributed to the specified beneficiaries of those assets. Priority is also given

to payment of all liquidation expenses (including fees of the administrator). The remaining

assets of the bank in liquidation are distributed pursuant to Article 87 on a pro rata basis in

the following order of priority:

unpaid monthly salaries within the limit of three months or R.O. 1,000, whichever is

less, plus employees’ claims related to other entitlements

claims by the Deposit Insurance Scheme, as a guarantor to the deposits

claims of the CBO

claims of “other creditors” of the bank in liquidation


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In respect of repayment of principal and interest represented by the Bonds, the

Bondholders will be unsecured and subordinated to Senior Liabilities of the Bank and the

Bond will form a part of the Issuer’s Subordinated Liabilities. The rights of the Bondholders

in respect of repayment of principal and interest represented by the Bonds will, however,

rank pari passu with all other Subordinated Liabilities of the Issuer and have priority over

payment to Shareholders.

It is recorded that the subordinated Bonds are specifically intended to comply with the

requirements of the regulations and laws applicable to banks registered and incorporated in

Oman as they relate and refer to second tier (Tier II) capital.

In this Clause:

“Senior Liabilities” mean liabilities of the Issuer, which are repayable ahead of Subordinated Liabilities and Share Capital; and

“Subordinated Liabilities” mean liabilities of the Issuer, which are stated to be repayable after payment of Senior Liabilities and ahead of Share Capital.

17. Status

The Bonds constitute a direct obligation of the Issuer and shall, save for such exceptions as

may be provided for by the Laws of Oman, at all times rank pari passu without any

preference among themselves.

18. Undertakings and Covenants

As long as any Bond remains outstanding (as defined in the Trust Deed), the Issuer shall duly

obtain and maintain in full force and effect all governmental approvals including any

exchange rules in the market and valid transfer approvals, which may, as a result of any

change in, or amendment to, the Laws of Oman subsequent to the commencement of the

period of subscription of the Bonds, become necessary or desirable under the Laws of Oman

for the execution, delivery and performance of the Bonds by the Issuer for the validity and

enforceability of the Bonds. It shall also obtain all necessary governmental and

administrative approvals in Oman for the payment of all amounts due in respect of the

Bonds as is required by the terms of the Issue.

19. Corporate reorganization

In the event of any consolidation or amalgamation of the Issuer with any company or other

corporate entity (other than a consolidation or amalgamation) in which the Issuer is the

continuing entity), or in the event of the occurrence of the sale or transfer of ownership of

all the assets of the Issuer, the Issuer will forthwith notify the Bondholders of such event

and It shall (to the extent permitted by law) cause the company or the corporate entity


30

resulting from such consolidation or amalgamation or which might have acquired such

assets, as the case may be, to execute a trust deed supplemental to the Trust Deed (in form

and substance satisfactory to the Trustee) such that the new entity assumes the obligations

of the Issuer under the Trust Deed.

20. Ratings

The Issuer has been rated by two leading credit rating agencies in the world namely Fitch

and CI. The long term ratings given by these agencies to the Issuer are given below:

Rating Agency Rating ‐ Fitch: BBB+ ‐ CI: BBB+

The Issuer undertakes to keep its rating under surveillance for the entire tenor of the Bond.

The ratings are reviewed annually or earlier at the discretion of the rating agency.

21. Events of Default

The following shall be treated as ‘Events of Default’ in connection with the Bonds being

issued:

1. The Issuer fails to pay any interest in respect of the Bonds until a period of 45 days after

the relevant interest payment date.

2. An order has been issued or legislation passed directing the liquidation of the Issuer.

3. The Issuer has stopped or intends to stop the payment of its debts generally or ceases to

carry on business or substantially the whole of its business.

4. The Issuer sells, transfers or otherwise disposes of, directly or indirectly, the whole or a

substantial part of its undertaking or assets except a disposal at market value or in the

ordinary course of its business or a disposal the terms of which have previously been

approved by the majority of not less than two‐thirds in value of the Bondholders. For

this purpose, a certificate from the Auditors of the Issuer for the time being shall be

obtained stating that, in its opinion, the business or assets disposed of are not

substantial. Such a certificate shall be conclusive evidence.

5. The Issuer becomes insolvent or is unable to pay its debts as they mature or applies for

the appointment of a liquidator or takes any proceedings under the prevailing laws for a

deferment, readjustment, compromise or any such arrangement with and for the

benefit of the creditors.

In each of such aforesaid events of default, the Trustee shall convene a meeting of the

Bondholders and, if so directed by the Bondholders’ resolution, shall give notice to the


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Issuer that the Bond will immediately start to accrue default interest as per Condition 9

mentioned above.

22. Prescription

Claims against the Issuer in respect of principal and interest shall become time‐barred

unless made within the limitation periods provided by the Laws of Oman.

23. General duties and obligations of the Issuer to Bondholders

23.1 The Issuer shall conduct its business of operating a bank in accordance with the laws of

Oman, as well as all bank and securities laws and regulations as may apply to it, or become

applicable to it during the period of issue of the Bonds.

23.2 The Issuer shall prepare interim and annual financial statements in accordance with the

laws applicable to banks in Oman. Any Bondholder shall be entitled to be furnished with a

copy of any released financial results, or Annual Report, within 14 (Fourteen) days of a

written request for such, which may be made to the Issuer.

23.3 The Issuer shall, in accordance with the regulatory requirements of Oman, publish its

financial results timely in at least 1 (One) Arabic and 1 (One) English language newspaper, in

each interim and annual financial reporting period, immediately after filing them with the

MSM electronic transmission system.

23.4 In the event that the Bonds for any reason whatsoever become delisted from the MSM

while still in issue, or are at any time removed from the electronically recorded registration

system, the Issuer shall be entitled to issue Bond certificates as valid documents of title in

respect of any Bonds then outstanding, as substitute to the electronic recording of

ownership and title thereof.

24. Enforcement

At any time after the Bonds becoming due and payable and remaining unpaid, the Trustee

may, at its discretion and without further notice, institute such proceedings against the

Issuer as it may think fit to enforce the terms of the Trust Deed and the Bonds.

25. Other rights attaching to the Bonds

The Bonds, while being transferable, are not negotiable and cannot be dealt with as a bill of

exchange or under the laws applicable to bills of exchange or similar commercial banking

instrument. However, the Bonds shall be capable of being pledged, ceded, sold,

bequeathed, donated or dealt with in any way as may be ordinarily allowed under the Laws

of Oman in respect of listed and stock market tradable securities.


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26. Subscription period

The bond issue shall open for subscription on December 12, 2010 and shall close on

December 15, 2010 (both days inclusive).

27. Joint and fraction holdings

No joint holdings of a Bond shall be capable of registration. Each Bond shall be registered in

the name of a single person or a single legal entity. The Issuer shall not be held responsible

for any misappropriation, loss or damage which any person may suffer due to a loss arising

from a holding which is, directly, or indirectly jointly held. No person shall be capable of

registering a fraction of a holding of a Bond.

28. Notices

Notices to the Bondholders will be sent by the Issuer by mail (airmail if overseas) at their

respective addresses on the Register, and will be deemed to have been given on the date of

mailing. Notices will also be published in one Arabic and one English newspaper having

general circulation in Oman, and each such notice shall be deemed to have been given on

the date of such publication or if published more than once or on different dates, on the

first date on which such publication is made. Copies of all notices shall also be given by the

Issuer to CMA.

29. Documents for inspection

The Articles, the Trust Deed and the audited financial statements of the Issuer for the

financial year ended December 31, 2009 and its unaudited financial statements for the nine

months ended on September 30, 2010 shall be available for inspection with the Trustee, at

the specified offices of the Trustee and with the Issue Manager.

30. Applicability of the Central Bank of Oman Rules & Regulations and Commercial Companies Law

The issue of the Bonds shall be governed by the CCL and the Laws of Oman. To the extent

that any clause herein does not comply with, or contradicts any Article or Chapter of such

Law, the Law shall override the provision contained in these terms and conditions. Nothing

contained herein shall preclude any matter or dispute arising from the Bond issue from

being adjudicated by a competent court of Oman. As the Bond issue is to meet the tier II

capital requirements of the Bank, the rules and regulations of the Central Bank of Oman

shall have an overriding influence on this current issue.


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31. Trusteeship

MCDC will be appointed as Trustee to the Bondholders to oversee the compliance of the

Issuer with the terms and conditions of the issue, and to oversee, co‐ordinate and monitor

the status and the rights of the Bondholders.

32. Governing law and jurisdiction

These Terms and Conditions shall be governed by and construed in accordance with the

Laws of Oman and any disputes arising between the Trustee, on behalf of the Bondholders

and the Issuer in respect of these Terms and Conditions or any interpretation thereof shall

be subject to amicable negotiations between the Issuer and the Trustee on behalf of the

Bondholders. Failing a satisfactory resolution of the dispute, the disputed matter may be

referred to the exclusive jurisdiction of the Primary Commercial Court of Oman for its

adjudication.


