BURGAN SENIOR SPC LIMITED

Transcription

BASE PROSPECTUS
(incorporated as a special purpose company with limited liability in the Dubai International Financial Centre)
unconditionally and irrevocably guaranteed by
BURGAN BANK K.P.S.C.
(a public shareholding company incorporated in the State of Kuwait)
U.S.$1,500,000,000
Euro Medium Term Note Programme
Under this U.S.$1,500,000,000 Euro Medium Term Note Programme (the Programme), Burgan Senior SPC Limited (the Issuer) may
from time to time issue notes (the Notes) denominated in any currency agreed between the Issuer, the Guarantor and the relevant
Dealer (as defined below).
The payments of all amounts due in respect of the Notes will be unconditionally and irrevocably guaranteed by Burgan Bank K.P.S.C.
(the Bank or the Guarantor).
Notes may be issued in bearer or registered form (respectively Bearer Notes and Registered Notes). The maximum aggregate
nominal amount of all Notes from time to time outstanding under the Programme will not exceed U.S.$1,500,000,000 (or its
equivalent in other currencies calculated as described in the Programme Agreement described herein), subject to increase as described
herein.
The Notes may be issued on a continuing basis to one or more of the Dealers specified under "General Description of the Programme"
and any additional Dealer appointed under the Programme from time to time by the Issuer (each a Dealer and together the Dealers),
which appointment may be for a specific issue or on an ongoing basis. References in this base prospectus (the Base Prospectus) to
the relevant Dealer shall, in the case of an issue of Notes being (or intended to be) subscribed by more than one Dealer, be to all
Dealers agreeing to subscribe such Notes.
An investment in Notes issued under the Programme involves certain risks. For a discussion of these risks see "Risk Factors".
This Base Prospectus has been approved by the Central Bank of Ireland (the Central Bank of Ireland) as competent authority under
the Prospectus Directive (as defined below). The Central Bank of Ireland only approves this Base Prospectus as meeting the
requirements imposed under Irish and European Union (EU) law pursuant to the Prospectus Directive. Application has been made to
the Irish Stock Exchange plc (the Irish Stock Exchange) for Notes issued under the Programme during the period of 12 months from
the date of this Base Prospectus to be admitted to the official list (the Official List) and to trading on its regulated market (the Main
Securities Market). Such approval relates only to the Notes which are to be admitted to trading on a regulated market for the purposes
of Directive 2004/39/EC (each such regulated market being a MiFID Regulated Market) and/or which are to be offered to the public
in any member state of the European Economic Area (each a Member State).
References in this Base Prospectus to Notes being listed (and all related references) shall mean that such Notes have been admitted to
trading on the Main Securities Market and have been admitted to the Official List or, as the case may be, another MiFID Regulated
Market as may be specified in the applicable Final Terms.
Notice of the aggregate nominal amount of Notes, interest (if any) payable in respect of Notes, the issue price of Notes and certain
other information which is applicable to each Tranche (as defined under "Terms and Conditions of the Notes") of Notes will be set out
in a final terms document (the Final Terms) which will be delivered to the Central Bank of Ireland and, with respect to Notes to be
listed on the Irish Stock Exchange, the Irish Stock Exchange.
The Programme provides that Notes may be listed or admitted to trading, as the case may be, on such other or further stock exchanges
or markets as may be agreed between the Issuer and the relevant Dealer. The Issuer may also issue unlisted Notes and/or Notes not
admitted to trading on any market.
The Issuer may agree with any Dealer that Notes may be issued in a form or with terms and conditions not contemplated by the terms
and conditions of the Notes herein, in which event a supplemental Base Prospectus, if appropriate, will be made available which will
describe the effect of the agreement reached in relation to such Notes.
The Bank has a long-term rating of BBB+ and a short-term rating of A2 from Standard & Poor's Credit Market Services Europe
Limited (S&P); a long-term rating of A3 and a short-term rating of P-2 by Moody's Investors Service Ltd. (Moody's); and a long-term
rating of A+ and a short-term rating of F1 by Fitch Ratings Limited (Fitch). The Programme has been assigned a long-term senior
unsecured rating of A3 by Moody’s Investors Service Cyprus Ltd. (Moody’s Cyprus) and a long-term senior unsecured rating of A+
and a short-term rating of F1 by Fitch. Each of S&P, Moody's, Moody’s Cyprus and Fitch is established in the European Union and is
registered under the Regulation (EC) No. 1060/2009 (as amended) (the CRA Regulation). As such, each of S&P, Moody's, Moody’s
Cyprus and Fitch is included in the list of credit rating agencies published by the European Securities and Markets Authority (ESMA)
on its website (at http://www.esma.europa.eu/page/List-registered-and-certified-CRAs) in accordance with the CRA Regulation.
Notes issued under the Programme may be rated or unrated by either of the rating agencies referred to above. Where a Tranche of
Notes is rated, such rating will be disclosed in the Final Terms and will not necessarily be the same as the rating assigned to the
Programme or Notes already issued by the relevant rating agency. A security rating is not a recommendation to buy, sell or hold
securities and may be subject to suspension, reduction, revision or withdrawal at any time by the assigning rating agency.
Arranger
HSBC
Dealers
Emirates NBD Capital
National Bank of Abu Dhabi
HSBC
Société Générale Corporate & Investment Banking
Standard Chartered Bank
The date of this Base Prospectus is 30 June 2016.
This Base Prospectus comprises a base prospectus for the purposes of Article 5.4 of the Prospectus Directive. Prospectus
Directive means Directive 2003/71/EC (and amendments thereto, including Directive 2010/73/EU), to the extent
implemented in a Relevant Member State (as defined below), and includes any relevant implementing measure in any
Relevant Member State (the Prospectus Directive).
Each of the Issuer and the Bank accepts responsibility for the information contained in this Base Prospectus and the Final
Terms for each Tranche of Notes issued under the Base Prospectus. To the best of the knowledge of the Issuer and the
Bank (each having taken all reasonable care to ensure that such is the case) the information contained in this Base
Prospectus is in accordance with the facts and does not omit anything likely to affect the import of such information.
Copies of Final Terms will be available from the registered office of each of the Issuer and the Bank and the specified
office set out below of the Issuing and Principal Paying Agent (as defined below) save that, if the relevant Notes are
neither admitted to trading on a regulated market in the European Economic Area nor offered in the European Economic
Area in circumstances where a prospectus is required to be published under the Prospectus Directive, the applicable Final
Terms will only be obtainable by a Noteholder (as defined under "Terms and Conditions of the Notes") holding one or
more Notes and such Noteholder must produce evidence satisfactory to the Issuer or, as the case may be, the Issuing and
Principal Paying Agent as to its holding of such Notes and identity.
Neither the Dealers nor the Arranger have independently verified the information contained herein. Accordingly, no
representation, warranty or undertaking, express or implied, is made and no responsibility or liability is accepted by the
Dealers or the Arranger as to the accuracy or completeness of the information contained in this Base Prospectus or any
other information provided by any Dealer or the Arranger or the Issuer or the Bank in connection with the Programme.
To the fullest extent permitted by law, no Dealer accepts any liability, whether arising in tort or contract or otherwise,
which it might otherwise have in respect of this Base Prospectus or any such statement, including in relation to the
information contained in this Base Prospectus or any other information provided by the Issuer or the Bank in connection
with the Programme or the issue or offering of Notes thereunder.
No person is or has been authorised by the Issuer or the Bank to give any information or to make any representation not
contained in or not consistent with this Base Prospectus or any other information supplied in connection with the
Programme or the Notes and, if given or made, such information or representation must not be relied upon as having
been authorised by the Issuer or the Bank or any of the Dealers.
Neither this Base Prospectus nor any other information supplied in connection with the Programme or any Notes (a) is
intended to provide the basis of any credit or other evaluation or (b) should be considered as a recommendation by the
Issuer, the Bank or any of the Dealers that any recipient of this Base Prospectus or any other information supplied in
connection with the Programme or any Notes should purchase any Notes. Each investor contemplating purchasing any
Notes should make its own independent investigation of the financial condition and affairs, and its own appraisal of the
creditworthiness, of the Issuer and/or the Bank. Neither this Base Prospectus nor any other information supplied in
connection with the Programme or the issue of any Notes constitutes an offer or invitation by or on behalf of the Issuer or
the Bank or any of the Dealers to any person to subscribe for or to purchase any Notes.
Neither the delivery of this Base Prospectus nor the offering, sale or delivery of any Notes shall in any circumstances
imply that the information contained herein concerning the Issuer and/or the Bank is correct at any time subsequent to the
date hereof or that any other information supplied in connection with the Programme is correct as of any time subsequent
to the date indicated in the document containing the same. The Dealers expressly do not undertake to review the financial
condition or affairs of the Issuer or the Bank during the life of the Programme or to advise any investor in the Notes of
any information coming to their attention.
The Notes have not been and will not be registered under the United States Securities Act of 1933, as amended, (the
Securities Act) and the Notes in bearer form are subject to U.S. tax law requirements. Subject to certain exceptions,
Notes may not be offered, sold or delivered within the United States or to, or for the account or benefit of, U.S. persons
(see "Subscription and Sale").
This Base Prospectus does not constitute an offer to sell or the solicitation of an offer to buy any Notes in any jurisdiction
to any person to whom it is unlawful to make the offer or solicitation in such jurisdiction. The distribution of this Base
Prospectus and the offer or sale of Notes may be restricted by law in certain jurisdictions. The Issuer, the Bank and the
Dealers do not represent that this Base Prospectus may be lawfully distributed, or that any Notes may be lawfully
offered, in compliance with any applicable registration or other requirements in any such jurisdiction, or pursuant to an
exemption available thereunder, or assume any responsibility for facilitating any such distribution or offering. In
particular, no action has been taken by the Issuer, the Bank or the Dealers which is intended to permit a public offering of
any Notes or distribution of this Base Prospectus in any jurisdiction where action for that purpose is required.
i
Accordingly, no Notes may be offered or sold, directly or indirectly, and neither this Base Prospectus nor any
advertisement or other offering material may be distributed or published in any jurisdiction, except under circumstances
that will result in compliance with any applicable laws and regulations. Persons into whose possession this Base
Prospectus or any Notes may come must inform themselves about, and observe, any such restrictions on the distribution
of this Base Prospectus and the offering and sale of Notes. In particular, there are restrictions on the distribution of this
Base Prospectus and the offer or sale of Notes in the United States, the European Economic Area (including the United
Kingdom), Japan, Hong Kong, the United Arab Emirates (excluding the Dubai International Financial Centre), the Dubai
International Financial Centre, the Kingdom of Saudi Arabia, the Kingdom of Bahrain (Bahrain), the State of Qatar
(Qatar) (including the Qatar Financial Centre), the State of Kuwait (Kuwait) and Singapore (see "Subscription and
Sale").
This Base Prospectus has been prepared on a basis that would permit an offer of Notes with a denomination of less than
€100,000 (or its equivalent in any other currency) only in circumstances where there is an exemption from the obligation
under the Prospectus Directive to publish a prospectus. As a result, any offer of Notes in any Member State which has
implemented the Prospectus Directive (each, a Relevant Member State) must be made pursuant to an exemption under
the Prospectus Directive, as implemented in that Relevant Member State, from the requirement to publish a prospectus
for offers of Notes. Accordingly any person making or intending to make an offer of Notes in that Relevant Member
State may only do so in circumstances in which no obligation arises for the Issuer or any Dealer to publish a prospectus
pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of the Prospectus
Directive, in each case, in relation to such offer. Neither the Issuer nor any Dealer has authorised, nor do they authorise,
the making of any offer of Notes in circumstances in which an obligation arises for the Issuer or any Dealer to publish or
supplement a prospectus for such offer.
SUITABILITY OF INVESTMENT
The Notes may not be a suitable investment for all investors. Each potential investor in the Notes must determine the
suitability of that investment in light of its own circumstances. In particular, each potential investor may wish to
consider, either on its own or with the help of its financial and other professional advisers, whether it:
(i)
has sufficient knowledge and experience to make a meaningful evaluation of the Notes, the merits and risks of
investing in the Notes and the information contained in this Base Prospectus or any applicable supplement;
(ii)
has access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its particular financial
situation, an investment in the Notes and the impact the Notes will have on its overall investment portfolio;
(iii)
has sufficient financial resources and liquidity to bear all of the risks of an investment in the Notes, including
Notes where the currency for principal or interest payments is different from the potential investor's currency;
(iv)
understands thoroughly the terms of the Notes and is familiar with the behaviour of financial markets; and
(v)
is able to evaluate possible scenarios for economic, interest rate and other factors that may affect its investment
and its ability to bear the applicable risks.
Legal investment considerations may restrict certain investments. The investment activities of certain investors are
subject to investment laws and regulations, or review or regulation by certain authorities. Each potential investor should
consult its legal advisers to determine whether and to what extent (a) Notes are legal investments for it, (b) Notes can be
used as collateral for various types of borrowing and (c) other restrictions apply to its purchase or pledge of any Notes.
Financial institutions should consult their legal advisers or the appropriate regulators to determine the appropriate
treatment of Notes under any applicable risk-based capital or similar rules.
No comment is made or advice given by the Issuer, the Bank, the Dealers or the Agents (as defined under "Terms and
Conditions of the Notes") in respect of taxation matters relating to any Notes or the legality of the purchase of the Notes
by an investor under any applicable law or regulation.
EACH PROSPECTIVE INVESTOR IS ADVISED TO CONSULT ITS OWN TAX ADVISER, LEGAL
ADVISER AND BUSINESS ADVISER AS TO TAX, LEGAL, BUSINESS AND RELATED MATTERS
CONCERNING THE PURCHASE OF ANY NOTES.
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PRESENTATION OF FINANCIAL AND OTHER INFORMATION
Unless otherwise indicated, the consolidated statement of financial position, the consolidated income statement and
consolidated statement of cash flows information included in this Base Prospectus relating to the Bank and its
subsidiaries (collectively, the Group) has been derived:

in the case of the unaudited financial information as at and for the three months ended 31 March 2016 and 31
March 2015 (restated), from the unaudited interim condensed consolidated financial information as at and for
the three months ended 31 March 2016 (the 2016 Interim Financial Statements);

in the case of the financial information as at and for the year ended 31 December 2015 and the restated financial
information as at and for the year ended 31 December 2014, from the audited consolidated financial statements
as at and for the year ended 31 December 2015 together with the notes thereto and the audit report thereon
(the 2015 Annual Financial Statements); and

in the case of the financial information (as reported) as at and for the years ended 31 December 2014 and 31
December 2013, from the audited consolidated financial statements as at and for the year ended 31 December
2014 together with the notes thereto and the audit report thereon (the 2014 Annual Financial Statements,
and together with the 2015 Annual Financial Statements, the Annual Financial Statements).
In addition, this Base Prospectus includes restated but unaudited and unreviewed financial information for the year ended
31 December 2013, as explained further below.
The Annual Financial Statements and the 2016 Interim Financial Statements, which are incorporated by reference herein,
are prepared in accordance with International Financial Reporting Standards (IFRS) as adopted for use by the State of
Kuwait.
These regulations require the adoption of all IFRS (as issued by the International Accounting Standards Board) except
for the International Accounting Standards (IAS) 39: Financial Instruments: Recognition and Measurement requirement
for collective provision on credit facilities, which has been replaced by the CBK's requirement for a minimum general
provision. In accordance with the CBK's requirements, the Bank makes provision for a minimum general provision on all
credit facilities that are not impaired, taking into account certain categories of collateral. Therefore, the Bank's policy for
the calculation of collective provision on credit facilities complies in all material respects with the relevant requirements
of the CBK. For further information see note 2 of each of the Annual Financial Statements.
The Annual Financial Statements have been jointly audited by Ernst & Young Al Aiban, Al Osaimi & Partners and
Deloitte & Touche, Al-Wazzan & Co. as stated in their reports incorporated by reference herein. The 2016 Interim
Financial Statements have been jointly reviewed by Ernst & Young Al Aiban, Al Osaimi & Partners and Deloitte &
Touche, Al-Wazzan & Co. in accordance with International Standard on Review Engagements 2410, "Review of interim
financial information performed by the Independent Auditor of the Entity" as stated in their report incorporated by
reference herein.
The Bank publishes its financial statements in Kuwaiti dinars (KD). As at the date of this Base Prospectus, the Kuwaiti dinar
was valued at KD 0.3019 to one U.S. dollar and the U.S. dollar was valued at 3.3129 to one KD.
In the 2015 Annual Financial Statements, all items in the consolidated income statement for the year ended 31 December
2014, were restated due to the disposal of the Bank's controlling stake in its Jordanian subsidiary, Jordan Kuwait Bank
P.S.C. (JKB) (see, "Description of the Guarantor – History of acquisitions and disposals") on 30 December 2015,
reflecting the Bank's continuing operations following such disposal. As a result, the financial information for the year
ended 31 December 2014 contained in the 2015 Annual Financial Statements is not comparable in all respects to certain
financial information presented in the 2014 Annual Financial Statements. The financial statements for the year ended 31
December 2013 have not been restated and as a result, the financial information for the year ended 31 December 2013 is
not comparable in all respects to the 2013 financial information presented in the 2014 Annual Financial Statements. In
order to allow a comparison of the financial information for the year ended 31 December 2013 with the financial
information for the years ended 31 December 2014 and 31 December 2015 as contained in the 2015 Annual Financial
Statements, the 2013 financial information contained in this Base Prospectus, where indicated, has been restated in
accordance with the following tables below. The restated 2013 financial information set out in this Base Prospectus has
neither been audited nor reviewed by any auditor. For the avoidance of doubt, all items in the consolidated balance sheet
for the years ended 31 Decembr 2013, 31 December 2014 and 31 December 2015 have not been been affected by the
restatements discussed above.
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Consolidated Income Statement
Year ended 31 December
JKB reclassified 2013 (Unaudited,
2013
as discontinued
Unreviewed and
(As Reported)
operations
Restated)
(KD 000's)
(KD 000's)
(KD 000's)
270,375
54,867
215,508
(104,940)
(16,844)
(88,096)
Interest income...................................................................
Interest expense .................................................................
Net interest income ..........................................................
165,435
38,023
127,412
Fee and commission income ..............................................
Fee and commission expense .............................................
48,124
(3,501)
4,778
-
43,346
(3,501)
Net fee and commission income ......................................
44,623
4,778
39,845
Net gain from foreign currencies .......................................
Net investment income ......................................................
Dividend income ................................................................
Other income .....................................................................
18,664
11,266
2,937
10,634
1,226
1,515
1,677
3,203
17,438
9,751
1,260
7,431
Operating income .............................................................
Staff expenses ....................................................................
Other expenses ...................................................................
253,559
(53,598)
(59,238)
50,422
(8,869)
(10,339)
203,137
(44,729)
(48,899)
Operating profit before provision ..................................
Provision for impairment of loans and advances ...............
Impairment of investment securities ..................................
140,723
(89,913)
(2,963)
31,214
(5,882)
(1,363)
109,509
(84,031)
(1,600)
Profit before taxation and board of directors'
remuneration ....................................................................
47,847
23,969
23,878
Taxation .............................................................................
Board of directors' remuneration .......................................
(15,692)
(90)
(8,402)
(465)
(7,290)
(555)
Profit for the year – continuing operations ...................
Profit for the year – discontinued operations ................
Profit for the year ............................................................
32,065
32,065
16,032
-
16,033
16,032
32,065
20,102
11,963
32,065
8,218
7,815
16,033
20,102
11,963
32,065
Fils
Fils
Fils
Attributable to:
Equity holders of the Bank ................................................
Non controlling interests ....................................................
Basic and diluted earnings per share – attributable
to the equity holders of the Bank ....................................
12
to the equity holders of the Bank – continuing
operations* .......................................................................
-
4.9
12
-
7.1
* Earnings per share calculated by dividing the profit for the year – continuing operations attributable to equity holders by the weighted number of
outstanding shares, net of treasury shares.
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Consolidated Income Statement - Restated
The following table shows the 2014 financial information included in the comparatives of the 2015 Annual Financial
Statements, and the 2014 financial information as presented in the 2014 Annual Financial Statements.
2014
2014 (As
(Restated)
Reported)
(KD 000's)
(KD 000's)
Continuing Operations
Interest income....................................................................................................
Interest expense ..................................................................................................
Net interest income ...........................................................................................
Fee and commission income ...............................................................................
Fee and commission expense ..............................................................................
Net fee and commission income .......................................................................
Net gain from foreign currencies ........................................................................
Net investment income .......................................................................................
Dividend income .................................................................................................
Other income ......................................................................................................
Operating income ..............................................................................................
Staff expenses .....................................................................................................
Other expenses ....................................................................................................
Operating profit before provision ...................................................................
Provision for impairment of loans and advances ................................................
Provision for impairment of investment securities .............................................
Profit for the year from continuing operations before
taxation and board of directors' remuneration ..............................................
Taxation ..............................................................................................................
Board of directors' remuneration ........................................................................
Profit for the year from continuing operations ..............................................
Profit after tax for the year from discontinued operations ...........................
Profit for the year .............................................................................................
Attributable to:
Equity holders of the Bank .................................................................................
Non-controlling interests ....................................................................................
to the equity holders of the Bank .....................................................................
Basic and diluted earnings per share from continuing
operations to equity holders .............................................................................
250,653
(102,736)
147,917
48,636
(5,195)
43,441
6,029
15,912
845
7,791
221,935
(49,844)
(50,004)
122,087
(55,392)
(357)
66,338
305,056
(119,518)
185,538
53,784
(5,195)
48,589
7,251
16,272
1,894
16,167
275,711
(58,538)
(63,636)
153,537
(61,302)
(2,079)
90,156
(9,967)
(90)
56,281
16,424
72,705
(17,361)
(90)
72,705
72,705
61,758
10,947
72,705
61,758
10,947
72,705
Fils
33.8
Fils
37.6
29.2
37.6
The financial information of the Bank’s subsidiaries in this Base Prospectus has been presented in Algerian dinar (DZD),
Iraqi dinar (IQD), U.S. dollars (U.S.$) and Turkish lira (TRY). The table below shows the profit and loss rates and the
statement of financial position rates for each of the above currencies to the Kuwaiti dinar for the periods indicated below.
The profit and loss rates are the average exchange rates over the respective year/period for each of the currencies. The
statement of financial position rates is the exchange rates at the end of the respective year/period for the relevant
currencies.
31 March
2016
Rates for DZD to KD
Profit and loss .............................................................................
Statement of Financial Position ..................................................
v
0.002804
0.002781
31 December
2015
2014
0.003079
0.002827
0.003473
0.003331
31 March
2016
Rates for IQD to KD
Profit and loss .............................................................................
Rates for U.S.$ to KD
Profit and loss .............................................................................
Rates for TRY to KD
Profit and loss .............................................................................
31 December
2015
2014
0.000268
0.000258
0.000265
0.000277
0.000248
0.000252
0.302675
0.301850
0.298150
0.303500
0.287425
0.292800
0.105446
0.106952
0.114865
0.103939
0.128887
0.125790
Non-GAAP measures
This Base Prospectus also includes certain references to non-GAAP measures, such as the Group's capital base and risk
weighted assets. The Bank uses these non-GAAP measures to evaluate its performance, and this additional financial
information is presented in this Base Prospectus. This information is not prepared in accordance with IFRS and should be
viewed as supplemental to the consolidated financial statements. Investors are cautioned not to place undue reliance on
this information and should note that the capital base and risk weighted assets, as calculated by the Bank may differ
materially from similarly titled measures reported by other banks, including the Bank's competitors.
Certain conventions
The Bank's financial year ends on 31 December, and references in this Base Prospectus to any specific year are, unless
otherwise indicated, to the 12-month period ended on 31 December of such year.
Certain figures and percentages included in this Base Prospectus have been subject to rounding adjustments; accordingly
figures shown in the same category presented in different tables may vary slightly and figures shown as totals in certain
tables may not be an arithmetic aggregation of the figures which precede them. These percentages are calculated based
on the amounts reported in the Guarantor's or its subsidiaries' financial statements.
In this Base Prospectus, unless otherwise specified or the context otherwise requires, references to U.S. dollars, U.S.$,
USD and United States dollars are to the lawful currency of the United States of America, its territories and possessions
and references to KD and Kuwaiti dinars are to the lawful currency of the State of Kuwait.
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NOTICE TO KINGDOM OF SAUDI ARABIA RESIDENTS
This Base Prospectus may not be distributed in the Kingdom of Saudi Arabia except to such persons as are permitted
under the Offers of Securities Regulations issued by the Capital Market Authority of the Kingdom of Saudi Arabia (the
Capital Market Authority).
The Capital Market Authority does not make any representations as to the accuracy or completeness of this Base
Prospectus, and expressly disclaims any liability whatsoever for any loss arising from, or incurred in reliance upon, any
part of this Base Prospectus. Prospective purchasers of Notes issued under the Programme should conduct their own due
diligence on the accuracy of the information relating to the Notes. If a prospective purchaser does not understand the
contents of this Base Prospectus he or she should consult an authorised financial adviser.
NOTICE TO BAHRAIN RESIDENTS
In relation to investors in Bahrain, Notes issued in connection with this Base Prospectus and related offering documents
may only be offered in registered form to existing accountholders and accredited investors as defined by the Central
Bank of Bahrain (the CBB) in Bahrain where such investors make a minimum investment of at least U.S.$100,000 or any
equivalent amount in other currency or such other amount as the CBB may determine.
This Base Prospectus does not constitute an offer of securities in Bahrain in terms of Article (81) of the Central Bank and
Financial Institutions Law 2006 (decree Law No. 64 of 2006). This Base Prospectus and related offering documents have
not been and will not be registered as a prospectus with the CBB. Accordingly, no Notes may be offered, sold or made
the subject of an invitation for subscription or purchase nor will this Base Prospectus or any other related document or
material be used in connection with any offer, sale or invitation to subscribe or purchase securities, whether directly or
indirectly, to persons in Bahrain, other than to accredited investors for an offer outside Bahrain.
The CBB has not reviewed, approved or registered this Base Prospectus or related offering documents and it has not in
any way considered the merits of the Notes to be offered for investment, whether in or outside Bahrain. Therefore, the
CBB assumes no responsibility for the accuracy and completeness of the statements and information contained in this
Base Prospectus and expressly disclaims any liability whatsoever for any loss howsoever arising from reliance upon the
whole or any part of the content of this Base Prospectus. No offer of securities will be made to the public in Bahrain and
this Base Prospectus must be read by the addressee only and must not be issued, passed to, or made available to the
public generally.
NOTICE TO QATAR RESIDENTS
Any Notes to be issued under the Programme will not be offered, sold or delivered at any time, directly or indirectly, in
Qatar (including the Qatar Financial Centre) in a manner that would constitute a public offering. This Base Prospectus
has not been and will not be reviewed or approved by, or registered with, the Qatar Financial Markets Authority, the
Qatar Central Bank, the Qatar Stock Exchange or the Qatar Financial Centre Regulatory Authority. The Notes are not
and will not be traded on the Qatar Stock Exchange. The Notes and interests therein will not be offered to investors
domiciled or resident in Qatar (including the Qatar Financial Centre) and do not constitute debt financing in Qatar under
the Commercial Companies Law No. (11) of 2015 or otherwise under the laws of Qatar.
NOTICE TO KUWAIT RESIDENTS
Unless all necessary approvals from the Kuwait Capital Markets Authority (the CMA) pursuant to Law No. 7 of 2010,
and its Executive Regulations (each as amended) and the various Resolutions, Instructions and Announcements issued
pursuant thereto, or in connection therewith, have been given in relation to the marketing of, and sale of, the Notes, the
Notes may not be offered for sale, nor sold, in Kuwait. No such approvals have been received or applied for in respect of
the Notes. Neither this Base Prospectus nor any of the information contained herein is intended to lead to the conclusion
of any contract of whatsoever nature within Kuwait.
STABILISATION
In connection with the issue of any Tranche of Notes, the Dealer or Dealers (if any) named as the Stabilising Manager(s)
(or person(s) acting on behalf of any Stabilising Manager(s)) in the applicable Final Terms may over-allot Notes or effect
transactions with a view to supporting the market price of the Notes at a level higher than that which might otherwise
prevail. However, there is no assurance that the Stabilising Manager(s) (or person(s) acting on behalf of a Stabilising
Manager) will undertake stabilisation action. Any stabilisation action may begin on or after the date on which adequate
public disclosure of the terms of the offer of the relevant Tranche of Notes is made and, if begun, may be ended at any
time, but it must end no later than the earlier of 30 days after the issue date of the relevant Tranche of Notes and 60 days
after the date of the allotment of the relevant Tranche of Notes. Any stabilisation action or over-allotment must be
vii
conducted by the relevant Stabilising Manager(s) (or persons acting on behalf of any Stabilising Manager(s)) in
accordance with all applicable laws and rules.
viii
CONTENTS
Section
Page
Risk Factors ......................................................................................................................................................... 2
Documents Incorporated by Reference ............................................................................................................. 22
Overview of the Programme ............................................................................................................................. 23
Form of the Notes .............................................................................................................................................. 27
Applicable Final Terms ..................................................................................................................................... 30
Terms and Conditions of the Notes ................................................................................................................... 39
Use of Proceeds ................................................................................................................................................. 66
Description of the Issuer .................................................................................................................................... 67
Selected Financial Information.......................................................................................................................... 69
Description of the Guarantor ............................................................................................................................. 85
Overview of Kuwait ........................................................................................................................................ 138
Banking Industry and Regulation in Kuwait ................................................................................................... 140
Taxation ........................................................................................................................................................... 145
Subscription and Sale ...................................................................................................................................... 148
General Information ........................................................................................................................................ 153
RISK FACTORS
Each of the Issuer and the Bank believes that the following factors may affect its ability to fulfil its obligations under the
Notes issued under the Programme or under the Guarantee, respectively. All of these factors are contingencies which
may or may not occur and neither the Issuer nor the Bank is in a position to express a view on the likelihood of any such
contingency occurring.
In addition, factors which are material for the purpose of assessing the market risks associated with the Notes are also
described below.
Each of the Issuer and the Bank believes that the factors described below represent the principal risks inherent in
investing in the Notes, but the inability of either the Issuer or the Bank to pay interest, principal or other amounts on or
in connection with any Notes or to pay any amount in respect of the Guarantee, respectively, may occur for other reasons
and the Issuer and the Bank make no representation that the statements below regarding the risks of holding any Notes
are exhaustive. Prospective investors should also read the detailed information set out elsewhere in this Base Prospectus
and reach their own views prior to making any investment decision.
Words and expressions defined in “Terms and Conditions of the Notes” shall have the same meanings in this section.
Factors that may affect the Issuer's ability to fulfil its obligations under or in connection with the notes issued under
the Programme
The Issuer has a limited operating history and no material assets
The Issuer is a special purpose company with limited liability, incorporated under the laws of the Dubai International
Financial Centre on 3 November 2015 and, accordingly, only has a limited operating history.
The Issuer does not have any other income except payments received from the Bank in respect of loans, which will be the
only material source of funds available to meet claims of the Noteholders against the Issuer. As a result, the Issuer is subject
to all the risks to which the Guarantor is subject, to the extent such risks could limit the Guarantor’s ability to satisfy in full
and on a timely basis its obligations to the Issuer under any such loans. See “- Factors that may affect the Bank’s ability, in
its capacity as Guarantor, to fulfil its obligations under the Notes and/or the Guarantee”.
Factors that may affect the bank's ability, in its capacity as Guarantor, to fulfil its obligations under the notes
and/or the guarantee
Risks relating to the Bank
Economic, political and related considerations
The Bank's operations are primarily focused on the Middle East and North Africa (MENA) region and Turkey. The
Bank's operations are thus exposed to geo-political risks associated with Iraq, the MENA region and Turkey which could
adversely affect its performance. The demand for services provided by the Bank and its subsidiaries is particularly
susceptible to adverse changes in economic and market conditions in the relatively unstable MENA region and Turkey.
Kuwait's economy remains vulnerable to both external and internal shocks, including volatility in oil prices, political,
economic and related developments in Kuwait, the other Gulf Cooperation Council (GCC) countries (i.e. Bahrain,
Oman, Qatar, Saudi Arabia and the United Arab Emirates) and the MENA region, but also resulting from political and
economic instability in surrounding countries such as Iran and Iraq. These risks include, but are not limited to, external
acts of warfare, civil clashes, terrorist activity, natural disasters, and regulatory, taxation and legal structure changes.
The business and results of operations of the Bank and its subsidiaries and the market price of the Notes are influenced
by economic and market conditions in Kuwait and, to a varying degree, economic and market conditions in the global
markets generally. Global financial crises and volatility in the emerging markets in the past have adversely affected
market prices in the world's securities markets for companies that operate in developing economies. Even if the Kuwaiti
economy remains relatively stable, financial turmoil in the emerging markets and globally could have a material adverse
effect on the Bank and its subsidiaries' business, financial condition, results of operations or prospects and the market
price of the Notes.
2
The Bank may be unable to effectively control the level of, or successfully restructure, its non-performing loans with
debtors in financial distress, or its allowances for loan impairment may be insufficient to cover loan losses the Bank's
financial condition and results of operations could be adversely affected
The Bank's asset quality remained relatively stable in the first three months of 2016 and in 2015 and 2014. Nonperforming assets (net of collaterals) remained stable at 1.4 per cent. of gross facilities as at each of 31 March 2016 and
31 December 2015. Non-performing assets (net of collaterals) were 1.5 per cent. of gross facilities as at 31 December
2014, while the Bank's coverage ratio declined to 328.1 per cent. as at 31 March 2016 compared to 331.9 per cent. as at
31 December 2015, but increased compared to 278.0 per cent. as at 31 December 2014. As at 31 March 2016, the Bank's
impaired loans amounted to 4.4 per cent. of loans and advances to borrowers before provision for loan impairment. As at
31 December 2015, 31 December 2014, and 31 December 2013 impaired loans amounted to 4.1 per cent., 3.9 per cent.
and 4.2 per cent. of the Bank's loans and advances to borrowers before provision for loan impairment, respectively. Such
decrease in non-performing assets may not be a continuing downward trend and there can be no assurance that the
coverage ratio will increase in the future and affect the financial results of the Bank for 2016. A decrease in the coverage
ratio may have a material adverse effect on the Bank's business, financial condition, results of operations or prospects.
Security interests or loan guarantees provided in favour of the Bank may not be sufficient to cover any losses and may
not be legally enforceable
The practice of pledging assets (such as share portfolios and real estate assets) to obtain a bank loan is subject to certain
limitations and administrative restrictions under Kuwaiti law. In particular, such security may not be enforced without a
court order. As a result, security over certain pledged assets may not be enforced in Kuwaiti courts. Accordingly, the
Bank may have difficulty foreclosing on collateral (including any real estate collateral) or enforcing guarantees or other
third party credit support arrangements when debtors default on their loans.
In addition, even if such security interests are enforceable in Kuwaiti courts, the time and costs associated with enforcing
security interests in Kuwait may make it uneconomic for the Bank to pursue such proceedings, adversely affecting the
Bank's ability to recover its loan losses.
The Bank typically requires additional collateral in the form of cash and/or other assets in situations where the Bank may
not be able to exercise rights over pledged shares or where it enters into guarantees or other third party credit support
arrangements for loans made to individuals and corporations. Any decline in the value or liquidity of such collateral may
prevent the Bank from foreclosing on such collateral for its full value or at all in the event that a borrower becomes
insolvent and enters bankruptcy, and could thereby adversely affect the Bank's ability to recover the full amounts
advanced to the borrower.
The occurrence of any of the foregoing could have a material adverse effect on the Bank's business, results of operations,
financial condition and prospects.
The Bank may experience a higher level of customer and counterparty defaults arising from adverse changes in credit
and recoverability that are inherent in the Bank's business
Risks arising from a deterioration in the credit quality and the recoverability of amounts due from borrowers and
counterparties are inherent in banking businesses. While the Bank has detailed policies to deal with overdue loans, there
can be no assurance that these policies will result in the full or partial recovery of its overdue loans. Although,
historically, overdue loans in the Kuwaiti banking sector have been low in comparison to other jurisdictions, the level of
impaired loans in Kuwait as a percentage of all loans has historically increased significantly due to the repercussions of
the global financial crisis in general and the liquidity crisis experienced by a number of companies in Kuwait in
particular. As at 31 March 2016, the Bank's impaired loans (net of collaterals) amounted to 1.5 per cent. of loans and
advances to borrowers before provision for loan impairment. As at 31 December 2015, 31 December 2014, and 31
December 2013 impaired loans amounted to 4.1 per cent., 3.9 per cent. and 4.2 per cent. of the Bank's loans and advances
to borrowers before provision for loan impairment, respectively. A substantial increase in loan losses would have a
material adverse effect on the Bank's business, financial condition, results of operations or prospects.
Credit risks could also arise from a deterioration in the credit quality of specific borrowers and counterparties of the Bank
or from adverse changes in global and regional economic conditions, or adverse changes which arise from systemic risks
in the financial systems, which could affect the recovery and value of the Bank's assets and require an increase in the
Bank's provisions. Adverse fluctuations in the factors mentioned above, amongst others, could have a material adverse
effect on the Bank's business, financial condition, results of operations or prospects.
3
Lending base concentration risk
A substantial proportion of the Bank's total loan portfolio constitutes loan exposures to related parties, see "Regulatory
Risks - Ownership concentration and related party exposures" below. As at 31 March 2016, the Bank's top 10 largest
loans accounted for 18.4 per cent. of its gross loans and advances to non-bank customers. Of these loans, 76.4 per cent.
(representing 14.1 per cent. of gross loans and advances to non-bank customers) were made to related parties. In addition,
the Bank has a high concentration of loans provided within Kuwait and has substantial exposure to the real estate sector,
mainly in Kuwait, which accounted for 24.2 per cent. of total loans as at 31 December 2015, 21.8 per cent. of total loans
as at 31 December 2014 and 23.6 per cent. of total loans as at 31 December 2013.
The Bank has exposure to local investment companies of 1.6 per cent. of "total loans plus due from other financial
institutions" as at 31 March 2016, 1.5 per cent. of "total loans plus due from other financial institutions" as at 31
December 2015, 1.7 per cent. of "total loans plus due from other financial institutions" as at 31 December 2014 and 2.5
per cent. of "total loans plus due from other financial institutions" as at 31 December 2013.
As at 31 December 2015, retail loans made up 12.0 per cent. and corporate loans made up 88.0 per cent. of the Bank's
aggregate loan portfolio, 67.6 per cent. of which comprises loans issued to individuals or corporates in Kuwait.
If Kuwait experiences adverse economic or geopolitical conditions generally or any crisis in the real estate sector more
specifically, then this may affect the repayment ability of a large proportion of the Bank's borrowers, which could have a
material adverse effect on the Bank's business, financial condition, results of operations or prospects.
Deposit base concentration risk
As at 31 December 2015, the Bank received 64.7 per cent. (KD 3,874.3 million) of its total funding from deposits (retail,
corporate, government and non-bank financial institutions). As at 31 March 2016, the Bank's top 10 largest deposits
accounted for 41.8 per cent. of these deposits with the top depositor representing 20.2 per cent.
The Bank's funding includes institutional, government and quasi-governmental entities' deposits in Kuwait which are
contracted on a commercial basis. As at 31 March 2016, the Bank's total funding from deposits by government and quasigovernmental entities accounted for 20.6 per cent. of its total deposits in Kuwait (or 14.6 per cent. of total Group
deposits). These funds have been a stable source of funding to the Kuwaiti banking sector for many years but there can
be no assurance that deposits from government and quasi-governmental entities will be available at the current level in
the future. The loss of a significant source of funding could increase the Bank's cost of funding by requiring it to seek
funding from other expensive sources and have a material adverse effect on the Bank's business, financial condition,
results of operations or prospects.
As at the date of this Base Prospectus, the CBK guarantees all banks' retail and corporate customer deposits in Kuwait.
Liquidity risk
Liquidity risk is the risk that the Bank will be unable to meet its obligations, including funding commitments, as they fall
due. This could arise from, amongst other factors, the inability of the Bank to anticipate and provide for an unforeseen
decrease or changes in funding sources.
In common with other banks in Kuwait, the MENA region and Turkey, the Bank has historically relied substantially on
customer deposits to meet most of its funding needs. Such deposits are subject to fluctuation due to certain factors
outside the Bank's control, such as any possible loss of confidence and competitive pressures, which could result in a
significant outflow of deposits within a short period of time. If such outflows of deposits were to occur, it could cause
liquidity difficulties for the Bank, which in turn could have a material adverse effect on the Bank's business, financial
condition, results of operations or prospects.
The Bank's liquidity may also be adversely affected by a number of factors, including significant unforeseen changes in
interest rates, ratings downgrades, higher than anticipated losses on investments and disruptions in the financial markets
generally which in turn may result in the Bank not being able to access the markets from which it raises funds at
favourable rates.
Should any of the abovementioned factors materialise, they could have a material adverse effect on the Bank's business,
financial condition, results of operations or prospects.
4
Changes in interest rate levels may affect the Bank's net interest margins and borrowing costs, and the value of assets
sensitive to interest rates and spread changes may be adversely affected
The Bank is exposed to unexpected fluctuations in market interest rates. An increase in interest rates generally may
decrease the value of the Bank's fixed rate loans and raise the Bank's funding costs. Such an increase could also generally
decrease the value of fixed rate debt securities in the Bank's securities portfolio. Volatility in interest rates may result in a
pricing gap between the Bank's interest-rate sensitive assets and its liabilities. As a result, the Bank may incur additional
costs in raising and maintaining capital. Interest rates react to many factors beyond the Bank's control, including, for
example, the policies of central banks, political factors and domestic and international economic conditions. Any adverse
effects of future interest rate fluctuations could have a material adverse effect on the Bank's business, financial condition,
Deterioration in the market value of the Bank's securities portfolio may affect the values of the Bank's investment and
trading portfolios. The Bank's income from securities operations depends on numerous factors beyond its control, such as
overall market trading activity, interest rate levels, fluctuations in currency exchange rates and general market volatility.
The Bank also engages, to a limited extent, in foreign currency transactions and maintains open currency positions in
relation to a number of currencies, which give rise to currency risks.
Future changes in foreign currency and interest rate risks may have a material adverse effect on the Bank's business,
financial condition, results of operations or prospects. See "Description of the Guarantor - Risk Management - Market
Risk".
The Bank has significant credit-related contingent liabilities and commitments that may lead to potential losses
As part of its normal banking business, the Bank issues guarantees, letters of credit and acceptances which are accounted
for off the Bank's balance sheet until such time as they are actually funded or cancelled. In addition, the Bank makes
irrevocable commitments to advance credit to its customers. Although these commitments are contingent, they
nonetheless subject the Bank to both credit and liquidity risks. As at 31 March 2016, the Bank had KD 1,497.4 million in
such contingent liabilities and commitments outstanding, equal to 26.4 per cent. of its combined customer loan portfolio
and contingent liabilities.
Although the Bank anticipates that only a portion of its obligations in respect of these commitments will be triggered and
funds itself accordingly, the Bank may need to make payments in respect of a greater portion of such commitments,
particularly in cases where there has been a general deterioration in market conditions. This would result in the Bank
needing to obtain additional funding, potentially at relatively short notice, which could have an adverse effect on its
financial condition and results of operations.
The Bank is exposed to risk of loss as a result of employee misrepresentation, misconduct and improper practice
The Bank's employees could engage in misrepresentation, misconduct or improper practice that could expose the Bank to
direct and indirect financial loss and damage to its reputation. Such practices may include embezzling clients' funds,
engaging in corrupt or illegal practices to originate further business, intentionally or inadvertently releasing confidential
information about clients or failing to follow internal procedures. It is not always possible to detect or deter employee
misconduct, and the precautions the Bank takes to detect and prevent misconduct may not be effective in all cases. There
can be no assurance that measures undertaken to combat employee misconduct will be successful. Such actions by
employees could expose the Bank to financial losses resulting from the need to reimburse clients, co-investors or other
business partners who suffered loss or as a result of fines or other regulatory sanctions, and could damage the Bank's
reputation, which would in turn materially adversely affect the Bank's business, results of operations, financial condition
and prospects.
The Bank is exposed to reputational risks related to its operations and industry
All financial institutions depend on the trust and confidence of their customers to succeed in their business. The Bank is
exposed to the risk that litigation, misconduct, operational failures, negative publicity and press speculation, whether or
not valid, will harm its reputation. The Bank's reputation may also be adversely affected by the conduct of third parties
over whom it has no control, including entities to which it lends money or in which it has invested. For example, if one of
the Bank's borrowers becomes associated with financial scandals or widely publicised improper behaviour, the Bank's
own reputation may be affected.
In common with other banks, the Bank is also exposed to adverse publicity relating to the financial services industry as a
whole. Financial scandals unrelated to the Bank or questionable ethical conduct by a competitor may taint the reputation
5
of the industry and affect the perception of investors, public opinion and the attitude of regulators. Any damage to the
Bank's reputation could cause existing customers to withdraw their business and lead potential customers to be reluctant
to do business with the Bank. Any of these developments could have an adverse effect on the Bank's business, results of
operations and financial condition.
The Bank could be adversely affected by the soundness or the perceived soundness of other financial institutions and
counterparties
Against the backdrop of constraints on liquidity and the high cost of funds in the interbank lending market, and given the
high level of interdependence between financial institutions that became most evident following the bankruptcy of
Lehman Brothers in 2008, the Bank is subject to the risk of deterioration in the commercial and financial soundness, or
perceived soundness, of other financial institutions. Within the financial services industry, the default of any one
institution could lead to significant losses, and potentially defaults, by other institutions. As was experienced in 2008 and
2009, concerns about, or a default by, one institution could also lead to significant liquidity problems, losses or defaults
by other institutions, because the commercial and financial soundness of many financial institutions is closely related as a
result of their credit, trading, clearing or other relationships. Even the perceived lack of creditworthiness of, or questions
about, a counterparty may lead to market-wide liquidity problems and losses or defaults by the Bank or other institutions.
This risk, often referred to as "systemic risk", may also adversely affect other financial intermediaries, such as clearing
agencies, clearing houses, securities firms and exchanges, with whom the Bank interacts on a daily basis. Systemic risk,
should it materialise, could have a material adverse effect on the Bank's ability to raise new funding and on its business,
financial condition, results of operations and prospects.
The Bank's risk management and internal controls may leave it exposed to unidentified or unanticipated risks, which
could result in material losses
In the course of its business activities, the Bank is exposed to a variety of risks, the most significant of which are credit
risk, market risk, liquidity risk and operational risk. See "Description of the Guarantor - Risk Management". Investors
should note that any failure to adequately control these risks could result in material adverse effects on the Bank's
business, results of operations, financial condition and prospects, as well as its general reputation in the market.
The Bank's risk management techniques may not be fully effective or consistently implemented in mitigating its exposure
in all market environments or against all types of risk, including risks that are unidentified or unanticipated. Some of the
Bank's methods of managing risk are based upon its use of historical market behaviour. These methods may not always
predict future risk exposures, which could be significantly greater than such historical measures indicate. Other risk
management practices, including "know your client" practices, depend upon the evaluation of information regarding the
markets in which the Bank operates, its clients or other matters that are publicly available or information otherwise
accessible to the Bank. As such practices are less developed in the GCC than they are in other markets and may not have
been consistently and thoroughly implemented in the past, this information may not be accurate, complete, up-to-date or
properly evaluated in all cases.
There can be no assurance that the Bank's risk management and internal control policies and procedures will adequately
control, or protect the Bank against, all credit, liquidity, market and other risks. In addition, certain risks could be greater
than the Bank's empirical data would otherwise indicate. The Bank also cannot give assurance that all of its staff have
adhered or will adhere to its risk policies and procedures.
The Bank is susceptible to, amongst other things, failure of internal processes or systems, unauthorised transactions by
employees and operational errors, including clerical or record-keeping errors, or errors resulting from faulty computer or
telecommunications systems, and fraud by employees or outsiders. See "Risks relating to the Bank - the Bank's business
may be adversely affected if there is any disturbance to its operational systems or a loss of business continuity". The
Bank's risk management and internal control capabilities are also limited by the information tools and technologies
available to it. Any material deficiency in the Bank's risk management or other internal control policies or procedures
may expose it to significant credit, liquidity, market or operational risk, which may in turn have a material adverse effect
on the Bank's business, results of operations, financial condition and prospects.
The Bank's business may be adversely affected if there is any disturbance to its operational systems or a loss of
business continuity
The Bank operates in businesses that are highly dependent on information systems and technologies and relies heavily on
its financial, accounting and other data processing systems. In addition, the Bank is increasingly offering its products and
services to customers through remote access banking, including online banking and automated teller machines (ATMs).
6
If any of these systems do not operate properly or are disabled, or become the target of fraudulent activity, the Bank
could suffer financial loss, a disruption of its business, liability to clients, regulatory intervention and reputational
damage.
In addition, the Bank's current information systems and technologies may not continue to be able to accommodate the
Bank's growth unless the Bank continues to invest in upgrading its operational systems. Such a failure to accommodate
growth, or an increase in costs related to such information systems, would have a material adverse effect on the Bank's
business. The cost of improving or upgrading such systems and technologies may be substantial and the cost of
maintaining such systems is likely to increase from its current level. The Bank's business operations and business
processes are vulnerable to damage or interruption from fires, floods, extreme weather, power loss, bomb threats,
explosions or other forms of terrorist activity, and other natural and man-made disasters or other extreme events. These
systems may also be subject to criminal damage, vandalism, theft and similar wrongdoing. If there is a disaster or other
disruption and the Bank's disaster recovery plans are found to be inadequate for any reason, there could be an adverse
impact on the Bank's business, results of operations, financial condition and prospects.
Further, the Bank relies on third-party service providers for certain aspects of its business including but not limited to
ACI Worldwide, Reuters, Bloomberg, SWIFT and Microsoft. Any interruption or deterioration in the performance of
these third parties or failures of their information systems and technology could impair the quality of the Bank's
operations and could impact its reputation. If any of the foregoing were to occur, it could materially adversely affect the
Bank's business, results of operations, financial condition and prospects.
Regulatory risks
The Bank is a highly regulated entity and changes to applicable laws or regulations, the interpretation or enforcement
of such laws or regulations or the failure to comply with such laws or regulations or a change in the capital treatment
of the Bank's instruments could have an adverse impact on the Bank's business
The Basel Committee on Banking Regulation and Supervisory Practices (the Basel Committee) has set international
standards for the capital adequacy of banks. The minimum capital adequacy ratio recommended by the 1988 Basel
Committee guidelines is 8.0 per cent. Pursuant to its Basel III (as defined in the Conditions) reforms, the Basel
Committee recommended a minimum total capital adequacy ratio of 8.0 per cent., which can rise to 10.5 per cent. after
factoring in the capital conservation buffer over a period of time (currently extending to 2019). However, the CBK, as the
banking regulator in Kuwait, requires Kuwaiti commercial banks to maintain a capital adequacy ratio based on the
Instructions (as defined in the Conditions). Pursuant to the Instructions, Kuwaiti commercial banks were required to
maintain a capital adequacy ratio of 12.5 per cent. of risk-weighted assets by the end of 2015, which increased to 13.0 per
cent. in 2016. Additionally, all commercial banks are required to maintain additional capital (0.5 per cent. to 2.0 per cent.
depending on the bank's size and complexity, as determined by CBK) in the form of a domestic systemically important
bank (D-SIB) charge.
The Bank's capital adequacy ratio under the CBK guidelines, based on the Basel III guidelines, was 16.4 per cent. as at
31 March 2016, compared to 15.6 per cent. as at 31 December 2015, 13.5 per cent. as at 31 December 2014, based on
Basel III guidelines, and 15.4 per cent as at 31 December 2013, based on Basel II guidelines. The Bank's Tier 1 capital
adequacy ratio was 13.5 per cent. as at 31 March 2016, compared to 14.7 per cent. and 12.2 per cent. as at 31 December
2015 and 31 December 2014, respectively, based on Basel III guidelines and 9.9 per cent. as at 31 December 2013, based
on Basel II guidelines. The Bank’s CET 1 ratio under CBK guidelines, based on Basel III regulations, was 10.7 per cent.
as at 31 March 2016, compared to 11.7 per cent. as at 31 December 2015, 9.4 per cent. as at 31 December 2014, based on
Basel III guidelines, and 10.7 per cent. as at 31 December 2013, based on Basel II guidelines.
As mentioned above, the capital adequacy level maintained by the Bank currently exceeds the minimum requirements set
out by the CBK, based on the Basel III regulations. However, if the Bank's loan portfolio continues to grow significantly,
or if the level of loan impairments increases, and the Bank fails to generate a sufficient level of profits to ensure
consistent growth in equity through retained earnings, or if any of the Bank's instruments lose their capital treatment as a
result of a change in the guidelines on capital adequacy issued by the Basel Committee, or corresponding implementing
measures as implemented by the CBK, the Bank may need to raise new capital to maintain the minimum capital
adequacy ratios set by the CBK. Such capital, whether in the form of debt financing or additional equity, may not be
available on attractive terms, or at all. Investors should be aware that the capital adequacy ratio of Kuwaiti commercial
banks, including the Bank, will be impacted due to more stringent capital adequacy requirements following the
implementation of the final Basel III rules by the CBK.
7
Any failure by the Bank to maintain certain capital adequacy ratios could lead to the imposition of sanctions by the CBK,
such as limitations on the Bank's ability to pay dividends, the issuance by the CBK of a directive to increase capital
and/or sell or reduce assets, the imposition of fines, as well as to an increase of the cost of funding. Any of these
outcomes could have an adverse effect on the Bank's business, financial condition, results of operations or prospects (see
"Risks relating to Kuwait, Turkey and the MENA region -The regulatory framework of the CBK").
Foreign exchange movements
The Bank maintains its accounts and reports its results in Kuwaiti dinar. Since 20 May 2007, the KD has been pegged to
an undisclosed weighted basket of international currencies. The undisclosed weighted basket of currencies is calculated
using various national currencies, reflecting the foreign trade and financial relations of the State of Kuwait. However,
with the removal of the previous peg to the US dollar, relative flexibility has been achieved in exchange rate
determination.
The Bank is exposed to the potential impact of any alteration to, or abolition of, this foreign exchange "peg" as well as
potential volatility of the constituent basket currencies.
The subsidiaries of the Bank maintain their respective accounts and report their respective results in the local currency of
the country of their incorporation. Any fluctuations in those foreign currencies against the KD at the time of translating
the subsidiaries' accounts in KD for the preparation of consolidated financials may result in the possibility that the value
of foreign currency assets or liabilities of any of the subsidiaries will change due to changes in currency exchange rates
which may affect the Bank's reported financial position expressed in KD.
Neither the government of Kuwait nor the Kuwaiti Investment Authority is under any obligation to invest in or
otherwise engage in business with the Bank
In response to the global economic crisis, the government of Kuwait and the CBK introduced a number of measures to
provide support to the Kuwaiti economy (see "Banking Industry and Regulation in Kuwait – Central Bank of Kuwait"
and "– Financial Stability Law and Deposit Guarantee Law"). In addition, the Kuwaiti Investment Authority (the KIA),
in 2009, acquired a 16 per cent. stake in Gulf Bank (K.S.C.) as part of a rescue plan after the bank posted heavy losses
from derivatives trading in the previous year. Although the government of Kuwait, the CBK and the KIA have supported
the domestic banking industry during the global economic crisis of 2008 and 2009, there can be no assurance that such
support will be provided to the Bank or the domestic banking industry if another major economic disruption were to
occur in the future.
A downgrade in the Bank's credit ratings
The Bank's credit ratings by the major credit rating agencies are intended to measure the probability of its ability to meet
its debt obligations as they mature and thus are an important factor in determining the Bank's cost of borrowing funds and
the amount of funding it could raise. The cost of funding of the Bank's borrowings is partly dependent on its credit
ratings. As at the date of this Base Prospectus, the Bank had the following ratings:

Standard & Poor's: BBB+ for long-term issuer credit, A-2 for short-term counterparty credit, with a stable
outlook;

Moody's: A3 for long-term bank deposits and P-2 for short-term debt deposits, with a stable outlook; and

