AKCB FINANCE LIMITED (Incorporated As an Exempted Company in the Cayman Islands with Limited Liability)

Proof 5: 14.6.13

BASE PROSPECTUS

AKCB FINANCE LIMITED (incorporated as an exempted company in the Cayman Islands with limited liability)

U.S.$750,000,000 Euro Medium Term Note Programme unconditionally and irrevocably guaranteed by AL KHALIJ COMMERCIAL BANK (al khaliji) Q.S.C. (a Qatari shareholding company incorporated with registration number 34548 under the Commercial Companies Law No. (5) of 2002)

Under this U.S.$750,000,000 Euro Medium Term Note Programme (the ‘‘Programme’’), AKCB Finance Limited (the ‘‘Issuer’’) may from time to time issue notes (the ‘‘Notes’’) denominated in any currency agreed between the Issuer and the relevant Dealer(s) (as defined below). The payments of all amounts due in respect of the Notes will be unconditionally and irrevocably guaranteed by Al Khalij Commercial Bank (al khaliji) Q.S.C. (the ‘‘Guarantor’’) on an unsubordinated basis. 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 and guaranteed under the Programme will not exceed U.S.$750,000,000 (or its equivalent in other currencies calculated as described in the Dealer Agreement (defined herein), subject to any increase as described in the Dealer Agreement). The Notes may be issued on a continuing basis to one or more of the Dealers specified under ‘‘Overview’’ and any additional Dealer(s) appointed under the Programme from time to time by the Issuer and the Guarantor (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 (‘‘Base Prospectus’’) to the ‘‘relevant Dealer(s)’’ shall, in the case of an issue of Notes being (or intended to be) subscribed by more than one Dealer, be to all Dealers who have agreed to subscribe to such Notes. An investment in Notes issued under the Programme involves certain risks. For a discussion of the principal risk factors that may affect the abilities of the Issuer and the Guarantor to fulfil their respective obligations under the Notes see ‘‘Risk Factors’’ below. This Base Prospectus has been approved by 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 law pursuant to the Prospectus Directive. Application will be 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 (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 (‘‘MiFID’’) on markets in financial instruments and/or which are to be offered to the public in any member state of the European Economic Area. 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 have been admitted to trading on such further stock exchanges or markets as may be specified in the relevant Final Terms (as defined below). The Main Securities Market is a regulated market for the purposes of MiFID. 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, will be delivered to the Irish Stock Exchange. The Programme also permits Notes to be issued on the basis that they will not be admitted to listing, trading and/or quotation by any competent authority, stock exchange and/or quotation system or to be admitted to listing, trading and/or quotation by such other or further competent authorities, stock exchanges and/or quotation systems as may be agreed with the Issuer and the Guarantor. The Issuer and the Guarantor 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. Neither the Notes nor the Guarantee of the Notes (as defined under ‘‘Terms and Conditions of the Notes’’) have been, or will be, registered under the United States Securities Act of 1933, as amended (the ‘‘Securities Act’’) or with any securities regulatory authority of any state or other jurisdiction of the United States and the Notes may not be offered, sold or delivered within the United States or to, or for the account or benefit of, U.S. Persons (as defined in Regulation S under the Securities Act (‘‘Regulation S’’)) except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws. Accordingly, the Notes may be offered or sold solely to persons who are not U.S. persons outside the United States in reliance on Regulation S. Each purchaser of Notes is hereby notified that the offer and sale of Notes to it is being made in reliance on the exemption from the registration requirements of the Securities Act provided by Regulation S. The Programme has been assigned senior unsecured ratings of A- long-term and F2 short-term by Fitch. Notes issued under the Programme may be rated or unrated. Where a Series (as defined under ‘‘Terms and Conditions of the Notes’’) of Notes is rated, such rating, and the credit rating agency issuing such rating, will be disclosed in the Final Terms and will not necessarily be the same as the rating assigned to the Programme by the relevant credit rating agency. The Guarantor has been assigned a rating of A-, with stable outlook, by Fitch Ratings Limited (‘‘Fitch’’). The State of Qatar has been assigned credit ratings of Aa2 and AA, each with stable outlook, by Moody’s Investors Service Ltd. (‘‘Moody’s’’) and Standard & Poor’s Credit Market Services Europe Limited, a division of The McGraw-Hill Companies, Inc. (‘‘S&P’’) respectively. Each of Fitch, Moody’s and S&P is established in the European Union and is registered under the Regulation (EC) No. 1060/2009, as amended (the ‘‘CRA Regulation’’). A 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. Arrangers BNP PARIBAS HSBC QNB Capital Standard Chartered Bank Dealers Barclays BNP PARIBAS BofA Merrill Citigroup Lynch Commerzbank Goldman Sachs HSBC National Bank of Abu International Dhabi P.J.S.C.

Nomura QNB Capital Standard Chartered Bank The date of this Base Prospectus is 17 June 2013 IMPORTANT NOTICES

This Base Prospectus comprises a base prospectus for the purposes of Article 5.4 of Directive 2003/ 71/EC, as amended (which includes the amendments made by Directive 2010/73/EU to the extent that such amendments have been implemented in a relevant Member State) (the ‘‘Prospectus Directive’’) and for the purpose of giving information with regard to the Issuer, the Guarantor, their respective Subsidiaries (as defined herein) (together, the ‘‘Group’’) and the Notes which, according to the particular nature of the Issuer, the Guarantor, the Group and the Notes, is necessary to enable investors to make an informed assessment of the assets and liabilities, financial position, profit and losses and prospects of the Issuer and the Guarantor. Each of AKCB Finance Limited (the ‘‘Issuer’’) and Al Khalij Commercial Bank (al khaliji) Q.S.C. (the ‘‘Guarantor’’), accepts responsibility for the information contained in this Base Prospectus and declares that, having taken all reasonable care to ensure that such is the case, the information contained in this Base Prospectus is, to the best of its knowledge, in accordance with the facts and contains no omission likely to affect its import. Certain information under the headings ‘‘Selected Financial Information’’, ‘‘Description of the Group’’, ‘‘Financial Review’’, ‘‘Overview of Qatar’’ and ‘‘Banking Industry and Regulation in Qatar’’ has been extracted from information provided by: (i) the QCB (as defined herein), in the case of ‘‘Selected Financial Information’’; (ii) Bloomberg and the QCB, in the case of ‘‘Description of the Group’’; (iii) the International Monetary Fund, in the case of ‘‘Financial Review’’; (iv) the Government (as defined herein), the QCB, the Qatar Statistics Authority and the U.S. Energy Information Administration, in the case of ‘‘Overview of Qatar’’; and (v) the Government, the International Monetary Fund, the QCB and the Qatar Financial Centre, in the case of ‘‘Banking Industry and Regulation in Qatar’’, and, in each case, the relevant source of such information is specified where it appears under those headings. Each of 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 the relevant sources referred to, no facts have been omitted which would render the reproduced information inaccurate or misleading. Each Tranche (as defined herein) of Notes will be issued on the terms and conditions set out herein under ‘‘Terms and Conditions of the Notes’’ (the ‘‘Conditions’’) as completed by a document specific to such Tranche called final terms (the ‘‘Final Terms’’). This Base Prospectus must be read and construed together with any amendments or supplements hereto and with any information incorporated by reference herein and, in relation to any Tranche of Notes, must be read and construed together with the relevant Final Terms. Subject as provided in the relevant Final Terms, the only persons authorised to use this Base Prospectus in connection with an offer of Notes are the persons named in the relevant Final Terms as the relevant Dealer or the Managers, as the case may be. The Issuer and the Guarantor have confirmed to the Dealers named under ‘‘Subscription and Sale’’ below that this Base Prospectus contains all information which is (in the context of the Programme, the issue, offering and sale of the Notes and the Guarantee of the Notes) material; that such information is true and accurate in all material respects and is not misleading in any material respect; that any opinions, predictions or intentions expressed herein are honestly held or made and are not misleading in any material respect; that this Base Prospectus does not omit to state any material fact necessary to make such information, opinions, predictions or intentions (in the context of the Programme, the issue, offering and sale of the Notes and the Guarantee of the Notes) not misleading in any material respect; and that all proper enquiries have been made to verify the foregoing. No person has been authorised to give any information or to make any representation not contained in or not consistent with this Base Prospectus or any other document entered into in relation to the Programme or the Notes or any information supplied by the Issuer or the Guarantor or such other information as is in the public domain and, if given or made, such information or representation should not be relied upon as having been authorised by the Issuer, the Guarantor or any Dealer or any other person. Neither the Dealers nor any of their respective affiliates have authorised the whole or any part of this Base Prospectus or independently verified the information contained herein and none of them makes any representation or warranty or accepts any responsibility as to the accuracy or completeness of the information contained in this Base Prospectus. Neither the delivery of this Base Prospectus or any Final Terms nor the offering, sale or delivery of any Note shall, in any circumstances, create any

2 c108406pu010 Proof 5: 14.6.13_22:19 B/L Revision: 0 Operator AllS implication that the information contained in this Base Prospectus is true subsequent to the date hereof or the date upon which this Base Prospectus has been most recently amended or supplemented or that there has been no adverse change, or any event reasonably likely to involve any adverse change, in the prospects or financial or trading position of the Issuer or the Guarantor since the date thereof or, if later, the date upon which this Base Prospectus has been most recently amended or supplemented or that any other information supplied in connection with the Programme is correct at any time subsequent to the date on which it is supplied or, if different, 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 Guarantor at any point, including during the life of the Programme, or to advise any investor in the Notes of any information coming to their attention. The distribution of this Base Prospectus and any Final Terms and the offering, sale and delivery of the Notes in certain jurisdictions may be restricted by law. Persons into whose possession this Base Prospectus or any Final Terms comes are required by the Issuer, the Guarantor and the Dealers to inform themselves about and to observe any such restrictions. For a description of certain restrictions on offers, sales and deliveries of Notes and on the distribution of this Base Prospectus or any Final Terms and other offering material relating to the Notes, see ‘‘Subscription and Sale’’. In particular, Notes have not been and will not be registered under the United States Securities Act of 1933 (as amended) (the ‘‘Securities Act’’) and Bearer Notes are subject to U.S. tax law requirements. Subject to certain exceptions, Notes may not be offered, sold or, in the case of Bearer Notes, delivered within the United States or to U.S. persons. Neither this Base Prospectus nor any Final Terms or any other information supplied in connection with the Programme or any Notes is: (i) intended to provide the basis of any credit or other evaluation; or (ii) should be considered as a recommendation by the Issuer, the Guarantor or the Dealers that any recipient of this Base Prospectus or any Final Terms should subscribe for or purchase any Notes. Each recipient of this Base Prospectus or any Final Terms and each investor contemplating purchasing any Notes should make its own independent investigation and appraisal of the condition (financial or otherwise), affairs and creditworthiness of the Issuer and the Guarantor.

Suitability of Investments The Notes of any Series may not be a suitable investment for all investors. Each potential investor in 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 advisors, whether it: (a) has sufficient knowledge and experience to make a meaningful evaluation of the relevant Notes, the merits and risks of investing in the relevant Notes and the information contained in this Base Prospectus or any applicable supplement hereto; (b) has access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its particular financial situation, an investment in the relevant Notes and the impact the relevant Notes will have on its overall investment portfolio; (c) has sufficient financial resources and liquidity to bear all of the risks of an investment in the relevant Notes, including where the currency of payment is different from the potential investor’s home currency; (d) understands thoroughly the terms of the relevant Notes and be familiar with the behaviour of any relevant indices and financial markets; and (e) is able to evaluate (either alone or with the help of a financial adviser) possible scenarios for economic, interest rate and other factors that may affect its investment and its ability to bear the applicable risks. Some Notes are complex financial instruments. Sophisticated institutional investors generally do not purchase complex financial instruments as stand-alone investments. They purchase complex financial instruments as a way to reduce risk or enhance yield with an understood, measured, appropriate addition of risk to their overall portfolios. A potential investor should not invest in Notes which are complex financial instruments unless it has the expertise (either alone or with the help of a financial adviser) to evaluate how the Notes will perform under changing conditions, the resulting effects on the value of the Notes and the impact this investment will have on the potential investor’s overall investment portfolio.

3 c108406pu010 Proof 5: 14.6.13_22:19 B/L Revision: 0 Operator AllS Legal investment considerations may restrict the ability of certain investors to make investments in Notes. The investment activities of certain investors are subject to legal 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: (i) Notes are legal investments for it; (ii) Notes can be used as collateral for various types of borrowing; and (iii) other restrictions apply to its purchase or pledge of any Notes by the investor. 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 and regulations. No comment is made or advice given by the Issuer, the Guarantor or the Dealers in respect of taxation matters relating to any Notes or the legality of the purchase of Notes by an investor under any applicable laws. 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. 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. None of the Issuer, the Guarantor or the Dealers represents 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 assumes any responsibility for facilitating any such distribution or offering. In particular, no action has been taken by the Issuer, the Guarantor 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. 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 the 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 Republic of Ireland and the United Kingdom), the Cayman Islands, Japan, the United Arab Emirates (excluding the Dubai International Financial Centre), the Dubai International Financial Centre, the Kingdom of Saudi Arabia, the Kingdom of Bahrain and the State of Qatar (excluding the Qatar Financial Centre) (see ‘‘Subscription and Sale’’). This Base Prospectus has been prepared on the basis that any offer of Notes in any Member State of the European Economic Area 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, the Guarantor 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. None of the Issuer, the Guarantor or any Dealer have authorised, nor do they authorise, the making of any offer of Notes in circumstances in which an obligation arises for the Issuer, the Guarantor or any Dealer to publish or supplement a prospectus for such offer. None of the Issuer, the Guarantor or the Dealers makes any representation to any investor in the Notes regarding the legality of its investment under any applicable laws. Any investor in the Notes should be able to bear the economic risk of an investment in the Notes for an indeﬁnite period of time.

PRESENTATION OF FINANCIAL AND OTHER INFORMATION

PRESENTATION OF FINANCIAL INFORMATION The consolidated ﬁnancial statements of the Group included in this Base Prospectus (together, the ‘‘Financial Statements’’) are as follows:

4 c108406pu010 Proof 5: 14.6.13_22:19 B/L Revision: 0 Operator AllS * unaudited interim condensed consolidated financial statements as at and for the three month period ended 31 March 2013 (the ‘‘Interim Financial Statements’’); * audited consolidated financial statements as at and for the financial year ended 31 December 2012 (the ‘‘2012 Financial Statements’’); and * audited consolidated financial statements as at and for the financial year ended 31 December 2011 (together with the 2012 Financial Statements, the ‘‘Annual Financial Statements’’). The Annual Financial Statements have been prepared in accordance with International Financial Reporting Standards (‘‘IFRS’’), as issued by the International Accounting Standards Board (the ‘‘IASB’’), and applicable Qatar Central Bank regulations. The Annual Financial Statements were audited by Deloitte & Touche and an unqualified opinion was expressed on them. The Interim Financial Statements have been prepared in accordance with International Accounting Standard No. 34, ‘‘Interim Financial Reporting’’ and applicable QCB regulations. The Interim Financial Statements were reviewed by Ernst & Young, independent auditors, as stated in their qualified review report appearing herein. The review conclusion was qualified to state that the financial position at 31 March 2013 and the results of operations for the three months ended 31 March 2013 of the Bank’s subsidiary, Al Khaliji France S.A., have been incorporated in the Interim Financial Statements on the basis of returns certified by management and have not been independently reviewed. The net profit of Al Khaliji France S.A. for the three month period ended 31 March 2013 and the total assets and total liabilities as at 31 March 2013 amounted to QAR 15.5 million, QAR 3.6 billion and QAR 2.9 billion, respectively. During 2012, the QCB required all banks to bring customer acceptances onto the statement of financial position. The impact of this was to increase both loans and advances to customers and other liabilities by an equal amount of QAR 139 million in 2012 and QAR 197 million in 2011. In the 2012 Financial Statements, certain other immaterial amounts have been reclassified to conform them to the QCB requirements. As a result, all financial information as at 31 December 2011 and for 2011 in this Base Prospectus has been extracted from the 2012 Financial Statements. In the Interim Financial Statements, the Group has adopted a number of new and amended accounting standards that became effective in 2013. This adoption did not have a material impact on the Interim Financial Statements but is likely to require extensive additional disclosures in the Group’s annual consolidated financial statements as at and for the year ending 31 December 2013. The Group presents its financial statements in Qatari riyals.

PRESENTATION OF QATARI STATISTICAL INFORMATION The statistical information set out in the section entitled ‘‘Overview of Qatar’’ has been accurately reproduced from a number of different identiﬁed sources. All statistical information provided in that section may differ from that produced by other sources for a variety of reasons, including the use of different deﬁnitions and cut-off times. Historical statistical data is also subject to revision in future periods.

PRESENTATION OF OTHER INFORMATION In this Base Prospectus, unless otherwise speciﬁed or the context otherwise requires, references to: * ‘‘2011’’ are references to the 12 months ended 31 December 2011; * ‘‘2012’’ are references to the 12 months ended 31 December 2012; * ‘‘EUR’’, ‘‘e’’ or ‘‘euro’’ are references to the currency introduced at the start of the third stage of European economic and monetary union, and as deﬁned in Article 2 of Council Regulation (EC) No 974/98 of 3 May 1998 on the introduction of the euro, as amended; * the ‘‘GCC’’ are references to the Gulf Co-operation Council; * ‘‘Government’’ are references to the government of Qatar; * a‘‘Member State’’ are references to a Member State of the European Economic Area; * the ‘‘MENA region’’ are references to the Middle East and North Africa region; * ‘‘Qatar’’ are references to the State of Qatar; * ‘‘Qatari riyals’’ and ‘‘QAR’’ are references to Qatari riyals, the lawful currency for the time being of Qatar;

5 c108406pu010 Proof 5: 14.6.13_22:19 B/L Revision: 0 Operator AllS * the ‘‘QCB’’ are references to the Qatar Central Bank; * ‘‘U.S.$’’ and ‘‘U.S. dollars’’ are references to U.S. dollars, the lawful currency for the time being of the United States of America; * the ‘‘UAE’’ are to the United Arab Emirates; and * the ‘‘United States’’ are references to the United States of America. The Qatari riyal currently is, and since the mid-1980s has been, pegged to the U.S. dollar at a fixed exchange rate of QAR 3.64 = U.S.$1.00 and, accordingly, translations of amounts from QAR to U.S. dollars have been made at this exchange rate for all periods in this Base Prospectus. 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. Information contained in any website referred to herein does not form part of this Base Prospectus.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Some statements in this Base Prospectus may be deemed to be ‘‘forward-looking statements’’. Forward-looking statements include statements concerning the Guarantor’s plans, objectives, goals, strategies and future operations and performance and the assumptions underlying these forward- looking statements. When used in this Base Prospectus, the words ‘‘anticipates’’, ‘‘estimates’’, ‘‘expects’’, ‘‘believes’’, ‘‘intends’’, ‘‘plans’’, ‘‘aims’’, ‘‘seeks’’, ‘‘may’’, ‘‘will’’, ‘‘should’’ and any similar expressions generally identify forward-looking statements. These forward-looking statements are contained in the sections entitled ‘‘Risk Factors’’ and ‘‘Description of the Group’’ and other sections of this Base Prospectus. The Guarantor has based these forward-looking statements on the current view of its management with respect to future events and financial performance. Although the Guarantor believes that the expectations, estimates and projections reflected in its forward-looking statements are reasonable, if one or more of the risks or uncertainties materialise, including those identified below or which the Guarantor has otherwise identified in this Base Prospectus, or if any of the Guarantor’s underlying assumptions prove to be incomplete or inaccurate, the Guarantor’s actual results of operation may vary from those expected, estimated or predicted. Investors are therefore strongly advised to read the sections ‘‘Risk Factors’’, ‘‘Description of the Guarantor’’ and ‘‘Banking Industry and Regulation in Qatar’’, which include a more detailed description of the factors that might have an impact on the Guarantor’s business development and on the industry sector in which the Guarantor operates. The risks and uncertainties referred to above include: * macro-economic and financial market conditions (and changes thereof) and, in particular, the global financial crisis; * credit risks, including the impact of a higher level of credit defaults arising from adverse economic conditions, the impact of provisions and impairments and concentration of the Guarantor’s portfolio of financing and investing assets; * the effects of, and changes in laws, regulations or governmental policy affecting the Group’s business activities; * removal or adjustment of the peg between the U.S. dollar and the Qatari riyal; * liquidity risks, including the inability of the Guarantor to meet its contractual and contingent cash flow obligations or the inability to fund its operations; and * changes in interest rates and other market conditions. Additional factors that could cause actual results, performance or achievements to differ materially include, but are not limited to, those discussed under ‘‘Risk Factors’’. These forward-looking statements speak only as at the date of this Base Prospectus. Without prejudice to any requirements under applicable laws, the Guarantor expressly disclaims any obligation or undertaking to disseminate after the date of this Base Prospectus any updates or revisions to any forward-looking statements contained herein to reflect any change in expectations thereof or any change in events, conditions or circumstances on which any forward-looking statement is based.

6 c108406pu010 Proof 5: 14.6.13_22:19 B/L Revision: 0 Operator AllS CAYMAN ISLANDS NOTICE

No invitation whether directly or indirectly may be made to any member of the public of the Cayman Islands to subscribe for any Notes and this Base Prospectus shall not be construed as an invitation to any member of the public of the Cayman Islands to subscribe for any Notes.

NOTICE TO RESIDENTS OF THE KINGDOM OF SAUDI ARABIA

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 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

A copy of this Base Prospectus has been submitted to the Central Bank of Bahrain (the ‘‘CBB’’) by a bank licensed by the CBB. Submission of this Base Prospectus to the CBB does not imply that any Bahraini legal or regulatory requirements have been complied with. The CBB has not in any way considered the merits of the Notes to be offered for investment whether in or outside of the Kingdom of Bahrain. Neither the CBB nor the licensed exchange assumes responsibility for the accuracy and completeness of the statements and information contained in this Base Prospectus and each expressly disclaims any liability whatsoever for any loss howsoever arising from reliance upon the whole or any part of the contents of this Base Prospectus. Each of the Issuer and the Guarantor accepts responsibility for the information contained in this Base Prospectus. To the best of the knowledge of each of the Issuer and the Guarantor (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.

NOTICE TO RESIDENTS OF THE STATE OF QATAR

This Base Prospectus does not and is not intended to constitute an offer, sale or delivery of notes or other debt ﬁnancing instruments under the laws of the State of Qatar and has not been and will not be reviewed or approved by or registered with the Qatar Financial Markets Authority, the QCB or the Qatar Financial Centre Regulatory Authority. The Notes are not and will not be traded on the Qatar Exchange.

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 relevant subscription agreement 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 persons 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 conducted by the Stabilising Manager(s) (or person(s) acting on behalf of the Stabilising Manager(s)) in accordance with all applicable laws and rules.

7 c108406pu010 Proof 5: 14.6.13_22:19 B/L Revision: 0 Operator AllS CONTENTS

Page OVERVIEW...... 9 RISK FACTORS ...... 14 FORMS OF THE NOTES ...... 31 TERMS AND CONDITIONS OF THE NOTES ...... 36 USE OF PROCEEDS ...... 60 FORM OF FINAL TERMS ...... 61 SUMMARY OF PROVISIONS RELATING TO THE NOTES WHILE IN GLOBAL FORM 67 DESCRIPTION OF THE ISSUER...... 69 SELECTED FINANCIAL INFORMATION ...... 71 DESCRIPTION OF THE GROUP ...... 74 RISK MANAGEMENT...... 84 MANAGEMENT AND EMPLOYEES...... 94 FINANCIAL REVIEW ...... 101 OVERVIEW OF QATAR ...... 121 BANKING INDUSTRY AND REGULATION IN QATAR ...... 124 TAXATION ...... 132 SUBSCRIPTION AND SALE ...... 135 GENERAL INFORMATION...... 139 FINANCIAL INFORMATION...... F-1

8 c108406pu010 Proof 5: 14.6.13_22:19 B/L Revision: 0 Operator AllS OVERVIEW

The following is an overview of the principal features of the Programme. This overview must be read as an introduction to this Base Prospectus and any decision by any investor to invest in any Notes should be based on a consideration of the Base Prospectus as a whole, including any information incorporated by reference. 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 each Tranche of Notes, the relevant Final Terms. Each investor should read the entire Base Prospectus and the relevant Final Terms carefully, especially the risks of investing in Notes issued under the Programme discussed under ‘‘Risk Factors’’. The Issuer, 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. This overview constitutes a general description of the Programme for the purposes of Article 22.5(3) of Commission Regulation (EC) No. 809/2004 implementing the Prospective Directive. Words and expressions defined in the ‘‘Terms and Conditions of the Notes’’ and ‘‘Forms of the Notes’’ below or elsewhere in this Base Prospectus have the same meanings in this overview. Issuer: AKCB Finance Limited, a limited liability exempted company incorporated in accordance with the laws of, and formed and registered in, the Cayman Islands with registered number QH- 277615 and its registered office at 94 Solaris Avenue, Camana Bay, P.O. Box 1348, Grand Cayman, KY1-1108, Cayman Islands. Guarantor: Al Khalij Commercial Bank (al khaliji) Q.S.C. Description: Euro Medium Term Note Programme Risk Factors: Investing in Notes issued under the Programme involves certain risks. There are certain factors that may affect the abilities of the Issuer and the Guarantor to fulfil their respective obligations under the Notes issued under the Programme, which are discussed under ‘‘Risk Factors’’ below. In addition, there are certain factors which are material for the purpose of assessing the market risks associated with Notes issued under the Programme. These are set out under ‘‘Risk Factors’’ and include certain risks relating to the structure of particular Series of Notes and certain market risks. Arrangers: BNP Paribas HSBC Bank plc QNB Capital LLC Standard Chartered Bank Dealers: Barclays Bank PLC BNP Paribas Citigroup Global Markets Limited Commerzbank Aktiengesellschaft Goldman Sachs International HSBC Bank plc Merrill Lynch International National Bank of Abu Dhabi P.J.S.C. Nomura International plc QNB Capital LLC Standard Chartered Bank and any other Dealer appointed from time to time by the Issuer and the Guarantor either generally in respect of the Programme or in relation to a particular Tranche of Notes. 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

9 c108406pu010 Proof 5: 14.6.13_22:19 B/L Revision: 0 Operator AllS reporting requirements from time to time (see ‘‘Subscription and Sale’’). Fiscal Agent and Paying Agent: Citibank N.A., London Branch Registrar and Transfer Agent: Citigroup Global Markets Deutschland AG Programme Size: The maximum aggregate nominal amount of Notes outstanding and guaranteed at any one time under the Programme will not exceed U.S.$750,000,000 (and for this purpose, any Notes denominated in another currency shall be translated into U.S. dollars at the date of the agreement to issue such Notes (calculated in accordance with the provisions of the Dealer Agreement)). The maximum aggregate nominal amount of Notes which may be outstanding and guaranteed at any one time under the Programme may be increased from time to time, subject to compliance with the relevant provisions of the Dealer Agreement. Listing and Admission to Trading: Application will be made to the Irish Stock Exchange for Notes issued under the Programme to be admitted during the period of twelve months after the date hereof to the Official List and for such Notes to be admitted to trading on the Main Securities Market. The Programme also permits Notes to be issued on the basis that they will not be admitted to listing, trading and/or quotation by any competent authority, stock exchange and/or quotation system or to be admitted to listing, trading and/or quotation by such other or further competent authorities, stock exchanges and/or quotation systems as may be agreed with the Issuer and the Guarantor. The relevant 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 exchange and/or markets. Distribution: Notes may be distributed by way of private or public placement and in each case on a syndicated or non-syndicated basis. Clearing Systems: Euroclear and/or Clearstream, Luxembourg and/or, in relation to any Tranche of Notes, any other clearing system as may be specified in the relevant Final Terms. Initial Programme Amount: Up to U.S.$750,000,000 (or its equivalent in other currencies) aggregate principal amount of Notes outstanding and guaranteed at any one time. Issuance in Series: Notes will be issued in Series. Each Series may comprise one or more Tranches issued on different Issue Dates. The Notes of each Series will all be subject to identical terms, except that the Issue Date and the amount of the first payment of interest may be different in respect of different Tranches. The Notes of each Tranche will all be subject to identical terms in all respects save that a Tranche may comprise Notes of different denominations. 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(s) and on redemption will be calculated on the basis of such Day Count Fraction as may be agreed between the Issuer, the Guarantor and the relevant Dealer(s). 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

10 c108406pu010 Proof 5: 14.6.13_22:19 B/L Revision: 0 Operator AllS (b) on the basis of the relevant Reference Rate as adjusted for any applicable Margin. The Margin (if any) relating to such floating rate will be agreed between the Issuer, the Guarantor and the relevant Dealer(s) for each Series of Floating Rate Notes. Floating Rate Notes may also have a maximum rate of interest, a minimum rate of interest or both. Interest on Floating Rate Notes in respect of each Interest Period, as agreed prior to issue by the Issuer, the Guarantor and the relevant Dealer(s), 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, the Guarantor and the relevant Dealer(s). Zero Coupon Notes: Zero Coupon Notes will be offered and sold at a discount to their nominal amount and will not bear interest. Forms of Notes: Notes may be issued in bearer form or in registered form. Each Tranche of Bearer Notes will initially be in the form of either a Temporary Global Note or a Permanent Global Note, in each case as specified in the relevant Final Terms. Each Global Note will be deposited on or around the relevant Issue Date with a depositary or a common depositary for Euroclear and/or Clearstream, Luxembourg and/or any other relevant clearing system. Each Temporary Global Note will be exchangeable for a Permanent Global Note or, if so specified in the relevant Final Terms, for Definitive Notes. If the TEFRA D Rules are specified in the relevant Final Terms as applicable, certification as to non-U.S. beneficial ownership will be a condition precedent to any exchange of an interest in a Temporary Global Note or receipt of any payment of interest in respect of a Temporary Global Note. Each Permanent Global Note will be exchangeable for Definitive Notes in accordance with its terms. Definitive Notes will, if interest- bearing, have Coupons attached and, if appropriate, a Talon for further Coupons. Each Tranche of Registered Notes will be in the form of either Individual Note Certificates or a Global Registered Note, in each case as specified in the relevant Final Terms. Each Global Registered Note will be deposited on or around the relevant Issue Date with a depositary or a common depositary for Euroclear and/ or Clearstream, Luxembourg and/or any other relevant clearing system and registered in the name of a nominee for such depositary and will be exchangeable for Individual Note Certificates in accordance with its terms. Currencies: Subject to any applicable legal or regulatory restrictions, any currency agreed between the Issuer and relevant Dealer. Status of the Notes: The Notes will constitute direct, unconditional, unsubordinated and (subject to the provisions of Condition 5 (Negative Pledge)) 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. Status of the Guarantee of the The Guarantee of the Notes constitutes direct, unconditional, Notes: unsubordinated and (subject to the provisions of Condition 5 (Negative Pledge)) unsecured obligations of the Guarantor and rank pari passu among themselves and (save for certain obligations required to be preferred by law) equally with all other unsecured

11 c108406pu010 Proof 5: 14.6.13_22:19 B/L Revision: 0 Operator AllS obligations (other than subordinated obligations, if any) of the Guarantor from time to time outstanding. Issue Price: Notes may be issued at any price and either on a fully or partly paid basis, as specified in the relevant Final Terms. The price and amount of Notes to be issued under the Programme will be determined by the Issuer, the Guarantor and the relevant Dealer(s) at the time of issue in accordance with prevailing market conditions. Maturities: The Notes will have such maturities as may be agreed between the Issuer and 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 or the relevant Specified Currency. Where Notes have a maturity of less than one year and either (a) the issue proceeds are received by the Issuer in the United Kingdom or (b) the activity of issuing the Notes is carried on from an establishment maintained by the Issuer in the United Kingdom, such Notes must: (i) have a minimum redemption value of £100,000 (or its equivalent in other currencies) and be issued only to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or 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; or (ii) be issued in other circumstances which do not constitute a contravention of section 19 of the FSMA by the Issuer. Redemption: Notes may be redeemable at par or at such other Redemption Amount as may be specified in the relevant Final Terms. Optional Redemption: Notes may be redeemed before their stated maturity at the option of the Issuer (either in whole or in part) and/or the Noteholders to the extent (if at all) specified in the relevant Final Terms. Tax Redemption: Except as described in ‘‘Optional Redemption’’ above, early redemption will only be permitted for tax reasons as described in Condition 9(b) (Redemption for tax reasons). Redemption for Change of If a Change of Ownership Put is specified in the relevant Final Ownership: Terms, each Noteholder will have the right to require the redemption of its Notes upon a Change of Ownership Event. See Condition 9(f) (Redemption and Purchase – Redemption for Change of Ownership (Change of Ownership Put)). Interest: Notes may be interest-bearing or non-interest bearing. Interest (if any) may accrue at a fixed rate or a floating rate and the method of calculating interest may vary between the Issue Date and the Maturity Date of the relevant Series. Denominations of Notes: The Notes will be issued in such denominations as may be agreed between the Issuer and the relevant Dealer 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 Currency (see ‘‘Maturities’’ above), and save that the minimum denomination of each Note will be c100,000 (or, if the Notes are denominated in a currency other than euro, the equivalent amount in such currency). Negative Pledge: The Notes will have the benefit of a negative pledge as described in Condition 5 (Negative Pledge).

12 c108406pu010 Proof 5: 14.6.13_22:19 B/L Revision: 0 Operator AllS Cross Default: The Notes will have the benefit of a cross default as described in Condition 13 (Events of Default). Taxation: All payments in respect of Notes will be made free and clear of withholding taxes of the Cayman Islands in relation to the Issuer and the State of Qatar in relation to the Guarantor, unless the withholding is required by law. In that event, the Issuer or Guarantor will (subject as provided in Condition 12 (Taxation)) pay such additional amounts as will result in the Noteholders receiving such amounts as they would have received in respect of such Notes had no such withholding been required. Governing Law: The Dealer Agreement, the Agency Agreement, the Deed of Covenant, the Deed of Guarantee (each as defined in ‘‘Terms and Conditions of the Notes’’) and the Notes and any non-contractual obligations arising out of or in connection therewith shall be governed by, and shall be construed in accordance with, English law. The Registered Office Agreement is governed by the law of the Cayman Islands. Enforcement of Notes in Global In the case of Global Notes, individual investors’ rights against the Form: Issuer will be governed by a Deed of Covenant dated 17 June 2013, a copy of which will be available for inspection at the Specified Office of the Fiscal Agent. Ratings: The Programme has been assigned senior unsecured ratings of A- long-term and F2 short-term by Fitch. The Guarantor has been assigned a rating of A-, with stable outlook, by Fitch. Fitch is established in the European Union and is registered under the CRA Regulation. Series of Notes issued under the Programme may be rated or unrated. Where a Series of Notes is rated, such rating, and the credit rating agency issuing such rating, will be disclosed in the relevant 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 credit rating agency. Selling Restrictions: For a description of certain restrictions on offers, sales and deliveries of Notes and on the distribution of offering material in the United States of America, the European Economic Area, the United Kingdom, the Cayman Islands, the State of Qatar (excluding the Qatar Financial Centre), Japan, the Kingdom of Saudi Arabia, the United Arab Emirates (excluding the Dubai International Financial Centre), the Dubai International Financial Centre and the Kingdom of Bahrain, see ‘‘Subscription and Sale’’ below.

13 c108406pu010 Proof 5: 14.6.13_22:19 B/L Revision: 0 Operator AllS RISK FACTORS

Any investment in Notes issued under the Programme is subject to a number of risks and uncertainties. Before making any investment decision, prospective investors should consider carefully the risks and uncertainties associated with an investment in any Notes, the Group’s business and the countries and markets in which it operates, together with all of the other information that is included in this Base Prospectus. Prospective investors should also consult their own financial and legal advisers about risks associated with an investment in the Notes and the suitability of investing in the Notes in light of their particular circumstances, without relying on the Issuer or the Guarantor. Prospective investors are advised to make, and will be deemed by the Issuer and the Guarantor to have made, their own investigations in relation to such factors before making any investment decision. Should one or more of the following events or circumstances occur at the same time or separately, the value of the Notes could decline and an investor might lose part or all of its investment. Each of the Issuer and the Guarantor believes that the factors described below represent the principal risks inherent in investing in the Notes, but the inability of the Issuer or the Guarantor to pay interest, principal or other amounts on or in respect of the Notes may occur for other reasons which may not be considered significant risks by the Issuer and the Guarantor based on information currently available to them or which they may not currently be able to anticipate. As a result, the following is unlikely to be an exhaustive list or explanation of all risks which investors may face when making an investment in the Notes and should be used as guidance only. Additional risks and uncertainties relating to the Group that are not currently known to the Issuer and the Guarantor, or that either currently deems immaterial, may individually or cumulatively also have a material adverse effect on the business, prospects, results of operations and/or financial position of the Group and, if any such risk should occur, the price of the Notes may decline and investors could lose all or part of their investment. Investors should consider carefully whether an investment in the Notes is suitable for them in light of the information in this Base Prospectus and their personal circumstances. The order in which the risks are presented below does not necessarily reflect the likelihood of their occurrence or the magnitude of their potential impact on the Issuer or the Guarantor. Words and expressions defined in the ‘‘Terms and Conditions of the Notes’’ below or elsewhere in this Base Prospectus have the same meanings in this section.

Risks Relating to the Issuer The Issuer will depend on receipt of payments from the Guarantor to make payments to holders of the Notes The Issuer is a newly formed entity incorporated in the Cayman Islands on 13 May 2013 and has no operating history. The Issuer’s principal purpose is to provide funding, through the international capital markets, to the Guarantor. All proceeds from the issue of Notes under the Programme will be lent by the Issuer to the Guarantor. Payments of principal and interest under any such loan by the Guarantor to the Issuer will fund the Issuer’s payment obligations under the Notes. As the Issuer does not have any other business operations, the Issuer’s ability to fulﬁl its obligations under the Notes is entirely dependent on the Guarantor’s performance under each such loan. Accordingly, the Issuer is subject to all the risks to which the Guarantor is subject, to the extent that such risks could limit the Guarantor’s ability to satisfy in full and on a timely basis its obligations under the Guarantee. See ‘‘Risk Factors—Risks relating to the Group’’ for a further description of certain of these risks.

Risks relating to the Group The Group’s business, financial condition, results of operations and prospects are and will continue to be affected by global and regional financial markets and economic conditions and any deterioration in economic conditions in Qatar and, to a lesser extent, the other GCC countries could materially adversely impact the Group There has been significant volatility and disruption in global capital and credit markets since the onset of the global financial crisis in late 2007. As a result, there has been a material reduction in the availability of financing, both for financial institutions and their customers, compelling many financial institutions to rely on central banks and governments to provide liquidity and, in some cases, additional capital. Governments around the world, including in Qatar and some of the other countries in the MENA region, have taken actions intended to stabilise financial markets and prevent the failure of financial institutions. See ‘‘Banking Industry and Regulation in Qatar’’. Despite such measures, international capital and credit markets have continued to experience volatility.

14 c108406pu020 Proof 5: 14.6.13_22:22 B/L Revision: 0 Operator AllS The Group’s business and results of operations have been adversely affected by these conditions. For example, changes in interest rates and/or widening credit spreads that have resulted from the continuing financial crisis have created a less favourable environment for certain of the Group’s businesses and have led to a decrease in the demand for certain loans and other products and services offered by the Group. If the ongoing levels of market disruption and volatility continue or recur, the Group may experience reductions in business activity, increased funding costs and funding pressures, decreased asset values, credit losses and impairment charges, and lower profitability and cash flows. The Group’s business and financial performance may also be adversely affected by future recovery rates on assets, particularly as the historical assumptions underlying asset recovery rates may prove to be inaccurate as a result of the prolonged market volatility and disruption since 2007. As at 31 March 2013, 89.5 per cent. of the Group’s assets were attributable to the operations of the Guarantor, which is based in Qatar. In terms of the Group’s credit exposure (determined by reference to the country of domicile of its counterparties), 70 per cent. of its total credit exposure at 31 March 2013 was to Qatari based entities and a further 19 per cent. was to entities located in other Gulf Co-operation Council (‘‘GCC’’) countries. In addition, 84.3 per cent. of its net operating income for the three months ended 31 March 2013 was attributable to the operations of the Guarantor. The economies of Qatar and the other GCC countries are largely dependent on oil and gas and related industries, as well as the prices and production quantities of these commodities. Oil prices have, however, been volatile in recent years which has impacted economic growth in many GCC countries. Any deterioration in economic conditions in Qatar or the other countries in which the Group operates, whether or not due to a deterioration in the oil and gas industries, could materially adversely affect many of the Group’s borrowers and contractual counterparties which, in turn, is likely to adversely affect the Group’s business, financial condition, results of operations and prospects. See ‘‘—The Group’s investment securities and customer loan portfolios and deposit base are concentrated in Qatar and the Group has significant individual customer concentrations’’.

The Group is exposed to credit risk and recent high levels of growth in the Group’s loan portfolio have resulted in an increase in its credit exposure and risk profile Risks arising from adverse changes in the credit quality and recoverability of loans, securities and amounts due from counterparties are inherent in a wide range of the Group’s businesses, principally in its lending and investment activities. In particular, the Group is exposed to the risk that borrowers may not repay their loans according to their contractual terms and that the collateral securing the payment of these loans may be insufficient. The Group continuously reviews and analyses its loan portfolio and credit risks, and the Group’s provision for losses on loans is based on, among other things, its analysis of current and historical delinquency rates and loan management and the valuation of the underlying assets, as well as numerous other management assumptions. However, these internal analyses and assumptions may give rise to inaccurate predictions of credit performance, particularly in the current volatile economic climate and in view of the Group’s limited trading history. The Group commenced business on 14 January 2007. At 31 March 2013, the Group’s loans and advances to customers (its ‘‘customer loan portfolio’’) amounted to QAR 14,054 million, an increase of 7.8 per cent. compared to 31 December 2012. At 31 December 2012, the Group’s customer loan portfolio amounted to QAR 13,032 million, an increase of QAR 1,521 million, or 13.2 per cent., compared to QAR 11,511 million at 31 December 2011. In 2011, the Group recorded QAR 38 million in provisions net of recoveries in respect of its customer loan portfolio, equal to 0.3 per cent. of its gross loans and advances to customers at 31 December 2011. In 2012, the Group recorded QAR 61 million in provisions net of recoveries in respect of its customer loan portfolio, equal to 0.5 per cent. of its gross loans and advances to customers at 31 December 2012. No impairment provisions were recorded in the first quarter of 2013. This high level of growth in the Group’s customer loan portfolio has increased its credit exposure and, as the Group continues to expand its customer loan portfolio, management will need to continually monitor the credit quality of the loan portfolio. See ‘‘Risk Management—Credit risk’’. A material deterioration in the quality of the Group’s loan portfolio or any significant increase in loan losses in the future could have a material adverse effect on the Group’s business, financial condition, results of operations and prospects.

15 c108406pu020 Proof 5: 14.6.13_22:22 B/L Revision: 0 Operator AllS Credit losses could also arise from a deterioration in the credit quality of specific issuers and counterparties of the Group, or from a general deterioration in local or global economic conditions, or from systemic risks within these financial systems, which could affect the recoverability and value of the Group’s assets and require an increase in the Group’s provisions for the impairment of loans, securities and other credit exposures. In relation to the Group’s personal banking loan portfolio, which amounted to 5.9 per cent. of its total gross customer loan portfolio at 31 December 2011, 9.6 per cent. of its total gross customer loan portfolio at 31 December 2012 and 13.4 per cent. of its total gross customer loan portfolio at 31 March 2013, the QCB launched the Central Credit Bureau, which is intended to collate information about customers based in Qatar and their credit history. However, given its relative lack of operational history, there is no certainty that the Central Credit Bureau will support the Group’s assessment of the overall debt level and creditworthiness of consumer credit applicants in Qatar. Because the availability of accurate and comprehensive financial and general credit information on individuals and small businesses in Qatar and the GCC is limited, it is likely to be more difficult for the Group to accurately assess the credit risk associated with such lending. Any failure by the Group to maintain the quality of its assets through effective risk management policies could lead to higher loan loss provisioning and result in higher levels of defaults and write- offs, which, in turn, could have a material adverse effect on the Group’s business, financial condition, results of operations and prospects.

The Group’s investment securities and customer loan portfolios and deposit base are concentrated in Qatar and the Group has significant individual customer concentrations The Group’s investment and loan portfolios are concentrated, geographically, in Qatar. The Group’s customer loan portfolio and investment securities portfolio together constituted 87.4 per cent. of its total assets, or QAR 30,074 million, at 31 March 2013. In terms of the Group’s net credit exposure (which includes its exposure to banks and under derivative financial contracts but excludes its liability under contingent commitments), 72.8 per cent. of this exposure was to counterparties located in Qatar and a further 17.3 per cent. was to counterparties located in other GCC countries, in each case at 31 March 2013. The Group’s customer deposits constituted 59.3 per cent. of its total liabilities, or QAR 17,276 million, as at 31 March 2013 and 88.4 per cent. of its customer deposits at 31 March 2013 had been accepted in Qatar. As a result, any deterioration in general economic conditions in Qatar or the GCC region generally or any failure by the Group to manage effectively its geographic risk concentrations could have a material adverse effect on the Group’s business, financial condition, results of operations and prospects. See ‘‘—The Group’s business, financial condition, results of operations and prospects are and will continue to be affected by global and regional financial markets and economic conditions and any deterioration in economic conditions in Qatar and the other GCC countries could materially adversely impact the Group’’. The Group’s 20 largest loans and advances to customers outstanding at 31 March 2013 constituted 63.8 per cent. of its total loan portfolio at that date. In addition, 80.1 per cent. of the Group’s QAR 16,021 million investment securities portfolio at 31 March 2013 represented debt securities issued or guaranteed by the Qatari government. In terms of liabilities, the Group’s 20 largest customer deposits at 31 March 2013 constituted 84.4 per cent. of its total customer deposits at that date. As a result, a material weakening in the credit quality of, or a default by, any one or more of the Group’s large loan customers or issuers of debt securities could result in the Group making significant additional loan loss provisions and experiencing reduced interest income. Similarly, the withdrawal or non- renewal of its deposits by any one or more of the Group’s large depositors could require the Group to obtain replacement funding from other sources which may not be readily available or may be significantly more expensive. Either of such eventualities would be likely to have a material adverse effect on the Group’s business, financial condition, results of operations and prospects.

The Group has signiﬁcant credit-related contingent liabilities and commitments that may lead to potential losses As part of its normal banking business, the Group issues loan commitments, guarantees and letters of credit, all of which are accounted for off the Group’s balance sheet until such time as they are actually funded or cancelled. Although these commitments are contingent, they nonetheless subject the Group to both credit and liquidity risks. Although the Group anticipates that only a portion of its

16 c108406pu020 Proof 5: 14.6.13_22:22 B/L Revision: 0 Operator AllS obligations in respect of these commitments will be triggered (as loan commitments include commitments to fund speciﬁc projects on a phased basis subject to certain milestones) and funds itself accordingly, the Group 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 Group needing to obtain additional funding, potentially at relatively short notice, which could have an adverse affect on its ﬁnancial condition and results of operations. As at 31 March 2013, the Group had QAR 13,488 million in such contingent liabilities outstanding, equal to 49.0 per cent. of its combined loans and advances to customers and contingent liabilities.

The Group could be adversely affected by the soundness or the perceived soundness of other financial institutions and counterparties, which could result in significant systemic liquidity problems, losses or defaults 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 Group is subject to the risk of deterioration of 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 Group 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 Group interacts on a daily basis. Systemic risk, should it materialise, could have a material adverse effect on the Group’s ability to raise new funding and on its business, financial condition, results of operations and prospects.

The Group is subject to the risk that liquidity may not always be readily available or may only be available at costs which may adversely affect the Group’s business or results of operations Liquidity risk is the risk that the Group will be unable to meet its obligations, including funding commitments, as they become due. This risk is inherent in banking operations and can be heightened by a number of enterprise-specific factors, including over-reliance on a particular source of funding (including, for example, short-term and overnight funding), changes in credit ratings or market-wide phenomena such as market dislocation and major disasters. Credit markets worldwide experienced a severe reduction in liquidity in the final quarter of 2008 and the first half of 2009. Since then, market conditions have been volatile with financial institutions continuing to experience periods of reduced liquidity. The perception of counterparty risk between banks has also increased significantly since the final quarter of 2008, which has led to reductions in certain traditional sources of liquidity, such as the debt markets, asset sales and redemption of investments. The Group’s access to these traditional sources of liquidity may be restricted or available only at a higher cost and there can be no assurance that the Qatari government will continue to provide the levels of support that it has provided to date, either to the Qatari banking sector generally or to the Guarantor in particular. In addition, uncertainty or volatility in the capital and credit markets may limit the Group’s ability to refinance maturing liabilities with long-term funding or increase the cost of such funding. The Group’s access to any additional financing it may need will depend on a variety of factors, including market conditions, the availability of credit generally and to borrowers in the financial services industry specifically, and the Group’s financial condition, credit ratings and credit capacity. The Group has historically relied on corporate deposits and sale and repurchase (‘‘repo’’) transactions in respect of a portion of its investment securities portfolio to meet most of its funding needs. The availability of deposits is subject to fluctuation due to factors outside the Group’s control, including possible loss of confidence and competitive pressures, and this could result in a significant outflow of deposits within a short period of time. As at 31 December 2012, approximately 51.5 per cent. of the Group’s funding (which comprises amounts due to banks and financial institutions, customer deposits and subordinated debt) had remaining maturities of one month or less or was payable on demand and approximately 81.5 per cent. had remaining maturities of one year or less or was payable on demand. In addition, the Group is reliant on certain large deposits from a limited group of government-related and private sector corporate customers. See ‘‘—The Group’s investment securities

17 c108406pu020 Proof 5: 14.6.13_22:22 B/L Revision: 0 Operator AllS and customer loan portfolios and deposit base are concentrated in Qatar and the Group has significant individual customer concentrations’’. If a substantial portion of the Group’s depositors withdraw their demand deposits or do not roll over their time deposits at maturity, the Group may need to seek other sources of funding or may have to sell assets to meet its funding requirements. There can be no assurance that the Group will be able to obtain additional funding as and when required or at prices that will not affect the Group’s ability to compete effectively and, if the Group is forced to sell assets to meet its funding requirements, it may suffer material losses as a result. In extreme cases, if the Group is unable to refinance or replace such deposits with alternative sources of funding to meet its liquidity needs, through deposits, the interbank markets, the international capital markets or through asset sales, this would have a material adverse effect on the Group’s business, financial condition, results of operations and prospects and could, potentially, result in its insolvency.

Market fluctuations and volatility may adversely affect the value of the Group’s positions in certain securities and make it more difficult to assess the fair value of certain of its assets The Group has significant holdings of available for sale and other investment securities, principally comprising Qatar Government fixed income debt securities and other GCC fixed income debt securities. As at 31 March 2013, the Group’s investment securities portfolio amounted to QAR 16,021 million or 46.5 per cent. of the Group’s total assets and fixed and floating rate debt securities comprised 97.5 per cent. of the portfolio. The Group earns interest income on the debt securities comprised in the portfolio as well as realised gains and losses on the sale of securities and unrealised gains and losses resulting from the fair valuation of the securities at each balance sheet date and the level of this income depends on numerous factors beyond the Group’s control, such as overall market trading activity, interest rate levels, fluctuations in currency exchange rates and general market volatility. In addition, the fair value of the Group’s fixed rate investment securities changes in response to perceived changes in the credit quality of the issuers of the securities as well as changes in interest and currency exchange rates. Although interest rates have historically been at low levels for many years, in an increasing interest rate environment the fair values of the Group’s fixed rate investment securities are likely to decline which could expose the Group to fair valuation losses or losses on the sale of such securities. Similarly, a decline in the credit quality of any of the issuers of the debt securities held by the Group could result in the Group making impairments or write-offs in respect of those securities. For example, in 2011 and 2012, the Group made impairments in respect of its investment securities of QAR 13 million and QAR 6 million, respectively, and the full amount of these impairments was written off in 2012. Valuations of the Group’s investment securities in future periods, reflecting then-prevailing market conditions, may result in significant changes in their fair values and, where these changes are negative, could adversely affect the Group’s results of operations. In addition, the value ultimately realised by the Group in respect of any investment securities may be materially different from their current or estimated fair value. Any of these factors could require the Group to recognise fair valuation losses or realise impairment charges, which would adversely affect its results of operations.

The Group is subject to extensive regulation and changes in this regulation, or the interpretation and enforcement of this regulation, or any failure by the Group to comply with this regulation could have a material adverse effect on the Group The Group, through its operations in Qatar, the UAE and France, is subject to a number of prudential and regulatory controls designed to maintain the safety and soundness of banks, ensure their compliance with economic and other objectives and limit their exposure to risk. In Qatar, these controls include laws and regulations promulgated by the QCB, the Qatar Financial Market Authority (the ‘‘QFMA’’) and the Qatar Exchange (the ‘‘QE’’) and these controls are further described under ‘‘Banking Industry and Regulation in Qatar’’. In addition, in order to carry out and expand its businesses, it is necessary for the Group to maintain or obtain a variety of licences, permits, approvals and consents from various regulatory, legal, administrative, tax and other governmental authorities and agencies. The processes for obtaining these licences, permits approvals and consents are often lengthy, complex, unpredictable and costly. If the Group is unable to maintain or obtain the relevant licences, permits, approvals and consents, its ability to achieve its strategic objectives could be impaired.

18 c108406pu020 Proof 5: 14.6.13_22:22 B/L Revision: 0 Operator AllS The regulations to which the Group is subject may limit its ability to carry on certain parts of its business, increase its loan portfolio or raise capital or may impose signiﬁcant additional costs on the Group. For example, in February 2011 conventional banks in Qatar were required by the QCB to cease carrying on Islamic banking operations by 31 December 2011. In response to this requirement, the Group closed its Islamic banking operations. In April 2011, the QCB imposed a cap on the amount of loans that could be made available to retail customers in Qatar and limited the interest payable on such loans and on credit cards held by such customers. Also in 2011, the Qatari government awarded a 60 per cent. salary increase to state employees and, in common with other Qatari banks, the Guarantor’s board of directors (the ‘‘Board’’) approved a 60 per cent. increase in pay to all of its Qatari staff.

Changes in applicable regulations may also increase the Group’s cost of doing business. The Qatari authorities have not always consulted with industry participants prior to the introduction of new regulations and it is not always possible for the Group to anticipate when a new regulation will be introduced. This creates a risk that the profitability of the Group may be adversely affected as a result of it being unable to adequately prepare for regulatory changes introduced by the Qatari authorities. In addition, increased regulations or changes in laws and regulations and the manner in which they are interpreted or enforced in any jurisdiction in which the Group operates may have a material adverse effect on the Group’s business, financial condition, results of operations or prospects. Furthermore, non-compliance by the Group with any applicable regulations could expose the Group to potential liabilities and fines, which may be significant. In addition, the Qatari government has enacted legislation to establish a single financial regulator in Qatar, which will oversee the banking, insurance and securities sectors. Once implemented, this may change the way that current regulations are implemented or enforced in a manner that may be adverse to the Group.

The Group is also required to comply with applicable know your customer, anti-money laundering and counter-terrorism financing laws and regulations in Qatar and other jurisdictions where it has operations, including those related to countries subject to sanctions by the United States Office of Foreign Assets Control (‘‘OFAC’’), similar regulations of the European Union (the ‘‘EU’’) and other jurisdictions, and applicable anti-corruption laws in the jurisdictions in which it conducts business. To the extent that the Group fails or is perceived to fail to comply with these and other applicable laws and regulations, its reputation could be materially damaged, with consequent adverse affects on its business, financial condition, results of operations and prospects.

A negative change in the Guarantor’s credit rating could limit its ability to raise funding and may increase its borrowing costs The Guarantor currently has a long-term foreign currency issuer default rating of A- with stable outlook from Fitch. This rating, which is intended to measure the Guarantor’s ability to meet its debt obligations as they mature, is an important factor in determining the Guarantor’s cost of borrowing funds.

A downgrade of the Guarantor’s credit rating, or a change in the outlook to negative, may limit its ability to raise funding and increase its cost of borrowing, which could adversely affect its business, ﬁnancial condition, results of operations and prospects. A downgrade of the Guarantor’s credit rating (or announcement of a negative ratings outlook) may also limit its ability to raise capital. Moreover, actual or anticipated changes in the Guarantor’s credit rating may affect the market value of the Notes.

A signiﬁcant factor underpinning the Guarantor’s rating is Fitch’s assessment that there is an extremely high probability of support for the Guarantor from the Qatari authorities and any event that causes Fitch to adjust this view would be likely to result in a negative change in the Guarantor’s rating. See ‘‘—The Qatari government is under no obligation to support the Guarantor and there is no assurance that the Guarantor will receive future support that is commensurate with the support that it has received in the past’’.

In addition, the credit rating assigned to the Guarantor may not reﬂect the potential impact of all risks related to an investment in the Notes, the market or any additional factors discussed in this document, and other factors may affect the value of the Notes. A securities rating is not a recommendation to buy, sell or hold securities. 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.

19 c108406pu020 Proof 5: 14.6.13_22:22 B/L Revision: 0 Operator AllS The Qatari government is under no obligation to support the Guarantor and there is no assurance that the Guarantor will receive future support that is commensurate with the support that it has received in the past In light of the global ﬁnancial crisis and its impact on the Qatari banking sector, the Qatari government initiated several plans to support its domestic banks (including the Guarantor). See ‘‘Description of the Group—Business Strengths’’. Although the Qatari government has in the past supported the domestic banking industry (including the Guarantor), there can be no assurance that it will continue to provide support to the domestic banking industry (including the Guarantor) in the future.

The banking industry is competitive and, in particular, the Guarantor is exposed to significant competition in Qatar The Group faces high levels of competition for all of its products and services in each jurisdiction in which it operates. In particular, in Qatar the Guarantor competes with other domestic banks and such competition may increase. As the Guarantor has a relatively short operating history in Qatar, most of its competitors have significantly greater resources and experience and the Guarantor is, therefore, potentially exposed to any aggressive competitive positions taken by those other banks in its strategic target segments of corporate banking, treasury and fixed income and premium banking for high net worth and ultra high net worth clients. In addition, as a relatively new entrant, the Guarantor may need to offer better pricing, products or service quality than its competitors in order to gain market share and there is no assurance that the Guarantor will be able to do this at all or at a cost that does not adversely affect its results of operations. Although the Guarantor plans to open new branches in locations that are appropriate to serve its chosen clients, the Guarantor also believes that the use of more contemporary distribution channels coupled with supporting branches is a more appropriate means to servicing its chosen clients and, accordingly, expects the size of its branch network to remain significantly smaller than those of some of its competitors. The relatively small branch network may disadvantage the Guarantor in seeking retail (premium and private banking) deposits. In addition, the Guarantor believes that the Qatari banking sector faces increased pressure for consolidation and that one or more of its current competitors in Qatar may consider acquiring or merging with each other. For example, in 2011, the Guarantor was party to merger discussions with another Qatari bank which ultimately did not proceed. Any such mergers which do not involve the Guarantor could result in competitors that are significantly bigger than the Guarantor and which have significantly greater resources with which to compete effectively. In addition to domestic banks, international banks are increasing their presence in Qatar, either directly or through strategic investments, and these banks compete with the Guarantor for wholesale corporate and government business. As at 31 December 2012, there were a total of 18 banks registered with the QCB in Qatar. In addition to these banks, more international banks are expected to commence business through the Qatar Financial Centre (the ‘‘QFC’’), which would allow them to compete for large corporate and government business. See ‘‘Banking Industry and Regulation in Qatar’’. The competitive nature of the Qatari banking market and any failure by the Guarantor to continue to compete successfully in its target markets in Qatar may adversely affect the Group’s business, financial condition, results of operations and prospects. In addition, increased competition in the other countries where the Group currently operates, particularly the UAE and France, could similarly adversely affect the Group’s businesses in those countries.

The Group’s financial condition and results of operations could be adversely affected by market risks The Group’s financial condition and results of operations could be affected by market risks that are outside its control, including, without limitation, volatility in interest rates, prices of securities and currency exchange rates. Fluctuations in interest rates could adversely affect the Group’s financial condition and results of operations in a number of different ways. In particular, an increase in interest rates generally may decrease the value of the Group’s fixed-rate loans and the debt securities in its investment securities portfolio and may raise the Group’s funding costs. As a result, the Group may experience a reduction in its net interest income. See note 4(d)(ii) to the 2012 Financial Statements which illustrates the Group’s interest rate sensitivity risk at 31 December 2012 and also ‘‘Risk Management—Market risk—Interest rate risk’’. Interest rates are sensitive to many factors beyond the Group’s control, including the policies of central banks, such as the QCB and the U.S. Federal Reserve, political factors and domestic and international economic conditions.

20 c108406pu020 Proof 5: 14.6.13_22:22 B/L Revision: 0 Operator AllS The Group’s financial condition and results of operations may also be affected by changes in the market value of its securities portfolio. See ‘‘—Market fluctuations and volatility may adversely affect the value of the Group’s positions in certain securities and make it more difficult to assess the fair value of certain of its assets’’.

The Group maintains its accounts, and reports its results, in Qatari riyals. As a result, the Group’s ﬁnancial results may be adversely affected by movements in the exchange rate of the Qatari riyal and the euro, which is the reporting currency for its French subsidiary. Both the Qatari riyal and the UAE dirham have been pegged at ﬁxed exchange rates to the U.S. dollar for a considerable period. The Group is exposed to the potential impact of any alteration to, or abolition of, either of these foreign exchange rate pegs.

Also, as a financial intermediary, the Group is exposed to foreign exchange rate risk. This risk includes the possibility that the value of a foreign currency asset or liability will change due to changes in currency exchange rates as well as the possibility that the Group may have to close out any open position in a foreign currency at a loss due to an adverse movement in exchange rates. The Group generally uses cross-currency derivative transactions to attempt to match the currencies of its assets and liabilities and any open currency position is maintained within the limits set by the QCB or other relevant regulator. However, where the Group is not so hedged (for example, reflecting the pegs described above, in relation to certain of its open U.S. dollar positions), it is exposed to fluctuations in foreign exchange rates and any such hedging activity may not in all cases protect the Group against such risks.

Adverse movements in foreign exchange rates may also adversely impact the revenues and ﬁnancial condition of the Group’s depositors and borrowers which, in turn, may impact the Group’s deposit base and the quality of its exposures to certain borrowers.

Ultimately, there can be no assurance that the Group will be able to protect itself from any adverse effects of a currency revaluation or future volatility in interest rate or currency exchange rates, which could have a material adverse effect on its business, ﬁnancial condition, results of operations and prospects.

The Group is exposed to a range of operational risks. In particular, any failure of the Group’s information technology systems could have a material adverse effect on its business and reputation Operational risk and losses can result from fraud, errors by employees, failure to document transactions properly or to obtain proper internal authorisation, failure to comply with regulatory requirements and conduct of business rules, systems and equipment failures, natural disasters or the failure of external systems (for example, those of the Group’s counterparties or vendors). The Group has implemented risk controls and loss mitigation strategies, and substantial resources are devoted to developing efﬁcient procedures and to staff training, but it is not possible to eliminate entirely each of the potential operational risks the Group faces. Losses from the failure of the Group’s system of internal controls could have a material adverse effect on its business, ﬁnancial condition, results of operations and prospects and could materially adversely affect its reputation.

The Group depends on its information technology systems to process a large number of transactions on an accurate and timely basis, and to store and process substantially all of the Group’s business and operating data. The proper functioning of the Group’s ﬁnancial control, risk management, credit analysis and reporting, accounting, customer service and other information technology systems, as well as the communication networks between its branches and main data processing centres, are critical to the Group’s business and ability to compete effectively. The Group’s business activities would be materially disrupted if there is a partial or complete failure of any of these information technology systems or communications networks. Such failures can be caused by a variety of factors, many of which are wholly or partially outside the Group’s control including natural disasters, extended power outages and computer viruses. The proper functioning of the Group’s information technology systems also depends on accurate and reliable data and other system input, which are subject to human errors. Any failure or delay in recording or processing the Group’s transaction data could subject it to claims for losses and regulatory ﬁnes and penalties. The Group has implemented and tested business continuity plans and processes as well as disaster recovery procedures, but there can be no assurance that these safeguards will be fully effective and any failure may have a material adverse effect on the Group’s business and reputation.

21 c108406pu020 Proof 5: 14.6.13_22:22 B/L Revision: 0 Operator AllS The Group’s risk management policies and procedures may not be effective in all circumstances and may leave it exposed to unidentified or unanticipated risks The Group’s risk management strategies and internal controls may not be effective in all circumstances and may leave the Group exposed to unidentified or unanticipated risks. There can be no assurance that the Group’s risk management and internal control policies and procedures will adequately control, or protect the Group against, all credit, liquidity, market, operational and other risks. In addition, certain risks may not be accurately quantified by the Group’s risk management systems. Some of the Group’s methods of managing risk are based upon the use of historical market data which, as evidenced by events caused by the global financial crisis, may not always accurately predict future risk exposures, which could be significantly greater than historical measures indicate. In addition, certain risks could be greater than the Group’s empirical data would otherwise indicate. Other risk management methods depend upon evaluation of information regarding the markets in which the Group operates, its clients or other matters that are publicly available or information otherwise accessible to the Group. This information may not be accurate, complete, up-to-date or properly evaluated in all cases. Any material deficiency in the Group’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 Group’s business, financial condition, results of operations and prospects.

The Group’s internal compliance systems might not be fully effective in all circumstances The Group’s ability to comply with all applicable regulations is largely dependent on its maintenance of compliance, audit and reporting systems and procedures, and its ability to attract and retain personnel qualiﬁed to manage and monitor such systems and procedures. Although the Group is subject to oversight by regulatory authorities, including regular examination activity, performs regular internal audits and employs an external auditor to monitor and test its compliance systems, the Group cannot be certain that these systems and procedures will be fully effective in all circumstances, particularly in the case of deliberate employee misconduct or other frauds perpetrated against the Group. In the case of actual or alleged non-compliance with applicable regulations, the Group could be subject to investigations and judicial or administrative proceedings that may result in substantial penalties or civil lawsuits for damages. Any of these could have a material adverse effect on the Group’s business, ﬁnancial condition, results of operations and prospects.

The Qatari government, with its 47 per cent. direct and indirect ownership interest in the Guarantor, may be able to exert significant control over the Guarantor and its interests may, in certain circumstances, conflict with those of Noteholders As at 31 March 2013, the Qatari government, through entities wholly-owned or otherwise controlled by it, was the Guarantor’s most significant shareholder, directly and indirectly owning 47 per cent. of the Guarantor’s outstanding voting shares. In accordance with the Guarantor’s Articles of Association, the Chairman of the Board represents Qatar Holding and the remaining directors are elected by the shareholders for three-year terms. A proposal at an extraordinary general assembly of shareholders of the Guarantor requires a vote of two-thirds of the shareholders present at the meeting to be passed, while a simple majority vote is required to pass a proposal at an annual general assembly. As a result, the Qatari government may be able to block certain actions or resolutions proposed at the Guarantor’s annual or extraordinary assembly of shareholders. Consequently, investors should note that the interests of the Qatari government may, in certain circumstances, be different from those of the Group’s creditors (including the holders of the Notes) and, in those circumstances, the holders of the Notes could be disadvantaged.

A return to high levels of inflation or a recurrence of deflation in Qatar could each adversely affect the Group’s profitability Prior to 2009, Qatar experienced high levels of inflation, with consumer price index (‘‘CPI’’) increases in excess of 10 per cent. in each of 2006, 2007 and 2008. However, in 2009 and 2010, decreasing housing and food costs in particular contributed to negative inflation rates of 4.9 per cent. and 2.4 per cent., respectively. Inflation has since returned, with an increase in the CPI of 1.9 per cent. in 2011 and 2.0 per cent. in 2012, principally as a result of increasing real estate prices and international food and raw materials prices.

22 c108406pu020 Proof 5: 14.6.13_22:22 B/L Revision: 0 Operator AllS Any return to the high levels of inflation experienced prior to 2009 could slow the rate of economic growth and consumer spending in Qatar. On the other hand, a return to a deflationary environment in Qatar could also adversely affect the Guarantor’s profitability, for example through its affect on collateral values. As a result, high rates of inflation or deflation could have a material adverse affect on the Group’s business, financial condition, results of operations and prospects.

Reflecting its limited history, the Group’s historical consolidated financial condition and results of operations may not be indicative of its future performance The Guarantor was established in January 2007. The Group’s profitability in recent years reflects the fact that its business is still developing and, in particular, although its funding costs have generally been low reflecting its reliance to date on corporate deposits and repo funding, its net interest margin has also been low reflecting the significant proportion of lower-yielding fixed income securities on its balance sheet and the short average tenor of its customer loan portfolio. In addition, the Group’s profitably has also been significantly affected in past years by gains made on its investment securities portfolio. See ‘‘—Financial Review—Principal factors affecting results of operations—Changes in factors affecting the fair value of the Group’s investment securities’’. Further, although the Group’s asset quality is generally sound, it does not have a significant track record of lending and its lending to date has generally been conservative. Reflecting these factors, the Group’s historical consolidated financial condition and results of operations are unlikely to be indicative of its future financial condition and results of operations. Thus there can be no assurance of the Group’s continued profitability or of increases in net assets in any future periods.

Although the Group currently has relatively high capital ratios, it may need to raise further capital in the future for a variety of reasons and such capital may be difficult to raise when needed As at 31 March 2013, the Group’s tier 1 capital adequacy ratio (calculated according to Basel II standards) was 18.3 per cent. and its total capital adequacy ratio was 19.9 per cent., in each case comfortably above the level required by the QCB of 10.0 per cent. A variety of factors affect the Group’s capital adequacy levels, including, in particular, changes in its risk weighted assets and its profitability from period to period. A significant increase in lending in the future is likely to reduce the Group’s capital adequacy ratios and any future losses experienced by it would have a similar effect. In addition, regulatory requirements in relation to the calculation of capital adequacy and required levels of capital adequacy change from time to time. The Group may also need to increase its capital as a result of market perceptions of adequate capitalisation levels and the perceptions of rating agencies. As a result, the Group may need to obtain additional capital in the future. Such capital, whether in the form of debt financing or additional equity, may not be available on commercially favourable terms, or at all. Moreover, should the Group’s capital ratios fall close to regulatory minimum levels or the Group’s own internal minimum levels, the Group may need to adjust its business practices, including reducing the risk and leverage of certain activities. If the Group is unable to maintain satisfactory capital adequacy ratios, its credit ratings may be lowered and its cost of funding may therefore increase.

The Group may not be able to recruit and retain qualified and experienced personnel, which could have an adverse effect on its business and its ability to implement its strategy The Group’s success and ability to maintain current business levels and sustain growth will depend, in part, on its ability to continue to recruit and retain qualified and experienced banking and management personnel. The market for such personnel in the Middle East is intensely competitive and the Group could face challenges in recruiting and retaining such personnel to manage its businesses. The Group depends on the efforts, skill, reputation and experience of its senior management, as well as synergies among their diverse fields of expertise and knowledge. The loss of key personnel could delay or prevent the Group from implementing its strategies. The Guarantor is also not insured against losses that may be incurred in the event of the loss of any member of its key personnel. Furthermore, the Guarantor is guided in its human resources decisions by the Qatari government’s recommended policy that 20.0 per cent. of its total personnel should consist of Qatari nationals and, in addition, certain management positions in Qatari companies are required under Qatari law to be filled by Qatari nationals. The Guarantor’s Qatarisation level at 31 December 2012 was 21 per cent.

23 c108406pu020 Proof 5: 14.6.13_22:22 B/L Revision: 0 Operator AllS and it is currently in compliance with all other applicable requirements as regards the employment of Qatari nationals.

The Group’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 Group records and reports its financial condition and results of operations. Management must exercise judgment in selecting and applying many of these accounting policies and methods so they comply with IFRS. Management has identified certain accounting policies in the notes to its financial statements as being critical because they require management’s judgment to ascertain the valuations of assets, liabilities, commitments and contingencies. See note 5 to the 2012 Financial Statements. These judgments include, for example, the determination of impairment allowances 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 Group has established policies and control procedures that are intended to ensure that these critical accounting estimates and judgments 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. Because of the uncertainty surrounding the Group’s judgments and the estimates pertaining to these matters, the Group 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 Qatar and the GCC Emerging markets such as Qatar and other GCC markets are subject to greater risks than more developed markets, and financial volatility in emerging markets could negatively impact the Group’s business Generally, investment in emerging markets is only suitable for sophisticated investors who fully appreciate the significance of the risks involved in, and are familiar with, investing in emerging markets. Investors should also note that emerging markets such as Qatar and the GCC are subject to rapid change and that the information set forth in this Base Prospectus may become outdated relatively quickly. Moreover, financial turmoil in any emerging market country tends to adversely affect confidence in other emerging market countries and cause investors to move their money to more developed markets. As has happened in the past, financial problems or an increase in the perceived risks associated with investing in emerging economies could dampen foreign investment in Qatar and the GCC and adversely affect those economies. In addition, during such times, companies that operate in emerging markets can face liquidity constraints as foreign funding sources are withdrawn and this could also adversely affect the Group’s business and result in a decrease in the price of the Notes. Specific risks in Qatar and the MENA region that could have a material adverse effect on the Group’s business, financial condition, results of operations and prospects include, without limitation, the following: * regional political instability, including government or military regime change, riots or other forms of civil disturbance or violence, including through acts of terrorism; * military strikes or the outbreak of war or other hostilities involving nations in the region; * a material curtailment of the industrial and economic infrastructure development that is currently underway across the MENA region; * government intervention, including expropriation or nationalisation of assets or increased levels of protectionism; * an increase in inflation and the cost of living; * cancellation of contractual rights, expropriation of assets and/or inability to repatriate profits and/or dividends; * increased government regulations, or adverse governmental activities, with respect to price, import and export controls, the environment, customs and immigration, capital transfers, foreign exchange and currency controls, labour policies and land and water use and foreign ownership; * arbitrary, inconsistent or unlawful government action;

24 c108406pu020 Proof 5: 14.6.13_22:22 B/L Revision: 0 Operator AllS * changing tax regimes, including the imposition or increase of taxes in tax favourable jurisdictions such as Qatar; * difficulties and delays in obtaining governmental and other approvals for operations or renewing existing ones; * inability to repatriate profits or dividends and restrictions on the right to convert or repatriate currency or export assets; and * potential adverse changes in laws and regulatory practices, including legal structures and tax laws. There can be no assurance that either the economic performance of, or political stability in, the countries in which the Group currently operates or may in the future operate can or will be sustained. Investors should note that a worsening of current financial market conditions, instability in certain sectors of the Qatari or regional economies or major political upheaval in Qatar or the MENA region could lead to decreased investor and consumer confidence, market volatility, economic disruption, and declines in real estate markets and, as a result, could have an adverse effect on the business, results of operations, financial condition and prospects of the Group.