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SECTION 8

RIGHTS AND RESPONSIBILITIES

TRUSTEE

The following are the rights and responsibilities of the Trustee as per the terms of the Trust Deed

entered into between the issuer and MCDC:

1. The Responsibilities and Duties of the Trustee

Calling for periodical reports from the Issuer and inspect books of accounts, records,

registers, the assets and the documents and reports relating to the credit rating of the

Issuer.

Monitoring material contracts, events, actions and announcements (including publications

(including publication of annual financial statements) entered into or announced by the

Issuer, from time to time. The Issuer shall inform the Trustee of any material transaction or

contract that could be judged to affect the rights of Bondholders.

Ensuring that interest due on the Bonds has been paid to the Bondholders on the relevant

interest due dates.

Monitoring the Issuer's adherence to the terms and conditions of the Issue and assessing

whether or not the Issuer is able to discharge the claims of Bondholders as and when they

become due.

Ascertaining that the Bonds have been redeemed in accordance with the terms &

conditions of the Issue.

Acting upon any reasonable request of a holder of the Bonds, the auditors of the Issuer, the

MOCI, CBO, the CMA, or the Issuer itself, who may alert MCDC to a situation which may

constitute an Event of Default or breach which has, or potentially may have a material and

substantial effect on the rights of the Bondholders.

Calling or causing to be called the general meeting of Bondholders or on a request by one or

more Bondholders who own at least 10% of the total issued Bonds. The call for the meeting

shall be pursuant to Article 92 of the CCL.

Ascertaining that the funds raised through this Issue are utilized in accordance with the

Prospectus.

Acting as an intermediary in resolving any material dispute arising between the Issuer and

any individual Bondholder, or collective number of Bondholders on issues directly relevant

to the terms and conditions relating to the Bonds.


35

Carrying out such other acts as necessary for the protection of the interests of the

Bondholders.

2. Rights and Powers of the Trustee

The Trustee shall have the following specific powers, in addition to any other powers that may be conferred upon it by the Laws of Oman:

The Trustee may act on the opinion or advice of, or information obtained from, any expert

and will not be responsible to anyone for any loss suffered by so acting. Any such opinion,

advice or information may be sent or obtained by letter, telex or fax and the Trustee will not

be liable to anyone for acting in good faith on any opinion, advice or information purporting

to be conveyed by such means even if it contains some error or is not authentic.

The Trustee need not notify anyone of the execution of the Trust Deed or do anything to

find out if an Event of Default has occurred. Until it has actual knowledge or express notice

to the contrary, the Trustee may assume that no such Event of Default has occurred and

that the Issuer is performing all its obligations under the Trust Deed and the Conditions.

The Trustee will not be responsible for having acted in good faith pursuant to a resolution

adopted in a meeting of the Bondholders in respect of which minutes have been made and

signed even if it is later found that no Event of Default has occurred and that the Issuer is

performing all its obligations under the Trust Deed and these terms and conditions.

If the Trustee, in the exercise of its functions, requires to be satisfied or to have information

as to any fact or the expediency of any act, it may call for and accept as sufficient evidence

of that fact or the expediency of that act a certificate signed by an Authorised Signatory of

the Issuer as to that fact or to the effect that, in their reasonable opinion, that act is

expedient and the Trustee need not call for further evidence and will not be responsible for

any loss occasioned by acting on such certificate.

The Trustee may deposit the Trust Deed and any other documents with any bank or entity

whose business includes the safe custody of documents or with any lawyer or firm of

lawyers believed by it to be of good repute and may pay all sums due in respect thereof.

The Trustee may, if it considers it expedient in the interests of the Bondholders, employ and

pay any professionals selected by it, for the performance of any functions and exercise of

any powers of the Trustee to transact or conduct, or assist in transacting or conducting any

business and to do or assist in doing all acts required to be done by the Trustee (including

the receipt and payment of money) pursuant to the terms of this Trust Deed. If the Trustee

exercises reasonable care in selecting an agent, the Trustee will not be responsible to

anyone for any misconduct or omission by such agent so employed by it.


36

The Trustee will not be liable to the Issuer or Bondholder by reason of having transferred

any monies to a Bondholder based on the information recorded against the name of a

registered Bondholder with the registrar.

Unless ordered to do so by a court of competent jurisdiction, the Trustee shall not disclose

or be required to disclose to any Bondholder or to any other person any confidential

financial or other information made available to the Trustee by the Issuer unless the Trustee

otherwise considers it necessary to so disclose for the proper discharge of its duties.

As between itself and the Bondholders, the Trustee may determine all questions and doubts

arising in relation to any of the provisions of the Trust Deed. Such determinations, whether

made upon such a question actually raised or implied in the acts or proceedings of the

trustee, will be conclusive and shall bind the Trustee and the Bondholders.

The Trustee may determine whether or not an Event of Default is in its opinion capable of

remedy. Any such determination will be conclusive and binding on the Issuer and the

Bondholders. If the Trustee so decides that an Event of Default has occurred and/or is

directed by the Bondholders pursuant to the passing of a Bondholders’ Resolution to

commence proceedings against the Issuer, the Trustee shall commence proceedings to

recover principal, interest and/or default interest on behalf of the Bondholders.

The Trustee will not be responsible for the receipt or application by the Issuer of the

proceeds of the issue of the Bonds.

BONDHOLDERS

Bondholder’s Rights

The Bondholders shall enjoy equal rights inherent in the ownership of Bonds as follows:

The right to receive principal amount of the Bonds in accordance with condition 4 and 5 of

Section 7 of this Prospectus.

The right to receive interest payable on the Bonds in accordance with conditions 7, 8 and 9

of Section 7 of this Prospectus.

The right to dispose or transfer the Bonds in accordance with condition 12 of Section 7 of

this Prospectus and the Laws of Oman.

In the event of the liquidation of the Bank, the right to claim any amounts outstanding

under the Bonds as a debt owed by the Bank.

The right to participate in Bondholders’ meetings and to vote at such meetings in

accordance with the provisions of the Trust Deed and the CCL.

The Bondholder shall have no right to participate in any other meetings of the Bank.


37

SECTION 9

RELATED PARTY TRANSACTIONS

Related Party Transactions

The Bank enters into transactions with major shareholders, directors, senior management and their

related corporate entities in the ordinary course of business at commercial interest and commission

rates, subject to shareholder approval (as may be required). Pricing policies and terms of other

transactions are approved by the Bank’s management and Board of Directors.

The year end balances in respect of related parties included in the balance sheet are as follows:

2009 2008

RO RO

Directors and Senior Management

Loans and advances 633,001 516,980

Customers deposits 260,664 297,193

Major shareholders

Loans and advances 14,879,945 3,832,924

Due to banks and customer deposits 3,921,867 14,383,267

Investments 1,925,000

Other liabilities 363,649 691,959

Derivatives 61,515,351 ‐

Contingent Liabilities and Commitments 11,259,178 ‐

Transactions with major shareholders are further analysed as follows:

2009 2008 RO ROLoans and advances:

MB Holding and subsidiaries 7,028,298 3,832,924 Ahli United Bank and its subsidiaries 217,142 Others 7,634,506

14,879,946 3,832,924


38

Due to Banks and customer deposits:

MB Holding and subsidiaries 669,681 7,001 Ahli United Bank and its subsidiaries 149,926 14,375,666 Others 3,102,260

3,921,867 14,382,667

Investments:

Ahli United Bank and its subsidiaries 1,925,000 ‐

Other Liabilities:

Ahli United Bank and its subsidiaries 206,640 601,253Others 157,009 90,706

363,649 691,959

Derivatives:

Ahli United Bank and its subsidiaries 61,515,351 ‐

Contingent Liabilities and Commitments:

Ahli United Bank and its subsidiaries 11,241,838 ‐ Others 17,340 ‐

11,259,178 ‐

The Bank has entered into a master risk participation agreement dated December 27, 2007 with a

shareholder. Under this agreement, the Bank participated in loans and advances amounting to nil as

of December 31, 2009 (December 31, 2008: RO 9 million).

No provision is required in respect of loans given to related parties (2008: nil).


39

The income and expenses in respect of related parties included in the financial statements are as

follows:

2009 2008

RO RO

Directors and Senior Management

Interest Income 36,268 55,502

Interest Expense 2,276 757

Board Remuneration proposed 75,000 44,600

Board Sitting fees 42,930 37,400

Major shareholders

Interest Income 604,459 166,618

Interest Expense 135,832 109,358

Fees and Other income 68,990 ‐

Other operating expenses 866,560 691,959

The Bank has also entered into a Technical and Management Services Agreement (TMSA) with a

major shareholder. Under the terms of this agreement, the Bank will pay 2% of the net profit before

tax and Management fee to the shareholder for services provided. An amount of RO 219,654 was

included in the operating expenses during 2009 (2008: RO 138,688).