Fitch: A+ for long-term issuer default with a stable outlook and F1 for short-term issuer default.
Further increases in non-performing loans or a deterioration in the Bank's balance sheet could cause a downgrade in the
Bank's credit ratings or cause the Bank to be placed on a negative ratings watch. A downgrade of the Bank's credit
ratings, or being placed on a negative ratings watch, may increase its cost of borrowing which could have a material
adverse effect on the Bank's business, financial condition, results of operations or prospects and its relationship with
creditors.
Any potential future downgrade of the Bank's credit ratings (or announcement of a negative ratings watch) may also limit
its or its subsidiaries' ability to raise capital. Moreover, actual or anticipated changes in the Bank's credit ratings may
affect the market price of the Notes. Ratings may be subject to revision or withdrawal at any time by the assigning rating
organisation and each rating should be evaluated independently of any other rating.
8
Ownership concentration and related party exposures
The Bank's shares are listed on the Kuwait Stock Exchange (KSE). As at 31 March 2016, Kuwait Investment Projects
Company K.S.C. (Closed) (KIPCO) held a direct shareholding interest of 41.2 per cent. in the Bank and a consolidated
effective interest (including shares held through other KIPCO group companies) of 64.7 per cent. in the Bank, Public
Institute for Social Security held 7.7 per cent. and the remainder of the shares were publicly held. On 12 July 2010,
KIPCO notified the KSE that the CBK had authorised United Gulf Bank B.S.C. (UGB) Bahrain (one of KIPCO's
subsidiaries) to increase its shareholding in the Bank to up to 20.0 per cent. The Central Bank of Bahrain (CBB) also
authorised this increase. As a result of the increase authorised by CBB, KIPCO reduced its direct shareholding in the
Bank by an approximate corresponding amount. However, this reduction in KIPCO's direct shareholding in the Bank did
not have a material effect on KIPCO's indirect shareholding in the Bank given that KIPCO owns 97.0 per cent. of UGB.
While KIPCO has a controlling interest in a diversified range of financial services and media companies in the GCC
region, there is no assurance that KIPCO will maintain the existing levels of its shareholding in the Bank, nor that
KIPCO will continue its support of the Bank through future injections of capital or deposits with the Bank where
necessary. Any change in the controlling interest by KIPCO may have an adverse effect on the business, financial
condition, results of operations and prospects of the Bank.
While the Bank does not have any loan exposure to KIPCO or its other main shareholder, it does have exposures to other
members of the KIPCO group and other related parties of the KIPCO group. As at 31 December 2015, the aggregate of
loan exposures to such related parties represented 18.6 per cent. of the total loan portfolio (excluding banks and OFIs
within the KIPCO group). Related party transactions could create conflicts of interest for the Bank and its affiliates,
which could potentially impact the Bank's business.
By virtue of its controlling interest, KIPCO has the ability to influence the Bank's business significantly through its
ability to control actions which require shareholder approval and to nominate the majority of the Board. The interests of
KIPCO may be different from those of the Bank's creditors (including the Noteholders). If the interests of shareholders,
including that of the majority shareholder, KIPCO, conflict with the interests of the Noteholders, the Noteholders may be
disadvantaged by any such conflict.
Small branch network and limited retail franchise
As at 31 March 2016, the Bank operated 28 branches and 127 ATMs in Kuwait. Among the Bank's four bank
subsidiaries, Gulf Bank Algeria S.A. (GBA) operated 58 branches and 99 ATMs in Algeria, Bank of Baghdad P.J.S.C.
(BoB) operated 43 branches and 52 ATMs in Iraq and one branch in Lebanon, Tunis International Bank S.A. (TIB)
operated three branches and has no ATMs in Tunisia and Burgan Bank A.Ş.-Turkey (BBT) operated 52 branches and 56
ATMs in Turkey as at 31 March 2016. Due to its small branch network and limited retail franchise, the Bank may not be
able to capitalise fully on opportunities or developments in the MENA retail banking sector. Any potential inability to
capitalise on these opportunities may affect the Bank's competitive advantage or the implementation of its expansion
strategy.
The Bank's growth strategy depends on its ability to successfully manage its growth
While historically the Bank's operations have been undertaken primarily in the Kuwaiti market, its strategy is to expand
further into markets within the GCC and the wider MENA region and Turkey, including operating in markets in which it
has not operated previously. Challenges that may result from this strategy include the Bank's ability to:

finance strategic investments or acquisitions and obtain majority interests or control in target entities;

fully integrate strategic investments or newly established entities or acquisitions in line with its strategy;

assess the value, strengths and weaknesses of investments or acquisition targets and capitalise these upon
acquisition;

align its current information technology systems adequately with those of an expanded group;

manage efficiently the operations and employees of expanding businesses;

manage a growing number of entities without over-committing management or losing key personnel;

maintain its existing customer base; and

apply its risk management policy effectively to an enlarged group.
9
The Bank may be unable to achieve any or all of these strategic expansion objectives which could have a material
adverse effect on the Bank's business, financial condition, results of operations or prospects.
If the Bank is unable to compete with other domestic banks in Kuwait or to retain key members of its senior
management and/or hire new qualified personnel in a timely manner, this could have an adverse effect on the
business of the Bank
The Bank and its subsidiaries and associates face a high level of competition for all of their products and services in all
countries in which they operate. The Bank competes with other domestic banks in Kuwait. In addition to domestic banks,
as the governments of the MENA region continue to liberalise their economies and initiate economic reforms,
international banks are increasing their presence in Kuwait, either directly or through strategic investments, and
competing with the Bank for loans and deposits as well as trade finance and other banking business. The competitive
nature of the Kuwait banking market and that of the MENA region and any inability by the Bank to compete successfully
may adversely impact the Bank's business, financial condition, results of operations or prospects.
The Bank's future success and growth depends to a substantial degree on its ability to retain and motivate the Bank's
senior management and other key personnel. The Bank depends especially on the efforts, skill, reputations and
experience of its key senior management. The loss of key personnel could have a material adverse effect on the Bank's
business, financial condition, results of operations or prospects. In addition, the Bank is not insured against losses that
may be incurred or related to the loss or dismissal of its key personnel and the Bank does not maintain key man insurance
for any of its employees, officers or directors.
If the Bank fails to comply with applicable anti-money laundering, anti-terrorism financing, OFAC sanctions and
other related regulations, it could face fines and damage to its reputation
The Bank is required to comply with applicable anti-money laundering, anti-terrorism financing laws, Office of Foreign
Assets (OFAC) sanctions and other regulations. These laws and regulations require the Bank, among other things, to
adopt and enforce "know your customer" (KYC) policies and procedures and to report suspicious and large transactions
(AML) to the applicable regulatory authorities. The Bank has adopted KYC/AML policies and procedures and reviews
them regularly in light of any relevant regulatory and market developments. To the extent the Bank may fail to fully
comply with applicable laws and regulations, the relevant government agencies to which it reports have the power and
authority to impose fines and other penalties on the Bank. In addition, the Bank's business and reputation could suffer if
customers use the Bank for money laundering or illegal purposes.
The Bank's accounting policies and methods are critical to how it reports its financial condition and results of
operations and require management to make estimates about matters that are uncertain
Accounting policies and methods are fundamental to how the Bank records and reports its financial condition and results
of operations. Management must exercise judgement in selecting and applying many of these accounting policies and
methods so they comply with IFRS, as adopted for use by the State of Kuwait. These judgements and estimates include,
for example, the determination of when assets may be impaired, the classification of financial assets, the determination of
provisions for credit losses and fair values of assets and liabilities.
A variety of factors could affect the ultimate value that is obtained either when earning income, recognising an expense,
recovering an asset or reducing a liability. The Bank has established policies and control procedures that are intended to
ensure that its significant accounting estimates and judgements are well controlled and applied consistently. In addition,
the policies and procedures are intended to ensure that the process for changing methodologies occurs in an appropriate
manner. However, due to the uncertainty surrounding the Bank's judgements and the estimates pertaining to these
matters, the Bank cannot guarantee that it will not be required to make changes in accounting estimates or restate prior
period financial statements in the future.
Risks relating to Kuwait, Turkey and the MENA region
Investing in securities involving emerging markets generally involves a higher degree of risk
Investors in emerging markets, such as Kuwait, should be aware that these markets are subject to greater risks than more
developed markets, including, but not limited to, higher volatility, limited liquidity and changes in the political and
economic environment. In addition, there can be no assurance that the market for securities bearing emerging market
risk, such as the Notes, will not be affected negatively by events elsewhere, especially in the emerging markets.
10
The economies of most of the countries in the MENA region are mainly driven by revenues from oil exports and
therefore exposed to volatility in oil prices. The national economies of most of the countries in the MENA region have
expanded significantly in recent years, in large part as a result of historically high oil prices, which has led to increased
financial activity by banks in the region. A sustained deterioration in the economies of these countries or political
upheaval in the region could have a material adverse effect on the Bank and its subsidiaries' business, financial condition,
In addition, although economic conditions are different in each country in the MENA region, investors' reactions to
developments in one country may affect the price of securities of issuers in other countries in the MENA region,
including Kuwait. Accordingly, the market price of the Notes may be subject to significant fluctuations, which may not
necessarily be related to the financial performance of the Bank and its subsidiaries.
In respect of Turkey, the country has seen significant growth in recent years. There can be no assurance that such growth
will continue. Moreover, while the government of Turkey's recent policies have generally resulted in improved economic
performance, the country has been susceptible to political instability as a result of current political and social tensions
within the country, and due to the instability of its neighbouring countries in the MENA region. After long following a
policy of good relations with its neighbours, Turkey adopted a strongly pro-rebel stance when the Syrian civil war broke
out, but stopped short of military assistance, see "Risks relating to Kuwait, Turkey and the MENA region - The Bank's
subsidiaries are located in a region that is subject to ongoing political and security concerns". There can be no assurance
that Turkey's level of economic performance can be sustained.
No assurance can be given that the government of Turkey will not implement regulations or fiscal or monetary policies,
including policies or new regulations or new legal interpretations of existing regulations or exchange controls, or
otherwise take actions which could have a material adverse effect on the Bank's business, financial condition, results of
operations or prospects or which could adversely affect the market price and liquidity of the Notes.
In Iraq there is currently significant uncertainty in the market due to recent political instability. Specific risks in Kuwait
and the MENA region that could have a material adverse effect on the Bank's business, financial condition, results of
operations and prospects include, without limitation, the following:

political, economic or social instability;

external acts of warfare, civil clashes or other hostilities or conflict;

domestic unrest or violence;

increases in inflation and the cost of living;

changing tax regimes and tax laws, including the imposition of taxes in tax-free jurisdictions or the increase of
taxes in low-tax jurisdictions;

government interventions and protectionism;

potential adverse changes in laws and regulatory practices, including legal structures and tax laws;

difficulties in staffing and managing operations;

legal systems which could make it difficult for the Bank to enforce its intellectual property and contractual
rights;

restrictions on the right to convert or repatriate currency or export assets;

greater risk of uncollectible accounts and longer collection cycles;

currency fluctuations; and

logistical and communications challenges.
Accordingly, prospective investors should exercise particular care in evaluating the risks involved and must determine
for themselves whether, in light of those risks, an investment in the Notes is appropriate.
Generally, investment in emerging markets is only suitable for sophisticated investors who fully appreciate the
significance of the risk involved.
11
The Bank's subsidiaries are located in a region that is subject to ongoing political and security concerns
A number of countries located in the MENA region are either experiencing, or have in the recent past experienced,
political and social instability, domestic turmoil and violence and armed conflict. For example, there has been significant
political change in Iraq, Tunisia and Egypt, armed conflict in Libya and Syria and protests and related activities in a
number of other countries in the MENA region. The situation has caused significant disruption to the economies of
affected countries and has had a destabilising effect on oil and gas prices. These recent and ongoing developments, along
with terrorist acts, acts of maritime piracy and other forms of instability in the MENA region, such as tensions between
the United States, Israel and Iran, that may or may not directly involve Kuwait, could have an adverse effect on Kuwait's
economy and its ability to engage in international trade which, in turn, could have an adverse effect on the Bank's
business, financial condition, results of operations and prospects.
As the first country to undergo the "Arab Spring" uprising in 2011, Tunisia has undergone significant political change in
recent years. However, it has taken significant steps towards regaining stability, such as by approving a new constitution
at the start of 2014.
In Iraq there is currently significant uncertainty in the market due to the recent political instability and the threat of oil
supply disruption caused by the rise of Islamic militant groups such as the "Islamic State of Iraq and al-Sham" (ISIS) in
Northern Iraq due, in part, to the removal of a large percentage of the US forces present in Iraq. Such political uncertainty
and sectarian violence could have a material adverse effect on the BoB's business, financial condition, results of
operations and prospects, particularly if it were to spread to the city of Baghdad. For the year ended 31 December 2015,
the BoB's operating income was 7.5 per cent. of the Group's operating income and its operating income amounted to 6.5
per cent. of the Group's restated operating income for the year ended 31 December 2014 and 8.7 per cent of the Group's
unaudited restated operating income for the year ended 31 December 2013. See "Description of the Guarantor - Key
Subsidiaries - Bank of Baghdad P.J.S.C.".
Algeria is one of the countries in the region that remained relatively stable during the "Arab Spring" uprising. The
government has maintained stability largely through public sector expenditure and minimal political reforms. The
country is relatively stable; however, in recent years it has experienced a continuous period of social and domestic
instability and is under continuous threat of terrorist attacks in certain areas of the country. Such risks may have a
negative impact on the Bank's operations in the country as it may discourage tourism and foreign investment.
In respect of Turkey, in addition to the threat imposed on the Bank's international growth by the instability of Turkey's
neighbouring countries in the MENA region, particularly Syria and Iraq, it is also susceptible to economic instability as a
result of the current political and social tensions within the country, as demonstrated by the recent protests against
government policies which began in May 2013. In 2015, efforts by Turkey's dominant party to form a new coalition
government officially failed, and calls for a new election were made; until such new elections took place, an interim
government was in position at a time when the threat from Islamic State was rising. In May 2016, Ahmet Davutoğlu
resigned as prime minister of Turkey over differences with the Turkish president Recep Tayyip Erdoğan, following
which an ally of the president, Binali Yildirim, was appointed as prime minister to form a new government. The prime
minister and president have announced plans to overhaul the constitution, which would change Turkey's political system
into a presidential system. Turkey has continued to experience problems with domestic terrorist and ethnic separatist
groups, such as the group "People's Congress of Kurdistan", formerly known as the PKK (which has been listed as a
terrorist group by several countries, including Turkey and the United States). In recent years tensions with Syria have
also increased due to the mortar attack in 2012 on the Turkish border town of Akcakale. Although such instability,
regional conflicts and threats of terrorism have not as of yet had a major impact on Turkey's economy, there is a risk of it
negatively impacting the country's level of tourism, foreign investments and capital markets, which may in turn
negatively impact the Bank's operations in the country.
Legal and regulatory systems may create an uncertain environment for investment and business activities
Kuwait is in the process of developing governing institutions and legal and regulatory systems, which are not yet as
firmly established as they are in Western Europe and the United States. Kuwait, along with other countries within the
GCC region, has enacted measures to promote greater efficiency and certainty within their legal and regulatory systems.
Among those measures, Kuwait and countries within the GCC region have assumed obligations under the General
Agreement on Tariffs and Trade (GATT) (as administered by the World Trade Organisation (WTO)) and Kuwait has
already enacted legislation, inter alia, to extend foreign ownership. However, Kuwait may experience changes in its
economy and government policies (including, without limitation, policies relating to the continued extension of the rights
of foreign ownership pursuant to Kuwait's GATT/WTO obligations) that may affect the Bank's business.
12
The legal system in Kuwait may not provide the same degree of protection or require the levels of disclosure of
information that would be the case in Western Europe or the United States. No assurance can be given that the
government will not implement regulation or fiscal or monetary policies, including policies, regulations, or new legal
interpretations of existing regulations, relating to or affecting expropriation, nationalisation, taxation, interest rates or
exchange controls, or otherwise take actions which could have a material adverse effect on the Bank's business, financial
condition, results of operations or prospects.
The regulatory framework of the CBK
As the Bank is a regulated entity, changes in applicable laws or regulations, the interpretation or enforcement of such
laws or regulations, or the Bank's failure to comply with such laws or regulations, could have a material adverse effect on
the Bank's business, financial condition, results of operations or prospects. The supervisory and regulatory rules and
activities of the CBK, and respective central banks in respect of the Bank's subsidiaries, cover in greater detail than in
many other countries matters such as capital adequacy requirements, liquidity, the rationalisation and organisation of
credit policy, the policy for the classification of credit facilities and the calculation of relevant provisions, credit
concentration, the organisation of investment policy, internal control systems, risk measurement and management
systems, rules and regulations concerning the required experience of banks' board members and executive officers, and
the combating of money laundering, suspicious operations and the financing of terrorism.
These regulations may limit banks' activities (including those of the Bank) while changes by any of the relevant central
banks in their supervision and regulation policies and practices could affect, to varying degrees, each bank's business, the
products or services that it offers or may offer, the value of its assets, the costs of doing business and its financial
condition.
FACTORS WHICH ARE MATERIAL FOR THE PURPOSE OF ASSESSING THE MARKET RISKS
ASSOCIATED WITH NOTES ISSUED UNDER THE PROGRAMME
Risks related to the structure of a particular issue of Notes
A wide range of Notes may be issued under the Programme. The Notes may have features which contain particular risks
for potential investors. Set out below is a description of the most common such features:
If the Issuer has the right to redeem any Notes at its option, this may limit the market value of the Notes concerned
and an investor may not be able to reinvest the redemption proceeds in a manner which achieves a similar effective
return
An optional redemption feature is likely to limit the market value of Notes. During any period when the Issuer may elect
to redeem Notes, the market value of those Notes generally will not rise substantially above the price at which they can
be redeemed. This also may be true prior to any redemption period.
The Issuer may be expected to redeem Notes when its cost of borrowing is lower than the interest rate on the Notes. At
any such time, an investor generally would not be able to reinvest the redemption proceeds at an effective interest rate as
high as the interest rate on the Notes being redeemed and may only be able to do so at a significantly lower rate. Potential
investors should consider reinvestment risk in light of other investments available at that time.
If the Issuer has the right to convert the interest rate on any Notes from a fixed rate to a floating rate, or vice versa,
this may affect the secondary market and the market value of the Notes concerned
Fixed/Floating Rate Notes are Notes which may bear interest at a rate that converts from a fixed rate to a floating rate, or
from a floating rate to a fixed rate. Where the Issuer has the right to effect such a conversion, this will affect the
secondary market in, and the market value of, the Notes since the Issuer may be expected to convert the rate when it is
likely to result in a lower overall cost of borrowing for the Issuer. If the Issuer converts from a fixed rate to a floating rate
in such circumstances, the spread on the Fixed/Floating Rate Notes may be less favourable than then prevailing spreads
on comparable Floating Rate Notes tied to the same reference rate. In addition, the new floating rate at any time may be
lower than the rates on other Notes. If the Issuer converts from a floating rate to a fixed rate in such circumstances, the
fixed rate may be lower than then prevailing rates on its Notes.
13
Notes issued at a substantial discount or premium may experience price volatility in response to changes in market
interest rates
The market values of securities issued at a substantial discount or premium (such as Zero Coupon Notes) from their
nominal amount tend to fluctuate more in relation to general changes in interest rates than do prices for more
conventional interest-bearing securities. Generally, the longer the remaining term of such securities, the greater the price
volatility as compared to more conventional interest-bearing securities with comparable maturities.
Risks relating to Renminbi-denominated Notes
Notes denominated in Renminbi (Renminbi Notes) may be issued under the Programme. Renminbi Notes contain
particular risks for potential investors, including;
Renminbi is not freely convertible and there are significant restrictions on the remittance of Renminbi into and
outside the PRC which may adversely affect the liquidity of Renminbi Notes
Renminbi is not freely convertible at present. The government of the PRC (the PRC Government) continues to regulate
conversion between Renminbi and foreign currencies despite significant reduction over the years by the PRC
Government of control over trade transactions involving import and export of goods and services as well as other
frequent routine foreign exchange transactions. These transactions are known as current account items. However,
remittance of Renminbi by foreign investors into the PRC for the purposes of capital account items such as capital
contributions, is generally only permitted upon obtaining specific approvals from or completing specific registrations or
filings with, the relevant authorities on a case-by-case basis and is subject to a strict monitoring system. Regulations in
the PRC on the remittance of Renminbi into the PRC for settlement of capital account items are developing gradually.
On 7 April 2011, the State Administration of Foreign Exchange of the PRC (SAFE) promulgated the "Circular on Issues
Concerning the Capital Account Items in connection with Cross-Border Renminbi" (the SAFE Circular), which became
effective on 1 May 2011. According to the SAFE Circular, in the event that foreign investors intend to use Renminbi
(including offshore Renminbi and onshore Renminbi held in the capital accounts of non-PRC residents) to make a
contribution to an onshore enterprise or make a payment for the transfer of equity interest of an onshore enterprise by a
PRC resident, such onshore enterprise shall be required to submit the prior written consent of the relevant Ministry of
Commerce (MOFCOM) to the relevant local branch of SAFE of such onshore enterprise and to register for a foreign
invested enterprise status. Further, the SAFE Circular clarifies that foreign debts borrowed, and foreign guarantees
provided, by an onshore entity (including a financial institution) in Renminbi shall, in principle, be regulated under the
current PRC foreign debt and foreign guarantee regime.
On 13 October 2011, the People's Bank of China (the PBOC) promulgated the "Administrative Measures on Renminbi
Settlement of Foreign Direct Investment" (the PBOC RMB FDI Measures) as part of the implementation of the PBOC's
detailed foreign direct investment (FDI) accounts administration system. The system covers almost all aspects in
relation to FDI, including capital injections, payments for the acquisition of PRC domestic enterprises, repatriation of
dividends and other distributions, as well as Renminbi denominated cross-border loans. Under the PBOC RMB FDI
Measures, special approval for FDI and shareholder loans from the PBOC, which was previously required, is no longer
necessary. In some cases however, post-event filing with the PBOC is still necessary. On 14 June 2012, the PBOC
further issued the implementing rules for the PBOC RMB FDI Measures, which provides more detailed rules relating to
cross-border Renminbi direct investments and settlement. On 5 July 2013, the PBOC promulgated the "Circular on
Policies related to Simplifying and Improving Cross-border Renminbi Business Procedures", which sought to improve
the efficiency of the cross-border Renminbi settlement process. For example, where automatic fund remittance occurs,
the bank can debit the amount into the relevant account first and subsequently verify the relevant transaction. PBOC
further issued the "Circular on the Relevant Issues on Renminbi Settlement of Investment in Onshore Financial
Institutions by Foreign Investors" on 23 September 2013, which provides further details for using Renminbi to invest in a
financial institution domiciled in the PRC.
On 3 December 2013, the MOFCOM promulgated the "Circular on Issues in relation to Cross-border Renminbi Foreign
Direct Investment" (the MOFCOM Circular), which became effective on 1 January 2014, to further facilitate FDI by
simplifying and streamlining the applicable regulatory framework. Pursuant to the MOFCOM Circular, written approval
from the appropriate office of MOFCOM and/or its local counterparts specifying "Renminbi Foreign Direct Investment"
and the amount of capital contribution is required for each FDI. Unlike previous MOFCOM regulations on FDI, the
MOFCOM Circular removes the approval requirement for foreign investors who intend to change the currency of their
existing capital contribution from a foreign currency to Renminbi. In addition, the MOFCOM Circular also clearly
prohibits FDI funds from being used for any investments in securities and financial derivatives (except for investments in
PRC listed companies by strategic investors) or for entrustment loans in the PRC.
14
As the SAFE Circular, the PBOC RMB FDI Measures and the MOFCOM Circular are relatively new circulars, they will
be subject to interpretation and application by the relevant authorities in the PRC.
There is no assurance that the PRC Government will continue to liberalise control over cross-border remittance of
Renminbi in the future, that any pilot schemes for cross-border utilisation will not be discontinued or that new
regulations in the PRC will not be promulgated in the future which have the effect of restricting or eliminating the
remittance of Renminbi into or outside the PRC. In the event that funds cannot be repatriated outside the PRC in
Renminbi, this may affect the overall availability of Renminbi outside the PRC and the ability of the Issuer to source
Renminbi to finance its obligations under Renminbi Notes.
There is only limited availability of Renminbi outside the PRC, which may affect the liquidity of Renminbi Notes and
the Issuer's ability to source Renminbi outside the PRC to service Renminbi Notes
As a result of the restrictions imposed by the PRC Government on cross-border Renminbi fund flows, the availability of
Renminbi outside the PRC is limited.
Currently, licensed banks in Singapore and Hong Kong may offer limited Renminbi-denominated banking services to
Singapore residents, Hong Kong residents and specified business customers. While the PBOC has entered into
agreements on the clearing of Renminbi business with financial institutions in a number of financial centres and cities
(the RMB Clearing Banks), including but not limited to Hong Kong and are in the process of establishing Renminbi
clearing and settlement mechanisms in several other jurisdictions (the Settlement Arrangements) the current size of
Renminbi-denominated financial assets outside the PRC is limited. Renminbi business participating banks do not have
direct Renminbi liquidity support from the PBOC. The relevant RMB Clearing Bank only has access to onshore liquidity
support from the PBOC for the purpose of squaring open positions of participating banks for limited types of
transactions, including open positions resulting from conversion services for corporations relating to cross-border trade
settlement. The relevant RMB Clearing Bank is not obliged to square for participating banks any open positions as a
result of other foreign exchange transactions or conversion services and the participating banks will need to source
Renminbi from outside the PRC to square such open positions.
Although it is expected that the offshore Renminbi market will continue to grow in depth and size, its growth is subject to
many constraints as a result of PRC laws and regulations on foreign exchange. There is no assurance that new PRC
regulations will not be promulgated or the Settlement Agreements will not be terminated or amended in the future which
will have the effect of restricting availability of Renminbi outside the PRC. The limited availability of Renminbi outside
the PRC may affect the liquidity of the Renminbi Notes. To the extent the Issuer is required to source Renminbi outside
the PRC to service the Renminbi Notes, there is no assurance that the Issuer will be able to source such Renminbi on
satisfactory terms, if at all. If Renminbi is not available in certain circumstances as described in the Conditions applicable
to Renminbi Notes, the Issuer can make payments in other currencies as set out in the Terms and Conditions of the Notes.
Investment in Renminbi Notes is subject to exchange rate risks
The value of Renminbi against the U.S. dollar and other foreign currencies fluctuates from time to time and is affected by
changes in the PRC and international political and economic conditions and by many other factors. All payments of
interest and principal with respect to Renminbi Notes will be made in Renminbi unless otherwise specified. As a result,
the value of these Renminbi payments in U.S. dollar or other foreign currency terms may vary with the prevailing
exchange rates in the marketplace. If the value of Renminbi depreciates against the U.S. dollar or other foreign
currencies, the value of an investment in U.S. dollar or other applicable foreign currency terms will decline.
In the event that access to Renminbi becomes restricted to the extent that, by reason of RMB Inconvertibility, RMB Nontransferability or RMB Illiquidity (as defined under "Terms and Conditions of the Notes"), the Issuer is unable, or it is
impossible for it, to pay interest or principal in Renminbi, the Conditions allow the Issuer to make payment in such other
currency as may be specified in the applicable Final Terms as the "Relevant Currency" at the prevailing spot rate of
exchange, all as provided in more detail in the Conditions. As a result, the value of these Renminbi payments may vary
with the prevailing exchange rates in the marketplace. If the value of the Renminbi depreciates against such currency as
may be specified in the applicable Final Terms as the "Relevant Currency" or other foreign currencies, the value of a
holder's investment in such currency as may be specified in the applicable Final Terms as the "Relevant Currency" or
other foreign currency terms will decline.
An investment in Renminbi Notes is subject to interest rate risks
The PRC Government has gradually liberalised the regulation of interest rates in recent years. Further liberalisation may
increase interest rate volatility. Renminbi Notes may carry a fixed interest rate. Consequently, the trading price of such
15
Renminbi Notes will vary with fluctuations in interest rates. If a holder of Renminbi Notes tries to sell any Renminbi
Notes before their maturity, they may receive an offer that is less than the amount invested.
Payments in respect of Renminbi Notes will only be made to investors in the manner specified in such Renminbi Notes
Investors may be required to provide certification and other information (including Renminbi account information) in
order to be allowed to receive payments in Renminbi in accordance with the Renminbi clearing and settlement system for
participating banks in the RMB Settlement Centre(s) (as defined under "Terms and Conditions of the Notes"). Except in
the limited circumstances stipulated in Condition 6.7 (as set out in the RMB provisions below), all Renminbi payments to
investors in respect of the Renminbi Notes will be made solely (i) for so long as the Renminbi Notes are represented by a
Temporary Bearer Global Note, a Permanent Bearer Global Note or a Registered Global Note (each as defined under
"Form of Notes") held with the common depositary for Euroclear Bank SA/NV (Euroclear) and Clearstream Banking
S.A. (Clearstream, Luxembourg) or any alternative clearing system, by transfer to a Renminbi bank account
maintained in the applicable RMB Settlement Centre(s) in accordance with prevailing Euroclear and Clearstream,
Luxembourg rules and procedures or those of such alternative clearing system, as set out in the applicable Final Terms;
or (ii) for so long as the Renminbi Notes are in definitive form, by transfer to a Renminbi bank account maintained in the
RMB Settlement Centre(s) in accordance with prevailing rules and regulations. Other than as described in the Conditions
of the Notes, the Issuer cannot be required to make payment by any other means (including in any other currency or in
bank notes, by cheque or draft or by transfer to a bank account in the PRC).
Gains on the transfer of the Renminbi Notes may become subject to income taxes under PRC tax laws Under the PRC
Enterprise Income Tax Law, the PRC Individual Income Tax Law and the relevant implementation rules, as amended
from time to time, any gain realised on the transfer of Renminbi Notes by non-PRC resident enterprise holders or
individual holders may be subject to PRC enterprise income tax (EIT) or PRC individual income tax (IIT) if such gain is
regarded as income derived from sources within the PRC. While the PRC Enterprise Income Tax Law levies EIT at the
rate of 20 per cent. of the gains derived by such non-PRC resident enterprise Noteholders from the transfer of the Notes,
its implementation rules have reduced the EIT rate to 10 per cent. In accordance with the PRC Individual Income Tax
Law and its implementation rules (as amended from time to time), any gain realised by a non-PRC resident individual
Noteholder from the transfer of the Notes may be regarded as being sourced from the PRC and thus be subject to IIT at a
rate of 20 per cent. of the gains derived by such non-PRC resident individual Noteholder from the transfer of the Notes.
However, there remains uncertainty as to whether the gain realised from the transfer of the Renminbi Notes would be
treated as income derived from sources within the PRC and be subject to PRC tax. This will depend on how the PRC tax
authorities interpret, apply or enforce the PRC Enterprise Income Tax Law, the PRC Individual Income Tax Law and
their respective implementation rules. If such gains are determined as income sourced in the PRC by the relevant PRC
tax authorities, (i) the non-PRC resident enterprise Noteholders may be subject to EIT at the rate of 10 per cent. of the
gains derived by such non-PRC resident enterprise Noteholders and (ii) the non-PRC resident individual Noteholders
may be subject to IIT at the rate of 20 per cent. of the gains derived by such non-PRC resident individual Noteholders,
unless there is an applicable tax treaty between PRC and the jurisdiction in which such non-PRC resident enterprise or
individual resident holders of Renminbi Notes reside that reduces or exempts the relevant EIT or IIT), the value of their
investment in the Renminbi Notes may be materially and adversely affected.
Risks related to Notes generally
Set out below is a brief description of certain risks relating to the Notes generally:
The conditions of the Notes contain provisions which may permit their modification without the consent of all
investors
The conditions of the Notes contain provisions for calling meetings of Noteholders to consider matters affecting their
interests generally and to obtain Written Resolutions on matters relating to the Notes from Noteholders without calling a
meeting. A Written Resolution signed by or on behalf of the holders of not less than 75 per cent. in nominal amount of
the Notes of the relevant Series who for the time being are entitled to receive notice of a meeting in accordance with the
provisions of the Agency Agreement (as defined under "Terms and Conditions of the Notes") and whose Notes are
outstanding shall, for all purposes, take effect as an Extraordinary Resolution.
In certain circumstances, where the Notes are held in global form in the clearing systems, the Issuer will be entitled to
rely upon:
(i)
where the terms of the proposed resolution have been notified through the relevant clearing system(s), approval
of a resolution proposed by the Issuer given by way of electronic consents communicated through the electronic
16
communications systems of the relevant clearing systems in accordance with their operating rules and
procedures by or on behalf of the holders of not less than 75 per cent. in nominal amount of the Notes of the
relevant Series for the time being outstanding; and
(ii)
where electronic consent is not being sought, consent or instructions given in writing directly to the Issuer by
accountholders in the clearing systems with entitlements to such global note or certificate or, where the
accountholders hold such entitlement on behalf of another person, on written consent from or written instruction
by the person for whom such entitlement is ultimately beneficially held (directly or via one or more
intermediaries), provided that the Issuer has obtained commercially reasonable evidence to ascertain the validity
of such holding and taken reasonable steps to ensure such holding does not alter following the giving of such
consent/instruction and prior to effecting such resolution;
A Written Resolution or an electronic consent as described above may be effected in connection with any matter
affecting the interests of Noteholders, including the modification of the Conditions, that would otherwise be required to
be passed at a meeting of Noteholders satisfying the special quorum in accordance with the provisions of the Agency
Agreement, and shall for all purposes take effect as an Extraordinary Resolution passed at a meeting of Noteholders duly
convened and held.
These provisions permit defined majorities to bind all Noteholders including Noteholders who did not attend and vote at
the relevant meeting and Noteholders who voted in a manner contrary to the majority. For further details of such matters
and the relevant majorities required at meetings of Noteholders, see Condition 16 and the corresponding provisions of the
Agency Agreement.
The Conditions also provide that the Issuing and Principal Paying Agent and the Issuer may, without the consent of
Noteholders, agree to (i) any modification of the Notes, the Coupons or the Agency Agreement which is not prejudicial
to the interests of the Noteholders and the Couponholders; or (ii) any modification of the Notes, the Coupons or the
Agency Agreement which is of a formal, minor or technical nature or is made to correct a manifest or proven error or to
comply with mandatory provisions of the law. Any such modification shall be binding on the Noteholders and the
Couponholders.
Investors who hold less than the minimum Specified Denomination may be unable to sell their Bearer Notes and may
be adversely affected if definitive Bearer Notes are subsequently required to be issued
In relation to any issue of Bearer Notes which have denominations consisting of a minimum Specified Denomination (as
defined in the Final Terms) plus one or more higher integral multiples of another smaller amount, it is possible that such
Bearer Notes may be traded in amounts in excess of the minimum Specified Denomination that are not integral multiples
of such minimum Specified Denomination. In such a case a holder who, as a result of trading such amounts, holds a
nominal amount which is less than the minimum Specified Denomination in his account with the relevant clearing
system would not be able to sell the remainder of such holding without first purchasing a nominal amount of Bearer
Notes at or in excess of the minimum Specified Denomination such that its holding amounts to one or more Specified
Denominations. Further, a holder who, as a result of trading such amounts, holds a nominal amount which is less than
the minimum Specified Denomination in his account with the relevant clearing system at the relevant time may not
receive a definitive Bearer Note in respect of such holding (should definitive Bearer Notes be printed) and would need to
purchase a nominal amount of Bearer Notes at or in excess of the minimum Specified Denomination such that its holding
amounts to one or more Specified Denominations.
If definitive Bearer Notes are issued, holders should be aware that definitive Bearer Notes which have a denomination
that is not an integral multiple of the minimum Specified Denomination may be illiquid and difficult to trade.
The Notes will be held in global form, subject to limited exceptions, and traded in the clearing systems
Notes issued under the Programme will be represented on issue by one or more Global Notes that may be deposited with
a common depositary for Euroclear and Clearstream, Luxembourg. Except in the circumstances described in each Global
Note, investors will not be entitled to receive Notes in definitive form. Euroclear and Clearstream, Luxembourg and their
respective direct and indirect participants will maintain records of the beneficial interests in each Global Note held
through it. While the Notes are represented by a Global Note, investors will be able to trade their beneficial interests only
through the relevant clearing systems and their respective participants.
While the Notes are represented by Global Notes, the Issuer will discharge its payment obligations under the Notes by
making payments through the relevant clearing systems. A holder of a beneficial interest in a Global Note must rely on
the procedures of the relevant clearing system and its participants to receive payments under the Notes. The Issuer has no
17
responsibility or liability for the records relating to, or payments made in respect of, beneficial interests in any Global
Note.
Holders of beneficial interests in a Global Note will not have a direct right to vote in respect of the Notes so represented.
Instead, such holders will be permitted to act only to the extent that they are enabled by the relevant clearing system and
its participants to appoint appropriate proxies.
EU financial transaction tax
On 14 February 2013, the European Commission issued proposals, including a draft Directive (the Commission's
proposal) for a financial transaction tax (FTT) to be adopted in certain participating EU member states (including
Belgium, Germany, Estonia, Greece, Spain, France, Italy, Austria, Portugal, Slovenia and Slovakia, although Estonia has
since stated that it will not participate). If the Commission’s proposal was adopted, the FTT would be a tax primarily on
"financial institutions" (which could include the Issuer) in relation to "financial transactions" (which would include the
conclusion or modification of derivative contracts and the purchase and sale of financial instruments).
Under the Commission's proposal, the FTT could apply in certain circumstances to persons both within and outside of the
participating member states. Generally, it would apply where at least one party is a financial institution, and at least one
party is established in a participating member state. A financial institution may be, or be deemed to be, "established" in a
participating member state in a broad range of circumstances, including (a) by transacting with a person established in a
participating member state or (b) where the financial instrument which is subject to the financial transaction is issued in a
participating member state.
The FTT may give rise to tax liabilities for the Issuer with respect to certain transactions (including concluding swap
transactions and/or purchases or sales of securities (such as authorised investments)) if it is adopted based on the
Commission’s proposal. Any such tax liabilities may reduce amounts available to the Issuer to meet its obligations under
the Notes and may result in investors receiving less interest or principal than expected. It should also be noted that the
FTT could be payable in relation to relevant transactions by investors in respect of the Notes (including secondary market
transactions) if the conditions for a charge to arise are satisfied and the FTT is adopted based on the Commission's
proposal. Primary market transactions referred to in Article 5(c) of Regulation (EC) No 1287/2006 are expected to be
exempt.
The FTT proposal remains subject to negotiation between participating member states. It may therefore be altered prior
to implementation, the timing of which remains unclear. Additional EU member states may decide to participate.
Prospective holders of the Notes are advised to seek their own professional advice in relation to the FTT.
Risks related to the market generally
Set out below is a brief description of the principal market risks, including liquidity risk, exchange rate risk, interest rate
risk and credit risk:
An active secondary market in respect of the Notes may never be established or may be illiquid and this would
adversely affect the value at which an investor could sell his Notes
Notes may have no established trading market when issued, and one may never develop. If a market for the Notes does
develop, it may not be very liquid. Therefore, investors may not be able to sell their Notes easily or at prices that will
provide them with a yield comparable to similar investments that have a developed secondary market. Illiquidity may
adversely affect the market value of the Notes.
If an investor holds Notes which are not denominated in the investor's home currency, he will be exposed to
movements in exchange rates adversely affecting the value of his holding. In addition, the imposition of exchange
controls in relation to any Notes could result in an investor not receiving payments on those Notes
The Issuer will pay principal and interest on the Notes and the Guarantor will make any payments under the Deed of
Guarantee in the Specified Currency. This presents certain risks relating to currency conversions if an investor's financial
activities are denominated principally in a currency or currency unit (the Investor's Currency) other than the Specified
Currency. These include the risk that exchange rates may significantly change (including changes due to devaluation of
the Specified Currency or revaluation of the Investor's Currency) and the risk that authorities with jurisdiction over the
Investor's Currency may impose or modify exchange controls. An appreciation in the value of the Investor's Currency
relative to the Specified Currency would decrease (1) the Investor's Currency-equivalent yield on the Notes, (2) the
18
Investor's Currency-equivalent value of the principal payable on the Notes and (3) the Investor's Currency-equivalent
market value of the Notes.
Government and monetary authorities may impose (as some have done in the past) exchange controls that could
adversely affect an applicable exchange rate or the ability of the Issuer or the Guarantor to make payments in respect of
the Notes. As a result, investors may receive less interest or principal than expected, or no interest or principal.
The value of Fixed Rate Notes may be adversely affected by movements in market interest rates
Investment in Fixed Rate Notes involves the risk that if market interest rates subsequently increase above the rate paid on
the Fixed Rate Notes, this will adversely affect the value of the Fixed Rate Notes.
Credit ratings assigned to the Issuer, the Guarantor or any Notes may not reflect all the risks associated with an
investment in those Notes
One or more independent credit rating agencies may assign credit ratings to the Issuer, the Guarantor or the Notes. The
ratings may not reflect the potential impact of all risks related to structure, market, additional factors discussed above,
and other factors that may affect the value of the Notes. A credit rating is not a recommendation to buy, sell or hold
securities and may be revised or withdrawn by the rating agency at any time. Any adverse change in an applicable credit
rating could adversely affect the trading price of the Notes that have been issued.
In general, European regulated investors are restricted under the CRA Regulation from using credit ratings for regulatory
purposes, unless such ratings are issued by a credit rating agency established in the EU and registered under the CRA
Regulation (and such registration has not been withdrawn or suspended), subject to transitional provisions that apply in
certain circumstances whilst the registration application is pending. Such general restriction will also apply in the case of
credit ratings issued by non-EU credit rating agencies, unless the relevant credit ratings are endorsed by an EU-registered
credit rating agency or the relevant non-EU rating agency is certified in accordance with the CRA Regulation (and such
endorsement action or certification, as the case may be, has not been withdrawn or suspended). The list of registered and
certified rating agencies published by ESMA on its website in accordance with the CRA Regulation is not conclusive
evidence of the status of the relevant rating agency included in such list, as there may be delays between certain
supervisory measures being taken against a relevant rating agency and the publication of the updated ESMA list. Certain
information with respect to the credit rating agencies and ratings is set out on the cover of this Base Prospectus.
Taxation risks on payments
Payments made by the Issuer and the Guarantor in respect of the Notes and the Guarantee, respectively, could become
subject to taxation. Condition 8 (Taxation) requires the Issuer or Guarantor to pay additional amounts in certain
circumstances in the event that any withholding, retention, or deduction for, or on account of, any present or future taxes,
levies, imports, fees, duties, assessments or governmental charges of whatever nature is imposed, levied, collected,
withheld or assessed by or on behalf of the UAE (including the DIFC) and/or Kuwait or any authority therein or thereof
having power to tax in respect of payments under the Notes or the Guarantee, as the case may be, such that net amounts
received by the holders of the Notes after such withholding, retention, or deduction shall equal the respective amounts of
principal and distributions which would otherwise have been receivable in respect of the Notes in the absence of such
withholding, retention, or deduction.
The circumstances described above may entitle the Issuer to redeem all (but not some only) of the Notes.
The value of the Notes could be adversely affected by a change in tax law
Statements in this Base Prospectus concerning the taxation of investors are of a general nature and are based upon current
law and practice in the jurisdictions stated. Such law and practice is, in principle, subject to change, possibly with
retrospective effect, and this could adversely affect investors. In addition, any change in taxation legislation or in practice
in a relevant jurisdiction could adversely impact the ability of the Issuer to make payments under the Notes and/or the
market value of the Notes.
The application and enforcement of the Kuwaiti income tax regime is uncertain, and holders of the Notes which are
"non-GCC corporate entities" may become subject to the Kuwaiti income tax regime in certain limited circumstances
Article 150 (bis) of Law No. 7 of 2010 Concerning the Establishment of the Capital Markets Authority and the
Regulating of Securities Activities, (which was introduced pursuant to Law No. 22 of 2015) (Article 150 (bis)), provides
that, without prejudice to the exemptions prescribed on capital gains tax arising from the disposal of securities issued by
19
companies listed on the Kuwait Stock Exchange, the returns from bonds and other similar securities, regardless of the
nature of the issuer, are exempt from Kuwaiti tax.
To date, there has been no official statement made by the Department of Income Tax (DIT) regarding its interpretation of
Article 150 (bis) and/or its application. Similarly, the Kuwaiti courts (who will be the final arbiters on the matter) have
not been required to interpret such provision to date.
Furthermore, the DIT has to date not always adopted consistent rulings on Kuwaiti tax matters more generally.
Accordingly, to the extent that the exemption afforded by Article 150 (bis) is held not to apply to the Notes, or to a
particular Noteholder, such Noteholder or the Noteholders which are non-GCC corporate entities may become subject to
income tax in Kuwait (see "Taxation — Kuwait" for further details).
In addition, neither Article 150 (bis) nor Ministry of Finance Administrative Order No. 2028/2015 endorsing the
provisions thereof, address the issue of whether or not there remains an obligation, as described under “Taxation –
Kuwait – Retention”, to make a deduction of five per cent. of the amount of any payments made by the Guarantor to the
Issuer or the Noteholders (if there is a call on the Guarantee). In the event of any such deduction, the Deed of Guarantee
provides that the Guarantor will pay such additional amounts in order that the net amounts received by the Noteholders
shall equal the amount which would have been receivable in the absence of such deduction.
Prospective purchasers of the Notes are advised to consult their tax advisers as to the consequences under Kuwaiti and
other applicable tax laws of acquiring, holding and disposing of the Notes and receiving payments under the Notes and
the Guarantee.
Enforcement under Kuwaiti Law
The insolvency regime in Kuwait is relatively untested with limited guidance as to how the legislative framework will
be applied in practice by the courts in Kuwait.
Notwithstanding that the Deed of Guarantee is expressed to be governed by English law, in the event of the Guarantor's
insolvency, Kuwaiti bankruptcy law will apply and such law may adversely affect the Guarantor's ability to perform its
obligations under the Deed of Guarantee, and obtaining a final bankruptcy judgment in Kuwait may take several years.
There is little precedent to predict how any claims on behalf of holders of the Notes against the Guarantor would be
resolved in the event of the Guarantor's insolvency and therefore there can be no assurance that holders of the Notes will
receive payment of their claims in full or at all in these circumstances.
Enforceability of the Guarantor's obligations under the Guarantee
Under Kuwaiti law, the obligations of a guarantor are incidental to the obligations of the principal debtor, and the
obligations of the guarantor will only be valid to the extent of the continuing obligations of the principal debtor. In
addition, in order to enforce a guarantee under Kuwaiti law, the underlying debt obligation for which such guarantee has
been granted may need to be proved before the Kuwaiti courts.
Accordingly, if upon enforcement Kuwaiti law is applied to the Guarantee, the obligations of the Guarantor under the
Guarantee will be treated as incidental obligations and dependent on the validity and the enforceability of the Issuer's
obligations under the Notes and the Issuer's obligations under the Notes may, therefore, need to be proved before the
courts of Kuwait in order for the obligations of the Guarantor under the Guarantee to be enforceable.
Enforcing foreign judgments and arbitral awards in Kuwait
The Deed of Guarantee, the Agency Agreement, the Deed of Covenant and the Notes (the Documents) each contains a
provision to the effect that disputes arising under the Documents will, unless the option to litigate set out therein is
exercised, be referred to arbitration under the London Court of International Arbitration Rules. If such option to litigate is
exercised, each of the Guarantor and the Issuer has, in the relevant Document, agreed to the courts of England (the
Courts of England) having exclusive jurisdiction to settle any such disputes.
Foreign Judgments
Although the choice of submission to the jurisdiction of the Courts of England in these documents is valid and binding, if
a claim is brought before the courts of Kuwait (the Kuwaiti Courts), the Kuwaiti Courts may still accept jurisdiction in
any suit, action or proceedings in the situations identified in Articles 23, 24 and 26 of Kuwaiti Law No. 38 of 1980 (the
Code of Civil and Commercial Procedure), as amended (the Code). These situations include (a) where the defendant in
20
the proceedings expressly or impliedly accepted the jurisdiction of the Kuwaiti Courts, (b) where the defendant is a
Kuwaiti national or is resident, domiciled or has a place of business or a chosen domicile in Kuwait or (c) if such legal
proceedings relate to property (movable or immovable) located in Kuwait, an obligation is created, executed or required
to be performed in Kuwait or a bankruptcy is declared in Kuwait.
There can therefore be no assurance that the Kuwaiti Courts will decline jurisdiction to adjudicate any dispute under the
Documents, notwithstanding that the Documents provide that the Courts of England shall have exclusive jurisdiction to
settle any disputes arising thereunder. The Kuwaiti Courts could be influenced when deciding whether or not to decline
jurisdiction by the existence of proceedings relating to such dispute in another jurisdiction.
The enforcement of a monetary judgment (not involving the payment of taxes or the like) obtained in the Courts of
England by the Kuwaiti Courts would require the filing of an enforcement action in the Kuwaiti Courts. Such action does
not involve either a re-trial or an examination of the merits of the case; its sole purpose is to establish whether the
judgment is compliant with the provisions of Article 199 of the Code which require that: (a) the courts of the jurisdiction
by which the judgment was rendered must afford reciprocal treatment to judgments rendered in Kuwait; (b) the judgment
must be rendered by a competent authority according to the law of the jurisdiction in which it was rendered; (c) the
parties must have been duly summoned to appear and were duly represented at the proceedings; (d) the judgment must be
final and non-appealable (res judicata) according to the law of the jurisdiction in which it was rendered; (e) the judgment
must not contradict any prior judgment rendered by a Kuwaiti Court; and, finally (f) the judgment must not contain
anything in conflict with the general morals or public order of Kuwait.
In respect of the requirement that the courts of the jurisdiction in which the judgment was issued must afford reciprocal
treatment to judgments issued by the Kuwaiti Courts, there is no treaty between Kuwait and the United Kingdom that
affords such required reciprocal treatment. There are no known instances of the Courts of England enforcing Kuwaiti
judgments, while there are different decisions issued by the Court of Cassation (the highest court in Kuwait) with regard
to the enforcement in Kuwait of a monetary judgment issued by the Courts of England. In 2004 and again in 2005, the
Court of Cassation had to consider applications for the enforcement in Kuwait of an English judgment. In the 2004 case,
the Court of Cassation was satisfied that, on the facts, the criteria for enforcement set out in Article 199 of the Code had
been satisfied and therefore approved enforcement. In the 2005 case, however, the Court of Cassation concluded that the
criteria had not been satisfied and therefore did not approve enforcement. It should be noted that precedents are not
binding on but only of persuasive value to the Kuwaiti Courts.
Arbitral awards
Kuwait is a party to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards
(the New York Convention). A foreign arbitral award will be recognised and enforced in Kuwait (without re-trial or
examination of the merits of the case) in accordance with the Code. Article 200 of the Code provides that foreign arbitral
awards are to be recognised and enforced under the same conditions (applied mutatis mutandis to foreign arbitral awards)
as are applied in respect of the enforcement of foreign judgments under Article 199 of the Code (as detailed above) save
that, in addition, the subject matter of the award must be considered arbitrable under Kuwaiti law and the arbitral award
must be enforceable in the jurisdiction in which it was rendered. The requirement to establish reciprocal enforcement
under Article 199 of the Code with respect to the recognition and enforcement of arbitral awards issued in England is
satisfied as England and Kuwait are both signatories to the New York Convention.
As noted above, enforcement of a foreign arbitral award or foreign judgment in Kuwait requires the filing of an
enforcement action in the Kuwaiti Courts. Proceedings before the Kuwaiti Courts, including enforcement actions, can
take a relatively long time before a final and non-appealable judgment is issued.
There have not been many occasions in which the Kuwaiti Courts have been asked to consider the enforcement of foreign
arbitral awards or foreign judgments and so (notwithstanding that on those occasions when they have been asked to do so
they have shown that they will follow the provisions of the Code and enforce an arbitral award) there is not a large body
of decided cases in which the practical implications of complying with Article 199 of the Code have been analysed.
Change in law
The Deed of Guarantee, the Agency Agreement, the Deed of Covenant and the Notes are governed by English law in
effect as at the date of this Base Prospectus. No assurance can be given as to the impact of any possible change to English
law after the date of this Base Prospectus, nor can any assurance be given as to whether any such change could adversely
affect the ability of the Issuer or the Guarantor to make payments under the Notes, the Agency Agreement, the Deed of
Covenant or the Deed of Guarantee, as applicable.
21
DOCUMENTS INCORPORATED BY REFERENCE
The following documents which have previously been published and have been filed with the Central Bank of Ireland
shall be incorporated in, and form part of, this Base Prospectus:
(a)
the interim condensed consolidated financial information for the three months ended 31 March 2016 of the
Group together with the review report thereon (an electronic copy of which is available at
http://www.burgan.com/uploads/FSQ12016.pdf);
(b)
the consolidated financial statements for the year ended 31 December 2015 of the Group together with the audit
report
thereon
(an
electronic
copy
of
which
is
available
at
http://www.burgan.com/uploads/FinancialStatementsFY15Eng31Dec2015.pdf); and
(c)
the consolidated financial statements for the year ended 31 December 2014 of the Group together with the audit
report
thereon
(an
electronic
copy
of
which
is
available
at
http://www.ise.ie/debt_documents/FY_2014_Financial_Statements(18240230_1)_fb7e7ca3-014f-4cbd-89f83529750079da.PDF?v=6102015).
Following the publication of this Base Prospectus a supplement may be prepared by the Issuer and approved by the
Central Bank of Ireland in accordance with Article 16 of the Prospectus Directive. Statements contained in any such
supplement (or contained in any document incorporated by reference therein) shall, to the extent applicable (whether
expressly, by implication or otherwise), be deemed to modify or supersede statements contained in this Base Prospectus
or in a document which is incorporated by reference in this Base Prospectus. Any statement so modified or superseded
shall not, except as so modified or superseded, constitute a part of this Base Prospectus.
Copies of documents incorporated by reference in this Base Prospectus can be obtained from the registered office of the
Issuer and the Guarantor and from the specified office of the Paying Agent for the time being in London.
Any documents themselves incorporated by reference in the documents incorporated by reference in this Base Prospectus
shall not form part of this Base Prospectus.
The Issuer and the Guarantor will, in the event of any significant new factor, material mistake or inaccuracy relating to
information included in this Base Prospectus which is capable of affecting the assessment of any Notes, prepare a
supplement to this Base Prospectus or publish a new Base Prospectus for use in connection with any subsequent issue of
Notes.
22
OVERVIEW OF THE PROGRAMME
This general description must be read as an introduction to this Base Prospectus and any decision to invest in any
Notes should be based on a consideration of this Base Prospectus as a whole. This overview does not purport to be
complete and is taken from, and is qualified in its entirety by, the remainder of this Base Prospectus and, in
relation to the terms and conditions of any particular Tranche of Notes, the applicable Final Terms. The Issuer
and the Guarantor and any relevant Dealer may agree that Notes shall be issued in a form other than that
contemplated in the Terms and Conditions, in which event, in the case of listed Notes only and if appropriate, a
supplemental Base Prospectus will be published.
Words and expressions defined in "Form of the Notes", "Terms and Conditions of the Notes" and "Description of the
Guarantor" shall have the same meanings in this summary.
Issuer:
Burgan Senior SPC Limited, a special purpose company, incorporated in the Dubai
International Financial Centre
Guarantor:
Burgan Bank K.P.S.C. incorporated in the State of Kuwait.
Risk Factors:
There are certain factors that may affect the Issuer's ability to fulfil its obligations
under or in connection with Notes issued under the Programme. There are also
certain factors that may affect the Guarantor's ability to fulfil its obligations under
the Deed of Guarantee. In addition, there are certain factors which are material for
the purpose of assessing the market risks associated with Notes issued under the
Programme and risks relating to the structure of a particular Series of Notes issued
under the Programme. All of these factors are set out under "Risk Factors".
Description:
Arranger:
HSBC Bank plc
Dealers:
Emirates NBD PJSC
HSBC Bank plc
National Bank of Abu Dhabi P.J.S.C.
Société Générale
and any other Dealers appointed in accordance with the Programme Agreement.
Certain Restrictions:
Each issue of Notes denominated in a currency in respect of which particular laws,
guidelines, regulations, restrictions or reporting requirements apply will only be
issued in circumstances which comply with such laws, guidelines, regulations,
restrictions or reporting requirements from time to time (see "Subscription and
Sale").
Notes having a maturity of less than one year
Notes having a maturity of less than one year will, if the proceeds of the issue are
accepted in the United Kingdom, constitute deposits for the purposes of the
prohibition on accepting deposits contained in section 19 of the Financial Services
and Markets Act 2000 (FSMA) unless they are issued to a limited class of
professional investors and have a denomination of at least £100,000 or its
equivalent, see "Subscription and Sale".
Issuing and Principal Paying
Agent:
HSBC Bank plc
Registrar:
HSBC Bank plc
Programme Size:
Up to U.S.$1,500,000,000 (or its equivalent in other currencies calculated as
described in the Programme Agreement) outstanding at any time. The Issuer and the
Guarantor may increase the amount of the Programme in accordance with the terms
23
of the Programme Agreement.
Distribution:
Notes may be distributed by way of private or public placement and in each case on
a syndicated or non-syndicated basis.
Currencies:
Subject to any applicable legal or regulatory restrictions, Notes may be denominated
in any currency agreed between the Issuer, the Guarantor and the relevant Dealer.
Maturities:
The Notes will have such maturities as may be agreed between the Issuer and the
relevant Dealer, subject to such minimum or maximum maturities as may be
allowed or required from time to time by the relevant central bank (or equivalent
body) or any laws or regulations applicable to the Issuer, the Guarantor or the
relevant Specified Currency.
Issue Price:
Notes may be issued on a fully-paid basis and at an issue price which is at par or at a
discount to, or premium over, par.
Form of Notes:
The Notes will be issued in bearer or registered form as described in "Form of the
Notes".
Registered Notes will not be exchangeable for Bearer Notes and vice versa.
Fixed Rate Notes:
Fixed interest will be payable on such date or dates as may be agreed between the
Issuer, the Guarantor and the relevant Dealer and on redemption and will be
calculated on the basis of such Day Count Fraction as may be agreed between the
Issuer, the Guarantor and the relevant Dealer.
Floating Rate Notes:
Floating Rate Notes will bear interest at a rate determined:
(a)
on the same basis as the floating rate under a notional interest rate swap
transaction in the relevant Specified Currency governed by an agreement
incorporating the 2006 ISDA Definitions (as published by the International
Swaps and Derivatives Association, Inc., and as amended and updated as at
the Issue Date of the first Tranche of the Notes of the relevant Series); or
(b)
on the basis of a reference rate appearing on the agreed screen page of a
commercial quotation service.
The margin (if any) relating to such floating rate will be agreed between the Issuer
and the relevant Dealer for each Series of Floating Rate Notes.
Floating Rate Notes may also have a maximum interest rate, a minimum interest rate
or both.
Interest on Floating Rate Notes in respect of each Interest Period, as agreed prior to
issue by the Issuer and the relevant Dealer, will be payable on such Interest Payment
Dates, and will be calculated on the basis of such Day Count Fraction, as may be
agreed between the Issuer and the relevant Dealer.
Zero Coupon Notes:
Zero Coupon Notes will be offered and sold at a discount to their nominal amount
and will not bear interest.
Redemption:
The applicable Final Terms will indicate either that the relevant Notes cannot be
redeemed prior to their stated maturity (other than for taxation reasons or following
an Event of Default) or that such Notes will be redeemable at the option of the
Issuer and/or the Noteholders upon giving notice to the Noteholders or the Issuer, as
the case may be, on a date or dates specified prior to such stated maturity and at a
price or prices and on such other terms as may be agreed between the Issuer, the
Guarantor and the relevant Dealer.
Denomination of Notes:
The Notes will be issued in such denominations as may be agreed between the
Issuer, the Guarantor and the relevant Dealer, as specified in the applicable Final
Terms, save that the minimum denomination of each Note will be such amount as
may be allowed or required from time to time by the relevant central bank (or
equivalent body) or any laws or regulations applicable to the relevant Specified
24
Currency and save that the minimum denomination of each Note admitted to trading
in a regulated market within the European Economic Area or offered to the public in
a Member State of the European Economic Area in circumstances which would
otherwise require the publication of a prospectus under the Prospectus Directive will
be €100,000 (or, if the Notes are denominated in a currency other than euro, the
equivalent amount in such currency as at the date of issue of the Notes).
Taxation:
All payments in respect of the Notes will be made without withholding, retention or
deduction for or on account of taxes imposed by any Tax Jurisdiction unless the
withholding, retention or deduction is required by law as provided in Condition 8. In
the event that any such withholding, retention or deduction is made, the Issuer or, as
the case may be, the Guarantor will, save in certain limited circumstances provided
in Condition 8, be required to pay additional amounts to cover the amounts so
deducted.
Negative Pledge:
The terms of the Notes will contain a negative pledge provision as further described
in Condition 4.
Cross Default:
The terms of the Notes will contain a cross default provision as further described in
Condition 10.
Status of the Notes:
The Notes will constitute direct, unconditional, unsubordinated and (subject to the
provisions of Condition 4) unsecured obligations of the Issuer and will rank pari
passu among themselves and (save for certain obligations required to be preferred
by law) equally with all other unsecured obligations (other than subordinated
obligations, if any) of the Issuer from time to time outstanding.
Deed of Guarantee:
The payments of principal and interest in respect of the Notes have been
unconditionally and irrevocably guaranteed by the Guarantor. The obligations of the
Guarantor under the Deed of Guarantee are direct, unconditional and (subject to the
provisions of Condition 4) unsecured obligations of the Guarantor and (save for
certain obligations required to be preferred by law) rank equally with all other
unsecured obligations (other than subordinated obligations, if any) of the Guarantor
from time to time outstanding.
Rating:
The Programme has been assigned long-term senior unsecured ratings of A3 by
Moody’s Cyprus, and a long-term senior unsecured rating of A+ and a short-term
senior unsecured rating of F1 by Fitch. Series of Notes issued under the Programme
may be rated or unrated. Where a Series of Notes is rated, such rating will be
disclosed in the applicable Final Terms and will not necessarily be the same as the
ratings assigned to the Programme. A security rating is not a recommendation to
buy, sell or hold securities and may be subject to suspension, reduction or
withdrawal at any time by the assigning rating agency.
Listing and admission to
trading:
Application has been made to the Irish Stock Exchange for Notes issued under the
Programme to be admitted to the Official List and for such Notes to be admitted to
trading on the Main Securities Market.
Notes may be listed or admitted to trading, as the case may be, on other or further
stock exchanges or markets agreed between the Issuer, the Guarantor and the
relevant Dealer in relation to the Series. Notes which are neither listed nor admitted
to trading on any market may also be issued.
The applicable Final Terms will state whether or not the relevant Notes are to be
listed and/or admitted to trading and, if so, on which stock exchanges and/or
markets.
Governing Law and Dispute
Resolution:
The Agency Agreement, the Deed of Covenant, the Deed of Guarantee and the
Notes and any non-contractual obligations arising out of, or in connection with the
Agency Agreement, the Deed of Covenant, the Deed of Guarantee and the Notes
will be governed by, and shall be construed in accordance with, English law.
25
In respect of any dispute, claim, difference or controversy under the Notes, the
Agency Agreement and the Deed of Covenant, the Deed of Guarantee and the
Notes, each of the Issuer and the Guarantor (as applicable) has consented to
arbitration in accordance with the LCIA Arbitration Rules unless any Agent (in the
case of the Agency Agreement) or Noteholder (in the case of the Notes, the Deed of
Covenant or the Deed of Guarantee) elects to have the dispute, claim, difference or
controversy resolved by a court, in which case the English courts will have
exclusive jurisdiction to settle such dispute.
Selling Restrictions:
There are restrictions on the offer, sale and transfer of the Notes in the United
States, the Public Offer Selling Restriction under the Prospectus Directive (in
respect of Notes having a specified denomination of less than €100,000 or its
equivalent in any other currency as at the date of issue of the Notes), the United
Kingdom, Japan, Hong Kong, the United Arab Emirates (excluding the Dubai
International Financial Centre), the Dubai International Financial Centre, the
Kingdom of Saudi Arabia, Bahrain, Qatar (including the QFC), Kuwait and
Singapore and such other restrictions as may be required in connection with the
offering and sale of a particular Tranche of Notes, see "Subscription and Sale".
United States Selling
Restrictions:
Regulation S, Category 2. TEFRA C/TEFRA D/TEFRA not applicable, as specified
in the applicable Final Terms.
26
FORM OF THE NOTES
The Notes of each Series will be in either bearer form, with or without interest coupons attached, or registered form,
without interest coupons attached. Notes will be issued outside the United States in reliance on Regulation S under the
Securities Act (Regulation S).
Bearer Notes
Each Tranche of Bearer Notes will be initially issued in the form of a temporary bearer global note (a Temporary
Bearer Global Note) or a permanent bearer global note (a Permanent Bearer Global Note) in each case, as so specified
in the applicable Final Terms which, in either case, will be delivered on or prior to the original issue date of the Tranche
to a common depositary (the Common Depositary) for Euroclear and Clearstream, Luxembourg. Whilst any Bearer
Note is represented by a Temporary Bearer Global Note, payments of principal, interest (if any) and any other amount
payable in respect of the Notes due prior to the Exchange Date (as defined below) will be made against presentation and,
at maturity, surrender of the Temporary Bearer Global Note only to the extent that certification (in a form to be provided)
to the effect that the beneficial owners of interests in such Bearer Note are not U.S. persons or persons who have
purchased for resale to any U.S. person, as required by U.S. Treasury regulations, has been received by Euroclear and/or
Clearstream, Luxembourg and Euroclear and/or Clearstream, Luxembourg, as applicable, has given a like certification
(based on the certifications it has received) to the Issuing and Principal Paying Agent.
On and after the date (the Exchange Date) which is 40 days after a Temporary Bearer Global Note is issued, such
Temporary Bearer Global Note will be exchangeable in whole or in part (free of charge) upon a request as described
therein either for (a) a Permanent Bearer Global Note of the same Series or (b) for security printed definitive Bearer
Notes of the same Series with, where applicable, interest coupons and talons attached (as indicated in the applicable Final
Terms), in each case against certification of beneficial ownership as described above unless such certification has already
been given. The holder of a Temporary Bearer Global Note will not be entitled to collect any payment of interest,
principal or other amount due on or after the Exchange Date unless, upon due certification, exchange of the Temporary
Bearer Global Note for an interest in a Permanent Bearer Global Note or for definitive Bearer Notes is improperly
withheld or refused.
Payments of principal, interest (if any) or any other amounts on a Permanent Bearer Global Note will be made through
Euroclear and/or Clearstream, Luxembourg against presentation or surrender (as the case may be) of the Permanent
Bearer Global Note without any requirement for certification.
The applicable Final Terms will specify that a Permanent Bearer Global Note will be exchangeable (free of charge), in
whole but not in part, for definitive Notes with, where applicable, interest coupons and talons attached upon either (a) not
less than 60 days' written notice from Euroclear and/or Clearstream, Luxembourg (acting on the instructions of any
holder of an interest in such Permanent Bearer Global Note) to the Issuing and Principal Paying Agent as described
therein or (b) only upon the occurrence of an Exchange Event, in each case, as specified in the applicable Final Terms.
For these purposes, Exchange Event means that (i) an Event of Default (as defined in Condition 10) has occurred and is
continuing or (ii) the Issuer has been notified that both Euroclear and Clearstream, Luxembourg have been closed for
business for a continuous period of 14 days (other than by reason of holiday, statutory or otherwise) or have announced
an intention permanently to cease business or have in fact done so and, in any such case, no successor clearing system is
available. The Issuer will promptly give notice to Noteholders in accordance with Condition 14 if an Exchange Event
occurs. In the event of the occurrence of an Exchange Event, Euroclear and/or Clearstream, Luxembourg or the common
depositary on their behalf (acting on the instructions of any holder of an interest in such Permanent Bearer Global Note)
may give notice to the Issuing and Principal Paying Agent requesting exchange. Any such exchange shall occur not later
than 45 days after the date of receipt of the first relevant notice by the Issuing and Principal Paying Agent.
The following legend will appear on all Permanent Bearer Global Notes and definitive Bearer Notes where TEFRA D is
specified in the applicable Final Terms and which have an initial maturity of more than 365 days and on all interest
coupons relating to such Bearer Notes:
"ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS
UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN
SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE."
The sections referred to provide that United States holders, with certain exceptions, will not be entitled to deduct any loss
on Bearer Notes or interest coupons and will not be entitled to capital gains treatment in respect of any gain on any sale,
disposition, redemption or payment of principal in respect of such Notes or interest coupons.
27
Notes which are represented by a Bearer Global Note will only be transferable in accordance with the rules and
procedures for the time being of Euroclear or Clearstream, Luxembourg, as the case may be.
Registered Notes
Each Tranche of Registered Notes will initially be represented by a global note in registered form (a Registered Global
Note). Registered Global Notes will be deposited with a common depositary for, and registered in the name of a nominee
for such common depositary of, Euroclear and Clearstream, Luxembourg. Persons holding beneficial interests in
Registered Global Notes will be entitled or required, as the case may be, under the circumstances described below, to
receive physical delivery of definitive Notes in fully registered form.
Payments of principal, interest and any other amount in respect of the Registered Notes will be made to the person shown
on the Register (as defined in Condition 6.4) as the registered holder of the Registered Notes in the manner set out in
Condition 6.4. None of the Issuer or the Agents will have any responsibility or liability for any aspect of the records
relating to or payments or deliveries made on account of beneficial ownership interests in the Registered Global Notes or
for maintaining, supervising or reviewing any records relating to such beneficial ownership interests.
Interests in a Registered Global Note will be exchangeable (free of charge), in whole but not in part, for definitive
Registered Notes only upon the occurrence of an Exchange Event. The Issuer will promptly give notice to Noteholders in
accordance with Condition 14 if an Exchange Event occurs. In the event of the occurrence of an Exchange Event,
Euroclear and/or Clearstream, Luxembourg or any person acting on their behalf (in each case, acting on the instructions
of any holder of an interest in such Registered Global Note) may give notice to the Registrar requesting exchange. Any
such exchange shall occur not later than 10 days after the date of receipt of the first relevant notice by the Registrar.
General
Pursuant to the Agency Agreement, the Issuing and Principal Paying Agent shall arrange that, where a further Tranche of
Notes is issued which is intended to form a single Series with an existing Tranche of Notes at a point after the Issue Date
of the further Tranche, the Notes of such further Tranche shall be assigned a common code and ISIN which are different
from the common code and ISIN assigned to Notes of any other Tranche of the same Series until such time as the
Tranches are consolidated and form a single Series, which shall not be prior to the expiry of the distribution compliance
period (as defined in Regulation S under the Securities Act) applicable to the Notes of such Tranche.
For so long as any of the Notes is represented by a Global Note held on behalf of Euroclear and/or Clearstream,
Luxembourg each person (other than Euroclear or Clearstream, Luxembourg) who is for the time being shown in the
records of Euroclear or of Clearstream, Luxembourg as the holder of a particular nominal amount of such Notes (in
which regard any certificate or other document issued by Euroclear or Clearstream, Luxembourg as to the nominal
amount of such Notes standing to the account of any person shall be conclusive and binding for all purposes save in the
case of manifest error) shall be treated by the Issuer, the Guarantor and the Agents as the holder of such nominal amount
of such Notes for all purposes other than with respect to the payment of principal or interest on such nominal amount of
such Notes, for which purpose the bearer of the relevant Bearer Global Note or the registered holder of the relevant
Registered Global Note shall be treated by the Issuer, the Guarantor and any Agent as the holder of such nominal amount
of such Notes in accordance with and subject to the terms of the relevant Global Note and the expressions Noteholder
and holder of Notes and related expressions shall be construed accordingly.
Any reference herein to Euroclear and/or Clearstream, Luxembourg shall, whenever the context so permits, be deemed to
include a reference to any additional or alternative clearing system specified in the applicable Final Terms.
Electronic Consent and Written Resolution
While any Temporary Bearer Global Note or Permanent Bearer Global Note is held on behalf of, or any Registered
Global Note is registered in the name of any nominee for, a clearing system, then:
(i)
approval of a resolution proposed by the Issuer given by way of electronic consents communicated through the
electronic communications systems of the relevant clearing system(s) in accordance with their operating rules
and procedures by or on behalf of the holders of not less than 75 per cent. in nominal amount of the Notes
outstanding (an Electronic Consent as defined in the Agency Agreement) shall, for all purposes (including
matters that would otherwise require an Extraordinary Resolution to be passed at a meeting for which the special
quorum was satisfied), take effect as an Extraordinary Resolution passed at a meeting of Noteholders duly
convened and held, and shall be binding on all Noteholders and holders of Coupons and Talons whether or not
they participated in such Electronic Consent; and
28
(ii)
where Electronic Consent is not being sought, for the purpose of determining whether a Written Resolution (as
defined in the Agency Agreement) has been validly passed, the Issuer shall be entitled to rely on consents or
instructions given in writing directly to the Issuer by accountholders in the clearing system with entitlements to
such Global Note or, where the accountholders hold any such entitlement on behalf of another person, on
written consent from or written instruction by the person for whom such entitlement is ultimately beneficially
held, whether such beneficiary holds directly with the accountholder or via one or more intermediaries and
provided that, in each case, the Issuer obtained commercially reasonable evidence to ascertain the validity of
such holding and has taken reasonable steps to ensure that such holding does not alter following the giving of
such consent or instruction and prior to the effecting of such amendment. Any resolution passed in such manner
shall be binding on all Noteholders and Couponholders, even if the relevant consent or instruction proves to be
defective. As used in this paragraph, "commercially reasonable evidence" includes any certificate or other
document issued by Euroclear, Clearstream, Luxembourg or any other relevant clearing system, or issued by an
accountholder of them or an intermediary in a holding chain, in relation to the holding of interests in the Notes.
Any such certificate or other document shall, in the absence of manifest error, be conclusive and binding for all
purposes. Any such certificate or other document may comprise any form of statement or print out of electronic
records provided by the relevant clearing system (including Euroclear's EUCLID or Clearstream, Luxembourg's
CreationOnline system) in accordance with its usual procedures and in which the accountholder of a particular
principal or nominal amount of the Notes is clearly identified together with the amount of such holding. The
Issuer shall not be liable to any person by reason of having accepted as valid or not having rejected any
certificate or other document to such effect purporting to be issued by any such person and subsequently found
to be forged or not authentic.
A Note may be accelerated by the holder thereof in certain circumstances described in Condition 10. In such
circumstances, where any Note is still represented by a Global Note and the Global Note (or any part thereof) has become
due and repayable in accordance with the Terms and Conditions of such Notes and payment in full of the amount due has
not been made in accordance with the provisions of the Global Note then from 8.00 p.m. (London time) on such day
holders of interests in such Global Note credited to their accounts with Euroclear and/or Clearstream, Luxembourg, as the
case may be, (a) will become entitled to proceed directly against the Issuer on the basis of statements of account provided
by Euroclear and/or Clearstream, Luxembourg on and subject to the terms of a deed of covenant (the Deed of Covenant)
dated 30 June 2016 and executed by the Issuer, and (b) will have no further rights under such Global Note (but without
prejudice to the rights which such holders or any other person may have under the Deed of Covenant).
29
APPLICABLE FINAL TERMS
Set out below is the form of Final Terms which will be completed for each Tranche of Notes issued under the
Programme.
[Date]
Issue of [Aggregate Nominal Amount of Tranche] [Title of Notes]
unconditionally and irrevocably guaranteed by Burgan Bank K.P.S.C.
under the U.S.$1,500,000,000
PART A — CONTRACTUAL TERMS
Terms used herein shall be deemed to be defined as such for the purposes of the Conditions set forth in the Base
Prospectus dated 30 June 2016 [and the supplement[s] to it dated [date] [and [date]] which [together] constitute[s] a base
prospectus (the Base Prospectus) for the purposes of the Prospectus Directive (Directive 2003/71/EC (and amendments
thereto, including Directive 2010/73/EU) to the extent implemented in the relevant Member State of the European
Economic Area, and including any relevant implementing measure in the relevant Member State of the European
Economic Area) (the Prospectus Directive). [This document constitutes the Final Terms of the Notes described herein
for the purposes of Article 5.4 of the Prospectus Directive and must be read in conjunction with the Base Prospectus]1.
Full information on the Issuer, the Guarantor and the offer of the Notes is only available on the basis of the combination
of these Final Terms and the Base Prospectus. The Base Prospectus is available for viewing during normal business
hours at the registered office of the Issuer (Office 616, 6th Floor, Liberty House, Dubai International Financial Centre,
PO Box 506734, Dubai, United Arab Emirates), the registered office of the Guarantor (P.O. Box 5389, Safat 12170,
Kuwait) and the Issuing and Principal Paying Agent (8 Canada Square, London, E14 5HQ) and copies may be obtained
from those offices. The Base Prospectus and these Final Terms have been published on the Central Bank of Ireland's
website (http://www.centralbank.ie).
[Include whichever of the following apply or specify as "Not Applicable" (N/A). Note that the numbering should remain
as set out below, even if "Not Applicable" is indicated for individual paragraphs or subparagraphs. Italics denote
directions for completing the Final Terms.]
1.
2.
(a)
Issuer:
Burgan Senior SPC Limited
(b)
Guarantor:
Burgan Bank K.P.S.C.
(a)
Series Number:
[
]
[(b)
Tranche Number:
[
]]
(b)
Date on which the Notes
will be consolidated and
form a single Series:
[The Notes will be consolidated and form a single Series with [identify
earlier Tranches] on [the Issue Date]/[exchange of the Temporary Bearer
Global Note for interests in the Permanent Bearer Global Note, as referred
to in paragraph 22 below, which is expected to occur on or about
[date]]][Not Applicable]
3.
Specified Currency or Currencies:
4.
Aggregate Nominal Amount:
5.
[
]
(a)
Series:
[
]
[(b)
Tranche:
[
]]
Issue Price:
[
] per cent. of the Aggregate Nominal Amount of this Tranche [plus
accrued interest from [insert date] (if applicable)]
1
Delete where the Notes are neither admitted to trading on a regulated market in the European Economic Area nor offered in the European Economic
Area in circumstances where a prospectus is required to be published under the Prospectus Directive.
30
6.
(a)
Specified
Denominations:
(in the case of
Registered Notes, this
means the minimum
integral amount in which
transfers can be made)
[
]
[
]
(N.B. Notes must have a minimum denomination of €100,000 (or
equivalent))
(Note — for Bearer Notes, where multiple denominations above
[€100,000] or equivalent and multiples of a lower nominal amount (e.g.
€1,000) are being used the following sample wording should be followed:
"[€100,000] and integral multiples of [€1,000] in excess thereof up to and
including [€199,000]. No Notes in definitive form will be issued with a
denomination above [€199,000].")
(N.B. If an issue of Notes is (i) NOT admitted to trading on a European
Economic Area exchange; and (ii) only offered in the European Economic
Area in circumstances where a prospectus is not required to be published
under the Prospectus Directive, the €100,000 minimum denomination is
not required.)
(b)
Calculation Amount (in
relation to calculation of
interest whilst the Notes
are in global form, see
the Conditions):
[
]
(If only one Specified Denomination, insert the Specified Denomination.
If more than one Specified Denomination, insert the highest common
factor. Note: There must be a common factor in the case of two or more
Specified Denominations.)
7.
(a)
Issue Date:
[
]
(b)
Interest Commencement
Date:
[specify/Issue Date/Not Applicable]
(N.B. An Interest Commencement Date will not be relevant for certain
Notes, for example Zero Coupon Notes)
8.
Maturity Date:
[Fixed rate — specify date/Floating rate — Interest Payment Date falling
in or nearest to [specify month and year]]
(Note that for Renminbi denominated Fixed Rate Notes where the Interest
Payment Dates and the amount of interest to be paid on such Interest
Payment Dates are subject to modification in accordance with a Business
Day Convention, it will be necessary to use the following wording:
"Interest Payment Date falling in or nearest to [specify month and year]")
9.
Interest Basis:
[[
] per cent. Fixed Rate]
[[EURIBOR/LIBID/LIBOR/SHIBOR/HIBOR/SIBOR/KLIBOR/EIBOR/S
AIBOR/BBSW/AUD
LIBOR/JPY
LIBOR/PRIBOR/CNH
HIBOR/TRLIBOR or TRYLIBOR/TIBOR] +/– [
] per cent.
Floating Rate]
[Zero Coupon]
(further particulars specified below)
31
10.
Redemption Basis:
Subject to any purchase and cancellation or early redemption, the Notes
will be redeemed on the Maturity Date at [ ] per cent. of their nominal
amount
11.
Change of Interest Basis:
[Specify the date when any fixed to floating rate change occurs or cross
refer to paragraphs 14 and 15 below and identify there][Not Applicable]
12.
Put/Call Options:
[Investor Put]
[Issuer Call]
[(see paragraphs 20 and 21 below)]
13.
(a)
Status of the Notes:
Senior
(b)
Status of the Deed of
Guarantee:
Senior
(c)
[Date [Board] approval
for issuance of Notes
and Deed of Guarantee
obtained:
[
] [and [
], respectively]]
(N.B. Only relevant where Board (or similar) authorisation is required for
the particular tranche of Notes or related Deed of Guarantee)
PROVISIONS RELATING TO INTEREST (IF ANY) PAYABLE
14.
Fixed Rate Note Provisions
[Applicable/Not Applicable]
(If not applicable, delete the remaining subparagraphs of this paragraph)
(a)
Rate(s) of Interest:
[
] per cent. per annum payable in arrear on each Interest Payment
Date
(b)
Interest Payment
Date(s):
[[
] in each year up to and including the Maturity Date]/[specify
other]
(N.B. This will need to be amended in the case of long or short coupons)
(For Renminbi denominated Fixed Rate Notes where the Interest Payment
Dates and the amount of interest to be paid on such Interest Payment
Dates are subject to modification, specify a Business Day Convention in
paragraph 14(c) below (which is expected to be the Modified Following
Business Day Convention) and add the words ", subject to adjustment in
accordance with the Business Day Convention. For these purposes,
"Business Day" means a day (other than a Saturday or Sunday) on which
commercial banks and foreign exchange markets settle payments in the
applicable RMB Settlement Centre" after "Maturity Date" in this
subparagraph (b))
(c)
Business Day
Convention:
[Floating
Rate
Convention/Following
Business
Day Convention/Modified Following Business Day Convention/ Preceding
Business Day Convention][Not Applicable]
(d)
Fixed
Coupon
Amount(s) for Notes in
definitive form (and in
relation to Notes in
global form see the
Conditions):
[
Broken Amount(s) for
Notes in definitive form
(and in relation to Notes
[
] per Calculation Amount, payable on the Interest Payment Date
falling [in/on] [
]
(e)
] per Calculation Amount
(For Renminbi denominated Fixed Rate Notes where Interest Payment
Dates and the amount of interest to be paid on such Interest Payment
Dates are subject to modification in accordance with a Business Day
Convention, the following alternative wording is appropriate: "Each Fixed
Coupon Amount shall be calculated by multiplying the product of the Rate
of Interest and the Calculation Amount by the Day Count Fraction and
rounding the resultant figure to the nearest CNY0.01, CNY0.005 being
rounded upwards.")
32
in global form see the
Conditions):
15.
(f)
Day Count Fraction:
[30/360 or Actual/Actual (ICMA) or Actual/365 (Fixed) 2]
(g)
Determination Date(s):
[[
] in each year] [Not Applicable]
(N.B. Only relevant where Day Count Fraction is Actual/Actual (ICMA).
In such a case, insert regular interest payment dates, ignoring issue date
or maturity date in the case of a long or short first or last coupon)
Floating Rate Note Provisions
(a)
Specified
Period(s)/Specified
Interest Payment Dates:
[
] [Subject to adjustment in accordance with the Business Day
Convention set out in (b) below/Not subject to adjustment, as the Business
Day Convention in (b) below is specified to be Not Applicable]
(b)
Business Day
Convention:
[Floating Rate Convention/Following Business Day Convention/Modified
Following Business Day Convention/Preceding Business Day
Convention/Not Applicable]
(c)
Additional Business
Centre(s):
[
(d)
Manner in which the
Rate of Interest and
Interest Amount is to be
determined:
[Screen Rate Determination/ISDA
Determination/Not applicable]
(e)
Party responsible for
calculating the Rate of
Interest and Interest
Amount (if not the
Issuing and Principal
Paying Agent):
[
(f)
Screen Rate
Determination:
]
] [Not applicable]