Qatar is 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 instability, domestic turmoil and violence, and armed conflict. For example, there has been significant political change in Tunisia and Egypt, armed conflict in Libya and Syria, and protests and related activities in a number of other countries in the MENA region. 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 Qatar, could have an adverse effect on Qatar’s economy and its ability to engage in international trade which, in turn, could have an adverse effect on the Group’s business, financial condition, results of operations and prospects.

The Qatar and GCC legal systems continue to develop and this may create an uncertain environment for investment and business activity Qatar and many of the GCC countries are in various stages of developing their legal and regulatory institutions that are characteristic of more developed markets. As a result, procedural safeguards as well as formal regulations and laws may not be applied consistently. In some circumstances it may not be possible to obtain the legal remedies provided under the relevant laws and regulations in a timely manner. As the legal environment remains subject to continuous development, investors in Qatar and the GCC countries may face uncertainty as to the security of their investments. Any unexpected changes in the legal systems in Qatar and the GCC may have a material adverse effect on the rights of holders of the Notes or the investments that the Group has made or may make in the future, which may in turn have a material adverse effect on the Group’s business, operating results, cash ﬂows, prospects and ﬁnancial condition.

The statistical data contained in this document should be treated with caution by prospective investors Statistics contained in this document, including in relation to gross domestic product (‘‘GDP’’), balance of payments, revenues and expenditures, and indebtedness of the Qatari government, have been obtained from, among other sources, the Qatari Ministry of Economy and Finance, the QCB, the Qatar Statistics Authority (the ‘‘QSA’’) and the International Monetary Fund (the ‘‘IMF’’). Such statistics, and the component data on which they are based, may not have been compiled in the same manner as data provided by other sources and may be different from statistics published by third parties, reﬂecting the fact that the underlying assumptions and methodology may vary from source to source. There may also be material variances between preliminary, estimated or projected statistics set forth in this document and actual results, and between statistics set forth in this document and corresponding data previously published by or on behalf of Qatar. Consequently, the statistical data contained in this document should be treated with caution by prospective investors.

Risks relating to the Notes There is no active trading market for the Notes Notes issued under the Programme will be new securities which may not be widely distributed and for which there is currently no active trading market (unless in the case of any particular Tranche,

25 c108406pu020 Proof 5: 14.6.13_22:22 B/L Revision: 0 Operator AllS such Tranche is to be consolidated with and form a single series with a Tranche of Notes which is already issued). There is no assurance that a secondary market for any Notes will develop or, if it does develop, that it will provide the Noteholders with liquidity of investment or that it will continue for the life of those Notes. A Noteholder may not be able to find a buyer to buy its Notes readily or at prices that will enable the Noteholder to realise a desired yield. Additionally, if the Notes are traded after their initial issuance, they may trade at a discount to their initial offering price, depending upon prevailing interest rates, the market for similar securities, general economic conditions and the financial condition of the Issuer and the Guarantor. Accordingly, the purchase of Notes is suitable only for investors who can bear the risks associated with a lack of liquidity in the relevant Notes and the financial and other risks associated with an investment in the relevant Notes. An investor in Notes must be prepared to hold the relevant Notes for an indefinite period of time or until their maturity. Although application has been made for the listing of certain Notes issued under the Programme on the Irish Stock Exchange, there is no assurance that such applications will be accepted, that any particular Tranche of Notes will be so admitted or that an active trading market will develop. Accordingly, there is no assurance as to the development or liquidity of any trading market for any particular Tranche of Notes.

The Notes may be redeemed prior to maturity Unless in the case of any particular Tranche of Notes the relevant Final Terms speciﬁes otherwise, in the event that the Issuer or the Guarantor would be obliged to increase the amounts payable in respect of any Notes due to any withholding or deduction for or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature imposed, levied, collected, withheld or assessed by or on behalf of the Cayman Islands or Qatar or any political subdivision thereof or any authority therein or thereof having power to tax, the Issuer may redeem all outstanding Notes in accordance with the Conditions. In addition, if in the case of any particular Tranche of Notes the relevant Final Terms speciﬁes that the Notes are redeemable at the Issuer’s option in certain other circumstances the Issuer may choose to redeem the Notes at a time when prevailing interest rates may be relatively low. In such circumstances an investor may not be able to reinvest the redemption proceeds in a comparable security at an effective interest rate as high as that of the relevant Notes. Potential investors should consider re-investment risk in light of other investments available at that time.

Fixed/Floating Rate Notes 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 and the market value of the Notes since the Issuer may be expected to convert the rate when it is likely to produce a lower overall cost of borrowing. 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.

Notes issued at a substantial discount or premium The market values of securities issued at a substantial discount (such as Zero Coupon Notes) or premium from their principal 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.

Modiﬁcation The Conditions contain provisions for calling meetings of Noteholders to consider matters affecting their interests generally. 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.

26 c108406pu020 Proof 5: 14.6.13_22:22 B/L Revision: 0 Operator AllS Risks relating to the market generally Interest rate risks 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 may not reflect all risks One or more independent credit rating agencies may assign credit ratings to the Guarantor or the Notes. The ratings may not reflect the potential impact of all risks related to the structure, market, additional factors discussed in this Base Prospectus and other factors that may affect the value of the Notes. 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). 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 a 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 the European Securities and Markets Authority (‘‘ESMA’’) on its website in accordance with the CRA Regulation is not conclusive evidence of the status of the relevant rating agency being included in such list as there may be delays between certain supervisory measures being taken against a relevant rating agency and publication of an updated ESMA list. Limited information with respect to the credit rating agencies and ratings will be disclosed in the relevant Final Terms. Certain information with respect to the credit rating agencies and ratings is set out on the cover page of this Base Prospectus. A credit rating is not a recommendation to buy, sell or hold securities and may be revised or withdrawn by its assigning credit rating agency at any time. Each rating should be evaluated independently of any other rating.

Change of law The Conditions are based on English law in effect as at the date of this Base Prospectus. No assurance can be given as to the impact of any possible judicial decision or change to English law or administrative practice after the date of issuance of the relevant Notes nor whether any such change could adversely affect the ability of the Issuer or the Guarantor to make payments under the Notes.

Investors in the Notes must rely on Euroclear and Clearstream, Luxembourg procedures Notes issued under the Programme may be represented by one or more Global Notes. Such Global Notes will be deposited with a common depositary for Euroclear and Clearstream, Luxembourg. Except in the circumstances described in the relevant 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 the Global Notes. While the Notes are represented by one or more Global Notes, investors will be able to trade their beneficial interests only through Euroclear and Clearstream, Luxembourg and their respective participants. While the Notes are represented by one or more Global Notes the Issuer and the Guarantor will discharge their payment obligations under the Notes by making payments to the, where applicable, common depositary for Euroclear and Clearstream, Luxembourg for distribution to their account holders. A holder of a beneficial interest in a Global Note must rely on the procedures of Euroclear and Clearstream, Luxembourg and their respective participants to receive payments under the relevant Notes. The Issuer and the Guarantor have no responsibility or liability for the records relating to, or payments made in respect of, beneficial interests in the Global Notes. Holders of beneficial interests in the Global Notes will not have a direct right to vote in respect of the relevant Notes. Instead, such holders will be permitted to act only to the extent that they are enabled by Euroclear and Clearstream, Luxembourg to appoint appropriate proxies. Similarly, holders of beneficial interests in the Global Notes will not have a direct right under the Global Notes to take enforcement action against the Issuer or the Guarantor in the event of a default under the relevant Notes but will have to rely upon their rights under the Deed of Covenant.

27 c108406pu020 Proof 5: 14.6.13_22:22 B/L Revision: 0 Operator AllS The Notes may be subject to fluctuations in currency exchange rates The Issuer will pay principal and interest on the Notes in the relevant 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 government and monetary authorities with jurisdiction over the Investor’s Currency may impose or modify exchange controls, which could adversely affect an applicable exchange rate. The Issuer and the Guarantor have no control over the factors that generally affect these risks, such as economic, financial and political events and the supply and demand for applicable currencies. In recent years, exchange rates between certain currencies have been highly volatile and volatility between such currencies or with other currencies may be expected in the future. However, fluctuations between currencies in the past are not necessarily indicative of fluctuations that may occur in the future. An appreciation in the value of the Investor’s Currency relative to the Specified Currency would decrease: (i) the Investor’s Currency-equivalent yield on the Notes; (ii) the Investor’s Currency- equivalent value of the principal payable on the Notes; and (iii) 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 as well as the availability of a specified foreign currency at the time of any payment of principal or interest on a Note. As a result, investors may receive less interest or principal than expected, or no interest or principal. Even if there are no actual exchange controls, it is possible that the Specified Currency for any particular Note not denominated in U.S. dollars would not be available at such Note’s maturity.

Notes which have a denomination that is not an integral multiple of the minimum Specified Denomination may be illiquid and difficult to trade In relation to any issue of Notes which have a denomination consisting of the minimum Specified Denomination (as defined in the Conditions) plus a higher integral multiple of another smaller amount, it is possible that the Notes may be traded in amounts in excess of such minimum Specified Denomination that are not integral multiples of such minimum Specified Denomination. In such a case a Noteholder who, as a result of trading such amounts, holds a face amount of less than the minimum Specified Denomination would need to purchase an additional amount of Notes such that it holds an amount equal to at least the minimum Specified Denomination to be able to trade such Notes. Noteholders should be aware that Notes which have a denomination that is not an integral multiple of the minimum Specified Denomination may be illiquid and difficult to trade. If a Noteholder holds an amount which is less than the minimum Specified Denomination in his account with the relevant clearing system at the relevant time such Noteholder may not receive a definitive Note in respect of such holding (should definitive Notes be printed) and would need to purchase a face amount of Notes such that its holding amounts to at least a Specified Denomination in order to be eligible to receive a definitive Note. If such Notes in definitive form are issued, holders should be aware that definitive Notes which have a denomination that is not an integral multiple of the minimum Specified Denomination may be illiquid and difficult to trade.

Risk factors relating to taxation Payment by the Issuer may be subject to withholding tax in Qatar The Income Tax Law No.21 of 2009 (the ‘‘Income Tax Law’’) and the Executive Regulations of the Income Tax Law issued in June 2011 (the ‘‘Executive Regulations’’) provide that any interest payments made to ‘‘non-residents’’ in respect of activities not connected with a permanent establishment in Qatar will be subject to withholding tax. However, the Executive Regulations provide for certain exemptions to such application of withholding tax and in accordance with Paragraph 2 of Article 21(4) of the Executive Regulations, ‘‘interest on bonds and securities issued by the State and public authorities, establishments and corporations owned wholly or partly by the State’’ shall not be subject to withholding tax. The Guarantor has obtained a written clarification from the Director of Public Revenues and Taxes Department at the Ministry of Economy and Finance in Qatar (the ‘‘Clarification’’) , which has clarified that, for so long as the Guarantor is wholly or partly owned by the State of Qatar, the exemption contained in Paragraph 2 of Article 21.4 of the Executive Regulations applies such that no withholding tax is applicable in connection with any payment of

28 c108406pu020 Proof 5: 14.6.13_22:22 B/L Revision: 0 Operator AllS interest under any issuance of Notes by the Issuer, by virtue of the Issuer being a wholly owned subsidiary of the Guarantor, or in connection with any payment of interest by it under any guarantee of Notes issued by the Issuer. The Clarification does not have the force of law in Qatar and it is therefore possible that the official interpretation of the Executive Regulations will in the future differ to that provided in the Clarification. To the extent that a different official interpretation of the Executive Regulations is taken in the future, or if any law or regulation relating to withholding tax is changed, then, in relation to any then outstanding Notes, the Issuer may be entitled to redeem the Notes pursuant to Condition 9(b) (Redemption and Purchase – Redemption for tax reasons). If the State of Qatar were to divest itself of its ownership of the Guarantor or if the Guarantor were to divest itself of ownership of the Issuer, payments under the transaction documents may also become subject to withholding tax. However, if the State of Qatar were to divest itself of its ownership of the Guarantor and the Change of Ownership Put is specified as applicable in the relevant Final Terms, the holder of any Note may, in accordance with Condition 9(f) (Redemption and Purchase – Redemption for Change of Ownership (Change of Ownership Put)), redeem the note by giving not less than 15 nor more than 30 days’ notice to the Issuer for an amount equal to 100 per cent. of the principal amount of such Note together with interest accrued to (but excluding) the relevant Change of Ownership Put Date. If the Guarantor were to divest itself of ownership of the Issuer, this would result in an event of default in accordance with Condition 13(k) (Events of Default) and a holder of a Note may declare such note to be forthwith due and payable, together with any interest accrued to the date of repayment.

EU Savings Directive Under EC Council Directive 2003/48/EC on the taxation of savings income (the ‘‘Savings Directive’’), Member States are required to provide to the tax authorities of another Member State details of certain payments paid by a person within its jurisdiction to an individual resident in that other Member State or to certain types of entities established in that other Member State. However, for a transitional period, Luxembourg and Austria are instead required (unless during that period they elect otherwise) to operate a withholding system in relation to such payments (the ending of such transitional period being dependent upon the conclusion of certain other agreements relating to information exchange with certain other countries). A number of non- EU countries and territories including Switzerland have adopted similar measures (a withholding system in the case of Switzerland). The European Commission has proposed certain amendments to the Savings Directive which may, if implemented, amend or broaden the scope of the requirements described above. If a payment were to be made or collected through a Member State which has opted for a withholding system and an amount of, or in respect of, tax were to be withheld from that payment, neither the Issuer nor any Paying Agent nor any other person would be obliged to pay additional amounts with respect to any Note as a result of the imposition of such withholding tax. The Issuer is required to maintain a Paying Agent in a Member State that is not obliged to withhold or deduct tax pursuant to the Savings Directive.

U.S. Foreign Account Tax Compliance Withholding Sections 1471 through 1474 of the U.S. Internal Revenue Code (‘‘FATCA’’) imposes a new reporting regime and, potentially, a 30 per cent. withholding tax with respect to (i) certain payments from sources within the United States, (ii) ‘‘foreign passthru payments’’ made to certain non-U.S. financial institutions that do not comply with this new reporting regime, and (iii) payments to certain investors that do not provide identification information with respect to interests issued by a participating non- U.S. financial institution. The Issuer may be classified as a financial institution for these purposes. If an amount in respect of such withholding tax were to be deducted or withheld from interest, principal or other payments made in respect of the Notes, neither the Issuer nor any paying agent nor any other person would, pursuant to the conditions of the Notes, be required to pay additional amounts as a result of the deduction or withholding. As a result, investors may receive less interest or principal than expected. Prospective investors should refer to the section ‘‘Taxation—U.S. Foreign Account Tax Compliance Act’’.

29 c108406pu020 Proof 5: 14.6.13_22:22 B/L Revision: 0 Operator AllS Risk factors relating to enforcement It may be difficult to enforce arbitration awards and foreign judgments against the Guarantor Under the Conditions, the parties have agreed that any dispute arising out of or in connection with the Notes shall be referred to and finally resolved by arbitration in accordance with the Arbitration Rules of the London Court of International Arbitration (the ‘‘LCIA’’), with a Noteholder having the right to require that the courts of England have exclusive jurisdiction to settle the dispute. A unilateral right to litigate, as on the part of a Noteholder has not been specifically raised before the Qatari courts. Accordingly, it is possible that a Qatari court may not accept that the Noteholder’s right to litigate is exclusive to such Noteholder and may afford the Guarantor the same right. In the event that proceedings are brought against the Guarantor in Qatar, the Qatari courts would, in accordance with their normal practice, enforce the contractual terms of the Notes (including the contractual choice of a governing law other than Qatari law to govern the Notes, provided that, this would not apply to any provision of that law which Qatari courts held to be contrary to any mandatory provision of Qatari law or to public order or morality in Qatar). Qatari courts have consistently enforced commercial interest obligations computed in accordance with the terms of the relevant agreement. It is, however, uncertain whether the Qatari courts would enforce the payment of interest on interest, or the payment of accrued interest which exceeds the amount of the principal sum. There is currently no treaty or convention for the reciprocal enforcement of judgments between Qatar on the one hand and England on the other. A judgment obtained from a court in England will be enforceable in Qatar subject to the provisions of Articles 379 and 380 of Law No. (13) of 1990 (the ‘‘Civil and Commercial Procedure Law’’), which provides, in the case of Article 379, that judgments and orders pronounced in a foreign country may be ordered to be executed in Qatar upon the conditions determined in that country for the execution of Qatari judgments and orders and provides, in the case of Article 380, that an order for execution of a foreign judgment or order will not be made unless and until the following have been ascertained, that: (i) the judgment or order was delivered by a competent court of the foreign jurisdiction in question; (ii) the parties to the action were properly served with notice of proceedings and properly represented; (iii) the judgment or order is one that is capable of being executed by the successful party to the proceedings in conformity with the laws of the foreign jurisdiction in question; and (iv) the foreign judgment or order does not conflict with a previous judgment or order of a competent Qatari court and is not contrary to public policy or morality in Qatar. A Qatari court would be entitled to call for textual evidence on the laws of England concerning the conditions that would be applicable for the execution of the judgment of a Qatari court in England and the Qatari court would then be entitled to execute the judgment of the English court upon those conditions. Accordingly, although a judgment obtained from a court in England would be admissible in evidence in any proceedings brought in Qatar to enforce such judgment it would still be necessary to initiate proceedings in Qatar. In accordance with their normal practice, Qatari courts would uphold the choice of arbitration as a dispute resolution method. However, this would be subject to the same qualifications as are stated above with regard to choice of law and a Qatari court may not accept that its own jurisdiction had been excluded by any provision providing that the submission to any particular jurisdiction was exclusive. Qatar is a party to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards adopted by the United Nations Conference on International Commercial Arbitration on 10 June 1958 (the ‘‘New York Convention’’), with effect from 30 March 2003. The United Kingdom is also a party to the New York Convention and therefore an arbitration award made in England should be enforceable in Qatar in accordance with the terms of the New York Convention. However, enforcement of foreign arbitral awards is underdeveloped in Qatar and largely untested and therefore there can be no assurance that arbitration in connection with the Notes would protect the interests of the relevant Noteholders to the same extent as would be expected in certain other jurisdictions.

30 c108406pu020 Proof 5: 14.6.13_22:22 B/L Revision: 0 Operator AllS FORMS 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.

Bearer Notes Each Tranche of Notes in bearer form (‘‘Bearer Notes’’) will initially be in the form of either a temporary global note in bearer form (the ‘‘Temporary Global Note’’), without interest coupons, or a permanent global note in bearer form (the ‘‘Permanent Global Note’’), without interest coupons, in each case as speciﬁed in the relevant Final Terms. Each Temporary Global Note or, as the case may be, Permanent Global Note (each a ‘‘Global Note’’) will be deposited on or around the Issue Date of the relevant Tranche of the Notes with a common depository for Euroclear and/or Clearstream, Luxembourg. In the case of each Tranche of Bearer Notes, the relevant Final Terms will also specify whether United States Treasury Regulation §1.163-5(c)(2)(i)(C) (the ‘‘TEFRA C Rules’’) or United States Treasury Regulation §1.163-5(c)(2)(i)(D) (the ‘‘TEFRA D Rules’’) are applicable in relation to the Notes or that neither the TEFRA C Rules nor the TEFRA D Rules are applicable.

Temporary Global Note exchangeable for Permanent Global Note If the relevant Final Terms specifies the form of Notes as being ‘‘Temporary Global Note exchangeable for a Permanent Global Note’’, then the Notes will initially be in the form of a Temporary Global Note which will be exchangeable, in whole or in part, for interests in a Permanent Global Note, without interest coupons, not earlier than 40 days after the Issue Date of the relevant Tranche of the Notes upon certification as to non-U.S. beneficial ownership in accordance with U.S. Treasury Regulations. No payments will be made under the Temporary Global Note unless exchange for interests in the Permanent Global Note is improperly withheld or refused. In addition, interest payments in respect of the Notes cannot be collected without such certification of non-U.S. beneficial ownership. Whenever any interest in the Temporary Global Note is to be exchanged for an interest in a Permanent Global Note, the Issuer shall procure (in the case of first exchange) the delivery of a Permanent Global Note to the bearer of the Temporary Global Note or (in the case of any subsequent exchange) an increase in the principal amount of the Permanent Global Note in accordance with its terms against: (i) presentation and (in the case of final exchange) presentation and surrender of the Temporary Global Note to or to the order of the Fiscal Agent; and (ii) receipt by the Fiscal Agent of a certificate or certificates of non-U.S. beneficial ownership. The principal amount of Notes represented by the Permanent Global Note shall be equal to the aggregate of the principal amounts specified in the certificates of non-U.S. beneficial ownership provided, however, that in no circumstances shall the principal amount of Notes represented by the Permanent Global Note exceed the initial principal amount of Notes represented by the Temporary Global Note. If: (a) the Permanent Global Note has not been delivered or the principal amount thereof increased by 5.00 p.m. (London time) on the seventh day after the bearer of the Temporary Global Note has requested exchange of an interest in the Temporary Global Note for an interest in a Permanent Global Note; or (b) the Temporary Global Note (or any part thereof) has become due and payable in accordance with the Terms and Conditions of the Notes or the date for final redemption of the Temporary Global Note has occurred and, in either case, payment in full of the amount of principal falling due with all accrued interest thereon has not been made to the bearer of the Temporary Global Note in accordance with the terms of the Temporary Global Note on the due date for payment, then the Temporary Global Note (including the obligation to deliver a Permanent Global Note) will become void at 5.00 p.m. (London time) on such seventh day (in the case of (a) above) or at 5.00 p.m. (London time) on such due date (in the case of (b) above) and the bearer of the Temporary Global Note will have no further rights thereunder (but without prejudice to the rights which the

31 c108406pu020 Proof 5: 14.6.13_22:22 B/L Revision: 0 Operator AllS bearer of the Temporary Global Note or others may have under the deed of covenant dated 17 June 2013 (the ‘‘Deed of Covenant’’)). The Permanent Global Note will become exchangeable, in whole but not in part only and at the request of the bearer of the Permanent Global Note, for Bearer Notes in definitive form (‘‘Definitive Notes’’): (a) on the expiry of such period of notice as may be specified in the Final Terms; or (b) at any time, if so specified in the Final Terms; or (c) if the Final Terms specifies ‘‘in the limited circumstances described in the Permanent Global Note’’, then if either of the following events occurs: (i) Euroclear or Clearstream, Luxembourg or any other relevant clearing system is closed for business for a continuous period of 14 days (other than by reason of legal holidays) or announces an intention permanently to cease business; or (ii) any of the circumstances described in Condition 13 (Events of Default) occurs. Whenever the Permanent Global Note is to be exchanged for Definitive Notes, the Issuer shall procure the prompt delivery (free of charge to the bearer) of such Definitive Notes, duly authenticated and with Coupons and Talons attached (if so specified in the Final Terms), in an aggregate principal amount equal to the principal amount of Notes represented by the Permanent Global Note to the bearer of the Permanent Global Note against the surrender of the Permanent Global Note to or to the order of the Fiscal Agent within 30 days of the bearer requesting such exchange. If: (a) Definitive Notes have not been duly delivered by 5.00 p.m. (London time) on the thirtieth day after the bearer has requested exchange of the Permanent Global Note for Definitive Notes; or (b) the Permanent Global Note was originally issued in exchange for part only of a Temporary Global Note representing the Notes and such Temporary Global Note becomes void in accordance with its terms; or (c) the Permanent Global Note (or any part thereof) has become due and payable in accordance with the Terms and Conditions of the Notes or the date for final redemption of the Permanent Global Note has occurred and, in either case, payment in full of the amount of principal falling due with all accrued interest thereon has not been made to the bearer in accordance with the terms of the Permanent Global Note on the due date for payment, then the Permanent Global Note (including the obligation to deliver Definitive Notes) will become void at 5.00 p.m. (London time) on such thirtieth day (in the case of (a) above) or at 5.00 p.m. (London time) on the date on which such Temporary Global Note becomes void (in the case of (b) above) or at 5.00 p.m. (London time) on such due date ((c) above) and the bearer of the Permanent Global Note will have no further rights thereunder (but without prejudice to the rights which the bearer of the Permanent Global Note or others may have under the Deed of Covenant).

Temporary Global Note exchangeable for Definitive Notes If the relevant Final Terms specifies the form of Notes as being ‘‘Temporary Global Note exchangeable for Definitive Notes’’, then the Notes will initially be in the form of a Temporary Global Note which will be exchangeable, in whole or in part, for Definitive Notes not earlier than 40 days after the Issue Date of the relevant Tranche of the Notes upon certification as to non-U.S. beneficial ownership in accordance with U.S. Treasury Regulations. Interest payments in respect of the Notes cannot be collected without such certification of non-U.S. beneficial ownership. Whenever the Temporary Global Note is to be exchanged for Definitive Notes, the Issuer shall procure the prompt delivery (free of charge to the bearer) of such Definitive Notes, duly authenticated and with Coupons and Talons attached (if so specified in the relevant Final Terms), in an aggregate principal amount equal to the principal amount of the Temporary Global Note to the bearer of the Temporary Global Note against the surrender of the Temporary Global Note to or to the order of the Fiscal Agent within 30 days of the bearer requesting such exchange. If: (a) Definitive Notes have not been duly delivered by 5.00 p.m. (London time) on the thirtieth day after the bearer has requested exchange of the Temporary Global Note for Definitive Notes; or

32 c108406pu020 Proof 5: 14.6.13_22:22 B/L Revision: 0 Operator AllS (b) the Temporary Global Note (or any part thereof) has become due and payable in accordance with the Terms and Conditions of the Notes or the date for ﬁnal redemption of the Temporary Global Note has occurred and, in either case, payment in full of the amount of principal falling due with all accrued interest thereon has not been made to the bearer in accordance with the terms of the Temporary Global Note on the due date for payment, then the Temporary Global Note (including the obligation to deliver Deﬁnitive Notes) will become void at 5.00 p.m. (London time) on such thirtieth day (in the case of (a) above) or at 5.00 p.m. (London time) on such due date (in the case of (b) above) and the bearer of the Temporary Global Note will have no further rights thereunder (but without prejudice to the rights which the bearer of the Temporary Global Note or others may have under the Deed of Covenant).

Permanent Global Note exchangeable for Definitive Notes If the relevant Final Terms specifies the form of Notes as being ‘‘Permanent Global Note exchangeable for Definitive Notes’’, then the Notes will initially be in the form of a Permanent Global Note which will be exchangeable in whole, but not in part, for Definitive Notes: (a) on the expiry of such period of notice as may be specified in the relevant Final Terms; or (b) at any time, if so specified in the relevant Final Terms; or (c) if the relevant Final Terms specifies ‘‘in the limited circumstances described in the Permanent Global Note’’, then if either of the following events occurs: (i) Euroclear or Clearstream, Luxembourg or any other relevant clearing system is closed for business for a continuous period of 14 days (other than by reason of legal holidays) or announces an intention permanently to cease business; or (ii) any of the circumstances described in Condition 13 (Events of Default) occurs. Whenever the Permanent Global Note is to be exchanged for Definitive Notes, the Issuer shall procure the prompt delivery (free of charge to the bearer) of such Definitive Notes, duly authenticated and with Coupons and Talons attached (if so specified in the Final Terms), in an aggregate principal amount equal to the principal amount of Notes represented by the Permanent Global Note to the bearer of the Permanent Global Note against the surrender of the Permanent Global Note to or to the order of the Fiscal Agent within 30 days of the bearer requesting such exchange. If: (a) Definitive Notes have not been duly delivered by 5.00 p.m. (London time) on the thirtieth day after the bearer has requested exchange of the Permanent Global Note for Definitive Notes; or (b) the Permanent Global Note (or any part thereof) has become due and payable in accordance with the Terms and Conditions of the Notes or the date for final redemption of the Permanent Global Note has occurred and, in either case, payment in full of the amount of principal falling due with all accrued interest thereon has not been made to the bearer in accordance with the terms of the Permanent Global Note on the due date for payment, then the Permanent Global Note (including the obligation to deliver Definitive Notes) will become void at 5.00 p.m. (London time) on such thirtieth day (in the case of (a) above) or at 5.00 p.m. (London time) on such due date ((b) above) and the bearer of the Permanent Global Note will have no further rights thereunder (but without prejudice to the rights which the bearer of the Permanent Global Note or others may have under the Deed of Covenant).

Terms and Conditions applicable to the Notes The terms and conditions applicable to any Deﬁnitive Note will be endorsed on that Note and will consist of the terms and conditions set out under ‘‘Terms and Conditions of the Notes’’ below and the provisions of the relevant Final Terms which supplement, amend and/or replace those terms and conditions. The terms and conditions applicable to any Note in global form will differ from those terms and conditions which would apply to the Note were it in deﬁnitive form to the extent described under ‘‘Summary of Provisions Relating to the Notes while in Global Form’’ below.

33 c108406pu020 Proof 5: 14.6.13_22:22 B/L Revision: 0 Operator AllS Legend concerning United States persons In the case of any Tranche of Bearer Notes having a maturity of more than 365 days and to which the TEFRA D Rules are applicable, the Notes in global form, the Notes in deﬁnitive form and any Coupons and Talons appertaining thereto will bear the following legend: ‘‘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.’’

Registered Notes Each Tranche of Registered Notes will be in the form of either individual Note Certificates in registered form (‘‘Individual Note Certificates’’) or global Notes in registered form (a ‘‘Global Registered Note’’), in each case as specified in the relevant Final Terms. Each Global Registered Note will be deposited on or around the relevant Issue Date with a depositary or a common depositary for Euroclear and/or Clearstream, Luxembourg and/or any other relevant clearing system and registered in the name of a nominee for such depositary and will be exchangeable for Individual Note Certificates in accordance with its terms. If the relevant Final Terms specifies the form of Notes as being ‘‘Individual Note Certificates’’, then the Notes will at all times be in the form of Individual Note Certificates issued to each Noteholder in respect of their respective holdings. If the relevant Final Terms specifies the form of Notes as being ‘‘Global Registered Note exchangeable for Individual Note Certificates’’, then the Notes will initially be in the form of a Global Registered Note which will be exchangeable in whole, but not in part, for Individual Note Certificates: (a) on the expiry of such period of notice as may be specified in the relevant Final Terms; or (b) at any time, if so specified in the relevant Final Terms; or (c) if the relevant Final Terms specifies ‘‘in the limited circumstances described in the Global Registered Note ‘‘, then if either of the following events occurs: (i) Euroclear or Clearstream, Luxembourg or any other relevant clearing system is closed for business for a continuous period of 14 days (other than by reason of legal holidays) or announces an intention permanently to cease business or (ii) any of the circumstances described in Condition 13 (Events of Default) occurs. Whenever the Global Registered Note is to be exchanged for Individual Note Certificates, the Issuer shall procure that Individual Note Certificates will be issued in an aggregate principal amount equal to the principal amount of the Global Registered Note within five business days of the delivery, by or on behalf of the registered holder of the Global Registered Note to the Registrar of such information as is required to complete and deliver such Individual Note Certificates (including, without limitation, the names and addresses of the persons in whose names the Individual Note Certificates are to be registered and the principal amount of each such person’s holding) against the surrender of the Global Registered Note at the Specified Office of the Registrar. Such exchange will be effected in accordance with the provisions of the Agency Agreement and the regulations concerning the transfer and registration of Notes scheduled thereto and, in particular, shall be effected without charge to any holder, but against such indemnity as the Registrar may require in respect of any tax or other duty of whatsoever nature which may be levied or imposed in connection with such exchange. If: (a) Individual Note Certificates have not been delivered by 5.00 p.m. (London time) on the thirtieth day after they are due to be issued and delivered in accordance with the terms of the Global Registered Note; or (b) any of the Notes represented by a Global Registered Note (or any part of it) has become due and payable in accordance with the Terms and Conditions of the Notes or the date for final redemption of the Notes has occurred and, in either case, payment in full of the amount of principal falling due with all accrued interest thereon has not been made to the holder of the Global Registered Note in accordance with the terms of the Global Registered Note on the due date for payment,

34 c108406pu020 Proof 5: 14.6.13_22:22 B/L Revision: 0 Operator AllS then, at 5.00 p.m. (London time) on such thirtieth day (in the case of (a) above) or at 5.00 p.m. (London time) on such due date (in the case of (b) above) each person shown in the records of Euroclear and/or Clearstream, Luxembourg (or any other relevant clearing system) as being entitled to interest in the Notes (each an ‘‘Accountholder’’) shall acquire the right under the Deed of Covenant to enforce against the Issuer, the Issuer’s obligations to the holder in respect of the Notes represented by the Global Registered Note, including the obligation of the Issuer to make all payments when due at any time in respect of such Notes as if such Notes had been duly presented and (where required by the Conditions) surrendered on the due date in accordance with the Conditions. Each Accountholder shall acquire such right without prejudice to the rights which the holder may have under the Global Registered Note and the Deed of Covenant. Notwithstanding such right that each Accountholder may acquire under the Deed of Covenant, payment to the holder in respect of any Notes represented by the Global Registered Note shall constitute a discharge of the Issuer’s obligations to the extent of any such payment and nothing in the Deed of Covenant shall oblige the Issuer to make any payment under the Notes to or to the order of any person other than the holder.

Terms and Conditions applicable to the Notes The terms and conditions applicable to any Individual Note Certificate will be endorsed on that Individual Note Certificate and will consist of the terms and conditions set out under ‘‘Terms and Conditions of the Notes’’ below and the provisions of the relevant Final Terms which supplement, amend and/or replace those terms and conditions. The terms and conditions applicable to any Global Registered Note will differ from those terms and conditions which would apply to the Note were it in definitive form to the extent described under ‘‘Summary of Provisions Relating to the Notes while in Global Form’’ below.

35 c108406pu020 Proof 5: 14.6.13_22:22 B/L Revision: 0 Operator AllS TERMS AND CONDITIONS OF THE NOTES

The following is the text of the terms and conditions which will be endorsed on each Note in definitive form issued under the Programme. The terms and conditions applicable to any Note in global form will differ from those terms and conditions which would apply to the Note were it in definitive form to the extent described under ‘‘Summary of Provisions Relating to the Notes while in Global Form’’ below. 1. Introduction (a) Programme: AKCB Finance Limited (the ‘‘Issuer’’) and Al Khalij Commercial Bank (al khaliji) Q.S.C. (the ‘‘Guarantor’’) have established a Euro Medium Term Note Programme (the ‘‘Programme’’) for the issuance of up to U.S.$750,000,000 in aggregate principal amount of notes (the ‘‘Notes’’). Notes issued under the Programme are guaranteed by the Guarantor. (b) Final Terms: Notes issued under the Programme are issued in series (each a ‘‘Series’’) and each Series may comprise one or more tranches (each a ‘‘Tranche’’) of Notes. Each Tranche is the subject of a final terms (the ‘‘Final Terms’’) which supplements these terms and conditions (the ‘‘Conditions’’). The terms and conditions applicable to any particular Tranche of Notes are these Conditions as completed by the relevant Final Terms. (c) Agency Agreement: The Notes are the subject of an issue and paying agency agreement dated 17 June 2013 (the ‘‘Agency Agreement’’) between the Issuer, the Guarantor, Citibank N.A., London Branch as fiscal agent (the ‘‘Fiscal Agent’’, which expression includes any successor fiscal agent appointed from time to time in connection with the Notes), Citigroup Global Markets Deutschland AG as registrar (the ‘‘Registrar’’, which expression includes any successor registrar appointed from time to time in connection with the Notes), the paying agents named therein (together with the Fiscal Agent, the ‘‘Paying Agents’’, which expression includes any successor or additional paying agents appointed from time to time in connection with the Notes) and the transfer agents named therein (together with the Registrar, the ‘‘Transfer Agents’’, which expression includes any successor or additional transfer agents appointed from time to time in connection with the Notes). In these Conditions references to the ‘‘Agents’’ are to the Paying Agents and the Transfer Agents and any reference to an ‘‘Agent’’ is to any one of them (d) Deed of Guarantee: The Notes are the subject of a deed of guarantee dated 17 June 2013 (the ‘‘Deed of Guarantee’’) entered into by the Guarantor. (e) Deed of Covenant: The Notes may be issued in bearer form (‘‘Bearer Notes’’), or in registered form (‘‘Registered Notes’’). Registered Notes are constituted by a deed of covenant dated 17 June 2013 (the ‘‘Deed of Covenant’’) entered into by the Issuer. (f) The Notes: All subsequent references in these Conditions to ‘‘Notes’’ are to the Notes which are the subject of the relevant Final Terms. Copies of the relevant Final Terms are available for viewing at the registered offices of the Issuer and the Fiscal Agent and copies may be obtained from such offices. (g) Summaries: Certain provisions of these Conditions are summaries of the Agency Agreement, the Deed of Guarantee and the Deed of Covenant and are subject to their detailed provisions. Noteholders and the holders of the related interest coupons, if any, (the ‘‘Couponholders’’ and the ‘‘Coupons’’, respectively) are bound by, and are deemed to have notice of, all the provisions of the Agency Agreement, the Deed of Guarantee and the Deed of Covenant applicable to them. Copies of the Agency Agreement, the Deed of Guarantee and the Deed of Covenant are available for inspection by Noteholders during normal business hours at the Specified Offices of each of the Agents, the initial Specified Offices of which are set out below.

2. Interpretation (a) Definitions: In these Conditions the following expressions have the following meanings: ‘‘Accrual Yield’’ has the meaning given in the relevant Final Terms; ‘‘Additional Business Centre(s)’’ means the city or cities specified as such in the relevant Final Terms; ‘‘Additional Financial Centre(s)’’ means the city or cities specified as such in the relevant Final Terms;

36 c108406pu020 Proof 5: 14.6.13_22:22 B/L Revision: 0 Operator AllS ‘‘Business Day’’ means: (i) in relation to any sum payable in euro, a TARGET Settlement Day and a day on which commercial banks and foreign exchange markets settle payments generally in each (if any) Additional Business Centre; and (ii) in relation to any sum payable in a currency other than euro, a day on which commercial banks and foreign exchange markets settle payments generally in London, in the Principal Financial Centre of the relevant currency and in each (if any) Additional Business Centre; ‘‘Business Day Convention’’, in relation to any particular date, has the meaning given in the relevant Final Terms and, if so specified in the relevant Final Terms, may have different meanings in relation to different dates and, in this context, the following expressions shall have the following meanings: (i) ‘‘Following Business Day Convention’’ means that the relevant date shall be postponed to the first following day that is a Business Day; (ii) ‘‘Modified Following Business Day Convention’’ or ‘‘Modified Business Day Convention’’ means that the relevant date shall be postponed to the first following day that is a Business Day unless that day falls in the next calendar month in which case that date will be the first preceding day that is a Business Day; (iii) ‘‘Preceding Business Day Convention’’ means that the relevant date shall be brought forward to the first preceding day that is a Business Day; (iv) ‘‘FRN Convention’’, ‘‘Floating Rate Convention’’ or ‘‘Eurodollar Convention’’ means that each relevant date shall be the date which numerically corresponds to the preceding such date in the calendar month which is the number of months specified in the relevant Final Terms as the Specified Period after the calendar month in which the preceding such date occurred provided, however, that: (A) if there is no such numerically corresponding day in the calendar month in which any such date should occur, then such date will be the last day which is a Business Day in that calendar month; (B) if any such date would otherwise fall on a day which is not a Business Day, then such date will be the first following day which is a Business Day unless that day falls in the next calendar month, in which case it will be the first preceding day which is a Business Day; and (C) if the preceding such date occurred on the last day in a calendar month which was a Business Day, then all subsequent such dates will be the last day which is a Business Day in the calendar month which is the specified number of months after the calendar month in which the preceding such date occurred; and (v) ‘‘No Adjustment’’ means that the relevant date shall not be adjusted in accordance with any Business Day Convention; ‘‘Calculation Agent’’ means the Fiscal Agent or such other Person specified in the relevant Final Terms as the party responsible for calculating the Rate(s) of Interest and Interest Amount(s) and/or such other amount(s) as may be specified in the relevant Final Terms; ‘‘Calculation Amount’’ has the meaning given in the relevant Final Terms; ‘‘Clearstream’’ means Clearstream Banking, socie´te´ anonyme; ‘‘Coupon Sheet’’ means, in respect of a Note, a coupon sheet relating to the Note; ‘‘Day Count Fraction’’ means, in respect of the calculation of an amount for any period of time (the ‘‘Calculation Period’’), such day count fraction as may be specified in these Conditions or the relevant Final Terms and: (i) if ‘‘Actual/Actual (ICMA)’’ is so specified, means: (A) where the Calculation Period is equal to or shorter than the Regular Period during which it falls, the actual number of days in the Calculation Period divided by the product of (1) the actual number of days in such Regular Period and (2) the number of Regular Periods in any year; and

37 c108406pu020 Proof 5: 14.6.13_22:22 B/L Revision: 0 Operator AllS (B) where the Calculation Period is longer than one Regular Period, the sum of: (1) the actual number of days in such Calculation Period falling in the Regular Period in which it begins divided by the product of (i) the actual number of days in such Regular Period and (ii) the number of Regular Periods in any year; and (2) the actual number of days in such Calculation Period falling in the next Regular Period divided by the product of (i) the actual number of days in such Regular Period and (ii) the number of Regular Periods in any year; (ii) if ‘‘Actual/365’’ or ‘‘Actual/Actual (ISDA)’’ is so specified, means the actual number of days in the Calculation Period divided by 365 (or, if any portion of the Calculation Period falls in a leap year, the sum of (A) the actual number of days in that portion of the Calculation Period falling in a leap year divided by 366 and (B) the actual number of days in that portion of the Calculation Period falling in a non-leap year divided by 365); (iii) if ‘‘Actual/365 (Fixed)’’ is so specified, means the actual number of days in the Calculation Period divided by 365; (iv) if ‘‘Actual/360’’ is so specified, means the actual number of days in the Calculation Period divided by 360; (v) if ‘‘30/360’’ is so specified, means the number of days in the Calculation Period divided by 360 (the number of days to be calculated on the basis of a year of 360 days with 12 30- day months (unless (A) the last day of the Calculation Period is the 31st day of a month but the first day of the Calculation Period is a day other than the 30th or 31st day of a month, in which case the month that includes that last day shall not be considered to be shortened to a 30-day month, or (B) the last day of the Calculation Period is the last day of the month of February, in which case the month of February shall not be considered to be lengthened to a 30-day month)); and (vi) if ‘‘30/360E’’ or ‘‘Eurobond Basis’’ is so specified means, the number of days in the Calculation Period divided by 360 (the number of days to be calculated on the basis of a year of 360 days with 12 30-day months, without regard to the date of the first day or last day of the Calculation Period unless, in the case of the final Calculation Period, the date of final maturity is the last day of the month of February, in which case the month of February shall not be considered to be lengthened to a 30-day month), provided, however, that in each such case the number of days in the Calculation Period is calculated from and including the first day of the Calculation Period to but excluding the last day of the Calculation Period; ‘‘Early Redemption Amount (Tax)’’ means, in respect of any Note, its principal amount or such other amount as may be specified in, or determined in accordance with, the relevant Final Terms; ‘‘Early Termination Amount’’ means, in respect of any Note, its principal amount or such other amount as may be specified in, or determined in accordance with, these Conditions or the relevant Final Terms; ‘‘Euroclear’’ means Euroclear Bank S.A./N.V.; ‘‘Extraordinary Resolution’’ has the meaning given in the Agency Agreement; ‘‘Final Redemption Amount’’ means, in respect of any Note, its principal amount or such other amount as may be specified in, or determined in accordance with, the relevant Final Terms; ‘‘First Interest Payment Date’’ means the date specified in the relevant Final Terms; ‘‘Fixed Coupon Amount’’ has the meaning given in the relevant Final Terms; ‘‘Guarantee’’ means, in relation to any Indebtedness of any Person, any obligation of another Person to pay such Indebtedness including (without limitation): (i) any obligation to purchase such Indebtedness; (ii) 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; (iii) any indemnity against the consequences of a default in the payment of such Indebtedness; and

38 c108406pu020 Proof 5: 14.6.13_22:22 B/L Revision: 0 Operator AllS (iv) any other agreement to be responsible for such Indebtedness; ‘‘Guarantee of the Notes’’ means the guarantee of the Notes given by the Guarantor in the Deed of Guarantee; ‘‘Holder’’, in the case of Bearer Notes, has the meaning given in Condition 3(b) (Title to Bearer Notes) and, in the case of Registered Notes, has the meaning given in Condition 3(d) (Title to Registered Notes); ‘‘Indebtedness’’ means any indebtedness of any Person for money borrowed or raised including (without limitation) any indebtedness for or in respect of: (i) amounts raised by acceptance under any acceptance credit facility; (ii) amounts raised under any note purchase facility; (iii) 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; (iv) 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 (v) amounts raised under any other transaction (including, without limitation, any forward sale or purchase agreement) having the commercial effect of a borrowing; ‘‘Interest Amount’’ means, in relation to a Note and an Interest Period, the amount of interest payable in respect of that Note for that Interest Period; ‘‘Interest Commencement Date’’ means the Issue Date of the Notes or such other date as may be specified as the Interest Commencement Date in the relevant Final Terms; ‘‘Interest Determination Date’’ has the meaning given in the relevant Final Terms; ‘‘Interest Payment Date’’ means the First Interest Payment Date and any date or dates specified as such in, or determined in accordance with the provisions of, the relevant Final Terms and, if a Business Day Convention is specified in the relevant Final Terms: (i) as the same may be adjusted in accordance with the relevant Business Day Convention; or (ii) if the Business Day Convention is the FRN Convention, Floating Rate Convention or Eurodollar Convention and an interval of a number of calendar months is specified in the relevant Final Terms as being the Specified Period, each of such dates as may occur in accordance with the FRN Convention, Floating Rate Convention or Eurodollar Convention at such Specified Period of calendar months following the Interest Commencement Date (in the case of the first Interest Payment Date) or the previous Interest Payment Date (in any other case); ‘‘Interest Period’’ means each period beginning on (and including) the Interest Commencement Date or any Interest Payment Date and ending on (but excluding) the next Interest Payment Date; ‘‘ISDA Definitions’’ means the 2000 ISDA Definitions (as amended and updated as at the date of issue of the first Tranche of the Notes of the relevant Series (as specified in the relevant Final Terms) as published by the International Swaps and Derivatives Association, Inc.) or, if so specified in the relevant Final Terms, the 2006 ISDA Definitions (as amended and updated as at the date of issue of the first Tranche of the Notes of the relevant Series (as specified in the relevant Final Terms) as published by the International Swaps and Derivatives Association, Inc.); ‘‘Issue Date’’ has the meaning given in the relevant Final Terms; ‘‘Margin’’ has the meaning given in the relevant Final Terms; ‘‘Material Subsidiary’’ means at any relevant time a Subsidiary of the Issuer or the Guarantor: (i) whose total assets or gross revenues (or, where the Subsidiary in question prepares consolidated financial statements, whose total consolidated assets or gross consolidated revenues, as the case may be) represents not less than 10 per cent, of the total consolidated assets or the gross consolidated revenues of the Issuer and its Subsidiaries or, as the case may be, the Guarantor and its Subsidiaries, all as calculated by reference to the then latest

39 c108406pu020 Proof 5: 14.6.13_22:22 B/L Revision: 0 Operator AllS audited financial statements (or consolidated accounts, as the case may be) of such Subsidiary and the then latest audited consolidated financial statements of the Issuer or the Guarantor; or (ii) 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; ‘‘Maturity Date’’ has the meaning given in the relevant Final Terms; ‘‘Maximum Redemption Amount’’ has the meaning given in the relevant Final Terms; ‘‘Minimum Redemption Amount’’ has the meaning given in the relevant Final Terms; ‘‘Non-recourse Project, Securitisation or Asset Financing’’ means any securitisation of existing or future assets or financing of all or part of the costs of the acquisition, construction or development of any project or asset, provided that (i) any Security Interest given by the Issuer, the Guarantor, or the relevant Subsidiary of the Issuer or the Guarantor is limited solely to assets of the securitisation, the project or to the asset (as applicable), (ii) the Person or Persons participating in such securitisation or providing such financing expressly agrees to limit their recourse to the project or asset (as applicable) so securitised or financed and the revenues derived from such project or asset (as applicable) as the principal source of repayment for the moneys advanced and (iii) there is no other recourse to the Issuer, the Guarantor, or the relevant Subsidiary of the Issuer or the Guarantor in respect of any default by any Person under the securitisation or financing; ‘‘Noteholder’’, in the case of Bearer Notes, has the meaning given in Condition 3(b) (Title to Bearer Notes) and, in the case of Registered Notes, has the meaning given in Condition 3(d) (Title to Registered Notes); ‘‘Optional Redemption Amount (Call)’’ means, in respect of any Note, its principal amount or such other amount as may be specified in, or determined in accordance with, the relevant Final Terms; ‘‘Optional Redemption Amount (Put)’’ means, in respect of any Note, its principal amount or such other amount as may be specified in, or determined in accordance with, the relevant Final Terms; ‘‘Optional Redemption Date (Call)’’ has the meaning given in the relevant Final Terms; ‘‘Optional Redemption Date (Put)’’ has the meaning given in the relevant Final Terms; ‘‘Participating Member State’’ means a Member State of the European Communities which adopts the euro as its lawful currency in accordance with the Treaty; ‘‘Payment Business Day’’ means: (i) if the currency of payment is euro, any day which is: (A) a day on which banks in the relevant place of presentation are open for presentation and payment of bearer debt securities and for dealings in foreign currencies; and (B) in the case of payment by transfer to an account, a TARGET Settlement Day and a day on which dealings in foreign currencies may be carried on in each (if any) Additional Financial Centre; or (ii) if the currency of payment is not euro, any day which is: (A) a day on which banks in the relevant place of presentation are open for presentation and payment of bearer debt securities and for dealings in foreign currencies; and (B) in the case of payment by transfer to an account, a day on which dealings in foreign currencies may be carried on in the Principal Financial Centre of the currency of payment and in each (if any) Additional Financial Centre; ‘‘Permitted Reorganisation’’ means: (i) any disposal by any Subsidiary of the whole or a substantial part of its business, undertaking or assets to the Issuer or the Guarantor or any wholly owned Subsidiary of the Issuer or the Guarantor; (ii) any amalgamation, consolidation or merger of a Subsidiary with any other Subsidiary or any other wholly owned Subsidiary of the Issuer or the Guarantor; or

40 c108406pu020 Proof 5: 14.6.13_22:22 B/L Revision: 0 Operator AllS (iii) any amalgamation, consolidation, restructuring, merger or reorganisation on terms previously approved by an Extraordinary Resolution of Noteholders; ‘‘Permitted Security Interest’’ means: (i) any Security Interest created or outstanding with the approval of an Extraordinary Resolution; (ii) any Security Interest existing on the date of the relevant subscription agreement relating to the issue of the first Tranche of the Notes; (iii) any Security Interest on assets or property existing at the time the Issuer, the Guarantor or, as the case may be, a Subsidiary of the Issuer or the Guarantor acquired such assets or property provided that such Security Interest was not created in contemplation of such acquisition and does not extend to other assets or property (other than proceeds of such acquired assets or property), provided that the maximum amount of Relevant Indebtedness thereafter secured by such Security Interest does not exceed the purchase price of such property or the Relevant Indebtedness incurred solely for the purpose of financing the acquisition of such property; (iv) any Security Interest securing the Relevant Indebtedness of a Person and/or its Subsidiaries existing at the time that such Person is merged into or consolidated with the Issuer, the Guarantor or, as the case may be, a Subsidiary of the Issuer or the Guarantor, provided that such Security Interest was not created in contemplation of such merger or consolidation and does not extend to any other assets or property of the Issuer, the Guarantor or, as the case may be, a Subsidiary of the Issuer or the Guarantor; (v) any Security Interest created in connection with any Non-recourse Project, Securitisation or Asset Financing; or (vi) any renewal of or substitution for any Security Interest permitted by any of the preceding sub-paragraphs (i) through (v), provided that with respect to any such Security Interest incurred pursuant to this sub-paragraph (vi), the principal amount secured has not increased and the Security Interest has not been extended to any additional property (other than the proceeds of such property); ‘‘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; ‘‘Principal Financial Centre’’ means, in relation to any currency, the principal financial centre for that currency provided, however, that: (i) in relation to euro, it means the principal financial centre of such Member State of the European Communities as is selected (in the case of a payment) by the payee or (in the case of a calculation) by the Calculation Agent; and (ii) in relation to New Zealand dollars, it means either Wellington or Auckland as is selected (in the case of a payment) by the payee or (in the case of a calculation) by the Calculation Agent; ‘‘Put Option Notice’’ means a notice which must be delivered to a Paying Agent by any Noteholder wanting to exercise a right to redeem a Note at the option of the Noteholder; ‘‘Put Option Receipt’’ means a receipt issued by a Paying Agent to a depositing Noteholder upon deposit of a Note with such Paying Agent by any Noteholder wanting to exercise a right to redeem a Note at the option of the Noteholder; ‘‘Rate of Interest’’ means the rate or rates (expressed as a percentage per annum) of interest payable in respect of the Notes specified in the relevant Final Terms or calculated or determined in accordance with the provisions of these Conditions and/or the relevant Final Terms; ‘‘Redemption Amount’’ means, as appropriate, the Final Redemption Amount, the Early Redemption Amount (Tax), the Optional Redemption Amount (Call), the Optional Redemption Amount (Put), the Early Termination Amount or such other amount in the nature of a redemption amount as may be specified in, or determined in accordance with the provisions of, the relevant Final Terms;

41 c108406pu020 Proof 5: 14.6.13_22:22 B/L Revision: 0 Operator AllS ‘‘Reference Banks’’ has the meaning given in the relevant Final Terms or, if none, four major banks selected by the Calculation Agent in the market that is most closely connected with the Reference Rate; ‘‘Reference Price’’ has the meaning given in the relevant Final Terms; ‘‘Reference Rate’’ means one of the following benchmark rates (as specified in the relevant Final Terms) in respect of the currency and period specified in the relevant Final Terms: (i) London interbank offered rate (‘‘LIBOR’’); (ii) Euro-Zone interbank offered rate (‘‘EURIBOR’’); (iii) Shanghai interbank offered rate (‘‘SHIBOR’’); (iv) Hong Kong interbank offered rate (‘‘HIBOR’’); (v) Singapore interbank offered rate (‘‘SIBOR’’); (vi) Emirates interbank offered rate (‘‘EIBOR’’); (vii) Saudi Arabia interbank offered rate (‘‘SAIBOR’’); (viii) Tokyo interbank offered rate (‘‘TIBOR’’); and (ix) Japanese Yen LIBOR (‘‘JPY LIBOR’’). ‘‘Regular Period’’ means: (i) in the case of Notes where interest is scheduled to be paid only by means of regular payments, each period from and including the Interest Commencement Date to but excluding the first Interest Payment Date and each successive period from and including one Interest Payment Date to but excluding the next Interest Payment Date; (ii) in the case of Notes where, apart from the first Interest Period, interest is scheduled to be paid only by means of regular payments, each period from and including a Regular Date falling in any year to but excluding the next Regular Date, where ‘‘Regular Date’’ means the day and month (but not the year) on which any Interest Payment Date falls; and (iii) in the case of Notes where, apart from one Interest Period other than the first Interest Period, interest is scheduled to be paid only by means of regular payments, each period from and including a Regular Date falling in any year to but excluding the next Regular Date, where ‘‘Regular Date’’ means the day and month (but not the year) on which any Interest Payment Date falls other than the Interest Payment Date falling at the end of the irregular Interest Period. ‘‘Relevant Date’’ means, in relation to any payment, whichever is the later of (a) the date on which the payment in question first becomes due and (b) if the full amount payable has not been received in the Principal Financial Centre of the currency of payment by the Fiscal Agent on or prior to such due date, the date on which (the full amount having been so received) notice to that effect has been given to the Noteholders; ‘‘Relevant Financial Centre’’ has the meaning given in the relevant Final Terms; ‘‘Relevant Indebtedness’’ means any Indebtedness which is in the form of or represented by any bond, note, debenture, debenture stock, loan stock, certificate or other instrument which is, or is capable of being, listed, quoted or traded on any stock exchange or in any securities market (including, without limitation, any over-the-counter market); ‘‘Relevant Screen Page’’ means the page, section or other part of a particular information service (including, without limitation, Reuters) specified as the Relevant Screen Page in the relevant Final Terms, or such other page, section or other part as may replace it on that information service or such other information service, in each case, as may be nominated by the Person providing or sponsoring the information appearing there for the purpose of displaying rates or prices comparable to the Reference Rate; ‘‘Relevant Time’’ has the meaning given in the relevant Final Terms; ‘‘Reserved Matter’’ means any proposal to change any date fixed for payment of principal or interest in respect of the Notes, to reduce the amount of principal or interest payable on any date in respect of the Notes, to alter the method of calculating the amount of any payment in

42 c108406pu020 Proof 5: 14.6.13_22:22 B/L Revision: 0 Operator AllS respect of the Notes or the date for any such payment, to change the currency of any payment under the Notes, to change the quorum requirements relating to meetings or the majority required to pass an Extraordinary Resolution or to amend the terms of the Deed of Guarantee; ‘‘Security Interest’’ means any mortgage, charge, pledge, lien or other security interest including, without limitation, anything analogous to any of the foregoing under the laws of any jurisdiction; ‘‘Specified Currency’’ has the meaning given in the relevant Final Terms; ‘‘Specified Denomination(s)’’ has the meaning given in the relevant Final Terms; ‘‘Specified Office’’ has the meaning given in the Agency Agreement; ‘‘Specified Period’’ has the meaning given in the relevant Final Terms; ‘‘Subsidiary’’ means, in relation to any Person (the ‘‘first Person’’) at any particular time, any other Person (the ‘‘second Person’’): (i) whose affairs and policies the first Person controls or has the power to control, whether by ownership of share capital, contract, the power to appoint or 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; ‘‘Talon’’ means a talon for further Coupons; ‘‘TARGET2’’ means the Trans-European Automated Real-Time Gross Settlement Express Transfer payment system which utilises a single shared platform and which was launched on 19 November 2007; ‘‘TARGET Settlement Day’’ means any day on which TARGET2 is open for the settlement of payments in euro; ‘‘Treaty’’ means the Treaty establishing the European Communities, as amended; ‘‘Zero Coupon Note’’ means a Note specified as such in the relevant Final Terms; (b) Interpretation: In these Conditions: (i) if the Notes are Zero Coupon Notes, references to Coupons and Couponholders are not applicable; (ii) if Talons are specified in the relevant Final Terms as being attached to the Notes at the time of issue, references to Coupons shall be deemed to include references to Talons; (iii) if Talons are not specified in the relevant Final Terms as being attached to the Notes at the time of issue, references to Talons are not applicable; (iv) any reference to principal shall be deemed to include the Redemption Amount, any additional amounts in respect of principal which may be payable under Condition 12 (Taxation), any premium payable in respect of a Note and any other amount in the nature of principal payable pursuant to these Conditions; (v) any reference to interest shall be deemed to include any additional amounts in respect of interest which may be payable under Condition 12 (Taxation) and any other amount in the nature of interest payable pursuant to these Conditions; (vi) references to Notes being ‘‘outstanding’’ shall be construed in accordance with the Agency Agreement; (vii) if an expression is stated in Condition 2(a) (Definitions) to have the meaning given in the relevant Final Terms, but the relevant Final Terms gives no such meaning or specifies that such expression is ‘‘not applicable’’ then such expression is not applicable to the Notes; and (viii) any reference to the Agency Agreement or the Deed of Guarantee shall be construed as a reference to the Agency Agreement or the Deed of Guarantee, as the case may be, as amended and/or supplemented up to and including the Issue Date of the Notes.

3. Form, Denomination, Title and Transfer (a) Bearer Notes: Bearer Notes are in the Specified Denomination(s) with Coupons and, if specified in the relevant Final Terms, Talons attached at the time of issue. In the case of a Series of Bearer Notes with more than one Specified Denomination, Bearer Notes of one Specified Denomination will not be exchangeable for Bearer Notes of another Specified Denomination.

43 c108406pu020 Proof 5: 14.6.13_22:22 B/L Revision: 0 Operator AllS (b) Title to Bearer Notes: Title to Bearer Notes and the Coupons will pass by delivery. In the case of Bearer Notes, ‘‘Holder’’ means the holder of such Bearer Note and ‘‘Noteholder’’ and ‘‘Couponholder’’ shall be construed accordingly.

(c) Registered Notes: Registered Notes are in the Specified Denomination(s), which may include a minimum denomination specified in the relevant Final Terms and higher integral multiples of a smaller amount specified in the relevant Final Terms.

(d) Title to Registered Notes: The Registrar will maintain the register in accordance with the provisions of the Agency Agreement. A certificate (each, a ‘‘Note Certificate’’) will be issued to each Holder of Registered Notes in respect of its registered holding. Each Note Certificate will be numbered serially with an identifying number which will be recorded in the Register. In the case of Registered Notes, ‘‘Holder’’ means the person in whose name such Registered Note is for the time being registered in the Register (or, in the case of a joint holding, the first named thereof) and ‘‘Noteholder’’ shall be construed accordingly.

(e) Ownership: The Holder of any Note or Coupon shall (except as otherwise required by law) be treated as its absolute owner for all purposes (whether or not it is overdue and regardless of any notice of ownership, trust or any other interest therein, any writing thereon or, in the case of Registered Notes, on the Note Certiﬁcate relating thereto (other than the endorsed form of transfer) or any notice of any previous loss or theft thereof) and no Person shall be liable for so treating such Holder. No person shall have any right to enforce any term or condition of any Note under the Contracts (Rights of Third Parties) Act 1999.

(f) Transfers of Registered Notes: Subject to paragraphs (i) (Closed periods) and (j) (Regulations concerning transfers and registration) below, a Registered Note may be transferred upon surrender of the relevant Note Certificate, with the endorsed form of transfer duly completed, at the Specified Office of the Registrar or any Transfer Agent, together with such evidence as the Registrar or (as the case may be) such Transfer Agent may reasonably require to prove the title of the transferor and the authority of the individuals who have executed the form of transfer; provided, however, that a Registered Note may not be transferred unless the principal amount of Registered Notes transferred and (where not all of the Registered Notes held by a Holder are being transferred) the principal amount of the balance of Registered Notes not transferred are Specified Denominations. Where not all the Registered Notes represented by the surrendered Note Certificate are the subject of the transfer, a new Note Certificate in respect of the balance of the Registered Notes will be issued to the transferor.

(g) Registration and delivery of Note Certificates: Within five business days of the surrender of a Note Certificate in accordance with paragraph (f) (Transfers of Registered Notes) above, the Registrar will register the transfer in question and deliver a new Note Certificate of a like principal amount to the Registered Notes transferred to each relevant Holder at its Specified Office or (as the case may be) the Specified Office of any Transfer Agent or (at the request and risk of any such relevant Holder) by uninsured first class mail (airmail if overseas) to the address specified for the purpose by such relevant Holder. In this paragraph, ‘‘business day’’ means a day on which commercial banks are open for general business (including dealings in foreign currencies) in the city where the Registrar or (as the case may be) the relevant Transfer Agent has its Specified Office.

(h) No charge: The transfer of a Registered Note will be effected without charge by or on behalf of the Issuer or the Registrar or any Transfer Agent but against such indemnity as the Registrar or (as the case may be) such Transfer Agent may require in respect of any tax or other duty of whatsoever nature which may be levied or imposed in connection with such transfer.

(i) Closed periods: Noteholders may not require transfers to be registered during the period of 15 days ending on the due date for any payment of principal or interest in respect of the Registered Notes.

(j) Regulations concerning transfers and registration: All transfers of Registered Notes and entries on the Register are subject to the detailed regulations concerning the transfer of Registered Notes scheduled to the Agency Agreement. The regulations may be changed by the Issuer with the prior written approval of the Registrar. A copy of the current regulations will be mailed (free of charge) by the Registrar to any Noteholder who requests in writing a copy of such regulations.

44 c108406pu020 Proof 5: 14.6.13_22:22 B/L Revision: 0 Operator AllS 4. Status and Guarantee (a) Status of the Notes The Notes constitute direct, unconditional, unsubordinated and (subject to the provisions of Condition 5 (Negative Pledge)) 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. (b) Guarantee of the Notes The obligations or the Guarantor under the Guarantee in relation to the Notes constitute direct, unconditional, unsubordinated and (subject to the provisions of Condition 5 (Negative Pledge)) unsecured obligations of the Guarantor 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 Guarantor from time to time outstanding.

5. Negative Pledge So long as any Note remains outstanding (as deﬁned in the Agency Agreement), the Issuer and the Guarantor shall not, and the Issuer and the Guarantor shall procure that none of their Material Subsidiaries will, create or permit to subsist any Security Interest other than a Permitted Security Interest upon the whole or any part of its present or future undertaking, assets or revenues (including any uncalled capital) to secure any Relevant Indebtedness or Guarantee of Relevant Indebtedness without (a) at the same time or prior thereto securing the Notes equally and rateably therewith or (b) providing such other security for the Notes as may be approved by an Extraordinary Resolution (as deﬁned in the Agency Agreement).

6. Fixed Rate Note Provisions (a) Application: This Condition 6 (Fixed Rate Note Provisions) is applicable to the Notes only if the Fixed Rate Note Provisions are specified in the relevant Final Terms as being applicable. (b) Accrual of interest: The Notes bear interest from the Interest Commencement Date at the Rate of Interest payable in arrears on each Interest Payment Date, subject as provided in Condition 10 (Payments – Bearer Notes). Each Note will cease to bear interest from the due date for final redemption unless, upon due presentation, payment of the Redemption Amount is improperly withheld or refused, in which case it will continue to bear interest in accordance with this Condition 6 (Fixed Rate Note Provisions) (as well after as before judgment) until whichever is the earlier of (i) the day on which all sums due in respect of such Note up to that day are received by or on behalf of the relevant Noteholder and (ii) the day which is seven days after the Fiscal Agent has notified the Noteholders that it has received all sums due in respect of the Notes up to such seventh day (except to the extent that there is any subsequent default in payment). (c) Fixed Coupon Amount: The amount of interest payable in respect of each Note for any Interest Period shall be the relevant Fixed Coupon Amount and, if the Notes are in more than one Specified Denomination, shall be the relevant Fixed Coupon Amount in respect of the relevant Specified Denomination. (d) Calculation of interest amount: The amount of interest payable in respect of each Note for any period for which a Fixed Coupon Amount is not specified shall be calculated by applying the Rate of Interest to the Calculation Amount, multiplying the product by the relevant Day Count Fraction, rounding the resulting figure to the nearest sub-unit of the Specified Currency (half a sub-unit being rounded upwards) and multiplying such rounded figure by a fraction equal to the Specified Denomination of such Note divided by the Calculation Amount. For this purpose a ‘‘sub-unit’’ means, in the case of any currency other than euro, the lowest amount of such currency that is available as legal tender in the country of such currency and, in the case of euro, means one cent.

7. Floating Rate Note Provisions (a) Application: This Condition 7 (Floating Rate Note Provisions) is applicable to the Notes only if the Floating Rate Note Provisions are speciﬁed in the relevant Final Terms as being applicable.

45 c108406pu020 Proof 5: 14.6.13_22:22 B/L Revision: 0 Operator AllS (b) Accrual of interest: The Notes bear interest from the Interest Commencement Date at the Rate of Interest payable in arrears on each Interest Payment Date, subject as provided in Condition 10 (Payments – Bearer Notes). Each Note will cease to bear interest from the due date for final redemption unless, upon due presentation, payment of the Redemption Amount is improperly withheld or refused, in which case it will continue to bear interest in accordance with this Condition (as well after as before judgment) until whichever is the earlier of (i) the day on which all sums due in respect of such Note up to that day are received by or on behalf of the relevant Noteholder and (ii) the day which is seven days after the Fiscal Agent has notified the Noteholders that it has received all sums due in respect of the Notes up to such seventh day (except to the extent that there is any subsequent default in payment). (c) Screen Rate Determination: If Screen Rate Determination is specified in the relevant Final Terms as the manner in which the Rate(s) of Interest is/are to be determined, the Rate of Interest applicable to the Notes for each Interest Period will be determined by the Calculation Agent on the following basis: (i) if the Reference Rate is a composite quotation or customarily supplied by one entity, the Calculation Agent will determine the Reference Rate which appears on the Relevant Screen Page as of the Relevant Time on the relevant Interest Determination Date; (ii) in any other case, the Calculation Agent will determine the arithmetic mean of the Reference Rates which appear on the Relevant Screen Page as of the Relevant Time on the relevant Interest Determination Date; (iii) if, in the case of (i) above, such rate does not appear on that page or, in the case of (ii) above, fewer than two such rates appear on that page or if, in either case, the Relevant Screen Page is unavailable, the Calculation Agent will: request the principal Relevant Financial Centre office of each of the Reference Banks to provide a quotation of the Reference Rate at approximately the Relevant Time on the Interest Determination Date to prime banks in the Relevant Financial Centre interbank market in an amount that is representative for a single transaction in that market at that time; and determine the arithmetic mean of such quotations; and (iv) if fewer than two such quotations are provided as requested, the Calculation Agent will determine the arithmetic mean of the rates (being the nearest to the Reference Rate, as determined by the Calculation Agent) quoted by major banks in the Principal Financial Centre of the Specified Currency, selected by the Calculation Agent, at approximately 11.00 a.m. (local time in the Principal Financial Centre of the Specified Currency) on the first day of the relevant Interest Period for loans in the Specified Currency to leading European banks for a period equal to the relevant Interest Period and in an amount that is representative for a single transaction in that market at that time, and the Rate of Interest for such Interest Period shall be the sum of the Margin and the rate or (as the case may be) the arithmetic mean so determined; provided, however, that if the Calculation Agent is unable to determine a rate or (as the case may be) an arithmetic mean in accordance with the above provisions in relation to any Interest Period, the Rate of Interest applicable to the Notes during such Interest Period will be the sum of the Margin and the rate or (as the case may be) the arithmetic mean last determined in relation to the Notes in respect of a preceding Interest Period. (d) ISDA Determination: If ISDA Determination is specified in the relevant Final Terms as the manner in which the Rate(s) of Interest is/are to be determined, the Rate of Interest applicable to the Notes for each Interest Period will be the sum of the Margin and the relevant ISDA Rate where ‘‘ISDA Rate’’ in relation to any Interest Period means a rate equal to the Floating Rate (as defined in the ISDA Definitions) that would be determined by the Calculation Agent under an interest rate swap transaction if the Calculation Agent were acting as Calculation Agent for that interest rate swap transaction under the terms of an agreement incorporating the ISDA Definitions and under which: (i) the Floating Rate Option (as defined in the ISDA Definitions) is as specified in the relevant Final Terms; (ii) the Designated Maturity (as defined in the ISDA Definitions) is a period specified in the relevant Final Terms; and

46 c108406pu020 Proof 5: 14.6.13_22:22 B/L Revision: 0 Operator AllS (iii) the relevant Reset Date (as defined in the ISDA Definitions) is the day specified in the relevant Final Terms. (e) Maximum or Minimum Rate of Interest: If any Maximum Rate of Interest or Minimum Rate of Interest is specified in the relevant Final Terms, then the Rate of Interest shall in no event be greater than the maximum or be less than the minimum so specified. (f) Calculation of Interest Amount: The Calculation Agent will, as soon as practicable after the time at which the Rate of Interest is to be determined in relation to each Interest Period, calculate the Interest Amount payable in respect of each Note for such Interest Period. The Interest Amount will be calculated by applying the Rate of Interest for such Interest Period to the Calculation Amount, multiplying the product by the relevant Day Count Fraction, rounding the resulting figure to the nearest sub-unit of the Specified Currency (half a sub-unit being rounded upwards) and multiplying such rounded figure by a fraction equal to the Specified Denomination of the relevant Note divided by the Calculation Amount. For this purpose a ‘‘sub-unit’’ means, in the case of any currency other than euro, the lowest amount of such currency that is available as legal tender in the country of such currency and, in the case of euro, means one cent. (g) Calculation of other amounts: If the relevant Final Terms specifies that any other amount is to be calculated by the Calculation Agent, the Calculation Agent will, as soon as practicable after the time or times at which any such amount is to be determined, calculate the relevant amount. The relevant amount will be calculated by the Calculation Agent in the manner specified in the relevant Final Terms. (h) Publication: The Calculation Agent will cause each Rate of Interest and Interest Amount determined by it, together with the relevant Interest Payment Date, and any other amount(s) required to be determined by it together with any relevant payment date(s) to be notified to the Paying Agents and in the case of each competent authority, stock exchange and/or quotation system (if any) by which the Notes have then been admitted to listing, trading and/or quotation, upon request of the Issuer, as soon as practicable after such determination but (in the case of each Rate of Interest, Interest Amount and Interest Payment Date) in any event not later than the first day of the relevant Interest Period. Notice thereof shall also promptly be given to the Noteholders. The Calculation Agent will be entitled to recalculate any Interest Amount (on the basis of the foregoing provisions) without notice in the event of an extension or shortening of the relevant Interest Period. If the Calculation Amount is less than the minimum Specified Denomination the Calculation Agent shall not be obliged to publish each Interest Amount but instead may publish only the Calculation Amount and the Interest Amount in respect of a Note having the minimum Specified Denomination. (i) Notifications etc: All notifications, opinions, determinations, certificates, calculations, quotations and decisions given, expressed, made or obtained for the purposes of this Condition by the Calculation Agent will (in the absence of manifest error) be binding on the Issuer, the Guarantor, the Paying Agents, the Noteholders and the Couponholders and (subject as aforesaid) no liability to any such Person will attach to the Calculation Agent in connection with the exercise or non-exercise by it of its powers, duties and discretions for such purposes.

8. Zero Coupon Note Provisions (a) Application: This Condition 8 (Zero Coupon Note Provisions) is applicable to the Notes only if the Zero Coupon Note Provisions are speciﬁed in the relevant Final Terms as being applicable. (b) Late payment on Zero Coupon Notes: If the Redemption Amount payable in respect of any Zero Coupon Note is improperly withheld or refused, the Redemption Amount shall thereafter be an amount equal to the sum of: (i) the Reference Price; and (ii) the product of the Accrual Yield (compounded annually) being applied to the Reference Price on the basis of the relevant Day Count Fraction from (and including) the Issue Date to (but excluding) whichever is the earlier of (i) the day on which all sums due in respect of such Note up to that day are received by or on behalf of the relevant Noteholder and (ii) the day which is seven days after the Fiscal Agent has notiﬁed the Noteholders that it has received all sums due in respect of the Notes up to such seventh day (except to the extent that there is any subsequent default in payment).