Compensation of the key management personnel is as follows:

2009 2008

RO RO

Salaries and allowances 481,556 422,209

End of service benefits 9,117 6,811

Total compensation paid to key personnel 490,673 429,020


40

SECTION 10

HISTORICAL FINANCIAL PERFORMANCE

Income Statement

Particulars 2010 ( 9 months up to September)(unaudited)

2009 2008 2007 2006

RO '000 RO RO RO RO

Interest income 25,392 28,088,190 22,967,237 13,630,636 12,593,504

Interest expense (11,688) (14,417,598) (11,638,616) (7,635,187) (6,007,266)

Net interest income 13,704 13,670,592 11,328,621 5,995,449 6,586,639

Fees and commissions income 4,693 4,077,242 2,196,496 1,254,258 502,615

Other income 340 149,148 709,736 399,826 464,641

Net operating income 18,737 17,896,982 14,234,853 7,649,533 7,553,895

Staff expenses (3,478) (4,361,185) (4,042,410) (2,184,992) (1,187,193)

Depreciation (841) (871,187) (383,192) (175,493) (53,574)

Other expense (2,262) (2,688,874) (3,256,355) (1,921,954,) (1,795,016)

Loan loss provision (359) (266,108) 139,319 (857,657) (56,455)

Net operating expenses (6,940) (8,187,354) (7,542,638) (5,140,096) (3,092,238)

Profit before taxation 11,797 9,709,628 6,692,215 2,509,437 4,461,658

Income tax expense (1,434) (1,168,464) (758,738) (290,783) (547,468)

Net profit for the year (10,363) 8,541,164 5,933,477 2,218,654 3,914,190


41

Balance Sheet

Particulars 2010 ( As of

September)(unaudited)

2009 2008 2007 2006

ASSETS RO '000 RO RO RO RO

Cash and balances with the Central Bank

33,211 108,819,765 14,765,276 9,008,881 2,145,989

Due from other bank 25,713 7,208,923 10,116,271 384,265 9,594,196

Financial investments‐ held for trading 6,042 6,198,219

Investment securities 27,554 36,216,426 46,004,380 55,311,308 11,204,813

Loans and advances to customers 575,306 443,562,243 375,297,761 239,412,791 150,322,598

Property and equipment 8,639 9,190,131 8,283,462 713,539 558,184

Deferred tax asset 357 344,455 340,341 326,628 209,628

Other assets 6288 4,517,870 1,597,046 809,105 1,142,743

Total 683,110 616,058,032 456,404,537 305,966,517 175,178,151

LIABILITIES AND EQUITY

LIABILITIES

Customers’ deposits 528,732 466,710,336 319,256,295 152,220,863 92,514,166

Other borrowed funds 6,613 7,863,459 23,937,292 29,100,000 32,950,000

Due to other banks 31,663 35,149,926 18,426,459 39,611,657 14,850,000

Taxation 2,058 1,756,861 1,075,808 606,160 738,109

Other liabilities 15,753 11,958,960 6,653,550 3,439,509 2,460,177

584,819 523,439,542 369,349,404 224,978,189 143,512,452

EQUITY

Share capital 71,238 67,846,154 64,615,384 64,615,384 21,000,000

Premium 6,290,440 6,290,440 ‐

Legal reserve 7,034 7,033,681 3,119,895 2,526,547 2,304,682

General banking reserve 1,559 1,558,554 1,131,496 834,822 1,877,389

General loan loss reserve 5,663 3,932,867 2,272,769

Cumulative change in fair value 152 93,558 (159,405) (292,733) (10,884)

Retained earnings 12,645 12,153,676 9,803,554 7,013,868 6,494,512

98,291 92,618,490 87,055,133 80,988,328 31,665,699

Total 683,110 616,058,032 456,404,537 305,966,517 175,178,151


42

Notes

Loans and Advances to customers:

2009 2008

RO RO Corporate lending 181,806,454 137,948,918

Mortgage and consumer lending 264,756,730 240,094,193

Gross loans and advances 446,563,184 378,043,111

Less: Allowance for impairment losses (3,000,941) (2,745,350)

443,562,243 375,297,761

An age analysis of the Bank's gross loans and advances is set out below:

Loans not in

arrears Loans in arrears Total

1‐30 days 31‐60 days

61‐89 days

90 days or more

Figures in RO

31 December 2009 425,417,683 8,683,610 5,174,786 5,875,833 1,411,272 446,563,184

31 December 2008 363,317,709 9,830,612 2,360,864 1,824,078 709,848 378,043,111

Loan and advances within 1 to 89 days category are considered by the Bank as past due but not

impaired.

The fair value of collateral that the Bank held as at 31 December 2009 towards loans and advances not impaired amounted to RO 328,105,000 (31 December 2008 RO 282,505,611)

An economic sector‐wise distribution of loans and advances before and after taking into account collateral held:

Economic Sector Gross Exposure Net Exposure Gross Exposure Net Exposure

2009 2009 2008 2008

Figures in (RO '000)

Wholesale & Retail 38,997 33,156 24,056 12,976

Mining and quarrying 20,991 ‐ 3,823 3,803

Construction 47,692 ‐ 43,242

Manufacturing 28,890 25,890 41,909 37,695

Electricity, gas and water 17,067 17,067 ‐ ‐


43

Transport & Communication 6,062 6,062 ‐ ‐

Financial Institutions 2,549 ‐ 4,314 4,292

Services 19,260 ‐ 8,894

Personal Loans 264,756 34,403 240,096 33,238

Non‐resident lending 299 299 1,389 1,382

Others ‐ ‐ 10,320 16

Total 446,563 116,877 378,043 93,402

Impairment allowance for loans and advances to customers:

2008 2009

Corporate

lending

Mortgage &

consumer

lending

Total Corporate

lending

Mortgage &

consumer

lending

Total

356,398 2,448,450 2,804,848 At 1 January 356,398 2,316,080 2,672,478

‐ 100,157 100,157 Charge for the

year ‐ 293,928 293,928

‐ (232,527) (232,527) Recoveries ‐ (64,613) (64,613)

356,398 2,316,080 2,672,478 At 31 December 356,398 2,545,395 2,901,793

Loan impairment expense, net of recoveries include a loan write off of OMR 10,517 (31 December

2008: OMR 18,473).

Interest is reserved for all non‐performing loans and advances where recovery is considered

doubtful. As at 31 December 2009, the total balance of loans and advances on which interest is not

being accrued, or where interest is suspended, amounted to OMR 1,411,272 (31 December 2008:

OMR 709,848). The fair value of collateral that the Bank holds relating to loans individually

determined to be impaired as at 31 December 2009 amounts to OMR 1,580,500 (31 December

2008: OMR 2,135,500). The collateral consists of cash, securities and properties.

In accordance with the requirements of the CBO’s circular referenced BM 977, the Bank is required

to create a portfolio‐based provision (general loan loss provision) by debiting the income statement.

On 29th December 2007, the CBO has permitted the Bank to create a general loan loss reserve in

lieu of such general loan loss provisions, for a temporary period of three years from 1 January 2008

to 31 December 2010. Accordingly, the Bank has set aside an amount of OMR 3.9 million (31

December 2008: OMR 2.273 million) as a non‐distributable loan loss reserve in its statement of

equity.