Reference Rate:
[
] month
[[EURIBOR/LIBID/LIBOR/SHIBOR/HIBOR/SIBOR/KLIBOR/EIBOR/S
AIBOR/BBSW/AUD LIBOR/JPY LIBOR/PRIBOR/CNH
HIBOR/TRLIBOR or TRYLIBOR/TIBOR]

Interest
Determination
Date(s):
[
]

Relevant Screen
Page:
[
]
(In the case of EURIBOR, if not Reuters EURIBOR01 ensure it is a page
which shows a composite rate or amend the fallback provisions
appropriately or, in the case of EIBOR, if not Reuters AEIBOR, ensure it is
a page which shows a composite rate)
(g)
2

Relevant Time:
[
]

Relevant
Financial
Centre:
[
]
ISDA Determination:
Applicable to Renminbi denominated Fixed Rate Notes.
33

Floating Rate
Option:
[
]

Designated
Maturity:
[
]

Reset Date:
[
]
(In the case of a LIBOR or EURIBOR based option, the first day of the
Interest Period)
16.
(h)
Linear Interpolation:
[Not Applicable/Applicable - the rate of interest for the [long/short]
[first/last] Interest Period shall be calculated using Linear Interpolation
(specify for each short or long interest period)]
(i)
Margin(s):
[+/ – ] [
(j)
Minimum Rate of
Interest:
[
] per cent. per annum
(k)
Maximum Rate of
Interest:
[
(l)
Day Count Fraction:
[Actual/Actual (ISDA)][Actual/Actual]
Actual/365 (Fixed)
Actual/365 (Sterling)
Actual/360
[30/360][360/360][Bond Basis]
[30E/360][Eurobond Basis]
30E/360 (ISDA)
Zero Coupon Note Provisions
(a)
Accrual Yield:
[
(b)
Reference Price:
[
]
(c)
Day Count Fraction in
relation to Early
Redemption Amounts
and late payment:
[30/360]
[Actual/360]
[Actual/365]
PROVISIONS RELATING TO
REDEMPTION
17.
Notice periods for Condition 7.4
Minimum period: [ ] days
Maximum period: [ ] days
18.
Issuer Call:
(a)
Optional Redemption
Date(s):
[
]
(b)
Optional Redemption
Amount:
[
(c)
If redeemable in part:
(i)
Minimum
Redemption
Amount:
[
]
(ii)
Maximum
Redemption
[
]
34
Amount:
(d)
19.
Notice periods:
Minimum period: [5] days
(N.B. When setting notice periods, the Issuer is advised to consider the
practicalities of distribution of information through intermediaries, for
example, clearing systems (which require a minimum of 5 clearing system
business days' notice for a call) and custodians, as well as any other notice
requirements which may apply, for example, as between the Issuer and the
Issuing and Principal Paying Agent)
Investor Put:
(a)
Optional Redemption
Date(s):
[
]
(b)
Optional Redemption
Amount:
[
(c)
Notice periods:
Minimum period: [15] days
(N.B. If setting notice periods which are different to those provided in the
Conditions, the Issuer is advised to consider the practicalities of
distribution of information through intermediaries, for example, clearing
systems (which require a minimum of 15 clearing system business days'
notice for a put) and custodians, as well as any other notice requirements
which may apply, for example, as between the Issuer and the Issuing and
Principal Paying Agent)
20.
Final Redemption Amount:
[[
21.
Early Redemption Amount
payable on redemption for
taxation reasons or on event of
default:
[
] per Calculation Amount]
(N.B. If the Final Redemption Amount is 100 per cent. of the nominal value
(i.e. par), the Early Redemption Amount is likely to be par (but consider).
If, however, the Final Redemption Amount is other than 100 per cent. of
the nominal value, consideration should be given as to what the Early
Redemption Amount should be.)
GENERAL PROVISIONS APPLICABLE TO THE NOTES
22.
Form of Notes:
[Bearer Notes:
[Temporary Bearer Global Note exchangeable for a Permanent Bearer
Global Note which is exchangeable for Definitive Notes [on 60 days'
notice given at any time]*/[only upon an Exchange Event]]
[Temporary Bearer Global Note exchangeable for Definitive Notes on and
after the Exchange Date] [Permanent Bearer Global Note exchangeable for
Definitive Notes [on 60 days' notice given at any time]*/[only upon an
Exchange Event]]]
[Registered Notes: Registered Global Note registered in the name of a
nominee for a common depositary for Euroclear and Clearstream,
Luxembourg]
(N.B. Those options indicated above with an "*" should not be expressed to
be applicable if the Specified Denomination of the Notes in paragraph 6
includes language substantially to the following effect: "[€100,000] and
integral multiples of [€1,000] in excess thereof up to and including
[€199,000]." Furthermore, such Specified Denomination construction is
not permitted in relation to any issue of Notes which is to be represented
on issue by a Temporary Bearer Global Note or Permanent Bearer Global
35
Note exchangeable for Definitive Notes.)
23.
Additional Financial Centre(s):
[Not Applicable/give details]
(Note that this paragraph relates to the date of payment and not Interest
Period end dates to which item 15(c) relates)
24.
Talons for future Coupons to be
attached to Definitive Bearer
Notes:
[Yes, as the Notes have more than 27 coupon payments, Talons may be
required if, on exchange into definitive form, more than 27 coupon
payments are still to be made/No]
25.
RMB Settlement Centre(s):
[
26.
RMB Currency Event:
27.
Relevant Currency for Condition
[RMB Currency Event]:
[ ][Not Applicable]
28.
Relevant Spot Rate Screen Pages
for Condition [RMB Currency
Event]:
(i)
Relevant Spot Rate Screen Page (Deliverable Basis): [ ] [Not
Applicable]
(ii)
Relevant Spot Rate Screen Page (Non-deliverable Basis): [ ] [Not
Applicable]
] [Not Applicable]
(For U.S. dollars, use Reuters Screen Page TRADCNY and Reuters Screen
Page TRADNDF, respectively.)
29.
Party responsible for calculating
the Spot Rate for Condition [RMB
Currency Event]:
[give name (the Calculation Agent)][Not Applicable]
THIRD PARTY INFORMATION
[[Relevant third party information] has been extracted from [specify source]. [Each of the][The] Issuer [and the
Guarantor] confirms that such information has been accurately reproduced and that, so far as it is aware and is able to
ascertain from information published by [specify source], no facts have been omitted which would render the reproduced
information inaccurate or misleading].
Signed on behalf of Burgan Senior SPC Limited:
Signed on behalf of Burgan Bank K.P.S.C.
By: ...............................................................
Duly authorised
By: ................................................................
Duly authorised
36
PART B— OTHER INFORMATION
1.
LISTING
(i)
Listing and admission to trading:
[Application has been made by the Issuer (or on its behalf)
to the [[London Stock Exchange/[Irish Stock
Exchange]/[Luxembourg Stock Exchange]] for the Notes
to be admitted to trading on its regulated market with]
effect from [
].]
[Not Applicable.]
(ii)
2.
Estimate of total expenses related to
admission to trading:
[
]
RATINGS
Ratings:
[The Notes to be issued [[have been]/[are expected to be]]
rated]/[The following ratings reflect ratings assigned to
Notes of this type issued under the Programme generally]:
[insert details]] by [insert the legal name of the relevant
credit rating agency entity(ies) and associated defined
terms].
Each of [defined terms] is established in the European
Union and is registered under Regulation (EC) No.
1060/2009 (as amended).
(The above disclosure should reflect the rating allocated to
Notes of the type being issued under the Programme
generally or, where the issue has been specifically rated,
that rating.)
3.
INTERESTS OF NATURAL AND LEGAL PERSONS INVOLVED IN THE ISSUE
[Save for any fees payable to the [Managers/Dealers], so far as the Issuer is aware, no person involved in the
issue of the Notes has an interest material to the offer. The [Managers/Dealers] and their affiliates have
engaged, and may in the future engage, in investment banking and/or commercial banking transactions with, and
may perform other services for, the Issuer, the Guarantor and their affiliates in the ordinary course of business –
Amend as appropriate if there are other interests]
4.
YIELD (Fixed Rate Notes Only)
Indication of yield:
[
] per cent. per annum on an annual basis.
The yield is calculated at the Issue Date on the basis of the
Issue Price. It is not an indication of future yield.
5.
OPERATIONAL INFORMATION
(i)
ISIN Code:
[
]
(ii)
Common Code:
[
]
(iii)
Any clearing system(s) other than
Euroclear Bank SA/NV and Clearstream
Banking S.A. and the relevant
identification number(s):
[Not Applicable/give name(s) and number(s)]
(iv)
Delivery:
Delivery [against/free of] payment
(v)
Names and addresses of additional
Paying Agent(s) (if any):
[
37
]
6.
DISTRIBUTION
(i)
Method of distribution:
[Syndicated/Non-syndicated]
(ii)
If syndicated, names of Managers:
[Not Applicable/give names]
(iii)
Date of [Subscription] Agreement:
[
(iv)
Stabilisation Manager(s) (if any)
[Not Applicable/give name]
(v)
If non-syndicated, name of relevant
Dealer:
[Not Applicable/give name]
(vi)
U.S. Selling Restrictions:
[Reg. S Compliance Category [1/2/3]; TEFRA D/TEFRA
C/TEFRA not applicable]]
38
]
TERMS AND CONDITIONS OF THE NOTES
The following are the Terms and Conditions of the Notes which, subject to completion in accordance with the provisions
of Part A of the relevant Final Terms will be incorporated by reference into each Global Note (as defined below) and
each definitive Note, in the latter case only if permitted by the relevant stock exchange or other relevant authority (if any)
and agreed by the Issuer and the relevant Dealer at the time of issue but, if not so permitted and agreed, such definitive
Note will have endorsed thereon or attached thereto such Terms and Conditions. The applicable Final Terms (or the
relevant provisions thereof) will be endorsed upon, or attached to, each Global Note and definitive Note. Reference
should be made to "Applicable Final Terms" for a description of the content of Final Terms which will specify which of
such terms are to apply in relation to the relevant Notes.
This Note is one of a Series (as defined below) of Notes issued by Burgan Senior SPC Limited (the Issuer) pursuant to
the Agency Agreement (as defined below).
References herein to the Notes shall be references to the Notes of this Series and shall mean:
(a)
in relation to any Notes represented by a global Note (a Global Note), units of each Specified Denomination in
the Specified Currency;
(b)
any Global Note;
(c)
any definitive Notes in bearer form (Bearer Notes) issued in exchange for a Global Note in bearer form; and
(d)
any definitive Notes in registered form (Registered Notes) (whether or not issued in exchange for a Global Note
in registered form).
The Notes and the Coupons (as defined below) have the benefit of an Agency Agreement (such Agency Agreement as
further amended and/or supplemented and/or restated from time to time, the Agency Agreement) dated 30 June 2016
and made between the Issuer, Burgan Bank K.P.S.C. (the Guarantor) as guarantor, HSBC Bank plc as issuing and
principal paying agent (the Issuing and Principal Paying Agent, which expression shall include any successor agent)
and the other paying agents named therein (together with the Issuing and Principal Paying Agent, the Paying Agents,
which expression shall include any additional or successor paying agents), HSBC Bank plc as registrar (the Registrar,
which expression shall include any successor registrar) and a transfer agent and the other transfer agents named therein
(if any) (together with the Registrar, the Transfer Agents, which expression shall include any additional or successor
transfer agents).
Interest bearing definitive Bearer Notes have interest coupons (Coupons) and, in the case of Notes which, when issued in
definitive form, have more than 27 interest payments remaining, talons for further Coupons (Talons) attached on issue.
Any reference herein to Coupons or coupons shall, unless the context otherwise requires, be deemed to include a
reference to Talons or talons. Registered Notes and Global Notes do not have Coupons or Talons attached on issue.
The payment of all amounts in respect of this Note have been guaranteed by the Guarantor pursuant to a Deed of
Guarantee (such Deed of Guarantee as modified and/or supplemented and/or restated from time to time, the Deed of
Guarantee) dated 30 June 2016 and executed by the Guarantor. The original of the Deed of Guarantee is held by the
Issuing and Principal Paying Agent on behalf of the Noteholders and the Couponholders at its specified office.
The final terms for this Note (or the relevant provisions thereof) are set out in Part A of the Final Terms attached to or
endorsed on this Note which supplement these Terms and Conditions (the Conditions). References to the applicable
Final Terms are, unless otherwise stated, to Part A of the Final Terms (or the relevant provisions thereof) attached to or
endorsed on this Note. The expression Prospectus Directive means Directive 2003/71/EC (as amended, including by
Directive 2010/73/EU), and includes any relevant implementing measure in a relevant Member State of the European
Economic Area.
Any reference to Noteholders or holders in relation to any Notes shall mean (in the case of Bearer Notes) the holders of
the Notes and (in the case of Registered Notes) the persons in whose name the Notes are registered and shall, in relation
to any Notes represented by a Global Note, be construed as provided below. Any reference herein to Couponholders
shall mean the holders of the Coupons and shall, unless the context otherwise requires, include the holders of the Talons.
As used herein, Tranche means Notes which are identical in all respects (including as to listing and admission to trading)
and Series means a Tranche of Notes together with any further Tranche or Tranches of Notes which (a) are expressed to
be consolidated and form a single series and (b) have the same terms and conditions or terms and conditions which are
the same in all respects save for the amount and date of the first payment of interest thereon and the date from which
interest starts to accrue.
39
The Noteholders and the Couponholders are entitled to the benefit of the Deed of Covenant (such Deed of Covenant as
amended and/or supplemented and/or restated from time to time, the Deed of Covenant) dated 30 June 2016 and made
by the Issuer. The original of the Deed of Covenant is held by the common depositary for Euroclear (as defined below)
and Clearstream, Luxembourg (as defined below).
Copies of the Agency Agreement and the Deed of Covenant are available for inspection and/or collection (in physical or
electronic form) during normal business hours at the specified office of the Issuing and Principal Paying Agent, the
Registrar and each of the Paying Agents and Transfer Agents (such Agents and the Registrar being together referred to as
the Agents). Copies of the applicable Final Terms are available for viewing at the registered office of the Issuer and of
the Issuing and Principal Paying Agent and copies may be obtained from those offices save that, if this Note is neither
admitted to trading on a regulated market in the European Economic Area nor offered in the European Economic Area in
circumstances where a prospectus is required to be published under the Prospectus Directive, the applicable Final Terms
will only be obtainable by a Noteholder holding one or more Notes and such Noteholder must produce evidence
satisfactory to the Issuer and the relevant Agent as to its holding of such Notes and identity. The Noteholders and the
Couponholders are deemed to have notice of, and are entitled to the benefit of, all the provisions of the Agency
Agreement, the Deed of Covenant and the applicable Final Terms which are applicable to them. The statements in the
Conditions include summaries of, and are subject to, the detailed provisions of the Agency Agreement.
Words and expressions defined in the Agency Agreement or used in the applicable Final Terms shall have the same
meanings where used in the Conditions unless the context otherwise requires or unless otherwise stated and provided
that, in the event of inconsistency between the Agency Agreement and the applicable Final Terms, the applicable Final
Terms will prevail.
1.
FORM, DENOMINATION AND TITLE
The Notes are in bearer form or in registered form as specified in the applicable Final Terms and, in the case of
definitive Notes, serially numbered, in the currency (the "Specified Currency") and the denomination (the
"Specified Denomination(s)") specified in the applicable Final Terms, provided that in the case of any Notes
which are to be admitted to trading on a regulated market within the European Economic Area or offered to the
public in a Member State of the European Economic Area in circumstances which would otherwise require the
publication of a prospectus under the Prospectus Directive, the minimum Specified Denomination shall be
€100,000 (or its equivalent in any other currency as at the date of issue of the relevant Notes). Notes of one
Specified Denomination may not be exchanged for Notes of another Specified Denomination and Bearer Notes
may not be exchanged for Registered Notes and vice versa.
This Note may be a Fixed Rate Note, a Floating Rate Note or a Zero Coupon Note or a combination of any of
the foregoing, depending upon the Interest Basis shown in the applicable Final Terms.
Definitive Bearer Notes are issued with Coupons attached, unless they are Zero Coupon Notes in which case
references to Coupons and Couponholders in the Conditions are not applicable.
Subject as set out below, title to the Bearer Notes and Coupons will pass by delivery and title to the Registered
Notes will pass upon registration of transfers in accordance with the provisions of the Agency Agreement. The
Issuer, the Guarantor and any Paying Agent will (except as otherwise required by law) deem and treat the bearer
of any Bearer Note or Coupon and the registered holder of any Registered Note as the absolute owner thereof
(whether or not overdue and notwithstanding any notice of ownership or writing thereon or notice of any
previous loss or theft thereof) for all purposes but, in the case of any Global Note, without prejudice to the
provisions set out in the next succeeding paragraph.
For so long as any of the Notes is represented by a Global Note held on behalf of Euroclear Bank SA/NV
(Euroclear) and/or Clearstream Banking S.A. (Clearstream, Luxembourg), each person (other than Euroclear
or Clearstream, Luxembourg) who is for the time being shown in the records of Euroclear or of Clearstream,
Luxembourg as the holder of a particular nominal amount of such Notes (in which regard any certificate or other
document issued by Euroclear or Clearstream, Luxembourg as to the nominal amount of such Notes standing to
the account of any person shall be conclusive and binding for all purposes save in the case of manifest error)
shall be treated by the Issuer, the Guarantor and the Agents as the holder of such nominal amount of such Notes
for all purposes other than with respect to the payment of principal or interest on such nominal amount of such
Notes, for which purpose the bearer of the relevant Bearer Global Note or the registered holder of the relevant
Registered Global Note shall be treated by the Issuer, the Guarantor and any Agent as the holder of such
40
nominal amount of such Notes in accordance with and subject to the terms of the relevant Global Note and the
expressions Noteholder and holder of Notes and related expressions shall be construed accordingly.
Notes which are represented by a Global Note will be transferable only in accordance with the rules and
procedures for the time being of Euroclear and Clearstream, Luxembourg, as the case may be.
References to Euroclear and/or Clearstream, Luxembourg shall, whenever the context so permits, be deemed to
include a reference to any additional or alternative clearing system specified in Part B of the applicable Final
Terms.
2.
TRANSFERS OF REGISTERED NOTES
2.1
Transfers of interests in Registered Global Notes
Transfers of beneficial interests in Registered Global Notes will be effected by Euroclear or Clearstream,
Luxembourg, as the case may be, and, in turn, by other participants and, if appropriate, indirect participants in
such clearing systems acting on behalf of beneficial transferors and transferees of such interests. A beneficial
interest in a Registered Global Note will, subject to compliance with all applicable legal and regulatory
restrictions, be transferable for Notes in definitive form only in the authorised denominations set out in the
applicable Final Terms and only in accordance with the rules and operating procedures for the time being of
Euroclear or Clearstream, Luxembourg, as the case may be, and in accordance with the terms and conditions
specified in the Agency Agreement and the terms of the Registered Global Note.
2.2
Transfers of Registered Notes in definitive form
Upon the terms and subject to the conditions set forth in the Agency Agreement, a Registered Note in definitive
form may be transferred in whole or in part (in the authorised denominations set out in the applicable Final
Terms). In order to effect any such transfer (i) the holder or holders must (A) surrender the Registered Note for
registration of the transfer of the Registered Note (or the relevant part of the Registered Note) at the specified
office of any Transfer Agent and the Registrar, with the form of transfer thereon duly executed by the holder or
holders thereof or his or their attorney or attorneys duly authorised in writing and (B) complete and deposit such
other certifications as may be required by the relevant Transfer Agent and (ii) the relevant Transfer Agent must,
after due and careful enquiry, be satisfied with the documents of title and the identity of the person making the
request. Any such transfer will be subject to such reasonable regulations as the Issuer and the Registrar may
from time to time prescribe (the initial such regulations being set out in Schedule 7 to the Agency Agreement).
Subject as provided above, the relevant Transfer Agent will, within three business days (being for this purpose a
day on which banks are open for business in the city where the specified office of the relevant Transfer Agent is
located) of the request (or such longer period as may be required to comply with any applicable fiscal or other
laws or regulations), authenticate and deliver, or procure the authentication and delivery of, at its specified
office to the transferee or (at the risk of the transferee) send by uninsured mail, to such address as the transferee
may request, a new Registered Note in definitive form of a like aggregate nominal amount to the Registered
Note (or the relevant part of the Registered Note) transferred. In the case of the transfer of part only of a
Registered Note in definitive form, a new Registered Note in definitive form in respect of the balance of the
Registered Note not transferred will be so authenticated and delivered or (at the risk of the transferor) sent to the
transferor.
2.3
Registration of transfer upon partial redemption
In the event of a partial redemption of Notes under Condition 7, the Issuer shall not be required to register the
transfer of any Registered Note, or part of a Registered Note, called for partial redemption.
2.4
Costs of registration
Noteholders will not be required to bear the costs and expenses of effecting any registration of transfer as
provided above, except for any costs or expenses of delivery other than by regular uninsured mail and except
that the Issuer may require the payment of a sum sufficient to cover any stamp duty, tax or other governmental
charge that may be imposed in relation to the registration.
41
3.
STATUS OF THE NOTES AND THE DEED OF GUARANTEE
3.1
Status of the Notes
The Notes and any relevant Coupons, are direct, unconditional, unsubordinated and (subject to the provisions of
Condition 4) unsecured obligations of the Issuer and rank pari passu among themselves and (save for certain
obligations required to be preferred by law) equally with all other unsecured obligations (other than
subordinated obligations, if any) of the Issuer from time to time outstanding. The Issuer shall execute such
instruments and do or take any such action as may be required by the Dubai International Financial Centre to
ensure the effectiveness of such ranking following any change in any law or regulation relating thereto which
becomes effective on or after the date on which agreement is reached to issue the first Tranche of the Notes and
which requires the Issuer to take such action.
3.2
Status of the Deed of Guarantee
The payment of principal and interest in respect of the Notes has been unconditionally and irrevocably
guaranteed by the Guarantor (the Deed of Guarantee). The obligations of the Guarantor under the Deed of
Guarantee are direct, unconditional, unsubordinated and (subject to the provisions of Condition 4) unsecured
obligations of the Guarantor and (save for certain obligations required to be preferred by law) rank equally with
all other unsecured obligations (other than subordinated obligations, if any) of the Guarantor, from time to time
outstanding.
4.
NEGATIVE PLEDGE
4.1
Negative Pledge
So long as any of the Notes or Coupons remains outstanding (as defined in the Agency Agreement) neither the
Issuer nor the Guarantor will, and the Issuer and the Guarantor will procure that none of their respective
Subsidiaries (as defined below) will, create or have outstanding any mortgage, charge, lien, pledge or other
security interest (each a Security Interest) upon, or with respect to, any present or future business, undertaking,
assets or revenues (including any uncalled capital) of the Issuer, the Guarantor and/or any of their respective
Subsidiaries to secure: (a) any Relevant Indebtedness or Relevant Sukuk Obligation (each as defined below); or
(b) any guarantee or indemnity in respect of any Relevant Indebtedness or Relevant Sukuk Obligation, unless
the Issuer or the Guarantor, as the case may be, in the case of the creation of a Security Interest, before or at the
same time and, in any other case, promptly, takes any and all action necessary to ensure that:
4.2
(i)
all amounts payable by it under the Notes and Coupons and/or the Deed of Guarantee as the case may
be, are secured by the Security Interest equally and rateably with the Relevant Indebtedness, Relevant
Note Obligation, or guarantee or indemnity in respect thereof, as the case may be; or
(ii)
such other Security Interest or other arrangement (whether or not it includes the giving of a Security
Interest) is provided as is approved by an Extraordinary Resolution (as defined in the Agency
Agreement) of the Noteholders.
Interpretation
For the purposes of these Conditions:
(a)
Relevant Indebtedness means any present or future indebtedness (whether being principal, premium,
interest or other amounts) for or in respect of any notes, bonds, debentures, debenture stock, loan stock
or other securities, which for the time being are, or are intended to be, or are capable of being, quoted,
listed or ordinarily dealt in or traded on any stock exchange, over-the-counter or other securities
market;
(b)
Relevant Sukuk Obligation means any present or future undertaking or other obligation to pay any
money given in connection with the issue of certificates, whether or not in return for consideration of
any kind, which for the time being are, or are intended to be, or are capable of being, quoted, listed or
ordinarily dealt in or traded on any stock exchange, over-the counter or other securities market; and
(c)
Subsidiary means in relation to any person (the first person) at any particular time, any other person
(the second person):
42
(i)
whose affairs and policies the first person controls or has power to control (directly or
indirectly), whether by ownership or share capital, contract, the power to appoint or remove
members of the governing body of the second person or otherwise; or
(ii)
whose financial statements are, in accordance with applicable law and generally accepted
accounting principles, consolidated with those of the first person.
5.
INTEREST
5.1
Interest on Fixed Rate Notes
Each Fixed Rate Note bears interest from (and including) the Interest Commencement Date at the rate(s) per
annum equal to the Rate(s) of Interest. Interest will be payable in arrear on the Interest Payment Date(s) in each
year up to (and including) the Maturity Date.
If the Notes are in definitive form, except as provided in the applicable Final Terms, the amount of interest
payable on each Interest Payment Date in respect of the Fixed Interest Period ending on (but excluding) such
date will amount to the Fixed Coupon Amount. Payments of interest on any Interest Payment Date will, if so
specified in the applicable Final Terms, amount to the Broken Amount so specified.
In the case of a Fixed Rate Note where the Specified Currency is Renminbi and the applicable Final Terms
specifies a Business Day Convention to be applicable (an Adjusted Renminbi Fixed Rate Note), each Interest
Payment Date (and, accordingly, the relevant Fixed Rate Period) will be adjusted (if required) in accordance
with the relevant Business Day Convention. For this purpose, the provisions relating to the application of a
Business Day Convention set out in Condition 5.2(a) below shall apply to this Condition 5.1, mutatis mutandis,
save that, for the purposes of the Conditions relating to an Adjusted Renminbi Fixed Rate Note, the term
Business Day shall mean a day (other than a Saturday or Sunday) on which commercial banks and foreign
exchange markets settle payments in the applicable RMB Settlement Centre(s) (as defined in Condition 6.7
below).
Interest shall be calculated in respect of any period for which an applicable Fixed Coupon Amount or Broken
Amount is not specified in the applicable Final Terms and in respect of the Fixed Interest Periods relating to
Adjusted Renminbi Fixed Rate Notes by applying the Rate of Interest to:
(A)
in the case of Fixed Rate Notes or Adjusted Renminbi Fixed Rate Notes, as the case may be, which are
represented by a Global Note, the aggregate outstanding nominal amount of the Fixed Rate Notes
represented by such Global Note; or
(B)
in the case of Fixed Rate Notes or Adjusted Renminbi Fixed Rate Notes, as the case may be, in
definitive form, the Calculation Amount;
and, in each case, multiplying such sum by the applicable Day Count Fraction, and rounding the resultant figure
to the nearest sub-unit of the relevant Specified Currency, half of any such sub-unit being rounded upwards or
otherwise in accordance with applicable market convention. Where the Specified Denomination of a Fixed Rate
Note or Adjusted Renminbi Fixed Rate Notes, as the case may be, in definitive form is a multiple of the
Calculation Amount, the amount of interest payable in respect of such Fixed Rate Note or Adjusted Renminbi
Fixed Rate Notes, as the case may be, shall be the product of the amount (determined in the manner provided
above) for the Calculation Amount and the amount by which the Calculation Amount is multiplied to reach the
Specified Denomination, without any further rounding.
As used in these Conditions:
Day Count Fraction means, in respect of the calculation of an amount of interest in accordance with this
Condition 5.1:
(a)
if "Actual/Actual (ICMA)" is specified in the applicable Final Terms:
(i)
in the case of Notes where the number of days in the relevant period from (and including) the
most recent Interest Payment Date (or, if none, the Interest Commencement Date) to (but
excluding) the relevant payment date (the Accrual Period) is equal to or shorter than the
Determination Period during which the Accrual Period ends, the number of days in such
Accrual Period divided by the product of (I) the number of days in such Determination Period
43
and (II) the number of Determination Dates (as specified in the applicable Final Terms) that
would occur in one calendar year; or
(ii)
in the case of Notes where the Accrual Period is longer than the Determination Period during
which the Accrual Period ends, the sum of:
(A)
the number of days in such Accrual Period falling in the Determination Period in
which the Accrual Period begins divided by the product of (x) the number of days in
such Determination Period and (y) the number of Determination Dates that would
occur in one calendar year; and
(B)
the number of days in such Accrual Period falling in the next Determination Period
divided by the product of (x) the number of days in such Determination Period and
(y) the number of Determination Dates that would occur in one calendar year;
(b)
if "30/360" is specified in the applicable Final Terms, the number of days in the period from (and
including) the most recent Interest Payment Date (or, if none, the Interest Commencement Date) to (but
excluding) the relevant payment date (such number of days being calculated on the basis of a year of
360 days with 12 30-day months) divided by 360; and
(c)
if "Actual/365" (Fixed) is specified in the applicable Final Terms, the actual member of days in the
Interest Period divided by 365;
Determination Period means each period from (and including) a Determination Date to (but excluding) the
next Determination Date (including, where either the Interest Commencement Date or the final Interest Payment
Date is not a Determination Date, the period commencing on the first Determination Date prior to, and ending
on the first Determination Date falling after, such date);
Fixed Interest Period means the period from (and including) an Interest Payment Date (or the Interest
Commencement Date) to (but excluding) the next (or first) Interest Payment Date; and
sub-unit means, with respect to any currency other than euro, the lowest amount of such currency that is
available as legal tender in the country of such currency and, with respect to euro, one cent.
5.2
Interest on Floating Rate Notes
(a)
Interest Payment Dates
Each Floating Rate Note bears interest from (and including) the Interest Commencement Date and such interest
will be payable in arrear on either:
(i)
the Specified Interest Payment Date(s) in each year specified in the applicable Final Terms; or
(ii)
if no Specified Interest Payment Date(s) is/are specified in the applicable Final Terms, each date (each
such date, together with each Specified Interest Payment Date, an Interest Payment Date) which falls
the number of months or other period specified as the Specified Period in the applicable Final Terms
after the preceding Interest Payment Date or, in the case of the first Interest Payment Date, after the
Interest Commencement Date.
Such interest will be payable in respect of each Interest Period (which expression shall, in the Conditions,
mean the period from (and including) an Interest Payment Date (or the Interest Commencement Date) to (but
excluding) the next (or first) Interest Payment Date).
If a Business Day Convention is specified in the applicable Final Terms and (x) if there is no numerically
corresponding day in the calendar month in which an Interest Payment Date should occur or (y) if any Interest
Payment Date would otherwise fall on a day which is not a Business Day, then, if the Business Day Convention
specified is:
(A)
in any case where Specified Periods are specified in accordance with Condition 5.2(a)(ii) above, the
Floating Rate Convention, such Interest Payment Date (a) in the case of (x) above, shall be the last day
that is a Business Day in the relevant month and the provisions of (ii) below shall apply mutatis
mutandis or (b) in the case of (y) above, shall be postponed to the next day which is a Business Day
unless it would thereby fall into the next calendar month, in which event (i) such Interest Payment Date
shall be brought forward to the immediately preceding Business Day and (ii) each subsequent Interest
44
Payment Date shall be the last Business Day in the month which falls the Specified Period after the
preceding applicable Interest Payment Date occurred; or
(B)
the Following Business Day Convention, such Interest Payment Date shall be postponed to the next
day which is a Business Day; or
(C)
the Modified Following Business Day Convention, such Interest Payment Date shall be postponed to
the next day which is a Business Day unless it would thereby fall into the next calendar month, in
which event such Interest Payment Date shall be brought forward to the immediately preceding
Business Day; or
(D)
the Preceding Business Day Convention, such Interest Payment Date shall be brought forward to the
immediately preceding Business Day.
In the Conditions, unless otherwise specified Business Day means a day which is:
(b)
(a)
a day on which commercial banks and foreign exchange markets settle payments and are open for
general business (including dealing in foreign exchange and foreign currency deposits) in London and
each Additional Business Centre (other than the TARGET2 System) specified in the applicable Final
Terms;
(b)
if the TARGET2 System is specified as an Additional Business Centre in the applicable Final Terms, a
day on which the Trans-European Automated Real-Time Gross Settlement Express Transfer
(TARGET2) System (the TARGET2 System) is open; and
(c)
either (i) in relation to any sum payable in a Specified Currency other than euro and Renminbi, a day
on which commercial banks and foreign exchange markets settle payments and are open for general
business (including dealing in foreign exchange and foreign currency deposits) in the principal
financial centre of the country of the relevant Specified Currency (which if the Specified Currency is
Australian dollars or New Zealand dollars shall be Sydney and Auckland, respectively) or (ii) in
relation to any sum payable in euro, a day on which the TARGET2 System is open or (iii) in relation to
any sum payable in Renminbi, a day (other than a Saturday, Sunday or public holiday) on which
commercial banks and foreign exchange markets in the applicable RMB Settlement Centre(s) are
generally open for business and settlement of Renminbi payments in the applicable RMB Settlement
Centre(s).
Rate of Interest
The Rate of Interest payable from time to time in respect of Floating Rate Notes will be determined in the
manner specified in the applicable Final Terms.
(i)
ISDA Determination for Floating Rate Notes
Where ISDA Determination is specified in the applicable Final Terms as the manner in which the Rate
of Interest is to be determined, the Rate of Interest for each Interest Period will be the relevant ISDA
Rate plus or minus (as indicated in the applicable Final Terms) the Margin (if any). For the purposes of
this subparagraph (i), ISDA Rate for an Interest Period means a rate equal to the Floating Rate that
would be determined by the Issuing and Principal Paying Agent under an interest rate swap transaction
if the Issuing and Principal Paying Agent were acting as Calculation Agent for that swap transaction
under the terms of an agreement incorporating the 2006 ISDA Definitions, as published by the
International Swaps and Derivatives Association, Inc. and as amended and updated as at the Issue Date
of the first Tranche of the Notes (the ISDA Definitions) and under which:
(A)
the Floating Rate Option is as specified in the applicable Final Terms;
(B)
the Designated Maturity is a period specified in the applicable Final Terms; and
(C)
the relevant Reset Date is the day specified in the applicable Final Terms.
For the purposes of this subparagraph (i), Floating Rate, Calculation Agent, Floating Rate Option,
Designated Maturity and Reset Date have the meanings given to those terms in the ISDA Definitions.
Unless otherwise stated in the applicable Final Terms the Minimum Rate of Interest shall be deemed to
be zero.
45
(ii)
Screen Rate Determination for Floating Rate Notes
Where Screen Rate Determination is specified in the applicable Final Terms as the manner in which the
Rate of Interest is to be determined, the Rate of Interest for each Interest Period will, subject as
provided below, be either:
(A)
the offered quotation; or
(B)
the arithmetic mean (rounded if necessary to the fifth decimal place, with 0.000005 being
rounded upwards) of the offered quotations,
(expressed as a percentage rate per annum) for the Reference Rate (as specified in the applicable Final
Terms) which appears or appear, as the case may be, on the Relevant Screen Page (or such replacement
page on that service which displays the information) as at the Relevant Time on the Interest
Determination Date in question plus or minus (as indicated in the applicable Final Terms) the Margin
(if any), all as determined by the Issuing and Principal Paying Agent. If five or more of such offered
quotations are available on the Relevant Screen Page, the highest (or, if there is more than one such
highest quotation, one only of such quotations) and the lowest (or, if there is more than one such lowest
quotation, one only of such quotations) shall be disregarded by the Issuing and Principal Paying Agent
for the purpose of determining the arithmetic mean (rounded as provided above) of such offered
quotations.
If the Relevant Screen Page is not available or if, in the case of sub-paragraph (ii)(A) above, no offered
quotation appears or, in the case of sub-paragraph (ii)(B) above, fewer than three offered quotations
appear, in each case as at the Relevant Time, the Issuing and Principal Paying Agent shall request each
of the Reference Banks (the contact details (including individual contacts) at such Reference Banks to
be provided to the Issuing and Principal Paying Agent by the Issuer) provide the Issuing and Principal
Paying Agent with its offered quotation (expressed as a percentage rate per annum) for the Reference
Rate at approximately the Relevant Time on the Interest Determination Date in question. If two or
more of the Reference Banks provide the Issuing and Principal Paying Agent with offered quotations,
the Rate of Interest for the Interest Period shall be the arithmetic mean (rounded if necessary to the fifth
decimal place with 0.000005 being rounded upwards) of the offered quotations plus or minus (as
appropriate) the Margin (if any), all as determined by the Issuing and Principal Paying Agent.
If on any Interest Determination Date one only or none of the Reference Banks provides the Issuing
and Principal Paying Agent with an offered quotation as provided in the preceding paragraph, the Rate
of Interest for the relevant Interest Period shall be the rate per annum which the Issuing and Principal
Paying Agent determines as being the arithmetic mean (rounded if necessary to the fifth decimal place,
with 0.000005 being rounded upwards) of the rates, as communicated to (and at the request of) the
Issuing and Principal Paying Agent by the Reference Banks or any two or more of them, at which such
banks were offered, at approximately the Relevant Time on the relevant Interest Determination Date,
deposits in the Specified Currency for a period equal to that which would have been used for the
Reference Rate by leading banks in the London inter-bank market (if the Reference Rate is LIBOR,
LIBID, AUD LIBOR, JPY LIBOR) or the Euro-zone inter-bank market (if the Reference Rate is
EURIBOR) or the Shanghai inter-bank market (if the Reference Rate is SHIBOR), or the Hong Kong
inter-bank market (if the Reference Rate is HIBOR or CNH HIBOR), or the Singapore inter-bank
market (if the Reference Rate is SIBOR), or the Kuala Lumpur inter-bank market (if the Reference
Rate is KLIBOR), or the Emirates inter-bank market (if the Reference Rate is EIBOR), or the Saudi
Arabia inter-bank market (if the Reference Rate is SAIBOR), or the Australia inter-bank market (if the
Reference Rate is BBSW), or the Prague inter-bank market (if the Reference Rate is PRIBOR), or the
Turkish inter-bank market (if the Reference Rate is TRLIBOR or TRYLIBOR), or the Tokyo interbank market (if the Reference Rate is TIBOR) plus or minus (as appropriate) the Margin (if any) or, if
fewer than two of the Reference Banks provide the Issuing and Principal Paying Agent with offered
rates, the offered rate for deposits in the Specified Currency for a period equal to that which would
have been used for the Reference Rate, or the arithmetic mean (rounded as provided above) of the
offered rates for deposits in the Specified Currency for a period equal to that which would have been
used for the Reference Rate, at which, at approximately the Relevant Time on the relevant Interest
Determination Date, any one or more banks (which bank or banks is or are in the opinion of the Issuer
suitable for the purpose) informs the Issuing and Principal Paying Agent it is quoting to leading banks
in the London inter-bank market (if the Reference Rate is LIBOR, LIBID, AUD LIBOR, JPY LIBOR)
46
or the Euro-zone inter-bank market (if the Reference Rate is EURIBOR) or the Shanghai inter-bank
market (if the Reference Rate is SHIBOR), or the Hong Kong inter-bank market (if the Reference Rate
is HIBOR or CNH HIBOR), or the Singapore inter-bank market (if the Reference Rate is SIBOR), or
the Kuala Lumpur inter-bank market (if the Reference Rate is KLIBOR), or the Emirates inter-bank
market (if the Reference Rate is EIBOR), or the Saudi Arabia inter-bank market (if the Reference Rate
is SAIBOR), or the Australia inter-bank market (if the Reference Rate is BBSW), or the Prague interbank market (if the Reference Rate is PRIBOR), or the Turkish inter-bank market (if the Reference
Rate is TRLIBOR or TRYLIBOR), or the Tokyo inter-bank market (if the Reference Rate is TIBOR)
plus or minus (as appropriate) the Margin (if any), provided that, if the Rate of Interest cannot be
determined in accordance with the foregoing provisions of this paragraph, the Rate of Interest shall be
determined as at the last preceding Interest Determination Date (though substituting, where a different
Margin is to be applied to the relevant Interest Period from that which applied to the last preceding
Interest Period, the Margin relating to the relevant Interest Period in place of the Margin relating to that
last preceding Interest Period).
As used in these Conditions:
Reference Rate means one of the following benchmark rates (as specified in the applicable Final
Terms) in respect of the currency and period specified in the applicable Final Terms:
(A)
Euro interbank offered rate (EURIBOR);
(B)
London interbank bid rate (LIBID);
(C)
London interbank offered rate (LIBOR);
(D)
Shanghai interbank offered rate (SHIBOR);
(E)
Hong Kong interbank offered rate (HIBOR);
(F)
Singapore interbank offered rate (SIBOR);
(G)
Kuala Lumpur interbank offered rate (KLIBOR);
(H)
Emirates interbank offered rate (EIBOR);
(I)
Saudi Arabia interbank offered rate (SAIBOR);
(J)
Bank Bill Swap Rate (BBSW);
(K)
Australian dollar LIBOR (AUD LIBOR);
(L)
Japanese Yen LIBOR (JPY LIBOR);
(M)
Prague interbank offered rate (PRIBOR);
(N)
CNH Hong Kong interbank offered rate (CNH HIBOR);
(O)
Turkish Lira interbank offered rate (TRLIBOR or TRYLIBOR); and
(P)
Tokyo interbank offered rate (TIBOR);
Relevant Financial Centre shall mean (i) London, in the case of a determination of LIBOR; (ii)
Brussels, in the case of a determination of EURIBOR; (iii) Tokyo, in the case of a determination of
TIBOR; or (iv) Hong Kong, in the case of a determination of HIBOR or CNH HIBOR, as specified in
the applicable Final Terms, or such other financial centre as specified in the relevant Final Terms; and
Relevant Time shall mean: (a) 11.00 a.m. (London time, in the case of a determination of LIBOR,
LIBID, AUD LIBOR, JPY LIBOR, Brussels time, in the case of a determination of EURIBOR,
Shanghai time, in the case of a determination of SHIBOR, Hong Kong time, in the case of a
determination of HIBOR, Singapore time, in the case of a determination of SIBOR, Kuala Lumpur
time, in the case of a determination of KLIBOR, Dubai time, in the case of a determination of EIBOR,
Riyadh time, in the case of a determination of SAIBOR, Sydney time, in the case of a determination of
BBSW, Prague time, in the case of a determination of PRIBOR, Istanbul time, in the case of a
determination of TRLIBOR or TRYLIBOR, or Tokyo time, in the case of a determination of TIBOR);
or (b) 11.15 a.m. Hong Kong time in the case of a determination of CNH HIBOR; or (c) Relevant
Financial Centre time in the case of a determination of any other Reference Rate.
47
(c)
Minimum Rate of Interest and/or Maximum Rate of Interest
If the applicable Final Terms specifies a Minimum Rate of Interest for any Interest Period, then, in the event that
the Rate of Interest in respect of such Interest Period determined in accordance with the provisions of paragraph
(b) above is less than such Minimum Rate of Interest, the Rate of Interest for such Interest Period shall be such
Minimum Rate of Interest.
If the applicable Final Terms specifies a Maximum Rate of Interest for any Interest Period, then, in the event
that the Rate of Interest in respect of such Interest Period determined in accordance with the provisions of
paragraph (b) above is greater than such Maximum Rate of Interest, the Rate of Interest for such Interest Period
shall be such Maximum Rate of Interest.
(d)
Determination of Rate of Interest and calculation of Interest Amounts
The Issuing and Principal Paying Agent will at or as soon as practicable after each time at which the Rate of
Interest is to be determined, determine the Rate of Interest for the relevant Interest Period.
The Issuing and Principal Paying Agent will calculate the amount of interest (the Interest Amount) payable on
the Floating Rate Notes for the relevant Interest Period by applying the Rate of Interest to:
(A)
in the case of Floating Rate Notes which are represented by a Global Note, the aggregate outstanding
nominal amount of the Notes represented by such Global Note; or
(B)
in the case of Floating Rate Notes in definitive form, the Calculation Amount;
and, in each case, multiplying such sum by the applicable Day Count Fraction, and rounding the resultant figure
to the nearest sub-unit of the relevant Specified Currency, half of any such sub-unit being rounded upwards or
otherwise in accordance with applicable market convention. Where the Specified Denomination of a Floating
Rate Note in definitive form is a multiple of the Calculation Amount, the Interest Amount payable in respect of
such Note shall be the product of the amount (determined in the manner provided above) for the Calculation
Amount and the amount by which the Calculation Amount is multiplied to reach the Specified Denomination,
without any further rounding.
Day Count Fraction means, in respect of the calculation of an amount of interest in accordance with this
Condition 5.2:
(i)
if "Actual/Actual (ISDA)" or "Actual/Actual" is specified in the applicable Final Terms, the actual
number of days in the Interest Period divided by 365 (or, if any portion of that Interest Period falls in a
leap year, the sum of (I) the actual number of days in that portion of the Interest Period falling in a leap
year divided by 366 and (II) the actual number of days in that portion of the Interest Period falling in a
non-leap year divided by 365);
(ii)
if "Actual/365 (Fixed)" is specified in the applicable Final Terms, the actual number of days in the
Interest Period divided by 365;
(iii)
if "Actual/365 (Sterling)" is specified in the applicable Final Terms, the actual number of days in the
Interest Period divided by 365 or, in the case of an Interest Payment Date falling in a leap year, 366;
(iv)
if "Actual/360" is specified in the applicable Final Terms, the actual number of days in the Interest
Period divided by 360;
(v)
if "30/360", "360/360" or "Bond Basis" is specified in the applicable Final Terms, the number of days
in the Interest Period divided by 360, calculated on a formula basis as follows:
Day Count Fraction =
[360 (Y2  Y1 )]  [30 ( M 2  M1 )]  (D2  D1 )
360
where:
"Y1" is the year, expressed as a number, in which the first day of the Interest Period falls;
"Y2" is the year, expressed as a number, in which the day immediately following the last day of the
Interest Period falls;
"M1" is the calendar month, expressed as a number, in which the first day of the Interest Period falls;
48
"M2" is the calendar month, expressed as a number, in which the day immediately following the last
day of the Interest Period falls;
"D1" is the first calendar day, expressed as a number, of the Interest Period, unless such number is 31,
in which case D1 will be 30; and
"D2" is the calendar day, expressed as a number, immediately following the last day included in the
Interest Period, unless such number would be 31 and D 1 is greater than 29, in which case D 2 will be 30;
(vi)
if "30E/360" or "Eurobond Basis" is specified in the applicable Final Terms, the number of days in the
Interest Period divided by 360, calculated on a formula basis as follows:
[360 (Y2  Y1 )]  [30 ( M 2  M1 )]  (D2  D1 )
360
where:
"D1" is the first calendar day, expressed as a number, of the Interest Period, unless such number would
be 31, in which case D1 will be 30; and
Interest Period, unless such number would be 31, in which case D 2 will be 30; and
(vii)
if "30E/360 (ISDA)" is specified in the applicable Final Terms, the number of days in the Interest
Period divided by 360, calculated on a formula basis as follows:
[360 (Y2  Y1 )]  [30 ( M 2  M1 )]  (D2  D1 )
360
where:
"D1" is the first calendar day, expressed as a number, of the Interest Period, unless (i) that day is the
last day of February or (ii) such number would be 31, in which case D 1 will be 30; and
Interest Period, unless (i) that day is the last day of February but not the Maturity Date or (ii) such
number would be 31, in which case D2 will be 30.
(e)
Linear Interpolation
Where Linear Interpolation is specified as applicable in respect of an Interest Period in the applicable Final
Terms, the Rate of Interest for such Interest Period shall be calculated by the Agent by straight line linear
interpolation by reference to two rates based on the relevant Reference Rate (where Screen Rate Determination
is specified as applicable in the applicable Final Terms) or the relevant Floating Rate Option (where ISDA
Determination is specified as applicable in the applicable Final Terms), one of which shall be determined as if
the Designated Maturity were the period of time for which rates are available next shorter than the length of the
relevant Interest Period and the other of which shall be determined as if the Designated Maturity were the period
49
of time for which rates are available next longer than the length of the relevant Interest Period provided however
that if there is no rate available for a period of time next shorter or, as the case may be, next longer, then the
Agent shall determine such rate at such time and by reference to such sources as it determines appropriate.
Designated Maturity means: (a) in relation to Screen Rate Determination, the period of time designated in the
Reference Rate; and (b) in relation to ISDA Determination, the Designated Maturity.
(f)
Notification of Rate of Interest and Interest Amounts
The Issuing and Principal Paying Agent will cause the Rate of Interest and each Interest Amount for each
Interest Period and the relevant Interest Payment Date to be notified to the Issuer and any stock exchange on
which the relevant Floating Rate Notes are for the time being listed (by no later than the first day of each
Interest Period) and notice thereof to be published in accordance with Condition 14 as soon as possible after
their determination but in no event later than the fourth London Business Day thereafter. Each Interest Amount
and Interest Payment Date so notified may subsequently be amended (or appropriate alternative arrangements
made by way of adjustment) without prior notice in the event of an extension or shortening of the Interest
Period. Any such amendment will be promptly notified to each stock exchange on which the relevant Floating
Rate Notes are for the time being listed and to the Noteholders in accordance with Condition 14. For the
purposes of this paragraph, the expression London Business Day means a day (other than a Saturday or a
Sunday) on which banks and foreign exchange markets are open for general business in London.
(g)
Certificates to be final
All certificates, communications, opinions, determinations, calculations, quotations and decisions given,
expressed, made or obtained for the purposes of the provisions of this Condition 5.2, by the Issuing and
Principal Paying Agent shall (in the absence of wilful default, bad faith or manifest error) be binding on the
Issuer, the Guarantor, the Issuing and Principal Paying Agent, the other Agents and all Noteholders and
Couponholders and (in the absence of wilful default, bad faith or manifest error) no liability to the Issuer, the
Guarantor, the Noteholders or the Couponholders shall attach to the Issuing and Principal Paying Agent or, if
applicable, the Calculation Agent in connection with the exercise or non-exercise by it of its powers, duties and
discretions pursuant to such provisions.
5.3
Accrual of interest
Each Note (or in the case of the redemption of part only of a Note, that part only of such Note) will cease to bear
interest (if any) from the date for its redemption unless payment of principal is improperly withheld or refused.
In such event, interest will continue to accrue until whichever is the earlier of:
(a)
the date on which all amounts due in respect of such Note have been paid; and
(b)
five days after the date on which the full amount of the moneys payable in respect of such Note has
been received by the Issuing and Principal Paying Agent and notice to that effect has been given to the
Noteholders in accordance with Condition 14.
6.
PAYMENTS
6.1
Method of payment
Subject as provided below:
(a)
payments in a Specified Currency other than euro and Renminbi will be made by credit or transfer to
an account in the relevant Specified Currency maintained by the payee with a bank in the principal
financial centre of the country of such Specified Currency (which, if the Specified Currency is
Australian dollars or New Zealand dollars, shall be Sydney and Auckland, respectively);
(b)
payments in euro will be made by credit or transfer to a euro account (or any other account to which
euro may be credited or transferred) specified by the payee; and
(c)
payments in Renminbi will be made by transfer to a Renminbi account maintained by or on behalf of
the payee with a bank in the applicable RMB Settlement Centre(s).
Payments in respect of principal and interest on the Notes are subject in all cases to (i) any fiscal or other laws
and regulations applicable in the place of payment, but without prejudice to the provisions of Condition 8 and
50
(ii) any withholding or deduction required pursuant to an agreement described in Section 1471(b) of the U.S.
Internal Revenue Code of 1986 (the Code) or otherwise imposed pursuant to Sections 1471 through 1474 of the
Code, any regulations or agreements thereunder, any official interpretations thereof, or (without prejudice to the
provisions of Condition 8) any law implementing an intergovernmental approach thereto.
6.2
Presentation of definitive Bearer Notes and Coupons
Payments of principal in respect of definitive Bearer Notes will (subject as provided below) be made in the
manner provided in Condition 6.1 above only against presentation and surrender (or, in the case of part payment
of any sum due, endorsement) of definitive Bearer Notes, and payments of interest in respect of definitive
Bearer Notes will (subject as provided below) be made as aforesaid only against presentation and surrender (or,
in the case of part payment of any sum due, endorsement) of Coupons, in each case at the specified office of any
Paying Agent outside the United States (which expression, as used herein, means the United States of America
(including the States and the District of Columbia and its possessions)).
Fixed Rate Notes in definitive bearer form (other than Long Maturity Notes (as defined below)) should be
presented for payment together with all unmatured Coupons appertaining thereto (which expression shall for
this purpose include Coupons falling to be issued on exchange of matured Talons), failing which the amount of
any missing unmatured Coupon (or, in the case of payment not being made in full, the same proportion of the
amount of such missing unmatured Coupon as the sum so paid bears to the sum due) will be deducted from the
sum due for payment. Each amount of principal so deducted will be paid in the manner mentioned above against
surrender of the relative missing Coupon at any time before the expiry of 10 years after the Relevant Date (as
defined in Condition 8) in respect of such principal (whether or not such Coupon would otherwise have become
void under Condition 9) or, if later, five years from the date on which such Coupon would otherwise have
become due, but in no event thereafter.
Upon any Fixed Rate Note in definitive bearer form becoming due and repayable prior to its Maturity Date, all
unmatured Talons (if any) appertaining thereto will become void and no further Coupons will be issued in
respect thereof.
Upon the date on which any Floating Rate Note or Long Maturity Note in definitive bearer form becomes due
and repayable, unmatured Coupons and Talons (if any) relating thereto (whether or not attached) shall become
void and no payment or, as the case may be, exchange for further Coupons shall be made in respect thereof.
A Long Maturity Note is a Fixed Rate Note (other than a Fixed Rate Note which on issue had a Talon
attached) whose nominal amount on issue is less than the aggregate interest payable thereon provided that such
Note shall cease to be a Long Maturity Note on the Interest Payment Date on which the aggregate amount of
interest remaining to be paid after that date is less than the nominal amount of such Note.
If the due date for redemption of any definitive Bearer Note is not an Interest Payment Date, interest (if any)
accrued in respect of such Note from (and including) the preceding Interest Payment Date or, as the case may
be, the Interest Commencement Date shall be payable only against surrender of the relevant definitive Bearer
Note.
6.3
Payments in respect of Bearer Global Notes
Payments of principal and interest (if any) in respect of Notes represented by any Global Note in bearer form
will (subject as provided below) be made in the manner specified above in relation to definitive Bearer Notes
and otherwise in the manner specified in the relevant Global Note against presentation or surrender, as the case
may be, of such Global Note at the specified office of any Paying Agent outside the United States. A record of
each payment made against presentation or surrender of any Global Note in bearer form, distinguishing between
any payment of principal and any payment of interest, will be made on such Global Note by the Paying Agent to
which it was presented and such record shall be prima facie evidence that the payment in question has been
made.
6.4
Payments in respect of Registered Notes
Payments of principal in respect of each Registered Note (whether or not in global form) will be made against
presentation and surrender (or, in the case of part payment of any sum due, endorsement) of the Registered Note
at the specified office of the Registrar or any of the Paying Agents. Such payments will be made by transfer to
the Designated Account (as defined below) of the holder (or the first named of joint holders) of the Registered
51
Note appearing in the register of holders of the Registered Notes maintained by the Registrar (the Register): (i)
where in global form, at the close of the business day before the relevant due date (business day being for this
purpose a day on which Euroclear and Clearstream, Luxembourg are open for business); and (ii) where in
definitive form, at the close of business on the fifth (in the case of Renminbi) and the third (in the case of a
currency other than Renmnibi) business day before the relevant due date (business day being for this purpose a
day on which banks are open for business in the city where the specified office of the Registrar is located).
Notwithstanding the previous sentence, if (i) a holder does not have a Designated Account or (ii) the nominal
amount of the Notes held by a holder is less than U.S.$250,000 (or its approximate equivalent in any other
Specified Currency), payment will instead be made by a cheque in the Specified Currency drawn on a
Designated Bank (as defined below). For these purposes, Designated Account means the account (which, in the
case of a payment in Renminbi, means the Renminbi account) maintained by a holder with a Designated Bank
and identified as such in the Register and Designated Bank means (in the case of payment in a Specified
Currency other than euro and Renminbi) a bank in the principal financial centre of the country of such Specified
Currency (which, if the Specified Currency is Australian dollars or New Zealand dollars, shall be Sydney or
Auckland, respectively) and (in the case of a payment in euro) any bank which processes payments in euro and
(in the case of a payment in Renminbi) a bank in the applicable RMB Settlement Centre(s).
Payments of interest in respect of each Registered Note (whether or not in global form) will be made by a
cheque in the Specified Currency drawn on a Designated Bank and mailed by uninsured mail on the business
day in the city where the specified office of the Registrar is located immediately preceding the relevant due date
to the holder (or the first named of joint holders) of the Registered Note appearing in the Register: (i) where in
global form, at the close of the business day before the relevant due date (business day being for this purpose a
day on which Euroclear and Clearstream, Luxembourg are open for business); and (ii) where in definitive form,
at the close of business on the fifth day (in the case of Renminbi) and at the close of business on the fifteenth
day (in the case of a currency other than Renminbi) (whether or not such fifth day (in the case of Renminbi) or
fifteenth day (in the case of a currency other than Renminbi) is a business day), before the relevant due date (the
Record Date) at his address shown in the Register on the Record Date and at his risk. Upon application of the
holder to the specified office of the Registrar not less than three business days in the city where the specified
office of the Registrar is located before the due date for any payment of interest in respect of a Registered Note,
the payment may be made by transfer on the due date in the manner provided in the preceding paragraph. Any
such application for transfer shall be deemed to relate to all future payments of interest (other than interest due
on redemption) in respect of the Registered Notes which become payable to the holder who has made the initial
application until such time as the Registrar is notified in writing to the contrary by such holder. Payment of the
interest due in respect of each Registered Note on redemption will be made in the same manner as payment of
the nominal amount of such Registered Note.
Holders of Registered Notes will not be entitled to any interest or other payment for any delay in receiving any
amount due in respect of any Registered Note as a result of a cheque posted in accordance with this Condition
arriving after the due date for payment or being lost in the post. No commissions or expenses shall be charged to
such holders by the Registrar in respect of any payments of principal or interest in respect of the Registered
Notes.
None of the Issuer, the Guarantor or the Agents will have any responsibility or liability for any aspect of the
records relating to, or payments made on account of, beneficial ownership interests in the Registered Global
Notes or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests.
6.5
General provisions applicable to payments
The holder of a Global Note shall be the only person entitled to receive payments in respect of Notes
represented by such Global Note and the Issuer's or, as the case may be, the Guarantor's payment obligations
hereunder will be discharged by payment to, or to the order of, the holder of such Global Note in respect of each
amount so paid. Each of the persons shown in the records of Euroclear or Clearstream, Luxembourg as the
beneficial holder of a particular nominal amount of Notes represented by such Global Note must look solely to
Euroclear or Clearstream, Luxembourg, as the case may be, for his share of each payment so made by the Issuer
or, as the case may be, the Guarantor to, or to the order of, the holder of such Global Note.
Notwithstanding the foregoing provisions of this Condition, if any amount of principal and/or interest in respect
of Bearer Notes is payable in U.S. dollars, such U.S. dollar payments of principal and/or interest in respect of
such Notes will be made at the specified office of a Paying Agent in the United States if:
52
6.6
(a)
the Issuer has appointed Paying Agents with specified offices outside the United States with the
reasonable expectation that such Paying Agents would be able to make payment in U.S. dollars at such
specified offices outside the United States of the full amount of principal and interest on the Bearer
Notes in the manner provided above when due;
(b)
payment of the full amount of such principal and interest at all such specified offices outside the United
States is illegal or effectively precluded by exchange controls or other similar restrictions on the full
payment or receipt of principal and interest in U.S. dollars; and
(c)
such payment is then permitted under United States law without involving, in the opinion of the Issuer
and the Guarantor, adverse tax consequences to the Issuer or the Guarantor.
Payment Day
If the date for payment of any amount in respect of any Note or Coupon is not a Payment Day, the holder
thereof shall not be entitled to payment until the next following Payment Day in the relevant place and shall not
be entitled to further interest or other payment in respect of such delay. For these purposes, Payment Day
means any day which (subject to Condition 9) is:
(a)
6.7
a day on which commercial banks and foreign exchange markets settle payments and are open for
general business (including dealing in foreign exchange and foreign currency deposits) in:
(i)
in the case of Notes in definitive form only, the relevant place of presentation;
(ii)
each Additional Financial Centre (other than the TARGET2 System) specified in the
applicable Final Terms; and
(b)
if the TARGET2 System is specified as an Additional Financial Centre in the applicable Final Terms, a
day on which the TARGET2 System is open; and
(c)
either (A) in relation to any sum payable in a Specified Currency other than euro and Renminbi, a day
on which commercial banks and foreign exchange markets settle payments and are open for general
business (including dealing in foreign exchange and foreign currency deposits) in the principal
financial centre of the country of the relevant Specified Currency which if the Specified Currency is
Australian dollars or New Zealand dollars shall be Sydney and Auckland, respectively) or (B) in
relation to any sum payable in euro, a day on which the TARGET2 System is open or (C) in relation to
any sum payable in Renminbi, a day (other than a Saturday, Sunday or public holiday) on which
commercial banks and foreign exchange markets in the applicable RMB Settlement Centre(s) are
generally open for business and settlement of Renminbi payments in the applicable RMB Settlement
Centre(s).
RMB Currency Event
If "RMB Currency Event" is specified as being applicable in the applicable Final Terms and a RMB Currency
Event exists on a date for payment of any amount in respect of any Note or Coupon, the Issuer's obligation to
make a payment in RMB under the terms of the Notes may be replaced by an obligation to pay such amount in
the Relevant Currency specified in the applicable Final Terms converted using the Spot Rate for the relevant
Rate Calculation Date.
Upon the occurrence of a RMB Currency Event, the Issuer shall give irrevocable notice as soon as practicable
and not less than five days prior to the due date for payment to the Noteholders in accordance with Condition 14
stating the occurrence of the RMB Currency Event, giving details thereof and the action proposed to be taken in
relation thereto.
For the purpose of these Conditions:
Governmental Authority means any de facto or de jure government (or any agency or instrumentality thereof),
court, tribunal, administrative or other governmental authority or any other entity (private or public) charged
with the regulation of the financial markets (including the central bank) of the applicable RMB Settlement
Centre(s);
HKMA means the Hong Kong Monetary Authority;
53
Rate Calculation Business Day means a day (other than a Saturday or Sunday) on which commercial banks are
open for general business (including dealings in foreign exchange) in the applicable RMB Settlement Centre(s),
London and the principal financial centre of the country of the Relevant Currency;
Rate Calculation Date means the day which is two Rate Calculation Business Days before the due date of the
relevant payment under the Notes;
Renminbi or RMB means the lawful currency for the time being of the People's Republic of China (the PRC),
which, for these purposes, excludes the Hong Kong Special Administrative Region of the PRC, the Macau
Special Administrative Region of the PRC and Taiwan;
RMB Currency Events means any one of RMB Illiquidity, RMB Non-Transferability and RMB
Inconvertibility;
RMB Illiquidity means the general RMB exchange market in the applicable RMB Settlement Centre(s)
becomes illiquid as a result of which the Issuer cannot obtain sufficient RMB in order to make any payment (in
whole or in part) due under the Notes, as determined by the Issuer in good faith and in a commercially
reasonable manner following consultation with two independent foreign exchange dealers of international repute
active in the RMB exchange market in the applicable RMB Settlement Centre(s);
RMB Inconvertibility means the occurrence of any event that makes it impossible for the Issuer to convert any
amount due in respect of the Notes into RMB in the general RMB exchange market in the applicable RMB
Settlement Centre(s), other than where such impossibility is due solely to the failure of the Issuer to comply with
any law, rule or regulation enacted by any Governmental Authority (unless such law, rule or regulation is
enacted after the Issue Date of the first Tranche of the relevant Series and it is impossible for the Issuer, due to
an event beyond its control, to comply with such law, rule or regulation);
RMB Non-Transferability means the occurrence of any event that makes it impossible for the Issuer to deliver
RMB between accounts inside the applicable RMB Settlement Centre(s) or from an account inside the
applicable RMB Settlement Centre(s) to an account outside the applicable RMB Settlement Centre(s) (including
where the RMB clearing and settlement system for participating banks in the applicable RMB Settlement
Centre(s) is disrupted or suspended), other than where such impossibility is due solely to the failure of the Issuer
to comply with any law, rule or regulation enacted by any Governmental Authority (unless such law, rule or
regulation is enacted after the Issue Date of the first Tranche of the relevant Series and it is impossible for the
Issuer, due to an event beyond its control, to comply with such law, rule or regulation);
RMB Settlement Centre(s) means the financial centre(s) specified as such in the applicable Final Terms in
accordance with applicable laws and regulations. If no RMB Settlement Centre is specified in the applicable
Final Terms, the RMB Settlement Centre shall be deemed to be Hong Kong; and
Spot Rate means the spot RMB/Relevant Currency exchange rate for the purchase of the Relevant Currency
with RMB in the over-the-counter Renminbi exchange market in the applicable RMB Settlement Centre(s) for
settlement in two Rate Calculation Business Days, as determined by the Calculation Agent at or around 11.00
a.m. (local time in the applicable RMB Currency Centre(s)) on the Rate Calculation Date, on a deliverable basis
by reference to the Relevant Spot Rate Screen Page (Deliverable Basis), or if no such rate is available, on a
non-deliverable basis by reference to the Relevant Spot Rate Screen Page (Non-deliverable Basis), each as
specified in the applicable Final Terms. If neither rate is available, the Calculation Agent shall determine the
spot rate taking into consideration all available information which the Calculation Agent deems relevant,
including pricing information obtained from the Renminbi non-deliverable exchange market in the applicable
RMB Settlement Centre(s) or elsewhere and the RMB/Relevant Currency exchange rate in the PRC domestic
foreign exchange market.
6.8
RMB account
Notwithstanding the foregoing, all payments in respect of any Note in Renminbi will be made solely by credit to
a Renminbi account maintained by the payee at a bank in the applicable RMB Settlement Centre(s) in
accordance with applicable laws, rules, regulations and guidelines issued from time to time (including all
applicable laws and regulations with respect to the settlement of Renminbi in the applicable RMB Settlement
Centre(s)).
54
6.9
Interpretation of principal and interest
Any reference in the Conditions to principal in respect of the Notes shall be deemed to include, as applicable:
(a)
any additional amounts which may be payable with respect to principal under Condition 8;
(b)
the Final Redemption Amount of the Notes;
(c)
the Early Redemption Amount of the Notes;
(d)
the Optional Redemption Amount(s) (if any) of the Notes;
(e)
in relation to Zero Coupon Notes, the Amortised Face Amount (as defined in Condition 7.5); and
(f)
any premium and any other amounts (other than interest) which may be payable by the Issuer under or
in respect of the Notes.
Any reference in the Conditions to interest in respect of the Notes shall be deemed to include, as applicable, any
additional amounts which may be payable with respect to interest under Condition 8.
7.
REDEMPTION AND PURCHASE
7.1
Redemption at maturity
Unless previously redeemed or purchased and cancelled as specified below, each Note will be redeemed by the
Issuer at its Final Redemption Amount and in the relevant Specified Currency on the Maturity Date in each case
as specified in the applicable Final Terms.
7.2
Redemption for tax reasons
The Notes may be redeemed at the option of the Issuer in whole, but not in part, at any time (if this Note is not a
Floating Rate Note) or on any Interest Payment Date (if this Note is a Floating Rate Note), on giving not less
than the minimum period nor more than the maximum period of notice specified in the applicable Final Terms
to the Issuing and Principal Paying Agent and, in accordance with Condition 14, the Noteholders (which notice
shall be irrevocable), if:
(a)
on the occasion of the next payment due under the Notes, the Issuer has or will become obliged to pay
additional amounts as provided or referred to in Condition 8 or the Guarantor would be unable for
reasons outside its control to procure payment by the Issuer and in making payment itself would be
required to pay such additional amounts, in each case as a result of any change in, or amendment to, the
laws or regulations of a Tax Jurisdiction (as defined in Condition 8) or any change in the application or
official interpretation of such laws or regulations, which change or amendment becomes effective on or
after the date on which agreement is reached to issue the first Tranche of the Notes; and
(b)
such obligation cannot be avoided by the Issuer or, as the case may be, the Guarantor taking reasonable
measures available to it,
provided that no such notice of redemption shall be given earlier than 90 days prior to the earliest date on which
the Issuer or, as the case may be, the Guarantor would be obliged to pay such additional amounts were a
payment in respect of the Notes then due.
Prior to the publication of any notice of redemption pursuant to this Condition, the Issuer shall deliver to the
Issuing and Principal Paying Agent to make available at its specified office to the Noteholders (i) a certificate
signed by two Directors of the Issuer or, as the case may be, two Directors of the Guarantor stating that the
Issuer is entitled to effect such redemption and setting forth a statement of facts showing that the conditions
precedent to the right of the Issuer so to redeem have occurred, and (ii) an opinion of independent legal advisers
of recognised standing to the effect that the Issuer or, as the case may be, the Guarantor has or will become
obliged to pay such additional amounts as a result of such change or amendment.
Notes redeemed pursuant to this Condition 7.2 will be redeemed at their Early Redemption Amount referred to
in Condition 7.5 below together (if appropriate) with interest accrued to (but excluding) the date of redemption.
55
7.3
Redemption at the option of the Issuer (Issuer Call)
If Issuer Call is specified as being applicable in the applicable Final Terms, the Issuer may, having given:
(a)
not less than the minimum period nor more than the maximum period of notice specified in the
applicable Final Terms to the Noteholders in accordance with Condition 14; and
(b)
not less than the minimum period nor more than the maximum period of the notice referred to in (a)
above, notice to the Issuing and Principal Paying Agent and, in the case of a redemption of Registered
Notes, the Registrar;
(which notices shall be irrevocable and shall specify the date fixed for redemption), redeem all or some only of
the Notes then outstanding on any Optional Redemption Date and at the Optional Redemption Amount(s)
specified in, the applicable Final Terms together, if appropriate, with interest accrued to (but excluding) the
relevant Optional Redemption Date. Any such redemption must be of a nominal amount not less than the
Minimum Redemption Amount and not more than the Maximum Redemption Amount, in each case as may be
specified in the applicable Final Terms. In the case of a partial redemption of Notes, the Notes to be redeemed
(Redeemed Notes) will be selected individually by lot, in the case of Redeemed Notes represented by definitive
Notes, and in accordance with the rules of Euroclear and/or Clearstream, Luxembourg, in the case of Redeemed
Notes represented by a Global Note, not more than 30 days prior to the date fixed for redemption (such date of
selection being hereinafter called the Selection Date). In the case of Redeemed Notes represented by definitive
Notes, a list of the serial numbers of such Redeemed Notes will be published in accordance with Condition 14
not less than 15 days prior to the date fixed for redemption. No exchange of the relevant Global Note will be
permitted during the period from (and including) the Selection Date to (and including) the date fixed for
redemption pursuant to this Condition 7.3 and notice to that effect shall be given by the Issuer to the
Noteholders in accordance with Condition 14 at least five days prior to the Selection Date.
7.4
Redemption at the option of the Noteholders (Investor Put)
If Investor Put is specified as being applicable in the applicable Final Terms, upon the holder of any Note giving
to the Issuer in accordance with Condition 14 not less than the minimum period nor more than the maximum
period of notice specified in the applicable Final Terms the Issuer will, upon the expiry of such notice, redeem
such Note on the Optional Redemption Date and at the Optional Redemption Amount together, if appropriate,
with interest accrued to (but excluding) the Optional Redemption Date. Registered Notes may be redeemed
under this Condition 7.4 in any multiple of their lowest Specified Denomination.
To exercise the right to require redemption of this Note the holder of this Note must, if this Note is in definitive
form and held outside Euroclear and Clearstream, Luxembourg, deliver, at the specified office of any Paying
Agent (in the case of Bearer Notes) or the Registrar (in the case of Registered Notes) at any time during normal
business hours of such Paying Agent or, as the case may be, the Registrar falling within the notice period, a duly
completed and signed notice of exercise in the form (for the time being current) obtainable from any specified
office of any Paying Agent or, as the case may be, the Registrar (a Put Notice) and in which the holder must
specify a bank account to which payment is to be made under this Condition and, in the case of Registered
Notes, the nominal amount thereof to be redeemed and, if less than the full nominal amount of the Registered
Notes so surrendered is to be redeemed, an address to which a new Registered Note in respect of the balance of
such Registered Notes is to be sent subject to and in accordance with Condition 2.2, in each case accompanied
by this Note or evidence satisfactory to the Paying Agent concerned that this Note will, following delivery of the
Put Notice, be held to its order or under its control. If this Note is represented by a Global Note or is in
definitive form and held through Euroclear or Clearstream, Luxembourg, to exercise the right to require
redemption of this Note the holder of this Note must, within the notice period, give notice to the Issuing and
Principal Paying Agent of such exercise in accordance with the standard procedures of Euroclear and
Clearstream, Luxembourg (which may include notice being given on his instruction by Euroclear or
Clearstream, Luxembourg or any common depositary for them to the Issuing and Principal Paying Agent by
electronic means) in a form acceptable to Euroclear and Clearstream, Luxembourg from time to time and, if this
Note is represented by a Global Note, at the same time present or procure the presentation of the relevant Global
Note to the Issuing and Principal Paying Agent for notation accordingly.
Any Put Notice or other notice given in accordance with the standard procedures of Euroclear and Clearstream,
Luxembourg by a holder of any Note pursuant to this Condition 7.4 shall be irrevocable except where, prior to
the due date of redemption, an Event of Default has occurred and is continuing, in which event such holder, at
56
its option, may elect by notice to the Issuer to withdraw the notice given pursuant to this Condition 7.4 and
instead to declare such Note forthwith due and payable pursuant to Condition 10.
7.5
Early Redemption Amounts
For the purpose of Condition 7.2 above and Condition 10, each Note will be redeemed at its Early Redemption
Amount calculated as follows:
(a)
in the case of a Note with a Final Redemption Amount equal to the Issue Price, at the Final
Redemption Amount thereof;
(b)
in the case of a Note (other than a Zero Coupon Note) with a Final Redemption Amount which is or
may be less or greater than the Issue Price or which is payable in a Specified Currency other than that
in which the Note is denominated, at the amount specified in the applicable Final Terms or, if no such
amount or manner is so specified in the applicable Final Terms, at its nominal amount; or
(c)
in the case of a Zero Coupon Note, at an amount (the Amortised Face Amount) calculated in
accordance with the following formula:
Early Redemption Amount = RP x (1 + AY) y where:
7.6
RP
means the Reference Price;
AY
means the Accrual Yield expressed as a decimal; and
y
is the Day Count Fraction specified in the applicable Final Terms which will be either (i)
30/360 (in which case the numerator will be equal to the number of days (calculated on the
basis of a 360-day year consisting of 12 months of 30 days each) from (and including) the
Issue Date of the first Tranche of the Notes to (but excluding) the date fixed for redemption or
(as the case may be) the date upon which such Note becomes due and repayable and the
denominator will be 360) or (ii) Actual/360 (in which case the numerator will be equal to the
actual number of days from (and including) the Issue Date of the first Tranche of the Notes to
(but excluding) the date fixed for redemption or (as the case may be) the date upon which such
Note becomes due and repayable and the denominator will be 360) or (iii) Actual/365 (in
which case the numerator will be equal to the actual number of days from (and including) the
Issue Date of the first Tranche of the Notes to (but excluding) the date fixed for redemption or
(as the case may be) the date upon which such Note becomes due and repayable and the
denominator will be 365).
Purchases
The Issuer, the Guarantor or any Subsidiary of the Guarantor may at any time purchase Notes (provided that, in
the case of definitive Bearer Notes, all unmatured Coupons and Talons appertaining thereto are purchased
therewith) at any price in the open market or otherwise. Such Notes may be held, reissued, resold or, at the
option of the Issuer or the Guarantor, surrendered to any Paying Agent for cancellation.
7.7
Cancellation
All Notes which are redeemed will forthwith be cancelled (together with all unmatured Coupons and Talons
attached thereto or surrendered therewith at the time of redemption). All Notes so cancelled and any Notes
purchased and cancelled pursuant to Condition 7.6 above (together with all unmatured Coupons and Talons
cancelled therewith) shall be forwarded to the Issuing and Principal Paying Agent and cannot be reissued or
resold.
7.8
Late payment on Zero Coupon Notes
If the amount payable in respect of any Zero Coupon Note upon redemption of such Zero Coupon Note pursuant
to Condition 7.1, 7.2, 7.3 or 7.4 above or upon its becoming due and repayable as provided in Condition 10 is
improperly withheld or refused, the amount due and repayable in respect of such Zero Coupon Note shall be the
amount calculated as provided in Condition 7.5(c) above as though the references therein to the date fixed for
the redemption or the date upon which such Zero Coupon Note becomes due and payable were replaced by
references to the date which is the earlier of:
57
8.
(a)
the date on which all amounts due in respect of such Zero Coupon Note have been paid; and
(b)
five days after the date on which the full amount of the moneys payable in respect of such Zero Coupon
Notes has been received by the Issuing and Principal Paying Agent and notice to that effect has been
given to the Noteholders in accordance with Condition 14.
TAXATION
All payments of principal and interest in respect of the Notes and Coupons by or on behalf of the Issuer or the
Guarantor will be made without withholding, retention or deduction for or on account of any present or future
taxes or duties of whatever nature (Taxes) imposed or levied by or on behalf of any Tax Jurisdiction unless such
withholding, retention or deduction is required by law. In such event, the Issuer or, as the case may be, the
Guarantor will pay such additional amounts as shall be necessary in order that the net amounts received by the
holders of the Notes or Coupons after such withholding, retention or deduction shall equal the respective
amounts of principal and interest which would otherwise have been receivable in respect of the Notes or
Coupons, as the case may be, in the absence of such withholding, retention or deduction; except that no such
additional amounts shall be payable with respect to any Note or Coupon:
(a)
the holder of which is liable for such Taxes in respect of such Note or Coupon by reason of his having
some connection with a Tax Jurisdiction other than the mere holding of such Note or Coupon; or
(b)
presented for payment more than 30 days after the Relevant Date (as defined below) except to the
extent that the holder thereof would have been entitled to an additional amount on presenting the same
for payment on such thirtieth day assuming that day to have been a Payment Day (as defined in
Condition 6.6).
As used herein:
(i)
Tax Jurisdiction means the United Arab Emirates (including the Dubai International
Financial Centre) or any political subdivision or any authority thereof or therein having power
to tax (in the case of payments by the Issuer), or Kuwait or any political subdivision or any
authority thereof or therein having power to tax (in the case of payments by the Guarantor) or
any other jurisdiction or any political subdivision or any authority thereof or therein having
power to tax to which payments made by the Issuer or the Guarantor of principal or interest
on, or in respect of, the Notes or Coupons become generally subject to tax; and
(ii)
the Relevant Date means the date on which such payment first becomes due, except that, if
the full amount of the moneys payable has not been duly received by the Issuing and Principal
Paying Agent on or prior to such due date, it means the date on which, the full amount of such
moneys having been so received, notice to that effect is duly given to the Noteholders in
accordance with Condition 14.
Notwithstanding any other provision of these Conditions, in no event will the Issuer or Guarantor be required to
pay any additional amounts in respect of the Notes for, or on account of, any withholding or deduction required
pursuant to an agreement described in Section 1471(b) of the Code or otherwise imposed pursuant to Sections
1471 through 1474 of the Code, any regulations or agreements thereunder, or any official interpretations thereof.
9.
PRESCRIPTION
The Notes and Coupons will become void unless claims in respect of principal and/or interest are made within a
period of 10 years (in the case of principal) and five years (in the case of interest) after the Relevant Date (as
defined in Condition 8) therefor.
There shall not be included in any Coupon sheet issued on exchange of a Talon any Coupon the claim for
payment in respect of which would be void pursuant to this Condition or Condition 6.2 or any Talon which
would be void pursuant to Condition 6.2.
10.
EVENTS OF DEFAULT
If any one or more of the following events (each an Event of Default) shall occur and be continuing:
58
(a)
default is made in the payment of any principal or interest due in respect of the Notes or any of them
and the default continues for a period of seven days in the case of principal and 14 days in the case of
interest; or
(b)
the Issuer fails to perform or observe any of its other obligations under the Conditions or the Guarantor
fails to perform or observe any of its other obligations under the Deed of Guarantee and (except in any
case where the failure is incapable of remedy when no such continuation or notice as is hereinafter
mentioned will be required) the failure continues for the period of 30 days next following the service
by a Noteholder on the Issuer or the Guarantor (as the case may be) of written notice requiring the
same to be remedied; or
(c)
(i) any Indebtedness of the Issuer, the Guarantor or any of its Subsidiaries is not paid when due or (as
the case may be) within any originally applicable grace period, (ii) any such Indebtedness becomes due
and payable prior to its stated maturity by reason of default (however described) or (iii) the Issuer, the
Guarantor or any of its Subsidiaries fails to pay when due or (as the case may be) within any originally
applicable grace period any amount payable by it under any Guarantee of any Indebtedness, provided
that each such event shall not constitute an Event of Default unless the aggregate amount of all such
Indebtedness, either alone or when aggregated with all other Indebtedness in respect of which such an
event shall have occurred and be continuing, shall be more than U.S.$15,000,000 (or its equivalent in
any other currency or currencies); or
(d)
one or more judgments or orders for the payment of any sum in excess of U.S.$15,000,000 is rendered
against the Issuer, the Guarantor or any of its Material Subsidiaries and continues unsatisfied, unstayed
and unappealed (or, if appealed, the appeal is unsuccessful and thereafter the judgment continues
unsatisfied and unstayed for a period of 30 days) for a period of 30 days after the date thereof; or
(e)
any order is made by any competent court or resolution passed for the winding up or dissolution of the
Issuer, the Guarantor or any Material Subsidiary; or
(f)
the Issuer, the Guarantor or any Material Subsidiary ceases or threatens to cease to carry on the whole
or substantially all of its business, or the Issuer, the Guarantor or any Material Subsidiary stops or
threatens to stop payment of, or is unable to, or admits its inability to, pay, its debts (or any class of its
debts) as they fall due, or is deemed unable to pay its debts pursuant to or for the purposes of any
applicable law, or is adjudicated or found bankrupt or insolvent; or
(g)
(i) court or other formal proceedings are initiated against the Issuer, the Guarantor or any Material
Subsidiary under any applicable liquidation, insolvency, composition, reorganisation or other similar
laws, or an application is made (or documents filed with a court) for the appointment of an
administrative or other receiver, manager, administrator or other similar official, or an administrative or
other receiver, manager, administrator or other similar official is appointed, in relation to the Issuer, the
Guarantor or any Material Subsidiary or, as the case may be, in relation to the whole or substantially all
of the undertaking or assets of any of them, or an encumbrancer takes possession of the whole or
substantially all of the undertaking or assets of any of them, or a distress, execution, attachment,
sequestration or other process is levied, enforced upon, sued out or put in force against the whole or
substantially all of the undertaking or assets of any of them and (ii) in any case (other than the
appointment of an administrator) is not discharged within 30 days; or
(h)
the Issuer, the Guarantor or any Material Subsidiary initiates or consents to corporate action or other
steps or judicial proceedings relating to itself under any applicable liquidation, insolvency,
composition, nationalisation, dissolution, administration, reorganisation (whether by way of voluntary
arrangement, scheme of arrangement or otherwise) or other similar laws (including the obtaining of a
moratorium) or takes any corporate action or other steps for the appointment of a liquidator, receiver,
administrator, administrative receiver, conservator, custodian, trustee or similar officer of it or of
substantially all or all of its revenues and assets or makes a conveyance or assignment for the benefit
of, or enters into any composition or other arrangement with, its creditors generally (or any class of its
creditors) or any meeting is convened to consider a proposal for an arrangement or composition with its
creditors generally (or any class of its creditors); or
(i)
any event occurs which under the laws of the Dubai International Financial Centre, the United Arab
Emirates or any Emirate therein, Kuwait or any other jurisdiction has an analogous effect to any of the
events referred to in paragraphs (e) to (h) above; or
59
(j)
if the Issuer ceases to be a subsidiary wholly owned and controlled, directly or indirectly, by the
Guarantor; or
(k)
at any time it is or becomes unlawful for the Issuer to perform or comply with any or all of its
obligations under or in respect of the Notes or it is or becomes unlawful for the Guarantor to perform or
comply with any of its obligations under or in respect of the Deed of Guarantee or any of the
obligations of the Issuer or the Guarantor thereunder are not or cease to be legal, valid, binding or
enforceable; or
(l)
by or under the authority of any government, (i) the management of the Issuer or the Guarantor or any
of its Material Subsidiaries is wholly or substantially displaced or the authority of the Issuer or the
Guarantor or any of its Material Subsidiaries in the conduct of its business is wholly or substantially
curtailed or (ii) all or a majority of the issued share capital of the Issuer or the Guarantor or any of its
Material Subsidiaries or the whole or substantially all of its revenues or assets are seized, nationalised,
expropriated or compulsorily acquired;
then any holder of a Note may, by written notice to the Issuer or the Guarantor at the specified office of the
Issuing and Principal Paying Agent, effective upon the date of receipt thereof by the Issuing and Principal
Paying Agent, declare any Note held by it to be forthwith due and payable whereupon the same shall become
forthwith due and payable at its Early Redemption Amount, together with accrued interest (if any) to the date of
repayment, without presentment, demand, protest or other notice of any kind.
For the purposes of these Conditions:
(i)
Auditors means a firm of independent auditors of good repute appointed by the Guarantor.
(ii)
Guarantee means, in relation to any Indebtedness of any Person, any obligation of another Person to
pay such Indebtedness including (without limitation):
(iii)
(iv)
(a)
any obligation to purchase such Indebtedness;
(b)
any obligation to lend money, to purchase or subscribe shares or other securities or to
purchase assets or services in order to provide funds for the payment of such Indebtedness;
(c)
any indemnity against the consequences of a default in the payment of such Indebtedness; and
(d)
any other agreement to be responsible for such Indebtedness;
Indebtedness means any indebtedness of any Person for money borrowed or raised including (without
limitation) deposits and any indebtedness for or in respect of:
(a)