47 c108406pu020 Proof 5: 14.6.13_22:22 B/L Revision: 0 Operator AllS 9. Redemption and Purchase (a) Scheduled redemption: Unless previously redeemed, or purchased and cancelled, the Notes will be redeemed at their Final Redemption Amount on the Maturity Date, subject as provided in Condition 10 (Payments – Bearer Notes). (b) Redemption for tax reasons: The Notes may be redeemed at the option of the Issuer in whole, but not in part: (i) at any time (if the Floating Rate Note Provisions are specified in the relevant Final Terms as being not applicable); or (ii) on any Interest Payment Date (if the Floating Rate Note Provisions are specified in the relevant Final Terms as being applicable), on giving not less than 30 nor more than 60 days’ notice to the Noteholders (which notice shall be irrevocable), at their Early Redemption Amount (Tax), together with interest accrued (if any) to the date fixed for redemption, if: (A) (1) the Issuer has or will become obliged to pay additional amounts as provided or referred to in Condition 12 (Taxation) as a result of any change in, or amendment to, the laws or regulations of the Cayman Islands or any political subdivision or any authority thereof or therein having power to tax, or any change in the application or official interpretation of such laws or regulations (including a holding by a court of competent jurisdiction), which change or amendment becomes effective (or, in the case of application or official interpretation, is announced) on or after the date of issue of the first Tranche of the Notes and (2) such obligation cannot be avoided by the Issuer taking reasonable measures available to it; or (B) (2) the Guarantor has or (if a demand was made under the Guarantee of the Notes) would become obliged to pay additional amounts as provided or referred to in Condition 12 (Taxation) or in the Deed of Guarantee or the Guarantor has or will become obliged to make any such withholding or deduction as is referred to in Condition 12 (Taxation) or in the Deed of Guarantee from any amount paid by it to the Issuer in order to enable the Issuer to make a payment of principal or interest in respect of the Notes, in either case as a result of any change in, or amendment to, the laws or regulations of the State of Qatar or any political subdivision or any authority thereof or therein having power to tax, or any change in the application or official interpretation of such laws or regulations (including a holding by a court of competent jurisdiction), which change or amendment becomes effective on or after the date of issue of the first Tranche of the Notes, and (2) such obligation cannot be avoided by the Guarantor taking reasonable measures available to it, provided, however, that no such notice of redemption shall be given earlier than: (1) where the Notes may be redeemed at any time, 90 days prior to the earliest date on which the Issuer or the Guarantor would be obliged to pay such additional amounts or the Guarantor would be obliged to make such withholding or deduction if a payment in respect of the Notes were then due or (as the case may be) a demand under the Guarantee of the Notes were then made; or (2) where the Notes may be redeemed only on an Interest Payment Date, 60 days prior to the Interest Payment Date occurring immediately before the earliest date on which the Issuer or the Guarantor would be obliged to pay such additional amounts or the Guarantor would be obliged to make such withholding or deduction if a payment in respect of the Notes were then due or (as the case may be) a demand under the Guarantee of the Notes were then made. Prior to the publication of any notice of redemption pursuant to this paragraph, the Issuer shall deliver or procure that there is delivered to the Fiscal Agent to make available at its Specified Office to the Noteholders (1) a certificate signed by two directors of the Issuer stating that the Issuer is entitled to effect such redemption and setting forth a statement of facts showing that the conditions

48 c108406pu020 Proof 5: 14.6.13_22:22 B/L Revision: 0 Operator AllS precedent to the right of the Issuer so to redeem have occurred and (2) an opinion of independent legal or tax 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 or (as the case may be) the Guarantor has or will become obliged to make such withholding or deduction as a result of such change or amendment. Upon the expiry of any such notice as is referred to in this Condition 9(b) (Redemption for tax reasons), the Issuer shall be bound to redeem the Notes in accordance with this Condition 9(b) (Redemption for tax reasons). (c) Redemption at the option of the Issuer: If the Call Option is specified as being applicable in the relevant Final Terms as being applicable, the Notes may be redeemed at the option of the Issuer in whole or, if so specified in the relevant Final Terms, in part on any Optional Redemption Date (Call) at the relevant Optional Redemption Amount (Call) on the Issuer giving not less than 30 nor more than 60 days’ notice to the Noteholders (which notice shall be irrevocable and shall oblige the Issuer to redeem the Notes or, as the case may be, the Notes specified in such notice on the relevant Optional Redemption Date (Call) at the Optional Redemption Amount (Call) plus accrued interest (if any) to such date). (d) Partial redemption: If the Notes are to be redeemed in part only on any date in accordance with Condition 9(c) (Redemption at the option of the Issuer), in the case of Bearer Notes, the Notes to be redeemed shall be selected by the drawing of lots in such place as the Fiscal Agent approves and in such manner as the Fiscal Agent considers appropriate, subject to compliance with applicable law, the rules of each competent authority, stock exchange and/or quotation system (if any) by which the Notes have then been admitted to listing, trading and/or quotation and the notice to Noteholders referred to in Condition 9(c) (Redemption at the option of the Issuer) shall specify the serial numbers of the Notes so to be redeemed, and, in the case of Registered Notes, each Note shall be redeemed in part in the proportion which the aggregate principal amount of the outstanding Notes to be redeemed on the relevant Optional Redemption Date (Call) bears to the aggregate principal amount of outstanding Notes on such date. If any Maximum Redemption Amount or Minimum Redemption Amount is specified in the relevant Final Terms, then the Optional Redemption Amount (Call) shall in no event be greater than the maximum or be less than the minimum so specified. (e) Redemption at the option of Noteholders: If the Put Option is specified as being applicable in the relevant Final Terms as being applicable, the Issuer shall, at the option of the Holder of any Note redeem such Note on the Optional Redemption Date (Put) specified in the relevant Put Option Notice at the relevant Optional Redemption Amount (Put) together with interest (if any) accrued to such date. In order to exercise the option contained in this Condition 9(e) (Redemption at the option of Noteholders), the Holder of a Note must, not less than 30 nor more than 60 days before the relevant Optional Redemption Date (Put), deposit with any Paying Agent such Note together with all unmatured Coupons relating thereto and a duly completed Put Option Notice in the form obtainable from any Paying Agent. The Paying Agent with which a Note is so deposited shall deliver a duly completed Put Option Receipt to the depositing Noteholder. No Note, once deposited with a duly completed Put Option Notice in accordance with this Condition 9(e) (Redemption at the option of Noteholders), may be withdrawn; provided, however, that if, prior to the relevant Optional Redemption Date (Put), any such Note becomes immediately due and payable or, upon due presentation of any such Note on the relevant Optional Redemption Date (Put), payment of the redemption moneys is improperly withheld or refused, the relevant Paying Agent shall mail notification thereof to the depositing Noteholder at such address as may have been given by such Noteholder in the relevant Put Option Notice and shall hold such Note at its Specified Office for collection by the depositing Noteholder against surrender of the relevant Put Option Receipt. For so long as any outstanding Note is held by a Paying Agent in accordance with this Condition 9(e) (Redemption at the option of Noteholders), the depositor of such Note and not such Paying Agent shall be deemed to be the Holder of such Note for all purposes. (f) Redemption for Change of Ownership (Change of Ownership Put): If a Change of Ownership Put is specified in the relevant Final Terms, and a Change of Ownership Event occurs, upon the holder of any Note giving to the Issuer in accordance with Condition 19 (Notices) not less than 15 nor more than 30 days’ notice the Issuer will, upon the expiry of such notice, redeem such Note on the Change of Ownership Put Date at an amount equal to 100 per cent. of the

49 c108406pu020 Proof 5: 14.6.13_22:22 B/L Revision: 0 Operator AllS principal amount of such Note together, if appropriate, with interest accrued to (but excluding) the Change of Ownership Put Date. Registered Notes may be redeemed under this Condition 9(f) (Redemption for Change of Ownership (Change of Ownership Put)) in any multiple of their lowest Specified Denomination. Immediately upon the Issuer or the Guarantor becoming aware that a Change of Ownership Event has occurred, the Issuer shall give notice to the Noteholders in accordance with Condition 19 (Notices) specifying the nature of the Change of Ownership Event. 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 Put Notice in which the holder must specify a bank account (or, if payment is required to be made by cheque, an address) 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 the provisions of Condition 3(f) (Transfers of Registered Notes). If this Note is in definitive bearer form, the Put Notice must be 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 Fiscal Agent of such exercise in accordance with the standard procedures of Euroclear or, as applicable, Clearstream, Luxembourg (which may include notice being given on his instruction by Euroclear or Clearstream, Luxembourg or any depositary for them to the Fiscal Agent by electronic means) in a form acceptable to Euroclear or Clearstream, Luxembourg (as applicable) 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 Fiscal Agent for notation accordingly. Any Put Notice or other notice given in accordance with the standard procedures of Euroclear or Clearstream, Luxembourg given by a holder of any Note pursuant to this Condition 9(f) (Redemption for Change of Ownership (Change of Ownership Put)) 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 its option, may elect by notice to the Issuer to withdraw the notice given pursuant to this Condition 9(f) (Redemption for Change of Ownership (Change of Ownership Put)) and instead to declare such Note forthwith due and payable pursuant to Condition 13 (Events of Default). In this Condition, the following expressions shall have the following meanings: (i) ‘‘Change of Ownership Event’’ means that the State of Qatar either ceases to have direct or indirect ownership of at least 30 per cent. of the issued share capital of the Guarantor or ceases to have direct or indirect ownership of such number of shares in the capital of the Guarantor as carry at least 30 per cent. of the voting rights normally exercisable at a general assembly (or general meeting) of the Guarantor; and (ii) ‘‘Change of Ownership Put Date’’ means the first Business Day after the expiry of the notice given by the holder of the Note pursuant to this Condition 9(f) (Redemption for Change of Ownership (Change of Ownership Put)). (g) No other redemption: The Issuer shall not be entitled to redeem the Notes otherwise than as provided in paragraphs (a) to (e) above. (h) Early redemption of Zero Coupon Notes: Unless otherwise specified in the relevant Final Terms, the Redemption Amount payable on redemption of a Zero Coupon Note at any time before the Maturity Date shall be an amount equal to the sum of: (i) the Reference Price; and (ii) the product of the Accrual Yield (compounded annually) being applied to the Reference Price from (and including) the Issue Date to (but excluding) the date fixed for redemption or (as the case may be) the date upon which the Note becomes due and payable.

50 c108406pu020 Proof 5: 14.6.13_22:22 B/L Revision: 0 Operator AllS Where such calculation is to be made for a period which is not a whole number of years, the calculation in respect of the period of less than a full year shall be made on the basis of such Day Count Fraction as may be speciﬁed in the Final Terms for the purposes of this Condition 9(h) (Early redemption of Zero Coupon Notes) or, if none is so speciﬁed, a Day Count Fraction of 30E/360. (i) Purchase: The Issuer, the Guarantor or any of their respective Subsidiaries may at any time purchase Notes in the open market or otherwise and at any price, and such Notes may be held, reissued, resold or, at the option of the Issuer, the Guarantor or any of their respective Subsidiaries, as the case may be, surrendered to any Paying Agent or the Registrar for cancellation. (j) Cancellation: All Notes so redeemed or purchased by the Issuer, the Guarantor or any of their respective Subsidiaries and any unmatured Coupons attached to or surrendered with them shall be cancelled and may not be reissued or resold.

10. Payments – Bearer Notes This Condition 10 (Payments – Bearer Notes) is only applicable to Bearer Notes. (a) Principal: Payments of principal shall be made only against presentation and (provided that payment is made in full) surrender of Bearer Notes at the Specified Office of any Paying Agent outside the United States of America (which expression, as used herein, means the United States of America and its dependent territories) by cheque drawn in the currency in which the payment is due on, or by transfer to an account denominated in that currency (or, if that currency is euro, any other account to which euro may be credited or transferred) and maintained by the payee with, a bank in the Principal Financial Centre of that currency. (b) Interest: Payments of interest shall, subject to paragraph (h) below, be made only against presentation and (provided that payment is made in full) surrender of the appropriate Coupons at the Specified Office of any Paying Agent outside the United States in the manner described in paragraph (a) above. (c) Payments in New York City: Payments of principal or interest may be made at the Specified Office of a Paying Agent in New York City if (i) the Issuer has appointed Paying Agents located outside the United States and its possessions with the reasonable expectation that such Paying Agents will be able to make payment of the full amount of the interest on the Notes in the currency in which the payment is due when due, (ii) payment of the full amount of such interest at the offices of all such Paying Agents is illegal or effectively precluded by exchange controls or other similar restrictions and (iii) payment is permitted by applicable United States law. (d) Payments subject to fiscal laws: All payments in respect of the Bearer Notes are subject in all cases to (i) any applicable fiscal or other laws, regulations and directives in the place of payment, but without prejudice to the provisions of Condition 12 (Taxation), and (ii) any withholding or deduction required pursuant to an agreement described in Section 1471(b) of the U.S. Internal Revenue Code of 1986, as amended (the ‘‘Code’’) or otherwise imposed pursuant to Sections 1471 through 1474 of the Code, any regulations or agreements thereunder, official interpretations thereof, or law implementing an intergovernmental approach thereto. No commissions or expenses shall be charged to the Noteholders or Couponholders in respect of such payments. (e) Deductions for unmatured Coupons: If the relevant Final Terms specifies that the Fixed Rate Note Provisions are applicable and a Bearer Note is presented without all unmatured Coupons relating thereto: (i) if the aggregate amount of the missing Coupons is less than or equal to the amount of principal due for payment, a sum equal to the aggregate amount of the missing Coupons will be deducted from the amount of principal due for payment; provided, however, that if the gross amount available for payment is less than the amount of principal due for payment, the sum deducted will be that proportion of the aggregate amount of such missing Coupons which the gross amount actually available for payment bears to the amount of principal due for payment;

51 c108406pu020 Proof 5: 14.6.13_22:22 B/L Revision: 0 Operator AllS (ii) if the aggregate amount of the missing Coupons is greater than the amount of principal due for payment: (A) so many of such missing Coupons shall become void (in inverse order of maturity) as will result in the aggregate amount of the remainder of such missing Coupons (the ‘‘Relevant Coupons’’) being equal to the amount of principal due for payment; provided, however, that where this sub-paragraph would otherwise require a fraction of a missing Coupon to become void, such missing Coupon shall become void in its entirety; and (B) a sum equal to the aggregate amount of the Relevant Coupons (or, if less, the amount of principal due for payment) will be deducted from the amount of principal due for payment; provided, however, that, if the gross amount available for payment is less than the amount of principal due for payment, the sum deducted will be that proportion of the aggregate amount of the Relevant Coupons (or, as the case may be, the amount of principal due for payment) which the gross amount actually available for payment bears to the amount of principal due for payment. Each sum of principal so deducted shall be paid in the manner provided in paragraph (a) above against presentation and (provided that payment is made in full) surrender of the relevant missing Coupons. (f) Unmatured Coupons void: If the relevant Final Terms specifies that this Condition 10(f) (Unmatured Coupons void) is applicable or that the Floating Rate Note Provisions are applicable, on the due date for final redemption of any Note or early redemption in whole of such Note pursuant to Condition 9(b) (Redemption for tax reasons), Condition 9(e) (Redemption at the option of Noteholders), Condition 9(c) (Redemption at the option of the Issuer)or Condition 13 (Events of Default), all unmatured Coupons relating thereto (whether or not still attached) shall become void and no payment will be made in respect thereof. (g) Payments on business days: If the due date for payment of any amount in respect of any Bearer Note or Coupon is not a Payment Business Day in the place of presentation, the Holder shall not be entitled to payment in such place of the amount due until the next succeeding Payment Business Day in such place and shall not be entitled to any further interest or other payment in respect of any such delay. (h) Payments other than in respect of matured Coupons: Payments of interest other than in respect of matured Coupons shall be made only against presentation of the relevant Bearer Notes at the Specified Office of any Paying Agent outside the United States (or in New York City if permitted by paragraph (c) above). (i) Partial payments: If a Paying Agent makes a partial payment in respect of any Bearer Note or Coupon presented to it for payment, such Paying Agent will endorse thereon a statement indicating the amount and date of such payment. (j) Exchange of Talons: On or after the maturity date of the final Coupon which is (or was at the time of issue) part of a Coupon Sheet relating to the Bearer Notes, the Talon forming part of such Coupon Sheet may be exchanged at the Specified Office of the Fiscal Agent for a further Coupon Sheet (including, if appropriate, a further Talon but excluding any Coupons in respect of which claims have already become void pursuant to Condition 14 (Prescription). Upon the due date for redemption of any Bearer Note, any unexchanged Talon relating to such Note shall become void and no Coupon will be delivered in respect of such Talon.

11. Payments – Registered Notes This Condition 11 (Payments – Registered Notes) is only applicable to Registered Notes. (a) Principal: Payments of principal shall be made by cheque drawn in the currency in which the payment is due drawn on, or, upon application by a Holder of a Registered Note to the Specified Office of the Fiscal Agent not later than the fifteenth day before the due date for any such payment, by transfer to an account denominated in that currency (or, if that currency is euro, any other account to which euro may be credited or transferred) and maintained by the payee with, a bank in the Principal Financial Centre of that currency (in the case of a sterling cheque, a town clearing branch of a bank in the City of London) and (in the case of redemption) upon surrender (or, in the case of part payment only, endorsement) of the relevant Note Certificates at the Specified Office of any Paying Agent.

52 c108406pu020 Proof 5: 14.6.13_22:22 B/L Revision: 0 Operator AllS (b) Interest: Payments of interest shall be made by cheque drawn in the currency in which the payment is due drawn on, or, upon application by a Holder of a Registered Note to the Specified Office of the Fiscal Agent not later than the fifteenth day before the due date for any such payment, by transfer to an account denominated in that currency (or, if that currency is euro, any other account to which euro may be credited or transferred) and maintained by the payee with, a bank in the Principal Financial Centre of that currency (in the case of a sterling cheque, a town clearing branch of a bank in the City of London) and (in the case of interest payable on redemption) upon surrender (or, in the case of part payment only, endorsement) of the relevant Note Certificates at the Specified Office of any Paying Agent.

(c) Payments subject to fiscal laws: All payments in respect of the Registered Notes are subject in all cases to (i) any applicable fiscal or other laws, regulations and directives in the place of payment, but without prejudice to the provisions of Condition 12 (Taxation), and (ii) 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, official interpretations thereof, or any law implementing an intergovernmental approach thereto. No commissions or expenses shall be charged to the Noteholders in respect of such payments.

(d) Payments on business days: Where payment is to be made by transfer to an account, payment instructions (for value the due date, or, if the due date is not Payment Business Day, for value the next succeeding Payment Business Day) will be initiated and, where payment is to be made by cheque, the cheque will be mailed (i) (in the case of payments of principal and interest payable on redemption) on the later of the due date for payment and the day on which the relevant Note Certificate is surrendered (or, in the case of part payment only, endorsed) at the Specified Office of a Paying Agent and (ii) (in the case of payments of interest payable other than on redemption) on the due date for payment. A Holder of a Registered Note shall not be entitled to any interest or other payment in respect of any delay in payment resulting from (A) the due date for a payment not being a Payment Business Day or (B) a cheque mailed in accordance with this Condition 11 (Payments – Registered Notes) arriving after the due date for payment or being lost in the mail.

(e) Partial payments: If a Paying Agent makes a partial payment in respect of any Registered Note, the Issuer shall procure that the amount and date of such payment are noted on the Register and, in the case of partial payment upon presentation of a Note Certiﬁcate, that a statement indicating the amount and the date of such payment is endorsed on the relevant Note Certiﬁcate.

(f) Record date: Each payment in respect of a Registered Note will be made to the person shown as the Holder in the Register at the opening of business in the place of the Registrar’s Specified Office on the fifteenth day before the due date for such payment (the ‘‘Record Date’’). Where payment in respect of a Registered Note is to be made by cheque, the cheque will be mailed to the address shown as the address of the Holder in the Register at the opening of business on the relevant Record Date.

12. Taxation (a) Gross up: All payments of principal and interest in respect of the Notes and the Coupons by the Issuer and all payments under the Guarantee by the Guarantor shall be made free and clear of, and without withholding or deduction for or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature imposed, levied, collected, withheld or assessed by or on behalf of the Cayman Islands or the State of Qatar or any political subdivision therein or any authority therein or thereof having power to tax, unless the withholding or deduction of such taxes, duties, assessments, or governmental charges is required by law. In that event, the Issuer or (as the case may be) the Guarantor shall pay such additional amounts as will result in receipt by the Noteholders and the Couponholders after such withholding or deduction of such amounts as would have been received by them had no such withholding or deduction been required, except that no such additional amounts shall be payable in respect of any Note or Coupon:

53 c108406pu020 Proof 5: 14.6.13_22:22 B/L Revision: 0 Operator AllS (i) held by or on behalf of a Holder which is liable to such taxes, duties, assessments or governmental charges in respect of such Note or Coupon by reason of its having some connection with the jurisdiction by which such taxes, duties, assessments or charges have been imposed, levied, collected, withheld or assessed other than the mere holding of the Note or Coupon; or (ii) where such withholding or deduction is imposed on a payment to an individual and is required to be made pursuant to European Council Directive 2003/48/EC on the taxation of savings income or any law implementing or complying with, or introduced in order to conform to, such Directive; or (iii) held by or on behalf of a Holder who would have been able to avoid such withholding or deduction by presenting the relevant Note or Coupon to another Paying Agent in a Member State of the EU; or (iv) where the relevant Note or Coupon or Note Certiﬁcate is presented or surrendered for payment more than 30 days after the Relevant Date except to the extent that the Holder of such Note or Coupon would have been entitled to such additional amounts on presenting or surrendering such Note or Coupon or Note Certiﬁcate for payment on the last day of such period of 30 days. (b) Taxing jurisdiction: If the Issuer or the Guarantor becomes subject at any time to any taxing jurisdiction other than the Cayman Islands or the State of Qatar respectively, references in these Conditions to the Cayman Islands or the State of Qatar shall be construed as references to the Cayman Islands or (as the case may be) the State of Qatar and/or such other jurisdiction.

13. Events of Default If any one or more of the following events occurs (each an ‘‘Event of Default’’): (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 at least seven days in the case of principal or at least 14 days in the case of interest; or (b) the Issuer or the Guarantor fails to perform or observe any of its other obligations under or in respect of the Notes or the Guarantee of the Notes 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 and the Guarantor of written notice requiring the same to be remedied; or (c) (i) any Indebtedness of the Issuer, the Guarantor or any of their respective Material 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 (or becomes capable of being declared) prior to its stated maturity by reason of default (however described) or (iii) the Issuer, the Guarantor or any of their Material Subsidiaries fails to pay when due any amount payable by it under any Guarantee of any Indebtedness, provided that the amount of Indebtedness referred to in (i) and/ or (ii) above and/or the amount payable under any Guarantee referred to in (iii) above individually or in the aggregate exceeds U.S.$10,000,000 (or its equivalent in any other currency or currencies); or (d) one or more judgments or orders for the payment of an aggregate amount in excess of U.S.$10,000,000 (or its equivalent in any other currency or currencies) is rendered against the Issuer, the Guarantor or any of their respective 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, liquidation or dissolution of the Issuer, the Guarantor or any of their respective Material Subsidiaries, save in connection with a Permitted Reorganisation; or (f) (i) the Issuer, the Guarantor or any of their respective Material Subsidiaries ceases or threatens to cease to carry on the whole or a substantial part of its business, save in connection with a Permitted Reorganisation, or the Issuer, the Guarantor or (ii) any of their respective Material Subsidiaries stops or threatens to stop payment of, or is unable to, or admits inability to, pay,

54 c108406pu020 Proof 5: 14.6.13_22:22 B/L Revision: 0 Operator AllS 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 of their respective Material Subsidiaries 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 of their respective Material Subsidiaries or, as the case may be, in relation to the whole or a substantial part of the undertaking, assets or revenues of any of them, or an encumbrancer takes possession of the whole or a substantial part of the undertaking, assets or revenues 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 a substantial part of the undertaking or assets of any of them and (ii) in any case (A) (other than the appointment of an administrator) is not discharged within 30 days and (B) such proceedings are not being actively contested in good faith; or (h) the Issuer, the Guarantor or any of their respective Material Subsidiaries (i) declares a moratorium in respect of any of its Indebtedness or any Guarantee of any Indebtedness given by it, (ii) initiates or consents to judicial proceedings relating to itself under any applicable liquidation, insolvency, composition, reorganisation or other similar laws (including the obtaining of a moratorium), (iii) 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 (iv) any meeting is convened to consider a proposal for an arrangement or composition with its creditors generally (or any class of its creditors) save, in all cases, in connection with a Permitted Reorganisation; or (i) any event occurs which under the laws of the Cayman Islands or the State of Qatar or any other relevant jurisdiction has an analogous effect to any of the events referred to in paragraphs (e) to (h) above; or (j) at any time it is or becomes unlawful for the Issuer or the Guarantor to perform or comply with any or all of its obligations under or in respect of the Notes, 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 (k) if the Issuer ceases to be a Subsidiary wholly-owned and controlled, directly or indirectly, by the Guarantor, then any Noteholder may give written notice to the Issuer and the Guarantor at the Specified Office of the Fiscal Agent, effective upon the date of receipt thereof by the Fiscal Agent, that such Note is due and payable, whereupon the same shall become forthwith due and payable at its principal amount, together with accrued interest (if any) to the date of repayment without presentation, demand, protest or other notice of any kind.

14. Prescription Claims for principal in respect of Bearer Notes shall become void unless the relevant Bearer Notes are presented for payment within ten years of the appropriate Relevant Date. Claims for interest in respect of Bearer Notes shall become void unless the relevant Coupons are presented for payment within ﬁve years of the appropriate Relevant Date. Claims for principal and interest on redemption in respect of Registered Notes shall become void unless the relevant Note Certiﬁcates are surrendered for payment within ten years of the appropriate Relevant Date.

15. Replacement of Notes and Coupons If any Note, Note Certificate or Coupon is lost, stolen, mutilated, defaced or destroyed, it may be replaced at the Specified Office of the Fiscal Agent, in the case of Bearer Notes, or the Registrar, in the case of Registered Notes (and, if the Notes are then admitted to listing, trading and/or quotation by any competent authority, stock exchange and/or quotation system which requires the appointment of a Paying Agent or Transfer Agent in any particular place, the Paying Agent or Transfer Agent having its Specified Office in the place required by such competent authority, stock exchange and/or quotation system), subject to all applicable laws and competent authority, stock exchange and/or quotation system requirements, upon payment by the claimant of the expenses incurred in connection with such replacement and on such terms as

55 c108406pu020 Proof 5: 14.6.13_22:22 B/L Revision: 0 Operator AllS to evidence, security, indemnity and otherwise as the Issuer may reasonably require. Mutilated or defaced Notes, Note Certiﬁcates or Coupons must be surrendered before replacements will be issued.

16. Agents In acting under the Agency Agreement and in connection with the Notes and the Coupons, the Agents act solely as agents of the Issuer and the Guarantor and do not assume any obligations towards or relationship of agency or trust for or with any of the Noteholders or Couponholders. The initial Agents and their initial Specified Offices are listed below. The initial Calculation Agent (if any) is specified in the relevant Final Terms. If any additional Agents are appointed in connection with any services, the names of such Agents will be specified in Part B of the relevant Final Terms. The Issuer and the Guarantor reserve the right at any time to vary or terminate the appointment of any Agent and to appoint a successor fiscal agent or registrar or Calculation Agent and additional or successor paying agents; provided, however, that: (a) the Issuer and the Guarantor shall at all times maintain a fiscal agent and a registrar; and (b) the Issuer and the Guarantor shall at all times maintain a paying agent in an EU member state that will not be obliged to withhold or deduct tax pursuant to European Council Directive 2003/48/EC; and (c) if a Calculation Agent is specified in the relevant Final Terms, the Issuer and the Guarantor shall at all times maintain a Calculation Agent; and (d) if and for so long as the Notes are admitted to listing, trading and/or quotation by any competent authority, stock exchange and/or quotation system which requires the appointment of a Paying Agent and/or a Transfer Agent in any particular place, the Issuer and the Guarantor shall maintain a Paying Agent and/or a Transfer Agent having its Specified Office in the place required by such competent authority, stock exchange and/or quotation system. Notice of any change in any of the Agents or in their Specified Offices shall promptly be given to the Noteholders.

17. Meetings of Noteholders; Modification (a) Meetings of Noteholders: The Agency Agreement contains provisions for convening meetings of Noteholders to consider matters relating to the Notes, including the modification of any provision of these Conditions. Any such modification may be made if sanctioned by an Extraordinary Resolution. Such a meeting may be convened by the Issuer and the Guarantor (acting together) and shall be convened by them upon the request in writing of Noteholders holding not less than one-tenth of the aggregate principal amount of the outstanding Notes. The quorum at any meeting convened to vote on an Extraordinary Resolution will be one or more Persons holding or representing one more than half of the aggregate principal amount of the outstanding Notes or, at any adjourned meeting, one or more Persons being or representing Noteholders whatever the principal amount of the Notes held or represented; provided, however, that Reserved Matters may only be sanctioned by an Extraordinary Resolution passed at a meeting of Noteholders at which one or more Persons holding or representing not less than two-thirds or, at any adjourned meeting, one-third of the aggregate principal amount of the outstanding Notes form a quorum. An Extraordinary Resolution may also be passed by consent being given by way of electronic consents through the relevant clearing system(s) by or on behalf of the holders of not less than two-thirds of the aggregate principal amount of the outstanding Notes. Any Extraordinary Resolution duly passed at any such meeting or by way of electronic consent through the relevant clearing system(s) shall be binding on all the Noteholders and Couponholders (whether or not present at the relevant meeting or having consented through the clearing system(s)). In addition, a resolution in writing signed by or on behalf of the Holders of not less than ninety per cent. in principal amount of the Notes who for the time being are entitled to receive notice of a meeting of Noteholders will take effect as if it were an Extraordinary Resolution. 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.

56 c108406pu020 Proof 5: 14.6.13_22:22 B/L Revision: 0 Operator AllS (b) Modiﬁcation: The Notes, these Conditions, the Deed of Guarantee and the Deed of Covenant may be amended without the consent of the Noteholders or the Couponholders to correct a manifest error. In addition, the parties to the Agency Agreement may agree to modify any provision thereof, but the Issuer and the Guarantor shall not agree, without the consent of the Noteholders, to any such modiﬁcation unless it is of a formal, minor or technical nature, it is made to correct a manifest error or it is, in the opinion of such parties, not materially prejudicial to the interests of the Noteholders.

18. Further Issues The Issuer may from time to time, without the consent of the Noteholders or the Couponholders, create and issue further notes having the same terms and conditions as the Notes in all respects (or in all respects except for the ﬁrst payment of interest) so as to form a single series with the Notes.

19. Notices (a) Bearer Notes: Notices to the Holders of Bearer Notes shall be valid if published in a leading English language daily newspaper published in London (which is expected to be the Financial Times) or Dublin or, if such publication is not practicable, in a leading English language daily newspaper having general circulation in Europe. Any such notice shall be deemed to have been given on the date of first publication (or if required to be published in more than one newspaper, on the first date on which publication shall have been made in all the required newspapers). Couponholders shall be deemed for all purposes to have notice of the contents of any notice given to the Holders of Bearer Notes. (b) Registered Notes: Notices to the Holders of Registered Notes shall be sent to them by first class mail (or its equivalent) or (if posted to an overseas address) by airmail at their respective addresses on the Register 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 having general circulation in the place or places required by those rules. Any such notice shall be deemed to have been given on the fourth day after the date of mailing.

20. Currency Indemnity If any sum due from the Issuer in respect of the Notes or the Coupons or any order or judgment given or made in relation thereto has to be converted from the currency (the ‘‘first currency’’) in which the same is payable under these Conditions or such order or judgment into another currency (the ‘‘second currency’’) for the purpose of (a) making or filing a claim or proof against the Issuer, (b) obtaining an order or judgment in any court or other tribunal or (c) enforcing any order or judgment given or made in relation to the Notes, the Issuer shall indemnify each Noteholder, on the written demand of such Noteholder addressed to the Issuer and delivered to the Issuer or to the Specified Office of the Fiscal Agent, against any loss suffered as a result of any discrepancy between (i) the rate of exchange used for such purpose to convert the sum in question from the first currency into the second currency and (ii) the rate or rates of exchange at which such Noteholder may in the ordinary course of business purchase the first currency with the second currency upon receipt of a sum paid to it in satisfaction, in whole or in part, of any such order, judgment, claim or proof. This indemnity constitutes a separate and independent obligation of the Issuer and shall give rise to a separate and independent cause of action.

21. Rounding For the purposes of any calculations referred to in these Conditions (unless otherwise speciﬁed in these Conditions or the relevant Final Terms), (a) all percentages resulting from such calculations will be rounded, if necessary, to the nearest one hundred-thousandth of a percentage point (with 0.000005 per cent. being rounded up to 0.00001 per cent.), (b) all United States dollar amounts used in or resulting from such calculations will be rounded to the nearest cent (with one half cent being rounded up), (c) all Japanese Yen amounts used in or resulting from such calculations will be rounded downwards to the next lower whole Japanese Yen

57 c108406pu020 Proof 5: 14.6.13_22:22 B/L Revision: 0 Operator AllS amount, and (d) all amounts denominated in any other currency used in or resulting from such calculations will be rounded to the nearest two decimal places in such currency, with 0.005 being rounded upwards.

22. Governing Law and Jurisdiction (a) Governing law: The Notes and any non-contractual obligations arising out of or in connection with the Notes are governed by, and shall be construed in accordance with, the laws of England. (b) Arbitration: Subject to Condition 22(c) (Option to litigate), any dispute, claim, difference or controversy arising out of, relating to or having any connection with Notes or the Deed of Covenant (including any dispute as to the existence, validity, interpretation, performance, breach or termination of the Notes or the Deed of Covenant or the consequences of their nullity and any dispute relating to any non contractual obligations arising out of or in connection with the Notes or the Deed of Covenant) (a ‘‘Dispute’’) shall be referred to and finally resolved by arbitration under the LCIA Arbitration Rules (the ‘‘Rules’’), which Rules (as amended from time to time) are incorporated by reference into this Condition 22(b) (Arbitration). For these purposes: (i) the place of arbitration shall be London; (ii) there shall be three arbitrators, each of whom shall be disinterested in the arbitration, shall have no connection with any party thereto and shall be an attorney experienced in international securities transactions; and (iii) the language of the arbitration shall be English. (c) Option to litigate: Notwithstanding Condition 22(b) (Arbitration) above, a Noteholder may, in the alternative, and at its sole discretion, by notice in writing to the Issuer and the Guarantor: (i) within 28 days of service of a Request for Arbitration (as defined in the Rules); or (ii) in the event no arbitration is commenced, require that a Dispute be heard by a court of law. If any Noteholder gives such notice, the Dispute to which such notice refers shall be determined in accordance with Condition 22(d) (Court proceedings) and, subject as provided below, any arbitration commenced under Condition 22(b) (Arbitration) in respect of that Dispute will be terminated. Each of the parties to the terminated arbitration will bear its own costs in relation thereto. If any notice to terminate is given after service of any Request for Arbitration in respect of any Dispute, the relevant Noteholder must also promptly give notice to the LCIA Court and to 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: (i) 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; (ii) his entitlement to be paid his proper fees and disbursements; and (iii) the date when any claim or defence was raised for the purpose of applying any limitation bar or any similar rule or provision. (d) Court proceedings: In the event that a notice pursuant to Condition 22(c) (Option to litigate)is issued, the following provisions shall apply: (i) subject to sub-paragraph (iii) below, the courts of England shall have exclusive jurisdiction to settle any Dispute and each of the Issuer and the Guarantor submits to the exclusive jurisdiction of such courts; (ii) each of the Issuer and the Guarantor agrees that the courts of England are the most appropriate and convenient courts to settle any dispute and, accordingly, that it will not argue to the contrary; and

58 c108406pu020 Proof 5: 14.6.13_22:22 B/L Revision: 0 Operator AllS (iii) this Condition 22(d) (Court proceedings) is for the beneﬁt of the Noteholders only. As a result, and notwithstanding sub-paragraph (i) above, any Noteholder may take proceedings relating to a Dispute (‘‘Proceedings’’) in any other courts with jurisdiction. To the extent allowed by law, any Noteholder may take concurrent Proceedings in any number of jurisdictions. (e) Process agent: Each of the Issuer and the Guarantor agrees that the documents which start any Proceedings and any other documents required to be served in relation to those Proceedings may be served on it by being delivered to Mourant Ozannes Corporate Services (UK) Limited, 6th Floor, 125 Old Broad Street, London, EC2N 1AR, United Kingdom (in the case of the Issuer) and London Registrars plc, Suite A, 6 Honduras Street, London, EC1Y 0TH, United Kingdom (in the case of the Guarantor) or, if different, their respective registered ofﬁces for the time being in England or Wales. If such person is not or ceases to be effectively appointed to accept service of process on behalf of the Issuer and the Guarantor, the Issuer and the Guarantor (acting together) shall, on the written demand of any Noteholder addressed to the Issuer and the Guarantor and delivered to the Issuer and the Guarantor appoint a further person in England to accept service of process on its behalf and, failing such appointment within 15 days, any Noteholder shall be entitled to appoint such a person by written notice addressed to the Issuer and the Guarantor and delivered to the Issuer and the Guarantor. Nothing in this paragraph shall affect the right of any Noteholder to serve process in any other manner permitted by law. This Condition 22(e) (Process agent) applies to Proceedings in England and to Proceedings elsewhere.

59 c108406pu020 Proof 5: 14.6.13_22:22 B/L Revision: 0 Operator AllS USE OF PROCEEDS

The net proceeds from each issue of Notes will be lent by the Issuer to the Guarantor through inter- company loans and will be used by the Guarantor for its general corporate purposes, which include making a proﬁt.

60 c108406pu020 Proof 5: 14.6.13_22:22 B/L Revision: 0 Operator AllS FORM OF FINAL TERMS

Set out below is the form of Final Terms which will be completed for each Tranche of Notes issued under the Programme.

Final Terms dated [*]

AKCB Finance Limited Issue of [Aggregate Nominal Amount of Tranche] [Title of Notes]

Guaranteed by Al Khalij Commercial Bank (al khaliji) Q.S.C. under the U.S.$ 750,000,000

Euro Medium Term Note Programme

PART A – CONTRACTUAL TERMS Terms used herein shall be deemed to be defined as such for the purposes of the Conditions (the ‘‘Conditions’’) set forth in the Base Prospectus dated 17 June 2013 [and the supplemental Base Prospectus dated [*]] which [together] constitute[s] a base prospectus (the ‘‘Base Prospectus’’) for the purposes of Directive 2003/71/EC, as amended (which includes the amendments made by Directive 2010/73/EU to the extent that such amendments have been implemented in a relevant Member State) (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.] These Final Terms contain the final terms of the Notes and must be read in conjunction with such Base Prospectus [as so supplemented]. Full information on the Issuer, the Guarantor and the offer of the Notes described herein is only available on the basis of the combination of these Final Terms and the Base Prospectus [as so supplemented]. The Base Prospectus[, the supplemental Base Prospectus] and these Final Terms are available for viewing in accordance with Article 14 of the Prospectus Directive on the website of the Central Bank of Ireland (www.centralbank.ie) and during normal business hours at the registered offices of the Issuer (at 94 Solaris Avenue, Camana Bay, P.O. Box 1348, Grand Cayman, KY1-1108, Cayman Islands) and the Fiscal Agent (at [*]) and copies may be obtained from such offices.

1. (i) Issuer: AKCB Finance Limited (ii) Guarantor: Al Khalij Commercial Bank (al khaliji) Q.S.C. 2. [(i) Series Number:] [*] [(ii) Tranche Number:] [*] [(iii) Date on which the Notes will be [The Notes will be consolidated and form a single consolidated and form a single Series:] Series with [identifying earlier Tranche] on [the Issue Date/exchange of the Temporary Global Note for interests in the Permanent Global Notes as referred to in paragraph [23] below, which is expected to occur on or about [date]/[Not Applicable]] 3. Speciﬁed Currency or Currencies: [*] 4. Aggregate Nominal Amount: [*] [(i)] [Series]: [*] [(ii) Tranche: [*]] 5. Issue Price: [*] per cent. of the Aggregate Nominal Amount [plus accrued interest from [*](if applicable)] 6. (i) Speciﬁed Denominations: (in the case of Registered Notes, this U.S.$200,000 and integral multiples of U.S.$1,000 means the minimum integral amount in in excess thereof. which transfers can be made) (ii) Calculation Amount: [*]

61 c108406pu030 Proof 5: 14.6.13_22:21 B/L Revision: 0 Operator AllS 7. (i) Issue Date: [*] (ii) Interest Commencement Date: [[*]/Issue Date/Not Applicable] 8. Maturity Date: [*] 9. Interest Basis: [[*] per cent. Fixed Rate] [[LIBOR/EURIBOR/SHIBOR/HIBOR/SIBOR/ EIBOR/SAIBOR/TIBOR/JPY LIBOR] +/- [*] per cent. Floating Rate] [Zero Coupon] (see paragraphs [15], [16] and [17] below) 10. Redemption/Payment Basis: [Redemption at par] [Subject to any purchase and cancellation or early redemption, the Notes will be redeemed on the Maturity Date at 100 per cent. of their nominal amount] [[*]] 11. Change of Interest or Redemption/Payment [Applicable/Not Applicable] Basis: 12. Put/Call Options: [Investor Put] [Issuer Call] [Change of Ownership Put] 13. [Date of [Board] approval for issuance of [*] [and [*] respectively] Notes [and Guarantee respectively] obtained:] 14. Method of distribution: [Syndicated/Non-syndicated]

PROVISIONS RELATING TO INTEREST (IF ANY) PAYABLE 15. Fixed Rate Note Provisions [Applicable/Not Applicable] (i) Rate[(s)] of Interest: [*] per cent. per annum [payable [annually/semi- annually/quarterly/monthly/[*]] in arrear] (ii) Interest Payment Date(s): [*] in each year [adjusted in accordance with [Following Business Day Convention/ Modified Following Business Day Convention/ Modified Business Day Convention/ Preceding Business Day Convention/ FRN Convention/ Floating Rate Convention/ Eurodollar Convention]/ not adjusted] (iii) Fixed Coupon Amount[(s)]: [*] per Calculation Amount (iv) Broken Amount(s): [*] per Calculation Amount, payable on the Interest Payment Date falling [in/on] [*] (v) Day Count Fraction: [Actual/Actual (ICMA)/ Actual/365/ Actual/ Actual (ISDA)/ Actual/365 (Fixed)/ Actual/360/ 30/360/ 30/360E/ Eurobond Basis] (vi) Determination Dates: [*] in each year (viii) ISDA Definitions [2000 ISDA Definitions (as amended and updated)][2006 ISDA Definitions (as amended and updated)] 16. Floating Rate Note Provisions [Applicable/Not Applicable] (i) Interest Period(s): [*] (ii) Specified Period: [Not Applicable/[*]] (iii) Specified Interest Payment Dates: [Not Applicable/[*]] (iv) [First Interest Payment Date: [*]]

62 c108406pu030 Proof 5: 14.6.13_22:21 B/L Revision: 0 Operator AllS (v) Business Day Convention: [Following Business Day Convention/ Modified Following Business Day Convention/ Modified Business Day Convention/ Preceding Business Day Convention/ FRN Convention/ Floating Rate Convention/ Eurodollar Convention/ No Adjustment] (vi) Additional Business Centre(s): [Not Applicable/[*]] (vii) Manner in which the Rate(s) of Interest [Screen Rate Determination/ISDA Determination/ is/are to be determined: [*]] (viii) Party responsible for calculating the [[*] shall be the Calculation Agent] Rate(s) of Interest and/or Interest Amount(s) (if not the [Fiscal Agent]): (ix) Screen Rate Determination: * Reference Rate: [LIBOR/EURIBOR/SHIBOR/HIBOR/SIBOR/ EIBOR/SAIBOR/TIBOR/JPY LIBOR] * Interest Determination Date(s): [*] * Relevant Screen Page: [*] * Relevant Time: [*] * Relevant Financial Centre: [*] (x) ISDA Determination: * Floating Rate Option: [*] * Designated Maturity: [*] * Reset Date: [*] (xi) Margin(s): [+/-][*] per cent. per annum (xii) Minimum Rate of Interest: [*] per cent. per annum (xiii) Maximum Rate of Interest: [*] per cent. per annum (xiv) Day Count Fraction: [Actual/Actual (ICMA)/ Actual/365/ Actual/ Actual (ISDA)/ Actual/365 (Fixed)/ Actual/360/ 30/360/ 30/360E/ Eurobond Basis] (xv) ISDA Definitions [2000 ISDA Definitions (as amended and updated)][2006 ISDA Definitions (as amended and updated)] 17. Zero Coupon Note Provisions [Applicable/Not Applicable] (i) [Amortisation/Accrual] Yield: [*] per cent. per annum (ii) Reference Price: [*]

PROVISIONS RELATING TO REDEMPTION 18. Call Option [Applicable/Not Applicable] (i) Optional Redemption Date(s): [*] (ii) Optional Redemption Amount(s) of [*] per Calculation Amount each Note: (iii) If redeemable in part: (a) Minimum Redemption Amount: [*] per Calculation Amount (b) Maximum Redemption Amount [*] per Calculation Amount (iv) Notice periods: [*] 19. Put Option [Applicable/Not Applicable] (i) Optional Redemption Date(s): [*] (ii) Optional Redemption Amount(s) of [*] per Calculation Amount each Note:

63 c108406pu030 Proof 5: 14.6.13_22:21 B/L Revision: 0 Operator AllS (iii) Notice periods: [*] 20. Change of Ownership Put [Condition 9(f) (Redemption for Change of Ownership (Change of Ownership Put))/Not Applicable] 21. Final Redemption Amount of each Note [*] per Calculation Amount 22. Early Redemption Amount [Not Applicable/[*]] Early Redemption Amount(s) per Calculation Amount payable on redemption for taxation reasons or on event of default or other early redemption:

GENERAL PROVISIONS APPLICABLE TO THE NOTES 23. Form of Notes: [Bearer Notes: [Temporary Global Note exchangeable for a Permanent Global Note which is exchangeable for Definitive Notes on [*] days’ notice/at any time/in the limited circumstances specified in the Permanent Global Note] [Temporary Global Note exchangeable for Definitive Notes on [*] days’ notice] [Permanent Global Note exchangeable for Definitive Notes on [*] days’ notice/at any time/in the limited circumstances specified in the Permanent Global Note]] [Registered Notes Global Registered Note exchangeable for Individual Note Certificates on [*] days’ notice/at any time/in the limited circumstances described in the Global Registered Note] 24. Additional Financial Centre(s): [Not Applicable/[*]] 25. Talons for future Coupons to be attached to [Not Applicable/[*]] Definitive Notes: 26. [Consolidation provisions: Not Applicable/The provisions [in Condition 18 (Further Issues)] apply]

RESPONSIBILITY The Issuer and the Guarantor accept responsibility for the information contained in these Final Terms. [(Relevant third party information) has been extracted from (specify source). Each of 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 AKCB Finance Limited: By: ...... Duly authorised

Signed on behalf of Al Khalij Commercial Bank (al khaliji) Q.S.C.: By: ...... Duly authorised]

64 c108406pu030 Proof 5: 14.6.13_22:21 B/L Revision: 0 Operator AllS 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 Irish Stock Exchange for Notes for the Notes to be admitted to the Ofﬁcial List and trading on its Main Securities Market with effect from [*].] [Not Applicable.] (ii) Estimate of total expenses related to [*] listing and admission to trading 2. RATINGS Ratings: The Notes to be issued have been rated by: [Fitch: [*]] [[*] is established in the European Union and registered under Regulation (EU) No. 1060/2009 (as amended).]/[[*] is not established in the European Union and has not applied for registration under Regulation (EU) No. 1060/2009 (as amended).]/[[*] is not established in the European Union but [*], which is registered under Regulation (EU) No. 1060/2009 (as amended), has indicated that it intends to endorse the ratings or [*] where possible.]/[[ *] is not established in the European Union and has not applied for registration under Regulation (EU) No. 1060/2009 (as amended), but it is certiﬁed in accordance with such Regulation.]

3. [INTERESTS OF NATURAL AND LEGAL PERSONS INVOLVED IN THE ISSUE/OFFER] Need to include a description of any interest, including conﬂicting ones, that is material to the issue/offer, detailing the persons involved and the nature of the interest. May be satisﬁed by the inclusion of the following statement: ‘‘Save as discussed in [‘‘Subscription and Sale’’], so far as the Issuer is aware, no person involved in the offer of the Notes has an interest material to the offer.’’ 4. [Fixed Rate Notes only – YIELD

Indication of yield: [*] per cent. per annum on a [quarterly/[semi-] annual] basis

5. [Floating Rate Notes only – HISTORIC INTEREST RATES Details of historic [LIBOR/ EURIBOR/ SHIBOR/ HIBOR/ SIBOR/ EIBOR/ SAIBOR/ TIBOR/ JPY LIBOR] rates can be obtained from [Reuters].] 6. OPERATIONAL INFORMATION

ISIN Code: [*] Common Code: [*] Any clearing system(s) other than Euroclear [Not Applicable/[*]] Bank S.A./N.V. and Clearstream Banking, socie´te´ anonyme and the relevant identiﬁcation number(s): Delivery: Delivery [against/free of] payment Names and addresses of additional Paying [*] Agent(s) (if any):

65 c108406pu030 Proof 5: 14.6.13_22:21 B/L Revision: 0 Operator AllS 7. DISTRIBUTION (i) If syndicated, names and addresses [Not Applicable/[*]] of Managers and underwriting commitments: (ii) Date of Subscription Agreement: [*] If non-syndicated, name and address of [Not Applicable/[*]] Dealer: U.S. Selling Restrictions: [Reg. S Compliance Category] [TEFRA C/TEFRA D/TEFRA not applicable] [Not Applicable]

66 c108406pu030 Proof 5: 14.6.13_22:21 B/L Revision: 0 Operator AllS SUMMARY OF PROVISIONS RELATING TO THE NOTES WHILE IN GLOBAL FORM

Clearing System Accountholders In relation to any Tranche of Notes represented by a Global Note in bearer form, references in the Terms and Conditions of the Notes to ‘‘Noteholder’’ are references to the bearer of the relevant Global Note which, for so long as the Global Note is held by a depositary or a common depositary, will be that depositary or common depositary. In relation to any Tranche of Notes represented by a Global Registered Note, references in the Terms and Conditions of the Notes to ‘‘Noteholder’’ are references to the person in whose name such Global Registered Note is for the time being registered in the Register which, for so long as the Global Registered Note is held by or on behalf of a depositary or a common depositary for Euroclear and/or Clearstream, Luxembourg and/or any other relevant clearing system, will be that depositary or common depositary or a nominee for that depositary or common depositary.

Conditions applicable to Global Notes Each Global Note and Global Registered Note will contain provisions which modify the Terms and Conditions of the Notes as they apply to the Global Note or Global Registered Note. The following is a summary of certain of those provisions: Payments: All payments in respect of the Global Note or Global Registered Note which, according to the Terms and Conditions of the Notes, require presentation and/or surrender of a Note, Note Certificate or Coupon will be made against presentation and (in the case of payment of principal in full with all interest accrued thereon) surrender of the Global Note or Global Registered Note to or to the order of any Paying Agent and will be effective to satisfy and discharge the corresponding liabilities of the Issuer in respect of the Notes. On each occasion on which a payment of principal or interest is made in respect of the Global Note, the Issuer shall procure that the payment is noted in a schedule thereto. Payment Business Day: In the case of a Global Note, or a Global Registered Note, shall be, if the currency of payment is euro, any day which is a TARGET Settlement Day and a day on which dealings in foreign currencies may be carried on in each (if any) Additional Financial Centre; or, if the currency of payment is not euro, any day which is a day on which dealings in foreign currencies may be carried on in the Principal Financial Centre of the currency of payment and in each (if any) Additional Financial Centre. Payment Record Date: Each payment in respect of a Global Registered Note will be made to the person shown as the Holder in the Register at the close of business (in the relevant clearing system) on the Clearing System Business Day before the due date for such payment (the ‘‘Record Date’’) where ‘‘Clearing System Business Day’’ means a day on which each clearing system for which the Global Registered Note is being held is open for business. Exercise of put option: In order to exercise the option contained in Condition 9(e) (Redemption at the option of Noteholders) the bearer of the Permanent Global Note or the holder of a Global Registered Note must, within the period specified in the Conditions for the deposit of the relevant Note and put notice, give written notice of such exercise to the Fiscal Agent specifying the principal amount of Notes in respect of which such option is being exercised. Any such notice will be irrevocable and may not be withdrawn. Partial exercise of call option: In connection with an exercise of the option contained in Condition 9(c) (Redemption at the option of the Issuer) in relation to some only of the Notes, the Permanent Global Note or Global Registered Note may be redeemed in part in the principal amount specified by the Issuer in accordance with the Conditions and the Notes to be redeemed will not be selected as provided in the Conditions but in accordance with the rules and procedures of Euroclear and Clearstream, Luxembourg (to be reflected in the records of Euroclear and Clearstream, Luxembourg as either a pool factor or a reduction in principal amount, at their discretion). Notices: Notwithstanding Condition 19 (Notices), while all the Notes are represented by a Permanent Global Note (or by a Permanent Global Note and/or a Temporary Global Note) or a Global Registered Note and the Permanent Global Note is (or the Permanent Global Note and/or the Temporary Global Note are), or the Global Registered Note is, deposited with a depositary or a common depositary for Euroclear and/or Clearstream, Luxembourg and/or any other relevant clearing system, notices to Noteholders may be given by delivery of the relevant notice to Euroclear and/or

67 c108406pu030 Proof 5: 14.6.13_22:21 B/L Revision: 0 Operator AllS Clearstream, Luxembourg and/or any other relevant clearing system and, in any case, such notices shall be deemed to have been given to the Noteholders in accordance with Condition 19 (Notices)on the date of delivery to Euroclear and/or Clearstream, Luxembourg and/or any other relevant clearing system.

Exchange The option for Global Notes to be exchangeable for Definitive Notes by giving notice should not be expressed to be applicable under paragraph 23 (Form of Notes) in Part A of the relevant Final Terms if the relevant Notes have denominations consisting of a minimum Specified Denomination plus one or more higher integral multiples of another smaller amount. Furthermore, Notes should not be issued which have such denominations if such Notes are to be represented on issue by a Temporary Global Note exchangeable for Definitive Notes. In the event that a Global Note is exchanged for Definitive Notes, such Definitive Notes shall be issued in Specified Denomination(s) only. A Noteholder who holds a principal amount of less than the minimum Specified Denomination will not receive a Definitive Note in respect of such holding and would need to purchase a principal amount of Notes such that it holds an amount equal to one or more Specified Denominations.

68 c108406pu030 Proof 5: 14.6.13_22:21 B/L Revision: 0 Operator AllS DESCRIPTION OF THE ISSUER

Registered office The registered office of the Issuer is at 94, Solaris Avenue, Camana Bay, P.O. Box 1348, Grand Cayman, KY1-1108, Cayman Islands and the telephone number of the registered office is +1 345 949 4123.

Date of incorporation and legal form The Issuer is an exempted company with limited liability incorporated in the Cayman Islands under the Companies Law (as amended) of the Cayman Islands on 13 May 2013 (with registration number QH-277615). The issued share capital of the Issuer is comprised of 1 ordinary share of U.S.$1.00 par value. The Issuer is a wholly-owned subsidiary of the Guarantor.

Purpose and business activity The principal objects of the Issuer are unrestricted and, as set out in its Memorandum of Association, the Issuer has full power and authority to carry out any object not prohibited by law. The Issuer is organised as a special purpose entity and consequently does not have any employees or own any physical assets. The Issuer has been established to raise capital for the Guarantor by the issue of debt instruments. The Issuer does not engage in, and has not, since its incorporation, engaged in, any activities other than those incidental to: (i) its registration as an exempted company; (ii) the authorisation of the offering and issue of debt instruments to which it is or will be a party; (iii) the ownership of such interests and other assets referred to herein; (iv) the other matters contemplated in this Base Prospectus or any other base prospectus related to the offering and issue of debt instruments to which it is or will be a party; (v) the authorisation and execution of the other documents referred to in this Base Prospectus or any other Base Prospectus related to the offering and issue of debt instruments, to which it is or will be a party; and (vi) other matters which are incidental or ancillary to those activities. The Issuer’s ongoing activities will principally comprise: (i) the issue of the Notes under the Programme; (ii) the entering into of any documents related to the update of the Programme and the issue of Notes under the Programme; and (iii) the exercise of related rights and powers and other activities referred to in this Base Prospectus or reasonably incidental to those activities. The Issuer does not have subsidiaries or non-executive directors.

Management The directors of the Issuer and their respective business addresses and principal activities are as follows:

Name Occupation Mohamed Asem Ahmed Abdelkhalek Group Chief Business Officer Hesham Elsayed EzzEldin Elsayed Group Chief Operating Officer The business address of each of the directors of the Issuer is Asia Street 60, West Bay, P.O. Box 28000, Doha, Qatar. There are no potential conflicts of interest between the private interests or other duties of the directors listed above and their duties to the Issuer. The corporate services provider of the Issuer is Mourant Ozannes Corporate Services (Cayman) Limited (the ‘‘Corporate Services Provider’’). The Issuer and the Corporate Services Provider have entered into a registered office agreement (the ‘‘Registered Office Agreement’’) dated 13 May 2013 pursuant to which the Corporate Services Provider has agreed to provide certain administrative services to the Issuer. The Registered Office Agreement is governed by the law of the Cayman Islands.

69 c108406pu030 Proof 5: 14.6.13_22:21 B/L Revision: 0 Operator AllS Independent auditors The Issuer is not required by Cayman Islands law, and does not intend, to publish audited ﬁnancial statements or appoint any auditors. Since the date of its incorporation, no ﬁnancial statements of the Issuer have been prepared.

70 c108406pu030 Proof 5: 14.6.13_22:21 B/L Revision: 0 Operator AllS SELECTED FINANCIAL INFORMATION

The following information has been extracted from, and should be read in conjunction with, and is qualiﬁed in its entirety by reference to, the Financial Statements, which are included in this Base Prospectus. The table below shows consolidated statement of ﬁnancial position information of the Group as at 31 December 2011 and 2012 and as at 31 March 2013.

As at As at 31 March 31 December (unaudited)

2011 2012 2013

(QAR million) Cash and balances with central banks ...... 860 1,779 1,648 Due from banks...... 3,118 2,241 1,936 Loans and advances to customers...... 11,511 13,032 14,054 Investment securities...... 11,029 15,865 16,021 Property and equipment ...... 96 66 64 Intangible assets...... 283 274 270 Other assets...... 303 416 433

Total assets ...... 27,200 33,672 34,425

Due to banks ...... 8,799 10,031 11,067 Customer deposits ...... 12,130 17,346 17,276 Subordinated debt ...... 117 120 117 Other liabilities ...... 750 505 668

Total liabilities ...... 21,797 28,001 29,127

Issued capital ...... 3,600 3,600 3,600 Legal reserve ...... 1,016 1,067 1,067 Risk reserve ...... 196 258 258 Fair value reserve ...... 114 233 99 Foreign currency translation reserve ...... 4 14 4 Retained earnings ...... 473 499 271

Total shareholders’ equity...... 5,402 5,671 5,298

Total liabilities and shareholders’ equity...... 27,200 33,672 34,425

71 c108406pu040 Proof 5: 14.6.13_22:20 B/L Revision: 0 Operator AllS The table below shows consolidated statement of income information of the Group for 2011 and 2012 and for the three month periods ended 31 March 2012 and 31 March 2013.

Three months ended Year ended 31 March 31 December (unaudited)

2011 2012 2012 2013

(QAR million) Interest income ...... 806 829 207 243 Interest expense ...... (219) (318) (70) (87)

Net interest income...... 587 511 137 156 Fee and commission income...... 130 93 29 49 Fee and commission expense...... (10) (20) (3) (2)

Net fee and commission income...... 120 73 26 47 Foreign exchange (loss)/gain ...... 7 (12) 2 4 Income from investment securities ...... 170 396 51 25 Other operating income...... 55 1 — —

Net operating income ...... 940 969 216 231 Staff costs ...... (186) (188) (48) (56) Depreciation and amortisation...... (77) (80) (17) (15) Net impairment loss on investment securities ...... (13) (6) (5) — Net (impairment) recoveries on loans and advances to customers ...... (38) (61) 1 2 Other expenses...... (126) (105) (22) (26)

Proﬁt for the year/period before tax ...... 500 529 125 135 Tax expense ...... (13) (17) (3) (4)

Proﬁt for the year/period...... 487 512 122 131

The table below shows consolidated statement of comprehensive income information of the Group for 2011 and 2012 and for the three month periods ended 31 March 2012 and 31 March 2013.

Three months ended Year ended 31 March 31 December (unaudited)

2011 2012 2012 2013

(QAR million) Proﬁt for the year/period...... 487 512 122 131 Foreign currency translation differences for foreign operations...... (5) 10 8 (10) Net change in fair value of available for sale investments ...... 38 119 (3) (134)

Other comprehensive income for the year/period, net of tax ...... 33 129 5 (145)

Total comprehensive income for the year/period..... 520 641 127 (13)

72 c108406pu040 Proof 5: 14.6.13_22:20 B/L Revision: 0 Operator AllS The table below shows selected consolidated statement of cash ﬂow information of the Group for 2011 and 2012 and for the three month periods ended 31 March 2012 and 31 March 2013.

Three months ended Year ended 31 March 31 December (unaudited)

2011 2012 2012 2013

(QAR million) Net cash from operating activities ...... 3,748 3,986 205 424 Net cash from/(used in) investing activities...... (4,135) (4,390) (266) 544 Net cash used in ﬁnancing activities ...... (339) (351) (297) (305) Cash and cash equivalents at the beginning of the year/period...... 3,181 2,461 2,461 1,722 Effects of exchange rate changes on cash and cash equivalents held ...... 6 16 22 (21) Cash and cash equivalents as at the end of the year/period...... 2,461 1,722 2,125 2,364 The table below shows selected consolidated ratios of the Group as at and for the years ended 31 December 2011 and 31 December 2012 and as at and for the three month periods ended 31 March 2012 and 31 March 2013. The ratios have been prepared based on management information and information in the Financial Statements.

As at/three months ended As at/year ended 31 March 31 December (unaudited)

2011 2012 2012 2013

(per cent.) Selected ratios: Return on average assets(1)...... 2.1 1.7 2.0 1.7 Return on average equity(2)...... 9.1 9.3 9.5 10.0 Cost income ratio(3) ...... 41.4 39.1 41.2 42.1 Net interest margin(4) ...... 2.7 1.8 2.6 1.9 Non-performing loans ratio(5) ...... 0.55 0.45 0.48 0.39 Provisioning charge/gross loans(6) ...... 0.34 0.46 (0.01) (0.01) Net loans/customer deposits(7)...... 95 75 97 81 Total capital adequacy ratio(8) ...... 23.3 21.4 24.2 19.9

Notes: (1) Trailing 12 months Proﬁt for the Period divided by the average of the beginning and ending balance of Total Assets for the trailing 12 months. (2) Trailing 12 months Proﬁt for the Period divided by the average of the beginning and ending balance of Total Shareholders’ Equity for the trailing 12 months. (3) Staff costs, general and administrative expenses, depreciation of property and equipment, amortisation of intangible assets and other expenses divided by net operating income for the period reported. (4) Trailing 12 months Net Interest Income including dividend income divided by the average of the beginning and ending balance of Total Earning Assets for the trailing 12 months. (5) Non-performing loans (being loans in respect of which payments of principal or interest are overdue for more than 90 days) divided by gross loans. (6) Net Impairment loss/recoveries on loans and advances for the reporting period divided by Gross Loans and Advances as at the reporting date. (7) Net Loans and Advances divided by Customer Deposits as at the reporting date. (8) Calculated according to Basel II methodology, as applied by the QCB.

73 c108406pu040 Proof 5: 14.6.13_22:20 B/L Revision: 0 Operator AllS DESCRIPTION OF THE GROUP

Introduction The Guarantor was incorporated as a Qatar Shareholding Company under the Minister of Economy and Trade’s Resolution No. 2 of 2007 dated 8 January 2007 (as published in the Official Gazette issue No. 1 dated 18 February 2007) and registered in the Commercial Register on 14 January 2007 by a group of investors from Qatar and other GCC countries and certain of its shares were offered to Qatari investors in an initial public offering conducted in April and May 2007. As at 31 December 2012 and based on QCB data, the Guarantor was the fourth largest conventional bank in Qatar in terms of assets, accounting for 4.1 per cent. of the total assets of the Qatari banking sector. The Guarantor is 47 per cent. owned directly and indirectly by the Government and has over 17,000 shareholders. As at 31 March 2013, the Guarantor had a market capitalisation of QAR 5.9 billion. The Guarantor has three wholly-owned subsidiaries: * Al Khaliji France S.A. (‘‘Al Khaliji France’’), previously known as BLC Bank (France) S.A., which it acquired in late 2008 and which gave it a European banking license and a network of four branches in the UAE and one branch in Paris; * Al Khaliji Capital S.P.C. (‘‘Al Khaliji Capital’’), which is intended to provide financial services, such as brokerage, once feasibility of the same has been established and all approvals have been finalised; and * the Issuer. The Guarantor was established with a retail focus and a view to expanding in the GCC region. However, as a result of the global financial crisis, the Guarantor re-assessed its strategy and, since 2009, the Group has focused on corporate banking and treasury operations with large corporate, Government and Government-related clients, with a geographic focus on Qatar and the GCC. The Guarantor also provides banking services to mid-cap corporates, to small and medium-sized enterprises (‘‘SMEs’’) to premium and high net worth customers. The Guarantor’s conservative credit policy and effective risk management has enabled the Group to maintain a high quality portfolio of assets, despite the continuing global financial crisis. As a result, the Guarantor believes that it has avoided any material adverse impact from the global financial crisis. The Guarantor currently has a long-term foreign currency issuer default rating of A- with stable outlook from Fitch. As at 31 March 2013, the Group had total assets of QAR 34,425 million and the Guarantor is the fourth largest conventional bank in Qatar in terms of assets. The Group’s profit for 2012 was QAR 512 million compared to QAR 487 million for 2011. The Group’s profit for the three months ended 31 March 2013 was QAR 131 million compared to QAR 122 million for the corresponding period of 2012. Since it was established and notwithstanding the global financial crisis, the Group has reported year on year increases in profitability. The Guarantor had a Tier 1 capital adequacy ratio of 18.3 per cent. and a total capital adequacy ratio of 19.9 per cent. as at 31 March 2013, well above the minimum requirements of the QCB and Basel II. The Guarantor’s registered office is at Asia Street 60, West Bay, P.O. Box 28000, Doha, Qatar. It is incorporated as a Qatar Shareholding Company under Emiri Decree No. (73) of 1974. Its commercial registration number is 34548, its place of registration is Doha and its telephone number is + 974 4494 0000.

Strategy The Group’s strategy, which was most recently updated at the end of 2012, continues to be a corporate and treasury led strategy with a measured approach to expanding the Group’s personal banking business and geographically focused on Qatar and the GCC.

74 c108406pu040 Proof 5: 14.6.13_22:20 B/L Revision: 0 Operator AllS The Group’s current three-year plan, for the period from 2013 through 2015, envisages the continued development of a unique specialist bank with a strong service proposition and competitive strengths in its target banking markets. The Group is currently focusing on: * expanding its existing strong corporate banking franchise focused principally on the Qatari market, where it conducts business with corporate, government and government-related clients. It is also targeting Qatari-government sponsored infrastructure projects and the companies and contractors involved in those projects. The Group anticipates that the project market in Qatar is likely to grow significantly as the government implements its large infrastructure development programme as part of the 2030 Qatar National Vision and ahead of the 2022 FIFA World Cup. The Group also works with Qatari-based conglomerates and other mid-size companies with a minimum annual turnover of QAR 75 million; * maintaining its leading position in treasury and the fixed income market through developing advanced treasury products. The Group’s investment securities portfolio was the largest single asset class on the Group’s balance sheet at 31 March 2013. The size of this portfolio reflects the Group’s measured approach to lending opportunities in 2012 and also provides the Group with an additional source of funding through the use of repos. The relative size of the Group’s investment securities portfolio is expected to reduce as the Group expands its lending activities in Qatar, particularly in the infrastructure project area; * developing a superior premium banking business and establishing an exclusive invitation-only private bank during 2013. Rather than establishing a large branch network, the Group is focusing on developing alternative distribution channels to serve its target premium and private banking customer segment, which predominantly comprises high and ultra-high net worth individuals. The Group believes that its target market lacks sophisticated services and offers growth potential. Accordingly, the Group plans to exploit this opportunity by offering high quality investment products, wealth management and related services; and * leveraging its existing footprint in Qatar, the UAE (its second home market) and France and aiming to capture the significant trade and investment flows between these geographies as well as flows with other GCC countries, Turkey and other MENA region countries. The Group plans to underpin its expansion by developing and offering leading products and expertise in its focus areas, through improving the efficiency of its back office, information technology (‘‘IT’’) and other corporate services and by adopting a selective risk appetite based on strong risk management capabilities. Geographically, the Group intends to remain predominantly focused on Qatar.

Business Strengths The Group benefits from a number of business strengths. In particular: * High level of Qatari government ownership and support: The Qatari government directly and indirectly owned 47 per cent. of the Guarantor’s shares as at 31 March 2013, which is the second highest government stake in a Qatari bank after Qatar National Bank (in which the government owns 50 per cent.). In common with other Qatari banks, the Guarantor benefitted from government support measures during the global financial crisis. The Qatari government and related agencies are also significant depositors, accounting for 60.2 per cent. of the Group’s customer deposits at 31 March 2013. See ‘‘Risk Factors — Risks relating to the Group —The Qatari government is under no obligation to support the Guarantor and there is no assurance that the Guarantor will receive future support that is commensurate with the support that it has received in the past’’. * Strong capitalisation, high levels of liquidity and sound asset quality: The Group currently has high capital ratios. As at 31 March 2013, the Group’s tier 1 capital adequacy ratio (calculated according to Basel II) was 18.3 per cent. (compared to 19.4 per cent. and 22.0 per cent. at 31 December 2012 and 31 December 2011, respectively) and its total capital adequacy ratio was 19.9 per cent. (compared to 21.4 per cent. and 23.3 per cent. at 31 December 2012 and 31 December 2011, respectively). See ‘‘Financial Review—Capital adequacy’’. In addition, the Group has high liquidity ratios. Its average net liquid assets to customer deposits ratios (which is the liquidity ratio monitored by the QCB) in each of 2011, 2012 and the three months ended 31 March 2013 all exceeded 170 per cent. (compared to a required level of 100 per cent.) and its lowest level in that period was 160 per cent. See ‘‘Risk Management—Liquidity risk’’. The Group also benefits from sound asset quality with non-performing loans ratios of 0.55 per cent.

75 c108406pu040 Proof 5: 14.6.13_22:20 B/L Revision: 0 Operator AllS at 31 December 2011, 0.45 per cent. at 31 December 2012 and 0.39 per cent. at 31 March 2013. The Group’s capitalisation, liquidity and asset quality afford it significant flexibility in the future development of its business. * Focused and coherent strategy: The Group’s focused and coherent strategy enables the Group to target selected sectors which it believes offer growth potential and steady income. In addition, by targeting specific sectors, the Group is able to adapt its structure to best meet the demands of its target client base which enables it to maximise efficiency and minimise its cost base. For example, by targeting premium individual customers, the Group does not need to develop an extensive and expensive branch network and instead is able to serve these customers through modern and tailored alternative distribution channels, including doorstep banking and exclusive premium centres in branches for premium customers and internet, call centre and mobile telephone banking channels for all customers. See ‘‘Business segments—Personal banking’’. * Specific geographic focus: The Group benefits from its focus on a specific geographical region, being Qatar, the UAE and the wider GCC region. In the immediate aftermath of the global financial crisis, countries in this region have grown strongly and, on the back of generally high oil prices, many GCC countries have significant long-term infrastructural development plans in place. * Strong risk culture: Management believes that it has implemented a strong risk culture that permeates the whole Group. The Group’s risk management procedures are described in detail under ‘‘Risk Management’’ and management believes that the strength of risk management systems is illustrated in the quality of the Group’s assets. In addition, the Group has a strong management team in place, see ‘‘Management and Employees’’, a strong corporate governance culture, which it believes is in line with international best practice and strong growth potential, reflecting its focus on the GCC region in which many countries, including Qatar, have strong economic fundamentals and significant investment plans.

Business Segments Overview The Group currently operates through four reporting segments: * Wholesale Banking – which comprises the Group’s corporate and international banking division and its commercial banking division; * Personal Banking (previously Consumer Banking) – which comprises the Group’s premium and private banking business as well as limited consumer banking (principally undertaken to support the Group’s major corporate customers); * Group Treasury – which manages the Group’s funding, investment securities portfolio, borrowing and derivatives transactions undertaken for risk management purposes and undertakes sales activity of treasury products to bank, corporate and high net worth clients; and * Central Functions – which comprises the cost of all central support functions, including ﬁnance, compliance, internal audit, risk management, IT, human resources, corporate affairs and others.