44

Financial Investments:

Available for

Sale Held to Maturity

Held For Trading

Total Cost

Figures in RO

31 December 2009

Government development bonds‐ Oman

‐ 1,135,000 6,198,219 7,333,219 7,367,863

Certificates of Deposit 30,000,000 ‐ ‐ 30,000,000 30,000,000

Listed debt securities 2,453,603 130,700 ‐ 2,584,303 2,552,218

Listed funds 2,497,123 ‐ ‐ 2,497,123 2,447,584

Total (RO) 34,950,726 1,265,700 6,198,219 42,414,645 42,367,665

31 December 2008

Government development bonds‐ Oman

‐ 1,535,000 ‐ 1,535,000 1,535,000

Government treasury bills ‐ 41,907,726 ‐ 41,907,726 41,802,353

Listed debt securities 1,120,177 1,412,180 ‐ 2,532,357 2,697,040

Listed funds 29,297 ‐ ‐ 29,297 22,585

Total (RO) 1,149,474 44,854,906 ‐ 46,004,380 46,056,978

Customer Deposits:

2009 2008

RO RO

Time deposits 364,976,601 296,550,176 Demand and saving deposits 101,733,735 22,706,119

466,710,336 319,256,295

Other Borrowed Funds:

2009 2008

RO RO

Fixed rate bonds 6,000,000 6,000,000

Syndicated loan ‐ 15,400,000

NBO Loan 1,863,459 2,537,292

7,863,459 23,937,292


45

Key Financial Ratios

30 ‐Sep‐10 31‐Dec‐09 31‐Dec‐08 31‐Dec‐07 31‐Dec‐06

Operational Efficiency

Net Interest Margin 2.5% 2.8% 2.33% 1.43% 2.25%

Interest Income/Operating Income 73% 76% 80% 78% 87%

Non‐interest Income/Operating Income

27% 24% 20% 22% 13%

Cost to Income Ratio 35.1% 44.3% 54.3% 56.0% 37.3%

Profitability

ROE (%) 14.10% 9.50% 7.10% 3.90% 12.30%

ROA (%) 2.00% 1.60% 1.60% 0.90% 2.40%

Valuation Measures

P/E 13.87 18.10 17.89 61.40 31.94

P/B 1.95 1.67 1.22 1.68 3.95

Asset Quality

NPL/Gross Loan 0.33% 0.32% 0.19% 0.37% 0.92%

Liquidity and Solvency

Gross Loan to Customer Deposits 109% 96% 118% 159% 165%

Gross Loan as % Total Assets 85% 72% 83% 79% 87%

Deposits as % Total Liabilities & Equity 77% 76% 70% 50% 53%

Capital Adequacy 15.66% 17.62% 23.36% 40.85% 33.13%

1. Net interest margin is calculated on the average interest bearing assets

2. ROE & ROA for 2010 are annualized

3. P/E is based on the market price as on the relevant dates and the annualized EPS (calculated on basis of weighted average number of shares outstanding during the year adjusted for bonus issue)

4. P/B is calculated on the basis of market price and book values on relevant dates


46

Information regarding Bonds issued previously

Instrument : Non‐guaranteed Bonds (5.55%)

Issued & Subscribed : 6,000,000 Bonds

Par Value : RO 1.000

Issue Date : April 20, 2004

Maturity Date : May 15, 2011

Market Capitalization : RO 6,132,000

The Bank is servicing the previously issued Bonds without any default in interest payments.

Litigations

(i) There is no litigation against the Bank which could have an adverse effect on the Bank’s

operations


47

SECTION 11

PEER GROUP COMPARISON

Licensed Local Commercial Banks in Oman (As at December 31, 2009)

Name of the Bank Date of

Establishment No. of Authorised

Offices No. of Operating

Offices

1. National Bank of Oman 1973 65 64

2. Oman Arab Bank 1973 45 45

3. Oman International Bank 1975 84 83

4. Bank Muscat 1981 127 126

5. Bank Dhofar 1990 55 53

6. Bank Sohar 2007 17 14

7. Ahli Bank 1997 13 13

Source: CBO Annual Report 2009

Market Share of Commercial Banks

ABOB5%

BKDB14%

BKMB44%

BKSB9%

NBOB15%

OAB6%

OIBB7%

Market share by loans and advances in Q4 2009

Source: Company Financial Statements


48

Comparative Financials (Based on 2009 Audited Financial Statements)

(Figures in RO million unless stated)

Ahli Bank Bank

Muscat NBO OIB Bank

Dhofar Bank Sohar

Net Interest income 14 174 57 32 49 23

Other operating income 4 117 25 11 16 6

Total operating income 18 291 82 43 65 29

Net profit 9 74 21 22 25 8

EPS (RO) 0.013 0.068 0.019 0.024 0.034 0.008

Dividend per share (RO) 0.007 0.020 0.012 0.022 0.015 ‐

Net Interest Margin 2.8% 3.3% 3.6% 3.8% 4.0% 2.6%

Interest Income/Operating Income

76.4% 59.9% 69.4% 74.0% 75.7% 78.5%

Cost to Income Ratio 44.3% 28.2% 42.5% 45.1% 36.4% 59.1%

ROE (%) 9.5% 10.3% 8.5% 12.5% 12.9% 7.9%

ROA (%) 1.6% 1.2% 1.1% 2.1% 1.8% 0.9%

NPL/Gross Loan 0.3% 5.0% 5.0% 10.5% 4.8% 0.24%

Gross Loan to Customer Deposits

95.7% 123.6% 113.4% 94.0% 114.2% 91.7%

Gross Loan as % Total Assets 72.5% 69.3% 79.5% 66.0% 84.6% 78.0%

Deposits as % Total Liabilities & Equity

75.8% 59.7% 70.1% 70.2% 74.1% 94.8%

Capital Adequacy 17.62% 15.2% 16.6% 15.3% 14.8% 12.9%

ABOB6%

BKDB13%

BKMB39%

BKSB10%

NBOB15%

OAB8%

OIBB9%

Market share by customer deposits in Q4 2009

Source: Company Financial Statements


49

SECTION 12

CORPORATE SNAPSHOT, BUSINESS PLAN AND FUTURE STRATEGY

Background

Ahli Bank SAOG (previously known as Alliance Housing Bank) is a public joint stock company

incorporated in the Sultanate of Oman and is engaged in commercial banking activities. The

registered address of the Bank is PO Box 545, Mina Al Fahal, Postal Code 116, Sultanate of Oman.

The Bank was incorporated in 1997 as a specialised housing bank focusing on the extension of

residential mortgages and listed on the Muscat Securities Market. In January 2007 the Bank

obtained in‐principle approval from the Central Bank of Oman to operate as a fully fledged

commercial bank.

In June 2007, the Bank formed a strategic alliance with Ahli United Bank, a premier pan‐GCC bank

with a UK presence, through 35% ownership in Ahli Bank SAOG and provision of technical services

through a 5 year (renewable) management contract to oversee conversion into a commercial

banking model. In December 2007 the International Finance Corporation (IFC), a 100% subsidiary of

World Bank, acquired a 9.9% ownership in Ahli Bank SAOG through participation in the capital

increase. In December 2007 the capital was increased by RO 50.9 million (US$132.2 million).

In January 2008, Alliance Housing Bank changed its name to Ahli Bank S.A.O.G. and commenced its

commercial banking operations.

The strategic tie ups have contributed to diversifying its business portfolio with varied activities

including retail finance, corporate finance and trade finance. Ahli Bank maintains its leading position

in providing the most convenient housing mortgage facilities to customers in Oman. The Bank has

successfully launched new deposit products and loan products which are competing with the best

ones in the market. It has now established itself as a fully‐fledged Omani commercial bank.

The Bank employed 239 employees as at September 30, 2010.


50

Share capital & Shareholding

The authorised share capital of the Bank is 1,000,000,000 shares of 100 baizas each, out of which

678,461,539 shares (2008: 646,153,846) are issued and fully paid up. 32,307,693 shares were issued

during the year as bonus shares out of share premium. Shareholders of the Bank who own 5% or

more of the Bank’s shares, whether in their name, or through a nominee account, and the number

of shares they hold are as follows:

Group Overview

Ahli United Bank BSC (AUB) with asset worth USD 25 billion (June 30, 2010) is a fully fledged

diversified financial services group centred on commercial banking, investment banking, private

banking, asset management and life insurance with an enhanced Sharia’a compliant business focus

and contribution. The AUB Group’s parent company, AUB, is based in Bahrain and the Group has an

operating presence in each of Egypt, Iraq, Kuwait, Libya, Oman, Qatar and the United Kingdom.

Details of the operations in various countries are given in the table below:

Country Name of Subsidiary/Associate Ownership %

UK Ahli United Bank (U.K) PLC 100%

Kuwait Ahli United Bank Kuwait 75%

Qatar Ahli Bank QSC 36.4%

Iraq Commercial Bank of Iraq 56.1%

Egypt Ahli United Bank (Egypt) 85.1%

Oman Ahli Bank S.A.O.G. (Oman) 35%

Libya UBCI (Libya) 40%

Number of Shares

%

September 2010

Ahli United Bank BSC 249,334,614 35.0%

MB Holding and subsidiaries 108,366,414 15.2%

International Finance Corporation 70,560,000 9.9%

Ministry of Defense – Pension Fund 46,305,000 6.5%

474,566,028


51

AUB has a presence in four out of the six Gulf Co‐operation Council (“GCC”) markets together with

Egypt, Iraq, Libya and the United Kingdom. The Bank is continuously assessing and seeking to

expand in the GCC and to acquire complementary banking platforms in identified secondary

markets in the Middle East and North Africa (“MENA”) region in order to act as a preferred regional

and international intermediary for its clients. The AUB Group’s presence in the United Kingdom

services the need of its gulf clients there and continues to be one of its key preferred overseas

markets for investments and acquisition of secondary residences. 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 border business and/or investment

flows within the MENA region.