amounts raised by acceptance under any acceptance credit facility;
(b)
amounts raised under any note purchase facility;
(c)
the amount of any liability in respect of leases or hire purchase contracts which would, in
accordance with applicable law and generally accepted accounting principles, be treated as
finance or capital leases;
(d)
the amount of any liability in respect of any purchase price for assets or services the payment
of which is deferred for a period in excess of 60 days; and
(e)
amounts raised under any other transaction (including, without limitation, any forward sale or
purchase agreement) having the commercial effect of a borrowing;
a Material Subsidiary is a Subsidiary of the Guarantor the gross assets of which exceed 7.5 per cent.
of the consolidated gross assets of the Guarantor and its Subsidiaries, taken as a whole, or the revenues
of which exceed 7.5 per cent. of the consolidated revenues of the Guarantor and its Subsidiaries, taken
as a whole, or to which is transferred all or substantially all of the assets and undertakings of a
Subsidiary which immediately prior to such transfer is a Material Subsidiary and, for these purposes:
(A)
the gross assets and the revenues of each Subsidiary which is, or might be, a Material
Subsidiary shall be determined by reference to its then most recently audited annual financial
statements (consolidated if the same are prepared) or, if none, its then most recent annual
management accounts; and
60
(B)
the consolidated gross assets and the consolidated revenues of the Guarantor and its
Subsidiaries, taken as a whole, shall be determined by reference to the Guarantor's then most
recently audited consolidated annual financial statements;
in each case adjusted, as the Auditors may consider appropriate, to take account of any changes in
circumstances since the date as of which such financial statements (or management accounts) were
prepared. A report of the Auditors that in their opinion a Subsidiary of the Guarantor is or is not or was
or was not at any particular time or through any particular period a Material Subsidiary shall (in the
absence of manifest or proven error) be conclusive and binding on the parties; and
(v)
11.
Person means any individual, company, corporation, firm, partnership, joint venture, association,
organisation, state or agency of a state or other entity, whether or not having separate legal personality;
REPLACEMENT OF NOTES, COUPONS AND TALONS
Should any Note, Coupon or Talon be lost, stolen, mutilated, defaced or destroyed, it may be replaced at the
specified office of the Issuing and Principal Paying Agent (in the case of Bearer Notes or Coupons) or the
Registrar (in the case of Registered Notes) upon payment by the claimant of such costs and expenses as may be
incurred in connection therewith and on such terms as to evidence and indemnity as the Issuer may reasonably
require. Mutilated or defaced Notes, Coupons or Talons must be surrendered before replacements will be issued.
12.
AGENTS
The names of the initial Agents and their initial specified offices are set out below. If any additional Paying
Agents are appointed in connection with any Series, the names of such Paying Agents will be specified in Part B
of the applicable Final Terms.
The Issuer is entitled to vary or terminate the appointment of any Agent and/or appoint additional or other
Agents and/or approve any change in the specified office through which any Agent acts, provided that:
(a)
there will at all times be an Issuing and Principal Paying Agent and, in the case of Registered Notes, a
Registrar and a Transfer Agent; and
(b)
so long as the Notes are listed on any stock exchange or admitted to trading by any other relevant
authority, there will at all times be a Paying Agent (in the case of Bearer Notes) and a Transfer Agent
(in the case of Registered Notes) with a specified office in such place as may be required by the rules
and regulations of the relevant stock exchange or other relevant authority.
In addition, the Issuer shall forthwith appoint a Paying Agent having a specified office in New York City in the
circumstances described in Condition 6.5. Notice of any variation, termination, appointment or change in Paying
Agents will be given to the Noteholders promptly by the Issuer in accordance with Condition 14.
In acting under the Agency Agreement, the Agents act solely as agents of the Issuer and the Guarantor and do
not assume any obligation to, or relationship of agency or trust with, any Noteholders or Couponholders. The
Agency Agreement contains provisions permitting any entity into which any Agent is merged or converted or
with which it is consolidated or to which it transfers all or substantially all of its assets to become the successor
paying agent.
13.
EXCHANGE OF TALONS
On and after the Interest Payment Date on which the final Coupon comprised in any Coupon sheet matures, the
Talon (if any) forming part of such Coupon sheet may be surrendered at the specified office of the Issuing and
Principal Paying Agent or any other Paying Agent in exchange for a further Coupon sheet including (if such
further Coupon sheet does not include Coupons to (and including) the final date for the payment of interest due
in respect of the Note to which it appertains) a further Talon, subject to the provisions of Condition 9.
61
14.
NOTICES
All notices regarding the Bearer Notes will be deemed to be validly given if published in a leading English
language daily newspaper of general circulation in the Republic of Ireland (which is expected to be the Irish
Times) or published on the website of the Irish Stock Exchange plc (www.ise.ie) or, if in either case such
publication is not practicable, in a leading English Language newspaper having general circulation in Europe.
The Issuer shall also ensure that notices are duly published in a manner which complies with the rules of any
stock exchange or other relevant authority on which the Bearer Notes are for the time being listed or by which
they have been admitted to trading. Any such notice will be deemed to have been given on the date of the first
publication or, where required to be published in more than one newspaper, on the date of the first publication in
all required newspapers.
All notices regarding the Registered Notes will be deemed to be validly given if sent by first class mail or (if
posted to an address overseas) by airmail to the holders (or the first named of joint holders) at their respective
addresses recorded in the Register and will be deemed to have been given on the fourth day after mailing and, in
addition, for so long as any Registered Notes are listed on a stock exchange or admitted to trading by another
relevant authority and the rules of that stock exchange or relevant authority so require, such notice will be
published in a daily newspaper of general circulation in the place or places required by those rules.
Until such time as any definitive Notes are issued, there may, so long as any Global Notes representing the
Notes are held in their entirety on behalf of Euroclear and/or Clearstream, Luxembourg, be substituted for such
publication in such newspaper(s) the delivery of the relevant notice to Euroclear and/or Clearstream,
Luxembourg for communication by them to the holders of the Notes and, in addition, for so long as any Notes
are listed on a stock exchange or are admitted to trading by another relevant authority and the rules of that stock
exchange or relevant authority so require, such notice will be published in a manner which complies with those
rules. Any such notice shall be deemed to have been given to the holders of the Notes on the second day after
the day on which the said notice was given to Euroclear and/or Clearstream, Luxembourg.
Notices to be given by any Noteholder shall be in writing and given by lodging the same, together (in the case of
any Note in definitive form) with the relative Note or Notes, with the Issuing and Principal Paying Agent (in the
case of Bearer Notes) or the Registrar (in the case of Registered Notes). Whilst any of the Notes are represented
by a Global Note, such notice may be given by any holder of a Note to the Issuing and Principal Paying Agent
or Registrar through Euroclear and/or Clearstream, Luxembourg, as the case may be, in such manner as the
Issuing and Principal Paying Agent, the Registrar and Euroclear and/or Clearstream, Luxembourg, as the case
may be, may approve for this purpose.
15.
CURRENCY INDEMNITY
If, under any applicable law and whether pursuant to a judgment being made or registered against the Issuer
and/or the Guarantor or in the liquidation, insolvency or any similar process of the Issuer and/or the Guarantor
or for any other reason, any payment under or in connection with the Notes or the Coupons is made or falls to be
satisfied in a currency (the other currency) other than the Specified Currency, then, to the extent that the
payment (when converted into the Specified Currency at the rate of exchange on the date of payment or, if it is
not practicable for the relevant recipient to purchase the Specified Currency with the other currency on the date
of payment, at the rate of exchange as soon thereafter as it is practicable for it to do so or, in the case of a
liquidation, insolvency or analogous process, at the rate of exchange on the latest date permitted by applicable
law for the determination of liabilities in such liquidation, insolvency or analogous process) actually received by
the relevant recipient falls short of the amount due under these Conditions, the Issuer and the Guarantor jointly
and severally undertake that they shall, as a separate and independent obligation, indemnify and hold harmless
the recipient against the amount of the shortfall. For the purpose of this Condition, rate of exchange means the
rate at which the relevant recipient is able on the London foreign exchange market on the relevant date to
purchase the Specified Currency with the other currency and shall take into account any premium and other
reasonable costs of exchange.
16.
MEETINGS OF NOTEHOLDERS, MODIFICATION AND WAIVER
The Agency Agreement contains provisions for convening meetings of the Noteholders to consider any matter
affecting their interests, including the sanctioning by Extraordinary Resolution of a modification of the Notes,
the Coupons or any of the provisions of the Agency Agreement or the Deed of Guarantee. Such a meeting may
be convened by the Issuer or the Guarantor and shall be convened by the Issuer if required in writing by
62
Noteholders holding not less than 10 per cent. in nominal amount of the Notes for the time being outstanding.
The quorum at any such meeting for passing an Extraordinary Resolution is one or more persons present and
holding or representing not less than 50 per cent. in nominal amount of the Notes for the time being outstanding,
or at any adjourned meeting one or more persons present whatever the nominal amount of the Notes so held or
represented, except that at any meeting the business of which includes the modification of certain provisions of
the Notes or the Agency Agreement (including modifying the date of maturity of the Notes or any date for
payment of interest thereon, reducing or cancelling the amount of principal or the rate of interest payable in
respect of the Notes or altering the currency of payment of the Notes), the quorum shall be one or more persons
present and holding or representing not less than two thirds in nominal amount of the Notes for the time being
outstanding, or at any adjourned such meeting one or more persons present and holding or representing not less
than one-third in nominal amount of the Notes for the time being outstanding. An Extraordinary Resolution
duly passed at any meeting of the Noteholders shall be binding on all the Noteholders, whether or not they are
present at the meeting at which such resolution was passed and whether or not voting, and on all
Couponholders.
The Issuing and Principal Paying Agent, the Issuer and the Guarantor may agree, without the consent of the
Noteholders or Couponholders, to:
(a)
any modification (except such modifications in respect of which an increased quorum is required as
mentioned above) of the Notes, the Coupons or the Agency Agreement which is not, as determined
solely by the Issuer and the Guarantor, prejudicial to the interests of the Noteholders and the
Couponholders; or
(b)
any modification of the Notes, the Coupons or the Agency Agreement which is of a formal, minor or
technical nature or is made to correct a manifest or proven error or to comply with mandatory
provisions of the law.
Any such modification shall be binding on the Noteholders and the Couponholders and any such modification
shall be notified to the Noteholders in accordance with Condition 14 as soon as practicable thereafter.
The Agency Agreement provides that (i) a resolution passed at a meeting duly convened and held in accordance
with the Agency Agreement by a majority consisting of not less than 75 per cent. of the votes cast on such
resolution, (ii) a resolution in writing signed by or on behalf of the holders of not less than 75 per cent. in
nominal amount of the Notes for the time being outstanding or (iii) consent given by way of electronic consent
through the relevant clearing system(s) (in a form satisfactory to the Issuing and Principal Paying Agent) by or
on behalf of the holders of not less than 75 per cent. in nominal amount of the Notes for the time being
outstanding, shall, in each case, be effective as an Extraordinary Resolution of the Noteholders. An
Extraordinary Resolution passed by the Noteholders will be binding on all the Noteholders, whether or not they
are present at any meeting and whether or not they voted on the resolution, and on all Receiptholders and
Couponholders. Such a resolution in writing may be contained in one document or several documents in the
same form, each signed by or on behalf of one or more Noteholders.
17.
FURTHER ISSUES
The Issuer shall be at liberty from time to time without the consent of the Noteholders or the Couponholders to
create and issue further notes having terms and conditions the same as the Notes or the same in all respects save
for the amount and date of the first payment of interest thereon and the date from which interest starts to accrue
and so that the same shall be consolidated and form a single Series with the outstanding Notes.
18.
CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999
No person shall have any right to enforce any term or condition of this Note under the Contracts (Rights of
Third Parties) Act 1999, but this does not affect any right or remedy of any person which exists or is available
apart from that Act.
63
19.
GOVERNING LAW AND SUBMISSION TO JURISDICTION
19.1
Governing law
The Agency Agreement, the Deed of Guarantee, the Deed of Covenant, these Conditions (including the
remaining provisions of this Condition 19), the Notes, the Coupons and any non-contractual obligations arising
out of or in connection with them are governed by, and shall be construed in accordance with, English law.
19.2
Arbitration
Subject to Condition 19.3, any dispute, claim, difference or controversy arising out of, relating to or having any
connection with the Notes, the Coupons and/or the Talons, these Conditions, the Agency Agreement, the Deed
of Covenant or the Deed of Guarantee (including any dispute as to their existence, validity, interpretation,
performance, breach or termination or the consequences of the nullity of any of them and any dispute relating to
any non-contractual obligations arising out of or in connection with them) (a Dispute) shall be referred to and
finally resolved by arbitration in accordance with the Arbitration Rules of the London Court of International
Arbitration (the LCIA) (the Rules), which Rules (as amended from time to time) are incorporated by reference
into this Condition 19.2. For these purposes:
19.3
(a)
the seat of arbitration shall be London, England;
(b)
there shall be three arbitrators each of whom shall be disinterested in the arbitration, shall have no
connection with any party to the Dispute and shall be an attorney experienced in international securities
transactions. The parties to the Dispute shall each nominate one arbitrator and both arbitrators in turn
shall appoint a further arbitrator who shall be the chairman of the tribunal. In cases where there are
multiple claimants and/or multiple respondents, the class of claimants jointly, and the class of
respondents jointly shall each nominate one arbitrator. If one party or both fails to nominate an
arbitrator within the time limits specified by the Rules, such arbitrator(s) shall be appointed by the
LCIA. If the party-nominated arbitrators fail to nominate the third arbitrator within 15 days of the
appointment of the second arbitrator, such arbitrator shall be appointed by the LCIA; and
(c)
the language of the arbitration shall be English.
Option to litigate
Notwithstanding Condition 19.2 above, any Noteholder or Couponholder may, in the alternative, and at its sole
discretion, by notice in writing to the Issuer and the Guarantor:
(a)
within 28 days of service of a Request for Arbitration (as defined in the Rules); or
(b)
in the event no arbitration has commenced,
require that a Dispute be heard by a court of law (a Notice to Litigate). If a Notice to Litigate is given, the
Dispute to which such notice refers shall be determined in accordance with Condition 19.5 and, subject as
provided below, any arbitration commenced under Condition 19.2 in respect of that Dispute will be terminated.
Each party to the terminated arbitration will bear its own costs in relation thereto.
19.4
Termination of Arbitral Proceedings
If a Notice to Litigate is given after service of any Request for Arbitration in respect of any Dispute, the relevant
Noteholder(s) or Couponholder(s) must also promptly give notice to the LCIA Court and any Tribunal (each as
defined in the Rules) already appointed in relation to the Dispute that such Dispute will be settled by the courts.
Upon receipt of such notice by the LCIA Court, the arbitration and any appointment of any arbitrator in relation
to such Dispute will immediately terminate. Any such arbitrator will be deemed to be functus officio. The
termination is without prejudice to:
(a)
the validity of any act done or order made by that arbitrator or by the court in support of that arbitration
before his appointment is terminated;
(b)
his entitlement to be paid his proper fees and disbursements; and
(c)
the date when any claim or defence was raised for the purpose of applying any limitation bar or any
similar rule or provision.
64
19.5
Provisions relating to Judicial Proceedings
In the event that a notice pursuant to Condition 19.3 is issued, the following provisions shall apply:
19.6
(a)
subject to paragraph (c) below, the courts of England shall have exclusive jurisdiction to settle any
Dispute and each of the Issuer and the Guarantor irrevocably submits to the exclusive jurisdiction of
such courts;
(b)
each of the Issuer and the Guarantor has waived any objection to the courts of England on the grounds
that they are an inconvenient or inappropriate forum to settle any Dispute and will not argue to the
contrary; and
(c)
this Condition 19.5 is for the benefit of the Noteholders and the Couponholders only. As a result, and
notwithstanding paragraphs (a) and (b) above, the Noteholders and Couponholders may take
proceedings relating to a Dispute (Proceedings) in any other courts with jurisdiction. To the extent
allowed by law, any Noteholders or Couponholder may take concurrent Proceedings in any number of
jurisdictions.
Appointment of Process Agent
Each of the Issuer and the Guarantor irrevocably appoints Maples and Calder at its registered office at 11th
Floor, 200 Aldersgate Street, London EC1A 4HD, United Kingdom as its authorised agent for service of process
in England. If for any reason such agent shall be unable or unwilling to act as agent for service of process, the
Issuer and the Guarantor shall forthwith appoint a new agent for service of process in England and shall notify
the Noteholders and Couponholders of such appointment. The Issuer and the Guarantor will procure that, so
long as any of the Notes remains outstanding, a person with an office in London shall be appointed to accept
service. The Issuer and the Guarantor each agree that failure by a process agent to notify it of any process will
not invalidate service. Nothing in this Condition 19 shall affect the right to serve process in any other manner
permitted by law.
19.7
Waiver of immunity
To the extent that the Issuer or the Guarantor may in any jurisdiction claim for itself or its assets or revenues
immunity from suit, execution, attachment (whether in aid of execution, before judgment or otherwise) or other
legal process and to the extent that such immunity (whether or not claimed) may be attributed in any such
jurisdiction to the Issuer or the Guarantor or its assets or revenues, each of the Issuer and the Guarantor agrees
not to claim and irrevocably and unconditionally waives such immunity to the fullest extent permitted by the
laws or such jurisdiction. Further, each of the Issuer and the Guarantor irrevocably and unconditionally consents
to the giving of any relief or the issue of any legal proceedings, including, without limitation, jurisdiction,
enforcement, prejudgment proceedings and injunctions in connection with any Proceedings or Disputes.
19.8
Other documents
Each of the Issuer and the Guarantor, where applicable, has in the Agency Agreement, the Deed of Guarantee
and the Deed of Covenant submitted to the jurisdiction of the English courts and appointed an agent in England
for service of process, in terms substantially similar to those set out above.
20.
CORPORATE OBLIGATIONS
Each Noteholder acknowledges and agrees that notwithstanding any other provision contained herein, the
obligations of the Issuer under the Conditions and the Notes are corporate or limited liability obligations of the
Issuer and, no Noteholder shall have any recourse against any of the directors, officers, employees or corporate
services providers of the Issuer (the Limited Parties) (nor shall any of the Limited Parties be personally liable
for any claims, losses, damages, liabilities, indemnities, representations or other obligations whatsoever of the
Issuer), under or in connection with the Notes or the Conditions, save in the case of the wilful default or actual
fraud of such Limited Party. Reference herein to wilful default or actual fraud means a finding to such effect by
a court of competent jurisdiction in relation to the conduct of the relevant Limited Party.
65
USE OF PROCEEDS
The net proceeds from each issue of Notes will be lent by the Issuer to the Guarantor and will be applied by the
Guarantor for its general corporate purposes.
66
DESCRIPTION OF THE ISSUER
General
The Issuer was incorporated in the Dubai International Financial Centre on 3 November 2015 as a special purpose
company under the Companies Law, DIFC Law No. 3 of 2006 and the Special Purpose Company Regulations and with
registered number 1995.
Registered office
The Issuer's registered office is c/o Maples Fund Services (Middle East) Limited, Office 616, 6th Floor, Liberty House,
Dubai International Financial Centre, P.O. Box 506734, Dubai, United Arab Emirates, and its telephone number is +971
4511 4200.
Business of the Issuer
The primary purpose of the Issuer is to issue the Notes and to undertake any ancillary activities. The Issuer is a newly
formed DIFC entity and, as at the date of the Base Prospectus, has not commenced business and does not have any
substantial assets or liabilities.
Administration
Maples Fund Services (Middle East) Limited acts as the corporate service provider of the Issuer (in such capacity, the
Corporate Service Provider). The office of the Corporate Service Provider serves as the general business office of the
Issuer. Through the office, and pursuant to the terms of a corporate services agreement dated 8 February 2016 entered
into between the Issuer and the Corporate Service Provider (the Corporate Services Agreement), the Corporate Service
Provider has agreed to perform in the United Arab Emirates and/or such other jurisdiction as may be agreed by the
parties from time to time various management functions on behalf of the Issuer and the provision of certain clerical,
administrative and other services until termination of the Corporate Services Agreement. The Issuer and the Corporate
Service Provider have also entered into a registered office agreement (the Registered Office Agreement) for the
provision of registered office facilities to the Issuer. In consideration of the foregoing, the Corporate Service Provider
will receive various fees payable by the Issuer at rates agreed upon from time to time, plus expenses.
The terms of the Corporate Services Agreement and Registered Office Agreement provide that either the Issuer or the
Corporate Service Provider may terminate such agreements upon the occurrence of certain stated events, including any
breach by the other party of its obligations under such agreements. In addition, the Corporate Services Agreement and the
Registered Office Agreement provide that either party shall be entitled to terminate such agreements by giving at least
one month's notice in writing to the other party with a copy to the DIFC Registrar of Companies. Furthermore, the
Corporate Service Provider has the right to terminate such agreements in the event that there is a change in the
shareholding of the Issuer or the Issuer has breached, or is unable to satisfy, any of its obligations under the Notes or the
Agency Agreement.
The Corporate Service Provider will be subject to the overview of the Issuer's Board of Directors.
The Corporate Service Provider's principal office is Office 616, 6th Floor, Liberty House, Dubai International Financial
Centre, PO Box 506734, Dubai, United Arab Emirates.
The directors of the Issuer are employees and/or officers of the Corporate Service Provider. The Issuer has no employees
and is not expected to have any employees in the future.
Directors
The directors of the Issuer are:
Name
Principal Occupation
Aaron Bennett
Vice President of Maples Fund Services (Middle East)
Limited
Andrew Millar
Regional Head of Fiduciary, Middle East, Maples Fund
Services (Middle East) Limited
No director of the Issuer has any actual or potential conflicts of interest between the director's private interests and the
director's duties to the Issuer.
67
The directors of the Issuer do not hold any direct, indirect, beneficial or economic interest in any of the shares of the
Issuer.
As a matter of Dubai International Financial Centre law, each director of the Issuer is under a duty to act honestly and in
good faith with a view to the best interests of the Issuer, regardless of any other interests the director may have.
The business address of the directors of the Issuer is c/o Maples Fund Services (Middle East) Limited, Office 616, 6th
Floor, Liberty House, Dubai International Financial Centre, PO Box 506734, Dubai, United Arab Emirates.
Secretary
Maples Fund Services (Middle East) Limited – see address above.
Share capital
The Issuer has an authorised share capital of U.S.$100 consisting of 100 shares of U.S.$1 nominal value each, of which
all 100 shares have been issued and fully paid up as at the date of this Base Prospectus. The Issuer is a wholly-owned
subsidiary of the Guarantor.
The rights of the Guarantor as the shareholder of the Issuer are contained in the articles of association of the Issuer and
the Issuer will be managed in its capacity in accordance with those articles the Corporate Services Agreement and the
provisions of DIFC law.
68
SELECTED FINANCIAL INFORMATION
The selected financial information below has been extracted from, and should be read in conjunction with, and is
qualified in its entirety by reference to, the Group's unaudited interim condensed consolidated financial information and
the notes thereto as at and for the three months ended 31 March 2016 and the consolidated financial statements and the
notes thereto as at and for the years ended 31 December 2015 and 31 December 2014, which have each been
incorporated by reference in this Base Prospectus.
Consolidated Statement of Financial Position
The following table shows the Group's consolidated statement of financial position data for the years ended 31 December
2015, 31 December 2014 and 31 December 2013, as reported.
2015
(KD 000's)
As at 31 December
2014
(KD 000's)
2013
(KD 000's)
ASSETS
Cash and cash equivalents ..............................................
Treasury bills and bonds with CBK and others ..............
Due from banks and other financial institutions .............
Loans and advances to customers ...................................
Investment securities ......................................................
Other assets .....................................................................
Property and equipment ..................................................
Intangible assets ..............................................................
Total Assets ...................................................................
903,409
471,800
574,870
4,011,645
570,125
165,533
81,163
46,160
6,824,705
1,040,563
629,819
689,819
4,386,466
484,942
259,495
93,566
166,754
7,751,424
1,004,290
583,647
700,083
3,954,848
421,402
238,138
81,378
170,965
7,154,751
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Due to banks ...................................................................
Due to other financial institutions ...................................
Deposits from customers ................................................
Other borrowed funds .....................................................
Other liabilities ...............................................................
Total Liabilities .............................................................
886,102
816,841
3,874,344
218,003
193,092
5,988,382
801,178
825,250
4,708,331
226,644
234,134
6,795,537
568,561
880,492
4,640,084
227,597
218,190
6,534,924
EQUITY
Share capital ...................................................................
Share premium ................................................................
Treasury shares ...............................................................
Statutory reserve .............................................................
Voluntary reserve............................................................
Treasury shares reserve ...................................................
Investment revaluation reserve .......................................
Share-based compensation reserve .................................
Foreign currency translation reserve ...............................
Other reserves .................................................................
Retained earnings............................................................
Total equity attributable to the equity holders of the
Bank ................................................................................
Perpetual Tier 1 capital securities ...................................
Non-controlling interests ................................................
Total Equity ...................................................................
Total Liabilities and Equity ........................................
204,936
210,559
(12,582)
67,859
68,237
45,082
(2,292)
564
(61,557)
(7,112)
122,981
636,675
144,025
55,623
836,323
6,824,705
69
195,177
210,559
(9,575)
59,916
60,294
45,082
4,912
564
(19,043)
554
112,401
660,841
144,025
151,021
955,887
7,751,424
162,222
129,559
(37,683)
53,480
53,858
36,554
7,047
564
(17,372)
554
86,675
475,458
144,369
619,827
7,154,751
Consolidated Income Statement – Restated
The following table shows the Group's consolidated income statement information for the years ended 31 December
2015 as reported and, 31 December 2014 and 31 December 2013, which has been restated as indicated below. In the case
of consolidated income statement information for the year ended 31 December 2013, this data has been derived from the
table under the heading "Consolidated Income Statement" in the section titled "Presentation of Financial Information"
and has neither been audited nor reviewed by any auditor.
2015
(KD 000's)
31 December
2014
(KD 000's)
(Restated)*
Interest income................................................................
Interest expense ..............................................................
Net interest income .......................................................
Fee and commission income ...........................................
Fee and commission expense ..........................................
Net fee and commission income ...................................
Net gain from foreign currencies ....................................
Net investment income ...................................................
Dividend income .............................................................
Other income ..................................................................
Operating income ..........................................................
Staff expenses .................................................................
Other expenses ................................................................
Operating profit before provision ...............................
Provision for impairment of loans and
advances..........................................................................
Provision for impairment of investment securities .........
Profit for the year from continuing operations before
taxation and board of directors' remuneration ..........
Taxation ..........................................................................
Board of directors' remuneration .....................................
Profit for the year from continuing operations ...........
Profit after tax for the year from discontinued
operations .......................................................................
263,612
(107,003)
156,609
43,049
(6,113)
36,936
26,246
10,740
3,109
14,457
248,097
(53,720)
(61,583)
132,794
250,653
(102,736)
147,917
48,636
(5,195)
43,441
6,029
15,912
845
7,791
221,935
(49,844)
(50,004)
122,087
2013
(KD 000's)
(Restated)
(Unaudited)
215,508
(88,096)
127,412
43,346
(3,501)
39,845
17,438
9,751
1,260
7,431
203,137
(44,729)
(48,899)
109,509
(56,491)
(2,111)
(55,392)
(357)
(84,031)
(1,600)
74,192
(9,984)
(90)
64,118
66,338
(9,967)
(90)
56,281
23,878
(7,290)
(555)
16,033
23,820
16,424
16,032
Profit for the year ..........................................................
87,938
72,705
32,065
76,131
11,807
87,938
61,758
10,947
72,705
20,102
11,963
32,065
Fils
Fils
Fils
32.1
33.8
12.0
24.6
29.2
7.1
Attributable to:
Equity holders of the Bank ..............................................
Non-controlling interests .................................................
Basic and diluted earnings per share attributable to
the equity holders of the Bank ......................................
Basic and diluted earnings per share from continuing
operations attributable to the equity holders of the
Bank ................................................................................
*Derived from the comparative information contained in the 2015 Annual Financial Statements.
70
Consolidated Income Statement – As Reported
The following table shows the Group's consolidated income statement data for the years ended 31 December 2014 and 31
December 2013, as reported.
31 December
2014
(KD 000's)
2013
(KD 000's)
Interest income..........................................................................................................
Interest expense ........................................................................................................
Net interest income .................................................................................................
Fee and commission income .....................................................................................
Fee and commission expense ....................................................................................
Net fee and commission income .............................................................................
Net gain from foreign currencies ..............................................................................
Net investment income .............................................................................................
Dividend income .......................................................................................................
Other income ............................................................................................................
Operating income ....................................................................................................
Staff expenses ...........................................................................................................
Other expenses ..........................................................................................................
Operating profit before provision .........................................................................
Provision for impairment of loans and advances ......................................................
305,056
(119,518)
185,538
53,784
(5,195)
48,589
7,251
16,272
1,894
16,167
275,711
(58,538)
(63,636)
153,537
(61,302)
270,375
(104,940)
165,435
48,124
(3,501)
44,623
18,664
11,266
2,937
10,634
253,559
(53,598)
(59,238)
140,723
(89,913)
Impairment of investment securities .........................................................................
Profit before taxation and board of directors' remuneration .............................
Taxation ....................................................................................................................
Board of directors' remuneration ..............................................................................
Profit for the year ...................................................................................................
(2,079)
90,156
(17,361)
(90)
72,705
(2,963)
47,847
(15,692)
(90)
32,065
61,758
10,947
72,705
20,102
11,963
32,065
Fils
Fils
37.6
12.0
Attributable to:
Equity holders of the Bank .......................................................................................
Non-controlling interests ..........................................................................................
Basic and diluted earnings per share attributable to the equity holders of the
Bank .........................................................................................................................
Consolidated Statement of Comprehensive Income – As Reported
The following table shows the Group's consolidated statement of comprehensive income data for the years ended 31
December 2015 as reported and 31 December 2014 and 31 December 2013, which has been restated as indicated in the
table below.
2015
2014
2013
(KD 000's)
(KD 000's)
(KD 000's)
(Restated)*
Profit for the year
Other comprehensive (loss) income ....................................
Other comprehensive (loss) income to be reclassified to
consolidated income statement in subsequent periods:
Financial assets available for sale:
71
87,938
72,705
32,065
Net fair value (loss) gain ........................................................
Net transfer to consolidated income statement ......................
Net transfer to consolidated income statement on disposal of
a subsidiary ............................................................................
Foreign currency translation:
Foreign currency translation adjustment ................................
2015
2014
2013
(KD 000's)
(KD 000's)
(KD 000's)
(8,021)
(2,053)
(1,582)
1,540
(1,373)
(1,773)
(780)
-
(15,834)
2,227
Net Transfer to consolidated income statement on disposal of
a subsidiary ............................................................................
(20,623)
-
-
Changes in fair value of cash flow hedges .............................
Net loss on hedge of a net investment ...................................
1,160
(6,710)
-
-
Other comprehensive loss for the year...............................
Total comprehensive income for the year ..........................
(49,268)
38,670
(1,199)
71,506
(18,472)
13,593
20,854
17,816
38,670
57,952
13,554
71,506
439
13,154
13,593
Attributable to:
Equity holders of the Bank ....................................................
Non-controlling interests .......................................................
(15,117)
*Derived from the comparative information contained in the 2015 Annual Financial Statements.
Consolidated Statement of Cash Flows – Restated
The following table shows the Group's consolidated statement of cash flows data for the years ended 31 December 2015
as reported and, 31 December 2014 and 31 December 2013, which has been restated.
2015
2014
2013
(KD 000's)
(KD 000's)
(KD 000's)
(Restated)*
(Restated)
(Unaudited)
Operating activities
Profit for the year before taxation and board of directors'
remuneration
- Continuing operations .......................................................................
- Discontinued operations ...................................................................
74,192
31,457
105,649
66,338
23,818
90,156
23,878
23,969
47,847
(10,740)
(16,272)
(11,266)
56,491
2,111
(3,109)
14,540
(6,505)
61,302
2,079
(1,894)
15,134
-
89,913
2,963
(2,937)
13,857
-
Adjustments:
Net investment income ........................................................................
Provision for impairment of loans and
advances...............................................................................................
Provision for impairment of investment securities ..............................
Dividend income ..................................................................................
Depreciation and amortisation .............................................................
Net gain on derecognition of a subsidiary ...........................................
Operating profit before changes in operating assets and
liabilities
158,437
150,505
140,377
Changes in operating assets and liabilities:
Treasury bills and bonds with CBK and others ...................................
Due from banks and other financial institutions ..................................
(41,526)
112,264
(46,172)
9,930
(100,059)
(112,204)
72
Loans and advances to customers ........................................................
Other assets ..........................................................................................
Due to banks ........................................................................................
Due to other financial institutions ........................................................
Deposits from customers .....................................................................
Other liabilities ....................................................................................
Taxation paid .......................................................................................
Net cash from (used in) operating activities ....................................
2015
2014
2013
(KD 000's)
(KD 000's)
(KD 000's)
(103,930)
(492,586)
(647,024)
8,395
(21,357)
(81,008)
224,166
232,617
256,927
(1,940)
(55,242)
167,239
816
68,247
744,968
(21,968)
13,860
17,684
(8,405)
(15,367)
(17,395)
326,309
(155,565)
369,505
Investing activities
Purchase of investment securities ........................................................
Proceeds from sale of investment securities ........................................
Purchase of property and equipment, net of disposals .........................
Dividends received ..............................................................................
Net cash outflow on disposal of a subsidiary .......................................
Net cash used in investing activities .................................................
(980,082)
838,043
(14,198)
3,109
(234,154)
(387,282)
(791,670)
738,897
(20,392)
1,894
(71,271)
(1,103,693)
998,260
(19,175)
2,937
(121,671)
Financing activities
Other borrowed funds ..........................................................................
Proceeds from share capital increase ...................................................
Proceeds from share capital increase in a subsidiary ...........................
Purchase of treasury shares ..................................................................
Sale of treasury shares .........................................................................
Proceeds from issue of perpetual Tier 1 capital securities ...................
Perpetual Tier 1 capital securities issuance cost ..................................
Cash dividend paid to equity holders of the Bank ...............................
Cash dividend paid to non-controlling interests ..................................
Interest Payment on Tier I capital securities ........................................
Net cash (used in) from financing activities .....................................
Net (decrease) increase in cash and cash equivalents .....................
Effect of foreign currency translation ..................................................
Cash and cash equivalents at 1 January ...............................................
Cash and cash equivalents at 31 December .....................................
(8,641)
(3,007)
(28,983)
(6,561)
(10,923)
(58,115)
(119,088)
(18,066)
1,040,563
903,409
(953)
102,600
312
(14,248)
50,884
144,025
(1,022)
(10,783)
(7,214)
263,601
36,765
(492)
1,004,290
1,040,563
(3,388)
6,092
(995)
(14,711)
(3,983)
(16,985)
230,849
(14,027)
787,468
1,004,290
Additional cash flow information:
Interest received ...................................................................................
Interest paid .........................................................................................
256,950
103,185
309,020
131,175
258,415
93,277
* The sole change to the restated consolidated statement of cash flows has been in the categorisation of the line item "Profit for the year before taxation
and board of directors' remuneration" into Continuing operations and Discontinued operations.
Consolidated Statement of Cash Flows
The following table shows the Group's consolidated statement of cash flows for the years ended 31 December 2014 and
31 December 2013, as reported in the 2014 Annual Financial Statements.
2014
2013
(KD 000's)
(KD 000's)
Profit for the year before taxation and board of directors' remuneration ..................
90,156
47,847
Adjustments:
Net investment income .............................................................................................
(16,272)
(11,266)
73
Provision for impairment of loans and advances ......................................................
Provision for impairment of investment securities ...................................................
Dividend income .......................................................................................................
Depreciation and amortisation ..................................................................................
Operating profit before changes in operating assets and liabilities ....................
Changes in operating assets and liabilities:...............................................................
Treasury bills and bonds with CBK and others ........................................................
Due from banks and other financial institutions .......................................................
Loans and advances to customers .............................................................................
Other assets ...............................................................................................................
Due to banks .............................................................................................................
Due to other financial institutions .............................................................................
Deposits from customers ..........................................................................................
Other liabilities .........................................................................................................
Taxation paid ............................................................................................................
Net cash from operating activities .........................................................................
2014
2013
(KD 000's)
(KD 000's)
61,302
89,913
2,079
2,963
(1,894)
(2,937)
15,134
13,857
150,505
140,377
(46,172)
9,930
(492,586)
(21,357)
232,617
(55,242)
68,247
13,860
(15,367)
155,565
(100,059)
(112,204)
(647,024)
(81,008)
256,927
167,239
744,968
17,684
(17,395)
369,505
Purchase of investment securities .............................................................................
Proceeds from sale of investment securities .............................................................
Purchase of property and equipment .........................................................................
Dividends received ...................................................................................................
Net cash used in investing activities ......................................................................
(791,670)
738,897
(20,392)
1,894
(71,271)
(1,103,693)
998,260
(19,175)
2,937
(121,671)
Other borrowed funds ...............................................................................................
Proceeds from share capital increase ........................................................................
Proceeds from share capital increase in a subsidiary ................................................
(953)
102,600
312
(3,388)
6,092
Purchase of treasury shares .......................................................................................
Sale of treasury shares ..............................................................................................
Proceeds from issue of perpetual Tier 1 capital securities ........................................
(14,248)
50,884
144,025
(995)
-
Perpetual Tier 1 capital securities issuance cost .......................................................
(1,022)
Cash dividend paid to equity holders of the Bank ....................................................
(10,783)
(14,711)
Cash dividend paid to non-controlling interests .......................................................
(7,214)
(3,983)
Net cash from (used in) financing activities ..........................................................
Net increase in cash and cash equivalents ............................................................
Effect of foreign currency translation .......................................................................
Cash and cash equivalents at 1 January ....................................................................
Cash and cash equivalents at 31 December ..........................................................
263,601
36,765
(492)
1,004,290
1,040,563
(16,985)
230,849
(14,027)
787,468
1,004,290
Interest received ........................................................................................................
Interest paid ..............................................................................................................
309,020
131,175
258,415
93,277
74
-
As at 31 December 2015 and 31 December 2014
As at 31 December 2015, the Group's consolidated total assets stood at KD 6,824.7 million compared to KD 7,751.4
million as at 31 December 2014, representing a decrease of 12.0 per cent. The decrease in consolidated total assets was
primarily a result of the deconsolidation of JKB in 2015. As at 31 December 2015, loans and advances to customers (net
of provisions), which accounted for 58.8 per cent. of the Group's total assets, decreased by 8.5 per cent., from KD
4,386.5 million as at 31 December 2014 to KD 4,011.6 million as at 31 December 2015. This decrease was primarily due
to the deconsolidation of JKB.
Cash and cash equivalents, which represented 13.2 per cent. of the Group's total assets as at 31 December 2015,
decreased by 13.2 per cent. from KD 1,040.6 million as at 31 December 2014 to KD 903.4 million as at 31 December
2015. This decrease was primarily due to the deconsolidation of JKB.
Investment securities increased, from KD 484.9 million as at 31 December 2014 to KD 570.1 million as at 31 December
2015, representing an increase of 17.6 per cent. and reflecting an increase in the Group's financial assets available for sale
(from KD 305.3 million as at 31 December 2014 to KD 396.1 million as at 31 December 2015). However, amounts due
from banks and other financial institutions decreased by 16.7 per cent. from KD 689.8 million as at 31 December 2014 to
KD 574.9 million as at 31 December 2015.
As at 31 December 2015, the consolidated total liabilities of the Group decreased by 11.9 per cent. to KD 5,988.4 million
compared to KD 6,795.5 million as at 31 December 2014. The decrease was primarily a result of the deconsolidation of
JKB in 2015.
Customer deposits (which as at 31 December 2015 constituted 64.7 per cent. of the Group's total liabilities), decreased by
17.7 per cent. from KD 4,708.3 million as at 31 December 2014 to KD 3,874.3 million as at 31 December 2015. This
decrease was primarily due to the deconsolidation of JKB. Amounts due to banks increased during 2015, from KD 801.2
million as at 31 December 2014 to KD 886.1 million as at 31 December 2015, representing an increase of 10.6 per cent.,
which reflected an increase in short-term deposit of funds with the Bank as part of the Bank's inter-bank business.
As at 31 December 2014 and 31 December 2013
As at 31 December 2014, the consolidated total assets of the Group stood at KD 7,751.4 million as compared to KD
7,154.8 million as at 31 December 2013, representing an increase of 8.3 per cent. As at 31 December 2014, loans and
advances to customers, which accounted for 56.6 per cent. of the Group's total assets, increased by 10.9 per cent., from
KD 3,954.8 million as at 31 December 2013 to KD 4,386.5 million.
Cash and cash equivalents, which represented 13.4 per cent. of the consolidated total assets as at 31 December 2014,
increased by 3.6 per cent. from KD 1,004.3 million as at 31 December 2013 to KD 1,040.6 million as at 31 December
2014.
Investment securities increased, from KD 421.4 million as at 31 December 2013 to KD 484.9 million as at 31 December
2014, representing an increase of 15.1 per cent. and reflecting an increase in the Group's financial assets held to maturity
(from KD 20.9 million as at 31 December 2013 to KD 53.1 million as at 31 December 2014). However, due from banks
and other financial institutions decreased by 1.5 per cent. from KD 700.1 million as at 31 December 2013 to KD 689.8
million as at 31 December 2014.
The following table sets out the Bank's consolidated assets by country as at 31 December 2013, 31 December 2014, 31
December 2015 and 31 March 2016.
Assets - Geographical segmentation
Kuwait ..............................................................
Turkey...............................................................
Algeria ..............................................................
Iraq ....................................................................
Tunisia ..............................................................
31 March
2016
(Unaudited)
5,322.9
1,290.2
485.6
365.5
183.5
75
2015
5,013.9
1,186.1
503.1
422.1
174.2
As at 31 December
2014
(KD 000's)
4,872.5
1,172.9
583.9
435.7
174.5
2013
4,624.7
948.0
498.2
433.8
171.6
Jordan*..............................................................
Consolidated Adjustments .............................
Total .................................................................
31 March
2016
(Unaudited)
(525.5)
7,122.1
As at 31 December
2014
(KD 000's)
1,073.4
(474.7)
(561.5)
6,824.7
7,751.4
2015
2013
1,010.0
(531.6)
7,154.8
*Operations in Jordan were discontinued due to the sale of JKB on 30 December 2015.
As at 31 December 2015, the Group's largest asset exposure after Kuwait was Turkey, followed by Algeria, Iraq and
Tunisia, representing 17.4 per cent., 7.4 per cent., 6.2 per cent. and 2.6 per cent. of the Group's total assets, respectively
(calculated on a consolidated basis including consolidated adjustments). As at 31 December 2014, the Group's largest
asset exposure after Kuwait was Turkey, followed by Jordan, Algeria, Iraq and Tunisia, representing 13.9 per cent., 7.5
per cent., 5.6 per cent. and 2.3 per cent. of the Group's total assets, respectively (calculated on a consolidated basis
including consolidated adjustments). The consolidated total liabilities of the Group increased by 4.0 per cent. from KD
6,534.9 million as at 31 December 2013 to KD 6,795.5 million as at 31 December 2014. The increase was primarily
driven by an increase in amounts due to banks.
Due to banks also increased during 2014 from KD 568.6 million as at 31 December 2013 to KD 801.2 million as at 31
December 2014, representing an increase of 40.9 per cent. reflecting an increase in short-term deposit funds with the
Bank as part of the Bank's inter-bank business.
Years ended 31 December 2015, as reported and 31 December 2014 (restated)
The following analysis is based on the financial information included in the 2015 Annual Financial Statements, which
restated certain financial information presented in the 2014 Annual Financial Statements.
The Group's net interest income increased by 5.9 per cent. from KD 147.9 million for the year ended 31 December 2014
to KD 156.6 million for the year ended 31 December 2015. This increase was principally the result of a 5.2 per cent.
increase in the Group's interest income from KD 250.7 million for the year ended 31 December 2014 to KD 263.6
million for the year ended 31 December 2015. Interest expense also increased in 2015 from KD 102.7 million for the
year ended 31 December 2014 to KD 107.0 million for the year ended 31 December 2015, representing an increase of 4.2
per cent. The Group's net fee and commission income decreased by 15.0 per cent. from KD 43.4 million for the year
ended 31 December 2014 to KD 36.9 million for the year ended 31 December 2015.
The Group's operating income increased by 11.8 per cent. from KD 221.9 million for the year ended 31 December 2014
to KD 248.1 million for the year ended 31 December 2015, whereas operating profit before provision increased by 8.8
per cent. from KD 122.1 million for the year ended 31 December 2014 to KD 132.8 million for the year ended 31
December 2015. Profit before taxation and board of directors' remuneration increased by 11.8 per cent. from KD 66.3
million for the year ended 31 December 2014 to KD 74.2 million for the year ended 31 December 2015, and overall
profit for the year increased by 21.0 per cent. from KD 72.7 million for the year ended 31 December 2014 to KD 87.9
million for the year ended 31 December 2015. This increase was primarily as a result of strong growth across key
businesses and a gain of KD 6.5 million on the disposal of JKB.
The Group recorded a total comprehensive income of KD 38.7 million for the year ended 31 December 2015 compared
to a total comprehensive income of KD 71.5 million for the year ended 31 December 2014, representing a decrease of
45.9 per cent. primarily due to a net transfer to consolidated income statement on disposal of JKB amounting to KD 20.6
million for the year ended 31 December 2015 and foreign currency translation loss of KD 15.8 million for the year ended
31 December 2015 as compared to a net gain of KD 2.2 million for the year ended 31 December 2014, which was
primarily due to the depreciation of the Turkish lira and the Algerian dinar in relation to the Group's investments in BBT
and GBA, respectively.
The Group's profit for the year increased by 21.0 per cent. from KD 72.7 million for the year ended 31 December 2014 to
KD 87.9 million for the year ended 31 December 2015 for the reasons set out above.
Years ended 31 December 2014 (restated) and 31 December 2013 (unaudited restated)
The following analysis is based on the financial information included in the comparatives of the 2015 Annual Financial
Statements, which restated certain financial information presented in the 2014 Annual Financial Statements and on
unaudited restated financial information for the year ended 31 December 2013, which data has been derived from the
76
table under the heading "Consolidated Income Statement" in the section titled "Presentation of Financial Information"
and has neither been audited nor reviewed by any auditor.
The Group's net interest income increased by 16.1 per cent. from KD 127.4 million for the year ended 31 December 2013
to KD 147.9 million for the year ended 31 December 2014. This increase was principally the result of a 16.3 per cent.
increase in the Group's interest income from KD 215.5 million for the year ended 31 December 2013 to KD 250.7
million for the year ended 31 December 2014, as a result of increases in loans and advances to customers. Interest
expense also increased in 2014, from KD 88.1 million for the year ended 31 December 2013 to KD 102.7 million for the
year ended 31 December 2014, representing an increase of 16.6 per cent. due to growth in deposits in certain of the
Bank's subsidiaries. The Group's net fee and commission income increased by 9.0 per cent. from KD 39.8 million for the
year ended 31 December 2013 to KD 43.4 million for the year ended 31 December 2014 due to an increase in core fixed
and commission income in Turkey from asset management, brokerage, card and other services.
Overall, operating income increased by 9.3 per cent. from KD 203.1 million for the year ended 31 December 2013 to KD
221.9 million for the year ended 31 December 2014, which was driven primarily by growth in all business lines,
profitable market share gains in the Group's core markets of Kuwait and Turkey and higher credit growth relative to the
Group's competitors. In addition, operating profit before provision increased by 11.5 per cent. from KD 109.5 million for
the year ended 31 December 2013 to KD 122.1 million for the year ended 31 December 2014. Profit before taxation and
board of directors' remuneration increased by 177.8 per cent. from KD 23.9 million for the year ended 31 December 2013
to KD 66.3 million for the year ended 31 December 2014, and overall profit for the year increased by 126.7 per cent.
from KD 32.1 million for the year ended 31 December 2013 to KD 72.7 million for the year ended 31 December 2014.
This was primarily a result of a 34.1 per cent. decrease in provisions for impairment of loans and advances, from KD
84.0 million for the year ended 31 December 2013 to KD 55.4 million for the year ended 31 December 2014. The reason
for the decrease in provisions during 2014 was primarily due to the lower precautionary general provisions combined
with an improvement in coverage of the Group in relation to its general provisions in respect of corporate loans and
advances as required by the CBK (see "Description of the Guarantor - Risk Management - Credit Risk - Impairment
Losses on Loans and Advances to Customers"). The Group recorded total comprehensive income of KD 71.5 million for
the year ended 31 December 2014 compared to a total comprehensive income of KD 13.6 million for the year ended 31
December 2013, representing an increase of 426.1 per cent. The reason for the increase was that the Group recorded a
decrease in other comprehensive losses of KD 1.2 million for the year ended 31 December 2014 compared to other
comprehensive loss of KD 18.5 million for the year ended 31 December 2013, which was principally due to the Group
recognising a foreign currency translation gain of KD 2.2 million for the year ended 31 December 2014 compared to a
negative foreign currency translation adjustment of KD 15.1 million for the year ended 31 December 2013.
The Group's profit for the year increased by 126.7 per cent. from KD 32.1 million for the year ended 31 December 2013
to KD 72.7 million for the year ended 31 December 2014 for the reasons set out above.
The following table sets out the Bank's consolidated operating income by country for the financial years ended 31
December 2013, as resported in the 2014 Annual Financial Statements, and 31 December 2014 and 31 December 2015,
as reported in the 2015 Annual Financial Statements.
2015
2014
2013
(KD million)
Operating Income
Kuwait ...................................................................................................
Jordan*...................................................................................................
Turkey....................................................................................................
Algeria ...................................................................................................
Iraq .........................................................................................................
Tunisia ...................................................................................................
Consolidated adjustments ......................................................................
Total ......................................................................................................
* Discontinued operations as at 31 December 2015.
77
137.3
55.6
33.6
18.6
3.9
(0.9)
248.1
122.6
53.8
45.4
37.2
14.3
6.0
(3.6)
275.7
107.7
50.4
37.4
37.9
17.6
6.2
(3.6)
253.6
Key Financial Ratios
The following table sets out certain key ratios calculated with results derived from the Financial Statements, as reported.
These ratios are not calculated on the basis of IFRS and are not IFRS measures of financial performance.
Three months
ended
31 March
2016
Key Measures of Profitability
Return on Average1 Assets (ROAA)2 ................................
Return on Average3 Equity (ROAE)4 ................................
Net interest margin5 ............................................................
Net interest spread6 .............................................................
Efficiency
Cost to income7 ...................................................................
Total operating expenses8 to average total assets ...............
Asset Quality
Non-performing loans to total gross loans ..........................
Risk provision9 to non-performing loans ............................
Non-performing loans net of collateral to gross loans 10 .....
Non-performing assets to total exposure10 ..........................
Risk provision to non-performing assets10 .........................
Non-performing assets net of collateral to total exposure...
Funding / Liquidity / Capitalisation
Loans to customer deposits .................................................
Loans to total assets ............................................................
Total assets to total equity11 ................................................
Total liabilities to total equity11 ..........................................
Capital Adequacy Ratio12 ...................................................
Tier 1 Capital Ratio ............................................................
2015
2014
2013
(% unless otherwise stated)
0.8
9.0
2.4
2.2
1.0
11.7
2.3
2.1
0.8
10.9
2.7
2.5
0.3
4.2
2.7
2.6
47.2
1.5
46.5
1.6
44.3
1.6
44.5
1.7
4.4
89.9
1.5
3.6
130.2
1.4
4.1
92.6
1.5
3.8
120.3
1.4
3.9
88.9
1.6
3.2
130.5
1.5
4.2
78.0
1.9
3.4
122.9
1.6
93.2
56.6
11.7
10.3
13.5
12.2
85.2
55.3
15.0
13.7
15.4
9.9
107.3
58.6
11.2
9.9
16.4
13.5
103.5
58.8
10.7
9.4
15.6
14.7
Further information
For further detail on the financial information of the Group, please see: (i) the notes to the 2014 Annual Financial
Statements, and (ii) the notes to the 2015 Annual Financial Statements, each of which are set out in this Base Prospectus.
1
Average numbers for 31 December are computed as average of financial year end and corresponding preceding financial year end while average
numbers for interim periods are computed as average of period ended 31 March in the relevant financial year.
2
Calculated as net profit for the year attributable to the equity holders of the Bank divided by average total assets (annualised for the three-month
periods ended 31 March 2016 and 31 March 2015).
3
Average numbers for 31 December are computed as average of the fiscal year end and corresponding year last year while average numbers for
interim periods are computed as average of the period ended March and the last fiscal year end.
4
Calculated as net profit for the year attributable to the equity holders of the Bank divided by average equity attributable to the equity holders of
the Bank (annualised for the three-month periods ended 31 March 2016 and 31 March 2015).
5
Calculated as net interest income divided by average interest earning assets (annualised for the three-month periods ended 31 March 2016 and 31
March 2015). Interest earning assets comprise all assets excluding other assets, fixed assets and intangible assets. The average for these assets is
calculated as provided in Footnote 1 above.
6
Calculated as yield (being the product of annualised interest income / average interest earning assets) less cost of funds (being the product of
annualised interest expenses / average interest bearing liabilities).
7
Calculated as total operating costs divided by total operating income.
8
Sum of staff expenses and other expenses.
9
Risk provision refers to total provisions, i.e. sum of general and specific provisions.
10
Non-performing loans (NPLs) constitute a subset of non-performing assets (NPAs). In addition to loans and advances to customers, NPAs
include non-cash exposures and exposures to OFIs / banks.
11
Total equity represents total equity attributable to the equity holders of the Bank.
12
Calculated in accordance with the requirements of the Central Bank of Kuwait and the Basel III regulations for 2014 and 2015.Calculated in
accordance with the requirements of the Central Bank of Kuwait and the Basel II regulations for 2013.
78
Recent Developments
For a total consideration of KD 191.1 million, on 30 December 2015, the Bank completed the sale of its 51.2 per cent.
controlling stake in its Jordanian subsidiary, JKB, (see, "Description of the Guarantor – History of acquisitions and
disposals"). The following table summarises key financial information of the contribution of JKB to the Group based on
the Group's unaudited interim condensed consolidated financial information for the nine months ended 30 September
2015 prepared in accordance with IFRS, as adopted in the State of Kuwait:
Net Interest Income .......................................................................
Operating Income .........................................................................
Net Income Attributable to Equity Holders ..................................
Total Assets ..................................................................................
As at / for the nine months ended
30 September 2015
JKB
Group
% of
contribution
(KD '000)
(KD '000)
(Unaudited)
(Unaudited)
(Unaudited)
26,394
143,983
18.3
35,619
216,753
16.4
4,681
59,029
7.9
1,163,600
7,853,436
14.8
The following table shows the Group's consolidated statement of financial position data as at the three months ended 31
March 2016 and 31 December 2015.
As at 31 March
2016
(KD 000's)
(Unaudited)
As at 31 December
2015
(KD 000's)
ASSETS
Cash and cash equivalents .......................................................................
Treasury bills and bonds with CBK and others .......................................
Due from banks and other financial institutions ......................................
Loans and advances to customers ............................................................
Investment securities ...............................................................................
Other assets ..............................................................................................
Property and equipment ...........................................................................
Intangible assets .......................................................................................
Total Assets .............................................................................................
875,272
488,728
696,546
4,176,328
549,977
209,943
81,047
44,297
7,122,138
903,409
471,800
574,870
4,011,645
570,125
165,533
81,163
46,160
6,824,705
LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES
Due to banks ............................................................................................
Due to other financial institutions ............................................................
Deposits from customers .........................................................................
Other borrowed funds ..............................................................................
Other liabilities ........................................................................................
Total Liabilities ......................................................................................
759,001
1,155,234
3,891,089
298,024
185,616
6,288,964
886,102
816,841
3,874,344
218,003
193,092
5,988,382
EQUITY
Share capital ............................................................................................
Share premium .........................................................................................
Treasury shares ........................................................................................
Statutory reserve ......................................................................................
Voluntary reserve .....................................................................................
Treasury shares reserve ............................................................................
Investment revaluation reserve ................................................................
Share-based compensation reserve ..........................................................
Foreign currency translation reserve ........................................................
Other reserves ..........................................................................................
79
204,936
210,559
(12,582)
67,859
68,237
45,082
(1,169)
564
(63,101)
(13,697)
204,936
210,559
(12,582)
67,859
68,237
45,082
(2,292)
564
(61,557)
(7,112)
Retained earnings.....................................................................................
Total equity attributable to the equity holders of the Bank ......................
Perpetual Tier 1 capital securities ............................................................
Non-controlling interests .........................................................................
Total Equity ............................................................................................
Total Liabilities and Equity .................................................................
As at 31 March
2016
(KD 000's)
131,783
638,471
144,025
50,678
833,174
7,122,138
As at 31 December
2015
(KD 000's)
122,981
636,675
144,025
55,623
836,323
6,824,705
Consolidated Income Statement – Restated
The following table shows the Group's consolidated income statement data for the three months ended 31 March 2016
and 31 March 2015. The 31 March 2015 information has been restated as indicated below.
Interest income........................................................................................................
Interest expense ......................................................................................................
Net interest income ...............................................................................................
Fee and commission income ...................................................................................
Fee and commission expense ..................................................................................
Net fee and commission income ...........................................................................
Net gain from foreign currencies ............................................................................
Net investment income ...........................................................................................
Dividend income .....................................................................................................
Other income ..........................................................................................................
Operating income ..................................................................................................
Staff expenses .........................................................................................................
Other expenses ........................................................................................................
Operating profit before provision .......................................................................
Provision for impairment of loans and advances ....................................................
Provision for impairment of investment securities .................................................
Profit for the period from continuing operations before taxation and board
of directors' remuneration ...................................................................................
Taxation ..................................................................................................................
Board of directors' remuneration ............................................................................
Profit for the period from continuing operations...............................................
Profit after tax for the period from discontinued operations ............................
Profit for the period ..............................................................................................
Attributable to:
Equity holders of the Bank .....................................................................................
Non-controlling interests ........................................................................................
Basic and diluted earnings per share attributable to the equity holders of the
Bank .......................................................................................................................
Basic and diluted earnings per share from continuing operations attributable
to the equity holders of the Bank .........................................................................
80
Three months ended 31 March
2016
2015
(KD 000's)
(Restated)
(Unaudited)
77,048
63,248
(36,451)
(25,433)
40,597
37,815
9,471
11,878
(1,174)
(1,458)
8,297
10,420
1,708
7,674
3,615
284
2,004
603
905
1,235
57,126
58,031
(13,327)
(13,242)
(13,627)
(12,996)
30,172
31,793
(14,042)
(13,007)
(2,591)
(131)
13,539
(1,492)
12,047
-
18,655
(2,470)
16,185
3,764
12,047
19,949
14,288
(2,241)
12,047
17,536
2,413
19,949
4.4
6.0
4.4
5.0
Consolidated Statement of Comprehensive Income – Restated
The following table shows the Group's consolidated statement of comprehensive income data for the three months ended
31 March 2016 and 31 March 2015. The 31 March 2015 information has been restated as indicated below.
Profit for the period
Other comprehensive (loss) income ...................................................................................
Other comprehensive (loss) income to be reclassified to consolidated income statement
in subsequent periods:
Financial assets available for sale:
Net fair value (loss) gain .......................................................................................................
Net transfer to consolidated income statement .....................................................................
Foreign currency translation:
Foreign currency translation adjustment ...............................................................................
Three months ended
31 March
2016
2015
(KD 000's)
(Restated)
(Unaudited)
12,047
19,949
(1,436)
2,762
(4,657)
495
(4,446)
(7,337)
Changes in fair value of cash flow hedges ............................................................................
Net loss on hedge of a net investment ..................................................................................
(726)
(5,864)
Other comprehensive (loss) income for the period ..........................................................
Total comprehensive income for the period .....................................................................
(9,710)
2,337
(11,383)
8,566
7,282
(4,945)
2,337
3,041
5,525
8,566
Attributable to:
Equity holders of the Bank ...................................................................................................
Non-controlling interests ......................................................................................................
116
-
Consolidated Statement of Cash Flows – Restated
The following table shows the Group's consolidated statement of cash flows data for the three months ended 31 March
2016 and 31 March 2015. The 31 March 2015 information has been restated as indicated below.
Three months ended
31 March
2016
2015
(KD 000's)
(Restated)
(Unaudited)
Profit for the period before taxation and board of directors' remuneration
- Continuing operations ....................................................................................................
- Discontinued operations ................................................................................................
Adjustments:
Net investment income .....................................................................................................
Provision for impairment of loans and advances ..............................................................
Provision for impairment of investment securities ...........................................................
Dividend income ...............................................................................................................
Depreciation and amortisation ..........................................................................................
Operating profit before changes in operating assets and liabilities
81
13,539
13,539
18,655
5,007
23,662
(3,615)
14,042
2,591
(2,004)
2,993
27,546
(284)
13,007
131
(603)
4,066
39,979
Three months ended
31 March
2016
2015
(KD 000's)
Changes in operating assets and liabilities:
Treasury bills and bonds with CBK and others ................................................................
Due from banks and other financial institutions ...............................................................
Loans and advances to customers .....................................................................................
Other assets .......................................................................................................................
Due to banks .....................................................................................................................
Due to other financial institutions .....................................................................................
Deposits from customers ..................................................................................................
Other liabilities .................................................................................................................
Taxation paid ....................................................................................................................
Net cash used in operating activities .............................................................................
(16,928)
(121,397)
(179,004)
(44,410)
(127,101)
338,393
16,745
(7,463)
(1,505)
(115,124)
(47,002)
(132,033)
15,526
25,843
59,352
(94,315)
84,237
3,025
(2,396)
(47,784)
Purchase of investment securities .....................................................................................
Proceeds from sale of investment securities .....................................................................
Purchase of property and equipment, net of disposals ......................................................
Dividends received ...........................................................................................................
Net cash from investing activities ..................................................................................
(182,331)
198,239
(1,892)
2,004
16,020
(313,916)
370,934
(8,463)
603
49,146
Other borrowed funds .......................................................................................................
Cash dividend paid to equity holders of the Bank ............................................................
Interest Payment on Tier I capital securities .....................................................................
Net cash from (used in) financing activities ..................................................................
Net decrease in cash and cash equivalents ....................................................................
Effect of foreign currency translation ...............................................................................
Cash and cash equivalents at 1 January ............................................................................
Cash and cash equivalents at 31 March ........................................................................
80,021
(5,486)
74,535
(24,569)
(3,568)
903,409
875,272
7,815
(28,983)
(5,434)
(26,602)
(25,240)
(8,962)
1,040,563
1,006,361
Interest received ................................................................................................................
Interest paid ......................................................................................................................
70,854
33,947
62,157
22,814
Financial Position as at 31 March 2016
As at 31 March 2016, the Group's consolidated total assets stood at KD 7,122.1 million compared to KD 6,824.7 million
as at 31 December 2015, representing an increase of 4.4 per cent. The increase in consolidated total assets reflected
growth in loans and advances to customers by 4.1 per cent. and in due from banks and other financial institutions by 21.2
per cent.
The Group's net loans and advances to customers (which comprises its loans and advances provided to customers (net of
provisions)) was KD 4,176.3 million as at 31 March 2016, compared to KD 4,011.6 million as at 31 December 2015
representing an increase of 4.1 per cent. compared to 31 December 2015. The increase in net loans and advances to
customers reflected growth in loans and advances in Kuwait followed by growth in Turkey.
The table below shows the Group's loans and advances to customers portfolio, provisions and financing to deposit ratios
as at 31 March 2016.
31 March
2016
(KD'000)
(Unaudited)
82
31 December
2015
(KD'000)
31 March
2016
(KD'000)
4,346,477
170,149
4,176,328
107.3%
71.9%
Gross loans and advances to customers(1) .................................................................
Less: provisions for impairments ..............................................................................
Net loans and advances to customers(3).....................................................................
Loans to customer deposits .......................................................................................
Net loans and advances to customers/total deposits(2) ..............................................
31 December
2015
(KD'000)
4,167,960
156,315
4,011,645
103.5%
71.9%
Notes:
(1) Gross loans and advances to customers comprises total loans and advances provided to customers disregarding impairment.
(2) Total deposits comprises due to banks, due to other financial institutions and deposits from customers.
(3) Net loans and advances to customers comprise gross loans and advances to customers less impairment charges.
The table below shows the distribution of the Group's loans and advances to customers portfolio by customer segment as
at 31 March 2016 and 31 December 2015.
Gross Loans and Advances to Customers
Less: Provision for impairment .................................................................................
Net Loans .................................................................................................................
As at 31 March
2016
(KD'000)
(Unaudited)
4,346,477
(170,149)
4,176,328
As at 31
December 2015
(KD'000)
4,167,960
(156,315)
4,011,645
As at 31 March 2016, the total liabilities of the Group stood at KD 6,289.0 million compared to KD 5,988.4 million as at
31 December 2015, representing an increase of 5.0 per cent. compared to 31 December 2015. The increase was primarily
a result of an increase in amounts due to other financial institutions and the Bank's issuance of the 2016 Subordinated
Bonds (as defined below).
The Group's deposits from customers were KD 3,891.1 million, or 61.9 per cent. of its total liabilities, as at 31 March
2016, compared to KD 3,874.3 million, or 64.7 per cent. of its total liabilities as at 31 December 2015.
The table below shows the Group's funding in the form of due to banks, due to other financial institutions, deposits from
customers and other liabilities as at 31 March 2016.
Due to banks .................................................................................................................
Due to other financial institutions .................................................................................
Deposits from customers ..............................................................................................
Other borrowed funds ...................................................................................................
Other liabilities
Total liabilities .............................................................................................................
As at 31 March 2016
(KD '000)
(% of total)
(Unaudited)
759,001
12.1
1,155,234
18.4
3,891,089
61.9
298,024
4.7
185,616
3.0
6,288,964
100.0
As at 31 March 2016, the consolidated total equity of the Group stood at KD 833.2 million compared to KD 836.3
million as at 31 December 2015, representing a decrease of 0.4 per cent. The decrease was primarily a result of changes
in the balance of non-controlling interests.
Three months ended 31 March 2016 and three months ended 31 March 2015 (restated)
The Group's operating income decreased by 1.6 per cent. from KD 58.0 million for the three months ended 31 March
2015 to KD 57.1 million for the three months ended 31 March 2016, whereas operating profit before provision decreased
by 5.1 per cent. from KD 31.8 million for the three months ended 31 March 2015 to KD 30.2 million for the three
months ended 31 March 2016.
83
The principal reasons for the decrease in operating income and operating profit before provision for impairment was a
reduction in net gains from foreign currencies, which decreased by 77.7 per cent. from KD 7.7 million for the three
months ended 31 March 2015 to KD 1.7 million for the three months ended 31 March 2016.
The Group's net interest income increased by 7.4 per cent. from KD 37.8 million for the three months ended 31 March
2015 to KD 40.6 million for the three months ended 31 March 2016. This increase was principally a result of a 21.8 per
cent. increase in interest income from KD 63.2 million for the three months ended 31 March 2015 to KD 77.0 million for
the three months ended 31 March 2016.
The Group's net fees and commission income decreased by 20.4 per cent. from KD 10.4 million for the three months
ended 31 March 2015 to KD 8.3 million for the three months ended 31 March 2016. This decrease was principally a
result of a decrease in fees and commission income from a change in regulations in Algeria, which resulted in lower
commission income from letters of credit and letters of guarantee from GBA during that period.
The Group's provision for impairment of investment securities increased by 19.8 times from KD 0.1 million as at 31
March 2015 to KD 2.6 million as at 31 March 2016. This increase primarily related to an impairment charge on a fixed
income bond held by the Bank.
The Group continued to achieve low levels of non-performing loans and advances to customers for the three months
ended 31 March 2016. Total non-performing loans and advances to customers as at 31 March 2016 amounted to KD
189.2 million (which represented 4.4 per cent. of total loans and advances to customers for that period).
84
DESCRIPTION OF THE GUARANTOR
Overview
The Bank was incorporated on 27 December 1975 in the State of Kuwait by an Amiri Decree and is registered with the
Ministry of Commerce and Industry under Commercial Registration No. 24067 and is listed on the Kuwait Stock
Exchange (the KSE).
The Bank operates principally in Kuwait, where it is a full service commercial bank. As at 31 March 2016, the Bank was
Kuwait's second largest conventional commercial bank by total assets. The Bank also has controlling interests in Burgan
Bank A.Ş. Turkey (BBT), Gulf Bank of Algeria S.A. (GBA) and Bank of Baghdad P.J.S.C. (BoB), each of which is a full
service commercial bank operating in Turkey, Algeria and Iraq, respectively. The Bank also has a controlling interest in
Tunis International Bank S.A. (TIB), an offshore bank in Tunisia and a strategic stake in FIMBank, an international trade
finance specialist bank in Malta (FIMBank Malta).
The Bank, together with its subsidiaries, offers a wide range of commercial banking services to its corporate, private and
retail banking customers. As at 31 March 2016, these services were offered through a distribution network of 28 branches
and 127 automated teller machines (ATMs) in Kuwait, 58 branches and 99 ATMs in Algeria (through GBA), 43
branches and 52 ATMs in Iraq (through BoB), 52 branches and 56 ATMs in Turkey (through BBT), three branches in
Tunisia (through TIB), one branch in Lebanon (through BoB), and one representative office in Libya (through TIB). In
addition to this network, the Bank also offers internet and telephone banking to its customers.
In addition to its subsidiaries, international banking activity is also undertaken through a number of correspondent
banking relationships and a network of affiliate banks in the KIPCO group (as defined below) (including United Gulf
Bank (UGB), JKB and FIMBank).
The Bank is registered in the register of banks maintained by the Central Bank of Kuwait (CBK). The Bank's registered
office is Burgan Tower, Abdullah Al-Ahmad Street, Al Sharq, Kuwait, Tel: +965 2298 8000.
Listing and Privatisation
The Bank was listed on the KSE on 29 September 1984. At the close of trading on the KSE on 31 May 2016, the Bank's
share price was KD 0.325 giving it a market capitalisation of KD666.0 million.
As part of the State of Kuwait's privatisation initiative across the banking industry, the Bank was privatised in 1997. The
Government of Kuwait (the Government) reduced its ownership in the Bank from 61.0 per cent. to less than 10.0 per
cent. As at the date of this Prospectus, the Government continued to own (directly or indirectly) an equity stake in the
Bank of less than 10.0 per cent.
Authorised and paid-up capital
As at 31 March 2016, the Bank had an authorised share capital of 2,500,000,000 shares of 100 fils each comprising
2,049,359,158 issued and fully paid up shares of KD 0.100 each.
In 2014, the Bank completed a rights issue of 216,000,000 ordinary shares, in which it raised KD 102.6 million (Rights
Issue), and which was approved by an Extraordinary General Meeting of the Bank held on 31 March 2014. Shareholders
were offered 124.44 shares per 1,000 shares at an offer price of KD 0.475 per share comprising a nominal value of KD
0.100 per share and a premium of KD 0.375 per share. The Rights Issue was fully subscribed resulting in an increase in
share capital of KD 21.6 million and a share premium of KD 81.0 million. The purpose of the Rights Issue was to
increase the equity base of the Bank in order to support the continued growth of the Bank's assets.
85
Ownership and Dividends
As at 31 March 2016, the following shareholders had holdings in excess of 5.0 per cent. of the Bank's issued ordinary
share capital:
Shareholders
Kuwait Projects Company (Holding) K.S.C.** .......................................
United Gulf Bank B.S.C. .........................................................................
Public Institute for Social Security ...........................................................
*
**
Percentage of
shares*
41.2
15.0
7.7
Number of ordinary
shares (in million)
843.8
307.5
157.5
Calculated as number of shares held divided by the paid-up share capital.
See "Parent Company" below for details on shareholders.
At the Annual General Meeting of shareholders of the Bank held on 20 April 2016, the board of directors approved a
cash dividend of 18 fils per share for the financial year ended 31 December 2015. At the Annual General Meeting of the
shareholders of the Bank held on 22 March 2015, the shareholders of the Bank approved a cash dividend of 15 fils per
share for the financial year ended 31 December 2014 (compared to a cash dividend of 7 fils per share for the year ended
31 December 2013) and an issuance of 5 bonus shares per 100 shares for the financial year ended 31 December 2014
(compared to an issuance of 7 bonus shares per 100 shares for the year ended 31 December 2013).
History of acquisitions and disposals
In 1997, Kuwait Projects Company (Holding) K.S.C. (Closed) (KIPCO), a multi-sector operating holding company
headquartered in Kuwait with operating entities across the GCC and the wider Middle East and North Africa (MENA)
region, acquired a majority shareholding in the Bank during the privatisation process of the State of Kuwait. The
privatisation process of the Government, which began in 1997, reduced Government ownership of the Bank from 61.0
per cent. to less than 10.0 per cent. KIPCO currently represents the single largest shareholder of the Bank. As at 31
March 2016, KIPCO had a consolidated (direct and indirect) shareholding of 64.7 per cent. in the Bank. Following the
change in ownership structure, the Bank realigned its strategic focus in line with the overall strategy of KIPCO and
changed its management style from that of a government-owned entity to a private sector, profit-orientated entity.
In mid-2008, KIPCO undertook a strategic reorganisation of its financial services businesses (the Reorganisation).
KIPCO streamlined its financial services businesses into three major segments: commercial banking, asset management
and investment banking and insurance. As part of the Reorganisation, the Bank was reorganised into a regional
commercial banking group through the acquisition of stakes in JKB, GBA, BoB and TIB that were held by UGB for
U.S.$725 million (KD 194 million) in aggregate.
Accordingly, in July 2008, the Bank acquired from UGB, an interest of 43.9 per cent. in JKB, which together with the 7.2
per cent. previously held by the Bank gave it a controlling 51.2 per cent. equity interest in JKB. In 2009, the Bank
acquired a 60.0 per cent. interest in GBA (which was increased to 91.1 per cent. in 2010) and a 45.3 per cent. interest in
BoB (which was increased to 51.8 per cent. in 2010). During the second quarter of 2010, the Bank acquired a 76.6 per
cent. stake in TIB, which together with the 10 per cent. previously owned by the Bank, gave it a controlling 86.7 per cent.
equity interest in TIB.
In December 2012, having obtained the requisite approvals from the regulatory authorities in Kuwait and Turkey, the
Bank completed the acquisition of a 99.3 per cent. stake in Eurobank Tekfen from Eurobank EFG. Following the
acquisition, Eurobank Tekfen is now operating under the name of Burgan Bank A.Ş.-Turkey.
On 30 December 2015, the Bank completed the sale of its 51.2 per cent. controlling stake in its Jordanian subsidiary,
JKB, to Al Rawabi International Co., a subsidiary of KIPCO (JKB Sale) for a consideration of KD 191.1 million,
resulting in a gain of KD 6.5 million (see " – Strategy").
Burgan Bank's subsidiaries as at 31 March 2016
As at 31 March 2016, the Bank had a controlling interest in each of the banks listed below and such banks have all been
consolidated into the accounts of the Bank:
Name
Country of
incorporation
86
Date of initial
purchase
Effective holding
(%)
Gulf Bank Algeria S.A. ...............................
Bank of Baghdad P.J.S.C. ...........................
Tunis International Bank S.A. ....................
Burgan Bank A.Ş. Turkey............................
Algeria
Iraq
Tunisia
Turkey
April 2009
April 2009
June 2010
December 2012
86.01
51.79
86.70
99.26
For further details, see the "Key Subsidiaries" section below.
Strategy
The Bank has adopted a multi-dimensional strategy of organic growth to strengthen its position in existing markets and
inorganic growth to achieve greater geographic diversification. Diversification will enable the Bank to capitalise on the
growth enjoyed in other markets and also to ensure a better distribution of risks.
As part of its organic growth strategy, the Bank identified the following key elements of its strategic plan:
(a)
Gain in market share: The Bank is focused on enhancing its competitive position in the corporate, private and
retail banking segments in Kuwait through the expansion of its customer base, introduction of new products and
services within pre-defined risk parameters that meet the needs and expectations of its customers, servicing
customers through a focused sales force and developing strong technology platforms for the distribution of its
products.
In order to achieve these strategic objectives, the Bank is focusing on:

establishing credit relationships with large multinationals undertaking large-scale projects in Kuwait;

focusing on international clients through club or syndication facilities on a selective basis;

developing a sales force focused on identifying customer needs and providing tailor-made solutions;

expanding private banking operations into a full-fledged private bank; and

growing retail banking through a focused approach to building its technology platforms, increasing
customer accounts, increasing customer deposits and product development.
(b)
Focus on banking fundamentals: The management of the Bank is continuing to focus on core banking
fundamentals (including prudent risk management practices across the Group, growth of non-interest income
lines and building on synergies across the Group) and has embarked on initiatives to implement the same
strategy across various businesses and support functions across the Group. By focusing on banking
fundamentals, the Bank and its subsidiaries have been delivering strong financial performance even in the more
recent challenging global economic environment.
(c)
Consolidation of existing subsidiaries: The Bank is focused on achieving synergies through integration and
realignment of the Bank's subsidiaries. The following are key initiatives of the Bank across the jurisdictions in
which it operates:

building synergies by cross-selling products and services;

expanding its branch reach, ATM network, e-banking and mobile banking platforms;

rationalising its cost structure and establishing a mechanism for intra-group funding;

implementing a common core banking platform across a majority of subsidiaries;

aligning Group risk management policies and procedures; and

establishing a solid regional brand that is based on a clear and simple brand architecture.
As a part of its inorganic growth strategy, and in line with the KIPCO group's regionalisation strategy, the Bank
will continue to focus on achieving the following strategic objectives:
(i)
Expanding its local and regional footprint and building scale: The Bank aspires to achieve the returns,
scale and consistency of top-tier banks in the MENA region. While the Bank believes its organic
growth strategy will help maintain profitability, to achieve its growth targets, the Bank believes it
would need to increase the scale of its activities primarily by expanding its international operations.
The Bank will continue to look for opportunities outside of Kuwait in countries with high demographic
growth in population, improving GDP trends and low penetration and barriers to entry relative to
87
mature markets in the region. The inorganic approach to expansion has historically been preferred by
the Bank due to difficulties in establishing green-field operations including as a result of licensing
issues, longer gestation periods and learning curves for new set-ups. However, the inorganic approach
to regional expansion has significant challenges such as a limited number of potential targets, lack of
information and transparency, perceived need for professional resources, and possible domestic
political resistance in the selected markets that the Bank may identify from time to time.
(ii)
(d)
Adding supplementary capabilities to drive growth: The Bank has been and continues to seek
supplementary capabilities such as private banking and wealth management through inorganic growth.
The Bank also intends to develop its asset management capabilities in order to drive future growth, see
"Key Subsidiaries - Burgan Bank A.Ş. – Turkey" below for further details.
Maintaining a Strong Capital Base: Management of the Bank's capital base is critical to the growth of the
Bank's group, both organically and through strategic investments. As part of this strategy, the Bank completed
the JKB Sale. The JKB Sale resulted in an increase in the Bank's Common Equity Tier 1 (CET) capital by KD
75.0 million to 11.7 per cent. and a capital adequacy ratio (CAR) of 15.6 per cent. as at 31 December 2015. The
purpose of the JKB Sale was to reduce the risk weighted assets of the Bank and to increase the capital base of
the Bank in order to: (i) support the continued diversification of the Bank's strategy in markets with higher
growth potential; and (ii) enhance the Bank's earnings and shareholder returns in the short- to medium-term, by
enabling the Bank to grow its loan portfolio by channelling surplus capital into its credit or investment
portfolios. The Bank has sought to limit the impact of the decline in the Group's net income from the JKB
deconsolidation by redirecting the additional capital from the proceeds of the JKB Sale into income-generating
assets in markets with higher growth potential (the Bank's return on average equity increased from 10.9 per cent.
as at 31 December 2014 to 11.7 per cent. as at 31 December 2015).
Competitive Strengths
The Bank believes that its business is characterised by the competitive strengths discussed below, and that these
competitive strengths position the Bank to successfully implement its strategy and to continue its growth plans.
(i)
Leading regional presence and growing international network: Through a combination of its own branches,
representative offices, subsidiaries and associates, the Bank is present in 8 countries across the MENA region
and Eastern Europe. The Group has grown considerably during 2014 and 2015 and has one of the largest
regional branch networks with 184 branches across Kuwait, Turkey, Algeria, Iraq, Tunisia and Lebanon as at 31
March 2016. In 2015, the Bank continued the expansion of its international offices. The international offices are
hubs specifically created to help improve work streaming and efficiencies between the subsidiaries within the
Group and thus increase coordination and business generation. Two such offices were initiated in 2014, one in
Turkey, supporting the Private Banking Division, and the other in Malta, supporting trade finance operations
within the Group and the Bank's factoring and forfeiting business. In addition, the Bank opened a representative
office in the Dubai International Financial Centre in 2015. Given the Bank's successful international expansion
undertaken through a combination of organic growth and acquisitions, the Bank believes that it is well
positioned to further enhance its international presence. The Bank also believes that its continued international
growth and expansion will diversify the Bank's business activities and geographical coverage and, in turn,
reduce its reliance on the Kuwaiti market.
(ii)
Strong operating performance, financial position and risk management: The Bank has historically maintained
stable growth across its operations in Kuwait and more recently the MENA region. For the three months ended
31 March 2016, the year ended 31 December 2015 and the year ended 31 December 2014, the Bank had net
profit of KD 12.0 million, KD 87.9 million and KD 72.7 million and total assets of KD 7,122.1 million, KD
6,824.7 million and KD 7,751.4 million, respectively. The Bank's prudent credit policy and effective utilisation
of risk management tools has enabled the Bank to maintain a high-quality loan portfolio. The Bank believes it
has well-defined and conservative lending policies and procedures. The Bank has thus been able to build its
reserves, which as at 31 March 2016 and 31 December 2015 stood at KD 267.8 million and KD 255.2 million,
respectively, while its coverage ratio* (net of collaterals) declined slightly to 328.1 per cent. as at 31 March
2016, compared to 331.9 per cent. as at 31 December 2015. In addition, the Bank's non-performing assets (net
of collateral) remained stable at 1.40 per cent. of gross facilities, while its capital adequacy ratio under Basel III
as at 31 March 2016 was 16.4 per cent. The Bank believes that its strong operating performance and financial
88
condition and prudent risk management will enable the Bank to take advantage of new opportunities in the
MENA region and Turkey thus enabling it to continue its international growth and expansion strategy.
(iii)
Stable funding base: The Bank's funding includes institutional, government and quasi-governmental entities'
deposits in Kuwait which are contracted on a commercial basis and are regarded by the Bank as relatively stable
and a low-cost source of funding. As at 31 March 2016, the Bank's total funding from deposits by government
and quasi-governmental entities accounted for 20.6 per cent. of its total deposits in Kuwait (or 14.6 per cent. of
total group deposits). 70.9 per cent. of the Bank's assets at 31 March 2016 were funded by deposits from
customers and other financial institutions, 10.7 per cent. by inter-bank funding, 4.2 per cent. by other
borrowed funds, 2.6 per cent. by other liabilities and the balance by its capital and reserves.
(iv)
Culture of excellence and commitment to training and development of personnel: The Bank has created a culture
that is customer-focused and focused on achieving strong operational performance. This culture is a key
component in recruitment, selection, learning and development processes and the performance evaluation of
employees and counterparties. The Bank has created and implemented a number of training and development
programmes for both domestic and international staff. The Bank has built a competitive advantage by investing
in the development of its employees and that of their teams and by encouraging and cultivating the growth of
potential leaders. Personal performance and contribution are promoted at the Bank. Every employee has
personal performance objectives that align with the Bank's strategic direction and reflect the culture of respect
and care for customers and support for the communities in which the Bank operates.
(v)
Experienced management team and commitment to corporate governance: All of the senior members of the
Bank's Board and Executive Management team have extensive knowledge of the banking sector in Kuwait and
the MENA region and bring with them a wealth of experience in leading financial institutions with an
international presence. See "Management" below. Further, management believes that corporate governance is a
matter of vital importance and a fundamental part of the business practices of the Group and that the
combination of an existing team of highly experienced professionals, coupled with best practice corporate
governance standards, positions the Group well for future growth. The Bank is strongly committed to the
maintenance of a strong corporate governance practice and framework. The governance practice at the Bank has
been designed to ensure that the Bank is effectively managed and that financial industry standards and the KSE
and the CBK requirements are fully met. The governance framework, which is underpinned by the Corporate
Governance Manual and related policies, clearly delineates the separate roles of the Board and the Bank's
management. The Audit Committee monitors developments in the governance area and updates its governance
practices to ensure that the Bank continues to maintain the most appropriate standards of governance. See
"Description of the Guarantor - Risk Management" and "Management" for further information.
Rating
As at the date of this Base Prospectus, the Bank had the following ratings:

Standard & Poor's: BBB+ for long-term issuer credit and A-2 for short-term counterparty credit, with a stable
outlook;

Moody's: A3 for long-term bank deposits and P-2 for short-term deposits, with a stable outlook; and

Fitch: A+ for long-term issuer default with a stable outlook and F1 for short-term issuer default.
Recognition and Awards
A number of external agencies have recognised the Bank's initiatives and strategy for growth and it has received various
accolades:
2015

"Best Domestic Retail Bank of the Year" award from "Asian Banking and Finance Magazine's Wholesale
Banking Awards 2015";

"Best Credit Card Initiative of the Year in Kuwait" award from "the Asian Banking and Finance Magazine's
Wholesale Banking Awards 2015";

"Best Advertising campaign of the Year in Kuwait" award from "the Asian Banking and Finance Magazine's
Wholesale Banking Awards 2015";
89

"Kuwait Domestic Cash Management Bank of the Year" award from "the Asian Banking and Finance
Magazine's Wholesale Banking Awards 2015";

"Best Treasury and Cash Management Provider in Kuwait" award from "Global Finance Magazine"; and

"Quality Recognition Award" from J.P. Morgan; and

"Best Co-Branded Credit Card Award” from “The Banker Middle East".
2014

"Best Private Bank in Kuwait" from "Capital Finance International";

"Best Domestic Cash Management Bank of the Year" award from "Asian Banking and Finance"
Wholesale Banking Awards 2014"

"Best Banking Group in Kuwait" award from "World Finance";

"European Award for Best Practices" from "European Society for Quality Research & European Convention for
Excellence"; and

"Best Investor Relations in GCC" award from "World Finance".
Magazine's
BUSINESS OVERVIEW
CORE AREAS
The Bank is engaged in the provision of conventional banking and investment services to individuals and corporates. The
Bank has a significant presence in the corporate and financial institutions sectors in Kuwait, the wider MENA region and
Turkey and is also focused on growing its retail and private banking customer base.
The following tables present certain financial results of the Bank as broken down by business segment.
Corporate
Banking Group
KD '000's
Private and
Retail Banking
Group
KD '000's
Treasury and
Investment
Banking Group
KD '000's
Total
KD '000's
As at / for the three months ended 31 March
2016 (Unaudited)
Operating income ................................................
Total assets ..........................................................
As at / for the three months ended 31 March
2015
(Unaudited / Restated)
Total assets
17,016
1,975,095
10,797
1,174,981
7,578
2,172,926
35,391
5,322,902
16,385
1,741,347
9,417
1,087,845
11,026
2,168,119
36,828
4,997,311
Total assets ..........................................................
65,712
1,808,515
48,134
1,145,607
48,183
2,064,522
162,029
5,018,644
As at / for the year ended 31 December 2014
(Restated)
Total assets ..........................................................
70,323
1,786,446
41,479
1,084,779
36,488
2,001,272
148,290
4,872,497
(Unaudited restated)
90
Total assets ..........................................................
70,721
1,761,368
37,715
1,050,716
17,107
1,812,663
125,543
4,624,747
The following provides an overview of the business lines of the Bank's core operating areas:

Corporate Banking Group (CBG) provides comprehensive products and services to corporates and financial
institutions including lending, deposits, trade services, foreign exchange services, advisory services. For the
three months ended 31 March 2016, the Bank's operating income from the CBG was KD 17.0 million compared
to KD 16.4 million (restated) for the three months ended 31 March 2015. For the year ended 31 December 2015,
the Bank's operating income from the Corporate Banking Group was KD 65.7 million compared to KD 70.3
million (restated) for the year ended 31 December 2014 and KD 70.7 million (unaudited restated) for the year
ended 31 December 2013. The Bank's total assets from the CBG as at 31 March 2016 were KD 1,975.1 million
compared to KD 1,808.5 million as at 31 December 2015, KD 1,786.4 million (restated) as at 31 December
2014 and KD 1,761.4 million (unaudited restated) as at 31 December 2013.

The Private and Retail Banking Group (PRG) includes the Private Banking Division and the Retail Banking
Division. It provides a wide range of products and services to retail and private bank customers including but
not limited to customer loans, deposit accounts, credit and debit cards, and foreign exchange services.
For the three months ended 31 March 2016, the Bank's operating income from the PRG was KD 10.8 million
compared to KD 9.4 million (restated) for the three months ended 31 March 2015. For the year ended 31
December 2015, the Bank's operating income from the PRG was KD 48.1 million compared to KD 41.5 million
(restated) for the year ended 31 December 2014 and KD 37.7 million (unaudited restated) for the year ended 31
December 2013. The Bank's total assets from the PRG amounted to KD 1,175.0 million as at 31 March 2016
compared to KD 1,145.6 million as at 31 December 2015, KD 1,084.8 million (restated) as at 31 December
2014 and KD 1,050.7 million (unaudited restated) as at 31 December 2013.

Treasury and Investment Banking Group (TIBG) is responsible for treasury and asset liability and liquidity
management, investment services and fund management and any residual transfer pricing. The TIBG also
provides products and services to banks including, lending, deposits, money market and foreign exchange
transactions.
For the three months ended 31 March 2016, the Bank's operating income from the TIBG was KD 7.6 million
compared to KD 11.0 million (restated) for the three months ended 31 March 2015. For the year ended 31
December 2015, the Bank's operating income from the TIBG was KD 48.2 million compared to KD 36.5
million (restated) for the year ended 31 December 2014 and KD 17.1 million (unaudited restated) for the year
ended 31 December 2013. The Bank's total assets from the TIBG amounted to KD 2,172.9 million as at 31
March 2016 compared to KD 2,064.5 million as at 31 December 2015, KD 2,001.3 million (restated) as at 31
December 2014 and KD 1,812.7 million (unaudited restated) as at 31 December 2013.
As at 31 December 2015, retail loans made up 12.0 per cent. and corporate loans made up 88.0 per cent. of the Bank's
aggregate loan portfolio, 67.6 per cent. of which comprises loans issued to individuals or corporates in Kuwait. In
addition, a substantial proportion of the total loan portfolio comprised loan exposures to related parties, see "Risk Factors
- Regulatory Risks - Ownership Concentration and Related Party Exposures".
The following provides an overview of the Bank's international operations:

BBT was originally founded in 1989 and is a mid-sized bank with a focus on the corporate segment and is
expanding its presence in selective retail businesses, see "Key Subsidiaries - Burgan Bank A.Ş. – Turkey" below.

GBA was established on 15 December 2003 as a commercial bank in Algeria and, since its establishment, has
aimed to contribute to the economic and financial development of Algeria and to provide professional services
with high-quality products, see "Key Subsidiaries - Gulf Bank of Algeria S.A." below.

BoB was established in 1992 and has a customer base of small and medium-sized enterprises, large corporate as
well as individual customers. It was the first licensed private bank to commence banking operations in 1992 in
Iraq after the change in the banking regulations by the Central Bank of Iraq, see "Key Subsidiaries - Bank of
Baghdad P.J.S.C." below.