76 c108406pu040 Proof 5: 14.6.13_22:20 B/L Revision: 0 Operator AllS The tables below are derived from note 4(i) to the Interim Financial Statements and note 6(i) to the 2012 Financial Statements and show certain ﬁnancial information in relation to each reporting segment for each of the three month periods ended 31 March 2012 and 31 March 2013 and for each of 2011 and 2012. As at/three months ended 31 March 2013 (unaudited)

Consolidation Wholesale Personal Group Central and IFRS Banking Banking Treasury Functions adjustments Total

(QAR million) Net operating income ...... 119 16 96 — — 231 Proﬁt (loss) for the period...... 94 7 80 (51) 1 131 Total assets ...... 13,357 1,686 18,459 1,496 (574) 34,425

As at/three months ended 31 March 2012 (unaudited)

Net operating income ...... 107 12 97 — — 216 Proﬁt (loss) for the period...... 78 — 88 (46) 2 122 Total assets ...... 12,842 994 12,095 1,271 (554) 26,648

As at/year ended 31 December 2012

Consolidation Wholesale Personal Group Central and IFRS Banking Banking Treasury Functions adjustments Total

(QAR million) Net operating income ...... 288 106 609 (34) 969 Proﬁt (loss) for the year ...... 201 12 537 (243) 6 512 Total assets ...... 11,654(1) 2,046(1) 19,231 1,292 (551) 33,672

As at/year ended 31 December 2011

Net operating income ...... 368 174 452 (53) 940 Proﬁt (loss) for the year ...... 248 114 372 (251) 4 487 Total assets ...... 10,575 1,655 14,690 966 (685) 27,200

Notes: (1) As at 31 March 2013, QAR 585 million of UAE assets that had been recorded as Personal Banking assets in 2012 were reclassiﬁed as Wholesale Banking assets

Wholesale banking The Group’s wholesale banking business comprises corporate and international banking and commercial banking divisions. In 2012, wholesale banking generated 29.7 per cent. of the Group’s net operating income (after consolidation and IFRS adjustments) and 26.8 per cent. of the net profit after tax generated by the Group’s three profit making segments. The corresponding figures for 2011 were 39.1 per cent. and 33.8 per cent., respectively. Wholesale banking is principally responsible for offering financing, cash management and other payment solutions to the Group’s corporate customers. Financing products include project finance, medium and long-term finance (including syndicated lending), contract financing (including through the issue of bid, performance and advance payment bonds), structured financing, working capital and overdraft loans and trade finance solutions such as documentary credits or collections and guarantees. These products are complemented by advisory services ranging from general advice relating to the optimisation of customers’ balance sheets (including structuring club and syndicated loans) to providing advice on obtaining credit ratings and arranging issues of debt securities in the international debt capital markets. Wholesale banking customers include large corporates, government owned entities and government organisations in Qatar and outside Qatar (which are the principal focus of the corporate and international banking division) and mid-cap corporates and SMEs (which are the principal focus of the commercial banking division). The principal focus for wholesale banking is strong Qatari companies, including those engaged in or supporting strategic government infrastructure projects. However, wholesale banking also works with

77 c108406pu040 Proof 5: 14.6.13_22:20 B/L Revision: 0 Operator AllS mid-size companies in Qatar, being those with an annual turnover of between QAR 75 million and QAR 400 million as well as corporates in other GCC countries including the UAE where the Group currently has four branches, one in each of Abu Dhabi, Dubai, Ras Al Khaimah and Sharjah. For these companies the Group seeks to offer convenient banking solutions across multiple geographies where the companies operate and to facilitate their cross border trade ﬂows. The Group’s Paris branch also positions it to support the investment plans of Qatari companies seeking to expand their operations into Europe or European companies seeking to invest in Qatar or the UAE.

Personal banking The Group’s personal banking business is focused on the premium and private banking segment. In 2012, personal banking generated 10.9 per cent. of the Group’s net operating income (after consolidation and IFRS adjustments) and 1.6 per cent. of the net profit after tax generated by the Group’s three profit making segments. The corresponding figures for 2011 were 18.5 per cent. and 15.6 per cent., respectively. The Group’s premium and private banking customers all have a dedicated relationship manager who is trained to listen to customers’ needs and to customise appropriate financial solutions. Customers can meet their relationship managers at their homes or other locations designated by them (known as doorstep banking) or in exclusive premium centres in branches. Premium customers also benefit from preferential pricing including discounted rates and fee waivers, complimentary premium banking membership for family members and other lifestyle privileges. The Group also offers its premium customers a range of products tailored to their needs, including structured products offering capital protection and potentially higher returns, and deposits with returns linked to underlying investments in Middle East equities, Government bonds and a range of commodities. The Group has also introduced the Visa Infinite credit card which is targeted at high net worth individuals and extended on an invitation only basis. Reflecting the number of high net worth individual customers currently being served, the Guarantor intends to launch an enhanced private banking capability in Qatar in 2013. This will offer tailored products and services, such as wealth management, asset financing and advisory services, to cater to the needs of high net worth and ultra high net worth individuals. The private bank will have a dedicated team of private bankers and intends to establish links with leading entities to influence and accelerate the deployment of the innovative products and solutions it aims to provide to its clients. The bank will accept clients on an invitation-only basis. In April 2011, the QCB issued a circular which limits the future retail banking business of Qatari banks. In particular, the circular set ceilings on loan amounts, limited the term for retail loans, fixed maximum interest rates, limited repayment instalments and prohibited the trading of retail loans between banks. The circular also restricts banks from lending to customers unless customer’s salary is deposited with the lending bank. As a relatively young bank, the overall impact of the circular on the Guarantor was limited, although it enhanced the Group’s focus on premium customers. In addition to premium customers, the Group also provides banking services to a limited group of personal customers, principally to support is corporate banking business. The Group offers all of its personal customers a choice of current, savings and fixed-term deposit accounts, as well as a fusion account which can be denominated in one of three currencies (U.S. dollars, euro and pounds sterling) and allows unlimited and instant access to savings as well as paying interest on the average monthly balance. The fusion account is the only transactional account in Qatar which comes with a free debit card, cheque book and access to all channels while paying interest. Customers can access their accounts through the Group’s branches, an always open call centre, the internet, their mobile telephone and the Group’s and third party ATMs. Personal banking customers may also apply for a Visa Platinum credit card and personal or mortgage loans. The success of the Personal Banking franchise has been recognised with a number of industry awards including ‘‘Best Premium Banking Service’’ by the Banker Middle East in 2012 and in 2013. The Banker Middle East also recognised the franchise’s expertise with the award for ‘‘Best Structured Product’’ in 2013.

Group treasury Group treasury manages the Group’s liquidity, investment securities and customer sales activities related to the capital markets. In 2012, group treasury generated 62.9 per cent. of the Group’s net operating income (after consolidation and IFRS adjustments) and 71.6 per cent. of the net proﬁt after

78 c108406pu040 Proof 5: 14.6.13_22:20 B/L Revision: 0 Operator AllS tax generated by the Group’s three profit making segments. The corresponding figures for 2011 were 48.1 per cent. and 50.7 per cent., respectively. Group treasury works closely with the Group’s other businesses to provide customer solutions using traditional as well as innovative treasury products. The Group’s treasury team has built strong relationships and executed master agreements with a large number of international and regional banks, allowing it to access a wide range of products and markets at competitive pricing. The funding and liquidity unit within group treasury is responsible for ensuring that there is sufficient liquidity in all relevant currencies to meet the Group’s funding needs as well as those of its customers. See ‘‘Risk Management—Liquidity risk’’ and ‘‘Financial Review—Liquidity and funding’’. The unit is also responsible for managing the Group’s short-term assets and liabilities, as well as its short-term foreign exchange exposures. Group treasury’s investment and derivatives unit manages the Group’s investment securities portfolio and hedges the portfolio against market risks. The unit has built a large portfolio of liquid and highly rated bonds issued by Qatari and other GCC issuers and has established strong relationships with major international and regional banks active in this area. The weighted average credit rating of this portfolio was AA- at 31 March 2013. The derivatives desk structures and transacts interest rate, foreign exchange, commodities and credit derivatives, both for its own hedging purposes and for sale to customers. See ‘‘—Investment securities portfolio’’. Group treasury’s sales unit provides a range of treasury products to its customers, who include leading corporate institutions in Qatar and the GCC, other wholesale banking clients and high net worth individuals. The products include foreign exchange contracts (on a spot or forward basis as well as options), interest rate derivatives and structured investment products.

Central functions The Group’s central functions do not generate any income and the after tax loss generated by this reporting segment was QAR 243 million in the year ended 31 December 2012 and QAR 251 million in the year ended 31 December 2011. The Group’s central functions include the following departments: * finance – which is responsible for budgeting and financial reporting, as well as internal financial performance measurement, the provision of management information and preparing forecasts and scenario planning to support the planning and strategy department. The finance department is also responsible for producing the Group’s annual and interim published financial statements and for the preparation of regular reports to the Group’s regulators in Qatar, the UAE and France; * compliance – each of the business functions in the Group has a dedicated compliance representative who reports to the Group compliance department. To ensure that compliance functions independently, the Group compliance department reports to the Board Compliance and Risk Committee and compliance departments in the subsidiaries report indirectly to the Group compliance department and directly to the general manager of the relevant subsidiary; * internal audit – which is an independent function reporting directly to the Board Audit Committee (the ‘‘BAC’’) and is governed by board approved terms of reference. The BAC is chaired by an independent director. The Group Head of Internal Audit has a direct reporting line to the BAC and attends all of its meetings. The Group’s Chief Financial Officer and the Group’s Chief Executive Officer (‘‘CEO’’) are normally invited to attend BAC meetings; * legal – which operates under the Group legal framework policy approved by the Board and intended to manage legal affairs and legal risk within the Group. The legal department provides central legal management and legal advisory services for the Group. All litigation and enforcement matters are centralised within the legal department which also is integrally involved in the Group’s ongoing regulatory compliance; * corporate affairs and marketing – working closely with the business, the marketing team is responsible for brand management and corporate communications targeted at employees, customers, prospective customers, journalists, shareholders, regulators and analysts; * human resources – which manages the Group’s human resource needs, including compliance with local employment laws and regulations and ensuring that appropriate programmes are in place for staff recruitment and retention, training and leadership development;

79 c108406pu040 Proof 5: 14.6.13_22:20 B/L Revision: 0 Operator AllS * IT and operations – which manages the Group’s IT systems, including its internet bank, and other operational support systems; and * planning and strategy – which is responsible for working with the CEO and the Group’s Chief Business Ofﬁcer and other business heads to develop strategic plans identifying short- and long- term business objectives.

Lending and funding Lending The Group’s customer loan portfolio amounted to QAR 14,054 million, or 40.8 per cent. of its total assets, at 31 March 2013. As at 31 December, 2012, the Group’s customer loan portfolio amounted to QAR 13,032 million, or 38.7 per cent. of its total assets, and as at 31 December 2011, it amounted to QAR 11,511 million, or 42.3 per cent. of its total assets. The reduction in the customer loan portfolio as a percentage of total assets at 31 December 2012 principally reﬂected a management decision not to compromise on credit quality in a tight lending environment, in expectation of better quality corporate banking opportunities in 2013. The Group’s customer loan portfolio grew by 55.9 per cent. during 2011 and by 13.2 per cent. during 2012. Management believes that the Group’s conservative credit policy and effective utilisation of risk management tools has enabled the Group to maintain a high quality loan portfolio, notwithstanding the continuing global ﬁnancial crisis. The table below shows the Group’s customer loan portfolio by industry segment as at December in each of 2011 and 2012 and as at 31 March 2013.

As at 31 December As at 31 March

2013 2011 2012 (unaudited)

(QAR (QAR (QAR million) (%) million) (%) million) (%) Government and related agencies(3)...... 1,476 12.6 2,375 17.9 1,283 9.0 Industry ...... 898 7.7 1,250 9.4 1,326 9.3 Commercial...... 1,176 10.1 951 7.2 1,164 8.1 Services(2) ...... 4,444 38.0 4,951 37.3 5,554 38.9 Contracting...... 1,168 10.0 1,163 8.8 1,541 10.8 Real Estate(1) ...... 1,777 15.2 1,235 9.3 1,378 9.6 Personal ...... 685 5.9 1,278 9.6 1,917 13.4 Others ...... 72 0.6 69 0.5 130 0.9

Gross loans and advances ...... 11,696 100.0 13,272 100.0 14,293 100.0 Allowance for impairment...... (185) (241) (239)

Net loans and advances to customers...... 11,511 13,032 14,054

Note: (1) Real estate exposure represents facilities extended to real estate companies when income from the financed properties is considered to be the primary source of repayment. Facilities that are collateralised by real estate assets but where repayment is derived from diversified operations is classified in the respective non-real estate sectors. (2) Services include loans to borrowers in the telecommunication, shipping, hotel and tourism sectors and conglomerates. (3) Includes a small amount of exposure to UAE government entities. See ‘‘Risk Management—Credit risk’’ for a discussion of the Group’s loan origination and monitoring procedures, its loan classification system and an analysis of its non-performing loans and provisioning and write-off policies.

Funding For a description of the Group’s funding, see ‘‘Financial review—Liquidity and funding—Funding’’.

80 c108406pu040 Proof 5: 14.6.13_22:20 B/L Revision: 0 Operator AllS Investment Securities Portfolio The Group maintains a significant portfolio of investment securities which principally comprises available for sale debt securities bearing fixed rates of interest. This portfolio provides the Group with a significant source of interest income and is also used by the Group as a funding tool. For the three months ended 31 March 2013, interest income from the Group’s investment securities comprised 47.3 per cent. of the Group’s total interest income compared to 45 per cent. in 2012 and 39.2 per cent. in 2011. As at 31 March 2013, debt securities with a carrying value of QAR 8,959 million were pledged as collateral under repurchase and other borrowing agreements with other banks. As at 31 March 2013, 90.1 per cent. of the Group’s gross investment securities portfolio represented available for sale securities, with 9.7 per cent. being held to maturity and the balance being held at fair value through profit and loss. As at 31 March 2013, 97.5 per cent. of the Group’s investment securities were interest bearing, 1.7 per cent. were mutual funds with the balance of 0.8 per cent. being equity securities. The table below shows a breakdown of the Group’s net investment securities by type as at 31 December in each of 2011 and 2012 and as at 31 March 2013.

As at 31 December As at 31 March

2013 2011 2012 (unaudited)

Quoted Unquoted Quoted Unquoted Quoted Unquoted

(QAR million) Available for sale State of Qatar debt securities . 4,702 920 6,555 2,036 5,982 1,921 Debt securities guaranteed by the State of Qatar...... 1,601 — 3,553 — 3,565 — Other GCC government debt securities ...... 228 — 34 — 34 — GCC ﬁnancial institutions and corporates debt securities ...... 1,581 — 1,536 — 2,401 — Other debt securities...... 50 5 111 5 112 5 Mutual funds ...... — 399 — 274 — 280 Equities ...... 138 — 131 — 128 —

Total available for sale...... 8,300 1,324 11,920 2,315 12,222 2,206 Fair value through proﬁt and loss Other debt securities...... — 39 — 37 — 39

Total fair value through proﬁt and loss ...... — 39 — 37 — 39 Held to maturity State of Qatar debt securities . 525 453 1,143 — 1,140 — Debt securities guaranteed by the State of Qatar...... 225 — 224 — 224 — Other GCC government debt securities...... 129 — 128 59 73 25 GCC ﬁnancial institutions and corporates debt securities...... 11 — 14 — 66 — Other debt securities...... — 23 25 — 25 — Total held to maturity ...... 890 476 1,534 59 1,528 25

Net investment securities ...... 9,190 1,839 13,453 2,411 13,750 2,270

As at 31 December 2010, the Group had no impaired investment securities. During 2011, a QAR 13 million impairment was made in respect of ﬁxed income securities issued by a European sovereign.

81 c108406pu040 Proof 5: 14.6.13_22:20 B/L Revision: 0 Operator AllS During 2012, a further impairment of QAR 6 million was made in respect of the same securities and, following an exchange offer in which new EFSF backed bonds were acquired, the full amount of the outstanding impairment was written off leaving no impaired securities as at 31 December 2012 and as at 31 March 2013. The Group’s investment securities portfolio focuses on regional fixed income securities, with a high investment grade rating. The Group’s investment strategy is to invest in the securities with the desired credit quality while hedging the associated market risk. In the fixed income book, the weighted average credit rating was AA- at 31 March 2013. The Group undertakes significant trading activity in fixed income securities. It does this with a view to enhancing the trading liquidity and minimising the volatility of Qatar government debt securities with a view to benefiting all Qatari issuers whose pricing and yields are benchmarked to these government bonds. Reflecting the size of its portfolio, its active risk management approach and the scale of its dealing activity with international banks, the Guarantor is considered to be a prominent market maker in GCC investment grade fixed income securities, particularly those from Qatari issuers.

Shares and shareholders As at 31 March 2013, the Guarantor had 360 million shares with a nominal value of QAR 10 each in issue, giving it an authorised share capital of QAR 3.6 billion. The Guarantor is 47 per cent. owned directly and indirectly by the Government and has over 17,000 shareholders. In addition to the Government’s holding, approximately 25 per cent. of the Guarantor’s shares are held by corporations, approximately 22 per cent. are held by retail investors and approximately 6 per cent. are held by banks and other ﬁnancial institutions. The table below shows the Guarantor’s principal shareholders (being those owning more than 4 per cent. of the Guarantor’s shares) as at 31 March 2013.

Shareholding Shareholder Category Domicile (%)

Qatari Diar Real Estate Investment Company ...... Government Qatar 17.24 Qatar Holding Co...... Government Qatar 10.00 Al Faisal International Investment Co...... Corporation Qatar 5.38 Pension and Retirement General Authority...... Government Qatar 5.36 Qatar Health and Education Fund ...... Government Qatar 5.00 Qatar Foundation...... Government Qatar 4.56 Union Investment House...... Corporation Bahrain 4.17

Total...... 51.71

Subsidiaries The Guarantor has three wholly-owned subsidiaries. The most significant of these is Al Khaliji France, which was previously known as BLC Bank (France) S.A., which the Guarantor acquired in late 2008 and which provided it with a European banking license and a network of four branches in the UAE and one branch in Paris. Al Khaliji France has its own board of directors and its own compliance structure that complies with both French and UAE requirements. Al Khaliji France plays a significant role in the Group’s strategy of capturing the significant trade and investment flows between Europe (and France in particular) and the UAE and Qatar, as well as flows with other GCC States, Turkey and other MENA region countries. The Group’s other subsidiaries are Al Khaliji Capital, which was established in 2011 as a brokerage and custodial services company but which has not yet commenced operations as the economic environment is not conducive, and the Issuer, which has been established to raise capital for the Guarantor, principally through the issue of debt instruments under the Programme.

Competition The Qatari banking sector is highly competitive, particularly with respect to retail banking activities, and is currently comprised of 18 banks (10 of which are Qatari domestic banks), including six conventional banks, four Islamic banks, seven local branches of foreign banks and one specialised development bank owned by the State of Qatar.

82 c108406pu040 Proof 5: 14.6.13_22:20 B/L Revision: 0 Operator AllS The focus of foreign banks in Qatar is primarily related to trade finance, foreign currency operations and Qatari government-related business, although several of these foreign banks also provide personal accounts and related services to individuals resident in Qatar. Foreign banks in Qatar compete for the same business as the Guarantor and other domestic banks, but operate under certain restrictions imposed by the QCB. The lending limits of foreign banks are based on their local capital base; however, foreign banks have historically been permitted to obtain guarantees from their head offices when credits exceed their legal lending limits. The Group’s principal domestic competitors in Qatar for non-Islamic banking services include Qatar National Bank, Commercial Bank of Qatar and Doha Bank, which, together, accounted for 61.4 per cent. of the Qatari market’s total assets, 65.2 per cent. of its total loans and advances and 75.5 per cent. of its total customer deposits as at 31 December 2012, according to Bloomberg and Central Bank figures. As at the same date, the Group’s equivalent market shares were 4.1 per cent., 2.6 per cent. and 3.8 per cent., respectively. The QFC is beginning to attract new banks given the low-tax environment, with a 10.0 per cent. tax on profits following a three-year tax holiday, 100.0 per cent. foreign ownership and profit repatriation. These new banks include investment banking firms which advise regional clients from offices in Dubai and London. The QFC is targeting global institutions relevant to the energy and other key sectors of the Qatari economy and which have expertise in banking, insurance, asset management, financial advisory services, and securities and derivatives dealing, as well as Islamic finance. Institutions registered with the QFC fall into two categories: * providers of ‘‘regulated activities’’ (essentially financial services); and * providers of ‘‘non-regulated’’ activities (essentially activities in support of financial services). QFC registered banks are currently subject to explicit restrictions on their local banking activities and, as a result, they cannot transact with retail customers in Qatar. However, these banks are often more experienced and able to offer more sophisticated products and services to corporate and institutional customers in Qatar, which adds another dimension to the competitive environment.

Information Technology The Group’s IT strategy is focused on providing reliable and available information and systems to its customers and employees in a secure environment. It also assesses the Group’s future operational needs and develops and implements new IT systems to meet them, in each case with reference to the Group’s overall technology strategy and with the primary aim of delivering efficient and cost-effective systems. For the Group’s customers, the focus is on delivering a secure, convenient and efficient banking service, offering a range of remote banking applications including ATMs, internet and telephone banking. For the Group’s internal businesses, the focus is on providing effective methods and processes for promoting and delivering services to their customers. The Group has implemented disaster and recovery sites on remote premises that can be activated when required, to ensure that critical systems and data continue to be fully operational and to provide essential services to its customers. The Group carries out daily and other periodic data back- ups which are stored at a location in Qatar away from its head office. The Group has developed an updated IT strategy covering the period 2012 to 2016. This is designed to ensure that the IT infrastructure continues to support the Group’s growth and enables the continued roll out of customer delivery channels as well as an enhanced customer relationship management front office solution. Additionally, the Group sends a copy of its critical systems and data to an international location in compliance with QCB instructions. The Group also carries out annual intrusion tests on its IT network with the assistance of an external vendor who performs continuous remote intrusion monitoring on the Group’s behalf, providing the Guarantor with a daily activity report. There is no evidence of successful intrusion attempts to date.

83 c108406pu040 Proof 5: 14.6.13_22:20 B/L Revision: 0 Operator AllS RISK MANAGEMENT

Overview The Group faces a wide range of risks in its business and operations, including: * credit risk, which is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s customer loan portfolio, interbank lending and investment securities; * liquidity risk, which is the risk that the Group will be unable to meet its obligations when they fall due as a result of customer deposits being withdrawn, cash requirements from contractual commitments, or other cash outflows. In extreme circumstances, lack of liquidity could result in losses on sales of assets, or potentially an inability to fulfil lending commitments; * market risk, which is the risk arising from changes in the value of financial instruments due to changes in interest rates and foreign exchange rates, as well as in equity and commodity prices; * operational risk, which is defined as the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events; and * regulatory and legal risks, which are managed by its legal and compliance departments. In order to identify, monitor and manage these risks, a risk management framework, approved by the Board Compliance and Risk Committee, has been put in place. The framework applies a robust set of policies, procedures and limits, including transaction analysis and suitability, risk ratings, risk limits, approval authorities and periodic reporting, which are binding on the Group’s risk management professionals, business segments and other functional teams. The Group’s risk management framework is designed to identify and analyse the risks set out above, prescribe appropriate risk limitations, monitor and record the incidence of such risks on an ongoing basis and to prescribe appropriate remedial action. The Group’s risk management framework is reviewed on a regular basis at least annually. At the same time, the Group maintains its compliance with Basel II and other regulatory guidelines within its risk management framework. The Group is committed to prudent risk management and has in excess of 35 dedicated staff committed to managing risk. The risk management framework and procedures implemented by the Group have allowed it to maintain a low non-performing loan ratio (the ratio of non-performing loans to total loans) of 0.39 per cent. at 31 March 2013. The Group’s provision coverage ratio (the ratio of provisions for non-performing loans) was well in excess of 100 per cent. as at 31 March 2013.

Risk management framework and governance The identification, measurement and management of risk is a strategic priority for the Group. The overall responsibility for ensuring a robust risk management infrastructure rests with the Board. The Group has established a risk management framework covering accountability, oversight, measurement and reporting to maintain relevant standards. The Group’s risk governance structure comprises five layers as follows: * Level 1: the Board, which is ultimately responsible for all risk management activities within the Group; * Level 2: the Board Compliance and Risk Committee, to which the Board has delegated significant risk management responsibility; * Level 3: senior management committees such as the Group Credit and Investment Committee; the Group Asset, Liability and Capital Committee (the ‘‘GALCCO’’); and the Group Risk Committee; * Level 4: the risk function, comprising units responsible for both corporate and consumer credit risk management, market risk management, security risk management and operational risk management; and * Level 5: the business units. The Group’s risk management framework is based on the principle of ‘‘three lines of defence’’. The first line of defence is the business, which is accountable for the ownership, day-to-day management and control of all risks at an operational level and for implementing processes and

84 c108406pu050 Proof 5: 14.6.13_22:20 B/L Revision: 0 Operator AllS testing key controls in compliance with the Group’s approved plans, policies, procedures and delegation of authority. The second line of defence is the Group’s control functions, primarily consisting of Risk Management, Compliance, Legal and Finance. These functions are responsible for ensuring that the activities of the Group are conducted with proper risk consideration and within the operational risk management framework, as well as complying with applicable legal and regulatory requirements. Regular monitoring and reporting are an integral part of these functions. The third line of defence is Internal Audit, which reports directly to the Board Audit Committee (‘‘BAC’’) and is responsible for independently assessing the adequacy and effectiveness of key controls and ensuring compliance with the Group’s policies. The Board of Directors and its committees convene quarterly to review reports that include the internal controls of the Group and to make decisions for the enhancement or remediation of any control weaknesses. The Board Compliance and Risk Committee has overall responsibility for ensuring that adequate structures, policies and procedures are in place for risk management and that they are properly implemented. The Board Compliance and Risk Committee also approves all risk management policies and sets limits by assessing risk appetite, skills available for managing risk and the Group’s risk bearing capacity.

Group oversight Each country in which the Group operates (namely, Qatar, France and the UAE) has its own Risk Manager. The risk policies, strategies and limits are set by the Board Compliance and Risk Committee for the entire Group. Additionally, a Risk Committee and an Asset, Liquidity and Capital Management Committee (‘‘ALCCO’’) have been established in each country to monitor and oversee the implementation of the risk framework, as well as the management of capital, liquidity and interest rate risks. These management committees exercise their powers in accordance with the limits approved for them by the Board and in accordance with the limits imposed on their respective jurisdictions. Al Khaliji France provides regular periodic reports on its internal controls and management committee’s activities to both its board and to the Guarantor, both for monitoring purposes and as part of the consolidation activities of the Guarantor.

Risk management responsibilities The main responsibilities of the Risk Management department are to oversee all credit, market, security, liquidity and operational risk matters at a Group level and to ensure compliance with local and international regulations and practices. The Risk Management department conducts periodic reviews of the Group’s risk portfolios and ensures that all applicable policies have been efficiently applied. In addition, the department is responsible for ensuring that the Group’s reputation is preserved and enhanced through choosing to engage responsibly in the right business activities with the right clients. The Group aims to manage and control concentrations of credit risk wherever they are identified, with specific emphasis on individual counterparty and group concentrations, as well as industry and country concentrations. The Group seeks to mitigate its exposure to credit risk through taking collateral or other security for funds advanced, see ‘‘—Credit risk—Collateral policy’’.

Credit risk The respective lending portfolios of each of the Guarantor, Al Khaliji France and the operations in the UAE are closely monitored and controlled by ensuring adherence to the Group Credit Policy and Instructions that have been approved by the Board. The Compliance and Risk Committee (the ‘‘CRC’’) of the Board exercises oversight of the credit risk management function in terms of: * approving risk policies; * delegating credit approval authorities; and * setting risk concentration limits.

85 c108406pu050 Proof 5: 14.6.13_22:20 B/L Revision: 0 Operator AllS The CRC also monitors the performance of the credit risk management function through periodic meetings which are held on at least a quarterly basis. At these meetings, reports are submitted as required under the approved risk policies, covering the following issues: * high value credits; * credits approved as exceptions to the credit policies; * portfolio concentrations; * watch list accounts and problem loans as well as the progress of ongoing recovery actions; and * reports on portfolio quality, breaking down concentrations by risk rating, tenor and industry. The Group Credit and Investment Committee (the ‘‘GCIC’’) is authorised by the CRC to approve exceptional individual credits, including those for amounts above the lending authorities of the senior credit ofﬁcers, those where individual concentration limits would be exceeded, and those containing unusual risks. In addition to the guidance provided by the Group Credit Policy and Instructions, lending by the Guarantor and Al Khaliji France is closely controlled by the maximum overall delegated lending authority granted to them by the CRC. Within the overall lending authority each unit has its own delegated lending authorities granted to senior credit ofﬁcers and management under their own respective credit committees. Any amount exceeding the delegated authority is subject to the approval of the GCIC.

Loan origination The Group has the following levels of credit approving authority:

Approving body Authority limit

Senior credit officer and Group chief risk officer...... QAR 50 million GCIC ...... All amounts above QAR 50 million CRC ...... High value credits, country limits and new bank clients The Group’s procedures for approval of loans differ depending upon the category of the proposed customer. Corporate credit applications are presented to the relevant approving authority by a relationship manager, along with the necessary information and analysis to support the relationship manager’s recommendation. Each credit application is then subject to analysis by a qualified credit risk analyst. The analyst’s assessment is based on an evaluation of externally and internally compiled data on the applicant and analysis of relevant risks, covering financial, business, structural and management risks to ascertain the proposed borrower’s repayment capability and cash flow. The application is also analysed in terms of the intended transaction amount, tenor, security and any relevant delinquency records. The analyst is required to comment upon whether the credit risk is acceptable and consistent with the overall policy guidelines and QCB regulations, and where necessary the analyst will suggest conditions to be applied to the proposed loan with a view to mitigating the underlying risks. In addition to the credit approval threshold levels described above, the Guarantor also has an embedded credit philosophy. For a credit application to be approved: * the borrower must have a clear repayment plan with two sources of repayment identified at the time of lending; * the borrower’s primary source of repayment must be from business cash flows and not from proceeds of the sale of any collateral * the borrower must provide a comprehensive suite of information, including accurate and current financial information and, where appropriate, satisfactory collateral or security; and * the transaction must not fall within the scope of activities that are against the Guarantor’s designated policies.

Loan classification and monitoring The Group has implemented a comprehensive internal credit rating system for its wholesale customers. The system allows the Group to rate the risk of a corporate customer based on qualitative as well as quantitative factors. Qualitative factors include competition, industry trends, management and other factors, while quantitative factors include financial indicators and historical financial

86 c108406pu050 Proof 5: 14.6.13_22:20 B/L Revision: 0 Operator AllS performance. A corporate customer is assigned a rating using a blend of these factors. Personal customers are assessed using comprehensive criteria employing factors such as income, age, organisation and current indebtedness. In its Financial Statements, the Group classifies its loans into one of four categories as follows: * Satisfactory risk – these are loans which are fully performing and otherwise generally satisfactory; * Viable but monitoring – these are loans which are fully performing but which are monitored on regular basis as regards financial ratios and other parameters, including as to their credit or compliance with approval conditions; * Past due but not impaired – a loan is past due where a due date for payment in respect of the loan or any part of it has occurred and the payment has not been made. A loan payable on demand is treated as past due when a demand for payment has been made and not met; * Impaired – these are loans in respect of which a specific impairment provision has been made. As at 31 March 2013, 94.9 per cent. of the Group’s customer loan portfolio was classified within the first two categories. As at 31 December 2012 and 31 December 2011, the equivalent proportions were 94.5 per cent. and 93.8 per cent., respectively. In addition to its customer loan portfolio, the Group also has significant credit exposure in relation to its investment securities portfolio and other banks. None of this exposure was past due or impaired at 31 March 2013 or 31 December 2012 and only 0.1 per cent. of this exposure was impaired at 31 December 2011. The table below shows an ageing analysis in respect of the Group’s past due but not impaired customer loans as at 31 December in each of 2011 and 2012 and as at 31 March 2013.

Past due Past due Past due Past due up to 30 30 to 60 60 to 90 over 90 days days days days Total

(QAR million) As at 31 December 2011 ...... 20 20 7 615 661 As at 31 December 2012 ...... 37 4 1 624 666 As at 31 March 2013 (unaudited) ...... 30 4 6 626 666 The table below shows an analysis of the Group’s impaired customer loans as at 31 December in each of 2011 and 2012 and as at 31 March 2013.

31 March 2013 31 December 2011 31 December 2012 (unaudited)

Fair value Fair value Fair value Gross of Gross of Gross of amount collateral amount collateral amount collateral

(QAR million) Consumer...... 25 9 30 34 26 9 Corporate...... 37 35 30 24 30 21

Total gross exposure ...... 62 44 59 58 56 30

The Group includes loans that are in the process of restructuring with no loss of capital as past due but not impaired. Loan restructuring is undertaken in relation to payment extensions and modiﬁcations, based on management plans or other criteria that, in the judgment of management, indicate that payments will most likely continue. The Group has made provisions against certain restructured loans that will be retained until the restructuring process is established as successful. As at 31 March 2013, the fair value of the collateral held by the Group in respect of its impaired customer loans amounted to 53.6 per cent. of the gross exposure under those loans. As at 31 December 2012 and 31 December 2011, the equivalent proportions were 98.9 per cent. and 71.2 per cent., respectively.

87 Collateral policy The majority of the Guarantor’s corporate credit exposure (non-Government) is collateralised. Eligible collateral and collateral valuation is based upon QCB regulations. The Group holds collateral in the form of property mortgages, charges over other property (including shares in listed companies (other than shares in the Guarantor)), guarantees, counter indemnities and assignments of contractual payments and receivables. While real estate security is professionally and independently valued once each year, listed shares are valued on a monthly basis.

Loan loss provisioning The QCB provides guidelines for classifying credit exposure in the following categories.

Type Number of days past due Provision

Standard(1) ...... Normal accounts — Special mention(2)...... Up to 90 Management discretion Substandard(3) ...... 90 days up to 180 days 20 per cent. Doubtful(3) ...... 180 days up to 270 days 50 per cent. Loss(3)...... 270 days and above 100 per cent.

Notes: (1) Loans classified by the Group as Satisfactory risk and as Viable but monitoring would typically also be classified as Standard under QCB guidelines. (2) Loans classified by the Group as Past due but not impaired would typically also be classified as Special mention under QCB guidelines. (3) Loans classified by the Group as Impaired would typically fall under one of the following QCB categories: Substandard, Doubtful or Loss. In addition to the above, the exposure can be classified based on qualitative factors. The Group has introduced an additional category for delinquent exposures that operates in advance of the timings dictated by the QCB guidelines for credit exposures. This additional category draws attention to accounts which exhibit potential weaknesses and require pre-emptive action. The result is that an account which is identified in this category is placed on a ‘‘watch list’’ so that it may be monitored and reviewed by relevant management. Although the QCB provides a provision range for delinquent accounts in different categories, the Group provides for a maximum in any exposure under the above-mentioned delinquent categories. The Group is also required to maintain a 2 per cent. reserve annually on the total loans and advances portfolio in addition to any specific provision for any exposure. In addition to the QCB regulatory requirements described above, the Group has its own internal policy in relation to provisioning and follows IFRS provisioning methodology in the preparation of its Financial Statements. Under IFRS, the Group assesses whether there is objective evidence that a loan may be impaired based on whether a loss event has occurred and, if so, whether the loss event has a negative impact on the future cash flows expected under the loan. Objective evidence may include significant financial difficulty being experienced by a borrower, a borrower’s loans being restructured in a manner that reduces their future cash flows, indications that the borrower may become bankrupt or the occurrence of economic conditions that correlate with increased defaults. Under IFRS, management assesses all individually significant loans and advances for impairment. Where loans are impaired as a result, the amount of the impairment is the difference between the carrying value of the loan and the present value of the future cash flows expected discounted at the loan’s original effective interest rate, after taking account of the value of collateral net of the estimated costs of realising that collateral. Individually significant loans which are not determined to be impaired and all other loans are also collectively assessed for impairment by grouping together loans with similar risk characteristics and considering factors such as credit quality, portfolio size, concentrations and economic factors. In order to determine the amount of the collective provision, assumptions are made to define the manner in which inherent losses are modelled and to determine the necessary inputs, based on historical experience and current economic conditions. The Group’s experience is that generally its total provisions meet or exceed those required under QCB/IFRS rules. The QCB requires all Qatari banks to discuss their individually significant provisions with the QCB before a final determination is made on the classification of the loan and the appropriate provisions made.

88 c108406pu050 Proof 5: 14.6.13_22:20 B/L Revision: 0 Operator AllS The early detection of accounts which demonstrate the potential to become a non-performing loan (‘‘NPL’’) (defined as a loan in respect of which payments of principal or interest are overdue by more than 90 days) is central to the Group’s remedial management process. Risk Management decides whether to include an account in the watch list based upon predefined early warning sign criteria. Factors considered would include, for example, circumstances in which an account is overdrawn and has been inactive for three months, or where a loan is three or more instalments in arrears or any other qualitative factors. The Group aims to ensure that any sign of deterioration in asset quality is promptly recognised and rehabilitation of the account is initiated. For corporate and institutional accounts, the relationship manager has direct responsibility for knowing the condition of each of the customers within his portfolio and it is therefore the relevant relationship manager’s responsibility to identify any sign of deterioration and initiate remedial action. The relationship manager is the primary person tasked with the identification of problem accounts. In addition, various reports covering daily excess positions, dormancy and loan instalment delinquency are circulated by Risk Management throughout the Group to the different business divisions and these are examined as appropriate on a daily, weekly or monthly basis by the Group’s relationship managers.

Loan write-offs After all possible means of recovery are exhausted, the accounts are transferred to the legal department so that legal proceedings may be instituted in order to recover funds through litigation. In the case of personal accounts, collection efforts are based on clearly defined and strict collection criteria and processes until the account is passed over to the legal department for action. The Group writes off a loan or an investment debt security balance, and any related allowances for impairment losses, once it has determined that the loan or security is uncollectible and after QCB approval. This determination is made after considering information such as the occurrence of significant changes in the debtor’s financial position such that the debtor can no longer pay the obligation, or that proceeds from collateral will not be sufficient to repay the entire exposure. For smaller balance standardised loans, write-off decisions are generally based on a product specific past due status.

Liquidity risk The aim of the Group’s liquidity management is to ensure that it is always in a position to honour its payment obligations and to minimise its costs of funding. Liquidity management activities are divided into: * operational liquidity – which is day-to-day management of cash and the Group’s accounts with other banks; and * medium-term and long-term liquidity – which is the management of expected cash flows generated by on- and off-financial position items so as to provide sufficient funds for the Group’s business activities. The Group uses internal measures for managing liquidity risks that include a combination of forecasting cash flows and stress testing around scenarios developed by the Guarantor. For this purpose, net liquid assets are considered as including cash and cash equivalents and investment grade debt securities for which there is an active and liquid market. The deposits from customers and committed advances to customers are weighted amounts, arrived at after applying behavioural characteristics.

89 c108406pu050 Proof 5: 14.6.13_22:20 B/L Revision: 0 Operator AllS In addition, the Group complies with the relevant regulatory guidelines prescribed by the respective banking regulator in each of the three regulated jurisdictions within which it operates (Qatar, the UAE and France). The table below shows the Group level liquidity, as measured by the QCB, for the years ended 31 December in each of 2011 and 2012 and for the three months ended 31 March 2013.

Three months ended 31 March 2013 (unaudited) 2012 2011

Average for the year/period...... 178% 173% 179% Maximum for the year/period ...... 187% 188% 198% Minimum for the year/period...... 172% 160% 162% A maturity analysis of the Group’s ﬁnancial assets and liabilities is contained in note 4(c)(iii) to the 2012 Financial Statements.

In addition, the Group is exposed to liquidity risk through its off balance sheet obligations to lend money and its contingent obligations under guarantees and letters credit. The table below shows the maturity proﬁle of these obligations based on their earliest contractual maturity date as at 31 December in each of 2011 and 2012 and as at 31 March 2013.

No later More than than 1 year 1 to 5 years 5 years Total

(QAR million) At 31 December 2011 Unutilised credit facilities ...... 3,798 16 — 3,814 Guarantees and letters of credit ...... 2,863 1,312 — 4,175 At 31 December 2012 Unutilised credit facilities ...... 6,834 34 — 6,868 Guarantees and letters of credit ...... 3,745 1,400 — 5,145 At 31 March 2013 (unaudited) Unutilised credit facilities ...... 7,271 28 — 7,299 Guarantees and letters of credit ...... 3,956 2,211 22 6,189 Market risk Market risk management aims to ensure that risk exposures from the major market risks do not exceed the Group’s risk appetite, as articulated in risk limits, policies and product programmes. These controls deﬁne permissible conduct and also specify the types of ﬁnancial instruments which the Group can acquire as part of its trading and investment activities.

The primary objective of the Group’s market risk management function is to provide a coherent policy and operating framework for the management of market risks, and to provide transparency into the Group’s market risk proﬁles for both internal and external stakeholders. The Board Compliance and Risk Committee approves the Group’s market risk appetite in the form of speciﬁc limits. These limits are based on one or a combination of notional amount, sensitivity measures and value at risk (‘‘VaR’’). The Board Compliance and Risk Committee also approves the market risk policies which provide guidelines to identify, measure and monitor the Group’s market risk exposures. The market risk management function is overseen by the Group Risk Committee, which oversees market risk management for the Group’s treasury and investment activities, and the GALCCO, which deals with issues such as structural interest rate and currency risks.

The market risk management function, which is independent of all business functions, monitors and reports all limits and provides periodic risk reports to the Group Risk Committee and the GALCCO. Daily risk reports are provided to senior management that cover trading activities. Stress testing and sensitivity analysis for interest rate risk and foreign exchange risk are conducted on a regular basis and the results are presented to the Group Risk Committee and the GALCCO for review. A detailed market risk review pack is submitted to the Board on a quarterly basis.

90 c108406pu050 Proof 5: 14.6.13_22:20 B/L Revision: 0 Operator AllS Interest rate risk The primary market risk to which the Group’s banking and trading portfolios are exposed to is the risk of loss from fluctuations in the future cash flows or fair values of financial instruments because of a change in market interest rates. Interest rate risk is managed through monitoring interest rate gaps and using off balance sheet instruments, primarily interest rate swaps, where appropriate. GALCCO is the monitoring body for compliance with these limits. A summary of the Group’s interest rate gap position on non-trading portfolios, using the shorter of maturity or re-pricing periods, is set out in note 4(d)(i) to the 2012 Financial Statements. In addition, note 4(d)(ii) to the 2012 Financial Statements contains an interest rate sensitivity analysis which shows that the effect of a parallel 1 per cent. change in interest rates applied to the currencies in which the Group’s financial assets and liabilities are denominated, with all other variables remaining unchanged, would have been: * to reduce the Group’s net interest income by QAR 84 million, and its comprehensive income by QAR 232 million, in 2012 (in the case of an increase in interest rates); and * to increase the Group’s net interest income by QAR 67 million, and its comprehensive income by QAR 88 million, in 2012 (in the case of a decrease in interest rates).

Exchange rate risk The Group is exposed to the effects of fluctuations in prevailing foreign exchange rate on its financial position and cash flows. Note 4(d)(iii) to the 2012 Financial Statements quantifies the Group’s net exposures in its principal currencies as at 31 December 2012 and includes a sensitivity analysis in relation to its euro and aggregate other currency exposure. No sensitivity analysis is provided in relation to the Group’s Qatari riyal, U.S. dollar and UAE dirham exposures as both the Qatari riyal and UAE dirham have a long-standing history of being pegged to the U.S. dollar at a fixed exchange rate.

Equity price risk The Group has only minimal holdings of equity securities and its exposure to equity price risk is considered immaterial.

Operational risk Governed by Board approved policies, the operational risk function works closely with all of the Group’s business lines and subsidiaries to raise awareness of operational risk. Key risks across businesses and units are identiﬁed and monitored on a monthly basis using various key risk indicators. The capture and reporting of operational risk incidents and losses is established as a ﬁrm process across all business and support units. An annual risk control self assessment programme is run for all business and support units and complements the Group’s risk budgeting programme. In addition, a comprehensive business continuity and disaster recovery management programme has been implemented and fully tested and is designed to cope with business disruptions and major disasters. Further, an insurance and risk transfer programme has been established to deal with any catastrophic losses. In addition, the operational risk function leads the process management and control function across the Group to ensure control gaps are minimised across the Group’s key processes. Finally, operational risk reporting is escalated periodically to the Group Risk Committee and the Board Compliance and Risk Committee to ensure proper oversight and review is conducted by relevant members of the Board and senior management.

Derivatives The Group transacts in derivatives instruments both as principal, to manage the Guarantor’s own financial risk, and on behalf of its clients. In the latter case, the Guarantor covers the exposure which it assumes on a back to back basis with market counter parties to avoid taking any market risk. The Group also uses interest rate options and swaps and cross currency swaps to hedge its exposure to changes in the fair value of fixed rate debt securities attributable to changes in interest rates. These swaps are matched to specific issues of debt securities and, where the characteristics of the derivative permit, hedge accounting is applied. Foreign exchange derivatives are also used to hedge mismatches between loans and deposits denominated in different currencies. Note 32 to the 2012 Financial Statements shows the fair values and notional amounts of the Group’s derivative instruments as at 31 December 2012 and 31 December 2011.

91 c108406pu050 Proof 5: 14.6.13_22:20 B/L Revision: 0 Operator AllS Compliance Overview Each of the business functions in the Group, has a dedicated compliance representative, who reports to the Group Compliance Department. To ensure independent functioning of compliance, the Group Compliance Department reports directly to the Board Compliance and Risk Committee and compliance departments in the subsidiaries report indirectly to the Group Compliance Department and directly to the General Manager. Internal Audit ensures that a robust compliance framework is being proactively implemented. The Group’s compliance programme has three main pillars (advise, monitor and report) built on a foundation of a sound understanding of the appropriate regulatory requirements. Advising encompasses internal notification of regulatory change, new products and services and internal processes as well as other internal communications including training and a compliance calendar. Monitoring includes procedures for compliance reviews, breach escalation, complaints handling, whistleblowing, issues management and compliance indicators. Reporting is done to executive management, the Board and regulators. As compliance requirements are constantly evolving, the Group has established an online portal which creates a central focus where the compliance team and employees can access and perform their compliance duties as well as view their compliance risk profiles and information. Compliance confidence indicators (‘‘CCIs’’) are used as a key tool in providing the Board Compliance and Risk Committee with a measurable way to monitor compliance across the Group. Every department head is assigned a CCI which also forms part of his appraisal.

Anti-money laundering and counter-terrorism financing The Group has defined comprehensive know your customer (‘‘KYC’’) and anti-money laundering policies and processes which comply with all applicable regulatory requirements. The Group’s KYC process includes customer profiling, risk assessment and due diligence aspects. Every business relationship within the Group is reviewed and rated against defined risk parameters that comply with applicable regulatory requirements. These relationships are subject to either reduced, standard or enhanced know your customer due diligence procedures, depending on the level of assessed risk. Compliance and the business units work together to ensure that clients and transactions are screened to enable the Guarantor to comply with all local regulations and to ensure that transactions are not conducted with entities on OFAC and other international watch and sanction lists.

Internal Audit The internal audit function is an independent function reporting directly to the Board Audit Committee (the ‘‘BAC’’) and is governed by Board-approved terms of reference. The BAC is chaired by an independent director. The Group Head of Internal Audit has a direct reporting line to the BAC and attends all of its meetings. The Group’s Chief Financial Officer and the CEO are normally invited to attend BAC meetings. The BAC’s terms of reference requires it to: * ensure independence and effectiveness of the internal audit function; * review the adequacy, efficiency and effectiveness of internal controls in the Group; * ensure the accuracy and reliability of financial, regulatory and management reporting; and * oversee the selection and compensation of the external auditor. The BAC’s terms of reference are complemented by the Internal Audit Charter, which defines the purpose, authority, responsibilities and other aspects of the internal audit activities. In addition, the Group’s internal audit framework includes: * an internal audit policy and instructions manual; * various internal policies and instructions published by the Guarantor; * external laws and regulations; and * standards set by The Institute of Internal Auditors (the ‘‘IIA’’). The internal audit process begins with determination of an audit strategy and an annual audit plan that are approved by the BAC. The strategy and plan are based on an assessment of the inherent

92 c108406pu050 Proof 5: 14.6.13_22:20 B/L Revision: 0 Operator AllS risks faced by the Group, estimated timelines and available resourcing. The approved strategy and plan forms the basis for performing audits for the period. Internal audit ensures compliance with QCB instructions to audit all critical functions of the Guarantor periodically. It adheres to best practices, in particular, those set by the IIA which awarded the Group’s internal audit function its highest rating at the end of 2012. The internal audit process consists of six main phases: (1) risk assessment and planning, (2) execution, (3) reporting, (4) post- audit 360º client feedback (5) periodic follow-up reviews and (6) periodic and comprehensive BAC presentations.

93 c108406pu050 Proof 5: 14.6.13_22:20 B/L Revision: 0 Operator AllS MANAGEMENT AND EMPLOYEES

Board of Directors The Board is responsible for the overall direction, supervision and control of the Group. The day to- day management of the Group is conducted by the Group’s Chief Executive Officer (the ‘‘CEO’’). Under its Articles of Association, the Board is required to comprise seven members, of whom six are elected by the General Assembly of Shareholders and one is appointed by Qatar Holding LLC as the Chairman of the Board. A majority of the Directors, including the Chairman, must be Qatari citizens. Board members are elected for a three year term and may not serve more than two consecutive terms. The Board’s duties and responsibilities include: * providing leadership and guidance to the Group’s activities; * overseeing the work of the management and its execution of the Group’s business strategies; * managing, monitoring and overseeing the business and the corporate governance framework of the Group; * adopting strategic and financial plans; * adopting and ensuring the implementation of appropriate risk assessment and risk management policies and processes; * monitoring and assessing the internal controls and the Group’s compliance with applicable laws and regulations; and * approving compensation, establishing a performance review process and adopting a succession plan for senior management. The Board meets regularly (and is required to meet at least six times a year). Decisions of the Board are, with limited exceptions, made by majority votes of those present (in person or by proxy) at the meeting. The Board and senior management have delegated certain powers to committees, as described below. The members of the Board of Directors are: Position Experience Sheikh Hamad Bin Faisal Bin H.E. Sheikh Al Thani holds a Bachelor’s degree in Political Science. Thani Al Thani H.E. Sheikh Al Thani’s other current positions include: Chairman and Managing Director Re-elected in March 2012 by * Vice Chairman, Qatari Investors Group; Qatar Holding LLC * Board Member, Qatari Businessmen Association; and * Board Member, Qatar Insurance Company. H.E. Sheikh Al Thani’s previous experience includes appointments as Minister of Economy and Commerce of Qatar, Member of Supreme Council for Economic Affairs and Investment, Director of Customs Department, Heir Apparent Office, Diwan Al Amiri, Vice Chairman of Qatar National Bank and Chairman of Qatar General Organisation for Standard and Metrology. Abdulla Bin Nasser Al Misnad H.E. Al Misnad is the Chairman and Managing Director of Al Vice Chairman, Independent Misnad Holding Company, which owns and manages a group of Member companies with diverse business activities. H.E. Al Misnad chairs the Group’s Audit Committee. His other current positions include: Re-elected in March 2012. * Qatari Investors Group, Chairman; * Vodafone, Vice Chairman; and * Qatari Businessmen Association, Board Member.

94 c108406pu050 Proof 5: 14.6.13_22:20 B/L Revision: 0 Operator AllS Mohammed Khalid Al Mana Mr. Al Mana holds a degree in Financial Management at Indiana Independent Member State University, United States. Mr Al Mana is the Chairman of the ad hoc Board Corporate Governance and Nomination Re-elected March 2012 Committee and a member of the Board Compliance and Risk Committee. His other current business interests include: * Al Mana and Partners, established in 1959; * Qatar Cleaning Co., established in 1979; * Al Mana Engineering and Contracting Company, established in 1960; * Almana and Bowyer Building LLC; and * Twenty Five North. His previous appointments have included the presidency of both Qatar Chamber of Commerce and Industry and the Gulf Tourism Committee and a member of the Supreme Education Council of Qatar. Mr. Al Mana also previously chaired the Group’s Audit Committee. Abdul Salam Bin Mohammed Al Mr. Al Murshidi holds a Master’s degree in Petroleum Geology Murshidi and a Bachelor’s degree in Geophysics. Mr. Al Murshidi is the Non-Executive Member Chairman of the Board Compliance and Risk Committee and a member of the Board Remuneration Committee. His other current Re-elected in March 2012 positions include: * Rawasi Oman Investments, Chairman; * Shell Oman Marketing (SAOG), Board Member and Chairman of the Audit Committee; * Sohar University, Member of the Board of Governors; * Higher Technical College, Member of the College Council; * V2 Trenching LLC, Director; * Member of the Economical Committee, Oman Chamber of Commerce and Industry; * The Omani-Qatari Businessmen Council; * The Omani-India Businessmen Council; * Member of the Arab-Austrian Chamber of Commerce; and * Honorary Counsel of Mongolia in Oman. He previous positions include Chief Executive Ofﬁcer of Oman Investment Corporation, Corporate Affairs Manager of Oman LNG, Managing Director in Al Amjad Trading and Vice Chairman of Muscat College. He has also founded various industrial, commercial and investment companies in the region. Hisham S. Al Saie Mr Al Saie holds an MBA from London Business School and a Non-Executive Member Bachelor’s degree in Accounting from the University of Texas. Mr. Al Saie is a member of the Board Audit Committee and the Board Re-elected in March 2012 Corporate Governance and Nomination Committee. His other current positions include: * Nass Corporation B.S.C; * Diyyar Al-Muharraq B.S.C (c); * BMI Bank B.S.C (c); * Amar Holding Company B.S.C (c); * Capital Management House B.S.C. (c); and * Bahrain Bay Development B.S.C. (c).

95 c108406pu050 Proof 5: 14.6.13_22:20 B/L Revision: 0 Operator AllS Mr. Al Saie’s previous positions include Head of Corporate Finance at SICO Investment Bank and positions at BDO Jawad Habib, PriceWaterhouse Coopers and Arthur Andersen. Rashid Al Naimi Mr. Al-Naimi holds a Bachelor of science degree in Economics Non-Executive Member from Indiana State University, United States. He is the Chairman of the Board Remuneration Committee and a member of the Board Elected in March 2012 Compliance and Risk Committee. His other current positions include: * Vice President of Administration, Qatar Foundation; and * Chairman for Mazaya Qatar, MEEZA Knowledge Ventures (KV) and Gulf Bridge International (GBI). In addition, Mr. Al Naimi also represents Qatar Foundation on a number of boards and committees, including Vodafone Qatar. Saif Al Madfaa Mr. Al Madfaa holds a Bachelor degree in commerce from the Non-Executive Member University of Cairo. He is a member of the Board Audit Committee and the Board Corporate Governance and Nomination Committee. Elected March 2012 He is currently Acting Director of the internal audit department of the Qatar Investment Authority, including Qatar Holding. Mr. Al-Madfaa previously worked at the State Audit Bureau as Senior Auditor. He then joined the Supreme Council for Economic Affairs and Investment in Qatar as Head of Employee Affairs. In 2006, after formation of the Qatar Investment Authority, he was appointed as the Head of Payments at the Finance Department before taking on his present role in 2011. The business address of each member of the Board is Asia Street 60, West Bay, P.O. Box 28000, Doha, Qatar. No member of the Board has any actual or potential conﬂict of interest between his duties to the Guarantor and his private interests and/or other duties.

Board Committees The Board has delegated certain of its duties to the following committees: * Audit Committee: The Audit Committee is delegated by the Board to review and monitor the integrity of the Group’s financial statements and financial reporting, its internal control systems, audit responsibilities and internal and external audit matters. The Audit Committee comprises three members and is chaired by independent director, H.E. Abdulla Bin Nasser Al Misnad. The other members are Mr. Saif Al Madfaa and Mr. Hisham Al Saie. In 2012, the Audit Committee held three meetings to review the financial interim and final results and to discuss the Internal Audit reports on key risk and control issues and approve the annual internal audit plan; * Corporate Governance and Nomination Committee: This Committee assists the Board in fulfilling its obligations by providing a focus on corporate governance and policy governance, taking into consideration established governance best practices. The Committee is tasked with approving or making recommendations regarding corporate values under the Group Code of Conduct, assisting the Board in determining its composition and structure and recommending succession planning for the Board. The Committee meets on an annual basis to review and evaluate the performance of the Board as a whole in meeting its key responsibilities and achieving its objectives and to evaluate the level of interaction between the Board and senior management. No meetings were held for the Committee in 2012 although certain resolutions were passed by circulation. The full Board decided on a number of matters falling under the remit of this committee during 2012, particularly pertaining to approval of policies and corporate governance practices; * Compliance and Risk Committee: The Compliance and Risk Committee is responsible for the Group’s compliance framework and for the policies, criteria and control mechanisms for all activities involving risks. The Committee reviews and monitors Group-wide risk management, including market, liquidity, credit and operational risk. Generally, the Committee’s remit does not cover operational matters but it performs an oversight, monitoring and advisory role in relation to key areas in the Group’s risk portfolio. The Committee is chaired by non-executive Board member, Mr. Al Murshidi, and comprises two other members: Mr. Rashid Al Naimi and

96 c108406pu050 Proof 5: 14.6.13_22:20 B/L Revision: 0 Operator AllS Mr. Al Mana. The Committee held three meetings in 2012. The Chief Risk Officer and the Group Compliance Officer attend the committee meetings and submit their periodic reports for review and discussion; and * Remuneration Committee: The Remuneration Committee provides overall guidance with respect to the establishment, maintenance and administration of the Group’s compensation programmes and employee benefit plans, including determining and agreeing with the Board the broad policy for the remuneration of the Chairman and the Directors, the CEO and the other members of the executive management. The Committee is chaired by Mr. Rashid Al Naimi and comprises two other members: Mr. Al Mana and Mr. Al Murshidi. The Committee met once in 2012. The CEO and the Group Head of Human Resources are invited to attend committee meetings, except during the period when their own remuneration is discussed.

Senior management The CEO is accountable for executing the Group’s strategy and running the business of the Group on a day-to-day basis. The CEO reports directly to the Board and keeps the Board fully informed of all important aspects of business performance. The CEO is supported by a senior management team which comprises four main executive positions: the Group Chief Risk Officer, the Group Chief Operating Officer, the Group Chief Finance Officer and the Group Chief Business Officer. In addition to the senior executive team, the CEO’s work is supported in the day-to-day business operations of the Group by additional senior managers with extensive backgrounds in banking and financial matters and by management committees with defined roles and responsibilities. The senior management of the Group is as follows: Title Experience Robin McCall Mr. McCall was appointed Group Chief Executive in June 2011. Group Chief Executive Officer He is the Chairman of the Executive Committee, Management Committee and Security Steering Committees. Mr. McCall is a board member of Al Khaliji France S.A. and member of the GCIC and the Group Risk Committee. Mr. McCall gained a Bachelor’s degree in Commerce from the University of Witwatersrand (Johannesburg). Mr McCall has more than 20 years’ experience with an extensive international exposure in Africa, Europe and the Middle East. Mr. McCall joined the Bank when it was established. Previously he worked at HSBC (where he worked in various positions including Head of Corporate, Institutional and Commercial Banking) and, before that, at Barclays Bank (where he was Associate Director in Corporate Banking). Oliver Schwarzhaupt Mr. Schwarzhaupt was appointed Group Chief Risk Officer in Group Chief Risk Officer January 2013. He is member of the GCIC, Chairman of the GRC and a member of the GALCCO. Mr. Schwarzhaupt gained a Master’s degree in Economics from Justus-Liebig University, Giessen (Germany). Mr. Schwarzhaupt has more than 20 years of international banking experience at Maritime Bank, Emirates NBD, Commerzbank and DZ Bank, where he was Chief Risk Officer, Deputy-Chief Risk Officer, Head of Rating Methods and Head of Credit Risk , respectively. He has significant experience in risk management and implementation practices in developed and emerging markets and international regulatory requirements. Christiaan de Beer Mr. de Beer was appointed Group Chief Finance Officer in Group Chief Finance Officer September 2008. He is Chairman of the GALCCO and member of the Executive Committee, Management Committee, Security Steering Committee, ICT Steering Committee, attends the GCIC as well as most of the ad hoc steering committees in the Guarantor. He is also in charge of the Investor Relations function of the Group. Mr. de Beer gained four degrees from three different

97 c108406pu050 Proof 5: 14.6.13_22:20 B/L Revision: 0 Operator AllS universities, including an honors degree in Economics, an honors degree in Accountancy, and a Master’s degree in Economics from Aberdeen University In Scotland. He is also a Certified Chartered Accountant. Mr. de Beer has more than 20 years of executive level finance experience. Apart from finance and investor relations, Mr. De Beer has additional expertise in the regulation of financial markets and exchanges, through his positions as Executive in Charge of Regulation of Financial Markets at the Financial Services Board in South Africa and member of the Financial Markets Advisory Board, The Public Accountants and Auditors’ Board and the Board of SAFEX, the South African Futures Exchange. He has also served on various company Boards in an executive capacity. Hesham Elsayed EzzEldin Elsayed Mr. EzzEldin was appointed Group Chief Operating Officer in Group Chief Operating Officer September 2011. He is a member of the Executive Committee, Management Committee, ICT Steering Committee, Group Risk Committee & Security Committee. Mr. EzzEldin gained a Bachelor of Commerce degree (Hons) Accountancy at Cairo University. Mr. EzzEldin has more than 25 years of banking experience with Bank AlJazira (where he worked in various positions including Operations Group Head) and Credit Agricole (where he worked in various positions including Deputy – Chief Operating Officer) and has extensive knowledge and diversified experience of banking support services and the ability to strategically plan and build back office operations. Mohamad Asem Ahmed Mr. Abdelkhalek was appointed as Group Chief Business Officer in Abdelkhalek April 2012. He is member of the Executive Committee, the Group Chief Business Officer GALCCO and the GCIC. Mr. Abdelkhalek holds a Bachelor’s degree in Commerce (Major: Accounting). He has also completed various programmes / diplomas by the Institute of Banking and Finance – American University in Cairo and the American Bankers Association (ABA) which qualified him as a Certified Banking Credit Specialist. Mr. Abdelkhalek has around 20 years’ international banking experience. He joined the Bank in 2007 (where he worked in various positions including Head of Corporate and International Banking), Mashreq Bank (where he worked in various positions including Vice President Corporate and Investment Banking Group) and Commercial International Bank of Egypt (Formally Chase National Bank) where he worked in Corporate Banking and Trade Finance. Mr. Abdelkhalek has led corporate banking teams and has particular expertise in corporate advisory and structured debt. Nadeem Abbasi Mr. Abbasi was appointed Group Head of Treasury in March 2012 Group Head of Treasury and is also a member of the Executive Committee. Mr. Abbasi gained an MBA from the University of Karachi, Pakistan and holds an Associateship Diploma from the Chartered Institute of Bankers (UK). He is also a Chartered Financial Analyst (CFA). Mr. Abbasi has more than 27 years’ experience in capital markets and corporate finance with Habib Bank Group (where he worked in various positions including Head of Corporate) and Royal Bank of Canada (where he worked in various positions including Vice President, Capital Markets). Hamad Al Kubaisi Mr. Al Kubaisi was appointed Group Head of Human Resources Group Head of Human Resources in April 2011. He is a member of Executive Committee. Mr. Al Kubaisi gained a Bachelor’s degree in Science of information Technology from Qatar University.

98 c108406pu050 Proof 5: 14.6.13_22:20 B/L Revision: 0 Operator AllS Mr. Al Kubaisi has more than 12 years’ experience with an extensive background in Human Resources. Mr. Al Kubaisi has headed several human resource departments including Kahramaa, Ashghaal and ICT Qatar. Prabirendra Ghosh Mr. Ghosh was appointed Group Head of Internal Audit in May Group Head of Internal Audit 2007. He is a Chartered Accountant Commerce graduate with Honours (B.Com-Hons); Fellow Chartered Accountant (FCA), Certified Internal Auditor (CIA-USA), Certified Information Systems Auditor (CISA-USA), Certified Financial Services Auditor (CFSA-USA), Certified Fraud Examiner (CFE-USA), Certified Business Manager (CBM-USA), Certified Business Administrator (USA), Certified Financial Consultant (Canada), Chartered Business Administrator (Canada) and Fellow Institute of Financial Consultants (Canada). Mr. Ghosh has over 30 years’ experience in finance management, auditing and risk assessment gained with Bahrain Middle East Bank where he was Senior Vice President – Group Head of Finance and a Director and Board Member of 26 other group companies of the bank. He also worked as Managing Director Audit Services with Canada Trust Inc., Toronto; Chief Internal Auditor at Bank of Oman Bahrain & Kuwait, based in Oman; General Manager & Chief Auditor at Global Trust Bank, India; Head of Internal Audit & Compliance at Standard Chartered Bank, Bahrain. Mr. Ghosh has had wide experience in finance, internal auditing and compliance in banks. Osama Zeineh Mr. Zeineh was appointed Group Head of Compliance in Group Head of Compliance November 2009. He is a member of the Management Committee and reports to the Board Compliance and Risk Committee. Mr. Zeineh gained a Master’s degree in Applied Finance from the University of Melbourne and is a Certified Internal Auditor and Certified Anti-Money Laundering Specialist. Mr. Zeineh has over 18 years’ experience in compliance, anti- money laundering, risk management and internal audit. During his career he worked for regional and international financial institutions such as Qatar National Bank, Qatar First Bank, Mashreq Bank, Arab Bank Australia and Bank of Cyprus Australia with responsibility for the compliance, anti-money laundering and risk management functions at these banks. Andre Tyan Mr. Tyan has over 40 years of experience in banking. He served for General Manager, Al Khaliji 20 years as Managing Director of Bank Saradar France, where he France S.A. initiated its expansion strategy. Mr. Tyan has a Master’s degree in Financial Management from the University of Saint Joseph in Beirut. The business address of each member of senior management is Asia Street 60, West Bay, P.O. Box 28000, Doha, Qatar. No member of senior management has any actual or potential conflict of interest between his duties to the Guarantor and his private interests and/or other duties.

Management Committees The Group’s management committees were restructured in 2012 and now comprise: * Senior Management Executive Committee (‘‘ExCo’’): ExCo supports the CEO and the Senior Management in decision-making, reviewing developments within the businesses, managing the day to day operations of the Group, discussing matters of Group strategy and formulating recommendations for the Board or relevant Board committees; * Group Asset, Liability and Capital Committee (‘‘GALCCO’’): GALCCO supports the CEO and senior management in managing and optimising the Group’s asset, liability and capital structure within the approved risk and operational boundaries articulated in the Group’s policies;

99 c108406pu050 Proof 5: 14.6.13_22:20 B/L Revision: 0 Operator AllS * Group Credit and Investment Committee (‘‘GCIC’’): GCIC determines and sets the parameters for credit risk and approves individual credit transactions in accordance with credit approval authorities delegated by the Board or the relevant Board committees; * Group Risk Committee: The Group Risk Committee is responsible for maintaining effective governance and oversight of risk related developments and performance, for monitoring the enforcement of the internal control framework, for monitoring the implementation of the business continuity plan, for overseeing security-related developments and performance and for making appropriate decisions and recommendations to help reduce operational risk; and * Security Steering Committee (‘‘SSC’’): SSC is a committee of the executive management established for the purpose of maintaining effective governance and oversight of security related developments and performance, monitoring the enforcement of security related controls and making appropriate decisions and recommendations based on progress reports to help increase the protection of the Group’s assets throughout their life cycles and their use within the Group.

Employees As at 31 December 2012, the Group employed 372 members of staff compared to 384 as at 31 December 2011 and 459 as at 31 December 2010. The Group’s employee strategy is aligned to its vision and growth plans. The Guarantor is committed to the training and development of its employees and has created and implemented a number of training and development programmes for its employees, including a graduate development programme, a management development programme and an executive development programme. These are focused on developing the employees and enhancing the Group’s intellectual capital, with a speciﬁc focus on developing Qatari talent in line with the Qatar National Vision. The Bank is guided in its human resources decisions by the Qatari government’s recommended policy that 20.0 per cent. of its total personnel should consist of Qatari nationals and, in addition, certain management positions in Qatari companies are required under Qatari law to be ﬁlled by Qatari nationals. The Bank’s Qatarisation level at 31 December 2012 was 21 per cent. and it is currently in compliance with all other applicable requirements as regards the employment of Qatari nationals.

100 c108406pu050 Proof 5: 14.6.13_22:20 B/L Revision: 0 Operator AllS FINANCIAL REVIEW

The following discussion and analysis should be read in conjunction with the information set out in ‘‘Presentation of Financial and other Information’’, ‘‘Selected Financial Information’’ and the Financial Statements. The discussion of the Group’s ﬁnancial condition and results of operations is based upon the Financial Statements which have been prepared in accordance with IFRS. This discussion contains forward-looking statements that involve risks and uncertainties. The Group’s actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed below and elsewhere in this Base Prospectus, particularly under the headings ‘‘Cautionary Statement regarding Forward-looking Statements’’ and ‘‘Risk Factors’’. See ‘‘Presentation of Financial and other Information’’ for a discussion of the source of the numbers presented in this section and certain other relevant information. All information in this section as at, and relating to the three month periods ended, 31 March 2013 and 31 March 2012 is unaudited. Results for any interim period within a year will not necessarily be indicative of the results for the full year.

Overview The Group commenced business on 14 January 2007. It currently provides a range of corporate and personal banking services, principally to customers in Qatar, and conducts treasury operations from Qatar. It also provides banking services to customers in the UAE and France through its subsidiary, Al Khaliji France, which has four branches in the UAE and a single branch in Paris. The principal activities of the Group comprise the provision of loans and advances and other financing facilities, which generate interest income and fee and commission income, and investment activities, which principally relate to its portfolio of fixed income securities and which generate interest income and trading gains or losses. The Group’s principal source of funding is its customer deposits. The Group’s principal focus is currently on strengthening relationships with its corporate, government and government related clients as well as its premium customers, who are high and ultra high net worth individuals, principally in its domestic market of Qatar and also in the GCC. The Group continues to position itself appropriately to benefit from the significant infrastructure development programme in Qatar as part of the State of Qatar’s 2030 Qatar National Vision and is also focusing on maximising the synergies between its operations in Qatar and its subsidiary’s operations in France and the UAE. As at 31 March 2013, the Group had total loans and advances to customers of QAR 14.1 billion, total investment securities of QAR 16.0 billion and total customer and bank deposits (including repos) of QAR 28.3 billion. For the three month period ended 31 March 2013, the Group recorded net operating income of QAR 231 million and profit for the period of QAR 131 million. In 2012, the Group’s net operating income was QAR 969 million and its profit for the year was QAR 512 million.

Principal factors affecting results of operations The following is a discussion of the principal factors that have affected, or are expected to affect, the Group’s results of operations.

Economic conditions The Group’s revenues and results of operations are affected by economic and market conditions in Qatar and, to a lesser extent, the broader GCC region and around the world. Based on IMF data following the conclusion of its Article IV consultation with Qatar in January 2013, Qatar’s real GDP growth was 16.7 per cent. in 2010, fell to 13.0 per cent. in 2011 and was 6.6 per cent. in 2012. The IMF expects Qatar’s real GDP growth to be 5.2 per cent. in 2013. Historically, Qatar has benefitted from high oil and natural gas prices, with expansionary government spending providing an additional stimulus. Reflecting the Qatari government’s shift of focus to economic diversification and growth in the non-hydrocarbon sectors through targeted infrastructure investments, overall GDP growth rates are projected by the IMF to have fallen in 2012 on the back of declining growth in the hydrocarbon sector in response to the government’s moratorium on increasing liquefied natural gas (‘‘LNG’’) capacity prior to 2015. Growth in the non-hydrocarbon sector is centred on the construction, transport and communications, trade and hotels, and services

101 c108406pu060 Proof 5: 14.6.13_22:25 B/L Revision: 0 Operator AllS sectors and is projected to be around 9 per cent. in 2012. Average CPI inflation in Qatar was 1.9 per cent. in 2011 and is expected by the IMF to be at a similar level in 2012, mainly due to depressed rents. According to the IMF, the economic outlook in Qatar remains strong with robust non-hydrocarbon growth, and inflation rising only gradually over the medium term. The main downside risks identified by the IMF are lower hydrocarbon prices, a tightening of external financing conditions, and potential disruption in transportation of LNG due to increased geopolitical tensions. Growth in the non- hydrocarbon sectors is expected to range between 9 and 10 per cent. over the medium term, while the hydrocarbon sector is projected to grow between -1.1 per cent. and 3.5 per cent. over the medium term. As infrastructure-related construction activities pick up, as the demand-supply situation in the real estate market converges, and as the expatriate population increases, inflation is expected to gradually increase from 3 per cent. in 2013 to 5 per cent. by 2016. Fiscal and external surpluses are projected to decline significantly, due to flat LNG revenues and a declining trend in crude oil production and exports, and higher fiscal expenditure. A core part of the Group’s strategy is to build a strong corporate banking franchise including targeting strategic Qatari-government sponsored infrastructure projects and the companies and contractors involved in them. As emphasised in Qatar’s National Development Strategy for 2011- 2016, total investments are expected to average 27 per cent. of GDP per year during 2012-2017, predominantly in the non-hydrocarbon sectors.

Factors affecting net interest income The Group’s net interest income is a major contributor to its total net operating income, comprising 67.3 per cent. of net operating income in the three months ended 31 March 2013 and 52.7 per cent. and 62.5 per cent. in each of 2012 and 2011, respectively. Within net interest income: * interest earned on loans and advances to customers and interest earned on fixed income securities are the major contributors to total interest income, together comprising 95.3 per cent. of total interest income in 2012 and 98.1 per cent. in 2011; and * interest paid on customer deposits is the major contributor to total interest expense, comprising 72.8 per cent. of total interest expense in 2012 and 77.3 per cent. in 2011. The Group’s net interest income is affected by a number of factors. It is primarily determined by the volume of interest-earning assets relative to interest-bearing liabilities, as well as the differential between rates earned on interest-earning assets and interest-bearing liabilities. The Group’s interest- earning assets principally consist of its customer loan portfolio and the fixed income securities held by it. The Group’s interest-bearing liabilities principally comprise its interest bearing customer deposits and, to a lesser extent, interbank borrowings. The Group’s net interest income in the periods under review has principally been positively impacted by increases in the volumes of its interest bearing assets and liabilities, and reductions in customer deposit rates and negatively impacted (in the case of the Group’s loans and advances to customers and fixed income investment securities) by reduced lending rates driven by competition as the banks awaited the roll out of the Government projects in Qatar. Since a large proportion of the Group’s fixed income investment securities portfolio is hedged for interest rate movements using interest rate derivatives, the impact of interest rate changes on the investment securities is offset to some extent by profits and losses on these derivatives. For those derivatives that qualify for hedge accounting, the profits and losses are included in ‘‘net interest income’’ while for non-qualifying derivatives the impact is included as trading income in ‘‘income from investment securities’’ as discussed below. Principally reflecting the general low level of international interest rates and increased competition (which is expected to reduce once the Government begins to implement its announced infrastructure project programme in Qatar), the Group’s net interest margin contracted in 2012 (to 1.79 per cent. from 2.74 per cent. in 2011) but then increased in the first three months of 2013 to 1.85 per cent.

Changes in factors affecting the fair valuation of the Group’s investment securities The Group has a signiﬁcant portfolio of investment securities, principally ﬁxed rate available for sale debt securities, which, at 31 March 2013 amounted to QAR 16.0 billion compared to QAR 15.9 billion at 31 December 2012 and QAR 11.0 billion at 31 December 2011. The weighted average credit rating of these assets was AA- at 31 March 2013.