As at September 30, 2010 AUB had the following credit ratings:

Standard & Poor’s: ‘A‐’

Fitch Ratings, Inc.: ‘A‐’

Capital Intelligence Ltd: ‘A’

Products of Ahli Bank

Retail and Premium Banking

Ahli Bank’s retail banking segment principally handles individual customers’ deposits. The unit

provides consumer loans, residential mortgages, credit cards and fund transfer facilities The

extensive product offerings include Savings plan (MyHassad and My Smart),Time deposits, Loans

products ( My Loan, MyHome, Auto loan, Business loans etc) and variety of Credit card products.

Ahli Bank introduced the first ATM‐chip debit card, equipped with the smart card technology also

known as Chip and PIN in July 2009. The new debit cards offer customers a much higher level of

security against fraud as well as quicker transaction times.

In March 2009, Ahli Bank announced the enhanced MyHassad Savings Scheme offering bigger

rewards to customers.

Ahli Bank has launched MyE‐Bank, an internet banking service which can be accessed from

anywhere in the world, at any time and at no extra cost to customers. Simultaneously the SMS

banking service was launched making ‘Push’ and ‘Pull’ transactions even easier for customers.

In October, 2009, Ahli Bank implemented Fast Track, the Retail Lending Tracking System in an

effort to improve the bank’s efficiency in processing and sanctioning loans to its customers.


52

The Bank has 12 Branches in Oman and planning to increase the branches to around 20‐25 in the

next 3 years.

Commercial Banking

The Commercial Banking has two units Corporate Banking and Small and medium enterprises

banking. The Corporate banking mainly caters to Manufacturing, Energy & Utility, General Trading,

Real Estate Contracting, Tourism & Transport and others.SME Banking caters to the small and

medium enterprises. As a recently converted commercial bank, the bank with strategic alliance with

Ahli United Bank is able to undertake high value deals and cross border transactions. The products

offered include Working capital financing, Project Financing; Trade Finance; Forex Services; Advisory

Services. It has a fully fledged dealing room and experienced Trade finance processing team.

Business Plan and strategy

Ahli Bank will continue with its business model of managing the asset growth with prudent risk

management approach and position itself as a leading commercial bank in the Sultanate of Oman.

The Bank plans to achieve a sustained growth based on solid capitalized, funding and asset

diversification. The Bank will try to maximize shareholder value by ensuring competitiveness in

terms of ability to service clients’ needs and through innovative capital structuring within regulatory

guidelines

The broad funding strategy of the Bank is to prudently raise funds in a cost effective manner on the

basis of business requirements within acceptable regulatory framework.

The Bank seeks to diversify its funding sources and reduce dependence on institutional deposits

progressively while adhering to regulatory requirements on the maturities.

To augment long term deposits the Bank has to launch new customer centric liability products so as

to gather more retail deposits. In order to garner long term and stable deposits, the Bank will focus

also on Corporate & SME teams to open current accounts and call deposits. The Bank will reduce

dependency on institutional funding with the aim to reduce concentration. Supplementary funding

other than deposits, will be through medium term loan, certificate of deposits, retained profits, re‐

launch of special deposit schemes with additional features.


53

SECTION 13

CORPORATE GOVERNANCE, BOARD OF DIRECTORS AND MANAGEMENT TEAM

This section summarises the Company's corporate structure effective as at the date of this

Prospectus and the Articles of Association. The description provided hereafter is only a summary and

does not purport to give a complete overview of the Articles, nor of relevant provisions of Omani law

or the CMA circulars; neither should it be considered as legal advice regarding these matters. A copy

of the Articles of Ahli Bank is available from the registered office of Ahli Bank.

Corporate Governance

The CMA framed a “Code of Corporate Governance for MSM listed companies”, (hereinafter

referred to as the “Code”) issued vide CMA Circular No.11/2002 dated June 3, 2002 and its

amendment Circular / Decision 001/2003 dated January 11, 2003. The CMA Code is comprehensive

in its coverage of the principles of Corporate Governance that have to be adopted by “publicly listed

companies and mutual funds organized as public companies” (Article 2 of the Code). Since the Bank

is a publicly listed company, the Code applies to it.

CBO also issued a circular, “Corporate Governance of Banking and Financial Institutions” (Circular

BM/932 dated February 4, 2002) which applies to Banks.

The Bank has affirmed its commitment to comprehensively adopting and implementing the above

regulatory requirements in its functioning.

Corporate governance practice embodies the dual goals of protecting the interests of all

stakeholders while respecting the duty of the board and senior management to oversee the affairs

of a bank, ensure accountability, inculcate integrity and promote long‐term growth and

profitability. With an excellent Board of Directors details of whom are given below and the

institution of all recommended sub committees, the Bank is already compliant with all statutory

requirements.

Ahli Bank’s corporate governance philosophy is based on the following principles:

1. Satisfy the spirit of the law and not just the letter of the law

2. Be transparent and maintain a high degree of disclosure levels

3. Communicate externally, in a truthful manner, about how the Bank is run internally

4. Have a simple and transparent corporate structure driven solely by business needs

5. Management is the trustee of the shareholders’ capital and not the owner

At the core of corporate governance practice is the Board, which oversees how the management

serves and protects the long‐term interests of all the stakeholders of the bank. In compliance with


54

the regulatory requirements and as per the best International practice, four board level sub‐

committees have been set up to ensure effective functioning of the Board.

The Corporate Governance Structure of the Ahli Bank SAOG is depicted below:

Disclosure and stakeholder education are core concerns which are addressed by constant

information flow and updation of knowledge bases. Ahli Bank SAOG publishes quarterly accounts

which are uploaded on the Muscat Securities Market (MSM) website, and when published also

makes these available on its website www.ahlibank‐oman.com.

All annual reports include a comprehensive management report. Management makes regular

presentations to analysts, the press and investors. These briefings outline the Bank’s performance,

and strategy on future prospects.

Board of Directors

The Bank is managed by a Board of Directors comprising 11 members elected by the annual general

meeting. The members of the Board of Directors are elected from amongst the shareholders of the

Bank or from amongst others, provided the candidate, if a shareholder, holds a minimum of 500

shares in the Bank which he may not dispose of to the extent that he shall be deprived of his status

as a shareholder in the Bank through the term of his office.

A minimum of one third of the Board Members must be independent directors. That is to say, such

directors or any of their first degree relatives should not have occupied any senior post (such as that

of a Chief Executive Officer, General Manager or similar posts in accordance with the Bank's

organisational structure) over the last two years. Additionally such independent Board Members

should not have had any relations with the Bank, its parent company or its affiliated or sister

companies resulting in financial transactions with such companies.

Subject to Article 95 of Commercial Companies Law No. 4/74 and its amendments, and without

prejudice to the Articles of Association, nominees to the membership of the Board must:

(a) be of good conduct and sound reputation;

Board of Directors

Audit Committee Executive & Credit Committee

Executive Risk Committee

Compensation Committee


55

(b) not be unable to settle his indebtedness to the Bank when he submits his application for

nomination;

(c) not be declared insolvent or bankrupt unless the state of insolvency or bankruptcy has

ceased pursuant to the laws of Oman;

(d) not be convicted of a felony or a dishonorable crime unless he has been rehabilitated;

(e) not be a member or represent a juristic person, on the boards of more than four public joint

stock companies based in the Sultanate of Oman or be a chairman of more than two of

these companies;

(f) be authorised to nominate himself to the membership of the Board of Directors by the

juristic person if he is nominated by a juristic entity;

(g) not be a member of the board of directors of a public or closed joint stock company which is

based in the Sultanate of Oman and which is carrying on commercial activities similar to

those of the Bank;

(h) present an acknowledgement which contains a statement of the number of his shares, if he

is a shareholder, with an undertaking that he will not dispose of such shares to the extent

that he shall cease to be a shareholder in the Bank, throughout the term of his office.

The directors shall be elected to the Bank's Board of Directors by direct secret ballot by the

shareholders of the Bank. Each Shareholder shall have a number of votes equal to that of the shares

held by him. A shareholder shall have the right to use the entirety of his votes in support of one

nominee or divide his shares among other nominees of his choice through the voting card. The total

number of votes cast by a shareholder in support of nominees standing for election to the Bank's

Board of Directors may not exceed the number of shares owned by such shareholder.

The membership of those elected in violation of the previous provisions shall be null and void with

effect from the date of their election. The Bank's Board must call a general meeting to elect another

member within a maximum period of one month from being aware of the nullity. The Bank shall

have the right to claim damages, resulting from this violation, from the said member or anyone who

took part in facilitating his participation in the elections.

The term of office of a member of the Board of Directors shall be three years and upon completion

of such term, the member shall be eligible to be re‐elected for a further period or periods of a

similar duration. The current term of the Board of Directors expires in March 2011.