TIB was established in June 1982 as the first fully licensed offshore banking corporation in Tunisia, see "Key
Subsidiaries - Tunis International Bank S.A." below.
91
Corporate Banking Group
The CBG provides a wide range of products and services for businesses in both commercial and industrial sectors in
Kuwait. The CBG participates in financing many significant infrastructure, petro-chemical and industrial projects in
Kuwait through syndicated loans and direct bilateral financing. The Bank has been able to maintain and grow its
customer base through a track record of well-established corporate banking relationships.
In order to provide tailor-made products and specialised services to the corporate sector, the CBG has structured its
operations into six main units:
Contracting Unit
This unit provides working capital financing to major contracting companies in Kuwait with a full range of credit
instruments, including loans, letters of credit and letters of guarantee. This unit also designs financing packages for the
development of several prominent projects, including schools, hospitals, roads and highways, housing complexes, hotels,
health clubs, resorts, shopping malls, chalets and other projects in Kuwait.
Trading and Automotive Unit
This unit focuses on extending a wide range of banking services and credit lines to the trading sector as a whole, with an
emphasis on the automotive industry and related entities. The Bank has corporate relationships with most of the prime
car importers in the industry and provides customised product and services packages to suit key business requirements of
this sector. This unit also finances major supply contracts to the government and oil sectors.
Services and Energy Unit
This unit works to establish banking and credit relationships with customers in the services and energy sectors in Kuwait.
The Bank's services sector customers are mainly involved in contractual cleaning, catering and agriculture, as well as the
provision of technical labour and security guards to various governmental institutions. The energy sector customer base
includes maintenance, technical and mechanical contractors, as well as suppliers of oil-related equipment and accessories
to the public sector oil companies.
Investment and Real Estate Market Unit
This unit specialises in providing short- and medium-term financing to entities such as holding companies and real estate
companies including those investing in owning and developing various real estate sectors (residential, commercial, buildoperate-transfer), predominantly in Kuwait, GCC countries and the wider MENA region.
Trading and Manufacturing Unit
This unit deals with wholesale and retail trading entities in addition to the industrial sector in Kuwait. It provides trading
companies with the financial assistance required for a variety of business sectors, from food to sophisticated engineering
and electronic products. It services all sizes of trading businesses. This unit also provides working capital to
manufacturing companies in Kuwait, with a full range of credit instruments, including, loans, letters of credit and letters
of guarantee. This unit offers both standard financing packages as well as customised solutions to meet the particular
needs of its customers.
International Banking Unit
This unit provides banking services to multinational corporations operating in Kuwait and the GCC. It provides financial
and consulting assistance and participates in financing major infrastructure, petro-chemical and industrial projects
performed by these multinationals in Kuwait through syndicated loans.
The core units referred to above are in turn supported by the Corporate Banking Branch. Among the new arrangements
aimed at improving the service and streamlining the operations of the CBG, a specialised Corporate Banking Branch was
introduced in 2009 to cater exclusively to the needs of corporate customers.
The services provided by the Corporate Banking Branch include:
92
B-Dinar Account
The B-Dinar Account is a product which the Bank set up in accordance with Kuwaiti labour law to provide services for
employees of corporate customers. This account allows employees of the Bank's corporate customers easy access to their
salaries and offers other benefits, including no withdrawal charges, quick and direct salary crediting, 24-hour access to all
of the Bank's ATMs, no minimum balance requirement and access to over 2,973 point of service terminals in Kuwait as
at 31 December 2015.
Corporate Cash Management Services
The Bank has developed a range of cash management products and services designed to offer solutions that optimise cash
flows for its corporate customers in Kuwait and the GCC.
The secure electronic banking facility is one of the cash management services offered by the Bank. It allows customers
online access to their accounts, to initiate payment instructions and perform other banking functions in a secure manner,
anywhere and at any time. This facility aims to reduce processing costs of domestic and global payments for corporate
customers, saving them time and money.
Financial Institutions Division
The Financial Institutions Division is responsible for all relationships with financial institutions and banks. It acts as a
focal point for correspondent banking relationships, in order that customer requirements can be actively supported and
the Bank can execute its own foreign transactions. This includes trade-related transactions for imports and exports and
arranging guarantees from banks to support overseas corporates working or providing services in Kuwait as well as to
Kuwaiti corporates venturing abroad. The Financial Institutions Division is also responsible for developing long-term
relationships and meeting all the banking requirements of local non-banking financial institutions.
In addition, the division has raised the Bank's international profile by organising high-level meetings with banks in Asia,
Europe and the United States as well as by attending and participating in industry events in other regions such as the
annual meeting of the Asian Development Bank and of the SWIFT International Banking Operations Seminar. Key
contacts and potential partners have also been identified, with the aim of concentrating business and developing bilateral
relationships. These initiatives support the Bank's own business, its subsidiaries and associated entities and that of its
growing customer base, which is particularly relevant given the Bank's ongoing regional expansion. The division has
strived for greater cooperation within these key relationships, to take full advantage of business opportunities for
customers in Kuwait and in other countries where the Bank and its subsidiaries or associates operate, for example,
outward business from Kuwait can be reciprocated by correspondents directing their business to the Bank's subsidiaries
in other countries. An important aspect of international relationships is the sourcing of international transactions from
outside Kuwait, which has contributed to portfolio development and diversification through participation in bilateral
funding and syndicated loans (both in the primary and secondary markets) and in trade-related risk participations (which
are tranches of a trade transaction purchased from leading correspondent banks, which seek to sell down part of their
portfolio). The Bank undertakes this on a selective basis, focusing on the leading banks in a particular country which
meet the risk criteria and appetite of the Bank. See also "Description of the Guarantor - Risk Management" below.
Private and Retail Banking Group
The PRG's products and services are offered through two distinct divisions, the Private Banking Division (PBD) and the
Retail Banking Division (RBD).
Private Banking Division
The PBD offers bespoke solutions and traditional banking services to Kuwaiti high-net-worth individuals, as well as
more traditional banking services in support of these services.
The PBD offers preferential products and services to meet the diverse needs of its customer base. This includes enhanced
flexibility and service through a dedicated relationship manager, preferential terms on loans, deposits, foreign exchange
transactions, gold accounts (interest-bearing current accounts) and other facilities.
Following a customer-centric approach, the Bank intends to expand its product offering, enhance offshore investment
capabilities and widen its distribution channels through strong technology-driven delivery platforms.
93
The PBD has relationships with offshore wealth management service providers to provide offshore wealth management
and estate planning services to this division's customers. The division has the ability to offer a diverse range of
investment products and seeks to continually diversify its offering of investment funds to customers.
Retail Banking Division
As at 31 December 2015, the RBD had a network of 28 branches and 127 ATMs in Kuwait. The Bank plans to further
expand in strategic areas of targeted customer growth.
The RBD offers a wide range of products and services to its customers, including a variety of savings and deposit
accounts, credit, debit and pre-paid cards, and customer loans. However, the Bank does not undertake residential
mortgage lending in line with the current local regulations. See also "Description of the Guarantor - Risk Management"
below.
The RBD's card offering includes credit cards, under the MasterCard and Visa payment processing systems, and debit
card products under the Visa brand. Recently, the Bank launched the multi-currency pre-paid card, a first in the Kuwaiti
market. In May 2014, the Bank, Qatar Airways (the flag carrier airline of Qatar) and MasterCard announced the launch
of the new Burgan Bank Qatar Airways co-branded MasterCard credit card, which is intended to provide "marketleading" experiences and benefits. The Burgan Bank Qatar Airways card, with its platinum and gold variants, will be
offered on the MasterCard network platform allowing the Bank's customers access to combined benefits and privileges
offered by the Bank, MasterCard and Qatar Airways.
The RBD's product range is complemented by strong alternative delivery channels, including the 24/7 telephone banking
service "Burgan Direct" and the internet banking platform "Burgan Online", which allow customers to make payments,
submit requests and make enquiries over the telephone or internet. The provision of an enterprise e-payment platform
(through the provider, ACI Worldwide) has allowed the Bank to provide online banking services for daily banking
activities and online payment for goods and services through the Bank's secure electronic platforms. Further, the RBD
utilises mobile technology which offers customers the use of a smart phone "app" which allows customers to complete a
wide range of banking transactions on their phone.
The Bank has a well-defined policy on customer segmentation and is in the process of further simplifying customer
segmentation, which would strengthen customer relationships. Under the new structure, the Bank would have three
separate customer segments: basic, regular and premier. The use of customer segmentation assists the Bank to identify
products and services that serve specific customer groups and individuals through the understanding of each segment's
needs and requirements, with a focus by the Bank on premier clients. Since 2009, the Customer Relationship
Management (CRM) system has been an integral part of the RBD to support the Bank's transition to a more customercentric bank. Further enhancements to the CRM system are planned to be implemented in the coming months to drive the
system's effectiveness and to improve its functionality.
Treasury and Investment Banking Group
The TIBG has the responsibility for all domestic and international wholesale market transactions and is also responsible
for managing the proprietary portfolio of the Bank.
Treasury Division
The objective of the division is to manage the Bank's financial market risks in line with its overall strategic direction. The
Treasury Division works closely with the Asset and Liability Committee (ALCO) and is actively involved in the
management of the bank-wide balance sheet, sourcing efficient funding, providing risk solutions to both internal and
external client bases, managing foreign exchange translation and related risks, and the management of customer
relationships. This is undertaken with strict adherence to the legal, compliance and limit framework approved by the
Board and the regulators.
The division is sub-divided into the following business units:

the Asset and Liabilities Management unit, which is responsible for the balance sheet management and
optimisation, the diversification of funding sources of the Bank, contingency funding requirements of the Bank,
the management of liquidity risk, interest rate and foreign exchange translation risks associated with the Bank's
balance sheet and any hedging thereof;

the Capital Markets unit, which provides interest rate hedging capabilities and solutions to both internal and
external clients of the Bank;
94

the Money Market unit, which is responsible for overseeing and managing trading activities with regard to both
conventional and Islamic money market instruments in both local and foreign currencies, managing the excess
liquidity of the Bank and acting as the sole point of contact for all fixed and floating interest rate pricing
requirements for all the Bank's business units and subsidiaries;

the FX Trading unit, which, via an in-house online pricing platform or directly, is responsible for providing
foreign exchange coverage for the Bank's operations, managing foreign exchange transactions for the Bank in
most regional and major currencies, interbank pricing in the domestic market and actively trading in foreign
currencies within defined limits; and

the Treasury Sales Desk, which works closely with all treasury business units within the Bank and is responsible
for relationship management with all the internal and external stakeholders providing basic to sophisticated
financial risk solutions in most products to the Bank's client base.
Through its staff and specialised systems, the Treasury Division provides the Bank and its customers with instant access
to the global financial markets. Experienced dealers execute transactions efficiently by offering competitive prices to
customers.
The Treasury Division also manages the Bank's debt capital raising exercises.

In 2010, Burgan Finance No. 1 (Jersey) Limited (incorporated with limited liability under the laws of Jersey), a
special purpose entity established by the Bank, issued U.S.$400 million 7.875 per cent. subordinated notes due
2020. The notes met the then-applicable requirements to be treated as Tier 2 eligible capital under Basel II
regulations issued by the CBK. In 2012, the Bank issued KD 100 million bonds due 2022 (the 2012
Subordinated Bonds). The issuance of the 2012 Subordinated Bonds met the requirements to be treated as Tier
2 eligible capital under Basel II regulations issued by the CBK. On 30 September, 2014, the Bank through
Burgan Tier 1 Financing Limited (a newly incorporated special purpose company with limited liability in the
Dubai International Financial Centre) issued Perpetual Tier 1 Capital Securities, amounting to U.S.$ 500
million. In December, 2015, the Bank repurchased its U.S.$400,000,000 7.875 per cent. Subordinated Notes due
2020 pursuant to a tender offer. In March 2016, the Bank issued KD 100 million Tier 2 bonds due 2026 (the
2016 Subordinated Bonds). The 2016 Subordinated Bonds met the requirements to be treated as Tier 2 eligible
capital under Basel III regulations issued by the CBK .
Investments Division
The Investments Division is mainly responsible for managing the proprietary portfolio of the Bank which is diversified
globally across the fixed income and equity (public and private) asset classes. The division follows a comprehensive topdown asset allocation process to select assets that offer the optimal risk and reward for the Bank.
The division invests in fixed income asset classes, which are rated in accordance with, and meet the investment criteria
of, CBK guidelines, under which the average portfolio of assets is required to be rated as investment grade. The division
also works closely with the product development unit to develop new investment products for the Bank's customers.
The following table sets out capital requirements by equity groupings as at 31 December 2015:
INVESTMENTS:
Equities .............................................................................................................
Fixed income instruments .................................................................................
Any other investments ......................................................................................
Total .................................................................................................................
Publicly traded
KD 000's
65,669
224,989
7,003
297,661
CAPITAL REQUIREMENTS BY EQUITY GROUPINGS:
Investments available for sale ...........................................................................
Investments held to maturity .............................................................................
Investments designated through profit & loss ...................................................
Investments held for trading .............................................................................
Investment in associates....................................................................................
Total .................................................................................................................
In addition to the Bank's proprietary portfolio, the division also manages the Burgan Equity Fund.
95
Privately held
KD 000's
162,481
40,402
69,581
272,464
50,049
8,098
11,245
731
4,125
74,247
The Burgan Equity Fund was established in December 2001 and generated an annual return of negative 11.9 per cent. in
2015 and 0.5 per cent. in 2014, and has a cumulative rate of return (measured by the cumulative growth in the Burgan
Equity Fund's NAV) of 116.9 per cent. up to 31 December 2015, with assets under management of KD 69.1 million as at
31 December 2015. The division also collaborates with the PBD in the assessment and distribution of financial products
offered by third party financial institutions. The Burgan Equity Fund invests exclusively in local securities listed on the
KSE. In particular, it is primarily focused on investing in the Kuwaiti banking and industrial sectors, with a view to
maximising long-term gains.
As at 31 December 2015, the Burgan Equity Fund had net assets of KD 69.1 million and held assets in various sectors
including: banking sector (27.8 per cent.), industrial sector (15.2 per cent.), financial services sector (11.2 per cent.), real
estate sector (11.4 per cent.) consumer goods sector (5.5 per cent.), basic materials sector (5.5 per cent.),
telecommunications sector (4.7 per cent.), consumer services sector (1.8 per cent.), oil and gas sector (1.0 per cent.), and
cash and cash equivalents (16.0 per cent.).
SUPPORT FUNCTIONS
Operations Group
The Operations Group (OG) assists in the support and execution of the strategic initiatives of all the business lines of the
Bank. The OG consists of the Operations Strategic Development, General Services and Administration (GSA) and
Banking Operations comprising Central & Branch operations (OPS). The function of each of these sub-groups is briefly
described below.
(a)
Operations Strategic Development is responsible for the management of the Business Continuity Planning
(BCP), Operations Project Office (OPO) and Organisation and Methods (O&M) units.

BCP is responsible for defining the policies related to Business Continuity and Disaster Recovery (DR)
procedures in co-ordination with all departments of the Bank. The unit is also responsible for the coordination of the regular testing of DR activities.

OPO is responsible for supporting and facilitating the implementation of large projects that support the
Bank's business strategies.

O&M is responsible for the documentation and publication of all the Bank's policies and procedures. It
is responsible for ensuring that the Bank retains its ISO 9001:2008 Quality Certification for all its
processes. The certification is an assurance that the Bank's internal policies and procedures meet
internationally recognised quality standards that are rigorously applied, independently reviewed and
certified by a standard body each year.
(b)
GSA provides administrative support in areas such as procurement, security, archiving and maintenance. The
purchase of equipment, furniture, stationery and materials is processed through GSA, which is responsible for
sourcing requirements, competitive bidding and tendering (where required) through a transparent procurement
process supported by adequate due diligence. GSA is also responsible for the Bank's security monitoring
systems and has been involved in the design, approval, tender, negotiation and construction of new branches at
various locations.
(c)
Banking Operations provides the Bank with central processing capabilities in terms of treasury, investment,
trade finance, local and foreign currency transfers, loans, check clearing, salary payments and processing. The
area utilises technology to drive down processing costs, to automate processes, and to create efficient output.
OPS provides the branch network with the necessary support required for the smooth functioning of each of the
branches. The team is also involved in the training of all new recruits on operational aspects.
Information Technology Group
The Bank's IT group is organised into the following three areas, each reporting to the Chief Information Technology
Officer (CITO):
(a)
Operations;
(b)
Development; and
(c)
Project Management Office (PMO).
96
The mission of the IT group is to deliver and maintain timely, cost-effective, resilient and scalable IT solutions and
services in support of the business strategy through business engagement and research.
To achieve this, the IT group continually engages with key users to ensure IT is aligned with the business, ensures that IT
staff retain updated domain knowledge, conducts an annual IT survey to gauge user perceptions on services delivered and
regularly assesses skills against requirements to identify any skills gaps and implements training requirements. In
addition, the IT group controls all IT-related acquisitions and implementations and constantly monitors operating
expenses to identify efficiencies and savings.
The CITO also has a mandate to coordinate selected IT-related activities across the Bank's subsidiaries.
The CITO is a member of the Management Executive Committee (MEXCO) and reports to the Group Chief Operations
Officer (GCOO).
Human Resources and Development Group
The Human Resources and Development Group is responsible for working with senior management to develop strategies
and drive human resources policies that are best suited to deliver the business objectives and aspirations of the Bank. The
group directs the development, implementation, communication and legal application of corporate-wide policies and
programmes to build the capabilities and skills of the Bank's staff including but not limited to compensation, benefits,
training and development and recruitment.
The Bank seeks to nurture its staff, reward them with attractive benefits programmes and provide them with suitable
career development and growth opportunities. It achieves this through significant investment in staff training and
development at all levels through specific programmes for executives, leadership development and induction training
programmes as part of the Kuwaiti national development initiative.
The Bank's total number of employees as at 31 March 2016 was 717 compared to 732 as at 31 December 2015, 760 as at
31 December 2014 and 722 as at 31 December 2013.
Strategic Business Development Group
The head of the Strategic Business Development Group reports directly to the Group's CEO (GCEO). The group is
responsible for strategic business development and works with all department and division heads and senior executive
officer(s) to identify and clarify business development needs and objectives. The head of the group leads a team,
supporting the GCEO to maximise the value of the Group's assets through strategic planning of investment activities,
providing assistance in evaluation and structure of mergers and acquisitions, investments and financing-related
opportunities including due diligence, valuation and negotiations.
The group also reviews summary reports of the business operations, monitors market opportunities, and reviews industry
research. It provides recommendations to the GCEO based on financial models, investment and strategic planning
proposals and assists to secure collaboration on strategic initiatives.
Customer Complaints Unit
The Customer Complaints Unit (CCU) is responsible for the development of a mechanism through which customers'
complaints are effectively and efficiently handled, escalated and resolved without preventable delays. The CCU
maintains the records of complaints received to ensure that regular reviews can be undertaken for monitoring and
reporting purposes. The CCU identifies recurring complaints and ensures that immediate corrective action is taken to
prevent repetition of the same complaints. The unit seeks out cases that concern contractual relationships and reports on
its performance on a monthly basis to the CBK and GCEO.
Internal Controls Unit
The Internal Controls Unit (ICU) supports the Bank in enhancing the effectiveness of the existing control environment.
The ICU follows local and international guidance on internal controls, primarily the Committee of Sponsoring
Organisations integrated framework, which prescribes a principle-based approach that provides flexibility and permits
the exercise of judgment in respect of designing, implementing and conducting internal controls that can be applied at the
entity, operating and functional levels of the Bank. It works with the business units and the business-enabling functions
as well as with other assurance providers, directly or through the corresponding functions, where applicable, by offering
guidance on internal control requirements and evaluating adherence to defined standards and assisting management in
developing processes and controls to manage risks and issues.
97
The objective of the ICU is to support the Bank in enhancing the effectiveness of the existing internal control systems,
primarily through monitoring the effectiveness of process-related controls. The unit promotes a culture of effective
controls among employees through information sharing and communication, training on controls awareness and
consequences of control breaches.
Legal Division
The Legal Division (LD) is headed by the Chief of Local and International Legal Counsels. It handles lawsuits brought
by or against the Bank before all courts and initiates legal proceedings. The LD coordinates with external law firms with
respect to the lawsuits undertaken by them and is responsible for the management of the Documentation Unit and guides
the workflow through the contract preparation stage (internal or authenticated) and also manages the Execution Unit by
monitoring the execution of the judgments issued in favour of the Bank. The LD also manages the authentication and
execution of documents.
The LD identifies the risks associated with agreements, contracts, lawsuits, adverse judgments and regulatory
enforcement. The division advises the Bank's senior management and the Board on significant legal risks and suggests
possible remediation measures for mitigation. It considers requirements of newly issued legislation and makes
recommendations on such legislation. The LD handles all functions related to credit recovery involving managing and
following up with defaulted customers of the CBG, PBD and RBD and the Financial Institutions division. The division
also manages the portfolio of purchased debts customers and carries out the necessary reporting and related functions.
The LD provides, through the Translation Unit, the translation service for all departments in the Bank. The division has
recently formed a unit responsible for Corporate Governance and Disclosure that carries out the necessary actions on the
corporate governance guidelines issued by the CBK.
The diagram below provides an overview of the LD's structure.
Legal
Division
Documentation Unit
Execution Unit
Credit Recovery Unit
Corporate Governance &
Disclosure Unit
Translation Unit
Corporate Communication Division
The Corporate Communication Division is responsible for managing the Bank's corporate and public affairs, which
includes brand management, corporate communications, marketing communications, media relations, investor relations,
external and corporate social responsibility.
The division consists of two functional units:

Marketing Communications, which caters to the Bank's communication needs and acts as a unit that
compliments the activities of Kuwaiti operations' business groups.

External Affairs, which handles investor relations activities and the Group's brand management, among other
activities.
Strategic Financial Planning and Control Group
The Strategic Financial Planning and Control Group is responsible for the preparation of financial statements, dealing
with financial auditors, liaising with the CBK and the preparation of the internal management information system (MIS).
The group also undertakes planning (including profitability and cost-benefit analysis in respect of opening branches,
launching products, executing long-term investment plans and completing mergers and acquisitions transactions),
budgeting and monitoring activities (measuring actual performance against budget on a monthly basis), liaises with rating
agencies, supports investor relations and controls expenses and accounts payable.
98
Risk Management Group
The Risk Management Group adopts and implements internationally accepted practices for the identification,
measurement, control and reporting of various risks that may affect the operations and business activities of the Bank.
See also "Description of the Guarantor - Risk Management" below.
International Operations Unit
The Bank has an International Operations unit that reports to the GCEO and comprises of highly experienced officers
from the Finance, Accounts, Risk and Internal Control departments. The unit is responsible for the supervision of the
businesses of the Bank's subsidiaries. The unit exercises complete independence and has always monitored and
supervised the businesses of the Bank's subsidiaries effectively to ensure seamless integration.
KEY SUBSIDIARIES
The Bank has four banking subsidiaries in Algeria, Iraq, Tunisia and Turkey. The largest of these is BBT, whose total
assets, as at 31 December 2015, accounted for 17.4 per cent. of the total assets of the Group and as at 31 December 2014,
accounted for 15.1 per cent. of the total assets of the Group (calculated on a consolidated basis including consolidated
adjustments). As at 31 December 2015, the total assets of GBA, BoB and TIB accounted for 7.4 per cent., 6.2 per cent.
and 2.6 per cent., respectively, of the total assets of the Group (each calculated on a consolidated basis including
consolidated adjustments). As at 31 December 2014, the total assets of GBA, BoB and TIB accounted for 7.5 per cent.,
5.6 per cent. and 2.3 per cent., respectively, of the total assets of the Group (each calculated on a consolidated basis
including consolidated adjustments). As the JKB Sale was completed on 30 December 2015, the percentages provided of
the total assets of the Group as at 31 December 2015, exclude the assets of JKB.
History
In mid-2008, as part of the Reorganisation, UGB's interests in JKB, GBA, BoB and TIB were acquired by the Group for
U.S.$725 million (KD 194 million) in aggregate.
Further, in July 2008, the Group acquired a 43.9 per cent. stake in JKB, which, together with the 7.2 per cent. previously
owned by the Group, gave it a controlling 51.2 per cent. equity interest in JKB.
In March 2009, the Group signed supplementary agreements with UGB for the acquisition of 60.0 per cent. of the shares
of GBA. This, combined with the Group's previously existing 5.1 per cent. effective interest in GBA (through JKB's 10.0
per cent. equity interest in GBA), increased its effective interest in GBA to 65.1 per cent. Further, with the acquisition of
TIB in the second quarter of 2010, the Group's effective stake in GBA increased to 91.1 per cent. in 2010.
During the second quarter of 2009, the Group acquired a 45.3 per cent. stake in BoB. Further, in 2010, the Group
acquired an additional 6.5 per cent. stake in BoB, thereby increasing its stake to 51.8 per cent.
During the second quarter of 2010, the Group acquired a 76.6 per cent. stake in TIB, which, together with the 10 per cent.
previously owned by the Group, gave it a controlling 86.7 per cent. equity interest in TIB.
During the fourth quarter of 2012, the Group acquired a 99.3 per cent. stake in Eurobank Tekfen and rebranded it as
Burgan Bank A.Ş. - Turkey.
During the fourth quarter of 2015, the Group disposed of its 51.2 per cent. stake in JKB.
99
The diagram below shows the Group's ownership interests in its subsidiaries as at 31 March 2016:
Burgan Bank
Shareholding
Gulf Bank
Algeria
Bank of
Baghdad
Tunis
International Bank
Burgan Bank
Turkey
86.01%^
51.79%
86.70%
99.26%
^ Effective Stake
Burgan Bank A.Ş. - Turkey
Overview
BBT was originally founded in 1989 as Tekfen Yatırım Finansman Bankası AŞ (Tekfen Investment Finance Bank Inc).
In 2006, the Tekfen Group entered into a strategic partnership agreement with Eurobank EFG, as a result of which the
bank's name was changed to Eurobank Tekfen. On 21 December 2012, the Group acquired a 99.3 per cent. stake in
Eurobank Tekfen and subsequently rebranded it as Burgan Bank A.Ş. -Turkey.
Eurobank Tekfen's subsidiaries (EFG Istanbul Equities and EFG Leasing) have also been re-branded as Burgan
Securities Inc. and Burgan Leasing, respectively. Burgan Securities Inc. is one of Turkey's leading institutions and is
active in the fields of brokerage, corporate finance and asset management in the Turkish capital markets. Burgan
Securities Inc. is a financial intermediary that serves retail and institutional investors operating in the domestic and/or
international markets. Burgan Leasing was established in March 1994 for the purpose of conducting leasing operations
under Leasing Law No. 3226 of Turkey.
The operations of BBT are currently in the process of being integrated within the structure of the Group, including its
risk management policies and procedures which the Group manages on a group-wide basis to ensure consistency, see
"Description of the Guarantor - Risk Management" below for further details.
BBT is a mid-sized bank with a focus on the corporate segment and is expanding its presence in selective retail business.
BBT operates under the supervision of the Central Bank of Turkey.
For the three months ended 31 March 2016, BBT's operating income was 21.2 per cent of the Group's operating income.
For the year ended 31 December 2015, BBT's operating income was 22.4 per cent. of the Group's operating income and
amounted to 20.4 per cent. of the Group's restated operating income for the year ended 31 December 2014 and 18.4 per
cent. of the Group's unaudited restated operating income for the year ended 31 December 2013. As at 31 March 2016,
BBT's total assets were 18.1 per cent. of the Group's total assets, compared to 18.4 per cent. of the Group's total assets as
at 31 December 2015, 15.1 per cent. of the Group's total assets as at 31 December 2014 and 13.2 per cent. of the Group's
total assets as at 31 December 2013. As the JKB Sale was completed on 30 December 2015, the percentages provided of
the total assets of the Group as at 31 December 2015, exclude the assets of JKB.
As at 31 March 2016, BBT had a network of 52 branches and 56 ATMs and had 1,159 employees.
Mr. A. Murat Dinç, CEO of BBT has over 19 years' experience in the banking industry and has been in his current role
since the beginning of 2014.
Products and Services
BBT provides services as a solutions partner for its customers, with 52 branches spread across the leading industrial and
trading zones in Turkey. It caters to the demands and expectations of customers with a diverse portfolio of products and
services in corporate, commercial, small business, retail and private banking. BBT's subsidiaries, Burgan Leasing,
Burgan Securities Inc. and Burgan Portfolio Management, complement BBT's product range while enabling cross-selling
opportunities.
100
Burgan Asset Management Inc. is a 100 per cent. affiliate of Burgan Securities Inc. and aims to provide investors with a
targeted return commensurate with their risk profile, supported by transparent investment products and services with
clearly defined goals. Burgan Asset Management Inc. offers investors a variety of investment alternatives including
managing equity, bond/bill, corporate bond, money market and gold funds as part of its portfolio along with the Burgan 1
Flexible Fund.
Strategy
BBT's strategic focus is to:

become a niche financial services provider in the region with good returns and high growth;

expand its customer base both in Turkey (especially with regard to SMEs) and in the MENA region and increase
its customers' income share;

develop private banking into a full-fledged business line;

selectively expand/relocate its branch network (including opening new deposit-oriented branches in high-street
areas) and to develop alternative delivery channels;

focus on product and service innovation and operational excellence; and

improve its risk architecture, streamline processes and to increase the monitoring of its efficiency.
Competition
As at 31 March 2016, there were 53 banks operating in Turkey with a combined network of 12,276 domestic and foreign
branches. According to the Turkish Banking Regulation and Supervision Agency and the Banks Association of Turkey,
banks in Turkey have the following three classifications: (i) deposit banks (35 in number), (ii) participation banks (five in
number); and (iii) development and investment banks (13 in number). Among deposit banks, there were three stateowned banks, eight privately-owned banks, 21 foreign banks and three banks under the deposit insurance fund. BBT is
an emerging player in the domestic market focusing on the corporate, commercial and SME sectors and competing with
both large state-owned banks and private sector banks.
Business Environment
The economy in Turkey is estimated to have grown by 3.8 per cent. in 2015, driven mostly by an increase in domestic
demand. Despite political uncertainty, unfavourable geopolitical developments, and a sharp decline in the value of the
Turkish lira, private consumption was resilient. Monetary tightening was insufficient to reduce inflationary pressures,
amid a sharp depreciation in the Turkish lira. Weak external demand depressed the growth of exports, the current account
deficit moderated significantly to an estimated 4.4 per cent. of GDP, as imports also decreased as a result of cheaper oil.
Strong growth is expected to continue in 2016, but with higher inflation. The 30 per cent. increase in the minimum wage
is expected to raise consumption by an estimated 0.5 to 1 per cent. of GDP in 2016. In addition, the recent further decline
in oil prices, and the insufficiently tight monetary stance is also expected to be supportive. GDP growth is expected to be
between 3.5 and 4 per cent. in 2016 and inflation is expected to exceed the Turkish authorities' 5 per cent. target by a
wide margin. The smaller current account deficit in 2015 was accompanied by external imbalances. The improvement
can be traced to lower oil prices, and the non-energy balance has remained relatively stable (source: IMF 2016 Article IV
Consultation).
Financial Summary
BBT's capital adequacy ratio was 15.6 per cent. as at 31 December 2015, in accordance with the CBK's regulations.
The following table summarises key financial information of BBT based on BBT's audited annual accounts for the years
ended 31 December 2013, 31 December 2014 and 31 December 2015 prepared in accordance with generally accepted
accounting principles in Turkey.
Total Assets .............................................................................................
101
Amounts in TRY 000's
unless otherwise stated
As at / for the year ended 31 December
2015
2014
2013
11,573,117
9,487,259
7,304,357
Loans and Advances to Customers ..........................................................
Customer Deposits ...................................................................................
Shareholders' Equity attributable to parent ..............................................
Net Interest Income ..................................................................................
Operating Income ....................................................................................
Loan Loss Provisions ...............................................................................
Expenses .................................................................................................
Net Income attributable to parent ............................................................
Non-performing loans ratio* ...................................................................
*
Amounts in TRY 000's
2015
2014
2013
8,264,799
6,501,329
4,622,965
6,611,511
5,339,413
3,407,897
1,012,502
953,026
591,217
365,098
247,467
184,280
463,229
354,637
253,831
92,382
71,069
94,812
301,919
258,246
221,988
52,169
17,824
(53,697)
2.6%
2.0%
2.3%
Calculated in accordance with CBK regulations.
Gulf Bank Algeria S.A.
Overview
GBA was established on 15 December 2003 as a commercial bank in Algeria. Since its establishment, GBA has aimed to
contribute to the economic and financial development of Algeria and to provide professional services with high-quality
products.
As at 31 March 2016, GBA had a network of 58 branches and 99 ATMs with a total of 899 employees.
For the three months ended 31 March 2016, GBA's operating income was 11.7 per cent of the Group's operating income.
For the year ended 31 December 2015, GBA's operating income was 13.5 per cent. of the Group's operating income and
amounted to 16.7 per cent. of the Group's restated operating income for the year ended 31 December 2014 and 18.7 per
cent. of the Group's unaudited restated operating income for the year ended 31 December 2013. As at 31 March 2016,
GBA's total assets amounted to 6.8 per cent. of the Group's total assets, compared to 7.4 per cent. of the Group's total
assets as at 31 December 2015, 7.5 per cent. of the Group's total assets as at 31 December 2014 and 7.0 per cent. of the
Group's total assets as at 31 December 2013. As the JKB Sale was completed on 30 December 2015, the percentages
provided of the total assets of the Group as at 31 December 2015, exclude the assets of JKB.
Mr. Mohamed Louhab, GBA's General Manager, has 41 years' experience in the banking industry in Algeria and has
been in his current role since 2005.
GBA provides retail and corporate banking services, which include car loans, mortgages, consumer loans and Islamic
financing. GBA has invested in technology and provides real-time operations such as SWIFT services, SMS banking and
internet banking.
Strategy
GBA's strategy is to maintain its market share in Algeria (at its current ranking of 4th (by loans, deposits and total
income)).
GBA's strategic focus is to:

increase its market penetration in real estate leasing products;

expand its trade finance and consumer credit portfolios subject to applicable regulations;

launch Bancassurance (involving the distribution of insurance products through banks) in 2016; and

expand its branch network across Algeria, with plans to increase the number of its branches.
102
Competition
Although the Algerian banking sector as a whole is at an early stage of development and is dominated by state-owned
banks, private banks are increasingly playing a major role in the overall development of the economy. As at 31 December
2015, GBA was one of 20 private banks in Algeria. Its main competitors are state-owned banks including Banque
Exterieur d'Algerie and a number of banks affiliated to leading foreign commercial banks.
Algeria is a primarily oil- and gas-based economy. According to the IMF, the impact of the recent oil price shock on
growth in Algeria has been limited thus far, but the fiscal and external balances have deteriorated significantly.
Real GDP grew by an estimated 3.9 per cent. in 2015, with the non-hydrocarbon sector growing by a robust 5 per cent..
Inflation increased to 4.8 per cent. The fiscal deficit nearly doubled to 16 per cent. of GDP in 2015 as a result of much
lower hydrocarbon revenues, and the fall in hydrocarbon exports by approximately 50 per cent. in 2015 caused the
current account deficit to widen sharply. Reserves, while still substantial, declined by U.S.$35 billion in 2015 to
U.S.$143 billion, down from a peak of U.S.$194 billion in 2013. External debt remains very low. However, growth and
inflation are expected to slow in 2016 under the effects of fiscal consolidation on non-hydrocarbon activity. (source: IMF
2016 Article IV Consultation).
Financial Summary
GBA's capital adequacy ratio was 22.8 per cent. as at 31 December 2015, in accordance with the CBK's regulations.
The following table summarises key financial information of GBA based on GBA's audited annual accounts for the years
accounting principles in Algeria.
Total Assets .....................................................................................
Loans and Advances to Customers ..................................................
Customer Deposits ...........................................................................
Shareholders' Equity attributable to parent ......................................
Net Interest Income ..........................................................................
Operating Income ............................................................................
Loan Loss Provisions .......................................................................
Expenses .........................................................................................
Net Income attributable to parent ....................................................
Non-performing loans ratio* ...........................................................
*
Amounts in DZD 000's
2015
2014
2013
177,377,511
176,819,451
138,962,534
104,883,046
101,162,236
81,240,932
125,339,056
122,863,971
91,645,524
22,952,772
20,376,578
18,940,661
8,750,439
6,201,546
4,580,828
10,899,778
10,579,594
10,520,317
501,213
902,610
1,036,210
5,694,392
4,491,150
3,580,398
3,628,435
4,010,423
5,035,072
5.9%
4.5%
4.1%
Bank of Baghdad P.J.S.C.
Overview
BoB was established in 1992 and has a customer base of small- and medium-sized enterprises and large corporate as well
as individual customers. It was the first licensed private bank to commence banking operations in Iraq in 1992 after the
change in the banking regulations by the Central Bank of Iraq (CBI).
BoB is the only private bank in Iraq to hold both principal licences for issuing Visa and MasterCard debit and credit
cards in Iraq. As at 31 March 2016, BoB had 43 branches, 52 ATMs and a total of 993 employees. BoB is present in all
18 provinces of Iraq and has opened its first branch outside Iraq, in Beirut, Lebanon.
For the three months ended 31 March 2016, BoB's operating income was 6.7 per cent of the Group's operating income.
For the year ended 31 December 2015, BoB's operating income was 7.5 per cent. of the Group's operating income and its
operating income amounted to 6.5 per cent. of the Group's restated operating income for the year ended 31 December
2014 and 8.7 per cent. of the Group's unaudited restated operating income for the year ended 31 December 2013. As at
103
31 March 2016, BoB's total assets amounted to 5.1 per cent. of the Group's total assets, compared to 6.2 per cent. of the
Group's total assets as at 31 December 2015, 5.6 per cent. of the Group's total assets as at 31 December 2014 and 6.1 per
cent. of the Group's total assets as at 31 December 2013. As the JKB Sale was completed on 30 December 2015, the
percentages provided of the total assets of the Group as at 31 December 2015, exclude the assets of JKB.
BoB's shares were listed on the Iraq Stock Exchange on 15 June 2004. At the close of trading on the Baghdad Stock
Exchange on 31 December 2015, BoB's share price was IQD 1.17 giving it a market capitalisation of IQD 292.5 billion.
Mr. Usam Ismaeel Shareef, BoB's Chairman, is a senior banking executive and has been in his current position at BoB
since 2010.
BoB provides retail and corporate banking products and services which include the following:

Deposit Products: current accounts, term deposit accounts, savings accounts and gold accounts (which provide a
group of services to certain elite customers) and static accounts (a form of term deposit);

Loans: industrial loans, trade loans, land loans (offered for financing construction, renovation or restoration of
commercial properties), agriculture loans and housing loans (extended to Iraqi nationals for financing the
acquisition or renovation of residential properties);

Trade Finance Services: letters of credit and letters of guarantee; and

Other Banking Services: credit and debit cards (Visa and MasterCard), internet banking, mobile phone banking,
foreign exchange, international transfers and payroll services.
Strategy
BoB's strategic focus is to:

expand its retail network and upgrade its existing infrastructure;

expand its retail loan book by focusing on both collateralised and non-collateralised loans; and

finance planned infrastructure projects in Iraq.
Competition
As at 31 December 2015, there were 57 banks operating in Iraq comprising of 6 state-owned banks, 24 private banks, 8
Islamic banks and 19 foreign banks. The state banks, Rafidain, Trade Bank of Iraq, Rasheed, and the Agricultural
Cooperation Bank are still dominant by asset size; however, BoB has a predominant position in terms of customer
service and technology (source: Central Bank of Iraq).
Iraq’s economy is driven primarily by the oil and gas sector, which accounted for over 97.5 per cent. of the country’s
total export income in 2014 (source: Central Bank of Iraq).
The ISIS insurgency has not halted the expansion of the oil sector from all oil-producing regions. Exports are expected to
rise from 3.3 million barrels per day (mbpd) in December 2015 to 3.6 mbpd in 2016, benefiting from the agreement with
the Kurdistan regional government. GDP growth suffered a setback in 2015 (remained at 0.0 per cent.) due to the decline
in economic activity in the areas in Iraq occupied by ISIS and stagnating government spending due to low oil prices.
However, it is expected to rebound in 2016 with 7.1 per cent. GDP growth on the back of rising oil production and
recovery in the non-oil sector in parts of the country not under ISIS control. Inflation outside ISIS-occupied areas is low,
at 3.0 per cent. at the end of 2015.
International reserves of the Central Bank of Iraq (CBI) have declined from U.S.$ 67.0 billion at the end of 2014 to
U.S.$ 57.0 billion at the end of 2015 due to a decline in oil revenues and the high level of imports.
Iraq is currently considered under-banked, with just 6.1 commercial bank branches per 100,000 adults compared to the
global average of 21.6. However, its outlook remains positive as banking infrastructure is expected to strengthen which
will improve the system accessibility. The policies of the CBI, which are encouraging private sector participation in the
banking sector, are also likely to lead to the growth of the banking sector in Iraq.
104
Financial Summary
BoB's capital adequacy ratio was 53.7 per cent. as at 31 December 2015, in accordance with the CBK's regulations.
The following table summarises key financial information of BoB based on BoB's audited annual accounts for the years
accounting principles in Iraq.
Total Assets .....................................................................................
Loans and Advances to Customers ..................................................
Customer Deposits ...........................................................................
Shareholders' Equity attributable to parent ......................................
Net Interest Income..........................................................................
Operating Income ............................................................................
Loan Loss Provisions .......................................................................
Expenses .........................................................................................
Net Income attributable to parent ....................................................
Non-performing loans ratio* ...........................................................
*
Amounts in IQD million
2015
2014
2013
1,549,537
1,827,505
1,764,905
237,923
228,904
219,170
897,311
1,491,599
1,393,584
268,488
292,419
291,262
55,607
44,883
9,510
67,061
63,871
71,466
30,000
16
76,504
43,419
29,775
13,261
32,847
38,797
34.5%
25.6%
17.2%
Tunis International Bank S.A.
Overview
Foreign investment in Tunisia is regulated by the Investment Code (Law 1993-120) (Tunisian Investment Code), which
was last amended in January 2009. The current Tunisian Investment Code divides potential investments into two
categories: (i) offshore, in which foreign capital accounts for at least 66 per cent. of equity and at least 70 per cent. of
production is destined for the export market (with some exceptions for the agricultural sector); and (ii) onshore, in which
foreign equity is limited to 49 per cent. in most non-industrial projects; onshore industrial investment can have up to 100
per cent. foreign equity.
TIB was established in June 1982 as the first fully licensed offshore banking corporation in Tunisia. TIB operates under
the supervision of the Central Bank of Tunisia (CBT). It is also a member of Tunisia's Clearing House Association.
TIB operates through three branches in Tunisia and a representative office in Libya and had 104 employees as at 31
March 2016.
For the three months ended 31 March 2016, TIB's operating income was 1.6 per cent of the Group's operating income.
For the year ended 31 December 2015, TIB's operating income was 1.6 per cent. of the Group's operating income and its
operating income amounted to 2.7 per cent. of the Group's restated operating income for the year ended 31 December
2014 and 2014 and 3.0 per cent. of the Group’s unaudited adjusted operating income for the year ended 31 December
2013. As at 31 March 2016, TIB's total assets amounted 2.6 per cent of the Group's total assets compared to 2.6 per cent.
of the Group's total assets as at 31 December 2015, 2.3 per cent. of the Group's total assets as at 31 December 2014 . As
the JKB Sale was completed on 30 December 2015, the percentages provided of the total assets of the Group as at 31
December 2015, exclude the assets of JKB.
Mr. Mohamed Fekih, Managing Director of TIB has over 36 years' experience in the banking industry and has been in his
current role since 2006.
TIB provides a comprehensive range of corporate banking services in Tunisia and overseas, which include foreign
exchange and money market operations in all convertible currencies including Tunisian dinars, international trade
financing, forfaiting, private banking facilities, commercial banking, loan syndications and investments and issuing Visa
and American Express cards. TIB's product range is constantly being reviewed to ensure that it is able, within its credit
and procedural policies, to meet the range of needs in its local market base.
105
Strategy
TIB's strategic focus is to:

increase offshore corporate loans in Tunisia, investment grade bonds and syndicated loans;

expand its product portfolio for the textiles, packaging and electrical sectors;

develop its trade finance business with Tunisian groups in collaboration with GBA and FIMBank; and

stabilise its deposit base by developing new customer relationships in the local market as well as in the region.
Competition
As at 31 December 2015, there were 30 banks operating in Tunisia, including seven off-shore banks (including TIB).
TIB's main competitors included local banks Alubaf International Bank, Tunisian Foreign Bank and certain foreign
banks, including Citibank and Arab Banking Corporation.
According to the IMF, Tunisia's economy has been resilient throughout a protracted political transition and a challenging
international economic environment. The country has been facing challenges posed by security threats and social
tensions, which have offset the benefits from the successful conclusion of the country's political transition, lower
international oil prices, and a recovering Europe.
After successfully recovering from its lowest growth rates in 2011, the growth momentum in Tunisia's growth rate
decelerated in early 2015, with GDP growth averaging 1.2 per cent. (year-on-year) for the first quarter as activity in the
manufacturing, tourism, and mining sectors slowed significantly. During this time, unemployment remained high. High
inflation rates dropped to 4.2 per cent. in July 2015, reflecting lower food prices and a prudent monetary policy. External
imbalances also remained high (source: IMF 2015 Article IV Consultation).
Weak receipts from tourism, increased imports (particularly from energy and capital goods imports), and declining oil
and phosphate exports widened the country's current account deficit to 8.8 per cent. of GDP in 2014, its highest level
since the 1980s. Exceptional olive oil exports and declining energy imports narrowed the deficit in the early part of 2015,
but this improvement did not last as tourism revenues—which were significantly impacted by the Bardo and Sousse
attacks— dropped in 2015. Reserve buffers remained steady, helped by a successful international bond issuance earlier in
2015.
The fiscal situation in the country improved, with the structural fiscal deficit declining to 3.3 per cent. of GDP in 2014
due to strong revenue collection. However, the budget composition weakened as public investment, which is necessary to
sustain growth, reached record lows of 4.2 per cent. of GDP while the wage bill, representing about 60 per cent. of
revenues, rose. The 2015 revised budget accommodated the short-term fallout of the recent economic slowdown,
including through increased security expenditures and transfers to SMEs.
The banking system in Tunisia remained fragile, with the system's capital adequacy ratio below the minimum regulatory
requirement. At 15.8 per cent., non-performing loans of the banking sector continued to be high. Low deposit growth
kept public banks structurally illiquid, increasing banks' recourse to CBT refinancing. Against this background, private
sector credit growth remained modest, with its level well below potential. The medium-term prospects of Tunisia remain
favourable, with growth projected to increase to 4.7 per cent. by 2020. These prospects depend on reduced security risks
and the easing of social tensions within the country, as well as the successful and quick implementation of
comprehensive reforms that improve the business climate and foster private sector development (source: IMF 2015
Article IV Consultation).
Financial Summary
TIB's capital adequacy ratio was 19.7 per cent. as at 31 December 2015, in accordance with the CBK's regulations.
The following table summarises key financial information of TIB based on TIB's audited annual accounts for the years
accounting principles in Tunisia.
Amounts in U.S.$000's unless otherwise stated
106
Total Assets .......................................................................................
Loans and Advances to Customers ....................................................
Customer Deposits .............................................................................
Shareholders' Equity attributable to parent ........................................
Net Interest Income ............................................................................
Operating Income ..............................................................................
Loan Loss Provisions .........................................................................
Expenses ...........................................................................................
Net Income attributable to parent ......................................................
Non-performing loans ratio* .............................................................
*
2015
580,606
131,127
274,592
128,997
2,591
21,904
332
7,358
14,215
11.8%
2014
608,060
111,929
293,174
129,441
2,646
25,858
1,700
7,786
16,372
10.6%
2013
623,289
126,422
295,886
127,327
1,955
32,846
2,973
7,198
22,675
10.7%
Investment in Associates
FIMBank Malta
Under a series of transactions during the second quarter of 2013, UGB and the Bank completed the acquisition of
FIMBank Malta. The Group acquired a 24.5 per cent. strategic stake in FIMBank Malta, which decreased to 19.5 per
cent. in the second quarter of 2013, following the conversion of bonds by UGB.
As at 31 March 2016, UGB and the Group held 61.20 per cent. and 19.72 per cent. stakes in FIMBank Malta,
respectively.
Incorporated in 1994 with the establishment of First International Merchant Bank Ltd., FIMBank Malta is an
international trade finance specialist bank providing trade finance solutions to corporates, banks and individuals
worldwide. FIMBank Malta was listed on the Malta Stock Exchange (MSE) in June 2001.
At the close of trading on the MSE on 31 March 2016, FIMBank Malta's share price was U.S.$ 0.71 per share, giving it a
market capitalisation of U.S.$ 219.4 million. FIMBank Malta's principal activity is to provide short-term international
trade finance to corporate traders and to act as an intermediary to other financial institutions for international settlements,
forfaiting and loan syndications. The bank also maintains accounts in various currencies for residents and non-residents
and provides credit card facilities to its customers.
PARENT COMPANY
Kuwait Projects Company (Holding) K.S.C. (Closed)
KIPCO was incorporated as a closed shareholding company on 2 August 1975 under Article 94 of the Kuwaiti
Commercial Companies Code, Law No. 15 1960, as amended (the Companies Law). It was registered under commercial
registration number 23118 on 15 November 1979. On 29 September 1999, it changed its structure to that of a holding
company and amended its name to Kuwait Projects Company (Holding) K.S.C. (Closed) from Kuwait Investment
Projects Company K.S.C. (Closed).
As at 31 March 2016, the following shareholders had holdings in excess of 5.0 per cent. of KIPCO's issued ordinary
share capital: (i) Al Futtooh Holding Company (44.7 per cent.); (ii) investment companies and other institutions (39.6 per
cent.); (iii) investment funds (6.9 per cent.); and (iv) high net worth individuals and retail investors (6.9 per cent.).
As at 31 March 2016, KIPCO had a direct shareholding interest of 41.2 per cent. in the Bank and a consolidated effective
interest (including shares held through other KIPCO group companies) of 64.7 per cent.
KIPCO's shares are listed on the KSE. At the close of trading on the KSE on 31 March 2016, KIPCO's share price was
KD 0.550 per share, giving it a market capitalisation of KD 810.5 million.
Group Structure
KIPCO, directly or indirectly, is the ultimate holding company of over 60 subsidiaries, associates (companies in which
the Group holds more than 20 per cent. but less than 50 per cent. of the shares) and joint ventures operating in several
sectors. Its assets substantially comprise shares in its group companies. KIPCO is dependent on revenues received from
other members of its group.
107
The principal subsidiaries and associates of KIPCO operate in the financial services and real estate sectors, and KIPCO
also has a joint venture in the media sector. The remaining companies of its group and its associates operate in the
services and industrial sectors and are primarily controlled by its principal subsidiaries.
The chart below sets out KIPCO's principal subsidiaries as at 31 December 2015:
KUWAIT PROJECTS COMPANY
(HOLDING)
Financial Services
Media
Real Estate
United Gulf
Bank
Gulf
Insurance
Burgan
Bank
JKB
OSN
United Real
Estate Co
Geographic
Presence in
MENA
7 Countries
10 Countries
8 Countries
3 Countries*
24 Countries^
8 Countries
Shareholding
96.7%
45.8%
64.8%
100.0%
60.4%
71.1%
*
JKB is indirectly held through Al-Rawabi, a shell-entity based in Kuwait, which holds a 51.19% stake. JKB has operations in Jordan and Palestine
and a branch in Cyprus.
^OSN is licenced to operate in 24 countries in the MENA region: however, OSN currently operates in 19 countries.
The table below sets out KIPCO's consolidated effective interest in its principal subsidiaries as at 31 December 2015:
Jurisdiction of
Incorporation
Company
Jordan Kuwait Bank P.S.C.
United Gulf Bank B.S.C. ..................
Gulf Insurance Company K.S.C. .........
Burgan Bank K.P.S.C..
Panther Media Group Ltd.4
................
United Real Estate Company ..............
Jordan
Bahrain
Kuwait
Kuwait
Dubai
International
Financial Centre
Kuwait
Year of initial
investment
Status
Group's
Effective
interest1 (in per
cent.)
Board
representation2
Subsidiary
Subsidiary
Associate
Subsidiary
Joint venture
2015
1988
1996
1995
19955
51.2
96.7
45.8
64.8
60.4
N/A
4 of 7
4 of 103
6 of 9
2 of 7
Subsidiary
19946
71.1
4 of 7
Effective interest is computed by adding KIPCO’s direct shareholding and KIPCO’s share of indirect interest held through subsidiaries and associates.
Number of the KIPCO group nominated directors on the board of the principal subsidiaries.
3
GIC has 10 board members, four from KIPCO, three from Fairfax Financial Holdings and three independent directors.
4
Panther Media Group Ltd. has seven board members, two each from the KIPCO and the Mawarid group and three independent directors.
5
Represents the year of initial investment in former Showtime, which merged with Orbit in 2009 to form Panther Media Group Ltd.
6
The Group acquired the initial stake in 1994; however, KIPCO acquired a significant stake in 2010.
1
2
KIPCO Group Business Overview and Strategy
Principal Business Activities
KIPCO is a multi-sector holding company headquartered in Kuwait with operating entities across the GCC and the wider
MENA region. KIPCO's business is to acquire or create businesses and to build and grow them in order to be able to
selectively sell such businesses, with a view to maximising shareholder value. KIPCO has an experienced management
108
team and benefits from key relationships in the region through its principal shareholders, which include members of the
Kuwaiti ruling family.
The principal business activities of the companies in which KIPCO has currently invested are as follows:

Commercial Banking: Historically, through the Bank, KIPCO has had a strong presence in the Kuwaiti
banking industry, offering a full range of commercial banking services to both retail and corporate customers.
As a result of the Reorganisation, KIPCO streamlined its financial services businesses into three major
segments: commercial banking, asset management and investment banking and insurance. The Bank has been
transformed into a regional commercial banking group offering a wide range of banking services and products
across the GCC and wider MENA region as a result of the purchase of UGB's stakes in JKB, BoB, GBA and
TIB. On 21 December 2012, the Bank acquired a 99.3 per cent. stake in Eurobank Tekfen. Following the
acquisition, Eurobank Tekfen is now operating under the name of Burgan Bank A.Ş. - Turkey. Through a series
of transactions in 2013, the Bank and UGB completed the acquisition of FIMBank Malta. As at 31 March 2016,
the Bank and UGB held 19.72 per cent. and 61.2 per cent., respectively. The total cumulative stake held in
FIMBank Malta was 80.9 per cent. as at 31 March 2016. On 30 December 2015, the Bank completed the sale of
its controlling stake in JKB to Al Rawabi International Co.

Asset Management and Investment Banking (AMIB): KIPCO operates in the AMIB market in the MENA
region through UGB and KAMCO. UGB has a track record of incubating and growing businesses, including the
four commercial banks that have been transferred to the Bank as part of the Reorganisation. Following the
Reorganisation, KIPCO is in the process of developing its pan-regional AMIB services in UGB and KAMCO.
KAMCO is an investment manager that offers its customers access to local and international capital markets
with a focus on asset management, investment advisory, investment research and financial services. KAMCO is
listed on the KSE and UGB is listed on the Bahrain Stock Exchange.

Insurance: The Bank believes that KIPCO's primary insurance company, Gulf Insurance Company (GIC), is
the market leader. GIC has expanded its presence in the MENA region and, besides Kuwait, has a presence in
Saudi Arabia, Lebanon, Egypt, Syria, Jordan, Iraq, the UAE and Bahrain. GIC's product portfolio includes
marine, aviation, property, casualty, motor, life and health insurance. GIC is listed on the KSE and had total
assets of KD 368.4 million as at 31 December 2015.

Media: Panther Media Group Ltd. (PMG) constitutes the Group's media segment. PMG owns and operates two
previously competing platforms of Showtime and Orbit, providing Pay TV services in the MENA region
through Direct-To-Home satellite distribution and third party cable, internet protocol television and shared
antenna systems. The merged group is managed as a jointly controlled entity between Gulf DTH (Showtime)
and the Mawarid group of companies. The merged entity operates under the brand "OSN" and offers a total of
154 channels to customers, showing premium sports, drama and entertainment in English, Arabic and some
Asian languages spoken by expatriate populations in the region. It is currently licensed to distribute content in
24 countries.
In August 2013, OSN announced the acquisition of Pehla Media & Entertainment, the largest provider of South
Asian Pay TV content in the MENA region. Currently called OSN Pehla, the platform broadcasts nearly 40
popular South Asian channels in the Hindi, Urdu, Bengali, Tamil and Malayalam languages, which are offered
to customers on a separate subscription basis or as a part of an OSN platform.

Real Estate: United Real Estate Company K.S.C., together with its subsidiaries and associates, constitutes
KIPCO's real estate segment. These real estate interests consist predominantly of existing hotels, and
commercial and office buildings in Kuwait, Bahrain, the Levant and Egypt, projects under construction in Oman
and North Africa and build-operate-transfer operations in Kuwait. These interests are primarily held under
United Real Estate Company K.S.C.