102 c108406pu060 Proof 5: 14.6.13_22:25 B/L Revision: 0 Operator AllS The investment securities (other than any held to maturity) generate gains or losses when they are sold and fair value gains and losses when they are re-valued at each balance sheet date. In the three months ended 31 March 2013, the net gains realised on sales of investment securities were QAR 40 million. In 2012 and 2011, the net gains realised on sales of investment securities were QAR 407 million and QAR 177 million, respectively. Net gains or losses realised on sales of investment securities may vary significantly from period to period and will depend on the volumes of securities sold as well as the prices realised relative to the amortised cost of the securities at the time they are sold. The unrealised gains and losses arise when the investment securities are fair valued at each balance sheet date. Reflecting the composition of the Group’s investment securities portfolio and save to the extent that hedge accounting is applied and is effective in any period, a significant proportion of these unrealised gains and losses are recorded in comprehensive income. As mentioned above, the Group uses derivative products, such as interest rate swaps, to manage the portfolio’s exposure to interest rate movements. Where hedge accounting is applied and is effective in relation to these derivative products, only part of the unrealised gains and losses of the relevant securities are recorded in comprehensive income; the balance is offset against swap gains and losses in the income statement. For the three months ended 31 March 2013, the net change in fair value of investment securities recorded in comprehensive income were QAR 134 million. In 2012 and 2011, the net unrealised gains on investment securities recorded in comprehensive income were QAR 119 million and QAR 38 million, respectively. Net unrealised gains or losses on investment securities may also vary significantly from period to period and, reflecting the predominance of fixed rate debt securities in the portfolio, will depend in particular on changes in interest rates, with falling interest rates tending to increase the fair value of the portfolio and increasing interest rates tending to reduce the fair value of the portfolio. In certain circumstances, the Group’s fixed income investment securities may become impaired. This could result from a deterioration in the credit value of the issuer or from a sustained adverse movement in interest or currency exchange rates or from other factors. In such a case, the Group will incur impairment losses which will reduce its net operating income. For example, in 2011, the Group recorded an impairment charge of QAR 13 million, equal to 0.1 per cent. of the gross value of its investment securities at 31 December 2011. The Group manages the credit risk in its investment portfolio by investing only in high investment grade securities. The weighted average credit rating of the investment securities portfolio was AA- at 31 March 2013.

Signiﬁcant accounting policies The Financial Statements have been prepared in accordance with IFRS. For a discussion of the accounting policies applied by the Group generally, see note 3 to the 2012 Financial Statements.

Critical accounting judgments and key sources of estimation uncertainty In preparing the Group’s financial statements, management is required to make certain estimates, judgments and assumptions. These affect the reported amounts of the Group’s assets and liabilities, including disclosure of contingent assets and liabilities, at the date of the financial statements as well as the reported amounts of its revenues and expenses during the periods presented. Management bases its estimates and assumptions on historical experience and other factors that it believes to be reasonable at the time the estimates and assumptions are made and evaluates the estimates and assumptions on an ongoing basis. However, future events and their effects cannot be predicted with certainty and the determination of appropriate estimates and assumptions requires the use of judgment. Actual outcomes may differ from any estimates or assumptions made and such differences may be material to the financial statements. For a discussion of the most significant accounting estimates, judgments and assumptions made in the preparation of the Group’s financial statements, see note 5 to the 2012 Financial Statements.

Results of operations Comparison of the three month periods ended 31 March 2012 and 31 March 2013 Net interest income Interest income is the Group’s principal source of income. The Group earns interest income on the loans and advances to customers made by it, on its signiﬁcant portfolio of ﬁxed income investment securities and on its deposits with central banks and other banks. The Group incurs interest expense on its customer deposits, its inter-bank funding and its subordinated loan. Interest income and

103 c108406pu060 Proof 5: 14.6.13_22:25 B/L Revision: 0 Operator AllS expense is recognised in the income statement using the effective interest method, as explained in note 3(o) to the 2012 Financial Statements. The table below shows a breakdown of the Group’s net interest income in each of the three month periods ended 31 March 2012 and 2013.

Three months ended 31 March

2012 2013 (unaudited) (unaudited)

(QAR (QAR million) (% of total) million) (% of total)

Interest income Loans and advances to customers...... 118 57.0 123 50.6 Investment securities...... 86 41.5 115 47.3 Due from banks...... 2 1.0 4 1.7 Due from central banks...... 1 0.5 1 0.4

Total interest income...... 207 100.0 243 100.0 Interest expense Customer deposits ...... (48) 68.6 (67) 77.0 Due to banks ...... (22) 31.4 (20) 23.0 Subordinated loan ...... — — — —

Total interest expense...... (70) 100.0 (87) 100.0

Net interest income...... 137 156

The Group’s total interest income for the three months ended 31 March 2013 amounted to QAR 243 million compared to QAR 207 million in the corresponding period of 2012. The increase of QAR 36 million, or 17.4 per cent., in the 2013 period compared to the 2012 period principally reflected: * a QAR 29 million, or 33.7 per cent., increase in interest income from investment securities. This reflected increased holdings of debt securities; and * a QAR 5 million, or 4.2 per cent., increase in interest income from loans and advances to customers. This reflected increased volumes of customer loans in the 2013 period compared to the 2012 period offset to a large extent by reduced lending rates in response to market competition. The Group’s total interest expense for the three months ended 31 March 2013 amounted to QAR 87 million compared to QAR 70 million in the corresponding period of 2012. The increase of QAR 17 million, or 24.3 per cent., in the 2013 period compared to the 2012 period principally reflected a QAR 19 million, or 39.6 per cent., increase in interest expense on customer deposits. This principally reflected increased volumes of deposits in the 2013 period compared to the 2012 period. Reflecting the above factors, the Group’s net interest income in three months ended 31 March 2013 amounted to QAR 156 million, an increase of QAR 19 million, or 13.8 per cent., from the QAR 137 million net interest income recorded in the corresponding period of 2012. The Group’s net interest margin was 1.85 per cent. in the three months ended 31 March 2013 compared to 2.55 per cent. for the corresponding period in 2012, reflecting market-wide pressure on interest margins.

Net fee and commission income The Group earns fees and commissions on the customer loans advanced by it, on other credit facilities (such as commitments to lend made by it and letters of credit and guarantees issued by it) and on other bank services provided by it, including account servicing fees, investment management fees, sales commission, placement fees and syndication fees. The Group pays fees and commissions principally on bilateral funding facilities and for equity brokerage services.

104 c108406pu060 Proof 5: 14.6.13_22:25 B/L Revision: 0 Operator AllS The table below shows a breakdown of the Group’s net fee and commission income in each of the three month periods ended 31 March 2012 and 2013.

Three months ended 31 March

2012 2013 (unaudited) (unaudited)

(QAR (QAR million) (% of total) million) (% of total)

Fee and commission income Loans and advances to customers...... 13 44.8 34 69.4 Indirect credit fees ...... 10 34.5 10 20.4 Bank service fees...... 6 20.7 5 10.2

Total fee and commission income ...... 29 100.0 49 100.0 Fee and commission expense...... (3) (2)

Net fee and commission income...... 26 47

The Group’s total fee and commission income for the three months ended 31 March 2013 amounted to QAR 49 million compared to QAR 29 million in the corresponding period of 2012. The increase of QAR 20 million, or 69.0 per cent., for the 2013 period compared to the 2012 period principally reflected a QAR 21 million, or 161.5 per cent., increase in fee and commission income from loans and advances to customers, reflecting growth in the loan portfolio. The Group’s fee and commission expense for the three months ended 31 March 2013 amounted to QAR 2 million compared to QAR 3 million in the corresponding period of 2012. Reflecting the above factors, the Group’s net fee and commission income for the three months ended 31 March 2013 amounted to QAR 47 million, an increase of QAR 21 million, or 80.8 per cent., from the QAR 26 million net fee and commission income recorded in the corresponding period of 2012.

Income from investment securities The Group maintains a significant portfolio of investment securities, principally comprising fixed income securities held on an available for sale basis. Interest income derived from these securities is recorded in the income statement under ‘‘Interest income’’. However, the Group also realises gains or losses on the sale of these securities which are recognised under this heading in the income statement at the time of sale. In addition, in accordance with IFRS, the bulk of the Group’s investment securities are fair valued at each balance sheet date. Where the securities are held at fair value through profit and loss the changes in fair value are recorded as income or loss in the income statement. Where the securities are held as available for sale and are not the subject of effective hedge accounting, the changes in fair value are recorded in other comprehensive income until the securities are sold, at which point the cumulative fair value gain or loss is transferred to the income statement. The Group also records as income from investment securities any fair value gains or losses on derivative instruments that are not the subject of effective hedge accounting and dividend income on its small portfolio of equity securities. Where available for sale securities are the subject of effective hedge accounting, only part of the change in their fair value is recorded in other comprehensive income with the balance being offset against the fair value gains or losses on the derivatives instruments making up the hedge.

105 c108406pu060 Proof 5: 14.6.13_22:25 B/L Revision: 0 Operator AllS The table below shows a breakdown of the Group’s income from investment securities in each of the three month periods ended 31 March 2012 and 2013.

Three months ended 31 March

2012 2013 (unaudited) (unaudited)

(QAR million) Changes in fair value of ﬁnancial assets measured at fair value through proﬁt and loss ...... — (4) Net gains on sales of investment securities...... 40 40 Net gains/(losses) on derivatives...... 5 (16) Dividend income...... 6 5

Total income from investment securities ...... 51 25

The Group’s total income from investment securities for the three months ended 31 March 2013 amounted to QAR 25 million compared to QAR 51 million in the corresponding period of 2012. The decrease of QAR 26 million, or 51.0 per cent., in the 2013 period compared to the 2012 period principally reﬂected a QAR 21 million adverse movement in net gains/(losses) on derivatives that are not subject to hedge accounting.

Other sources of operating income The Group’s other sources of operating income include foreign exchange gains and losses recorded on foreign exchange transactions entered into by the Group with customers, which amounted to QAR 4 million for the three months ended 31 March 2013 compared to QAR 1 million in the corresponding period of 2012.

Staff costs The Group’s staff costs amounted to QAR 56 million in the three months ended 31 March 2013 and QAR 47 million in the corresponding period of 2012. The increase of QAR 9 million, or 19.1 per cent., for the 2013 period compared to the 2012 period reﬂected the effect of annual cost of living adjustments, staff salary increases, promotions and earlier bonus provisions compared to 2012.

Depreciation and amortisation The Group incurs depreciation and amortisation costs principally on branch refurbishments (accounted as leasehold improvements), furniture and equipment owned by the Group and software purchased or developed by the Group. Leasehold improvements are depreciated on a straight line basis over seven years, furniture and equipment is depreciated on a straight line basis over its estimated useful life, which ranges between three and ﬁve years depending on the asset, and software is amortised over its estimated useful life, which generally ranges between three and seven years. The Group’s depreciation and amortisation costs amounted to QAR 15 million in the three months ended 31 March 2013 and QAR 17 million in the corresponding period of 2012.

Impairment charges At each reporting date, the Group assesses its financial assets (other than financial assets held at fair value through profit and loss) for objective evidence of impairment. In particular: * all individually significant loans and advances to customers and held to maturity investments are assessed for specific impairment and, if found not to be impaired, are then collectively assessed for any impairment that has been incurred but not yet identified; * impairment losses on assets carried at amortised cost (including the Group’s customer loan portfolio and held to maturity investment securities) are measured as the difference between the carrying amount of the relevant asset and the present value of the estimated future cash flows from it discounted at the asset’s original effective interest rate; * impairment losses on available for sale investment securities are recognised by transferring the cumulative loss that has been recognised in other comprehensive income to profit and loss as a reclassification adjustment.

106 c108406pu060 Proof 5: 14.6.13_22:25 B/L Revision: 0 Operator AllS For further information, see note 3(c)(vi) to the 2012 Financial Statements. The table below shows details of the Group’s impairment losses in each of the three month periods ended 31 March 2012 and 2013.

Three months ended 31 March

2012 2013 (unaudited) (unaudited)

(QAR million) Net impairment recovery on loans and advances to customers...... 1 2 Net impairment loss on investment securities ...... (5) —

Total net impairment (loss)/recovery...... (4) 2

The Group’s total impairment recovery amounted to QAR 2 million for the three months ended 31 March 2013 compared to a loss of QAR 4 million in the corresponding period of 2012. The positive movement of QAR 6 million was primarily due to a one-off QAR 5 million impairment loss on investment securities in 2012, see ‘‘Comparison of 2011 and 2012—Impairment charges’’. There were no major movements in impairments of loans and advances to customers.

Other expenses The Group’s other expenses include computer and IT costs, rent and maintenance, legal and professional fees and advertising, marketing and promotional expenses. The Group’s other expenses were QAR 26 million in the three months ended 31 March 2013 compared to QAR 23 million in the corresponding period of 2012.

Profit for the period before tax Reflecting the above factors, the Group’s profit before tax for the three months ended 31 March 2013 was QAR 135 million compared to QAR 125 million for the corresponding period in 2012, an increase of QAR 10 million, or 8.0 per cent.

Tax expense The Group incurs tax on the proﬁts made by its subsidiary, Al Khaliji France, and some of its branches in the UAE. The tax charge for the three months ended 31 March 2013 amounted to QAR 4 million compared to QAR 3 million in the corresponding period of 2012.

Profit for the period Reflecting the above factors, the Group’s profit for the three months ended 31 March 2013 was QAR 131 million compared to QAR 122 million in the corresponding period of 2012, an increase of QAR 9 million, or 7.9 per cent.

Other comprehensive income for the period, net of tax The Group’s other comprehensive income comprises foreign currency translation differences for its foreign operations, principally Al Khaliji France, and the net change in fair value of its available for sale investment securities. In the three months ended 31 March 2013, the Group recorded a foreign currency translation loss for its foreign operations of QAR 10 million compared to a foreign currency translation gain of QAR 8 million in the corresponding period of 2012. The net change in the fair value of the Group’s available for sale investment securities was a QAR 134 million reduction in the three months ended 31 March 2013 compared to a reduction of QAR 3 million in the corresponding period of 2012, principally reﬂecting asset disposals and increased market interest rates, which have a negative impact on the valuation of ﬁxed rate securities.

Total comprehensive income for the period Reﬂecting the above factors and the Group’s proﬁt for the period, the Group’s total comprehensive income for the three months ended 31 March 2013 was a QAR 13 million loss compared to income of QAR 127 million for the corresponding period in 2012.

107 c108406pu060 Proof 5: 14.6.13_22:25 B/L Revision: 0 Operator AllS Comparison of 2011 and 2012 Net interest income The table below shows a breakdown of the Group’s net interest income in each of 2011 and 2012.

Year ended 31 December

2011 2012

(QAR (QAR million) (% of total) million) (% of total)

Interest income Loans and advances to customers...... 475 58.9 417 50.3 Investment securities...... 316 39.2 373 45.0 Due from banks...... 12 1.5 37 4.5 Due from central banks...... 3 0.4 2 0.2

Total interest income...... 806 100.0 829 100.0 Interest expense Customer deposits ...... 169 77.3 231 72.8 Due to banks ...... 49 22.2 86 27.1 Subordinated loan ...... 1 0.5 — —

Total interest expense...... 219 100.0 318 100.0

Net interest income...... 587 511

The Group’s total interest income for 2012 amounted to QAR 829 million compared to QAR 806 million for 2011. The increase of QAR 23 million, or 2.8 per cent., in 2012 compared to 2011 principally reflected: * a QAR 57 million, or 18.0 per cent., increase in interest income from investment securities. This reflected increased holdings of debt securities. * a QAR 25 million, or 210.1 per cent., increase in interest income from placements with other banks. The Group’s placements with other banks are generally short term in nature and the volume of such placements varies significantly on a day-to-basis. These increases were partly offset by a QAR 58 million, 12.2 per cent., reduction in interest income from loans and advances to customers. This principally reflected reduced lending interest rates in response to market wide competition and generally lower interest rates internationally. The Group’s total interest expense for 2012 amounted to QAR 318 million compared to QAR 219 million for 2011. The increase of QAR 99 million, or 45.2 per cent., in 2012 compared to 2011 principally reflected: * a QAR 62 million, or 36.7 per cent., increase in interest expense on customer deposits. This principally reflected increased volumes of deposits over the two years. * a QAR 37 million, or 77.2 per cent., increase in interest expense on increased borrowing from other banks. The Group’s borrowing from other banks is a mixture of short-term secured (i.e. repo) and unsecured borrowing in addition to longer-term unsecured bilateral facilities. Reflecting the above factors, the Group’s net interest income in 2012 amounted to QAR 511 million, a decrease of QAR 76 million, or 13.0 per cent., from the QAR 587 million net interest income recorded in 2011. The Group’s net interest margin was 1.79 per cent. in 2012 compared to 2.74 per cent. in 2011, reflecting margin compression as asset interest rates reduced at a faster pace than liability interest rates. The reduction in interest margins was seen across the banking sector in Qatar.

108 c108406pu060 Proof 5: 14.6.13_22:25 B/L Revision: 0 Operator AllS Net fee and commission income The table below shows a breakdown of the Group’s net fee and commission income in each of 2011 and 2012.

Year ended 31 December

2011 2012

(QAR (QAR million) (% of total) million) (% of total)

Fee and commission income Loans and advances to customers...... 69 52.7 37 40.3 Indirect credit fees ...... 47 36.2 42 44.8 Bank service fees...... 14 11.1 14 14.9

Total fee and commission income ...... 130 100.0 93 100.0 Fee and commission expense...... (10) (20)

Net fee and commission income...... 120 73

The Group’s total fee and commission income for 2012 amounted to QAR 93 million compared to QAR 130 million for 2011. The decrease of QAR 37 million, or 28.8 per cent., in 2012 compared to 2011 principally reflected: * a QAR 32 million, or 45.6 per cent., decrease in fee and commission income from loans and advances to customers. This reflected a lower volume of loan growth in 2012; and * a QAR 5 million, or 11.9 per cent., decrease in indirect credit fees. This reflected the fact that due to delays in implementing infrastructure development plans, a number of facilities intended to finance that expenditure were rolled over at considerably lower rates than the original facilities as a result of increased competition. The Group’s fee and commission expense for 2012 amounted to QAR 20 million compared to QAR 10 million for 2011. The increase of QAR 10 million, or 95.8 per cent., in 2012 compared to 2011 principally reflected increased fees associated with securing bilateral loan facilities, which are amortised over the duration of the loans, and increased equity brokerage fees. Reflecting the above factors, the Group’s net fee and commission income in 2012 amounted to QAR 73 million, a decrease of QAR 47 million, or 39.2 per cent., from the QAR 120 million net fee and commission income recorded in 2011.

Income from investment securities The table below shows a breakdown of the Group’s income from investment securities in each of 2011 and 2012.

Year ended 31 December

2011 2012

(QAR million) Changes in fair value of ﬁnancial assets held at fair value through proﬁt and loss ...... (2) — Net gains on sales of investment securities...... 177 407 Net losses on derivatives...... (11) (17) Dividend income...... 6 6

Total income from investment securities ...... 170 396

The Group’s total income from investment securities for 2012 amounted to QAR 396 million compared to QAR 170 million for 2011. The increase of QAR 226 million, or 132.6 per cent., in 2012 compared to 2011 principally reﬂected a QAR 230 million, or 129.4 per cent., increase in net gains

109 c108406pu060 Proof 5: 14.6.13_22:25 B/L Revision: 0 Operator AllS from the sale of investment securities. This principally reﬂected realised gains on sales of securities within the portfolio.

Other sources of operating income In 2012, the Group recorded a net loss on foreign exchange transactions of QAR 12 million, reﬂecting the net impact of early terminations of cross currency swap transactions. In 2011, the Group recorded a net gain on foreign exchange transactions of QAR 7 million, reﬂecting a QAR 12 million gain on foreign exchange transactions entered into by the Group and a QAR 5 million revaluation loss. In 2011, the Group received QAR 54 million in insurance proceeds following a successful claim made. This was recognised as Other operating income in 2011.

Staff costs The Group’s staff costs amounted to QAR 188 million in 2012 and QAR 186 million in 2011. The increase of only QAR 2 million, or 1.0 per cent., despite the 60 per cent. increase in local Qatari staff salaries in late 2011, reﬂects active management of total staff costs.

Depreciation and amortisation The Group’s depreciation and amortisation costs amounted to QAR 80 million in 2012 and QAR 77 million in 2011. The increase of QAR 3 million, or 3.8 per cent., principally reﬂected an acceleration in depreciation of leasehold improvements.

Impairment charges The table below shows details of the Group’s impairment losses in each of 2011 and 2012.

Year ended 31 December

2011 2012

(QAR million) Net impairment loss on loans and advances to customers ...... (38) (61) Net impairment loss on investment securities ...... (13) (6)

Total net impairment loss ...... (51) (67)

The Group’s total net impairment loss amounted to QAR 67 million in 2012 and QAR 51 million in 2011. The increase of QAR 16 million, or 31.6 per cent., reﬂected a combination of: * a QAR 23 million, or 60.7 per cent., increase in net impairment loss on loans and advances to customers; and * a QAR 7 million, or 55.6 per cent., decrease in net impairment loss on investment securities. At a gross level, the Group’s total impairment loss on loans and advances to customers provided in 2012 amounted to QAR 69 million compared to QAR 110 million in 2011, a reduction of QAR 41 million, or 37.4 per cent. However, in 2011, the Group recovered QAR 72 million, in previously created impairments, compared to only QAR 8 million in 2012. The Group’s impairment loss on investment securities in both years related to a small position in a European sovereign bond. These amounts were written-off in full during 2012 as the bonds were converted into European Financial Stability Facility notes.

Other expenses The Group’s other expenses were QAR 105 million in 2012 compared to QAR 126 million in 2011. The reduction of QAR 21 million, or 16.6 per cent., principally reﬂected reductions in rent, due to vacating one location, and IT costs, as maintenance of the Islamic banking software became unnecessary. These reductions were partly offset by an increase in legal and professional fees in respect of consultancy fees incurred in connection with strategic reviews.

Profit for the year before tax Reflecting the above factors, the Group’s profit for the year before tax was QAR 529 million in 2012 compared to QAR 500 million in 2011, an increase of QAR 29 million, or 5.7 per cent.

110 Tax expense The Group’s tax charge in 2012 amounted to QAR 17 million compared to QAR 13 million in 2011, reﬂecting improved proﬁtability in Al Khaliji France.

Profit for the year Reflecting the above factors and, in particular, the increase in income from investment securities, the Group’s profit for the year was QAR 512 million in 2012 compared to QAR 487 million in 2011, an increase of QAR 25 million, or 5.2 per cent.

Other comprehensive income for the year, net of tax In 2012, the Group recorded a foreign currency translation gain for its foreign operations of QAR 10 million compared to a foreign currency translation loss of QAR 5 million in 2011. The net change in the fair value of the Group’s available for sale investment securities was QAR 119 million in 2012 compared to QAR 38 million in 2011, principally reﬂecting a signiﬁcant appreciation in value of the Group’s debt securities in 2012 driven by falling interest rates and credit spreads.

Total comprehensive income for the year Reﬂecting the above factors and the Group’s proﬁt for the year, the Group’s total comprehensive income for the year was QAR 641 million in 2012 compared to QAR 520 million in 2011, an increase of QAR 121 million, or 23.4 per cent.

Segmental analysis The Group’s income generating reporting segments comprise: * Wholesale banking, which includes loans, deposits and other transactions and balances with corporate customers; * Personal banking (previously Consumer Banking), which includes loans, deposits and other transactions and balances with high net worth and ultra-high net worth customers; and * Group treasury, which undertakes the Group’s funding and centralised risk management activities through borrowings, the use of derivatives and investing in liquid assets (including the Group’s investment securities portfolio).

111 c108406pu060 Proof 5: 14.6.13_22:25 B/L Revision: 0 Operator AllS Comparison of the three month periods ended 31 March 2012 and 31 March 2013 The table below shows the contribution of each of the Group’s reporting segments to consolidated net operating income as well as its contribution to consolidated net proﬁt after tax, which is the measure used by management to measure the performance of each reporting segment, in each of the three month periods ended 31 March 2012 and 2013.

Wholesale Personal Group Central Banking Banking Treasury Functions Adjustments(1) Total

(QAR million) Three months ended 31 March 2012 (unaudited) Net interest income ...... 83 12 42 ——137 Net fee and commission income...... 22 — 4 ——26 Foreign exchange gain/ (loss)...... 2 ———— 2 Income from investment securities...... ——51 ——51

Net operating income...... 107 12 97 — — 216

Proﬁt (loss) for the period 78 — 88 (46) 2 122

Three months ended 31 March 2013 (unaudited) Net interest income ...... 70 14 71 ——155 Net fee and commission income...... 46 2 (1) ——47 Foreign exchange gain/ (loss)...... 1 — 3 —— 4 Income from investment securities...... 2 — 23 ——25

Net operating income...... 119 16 96 — — 231

Proﬁt (loss) for the period 94 7 80 (51) 1 131

Note (1) The adjustments are for IFRS and consolidation purposes

Wholesale banking Wholesale banking recorded net operating income of QAR 119 million for the three months ended 31 March 2013 compared to QAR 107 million in the corresponding period of 2012. The QAR 12 million, or 11.2 per cent., increase in 2013 was driven by a QAR 24 million, or 109.1 per cent., increase in net fee and commission income generated from fees associated with new loans. This increase was partly offset by a QAR 13 million, or 15.7 per cent., reduction in net interest income caused by reduced interest rates on loans. Wholesale banking’s proﬁt for the period was QAR 94 million for the three months ended 31 March 2013 compared to QAR 78 million in the corresponding period of 2012, an increase of QAR 16 million, or 20.5 per cent.

Personal banking Personal banking recorded net operating income of QAR 16 million for the three months ended 31 March 2013 compared to QAR 12 million in the corresponding period of 2012. The QAR 4 million, or 33.3 per cent., increase for the three months ended 31 March 2013 was a result of increased interest income and higher net fee and commission income. Personal banking’s proﬁt for the period was QAR 7 million for the three months ended 31 March 2013 compared to nil in the corresponding period of 2012, an increase of QAR 7 million.

112 c108406pu060 Proof 5: 14.6.13_22:25 B/L Revision: 0 Operator AllS Group treasury Group treasury recorded net operating income of QAR 96 million for the three months ended 31 March 2013 compared to QAR 97 million in the corresponding period of 2012. Increased net interest income of QAR 29 million, or 69.0 per cent., arising from a larger investment securities portfolio in the 2013 period was offset by lower realised gains on sales of securities during that period of QAR 28 million, or 54.9 per cent. Group treasury’s proﬁt for the period was QAR 80 million for the three months ended 31 March 2013 compared to QAR 88 million in the corresponding period of 2012, a decrease of QAR 8 million, or 9.1 per cent.

Geographical segmentation In geographical terms and based on the location of the entity in which the transactions are recorded: * 84.3 per cent. of the Group’s net operating income was derived from Qatar in the three months ended 31 March 2013 compared to 83.2 per cent. in the corresponding period of 2012; * 12.4 per cent. of the Group’s net operating income was derived from the UAE in the three months ended 31 March 2013 compared to 12.6 per cent. in the corresponding period of 2012; and * 3.3 per cent. of the Group’s net operating income was derived from France in the three months ended 31 March 2013 compared to 4.2 per cent. in the corresponding period of 2012.

Comparison of 2011 and 2012 The table below shows the contribution of each of the Group’s reporting segments to consolidated net operating income as well as its contribution to consolidated net proﬁt after tax, which is the measure used by management to measure the performance of each reporting segment, in each of 2011 and 2012.

Wholesale Personal Group Central Banking Banking Treasury Functions Adjustments(1) Total

(QAR million) 2011 Net interest income ...... 278 79 231 ——587 Net fee and commission income...... 84 34 3 ——120 Foreign exchange gain/ (loss)...... 1 5 ——— 7 Income from investment securities...... 6 — 218 — (53) 170 Other operating income ... (1) 55 ———55

Net operating income...... 368 174 452 — (53) 940

Net proﬁt after tax ...... 248 114 372 (251) 4 487

2012 Net interest income ...... 214 76 221 ——511 Net fee and commission income...... 64 24 (15) ——73 Foreign exchange gain/ (loss)...... 1 5 (18) ——(12) Income from investment securities...... 8 — 421 — (34) 396 Other operating income ... — 1 ——— 1

Net operating income...... 288 106 609 — (34) 969

Net proﬁt after tax ...... 201 12 537 (243) 6 512

Note (1) The adjustments are for IFRS and consolidation purposes

113 c108406pu060 Proof 5: 14.6.13_22:25 B/L Revision: 0 Operator AllS Wholesale banking Wholesale banking recorded net operating income of QAR 288 million in 2012 compared to QAR 368 million in 2011. The QAR 81 million, or 21.9 per cent., reduction in 2012 was driven by: * a QAR 63 million, or 22.8 per cent., reduction in net interest income caused by reduced interest rates receivable on loans; and * a QAR 20 million, or 23.6 per cent., reduction in net fee and commission income caused by a reduced volume of loan growth in 2012 compared to 2011. Wholesale banking’s net proﬁt after tax was QAR 201 million in 2012 compared to QAR 248 million in 2011, a decrease of QAR 47 million, or 18.9 per cent., reﬂecting the fact that, in addition to the reduction in interest margins within the banking sector in Qatar, the Group decided in 2012 to take lower risk assets on to its balance sheet in anticipation of the commencement of Governmental infrastructure projects when interest margins are expected to improve.

Personal banking Personal banking recorded net operating income of QAR 106 million in 2012 compared to QAR 174 million in 2011. The QAR 68 million, or 39.1 per cent., reduction in 2012 was driven by the fact that in 2011 the Personal banking segment recorded non- recurring other operating income of QAR 54 million from an insurance claim. In addition, in 2012 the Personal banking segment: * recorded QAR 10 million, or 28.6 per cent., lower net fee and commission income caused by one off early loan termination fees in 2011; and * recorded QAR 3 million, or 3.9 per cent., lower net interest income caused by lower loan volumes following the QCB regulation governing interest rates. Personal banking’s net proﬁt after tax was QAR 12 million in 2012 compared to QAR 114 million in 2011 (which included net loan recoveries of QAR 44 million), a decrease of QAR 102 million, or 89.5 per cent. If the non-recurring income in 2011 is excluded, the net proﬁt in 2011 would have been QAR 16 million.

Group treasury Group treasury recorded net operating income of QAR 609 million in 2012 compared to QAR 452 million in 2011. The QAR 157 million, or 34.8 per cent., increase in 2012 was driven by a QAR 203 million, or 93.6 per cent., increase in income from investment securities principally reﬂecting increased realised gains on sales of such securities in 2012. This increase was partly offset by: * a QAR 18 million foreign exchange loss recorded in 2012 (against an immaterial gain in 2011) as a result of early terminations of cross currency swap transactions; and * a QAR 10 million, or 4.3 per cent., reduction in net interest income earned by Group treasury caused by the lower level of interest rates and a rebalancing of the debt securities portfolio. Group treasury’s net proﬁt after tax was QAR 537 million in 2012 compared to QAR 372 million in 2011, an increase of QAR 165 million, or 44.4 per cent.

Geographical segmentation In geographical terms and based on the location of the entity in which the transactions are recorded: * 83.7 per cent. of the Group’s net operating income was derived from Qatar in 2012 compared to 84.3 per cent. in 2011; * 12.2 per cent. of the Group’s net operating income was derived from the UAE in 2012 compared to 11.3 per cent. in 2011; and * 4.1 per cent. of the Group’s net operating income was derived from France in 2012 compared to 4.4 per cent. in 2011.

Liquidity and Funding Overview The Group’s liquidity needs arise primarily from making loans and advances to customers, payment of expenses and dividends and investments in securities. To date, the Group’s liquidity needs have been funded largely through deposits, repos, unsecured term funding from banks and operating cash

114 c108406pu060 Proof 5: 14.6.13_22:25 B/L Revision: 0 Operator AllS ﬂow, including interest received on the Group’s loans and advances and its portfolio of ﬁxed income securities. See ‘‘—Funding’’.

Liquidity The tables below show the Group’s cash ﬂow from operating activities, investing activities and ﬁnancing activities for each of the three month periods ended 31 March in 2012 and 2013 and for each of 2011 and 2012.

Three months ended 31 March

2012 2013 (unaudited) (unaudited)

(QAR million) Net cash from operating activities...... 205 424 Net cash (used in) from investing activities...... (266) 544 Net cash used in ﬁnancing activities...... (297) (305) Effects of exchange rate changes on cash and cash equivalents held ...... 22 (21) Cash and cash equivalents at period end ...... 2,125 2,364

Year ended 31 December

2011 2012

(QAR million) Net cash from operating activities...... 3,748 3,986 Net cash (used in) from investing activities...... (4,135) (4,390) Net cash used in financing activities...... (339) (352) Effects of exchange rate changes on cash and cash equivalents held ...... 6 16 Cash and cash equivalents at period end ...... 2,461 1,722 Net cash from operating activities for the three months ended 31 March 2013 was QAR 424 million compared to QAR 205 million in the corresponding period of 2012. Net cash from operating activities is driven by the Group’s net profit for the period with the principal adjustment in the 2013 period (before changes in operating assets and liabilities) being an addition in respect of net unrealised losses on the Group’s available for sale investment securities portfolio. Net cash from operating activities in 2012 was QAR 3,986 million compared to QAR 3,748 million in 2011. Net cash from operating activities is driven by the Group’s net profit for the year with the principal adjustment (before changes in operating assets and liabilities) being a deduction in respect of net unrealised gains on the Group’s available for sale investment securities portfolio. Net cash generated by investing activities for the three months ended 31 March 2013 was QAR 544 million compared to cash used of QAR 266 million in the corresponding period of 2012. In each period, the principal investment activities were acquisitions and sales of investment securities. Net cash used in investing activities in 2012 was QAR 4,390 million compared to QAR 4,135 million in 2011. In each year, the principal investments made were acquisitions and sales of investment securities. Net cash used in financing activities for the three months ended 31 March 2013 was QAR 305 million compared to QAR 297 million in the corresponding period of 2012 and in each period comprised the dividend paid by the Bank to its shareholders. Net cash used in financing activities in 2012 was QAR 352 million compared to QAR 339 million in 2011 and in each year comprised the dividend paid by the Bank to its shareholders.

Funding The Group’s principal source of funding is its customer deposits, which have grown to QAR 17.3 billion (as at 31 March 2013) since the Bank was established in 2007. In 2010, the Bank also had an Islamic banking business which was closed during 2011 in response to a QCB directive to the effect that conventional banks in Qatar should cease carrying on Islamic banking operations by 31 December 2011. As a result, in 2010 and, to an immaterial extent, in 2011 the Bank had

115 c108406pu060 Proof 5: 14.6.13_22:25 B/L Revision: 0 Operator AllS unrestricted investment accounts (the Islamic equivalent of conventional deposits) on its statement of financial position. The Group also obtains interbank funding (in the form of short-term secured repo and unsecured funding as well as bilateral term funding), and has an outstanding long-term subordinated borrowing. The Group also has access to a pool of unencumbered and liquid securities that it can access to meet liquidity needs, in addition to its cash balances and placements with central banks. The Bank is party to derivatives and repo agreements with a number of counterparties which include obligations to provide collateral and/or which are subject to master netting agreements. As at 31 March 2013, debt securities with a carrying value of QAR 8,959 million, equal to 55.9 per cent. of its investment securities portfolio, were pledged as collateral under repo and other agreements. The Group’s customer deposits were QAR 17,276 million, or 59.3 per cent. of the Group’s total liabilities, at 31 March 2013. The Group’s customer deposits amounted to QAR 17,346 million, or 61.9 per cent. of its total liabilities, at 31 December 2012 and to QAR 12,130 million, or 55.7 per cent. of its total liabilities as at 31 December 2011. The Group has a significant concentration of customer deposits with governments and related agencies, principally in Qatar, which, at 31 March 2013 amounted to 60.2 per cent. of its total deposits. The equivalent proportions at 31 December 2012 and 2011 were 64.6 per cent. and 60.2 per cent., respectively. See ‘‘Risk factors—Factors that may affect the Bank’s ability to fulfil its obligations under its guarantee of the Notes—The Group’s investment securities and customer loan portfolios are concentrated in Qatar and the Group has significant individual customer concentrations’’. The Group’s repo funding amounted to QAR 7,888 million, or 27.1 per cent. of its liabilities, at 31 March 2013. The Group’s repo funding amounted to QAR 6,595 million, or 23.6 per cent. of its total liabilities, at 31 December 2012 and QAR 4,755 million, or 21.8 per cent. of its total liabilities at 31 December 2011. The Group’s subordinated debt is in the amount of c25 million, with no fixed maturity date, extended by a major shareholder of the Group to the French subsidiary, prior to it becoming a Group subsidiary. In the event of the winding up of the subsidiary, this loan is subordinated to the claims of depositors and all other creditors of the subsidiary. This loan does not contain any financial covenants nor contractual terms permitting its acceleration. In addition, it may only be repaid subject to the prior consent of the General Secretariat of the Banque de France’s Banking Commission. The table below shows the Group’s funding in the form of customer deposits, repos, interbank deposits and subordinated debt as at 31 December in each of 2011 and 2012 and as at 31 March 2013.

As at 31 December As at 31 March

2013 2011 2012 (unaudited)

(QAR (QAR (QAR million) (%) million) (%) million) (%)

Customer deposits...... 12,130 57.6 17,346 63.1 17,276 60.7 Repos ...... 4,755 22.6 6,595 24.0 7,888 27.7 Interbank deposits(1) ...... 4,045 19.2 3,436 12.5 3,179 11.2 Subordinated debt...... 117 0.1 120 — 117 0.4

Total...... 21,047 100.0 27,496 100.0 28,460 100.0

Note (1) This includes unsecured term borrowings from banks

116 c108406pu060 Proof 5: 14.6.13_22:25 B/L Revision: 0 Operator AllS The table below shows a breakdown of the Group’s customer deposits by type as at 31 December in each of 2011 and 2012 and as at 31 March 2013.

As at 31 December As at 31 March

2013 2011 2012 (unaudited)

(QAR (QAR (QAR million) (%) million) (%) million) (%)

Demand and call accounts 1,632 13.5 2,880 16.6 1,720 10 Savings accounts ...... 18 — 20 — 39 0.2 Term deposits...... 10,473 86.3 14,445 83.3 15,517 89.8 Other ...... 8 — — — — —

Total...... 12,130 100.0 17,346 100.0 17,276 100.0

The table below shows a breakdown of the Group’s customer deposits by sector as at 31 December in each of 2011 and 2012 and as at 31 March 2013.

As at 31 December As at 31 March

2013 2011 2012 (unaudited)

(QAR (QAR (QAR million) (%) million) (%) million) (%)

Government and related agencies ...... 7,305 60.2 11,203 64.6 10,396 60.2 Non-banking ﬁnancial institutions...... 207 1.7 84 — 435 2.5 Corporate...... 3,393 28.0 4,074 23.5 4,057 23.5 Individuals...... 1,226 10.1 1,984 11.4 2,388 13.8

Total...... 12,130 100.0 17,346 100.0 17,276 100.0

Maturity proﬁle The table below shows the maturity proﬁle of the Group’s customer deposits and amounts due to banks (including repo funding) as at 31 December 2012 and 31 March 2013

1–3 3–12 1–5 No 51 month months months years 45 years maturity Total

(QAR million) As at 31 December 2012 Customer deposits . 12,079 1,191 1,148 27 — 2,901 17,346 Due to banks(1)...... 2,030 4,651 1,296 2,004 — 49 10,030 As at 31 March 2013 (unaudited) Customer deposits . 12,696 1,499 1,350 20 — 1,711 17,276 Due to banks...... 4,077 2,701 828 3,351 — 110 11,067

Note: (1) An analysis of the Group’s deposits due to banks is contained in note 15 to the 2012 Financial Statements In line with many local and regional banks, a signiﬁcant proportion of the Group’s principal sources of funding at 31 March 2013 is short-term in nature, with 59.1 per cent. of such funding being repayable within one month and a further 23.1 per cent. being repayable within one year. See ‘‘Risk Factors—Factors that may affect the Bank’s ability to fulﬁl its obligations under its guarantee of the

117 c108406pu060 Proof 5: 14.6.13_22:25 B/L Revision: 0 Operator AllS Notes—The Group is subject to the risk that liquidity may not always be readily available or may only be available at costs which may adversely affect the Group’s business or results of operations’’. The establishment of the Programme is intended to help the Group diversify its sources of funding and issues of Notes under the Programme are expected to extend the average maturity of the Group’s funding. The Group continues to diversify its sources of customer deposits, has increased its unsecured term borrowing from the bank markets and is focused on extending the maturity proﬁle of its liabilities.

Capital Adequacy The adequacy of the Group’s capital is monitored using, among other measures, the rules and ratios established by the Basel Committee and adopted by the QCB in supervising the Group. The QCB supervises the Group on a consolidated basis and, as such, receives information on the capital adequacy of, and sets capital requirements for, the Group as a whole. Individual banking subsidiaries are directly regulated by their local supervisors, who set their capital adequacy requirements. The primary objectives of the Group’s capital management are to ensure that the Group complies with externally imposed capital requirements and that the Group maintains strong credit ratings and healthy capital ratios in order to support its business and to maximise shareholders’ value. The Group manages its capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of its activities. The Group’s regulatory capital consists of tier 1 capital (which comprises issued share capital, legal reserves and retained earnings (including profit for the current period but excluding any proposed dividend), adjusted for goodwill) and tier 2 capital (which comprises subordinated debt, the Group’s risk reserve (limited to 1.25 per cent. of risk weighted assets) and 45 per cent. of the fair value and foreign currency translation reserves if the balance is positive or 100 per cent. if the balance is negative). The minimum total capital adequacy ratio required by the QCB is 10 per cent. and the minimum required by Basel II is 8 per cent. The Group has capital adequacy ratios well in excess of these minimum requirements. The Group is currently compliant with Basel II having adopted the Standardised Approach for credit risk, the Basic Indicator Approach for operational risk and the Standardised Approach for market risk, consistent with QCB requirements. Compliance methodology with regard to Pillar II risks and the Internal Capital Adequacy Assessment Process under Basel II is under consideration, pending guidance from the QCB. However, implementation of processes, models, and systems consistent with Internal Rating Based Approaches for credit risk are expected to be introduced over the next three years, while Standardised Approach standards for operational risk and Internal Models standards for market risk are largely in place. In response to the global financial crisis, there has been a worldwide focus on the regulation of financial institutions, with many new regulations and changes in existing regulation having been implemented or in the process of being implemented. Examples of such new regulations include the new regime proposed by the Basel Committee on Banking Supervision (the ‘‘Basel Committee’’) in December 2010 (referred to as ‘‘Basel III’’). The aim of the Basel III framework is to improve the banking sector’s ability to absorb shocks arising from financial and economic stress, improve risk management and governance and strengthen banks’ transparency and disclosures. The framework raises both the quality and quantity of the capital base and increases capital requirements for certain positions. The minimum requirements for capital will be underpinned by a leverage ratio that serves as a backstop to the risk-based capital measures. In addition to the minimum requirements, there will also be buffer requirements in the form of both a capital conservation buffer and a countercyclical capital buffer. The framework also introduces internationally harmonised minimum requirements for liquidity risk. The implementation of Basel III is taking place according to the QCB phase-in timelines starting in 2013 through to 2018. From a capital adequacy perspective, the Bank already meets the most stringent capital standards to be implemented under Basel III. In addition, the Bank expects to meet the Basel III liquidity standards when they are introduced.

118 c108406pu060 Proof 5: 14.6.13_22:25 B/L Revision: 0 Operator AllS The table below shows the composition of the Group’s regulatory capital, a breakdown of its risk- weighted assets and its capital ratios as at 31 December in each of 2011 and 2012 and as at 31 March 2013.

As at As at 31 December 31 March

2013 2011 2012 (unaudited)

(QAR million, except percentages) Tier 1 capital...... 4,568 4,649 4,672 Tier 2 capital...... 278 481 417

Total regulatory capital...... 4,846 5,130 5,089 Due from banks...... 1,514 848 1,301 Loans and advances to customers...... 10,646 12,243 13,023 Investment securities...... 949 752 760 Other assets...... 683 681 648 Off balance sheet assets ...... 3,449 4,621 5,040

Total risk weighted assets for credit risk...... 17,242 19,144 20,772 Risk weighted assets for market risk...... 2,428 3,654 3,299 Risk weighted assets for operational risk...... 1,135 1,192 1,462

Total risk weighted assets...... 20,805 23,991 25,533

Tier 1 capital adequacy ratio...... 19.4% 18.3% Total capital adequacy ratio...... 21.4% 19.9%

Capital expenditure and other commitments The Group does not have any material ongoing capital expenditure, although, as at 31 March 2013, it had a QAR 44 million capital commitment in respect of existing branch refurbishments, software development and the refurbishment of a new branch which is under construction. The Group also has commitments under non-cancellable operating leases in respect of its branches and ofﬁce premises. These leases typically have maturities of three to ﬁve years with an option for the Group to renew at the end of the lease term. As at 31 March 2013, the Group’s commitments under these leases amounted to QAR 3 million.

Contingent liabilities The Group has contingent liabilities in respect of funding commitments it has made as well as in relation to guarantees and letters of credit issued by it. The table below shows these contingent liabilities as at 31 December in each of 2011 and 2012 and as at 31 March 2013.

As at As at 31 December 31 March

2013 2011 2012 (unaudited)

(QAR million) Unutilised credit facilities ...... 3,814 6,868 7,299 Guarantees...... 3,705 4,473 5,080 Letters of credit ...... 470 673 1,109

Total contingent liabilities ...... 7,989 12,014 13,488

The majority of the Group’s commitments to extend credit expire within one year. As commitments may expire without being drawn, and as guarantees and letters of credit are contingent upon speciﬁc events occurring, the amounts stated above do not necessarily represent future cash requirements.

119 c108406pu060 Proof 5: 14.6.13_22:25 B/L Revision: 0 Operator AllS Related party transactions The Group’s principal related party transactions are with its directors and members of senior management, their close family members and affiliated companies over which they have significant control and who may in some instances be minority shareholders of the Group. The Group also has significant transactions with its major shareholder, the Qatari government, and agencies of the Qatari government. These transactions include lending and deposit taking, as well as salaries and other benefits paid to senior management and fees paid to directors. All such transactions have been entered into on arm’s-length terms. Under QCB guidelines, loans and advances extended to a member of the Board (including his ‘‘credit group’’ and all his family members) may not exceed seven per cent. of the Bank’s capital and reserves and the aggregate loans and advances extended to members of the Board (and their credit groups and family members) as a whole may not exceed 35 per cent. of the Bank’s capital reserves. Any loan and advance extended to a member of the Board (or his credit group or family members) is required to be fully secured. Permitted security includes a cash guarantee covering the entire outstanding balance of the credit facility, an irrevocable, unconditional bank guarantee from an internationally rated bank and security over shares (other than shares in a company of which the Board member is a director), real estate or land (excluding the private residence of the Board member or his relatives). Loans and advances extended to relatives of Board members (that is, father, mother, brother and sister) may not exceed in aggregate 20 per cent. of the Bank’s capital and reserves. The related Board member is not permitted to participate in the decision of whether to extend the loan or advance to his relative. The QCB prohibits any preferential treatment in the conditions of granting loans or in the applicable interest rate payable by a Board member. Board approval is required when granting or renewing any loan facility extended to a member of the Board or his credit group. Further information on the Group’s related party transactions in 2011 and 2012 is set out in note 33 to the 2012 Financial Statements and further information on the Group’s related party transactions in the three month periods ended 31 March in 2012 and 2013 is set out in note 12 to the Interim Financial Statements.

Disclosures about risk The Group is exposed to a number of ﬁnancial risks and takes steps to mitigate certain of these risks as described ‘‘Description of the Group—Risk management’’ and in note 4 to the 2012 Financial Statements.

120 c108406pu060 Proof 5: 14.6.13_22:25 B/L Revision: 0 Operator AllS OVERVIEW OF QATAR

Unless indicated otherwise, information in this section has been derived from Qatar government publications.

Country Proﬁle Qatar is an independent state in the Southern Arabian Gulf. Qatar shares a land border and maritime boundaries with Saudi Arabia and maritime boundaries with Bahrain, the UAE and Iran. Qatar covers an area of approximately 11,493 square kilometres. Doha is the capital city of Qatar, the seat of government and Qatar’s cultural, commercial and ﬁnancial centre. It includes the country’s main seaport and international airport and has an advanced road system linking it with the international road network. According to the most recent government census, Qatar’s population was 1,699,435 in April 2010 indicating a 128.4 per cent. growth in population since the census prior to that was carried out in 2004. More recently, the Qatar Statistics Authority estimated Qatar’s population to be 1.95 million at the end of April 2013. A large portion of Qatar’s population is comprised of non-Qatari nationals.

In terms of foreign relations and membership of international organisations, Qatar, together with Bahrain, Kuwait, Oman, Saudi Arabia and the UAE, form the GCC. Qatar is also a member of the Organisation of the Petroleum Exporting Countries (‘‘OPEC’’), the Gas Exporting Countries Forum (which was established in 2008 and has its headquarters in Doha) 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 Multinational Investment Guarantee Organisation and UNESCO.

Legal System Over the last decade, Qatar’s legal system has been significantly reformed by the enactment of legislation intended to bring Qatari laws in line with international laws, standards and practices. Qatar’s civil law sets forth civil law principles, including with respect to conflict of laws, contracts, rights and obligations, security, ownership and torts. Qatar’s commercial law addresses commercial affairs and entities, competition, commercial obligations and contracts, and commercial paper. The commercial law also provides comprehensive provisions addressing bankruptcy matters, permitting creditors to file claims against any corporate entity, except for certain professional companies and other companies that are at least majority owned by the government. Finally, the Commercial Companies Law addresses matters with respect to the ownership of shares, limited liability, capital contributions, payment of dividends, shareholder rights and obligations and general principles of corporate governance. The Commercial Companies Law also introduces the concept of a single member limited liability company, and is not dissimilar to the companies laws of more mature legal systems.

The Qatar government has passed other signiﬁcant legislation in recent years, including the Foreign Investment Law, the Central Bank Law, the Money Laundering Law, the Doha Securities Market Law (now the Qatar Exchange Law) and the Qatar Financial Centre Law (the ‘‘QFC Law’’), as well as competition, intellectual property, labour, property and environmental laws.

Following the establishment of the QFC in 2005, the QFC Law established a legal and regulatory regime to govern the QFC that is generally parallel to and separate from Qatari laws and the Qatari legal system, except for Qatari criminal law. The QFC has established its own rules and regulations applicable to, among others, financial services companies, and which cover such topics as employment, companies, anti-money laundering, contracts and insolvency. In accordance with the rules and regulations of the QFC, the Qatar Financial Centre Regulatory Authority (the ‘‘QFCRA’’) regulates, authorises and supervises banking, financial and insurance related businesses carried on, in or from the QFC in accordance with legislative principles of an international standard, modelled closely on those used in London and other major financial centres. In addition, the Qatar International Court and Dispute Resolution Centre comprises the QFC Civil and Commercial Court, the Regulatory Tribunal and a Dispute Resolution Centre. The QFC Civil and Commercial Court deals with matters arising under the QFC Law, the QFC Regulatory Tribunal hears appeals against the decisions of the QFC Authority and other QFC institutions and the Dispute Resolution Centre offers international arbitration and mediation services.

121 c108406pu070 Proof 5: 14.6.13_22:25 B/L Revision: 0 Operator AllS Economic Overview Qatar is one of the most prosperous countries in the world, with a nominal GDP per capita of QAR 382,678 in 2012 based on Qatar’s 2012 population figure of 1.83 million. Over the last several years, Qatar has been one of the fastest growing economies in the world. According to the US Energy Information Administration Report of January 2013 Qatar’s proven oil reserves in 2012 amounted to 25.4 billion barrels of oil and its proven gas reserves amounted to 890 trillion cubic feet. Virtually all of Qatar’s proven reserves are located in the North Field, which is estimated by the U.S. Energy Information Administration to be the largest non-associated gas field in the world. Qatar holds 13 per cent. of total world’s natural gas reserves which are the third largest in the world after Russia and Iran. Qatar has over 100 years of proven gas reserves at projected long-term production levels. Qatar’s exploitation of its hydrocarbon reserves resulted in a nominal GDP compound annual growth rate (‘‘CAGR’’) of 25.2 per cent. from 2004 to 2012. Qatar’s total nominal GDP in 2012 was QAR 700,300 million, having grown by 12.2 per cent. in 2012 compared to 2011. The increase of Qatar’s total nominal GDP in 2012 has been attributed to the expansion in the production levels of gas- related products, LNG and condensates, coupled with high hydrocarbon prices. The oil and gas sector contributed 59.3 per cent. and 57.7 per cent. of Qatar’s total nominal GDP in 2011 and 2012, respectively. As Qatar reaches the end of its successful 20 year LNG development plan, LNG production is expected to plateau at a high, but steady, level over the next few years. Future growth in gas production is expected to come from the Barzan Project, which is a gas project under development to provide domestic pipeline gas. Qatar has focused on diversifying its economy in recent years in an effort to reduce its historical dependence on oil and gas revenues. The construction and real estate sectors have recently made substantial contributions to Qatar’s economic growth and significant investments have been made to increase economic returns from, in particular, petrochemicals, financial services, infrastructure development and tourism. As a result, nominal GDP for the non-oil and gas sector grew at a CAGR of 23.7 per cent. between 2004 and 2012, reflecting a slightly lower annual growth rate than the oil and gas sector for the same period. Nominal GDP for the non-oil and gas sector reached QAR 295,595 million (U.S.$81,180 million), or 42.3 per cent. of Qatar’s total nominal GDP, in 2012. In recent years, Qatar has focused on developing and exploiting its natural gas resources beyond the LNG industry by implementing a downstream strategy driven by opportunities to generate additional revenue from its existing oil and gas production. Qatar Petroleum (‘‘QP’’) has developed pipeline gas projects both for regional export markets and for domestic petrochemicals and industrial consumption. In addition, QP is the majority shareholder in a number of industrial companies located primarily at Ras Laffan City and Mesaieed Industrial City, which use natural gas as feedstock and/or fuel to produce various value added products, such as petrochemicals, fertiliser, steel, iron and metal coating, both for domestic consumption and for export. Qatar has also invested in exploiting various gas-to-liquid (‘‘GTL’’) technologies and has two joint venture projects currently in operation to generate GTL products like distillates. Throughout a period characterised by rapid growth and development, Qatar has demonstrated fiscal responsibility by managing its budget and public finances prudently. Qatar has historically had low levels of indebtedness but there was an increase in indebtedness starting in 2009 and continuing through 2012, due to the support given by Qatar to the commercial banking sector during the global financial crisis in 2009 and the issuance of bonds and treasury bills by the QCB in 2010, 2011 and 2012 to absorb excess liquidity among domestic commercial banks and to develop a yield curve for riyal-denominated domestic bonds. Qatar’s total direct external indebtedness was QAR 87,797 million as of 31 March 2012. Most of Qatar’s significant energy projects are funded on a stand-alone, limited recourse basis. The significant revenues generated by the oil and gas sector (which contributed 85.14 per cent. and 81.16 per cent. of Qatar’s annual revenues in the fiscal years ended 31 March 2011 and 31 March 2012, respectively) have provided sustained liquidity while ensuring sizeable surpluses in the fiscal and external accounts. Qatar has had budget surpluses since the fiscal year ended 31 March 2001, with an estimated budgeted surplus of QAR 79.8 billion or 11.3 per cent. of estimated GDP. In addition, Qatar’s trade activity is strong, with total goods exported (including re-exports) in 2012 valued at QAR 484,002 million and total imports in 2012 valued at QAR 94,940 million, together constituting 82.7 per cent. of total nominal GDP. Between 2008 and 2012, the value of Qatar’s exports increased by 97.5 per cent, while the value of its imports decreased by 6.5% per cent. The external sector has been characterised by a large current account surplus each year since 2000 and robust growth in imports has been counterbalanced by a significant rise in hydrocarbon exports.

122 c108406pu070 Proof 5: 14.6.13_22:25 B/L Revision: 0 Operator AllS In recent years, Qatar has used its budget surpluses to diversify the economy through increased spending on infrastructure, social programmes, healthcare and education, which have modernised Qatar’s economy. Qatar’s economic growth has also enabled it to diversify its economy through domestic and international investment into different classes of assets. This diversification will be important to Qatar’s future government revenues as the growth rate of the State’s revenue from the oil and gas sector is expected to stabilise given the completion of several of the State’s long-term hydrocarbon investment programmes. In 2005, the QIA was established to propose and implement investments for Qatar’s growing financial reserves, both domestically and abroad. Through the Qatar Investment Authority (the ‘‘QIA’’), Qatar has invested in private equity, the banking sector, real estate, publicly traded securities and alternative assets. With its growing portfolio of international and domestic long-term strategic investments, the QIA has continued to develop Qatar’s economic diversification strategy while contributing to the nation’s significant economic expansion. The QIA has provided financial support to Qatar’s financial sector as a response to the global economic downturn and as a preventative measure to preserve the general stability in Qatar’s banking sector. See ‘‘Banking industry and regulation in Qatar—Banking system’’.

Annual Indicators The table below shows certain economic data for Qatar for the years indicated (Source: QCB).

2009 2010 2011 2012

GDP (QAR billons) ...... 356.0 455.4 624.2 700.3 Growth Rate (%)...... n/a 27.9 37.1 12.2 Oil Sector Share (%)...... 44.8 52.6 59.3 57.8 Growth Rate (%)...... n/a 50.3 54.4 9.3 Non-Oil Sector Share (%)...... 55.2 47.4 40.7 42.2 Growth Rate (%)...... n/a 9.8 17.8 16.4 GDP Per Capita (QAR thousand) ...... 217.1 264.8 360.8 382.7 CPI-Inﬂation (%)...... -4.89 -2.44 1.93 1.9

123 c108406pu070 Proof 5: 14.6.13_22:25 B/L Revision: 0 Operator AllS BANKING INDUSTRY AND REGULATION IN QATAR

Unless otherwise indicated, information in this section has been derived from publications of the Qatari government, the QCB and the QFC’s annual report and website.

Qatar Central Bank The QCB was established in 1993 and operates in coordination with the Ministry of Economy and Finance. The QCB is managed by a board of directors and chaired by its Governor. The board of directors includes the Deputy Governor of the QCB and at least three other members, including representatives from the Ministry of Economy and Finance, the Ministry of Business and Trade and the Economic Adviser from the Emiri Diwan. The QCB’s main objective in its monetary policy is to ensure the stability of the exchange rate of the Qatari riyal, the stability of commodity prices and the prices of services. In its supervisory capacity, the QCB oversees the activities of Qatar’s commercial banks and non- bank financial institutions (with the exception of insurance companies) with a view to minimising banking and financial risk in Qatar’s financial sector. The QCB conducts regular inspections of commercial banks and reviews reports and other mandatory data submitted by commercial banks, including monthly capital adequacy compliance reports. The QCB has implemented regulations regarding non-performing loans, large exposures, country risk, money market and foreign exchange accounts, credit ratios, fixed assets for banks’ use, reserve requirements and banks’ investments. The QCB has the authority to impose penalties in the event that banks fail to comply with these regulations. It requires commercial banks to meet minimum reserve requirements and capital adequacy requirements, as discussed below. The QCB has established the Qatar Credit Bureau which provides analytical data and supports banks in their implementation of advanced risk management techniques outlined by Basel II. The QCB plans to implement Basel III standards earlier than the required timeline for completion of different aspects of the Basel III framework which fall between 2013 and 2019. Commercial banks are required to have their annual accounts audited by the QCB’s approved independent auditors and to obtain prior approval from the QCB to appoint senior management. The IMF’s staff report for the 2011 Article IV consultation, which was completed on 12 January 2012, noted that the Qatari banking system continued to remain resistant to any economic shocks. The IMF Report further noted that results of stress tests done on banks indicated that the Qatari banking system has the ability to withstand credit and market risks, and that the exposure of local Qatari banks to European banks was limited, with local banks’ exposures (loans and investments) to the European banking sector being approximately U.S.$3.3 billion as at the end of June 2011. The IMF’s staff report for the 2012 Article IV consultation was completed on 11 January 2013. The report noted that the commercial banking sector in Qatar was well capitalised, with a capital adequacy ratio of 21.1 per cent. in June 2012, and remained profitable, with a return on assets of 2.5 per cent. in June 2012. The report also noted a need to limit the build up of liquidity risk related to short-term foreign borrowings being channelled into funding medium-and long-term domestic lending, including through the use of additional prudential liquidity ratios. In addition, the report noted that the banking system is exhibiting resilience in terms of credit risk, but there is a need to prevent the build up of excessive exposure of the banking system to the real estate sector. The QCB also issues domestic currency and conducts bank clearing operations and settlements. The investment department of the QCB manages the investments of the QCB’s financial reserves. These investments are primarily in the form of securities issued or guaranteed by other sovereigns with maturities of up to 10 years and are maintained at a level at least equal to 100 per cent. of the riyals issued by the QCB at any time. The QCB, in order to ensure better regulation and risk management in the domestic Islamic and conventional banking sector, issued instructions in 2011 to conventional banks to wind up their Islamic banking operations by the end of 2011.

Certain banking regulations Credit facility classiﬁcations The QCB requires banks operating in Qatar to evaluate and classify their credit facilities on a regular basis. The classiﬁcation categories are performing (which is subdivided into low risk and special mention categories) and non-performing (which is subdivided into sub-standard, doubtful and bad).

124 c108406pu070 Proof 5: 14.6.13_22:25 B/L Revision: 0 Operator AllS Non performing loans are determined by reference to a range of indicators, and include loans that meet one of the following conditions for at least three months: (i) the borrower is not able to meet its loan repayments and the loan is past due; (ii) other credit facilities of that borrower are past due; (iii) the existing credit limits granted to that borrower for its other credit facilities are not renewed; or (iv) a borrower exceeds its agreed credit limit by 10 per cent. or more without prior authorisation. Within the non performing loan categorisation, sub-standard loans are those that have not performed for three or more months, doubtful loans are those that have not performed for six or more months, and bad loans are those that have not performed for nine or more months. Provisions are required to be made against non-performing loans at 20 per cent. for sub-standard, 50 per cent. for doubtful and 100 per cent. for bad loans and are permitted to be made at management’s discretion against special mention performing loans. Banks are permitted to exclude 100 per cent. provisioned loans which have been non-performing for more than one year from their balance sheets, provided certain conditions have been satisﬁed.

Connected party limits The QCB imposes certain exposure limits and credit controls on commercial banks, which are subject to limited exceptions. These limits include: * the maximum credit facilities that a bank may extend to a single customer’s borrower group is 20 per cent. of the bank’s capital and reserves; * the maximum credit and investment facilities that a bank may extend to a single customer’s borrower group is 25 per cent. of the bank’s capital and reserves; and * the maxim credit facilities that a bank may extend to a single major shareholder’s borrower group is 10 per cent. of the bank’s capital and reserves.

Investment concentrations The QCB sets limits for investment concentrations, including equity investments, debt securities investments, other investment products, subsidiaries and real estate and other ﬁxed assets.

Country concentrations The QCB sets country risk concentrations for Qatari banks based on their categorisation as a ﬁrst, second or third category bank. This categorisation primarily depends on the rating of each bank. These risk categorisations do not apply to GCC countries.

Consumer lending limits The QCB sets a maximum limit on loans and Islamic finance against transfer of salaries of QAR 2 million for Qatari citizens and QAR 400,000 for non-Qatari residents. The QCB provides that the maximum terms on these facilities are six years for Qatari citizens and four years for non-Qatari residents. Maximum rates of interest are set at the QCB lending rate (the ‘‘QCB Rate’’) on top of which 1.5 per cent. is added for Qatari citizens and non-Qatari residents. The QCB also sets caps in relation to the amount of total monthly obligations that an individual can have against salary which is set at 75 per cent. of the sum of basic salary and social allowance for Qatari citizens and 50 per cent. of total salary for non-Qatari residents. The QCB regulations require that the maximum credit card withdrawal limit of an individual in Qatar is double his or her net total salary for both Qatari citizens and the non-Qatari residents. The QCB also sets maximum rates of interest for credit card lending. The QCB also has specific regulations applicable to consumer financing secured by real estate which set a maximum loan to value ratio which varies based on whether the borrower’s salary is the main source of repayment or not and on certain other factors. The regulations also limit the term of such loans to a maximum of 20 years or 15 years, in each case including any grace period, again depending on whether the borrower’s salary is the main source of repayment or not.

Capital adequacy The QCB requires commercial banks in Qatar to meet a minimum capital adequacy ratio of 10 per cent., calculated in accordance with Basel II methodology. Currently, Qatar’s commercial banks are compliant with Basel II pillar one, and are working to become compliant with the remaining risk components of pillars two and three.

125 c108406pu070 Proof 5: 14.6.13_22:25 B/L Revision: 0 Operator AllS Foreign investment Foreign investment in Qatari banks is not permitted, save with a speciﬁc permission from the Council of Ministers. This restriction does not apply to Qatari banks listed on the QE, although foreign investors are restricted to holding, in aggregate, not more than 25 per cent. of the shares of any company so listed. This limit may be increased for individual companies in certain circumstances.

Reserve requirements The QCB requires each commercial bank to maintain a minimum reserve with the QCB equal to 4.75 per cent. of the bank’s total deposits. The percentage is calculated on the basis of the average daily total deposits balances during the period from the 16th of each month to the 12th of the following month. The QCB also requires each commercial bank to maintain a risk reserve from its net profit of not less than 2 per cent. of the total amount of direct credit facilities. This figure is calculated according to each bank’s consolidated balance sheet, after deduction of the specific provisions, suspended interests and deferred profits for Islamic banks, with the exception of credit facilities extended to the Ministry of Economy and Finance, credit facilities guaranteed by the Ministry of Economy and Finance and credit facilities secured by cash collateral (with a lien on cash deposits). Pursuant to a QCB circular issued in December 2011, risk reserve levels that national banks must adhere to were increased from 1.5 per cent. to 2 per cent. of the total direct credit facilities granted by the banks with effect from 31 December 2012. Pursuant to the same circular, the risk reserve level is to be increased to 2.5 per cent. by the end of 2013.

Interest rates The QCB utilises three different interest rates: a lending rate, a deposit rate and a repo rate. The lending rate applies to the lending facility through which commercial banks can obtain liquidity from the QCB. The deposit rate applies to the deposit facility through which commercial banks can place deposits with the QCB. Both of these facilities may be rolled over to the next day, when transactions are executed electronically. The repo rate is a pre-determined interest rate set by the QCB for repo transactions entered into between the QCB and commercial banks. Also, an overnight liquidity facility rate applies to overnight lending by the QCB to commercial banks. Prior to July 2007, the QCB closely tracked the interest rates of the U.S. Federal Reserve as the Qatari riyal is pegged to the U.S. dollar. However, the QCB has not deemed it necessary to change interest rates to the same extent, or as quickly, as the U.S. Federal Reserve on all occasions, particularly in recent years. As at the date of this Base Prospectus, the QCB overnight deposit rate is 0.75 per cent. and its overnight lending rate and repo rate are 4.5 per cent. In May 2012, the QCB and Bloomberg launched the Qatar Interbank Offer Rate (‘‘QIBOR’’) in a move aimed at encouraging a more active interbank market in Qatar.

Liquidity The QCB, on behalf of the Government, issues bonds and treasury bills to absorb domestic liquidity and develop a yield curve for riyal-denominated domestic bonds. The QCB has issued a number of domestic bonds since 1999. The government had a total of QAR 75.6 billion of bonds outstanding as at 31 March 2013. The majority of this long-term debt is issued in local currency. Since the beginning of 2012, the government has begun to issue three-month treasury bills denominated in local currency on a monthly basis, with QAR 21 billion outstanding as at 31 March 2013. The QCB is also considering issuing certiﬁcates and Islamic ﬁnancing products to further absorb domestic liquidity and also uses the current deposit accounts of commercial banks at the QCB to control domestic liquidity. In addition, the QCB has announced that it will issue local currency bonds (with various maturities) on a quarterly basis to further develop a local currency yield curve.

Banking system Commercial banks in Qatar consist of six locally owned conventional commercial banks, four Islamic institutions that operate according to Islamic Shari’a principles (including the prohibition on the charging of interest on loans), seven branches of foreign banks and one development bank. Commercial banks are the primary ﬁnancial institutions in Qatar, providing deposit taking, credit and investment services, as well as foreign exchange and clearance services. The deposits made in Qatar’s commercial banks are not insured as there is no deposit insurance scheme in Qatar.

126 c108406pu070 Proof 5: 14.6.13_22:25 B/L Revision: 0 Operator AllS The QIA has provided financial support to Qatar’s financial sector as a response to the global economic downturn and as a preventative measure to preserve the general stability in Qatar’s banking sector. In early 2009, the QIA began making direct capital injections in Qatar’s commercial banking sector through a plan to purchase equity ownership interests of up to 20 per cent. in the domestic banks listed on the QE. In line with the plan, from 2009 through to 2011, the QIA acquired equity positions ranging from 5 per cent. to 20 per cent. in various domestic banks. The QIA did not acquire any shares in the Guarantor reflecting the fact that, as a relatively young bank at the time, The Guarantor was still soundly capitalised. In addition to the equity purchases, the QIA also assisted the banking sector by purchasing certain portions of their investment and real estate portfolios. In March 2009, the QIA purchased the investment portfolios of seven of the nine domestic banks listed on the QE at a total purchase price of approximately QAR 6,500 million paid through a combination of cash and domestic government bonds. This purchase price was equal to the value of such investment portfolios as registered in the records of each bank as of 28 February 2009. In an effort to further boost liquidity and encourage lending, in early June 2009, the QIA made a second round of investments and bought the real estate portfolios and investments of nine domestic commercial banks at a sale price equivalent to the net book value of such portfolios and investments with a total ceiling amount of QAR 15,000 million. The total support to the banking sector, which includes purchases of real estate and investment portfolio in domestic banks as well as the equity injections has been QAR 32,700 million. The Guarantor, as a relatively new bank in 2009, had limited investment and real estate portfolios but was still eligible to participate, in line with other Qatari banks. The Guarantor has benefitted from a track record of government support measures since it was established. However, unlike most other Qatari banks, the Guarantor did not receive a capital injection in 2009, but a grant of QAR 291 million, due to the government’s already large stake in the Guarantor. The amount of credit extended by commercial banks to the private sector in Qatar grew by 19.2 per cent. in 2011 and by 13.5 per cent. in 2012 and was QAR 258,332 million at 31 December 2012. In 2012, credit extended to the real estate sector amounted to 33.1 per cent. of total private sector credit extended by commercial banks, while credit extended to the services sector and credit classified as ‘‘consumption’’ amounted to 13.8 per cent. and 27.5 per cent. of total private sector credit, respectively. In 2012, the amount of credit extended to the real estate, services and consumption sectors grew by 12.3 per cent., 4.5 per cent. 20.3 per cent., respectively. The table below summarises the capital adequacy ratio and the ratio of non-performing loans to total capital for the Qatari banking system as at 31 December 2008 to December 2011. Data for 2012 is not currently published by the QCB.

As of 31 December

2008 2009 2010 2011

Capital adequacy ratio (per cent.)...... 15.5 16.1 16.1 20.6 Non-performing loans/capital (per cent.) ...... 1.0 1.2 1.3 1.0

Source: QCB

127 c108406pu070 Proof 5: 14.6.13_22:25 B/L Revision: 0 Operator AllS The table below shows the consolidated balance sheet of the Qatari commercial banking sector as at 31 December in each of 2010, 2011 and 2012.

As at 31 December

2010 2011 2012

(QAR million) Assets: Reserves: Cash ...... 1,879.4 2,079.1 2,814.3 Balances with the QCB...... 83,578.5 21,802.1 34,264.0 Foreign assets Cash ...... 403.4 1,212.0 1,140.4 Claims on foreign banks...... 41,781.8 59,836.3 68,814.1 Foreign credit...... 20,560.5 26,867.3 31,742.6 Foreign investments ...... 28,379.1 31,523.8 26,748.5 Other assets...... — — 39.0

Domestic assets: Due from Banks in Qatar...... 27,999.1 38,656.4 27,433.9 Domestic credit ...... 293,920.0 376,695.2 476,885.7 Domestic investments...... 56,174.7 121,567.2 133,936.1 Fixed assets ...... 4,082.3 4,196.6 3,885.9 Other assets...... 8,723.4 9,864.5 8,928.8

Total assets ...... 567,482.2 694,300.5 816,633.3

Liabilities: Foreign liabilities: Non-resident deposits ...... 29,680.8 19,835.2 40,729.1 Due to foreign banks ...... 97,103.4 133,276.7 144,770.7 Debt securities...... 12,525.1 8,420.1 31,754.7 Other liabilities...... — — 7,292.9

Domestic liabilities: Resident deposits ...... 277,106.7 343,777.2 417,336.5 Due to domestic banks ...... 23,419.9 32,246.4 22,926.0 Due to QCB...... 3,413.2 4,910.3 2,170.4 Debt securities...... 115.0 7,541.3 1,113.9 Margins ...... 1,047.8 1,096.2 914.7 Capital accounts...... 62,793.1 87,744.6 102,458.1 Provisions...... 7,315.8 8,162.0 8,038.1 Other liabilities...... 52,961.4 47,290.5 37,128.2

Total liabilities ...... 567,482.2 694,300.5 816,633.3

Source: QCB

128 c108406pu070 Proof 5: 14.6.13_22:25 B/L Revision: 0 Operator AllS The table below shows the distribution of Qatari commercial bank credit facilities as at 31 December in each of 2010, 2011 and 2012.

As at 31 December

2010 2011 2012

(QAR million) Public Sector: Government ...... 36,303.1 40,801.2 51,745.9 Government institutions ...... 50,452.2 90,618.9 139,585.1 Semi government institutions...... 16,302.7 17,750.3 27,222.4

Total public sector loans...... 103,058.0 149,170.4 218,553.4

Private sector: General trade ...... 24,875.2 26,855.3 33,238.2 Industry...... 6,648.2 6,534.0 8,664.7 Contractors ...... 18,410.6 16,219.9 16,546.4 Real estate...... 51,041.8 76,220.4 85,561.5 Consumption...... 56,735.1 67,975.3 71,046.4 Services...... 29,541.1 29,709.0 35,734.4 Other ...... 3,610.0 4,010.9 7,540.7

Total private sector loans ...... 190,862.0 227,524.8 258,332.3

Total domestic loans...... 293,920.0 376,695.2 476,885.7

Loans outside Qatar...... 20,560.5 26,867.3 31,742.6

Total loans ...... 314,480.5 403,562.5 508,628.3

Source: QCB

129 c108406pu070 Proof 5: 14.6.13_22:25 B/L Revision: 0 Operator AllS The table below shows the breakdown of Qatari commercial bank deposits as at 31 December 2008 to 31 December 2011 and as at 30 June 2012. As at 31 December

2010 2011 2012

(QAR million) Public Sector: By term and currency: In Qatari Riyal Demand deposits ...... 13,877.7 19,274.6 19,366.2 Time and savings deposits...... 41,875.4 47,655.1 53,060.3 In foreign currencies Demand deposits ...... 10,086.2 25,101.1 18,522.3 Time and savings deposits...... 6,231.9 33,844.8 89,780.3 By sector: Government...... 18,485.8 40,824.6 44,444.7 Government institutions...... 32,276.5 57,350.9 104,378.1 Semi government institutions ...... 21,308.9 27,700.1 31,906.3

Total public sector deposits ...... 72,071.2 125,875.6 180,729.1

Private sector: By term and currency: In Qatari Riyal Demand deposits ...... 51,793.1 61,926.2 69,010.7 Time and savings deposits...... 137,392.9 131,942.2 142,011.2 In foreign currencies Demand deposits ...... 10,024.3 11,823.2 10,561.2 Time and savings deposits...... 5,825.2 12,210.0 15,024.3 By sector: Personal...... 90,828.1 103.093.1 116,257.2 Companies and institutions...... 114,207.4 114,808.5 120,350.2

Total private sector deposits...... 205,035.5 217,901.6 236,607.4

Total deposits: By currency: In Qatari Riyal...... 244,939.1 260,798.1 283,448.4 In foreign currencies...... 32,167.6 82,979.1 133,888.1 By term: Total demand deposits ...... 85,781.3 118,125.1 117,460.4 Total time and savings deposits ...... 191,325.4 225,652.1 299,876.1 Non-resident deposits ...... 29,680.8 19,835.2 40,729.1

Total deposits ...... 306,787.5 363,612.4 458,065.6

Source: QCB

Qatar Development Bank Qatar Development Bank (‘‘QDB’’) was established by the Qatari government in 1997, with contributions from national banks under the name of Qatar Industrial Development Bank. In 2006, QDB became a government-owned bank and the following year changed its name to Qatar Development Bank. QDB’s main objective is to contribute to the development and diversification of economic and industrial investments in Qatar. QDB finances small and medium sized industrial projects and provides technical assistance and advice to industrialists for the implementation of their projects. QDB also provides consultancy services and financing for projects in the education, agriculture, fisheries, healthcare, animal resources and tourism sectors. As of 31 December 2012, QDB’s paid up capital was QAR 2.9 billion.