The Board of Directors shall have the widest authority in carrying out all work required by the

Bank's management to achieve the Bank's objectives and implementing the resolutions of the

general meeting. Such authority shall be unrestricted except by stipulations made by law and


56

regulations adopted in the Sultanate of Oman or by the Bank's regulations or by decisions issued by

general meetings of the Bank.

The Board of Directors shall have full authority to perform all acts required for the management of

the Bank in course of achieving its objectives and implementing the resolutions of the general

meeting. It includes the following:

i) Approving the Bank's commercial and financial policies together with its estimated budget

with a view to achieving the objectives of the Bank and to maintain and promote the rights

of its shareholders.

ii) Developing, reviewing and updating necessary business plans from time to time in order to

put into operation the Bank's objectives and for carrying out the Bank's commercial

activities in the light of the Bank's objectives for which it has been incorporated.

iii) Adopting the Bank's disclosure measures and to follow up the implementation thereof in

accordance with the disclosure rules and guidelines issued by the Capital Market Authority;

iv) Supervising the performance of the executive management and to ensure that the Bank's

business proceeds in a manner which achieves the Bank's objectives in the light of the

objectives for which the Bank has been established;

v) Providing accurate information to the Bank's shareholders on the dates specified by the

Capital Market Authority by its disclosure rules and guidelines;

vi) Appointment of the Chief Executive Officer or the General Manager of the Bank provided

that neither of them shall be the Chairman of the Board of Directors. Also, to appoint staff

who shall work with any of the Chief Executive Officer and/or the General Manager

pursuant to the Bank's organisational structure and to specify their rights, responsibilities,

obligations and duties;

vii) Appraising the performance of the Bank's employees referred to above and to assess the

work carried out by the committees formed by the Board pursuant to article 102 of the

Commercial Companies law;

viii) Approving the financial statements related to the Bank's business and work results as

submitted by the executive management to the Bank's Board quarterly, which should reflect

the exact financial position of the Bank;

ix) Including in the annual report presented to the Shareholders General Meeting the reasons,

which justify the ability of the Bank to pursue its specified activities for the achievement of

its objectives;

x) Appointing a secretary to the Board in its first meeting and to hold four meetings per annum

provided that a maximum period of four months should not lapse between any two

consecutive Board meetings;


57

xi) Appointing the Managing Director or the Executive Director, should such posts exist,

provided that the said persons should be committed to the Bank's work on a fulltime basis;

xii) Including in the financial statements a full statement of all amounts which a director may

have received during the course of each financial year including monies paid to directors in

their capacity as employees of the Bank.

The Board of Directors shall not be permitted to carry out the following unless authorised to do so

by the ordinary general meeting:

i) Make gifts or donations except for ordinary gifts of minimal value required in the ordinary

course of business.

ii) Sell all or an important part of the Bank’s assets.

iii) Use the assets of the Bank as collateral except to guarantee its debts arising in the normal

course of its business in order to achieve the objectives of the Bank.

iv) Guarantee the debts of others apart from guarantees contracted in the course of normal

business in order to achieve the objectives of the Bank and guarantees relating to its Bank's

and subsidiaries against others.

The Bank’s Board of Directors consists of the following:

S. No. Name of Director Position Type of Directorship

1. H.E. Sayyid Khalid Hamad Hamood Al Busaidi

Chairman Independent

2. Hamdan Ali Nasser Al Hinai First Deputy Chairman Independent/ Representing MOD Pension Fund

3. Hamad Abdulmohsen H.D. Al Marzouq

Second Deputy Chairman

Independent/ Representing Ahli United Bank

4. Munir Abdulnabi Yousef Makki

Director Independent

5. Hassan Ehsan Naseeb Director Independent

6. Usama Mohammed Al Barwani Director Independent / Representing MB Holding

7. Adel Mohamed Abdelshafe El‐Labban

Director Independent

8. Sanjeev Baijal Director Independent

9. Keith Henry Gale Director Independent

10. Mustafa Shafqat Anwar Director (from March 2010)

Independent

11. Safana Al Barwani Director (from June 2010)

Independent / Representing Al Murjan Investment and

Services Co

All members of the Board are non‐executive directors.


58

Brief Profile of Directors are given below:

1‐Sayyid Khalid Hamad Hamood Al Busaidi – Chairman

Chairman:

• Sabco LLC • Oman Expo LLC • Amouage LLC • Oman Perfumery LLC

• Sabco Catering • Al Hail Investments LLC • Sabco Arts LLC

• Faisal Mo`ad Trading and Contracting LLC • Sabco Media SAOC

• Horizon Technologies FZE • Horizon Technologies SAOC

• Oman Shapoorji Construction Company LLC

Director: National Mineral Water Co. SAOG

2‐Hamdan Ali Nasser Al Hinai – First Deputy Chairman

Director:

• Contracts and Legal Affairs, Ministry of Defence

Former Director:

• Planning, Ministry of Regional Municipalities and Environment

3‐Hamad Abdulmohsen H.D. Al Marzouq ‐ Second Deputy Chairman

Chairman and Managing Director: • Ahli United Bank, Kuwait

Deputy Chairman:

• Ahli United Bank, Bahrain • Ahli United Bank (UK) PLC

• Ahli United Bank, Egypt • Ahli Bank, Qatar

Board Member:

• Commercial Bank of Iraq • Kuwait Banking Association

• Kuwait & Middle East Financial Investment Co, Kuwait

• Union of Arab Banks

• Institute of Banking Studies, Kuwait

• The Public Authority for Applied Education & Training, Kuwait

Member of the Board of Trustees: • The Arab Academy of Banking & Financial Sciences, Kuwait

4‐ Munir Abdulnabi Yousef Makki ‐ Director

Managing Director and President: • The Financial Corporation (FINCORP) SAOG

Director:

• Al Maha Petroleum Marketing Co. SAOG

• Qatar Oman Investment Company – Qatar

Chairman:

• Advent United LLC


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• Member of the Council of Higher Education

• Member of Omani Moroccan Businessmen Council – OCCI

• Member of Omani Indian Businessmen Council – OCCI

• Member of Economic Committee – OCCI

Former Ambassador of Oman to France

5‐ Hassan Ehsan Naseeb – Director

Vice Chairman:

• Global Financial Investments

• Oman Hotels and Tourism

Director:

• Oman Holdings International Co. SAOG

6‐Usama Mohammed Al Barwani ‐ Director

Chairman:

• Flexible Industrial Packages Co. SAOG

Director:

• Taageer Finance Co. SAOG

• Oman Medical Projects Company SAOG

7‐ Adel Mohamed Abdelshafe El‐Labban ‐ Director

Group CEO and Managing Director: • Ahli United Bank, Bahrain

Board Member:

• Ahli United Bank (UK) PLC

• Ahli United Bank, Kuwait

• Ahli Bank, Qatar • Bahrain Stock Exchange

• Kuwait & Middle East Financial Investment Co, Kuwait

• Ahli United Bank, Egypt

Director: • Board of Trustees – Bankers Society of Bahrain, Bahrain

8‐Sanjeev Baijal – Director

Deputy Group CEO: • Finance and Strategic Development, Ahli United Bank, Bahrain.

Deputy Chairman:

• Legal and General Gulf BSC (C)

• Legal and General Gulf Takaful BSC (C)

Director:

• Ahli United Bank, Kuwait


60

• AUB Investments (Cyprus) Ltd.

9‐ Keith Henry Gale – Director

Deputy Group CEO:

• Risk, Legal and Compliance, Ahli United Bank, Bahrain

Director:

• AUB Investments ( Cyprus) Ltd

10‐Mustafa Shafqat Anwar‐ Director

Deputy Group CEO: • Operations and Technology, Ahli United Bank, Bahrain

11‐Safana Al Barwani‐ Director

Director:

• MB Holding Company

• MB Petroleum Services LLC

• Crest Petroleum

• Musstir LLC

Management

Overview

The respective roles and responsibilities of the management bodies of Ahli Bank are in large part

governed by the provisions of the Commercial Companies Law, the Articles and by the Code and

circulars issued by the CMA in respect thereof.

The management of strategic issues of Ahli Bank is entrusted to the Board of Directors. The Board

may perform all acts necessary or useful for achieving the corporate purposes of the corporate

entity, with the exception of those acts that are by law or the Articles explicitly reserved for the

shareholders.

The day‐to‐day management of Ahli Bank is performed by the management team.

Senior Management Team

1‐Abdul Aziz Mohammed Al Balushi: CEO

Former Deputy Chief Executive Officer – National Bank of Oman

10 years of banking experience in various positions in National Bank of Oman

12 years of banking experience in various positions in Oman International Bank


61

Former Board Member and Chairman of the Audit Committee in Oman National Investment Corporation Holding S.A.O.G (ONIC)

Former Member of the Board and Chairman of the Audit Committee of Al Ahli Insurance

Former Member of the Board and Chairman of the Audit Committee of National Life Insurance

Former Director, Oman Investment and Finance Co. Ltd. S.A.O.G (OIFC)

Former Director, Gulf Hotel (Oman) Co. Ltd.