Industrial: KIPCO has investments in companies which are active in a variety of industries including the petrochemical and dairy industries; some of these companies have several years of operating history and others have
recently been established. These investments are held primarily through United Industries Company KSC.
Regional presence
The KIPCO group and its associates have presence in the following countries:
Company
Present in
109
Company
United Gulf Bank
Present in
Bahrain, Kuwait, Tunisia, the UAE, Syria, Morocco and Malta
Gulf Insurance Company
Kuwait, Saudi Arabia, Lebanon, Egypt, Syria, Jordan, Iraq, the
UAE, Bahrain and Algeria
Kuwait, Iraq, Algeria, Tunisia, Turkey, Malta, Lebanon (branch
of BoB), and Libya (representative office of TIB)
Jordan Kuwait Bank
Jordan, Cyprus and Palestine
Panther Media Group Ltd, (OSN)
Licensed to operate in 24 countries in the MENA region;
however, it currently operates in 19 countries
United Real Estate Company K.S.C.
Kuwait, Jordan, Egypt, Oman, UK, Syria, the UAE and
Lebanon
United Industries Company K.S.C.
Kuwait
Business Strategy
The key elements of the KIPCO group's strategy are to:

leverage its position and reputation in the GCC and wider MENA region to capture further growth in these
regions;

acquire, create, build and selectively sell businesses in sectors that capitalise on regional opportunities;

exercise management control over businesses; and

maximise value from businesses with a medium- to long-term horizon.
RISK MANAGEMENT
The Bank has a multi-faceted approach to risk management, combining a formal risk and disclosure policy, strict lending
limits and criteria, a focus on staff training and development and a strong risk management culture across the Bank with
a dedicated independent Risk Management Group. The Bank's Risk Management Group is headed by a Senior General
Manager who reports directly to the GCEO. The Risk Management Group does not have any business targets in terms of
either levels of business or income/profits to be achieved, in order to ensure objectivity in analysing the various risks.
The mission of the Risk Management Group is to identify, measure and control various risks and to report to the top
management of the Bank on their effects and, where possible, mitigations. The Bank has a well-documented Risk and
Disclosure Policy, prepared internally and approved by the Board, which classifies the risks faced by it in its day-to-day
activities according to certain categories. Pursuant to this policy, the Risk Management Group has given specific
responsibilities to various officers for the identification, measurement, control and reporting of these identified categories
of risk. These categories are:
(a)
Credit Risk: the risk that one party to a financial instrument will fail to discharge an obligation and cause the
other party to incur a financial loss;
(b)
Market Risk: the risk that the value of a financial instrument will fluctuate because of changes in market interest
rates, foreign exchange rates and market prices for equities and commodities; and
(c)
Operational Risk: the risk that financial loss may occur due to operational failures.
The Risk Management Group manages risk on a group-wide basis to ensure the consistency of the implementation of
policy and includes three key departments, each of which is responsible for one of the above three categories of risk, i.e.
the Credit Risk, Market Risk and Operational Risk departments. The implementation of risk policies across the Group is
currently at various stages of completion in respect of each of the Bank's subsidiaries.
For BBT, the Credit Committee undertakes the assessment of credit proposals and revisions to such proposals, within the
framework granted by the Board.
GBA's Board of Directors approved the organisational structure of GBA through which it officially implements a risk
management structure. It is headed by a Head of Division and organised into four sections responsible for the three
categories of risk: the Credit Risk department, the Market Risk department, the Operational Risk department and a
Compliance Unit that is in charge of reporting on anti-money laundering issues.
110
For BoB, the Board of Directors is ultimately responsible for the overall risk management approach and for approving
the risk strategies and principles. Currently, the implementation of risk-related procedures is maintained by the relevant
departments under the direct supervision and responsibility of BoB's Managing Director. Risk management processes
throughout BoB are audited regularly by the internal audit function that examines both the adequacy of the procedures
and BoB's compliance with the procedures. The Internal Audit department of BoB discusses the results of all assessments
with management, and reports its findings and recommendations to the audit committee.
As regards TIB, the Credit Committee is responsible for credit risk and all aspects of risk management.
Credit Risk
The Bank structures, on a group-wide basis, the levels of credit risk it and its subsidiaries undertake by placing limits on
the amount of risk accepted in relation to one borrower, or group of borrowers, and to geographical and industry
segments in accordance with the central bank requirements of the jurisdiction of each of the Bank's subsidiaries.
Considerations which are taken into account to set limits on the amount of loans include the integrity of such borrower(s)
(including completing "know your customers" (KYC) checks and obtaining references), the purpose of the loan, the
borrower's ability to repay, the source of the repayment monies and any security that is being offered. Such risks are
monitored on a regular basis and are subject to regular review. The Board, or a sub-committee of the Board (or certain
delegated authorities), approves limits on the level of credit risk for borrowers, as well as by industry sector and by
country.
The following table sets out the Bank's consolidated loans and advances to customers and financial assets and contingent
liabilities by industry as at 31 December 2014 and 31 December 2015.
Financial Assets (including commitments) and Contingent Liabilities by Industry
Industry sector
Sovereign ..................................................................................................................
Banking .....................................................................................................................
Investment ................................................................................................................
Trade and commerce .................................................................................................
Real estate .................................................................................................................
Personal ....................................................................................................................
Manufacturing...........................................................................................................
Construction..............................................................................................................
Other services ...........................................................................................................
Loans and Advances to Customers
Corporate ..................................................................................................................
Retail .........................................................................................................................
Gross Loans and Advances to Customers
Net Loans .................................................................................................................
As at 31 December
2015
2014
KD 000's
KD 000's
904,973
1,288,451
1,130,793
1,100,176
190,003
183,314
651,448
1,087,038
1,179,287
1,181,876
1,159,444
1,212,861
622,533
841,613
666,222
713,850
1,137,424
1,289,176
7,642,127
8,898,355
3,668,363
499,597
4,167,960
(156,315)
4,011,645
3,988,338
553,916
4,542,254
(155,788)
4,386,466
The following table sets out the Bank's amounts due from banks and OFIs as at 31 December 2014 and 31 December
2015:
Banks ........................................................................................................................
OFIs ..........................................................................................................................
Total Due from Banks and OFIs ...........................................................................
111
2015
KD 000's
579,419
75,990
655,409
(80,539)
574,870
2014
KD 000's
672,689
98,020
770,709
(80,890)
689,819
The following table sets out the Bank's total provisions as at 31 December 2014 and 2015:
Banks and
OFIs
KD 000's
Corporate
KD 000's
Retail
KD 000's
Total
KD 000's
At 1 January 2015 ....................................................
Exchange adjustment .................................................
Amounts written off ...................................................
Charged to income statement .....................................
Disposal of a Subsidiary
At 31 December 2015 ...............................................
80,890
63
(101)
(313)
80,539
149,217
(5,743)
(12,438)
46,251
(33,778)
143,509
24,190
214
9,136
(2,395)
31,145
254,297
(5,466)
(12,539)
55,074
(36,173)
255,193
At 1 January 2014 ...................................................
Exchange adjustment ................................................
Amounts written off ..................................................
Charged to income statement ....................................
At 31 December 2014 ..............................................
Bank and
OFIs
KD 000's
80,792
(22)
—
120
80,890
Corporate
KD 000's
130,379
(1,123)
(38,239)
58,200
149,217
Retail
KD 000's
21,315
73
(180)
2,982
24,190
Total
KD 000's
232,486
(1,072)
(38,419)
61,302
254,297
The following table sets out the Bank's consolidated impaired assets and provisions by standard portfolio as at 31
December 2014 and 31 December 2015:
Claims on banks .............................................................................
Claims on corporates .....................................................................
Regulatory retail exposures ...........................................................
Other exposures .............................................................................
Total ..............................................................................................
As at 31 December 2015
Impaired
Loans (net of
Specific
suspended
provision
interest and
charge /
collateral)
Total provision
charge off (-)
KD 000's
1,207
6,894
(587)
29,997
206,344
19,819
24,474
31,145
6,372
6,471
10,810
(2,033)
62,149
255,193
23,571
Claims on banks ............................................................................
Claims on corporates ....................................................................
Regulatory retail exposures ..........................................................
Other exposures ............................................................................
Total .............................................................................................
As at 31 December 2014
Impaired
Loans (net of
Specific
suspended
provision
interest and
charge /
collateral)
Total provision
charge off (-)
KD 000's
1,903
6,141
431
53,105
209,830
34,747
19,912
24,190
4,764
–
14,136
3,971
74,920
254,297
43,913
Non-performing loans (NPLs) as a percentage of gross loans to customers marginally increased from 3.9 per cent. as at
31 December 2014 to 4.1 per cent. as at 31 December 2015, see "Impairment Losses on Loans and Advances to
Customers" below for further detail.
112
The following table compares the gross amount of loans, advances and financing to customers past due but not impaired
as at each of 31 December 2014 and 2015.
31 December 2015
Banks and OFIs ...................
Corporates............................
Retail ...................................
Fair value of collateral held .
31 December 2014
1 to 45 days
KD 000's
839
45 to 90 days
KD 000's
-
Total
KD 000's
839
1 to 45 days
KD 000's
—
45 to 90 days
KD 000's
—
Total
KD 000's
—
76,603
14,742
92,184
60,765
7,633
9,224
16,857
132
84,236
23,966
109,041
60,897
143,754
15,035
158,789
101,752
22,547
11,739
34,286
2,181
166,301
26,774
193,075
103,933
The following table sets out the Bank's consolidated geographical distribution of gross credit exposures as at 31
December 2015:
Geographic Distribution of Credit Exposures
KD 000's
Kuwait
Claims on sovereigns ......
Claims on public sector
entities ............................
Claims on banks ..............
Claims on corporates ......
Cash items ......................
Regulatory retail
exposures ........................
RHL Eligible for 35%
RW .................................
Past due exposures ..........
Other exposures* ............
Total ...............................
*
Jordan
Algeria
Iraq
Tunisia
Other
Middle
East
Turkey
Rest of
the World
Europe
Total
446,581
-
134,042
189,314
-
165,581
53,076
-
4,862
993,456
40,993
312,553
2,213,983
81,291
74,800
-
528
456,268
31,122
18,542
48,080
33,533
23,023
6,297
269
94,151
1,332,906
2,745
11,463
710,608
76,899
196
705,282
3,888
-
3,675
137,618
45,742
9,576
56,131
2,077,105
4,184,063
158,732
406,803
-
36,409
28,213
255
226,923
42
1,465
332
700,442
84,322
1,151,351
580
10,654
48,085
47,937
42,613
190
5,237
49,676
4,352
97,247
16,680
93,983
147,455
1,505,452
4,737,877
75,380
717,108
408,232
35,271
1,871,982
953,883
727,315
295,788
9,822,836
Other exposures includes loans to real estate activity and share financing, which attract a risk weight of 150% based on the CBK's
regulations.
The following table sets out the Bank's credit exposure and contingent liabilities by geography as at 31 December 2014
and 31 December 2015:
Kuwait ..............................
Jordan................................
Algeria ..............................
Iraq ....................................
Tunisia ..............................
Turkey...............................
Other Middle East .............
Europe ...............................
Rest of the world ...............
December 2015
Commitments and contingent
Assets
Liabilities
Total
KD 000's
KD 000's
KD 000's
3,415,294
877,655
4,292,949
68,868
5,932
74,800
424,945
208,625
633,570
286,272
50,606
336,878
24,357
2,969
27,326
1,220,133
238,487
1,458,620
447,458
4,965
452,423
123,538
19,378
142,916
185,824
36,821
222,645
6,196,689
1,445,438
7,642,127
113
December 2014
Commitments and contingent
Assets
Liabilities
Total
KD 000's
KD 000's
KD 000's
3,095,258
1,096,317
4,191,575
767,157
201,454
968,611
483,803
255,077
738,880
309,160
106,188
415,348
39,332
2,337
41,669
1,217,635
213,528
1,431,163
497,024
2,943
499,967
224,989
23,580
248,569
307,775
54,798
362,573
6,942,133
1,956,222
8,898,355
The following table sets out the Bank's consolidated geographical distribution of impaired loans (net) as at 31 December
2015:
KD 000's
Kuwait
Algeria
Iraq
Tunisia
Turkey
Other
Middle
East
Rest of
the
world
Europe
Total
Claims on banks .............................
Claims on corporates ...................... 4,380
Regulatory retail exposures ............ 21,060
Other Exposures ............................. 6,471
6,915
571
-
3,078
2,446
-
584
-
15,040
397
-
1,207
-
-
-
1,207
29,997
24,474
6,471
Total .............................................. 31,911
7,486
5,524
584
15,437
1,207
-
-
62,149
*
Other exposures include loans to real estate activity and share financing, which attract a risk weight of 150% based on the CBK's regulations.
(a)
Impairment Losses on Loans and Advances to Customers
The Bank reviews its consolidated loans and advances on a monthly basis to assess whether a provision for
impairment should be recorded in the consolidated quarterly income statement. In particular, considerable
judgment by management is required in the estimation of the amount and timing of future cash flows when
determining the level of provisions required. Such estimates are necessarily based on assumptions about several
factors involving varying degrees of judgment and uncertainty, and actual results may differ, resulting in future
changes to such provisions.
The Bank's impairment provision policy for credit facilities complies in all material respects with the specific
provision requirements of the CBK and IFRS as adopted for use by the State of Kuwait. In March 2007, the
CBK issued a circular amending the basis of making minimum general provisions on facilities, changing the rate
from 2 per cent. to 1 per cent. for cash facilities and 0.5 per cent. for non-cash facilities. The revised rates were
applied with effect from 1 January 2007 on the net increase in facilities, net of certain restricted categories of
collateral during the reporting period. The general provision as of 31 December 2006 in excess of the present 1
per cent. for cash facilities and 0.5 per cent. for non-cash facilities amounts to KD 16.2 million and is retained as
a general provision until further direction from the CBK. Interest income on impaired loans and advances
remains immaterial.
The following table sets out the Bank's provision for impairment of loans and advances by reference to (i) the
requirements of IFRS; and (ii) the additional provisioning required by the CBK, in each case, for the financial
years ended 31 December 2014 and 31 December 2015.
2015
2014
(KD 000's)
Provision for impairment of loans and advances
IFRS provisioning ...........................................................................................
Additional provisioning required by the CBK .................................................
Total ................................................................................................................
27.5
29.0
56.5
36.4
25.0
61.3
The Bank's asset quality improved marginally in 2015 with non-performing assets (net of collaterals) amounting
to 1.4 per cent. of gross facilities as compared to 1.5 per cent. as at 31 December 2014. The Bank's coverage
ratio* increased to 331.9 per cent. as at 31 December 2015 as compared to 277.9 per cent. as at 31 December
2014. The Bank's capital adequacy ratio as at 31 December 2015 was 15.6 per cent.
The following table sets out the Bank's impaired assets as at 31 December 2014 and 31 December 2015:
2015
Total
KD 000's
Provision
KD 000's
114
2014
Fair value
of
Collateral
held
KD 000's
Total
KD 000's
Provision
KD 000's
Fair value
of
Collateral
held
KD 000's
2015
Banks and OFIs..................
Corporates ..........................
Retail..................................
(b)
2014
Total
KD 000's
1,480
133,162
35,715
Provision
KD 000's
1,514
31,640
17,356
Fair value
of
Collateral
held
KD 000's
96,967
11,241
170,357
50,510
108,208
Total
KD 000's
2,251
146,017
29,255
Provision
KD 000's
2,268
45,011
12,767
Fair value
of
Collateral
held
KD 000's
—
93,257
9,346
177,523
60,046
102,603
Remedial Loan Management and Collection Management
The Bank has a separate recovery department that is responsible for recovery of identified non-performing
loans. This function is part of the LD.
Where the clients need restructuring of their exposures these are handled by the relevant department dealing
with that particular client and the proposal will be considered and approved by such departments only after
having been reviewed and authorised by the Risk Management Group.
In relation to retail loans, recoveries are handled first by a collection department which is part of the retail credit
department which will make considerable efforts to recover the full amount of principal, interest, fees and
related expenses. If the recovery performance is not satisfactory and the above avenue exhausted, the recovery is
then delegated to external recovery agencies which follow up the recoveries and take legal action, if necessary.
(c)
Strategies and Processes
The Bank has a well-documented credit policy that complies with the CBK regulations and defines the
assumption of risks in the Bank's various business divisions, particularly the CBG, PBD, RBD and IBT groups.
The credit policy has been developed by the Risk Management Group in consultation with the business
divisions and under the guidance and approval of the Board. All the business divisions are required to present
credit proposals in accordance with the general and specific guidelines stated in the credit policy. Subject to the
guidelines of the credit policy, each business division may draw up its own business strategy, which is
deliberated on at the MEXCO and approved by the Board Executive Committee (BEXCO). The policy also
defines the types of products that the various business groups can market to their clients and counterparties. Any
new product is required to undergo a specific validation process before its launch.
GBA has a credit policy that governs the grant of its credit facilities to clients segmented into Corporate
Banking, Retail Banking, Financial Institutions, Islamic Banking and Leasing.
BoB manages its credit risk by setting limits for individual borrowers and groups of borrowers. It also sets limits
for geographical and industry segments. The bank also monitors credit exposures and continually assesses the
creditworthiness of counterparties. In addition, the bank obtains security where appropriate and limits the
duration of exposure.
TIB manages its credit risk by setting limits for individual borrowers and groups of borrowers. The bank also
monitors credit exposures and continually assesses the creditworthiness of counterparties. In addition, the bank
obtains security where appropriate and limits the duration of exposure.
BBT manages its credit risk through the Credit Risk Unit which is responsible for monitoring, on a portfolio
basis, the credit risk undertaken by BBT as a result of its lending activities. The unit provides information to the
executive management of BBT in terms of the current position and performance direction of the loan portfolio
through regular monitoring of all the stages of lending activities and by regular and frequent reporting of credit
limits and risks on the basis of collateral, sector, geographical region, and internal rating scores.
(d)
Structure and Organisation
The Credit Risk Department of the Bank is headed by the Chief Credit Risk Officer and has independent teams
that are respectively responsible for the Credit Analysis unit and the Credit Control unit (see paragraph (e)
(Scope and Nature of Reporting Systems) for details). The Credit Analysis function is responsible for
independent financial analysis and appraisal of credit proposals that are marketed by the CBG, PBD and
Financial Institutions divisions of the Bank. There are detailed guidelines for financial analysis that are followed
115
by this department which gives its independent views/recommendations on credit proposals brought to it by the
relationship managers of the various business groups. These proposals are then further processed in accordance
with the delegation of powers approved by the Board. The Bank's structure of delegation of powers envisages
that a credit approval requires, in addition to the recommendation of the concerned business group, the
concurrence of an official of the Risk Management Group for credit approval of certain loans. To determine the
concurrence of an official of the Risk Management Group, factors that will be taken into account include the
amount of the loan and existing facilities, the borrower's ability to repay, the source of the repayment monies
and the collateral being offered. This ensures that the approval process has an in-built mechanism of checks and
balances with the concurrence of an independent functionary before a credit proposal can be approved.
On 1 July 2013, the CBK introduced regulations designed to increase the independence of oversight of all banks
in Kuwait. After 1 July 2013, a Chief Credit Risk Officer was required to report to the Credit Risk Committee,
which was empowered by the Board, rather than to report directly to the CEO. The regulations also require that
the appointment and termination of the Chief Credit Risk Officer is to be determined by the Board in
conjunction with the CBK. These measures were introduced to increase the independence of the Chief Credit
Risk Officer.
At GBA, the credit analysis function is in the business groups, although the business units and Credit Analysis
unit are segregated. The Credit Risk section is responsible for credit portfolio analysis and supervision and is not
involved in any decision-making.
At BoB, the Credit Committee is a management level authority responsible for taking credit decisions and
monitoring credit activities within the discretionary authority delegated by the Executive Committee and the
Board. In performing its role, the Credit Committee periodically reviews and provides constructive
recommendations on the credit policies, guidelines, processes and the future direction of credit activities for
review and decision of the Executive Committee and/or Board wherever applicable.
At TIB, the Credit Committee is a management-level authority responsible for taking credit decisions and
monitoring credit activities within the discretionary authority delegated by the Board. In performing its role, the
Credit Committee periodically reviews and provides constructive recommendations on the credit policies,
guidelines, processes and the future direction of credit activities for review and decision of the Executive
Committee and/or Board wherever applicable.
At BBT, the Credit Committee undertakes the assessment of credit proposals and revisions to the credit
proposals, within the framework of the authority granted by the Board. If it is deemed appropriate, the Credit
Committee refers credit proposals beyond its authorisation limit to the Board. The Credit Committee is briefed
on credit proposals and credit risks by the Credits and Marketing Groups and keeps the Board informed on a
regular basis.
(e)
Scope and Nature of Reporting Systems
After the approval of a credit proposal, the Credit Control unit of the Credit Risk department of the Bank is
entrusted with the responsibility of checking that the conditions precedent for the drawdown of the credit
facilities as approved are fulfilled before the facilities are made available to the client/counterparty. This unit,
which is independent of the Credit Analysis unit of the Credit Risk department, also monitors the account's
activity by the client/counterparty to ensure it is in accordance with the terms of approval and reports any
irregularities to the Credit Risk department for necessary corrective action. This unit is also responsible for
ensuring that the relevant details for measurement of the risk and allocation of the appropriate risk weights to
the exposures are made available in the system, so that the computation of the risk weighted assets can be made
appropriately.
The types of collateral accepted by the Bank normally consist of cash in the form of deposits with the Bank,
shares, bonds and units of mutual funds, various forms of real estate such as vacant lands, residential and
commercial buildings and projects under construction. However, the Bank does not undertake residential
mortgage lending in line with current local regulations. The scope to obtain any other type of collateral, such as
movables, is limited since Kuwaiti law does not recognise a hypothecation charge or a chattel mortgage. To
mitigate credit risk, the only types of collateral which will be taken into account are those permitted by the
Financial Regulator, and those for which conditions stipulated are fully met, are considered.
As regards shares, bonds and similar types of collateral, the Bank fulfils the stipulated regulatory requirements
including for their periodic valuation and the application of haircuts. As regards real estate assets, the Bank
116
employs independent, professional and government-recognised valuers who are required to assess the value of
the collateral before it is accepted as security. The Bank will ordinarily obtain two independent valuation reports
and consider the lower of the two. The frequency of the valuation is again in line with the regulatory
requirements. The amount of a secured facility that a borrower can draw down is based on the valuation of
security, after applying the necessary coverage ratios under the conditions of approval.
In relation to Retail Banking, the retail credit policy and the various retail banking products are examined by the
Credit Risk department as regards the underlying risks. The policy, along with the comments of the Credit Risk
department, is presented for approval of the appropriate authorities of the Bank, such as the Board Credit
Committee. The approved policy, which details the credit underwriting criteria, is then implemented by the
Retail Banking Group. The Retail Banking assets are monitored by the Credit Risk department.
In GBA, the client's application is sent to the respective business unit. Approvals are required for the credit
proposal, and the Credit Administration unit of the Credit Risk department is entrusted with the responsibility of
checking that the conditions precedent for the drawdown of the credit facilities as approved are fulfilled before
the facilities are made available to the client/counterparty.
In TIB, the Credit and Risk Management department reviews compliance with guidelines and thresholds and
monitors compliance with lending limits. The head of Credit and Risk Management sits on the Credit
Committee of the bank which in turn is a committee of the Board of TIB which is ultimately responsible for
approving all credits above certain thresholds.
In BBT, the Credit Monitoring Unit monitors the corporate, commercial and retail credit portfolio. The Credit
Monitoring Unit implements a proactive method by communicating credit accounts which are potentially
problematic and which are identified through early warning signals to the relevant management. Once such
problematic credit accounts have been identified the Credit Monitoring Unit takes the necessary action in order
to minimise BBT's possible loss.
(f)
Hedges and Mitigants
The Credit Policy of the Bank, while outlining the risk appetite as regards credit risk, also laid down guidelines
to mitigate risks in terms of availability of credit enhancements and/or collateral to support the exposure, the
ratio of collateral value to the loan to be granted, and the threshold levels for top-up of security and liquidation.
The policy and procedures of the Bank also lay down the required methods and intervals for valuation of the
different types of collateral so as to determine the necessity for top-up by the client and/or procedure for
liquidation. Since there are limited avenues for other types of hedges such as credit default swaps and other
similar structures in the Kuwaiti banking environment, the chief mitigants considered are eligible collateral
and/or guarantees of acceptable third parties.
The Credit Policy of GBA, while outlining the risk appetite as regards credit risk, has also laid down guidelines
for mitigating risks in terms of acceptable collateral and the ratio of collateral value to the loan to be granted.
With regard to real estate assets, the Bank has employed independent and professional appraisers who are
required to assess the value of the collateral before it is accepted as security. Algerian law permits enforcement
of the mortgage on the primary residence.
For BoB, the amount and type of collateral required depends on the assessment of credit risk of the
counterparty. Guidelines are implemented regarding the acceptability of types of collateral and valuation
parameters. The main types of collateral obtained are real estate properties, inventory and cash margin.
For TIB, the amount and type of collateral required depends on the assessment of credit risk of the counterparty.
Guidelines are implemented regarding the acceptability of types of collateral and valuation parameters. The
main types of collateral obtained are real estate properties, inventory, bank guarantees, deposits and cash
margin.
For BBT, the credit risk policy requires that credit exposures are adequately covered by satisfactory collateral.
117
Market Risk
(a)
Foreign Currency Risk
Foreign currency risk is the risk of loss that results from changes in foreign exchange rates. The Bank's exposure
to foreign currency risk is limited and is strictly controlled by the market risk and structural risk management
policies established by the Bank, which govern the maximum trading and exposure limits that are permitted.
The Board sets limits on the level of exposure by currency and in total for both overnight and intra-day
positions, which are monitored daily.
The following table analyses the effect on profit and equity of an assumed 5 per cent. strengthening in value of
the relevant currency rate against the Kuwaiti dinar from levels applicable at the year end, with all other
variables held constant:*
For the year ended
31 December 2015
Currency
Jordanian dinar ..............................
Algerian dinar ................................
Iraqi dinar ......................................
Turkish Lira ...................................
US Dollar .......................................
Others ............................................
(b)
%**
Change in
currency
rate
+5
+5
+5
+5
+5
+5
Effect on
profit
KD 000's
22
134
123
558
432
Effect on
equity
KD 000's
3,942
4,478
2,515
-
For the year ended
31 December 2014
Effect on
profit
KD 000's
780
334
155
63
630
549
Effect on
equity
KD 000's
13,924
3,929
4,112
6,171
2,910
—
*
The strengthening in value of the relevant currency rate against the Kuwaiti dinar from levels
applicable at the period end, with all other variables held constant, is not computed as at 31 December
2015.
**
The % change in currency rate is an assumed 5 per cent. strengthening in value of the relevant
currency rate against the Kuwaiti dinar from levels applicable at the year end, with all other variables
held constant, see Note 24 to the 2015 Financial Statements for further detail.
Interest Rate Risk
The Bank is exposed to interest rate risk on its interest bearing assets and liabilities (treasury bills and bonds
with the CBK and others, due from banks and other financial institutions, loans and advances to customers, due
to banks, due to other financial institutions, deposits from customers and other borrowed funds).
The table below summarises the effect on consolidated net interest income of the Bank because of the changes
in interest rate as at 31 December 2014 and 2015:
For the year ended 31
December
2015
2014
KD 000's
KD 000's
Increase in interest rate basis points
50 ..........................................................................................................................
100 ........................................................................................................................
Decrease in interest rate basis points
50 ..........................................................................................................................
100 ........................................................................................................................
(i)
4,614
9,519
5,594
11,328
(3,578)
(4,949)
(3,893)
(6,882)
The operations of the Bank's IBT Group give rise to the market risks assumed by the Bank. The Bank
has a well-defined and CBK-compliant Treasury Policy that outlines its risk appetite in relation to
118
undertaking transactions that result in exposures to market risk. Being a specialised area that requires
in-depth knowledge of the market and various products and participants therein, the policy document
is prepared by the IBT Group with inputs/concurrence from the Risk Management Group, under the
guidance and approval of the Board. The policy covers rules concerning the positions that the Bank
assumes in the course of its trading in foreign exchange, equities and fixed income securities and also
the interest rate risk position of its banking book in terms of mismatches in maturity and/or re-pricing
periods. At present, the Bank does not trade in commodities or take up any positions in respect of
commodity-based derivatives or other products. The strategies that the IBT Group plans to adopt
during the coming year are decided on the basis of market forecasts that are made at the time of
preparation of the annual budget. These are, on an ongoing basis, discussed at the ALCO meetings and
required action, if any, is decided at these meetings. These meetings are chaired by the CEO and are
convened by the Market Risk Controller in the Risk Management Group. The ALCO discusses and
deliberates on all aspects of market and liquidity risks. The ALCO has the overall responsibility for
Asset-Liability Management as well as the Bank's liquidity. At ALCO monthly meetings, the Bank's
liquidity indicators, deposit concentration and regulatory ratios for liquidity, among other things, are
discussed in detail. In June 2013, the ALCO approved a revised Liquidity Contingency Plan that takes
into account the actions needed to be taken by the Bank in the area of liquidity management. This plan
defines in detail the role that ALCO would play in case of liquidity stress scenarios.
GBA has set up an ALCO. The policy covering the main areas of market risk is under implementation.
ALCO will be chaired by the General Manager and will be convened by the Head of Credit and Market
Risks in the Risk Management department.
The market risks at BoB are monitored and managed within acceptable levels through BoB's Executive
Committee, Treasury Department and Board.
At TIB, ALCO is responsible for managing interest rate risk and liquidity risk.
At BBT, all market risk limit utilisations are reported to the ALCO and the Risk Committee.
(ii)
The IBT Group, in consultation with the Risk Management Group, lays down the various limits and
rules under which the various members of the Treasury Dealing Room are allowed to take up positions.
These limits are approved by the BEXCO and, where so required under the regulations, also by the
CBK. These limits relate to, for example, intra-day and overnight positions as well as positions under
different maturity buckets, counterparty exposure limits and stop loss levels. The adherence of the
Bank to these limits is monitored by the Senior General Manager of the IBT Group, and is also
independently monitored by the Market Risk Controller who is placed in the Treasury Dealing Room
but reports to the Senior General Manager of the Risk Management Group. The Market Risk Controller
reports relevant information on the treasury activities of the Bank (including the various positions taken
by the IBT Group) to the Senior General Manager of the Risk Management Group daily or more
frequently if necessary. The Middle Office reports to the Financial Control Group and the treasury back
office reports to Banking Operations.
As regards GBA, apart from cover operations to meet client requests for foreign currency transactions,
it does not actively trade in foreign currencies or assume material proprietary positions in such
currencies. GBA's positions are subject to a ceiling of 10.0 per cent. of its equity for a single currency
and 30.0 per cent. in aggregate for all foreign currencies.
At BoB, the Board has established limits on the interest rate gaps for stipulated periods. Positions are
monitored on a daily basis. Similarly for foreign currency risk, the Board has set limits on positions by
currencies which are monitored on a daily basis.
TIB is mainly oriented towards short-term self-liquidating business and is not involved in trading
activities. TIB is subject to interest rate risk and liquidity risk. ALCO monitors funding needs, risk
appetite, composition of assets and liabilities and the competitive environment in which the bank
operates, liquidity, hedging strategies and funding mix.
At BBT, FX position limits, bond portfolio limits and VaR limits are monitored daily and interest rate
gap limits are monitored monthly. All market risk limit utilisations are reported to the ALCO and Risk
Committee. BBT's Market Risk Unit runs stress tests on a regular basis and presents the results to the
119
Board, ALCO and Risk Committee. The stress tests describe the effects of defined changes in yield
curves, credit spreads and FX rates on certain on-balance-sheet and off-balance-sheet items.
(iii)
The Bank has implemented software that allows independent, on-line monitoring of the intraday
positions from outside the Treasury Dealing Room. This system also enables the Market Risk
Controller to monitor the activities of the various members of the Treasury Dealing Room at the same
time as the dealing transactions are made.
A major part of the banking book of the Bank is in KDs, the other important currencies being the
internationally actively traded currencies. Due to the limited scope for hedging interest rate positions in
KD arising from a limited range of hedging products, the Bank enters into, where reasonably possible,
variable interest rate transactions structured to enable it to minimise maturity and repricing
mismatches. As regards other currencies, the open positions taken by the Bank are within pre-set limits
and tenors for the respective currency. The Bank also makes use of interest rate and currency swaps to
hedge its interest rate and currency positions in foreign currencies.
Operational Risk
(a)
The Operations Risk Department is headed by a general manager, referred to herein as the Operational Risk
Controller, who reports to the Chief Risk Officer, Senior General Manager of the Risk Management Group. This
department oversees the operational procedures and controls with a view to identifying the areas of weakness in
the operating procedures and processes of the various operating departments of the Bank and correcting them
from time to time. The Risk and Disclosure Policy of the Bank classifies the various areas of operational risks
and identifies specific officers who are primarily responsible for these risks. For example, the legal risks fall
under the direct responsibility of the legal officer whereas the IT risks fall under the responsibility of the Head
of the IT Department. The specific procedural guidelines for all departments under the Operations Group are
overseen by the Operational Risk Controller, who also collates various incidents that give rise to actual or
potential operational risks and an actual or potential loss situation.
For the purpose of separation of the functions of IT development/operations from IT security, the Operational
Risk Controller is also responsible for independently ensuring the adequacy and effectiveness of IT security
systems and procedures. These include both internal and external IT security measures.
The Bank also has a Business Continuity and Recovery Plan, which was developed with necessary inputs from
all the concerned groups in the Bank. This plan is being upgraded with necessary inputs from external
consultants and consolidated across the Bank's subsidiaries.
At GBA, the IT security function directly reports to the General Manager. For the purpose of separation of the
functions of IT development/operations from IT Security, the Head of IT Security and Business Continuity
Management in the Operations Risk Department is also responsible for independently ensuring the adequacy
and effectiveness of IT security systems and procedures. These include both internal and external IT security
measures. He also takes the responsibility for business continuity management. GBA does not apply any
approach for computing operational risk because Basel II is still not applicable in all banks in Algeria.
At BoB, the management of operational risk in the bank is the responsibility of every employee. BoB has
established a culture that emphasises the importance of mitigating operational risk in its business. This is
accomplished by having reliable risk management reporting and supervision of various board and management
committees, implementing segregation of duties, KYC procedures, strong internal controls and enhancing
employees' awareness.
At TIB, the management of operational risk in the bank is the responsibility of the Internal Control Department,
whose head also acts as the Money Laundering Reporting Officer. To mitigate operational risk in its business
the bank has invested in a new automated system to identify potentially suspicious transactions and introduced
KYC procedures.
120
At BBT, the Head of the Risk Management Group is assigned with the coordination of the Operational Risk
Unit and presentation of the results of its work to the Risk Committee for review.
(b)
The various operational functions of the Bank come under the Operations Group headed by the Chief
Operations Officer, General Manager, who oversees the day-to-day operational and support functions of the
Bank. The processing of various transactions is governed by Standard Operating Procedures (SOP) laid down
for each of the operating departments with the necessary inputs/concurrence from, among others, the
Operational Risk Controller.
The operational functions at GBA are the responsibility of two Deputy General Managers, who directly report to
the General Manager. The Deputy General Manager (Core Business) is in charge of corporate banking, retail
banking, branch network and corporate communication, while the Deputy General Manager (Support Services)
is in charge of HR, Trade Finance and IT.
BoB has developed a framework whereby business units are responsible for identifying and documenting
various key risk indicators emanating from the activities of their operations in order to measure the integrity and
effectiveness of the implemented internal control environment within their departments. Given the importance
of monitoring operational risk, these together with other operational risk incidents/issues are discussed on a
monthly basis with top management/executive committee members and an appropriate course of action is taken
to mitigate them.
As part of the operational risk management, TIB has developed a framework whereby business units are
responsible for identifying and documenting various key risk indicators emanating from the activities of their
operations in order to measure the integrity and effectiveness of the implemented internal control environment
within their departments.
At BBT, a loss database has been implemented for operational risk quantification. Operational risk categories
have been developed based on the BIS standards, and a sub-categorisation of the incidents that might be
encountered has been completed. BBT's operational risk unit maintains and improves BBT's Contingency Plan.
(c)
As regards the scope and nature of risk reporting in this area, the Bank has laid down Internal Control Charts
(ICC) that are required to be submitted by the various divisions/groups at critical levels and with differing
reporting periods. These are required to be submitted to specified supervisors, who conduct the necessary
follow-up in relation to exceptions and ensure corrective action.
GBA has in place an Internal Control Unit in the Operational Risk Unit. It is responsible for identifying key risk
areas mainly in the branches for control and follow-up, which are in the process of being implemented in all
departments. GBA is also in the process of applying the same ICC system existing at the Bank.
The Internal Audit Department at BoB provides the Board Audit Committee and Senior Management of the
bank with continuous assessment and assurance on the effectiveness and quality of controls. Through a
systematic risk based approach, the department aims at introducing continuous improvements to the bank's
overall operations and procedures, in line with applicable regulatory requirements and best practices. The
department operates on a three-year strategic audit plan approved by the Board Audit Committee of the bank.
The plan covers key auditable areas categorised by department. These areas would receive audit attention given
their significance on BoB's risk profile and the importance of having an appropriate control environment on
which to rely.
TIB is in the process of applying the same ICC system existing at the Bank. TIB also minimises conflicts of
interests and the risk of unauthorised transactions or fraudulent activities through the segregation of duties of its
employees, and heads of departments are responsible to monitor this.
The Internal Audit department at BBT, by carrying out audits in BBT's branches, headquarter divisions and
subsidiaries, provides assurance to BBT's management that BBT's operations are in compliance with laws and
other legislation, BBT's strategy, policy and procedures and that BBT's internal control and risk management
systems are effective and adequate.
121
The Bank has set up an Incident Management System, under which various incidents of operational risks are
noted and registered with all the relevant details. These incidents may relate to either actual or potential loss
incidents resulting from an operational failure or dysfunction, due to either external or internal causes. These
incidents are analysed to effect necessary changes in the SOPs so as to enhance the operational controls and to
eliminate or minimise operational losses. These incidents are, at appropriate intervals, reported to the top
management of the Bank and the appropriate Board Committee.
The Bank has also developed Risk Dashboards in some of its operational areas, which serve to provide a
snapshot of the operational risks in these operating units. The Bank intends to extend these Risk Dashboards
progressively to cover more units of the Bank.
BoB has a dedicated team to protect the bank's Information Technology systems and network and ensure
integrity of the data. In addition, appropriate disaster recovery and business continuity planning and setup is in
place, including remote data back-up and disaster recovery facilities.
See the description of BBT's loss database for operational risk qualifications under "Operational Risk Structure and Organisation" above.
Compliance Risk, Anti-Money Laundering and Counter-Financing of Terrorism
Compliance risk is the risk of reputation, earnings or capital arising from the violation or non-conformation with laws,
regulations, policies, practices and ethical standards including money laundering in terms of process by which criminals
attempt to hide and disguise the true origin and proceeds of their criminal activities and in relation to financing of
terrorist activity.
The Bank ensures the implementation of the local and regulatory and statutory requirements and has in place customer
due diligence policies and procedures in line with KYC principles as set out below. The Bank's KYC procedures form a
fundamental part of its anti-money laundering internal control regime. The procedures are intended to reduce risk of
accounts being used for money laundering or terrorist financing and to help identify suspicious transactions.
The Bank has an Anti-Money Laundering Policy (AML Policy) in place pursuant to CBK instructions relating to AntiMoney Laundering and the Combating of Terrorism Financing.
The AML Policy is defined by a set of key principles:
(a)
Engagement. The AML Policy applies to all areas of the Bank's business, its operating groups, each of its
branches and subsidiaries to ensure proper implementation;
(b)
KYC. The Bank has put in place KYC procedures, which are designed to determine and document the true
identity of customers, obtain basic background information on customers and also provide for periodic updates
on the identity of customers. The Bank's AML Policy covers the saving and retrieval of documents and
examines the identity of the transferor and transferee on outward and inward transfers;
(c)
Training. The Bank has regular training courses for its staff to ensure it understands its responsibilities under the
AML Policy, implements it in its day-to-day work and has a clear understanding how to detect, monitor and
report suspicious activities and transactions; and
(d)
Effectiveness. The Bank also has a system that gives details of potential suspicious transactions day to day, and
these are further examined and explanations taken, when considered necessary. In the case of strong suspicion, a
report is made to the relevant legal authorities.
Legal Division
The Legal Division handles the legal affairs and various administrative functions of the Bank, which amongst other
things include coordinating lawsuits where the Bank is a party to the action, providing legal advice and opinions,
reviewing the impact of legislative amendments on the Bank, and drafting contracts and internal company documents.
The General Manager and Chief Legal Counsel are responsible for the functioning of the Legal Division and oversee
Kuwaiti qualified lawyers, internationally and locally focused legal counsellors, support services staff and a translation
unit. The Legal Division also has a recovery unit that handles all cases of loss assets. The Legal Division reports directly
to the CEO and, amongst other things, provides the CEO and the Risk Management Group with details of any legal
122
matters arising that may have particular importance to the Bank. Quarterly reports are also produced by the Legal
Division and sent to the Financial Accounting and Control Group (under the Operations Group).
Risk Committee
The Board constitutes a Board Risk & Compliance Committee, which defines the risk policy of the Bank and oversees
the risk assessment.
LIQUIDITY
The Bank's liquidity needs arise primarily from making loans and advances to customers, payment of expenses and
dividends, and investments in associates. To date, the Bank's liquidity needs have been funded largely through deposits,
syndicated loans, interbank loans and interest received on loans and advances to customers, and through debt issuances.
During 2008-2009, government entities injected funds into the banking system to support the economy (bank deposits
were also guaranteed) and stability was maintained throughout. Additionally, the Bank significantly altered the allocation
of liquid assets in 2009 to improve the return on assets on its balance sheet by moving a higher percentage of liquid
assets from placements in the interbank market, which became inactive, to treasury bills and bonds.
In 2012, the Bank issued the 2012 Subordinated bonds at 100.0 per cent. of the principal amount. The 2012 Subordinated
bonds met the requirements to be treated as Tier 2 eligible capital under Basel II regulations issued by the CBK. In 2014,
the Bank issued U.S.$500 million Perpetual Tier I capital securities which met the eligibility requirements for additional
Tier 1 capital under the Basel III regulations.
In March 2016, the Bank issued the 2016 Subordinated Bonds. The 2016 Subordinated Bonds met the requirements to be
treated as Tier 2 eligible capital under Basel III regulations issued by the CBK. The Bank is classified as a D-SIB.
REGULATORY CAPITAL
Management of the Bank's capital base is critical to the growth of the Bank's group, both organically and through
strategic investments.
CAR is calculated in accordance with the international framework for capital measurement and capital standards for
banking institutions set by the Basel Committee on Banking Regulation and Supervisory Practices.
The following table sets out the principal components of the Bank's CAR as at 31 March 2016, 31 December 2014 and
2015 (each in accordance with Basel III).
Risk weighted assets .......................................................................................
Capital required* ............................................................................................
As at 31
March
2016
KD 000's
5,149,689
643,711
Capital available
Common Equity Tier 1 (CET1) capital ..........................................................
Additional Tier 1 (AT1) capital ......................................................................
Tier 2 capital ...................................................................................................
Total eligible capital .....................................................................................
CET1 capital adequacy ratio ...........................................................................
Tier 1 capital adequacy ratio ...........................................................................
Total capital adequacy ratio ............................................................................
551,504
145,706
146,975
844,185
10.7%
13.5%
16.4%
*
As at 31 December
2015
2014
KD 000's
KD 000's
4,827,665
5,411,616
603,458
649,394
562,592
145,776
43,168
751,536
11.7%
14.7%
15.6%
506,578
151,651
72,418
730,647
9.4%
12.2%
13.5%
Capital required is the % of risk weighted assets based on Central Bank requirements.
On 27 April 2010, the Bank raised KD 100.8 million (capital KD 36.0 million; share premium KD 64.8 million) through
a rights issue of 360 million shares at KD 0.280 per share (the Rights Issue). Part of the proceeds was used to prepay
half of the subordinated debt owing to a related party while the remaining funds were used to fund the Bank's expansion
strategy. On 24 June 2014, the Financial Regulator issued its final instructions ("Implementing Capital Adequacy
Standards - Basel III - for conventional banks") to conventional banks in Kuwait, that impose risk-based Basel III (as
123
defined in the Conditions) capital and leverage standards upon Kuwaiti banks, which substantially adhere to Basel
Committee standards. These instructions establish a systematic analytical framework that makes regulatory capital
requirements more sensitive to differences in credit risk profiles among banking organisations, takes off-balance sheet
exposures into explicit account in assessing capital adequacy and minimises disincentives to holding liquid, low-risk
assets. The risk-based ratio is determined by assigning assets and certain off-balance sheet exposures, such as foreign
exchange and derivative products and letters of credit, into one of four risk-weighted categories, with higher levels of
capital being required for the categories perceived as representing greater credit risk. The risk-based capital instructions
also incorporate a measure for market risk in foreign exchange and commodity activities and in the trading of debt and
equity investments.
Under the instructions referred to above, capital is divided into two tiers. The first tier (Tier 1) includes common
shareholders' equity (excluding net unrealised holding gains or losses on securities available-for-sale and net gains or
losses on cash flow hedges and risk reserves which are created pursuant to the CBK regulations for portfolio credit risk
purposes), qualifying perpetual preferred stock and any related surplus, mandatorily redeemable securities of subsidiary
trusts, and minority interests that are held by others in a bank's consolidated subsidiaries, less certain intangible assets,
and a capital charge for certain non-financial equity investments. The second tier (Tier 2) includes, among other items,
perpetual preferred stock to the extent it does not qualify for Tier 1, qualifying senior and subordinated debt and
subordinated capital notes, limited life preferred stock and any related surplus, a portion of unrealised marketable equity
securities gains and the allowance for credit losses, subject to certain limitations. In addition, pursuant to the Instructions
(as defined in the Conditions), Kuwaiti banks were required to maintain a capital adequacy ratio of 12.0 per cent. of riskweighted assets (Tier 1 plus Tier 2 capital), which level was applicable until the end of 2014 and which rose to 12.5 per
cent. by the end of 2015 and will rise by 13.0 per cent. by the end of 2016. Additionally, all commercial banks are
required to maintain additional capital (0.5 per cent. to 2.0 per cent. depending on the bank's size and complexity, as
determined by CBK) in the form of a D-SIB charge. The Bank is classified as a D-SIB.
The Bank has an ICAAP, which provides for the calculation of the capital adequacy ratio of the Bank at regular intervals,
whereby a cushion is maintained to mitigate any unexpected risks that the Bank may face in maintaining the required
level of capital.
Failure to meet applicable capital guidelines or instructions issued by the Financial Regulator could subject the Bank to a
variety of enforcement remedies available to the Kuwait regulatory authorities, including limitations on the Bank's ability
to pay dividends, the issuance by the Financial Regulator of a directive to increase capital and/or sell or reduce assets, as
well as the imposition of fines.
OFF-BALANCE SHEET ITEMS
The Bank offers products such as guarantees, which do not appear on its balance sheet (but which are shown in Note 21
to the 2015 Financial Statements). In order to comply with CBK liquidity ratios, the Bank must maintain certain cash
balances against such off-balance sheet commitments.
RELATED PARTY TRANSACTIONS
The Bank enters into transactions with certain related parties (KIPCO, directors and key management personnel of the
Bank and entities controlled, jointly controlled or significantly influenced by such parties) who were customers of the
Bank. The terms of these transactions are approved by the Board Credit Committee or a delegated authority below that,
depending on the nature of the transaction. As at 31 December 2015, the aggregate of loan exposures to related parties
represented 18.6 per cent. of the total loan portfolio (excluding banks and OFIs within the KIPCO group).
None of the Bank's directors or officers, or the direct or indirect shareholders of the Bank holding more than 5.0 per cent.
of their respective issued share capital, has or had any interest in any transactions with the Bank or its affiliates that are or
were unusual in their nature or conditions or significant to the Bank's business or its affiliates taken as a whole that were
effected during the current or immediately preceding three financial years.
The following table sets out the balances as at 31 December 2014 and 31 December 2015 and transactions for the year
then ended:
124
As at/for the year ended 31
December
2015
2014
KD 000's
Balances
Due from banks and other financial institutions ......................................................
Loans and advances to customers ............................................................................
Investment securities ...............................................................................................
Investment securities managed by a related party....................................................
296,078
876,897
172,146
61,971
196,382
775,636
77,751
62,966
Due to banks ............................................................................................................
Due to other financial institutions ............................................................................
Deposits from customers .........................................................................................
9,605
20,475
64,461
20,782
23,015
36,713
Commitments, contingent liabilities and derivatives
Letters of credit ........................................................................................................
Letters of guarantee .................................................................................................
Derivative financial instruments ..............................................................................
4,146
41,359
38,327
36
14,369
35,996
Transactions
Interest income.........................................................................................................
Interest expense .......................................................................................................
Fee and commission income ....................................................................................
Fee and commission expense ...................................................................................
Dividend income ......................................................................................................
Other expenses .........................................................................................................
32,786
532
1,372
2,389
1,719
25,377
494
956
712
751
2,798
Other Transactions during the year
Sale of a subsidiary ..................................................................................................
Purchase of investment securities ............................................................................
Sale of investment securities ....................................................................................
Gain on sale of a subsidiary .....................................................................................
191,128
65,495
15,213
6,505
-
As at/for the year ended 31
December
2015
2014
(Restated)
Board members
3,777
974
3,528
781
Executive Staff
Letters of guarantee…………………………………………………………………
156
2,308
2
167
1,918
1
Key managerial compensation
The table below sets out the remuneration paid or accrued in relation to "key management" (deemed for this purpose to
comprise the Bank's directors in relation to their committee service, the Chief Executive Officer and other members of
the Bank's Executive Management) for the year ended 31 December 2014, 31 December 2015 and the three months
ended 31 March 2016 (as reported):
31 March
2016
(Unaudited)
125
31 December
2015
2014
(Restated)
Short-term employee benefits - including salary and bonus ..................
Accrual for end of service indemnity .....................................................
Accrual for long-term incentive rights ...................................................
Accrual for committee services .............................................................
KD 000's
2,556
238
530
75
3,399
KD 000's
5,015
423
472
300
6,210
KD 000's
4,925
819
379
300
6,423
LITIGATION
The Bank is currently involved in a number of legal proceedings which it considers immaterial and which have arisen
during the ordinary course of its business. The Bank does not believe that any final judgments made against it in such
proceedings would have a material adverse effect on its consolidated results or financial position and, as at 31 December
2015, has made adequate provisions regarding any outstanding legal proceedings involving the Bank.
INSURANCE
The Bank maintains fire and perils property insurance for its premises, including head office and the branches, building
and contents; and fire and perils property insurance for goods at customs warehouse. Its electronic equipment has been
insured with computer all risk insurance while mobile ATMs are covered with plant and machinery insurance. The Bank
also provides staff with medical insurance. The Bank also maintains third party liability insurance, bankers' blanket
insurance, directors' and officers' liability insurance, and sabotage and terrorism insurance.
The insurance coverage of the Bank is reviewed on an on-going basis and is updated accordingly.
PROPERTY
The Bank owns its Burgan Tower offices and one of its branches. The rest of the Bank's properties are typically leased
for three- to five-year terms and the Bank has the option to renew these leases. Out of the leased properties, certain
properties have been leased from the Ministry of Finance, Public Authority for Industry and cooperatives.
MANAGEMENT
The Board of the Directors of the Bank
The board of directors of the Bank (the Board) consists of nine directors. The Bank's articles of association provide that
each director is elected at an ordinary general meeting of shareholders for a three-year term and is eligible for re-election
upon expiration of such term. The Board has the power to appoint and remove the Chairman and Group Chief Executive
Officer (GCEO) at any time provided there is a quorum of three directors.
The Board convenes at least six times a year in accordance with regulatory requirements.
In April 2016, the Board was elected by the Bank's shareholders for a term of three years. Currently, the membership of
the Board comprises:
Majed Essa Al Ajeel (Chairman)
Mr. Al Ajeel has held the position of the Chairman of the Board since 2009. Previously, he was Vice-Chairman of the
Bank from 2004 to 2007 and a Board member from 1998 to 2004. He is also the vice chairman of the Kuwait Banking
Association. He served as the Chairman and CEO of United Projects Company from 2004 to April 2010,as the ViceChairman and CEO from 2010 to July 2012 and is currently still a board member at the company. He was a board
member of Kuwait & Middle East Financial Investment Company, Kuwait from 1984 to 1986, Kuwait Real Estate
Investment Consortium, Kuwait from1985 to 1992, and International Leasing & Investment Company, Kuwait from
1999 to 2003. He graduated with a Bachelor's degree of Science in Architecture from the Catholic University of America
in 1977 and a Master's degree in City and Regional Planning from the Catholic University of America in 1978.
Mohammed Abdul Rahman Al Bisher (Vice-Chairman)
Mr. Al Bisher is the Vice-Chairman of the Bank. He is the owner and director of Abdul Rahman Al Bisher and Zaid Al
Kazemi Group, Kuwait, director of Al Bisher Sons' Group for General Trading and Contracting, Kuwait, chairman of
Leo Writter GmbH (jewellery and precious mineral), Kuwait, director of Itemadco Exchange Company, Kuwait, partner
of International Optique Company, Kuwait, partner of a group of Saudi Arabian companies and representative for ATA
Investment Company, Turkey. Previously, he has held the positions of board member of Kuwait International Investment
126
Company, Kuwait, Kuwait Clearing Company and Jordan Kuwait Bank, Jordan. He graduated with a Bachelor's degree
in Commerce, Economic & Political Science from Kuwait University in 1970-71.
H.E. Abdul Karim Kabariti (Board Member)
Mr. Kabariti has been a Board member of the Bank since April 2004. He also holds the positions of Chairman of Jordan
Kuwait Bank, Gulf Bank Algeria, United Financial Investments Company and the board of trustees, Al-Ahliyya Amman
University. Previously, he has held several high ranking political and legislative positions in Jordan from 1989 to 2007
including, Prime Minister of Jordan, Chief of the Royal Court, Member of the Parliament, Jordan, member of the
Jordanian Senate and Minister of Foreign Affairs, Labour and Tourism, Jordan. He graduated with a Bachelor's degree in
Business and Finance with Honours from St. Edward's University, USA in 1973.
Saudoun Abdullah Ali (Board Member)
Mr. Ali has been a Board member of the Bank since April 2004. He also holds the positions Vice-Chairman and CEO of
Al Qurain Petrochemicals Industries Company, Kuwait, board member of Bank of Baghdad, Iraq, board member of
Advanced Technology Company, Kuwait, advisor to the chairman and executive committee at United Industries
Company, Kuwait and chairman of United Oil Projects Company, Kuwait. Previously, Mr. Ali has held the positions of
board member of Manafae Investment Company, Kuwait and managing director and CEO of KAMCO Investment
Company, Kuwait. He graduated with a Bachelor of Science degree in Management of Financial & Accounting Services
from Ashland University, USA in 1988 and also obtained a Diploma in Commercial Banks from The Public Authority
for Applied Education & Training.
Abdul Salam Mohammed Al Bahar (Board Member)
Mr. Al Bahar has been a Board member of the Bank since April 2004. He also holds the positions of board member of
United Industries Company and United Networks Company, Kuwait and financial advisor to Overland Real Estate
Company, Kuwait. Previously, he has held the positions of Chairman and Managing Director of Kuwait National
Airways Company, Kuwait, chairman of Kuwait Catering Company, Kuwait, board member of Tamdeen Real Estate
Company, Kuwait, board member of Wataniya Telecom, Kuwait, board member of Bank of Bahrain and the Middle
East, Bahrain and board member of Tunis International Bank S.A. He graduated with a Bachelor's degree in electrical
engineering from Fairleigh Dickinson University, USA in 1988.
Pinak Maitra (Board Member)
Mr. Maitra has been a Board member of the Bank since April 2010. He also holds the positions of group chief financial
officer of KIPCO, Kuwait, Vice-Chairman of Panther Media Group Ltd (OSN), UAE and board member of Pulsar
Knowledge Centre, India and Orbit Showtime Networks. Previously, he worked with Arthur Young International. In
2008, Mr. Maitra won the MENA Private Sector CFO of the Year award. He graduated from Osmania University, India
in 1978.
Samer Subhi Khanachet (Board Member)
Mr. Khanachet has been a Board member of the Bank since May 2011. He also holds the positions of group chief
operating officer of KIPCO, Kuwait, chairman of Taka'ud Savings and Pension, Bahrain, board member of United Gulf
Bank, Bahrain, board member of United Real Estate Company, Kuwait, board member of American University of
Kuwait, Kuwait and board and committee positions with Massachusetts Institute of Technology (MIT) and Forsyth
University. He graduated with two Bachelor of Science degrees from Massachusetts Institute of Technology (MIT) and a
Masters degree in Business Administration from Harvard University.
Masoud Hayat (Board Member)
Mr. Hayat joined the Board of the Bank in 2013. He also holds the position of CEO Banking of KIPCO, Kuwait, and
chairman of United Gulf Bank, Syria Gulf Bank and Tunis International Bank S.A., and vice chairman of Gulf Bank
Algeria, Bank of Baghdad and North Africa Holding Company. He is also a board member of Jordan Kuwait Bank and
KAMCO. He has a degree with a major in Economics from Kuwait University and a High Diploma in Banking Studies
from the Institute of Banking Studies, Kuwait.
Faisal Al Radwan (Board Member)
Mr. Al Radwan has been a Board member of the Bank since April 2010. He has also previously owned and managed a
financial consultancy firm with the name Faisal Al Radwan Management and has been a financial consultant since 1994.
Prior to this, he was employed at National Bank of Kuwait in 1970 where he was appointed as general manager in 1980
and deputy chief general manager from 1983 until 1993. He was also Managing Director of the Bank from 2003 to 2004.
127
He was appointed as Deputy Chairman of Kuwait Clearing Company from 1982 to 1986 where he was a member of the
arbitration panel that handled disputes arising due to the Manakh Crisis. He has also held positions of board member at
Bank of Bahrain and Kuwait, Bank of Oman, Gulfinvest International and Al Ahlia Invest. Mr. Al Radwan graduated
from Cairo University, Egypt.
There are no potential conflicts of interest between the duties to the Bank of the members of the Board and their private
interests or other duties.
The business address of each member of the board is: P.O. Box 5389, Safat 12170, Kuwait City, State of Kuwait.
The table below sets out the number and proportion of the shares of the Bank's capital owned by each member of the
Bank's Board as of 31 December 2015, as follows:
Direct
Shares
Per cent.
Directors
Majed Essa Al-Ajeel ...........................................
Mohammed Abdul Rahman Al Bisher ...............
H.E. Abdul Karim Kabariti .................................
Saudoun Abdullah Ali ........................................
Abdul Salam Mohd Al Bahar .............................
Pinak Maitra .......................................................
Samer Subhi Khanachet ......................................
Masoud Hayat .....................................................
Faisal Al Radwan ................................................
161,350
133,346
169,417
169,417
169,417
140,013
140,013
—
133,346
0.008
0.007
0.008
0.008
0.008
0.007
0.007
0.000
0.007
Outstanding
Stock
options
Shares
Indirect through
portfolio managers
Shares
Per cent.
—
—
—
—
—
58,334
—
—
—
—
—
—
—
—
0.003
—
—
—
—
—
—
—
200,023
—
—
—
—
Key Management Compensation
For the year ended 31 December 2015, the aggregate compensation remained in line with the aggregate compensation in
respect of the previous year; however, the portion of compensation related to performance varied with the performance of
the Bank, see "Description of the Guarantor - Risk Management - Related Party Transactions" for further detail.
Description of related party transactions
The details of material related party transactions, including any material contract between any of the Bank's directors or
his immediate family and the Bank or any of its subsidiaries are set out in note 20 of the 2015 Annual Financial
Statements.
The Bank's directors and their immediate family conduct business with the Bank and its subsidiaries as customers on
commercial, arm's length terms in the normal course of business activities. This includes bank accounts, savings and
investment products, and other such services. None of these transactions is for a material amount.
The Executive Management of the Bank
The table below sets forth certain information with respect to the Executive Management of the Bank.
Name
Age
Position
Years with the
Bank
Eduardo Eguren Linsen
60
Group Chief Executive Officer
5
Adrian Alejandro Gostuski
60
Group Chief Operating Officer
4
Andrew Christopher Singh
49
Group Chief Risk Officer
2
Raed Abdullah Al Haqhaq
44
Chief Banking Officer
15
Robbert Johannse Rijik Voogt
47
Group Chief Private Banking Officer
1
Robert James Frost
50
Group Chief Investment Banking and
Treasury Officer
2
128
Venkatakrishnan Menon
50
Chief Retail Banking Officer
10
Ghassan Bani Al Marjeh
55
Chief Operations Officer
1
Khalid Fahad Al Zouman
50
Group Chief Financial Officer
15
Amr Mohamed Samy El Kasaby
49
Group Chief Internal Auditor
8
Halah Mohammad El Sherbini
41
Group Chief Human Resources &
Development Officer
4
Hanan Mohamed Hassan Metwalli
65
Group Head of Compliance
25
Bashir Ghassan Jaber
37
Group Head of Corporate
Communications
8
Elyas Naser
32
Group Head of Strategic Business
Department and Chief of Staff
4
Mahmoud Ezzat
48
Chief Legal Counsel
14
Fahad Mohammed Hamad Al Menayes
46
Chief Information Technology Officer
3
Anil Sunal
62
Head of International Operations
Office
22
The business address of each member of the Executive Management is: P.O. Box 5389, Safat 12170, State of Kuwait.
Eduardo Eguren Linsen
Mr. Eguren was appointed as the Group Chief Executive Officer of the Bank in September 2010. He has over 31 years of
experience in global corporate, retail and commercial banking across five continents. Before joining the Bank, Mr.
Eguren was the chief executive officer of Global Commercial Banking for Barclays Bank in the United Kingdom. From
1984 to 2007, he held several senior management positions including chief financial officer and chief operating officer at
Citigroup, Citibank and Citi, across corporate and retail banking, asset management, insurance and pension funds in
Latin America, Europe, Asia, North America and Africa. He has extensive experience in developing, implementing and
driving forward strategies for a number of global banks and initiating inorganic growth opportunities in emerging
markets. He is a chartered accountant and holds a Bachelor's degree in Administration from Montevideo University,
Uruguay.
Adrian Alejandro Gostuski
Mr. Gostuski joined the Bank in 2011. As the Group Chief Operating Officer, he has been responsible for leading the
Bank's operational areas of finance, legal, banking operations, internal control and technology. Prior to joining the Bank,
he worked with Barclays Bank in London. From 2003 to 2008, he held the role of chief financial officer of Latin
America and Banamex for Citigroup - Corporate where he worked for over 23 years in various capacities of which the
last seven years were in the capacity of chief financial officer in Mexico and in Singapore. He has over 37 years of
experience in both developed and emerging markets with expertise in finance, investment management and mergers and
acquisitions. Mr. Gostuski has broad experience as chief financial officer and in senior executive positions across
operations, technology, treasury and equity funds. He is a certified public accountant (CPA) from Buenos Aires
University, Argentina and also holds a Master's degree in Business Administration in Strategic Planning from ESEADE,
Buenos Aires, Argentina.
Andrew Christopher Singh
Mr. Singh joined the Bank as Group Chief Risk Officer in 2015 with over 27 years of experience in financial services
and with 16 years of extensive experience in risk management. He has held previous positions as regional head of
Enterprise Risk for Europe at Credit Suisse, Regional Head of Risk Americas at Depfa Bank Plc, Group Chief Risk
Officer at EFG Hermes Holding for the Middle East and North Africa, and various risk and control-related roles at
JPMorgan Asia Pacific and UK. He has a solid record in enterprise-wide risk management in both developed and
emerging markets as well as in market, credit and operational risk, regulatory compliance, capital markets, investment
and commercial banking across a number of businesses including investment banking, asset management, brokerage,
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private equity, infrastructure finance, trade finance, treasury and liquidity management. Mr. Singh is responsible for
establishing the Bank Group risk strategies and framework, enhancing the Bank's risk management framework,
developing the Group's risk appetite framework as well as developing and implementing risk policies and risk
governance across the Bank in Kuwait and across its subsidiaries. He also has in depth knowledge of market credit,
operational risk and regulatory compliance. Mr. Singh holds a Bachelor of Science Degree in Chemistry from Imperial
College, London. He also holds an A.R.C.S. (Associate of the Royal College of Science) in Management Science.
Raed Abdullah Al Haqhaq
Mr. Al Haqhaq joined the Bank in 2000 as Unit Head in Corporate Banking and held senior roles in Corporate Banking
prior to his appointment as Chief Banking Officer in 2008. Currently, he is the Head of the Banking Group responsible
for the strategic direction, leadership, revenue growth and profitability of Corporate Banking, Retail Banking and
Financial Institutions, and the development of new business and the expansion of existing business relationships. He is
also responsible for managing the Bank's relationship with financial institutions across a wide range of geographical
regions. He has over 20 years of local and international experience in corporate and investment banking. Mr. Al Haqhaq
began his career at the Kuwait Investment Authority and then joined the International Investment Group where his last
role was the position of Assistant Vice President. He holds a Bachelor of Science degree in Strategic Management from
California State University, USA.
Robbert Johannes Rijik Voogt
Mr. Voogt joined the Bank in 2013 and was appointed as Group Chief Private Banking Officer in 2014. He is responsible
for the growth of the private banking business and portfolio of the Bank at Group level covering Kuwait as well as the
Bank's subsidiaries. Mr. Voogt has solid experience of over 24 years, of which 21 years were gained in private banking.
He has held senior level positions in established private banking institutions including EmiratesNBD, Mees Pierson and
Merrill Lynch in Europe, the Middle East and the Far East regions. Prior to joining the Bank, Mr. Voogt was Group Head
at CIMB Private Banking, Malaysia. Mr. Voogt holds a Bachelor's degree in Business from Nvenrode Business
University, Netherland.
Robert James Frost
Mr. Frost joined the Bank as Group Chief Investment Banking & Treasury Officer in 2014. He is primarily responsible
for the development of a unified and robust strategy for the Treasury and Investment Banking function by achieving its
objectives across the subsidiaries of the Group. He has over 20 years of experience gained in global financial markets at
Macquarie Bank Ltd., Australia, where he held the position of executive director and global head of capital management
since 1994, with responsibility for building the capital management division for Macquarie Securities Group and for
managing the treasury requirements of the group in more than 20 markets. Mr. Frost holds a Bachelor's degree of
Economics and a Bachelor's degree in Science (Mathematics) from The University of Queensland, Australia.
Venkatakrishnan Menon
Mr. Menon joined the Bank in 2005. As the Chief Retail Banking Officer, he is responsible for the Retail Banking
function at the Bank. He was previously the Chief Operations Officer at the Bank. He has over 29 years of experience in
the banking industry. Prior to his current role, he was Chief Operations Officer for 9 years at the Bank. Prior to joining
the Bank, Mr. Menon has held senior management roles at Qatar National Bank, BNP Paribas, Standard Chartered Bank
and HDFC Bank. He holds a Master's degree in Business Management and a Bachelor of Science degree from University
of Bombay, India.
Ghassan Bani Al Marjeh
Mr. Al Marjeh joined the Bank in 2014. As the Chief Operations Officer, Mr. Al Marjeh is responsible for the planning,
implementation and administration of the Bank’s operational and support functions such as Operations Strategic
Development, General Services, and Centralised Banking Operations. Mr. Al Marjeh has over 33 years of experience in
banking. He has held various operations positions at the National Bank of Kuwait, Gulf Bank and the Commercial Bank
of Qatar, in addition to the Bank. Prior to rejoining the Bank, Mr. Al Marjeh acted as Deputy Chief Operations Officer at
Warba Bank. Mr. Al Marjeh holds a Masters in Business Administration, Aviation Management from Coventry
University, UK and Bachelor of Arts from University of Damascus, Syria in addition to a Diploma in Banking
Operations & Information Technology, Vanderbilt University, USA.
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Khalid Fahad Al Zouman
Mr. Al Zouman joined the Bank in 2000 as the Head of Risk Management, prior to his appointment as Chief Financial
Officer in 2003. He is mainly responsible for the strategic planning of the finance activities of the Group and for the
development and implementation of financial guidelines, controls and reporting procedures. He has over 27 years of
experience working in Kuwait and internationally in financial management with expertise in accounting and auditing.
Prior to joining the Bank, Mr. Al Zouman held senior financial management roles with Ernst & Young in Kuwait and in
the United States. He is a certified public accountant (CPA) from the State of New Hampshire, USA, and also holds a
Bachelor's degree in Computer Science from Kuwait University.
Amr Mohamed Samy El Kasaby
Mr. El Kasaby joined the Bank in 2007. As the Group Chief Internal Auditor, he is responsible for leading the internal
audit function for the Bank Group. He has over 26 years of experience in auditing and accounting and has led audit
functions within a broad range of industries including banking, trading, investment management, manufacturing, the
automotive industry, and the oil and gas industry. Prior to joining the Bank, Mr. El Kasaby was the deputy manager and
acting chief internal auditor of the internal audit department for the Kuwait Finance House. He is a certified public
accountant (CPA) from State of Oregon, USA, certified fraud examiner (CFE) and certified internal control auditor
(CICA). He also holds a Bachelor's degree of Commerce in Accounting and Auditing from Kuwait University.
Halah Mohammad El Sherbini
Ms. El Sherbini joined the Bank in 2011 as the Chief Human Resources and Development Officer. She is responsible for
developing strategies, at the Group level, to develop and expand the capabilities and skills of the Bank's staff, to enable
the Bank to achieve its business objectives and aspirations. She has over 20 years of experience in the banking industry.
Prior to joining the Bank, Ms. El Sherbini was head of human resources at Ahli United Bank and Citibank Kuwait and
held various roles in human resources at National Bank of Kuwait and Gulf Bank. She holds a Bachelor's degree in
English Literature from Alexandria University, Egypt and a professional in human resources certificate (PHR) from the
Society for Human Resource Management (SHRM). She is a certified professional trainer from the Arab Bankers
Association and a certified assessor from Saville and Holdsworth Ltd.
Hanan Mohamed Hassan Metwalli
Mrs. Metwalli has been with the Bank for over 25 years, has spent 15 years working in the Corporate and Risk
Management Groups and was appointed as Head of Compliance in 2006. She is responsible, at the Group level, for
developing, monitoring and implementing strategies, work plans and policies in accordance with the principles issued by
the Basel Committee on Banking Supervision (BCBS) and for implementing regulatory compliance with state regulatory
agencies such as the CBK, KSE, the Ministry of Communications and other agencies. Prior to joining the Bank, Mrs.
Metwalli gained 11 years of experience with Al Ahli Bank of Kuwait, Commercial Bank of Kuwait and Gulf Bank. She
holds a Bachelor's degree of Commerce (Accounting) from the University of Alexandria, Egypt, and a degree as a
certified compliance officer (CCO) from the American Academy of Financial Management (AAFM).
Bashir Ghassan Jaber
Mr. Jaber joined the Bank in 2006 as the Group Head of Investor Relations and Corporate Communications. He has been
responsible for managing the Bank's corporate marketing division which includes investor relations, brand management,
relationship management, investor relations, external communications and corporate social responsibility. He has over 15
years of experience in the advertising industry. Prior to joining the Bank, Mr. Jaber held various positions internationally
at Ogilvy and Mather - an international advertising, marketing and public relations group. He holds an Executive Masters
degree in Business Administration (EMBA) from the American University of Beirut, Bachelor's degree of Arts in
Advertising & Marketing from Notre Dame University, Lebanon and a post-graduate diploma in Business
Administration from University of Leicester, UK.
Elyas Naser
Mr. Naser joined the Bank in 2011 as Unit Head - Group Special Projects with the Group Operations Office and was
subsequently appointed as Head of the Strategic Business Department and Chief of Staff in 2013. He has been
responsible for maximising the value of assets through the strategic planning of investment activities, analysing business
operations, monitoring market opportunities, assisting with the identification of potential targets and reviewing industry
research. Prior to joining the Bank, Mr. Naser worked with various financial institutions in the region for over 10 years,
131
including HSBC, Central Bank of Bahrain and United Gulf Bank. He holds an Executive Masters degree in Business
Administration (EMBA) from the American University of Beirut, and a Bachelor's degree in Banking and Finance from
the University of Bahrain.
Fahad Mohammed Al Menayes
Mr. Al Menayes joined the Bank in 2012 as Head of IT Operations. He has been responsible for the Bank's Information
Technology department. Mr. Al Menayes directs the Bank's strategy and leadership in terms of technology functions. He
has over 18 years of experience in the field of information technology gained at Al Ahli Bank of Kuwait and at the Bank.
He holds a Master's degree of Science in Software Engineering and a Bachelor's degree in Computer Science and Maths
from Monmouth University, USA.
Anil Sunal
Mr. Sunal joined the Bank in 1993 having worked for 9 years in the Bank's Corporate Banking Group prior to moving to
the Bank's Strategic Financial Planning Group where he was appointed as Head of Management Information in 2004. Mr.
Sunal was appointed as Head of the International Operations Office in 2012. Mr. Sunal is responsible for monitoring the
performance of the Bank's subsidiaries on financial, risk, regulatory, control and other critical aspects of the Bank's
business. He also coordinates with the Banks Board Members in its subsidiaries to ensure the alignment of the Banks
group-wide policies and strategies. Prior to joining the Bank Mr. Sunal had 19 years of experience. Mr. Sunal holds a
Bachelor's degree in Science and a degree in Law from Karnataka University, India.
There are no potential conflicts of interest between the duties to the Bank of the members of the Bank's Executive
Management and their private interests or other duties.
Corporate Governance Structure
The diagram below summarises the Bank's corporate governance structure.
The Bank is committed to upholding the highest international standards of corporate governance, balancing innovation,
control and transparency through all its dealings, and maintaining value for all of the Bank's stakeholders.
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The Board has resolved that good faith, integrity, compliance, quality and respect must guide the conduct of staff at all
times, when engaged in the Bank's business. These principles apply equally in dealings with clients, counterparties,
regulatory authorities, business colleagues and towards the Bank itself.
In order to apply these principles in a consistent manner, the Board has approved a formal Code of Business Conduct,
which all employees are given upon commencement of work with the Bank, including requiring them to enter into a
confidentiality undertaking.
In addition to the Code of Business Conduct, the corporate governance framework for the Bank comprises extensive
operational policies and procedures, internal and external audit and compliance procedures, effective communications,
transparent disclosure, accountability and measurement to assist the Board in shaping and monitoring corporate
governance and practices as well as to evaluate the Bank's compliance with existing policies.
Seven out of the nine members of the Board participate in all Board committees.
Key Board Committees
The following is a summary of the principal objectives and duties of the principal committees of the Board. In a number
of cases, the detailed implementation of a committee function is delegated to a subcommittee on either an ad hoc or an
ongoing basis.
BEXCO
This committee is principally concerned with supervising:

strategy and planning;

risk management;

the ALCO;

approval of ALCO and treasury limits;

investment; and

operations policy and incident reporting.
The committee comprises four members and a Chairman, who is the Chairman of the Bank.
Board Credit Committee (BCC)
This committee is principally concerned with approving facilities in excess of the limits delegated to management; in
addition, it is involved in:

receiving and considering reports on the exercise of the delegation to management;

considering the Bank's provisioning policy and the need for large individual provisions; and

approving credit procedures and related issues.
The committee comprises four members and a Chairman, who is the Chairman of the Bank.
Board Corporate Governance Committee (BCGC)
This committee is principally concerned with assisting the Board in setting the Bank's corporate governance policies and
following up on its execution and periodic review to ensure its effectiveness. The committee comprises three members
and a chairman, who is the chairman of the Bank.
Board Audit Committee (BAC)
This committee is principally concerned with:

reviewing the integrity of periodic and other key financial statements and regulatory reporting prior to
submission to the Board to confirm that they have been accurately derived from the Bank's books and records
and are CBK and IAS/IFRS-compliant;

supervising and reviewing the work of the external auditor(s);
133

supervising and reviewing the work of the internal audit function;

ensuring that the internal audit function is staffed and equipped to operate with a satisfactory methodology and
attains appropriate professional standards;

procuring the Bank's Management and/or the internal audit function, following up on transaction- or procedureexceptions or risk observations made in internal or external audit communications and advising the Board of
remedial action required and/or already taken;

reviewing and following up any actions or disclosures required to ensure compliance with CBK and other
regulatory obligations; and

reviewing systems of internal control and authorisation and reporting to the Board on any significant
deficiencies together with the steps to be taken to remedy them.
The committee comprises three members, a technical adviser and a chairman who is the Vice Chairman of the Bank.
Board Risk Committee
This committee is principally concerned with reviewing and reporting to the Board on the current and future risk strategy
and tolerance along with supervising implementation of this strategy by the BEXCO. This committee ensures the
existence of effective systems for risk management and independence of these functions. The committee comprises three
members.
Board Recovery Committee (BRC)
This committee is constituted as an ad hoc sub-committee of the BCC to review loan recovery policy and follow up
recovery action in substantial cases as requested by BCC.
The committee comprises three members.
Board Nomination and Remuneration Committee (BNRC)
The key duties of this Committee are:

to recommend to the Board (and hence to the AGM) candidates to fill any vacancies on the Board;

to recommend to the Board the appointment or dismissal of the CEO and settle the related financial terms;

to appoint or dismiss (after considering the advice of the CEO) any executive manager in the governance
structure who reports directly to the CEO (including dotted line reports), who reports to a Board Committee, the
Board itself or the Chairman of the Board;

to approve salary/allowance scales and related grading systems;

to approve any discretionary bonus or similar payments proposed by the CEO to be made in addition to the
approved scales, which approval is sought both for:

amounts payable to staff generally in excess of budget;

specific amounts payable to staff whose HR actions require BNRC approval; and

to review and approve remuneration disclosure in the Bank's annual report to shareholders.
The committee comprises three members.
Key Management Committees
The following is a summary of the principal objectives and duties of the principal management committees.
MEXCO
MEXCO reviews recommendations at senior management level and considers all other policy or operational issues not
incorporated in one of the other Management/Board committee decision - taking chains established by the procedures set
out in the Bank's Corporate Governance. The committee comprises six members and a Chairman who is the CEO of the
Bank.
134
Management Risk Monitoring Committee (MRMC)
The key duties of this committee are to:

review the Bank's policies in line with, among other issues, changing market environments, regulations and new
developments and to instruct the relevant groups to propose changes to the relevant policy for the decision of the
BAC. This will, however, not diminish the responsibility of the concerned group to review the policies
applicable to it from time to time;

introduce a coordinated approach for monitoring all categories of risks, in particular those that are not
specifically reported through currently available reports, such as accounting risk, information systems risk, legal
and fiscal risk and outsourcing risk;

examine the following reports on a periodic basis and comment on any findings and/or opinions to the BAC,
including corrective action:
˗
quarterly MIS reports on the credit portfolio;
˗
MIS reports on the evolution of retail banking assets;
˗
monthly risk dashboards;
˗
monthly incident reports;
˗
any items raised at the ALCO that may have an impact on other categories of risks; and
˗
all CBK circulars and other instructions received, in order to examine if any of them may have the
effect of changing the risk profile of the Bank;

any new initiatives for better measurement, management and reporting of any of the categories of risks;

review the Bank's business continuity plan and disaster recovery initiatives and examine changes and/or
reviews, if any, which may be necessary to align the Bank's preparedness with the operating environment from
time to time;

coordinate between the different groups to arrive at a balance between operational risk control requirements on
the one hand and business needs and/or costs and the ease and/or practicality of the application of procedures
and controls; and

examine the Bank's anti-money laundering (AML) efforts to ensure that there is adequate coordination between
the AML unit and the other areas of the Bank not only to meet the relevant regulatory and legal requirements
but to gradually introduce the best industry practices.
The committee comprises seven members and a Chairman, who is the CEO of the Bank.
Management Credit Committee (MCC)
This committee reviews those credit proposals that are in the CEO delegation band; it is chaired by the CEO and has two
other senior general managers as members: one from risk and the other from the concerned business group. Other
representatives from these two groups may be invited. A quorum of three is required but in the event that any member
has a reservation on any specific credit the dissenting view is minuted. Further details are set out in the context of the
procedures to be used for the delegation of authority; minutes of the MCC are sent to the BCC on a monthly basis and a
report listing facilities approved by the BCC is produced on a weekly basis.
The committee comprises four members and the Chairman, who is the CEO of the Bank.
Management Investment Committee (MIC)
The MIC supervises the investment activities of the Bank, takes decisions within its delegated authority and implements
BEXCO decisions outside its authority. It meets monthly (or as required to review urgent matters), copies its minutes
promptly and submits a monthly report to BEXCO summarising the investment transactions within five working days of
the end of the relevant month.
The committee comprises five members and a Chairman who is the CEO of the Bank.
135
Management Human Resources Committee (MHRC)
The key duties of this committee are:

to keep the HR function under continuous review and to report to the BNRC all proposed procedure changes
and developments that have policy implications generally and, in particular, are likely to affect individual staff
entitlements;

to review both the basis and detail of periodic performance assessments and make recommendations to BNRC
on:
˗
general adjustments to salary scales;
˗
criteria for payment of individual merit awards; and
˗
specific rewards proposed for all staff members holding posts that require BNRC approval;

to consider, amend and approve any proposals made by the Chief Human Resources and Development Officer
and General Manager for the HR Group in relation to changes in allowances;

to keep the grading mechanisms adopted by the Bank under review and approve any significant changes
proposed by the Chief Human Resources and Development Officer or the General Manager for the HR Group;

to incorporate all aspects of the above and other HR issues into a written manual and prepare a proposal to the
BNRC from time to time for the approval of a group of amendments to the HR manual;

to consider and approve proposals made by the Chief Human Resources Development Officer and the General
Manager for the HR Group to protect the access to HR data having due regard to regulatory disclosure
obligations, Board disclosure policy and individual entitlement to confidentiality;

to report to BNRC on any other HR-related issue on which it requires information; and

to take decisions on disciplinary matters required to be referred to it.
The committee comprises six members and a Chairman, who is the CEO of the Bank.
Management Audit Committee (MAC)
The key duties of this committee are:

to consider draft internal audit reports, after department heads have commented on them but before they are
submitted to the BAC in final form;

to seek to resolve any differing views as to how particular issues are best resolved;

to allocate management responsibility and determine timeframes for implementing any corrective action agreed
to be required; and

to respond as "Management" to the Internal Audit Department on the validity of the points put forward by
Internal Audit.
The CEO is the Chairman of MAC and the Chief Internal Auditor (CIA) attends ex-officio; other attendees are co-opted
as the CEO may see fit. The MAC meetings are minuted and the final internal audit report takes due account of both the
minutes and the written "Management reply" on each issue reported to the BAC.
The BAC will be supplied with copies of the MAC meetings on a quarterly basis as part of the Internal Audit
Department's own quarterly report to the BAC.
The committee comprises two members and a Chairman, who is the CEO of the Bank.
ALCO
This committee looks into all aspects of the Bank's asset liability management (ALM). This includes the pricing of
customer assets and liabilities, gaps and mismatches in interest rates and maturities, liquidity positions, market
movements and forecasts of interest and exchange rate durations of assets and liabilities. The committee is chaired by the
CEO. Members of the committee are the senior general managers, the CFO, the Head of MIS and the Market Risk
Controller. The committee meets monthly and meeting minutes are reported to the BEXCO.
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The committee comprises six members and a Chairman, who is the CEO of the Bank.
LITIGATION STATEMENT ABOUT DIRECTORS AND SENIOR MANAGEMENT
Within the period of five years preceding the date of this Base Prospectus, none of the Directors or members of Executive
Management:

has any convictions in relation to fraudulent offences;

has been a director or senior manager of any company at the time of any bankruptcy, receivership or liquidation
of such company; or

has received any official public incrimination and/or sanction by any statutory or regulatory authorities
(including designated professional bodies) or has been disqualified by a court from acting as a director of a
company or from acting in the management or conduct of the affairs of a company.
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OVERVIEW OF KUWAIT
Unless indicated otherwise, information in this section has been derived from Kuwaiti government publications.
Country Profile
Kuwait is a sovereign state on the coast of the Arabian Gulf, enclosed by Saudi Arabia to the south and south west and
Iraq to the north and west. Kuwait has proven conventional crude oil reserves of 101,500 million barrels, the fifth largest
in the world (according to OPEC’s Annual Statistical Bulletin 2015). The total area of Kuwait is 17,818 square
kilometres. Kuwait is a constitutional monarchy with a parliamentary system of government and Kuwait City serves as
the state’s political and economic capital. Kuwait has an open economy that is primarily dependent on its oil industry and
which is dominated by the government sector. Based on information from the Public Authority for Civil Information,
Kuwait’s population was approximately 4.2 million as of June 2015 (of which Kuwaiti nationals accounted for 30.9 per
cent.).
Political Overview
Kuwait is a constitutional monarchy. The head of state, the Emir, appoints the prime minister, who leads a collective
majority of elected members of parliament (National Assembly) to form the government of Kuwait. The prime minister
selects a cabinet of a maximum of 16 members and at least one cabinet minister must be drawn from the elected
parliament. The membership of the cabinet is subject to the approval of the Emir. The current National Assembly was
elected in July 2013.
The current Emir is His Highness Sheikh Sabah Al-Ahmad Al-Jaber Al-Sabah, with the current Crown Prince being His
Highness Sheikh Nawaf Al-Ahmad Al-Jaber Al-Sabah and the current prime minister being His Highness Sheikh Jaber
Al-Mubarak Al-Hamad Al-Sabah.
In terms of foreign relations and membership of international organisations, Kuwait, together with Bahrain, Oman, Qatar,
Saudi Arabia and the UAE, form the GCC. Kuwait is also a member of OPEC and the United Nations. It is also a
member of numerous international and multilateral organisations, including the IMF, the International Bank for
Reconstruction and Development, the World Trade Organisation, the League of Arab States, the Organisation of the
Islamic Conference, the Multilateral Investment Guarantee Agency and the United Nations Educational, Scientific and
Cultural Organisation (UNESCO).
Economic Overview
According to data from the IMF’s World Economic Outlook Database April 2016, Kuwait’s real GDP increased by 0.9
per cent. in 2015 and is projected to increase by 2.4 per cent. in 2016. The IMF estimates that Kuwait’s GDP will
increase by 2.6 per cent. in 2015. Kuwait has posted a budget surplus for each of the last 15 fiscal years through to 31
March 2017.
The IMF’s data indicates that inflation, on an average consumer price-measure, was 2.7 per cent. in 2013, 2.9 per cent. in
2014 and 3.4 per cent. in 2015. The IMF projects that inflation will remain stable at 3.4 per cent in 2016 and projects that
inflation will increase to 3.5 per cent. in 2017.
The oil and oil products sector is the most significant contributor to Kuwait’s GDP. Oil and gas exports accounted for
61.8 per cent. of Kuwait’s nominal GDP in 2013 and 56.6 per cent. of Kuwait’s nominal GDP in 2014. Oil and gas
exports were projected to account for 42.6 per cent. of nominal GDP in 2014 (according to the IMF’s December 2015
Article IV Consultation with Kuwait). The sector is also the main contributor to Kuwait’s annual revenues. On average,
Kuwait produced 2.9 million barrels of crude oil each day in 2014 (source: OPEC Annual Statistical Bulletin 2015).
Kuwait's fiscal breakeven oil price was U.S.$49.2 per barrel in 2015 and is projected to be U.S.$52.1 per barrel in 2016
(source: IMF's Regional Economic Outlook Update: Middle East and Central Asia, April 2016).
The IMF estimates that real non-oil GDP growth is projected to have slowed in 2015 and to slow further in 2016 on
account of slower consumption and private investment activity, and to increase to 3.5 to 4.0 per cent. in the medium
term, supported by government investment in infrastructure and private investment.
Kuwait is estimated to have held reserves of foreign exchange and gold worth U.S.$.31,430,000,000 as at 31 December
2015 (source: the CIA). In addition, Kuwait’s sovereign wealth fund, the Kuwait Investment Authority, which was
launched in 1953 and is the oldest sovereign wealth fund in the GCC region, has approximately U.S.$ 592 billion of
assets under management according to data from the Sovereign Wealth Fund Institute.
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In February 2015, the National Assembly approved a new five-year development plan (the Kuwait Development Plan)
that envisages spending of approximately KD 34 billion to implement over 500 projects. The Kuwait Development Plan
is scheduled to start in April 2015 and end in March 2020. The Kuwait Development Plan is the second of a series of
plans based on a strategic vision for 2035 that emphasises investment in infrastructure, health and education, and
envisages significant co-participation of the private sector through the establishment of public shareholding companies.
The primary objectives of the plan are to boost GDP, increase the private sector share of the economy and raise the
number of Kuwaitis in the private sector.
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BANKING INDUSTRY AND REGULATION IN KUWAIT
Unless otherwise indicated, information in this section has been derived from Law No. 32/1968 as amended and the
instructions issued by the CBK to conventional banks operating in Kuwait (Instructions).
Central Bank of Kuwait
The CBK was established by Law No. 32/1968 and is managed by a board which is chaired by the Governor of the CBK.
The membership of the board, in addition to the Governor, comprises the Deputy Governor, a representative from each of
the Ministry of Finance and the Ministry of Commerce and Industry (the MOCI) and four additional members, each of
whom must be a Kuwaiti national and must be nominated by the Minister of Finance (after obtaining the approval of the
Council of Ministers). Each of the four additional board members are drawn from expert practitioners in economics,
finance or banking and is appointed by an Amiri Decree for three years. The Governor of the CBK and the Deputy
Governor are each appointed by decree for a five-year renewable term. The CBK’s objectives are:

to issue currency on behalf of Kuwait;

to secure the stability of the Kuwaiti dinar and its free convertibility into other currencies;

to direct credit policy in order to contribute to Kuwait’s social and economic progress and the growth of national
income;

to supervise the banking system in Kuwait;

to serve as banker to the Kuwaiti government; and

to render financial advice to the Kuwaiti government.
The CBK, either directly or through other financial institutions, undertakes operations relating to the sale and
management of securities issued or guaranteed by the Kuwaiti government, or issued in Kuwaiti dinar by any public
organisation or institution. The CBK may purchase, sell, discount and rediscount Kuwaiti government treasury bills and
purchase and sell public debt securities issued and offered for sale by the Kuwaiti government.
In its supervisory capacity, the CBK may at any time inspect banks, investment companies and other institutions subject
to the CBK’s supervision, including branches, companies and banks that operate abroad that are subsidiaries of Kuwaiti
banks. The CBK may issue such Instructions to banks as it deems necessary to realise its credit or monetary policy or to
ensure the sound progress of the banking business. The CBK is entitled to inspect any accounts, books, records,
instruments and any other documents that it deems necessary for performing its supervisory role and may also request
any other relevant data and information to be provided by any board member of any CBK-regulated institution. On
completion of each inspection, the CBK issues a comprehensive report incorporating its recommendations of actions to
be taken to address any issues identified during the inspection.
The CBK Instructions cover a wide range of matters, including the liquidity system, maximum limits for credit
concentration, credit facilities classification, interest rate ceilings, the organisation of banks’ credit policy, the extension
of consumer loans and other instalment loans, the extension of banking services, foreign exchange translation and
portfolio management (see “—Certain Banking Regulations” below). The CBK may impose penalties on any institution
that fails to comply with an Instruction.
The CBK has established the Financial Stability Office (the FSO), which aims to contribute to a sound financial system
in Kuwait capable of withstanding financial and economic shocks by utilising financial stress testing and macroeconomic models to identify key vulnerabilities in CBK-regulated institutions and suggesting appropriate corrective
measures. The FSO also assists in maintaining an effective internal supervisory system and promoting sound risk
management and governance practices.
Certain Banking Regulations
All banks operating within Kuwait are subject to the supervision of the CBK, which is the primary regulator of banks and
financial institutions in Kuwait whilst the CMA exercises supervisory authority over all Kuwaiti entities (including banks
and financial institutions) which are listed on the KSE or engage in securities activities as discussed further below. The
CBK imposes the following regulations upon banks:
140
Liquidity Regulations
The CBK requires banks to maintain 18 per cent. of their KD customer deposits in the form of balances with the CBK.
Banks’ liquidity is monitored using the Maturity Ladder Approach under which future cash inflows are compared with
future cash outflows. The resulting liquidity mismatches are then examined in time bands against approved limits for
each band. The relevant Instruction relating to liquidity establishes the elements to be included when calculating assets
and liabilities for the purpose of determining liquidity.
In line with CBK policy to implement the full package of the standards issued by Basel Committee, i.e. Basel III set of
regulatory reforms, the CBK board of directors approved, in its session held on 25th October 2015, the "Net Stable
Funding Ratio" (NSFR) guidelines for both conventional and Islamic banks, including the branches of foreign banks
operating in Kuwait.
The minimum required NSFR is calculated as a percentage of available stable funding to required stable funding that
should not be less than 100 per cent, as recommended by the BCBS. In this context, in accordance with the Basel
guidelines and the other international practices, the CBK guidelines allow banks to apply the minimum required ratio of
100 per cent. effective from the beginning of 2018. Furthermore, banks are required to start reporting the NSFR to the
CBK as from 1st January 2016. Until the official implementation of NSFR guidelines, banks will have been provided
with sufficient time to upgrade their systems, revise their methodologies of asset/liability management, and make
relevant changes to their sources and uses of fund structures in accordance with the new guidelines.
Credit Risk Regulations
Loans to deposit ratio
Kuwaiti banks are restricted by the CBK from lending amounts in excess of a prescribed percentage of qualifying
deposits. With effect from May 2012, the prescribed percentages are 75 per cent. for deposits with a maturity of less than
three months, 90 per cent. for deposits with maturities from three months to one year and 100 per cent. for deposits with
a maturity in excess of one year.
Investment limits
The total ratio of the securities portfolio held by a Kuwaiti bank should not exceed 50 per cent. of the bank’s capital in its
comprehensive concept, as defined under the CBK’s Instructions to the local banks in respect of the Capital Adequacy
Ratio and the CBK Instruction no. BS/101/1995 in respect of the credit concentration limits. Further, the ratio of the
investment in the securities of any one issuer should be the lower of 10 per cent. of the bank’s capital in its
comprehensive concept or 10 per cent. of the issuer’s capital.
Credit facility classifications
The CBK requires banks operating in Kuwait to evaluate and classify their credit facilities into two categories (regular
and irregular) on a periodic basis. The relevant Instructions specify the cases when a credit facility must be classified as
‘irregular’ and include where payment of an instalment is not made, interest is not paid on the maturity date or the debit
balance exceeds the drawing limits determined for the customer.
Foreign exchange transactions
Local banks may deal with foreign banks for foreign exchange transactions, may deposit Kuwaiti dinar with foreign
banks and may enter into foreign exchange swap and other derivative transactions, including options, futures and forward
contracts.
Concentration Risk Regulations
Maximum limit for credit concentration
Subject to certain exceptions or where prior CBK approval has been obtained, the total credit liabilities of any single
customer (including its legally or economically associated entities) to a bank may not exceed 15 per cent. of the bank’s
capital base.
141
Clustering limit – total limit for large concentrations
The aggregate of large credit concentrations (being concentrations which exceed 10 per cent. of a bank’s capital base),
including any exceptions approved by the CBK, may not exceed 400 per cent. of a bank’s capital base.
Consumer loans
The CBK's circular on Buy Out and Top Up issued in July 2015 provides that any consumer loans granted to a bank’s
customers cannot be utilised for the purpose of repaying an existing loan with another bank in Kuwait.
Extension of facilities for non-residents
Local banks are permitted to extend credit facilities in KD to non-residents without the need for prior consent from the
CBK only in connection with financing contracts awarded by government bodies in Kuwait whose value does not exceed
KD 40 million and where the loan does not exceed 70 per cent. of the total value of the contract. In all other cases, CBK
consent is required for loans to non-residents.
Interest Rate Cap Regulations
The CBK’s instruction on interest rates provides that the maximum limits for interest rates on KD loans to corporates
should not exceed:

2.5 per cent. over the CBK’s discount rate in the case of commercial loans with a maturity of one year or less;
and

4 per cent. over the CBK’s discount rate in the case of commercial loans exceeding one year.
Interest rates for housing and consumer loans denominated in Kuwaiti dinar are currently capped at the CBK discount
rate plus 3 per cent. for each block of five years. Such interest rates may be adjusted by no more than plus or minus 2 per
cent. for each subsequent block of five years.
Interest rates for loans in currencies other than the Kuwaiti dinar are not regulated by the CBK.
Third Party Portfolio Management CMA Management of third parties’ portfolios
Portfolios managed by banks and investment companies for the account of third parties and invested in foreign securities
and other financial instruments are currently subject to instructions issued pursuant to the Law No.7 of 2010 and its
Executive Regulations (as amended) issued pursuant thereto (the “CMA Regulations”).
Notable CBK instructions
The CBK has also issued Instructions containing guidelines relating to, among other matters: (i) post-dated cheques; (ii)
banks’ credit policy ratios; (iii) the verification of the purpose of credit facilities granted to customers; (iv) collateral to
be granted by customers against credit facilities; (v) the provision of facilities for trading in shares listed on the KSE; (vi)
the protection of customers; (vii) special needs of customers; (viii) anti-money laundering and the combat of the
financing of terrorism
Corporate Governance
During June 2012, the CBK issued the “Instructions for the Governance of Kuwaiti Banks” (the Governance
Instructions) which apply to all banks in Kuwait and were required to be implemented by 1 July 2013. The Governance
Instructions provide principles that should be followed and applied by Kuwaiti banks in order to ensure proper
governance. These include the independence of the board while conducting its work, the setting of a strategy for the
bank, putting in place a clear risk policy, protecting the interests of depositors and conducting its business in a safe
manner. The Governance Instructions require each bank to produce a governance manual (which must be approved by
the bank’s board) and establish a governance committee to ensure the execution of the governance manual.
The Governance Instructions define the role of a bank’s board, the executive committee (which is to include the chief
executive officer), the risk committee, the internal and external audit committee, and any other committees that have an
active role in the business of the bank. The Governance Instructions also require each bank to adopt a disclosure and
transparency policy (covering topics including material information that may affect the relevant bank’s financial position,
changes to its management, board or shareholding structure).
142
The Board of Directors of the Bank adopts and implements internationally accepted as well as local corporate governance
practices, including the Governance Instructions. See “Management and Employees– Management–Corporate
governance structure” for further detail.
Application of CBK Regulations to the Bank
The Bank is incorporated as a public shareholding company in Kuwait, is registered as a bank with the CBK and is listed
on the KSE. As a Kuwaiti shareholding company, the Bank is licensed by the MOCI and, as a bank, is primarily
supervised by the CBK. The MOCI issued the Bank with a commercial licence, renewable according to Kuwaiti law, to
carry on banking activities. The Bank’s commercial licence was last renewed on 1 July 2012 for the period until 31 July
2016. The Bank has no reason to believe that its commercial licence will not be renewed by the MOCI.
The CBK acts as lender of last resort to all of the Kuwaiti banks. As a financial institution, the Bank is required to submit
various periodic and one-off reports to the CBK in a format prescribed by it. The CBK also conducts inspections of
banking and financial institutions (banks, investment companies, money exchange companies and mutual funds) which
are subject to its supervision in order to ascertain their financial sustainability and their adherence to their constitutional
by-laws. These inspections may be in the form of a specific inspection or a full audit of all activities. The CBK inspects
all financial institutions which are subject to its supervision periodically and its most recent inspection of the Bank was
conducted during February 2016. The final inspection report was issued by the CBK on 12 May 2016 and contained no
material issues.
In addition to the CBK, the CMA also exercises supervisory authority over the Bank as a company listed on the KSE and
as an institution that engages in investment activities in accordance with article 124 of the CMA's Regulations.
Banking System
As at 31 December 2015, the Kuwaiti banking sector comprised 23 banks, including five commercial banks, one
specialised bank, five Shari’a-compliant local banks, branches of 11 international conventional banks and a branch of a
Saudi Arabian Islamic bank.
The Kuwait banking sector has experienced increased competition and diversification from the entry of international
banks establishing branches in Kuwait, following the promulgation of Law No. 28 of 2004 amending certain provisions
of Law No. 32 of 1968 concerning Currency, CBK and the Organisation of Banking Business. As at 31 March 2016, total
assets in the Kuwaiti banking sector amounted to KD 59.8 billion and total loans to Kuwaiti residents amounted to KD
33.7 billion (source: CBK).
The key performance indicators of the conventional Kuwaiti banks for the three months ended 31 March 2016 are set out
below (source: annual reports published on the company website of each bank listed below).
National Bank of Kuwait .................................................
Burgan Bank .....................................................................
Gulf Bank .........................................................................
Commercial Bank of Kuwait ...........................................
Al-Ahli Bank of Kuwait ...................................................
Cost to
income ratio
(%)
32.7%
47.2%
35.4%
25.3%
39.3%
Return on
assets
(%)
1.4%
0.8%
0.6%
0.8%
0.7%
Return on
equity
(%)
11.7%
9.0%
5.8%
5.5%
5.6%
Earnings
per share
(Fils)
15
4.4
3.0
5.2
5.0
Financial Stability Law and Deposit Guarantee Law
In response to the global financial crisis which began in 2008, the Kuwaiti Government took a number of measures,
including the passing of Decree No. 2 of 2009 (the Financial Stability Law). The Financial Stability Law sought to
stabilise the financial sector in Kuwait and other economic sectors so as to encourage the financing of such sectors by
local banks.
As a further measure, the Kuwaiti Government passed Law No. 30 of 2008 regarding the guarantee of deposits held with
local banks (the Deposit Guarantee Law). Under the Deposit Guarantee Law, the Kuwaiti Government has undertaken
to guarantee the principal (but not interest) of all deposits held with local banks in Kuwait, including saving accounts and
current accounts.
143
The Family Support Fund
In 2013, the Kuwaiti Government enacted Law No. 14 of 2013 (the Family Support Fund Law) and its executive
regulations. The Family Support Fund Law established a debt relief fund (the Family Support Fund) which, subject to
certain conditions, was authorised to purchase the remaining outstanding balances under consumer and installment loans
granted by conventional banks and investment companies to Kuwaiti citizens prior to 30 March 2008 and which
remained active as of 12 June 2013 (the Loans). The Family Support Fund Law provides for a waiver by the Family
Support Fund of all future interest payable under the Loans together with the rescheduling of payments in the form of
equal installments amortised over a period not exceeding fifteen (15) years. Applications by Kuwaiti citizens wanting to
take advantage of the debt relief under the Family Support Fund Law were required to be submitted within four (4)
months from the date of effect of the Family Support Fund Law.
144
TAXATION
The following summary of certain Kuwait, United Arab Emirates, Dubai International Financial Centre, United States
and European Union tax consequences relating to the Notes is based upon laws, regulations, decrees, rulings, income
tax conventions, administrative practice and judicial decisions in effect at the date of this Base Prospectus. Legislative,
judicial or administrative changes or interpretations may, however, be forthcoming that could alter or modify the
statements and conclusions set forth herein. Any such changes or interpretations may be retroactive and/or have
retrospective effect, and could affect the tax consequences for holders of the Notes. This summary does not purport to be
a legal opinion or to address all tax aspects that may be relevant to a holder of Notes. Each prospective holder is urged
to consult its own tax adviser as to the particular tax consequences to such holder of acquiring, holding and disposing of
Notes, including the applicability and effect of any other tax laws or tax treaties, and of pending or proposed changes in
applicable tax laws as of the date of this Base Prospectus, and of any actual changes in applicable tax laws after such
date.
General
The following is a general description of certain tax considerations relating to Notes issued under the Programme. It does
not purport to be a complete analysis of all tax considerations relating to the Notes. Prospective purchasers of Notes are
advised to consult their tax advisers as to the consequences, under the tax laws of the countries of their respective
citizenship, residence or domicile of a purchase of Notes, including, but not limited to, the consequences of receipt of
payments under the Notes and their disposal or redemption. This summary is based upon the law as in effect on the date
of this Base Prospectus and is subject to any change in law that may take effect after such date.
Kuwait
This summary of taxation in Kuwait is based on the Kuwait Income Tax Decree No. 3 of 1955 (the Decree), as amended
by Law No. 2 of 2008 "Amending Certain Provisions of Kuwait Income Tax Decree No. 3 of 1955" (the Amendment), the
Executive Bylaws of the Amendment (the Regulations), and various ministerial resolutions and circulars relating thereto
issued by the Kuwait Ministry of Finance (the MOF) (together, the Taxation Laws) as interpreted and implemented by
the MOF's Department of Income Tax (the DIT) as at the date of this Base Prospectus. Any subsequent changes in either
the Taxation Laws or the interpretation or implementation of the same by the DIT may alter and affect this summary.
Income tax
Under the Taxation Laws, income tax (at a flat rate of 15 per cent.) is levied on, inter alia, the net income and capital
gains realised by any corporate entity (interpreted by the DIT to mean any form of company or partnership), wherever
incorporated, that conducts business in Kuwait. However, the DIT to date has granted a concession to such corporate
entities incorporated in Kuwait or in any other GCC country (being referred to in this Base Prospectus as GCC
corporate entities) and has only imposed income tax on corporate entities which are not GCC corporate entities (being
referred to in this Base Prospectus as non-GCC corporate entities) which, for the avoidance of doubt, includes
shareholders of GCC corporate entities which are themselves non-GCC corporate entities, in each case, conducting
business in Kuwait.
Article 150 (bis) provides that returns from bonds and other similar securities (which would include income generated
from the holding of the Notes), regardless of the nature of the issuer, is exempt from Kuwaiti tax and this should also
apply to non-GCC corporate entities.
However, see “Risk Factors – The application and enforcement of the Kuwaiti income tax regime is uncertain, and
holders of the Notes which are "non-GCC corporate entities" may become subject to the Kuwaiti income tax regime in
certain limited circumstances”.
Individuals are not subject to any Kuwaiti income tax on their income or capital gains.
Retention
Under the Regulations, a Kuwaiti-based party making a payment (being referred to in this section as the payer) to any
other party (being referred to in this section as the payee), wherever incorporated, is obliged to deduct five per cent. of
the amount of each such payment until such time as the DIT issues a tax clearance certificate approving the release of
such amount. The payer is not required to transfer the deducted amount to the DIT immediately, but instead retains such
amount and releases it either (i) to the payee upon presentation to the payer by such payee of a tax clearance certificate
145
from the DIT confirming that the payee is not subject to or is exempt from income tax, or has realised a loss, or has paid
or guaranteed the payment of its income tax; or (ii) in the absence of such a tax clearance certificate, to the DIT, on
demand.
According to a literal interpretation of the Regulations, payments which are subject to a deduction as described above
would include principal and interest payments. Accordingly, a payer (such as the Guarantor) would be required to deduct
five per cent. from every payment made by it to a payee (such as the Issuer and the holders of the Notes (if there was a
call on the Deed of Guarantee)), which amount would be released by the payer upon presentation to it by payee of a tax
clearance certificate from the DIT.
Neither Article 150 (bis) nor Ministry of Finance Administrative Order No. 2028/2015 endorsing the provisions thereof,
address the issue of whether or not there remains an obligation to make a deduction as specified above.
In the event of any such deduction, the Deed of Guarantee provides that the Guarantor will pay such additional amounts
in order that the net amounts received by the Holders shall equal the amount which would have been receivable in the
absence of such deduction.
Other taxes
Save as described above, all payments in respect of the Notes and the Deed of Guarantee may be made without
withholding, deduction or retention for, or on account of, present taxes, duties, assessments or governmental charges of
whatsoever nature imposed or levied by or on behalf of Kuwait.
No stamp, registration or similar duties or taxes will be payable in Kuwait by holders of Notes in connection with the
issue or any transfer of the Notes.
United Arab Emirates (excluding the Dubai International Financial Centre)
Under current legislation, there is no requirement for withholding or deduction for or on account of UAE or Dubai
taxation in respect of payments made by the Guarantor under the documents to which it is a party and/or the Issuer under
the Notes.
The Constitution of the UAE specifically reserves to the Federal Government of the UAE the right to raise taxes on a
federal basis for purposes of funding its budget. It is not known whether this right will be exercised in the future.
If any such withholding or deduction is required to be made in respect of payments due by (i) the Guarantor under the
documents to which it is a party; or (ii) the Issuer under the Notes, the Guarantor has undertaken in the documents to
which it is a party to make gross-up payments to compensate for any such withholding.
Dubai International Financial Centre
Pursuant to Article 14 of Law No. (9) of 2004 in respect of the Dubai International Financial Centre (the DIFC Law),
entities licensed, registered or otherwise authorised to carry on financial services in the Dubai International Financial
Centre and their employees shall be subject to a zero rate of tax for a period of 50 years from 13 September 2004. This
zero rate of tax applies to income, corporation and capital gains tax. In addition, this zero rate of tax will also extend to
repatriation of capital and to transfers of assets or profits or salaries to any party outside the Dubai International Financial
Centre. Article 14 of the DIFC Law also provides that it is possible to renew the 50-year period to a similar period upon
issuance of a resolution by the Ruler of the Emirate of Dubai. As a result no payments by the Issuer under the Notes are
subject to any Dubai International Financial Centre tax, whether by withholding or otherwise.
If any such withholding or deduction is required to be made in respect of payments due by (i) the Guarantor under the
documents to which it is a party; or (ii) the Issuer under the Notes, the Guarantor has undertaken in the documents to
which it is a party to make gross-up payments to compensate for any such withholding.
Foreign Account Tax Compliance Act
Pursuant to certain provisions of the U.S. Internal Revenue Code of 1986, commonly known as FATCA, a foreign
financial institution may be required to withhold on certain payments it makes (foreign passthru payments) to persons
that fail to meet certain certification, reporting, or related requirements. The Issuer may be and the Guarantor is a foreign
financial institution for these purposes. A number of jurisdictions (including the United Arab Emirates and Kuwait) have
entered into, or have agreed in substance to, intergovernmental agreements with the United States to implement FATCA
(IGAs), which modify the way in which FATCA applies in their jurisdictions. Under the provisions of IGAs as currently
146
in effect, a foreign financial institution in an IGA jurisdiction would generally not be required to withhold under FATCA
or an IGA from payments that it makes. Certain aspects of the application of the FATCA provisions and IGAs to
instruments such as the Notes, including whether withholding would ever be required pursuant to FATCA or an IGA
with respect to payments on instruments such as the Notes, are uncertain and may be subject to change. Even if
withholding would be required pursuant to FATCA or an IGA with respect to payments on instruments such as the
Notes, such withholding would not apply prior to 1 January 2019 and Notes issued on or prior to the date that is six
months after the date on which final regulations defining "foreign passthru payments" are filed with the U.S. Federal
Register generally would be "grandfathered" for purposes of FATCA withholding unless materially modified after such
date. However, if additional notes (as described under "Terms and Conditions of the Notes—Further Issues") that are not
distinguishable from previously issued Notes are issued after the expiration of the grandfathering period and are subject
to withholding under FATCA, then withholding agents may treat all Notes, including the Notes offered prior to the
expiration of the grandfathering period, as subject to withholding under FATCA. Holders should consult their own tax
advisors regarding how these rules may apply to their investment in the Notes.
147
SUBSCRIPTION AND SALE
The Dealers have, in a programme agreement dated 30 June 2016 (the Programme Agreement), agreed with the Issuer
and the Guarantor a basis upon which they or any of them may from time to time agree to purchase Notes. Any such
agreement will extend to those matters stated under "Form of the Notes" and "Terms and Conditions of the Notes". In the
Programme Agreement, the Issuer (failing which, the Guarantor) has agreed to reimburse the Dealers for certain of their
expenses in connection with the establishment and any future update of the Programme and the issue of Notes under the
Programme and to indemnify the Dealers against certain liabilities incurred by them in connection therewith.
United States
The Notes have not been and will not be registered under the Securities Act and may not be offered or sold within the
United States or to, or for the account or benefit of, U.S. persons except to certain persons in an offshore transaction in
reliance on Regulation S under the Securities Act. Terms used in this paragraph have the meanings given to them by
Regulation S under the Securities Act.
The Notes in bearer form are subject to U.S. tax law requirements and may not be offered, sold or delivered within the
United States or its possessions or to a U.S. person, except in certain transactions permitted by U.S. tax regulations.
Terms used in this paragraph have the meanings given to them by the U.S. Internal Revenue Code of 1986 and
regulations promulgated thereunder. The applicable Final Terms will identify whether TEFRA C rules or TEFRA D
rules apply or whether TEFRA is not applicable.
Each Dealer has represented and agreed, and each further Dealer appointed under the Programme will be required to
represent and agree, that it will not offer, sell or deliver Notes (a) as part of their distribution at any time or (b) other wise
until 40 days after the completion of the distribution, as determined and certified by the relevant Dealer or, in the case of
an issue of Notes on a syndicated basis, the relevant lead manager, of all Notes of the Tranche of which such Notes are a
part, within the United States or to, or for the account or benefit of, U.S. persons. Each Dealer has further agreed, and
each further Dealer appointed under the Programme will be required to agree, that it will send to each dealer to which it
sells any Notes during the distribution compliance period a confirmation or other notice setting forth the restrictions on
offers and sales of the Notes within the United States or to, or for the account or benefit of, U.S. persons. Terms used in
this paragraph have the meanings given to them by Regulation S under the Securities Act.
Until 40 days after the commencement of the offering of any Series of Notes, an offer or sale of such Notes within the
United States by any dealer (whether or not participating in the offering) may violate the registration requirements of the
Securities Act if such offer or sale is made otherwise than in accordance with an available exemption from registration
under the Securities Act.
Public Offer Selling Restriction under the Prospectus Directive
In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each,
a Relevant Member State), each Dealer has represented and agreed, and each further Dealer appointed under the
Programme will be required to represent and agree, that with effect from and including the date on which the Prospectus
Directive is implemented in that Relevant Member State (the Relevant Implementation Date) it has not made and will
not make an offer of Notes which are the subject of the offering contemplated by this Base Prospectus as completed by
the applicable Final Terms in relation thereto to the public in that Relevant Member State, except that it may, with effect
from and including the Relevant Implementation Date, make an offer of such Notes to the public in that Relevant
Member State:
(a)
at any time to any legal entity which is a qualified investor as defined in the Prospectus Directive;
(b)
at any time to fewer than 150 natural or legal persons (other than qualified investors as defined in the Prospectus
Directive) subject to obtaining the prior consent of the relevant Dealer or Dealers nominated by the Issuer for
any such offer;
(c)
at any time if the denomination per Note being offered amounts to at least €100,000 (or equivalent); or
(d)
at any time in any other circumstances falling within Article 3(2) of the Prospectus Directive,
provided that no such offer of Notes referred to above shall require the Issuer or any Dealer to publish a prospectus
pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of the Prospectus
Directive.
148
For the purposes of this provision: (i) the expression an offer of Notes to the public in relation to any Notes in any
Relevant Member State means the communication in any form and by any means of sufficient information on the terms
of the offer and the Notes to be offered so as to enable an investor to decide to purchase or subscribe the Notes, as the
same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State;
and (ii) the expression Prospectus Directive means Directive 2003/71/EC (as amended, including by Directive
2010/73/EU, and includes any relevant implementing measure in each Relevant Member State.
United Kingdom
represent and agree, that:
(a)
in relation to any Notes which have a maturity of less than one year, (i) it is a person whose ordinary activities
involve it in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of
its business and (ii) it has not offered or sold and will not offer or sell any Notes other than to persons whose
ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or as
agent) for the purposes of their businesses or who it is reasonable to expect will acquire, hold, manage or
dispose of investments (as principal or agent) for the purposes of their businesses where the issue of the Notes
would otherwise constitute a contravention of Section 19 of the FSMA by the Issuer;
(b)
it has only communicated or caused to be communicated and will only communicate or cause to be
communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21
of the FSMA) received by it in connection with the issue or sale of any Notes in circumstances in which Section
21(1) of the FSMA does not apply to the Issuer or the Guarantor; and
(c)
it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it
in relation to any Notes in, from or otherwise involving the United Kingdom.
Japan
The Notes have not been and will not be registered under the Financial Instruments and Exchange Act of Japan (Act No.
25 of 1948, as amended; the FIEA) and each Dealer has represented and agreed, and each further Dealer appointed under
the Programme will be required to represent and agree, that it will not offer or sell any Notes, directly or indirectly, in
Japan or to, or for the benefit of, any resident of Japan (as defined under Item 5, Paragraph 1, Article 6 of the Foreign
Exchange and Foreign Trade Act (Act No. 228 of 1949, as amended)), or to others for re-offering or resale, directly or
indirectly, in Japan or to, or for the benefit of, any resident of Japan, except pursuant to an exemption from the
registration requirements of, and otherwise in compliance with, the FIEA and any other applicable laws, regulations and
ministerial guidelines of Japan.
Hong Kong
represent and agree, that:
(a)
it has not offered or sold and will not offer or sell in Hong Kong, by means of any document, any Notes other
than (i) to persons whose ordinary business is to buy and sell shares or debentures (whether as principal or
agent); or (ii) to "professional investors" within the meaning of the Securities and Futures Ordinance (Cap. 571)
of Hong Kong (the SFO) and any rules made under the SFO; or (iii) in other circumstances which do not result
in the document being a "prospectus" as defined in the Companies Ordinance (Winding Up and Miscellaneous
Provisions) (Cap. 32) of Hong Kong (the Companies Ordinance) or which do not constitute an offer to the
public within the meaning of that Ordinance; and
(b)
it has not issued or had in its possession for the purposes of issue, and will not issue or have in its possession for
the purposes of issue, in each case whether in Hong Kong or elsewhere, any advertisement, invitation or
document relating to the Notes, which is directed at, or the contents of which are likely to be accessed or read
by, the public in Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than
with respect to the Notes which are or are intended to be disposed of only to persons outside Hong Kong or only
to "professional investors" as defined in the SFO and any rules made under the SFO.
149
United Arab Emirates (excluding the Dubai International Financial Centre)
represent and agree, that the Notes to be issued under the Programme have not been and will not be offered, sold or
publicly promoted or advertised by it in the UAE other than in compliance with any laws applicable in the UAE
governing the issue, offering and sale of securities.
represent and agree, that it has not offered and will not offer the Notes to be issued under the Programme to any person in
the Dubai International Financial Centre unless such offer is:
(a)
an "Exempt Offer" in accordance with the Markets Rules of the Dubai Financial Services Authority (the
DFSA); and
(b)
made only to persons who meet the "Professional Client" criteria set out in Rule 2.3.2 of the Conduct of
Business Module of the DFSA rulebook.
Kingdom of Saudi Arabia
No action has been or will be taken in the Kingdom of Saudi Arabia that would permit a public offering of the Notes.
Any investor in the Kingdom of Saudi Arabia or who is a Saudi person (a Saudi Investor) who acquires Notes pursuant
to any offering should note that the offer of Notes is a private placement under Article 10 or Article 11 of the "Offer of
Securities Regulations" as issued by the Board of the Capital Market Authority resolution number 2-11-2004 dated 4
October 2004 and amended by the Board of the Capital Market Authority resolution number 1-28-2008 dated 18 August
2008 (the KSA Regulations) through a person authorised by the Capital Market Authority (CMA) to carry on the
securities activity of arranging and following a notification to the CMA under the KSA Regulations.
The Notes may thus not be advertised, offered or sold to any person in the Kingdom of Saudi Arabia other than to
"sophisticated investors" under Article 10 of the KSA Regulations or by way of a limited offer under Article 11 of the
KSA Regulations. Each Dealer has represented and agreed, and each further Dealer appointed under the Programme will
be required to represent and agree, that any offer of the Notes will comply with the KSA Regulations.
Each offer of Notes shall not therefore constitute a "public offer" pursuant to the KSA Regulations, but is subject to the
restrictions on secondary market activity under Article 17 of the KSA Regulations. Any Saudi Investor who has acquired
Notes pursuant to a private placement under Article 10 or Article 11 of the KSA Regulations may not offer or sell those
Notes to any person unless the offer or sale is made through an authorised person appropriately licensed by the CMA
and: (a) the Notes are offered or sold to a Sophisticated Investor; (b) the price to be paid for the Notes in any one
transaction is equal to or exceeds Saudi Riyal 1 million or an equivalent amount; or (c) the offer or sale is otherwise in
compliance with Article 17 of the KSA Regulations.
Kingdom of Bahrain
represent and agree, that it has not offered or sold, and will not offer or sell, any Notes except on a private placement
basis to persons in the Kingdom of Bahrain who are "accredited investors".
For this purpose, an "accredited investor" means:
(a)
an individual holding financial assets (either singly or jointly with a spouse) of U.S.$1,000,000 or more;
(b)
a company, partnership, trust or other commercial undertaking which has financial assets available for
investment of not less than U.S.$1,000,000; or
(c)
a government, supranational organisation, central bank or other national monetary authority or a state
organisation whose main activity is to invest in financial instruments (such as a state pension fund).
State of Qatar
represent and agree, that it has not offered, sold or delivered, and will not offer, sell or deliver, directly or indirectly, any
Notes in the State of Qatar including the Qatar Financial Centre, except: (a) in compliance with all applicable laws and
regulations of the State of Qatar; and (b) through persons or corporate entities authorised and licensed to provide
investment advice and/or engage in brokerage activity and/or trade in respect of foreign securities in the State of Qatar.
150
Kuwait
represent and agree, that the Notes have not been and will not be offered, sold, promoted or advertised by it in Kuwait
other than in compliance with Law No. 7 of 2010 and the bylaws thereto, as amended governing the issue, offering and
sale of securities.
No private or public offering of the Notes is being made in Kuwait, and no agreement relating to the sale of the Notes
will be concluded in Kuwait. No marketing or solicitation or inducement activities are being used to offer or market the
Notes in Kuwait.
Singapore
Each Dealer has acknowledged that this Base Prospectus has not been registered as a prospectus with the Monetary
Authority of Singapore under the Securities and Futures Act, Chapter 289 of Singapore (the SFA). Accordingly, each
Dealer has represented and agreed, and each further Dealer appointed under the Programme will be required to represent
and agree, that it has not offered or sold any Notes or caused such Notes to be made the subject of an invitation for
subscription or purchase and will not offer or sell any Notes or cause such Notes to be made the subject of an invitation
for subscription or purchase, and has not circulated or distributed, nor will it circulate or distribute, this Base Prospectus
or any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of any
Notes, whether directly or indirectly, to any person in Singapore other than: (a) to an institutional investor pursuant to
Section 274 of the SFA, or (b) to a relevant person pursuant to Section 275(1), or any person pursuant to Section 275(1A)
of the SFA, and in accordance with the conditions specified in Section 275 of the SFA; or (c) pursuant to, and in
accordance with the conditions of, any other applicable provisions of the SFA.
Where Notes are subscribed or purchased under Section 275 of the SFA by a relevant person which is:
(a)
a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of
which is to hold investments and the entire share capital of which is owned by one or more individuals, each of
whom is an accredited investor; or
(b)
a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each
beneficiary of the trust is an individual who is an accredited investor,
securities (as defined in Section 239(1) of the SFA) of that corporation or the beneficiaries' rights and interest (howsoever
described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the Notes
pursuant to an offer made under Section 275 of the SFA except:
(i)
to an institutional investor or to a relevant person defined in Section 275(2) of the SFA, or to any
person arising from an offer referred to in Section 275(1A) or Section 276(4)(i)(B) of the SFA;
(ii)
where no consideration is or will be given for the transfer;
(iii)
where the transfer is by operation of law;
(iv)
as specified in Section 276(7) of the SFA; or
(v)
as specified in Regulation 32 of the Securities and Futures (Offers of Investments) (Shares and
Debentures) Regulations 2005 of Singapore.
General
Each Dealer has agreed, and each further Dealer appointed under the Programme will be required to agree, that it will (to
the best of its knowledge and belief) comply with all applicable securities laws and regulations in force in any
jurisdiction in which it offers or sells Notes or possesses or distributes this Base Prospectus and none of the Issuer, the
Guarantor and any other Dealer shall have any responsibility therefor.
None of the Issuer, the Guarantor and any of the Dealers represents that Notes may at any time lawfully be sold in
compliance with any applicable registration or other requirements in any jurisdiction, or pursuant to any exemption
available thereunder, or assumes any responsibility for facilitating any such sale.
With regard to each Tranche, the relevant Dealer will be required to comply with any additional restrictions agreed
between the Issuer and the relevant Dealer and set out in the applicable Final Terms.
151
Persons into whose possession this Base Prospectus, any Final Terms or any Notes may come must inform themselves
about, and observe, any applicable restrictions on the distribution of this Base Prospectus and the offering and sale of
Notes.
152
GENERAL INFORMATION
Authorisation
The establishment of the Programme and the issue of Notes by the Issuer and its entry into the Programme Agreement,
the Agency Agreement and the Deed of Covenant have been duly authorised by resolutions of the Board of Directors of
the Issuer dated 28 June 2016.
The entry into the Programme Agreement, the Agency Agreement and the Deed of Guarantee by the Bank has been duly
authorised by a resolution of the Board of Directors of the Guarantor dated 13 October 2015.
Listing of Notes
It is expected that each Tranche of Notes which is to be admitted to the Official List and to trading on the Main Securities
Market will be admitted separately as and when issued, subject only to the issue of a Global Note or Notes initially
representing the Notes of such Tranche.
This Base Prospectus has been approved by the Central Bank of Ireland as competent authority under the Prospectus
Directive. The Central Bank of Ireland only approves this Base Prospectus as meeting the requirements imposed under
Irish and EU law pursuant to the Prospectus Directive. Such approval relates only to the Notes which are to be admitted
to trading on the Main Securities Market or any other MiFID Regulated Market and/or which are to be offered to the
public in any Member State. Application has been made to the Irish Stock Exchange for Notes issued under the
Programme during the period of 12 months from the date of this Base Prospectus to be admitted to the Official List and
trading on its Main Securities Market. The approval of the Programme in respect of Notes is expected to be granted on
or about 30 June 2016.
Arthur Cox Listing Services Limited is acting solely in its capacity as listing agent for the Issuer in connection with the
Notes and is not itself seeking admission of the Notes to the Official List of the Irish Stock Exchange or to trading on the
Main Securities Market for the purposes of the Prospectus Directive.
Documents Available
For the period of 12 months from the date of this Base Prospectus, copies of the following documents will, when
published, be available for inspection or collection, in physical format or provided to holders in electronic form, from the
registered office of each of the Issuer and the Guarantor and from the specified office of the Paying Agent for the time
being in London:
(a)
the Memorandum and Articles of Association (with an English translation thereof if applicable) of each of the
Issuer and the Bank;
(b)
the consolidated financial statements of the Group in respect of the financial years ended 31 December 2015 and
31 December 2014, in each case together with the audit reports prepared in connection therewith;
(c)
the most recently published audited consolidated annual financial statements of the Group and the most recently
published unaudited interim condensed consolidated financial information of the Group, in each case together
with any report prepared in connection therewith;
(d)
the Agency Agreement, the Deed of Guarantee, the Deed of Covenant and the forms of the Global Notes, the
Notes in definitive form, the Coupons and the Talons;
(e)
a copy of this Base Prospectus; and
(f)
any future base prospectuses, prospectuses, information memoranda, supplements to and Final Terms related to
Notes issued pursuant to this Base Prospectus and any other documents incorporated therein by reference (save
that a Final Terms relating to a Note which is neither admitted to trading on a regulated market in the European
Economic Area nor offered in the European Economic Area in circumstances where a prospectus is required to
be published under the Prospectus Directive will only be available for inspection by a holder of such Note and
such holder must produce evidence satisfactory to the Issuer and the Paying Agent as to its holding of Notes and
identity).
153
Clearing Systems
The Notes have been accepted for clearance through Euroclear and Clearstream, Luxembourg (which are the entities in
charge of keeping the records). The appropriate Common Code and ISIN for each Tranche of Notes allocated by
Euroclear and Clearstream, Luxembourg will be specified in the applicable Final Terms. If the Notes are to clear through
an additional or alternative clearing system the appropriate information will be specified in the applicable Final Terms.
The address of Euroclear is Euroclear Bank SA/NV, 1 Boulevard du Roi Albert II, B-1210 Brussels, Belgium and the
address of Clearstream, Luxembourg is Clearstream Banking S.A., 42 Avenue JF Kennedy, L-1855 Luxembourg.
Conditions for determining price
The price and amount of Notes to be issued under the Programme will be determined by the Issuer and the relevant
Dealer at the time of issue in accordance with prevailing market conditions.
Significant or Material Change
There has been no significant change in the financial or trading position of the Issuer and no material adverse change in
the prospects of the Issuer, in each case, since the date of its incorporation.
There has been no significant change in the financial or trading position of the Bank or the Group since 31 March 2016
and there has been no material adverse change in the prospects of the Bank or the Group since 31 December 2015.
Litigation
The Issuer is not and has not been involved in any governmental, legal or arbitration proceedings (including any such
proceedings which are pending or threatened of which the Issuer is aware) since the date of its incorporation which may
have or have in such period had a significant effect on the financial position or profitability of the Issuer.
Neither the Bank nor any other member of the Group is or has been involved in any governmental, legal or arbitration
proceedings (including any such proceedings which are pending or threatened of which the Bank is aware) in the 12
months preceding the date of this Base Prospectus which may have or have in such period had a significant effect on the
financial position or profitability of the Bank or of the Group.
Auditors
Since the date of its incorporation, no financial statements of the Issuer have been prepared. The Issuer is not required by
the laws of the Dubai International Financial Centre, and does not intend, to publish audited financial statements or
appoint any auditors.
The Bank's appointed auditors are Ernst & Young (Al Aiban, Al Osaimi & Partners) (EY) whose business address is P.O.
Box 74, Safat 13001, Kuwait, Baitak Tower, 18-21st Floor, Safat Square, Ahmed Al-Jaber Street and Deloitte & Touche
(Al-Wazzan & Co.) (DT) whose business address is Ahmed Al-Jaber Street, Sharq, Dar Al- Awadi Complex, Floors 7 &
9, P.O. Box 20174, Safat 13062. Each of EY and DT are regulated in Kuwait by the Kuwait Ministry of Commerce and
Industry and the CMA and each of whom is a registered auditor licensed to act as an auditor in Kuwait by the Kuwait
Association of Accountants and Auditors.
The consolidated financial statements of the Group as at and for the years ended 31 December 2015 and 31 December
2014 have been jointly audited by EY with licence no. 68-A and DT with licence no. 62-A in accordance with
International Standard on Auditing as stated in their reports incorporated by reference herein. The interim condensed
consolidated financial information of the Group for the three-month period ended 31 March 2016 has not been audited
but has been jointly reviewed by EY and DT in accordance with the International Standard on Review Engagements
2410, "Review of Interim Financial Information Performed by an Independent Auditor of the Entity" as stated in their
report incorporated by reference herein. Neither EY nor DT expresses an audit opinion in respect of the 2016 Interim
Financial Information.
Dealers transacting with the Issuer and the Guarantor
Certain of the Dealers and their affiliates have engaged, and may in the future engage, in investment banking and/or
commercial banking transactions with, and may perform services for the Issuer, the Guarantor and their respective
affiliates in the ordinary course of business for which they may receive fees.
154
In addition, in the ordinary course of their business activities, the Dealers and their affiliates may make or hold a broad
array of investments and actively trade debt and equity securities (or related derivative securities) and financial
instruments (including bank loans) for their own account and for the accounts of their customers. Such investments and
securities activities may involve securities and/or instruments of the Issuer, the Guarantor and their affiliates. Certain of
the Dealers or their affiliates that have a lending relationship with the Issuer, the Guarantor and their affiliates routinely
hedge their credit exposure to the Issuer, the Guarantor and their affiliates consistent with their customary risk
management policies. Typically, such Dealers and their affiliates would hedge such exposure by entering into
transactions which consist of either the purchase of credit default swaps or the creation of short positions in securities,
including potentially the Notes issued under the Programme. Any such short positions could adversely affect future
trading prices of Notes issued under the Programme. The Dealers and their affiliates may also make investment
recommendations and/or publish or express independent research views in respect of such securities or financial
instruments and may hold, or recommend to clients that they acquire, long and/or short positions in such securities and
instruments. For the purposes of this paragraph, the term "affiliates" shall also include parent companies.
155
ISSUER
Burgan Senior SPC Limited
c/o Maples Fund Services (Middle East) Limited
Office 616, 6th Floor, Liberty House, DIFC
PO Box 506734
Dubai
United Arab Emirates
GUARANTOR
Al Sharq – Abdullah Al Ahmed Street
Burgan Tower
P.O. Box 5389, Al Safat 12170
Kuwait
ISSUING AND PRINCIPAL PAYING AGENT AND TRANSFER AGENT
HSBC Bank plc
8 Canada Square
London E14 5HQ
United Kingdom
REGISTRAR, PAYING AGENT AND TRANSFER AGENT
HSBC Bank plc
8 Canada Square
London E14 5HQ
United Kingdom
LEGAL ADVISERS
To the Issuer and the Guarantor
as to English law and DIFC law
Dentons & Co.
Level 18, Boulevard Plaza 2
Burj Khalifa District
P.O. Box 1756
Dubai
To the Dealers as to English law
Allen & Overy LLP
11th Floor
Burj Daman Building
Al Sa'ada Street
PO Box 506678
Dubai
To the Issuer and the Guarantor
as to Kuwaiti Law
The Law Office of Bader Saud Al-Bader
and Partners
Al-Nejma Building, 5th Floor
Burj Khalifa District Hamoud Zaid Al-Khaled Street
P.O. Box 1756 Al Sha'ab
Dubai Kuwait
To the Dealers as to Kuwaiti law
ASAR – Al-Ruwayeh & Partners
Salhiya Complex, Gate 1, Floor 3,
P.O. Box 447
Safat 13005
Kuwait
AUDITORS TO THE GUARANTOR
Ernst & Young, Kuwait
(Al-Aiban, Al-Osaimi and Partners)
P.O. Box 74, Safat 13001, Kuwait
Deloitte & Touche,
(Al Wazzan & Co.)
Ahmed Al-Jaber Street, Sharq
Dar Al-Awadi Complex, Floors 7 & 9
P.O. Box 20174, Safat 13062
Kuwait
Baitak Tower, 18-21st Floor
Safat Square, Ahmed Al-Jaber Street
DEALERS
Emirates NBD PJSC
P.O. Box 777
Dubai
HSBC Bank plc
8 Canada Square
London E14 5HQ
United Kingdom
National Bank of Abu Dhabi P.J.S.C.
One NBAD Tower
Debt Capital Markets
23rd Floor
Sheikh Khalifa Street
P.O. Box 4
Abu Dhabi
Société Générale
29 Boulevard Haussmann
75009 Paris
France
P.O. Box 999
Dubai
IRISH LISTING AGENT
Arthur Cox Listing Services Limited
Earlsfort Centre
Earlsfort Terrace
Dublin 2
Ireland

BURGAN SENIOR SPC LIMITED

Transcription

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