130 c108406pu070 Proof 5: 14.6.13_22:25 B/L Revision: 0 Operator AllS Qatar Financial Centre The QFC is a financial and business centre established by the Government in 2005 with a view to attracting international financial services institutions and multinational corporations to Doha in order to grow and develop the market for financial services in the region. Unlike other financial centres in the region, the QFC is an onshore financial and business environment. The QFC comprises: the QFCA, the QFCRA and the QFC Dispute Resolution Centre. The QFCA determines the commercial strategy of the QFC and is responsible for legislation and compliance matters relating to the QFC legal environment. The QFCRA regulates, authorises, supervises and, when necessary, disciplines banking, securities, insurance and other financial businesses carried on in or from the QFC. The QFCRA also registers and supervises the directors and other designated officers of the businesses authorised by it. The QFCRA’s regulatory approach is modelled closely on that of the UK’s Financial Conduct Authority. The QFC Civil and Commercial Court has jurisdiction over civil and commercial disputes arising between: (i) entities established within the QFC; (ii) employees or contractors employed by entities established in the QFC and the employing entity; (iii) QFC entities and residents of the State of Qatar; and (iv) QFC institutions and entities established in the QFC. The QFC Regulatory Tribunal hears appeals against decisions of the QFCRA, QFCA and other QFC institutions. The QFC Dispute Resolution Centre offers international arbitration and mediation services. The QFCA, QFCRA, the QFC Civil and Commercial Court and the Regulatory Tribunal are all statutory independent bodies reporting to the Council of Ministers. Firms operating under the QFC umbrella fall into two categories: those providing financial services, which are regulated activities, and those engaged in non-regulated activities in support of financial services. All QFC firms must apply to the QFCA for a business license to conduct a permitted activity in or from the QFC. Firms planning to conduct regulated activities also need to apply to the QFCRA for authorisation. The operations of the Company Registration Office are handled by the QFCA. The QFCA imposed a tax rate of 10 per cent. on local source business profits effective 1 January 2010. Financial institutions licensed by the QFCRA as ‘‘Category-1’’ financial institutions are authorised to operate as universal banks and, among other things, may make various types of loans and accept deposits in any currency. Under the QFC licensing policy, such institutions are currently prohibited from conducting retail banking with, or on behalf of, retail customers unless they obtain authorisation from the QFCRA. Financial institutions authorised by the QFCRA as ‘‘Category-2’’, ‘‘Category-3’’ or ‘‘Category-4’’ are permitted to undertake certain more limited activities, and ‘‘Category-5’’ institutions may undertake Islamic finance activities.

Proposed single regulator The Ministry of Business and Trade has in the past announced its intention to establish a single financial regulator in Qatar, which will regulate the banking, insurance and securities sectors, and the QFC. The proposed single regulator would incorporate the Banking Supervision Division of QCB, the QFMA, the regulatory division of the QE and the Qatar Financial Centre Regulatory Authority and would also supervise the insurance sector in Qatar. In December 2012, a law providing for an umbrella body to regulate banks, financial services, insurance companies, the QE and all banking, financial and insurance companies licensed by the QFC, was implemented. This body will be placed under the authority of the QCB, although no specific timelines for implementation have been provided.

131 c108406pu070 Proof 5: 14.6.13_22:25 B/L Revision: 0 Operator AllS TAXATION

The following is a general description of certain tax considerations relating to the Notes under the Programme. It does not purport to be a complete analysis of all tax considerations relating to the Notes, whether in those countries or elsewhere. Prospective purchasers of Notes should consult their own tax advisers as to which countries’ tax laws could be relevant to acquiring, holding and disposing of Notes and receiving payments of interest, principal and/or other amounts under the Notes and the consequences of such actions under the tax laws of those countries. 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.

EU Savings Directive Under EC Council Directive 2003/48/EC on the taxation of savings income, Member States are required to provide to the tax authorities of another Member State details of payments of interest (or similar income) paid by a person within its jurisdiction to an individual resident in that other Member State or to certain limited types of entities established in that other Member State. However, for a transitional period, Luxembourg and Austria are instead required (unless during that period they elect otherwise) to operate a withholding system in relation to such payments (the ending of such transitional period being dependent upon the conclusion of certain other agreements relating to information exchange with certain other countries). A number of non-EU countries and territories including Switzerland have adopted similar measures (a withholding system in the case of Switzerland). The European Commission has proposed certain amendments to the Savings Directive, which may, if implemented, amend or broaden the scope of the requirements described above.

Proposed EU Financial Transactions Tax The European Commission recently published a proposal for a Directive for a common financial transaction tax (‘‘FTT’’) in Belgium, Germany, Estonia, Greece, Spain, France, Italy, Austria, Portugal, Slovenia and Slovakia (the ‘‘Participating Member States’’). The tax would be applicable from 1 January 2014. The proposed FTT has very broad, potentially extraterritorial scope. Generally, it would apply to financial transactions where at least one party is a financial institution, and (a) one party is established in a Participating Member State or (b) the financial instrument which is subject to the transaction is issued 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 by merely transacting with a person established in a Participating Member State. In relation to many secondary market transactions in bonds and shares, the FTT would be charged at a minimum rate of 0.1 per cent. on each financial institution which is party to the transaction. Primary market transactions referred to in Article 5(c) of Regulation (EC) No 1287/2006 are exempt. There are no broad exemptions for financial intermediaries or market makers. Therefore, the effective cumulative rate applicable to some dealings in bonds or shares (for instance, cleared transactions) could be in excess of 0.1 per cent. A person transacting with a financial institution which fails to account for FTT would be jointly and severally liable for that tax. The FTT proposal remains subject to negotiation between the Participating Member States and is the subject of legal challenge. It may therefore be altered prior to any implementation. Additional EU member states may decide to participate. Prospective holders of the Notes are strongly advised to seek their own professional advice in relation to the FTT.

Cayman Islands The following is a discussion on certain Cayman Islands income tax consequences of an investment in Notes to be issued under the Programme. The discussion is a general summary of present law, which is subject to prospective and retroactive change. It is not intended as tax advice, does not consider any investor’s particular circumstances and does not consider tax consequences other than those arising under Cayman Islands law. Under existing Cayman Islands laws payments on Notes to be issued under the Programme will not be subject to taxation in the Cayman Islands and no withholding will be required on the payments to

132 c108406pu070 Proof 5: 14.6.13_22:25 B/L Revision: 0 Operator AllS any holder of Notes nor will gains derived from the disposal of Notes be subject to Cayman Islands income or corporation tax. The Cayman Islands currently have no income, corporation or capital gains tax and no estate duty, inheritance or gift tax. Subject as set out below, no capital or stamp duties are levied in the Cayman Islands on the issue, transfer or redemption of Notes. An instrument transferring title to any Notes, if brought to or executed in the Cayman Islands, would be subject to Cayman Islands stamp duty. An annual registration fee is payable by the Issuer to the Cayman Islands Registrar of Companies which is calculated by reference to the nominal amount of its authorised capital. At current rates, this annual registration fee is approximately U.S.$853.66. The foregoing is based on current law and practice in the Cayman Islands and this is subject to change therein.

Qatar The following is a summary of the principal Qatari tax consequences of ownership of the Notes by beneficial owners who or which are not incorporated in or residents of Qatar for Qatari tax purposes and do not conduct business activities in Qatar (‘‘Non-Qatari Holders’’). The summary below of the taxation in Qatar is based upon: (a) the Income Tax Law No. 21 of 2009 (‘‘Income Tax Law’’); (b) Decision No. 10 of 2011 of the Minister of Economy and Finance Issuing the Executive Regulations to the Income Tax Law (‘‘Executive Regulations’’ or ‘‘Regulations’’); and (c) the practice that has been adopted and is applied by the Public Revenue and Taxes Department (the ‘‘PRTD’’) Income Tax Department of the Ministry of Economy and Finance, each as in effect on the date of this Base Prospectus. This general description is subject to any subsequent change in the Income Tax Law, Regulations and practice that may come into effect after such date. Under the Income Tax Law, tax is imposed on income derived from a source in Qatar. Income derived from a source in Qatar includes gross income arising from an activity carried on in Qatar, contracts wholly or partially performed in Qatar and real estate situated in Qatar (including the sale of shares in companies or partnerships, the assets of which consist mainly of real estate situated in Qatar). The gross income of Qatari natural persons resident in Qatar, including their shares in the profits of legal entities, is exempt from Qatar tax as is the capital gains on the disposal of real estate and securities derived by natural persons provided that the real estate and securities so disposed of do not form part of the assets of a taxable activity. Natural or legal persons deemed subject to income tax in Qatar will either pay tax at the standard rate of 10 per cent. on the net taxable income or, the tax will be withheld at source from the gross payment to be made. A withholding tax applies to certain payments made to ‘‘non-residents’’ (as defined in the Income Tax Law) in respect of activities not connected with a permanent establishment in Qatar. Particularly, the Income Tax Law specifies a withholding tax rate of 7 per cent. on payments of interest. The Executive Regulations provide for certain exemptions to withholding tax on interest payments. These exemptions are: (i) interest on deposits in banks in Qatar; (ii) interest on bonds and securities issued by the State of Qatar and public authorities, establishments, corporations and companies owned wholly or partly by the State of Qatar; (iii) interest on transactions, facilities and loans with banks and financial institutions; and (iv) interest paid by a permanent establishment in Qatar to the head office or to an entity related to the head office outside Qatar. The PRTD has confirmed to the Guarantor in written guidance dated 12 June 2013 that interest payments payable under the terms of the Notes will be exempt from withholding tax under (ii) above, on the basis that the State of Qatar, through Qatar Holding LLC (an entity established by the Qatar Investment Authority), is a part owner of both the Guarantor and, by virtue of it being a wholly- owned subsidiary of the Guarantor, the Issuer. The exemption under (ii) will be lost if Qatar Holding LLC divests itself of its ownership of the Guarantor and while interest payments payable by the Guarantor under any guarantee of the Notes issued by the Issuer are also exempt through its status as a ‘‘financial institution’’ under (iii) above, it is not clear whether that exemption would also apply to interest payments payable by the Issuer under the terms of Notes issued by the Issuer. There is no stamp duty, capital gains tax or sales tax applicable in Qatar (however, unless specifically exempt under the Qatar tax law, gains of a capital nature are treated as income and taxed at the same rate as income).

U.S. Foreign Account Tax Compliance Act Sections 1471 through 1474 of the U.S. Internal Revenue Code (‘‘FATCA’’) impose a new reporting regime and potentially a 30 per cent. withholding tax with respect to certain payments to (i) any non-

133 c108406pu070 Proof 5: 14.6.13_22:25 B/L Revision: 0 Operator AllS U.S. financial institution (a ‘‘foreign financial institution’’, or ‘‘FFI’’ (as defined by FATCA)) that does not become a ‘‘Participating FFI’’ by entering into an agreement with the U.S. Internal Revenue Service (‘‘IRS’’) to provide the IRS with certain information in respect of its account holders and investors or is not otherwise exempt from or in deemed compliance with FATCA and (ii) any investor (unless otherwise exempt from FATCA) that does not provide information sufficient to determine whether the investor is a U.S. person or should otherwise be treated as holding a ‘‘United States Account’’ of the Issuer (a ‘‘Recalcitrant Holder’’). The Issuer may be classified as an FFI. The new withholding regime will be phased in beginning 1 January 2014 for payments from sources within the United States and will apply to ‘‘foreign passthru payments’’ (a term not yet defined) no earlier than 1 January 2017. This withholding would potentially apply to payments in respect of (i) any Notes characterized as debt (or which are not otherwise characterized as equity and have a fixed term) for U.S. federal tax purposes that are issued on or after the ‘‘grandfathering date’’, which is the later of (a) 1 January 2014 and (b) the date that is six months after the date on which final U.S. Treasury regulations defining the term foreign passthru payment are filed with the Federal Register, or which are materially modified on or after the grandfathering date and (ii) any Notes characterized as equity or which do not have a fixed term for U.S. federal tax purposes, whenever issued. If Notes are issued before the grandfathering date, and additional Notes of the same series are issued on or after that date, the additional Notes may not be treated as grandfathered, which may have negative consequences for the existing Notes, including a negative impact on market price. The United States and a number of other jurisdictions have announced their intention to negotiate intergovernmental agreements to facilitate the implementation of FATCA (each, an ‘‘IGA’’). Pursuant to FATCA and the ‘‘Model 1’’ and ‘‘Model 2’’ IGAs released by the United States, an FFI in an IGA signatory country could be treated as a ‘‘Reporting FI’’ not subject to withholding under FATCA on any payments it receives. Further, an FFI in a Model 1 IGA jurisdiction would not be required to withhold under FATCA or an IGA (or any law implementing an IGA) (any such withholding being ‘‘FATCA Withholding’’) from payments it makes (unless it has agreed to do so under the U.S. ‘‘qualified intermediary’’, ‘‘withholding foreign partnership’’ or ‘‘withholding foreign trust’’ regimes). The Model 2 IGA leaves open the possibility that a Reporting FI might in the future be required to withhold as a Participating FFI on foreign passthru payments and payments that it makes to Recalcitrant Holders. Under each Model IGA, a Reporting FI would still be required to report certain information in respect of its account holders and investors to its home government or to the IRS. The U.S. Treasury has announced that it is actively engaged in a dialogue towards concluding an IGA with the Cayman Islands. If the Issuer becomes a Participating FFI under FATCA, the Issuer and financial institutions through which payments on the Notes are made may be required to withhold FATCA Withholding if (i) any FFI through or to which payment on such Notes is made is not a Participating FFI, a Reporting FI, or otherwise exempt from or in deemed compliance with FATCA or (ii) an investor is a Recalcitrant Holder. If an amount in respect of FATCA Withholding were to be deducted or withheld from interest, principal or other payments made in respect of the Notes, neither the Issuer nor any paying agent nor any other person would, pursuant to the conditions of the Notes, be required to pay additional amounts as a result of the deduction or withholding. As a result, investors may receive less interest or principal than expected. FATCA is particularly complex and its application is uncertain at this time. The above description is based in part on regulations, official guidance and model IGAs, all of which are subject to change or may be implemented in a materially different form. Prospective investors should consult their tax advisers on how these rules may apply to the Issuer and to payments they may receive in connection with the Notes. TO ENSURE COMPLIANCE WITH IRS CIRCULAR 230, EACH TAXPAYER IS HEREBY NOTIFIED THAT: (A) ANY TAX DISCUSSION HEREIN IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED BY THE TAXPAYER FOR THE PURPOSE OF AVOIDING U.S. FEDERAL INCOME TAX PENALTIES THAT MAY BE IMPOSED ON THE TAXPAYER; (B) ANY SUCH TAX DISCUSSION WAS WRITTEN TO SUPPORT THE PROMOTION OR MARKETING OF THE TRANSACTIONS OR MATTERS ADDRESSED HEREIN; AND (C) THE TAXPAYER SHOULD SEEK ADVICE BASED ON THE TAXPAYER’S PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISER.

134 c108406pu070 Proof 5: 14.6.13_22:25 B/L Revision: 0 Operator AllS SUBSCRIPTION AND SALE

The Dealers have, in a dealer agreement dated 17 June 2013 (the ‘‘Dealer 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 ‘‘Forms of the Notes’’ and ‘‘Terms and Conditions of the Notes’’. In accordance with the terms of the Dealer Agreement, the Issuer and the Guarantor have 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 the Issuer and the Guarantor have agreed to indemnify the Dealers against certain liabilities incurred by them in connection therewith.

United States of America The Notes have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the ‘‘Securities Act’’), or with any securities regulatory authority of any state or other jurisdiction of the United States, and may not be offered, sold or delivered within the United States or to, or for the account or benefit of, U.S. persons (as defined in Regulation S under the Securities Act (‘‘Regulation S’’)) except in accordance with Regulation S or pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws. Each Dealer has represented, warranted and undertaken, and each further Dealer appointed under the Programme will be required to represent, warrant and undertake, that, except as permitted by the Dealer Agreement, it will not offer, sell or deliver Notes, (a) as part of their distribution at any time or (b) otherwise until 40 days after the completion of the distribution of the Notes comprising the relevant Tranche, as certified to the Fiscal Agent or the Issuer by such Dealer (or, in the case of a sale of a Tranche of Notes to or through more than one Dealer, by each of such Dealers as to the Notes of such Tranche purchased by or through it, in which case the Fiscal Agent or the Issuer shall notify each such Dealer when all such Dealers have so certified) within the United States or to, or for the account or benefit of, U.S. persons, and such Dealer will have sent to each dealer to which it sells Notes during the distribution compliance period relating thereto 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. In addition, until the expiration of 40 days after the commencement of the offering, an offer or sales of the Notes within the United States by any dealer (whether or not participating in the offering) may violate the registration requirements of the Securities Act. Each Dealer has also undertaken, and each further Dealer appointed under the Programme will be required to undertake, that, at or prior to confirmation of sale of Notes, it will have sent to each distributor, dealer or person receiving a selling concession, fee or other remuneration that purchases Notes from it during the distribution compliance period a confirmation or notice in substantially the following form: ’’The Securities covered hereby have not been registered under the United States Securities Act of 1933, as amended (the ‘‘Securities Act’’) and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons, (a) as part of their distribution at any time or (b) otherwise until 40 days after the completion of the distribution of the Tranche of Notes of which such Notes are a part, as determined by [Name of Dealer or Dealers, as the case may be], except in either case in accordance with Regulation S under the Securities Act (‘‘Regulation S’’). Terms used above have the meanings given to them by Regulation S.’’ Each Dealer has represented, warranted and undertaken, and each further Dealer appointed under the Programme will be required to represent, warrant and undertake, that it, its affiliates or any persons acting on its or their behalf have not engaged and will not engage in any directed selling efforts with respect to any Notes, and it and they have complied and will comply with the offering restrictions requirement of Regulation S. The Bearer Notes 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. Treasury regulations. Terms used in this paragraph have the meanings given to them by the United States Internal Revenue Code of 1986, as amended, and U.S. Treasury regulations promulgated thereunder.

135 c108406pu070 Proof 5: 14.6.13_22:25 B/L Revision: 0 Operator AllS United Kingdom Each Dealer has represented, warranted and undertaken, and each further Dealer appointed under the Programme will be required to represent, warrant and undertake, 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 the 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 the 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 the Notes in, from or otherwise involving the United Kingdom.

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, warranted and undertaken, and each further Dealer appointed under the Programme will be required to represent, warrant and undertake, 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 the Base Prospectus as completed by the 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) Qualified investors: at any time to any legal entity which is a qualified investor as defined in the Prospectus Directive; (b) Fewer than 100 offerees: at any time to fewer than 100 or, if the Relevant Member State has implemented the relevant provision of the 2010 PD Amending Directive, 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; or (c) Other exempt offers: at any time in any other circumstances falling within Article 3(2) of the Prospectus Directive, provided that no such offer of Notes referred to in (a) to (c) 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. For the purposes of this provision, 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, the expression ‘‘Prospectus Directive’’ means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State), and includes any relevant implementing measure in the Relevant Member State and the expression ‘‘2010 PD Amending Directive’’ means Directive 2010/73/EU.

State of Qatar Each Dealer has represented, warranted and undertaken, and each further Dealer appointed under the Programme will be required to represent, warrant and undertake, that it has not offered or sold, and

136 c108406pu070 Proof 5: 14.6.13_22:25 B/L Revision: 0 Operator AllS will not offer or sell or deliver, directly or indirectly, any Notes in Qatar, except: (a) in compliance with all applicable laws and regulations 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 debt ﬁnancing instruments in Qatar.

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’’). Accordingly, each Dealer has represented, warranted and undertaken, and each further Dealer appointed under the Programme will be required to represent, warrant and undertake, that it has not, directly or indirectly, offered or sold Notes, and will not, directly or indirectly, offer or sell any Notes 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.

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 any Notes pursuant to an 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, warranted and undertaken, and each further Dealer appointed under the Programme will be required to represent, warrant and undertake, that any offer of Notes to a Saudi Investor will be made in compliance 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 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’’ under Article 10 of the KSA Regulations; (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.

United Arab Emirates (excluding the Dubai International Financial Centre) Each Dealer has represented, warranted and undertaken, and each further Dealer appointed under the Programme will be required to represent, warrant and undertake, 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 United Arab Emirates other than in compliance with any laws applicable in the United Arab Emirates governing the issue, offering and sale of securities.

Dubai International Financial Centre Each Dealer has represented, warranted and undertaken, and each further Dealer appointed under the Programme will be required to represent, warrant and undertake, 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 2012 of the Dubai Financial Services Authority (the ‘‘DFSA’’); and

137 c108406pu070 Proof 5: 14.6.13_22:25 B/L Revision: 0 Operator AllS (b) made only to persons who meet the Professional Client criteria set out in Rule 2.3.2 of the DFSA Conduct of Business Module.

Kingdom of Bahrain This Base Prospectus does not constitute an offer to: (i) the Public (as defined in Articles 142- 146 of the Commercial Companies Law (Decree Law No. 21/2001 of Bahrain)) in the Kingdom of Bahrain; or (ii) any person in the Kingdom of Bahrain who is not an ‘‘accredited investor’’. 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). Each Dealer has represented, warranted and undertaken, and each further Dealer appointed under the Programme will be required to represent, warrant and undertake, that it has not offered, and will not offer, Notes: (i) to the Public in the Kingdom of Bahrain except pursuant to the provisions of Articles 80-85 of the Central Bank of Bahrain and Financial Institutions Law; and (ii) except on a private placement basis to persons in the Kingdom of Bahrain who are accredited investors.

Cayman Islands Each Dealer has represented, warranted and undertaken, and each further Dealer appointed under the Programme will be required to represent, warrant and undertake, that no offer or invitation to subscribe for the Notes has been or will be made to the public of the Cayman Islands.

General Each Dealer has represented, warranted and undertaken, and each further Dealer appointed under the Programme will be required to represent, warrant and undertake, that, to the best of its knowledge and belief, it has complied and will comply with all applicable laws and regulations in each country or jurisdiction in which it purchases, offers, sells or delivers Notes or possesses or distributes the Base Prospectus and will obtain any consent, approval or permission required by it for the purchase, offer, sale or delivery by it of Notes under the laws and regulations in force in any jurisdiction to which it is subject or in which it makes such purchases, offers, sales or deliveries and neither the Issuer, the Guarantor nor any of the other Dealers shall have any responsibility therefor. None of the Issuer, the Guarantor or 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 such sale. Persons into whose possession this Base Prospectus 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. With regard to each Tranche, the relevant Dealer will be required to comply with any additional restrictions as the Issuer, the Guarantor and the relevant Dealer shall agree and as shall be set out in the relevant subscription agreement or dealer conﬁrmation letter (howsoever described), as the case may be.

138 c108406pu070 Proof 5: 14.6.13_22:25 B/L Revision: 0 Operator AllS GENERAL INFORMATION

Authorisation 1. The establishment of the Programme was authorised by a board resolution dated 12 June 2013 in relation to the Issuer and a board resolution dated 4 June 2013 in relation to the Guarantor. The Issuer and the Guarantor have obtained or will obtain from time to time all necessary consents, approvals and authorisations in connection with the issue and performance of the Notes and the giving of the guarantee relating to them.

Listing 2. Arthur Cox Listing Services Limited is acting solely in its capacity as listing agent for the Issuer in relation to the Notes, and is not itself seeking admission of Notes issued under the Programme to the Official List or to trading on the Main Securities Market for the purposes of the Prospectus Directive. 3. 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. 4. Application will be made to the Irish Stock Exchange for Notes issued under the Programme during the 12 months from the date of this Base Prospectus to be admitted to the Official List and admitted to trading on the Main Securities Market. Unlisted Notes may be issued pursuant to the Programme. Notes may also be issued pursuant to the Programme which will not be listed on the Irish Stock Exchange or any other stock exchange or which will be listed on such stock exchange as the Issuer, the Guarantor and the relevant Dealer may agree. 5. This Base Prospectus has been approved by the Central Bank of Ireland as competent authority under 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 markets or which are to be offered to the public in any Member State. 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.

Legal and Arbitration Proceedings 6. There are no governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened, of which the Issuer and the Guarantor are aware), which may have, or have had during the 12 months prior to the date of this Base Prospectus, a significant effect on the financial position or profitability of the Issuer or the Guarantor and its Subsidiaries.

Conditions for determining price 7. The price and amount of Notes to be issued under the Programme will be determined by the Issuer, the Guarantor and each relevant Dealer at the time of issue in accordance with prevailing market conditions.

Significant/Material Change 8. There has been no significant change in the financial or trading position, or material adverse change in the prospects, of the Issuer in each case since the date of its incorporation. 9. There has been no significant change in the financial or trading position of the Guarantor or the Group since 31 March 2013 and there has been no material adverse change in the prospects of the Guarantor or the Group since 31 December 2012.

Auditors 10. The Issuer is not required by Cayman Islands law, and does not intend, to publish audited financial statements or appoint any auditors. Since the date of its incorporation, no financial statements of the Issuer have been prepared. 11. The Interim Financial Statements included in this Base Prospectus have been reviewed by Ernst & Young, Qatar, independent auditors, as stated in their qualified review report appearing herein. The review conclusion in respect of the Interim Financial Statements was qualified to state that the financial position at 31 March 2013 and the results of operations for the three

139 c108406pu070 Proof 5: 14.6.13_22:25 B/L Revision: 0 Operator AllS months ended 31 March 2013 of the Guarantor’s subsidiary, Al Khaliji France, have been incorporated in the Interim Financial Statements on the basis of returns certified by management and have not been independently reviewed. Ernst & Young, Qatar are public accountants registered to practise as auditors with the Ministry of Business & Trade in Qatar. The registered office of Ernst & Young, Qatar is Ernst & Young, Level 24 Al Gassar Tower, West Bay, P.O. Box 164, Doha, Qatar. 12. The Annual Financial Statements included in this Base Prospectus have been audited without qualification by Deloitte & Touche, Qatar, independent auditors, as stated in their report appearing herein. Deloitte & Touche, Qatar are public accountants registered to practise as auditors with the Ministry of Business & Trade in Qatar. The registered office of Deloitte & Touche, Qatar is Deloitte & Touche, Al Ahli Bank Head Office Building, P.O. Box 431, Doha, Qatar.

Documents on Display 13. Physical copies of the following documents (together with English translations, when appropriate) may be inspected during normal business hours at the registered offices of the Issuer and the Specified Office of the Fiscal Agent for so long as Notes as listed: (a) the memorandum and articles of association of each of the Issuer and the Guarantor; (b) the Base Prospectus and any supplements thereto; (c) the Financial Statements; (d) the Agency Agreement; (e) the Deed of Guarantee; (f) the Deed of Covenant; (g) any relevant Final Terms; and (h) the Programme Manual (which contains the forms of the Notes in global and definitive form).

Clearing of the Notes 14. The Notes have been accepted for clearance through Euroclear and Clearstream, Luxembourg. The appropriate common code and the International Securities Identiﬁcation Number in relation to the Notes of each Tranche allocated by Euroclear and Clearstream, Luxembourg will be speciﬁed in the relevant Final Terms. The relevant Final Terms shall specify any additional or alternative clearing system as shall have accepted the relevant Notes for clearance together with any further appropriate information. The address of Euroclear is Euroclear Bank SA/NV, 1 Boulevard du Roi Albert II, B-1 210 Brussels, Belgium and the address of Clearstream, Luxembourg is Clearstream Banking, socie´te´ anonyme, 42 Avenue JF Kennedy, L-1855 Luxembourg.

Dealers Transacting with the Issuer and the Guarantor 15. 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 have received, and for which they may in the future receive, fees. 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 or their respective affiliates. Certain of the Dealers or their affiliates that have a lending relationship with the Guarantor routinely hedge their credit exposure to the Guarantor 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

140 c108406pu070 Proof 5: 14.6.13_22:25 B/L Revision: 0 Operator AllS 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.

141 c108406pu070 Proof 5: 14.6.13_22:25 B/L Revision: 0 Operator AllS This page is intentionally left blank FINANCIAL INFORMATION

Unaudited interim condensed consolidated financial statements of the Group as at and for the three month period ended 31 March 2013...... F-2 Auditors’ review report in respect of the unaudited interim condensed consolidated financial statements of the Group as at and for the three month period ended 31 March 2013 ...... F-4 Audited consolidated financial statements of the Group as at and for the financial year ended 31 December 2012...... F-18 Auditors’ audit report in respect of the audited consolidated financial statements of the Group as at and for the financial year ended 31 December 2012...... F-20 Audited consolidated financial statements of the Group as at and for the financial year ended 31 December 2011...... F-74 Auditors’ audit report in respect of the audited consolidated financial statements of the Group as at and for the financial year ended 31 December 2011...... F-76

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Al Khalij Commercial Bank (al khaliji) Q.S.C. Interim Condensed Consolidated Financial Statements 31 March 2013

F-2 Al Khalij Commercial Bank (al khaliji) Q.S.C. Interim Condensed Consolidated Financial Statements For the three months ended 31 March 2013

TABLE OF CONTENTS Page

Independent Auditors’ Review Report 1‐2

Interim Consolidated Statement of Financial Position 3

Interim Consolidated Statement of Income 4

Interim Consolidated Statement of Comprehensive Income 5

Interim Consolidated Statement of Changes in Shareholders’ Equity 6

Interim Condensed Consolidated Statement of Cash Flows 7

Notes to the Interim Condensed Consolidated Financial Statements 8‐14

F-3 Al Khalij Commercial Bank (al khaliji) Q.S.C. Independent Auditors’ Review Report on the Interim Condensed Consolidated Financial Statements

REPORT ON REVIEW OF INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS TO THE BOARD OF DIRECTORS OF AL KHALIJ COMMERCIAL BANK (al khaliji) Q.S.C.

Introduction We have reviewed the accompanying interim condensed consolidated financial statements of Al Khalij Commercial Bank (al khaliji) Q.S.C. (the “Bank”) and its subsidiaries (the “Group”) as at 31 March 2013, comprising of the interim consolidated statement of financial position as at 31 March 2013 and the related interim consolidated statement of income, interim consolidated statement of comprehensive income, interim consolidated statement of changes in equity and interim condensed consolidated statement of cash flows for the three month period then ended, and the related explanatory notes. The Board of Directors is responsible for the preparation and presentation of these interim condensed consolidated financial statements in accordance with IAS 34 – Interim Financial Reporting (“IAS 34”) and the applicable provisions of Qatar Central Bank regulations. Our responsibility is to express a conclusion on these interim condensed consolidated financial statements based on our review.

Scope of Review Except as discussed in the following paragraph below, we conducted our review in accordance with International Standard on Review Engagements 2410, “Review of Interim Financial Information Performed by the Independent Auditor of the Entity.” A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing. Consequently, it does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Basis for Qualified Conclusion The accompanying interim condensed consolidated financial statements include the financial position as at 31 March 2013 and results of operations for the three month period ended with respect to the subsidiary’s operations which have been incorporated on the basis of returns certified by management and have not been independently reviewed. The net profit for the three month period ended 31 March 2013 and the total assets and total liabilities as at 31 March 2013 of the subsidiary amounted to QAR 15.5 million, QAR3.6 billion and QAR 2.9 billion respectively.

Qualified Conclusion Based on our review, with the exception of the matter described in the preceding paragraph, nothing has come to our attention that causes us to believe that the accompanying interim condensed consolidated financial statements are not prepared, in all material respects, in accordance with IAS 34 and the applicable provisions of Qatar Central Bank regulations.

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F-4 Al Khalij Commercial Bank (al khaliji) Q.S.C. Independent Auditors’ Review Report on the Interim Condensed Consolidated Financial Statements

Other Matter The interim condensed consolidated financial statements as at 31 March 2012 were reviewed and the consolidated financial statements as at and for the year ended 31 December 2012 were audited by another auditor, whose reports dated 15 April 2012 and 4 February 2013 respectively, expressed a modified review conclusion and an unmodified audit opinion on those statements.

Firas Qoussous of Ernst & Young Auditor’s Registration No: 236

Date: 23 April 2013 Doha

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F-5 Al Khalij Commercial Bank (al khaliji) Q.S.C. Interim Consolidated Statement of Financial Position As at 31 March 2013

31 March 31 March 31 December 2013 2012 2012 (Reviewed) (Reviewed) (Audited) Notes QAR’000 QAR’000 QAR’000 Assets Cash and balances with central banks 1,647,830 771,846 1,778,889 Due from banks 1,936,182 2,340,909 2,240,807 Loans and advances to customers 5 14,053,704 11,732,143 13,031,579 Investment securities 6 16,020,624 11,300,157 15,865,129 Property and equipment 63,880 91,378 66,500 Intangible assets 269,993 277,544 273,675 Other assets 432,647 309,617 415,553 Total assets 34,424,860 26,823,594 33,672,132

Liabilities Due to banks 11,066,883 8,689,655 10,030,528 Customer deposits 17,275,625 12,066,837 17,345,940 Subordinated debt 116,667 120,877 120,018 Other liabilities 667,712 776,711 504,608 Total liabilities 29,126,887 21,654,080 28,001,094

Shareholders' equity Issued capital 3,600,000 3,600,000 3,600,000 Legal reserve 1,066,989 1,015,768 1,066,989 Risk reserve 257,769 195,821 257,769 Fair value reserve 99,063 111,142 233,351 Foreign currency translation reserve 3,509 12,079 13,768 Retained earnings 270,643 234,704 499,161 Total shareholders’ equity 5,297,973 5,169,514 5,671,038 Total liabilities and shareholders’ equity 34,424,860 26,823,594 33,672,132 These Interim Condensed Consolidated Financial Statements have been approved by the Board of Directors on 23 April 2013.

Hamad Bin Faisal Bin Thani Al‐Thani Robin McCall Chairman of the Board of Directors Group Chief Executive Officer

The accompanying notes 1 to 13 set out on pages 8 to 14 form an integral part of these Interim Condensed Consolidated Financial Statements.

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F-6 Al Khalij Commercial Bank (al khaliji) Q.S.C. Interim Consolidated Statement of Income For the three months ended 31 March 2013

3 months ended 31 March 2013 2012 Note (Reviewed) (Reviewed) QAR’000 QAR’000 Interest income 242,697 207,012 Interest expense (87,319) (69,958) Net interest income 155,378 137,054 Fee and commission income 49,236 28,755 Fee and commission expense (1,946) (2,709) Net fee and commission income 47,290 26,046 Foreign exchange gain 3,616 1,323 Income from investment securities 11 24,742 50,974 Other operating income 14 315 Net operating income 231,040 215,712 Staff costs (56,201) (47,196) Depreciation and amortisation (15,431) (17,048) Net impairment loss on investment securities ‐ (4,768) Net impairment recoveries on loans and advances to customers 1,539 1,048 Other expenses (25,746) (22,589) Profit for the period before tax 135,201 125,159 Tax expense (3,719) (3,371) Profit for the period 131,482 121,788

Earnings per share Basic and diluted earnings per share (QAR per share) 0.37 0.34 Weighted average number of shares outstanding 360,000,000 360,000,000

The accompanying notes 1 to 13 set out on pages 8 to 14 form an integral part of these Interim Condensed Consolidated Financial Statements.

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F-7 Al Khalij Commercial Bank (al khaliji) Q.S.C. Interim Consolidated Statement of Comprehensive Income For the three months ended 31 March 2013

3 months ended 31 March 2013 2012 (Reviewed) (Reviewed) QAR’000 QAR’000

Profit for the period 131,482 121,788 Other comprehensive income for the period, net of tax Foreign currency translation differences for foreign operations (10,259) 8,379 Net change in fair value of available‐for‐sale investments (134,288) (3,043) Other comprehensive income for the period, net of tax (144,547) 5,336

Total comprehensive income for the period (13,065) 127,124

The accompanying notes 1 to 13 set out on pages 8 to 14 form an integral part of these Interim Condensed Consolidated Financial Statements.

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F-8 Al Khalij Commercial Bank (al khaliji) Q.S.C. Interim Consolidated Statement of Changes in Shareholders’ Equity For the three months ended 31 March 2013

Foreign Fair currency Issued Legal Risk value translation Retained Total capital reserve reserve reserve reserve earnings equity QAR’000 QAR’000 QAR’000 QAR’000 QAR’000 QAR’000 QAR’000

Balance as at 1 January 2013 3,600,000 1,066,989 257,769 233,351 13,768 499,161 5,671,038 Profit for the period ‐ ‐ ‐ ‐ ‐ 131,482 131,482 Other comprehensive income ‐ ‐ ‐ (134,288) (10,259) ‐ (144,547) Total comprehensive income for the period ‐ ‐ ‐ (134,288) (10,259) 131,482 (13,065)

Dividends for the year 2012 (note 7) ‐ ‐ ‐ ‐ ‐ (360,000) (360,000) Balance at 31 March 2013 3,600,000 1,066,989 257,769 99,063 3,509 270,643 5,297,973 F-9

Balance as at 1 January 2012 3,600,000 1,015,768 195,821 114,185 3,700 472,916 5,402,390 Profit for the period ‐ ‐ ‐ ‐ ‐ 121,788 121,788 Other comprehensive income ‐ ‐ ‐ (3,043) 8,379 ‐5,366 Total comprehensive income for the period ‐ ‐ ‐ (3,043) 8,379 121,788 127,124

Dividend for the year 2011 ‐ ‐ ‐ ‐ ‐ (360,000) (360,000) Balance at 31 March 2012 3,600,000 1,015,768 195,821 111,142 12,079 234,704 5,169,514

The accompanying notes 1 to 13 set out on pages 8 to 14 form an integral part of these Interim Condensed Consolidated Financial Statements.

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Al Khalij Commercial Bank (al khaliji) Q.S.C. Interim Condensed Consolidated Statement of Cash Flows For the three months ended 31 March 2013

31 March 31 March 31 December 2013 2012 2012 (Reviewed) (Reviewed) (Audited) Note QAR’000 QAR’000 QAR’000 Cash flows from operating activities: 424,420 204,628 3,986,274

Cash flows from investment activities: Acquisition of investment securities (763,121) (1,482,975) (15,155,008) Proceeds from sale of investment securities 1,320,162 1,217,031 10,802,950 Net (acquisition) / disposal of property and equipment (1,919) 22 (8,358) Acquisition of intangible assets (11,263) ‐ (29,089) Net cash from / (used in) investing activities 543,859 (265,922) (4,389,505) Cash flows from financing activities: Dividends paid (305,398) (297,070) (351,624) Net cash used in financing activities (305,398) (297,070) (351,624)

Net increase / (decrease) in cash and cash equivalents 662,881 (358,364) (754,855)

Cash and cash equivalents as at 1 January 1,722,062 2,460,986 2,460,986 Effects of exchange rate changes on cash and cash (21,397) 21,897 15,931 equivalents held Cash and cash equivalents as at 31 March / 31 December 10 2,363,546 2,124,519 1,722,062

The accompanying notes 1 to 13 set out on pages 8 to 14 form an integral part of these Interim Condensed Consolidated Financial Statements.

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F-10 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Interim Condensed Consolidated Financial Statements For the three months ended 31 March 2013

1 INCORPORATION AND PRINCIPAL ACTIVITIES Al Khalij Commercial Bank (al khaliji) Q.S.C. (the “Bank”) was incorporated on 9 January 2007 as a Qatari Shareholding Company under Commercial Registration No. 34548, with its registered head office in Doha. The shares of al khaliji are listed on the Qatar Exchange. al khaliji and its subsidiaries (the “Group”) are engaged in commercial banking activities. The Group operates from its head office and two branches in Qatar, subsidiary head office in France and four branches in the United Arab Emirates. The Bank has also established a fully owned subsidiary “Al Khaliji Capital S.P.C.” which is intended to provide financial services such as brokerage once the feasibility has been established and all approvals have been finalised. The subsidiaries of the Group are as follows:

Company’s Country of Share Acquired/ Percentage Principal Name Incorporation Capital Set up Owned Activities Al Khaliji France S.A. France EUR 104,000,000 2008 100% Banking Al Khaliji Capital S.P.C. Qatar QAR 50,000,000 2011 100% Brokerage

2 BASIS OF PREPARATION (a) Statement of compliance The Interim Condensed Consolidated Financial Statements have been prepared in accordance with IAS 34 Interim Financial Reporting and the applicable provisions of the QCB Regulations. The Interim Condensed Consolidated Financial Statements do not include all the information and disclosures required in the Annual Consolidated Financial Statements and should be read in conjunction with the Annual Consolidated Financial Statements for the year ended 31 December 2012. The results of the three months ended 31 March 2013 are not necessarily indicative of the results that may be expected for the financial year ending 31 December 2013 Certain amounts in interim consolidated statement of financial position and supporting notes disclosure as at 31 March 2012 have been reclassified to conform to the current period’s interim condensed consolidated financial statements format and minimum disclosures as prescribed by the QCB. However, such reclassifications did not have any effect on the consolidated profit for the period, other comprehensive income nor the total consolidated equity for the comparative period. (b) Basis of measurement The Interim Condensed Consolidated Financial Statements have been prepared on the historical cost basis except for the following, which are measured at fair value: • financial assets held for trading or designated at fair value through profit or loss; • derivatives; and • available‐for‐sale financial investments (c) Functional and presentation currency These Interim Condensed Consolidated Financial Statements are presented in Qatari Riyal (“QAR”), which is the Bank’s functional currency. Except as otherwise indicated, financial information presented in QAR has been rounded to the nearest thousand.

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F-11 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Interim Condensed Consolidated Financial Statements For the three months ended 31 March 2013

(d) Accounting policies The accounting policies used in preparation of the Interim Condensed Consolidated Financial Statements are consistent with those used in the preparation of the Group’s Consolidated Financial Statements for the year ended 31 December 2012, except for certain new and revised standards and interpretations, that became effective in the current period. The following new and amended accounting standards became effective in 2013 and have been adopted by the Group in preparation of these Interim Condensed Consolidated Financial Statements as applicable. Whilst they did not have any material impact on these Interim Condensed Consolidated Financial Statements they are likely to require extensive additional disclosures in the Annual Consolidated Financial Statements for the year ending 31 December 2013.

IAS 1 Presentation of items of Other Comprehensive Income and clarification of the requirements for comparative information IAS 19 Employee benefits IFRS 7 Financial Instruments: Disclosures for offsetting financial assets and liabilities IFRS 10 Consolidated Financial Statements and IAS 27 Separate Financial Statements IFRS 12 Disclosure of Interests in Other Entities IFRS 13 Fair Value Measurement

(e) Use of estimates and judgments The preparation of the Interim Condensed Consolidated Financial Statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an on‐going basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. In preparing these Interim Condensed Consolidated Financial Statements, the significant judgments made by management in applying the Group’s accounting policies were the same as those applied to the Consolidated Financial Statements as at and for the year ended 31 December 2012.

3 FINANCIAL RISK MANAGEMENT The Group has exposure to credit risk, market risk, liquidity risk and operational risk related to its activities. The Interim Condensed Consolidated Financial Statements do not include all financial risk management information and disclosures required in the Annual Consolidated Financial Statements, and should be read in conjunction with the Group's Annual Consolidated Financial Statements as at 31 December 2012. There have been no significant changes in the risk management since the year end or in any risk management policies.

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F-12 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Interim Condensed Consolidated Financial Statements For the three months ended 31 March 2013

4 OPERATING SEGMENTS The Group is organised into four main operating segments for management purposes, which comprise Wholesale Banking, Personal Banking, Group Treasury and Central Functions.

Total Assets 13,357,274 1,686,218 18,458,723 1,496,196 (573,551) 34,424,860 Total Liabilities 15,902,394 1,867,081 11,237,201 146,918 (26,707) 29,126,887 31 March 2012 (Reviewed) Net operating income 106,985 11,970 96,757 ‐ ‐ 215,712 Profit for the period 77,869 (272) 88,106 (45,551) 1,636 121,788 31 December 2012 (Audited) Total Assets 11,654,350 2,046,060 19,230,712 1,291,860 (550,850) 33,672,132 Total Liabilities 15,040,839 2,718,115 10,084,843 163,627 (6,330) 28,001,094 (ii) Geographical areas The geographical analysis of operating income and non‐current assets is based on the location of the entity in which the transactions and assets are recorded. Net Total Total operating income non‐current assets assets QAR’000 Share % QAR’000 Share % QAR’000 Share % 31 March 2013 (Reviewed) Qatar 194,808 84.3% 318,903 95.5% 30,817,676 89.5% United Arab Emirates 28,662 12.4% 3,859 1.2% 2,041,138 5.9% France 7,570 3.3% 11,111 3.3% 1,566,046 4.6% Total 231,040 100.0% 333,873 100.0% 34,424,860 100.0% 31 March 2012 31 December 2012 (Reviewed) (Audited) Qatar 179,378 83.2% 324,407 95.4% 30,105,882 89.4% United Arab Emirates 27,152 12.6% 4,093 1.2% 1,888,448 5.6% France 9,182 4.2% 11,675 3.4% 1,677,802 5.0% Total 215,712 100.0% 340,175 100.0% 33,672,132 100.0% Non‐current assets consist of property and equipment and intangible assets.

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F-13 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Interim Condensed Consolidated Financial Statements For the three months ended 31 March 2013

5 LOANS AND ADVANCES TO CUSTOMERS 31 March 31 March 31 December 2013 2012 2012 QAR’000 QAR’000 QAR’000 (Reviewed) (Reviewed) (Audited) Loans 12,081,332 10,351,817 11,669,374 Acceptances 178,671 175,572 138,954 Overdrafts 1,426,237 923,301 933,527 Bills discounted 606,646 468,484 530,466 Gross loans and advances 14,292,886 11,919,174 13,272,321 Less allowance for impairment (239,182) (187,031) (240,742) Net loans and advances to customers 14,053,704 11,732,143 13,031,579 The total non‐performing loans and advances to customers amounted to QAR 55.6 million (31 December 2012: QAR 59.0 million), representing 0.39% (31 December 2012: 0.45%) of the total gross loans and advances to customers. Interest in suspense amounted to QAR 19.1 million (31 December 2012: QAR 17.4 million). 6 INVESTMENT SECURITIES 31 March 31 March 31 December 2013 2012 2012 QAR’000 QAR’000 QAR’000 (Reviewed) (Reviewed) (Audited) Available‐for‐sale 14,428,162 9,897,251 14,234,833 Fair value through profit or loss 38,726 39,170 37,017 Held‐to‐maturity 1,553,736 1,367,725 1,593,279 Gross investment securities 16,020,624 11,304,146 15,865,129 Less allowance for impairment ‐ (3,989) ‐ Net investment securities 16,020,624 11,300,157 15,865,129 Debt securities with a carrying value of QAR 8,959.3 million (31 December 2012: QAR 7,917.4 million) were pledged as collateral under repurchase and other borrowing agreements with other banks. 7 DIVIDENDS A cash dividend of 10% (QAR 1 per share) relating to the year ended 31 December 2012, amounting to QAR 360 million, was approved by the shareholders at the Annual General Assembly held on 4 March 2013. 8 EXPOSURE TO SPECIAL PURPOSE ENTITIES (SPEs) The Group has exposure through collateralized loans to an SPE. The SPE is an Investment Fund holding a portfolio of high quality GCC Bonds and Sukuks, which has been consolidated in accordance with the requirements of IFRS10 based on the conclusion that the Group has effective control of the SPE.

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F-14 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Interim Condensed Consolidated Financial Statements For the three months ended 31 March 2013

9 CONTINGENT LIABILITIES AND OTHER COMMITMENTS To meet the financial needs of customers, the Group issues various commitments and contingent liabilities. The total outstanding amounts are as follows: 31 March 31 March 31 December 2013 2012 2012 QAR’000 QAR’000 QAR’000 (Reviewed) (Reviewed) (Audited) a) Contingent liabilities Unutilised credit facilities 7,299,211 3,488,828 6,868,064 Guarantees 5,079,985 3,470,108 4,472,503 Letters of credit 1,108,569 1,429,418 672,982 Total contingent liabilities 13,487,765 8,388,354 12,013,549 b) Other commitments Capital commitments 43,696 909 40,308 Lease commitments 2,582 23,169 13,835 Foreign exchange contracts 2,355,185 2,942,082 4,079,634 Interest rate swaps 9,226,879 5,462,621 7,093,806 Cross currency swaps 2,598,093 1,807,228 2,602,785 Option contracts 2,211,040 84,751 2,785,613 Total other commitments 16,437,475 10,320,760 16,615,981

10 CASH AND CASH EQUIVALENTS Cash and cash equivalents for the purpose of the Interim Condensed Consolidated Statement of Cash Flows, comprise the following 31 March 31 March 31 December 2013 2012 2012 QAR’000 QAR’000 QAR’000 (Reviewed) (Reviewed) (Audited) Cash and balances with central banks (excluding mandatory cash 801,073 183,497 891,917 reserves) Due from banks 1,562,473 1,941,022 830,145 Cash and cash equivalents 2,363,546 2,124,519 1,722,062 11 INCOME FROM INVESTMENT SECURITIES 31 March 31 March 2013 2012 QAR’000 QAR’000 (Reviewed) (Reviewed) Changes in fair value of financial assets measured at fair value through profit or loss (3,713) 368 Net gains on sale of investment securities 39,863 39,747 Net (losses) / gains on derivatives (15,989) 5,303 Dividend income 4,581 5,556 Total income from investment securities 24,742 50,974

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F-15 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Interim Condensed Consolidated Financial Statements For the three months ended 31 March 2013

12 RELATED PARTIES The Group has carried out transactions in the ordinary course of business with directors, officers of the Group and entities of which they have significant control. These transactions include loans, financing activities, deposits and foreign currency transactions. The related party transactions and balances included in these Interim Condensed Consolidated Financial Statements are as follows: (a) Statement of financial position items Key management Others Total QAR’000 QAR’000 QAR’000 31 March 2013 (Reviewed) Loans and advances 4,139 2,100,982 2,105,121 Customer deposits 8,449 1,229,959 1,238,408 Subordinated debt ‐ 116,667 116,667 31 March 2012 (Reviewed) Loans and advances 6,489 364,000 370,489 Customer deposits 7,306 967,359 974,665 Subordinated debt ‐ 120,877 120,877 31 December 2012 (Audited) Loans and advances 6,441 2,094,781 2,101,222 Customer deposits 1,481 2,287,966 2,289,447 Subordinated debt ‐ 120,018 120,018 (b) Statement of income items 3 months ended 31 March Key management Others Total QAR‘000 QAR‘000 QAR‘000 2013 (Reviewed) Interest income 19 25,435 25,454 Interest expense 25 8,672 8,697 Fee and commission income ‐ 1,425 1,425 2012 (Reviewed) Interest income 42 2,931 2,973 Interest expense 17 2,175 2,192 Fee and commission income ‐ ‐‐ Included in the above tables under the ‘Others’ column are the balances of any entity which owns more than 5% of the issued share capital of the Group, including those balances with the Government of Qatar and its related Agencies, which jointly owns 47.1% of the Group.

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F-16 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Interim Condensed Consolidated Financial Statements For the three months ended 31 March 2013

(c) Compensation of key management personnel 3 months ended 31 March 2013 2012 QAR’000 QAR’000 (Reviewed) (Reviewed) Salaries, allowances and other benefits 14,734 9,672 End of service benefits 780 388 Total compensation paid to key management personnel 15,514 10,060 13 Capital Adequacy Ratio 31 March 31 March 31 December 2013 2012 2012 QAR’000 QAR’000 QAR’000 (Reviewed) (Reviewed) (Audited) Total Eligible Tier 1 Capital 4,672,802 4,590,524 4,648,991 Total Eligible Tier 2 Capital 416,764 360,874 481,008 Total Eligible Capital 5,089,566 4,951,398 5,129,999

Risk Weighted Assets 25,533,125 20,493,502 23,990,761 Tier 1 Capital Ratio 18.3% 22.4% 19.4% Total Capital Ratio 19.9% 24.2% 21.4%

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F-17

Al Khalij Commercial Bank (al khaliji) Q.S.C. Consolidated Financial Statements for the year ended 31 December 2012

F-18 Al Khalij Commercial Bank (al khaliji) Q.S.C. Consolidated Financial Statements For the year ended 31 December 2012

TABLE OF CONTENTS Page

Independent Auditor’s Report 1‐2

Consolidated Statement of Financial Position 3

Consolidated Statement of Income 4

Consolidated Statement of Comprehensive Income 5

Consolidated Statement of Changes in Shareholders’ Equity 6

Consolidated Statement of Cash Flows 7

Notes to the Consolidated Financial Statements 8‐54

F-19

QR. 21523

INDEPENDENT AUDITOR’S REPORT

To The Shareholders Al Khalij Commercial Bank (al khaliji) Q.S.C. Doha – Qatar.

Report on the Financial Statements

We have audited the accompanying consolidated financial statements of Al Khalij Commercial Bank (al khaliji) Q.S.C. (the “Bank”), and its subsidiaries (together the “Group”) which comprise the consolidated financial position as at December 31, 2012 and the consolidated statements of income, comprehensive income, changes in shareholders’ equity and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards and Qatar Central Bank Regulations. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditor’s Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Bank’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

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F-20

Opinion

In our opinion, the consolidated financial statements give a true and fair view of the financial position of the Group as of December 31, 2012 and of its financial performance and its cash flows for the year ended December 31, 2012 in accordance with International Financial Reporting Standards and Qatar Central Bank regulations.

Report on Other Legal and Regulatory Requirements

We have obtained all the information and explanations which we considered necessary for the purpose of our audit. We further confirm that the financial information included in the Annual Report of the Board of Directors is in agreement with the books and records of the Group and that we are not aware of any contravention by the Group of its Articles of Association, the Qatar Commercial Companies Law No. 5 of 2002 and Decree Law No. 33 of 2006 and Qatar Central Bank regulations during the financial year that would materially affect its activities or its financial position.

For Deloitte & Touche

Muhammad Bahemia

Doha, Qatar February 04, 2013 License No. 103

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F-21 Al Khalij Commercial Bank (al khaliji) Q.S.C. Consolidated Statement of Financial Position As at 31 December 2012 2011 Notes QAR’000 QAR’000 Assets Cash and balances with central banks 8 1,778,889 859,544 Due from banks 9 2,240,807 3,117,677 Loans and advances to customers 10 13,031,579 11,510,631 Investment securities 11 15,865,129 11,028,907 Property and equipment 12 66,500 96,190 Intangible assets 13 273,675 283,315 Other assets 14 415,553 303,314 Total assets 33,672,132 27,199,578

Liabilities Due to banks 15 10,030,528 8,799,428 Customer deposits 16 17,345,940 12,130,266 Subordinated debt 17 120,018 117,210 Other liabilities 18 504,608 750,284 Total liabilities 28,001,094 21,797,188

Shareholders' equity Issued capital 19a 3,600,000 3,600,000 Legal reserve 19b 1,066,989 1,015,768 Risk reserve 19c 257,769 195,821 Fair value reserve 19d 233,351 114,185 Foreign currency translation reserve 19e 13,768 3,700 Retained earnings 499,161 472,916 Total equity 5,671,038 5,402,390 Total liabilities and equity 33,672,132 27,199,578

The consolidated financial statements have been approved by the Board of Directors on 4 February 2013, and signed on its behalf by:

Hamad Bin Faisal Bin Thani Al‐Thani Robin McCall Chairman of the Board of Directors Group Chief Executive Officer

The accompanying notes 1 to 35 set out on pages 8 to 54 form an integral part of the consolidated financial statements.

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F-22 Al Khalij Commercial Bank (al khaliji) Q.S.C. Consolidated Statement of Income For the year ended 31 December 2012 2011 Notes QAR’000 QAR’000 Interest income 20 828,790 806,328 Interest expense 21 (317,775) (218,874) Net interest income 511,015 587,454 Fee and commission income 22 92,865 130,450 Fee and commission expense 22 (19,706) (10,065) Net fee and commission income 73,159 120,385 Foreign exchange (loss) / gain 23 (12,109) 7,329 Income from investment securities 24 396,206 170,324 Other operating income 25 606 54,752 Net operating income 968,877 940,244 Staff costs 26 (188,374) (186,498) Depreciation and amortisation 12, 13 (79,815) (76,890) Net impairment loss on investment securities 11d (5,635) (12,683) Net impairment loss on loans and advances to customers 10c (61,113) (38,035) Other expenses 27 (105,151) (126,076) Profit for the year before tax 528,789 500,062 Tax expense 28 (16,570) (13,061) Profit for the year 512,219 487,001

Earnings per share Basic and diluted earnings per share (QAR per share) 29 1.42 1.35

The accompanying notes 1 to 35 set out on pages 8 to 54 form an integral part of the consolidated financial statements.

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F-23 Al Khalij Commercial Bank (al khaliji) Q.S.C. Consolidated Statement of Comprehensive Income For the year ended 31 December

2012 2011 QAR’000 QAR’000

Profit for the year 512,219 487,001 Other comprehensive income for the year, net of tax Foreign currency translation differences for foreign operations 10,068 (4,830) Net change in fair value of available‐for‐sale investments: 19d 119,166 37,758 Other comprehensive income for the year, net of tax 129,234 32,928

Total comprehensive income for the year 641,453 519,929

The accompanying notes 1 to 35 set out on pages 8 to 54 form an integral part of the consolidated financial statements.

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F-24 Al Khalij Commercial Bank (al khaliji) Q.S.C. Consolidated Statement of Changes in Shareholders’ Equity Issued Legal Risk Fair Foreign Retained Total capital reserve reserve value currency earnings equity

reserve translation reserve Notes QAR’000 QAR’000 QAR’000 QAR’000 QAR’000 QAR’000 QAR’000

Balance as at 1 January 2012 3,600,000 1,015,768 195,821 114,185 3,700 472,916 5,402,390 Profit for the year ‐ ‐ ‐ ‐ ‐ 512,219 512,219 Other comprehensive income ‐ ‐ ‐ 119,166 10,068 ‐ 129,234 Total comprehensive income for the year ‐ ‐ ‐ 119,166 10,068 512,219 641,453

Transfer to Legal Reserve 19b ‐ 51,221 ‐ ‐ ‐ (51,221) ‐ Transfer to Risk Reserve 19c ‐ ‐ 61,948 ‐ ‐ (61,948) ‐ Contribution to Social and Sport Fund 19f ‐ ‐ ‐ ‐ ‐ (12,805) (12,805) Dividend paid for 2011 ‐ ‐ ‐ ‐ ‐ (360,000) (360,000) Balance at 31 December 2012 3,600,000 1,066,989 257,769 233,351 13,768 499,161 5,671,038 F-25

Balance as at 1 January 2011 3,600,000 967,068 108,851 76,427 8,530 493,760 5,254,636 Profit for the year ‐ ‐ ‐ ‐ ‐ 487,001 487,001 Other comprehensive income ‐ ‐ ‐ 37,758 (4,830) ‐32,928 Total comprehensive income for the year ‐ ‐ ‐ 37,758 (4,830) 487,001 519,929

Transfer to Legal Reserve 19b ‐ 48,700 ‐ ‐ ‐ (48,700) ‐ Transfer to Risk Reserve 19c ‐ ‐ 86,970 ‐ ‐ (86,970) ‐ Contribution to Social and Sport Fund 19f ‐ ‐ ‐ ‐ ‐ (12,175) (12,175) Dividend paid for 2010 ‐ ‐ ‐ ‐ ‐ (360,000) (360,000) Balance at 31 December 2011 3,600,000 1,015,768 195,821 114,185 3,700 472,916 5,402,390

The accompanying notes 1 to 35 set out on pages 8 to 54 form an integral part of the consolidated financial statements.

Page 6 of 54 Al Khalij Commercial Bank (al khaliji) Q.S.C. Consolidated Statement of Cash Flows For the year ended 31 December 2012

2012 2011 Notes QAR’000 QAR’000 Cash flows from operating activities: Profit for the year before tax 528,789 500,062 Adjustment for: ‐ Net impairment loss on loans and advances to customers 10c 61,113 38,035 ‐ Net impairment loss on investment securities 11d 5,635 12,683 ‐ Depreciation and amortisation 12,13 79,815 76,890 ‐ Net gain on sale of available‐for‐sale securities 24 (406,554) (177,239) ‐ Other provisions 460 7,994 ‐ Amortisation of discount on Investment Securities (1,290) (17,295) ‐ Fair value of forward contracts 1,743 4,619 Profit before changes in operating assets and liabilities 269,711 445,749 Changes in operating assets and liabilities: ‐ Net increase in regulatory reserves with central banks (246,712) (141,391) ‐ Change in due from banks (183,063) (508,076) ‐ Change in loans and advances to customers (1,582,061) (4,291,957) ‐ Change in other assets (112,239) (66,758) ‐ Change in due to banks 1,231,100 4,307,219 ‐ Change in customer deposits 5,215,674 3,624,930 ‐ Change in other liabilities (606,136) 377,913 Net cash from operating activities 3,986,274 3,747,629

Cash flows from investment activities Acquisition of investment securities (15,155,008) (8,123,875) Proceeds from sale of investment securities 10,802,950 4,000,642 Net acquisition / disposal of property and equipment 12 (8,358) (10,746) Acquisition of intangible assets 13 (29,089) (1,456) Net cash used in investing activities (4,389,505) (4,135,435) Cash flows from financing activities Dividends paid (351,624) (339,110) Net cash used in financing activities (351,624) (339,110)

Net decrease in cash and cash equivalents (754,855) (726,916)

Cash and cash equivalents as at 1 January 2,460,986 3,181,426 Effects of exchange rate changes on cash and cash equivalents held 15,931 6,476 Cash and cash equivalents as at 31 December 31 1,722,062 2,460,986

The accompanying notes 1 to 35 set out on pages 8 to 54 form an integral part of the consolidated financial statements.

Page 7 of 54

F-26 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2012

1 INCORPORATION AND PRINCIPAL ACTIVITIES Al Khalij Commercial Bank (“al khaliji” or “the Bank”) Q.S.C. was incorporated on 9 January 2007 as a Qatari Shareholding Company under Commercial Registration No. 34548, with its registered head office in Doha. The shares of al khaliji are listed on the Qatar Exchange. al khaliji and its subsidiaries (the “Group”) are engaged in commercial banking activities. The Group operates from its head office and two branches in Qatar, one branch in France and four branches in the United Arab Emirates. The bank has also established a fully owned subsidiary “Al Khaliji Capital S.P.C.” which will provide financial services such as brokerage once all approvals have been finalised. The subsidiaries of the Group are as follows:

Company’s Country of Share Acquired/ Percentage Principal Name Incorporation Capital Set up Owned activities Al Khaliji France S.A. France EUR 104,000,000 2008 100% Banking Al Khaliji Capital S.P.C. Qatar QAR 50,000,000 2011 100% Brokerage

2 BASIS OF PREPARATION (a) Statement of compliance The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and the applicable provisions of Qatar Central Bank (“QCB”) regulations. (b) Basis of measurement The consolidated financial statements have been prepared on the historical cost basis except for the following, which are measured at fair value: • financial assets held for trading; • financial assets designated at fair value through profit or loss; • derivatives; and • available‐for‐sale financial investments (c) Functional and presentation currency These consolidated financial statements are presented in Qatari Riyal (“QAR”), which is the Bank’s functional currency. Except as otherwise indicated, financial information presented in QAR has been rounded to the nearest thousand. (d) Use of estimates and judgments The preparation of the consolidated financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. Information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the consolidated financial statements are described in note 5.

Page 8 of 54

F-27 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2012

3 SIGNIFICANT ACCOUNTING POLICIES The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements, and have been applied consistently by Group entities. (a) Basis of consolidation (i) Business combinations Accounting for business combinations only applies if it is considered that a business has been acquired. Under IFRS 3, “Business Combinations”, a business is defined as an integrated set of activities and assets conducted and managed for the purpose of providing a return to investors or lower costs or other economic benefits directly and proportionately to policyholders or participants. A business generally consists of inputs, processes applied to those inputs, and resulting outputs that are, or will be, used to generate revenues. If goodwill is present in a transferred set of activities and assets, the transferred set is presumed to be a business. For acquisitions meeting the definition of a business, the acquisition method of accounting is used as at the acquisition date, which is the date on which control is transferred to the Group. The Group measures goodwill at the acquisition date as the total of:  the fair value of the consideration transferred; plus  the recognised amount of any non‐controlling interest in the acquiree; plus if the business combination is achieved in stages, the fair value of the existing equity interest in the acquiree; less  the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed. When this total is negative, a bargain purchase gain is recognised immediately in profit or loss. The consideration transferred does not include amounts related to the settlement of pre‐existing relationships. Such amounts are generally recognised in profit or loss. Costs related to the acquisition, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred. Any contingent consideration payable is recognised at fair value at the acquisition date. If the contingent consideration is classified as equity, it is not re‐measured and settlement is accounted for within equity. Otherwise, subsequent changes to the fair value of the contingent consideration are recognised in profit or loss. For acquisitions not meeting the definition of a business, the Group allocates the cost between the individual identifiable assets and liabilities. The cost of acquired assets and liabilities is determined by: (a) accounting for financial assets and liabilities at their fair value at the acquisition date; and (b) allocating the remaining balance of the cost of purchasing the assets and liabilities to the individual assets and liabilities, other than financial instruments, based on their relative fair values at the acquisition date. (ii) Subsidiaries Subsidiaries are entities controlled by the Bank. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities and is generally assumed when the Group holds, directly or indirectly, majority of the voting rights of the entity. In assessing control, the Group takes into consideration potential voting rights that currently are exercisable. The accounting policies of subsidiaries have been changed when necessary to align them with the policies adopted by the Group.

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F-28 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2012

(iii) Transactions eliminated on consolidation Intra‐group balances, and income and expenses (except for foreign currency transaction gains or losses) arising from intra‐group transactions, are eliminated in preparing the consolidated financial statements. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment. (b) Foreign currency (i) Foreign currency transactions and balances Foreign currency transactions that are transactions denominated or that require settlement in a foreign currency are translated into the respective functional currencies of the operations at the spot exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated into the functional currency at the spot exchange rate at that date. Non‐monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated into the functional currency at the spot exchange rate at the date that the fair value was determined. Non‐monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Foreign currency differences resulting from the settlement of foreign currency transactions and arising on translation at period end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss. (ii) Foreign operations The results and financial position of all the Group’s entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows:  assets and liabilities for each statement of financial position presented are translated at the closing rate at the reporting date;  income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and  all resulting exchange differences are recognised in other comprehensive income. Exchange differences arising from the above process are reported in shareholders’ equity as “foreign currency translation reserve . On consolidation, exchange differences arising from the translation of the net investment in foreign entities, and of borrowings and other currency instruments designated as hedges of such investments, are taken to “Other comprehensive income”. When a foreign operation is disposed of, or partially disposed of, such exchange differences are recognised in the consolidated income statement as part of the gain or loss on sale. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate. When the settlement of a monetary item receivable from or payable to a foreign operation is either planned nor likely in the foreseeable future, foreign exchange gains and losses arising from such a monetary item are considered to form part of the net investment in the foreign operation and are recognised in other comprehensive income, and presented in the foreign exchange translation reserve in equity.

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F-29 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2012

(c) Financial assets and financial liabilities (i) Recognition and initial measurement The Group initially recognises loans and advances to customers, due from / to banks, customer deposits, investment securities and other borrowings on the date at which they are originated. All other financial assets and liabilities are initially recognised on the trade date at which the Group becomes a party to the contractual provisions of the instrument. A financial asset or financial liability is measured initially at fair value plus, for an item not at fair value through profit or loss, transaction costs that are directly attributable to its acquisition or issue. (ii) Classification Financial assets At inception a financial asset is classified in one of the following categories:  loans and receivables;  held to maturity;  available‐for‐sale; or  at fair value through profit or loss , either as: o held for trading; or o designated at fair value through profit or loss. Financial liabilities The Group has classified and measured its financial liabilities at amortised cost. (iii) De‐recognition The Group derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or when it transfers the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred or in which the Group neither transfers nor retains substantially all the risks and rewards of ownership and it does not retain control of the financial asset. Any interest in transferred financial assets that qualify for de‐recognition that is created or retained by the Group is recognised as a separate asset or liability in the statement of financial position. On de‐recognition of a financial asset, the difference between the carrying amount of the asset (or the carrying amount allocated to the portion of the asset transferred), and consideration received (including any new asset obtained less any new liability assumed) is recognised in profit or loss. The Group enters into transactions whereby it transfers assets recognised on its statement of financial position, but retains either all or substantially all of the risks and rewards of the transferred assets or a portion of them. If all or substantially all risks and rewards are retained, then the transferred assets are not derecognised. Transfers of assets with retention of all or substantially all risks and rewards include, for example, securities lending and repurchase transactions. When assets are sold to a third party with a concurrent total rate of return swap on the transferred assets, the transaction is accounted for as a secured financing transaction similar to repurchase transactions as the Group retains all or substantially all the risks and rewards of ownership of such assets. The Group derecognises a financial liability when its contractual obligations are discharged or cancelled or expire.

Page 11 of 54

F-30 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2012

(iv) Offsetting Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to set off the recognised amounts and it intends either to settle on a net basis or to realise the asset and settle the liability simultaneously. Income and expenses are presented on a net basis only when permitted under IFRS and when approved by the QCB, or for gains and losses arising from a group of similar transactions such as in the Group’s trading activity. (v) Measurement principles Amortised cost measurement The amortised cost of a financial asset or liability is the amount at which the financial asset or liability is measured at initial recognition, minus principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between the initial amount recognised and the maturity amount, minus any reduction for impairment loss. The calculation of effective interest rate includes all fees and points paid or received that are an integral part of the effective interest rate. Fair value measurement Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction on the measurement date. The Group measures the fair value of listed investments at the market closing price for the investment. For unlisted investments, the Group recognises any increase in the fair value, when they have reliable indicators to support such an increase. These reliable indicators are limited to the most recent transactions for the specific investment or similar investments made in the market on a commercial basis between desirous and informed parties who do not have any reactions which might affect the price. The fair value of investments in mutual funds and portfolios whose units are unlisted are measured at the net asset value. Assets and long positions are measured at a bid price; liabilities and short positions are measured at an asking price. Where the Group has positions with offsetting risks, mid‐market prices are used to measure the offsetting risk positions and a bid or asking price adjustment is applied only to the net open position as appropriate. Fair values reflect the credit risk of the instrument and include adjustments to take account of the credit risk of the Group and the counterparty where appropriate. Fair value estimates obtained from models are adjusted for any other factors, such as liquidity risk or model uncertainties; to the extent that the Group believes a third‐party market participant would take them into account in pricing a transaction. (vi) Identification and measurement of impairment At each reporting date the Group assesses whether there is objective evidence that financial assets not carried at fair value through profit or loss are impaired. A financial asset or a group of financial assets is impaired when objective evidence demonstrates that a loss event has occurred after the initial recognition of the asset(s), and that the loss event has an impact on the future cash flows of the asset(s) that can be estimated reliably. Objective evidence that financial assets (including equity securities) are impaired can include significant financial difficulty of the borrower or issuer, default or delinquency by a borrower, restructuring of a loan or advance by the Group on terms that the Group would not otherwise consider, indications that a borrower or issuer will enter bankruptcy, the disappearance of an active market for a security, or other observable data relating to a group of assets

Page 12 of 54

F-31 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2012 such as adverse changes in the payment status of borrowers or issuers in the group, or economic conditions that correlate with defaults in the group. The Group considers evidence of impairment loss for loans and advances to customers and held‐to‐maturity investment securities at both a specific asset and collective level. All individually significant loans and advances to customers and held‐to‐maturity investment securities are assessed for specific impairment. All individually significant loans and advances to customers and held‐to‐maturity investment securities found not to be specifically impaired are then collectively assessed for any impairment that has been incurred but not yet identified. Loans and advances to customers and held‐to‐maturity investment securities that are not individually significant are collectively assessed for impairment by grouping together loans and advances to customers and held‐to‐maturity investment securities with similar risk characteristics. In assessing collective impairment the Group considers factors such as credit quality, portfolio size, concentrations and economic factors. In order to estimate the required allowance, assumptions are made to define the way inherent losses are modelled and to determine the required input parameters, based on historical experience and current economic conditions. Impairment losses on assets carried at amortised cost are measured as the difference between the carrying amount of the financial asset and the present value of estimated future cash flows discounted at the asset’s original effective interest rate. Impairment losses are recognised in profit or loss and reflected in an allowance account against loans and advances to customers. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed by adjusting the impairment account. The amount of the reversal is recognised in the statement of income. For listed investments, a decline in the market value by 20% from cost or more, or for a continuous period of 9 months or more, are considered to be indicators of impairment. Impairment losses on available‐for‐sale investment securities are recognised by transferring the cumulative loss that has been recognised in other comprehensive income to profit or loss as a reclassification adjustment. The cumulative loss that is reclassified from other comprehensive income to profit or loss is the difference between the acquisition cost, net of any principal repayment and amortisation, and the current fair value, less any impairment loss previously recognised in profit or loss. Changes in impairment provisions attributable to time value are reflected as a component of interest income. In subsequent periods, the appreciation of fair value of an impaired available‐for‐sale investment securities is recorded in fair value reserves. (d) Cash and cash equivalents Cash and cash equivalents include notes and coins on hand, unrestricted balances held with central banks and highly liquid financial assets with maturities of three months or less from the acquisition date that are subject to an insignificant risk of changes in their fair value, and are used by the Group in the management of its short‐term commitments. Mandatory cash reserves with central banks are not available for operational purposes and not included as part of cash and cash equivalents. (e) Loans and advances to customers Loans and advances to customers are non‐derivative financial assets with fixed or determinable payments that are not quoted in an active market and that the Group does not intend to sell immediately or in the near term. Loans and advances to customers, cash and balances with central banks and due from banks are classified as “loans and receivables”. Loans and advances to customers are initially measured at the transaction price which is the fair value plus incremental direct transaction costs, and subsequently measured at their amortised cost using the effective interest method.