Former Advisory Member in College of Agricultural and Marine Sciences at Sultan Qaboos University

Advisory Board Member “The British Scholarships of Oman” A local organization that sponsors outstanding Omanis for Post Graduate Studies in the UK

2‐Chandrashekhar Chetty: DCEO – Support Services

Former COO, Global Retail & Commercial Bank Barclays Bank PLC –Mumbai, India

Former COO, Calyon Bank –Mumbai, India

Former COO, Dresdner Bank Group, India

3‐CB Ganesh: DCEO‐ Commercial Banking and Treasury

Former Head of Trade Finance – ICICI Bank Ltd, India

Former Dy. Chief Executive & Head of Wholesale Banking – North Asia, ICICI Bank Ltd

Former Regional Head, Corporate Banking, South India– ICICI Bank Ltd, India

4‐ Ashish Sood: DCEO‐ Retail and Private Banking

Former Head of Consumer Banking, Standard Chartered Bank, Jordan

14 years of banking experience in various positions and geographies in Standard Chartered Bank including:

General Manager, Lending, Northern Gulf and Levant based in Bahrain

General Manager, Credit Cards and Personal Loans, Bahrain

Head of Sales, Credit Cards, Standard Chartered Bank, UAE


62

SECTION 14

SUBSCRIPTION CONDITIONS AND PROCEDURES

Eligibility for the subscription of Bonds offered

The subscription to 35,000,000 (Thirty Five million) Bonds offered shall be open to Omani and Non‐Omani individuals and Juristic Persons.

Details of Proposed Investors

Sl. Name of the Investor Undertaking amount Proposed Allotment

Million Bonds Million Bonds

1 Public Authority for Social Insurance (PASI) 6.000 3.850

2 MoD PF (10%) 3.500 2.250

3 Oman Fisheries 1.000 0.640

4 Vision Insurance 0.400 0.260

5 National Life & General Insurance 0.500 0.320

6 Dr. Abdulla Abbas 0.500 0.320

7 Rashid Al Rajhi 2.000 1.280

8 The Financial Corporation Co. SAOG (FINCORP) 3.000 1.930

9 Port Services Corporation 3.000 1.930

10 Oman Arab Bank SAOC 1.500 0.960

11 Abdul Kader Ahmed Askalan 0.300 0.200

12 Oman Qatar Insurance 0.400 0.260

13 Oman Investment Fund 5.000 3.210

14 Oman Re‐insurance 0.500 0.320

15 Ahli United Bank Money Market Fund 0.500 0.320

16 Oman LNG 0.575 0.370

17 Bank Muscat –Staff Saving 0.500 0.320

18 Civil Service Pension Fund 10.000 6.420

19 Engr. Mohsin Mohammed Al Sheikh 0.300 0.200

20 Diwan of Royal Court Pension Fund 3.000 1.930

21 Malallah Ali Mohammed Al Lawati 12.000 7.710

Total 54.475 35.000


63

Prohibitions with regard to the Applications for subscription

The subscribers to the Bonds issued as mentioned hereunder shall not be permitted to participate

in the subscription:

1. Sole Proprietorship Establishments: Whereas, an owner of a sole proprietorship establishment

would be required to subscribe in his name only if he so desires.

2. Trust Accounts: Brokerage companies are required to lodge applications for subscriptions for

Bonds, which are made on behalf of their “Trust Account” clients in the personal names of their

clients.

3. Multiple Applications for the subscription: A person is not permitted to submit more than one

application for subscription in his personal name.

4. Applications made in joint names (including the applications made in the name of legal heirs).

All applications made that violate the above prohibitions shall be rejected without further reference

to the applicant.

Shareholder’s (Investor’s) Number with Muscat Clearing and Depository Company

1. Any person who desires to subscribe to the Issue must have an investor account with MCDC as

per its working form, which may be obtained from the MCDC Head Office or its site on the

World Wide Web or from brokerage companies. Each subscriber may open this account through

the following outlets:

Head Office of MCDC based in the Ground Floor of the building of the Capital Market

Authority, Commercial Business District

Branch of MSM based in Salalah

Office of the Brokerage Companies that are licensed by MSM

By fax No. 24817491

By opening an account through the MCDC website at www.csdoman.co.om

2. With regard to the investors who presently hold accounts with MCDC, all investors shall be

required, before the subscription, to confirm whether their accounts contain their basic

particulars totally, that being the name in full, postal address, Civil Status No., as mentioned in

the Personal Card (Civil) or Civil No., furnished in the Passport or Civil No., as provided for in the

new Birth Certificate and details of the Bank Account. Every Bondholder may update his

particulars through the outlets mentioned above.

3. All correspondence including notices and cheques shall be sent to the subscriber at the address

recorded at MCDC. Therefore, all subscribers shall verify the correctness of such addresses.


64

4. Each subscriber shall be required, after opening of the Account or updating of his particulars, to

secure from MCDC, the right number so as to have it registered in the Application for the

subscription. The investor himself shall be responsible for verification of the number furnished

in the Application for the subscription. The applications not bearing the correct Account

Numbers shall be rejected without contacting the subscriber.

For more information on these Procedures, please contact:

Muscat Clearing and Depository Company SAOC

Tel. 24814827 ‐ Fax. 24817491

http://www.csdoman.co.om/

Subscription Period

Subscription for the Issue shall start on the December 12, 2010 and shall close on the December 15,

2010 (both days inclusive).

Minimum and Maximum Application Size

The minimum number of Bonds for subscription will be 100,000 and in multiples of 1000 Bonds

thereafter. There is no maximum limit.

Particulars of the Bank Account

1) Each subscriber shall be required to furnish the particulars of his Bank Account (Registered in

the name of the Applicant). The subscriber shall not use the Bank Account Number of any other

person except in case of minor children only.

2) If the Bank Account of the subscriber is registered with a bank other than the one receiving the

subscription, he shall be required to submit a document in evidence of correctness of the Bank

Account Particulars as provided for in the Application. This can be done by submitting any

document from the Bank of the subscriber furnishing therein Number and Name of the

Account Holder like the upper Portion of the Account Statement issued by the Bank containing

these particulars only or a letter or any document issued by the said Bank containing the said

information. The subscriber shall ensure that the evidence submitted is readable in a clear

manner, containing Number and Full Name of the Account Holder. As additional clarification, it

is made known that the subscriber is not obliged to submit the evidence with regard to

correctness of his Bank Account if he is subscribing through the bank wherein he is maintaining

his account. In this case, the bank shall be required to verify and confirm the correctness of the

subscriber’s Account through its specific System and Procedure or through the evidence

submitted to it by the subscriber.

3) In accordance with the instructions issued by the CMA, the particulars of the Bank Account

referred to above shall be recorded in the Registers of MCDC and this account shall be used in


65

the transfer of the excess funds of the subscription and distribution of the interest payable to

the Bondholder available with the MCDC. Whereas, with regard to the subscribers who have

their Bank Accounts registered presently with the Registers of MCDC, the Bank Account Number

provided for in the Application for the subscription would be utilized only for the purpose of

transfer of the excess sums.

4) The Application for subscription containing the Bank Account Number of a person other than

the subscriber shall be rejected, with the exception of the applications made on behalf of minor

children that contain Bank Accounts particulars of their fathers.

Documentation Required

1) Submission of a document confirming correctness of the Bank Account Number as provided for

in the application for subscription in one case only that is being subscription through a bank

other than the one with whom the subscriber has his account.

2) Copy of a valid Power of Attorney duly endorsed by the competent legal authorities in the event

the subscription is on behalf of another person (with the exception of the subscription made by

a father on behalf of his minor children).

3) In case of applications by non‐individuals, which are signed by a person in his/her capacity as an

authorized signatory, a copy of adequate and valid documentation should be attached.

Mode of subscription

1) The subscriber shall be responsible for furnishing all his particulars, ensuring correctness and

validity of the information provided for in the application. While emphasizing on it, the Banks

receiving the subscription have been instructed to accept the applications for subscription that

comply with all the requirements as provided for in the Application for subscription and

Prospectus.

2) The subscriber shall be required, before filling the Application Form for subscription, to peruse

the Prospectus and read the conditions and procedures governing the subscription with total

care and importance.

3) The subscriber shall be required to fill in the Application for the subscription and furnish all his

particulars including the Shareholder Number available with MCDC, Civil Number/Passport

Number and date of birth in case of minor children.

4) The subscriber shall be required to submit the application to the Collecting Bank along with the

payment towards the Bonds and also ensure that the documents in support of the information

furnished referred to above are enclosed.