Page 13 of 54

F-32 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2012

When the Group purchases a financial asset and simultaneously enters into an agreement to resell the asset (or a substantially similar asset) at a fixed price on a future date (reverse repo or stock borrowing), the arrangement is accounted for as a loan or advance, and the underlying asset is not recognised in the Group’s financial statements. (f) Investment securities Subsequent to initial recognition investment securities are accounted for depending on their classification as either “held to maturity”, “fair value through profit or loss”, or “available‐for‐sale”. (i) Held‐to‐maturity financial assets Held‐to‐maturity investments are non‐derivative assets with fixed or determinable payments and fixed maturity that the Group has the positive intent and ability to hold to maturity, and which were not designated as at fair value through profit or loss or as available‐for‐sale. Held‐to‐maturity investments are carried at amortised cost using the effective interest method. (ii) Fair value through profit or loss The Group has classified its investments as held for trading where such investments are managed for short‐term profit taking or designated certain investments as fair value through profit or loss. Fair value changes on these investments are recognised immediately in profit or loss. (iii) Available‐for‐sale financial investments Available‐for‐sale investments are non‐derivative investments that are designated as available‐for‐sale or are not classified as another category of financial assets. Unquoted equity securities are carried at cost less impairment, and all other available‐for‐sale investments are carried at fair value. Interest income is recognised in profit or loss using the effective interest method. Dividend income is recognised in profit or loss when the Group becomes entitled to the dividend. Foreign exchange gains or losses on available‐for‐sale debt security investments are recognised in profit or loss. Other fair value changes are recognised in other comprehensive income until the investment is sold or impaired, whereupon the cumulative gains and losses previously recognised in other comprehensive income are reclassified to profit or loss as a reclassification adjustment. A non‐derivative financial asset may be reclassified from the available‐for‐sale category to the loans and receivables category if it otherwise would have met the definition of loans and receivables and if the Group had the intention and ability to hold that financial asset for the foreseeable future or until maturity. (g) Derivatives (i) Derivatives held for risk management purposes (including hedge accounting) Derivatives held for risk management purposes include all derivative assets and liabilities that are not classified as trading assets or liabilities. Derivatives held for risk management purposes are measured at fair value on the statement of financial position. The Group designates certain derivatives held for risk management as well as certain non‐derivative financial instruments as hedging instruments in qualifying hedging relationships. On initial designation of the hedge, the Group formally documents the relationship between the hedging derivative instrument(s) and hedged item(s), including the risk management objective and strategy in undertaking the hedge, together with the method that will be used to assess the effectiveness of the hedging relationship. The Group makes an assessment, both at the inception of the hedge relationship as well as on an ongoing basis, as to whether the hedging instrument(s) is (are) expected to be highly effective in offsetting the changes in the fair value or cash flows of the respective hedged item(s) during the period for

Page 14 of 54

F-33 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2012 which the hedge is designated, and whether the actual results of each hedge are within a range of 80‐125 per cent. These hedging relationships are discussed below. Fair value hedges – qualifying for hedge accounting When a derivative is designated as the hedging instrument in a hedge of the change in fair value of a recognised asset or liability or a firm commitment that could affect profit or loss, changes in the fair value of the derivative are recognised immediately in profit or loss together with changes in the fair value of the hedged item that are attributable to the hedged risk. If the hedging derivative expires or is sold, terminated, or exercised, or the hedge no longer meets the criteria for fair value hedge accounting, or the hedge designation is revoked, then hedge accounting is discontinued prospectively. Any adjustment up to that point to a hedged item, for which the effective interest method is used, is amortised to profit or loss as part of the recalculated effective interest rate of the item over its remaining life. Hedging derivatives – not qualifying for hedge accounting When a derivative is held for risk management purposes but, due to the characteristics of the derivative (e.g. where it includes embedded options), it does not qualify for hedge accounting, all changes in its fair value are recognised immediately in profit or loss. Also included in this category are foreign exchange derivatives (such as forward exchange contracts and cross currency swaps) that are used to hedge foreign currency risks arising between lending and funding activities. (ii) Derivatives held for trading purposes The Group’s derivative trading instruments includes primarily forward foreign exchange contracts, interest rate swaps and interest rate options. The Group sells these derivatives to customers in order to enable them to transfer, modify or reduce current and future risks. These derivative instruments are fair valued as at the end of reporting date and the corresponding fair value changes are recognised in the profit or loss. (h) Property and equipment (i) Recognition and measurement Items of property and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self‐ constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the assets to a working condition for their intended use, the costs of dismantling and removing the items and restoring the site on which they are located and capitalised borrowing costs. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment. When parts of an item of property or equipment have different useful lives, they are accounted for as separate items (major components) of property and equipment. The gain or loss on disposal of an item of property and equipment is determined by comparing the proceeds from disposal with the carrying amount of the item of property and equipment, and is recognised in other income/other expenses in profit or loss. (ii) Subsequent costs The cost of replacing a component of an item of property or equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The carrying amount of the replaced part is derecognised. The costs of the day‐to‐day servicing of property and equipment are recognised in profit or loss as incurred.

Page 15 of 54

F-34 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2012

(iii) Depreciation Depreciable amount is the cost of property and equipment, or other amount substituted for cost, less its residual value. Depreciation is recognised in profit or loss on a straight‐line basis over the estimated useful lives of each part of an item of property and equipment since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset and is based on cost of the asset less its estimated residual value. Land is not depreciated. The estimated useful lives for the current and comparative years are as follows:

Leasehold improvements: 7 years Furniture and equipment: 3 to 5 years Motor vehicles: 3 years Depreciation methods, useful lives and residual values are reassessed at each reporting date and adjusted prospectively, if appropriate. (i) Intangible assets (i) Goodwill Goodwill that arises upon the acquisition of subsidiaries is included in intangible assets. Subsequent to initial recognition goodwill is measured at cost less accumulated impairment losses. Goodwill is tested at each reporting date for impairment by comparing the present value of the expected future cash flows from a cash generating unit with the carrying value of its net assets, including attributable goodwill and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. (ii) Computer software Costs associated with the development of software for internal use are capitalised if the software is technically feasible and the Group has both the intent and sufficient resources to complete the development. Costs are only capitalised if the asset can be reliably measured and will generate future economic benefits to the Group. Only costs that are directly attributable to bringing the software into working condition for its intended use are capitalised. These costs include all directly attributable costs necessary to create, produce and prepare the asset to be capable of operating in a manner intended by management. Other development expenditure is recognised in the statement of income as an expense when incurred. Capitalised development expenditure and purchased software is stated at cost less accumulated amortisation and impairment losses. Once the software is ready for use, the capitalised costs are amortised over their expected lives, generally between three to seven years. Capitalised software is assessed for impairment where there is an indication of impairment. Where impairment exists, the carrying amount of the asset is reduced to its recoverable amount and the impairment loss recognised in the statement of income. The amortisation charge for the asset is then adjusted to reflect the asset’s revised carrying amount. Subsequent expenditure is only capitalised when it increases the future economic benefits embodied in the specific asset to which it relates. (j) Impairment of non‐financial assets The carrying amounts of the Group’s non‐financial assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated.

Page 16 of 54

F-35 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2012

For goodwill and intangible assets that have indefinite useful lives or that are not yet available for use, the recoverable amount is estimated each year at the same time. An impairment loss is recognised if the carrying amount of an asset or its Cash Generating Unit (“CGU”) exceeds its estimated recoverable amount. The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre‐tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGU. Subject to an operating segment ceiling test, for the purposes of goodwill impairment testing, CGUs to which goodwill has been allocated are aggregated so that the level at which impairment testing is performed reflects the lowest level at which goodwill is monitored for internal reporting purposes. Goodwill acquired in a business combination is allocated to groups of CGUs that are expected to benefit from the synergies of the combination. The Group’s corporate assets do not generate separate cash inflows and are utilised by more than one CGU. Corporate assets are allocated to CGUs on a reasonable and consistent basis and tested for impairment as part of the testing of the CGU to which the corporate asset is allocated. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the CGU (group of CGUs) and then to reduce the carrying amount of the other assets in the CGU (group of CGUs) on a pro rata basis. An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. (k) Provisions A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre‐tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Contingent liabilities are possible obligations whose existence will be confirmed only by uncertain future events or present obligations where the transfer of economic benefit is uncertain or cannot be reliably measured. Contingent liabilities are not recognised but are disclosed unless they are remote. (l) Financial guarantees Financial guarantees are contracts that require the Group to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the terms of a debt instrument. Financial guarantee liabilities are recognised initially at their fair value, and the initial fair value is amortised over the life of the financial guarantee. The financial guarantee liability is subsequently carried at the higher of this amortised amount and the present value of any expected payment when a payment under the guarantee has become probable. Financial guarantees are included within other liabilities.

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F-36 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2012

(m) Employees benefits (i) End of service benefits The Group provides for end of service benefits payable to its employees, based on the individual’s period of service at the reporting date in accordance with the employment policy of the Group and the provisions in Qatar Labour Law. The expected costs of these benefits are accrued over the period of employment, and included as part of other liabilities in the statement of financial position. The Group provides for its contribution to the State administered retirement fund for Qatari employees in accordance with the retirement law, and the resulting charge is included with in the personnel cost under general administration expenses in the consolidated statement of income The Group has no further payment obligations once the contributions have been paid. The contributions are recognised when they are due. (ii) Short‐term employee benefits Short‐term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognised for the amount expected to be paid under short‐term cash bonus or profit‐ sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably. (iii) Long‐term incentive plan The Group operates a long‐term incentive plan in respect of services received from certain of its employees. This long‐ term incentive plan is based on the achievement of internal performance targets, including the increase in the value of the bank’s shares, and is not a share scheme or equity settled scheme. The fair value of the services received is measured by reference to the fair value of the awards granted on the date of the grant. The cost of the employee services received in respect of the awards granted is recognised in the statement of income over the period that the services are received, which is the vesting period. The fair value of the awards granted is determined using option pricing models. (n) Issued capital and reserves (i) Share issue costs Incremental costs directly attributable to the issue of an equity instrument are deducted from the initial measurement of the equity instruments. (ii) Dividends on ordinary shares Dividends on ordinary shares are recognised in equity in the period in which they are approved by the Group’s shareholders. Dividends for the year that are declared after the date of the consolidated statement of financial position are dealt with in the subsequent events note. (o) Interest income and expense Interest income and expense are recognised in profit or loss using the effective interest method. The effective interest rate is the rate that exactly discounts the estimated future cash payments and receipts through the expected life of the financial asset or liability (or, where appropriate, a shorter period) to the carrying amount of the financial asset or liability. When calculating the effective interest rate, the Group estimates future cash flows considering all contractual terms of the financial instrument, but not future credit losses. The calculation of the effective interest rate includes all transaction costs and fees and points paid or received that are an integral part of the effective interest rate.

Page 18 of 54

F-37 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2012

Transaction costs include incremental costs that are directly attributable to the acquisition or issue of a financial asset or liability. Interest income and expense presented in the consolidated statement of income include:  the interest on financial assets and financial liabilities measured at amortised cost;  the interest on available‐for‐sale, held to maturity and designated at fair value through profit or loss investment securities; and  the interest on derivatives that are designated as qualifying hedges. (p) Fees and commission income and expense Fees and commission income and expense that are integral to the effective interest rate on a financial asset or liability are included in the measurement of the effective interest rate. Other fees and commission income, including account servicing fees, investment management fees, sales commission, placement fees and syndication fees, are recognised as the related services are performed. When a loan commitment is not expected to result in the draw‐down of a loan, the related loan commitment fees are recognised on a straight‐line basis over the commitment period. Other fees and commission expense relate mainly to transaction and service fees, which are expensed as the services are received. (q) Income from investment securities (i) Investment securities Unrealised gains or losses arising from changes in fair values of investment securities designated as available‐for‐sale are recognised directly in other comprehensive income and accumulated in equity under the fair value reserve, except for impairment losses or foreign exchange gains or losses, which are recognised immediately in the consolidated statement of income in impairment on investment securities. On sale or maturity, previously unrealised gains and losses are transferred to operating income. Unrealised gains or losses on fair value changes from re‐measurement of investment securities designated as fair value through profit or loss are recognised in profit or loss. (ii) Derivatives This includes all fair value changes on derivatives whether qualifying hedges or not. In addition, interest income and expense arising on derivatives that are not designated as qualifying hedges are also included. (r) Dividend income Dividend income is recognised when the right to receive income is established. (s) Tax expense Income tax payable on taxable profits ('current tax') is recognised as an expense in the period in which the profits arise. A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. (t) Earnings per share Basic earnings per share (EPS) is calculated by dividing the profit or loss attributable to ordinary shareholders of the Bank by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by

Page 19 of 54

F-38 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2012 adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares. (u) Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision‐makers (i.e. the Group Executive Board). The Board is responsible for allocating resources to each segment and assessing its performance, and for which discrete financial information is available. The Group has the following business segments: Wholesale Banking, Retail Banking, Group Treasury and Central Functions. (v) Repossessed collateral Repossessed collaterals against settlement of customers’ debts are stated within the consolidated statement of financial position under “Other assets” at their acquisition value net of allowance for impairment. (w) Comparatives Except when a standard or an interpretation permits or requires otherwise, all amounts are reported or disclosed with comparative information. (x) Parent bank financial information Statement of financial position and statement of income of the Parent bank as disclosed in note 35 are prepared following the same accounting policies as mentioned above except for investment in subsidiaries which are not consolidated and carried at cost. (y) New standards and interpretations

(i) Standards and interpretations that were adopted by the Group for the first time in the current year The following amended standard, which became effective in 2012, is relevant to the Group. The adoption of this amended standard had no impact on the financial performance or positions of the Group, nor impacted presentations and disclosures. IFRS 7 (Revised) Financial Instruments Disclosures ‐ The amendment introduced new disclosure requirements about transfers of financial assets, including disclosures for financial assets that are not derecognised in their entirety, and financial assets that are derecognised in their entirety but for which the entity retains continuing involvement. The following amendments and interpretations became effective in 2012, but did not have a material impact or were not relevant to the accounting policies, financial position or performance of the Group: IFRS 1 (Revised) - First time adoption of International Financial Reporting Standards‐ ‐ i) Replacement of 'fixed dates' for certain exceptions with 'the date of transition to IFRSs'; and ii) Additional exemption for entities ceasing to suffer from severe hyperinflation. IAS 12 (Revised) - Income Taxes ‐ Limited scope amendment (recovery of underlying assets).

(ii) Standards, amendments and interpretation issued but not yet effective The following accounting standards, amendments and interpretations have been issued and are mandatory for the Group’s accounting periods beginning on or after 1 July 2012, and some of which are expected to be relevant to the Group. The Group has not early adopted these new or amended standards in the year ended 31 December 2012:

Page 20 of 54

F-39 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2012

IAS 1 (Revised) - Presentation of Financial Statements ‐ Amendments to revise the way other 1 July 2012 comprehensive income is presented. IAS 19 (Revised) - Employee Benefits ‐ Amended Standard resulting from the Post‐Employment 1 January 2013 Benefits and Termination Benefits projects. IAS 27 (Revised) - Consolidated and Separate Financial Statements ‐ Reissued as IAS 27 Separate 1 January 2013 Financial Statements. IAS 28 (Revised) - Investments in Associates ‐ Reissued as IAS 28 Investments in Associates and 1 January 2013 Joint Ventures. IAS 32 (Revised) - Offsetting Financial Assets and Financial Liabilities – Amendment clarifying 1 January 2014 “currently has a legally enforceable right to set‐off” and how to apply offsetting to settlement systems. IFRS 7 (Revised) - Financial Instruments Disclosures ‐ Amendments enhancing disclosures about 1 January 2013 offsetting of financial assets and financial liabilities. IFRS 7 (Revised) - Financial Instruments Disclosures ‐ Amendments requiring disclosures about 1 January 2015 the initial application of IFRS 9. IFRS 9 (New) - Financial Instruments – i) Classification and measurement of financial assets; 1 January 2013 and ii) Accounting for financial liabilities and de‐recognition. IFRS 10 (New) - Consolidated Financial Statements 1 January 2013 IFRS 11 (New) - Joint Arrangements 1 January 2013 IFRS 12 (New) - Disclosure of Interests in Other Entities 1 January 2013 IFRS 13 (New) - Fair Value Measurement 1 January 2013 IFRIC 20 (New) - Stripping Costs in the Production Phase of a Surface Mine 1 January 2015 The Group is considering the implications of these standards, the impact on the consolidated financial statements and the timing of its adoption.

4 FINANCIAL RISK MANAGEMENT

(a) Introduction and overview The identification, measurement and management of risk is a strategic priority for the Group. The overall responsibility for ensuring a robust risk management infrastructure rests with the Board of Directors. The Group has established a risk management framework covering accountability, oversight, measurement and reporting to maintain relevant standards. The risk governance structure at al khaliji consists of five layers comprising of the following: Level 1: Board of Directors Level 2: Board Committees ‐ Compliance and Risk Committee Level 3: Senior Management Committees – Group Credit and Investment Committee; Group Asset, Liability and Capital Committee (“GALCCO”); Group Risk Committee Level 4: Risk Function ‐ Units for Corporate Credit, Business Banking Credit, Consumer Credit, Market Risk, Security Risk and Operational Risk Level 5: Business Units ‐ Risk awareness culture, desktop level procedures, systems and controls Internal audit provides an independent assessment of the adequacy of risk management and compliance with its policies, procedures, and reports to the audit committee of the board.

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F-40 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2012

The Group has exposure to the following key risks from the use of financial instruments:  Credit risk  Liquidity risk  Market risk  Operational risk These risks occur as a part of normal business activities and are identified, monitored and managed through a framework of controls. These controls include transaction analysis and suitability, risk ratings, risk limits, approval authorities and periodic reporting. Risks are reviewed on a transaction as well as portfolio basis by senior management, relevant committees and the Board of Directors. The risk management process encompasses all businesses and functions through an organization‐wide culture of ‘risk awareness’. The Group remains cognizant of the market environment and calibrates its risk appetite and risk controls in light of changing conditions.

(b) Credit risk Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s loans and advances to customers, due from banks and investment securities. The Group manages limits and controls concentrations of credit risk wherever they are identified, with specific emphasis to individual counterparties and groups, and to industries and countries and mitigates its exposure to credit risk through collateral, by taking security for funds advanced, and uses approved guidelines on the acceptability of specific classes of collateral or credit risk mitigation. (i) Maximum exposure to credit risk before collateral held or other credit enhancements The following table provides the maximum exposure to credit risk for all financial position and off‐financial position items where credit risk exposures exist. This maximum exposure depicts the gross worse‐case amount before considering the effect of collateral, master netting agreements or other mitigation: 2012 2011 QAR’000 QAR’000

Credit exposure relating to on‐financial position items: Due from central banks – excluding cash 1,721,685 794,134 Due from banks 2,240,807 3,117,677 Loans and advances to customers 13,031,579 11,510,631 Investment Securities 15,865,129 11,028,907 Derivative financial instruments 101,638 33,676 Net on‐financial position credit exposure 32,960,838 26,485,025

Credit exposure relating to off‐financial position items: Guarantees 4,472,503 3,705,479 Letters of credit 672,982 469,879 Unutilised credit facilities 6,868,064 3,813,732 Net off‐financial position credit exposure 12,013,549 7,989,090 Net credit exposure 44,974,387 34,474,115

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F-41 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2012

(ii) Concentration of risks of financial assets with credit risk exposure

Geographical sectors The following table breaks down the Group’s credit exposure at their carrying amounts (without taking into account any collateral held or other credit support), as categorized by geographical region. For this table, the Group has allocated exposures to regions based on the country of domicile of its counterparties.

Other UK and Rest of the Qatar GCC Europe World Total QAR’000 QAR’000 QAR’000 QAR’000 QAR’000

At 31 December 2012 Due from central banks – excluding cash 1,544,380 163,805 13,500 ‐1,721,685 Due from banks 239,733 185,750 1,503,099 312,225 2,240,807 Loans and advances to customers 8,529,209 3,994,702 206,060 301,608 13,031,579 Derivative financial instruments ‐5,953 95,685 ‐101,638 Investment Securities 14,199,879 823,999 526,178 315,073 15,865,129 Net exposure 24,513,201 5,174,209 2,344,522 928,906 32,960,838

At 31 December 2011 Due from central banks – excluding cash 576,842 198,117 19,175 794,134 Due from banks 936,073 74,746 1,871,092 235,766 3,117,677 Loans and advances to customers 7,298,779 3,870,321 115,902 225,629 11,510,631 Derivative financial instruments 10,321 450 22,905 ‐33,676 Investment Securities 9,441,703 698,218 685,482 203,504 11,028,907 Net exposure 18,263,718 4,841,852 2,714,556 664,899 26,485,025

Other UK and Rest of the Qatar GCC Europe World Total QAR’000 QAR’000 QAR’000 QAR’000 QAR’000

At 31 December 2012 Guarantees 2,251,143 1,298,658 797,534 125,168 4,472,503 Letters of credit 52,300 291,945 99,365 229,372 672,982 Unutilised credit facilities 5,251,237 1,446,829 92,784 77,214 6,868,064 Total exposure 7,554,680 3,037,432 989,683 431,754 12,013,549

At 31 December 2011 Guarantees 1,225,028 1,341,220 841,938 297,293 3,705,479 Letters of credit 121,827 171,197 78,529 98,326 469,879 Unutilised credit facilities 2,379,266 1,271,122 100,435 62,909 3,813,732 Total exposure 3,726,121 2,783,539 1,020,902 458,528 7,989,090

Page 23 of 54

F-42 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2012

Industry sector The following table breaks down the Group’s main credit exposure at their carrying amounts, as categorised by the industry sectors of our counterparties: 2012 2011 QAR’000 QAR’000 Funded and Unfunded Government 11,396,326 6,929,842 Government agencies 6,692,730 4,375,701 Industry 1,416,147 1,494,848 Commercial 1,412,693 1,176,422 Services 8,182,639 8,995,474 Contracting 1,150,508 1,167,610 Real Estate 1,241,583 1,785,283 Personal 1,277,884 685,110 Others 431,070 71,534 Contingent liabilities 12,013,549 7,989,090 Gross exposure 45,215,129 34,670,914 Allowance for impairment (240,742) (196,799) Net exposure 44,974,387 34,474,115

Credit risk exposure The table below provides the credit quality of financial assets, by credit ratings designation based on Standard & Poor’s or their equivalent: 2012 2011 QAR’000 QAR’000 Equivalent Grades AAA to AA‐ 15,152,485 10,726,126 A+ to A‐ 2,636,753 3,337,532 BBB+ to BBB‐ 139,398 88,897 BB+ to B‐ 41,876 ‐ Unrated 14,990,326 12,332,470 Net exposure (excluding contingent liabilities) 32,960,838 26,485,025

Page 24 of 54

F-43 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2012

(iii) Credit quality Loans and Derivative advances to Due from Investments financial customers banks securities instruments QAR’000 QAR’000 QAR’000 QAR’000 At 31 December 2012 Neither past due nor impaired 12,547,445 2,240,807 15,865,129 101,638 Past due but not impaired 665,801 ‐‐‐ Impaired (net of interest in suspense) 59,075 ‐‐‐ Total gross exposure 13,272,321 2,240,807 15,865,129 101,638 At 31 December 2011 Neither past due nor impaired 10,971,747 3,117,677 11,017,172 33,676 Past due but not impaired 661,551 ‐‐‐ Impaired (net of interest in suspense) 62,411 ‐ 23,456 ‐ Total gross exposure 11,695,709 3,117,677 11,040,628 33,676 Loans and advances to customers The table above provides an analysis of loans and advances to customers that are due to the Group. Loans and advances to customers are considered past due where a specific expiry date is in place or regular instalments are required and such payments have not been received by the Group. A loan payable on demand is treated as overdue where a demand for repayment has been served but the repayment has not been made in accordance with demand requirements. Loans and advances to customers ‐ neither past due nor impaired Satisfactory Viable but Fair value of risk monitoring Total collateral QAR’000 QAR’000 QAR’000 QAR’000 At 31 December 2012 Consumer 1,412,061 2,182 1,414,243 1,330,618 Corporate 11,063,665 69,537 11,133,202 8,722,627 Total gross exposure 12,475,726 71,719 12,547,445 10,053,245 At 31 December 2011 Consumer 1,030,688 7,404 1,038,092 618,773 Corporate 9,892,553 41,102 9,933,655 5,849,735 Total gross exposure 10,923,241 48,506 10,971,747 6,468,508

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F-44 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2012

Loans and advances to customers ‐ past due but not impaired Past due Past due up Past due 30 Past due 60 longer than Fair value of to 30 days to 60 days to 90 days 90 days Total collateral QAR’000 QAR’000 QAR’000 QAR’000 QAR’000 QAR’000 At 31 December 2012 Consumer 3,416 4,304 423 ‐ 8,143 40,748 Corporate 33,824 127 117 623,590 657,658 322,060 Total gross exposure 37,240 4,431 540 623,590 665,801 362,808

At 31 December 2011 Consumer 6,504 5,825 1,265 70 13,664 12,969 Corporate 13,868 13,806 5,739 614,474 647,887 300,680 Total gross exposure 20,372 19,631 7,004 614,544 661,551 313,649

The bank includes loans that are in the final process of re‐structuring with no loss of capital as past due but not impaired. The Group, in consultation with its Regulators, has created some provisions for such deals and ones that were recently re‐structured. Such provisions will be retained until the re‐structuring process has proven to be successful and then released after similar consultation. Loans and advances to customers impaired 2012 2011 Gross Fair value of Gross Fair value of Amount collateral Amount collateral QAR’000 QAR’000 QAR’000 QAR’000 Consumer 29,556 34,114 25,140 8,961 Corporate 29,519 24,305 37,271 35,450 Total gross exposure 59,075 58,419 62,411 44,411

Renegotiated loans and advances to customers Restructuring activities include extended payment arrangements, approved external management plans, modification and deferral of payments. Restructuring policies and practices are based on indicators or criteria that, in the judgement of local management, indicate that payment will most likely continue. These policies are kept under continuous review. Restructuring is most commonly applied to term loans.

2012 2011 QAR’000 QAR’000 Consumer 265,977 263,102 Corporate 798,362 757,432 Total 1,064,339 1,020,534

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F-45 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2012

(iv) Collateral The determination of eligible collateral and the value of collateral are based on QCB regulations and are assessed by reference to market price or indexes of similar assets. The Group holds collateral against loans and advances to customers in the form of mortgage interests over property, other registered securities over assets and guarantees. Estimates of the fair value of collateral are based on the value of collateral assessed at inception of the borrowing, using valuation techniques commonly used for the corresponding assets. In the event non‐cash collateral is realised, a more conservative assessment of the collateral’s value is observed in conformance with the Qatar Central Bank impairment regulations.

At 31 December 2012 the Group did not hold any repossessed collateral (2011: QAR nil).

(v) Write‐off policy The Group writes off a loan or an investment debt security balance, and any related allowances for impairment losses, when Group Credit determines that the loan or security is uncollectible and after QCB approval.

This determination is made after considering information such as the occurrence of significant changes in the borrower’s/issuer’s financial position such that the borrower/issuer can no longer pay the obligation, or that proceeds from collateral will not be sufficient to pay back the entire exposure. For smaller balance standardised loans, write‐off decisions generally are based on a product specific past due status.

(c) Liquidity Risk Liquidity risk is the risk that the Group is unable to meet its obligations when they fall due as a result of customer deposits being withdrawn, cash requirements from contractual commitments, or other cash outflows, such as debt maturities or margin calls for derivatives etc. Such outflows would deplete available cash resources for client lending, trading activities and investments. In extreme circumstances, lack of liquidity could result in losses on sales of assets, or potentially an inability to fulfil lending commitments. The risk that the Group will be unable to do so is inherent in all banking operations and can be affected by a range of institution‐specific and market‐wide events including, but not limited to, credit events, merger and acquisition activity, systemic shocks and natural disasters. The aim of liquidity management is to honour the payment obligations and to minimise the costs of funding of the Group’s activities. Liquidity management is divided with respect to maturity into following two categories:  Operational liquidity: day‐to‐day management of cash and the Group’s accounts with other banks  Medium‐term and long‐term liquidity: to manage expected cash flows generated by on‐ and off‐financial position items and to provide sufficient funds for the Group’s business activities. Two categories of tools are used to measure liquidity risk, the liquidity ratio approach and expected cash‐flow approach. Both aim to quantify the current and expected gap between cash inflows (from new funding or asset maturities / sales) and outflows (funding maturities / withdrawals and new assets). Cognizance is taken of the difference between nominal and actuarial or expected maturities of assets and liabilities. Stress testing for different scenarios is also performed.

Page 27 of 54

F-46 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2012

(i) Exposure to liquidity risk One key measure used by the Group for managing liquidity risk is the ratio of net liquid assets to deposits from customers. For this purpose net liquid assets are considered as including cash and cash equivalents and investment grade debt securities for which there is an active and liquid market less any deposits from banks, debt securities, other borrowings and commitments maturing within the next month. A similar, but not identical, calculation is used to measure the Group’s compliance with the liquidity limit established by the Group’s lead regulator, the QCB. Details of the reported QCB Group ratio of net liquid assets to deposits from customers at the reporting date and during the year were as follows: At 31 December 2012 2011 Average for the year 173% 179% Maximum for the year 188% 198% Minimum for the year 160% 162%

(ii) Maturity analysis (including all assets and liabilities) The following table illustrates the maturity profile of the Group’s financial assets and liabilities based on contractual maturities. The contractual maturities of assets and liabilities have been determined based on the remaining period at the reporting date to the contractual maturity date and do not take account of the Group’s deposit retention history. Up to 1 1 to 3 3 to 12 1 to 5 More than No Carrying month months months years 5 years Maturities Amount At 31 December 2012 QAR’000 QAR’000 QAR’000 QAR’000 QAR’000 QAR’000 QAR’000 Cash and balances with central banks 1,586,860 ‐ ‐ ‐ ‐ 192,029 1,778,889 Due from banks 475,569 115,049 130,035 1,017,380 ‐ 502,774 2,240,807 Loans and advances to customers 639,957 2,219,795 1,738,350 3,215,138 4,549,185 669,154 13,031,579 Investment Securities 59,438 6,834 233,784 5,254,084 10,180,067 130,922 15,865,129 Other assets 80,572 14,725 269,955 13,054 9,220 368,202 755,728 Total assets 2,842,396 2,356,403 2,372,124 9,499,656 14,738,472 1,863,081 33,672,132 Deposits from banks 2,030,126 4,651,027 1,296,227 2,004,404 ‐ 48,744 10,030,528 Customer deposits 12,079,265 1,191,470 1,147,880 26,800 ‐ 2,900,525 17,345,940 Subordinated debt ‐ ‐ ‐ ‐ ‐ 120,018 120,018 Other liabilities 232,386 10,910 7,831 1,281 11,788 240,412 504,608 Total liabilities 14,341,777 5,853,407 2,451,938 2,032,485 11,788 3,309,699 28,001,094 Financial position maturity gap (11,499,381) (3,497,004) (79,814) 7,467,171 14,726,684 (1,446,618) 5,671,038

At 31 December 2011 Cash and balances with central banks 647,654 ‐ ‐ ‐ ‐ 211,890 859,544 Due from banks 2,004,539 165,960 104,362 735,280 91,000 16,536 3,117,677 Loans and advances to customers 1,608,241 1,424,640 2,488,188 4,019,912 1,644,747 324,903 11,510,631 Investment Securities 91,009 4,697 580,385 6,105,057 4,109,851 137,908 11,028,907 Other assets 31,042 201,526 9,765 25,033 ‐ 415,453 682,819 Total assets 4,382,485 1,796,823 3,182,700 10,885,282 5,845,598 1,106,690 27,199,578 Due to banks 3,501,463 3,343,510 628,890 1,304,495 ‐ 21,070 8,799,428 Customer deposits 9,549,719 1,395,333 736,497 12,029 ‐ 436,688 12,130,266 Subordinated debt ‐ ‐ ‐ ‐ ‐ 117,210 117,210 Other liabilities 292,861 190,059 2,744 20,592 ‐ 244,028 750,284 Total liabilities 13,344,043 4,928,902 1,368,131 1,337,116 ‐ 818,996 21,797,188 Financial position maturity gap (8,961,558) (3,132,079) 1,814,569 9,548,166 5,845,598 287,694 5,402,390

Page 28 of 54

F-47 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2012

The table below summarises the maturity profile of the Group’s off‐financial position financial instruments based on the earliest contractual maturity date: No later 1 to 5 More than than 1 year years 5 years Total QAR’000 QAR’000 QAR’000 QAR’000 At 31 December 2012 Unutilised credit facilities 6,834,193 33,871 ‐6,868,064 Guarantees and letters of credit 3,745,413 1,400,073 ‐5,145,486 Contingent liabilities 10,579,606 1,433,944 ‐12,013,550 At 31 December 2011 Unutilised credit facilities 3,797,725 16,007 ‐3,813,732 Guarantees and letters of credit 2,863,096 1,312,101 161 4,175,358 Contingent liabilities 6,660,821 1,328,108 161 7,989,090

(d) Market Risk Market risk is the risk arising from changes in the value of financial instruments due to changes in interest rates, foreign exchange rates, as well as equity and commodity prices. Market risk management ensures that risk exposures from the generic risk factors do not exceed the risk appetite of the Group, as articulated in the risk limits, policies and product programs. These controls define permissible conduct, and also specify the types of financial instruments which the Group can acquire as part of its trading and investment activities. (i) Interest rate risk The primary market risk to which the banking and trading portfolios are exposed to is the risk of loss from fluctuations in the future cash flows or fair values of financial instruments because of a change in market interest rates. Interest rate risk is managed through monitoring interest rate gaps and using off balance sheet instruments, primarily interest rate swaps, where appropriate. GALCCO is the monitoring body for compliance with these limits and is assisted by Risk Management in its day‐to‐day monitoring activities. A summary the Group’s interest rate gap position on non‐trading portfolios, using the shorter of maturity or re‐pricing periods is as follows: Non‐ Total Effective Within 3 3 months 1 to 5 More than interest Carrying interest months to 1 year years 5 years bearing Amount rate QAR’000 QAR’000 QAR’000 QAR’000 QAR’000 QAR’000 QAR’000 At 31 December 2012 Cash and balances at central banks 716,142 ‐‐‐ 1,062,747 1,778,889 Due from banks 908,282 130,035 1,017,380 ‐ 185,110 2,240,807 1.0% Loans and advances to customers 4,668,257 3,577,994 1,940,626 2,843,689 1,013 13,031,579 3.6% Investment securities 97,736 214,097 5,242,318 10,180,065 130,913 15,865,129 3.4% Other assets ‐‐‐‐ 755,728 755,728 Total assets 6,390,417 3,922,126 8,200,324 13,023,754 2,135,511 33,672,132 Due to banks 6,722,754 1,299,199 2,004,404 ‐ 4,171 10,030,528 0.9% Customer deposits 13,294,180 1,147,880 26,800 ‐ 2,877,080 17,345,940 1.7% Subordinated debt ‐‐‐‐ 120,018 120,018 0.1% Other liabilities ‐‐‐‐ 504,608 504,608 Shareholders' equity ‐‐‐‐ 5,671,038 5,671,038 Total liabilities and shareholders' equity 20,016,934 2,447,079 2,031,204 ‐ 9,176,915 33,672,132 Financial position re‐price gap (13,626,517) 1,475,047 6,169,120 13,023,754 (7,041,404) Derivatives 9,177,833 ‐ (2,288,000) (6,889,833) ‐ Interest rate re‐pricing gap (4,448,684) 1,475,047 3,881,120 6,133,921 (7,041,404) Cumulative interest rate re‐pricing gap (4,448,684) (2,973,637) 907,483 7,041,404

Page 29 of 54

F-48 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2012

Non‐ Total Effective Within 3 3 months 1 to 5 More than interest Carrying interest months to 1 year years 5 years bearing Amount rate QAR’000 QAR’000 QAR’000 QAR’000 QAR’000 QAR’000 QAR’000 At 31 December 2011 Cash and balances at central banks 19,175 ‐‐‐ 840,369 859,544 Due from banks 1,988,526 104,362 735,280 91,000 198,509 3,117,677 1.2% Loans and advances to customers 4,725,204 4,107,239 1,760,325 910,483 7,380 11,510,631 4.7% Investment Securities 115,177 809,940 6,179,465 3,924,325 ‐ 11,028,907 3.5% Other assets ‐‐‐‐ 682,819 682,819 Total assets 6,848,082 5,021,541 8,675,070 4,925,808 1,729,077 27,199,578 Due to banks 6,866,043 628,890 1,304,495 ‐ ‐ 8,799,428 0.8% Customer deposits 9,390,105 1,649,625 12,029 ‐ 1,078,507 12,130,266 1.6% Subordinated debt ‐ 117,210 ‐‐ ‐ 117,210 0.9% Other liabilities 18,731 ‐‐‐ 731,553 750,284 Shareholders' equity ‐‐‐‐ 5,402,390 5,402,390 Total liabilities and shareholders' equity 16,274,879 2,395,725 1,316,524 ‐ 7,212,450 27,199,578 Financial position re‐price gap (9,426,797) 2,625,816 7,358,546 4,925,808 (5,483,373) Derivatives 4,068,542 ‐ (1,314,334) (2,754,208) ‐ Interest rate re‐pricing gap (5,358,255) 2,625,816 6,044,212 2,171,600 (5,483,373) Cumulative interest rate re‐pricing gap (5,358,255) (2,732,439) 3,311,773 5,483,373 (ii) Net Interest income sensitivity The following table illustrates the effect of a reasonably possible change in interest rates, with all other variables held constant, on the consolidated statement of income. The sensitivity of the consolidated statement of income is the effect of the assumed changes in interest rates on the net interest income for one year, based on the changing rate of financial assets and liabilities, including the effect of hedging instruments. The sensitivity of comprehensive income is calculated by revaluing available‐for‐sale investments, including the effect of any associated hedges. Percentage Sensitivity Sensitivity of Change of income comprehensive income Increase / Decrease Increase Decrease Increase Decrease Currency Parallel QAR’000 QAR’000 QAR’000 QAR’000 At 31 December 2012 QAR +1% / ‐1% (22,565) 20,695 (94,345) 47,172 USD +1% / ‐1% (48,288) 39,918 (133,912) 40,174 AED +1% / ‐1% 817 (817) (27) 16 EUR +1% / ‐1% (9,170) 4,012 (3,530) 1,059 Other minor currencies +1% / ‐1% (4,448) 2,893 (10) 7 Overall at 31 December +1% / ‐1% (83,654) 66,701 (231,824) 88,428 At 31 December 2011 QAR +1% / ‐1% (17,185) 33,019 (72,086) 36,043 USD +1% / ‐1% (44,243) 37,939 (64,145) 19,243 AED +1% / ‐1% 6,895 (254) (50) 40 EUR +1% / ‐1% (2,675) 1,361 (4,307) 3,445 Other minor currencies +1% / ‐1% (2,083) (158) (8) 7 Overall at 31 December +1% / ‐1% (59,291) 71,907 (140,596) 58,778

Page 30 of 54

F-49 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2012

(iii) Foreign exchange risk The Group takes on exposures to the effects of fluctuations in the prevailing foreign currency exchange rates on its financial position and cash flows. The Group has a set of limits on the level of currency exposure, which are monitored continually. The Group had the following significant net exposures: QAR EUR USD AED Other Total QAR’000 QAR’000 QAR’000 QAR’000 QAR’000 QAR’000 At 31 December 2012 Financial position items: Assets 10,624,004 841,712 20,840,793 1,239,554 126,069 33,672,132 Liabilities and shareholders’ equity (14,207,408) (2,081,848) (15,948,828) (1,264,121) (169,927) (33,672,132) Financial position currency exposure (3,583,404) (1,240,136) 4,891,965 (24,567) (43,858) ‐ Off‐financial position items: Contingent liabilities (7,910,601) (194,067) (1,246,928) (2,628,874) (33,079) (12,013,549) At 31 December 2011 Financial position items: Assets 9,781,038 675,670 15,061,437 1,625,308 56,125 27,199,578 Liabilities and shareholders’ equity (10,741,524) (992,232) (13,910,463) (1,477,362) (77,997) (27,199,578) Financial position currency exposure (960,486) (316,562) 1,150,974 147,946 (21,872) ‐ Off‐financial position items: Contingent liabilities (3,082,065) (191,408) (2,336,314) (2,356,169) (23,134) (7,989,090) (iv) Foreign currency sensitivity analysis The following table illustrates the effect of a reasonably possible change of the relevant foreign currencies against the Qatari Riyal, with all other variables held constant, on the consolidated statement of income. An equal decrease in each of the below mentioned currencies against the Qatari Riyal is expected to have an equal but opposite impact.

Percentage 2012 2011 change QAR’000 QAR’000 Euro +3% 330 (115) Other currencies +3% 110 88

The Qatari Riyal and the United Arab Emirate Dirham (AED) are both officially pegged against the US Dollar (USD). No sensitivity analysis has been calculated for exposures to USD and AED as these exposures are not considered subject to fluctuation.

(v) Equity price risk Equity price risk is the risk that the fair values of equity investments decrease as a result of changes in the levels of equity indices and the value of individual stocks. The effect on other comprehensive income due to a reasonable possible change in equity indices, with all other variables held constant, is as follows:

Percentage 2012 2011 change QAR’000 QAR’000 Qatar Exchange +10% 13,120 13,452 An equal decrease in each of the above mentioned equity indices is expected to have an equal but opposite impact.

Page 31 of 54

F-50 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2012

(e) Operational Risk Operational risk is defined as the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. Governed by Board approved policies, the Operational Risk function works closely with all of the Bank’s business lines and subsidiaries to raise awareness of operational risk. Major activities of the function include the following:  Key risks across businesses and units are identified, monitored on a monthly basis using various Key Risk Indicators (KRIs).  The capture and reporting of operational risk Loss Data Collection and Incident Management is established as a firm process across all business and support units.  The practice of running an annual Risk Control Self‐Assessment (RCSA) for all business and support units complements the risk budgeting program.  A comprehensive Business Continuity Management program has been implemented in order to handle business disruptions and major disasters.  A broad Insurance / Risk Transfer program has been put in place to handle catastrophic losses.  Operational Risk leads the Process Management and Control function across the Group to ensure control gaps are minimized across the various key processes of the Bank.  Operational Risk Reporting is escalated monthly to the Group Risk Committee and the Compliance & Risk Committee of the Board to ensure proper oversight and review is conducted by relevant members of the Board of Directors and Senior Management.

(f) Capital management The Group maintains a strong capital base to support the development of its business and to meet its regulatory capital requirements at all times. The Group manages its capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of its activities. The Qatar Central Bank supervises the Group on a consolidated basis and, as such, receives information on the capital adequacy of, and sets capital requirements for, the Group as a whole. Individual banking subsidiaries are directly regulated by their local supervisors, who set their capital adequacy requirements. The table below summarises the composition of regulatory capital and the ratios of the Group. The Group and the individual entities within it complied with the externally imposed capital requirements to which they are subject to: 2012 2011 QAR’000 QAR’000 Tier 1 capital 4,648,991 4,567,613 Tier 2 capital 481,008 278,479 Total regulatory capital 5,129,999 4,846,092 Risk weighted assets 23,990,761 20,805,395 Tier 1 capital adequacy ratio 19.4% 22.0% Total capital adequacy ratio 21.4% 23.3%

Tier 1 capital includes issued paid‐up capital, legal reserves, and retained earnings (including the profit for the reporting period), adjusted for goodwill. Tier 2 capital includes risk reserve (limited to 1.25% of risk weighted assets), fair value reserves and foreign currency translations reserve (limited to 45% if positive, 100% if negative), and subordinated debt (limited to 50% of Tier 1 capital).

Page 32 of 54

F-51 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2012

The minimum required total capital adequacy ratio determined by the QCB is 10% and the minimum required by Basel II is 8%. 2012 2011 Basel II Risk Basel II Risk 2012 2011 Weighted Weighted Carrying Carrying Amount Amount Amount Amount QAR’000 QAR’000 QAR’000 QAR’000 Cash and balances with central banks ‐‐ 1,778,889 859,544 Due from banks 847,546 1,514,368 2,240,807 3,117,677 Loans and advances to customers 12,242,701 10,646,069 13,031,579 11,510,631 Investment securities 751,926 949,013 15,865,129 11,028,907 Other assets 681,076 682,997 755,728 682,819 Off balance sheet assets 4,620,794 3,449,402 25,928,729 16,631,740 Total risk weighted assets for credit risk 19,144,043 17,241,849 Risk weighted assets for market risk 3,654,329 2,428,330 Risk weighted assets for operational risk 1,192,389 1,135,216 Total risk weighted assets 23,990,761 20,805,395

5. USE OF ESTIMATES AND JUDGMENTS

(a) Key sources of estimation uncertainty The Group makes estimates and assumptions that affect the reported amounts of assets and liabilities. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. (i) Allowances for impairment Assets accounted for at amortised cost are evaluated for impairment on a basis described in the accounting policy note. The specific counterparty component of the total allowances for impairment applies to financial assets evaluated individually for impairment and is based upon management’s best estimate of the present value of the cash flows that are expected to be received. In estimating these cash flows, management makes judgements about counterparty’s financial situation and the net realisable value of any underlying collateral. Each impaired asset is assessed on its merits, and the workout strategy and estimate of cash flows considered recoverable are independently approved by the Credit Risk function. Minimum impairment on specific counterparties are determined based on the QCB regulations. Collectively assessed impairment allowances cover credit losses inherent in portfolios of loans and advances to customers and investment securities measured at amortised cost with similar credit risk characteristics when there is objective evidence to suggest that they contain impaired financial assets, but the individual impaired items cannot yet be identified. In assessing the need for collective loss allowances, management considers factors such as credit quality, portfolio size, concentrations and economic factors. In order to estimate the required allowance, assumptions are made to define the way inherent losses are modelled and to determine the required input parameters, based on historical experience and current economic conditions. The accuracy of the allowances depends on the estimates of future cash flows for specific counterparty allowances and the model assumptions and parameters used in determining collective allowances.

Page 33 of 54

F-52 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2012

(ii) Determining fair values The determination of fair value for financial assets and liabilities for which there is no observable market price requires the use of valuation techniques as described in accounting policy. For financial instruments that trade infrequently and have little price transparency, fair value is less objective, and requires varying degrees of judgement depending on liquidity, concentration, uncertainty of market factors, pricing assumptions and other risks affecting the specific instrument. (b) Critical accounting judgements in applying the Group’s accounting policies (i) Valuation of financial instruments The Group’s accounting policy on fair value measurements is discussed in the significant accounting policies section. The Group measures fair values using the following fair value hierarchy that reflects the significance of the inputs used in making the measurements. Level 1: Quoted market price (unadjusted) in an active market for an identical instrument (observable inputs). Level 2: Valuation techniques based on observable inputs, either directly (i.e. as prices) or indirectly (i.e. derived from prices). This category includes instruments valued using: quoted market prices in active markets for similar instruments; quoted prices for identical or similar instruments in markets that are considered less than active; or other valuation techniques where all significant inputs are directly or indirectly observable from market data. Level 3: Valuation techniques using significant unobservable inputs. This category includes all instruments where the valuation technique includes inputs not based on observable data and the unobservable inputs have a significant effect on the instrument’s valuation. This category includes instruments that are valued based on quoted prices for similar instruments where significant unobservable adjustments or assumptions are required to reflect differences between the instruments. Fair values of financial assets and financial liabilities that are traded in active markets are based on quoted market prices or dealer price quotations. For all other financial instruments the Group determines fair values using valuation techniques. Valuation techniques include net present value and discounted cash flow models, comparison to similar instruments for which market observable prices exist, Black‐Scholes and polynomial option pricing models and other valuation models. Assumptions and inputs used in valuation techniques include risk‐free and benchmark interest rates, credit spreads and other premiums used in estimating discount rates, bond and equity prices, foreign currency exchange rates, equity and equity index prices and expected price volatilities and correlations. The objective of valuation techniques is to arrive at a fair value determination that reflects the price of the financial instrument at the reporting date, that would have been determined by market participants acting at arm’s length. The table below analyses financial instruments measured at fair value at the end of the reporting period, by the level in the fair value hierarchy into which the fair value measurement is categorised:

Page 34 of 54

F-53 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2012

Level 1 Level 2 Total QAR’000 QAR’000 QAR’000 At 31 December 2012 Available‐for‐sale investment securities 13,515,455 378,348 13,893,803 Investment securities at fair value through profit or loss ‐ 37,017 37,017 Derivatives ‐ 101,638 101,638 Total assets at fair value 13,515,455 517,003 14,032,458

Derivatives ‐ (13,078) (13,078) Total liabilities at fair value ‐ (13,078) (13,078) At 31 December 2011 Available‐for‐sale investment securities 8,879,103 403,763 9,282,866 Investment securities at fair value through profit or loss ‐ 38,626 38,626 Derivatives ‐ 33,676 33,676 Total assets at fair value 8,879,103 476,065 9,355,168

Derivatives ‐ (197,209) (197,209) Total liabilities at fair value ‐ (197,209) (197,209)

All unquoted available‐for‐sale securities are recorded at fair value except securities amounting to QAR 341.0 million (2011: QAR 341.0 million) that are recorded at cost since the fair value cannot be reliably measured. (ii) Financial asset and liability classification The Group’s accounting policies provide scope for assets and liabilities to be designated at inception into different accounting categories in certain circumstances: • In classifying financial assets or liabilities as trading, the Group has determined that it meets the description of trading assets and liabilities set out in accounting policies. • In designating financial assets at fair value through profit or loss, the Group has determined that it has met one of the criteria for this designation set out in accounting policies. • In classifying financial assets as held‐to‐maturity, the Group has determined that it has both the positive intention and ability to hold the assets until their maturity date as required by accounting policies. Details of the Group’s classification of financial assets and liabilities are given in Note 7. (iii) Qualifying hedge relationships When designating financial instruments in qualifying hedge relationships, the Group has determined that it expects the hedges to be highly effective over the period of the hedging relationship. (iv) Impairment of investments in equity and debt securities Investments in equity and debt securities are evaluated for impairment on the basis described in the significant accounting policies section.

Page 35 of 54

F-54 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2012

(v) Useful lives of property and equipment The Group’s management determines the estimated useful life of property and equipment for calculating depreciation. This estimate is determined after considering the expected usage of the asset, physical wear and tear, technical or commercial obsolescence. (vi) Useful lives of intangible assets The Group’s management determines the estimated useful life of its intangible assets for calculating amortisation. This estimate is determined after considering the expected economic benefits to be received from the use of intangible assets. 6. OPERATING SEGMENTS The Group is organised into four main operating segments for management purposes, which comprise Wholesale Banking, Retail Banking, Group Treasury and Central Functions. The segments offer different products and services, and are managed separately based on the Group’s management and internal reporting structure. For each of the segment, the Group Senior Management reviews internal management reports on at least a quarterly basis. The following describes the operations in each of the Group’s reportable segments.

Wholesale Banking Includes loans, deposits and other transactions and balances with corporate customers

Retail Banking Includes loans, deposits and other transactions and balances with retail customers

Group Treasury Undertakes the Group’s funding and centralised risk management activities through borrowings, issues of debt securities, use of derivatives for risk management purposes and investing in liquid assets such as short‐term placements and corporate and government debt securities.

Central Functions Comprises the costs of all central support departments such as Finance, Risk Management, Operations etc.

Information regarding the results of each reportable segment is included below. Performance is measured based on segment profit after tax, as included in the internal management reports that are reviewed by the Group’s Management. Segment profit is used to measure performance as management believes that such information is the most relevant in evaluating the results of certain segments relative to other entities that operate within these industries. Inter‐segment pricing is determined on an arm’s length basis.

Page 36 of 54

F-55 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2012

(i) Information about operating segments The results of each of the operating segments which are reviewed regularly by the Group’s management, are as follows: Consolidation Wholesale Retail Group Central and IFRS Banking Banking Treasury Functions adjustments Total QAR’000 QAR’000 QAR’000 QAR’000 QAR’000 QAR’000 31 December 2012 Net interest income 214,363 75,894 220,758 ‐ ‐ 511,015 Net fee and commission income 63,839 24,358 (15,038) ‐ ‐ 73,159 Foreign exchange gain / (loss) 1,059 4,888 (18,056) ‐ ‐ (12,109) Income from investment securities 8,261 ‐ 421,448 ‐ (33,503) 396,206 Other operating income ‐ 606 ‐‐ ‐606 Net operating income 287,522 105,746 609,112 ‐ (33,503) 968,877

Net Profit after tax 200,995 12,008 536,938 (243,430) 5,708 512,219

Total Assets 11,654,350 2,046,060 19,230,712 1,291,860 (550,850) 33,672,132 Total Liabilities 15,040,839 2,718,115 10,084,843 163,627 (6,330) 28,001,094

31 December 2011 Net interest income 277,722 78,952 230,780 ‐ ‐ 587,454 Net fee and commission income 83,512 34,092 2,781 ‐ ‐ 120,385 Foreign exchange gain / (loss) 1,451 5,489 389 ‐ ‐ 7,329 Income from investment securities 5,987 ‐ 217,709 ‐ (53,372) 170,324 Other operating income (598) 55,083 267 ‐ ‐ 54,752 Net operating income 368,074 173,616 451,926 ‐ (53,372) 940,244

Net profit after tax 247,935 114,377 371,916 (251,391) 4,164 487,001

Total Assets 10,574,798 1,654,596 14,689,617 965,654 (685,087) 27,199,578 Total Liabilities 10,716,727 1,898,191 8,336,038 964,944 (118,712) 21,797,188

(ii) Geographical areas The geographical analysis of operating income and non‐current assets is based on the location of the entity in which the transactions and assets are recorded. Net Total Total operating income non‐current assets assets QAR’000 Share % QAR’000 Share % QAR’000 Share % 31 December 2012 Qatar 810,633 83.7% 324,407 95.4% 30,105,882 89.4% United Arab Emirates 118,398 12.2% 4,093 1.2% 1,888,448 5.6% France 39,846 4.1% 11,675 3.4% 1,677,802 5.0% Total 968,877 100.0% 340,175 100.0% 33,672,132 100.0%

Page 37 of 54

F-56 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2012

Net Total Total operating income non‐current assets assets QAR’000 Share % QAR’000 Share % QAR’000 Share % 31 December 2011 Qatar 792,791 84.3% 363,942 95.9% 23,943,594 88.0% United Arab Emirates 106,351 11.3% 3,569 0.9% 1,661,392 6.1% France 41,102 4.4% 11,994 3.2% 1,594,592 5.9% Total 940,244 100.0% 379,505 100.0% 27,199,578 100.0%

Non‐current assets consist of property, equipment, and intangible assets.

7. FINANCIAL ASSETS AND LIABILITIES

(a) Accounting classifications and fair values The table below sets out the carrying amounts and fair values of the Group’s financial assets and financial liabilities:

Fair value Held‐to Loans and Available Others Total Fair Through maturity receivables for‐sale QAR’000 carrying value profit or amount loss QAR’000 QAR’000 QAR’000 QAR’000 QAR’000 QAR’000 QAR’000 At 31 December 2012 Cash and balances with central banks ‐ ‐ 1,778,889 ‐ ‐ 1,778,889 1,778,889 Due from banks ‐ ‐ 2,240,807 ‐ ‐ 2,240,807 2,240,807 Derivative assets 101,638 ‐ ‐ ‐ ‐ 101,638 101,638 Loans and advances to customers ‐ ‐ 13,031,579 ‐ ‐ 13,031,579 13,031,579 Investment securities: ‐ Measured at fair value 37,017 ‐ ‐ 14,234,833 ‐ 14,271,850 14,271,850 ‐ Measured at amortised cost ‐ 1,593,279 ‐ ‐ ‐ 1,593,279 1,632,927 Total Financial Assets 138,655 1,593,279 17,051,275 14,234,833 ‐ 33,018,042 33,057,690 Derivative liabilities 13,078 ‐ ‐ ‐ ‐ 13,078 13,078 Due to banks ‐ ‐ ‐ ‐ 10,030,528 10,030,528 10,030,528 Customer deposits ‐ ‐ ‐ ‐ 17,345,940 17,345,940 17,345,940 Subordinated debt ‐ ‐ ‐ ‐ 120,018 120,018 120,018 Total Financial Liabilities 13,078 ‐ ‐ ‐ 27,496,486 27,509,564 27,509,564

At 31 December 2011 Cash and balances with central banks ‐ ‐ 859,544 ‐ ‐ 859,544 859,544 Due from banks ‐ ‐ 3,117,677 ‐ ‐ 3,117,677 3,117,677 Derivative assets 33,676 ‐ ‐ ‐ ‐ 33,676 33,676 Loans and advances to customers ‐ ‐ 11,510,631 ‐ ‐ 11,510,631 11,510,631 Investment securities: ‐ Measured at fair value 38,626 ‐ ‐ 9,623,896 ‐ 9,662,522 9,662,522 ‐ Measured at amortised cost ‐ 1,366,385 ‐ ‐ ‐ 1,366,385 1,211,699 Total Financial Assets 72,302 1,366,385 15,487,852 9,623,896 ‐ 26,550,435 26,395,749 Derivative liabilities 197,209 ‐ ‐ ‐ ‐ 197,209 197,209 Due to banks 8,799,428 8,799,428 8,799,428 Customer deposits ‐ ‐ ‐ ‐ 12,130,266 12,130,266 12,130,266 Subordinated debt ‐ ‐ ‐ ‐ 117,210 117,210 117,210 Total Financial Liabilities 197,209 ‐ ‐ ‐ 21,046,904 21,244,113 21,244,113

Page 38 of 54

F-57 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2012

8. CASH AND BALANCES WITH CENTRAL BANKS 2012 2011 QAR’000 QAR’000 Cash 57,204 65,410 Balances with QCB other than mandatory cash reserves 821,213 100,388 Balances with other central banks other than mandatory cash reserves 13,500 107,942 Included in cash and cash equivalents (note 31) 891,917 273,740 Mandatory cash reserves with QCB 723,166 476,454 Mandatory cash reserves with other central banks 163,806 109,350 Cash and balances with central banks 1,778,889 859,544 Mandatory cash reserves with central banks are not available for use in the Group’s day‐to‐day operations.

9. DUE FROM BANKS 2012 2011 QAR’000 QAR’000 Demand accounts 671,662 502,389 Deposits 158,483 1,684,857 Balances with banks included in cash and cash equivalents (note 31) 830,145 2,187,246 Long term deposits 393,282 13,151 Loans and advances to banks 1,017,380 917,280 Total due from banks 2,240,807 3,117,677

10. LOANS AND ADVANCES TO CUSTOMERS a) By Type 2012 2011 QAR’000 QAR’000 Loans 11,669,374 10,328,114 Overdrafts 933,527 784,111 Bills discounted 669,420 583,484 Gross loans and advances 13,272,321 11,695,709 Less allowance for impairment (note 10c) (240,742) (185,078) Total net loans and advances to customers 13,031,579 11,510,631 The total non‐performing loans and advances to customers amounted to QAR 59.0 million (2011: QAR 62.4 million), representing 0.45% (2011: 0.55%) of the total gross loans and advances to customers. Interest in suspense amounted to QAR 17.4 million (2011: QAR 14.2 million).

Page 39 of 54

F-58 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2012 b) By industry Bills Loans Overdrafts discounted Total QAR’000 QAR’000 QAR’000 QAR’000 At 31 December 2012 Government and related agencies 2,375,415 ‐ ‐ 2,375,415 Industry 982,508 130,685 136,329 1,249,522 Commercial 417,137 242,378 291,543 951,058 Services 4,712,955 70,407 167,438 4,950,800 Contracting 820,549 287,248 55,396 1,163,193 Real Estate 1,233,318 2,108 ‐1,235,426 Personal 1,116,177 161,628 ‐1,277,805 Others 11,315 39,073 18,714 69,102 Total exposure 11,669,374 933,527 669,420 13,272,321 Allowance for impairment (240,742) ‐ ‐ (240,742) Net exposure 11,428,632 933,527 669,420 13,031,579

At 31 December 2011 Government and related agencies 1,476,043 ‐ ‐ 1,476,043 Industry 706,853 113,486 77,188 897,527 Commercial 763,519 248,853 164,032 1,176,404 Services 4,140,312 79,818 223,906 4,444,036 Contracting 847,893 220,384 99,333 1,167,610 Real Estate 1,776,468 977 ‐1,777,445 Personal 609,989 74,865 256 685,110 Other 7,037 45,728 18,769 71,534 Total exposure 10,328,114 784,111 583,484 11,695,709 Allowance for impairment (153,699) (27,872) (3,507) (185,078) Net exposure 10,174,415 756,239 579,977 11,510,631 c) Movement in impairment loss on loans and advances to customers 2012 2011 QAR’000 QAR’000 Balance at the beginning of the year 185,078 161,567 Provided during the year 68,625 109,605 Recoveries during the year (7,512) (71,570) Net impairment during the year 61,113 38,035 Amounts written off (5,590) (8,587) Foreign exchange translation 141 (5,937) Balance at the end of the year 240,742 185,078

Page 40 of 54

F-59 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2012

11. INVESTMENT SECURITIES a) By category 2012 2011 QAR’000 QAR’000 Available‐for‐sale 14,234,833 9,623,896 Fair value through profit or loss 37,017 38,626 Held‐to‐maturity 1,593,279 1,378,106 Gross investment securities 15,865,129 11,040,628 Less allowance for impairment (note 11d) ‐ (11,721) Net investment securities 15,865,129 11,028,907 Debt securities with a carrying value of QAR 7,917.4 million (2011: QAR 5,868.5 million) were pledged as collateral under repurchase and other borrowing agreements with other banks. b) By type 2012 2011 Quoted Unquoted Quoted Unquoted QAR’000 QAR’000 QAR’000 QAR’000 Available‐for‐sale State of Qatar debt securities 6,554,783 2,036,337 4,702,148 920,419 Other GCC Government debt securities 33,608 ‐ 228,144 ‐ Other debt securities 5,200,340 5,030 3,231,505 4,697 Mutual funds ‐273,812 ‐399,066 Equities 130,913 10 137,908 9 Fair value through profit or loss Other debt securities ‐37,017 ‐38,626 Held‐to‐maturity State of Qatar debt securities 1,142,512 ‐ 525,490 453,026 Other GCC Government debt securities 128,083 59,438 128,606 ‐ Other debt securities 263,246 ‐ 235,821 23,442 Net investment securities 13,453,485 2,411,644 9,189,622 1,839,285 c) By interest rate 2012 2011 QAR’000 QAR’000 Available‐for‐sale Fixed rate 13,961,229 9,466,499 Floating rate 142,681 19,480 Fair value through profit or loss Fixed rate 37,017 38,626 Held‐to‐maturity Fixed rate 1,593,279 1,366,385 Net interest bearing 15,734,206 10,890,990 Equities 130,923 137,917 Net investment securities 15,865,129 11,028,907

Page 41 of 54

F-60 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2012 d) Movement in impairment loss on investment securities 2012 2011 QAR’000 QAR’000 Balance at the beginning of the year 11,721 ‐ Provision for impairment loss during the year 5,635 12,683 Amounts written off (17,341) ‐ Foreign exchange translation (15) (962) Balance at the end of the year ‐ 11,721

12. PROPERTY AND EQUIPMENT Land and Leasehold Furniture & Motor Work buildings improvements equipment vehicles in progress Total QAR’000 QAR’000 QAR’000 QAR’000 QAR’000 QAR’000 At 31 December 2012 Cost: Balance at beginning of the year 19,417 73,326 113,369 1,241 14,312 221,665 Additions ‐125 4,855 228 3,172 8,380 Disposals ‐‐‐(236) ‐(236) Transfers and adjustments ‐5,686 ‐‐ (5,686) ‐ Foreign currency translation 132 ‐‐‐ (1,026) (894) Total cost 19,549 79,137 118,224 1,233 10,772 228,915 Accumulated Depreciation: Balance at beginning of the year 267 32,141 91,853 1,214 ‐125,475 Charged during the year 291 26,397 10,298 46 ‐37,032 Disposals ‐ ‐ ‐ (236) ‐(236) Foreign currency translation ‐ ‐ 144 ‐ ‐ 144 Total accumulated depreciation 558 58,538 102,295 1,024 ‐162,415 Net carrying amount 18,991 20,599 15,929 209 10,772 66,500 At 31 December 2011 Cost: Balance at beginning of the year 19,621 72,866 110,616 1,298 9,543 213,944 Additions ‐657 2,901 ‐ 7,210 10,768 Disposals ‐‐(21) ‐ (2,374) (2,395) Transfers and adjustments ‐‐‐(59) ‐(59) Foreign currency translation (204) (197) (127) 2 (67) (593) Total cost 19,417 73,326 113,369 1,241 14,312 221,665 Accumulated Depreciation: Balance at beginning of the year 125 19,893 77,099 1,155 ‐98,272 Charged during the year 153 12,306 14,816 115 ‐27,390 Disposals ‐ ‐ (16) (59) ‐(75) Foreign currency translation (11) (58) (46) 3 ‐(112) Total accumulated depreciation 267 32,141 91,853 1,214 ‐125,475 Net carrying amount 19,150 41,185 21,516 27 14,312 96,190

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F-61 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2012

13. INTANGIBLE ASSETS Goodwill Software Total QAR’000 QAR’000 QAR’000 At 31 December 2012 Cost: Balance at beginning of the year 133,969 301,807 435,776 Additions ‐ 29,089 29,089 Adjustments ‐ ‐‐ Foreign currency translation 3,210 844 4,054 Total cost 137,179 331,740 468,919 Accumulated amortisation: Balance at beginning of the year ‐ 152,461 152,461 Charged during the year ‐ 42,783 42,783 Foreign currency translation ‐ ‐ ‐ Total accumulated amortisation ‐ 195,244 195,244 Net carrying amount 137,179 136,496 273,675

At 31 December 2011 Cost: Balance at beginning of the year 137,733 300,954 438,687 Additions ‐ 1,456 1,456 Adjustments ‐ (383) (383) Foreign currency translation (3,764) (220) (3,984) Total cost 133,969 301,807 435,776 Accumulated amortisation: Balance at beginning of the year ‐ 103,088 103,088 Charged during the year ‐ 49,500 49,500 Foreign currency translation ‐ (127) (127) Total accumulated amortisation ‐ 152,461 152,461 Net carrying amount 133,969 149,346 283,315 The Goodwill (amounting to EUR 28 million) arose on the acquisition of Al Khaliji France.

14. OTHER ASSETS 2012 2011 QAR’000 QAR’000 Accrued interest receivable 285,064 228,852 Derivatives with positive fair value (note 32) 101,638 33,676 Prepaid expenses 16,761 25,366 Other receivables 12,090 15,420 Total other assets 415,553 303,314

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F-62 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2012

15. DUE TO BANKS 2012 2011 QAR’000 QAR’000 Demand and call deposits 1,246,484 2,107,970 Repurchase agreements 6,594,589 4,754,527 Term deposits, residual maturity less than 1 year 899,101 941,709 Term deposits, residual maturity greater than 1 year 1,290,354 995,222 Total due to banks 10,030,528 8,799,428

16. CUSTOMER DEPOSITS 2012 2011 QAR’000 QAR’000 By type: Demand and call accounts 2,880,457 1,632,105 Saving accounts 20,011 17,688 Term deposits 14,445,412 10,472,524 Other 60 7,949 Total customer deposits 17,345,940 12,130,266 By sector: Government and related agencies 11,202,983 7,304,564 Non‐banking financial institutions 84,369 206,812 Corporate 4,074,112 3,392,795 Individuals 1,984,476 1,226,095 Total customer deposits 17,345,940 12,130,266

17. SUBORDINATED DEBT The subordinated debt consists of a loan amounting to EUR 25 million for an undetermined period, and carries interest at EONIA monthly rate (Euro Overnight index average) payable in arrears on a quarterly basis. This loan will, in the event of the winding‐up of the issuer, be subordinated to the claims of depositors and all other creditors of the issuer.

2012 2011 QAR’000 QAR’000 Balance at the beginning of year 117,210 120,503 Foreign exchange translation 2,808 (3,293) Balance at the end of year 120,018 117,210

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F-63 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2012

18. OTHER LIABILITIES 2012 2011 QAR’000 QAR’000 Deferred income 12,843 7,489 Accounts payable 45,839 64,884 Derivative with negative fair value (note 32) 13,078 197,209 Provision for staff benefits (note 18a) 32,878 32,418 Accrued interest payable 53,821 34,102 Directors remuneration 2,400 2,400 Other payables 343,749 411,782 Total other liabilities 504,608 750,284 (a) Provision for staff benefits 2012 2011 QAR’000 QAR’000 Balance at the beginning of year 32,418 27,917 Provided during the year 7,790 8,631 Utilised during the year (7,330) (4,034) Foreign exchange translation ‐(96) Total provisions for staff benefits 32,878 32,418

19. CAPITAL AND RESERVES

(a) Issued capital Ordinary Shares 2012 2011 On issue at 31 December 360,000,000 360,000,000 The authorised, issued and fully paid up Issued capital of the Group totalling QAR 3,600 million consists of 360 million ordinary shares of QAR 10 each. Qatar Holding Co. holds 10% of the ordinary shares of al khaliji (2011: 10%). Other Qatar Government related entities hold another 37.2% (2011: 35.5%) of the ordinary shares, with the remaining 52.8% (2011: 54.5%) held by institutional investors and members of the public. All shares in issue are of the same class and carry equal rights.

(b) Legal reserve In accordance with Qatar Central Bank’s Law No. 33 of 2006 as amended, 10% of the net profit for the year is required to be transferred to legal reserve until the legal reserve equals 100% of the paid up capital. This reserve is not available for distribution except in circumstances specified in the Qatar Commercial Companies’ Law No. 5 of 2002 and is subject to the approval of QCB. During the year the appropriation made to the legal reserve amounts to QAR 51.2 million (2011: QAR 48.7 million). The legal reserve includes share premium received on issuance of new shares in accordance with Qatar Commercial Companies Law (5) of 2002.

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F-64 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2012

(c) Risk reserve In accordance with QCB regulations, a risk reserve should be created to cover contingencies on both the public and private sector financing assets, with a minimum requirement of 2% of the total private sector exposure granted by the Group inside and outside Qatar after the exclusion of the specific provisions and interest in suspense. The finance provided to/or secured by the Ministry of Finance or finance against cash guarantees is excluded from the gross direct finance. Based on profit for the year, the total amount of the transfer made to the risk reserve was QAR 61.9 million (2011: QAR 87.0 million).

(d) Fair value reserve Fair value reserve comprises the cumulative change in fair value of available‐for‐sale financial assets until these assets are derecognised. The movement in fair value reserve during the year is as follows: 2012 2011 QAR’000 QAR’000 Balance at beginning of the year 114,185 76,427 Gain on revaluation 487,823 203,708 Net amount transferred to the consolidated statement of income (368,657) (165,950) Net change in fair value of available‐for‐sale investment securities 119,166 37,758 Balance at the end of the year 233,351 114,185 Fair value reserve for available‐for‐sale investments at 31 December 2012 includes negative fair value of QAR 19.1 million (2011: QAR 11.4 million).

(e) Foreign currency translation reserve The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations as well as from the translation of liabilities and gains and losses on derivatives that hedge the Group’s net investment in foreign operations.

(f) Contribution to Social and Sports fund Pursuant to Qatari law no. 13 of 2008 and further clarification of the law issued in 2010, the Group made appropriation of QAR 12.8 million (2011: QAR 12.2 million) from retained earnings for its contribution to the Social and Sports Activities Support Fund of Qatar. This amount represents 2.5% of the net profit earned from the Group’s consolidated operations for the financial year.

(g) Proposed dividend The Board of Directors has proposed a cash dividend of 10% (QAR 1 per share) for the year 2012 (2011: 10% or QAR 1 per share). The proposed cash dividends are subject to approval of the shareholders at the forthcoming Annual General Assembly. During 2012, the shareholders approved the dividend of QAR 1 per share totalling QAR360 million in respect of the year ended 31 December 2011.

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F-65 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2012

20. INTEREST INCOME 2012 2011 QAR’000 QAR’000 Due from central banks 1,922 3,323 Due from banks 37,012 11,935 Investment Securities 373,091 316,136 Loans and advances to customers 416,765 474,934 Total interest income 828,790 806,328

21. INTEREST EXPENSE 2012 2011 QAR’000 QAR’000 Due to banks 86,117 48,599 Customer deposits 231,386 169,240 Subordinated debt 272 1,035 Total interest expense 317,775 218,874

22. NET FEE AND COMMISSION INCOME 2012 2011 QAR’000 QAR’000 Fee and commission income Loans and advances to customers 37,463 68,804 Indirect credit facilities 41,580 47,221 Bank service fees 13,822 14,425 Total fee and commission income 92,865 130,450 Fee and commission expense (19,706) (10,065) Net fee and commission income 73,159 120,385

23. FOREIGN EXCHANGE GAIN / (LOSS) 2012 2011 QAR’000 QAR’000 Foreign currency transactions (44,248) 11,948 Revaluation of assets and liabilities 32,139 (4,619) Net (expense) / income from foreign exchange transactions (12,109) 7,329

24. INCOME FROM INVESMENT SECURITIES 2012 2011 QAR’000 QAR’000 Changes in fair value of financial assets measured at fair value through profit or loss 217 (1,646) Net gains on sales of investment securities 406,554 177,239 Net losses on derivatives (17,041) (11,289) Dividend income 6,476 6,020 Total income from investment securities 396,206 170,324

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F-66 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2012

25. OTHER OPERATING INCOME

During the year ended 31 December 2011, the Group received QAR 54.1 million following a successful insurance claim. The full amount was recognised as income in that year.