5) In case of payment of the value of the subscription by Cheque/Demand Draft, it shall be in

favour of “Ahli Bank Bonds”.


66

Banks receiving the subscription

The applications for subscription shall be accepted by one of the following commercial bank (“the

Collecting Bank”) during the official working hours only:

1. Ahli Bank SAOG

The Bank receiving the subscription shall be required to accept the application for subscription after

confirmation of compliance of the procedure and subject matter in line with the requirements as

provided for in the Prospectus. Hence, the Bank must instruct the subscribers to comply and fulfill

any requirement that may appear in the application submitted.

The subscriber shall be responsible for submission of his application for subscription to one of the

Banks receiving the subscription before closing of the period for subscription. In this regard, the

Bank shall have the right not to accept any application for subscription that reaches it after the

official working hours on closing date of the period for subscription.

Acceptance of the Applications for subscription

The Bank receiving the subscription shall neither receive nor accept the Applications for

subscription under the following circumstances:

1) If the Application for subscription does not bear the signature of the Applicant.

2) In case of failure to pay the value of the Bonds subscribed in accordance with the conditions

provided for in the Prospectus.

3) If the value of the Bonds subscribed is paid through Cheque and if the same is dishonored

for whatever reason.

4) If the Application for subscription is not bearing the MSM No., available with MCDC.

5) If the MSM Number furnished in the Application for subscription is noted to be incorrect.

6) If the subscriber submits more than one application in the same name, all of them shall be

rejected.

7) If the Supporting Documents referred to in the Prospectus are not enclosed with the

Application for subscription.

8) If the Application does not contain all the particulars of the Bank Account of the Applicant.

9) If all the particulars of the Bank Account held by the Applicant as provided for in the

Application are noted to be incorrect.

10) If the particulars of the Bank Account provided for in the Application are found to be not

relevant to the Applicant, with the exception of the applications submitted in the name of


67

Minor Children, who are allowed to make use of the particulars of the Bank Accounts held

by their fathers.

11) In case of failure to have the Powers of Attorney attached with the Application as provided

for in the Prospectus in respect of the Person who subscribes and (sign) on behalf of

another Person (with the exception of the fathers who subscribe on behalf of their Minor

Children).

12) If the Application has not complied with the legal and organizational requirements as

provided for in the Prospectus.

If the Bank observes, after receipt of the application and before expiry of the time schedule

prescribed for handing over of the applications in a final manner to the Issue Manager, that the

application has not complied with the legal requirements as provided for in the Prospectus, due

effort would be taken for contacting the Applicant so as to correct the mistake detected. In case of

failure to have the mistake corrected within the period referred to, the Bank receiving the

subscription shall be required to return the application for the subscription together with the

subscription value before expiry of the period specified for handing over of the applications to the

Issue Manager.

Refusal of subscription Applications

The Issue Manager may reject the subscription Applications under any of the conditions referred to

above, after securing the approval of the CMA and submission of a comprehensive report furnishing

the details of the subscription Applications that are required to be rejected and reasons behind

such rejection.

Enquiry & Complaints

The subscribers who intend to seek clarification or file complaints with regard to the issues related

to the allotment or rejected applications or refund of the funds in excess of the subscription may

contact the Branch of the Bank where the subscription was made. In case of absence of any

response from the Branch, the subscriber may contact the person concerned as hereunder:

Bank Person in

Charge

Postal

Address

Phone

No.

Fax No. Email

Ahli Bank SAOG Sriram

Balakrishnan

P.O. Box 545,

PC 116,

Sultanate of

Oman

24577000 24568001 Sriram.Bala@ahlibank‐

oman.com


68

Allotment Letters and Refund of Money

The Bank will make efforts to complete the allotment of Bonds within fifteen Business Days from

the date on which the Issue closes for subscription, subject to the approval of all relevant

authorities. The Registrar of the Bonds shall maintain a register setting out the names and

addresses of the Bondholders to send the allotment advices. The allotment advice will contain the

name and address of the Bondholder, face value of the Bond, number of Bonds allotted, the total

value of Bonds allotted and folio number as recorded with the Registrar. No physical certificates will

be issued for the Bonds allotted.

Proposed Timetable

Procedure Date

Commencement of subscription December 12, 2010

Closing of subscription December 15, 2010

Due date for the Issue Manager to receive the subscription data and final registers of the subscribers from the bank (Allotment Date)

December 16, 2010

Notifying the CMA of the outcome of the subscription and proposal with regard to the allotment

December 18, 2010

Approval of the CMA with regard to the proposal for the allotment December 19, 2010

Commencement of refund and dispatch of the notices regarding allotment

December 20, 2010

Listing of the Bonds on the MSM December 22, 2010

Listing & Trading of the Bonds of the Issuer

The Bonds of the Bank shall be listed with MSM in accordance with the Laws and Procedures that

are in force on the date application is made for the listing and registration.

Responsibilities & Obligations

The Issue Manager, the Collecting Bank and the MCDC shall abide by the responsibilities and duties

specified under the Regulations issued by the CMA and shall comply with by any other

responsibilities and obligations set out in the agreements entered into between them and the

issuer. The parties concerned shall be required to take remedial measures with regard to the

damages arising from any negligence committed in the performance of the functions and

responsibilities assigned to them. In such event the Issue Manager shall liaise with relevant

authorities such as CMA and MSM for taking suitable steps and measures for repairing such

damages.


69

SECTION 15

UNDERTAKINGS

Issuing Company: Ahli Bank SAOG

The Board of Directors of Ahli Bank SAOG confirm that:

1. All the information provided in this Prospectus are complete, correct and sound and

reasonable care has been taken so as to avoid omission of any important facts or

information that would have made the expressions in the Prospectus misleading

2. Investors to the private placement are informed of all information that are required to make

their investment decision on whether to subscribe to the Company’s Bonds.

3. They will abide by all the provisions set out in the Capital Market Law, Commercial

Companies Law, Rules and Regulations issued pursuant to them

Signed on behalf of the Board of Directors:

S. No. Name Designation Signature

1 Mr. Hamdan Ali Nasser Al Hinai First Deputy Chairman

2 Mr. Hassan Ehsan Naseeb Director


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Issue Manager: The Financial Corporation Company SAOG

In accordance with the responsibilities assigned to us pursuant to the Provisions laid down in Article

3 of the Capital Market Law, Executive Regulations and Instructions issued by the Capital Market

Authority, we have reviewed all the relevant documents and other material required for the

preparation of the Prospectus pertaining to the Issue of Bonds of Ahli Bank SAOG.

The Board of Directors of Ahli Bank SAOG shall bear the responsibility with regard to correctness of

the information provided for in the Prospectus, and they have confirmed not to have deleted any

material information from it, omission of which would have made the Prospectus misleading.

We confirm that we have taken due care as required by the profession with regard to the

Prospectus that has been prepared under our supervision. On the basis of the review works

referred to above and discussion with the issuer of the securities represented by the Issuer

Company, its directors/founders, officers and other related parties and on the basis of the review

carried out by us with these authorities concerned with regard to the subject matter of the Issue

and contents of the documents submitted to us, we confirm the following:

1) We have taken necessary and reasonable care in ensuring that the information furnished to

us by Ahli Bank SAOG and that contained in the Prospectus are consistent with the facts

available in the documents, material and other documents pertaining to the Issue.

2) On the basis of our perusal and information made available to us by the Issuer , it is hereby

confirmed that the Issuer has neither concealed any fundamental information nor omitted

any important information omission of which would have made the Prospectus misleading.

3) The Prospectus and the private placement to which it relates are consistent with all the

rules and conditions governing the transparency as provided for in the Capital Market Law

as amended, the Executive Regulations of the Capital Market Law and applicable Specimen

Prospectus available with the Authority. Also noted to be in conformity with the

Commercial Companies Law as amended and the directives and decisions issued in this

regard.


71

4) The data and information which have been presented in the Prospectus in Arabic (with its

unofficial translation in English) are correct, reasonable and adequate as per our perusal so

as to assist the investor in taking an appropriate decision whether or not to invest in the

Bonds offered in accordance with the rules and conditions governing the transparency.

Issue Manager

The Financial Corporation Co. SAOG


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III. Legal Advisor: Said Al Shahry Law Office

The Legal Advisor, whose name appears below, hereby confirms that all the non‐financial

particulars and information set out in the Prospectus are consistent and in conformity with the

laws and regulations of Oman relevant to the activity of the Issuer, the Commercial Companies

Law, the Capital Market Law and their implementing regulations and directives, the

requirement and rules for the issue of bonds issued by the CMA and the Articles of Association

of the Issuer and the resolutions of the general meeting of the Issuer. The Issuer has secured all

the licences and official approvals that are required to engage in the activities which are the

subject matter of the Prospectus.

Legal Advisor

Said Al Shahry Law Office