26. STAFF COSTS 2012 2011 QAR’000 QAR’000 Wages and salaries 177,360 178,544 Employee end of service benefits 9,538 7,217 Training 1,476 737 Total staff costs 188,374 186,498

27. OTHER EXPENSES 2012 2011 QAR’000 QAR’000 Directors’ remuneration and meeting attendance fees 2,792 2,978 Advertising, marketing and promotional expenses 10,239 10,365 Legal and professional fees 24,392 9,912 Rent and maintenance 27,283 39,478 Computer and IT costs 31,500 36,065 Travelling expenses 1,504 1,374 Licences and subscriptions 1,811 3,019 Other expenses 5,630 22,885 Total other expenses 105,151 126,076

28. TAX EXPENSE According to the laws and regulations effective in France and United Arab Emirates, income tax expense of QAR 16.6 million (2011: QAR 13.1 million) was calculated for the subsidiary companies in France and United Arab Emirates for the year ended 31 December 2012. The subsidiary company in France has previously accumulated tax losses amounting to EUR 6.0 million (2011: EUR 5.2 million) which it intends to utilise against the company’s future taxable income. The benefit of the tax losses has not been recognised by raising a deferred tax asset as the exact amount of the benefit is uncertain. 29. EARNINGS PER SHARE Earnings per share of the Bank is calculated by dividing profit for the year attributable to the equity holders of the Bank by the weighted average number of ordinary shares in issue during the year: 2012 2011 QAR’000 QAR’000 Profit attributable to equity holders 512,219 487,001 Basic weighted average number of shares in issue (shares) 360,000,000 360,000,000 Basic and diluted earnings per share (in QAR) 1.42 1.35 No potential dilutions of ordinary shares existed at 31 December 2012 (2011: none).

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F-67 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2012

30. CONTINGENT LIABILITIES AND OTHER COMMITMENTS To meet the financial needs of customers, the Group issues various commitments and contingent liabilities. Even though these obligations may not be recognised in the consolidated statement of financial position, they do contain credit risk and are therefore part of the overall risk of the Group. In many instances, the amount recognised in the consolidated statement of financial position for incurred obligations do not represent the potential loss of the arrangement in full. The total outstanding commitments and contingent liabilities are as follows: 2012 2011 QAR’000 QAR’000 a) Contingent liabilities Unutilised credit facilities 6,868,064 3,813,732 Guarantees 4,472,503 3,705,479 Letters of credit 672,982 469,879 Total contingent liabilities 12,013,549 7,989,090 b) Other commitments Capital commitments 40,308 8,151 Lease commitments 13,835 25,647 Foreign exchange contracts (note 32) 4,079,634 1,915,025 Interest rate swaps (note 32) 7,093,806 4,819,781 Cross currency swaps (note 32) 2,602,785 1,620,094 Option contracts (note 32) 2,785,613 91,000 Total other commitments 16,615,981 8,479,698 (i) Unutilised credit facilities Commitments to extend credit represent contractual commitments to make loans and revolving credits. The majority of these expire within 1 year. Since commitments may expire without being drawn upon, the total contractual amounts do not necessarily represent future cash requirements. (ii) Guarantees and letters of credit Guarantees and letters of credit commit the group to make payments on behalf of customers in the event of a specific event. Guarantees and standby letters of credit carry the same credit risk as loans. (iii) Litigation and claims The Group has contingent liabilities in respect of legal claims arising in the ordinary course of business amounting to QAR 17.4 million (2011: QAR 10.0 million). Based on legal advice, the Group does not expect the outcome of the legal claims to have a material effect on the Group’s financial position.

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F-68 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2012

(iv) Capital commitments The capital commitments represent refurbishment commitments relating to a new branch building, as well as contractual commitments in respect of software development. (v) Lease commitments Non‐cancellable operating lease rentals are payable as follows: 2012 2011 QAR’000 QAR’000 Less than one year 13,551 11,022 Between one and five years 284 14,625 Total operating lease commitments 13,835 25,647

The Group leases a number of branches and office premises under operating leases. The leases typically run for a period of between 3 and 5 years, with an option to renew the lease after that period at new rates to reflect market rentals.

31. CASH AND CASH EQUIVALENTS Cash and cash equivalents for purpose of the consolidated statement of cash flows, comprise the following: 2012 2011 QAR’000 QAR’000 Cash and balances with central banks (note 8) 891,917 273,740 Due from banks (note 9) 830,145 2,187,246 Cash and cash equivalents 1,722,062 2,460,986 Cash and balances with central banks do not include mandatory cash reserves.

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F-69 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2012

32. DERIVATIVES The Group transacts in derivatives as principal either as a trading activity or to manage risk. The Group's objectives and policies on managing the risks that arise in connection with derivatives are included in note 4 under the headings Market Risk, Credit Risk and Liquidity Risk. The notional amounts of certain types of financial instruments provide a basis for comparison with instruments recognised on the statement of financial position but do not necessarily indicate the amounts of future cash flows involved or the current fair value of the instruments and, therefore, do not indicate the Group's exposure to credit or price risks. The fair value of a derivative contract represents the amount at which that contract could be exchanged in an arms‐length transaction, calculated at market rates ruling at the reporting date. The fair values and notional amounts of derivative instruments are set out in the following table: Fair Notional Notional amount value amount by term to maturity Asset Liability Gross Within 3 3 months 1 to Over months to 1 year 5 years 5 years QAR’000 QAR’000 QAR’000 QAR’000 QAR’000 QAR’000 QAR’000 At 31 December 2012 Derivatives held for trading Interest rate swaps ‐ ‐ ‐ ‐ ‐ ‐ ‐ Derivatives not qualifying as accounting hedges Forward exchange contracts 24,350 (1,742) 4,079,634 3,897,359 182,275 ‐ ‐ Interest rate swaps 59,997 (2,664) 7,093,806 ‐ ‐ 2,078,573 5,015,233 Cross currency swaps 11,099 (840) 2,602,785 364,000 455,000 1,783,785 ‐ Interest rate options 6,192 (7,832) 2,785,613 55,613 418,600 364,000 1,947,400 Derivatives qualifying as accounting hedges Interest rate swaps ‐ ‐ ‐ ‐ ‐ ‐ ‐ Cross currency swaps ‐ ‐ ‐ ‐ ‐ ‐ ‐ Total derivative assets/(liabilities) 101,638 (13,078) 16,561,838 4,316,972 1,055,875 4,226,358 6,962,633 At 31 December 2011 Derivatives held for trading Interest rate swaps ‐ ‐ 728,000 ‐ 728,000 ‐ ‐ Derivatives not qualifying as accounting hedges Forward exchange contracts 556 (10,303) 1,915,025 1,915,025 ‐ ‐ ‐ Interest rate swaps 11,808 (8,880) 187,332 ‐ ‐ 187,332 ‐ Cross currency swaps 8,083 (142) 1,456,000 364,000 1,092,000 Interest rate options ‐ (673) 91,000 54,600 ‐ 36,400 ‐ Derivatives qualifying as accounting hedges Interest rate swaps ‐ (162,965) 3,904,449 ‐ ‐ 1,150,240 2,754,209 Cross currency swaps 13,229 (14,246) 164,094 ‐ ‐ 164,094 ‐ Total derivative assets/(liabilities) 33,676 (197,209) 8,445,900 2,333,625 728,000 2,630,066 2,754,209

The Group uses interest rate options and swaps and cross currency swaps to hedge its exposure to changes in the fair value of fixed rate debt securities, attributable to changes in market interest rates. These swaps are matched to specific issuance of fixed rate debt securities. Where the characteristics of the derivative permit, hedge accounting may be adopted. Foreign exchange contracts are used to hedge mismatches between loans and deposits denominated in different currencies.

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F-70 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2012

33. RELATED PARTIES The Group has carried out transactions in the ordinary course of business with directors and members of the senior management team, their close family members, and affiliated companies which have significant influence in the Group’s financial and operating decisions. These transactions include loans, financing activities, deposits and foreign currency transactions. The related party transactions and balances included in these consolidated financial statements are as follows: (a) Statement of financial position items Key management Others Total QAR’000 QAR’000 QAR’000 31 December 2012 Loans and advances 6,441 2,094,781 2,101,222 Customer deposits 1,481 2,287,966 2,289,447 Subordinated debt ‐ 120,018 120,018 31 December 2011 Loans and advances 6,443 364,000 370,443 Customer deposits 3,594 1,097 4,691 Subordinated debt ‐ 117,210 117,210 (b) Statement of income items Key management Others Total QAR‘000 QAR‘000 QAR‘000 Year ended 2012 Interest income 63 25,717 25,780 Interest expense 51 10,450 10,501 Year ended 2011 Interest income 353 12,498 12,851 Interest expense 74 3,146 3,220

The Group also has significant commercial transactions with the Government of Qatar and related Agencies, which is the major shareholder of the Group (47.2%). All the transactions are on an arms‐length basis and the balances are disclosed in notes 10 and 16. (c) Compensation of key management personnel 2012 2011 QAR’000 QAR’000 Salaries, allowances and other benefits 39,188 38,725 End of service benefits 1,527 1,545 Total compensation paid to key management personnel 40,715 40,270 (d) Board of Directors’ fees The Board of Directors' fees for 2012 amounted to QAR 2.8 million (2011: QAR 3.0 million) which is subject to the approval of the Annual General Assembly.

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F-71 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2012

34. COMPARATIVES Certain amounts in the prior year financial statements and supporting note disclosures have been reclassified to conform to the current year’s financial statements format and minimum disclosures as prescribed by the QCB. However, such reclassifications did not have any effect on the consolidated profit for the year, other comprehensive income nor the total consolidated equity for the comparative year. In particular, the QCB required all banks to bring customer acceptances onto the statement of financial position. The impact of this was to increase both loans and advances to customers and other liabilities by an equal amount of QAR 138.9 million (2011: QAR 196.8 million).

35. FINANCIAL STATEMENTS OF PARENT BANK (a) Statement of financial position ‐ Parent bank 2012 2011 As at 31 December QAR’000 QAR’000 Assets Cash and balances with central banks 1,586,860 628,478 Due from banks 1,503,968 2,651,489 Loans and advances to customers 11,082,920 9,815,340 Investment securities 15,226,533 10,326,264 Investments in subsidiaries 691,571 691,571 Property and equipment 53,931 82,255 Intangible assets 133,297 147,718 Other assets 387,524 267,366 Total assets 30,666,604 24,610,481

Liabilities Due to banks 9,658,378 8,483,470 Customer deposits 15,267,371 10,389,989 Other liabilities 205,440 438,541 Total liabilities 25,131,189 19,312,000

Shareholders' equity Issued capital 3,600,000 3,600,000 Legal reserve 1,066,989 1,015,768 Risk reserve 257,769 195,821 Fair value reserve 221,457 102,330 Retained earnings 389,200 384,562 Total shareholders' equity 5,535,415 5,298,481 Total liabilities and shareholders' equity 30,666,604 24,610,481

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F-72 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2012

(b) Income statement ‐ Parent bank 2012 2011 For the year ended 31 December QAR’000 QAR’000 Interest income 698,312 688,993 Interest expense (293,205) (201,699) Net interest income 405,107 487,294 Fee and commission income 61,083 93,502 Fee and commission expense (17,686) (7,330) Net fee and commission income 43,397 86,172 Foreign exchange (loss)/gain (17,935) 345 Income from investment securities 379,547 164,319 Other operating income 517 54,661 Net operating income 810,633 792,791 Staff Costs (144,140) (139,652) Depreciation and amortisation (77,766) (75,454) Net impairment loss on loans and advances to customers (56,424) (34,473) Other expenses (87,895) (111,687) Profit before dividend from subsidiary 444,408 431,525 Dividend income from subsidiary 33,503 53,372 Profit for the year 477,911 484,897

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F-73

Al Khalij Commercial Bank (al khaliji) Q.S.C. Consolidated Financial Statements for the year ended 31 December 2011

F-74 Al Khalij Commercial Bank (al khaliji) Q.S.C. Consolidated Financial Statements For the year ended 31 December 2011

TABLE OF CONTENTS Page

Independent Auditor’s Report 1‐2

Consolidated Statement of Financial Position 3

Consolidated Statement of Income 4

Consolidated Statement of Comprehensive Income 5

Consolidated Statement of Changes in Shareholders’ Equity 6

Consolidated Statement of Cash Flows 7

Notes to the Consolidated Financial Statements 8‐50

F-75

QR. 21523

INDEPENDENT AUDITOR’S REPORT

To The Shareholders Al Khalij Commercial Bank (al khaliji) Q.S.C. Doha – Qatar.

Report on the Financial Statements

We have audited the accompanying consolidated financial statements of Al Khalij Commercial Bank (al khaliji) Q.S.C. (the “Bank”), and its subsidiaries (together the “Group”) which comprise the consolidated financial position as at December 31, 2011 and the consolidated statements of income, comprehensive income, changes in shareholders’ equity and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes.

Management’s Responsibility for the Financial Statements

Auditor’s Responsibility

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Page 1 of 50

F-76

Opinion

In our opinion, the consolidated financial statements give a true and fair view of the financial position of the Group as of December 31, 2011 and of its financial performance and its cash flows for the year ended December 31, 2011 in accordance with International Financial Reporting Standards and Qatar Central Bank regulations.

Report on Other Legal and Regulatory Requirements

For Deloitte & Touche

Doha, Qatar Muhammad Bahemia February 07, 2012 License No. 103

Page 2 of 50

F-77 Al Khalij Commercial Bank (al khaliji) Q.S.C. Consolidated Statement of Financial Position As at 31 December 2011 2010

Notes QAR’000 QAR’000 Assets Cash and balances with central banks 4 859,544 1,387,231 Due from banks and financial institutions 5 3,117,677 2,321,853 Loans, advances and financing activities to customers 6 11,313,881 7,256,709 Financial investments 7 11,028,907 7,083,441 Intangible assets 8 283,315 335,599 Property and equipment 9 96,190 115,672 Other assets 10 303,314 236,556 Total assets 27,002,828 18,737,061

Liabilities Due to banks and financial institutions 11 8,799,428 4,492,209 Customer deposits 12 12,129,266 7,830,622 Subordinated debt 13 117,210 120,503 Other liabilities 14 553,534 364,377 Total liabilities 21,599,438 12,807,711

Unrestricted investment accounts 15 1,000 674,714 Total liabilities and unrestricted investment accounts 21,600,438 13,482,425

Shareholders' equity 16 Share capital 3,600,000 3,600,000 Statutory reserve 1,015,768 967,068 Risk reserve 195,821 108,851 Fair value reserve 114,185 76,427 Foreign currency translation reserve 3,700 8,530 Proposed dividends 360,000 360,000 Retained earnings 112,916 133,760 Total shareholders' equity 5,402,390 5,254,636 Total liabilities, unrestricted investment accounts and shareholders' equity 27,002,828 18,737,061

The consolidated financial statements have been approved by the Board of Directors on 7 February 2012, and signed on its behalf by:

Hamad Bin Faisal Bin Thani Al‐Thani Robin McCall Chairman of the Board of Directors Group Chief Executive Officer

The accompanying notes 1 to 30 set out on pages 8 to 50 form an integral part of the consolidated financial statements.

Page 3 of 50

F-78 Al Khalij Commercial Bank (al khaliji) Q.S.C. Consolidated Statement of Income For the year ended 31 December 2011 2010

Notes QAR’000 QAR’000 Interest income 783,894 764,938 Interest expense (207,068) (301,716) Net interest income 19 576,826 463,222 Income from Islamic financing and investing activities 22,434 107,782 Unrestricted investment account holders’ share in profits (11,806) (18,955) Net income from Islamic financing and investing activities 30.2 10,628 88,827 Fee and commission income 130,450 106,352 Fee and commission expense (10,065) (5,121) Net fee and commission income 20 120,385 101,231 Dividend income 6,020 1,666 Net gains from foreign currency transactions 21 7,329 11,649 Net (losses) /gains from financial instruments at fair value (1,646) 4,331 Net profit on available‐for‐sale investments 16.4 165,950 88,768 Other operating income 22 54,752 655 Net operating income 940,244 760,349 General and administration expenses 23 (297,378) (319,515) Depreciation of property and equipment 9 (27,390) (31,494) Amortisation of intangible assets 8 (49,500) (43,667) Impairment losses on loans, net of recoveries 6 (38,035) 70,165 Impairment losses on financial investments 7 (12,683) ‐ Other (expenses) / income 24 (15,196) 1,475 Profit before tax 500,062 437,313 Income tax expense 25 (13,061) (10,610) Profit for the year 487,001 426,703

QAR QAR Earnings per share Basic and diluted earnings per share 26 1.35 1.19

The accompanying notes 1 to 30 set out on pages 8 to 50 form an integral part of the consolidated financial statements.

Page 4 of 50

F-79 Al Khalij Commercial Bank (al khaliji) Q.S.C. Consolidated Statement of Comprehensive Income For the year ended 31 December

2011 2010

QAR’000 QAR’000

Profit for the year 487,001 426,703 Other comprehensive income Foreign currency translation difference of foreign operations (4,830) (66,176) Net change in fair value of available‐for‐sale investments 16 37,758 75,617 Total other comprehensive income for the year 32,928 9,441

Total comprehensive income for the year 519,929 436,144

The accompanying notes 1 to 30 set out on pages 8 to 50 form an integral part of the consolidated financial statements.

Page 5 of 50

F-80 Al Khalij Commercial Bank (al khaliji) Q.S.C. Consolidated Statement of Changes in Shareholders’ Equity Foreign Proposed Fair Share Statutory Risk currency dividends Retained value Total capital reserve reserve translation earnings reserve reserve QAR’000 QAR’000 QAR’000 QAR’000 QAR’000 QAR’000 QAR’000 QAR’000

Balance at 1 January 2011 3,600,000 967,068 108,851 76,427 8,530 360,000 133,760 5,254,636 Profit for the year ‐ ‐ ‐ ‐ ‐ ‐ 487,001 487,001 Foreign currency translation difference of foreign operations ‐ ‐ ‐ ‐ (4,830) ‐ ‐ (4,830) Net change in fair value of available‐for‐sale investments ‐ ‐ ‐ 37,758 ‐ ‐ ‐ 37,758 Total comprehensive income for the year ‐ ‐ ‐ 37,758 (4,830) ‐ 487,001 519,929

Contribution to Social and Sport Fund (note 16.5) ‐ ‐ ‐ ‐ ‐ ‐ (12,175) (12,175) Transfer to Risk Reserve ‐ ‐ 86,970 ‐ ‐ ‐(86,970) ‐ Transfer to Statutory Reserve ‐ 48,700 ‐ ‐ ‐ ‐ (48,700) ‐

F-81 Dividend paid for 2010 ‐ ‐ ‐ ‐ ‐ (360,000) ‐ (360,000) Proposed dividends ‐ ‐ ‐ ‐ ‐ 360,000 (360,000) ‐ Balance at 31 December 2011 3,600,000 1,015,768 195,821 114,185 3,700 360,000 112,916 5,402,390

Balance at 1 January 2010 3,600,000 924,398 42,927 810 74,706 ‐187,064 4,829,905 Profit for the year ‐ ‐ ‐ ‐ ‐ ‐ 426,703 426,703 Foreign currency translation difference of foreign operations ‐ ‐ ‐ ‐ (66,176) ‐ ‐ (66,176) Net change in fair value of available‐for‐sale investments ‐ ‐ ‐ 75,617 ‐ ‐ ‐ 75,617 Total comprehensive income for the year ‐ ‐ ‐ 75,617 (66,176) ‐ 426,703 436,144

Contribution to Social and Sport Fund (note 16.5) ‐ ‐ ‐ ‐ ‐ ‐ (11,413) (11,413) Transfer to Risk Reserve ‐ ‐ 65,924 ‐ ‐ ‐ (65,924) ‐ Transfer to Statutory Reserve ‐ 42,670 ‐ ‐ ‐ ‐ (42,670) ‐ Proposed dividends ‐ ‐ ‐ ‐ ‐ 360,000 (360,000) ‐ Balance at 31 December 2010 3,600,000 967,068 108,851 76,427 8,530 360,000 133,760 5,254,636

The accompanying notes 1 to 30 set out on pages 8 to 50 form an integral part of the consolidated financial statements.

Page 6 of 50 Al Khalij Commercial Bank (al khaliji) Q.S.C. Consolidated Statement of Cash Flows For the year ended 31 December

2011 2010

Notes QAR’000 QAR’000 Cash flow from operating activities: Profit for the year before tax 500,062 437,313 Reconciliation of profit before tax to net cash flows from operating activities: Adjustment for non‐cash items: ‐ Impairment losses on loans, net of recoveries 6 38,035 (70,165) ‐ Impairment losses on financial investments 7 12,683 ‐ ‐ Depreciation and amortisation of property, equipment and intangible assets 8, 9 76,890 75,161 ‐ Gain on sale of available‐for‐sale financial investments (165,950) (88,768) ‐ Loss on sales of assets ‐ 3,405 ‐ Other provisions 7,994 9,791 ‐ Amortisation of discount on financial investments (17,295) (4,442) ‐ Fair value of forward contracts 4,619 92 457,038 362,387 Changes in operating assets and liabilities: ‐ Net increase in regulatory reserves with central banks (141,391) (35,108) ‐ Net increase in due from banks and financial institutions (508,076) (1,085,093) ‐ Net (increase) / decrease in loans and advances customers (4,095,207) 1,398,862 ‐ Net decrease in other assets (66,758) (2,193) ‐ Net increase in due to banks and financial institutions 4,307,219 2,998,720 ‐ Net increase /(decrease) in customer deposits 3,624,930 (573,838) ‐ Net increase in other liabilities 181,163 1,462 Net cash from operating activities 3,758,918 3,065,199 Cash flow from investment activities Purchase of financial investments (8,135,164) (7,950,836) Purchase of intangible assets 8 (1,456) (9,212) Purchase of property and equipment 9 (10,768) (40,882) Proceeds from financial investments 4,000,642 4,436,555 Proceeds from property and equipment 9 22 ‐ Net cash used in investing activities (4,146,724) (3,564,375) Cash flow from financing activities Dividend paid (339,110) ‐ Net decrease in cash and cash equivalents (726,916) (499,176) Exchange gains on foreign currency cash and cash equivalents 6,476 (29,961) Cash and cash equivalents at beginning of the year 3,181,426 3,710,563 Cash and cash equivalents at end of year 28 2,460,986 3,181,426

The accompanying notes 1 to 30 set out on pages 8 to 50 form an integral part of the consolidated financial statements.

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F-82 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2011

1 Incorporation and Principal Activities Al Khalij Commercial Bank (al khaliji) Q.S.C. was incorporated on 9 January 2007 as a Qatari Shareholding Company under Commercial Registration No. 34548, with its registered head office in Doha. The shares of al khaliji are listed on the Qatar Exchange. al khaliji and its subsidiaries (the “Group”) are engaged in commercial banking activities. The Group operates from its head office and two branches in Qatar, one branch in France and four branches in the United Arab Emirates. During 2011, the bank established a fully owned subsidiary “Al Khaliji Capital S.P.C” which will provide financial services such as brokerage. The company will commence operations in 2012. In June 2011, al khaliji Q.S.C. and International Bank of Qatar have jointly decided to end the negotiations for the proposed merger after final terms could not be agreed. 1.1 Islamic banking operations During the year the Qatar Central Bank issued a directive to conventional banks to close down their Islamic banking activities by 31 December 2011. In accordance with this directive al khaliji ceased to extend Islamic facilities to, or take Islamic deposits from new customers.

Based on the above, no separate financial information on Islamic banking activities have been included in these consolidated financial statements. All Islamic financing balances that remain outstanding as at 31 December 2011 are being maintained separately in the Bank’s financial records until those balances are fully settled. As for the Unrestricted Investment Depositors’ Accounts, all customers concerned have been requested to transfer their account balances to conventional banking accounts. As at the reporting date, the total balance not transferred to conventional banking deposits is left in Unrestricted Investment Depositors’ accounts balance, until such time that the entire balance is transferred.

2 Significant Accounting Policies The significant accounting policies adopted in the preparation of these consolidated financial statements are set out below. These accounting policies have been consistently applied to the accounting periods presented except where the Group adopted standards, amendments and interpretations which are effective in the current year.

2.1 Statement of compliance The consolidated financial statements of the Group, have been prepared in accordance with International Financial Reporting Standards (IFRS) and interpretations issued by the International Accounting Standards Board (IASB) and the Qatar Central Bank regulations.

2.2 Standards, amendments and interpretations effective in the current year The following standards, amendments and interpretations, which became effective in 2011, are relevant to the Group. The adoption of these standards, amendments and interpretations do not impact the financial performance or positions of the group, but impacted presentations and disclosures: (i) IAS 1 Presentation of Financial Statements (as part of improvements to IFRS issued in 2010) The amendments to IAS 1 clarify that an entity may choose to disclose an analysis of other comprehensive income by item in the statement of changes in equity or in the notes to financial statements. In the current year, the Group has elected to present such an analysis by item in the statement of changes in equity. (ii) IAS 24 Related Party Disclosures (as revised in 2009) IAS 24 (as revised in 2009) has been revised on the following two aspects: (a) The standard has changed the definition of a related party and (b) Introduces a partial exemption from the disclosure requirements for government‐related entities.

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F-83 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2011 The related party disclosures set out in note 27 to the consolidated financial statements have been changed to reflect the application of the revised standard. Changes have been applied retrospectively.

In addition to the amendments described above, a number of Improvements to IFRSs were issued in 2010 which have led to changes in the details of the Bank’s accounting policies. These improvements had no material effect on amounts reported in the consolidated financial statements. The following amendments and interpretations became effective in 2011, but did not have a material impact or were not relevant to the accounting policies, financial position or performance of the Group: IFRS 3 (Revised) - Business combinations IAS 32 (Revised) - Classification of right issues IFRIC 14 (Revised) - Prepayments of a minimum funding requirement IFRIC 19 (New) - Extinguishing financial liabilities with equity instruments

2.3 Standards, amendments and interpretation issued but not yet effective The following accounting standards, amendments and interpretations have been issued and are mandatory for the Group’s accounting periods beginning on or after 1 July 2011, and are expected to be relevant to the Group. The Group has not early adopted these new or amended standards in the year ended 31 December 2011: IFRS 7 (Revised) - Financial instruments disclosures ‐ Transfer of Financial Assets 1 July 2011 IFRS 9 (New) - Financial instruments 1 January 2013 IFRS 10 (New) - Consolidated Financial Statements 1 January 2013 IFRS 11 (New) - Joint Arrangement 1 January 2013 IFRS 12 (New) - Disclosure of Interests in Other Entities 1 January 2013 IFRS 13 (New) - Fair Value Measurement 1 January 2013 IAS 1 (Revised) - Presentation of items of Other Comprehensive Income 1 July 2012 IAS 12 (Revised) - Deferred Tax – Recovery of Underlying Assets 1 January 2012 IAS 19 (Revised) - Employee Benefits 1 January 2013 IAS 27 (Revised) - Separate Financial Statements 1 January 2013 IAS 28 (Revised) - Investment in Associates and Joint Ventures 1 January 2013 The Group is considering the implications of these standards, the impact on the consolidated financial statements and the timing of its adoption.

2.4 Basis of preparation The consolidated financial statements comprise the consolidated statement of financial positions, the statement of income and statement of comprehensive income as two separate statements, the statement of changes in equity, the cash flow statement and the notes for Al Khalij Commercial Bank Q.S.C. and its subsidiaries. The consolidated and individual financial statements have been prepared under the historical cost convention, with exception of derivative financial instruments, available‐for‐sale and fair value through profit and loss financial assets that are measured at their fair values. Islamic financing activities are conducted in accordance with the Islamic Sharia, as determined by the Sharia Supervisory Board. The statements of income and financial position for Islamic activities are ultimately combined with the records to produce the overall Group’s results.

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F-84 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2011 2.5 Comparative financial reporting During the year, the group identified certain assets and liabilities subject to offsetting agreements. As a result, some comparative amounts were reclassified, where necessary to conform to the current year’s presentation. Those reclassifications did not have any impact on the prior year’s equity and financial performance of the group.

2.6 Consolidation 2.6.1 Subsidiaries The consolidated financial statements combine the financial statements of al khaliji and its subsidiaries. The details of the subsidiaries are as follows: Country of Acquired/ Name of subsidiary incorporation Share capital Set up Ceased Owned Principal activities Al Khaliji France S.A. France EUR 104,000,000 2008 ‐ 100% Banking Al Khaliji Capital S.P.C. Qatar QAR 50,000,000 2011 ‐ 100% Brokerage Subsidiaries are consolidated in the Group financial statements commencing on the date control is obtained until the date control ceases. Control is achieved where the Group has the power, directly or indirectly, to govern the financial and operating policies of such entities so as to obtain benefits from its activities. The acquisition method of accounting is used to account for the acquisition of subsidiaries. The cost of an acquisition is measured at the fair value of the assets given, equity instruments issued and liabilities and contingent liabilities incurred or assumed. The excess of the cost of an acquisition over the Group's share of the fair value of the identifiable net assets acquired is recorded as goodwill. The financial statements of the Group have been prepared using uniform accounting policies for like transactions and other events in similar circumstances. Intra‐group transactions, balances, income and expenses, and profits and losses are eliminated on consolidation.

2.7 Foreign currency translation 2.7.1 Functional and presentation currency Items included in the financial statements of each of the Group’s companies are measured using the currency of the primary economic environment in which that entity operates (the functional currency). The consolidated financial statements are presented in Qatari Riyals (QAR), which is the functional and presentation currency of the holding company. Except as indicated all amounts are rounded to the nearest thousand Qatari Riyals. 2.7.2 Transactions and balances Foreign currency transactions are translated into the appropriate functional currency using the spot exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions are recognised in the statement of income. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated into the functional currency at the spot exchange rate at that date. Exchange gains and losses resulting therefrom are taken to the statement of income. Non‐monetary asset and liabilities that are recognised at historical cost are translated using the exchange rates prevailing at the initial transactions date. Translation differences on available‐for‐sale assets are recognised in the fair value reserve in equity.

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F-85 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2011 2.7.3 Group companies For the purposes of translation into the presentational currency, assets, liabilities and equity of foreign operations are translated at the closing rate at the reporting date. Items of income and expense are translated into Qatari Riyals at the rates prevailing on the dates of the transactions, or average rates of exchange where these approximate actual rates. All resulting exchange differences are recognised in other comprehensive income and included in shareholders’ equity within foreign currency translation reserve. The exchange differences arising on the translation of a foreign operation are included in the statement of income on disposal or partial disposal of the operation. 2.8 Revenue recognition 2.8.1 Interest The Group recognises interest income and interest expense in the statement of income for all interest bearing financial instruments classified as loans and receivables, held‐to‐maturity and available‐for‐sale using the effective interest method. The effective interest rate is the rate that discounts the expected future cash payments or receipts through the expected life of the financial instrument, or when appropriate, a shorter period, to the net carrying amount of the financial asset or financial liability. When calculating effective interest, the Group estimates cash flows considering all contractual terms of the financial instrument but does not consider future credit losses. The calculation includes fees, including those for early redemption, to the extent that they can be measured and are considered to be an integral part of the effective interest rate. Where it is not possible to otherwise estimate reliably the cash flows or the expected life of a financial instrument, effective interest is calculated by reference to the payments or receipts specified in the contract, and the full contractual term. Interest income on non‐performing loans and advances is suspended when realisation of such interest or the principal amount becomes doubtful.

2.8.2 Fees and commissions Fees and commission income and expenses are generally recognised in the statement of income on an accrual basis as the related services are provided except those that are integral to the effective interest rate calculations. Loan syndication fees are recognised as revenue when the syndication has been completed and the Group has retained no part of the loan package for itself or retained a part at the same effective interest rate for the other participants. Fees and commission included in the effective interest rate calculation are those that are incremental and directly attributable to the origination of the product and which are integral to the yield of the product.

2.9 Financial instruments The Group classifies its financial instruments in the following categories. Management determines the classification at initial recognition.

2.9.1 Financial assets

2.9.1.1 Due from banks and financial institutions and loans, advances and financing activities to customers Due from banks and financial institutions and loans, advances and financing activities to customers are non‐derivative financial assets with fixed or determinable payments that are not quoted in an active market and which are not classified as fair value through profit or loss, or available‐for‐sale.

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F-86 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2011 Due from banks and financial institutions and loans and advances are initially recognised at the draw down date at the fair value. Loans and advances are subsequently carried at amortised cost using the effective interest method less provisions for impairment. Islamic financing activities are stated at their gross principal amounts less any amount received, provision for credit loss and deferred profit. Revenues from Islamic financing transactions are recognised on an accrual basis using the reducing instalment method.

2.9.1.2 Held‐to‐maturity financial instruments Held‐to‐maturity financial investments are non‐derivative financial assets, with fixed or determinable payments and fixed maturities that the group has the ability and the positive intent to hold to maturity, and are not designated as fair value through profit or loss, or available‐for‐sale. Held‐to‐maturity investments are carried at the amortised cost using the effective interest rate method.

2.9.1.3 Available‐for‐sale financial investments Available‐for‐sale financial investments are non‐derivative financial assets that are intended to be held for an indefinite period of time, which may be sold in response to needs for liquidity or changes in interest rates, exchange rates or equity prices. They are initially recognised at fair value plus directly related incremental transaction costs and are subsequently carried on the statement of financial position at fair value. Unrealised gains or losses arise from changes in the fair values are recognised directly in other comprehensive income and accumulated in equity under the fair value reserve, except for impairment losses or foreign exchange gains or losses related to debt securities, which are recognised immediately in the statement of income in impairment on investment securities or other operating income respectively. On sale or maturity, previously unrealised gains and losses are recognised in operating income. The fair value of investment securities trading in active markets is based on market prices or broker/dealer valuations. Where quoted prices on instruments are not readily and regularly available, or available prices do not represent regular transactions in the market, the fair value is estimated. These estimates use quoted market prices for securities with similar credit, maturity and yield characteristics or similar valuation models. The Group uses settlement date accounting when recording the purchase and sale of financial investments.

2.9.1.4 Fair value through profit and loss financial instruments Financial investments are classified as fair value through profit and loss if the investments are managed, evaluated and reported internally on fair value basis. Changes in fair value of these investments are recognised immediately in the statement of income.

2.9.2 Derivatives financial instruments Derivatives are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently re‐measured at their fair value. Fair values are obtained from quoted market prices in active markets, including recent market transactions, and valuation techniques, including discounted cash flow models and options pricing models, as appropriate. All derivatives are carried as assets when fair value is positive and as liabilities when fair value is negative.

2.9.3 Derivatives held for risk management and hedge accounting On initial designation of the hedge, the Group formally documents the relationship between the hedging instrument(s) and hedged item(s), including the risk management objective and the strategy in undertaking the hedge transaction, together with the method that will be used to assess the effectiveness of the hedging relationship. The group makes an

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F-87 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2011 assessment, both at the inception of the hedge relationship as well as on an ongoing basis, whether the hedging instruments are expected to be ‘highly effective’ in offsetting the changes in the fair value or cash flows of the respective hedged item during the period for which hedge is designated. Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recognised in the statement of income, together with any changes in the fair value of the hedged item that are attributable to the hedged risk. Effective changes in fair value of hedging instruments and related hedged items are reflected in the same statement of income line item. Any ineffectiveness is recognised in ‘Gains/losses from financial instruments at fair value’.

If the hedge no longer meets the criteria for fair value hedge accounting, hedge accounting is prospectively discontinued. Any adjustment up to that point, to a hedged item for which the effective interest method is used, is amortised to profit or loss as part of the effective interest rate of the item over its remaining life.

2.9.4 Offsetting Financial assets and liabilities are offset and the net amount reported in the statement of financial position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously.

2.9.5 Impairment of financial assets The Group assesses at each reporting date whether there is objective evidence that financial assets are impaired. Financial assets are impaired and impairment losses are incurred if, and only if, there is objective evidence of impairment as a result of one or more loss events that occurred after the initial recognition of the asset and prior to the reporting date ('a loss event') and that loss event or events has had an impact on the estimated future cash flows of the financial asset or the portfolio that can be reliably estimated.

2.9.5.1 Assets carried at amortised cost For financial assets carried at amortised cost i.e. due from banks and financial institutions; loans, advances and financing activities to customers; and held‐to‐maturity investments, the Group first assesses whether objective evidence of impairment exists individualy for these financial assets carried at amortised cost that are individually significant, and individually or collectively for financial assets that are not individually significant. If the Group determines that no objective evidence of impairment exists for individually assessed assets, whether significant or not, it includes the assets in a group of assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment is recognised, are not included in a collective assessment of impairment. The amount of any impairment is calculated by comparing the present value of estimated future cash flows discounted at the asset's original effective interest rate with the carrying amount. The present value of estimated cash flows recoverable is determined after taking into account any security held. If impaired, the carrying value is adjusted and the difference is recognised in the statement of income. The methodology and assumptions used for estimating future cash flows are reviewed regularly to reduce any differences between loss estimates and actual loss experience. The estimation involved in these impairment assessments is considered a critical accounting estimate (see note 2.18) When a financial asset is uncollectable, it is written off against the related provision for impairment. Such assets are written off after all the necessary procedures have been completed and the amount of the loss has been determined. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed by adjusting the impairment account. The amount of the reversal is recognised in the statement of income.

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F-88 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2011 2.9.5.2 Available‐for‐sale financial assets In the case of available‐for‐sale financial investments, a significant or prolonged decline in the fair value of the security below its cost is also considered in determining whether impairment exists. Where such evidence exists, the cumulative net loss that has been previously recognised directly in equity is removed from equity and recognised in the statement of income. In the case of debt instruments classified as available‐for‐sale, impairment is assessed based on the same criteria as all other financial assets. Reversals of impairment of debt instruments are recognised in the statement of income. Reversals of impairment of equity shares are not recognised in the statement of income. Rather, increases in the fair value of equity shares after impairment are recognised directly in other comprehensive income and accumulated in equity under the fair value reserve. 2.9.6 Unrestricted investment accounts Profit distribution among unrestricted investment account holders and shareholders of Islamic Branch is guided by Qatar Central Bank regulations. All income and expenses of Islamic branch for the financial year are taken into consideration for profit distribution. The unrestricted investment account holders’ share of profit is calculated on the basis of their daily deposit balances over the year, after deducting the pre‐agreed and declared Mudaraba fee. Expenses or losses which arise out of misconduct on the part of the Bank due to non‐compliance of regulatory instructions or sound banking norms, are not borne by the unrestricted investment account holders. Such matter is subject to the Qatar Central Bank’s decision. In case of Islamic branch results at end of a financial year being a net loss, then the Qatar Central Bank, who has the authority to evaluate the Bank’s responsibility for the loss, shall decide how this loss will be treated according to the rules and principles of Islamic Sharia. 2.9.7 Repurchase agreements Debt securities sold subject to repurchase agreements (“repos”) are retained on the statement of financial position as available‐for‐sale financial investments. The funds received under these agreements are included within deposits due to banks and other financial institutions, at amortised cost. The difference between sale and repurchase prices is reflected within interest expense in the statement of income over the lives of the transactions, using the effective interest method. 2.9.8 De‐recognition of financial instruments The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire or it transfers the right to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. The Group derecognises a financial liability when its contractual obligations are discharged or cancelled or expire. 2.10 Property and equipment Property and equipment is stated at cost less accumulated depreciation and provisions for impairment, if any. Additions and subsequent expenditures are capitalised only to the extent that they enhance the future economic benefits expected to be derived from the assets. Depreciation on property and equipment are recognised in the statement of income on a straight‐line basis over their estimated useful economic lives. The depreciable amount is all costs incurred to bring the asset to the working condition for its intended use. Land is stated at cost and is not depreciated. The estimated useful lives for the current period are as follows:

Leasehold improvements: 7 years Furniture and equipment: 3 to 5 years Motor vehicles: 3 years Page 14 of 50

F-89 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2011 The useful lives, methods and the residual values underlying the calculation of depreciation of items of property and equipment are reviewed at each reporting date to take account of any change in circumstances, and adjusted if appropriate. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. The recoverable amount is the higher of the asset’s fair value less costs to sell and value in use. No property, plant and equipment were impaired as at 31 December 2011 (2010: QAR nil). Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in the statement of income.

2.11 Intangible assets

2.11.1 Goodwill Goodwill represents the excess of the cost of acquisition over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the acquired subsidiaries. Goodwill on the acquisition of subsidiaries is included in intangible assets and carried at cost less accumulated impairment losses. Goodwill is allocated to cash‐generating units or groups of cash‐generating units for the purpose of impairment testing. The allocation is made to those cash‐generating units or groups of cash‐generating units that are expected to benefit from the business combination in which the goodwill arose. Goodwill is tested at each reporting date for impairment by comparing the present value of the expected future cash flows from a cash generating unit with the carrying value of its net assets, including attributable goodwill and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

2.11.2 Computer software Costs associated with the development of software for internal use are capitalised if the software is technically feasible and the Group has both the intent and sufficient resources to complete the development. Costs are only capitalised if the asset can be reliably measured and will generate future economic benefits to the Group either through sale or use. Only costs that are directly attributable to bringing the software into working condition for its intended use are capitalised. These costs include all directly attributable costs necessary to create, produce and prepare the asset to be capable of operating in a manner intended by management. Other development expenditure is recognised in the statement of income as an expense when incurred. Capitalised development expenditure and purchased software is stated at cost less accumulated amortisation and impairment losses. Once the software is ready for use, the capitalised costs are amortised over their expected lives, generally between three to seven years. Capitalised software is assessed for impairment where there is an indication of impairment. Where impairment exists, the carrying amount of the asset is reduced to its recoverable amount and the impairment loss recognised in the statement of income. The amortisation charge for the asset is then adjusted to reflect the asset’s revised carrying amount. Subsequent expenditure is only capitalised when it increases the future economic benefits embodied in the specific asset to which it relates.

2.12 Financial guarantees Financial guarantee contracts are contracts that require the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due in accordance with the terms of a debt instrument. Such financial guarantees are given to banks, financial institutions and other bodies on behalf of customers to secure loans, overdrafts and other banking facilities.

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F-90 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2011 Financial guarantees are initially recognised in the financial statements at fair value on the date that the guarantee was given, being the premium received. Subsequent to initial recognition, the group’s liabilities under such guarantees are measured at the higher of the initial measurement, less amortisation calculated to recognise in the statement of income any fee income earned over the period, and the best estimate of the expenditure required to settle any financial obligation arising as a result of the guarantees at the reporting date. Any increase in the liability relating to guarantees is taken to the statement of income. Any liability remaining is recognised in the statement of income when the guarantee is discharged, cancelled or expires.

2.13 Employees end of service benefits, share based payments and pension fund The Group provides for end of service benefits payable to its employees, based on the individual’s period of service at the reporting date in accordance with the employment policy of the Group and the provisions in Qatar Labour Law. The expected costs of these benefits are accrued over the period of employment, and included as part of other liabilities in the statement of financial position. With respect to Qatari employees, the Group provides for its contribution to the Qatar Pension Fund in accordance with the Retirement and Pension Law No. 24 of 2002, and includes the resulting charge within the personnel cost in the statement of income. The Group’s obligations are limited to these contributions. Short‐term employee benefits, such as salaries, paid absences, and other benefits, are accounted for on an accruals basis over the period which employees have provided services. Bonuses are recognised to the extent that the Group has a present obligation to its employees that can be measured reliably. All expenses related to employee benefits are recognised in the statement of income in staff costs, which is included within operating expenses. The Group engages in long‐term incentive plan in respect of services received from certain of its employees. This long‐ term incentive plan is based on the achievement of internal performance targets, including the increase in the value of the bank’s shares, and is not a share scheme or equity settled scheme. The fair value of the services received is measured by reference to the fair value of the awards granted on the date of the grant. The cost of the employee services received in respect of the awards granted is recognised in the statement of income over the period that the services are received, which is the vesting period. The fair value of the awards granted is determined using option pricing models.

2.14 Provisions Provisions are recognised for present obligations arising as consequences of past events where it is more likely than not that a transfer of economic benefit will be necessary to settle the obligation, and it can be reliably estimated. Contingent liabilities are possible obligations whose existence will be confirmed only by uncertain future events or present obligations where the transfer of economic benefit is uncertain or cannot be reliably measured. Contingent liabilities are not recognised but are disclosed unless they are remote.

2.15 Taxes, including deferred taxes Income tax payable on taxable profits ('current tax') is recognised as an expense in the period in which the profits arise. Income tax recoverable on tax allowable losses is recognised as an asset only to the extent that it is regarded as recoverable by offset against current or future taxable profits.

2.16 Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision‐makers i.e. the Group executive Board. The Board is responsible for allocating resources to and assessing the performance of the operating segments. The Group has the following business segments: conventional banking, Islamic banking and foreign operations.

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F-91 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2011 2.17 Cash and cash equivalents For the purposes of the cash flow statement, cash comprises cash on hand and demand deposits, and cash equivalents comprise highly liquid investments that are convertible into cash with an insignificant risk of changes in value with original maturities of less than three months. Mandatory cash reserves with central banks are not available for operational purposes and not included as part of cash and cash equivalents.

2.18 Significant accounting judgements and estimates The preparation of the consolidated financial statements necessarily requires the exercise of judgement in the application of the accounting policies, and to make certain estimates where uncertainty exists. These judgements and estimates are reviewed on an ongoing basis, and evaluated based on historical experience and other factors, including expectation for future events that are considered reasonable and possible under the circumstances. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. The principle critical accounting judgements and estimates made by the Group that have a material financial impact on the financial statements are as follows:

2.18.1 Impairment losses on financial assets The Group evaluates financial assets held at amortised costs for impairment on a basis described in accounting policy 2.9.5.1. For financial assets that are evaluated individually for impairment, the allowances for impairment are based on management’s best estimate of the present value of the expected future cash flows to be received. In estimating these cash flows, management makes judgements about a counterparty’s financial situation and the net realisable value of any collateral. Each impaired asset is assessed on its merits, and the workout strategy and estimated cash flows considered recoverable are independently approved by the Risk Function.

Collectively assessed impairment allowances cover credit losses inherent in portfolios of loans and advances and investment securities measured at amortised cost with similar credit risk characteristics when there is objective evidence to suggest that they contain impaired financial assets, but the individual impaired items cannot yet be identified. In assessing the need for collective loss allowances, management considers factors such as credit quality, portfolio size, concentrations and economic factors. In order to estimate the required allowance, assumptions are made to define the way inherent losses are modelled and to determine the required input parameters, based on historical experience and current economic conditions. The accuracy of the allowances depends on the estimates of future cash flows for specific counterparty allowances and the model assumptions and parameters used determining collective allowances.

2.18.2 Fair values of financial investments The fair value of financial assets traded in an organised financial market is determined by reference to quoted market bid prices at the close of business at the reporting date. Where the fair values of financial assets and financial liabilities recorded on the statement of financial position cannot be derived from active markets, the Group uses valuation techniques. These valuation techniques include using recent arm’s length transactions, reference to the current fair value of other instruments that are substantially the same, discounted cash flow analysis, option pricing models, and other valuation techniques commonly used by market participants.

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F-92 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2011

3 Financial instruments and related risk management

3.1 Financial instruments 3.1.1 Definition and classification Financial instruments represent all the financial assets and liabilities of the Group. Note 2 describes the accounting policies applied by the Group in respect of the recognition and measurement of the financial instruments and their related income and expense.

3.1.2 Fair value of financial instruments

3.1.2.1 Floating rate financial instruments: For financial assets and liabilities that are liquid or have a maturity less than three months, or re‐price frequently, the carrying amounts approximate the fair value of these assets and liabilities.

3.1.2.2 Fixed rate financial instruments: For financial assets and liabilities with fixed rate of interest or profit carried at amortised cost, the fair value is estimated by comparing market rates when they were first recognised with current market rates offered for similar financial instruments. For financial instruments maturing within three months, the carrying amounts approximate their fair value.

3.1.2.3 Fair value measurement: The Group uses the following hierarchy to determine and disclose the fair value of financial instruments by valuation technique: Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities (observable inputs). Level 2: Inputs, other than quoted prices, which have a significant effect on the fair value that are observable, either directly or indirectly (derived inputs). Level 3: Valuation techniques which use inputs which have a significant effect on the fair value that are not based on observable market data (unobservable inputs).

The table below provides an analysis of financial instruments recognised at fair value by level of the fair value hierarchy set out above: Level 1 Level 2 Level 3 Total QAR’000 QAR’000 QAR’000 QAR’000 At 31 December 2011 Available‐for‐sale financial investments 8,879,103 403,763 341,030 9,623,896 Financial investments at fair value through profit or loss ‐ 38,626 ‐38,626 Derivative instruments held for trading ‐20,447 ‐20,447 Derivative instruments held for risk management ‐13,229 ‐13,229 Total assets at fair value 8,879,103 476,065 341,030 9,696,198

Derivative instruments held for trading ‐(19,998) ‐(19,998) Derivative instruments held for risk management ‐(177,211) ‐(177,211) Total liabilities at fair value ‐ (197,209) ‐(197,209)

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F-93 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2011 3.1.2.3 Fair value measurement (continued)

Level 1 Level 2 Level 3 Total QAR’000 QAR’000 QAR’000 QAR’000 At 31 December 2010 Available‐for‐sale financial investments 4,136,528 1,744,438 417,039 6,298,005 Financial investments at fair value through profit or loss ‐ 40,043 ‐40,043 Derivative instruments held for trading ‐21,645 ‐21,645 Total assets at fair value 4,136,528 1,806,126 417,039 6,359,693

Derivative instruments held for trading ‐(20,941) ‐(20,941) Derivative instruments held for risk management ‐(24,639) ‐(24,639) Total liabilities at fair value ‐(45,580) ‐(45,580) During 2011, available‐for‐sale government bonds which had a fair value of QAR 1,124 million at 31 December 2010 started to trade and quoted prices are available from an active market. The Group transferred these available‐for‐sale government bonds from level 2 into level 1. There were no transfers between the fair value measurements during 2010. There were no reclassifications of financial assets between available‐for sale, fair value through profit or loss and held‐ to‐maturity, during the year ended 31 December 2011.

3.2 Risk management The identification, measurement and management of risk is a strategic priority for the Group. The overall responsibility for ensuring a robust risk management infrastructure rests with the Board of Directors. The Group has established a risk management framework covering accountability, oversight, measurement and reporting to maintain relevant standards. The Risk governance structure at al khaliji consists of five layers comprising of the following: ‐ Level 1: Board of Directors ‐ Level 2: Board Committees ‐ Compliance and Risk Committee ‐ Level 3: Senior Management Committees – Group Credit and Investment Committee; Group Asset, Liability and Capital Committee; Group Operational Risk Committee; Group Security Committee ‐ Level 4: Risk Function ‐ Units for Corporate Credit, Business Banking Credit, Consumer Credit, Market Risk, Security Risk and Operational Risk ‐ Level 5: Business Units ‐ Risk awareness culture, Desktop level procedures, systems and controls Internal audit provides an independent assessment of the adequacy of risk management and compliance with its policies, procedures, and reports to the audit committee of the board. The Group has exposure to the following key risks from the use of financial instruments: ‐ Credit risk (see note 3.3) ‐ Market risk (see note 3.4 ‐ Liquidity risk (see note 3.5) ‐ Operational risk (see note 3.6) These risks occur as a part of normal business activities and are identified, monitored and managed through a framework of controls. These controls include transaction analysis and suitability, risk ratings, risk limits, approval authorities and periodic reporting. Risks are reviewed on a transaction as well as portfolio basis by senior management, relevant committees and the Board of Directors. The risk management process encompasses all businesses and functions through an organization‐wide culture of ‘risk awareness’. The Group remains cognizant of the market environment and calibrates its risk appetite and risk controls in light of changing conditions.

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F-94 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2011 3.3 Credit risk Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s loans, advances and financing activities to customers, due from banks and financial institutions and financial investments. The Group manages limits and controls concentrations of credit risk wherever they are identified, with specific emphasis to individual counterparties and groups, and to industries and countries. The Group controls and mitigates its exposure to credit risk through collateral, by taking security for funds advanced, and uses approved guidelines on the acceptability of specific classes of collateral or credit risk mitigation.

3.3.1 Credit exposure The following table provides the maximum exposure to credit risk for all financial position and off‐financial position items where credit risk exposures exist. This maximum exposure depicts the gross amount before considering the effect of collateral, master netting agreements or other mitigation: 2011 2010 QAR’000 QAR’000

Credit exposure relating to on‐financial position items: Due from central banks 794,134 1,322,980 Due from banks and other financial institutions 3,117,677 2,321,853 Loans and advances to customers 11,313,881 7,256,709 Financial investments 11,028,907 7,083,441 Derivative financial instruments 33,676 21,645 Total on‐financial position credit exposure 26,288,275 18,006,628

Credit exposure relating to off‐financial position items: Guarantees 3,705,479 3,113,086 Unutilised credit facilities 3,813,732 4,395,916 Letters of credit and acceptances 666,629 892,093 Total off‐financial position credit exposure 8,185,840 8,401,095 Total credit exposure 34,474,115 26,407,723

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F-95 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2011 3.3.2 Quality of credit exposure Loans, advances Banks and Derivative and financing financial Financial financial activities institutions investments instruments QAR’000 QAR’000 QAR’000 QAR’000 At 31 December 2011 Neither past due nor impaired 10,722,648 3,911,811 11,017,172 33,676 Past due but not impaired 585,080 ‐‐‐ Impaired (net of interest in suspense) 6,153 ‐ 11,735 ‐ Total net exposure 11,313,881 3,911,811 11,028,907 33,676 At 31 December 2010 Neither past due nor impaired 6,589,936 3,644,833 7,083,441 21,645 Past due but not impaired 637,960 ‐‐‐ Impaired (net of interest in suspense) 28,813 ‐‐‐ Total net exposure 7,256,709 3,644,833 7,083,441 21,645

3.3.2.1 Loans, advances and financing activities to customers The table above provides an analysis of loans, advances and financing activities to customers that are due to the Group. Loans, advances and financing activities to customers are considered past due where a specific expiry date is in place or regular instalments are required and such payments have not been received by the Group. A loan payable on demand is treated as overdue where a demand for repayment has been served but the repayment has not been made in accordance with demand requirements. (i) Loans and advances neither past due nor impaired The table below presents an analysis of the credit quality of customer advances that are neither past due nor impaired: Satisfactory Viable but Fair value of risk monitoring Total collateral QAR’000 QAR’000 QAR’000 QAR’000 At 31 December 2011 Consumer 1,030,688 7,404 1,038,092 618,773 Corporate 9,477,553 41,102 9,518,655 5,849,735 Conventional banking 10,508,241 48,506 10,556,747 6,468,508 Islamic banking 218,250 ‐ 218,250 ‐ Total gross exposure 10,726,491 48,506 10,774,997 6,468,508 At 31 December 2010 Consumer 904,460 10,936 915,396 706,018 Corporate 4,690,098 764,384 5,454,482 3,575,905 Conventional banking 5,594,558 775,320 6,369,878 4,281,923 Islamic banking 310,148 ‐ 310,148 500,000 Total gross exposure 5,904,706 775,320 6,680,026 4,781,923

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F-96 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2011 (ii) Loans and advances past due but not impaired The gross amount of loans and advances by class to customers that were past due but not impaired were as follows: Past due Past due up Past due 30 Past due 60 longer than Fair value of to 30 days to 60 days to 90 days 90 days Total collateral QAR’000 QAR’000 QAR’000 QAR’000 QAR’000 QAR’000 At 31 December 2011 Consumer 6,504 5,825 1,265 70 13,664 12,969 Corporate 13,868 13,806 5,739 614,474 647,887 300,680 Conventional banking 20,372 19,631 7,004 614,544 661,551 313,649 Islamic banking ‐ ‐‐‐ ‐‐ Total gross exposure 20,372 19,631 7,004 614,544 661,551 313,649

At 31 December 2010 Consumer 29,936 7,275 702 ‐ 37,913 56,081 Corporate 16,060 578,784 5,203 ‐ 600,047 365,565 Conventional banking 45,996 586,059 5,905 ‐ 637,960 421,646 Islamic banking ‐ ‐‐‐ ‐‐ Total gross exposure 45,996 586,059 5,905 ‐ 637,960 421,646 (iii) Impaired loans The breakdown of the individually impaired loans and advances by class, along with the fair value of related collateral held by the Group as security, are as follows: 2011 2010 Gross Fair value of Gross Fair value of Amount collateral Amount collateral QAR’000 QAR’000 QAR’000 QAR’000 Consumer 25,140 8,961 76,918 80,876 Corporate 37,271 35,450 23,372 23,707 Conventional banking 62,411 44,411 100,290 104,583 Islamic banking ‐ ‐ ‐‐ Total gross exposure 62,411 44,411 100,290 104,583

(iv) Renegotiated loans and advances with customers Restructured facilities include extended payment arrangements, approved external management plans, modification and deferral of payments. Following restructuring, a previously past due account is reset to current status. 2011 2010 QAR’000 QAR’000 Consumer 263,102 255,903 Corporate 757,432 11,979 Total 1,020,534 267,882

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F-97 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2011 (v) Collateral The Group holds collateral against loans and advances to customers in the form of mortgage interests over property, other registered securities over assets and guarantees. Estimates of the fair value of collateral are based on the value of collateral assessed at inception of the borrowing, using valuation techniques commonly used for the corresponding assets. In the event non‐cash collateral is realised, a more conservative assessment of the collateral’s value is observed in conformance with the Qatar Central Bank impairment regulations. At 31 December 2011 the Group did not hold any significant repossessed collateral (2010: QAR 0.4 million).

3.3.2.2 Financial assets other than advances The table below provides the credit quality of financial assets other than loans, advances and financing activities to customers, based on credit ratings: Banks and Derivative financial financial Financial institutions instruments investments Total QAR’000 QAR’000 QAR’000 QAR’000 At 31 December 2011 AAA to AA‐ 1,442,068 33,658 9,250,400 10,726,126 A+ to A‐ 2,221,495 ‐ 1,116,037 3,337,532 Lower than A‐ 36,065 ‐ 52,832 88,897 Unrated 212,183 18 609,638 821,839 Total 3,911,811 33,676 11,028,907 14,974,394

At 31 December 2010 AAA to AA‐ 1,311,790 21,645 5,001,787 6,335,222 A+ to A‐ 1,025,919 ‐ 1,011,139 2,037,058 Lower than A‐ 409,724 ‐ 127,385 537,109 Unrated 897,400 ‐ 943,130 1,840,530 Total 3,644,833 21,645 7,083,441 10,749,919

Included with financial investments, rated “Lower than A‐”, are held‐to‐maturity government bonds issued by the Hellenic Republic (Greece) held by Al Khaliji France, with a nominal value of EUR 5.0 million. Al Khaliji France carries a 50% specific provision for impairment against these bonds as required by its regulator, Banque de France. The remaining investment in government bonds held by the Group are restricted to the State of Qatar, Abu Dhabi and Ras Al‐Khaimah.

The remainder of financial assets other than loans, advances and financing activities to customers are considered neither past due nor impaired.

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F-98 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2011 3.3.3 Concentration of risk of financial assets with credit exposure 3.3.3.1 Geographical sectors The following table breaks down the Group’s main credit exposure at their carrying amounts, as categorised by geographical region. For this table, the Group has allocated exposures to regions based on the country of domicile of counterparties. UK and Canada Qatar Other GCC Europe and US Other Total QAR’000 QAR’000 QAR’000 QAR’000 QAR’000 QAR’000

At 31 December 2011 Due from banks and financial institutions 1,512,915 272,863 1,890,267 198,096 37,670 3,911,811 Loans, advances and financing activities 7,219,998 3,752,352 115,902 ‐ 225,629 11,313,881 Derivative financial instruments 10,321 450 22,905 ‐ ‐ 33,676 Financial investments 9,441,703 698,218 685,482 46,734 156,770 11,028,907 Net exposure 18,184,937 4,723,883 2,714,556 244,830 420,069 26,288,275

At 31 December 2010 Due from banks and financial institutions 1,788,688 684,872 927,515 26,518 217,240 3,644,833 Loans, advances and financing activities 3,840,621 2,684,944 170,514 96,159 464,471 7,256,709 Derivative financial instruments ‐18 ‐ 21,627 ‐21,645 Financial investments 5,226,538 835,411 946,563 69,525 5,404 7,083,441 Net exposure 10,855,847 4,205,245 2,044,592 213,829 687,115 18,006,628

With the exception of the Greek bonds mentioned in note 3.3.2.2, the Group had no other direct exposures against Greece, Italy, Ireland, Portugal or Spain (“GIIPS countries”) at 31 December 2011, and the majority of exposures in Europe related to France, Switzerland and Luxembourg.

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F-99 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2011 3.3.3.2 Industry The following table breaks down the Group’s main credit exposure at their carrying amounts, as categorised by the industry sectors of our counterparties: Banks and Derivative financial Loans and financial Financial institutions advances instruments investments Total QAR’000 QAR’000 QAR’000 QAR’000 QAR’000 At 31 December 2011 Government ‐‐‐ 6,929,842 6,929,842 Government agencies 794,134 1,476,043 ‐ 2,105,524 4,375,701 Industry ‐897,527 ‐ 597,321 1,494,848 Commercial ‐1,176,404 18 ‐1,176,422 Services and financial institutions 3,117,677 4,247,286 33,658 1,400,103 8,798,724 Contracting ‐1,167,610 ‐ ‐ 1,167,610 Real Estate ‐1,777,445 ‐ 7,838 1,785,283 Personal ‐ 685,110 ‐ ‐ 685,110 Others ‐71,534 ‐ ‐ 71,534 Total 3,911,811 11,498,959 33,676 11,040,628 26,485,074 Allowance for impairment ‐(185,078) ‐ (11,721) (196,799) Net exposure 3,911,811 11,313,881 33,676 11,028,907 26,288,275

At 31 December 2010 Government ‐ 364,000 ‐ 4,686,564 5,050,564 Government agencies 1,322,980 ‐‐ 354,923 1,677,903 Industry ‐332,385 ‐ 408,428 740,813 Commercial ‐742,786 ‐ 126,588 869,374 Services and Financial institutions 2,322,205 3,177,529 21,645 1,506,938 7,028,317 Contracting ‐555,210 ‐ ‐ 555,210 Real Estate ‐1,327,645 ‐ ‐ 1,327,645 Personal ‐597,733 ‐ ‐ 597,733 Other ‐320,988 ‐ ‐ 320,988 Total 3,645,185 7,418,276 21,645 7,083,441 18,168,547 Allowance for impairment (352) (161,567) ‐ ‐ (161,919) Net exposure 3,644,833 7,256,709 21,645 7,083,441 18,006,628

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F-100 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2011 3.4 Market risk Market risk is the risk arising from changes in the value of financial instruments due to changes in interest rates, foreign exchange rates, as well as equity and commodity prices. Market risk management ensures that risk exposures from the generic risk factors do not exceed the risk appetite of the Group, as articulated in the risk limits, policies and product programs. These controls define permissible conduct, and also specify the types of financial instruments which the Group can acquire as part of its trading and investment activities. 3.4.1 Interest rate risk The principle risk to which non‐trading portfolios are exposed to is the risk of loss from fluctuations in the future cash flows or fair values of financial instruments because of a change in market interest rates. Interest rate risk is managed through monitoring interest rate gaps and using off balance sheet instruments, primarily interest rate swaps, where appropriate. The Group Asset, Liability and Capital Committee is the monitoring body for compliance with these limits and is assisted by Risk Management in its day‐to‐day monitoring activities. A summary the Group’s interest rate gap position on non‐trading portfolios, using the shorter of maturity or repricing periods is as follows: Within 3 3 months to More than 5 Non‐interest Effective months 1 year 1 to 5 years years bearing Total interest rate QAR’000 QAR’000 QAR’000 QAR’000 QAR’000 QAR’000 QAR’000

F-101 At 31 December 2011 Cash and balances at central banks 19,175 ‐‐ ‐840,369 859,544 Due from banks and financial institutions 1,988,526 104,362 735,280 91,000 198,509 3,117,677 1.2% Loans, advances and financing activities 4,528,454 4,107,239 1,760,325 910,483 7,380 11,313,881 4.7% Financial investments 115,177 809,940 6,179,465 3,924,325 ‐ 11,028,907 3.5% Other assets ‐‐‐ ‐682,819 682,819 Total assets 6,651,332 5,021,541 8,675,070 4,925,808 1,729,077 27,002,828 Deposits to banks 6,866,043 628,890 1,304,495 ‐ ‐8,799,428 0.8% Customer deposits 9,389,105 1,649,625 12,029 ‐1,078,507 12,129,266 1.6% Subordinated debt ‐117,210 ‐ ‐ ‐ 117,210 0.9% Other liabilities 18,731 ‐‐ ‐534,803 553,534 Unrestricted investment accounts 1,000 ‐‐ ‐ ‐1,000 Shareholders' equity ‐‐‐ ‐5,402,390 5,402,390 Total liabilities and shareholders' equity 16,274,879 2,395,725 1,316,524 ‐7,015,700 27,002,828 Financial position re‐price gap (9,623,547) 2,625,816 7,358,546 4,925,808 (5,286,623) Derivatives held for risk management 4,068,542 ‐ (1,314,334) (2,754,208) ‐ Interest rate repricing gap (5,555,005) 2,625,816 6,044,212 2,171,600 (5,286,623) Cumulative interest rate repricing gap (5,555,005) (2,929,189) 3,115,023 5,286,623

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Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2011 3.4.1 Interest rate risk (continued) Within 3 3 months to More than 5 Non‐interest Effective months 1 year 1 to 5 years years bearing Total interest rate QAR’000 QAR’000 QAR’000 QAR’000 QAR’000 QAR’000 QAR’000 At 31 December 2010 Cash and balances at central banks 808,865 ‐ ‐ ‐578,366 1,387,231 Due from banks and financial institutions 1,855,550 52,217 371,280 ‐42,806 2,321,853 1.7% Loans, advances and financing activities 4,201,337 1,780,483 1,193,094 81,795 ‐ 7,256,709 6.2% Financial investments 1,959,955 3,910,660 577,011 ‐635,815 7,083,441 4.6% Other assets ‐ ‐ ‐ 513,697 174,130 687,827 Total assets 8,825,707 5,743,360 2,141,385 595,492 1,431,117 18,737,061 Deposits from banks 3,002,424 679,885 809,900 ‐ ‐4,492,209 1.4% Customer deposits 6,626,043 958,721 200 ‐411,262 7,996,226 3.6% Subordinated debt ‐ 120,503 ‐ ‐ ‐ 120,503 0.4% Other liabilities ‐ ‐‐ ‐198,028 198,028 F-102 Unrestricted investment accounts 672,714 2,000 ‐ ‐ ‐ 674,714 Shareholders' equity ‐ ‐‐ ‐5,255,381 5,255,381 Total liabilities and shareholders' equity 10,301,181 1,761,109 810,100 0 5,864,671 18,737,061 Financial position re‐price gap (1,475,474) 3,982,251 1,331,285 595,492 (4,433,554) Derivatives held for risk management 1,705,613 (364,000) (1,341,613) ‐ ‐ Interest rate repricing gap 230,139 3,618,251 (10,328) 595,492 (4,433,554) Cumulative interest rate repricing gap 230,139 3,848,390 3,838,062 4,433,554 3.4.1.1 Net Interest income sensitivity The following table illustrates the effect of a reasonably possible change in interest rates, with all other variables held constant, on the consolidated statement of income. The sensitivity of the consolidated statement of income is the effect of the assumed changes in interest rates on the net interest income for one year, based on the changing rate of financial assets and liabilities, including the effect of hedging instruments. The sensitivity of comprehensive income is calculated by revaluing available‐for‐sale investments, including the effect of any associated hedges. Change in % Sensitivity of income Sensitivity of comprehensive income Increase/ (Decrease) Increase Decrease Increase Decrease Currency QAR’000 QAR’000 QAR’000 QAR’000 QAR 10% (17,185) 33,019 (72,086) 36,043 USD 10% (44,243) 37,939 (64,145) 19,243 AED 10% 6,895 (254) (50) 40 EUR 10% (2,675) 1,361 (4,307) 3,445 Page 27 of 50

Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2011 3.4.1.2 Equity price risk Equity price risk is the risk that the fair values of equity investments decrease as a result of changes in the levels of equity indices and the value of individual stocks. The effect on equity due to a reasonable possible change in equity indices, with all other variables held constant, is as follows: Sensitivity of other Change in basis points comprehensive income Increase / (Decrease) Increase Decrease Market Indices QAR’000 QAR’000 Qatar Exchange 10% 13,452 (13,452)

3.4.2 Foreign exchange risk The Group takes on exposures to the effects of fluctuations in the prevailing foreign currency exchange rates on its financial position and cash flows. The Group has a set of limits on the level of currency exposure, which are monitored continually. The Group had the following significant net exposures: QAR EUR USD AED Other Total QAR’000 QAR’000 QAR’000 QAR’000 QAR’000 QAR’000

F-103 At 31 December 2011 Financial position items: Assets 9,584,288 675,670 15,061,437 1,625,308 56,125 27,002,828 Liabilities and shareholders’ equity 10,544,774 992,232 13,910,463 1,477,362 77,997 27,002,828 Financial position currency exposure (960,486) (316,562) 1,150,974 147,946 (21,872) ‐ Off‐financial position items: Contingent liabilities 3,278,815 191,408 2,336,314 2,356,169 23,134 8,185,840

At 31 December 2010 Financial position items: Assets 9,144,175 750,658 7,101,480 1,552,953 187,795 18,737,061 Liabilities and shareholders’ equity 10,635,431 842,184 5,568,867 1,506,686 183,893 18,737,061 Financial position currency exposure (1,491,256) (91,526) 1,532,613 46,267 3,902 ‐ Off‐financial position items: Contingent liabilities 3,322,664 249,385 2,557,751 2,228,644 42,651 8,401,095

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Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2011

Foreign currency sensitivity analysis The following table illustrates the effect of a reasonably possible change of the relevant foreign currencies against the Qatari Riyal, with all other variables held constant, on the consolidated statement of income. An equal decrease in each of the below mentioned currencies against the Qatari Riyal is expected to have an equal but opposite impact.

Percentage 2011 2010 change QAR’000 QAR’000 Euro +3% (115) 380 Other currencies +3% 88 117

F-104 3.5 Liquidity risk Liquidity risk arises when the Group is unable to meet its payment obligations when they fall due and to replace funds when they are withdrawn, in particular, its failure to meet obligations to repay depositors and fulfil commitments to lend. The aim of liquidity management is to honour the payment obligations and to minimize the costs of funding of the Group’s activities. Liquidity management is divided with respect to maturity into following two categories: ‐ Operational liquidity: day‐to‐day management of cash and the Group’s accounts with other banks ‐ Medium‐term and long‐term liquidity: to manage expected cash flows generated by on‐ and off‐financial position items and to provide sufficient funds for the Group’s business activities. Two categories of tools are used to measure liquidity risk, the liquidity ratio approach and expected cash‐flow approach. Both aim to quantify the current and expected gap between cash inflows (from new funding or asset maturities / sales) and outflows (funding maturities / withdrawals and new assets). Cognizance is taken of the difference between nominal and actuarial or expected maturities of assets and liabilities. The following table illustrates the maturity profile of the Group’s financial assets and liabilities based on contractual maturities. The contractual maturities of assets and liabilities have been determined based on the remaining period at the reporting date to the contractual maturity date and do not take account of the Group’s deposit retention history.

Page 29 of 50 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2011 3.5.1 Financial position items 3 to 12 More than 5 No Maturities Up to 1 month 1 to 3 months months 1 to 5 years years Total At 31 December 2011 QAR’000 QAR’000 QAR’000 QAR’000 QAR’000 QAR’000 QAR’000 Assets Cash and balances with central banks 647,654 ‐ ‐ ‐ ‐ 211,890 859,544 Banks and financial institutions 2,004,539 165,960 104,362 735,280 91,000 16,536 3,117,677 Loans, advances and financing activities 1,411,491 1,424,640 2,488,188 4,019,912 1,644,747 324,903 11,313,881 Financial Investments 91,009 4,697 580,385 6,105,057 4,109,851 137,908 11,028,907 Other assets 31,042 201,526 9,765 25,033 ‐ 415,453 682,819 Total assets 4,185,735 1,796,823 3,182,700 10,885,282 5,845,598 1,106,690 27,002,828 Liabilities Deposits from banks 3,501,463 3,343,510 628,890 1,304,495 ‐ 21,070 8,799,428 Customer deposits 9,548,719 1,395,333 736,497 12,029 ‐ 436,688 12,129,266 Subordinated debt ‐ ‐ ‐ ‐ ‐ 117,210 117,210 F-105 Other liabilities 96,111 190,059 2,744 20,592 ‐ 244,028 553,534 Unrestricted investment accounts 1,000 ‐ ‐ ‐ ‐ ‐ 1,000 Total liabilities 13,147,293 4,928,902 1,368,131 1,337,116 ‐ 818,996 21,600,438 Financial position maturity gap (8,961,558) (3,132,079) 1,814,569 9,548,166 5,845,598 287,694 5,402,390 At 31 December 2010 Assets Cash and balances with central banks 1,387,231 ‐‐ ‐ ‐ ‐1,387,231 Banks and financial institutions 1,128,793 381,463 440,317 371,280 ‐‐2,321,853 Loans, advances and financing activities 1,376,787 198,701 1,777,664 2,924,809 978,748 ‐ 7,256,709 Financial Investments 264,899 546,671 123,161 3,297,056 2,766,078 85,576 7,083,441 Other assets 34,148 179,666 ‐ 3 ‐ 474,010 687,827 Total assets 4,191,858 1,306,501 2,341,142 6,593,148 3,744,826 559,586 18,737,061 Liabilities Deposits from banks 1,890,639 723,685 1,431,985 445,900 ‐‐4,492,209 Customer deposits 5,741,234 1,130,463 958,725 200 ‐‐7,830,622 Subordinated debt ‐‐‐ ‐‐120,503 120,503 Other liabilities 256,141 24,221 1,409 21,158 4,447 57,001 364,377 Unrestricted investment accounts 15,000 657,714 2,000 ‐ ‐ ‐674,714 Total liabilities 7,903,014 2,536,083 2,394,119 467,258 4,447 177,504 13,482,425 Financial position maturity gap (3,711,156) (1,229,582) (52,977) 6,125,890 3,740,379 382,082 5,254,636 Page 30 of 50 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2011

3.5.2 Off‐financial position items The table below summarises the maturity profile of the Group’s off‐financial position financial instruments based on the earliest contractual maturity date:

No later than 1 1 to 5 More than 5 year years years Total At 31 December 2011 QAR’000 QAR’000 QAR’000 QAR’000 Loan commitments 3,797,725 16,007 ‐3,813,732 Other financial facilities 3,059,846 1,312,101 161 4,372,108 Contingent liabilities 6,857,571 1,328,108 161 8,185,840

At 31 December 2010 Loan commitments 1,943,212 2,452,704 ‐4,395,916 Other financial facilities 3,439,971 565,186 22 4,005,179

F-106 Contingent liabilities 5,383,183 3,017,890 22 8,401,095

Page 31 of 50 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2011

3.6 Operational Risk Operational risk is defined as the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. Governed by Board approved policies, the Operational Risk function works closely with all of the Bank’s business lines and subsidiaries to raise awareness of operational risk. Major activities of the function include the following:  Key risks across businesses and units are identified, monitored on a monthly basis using various Key Risk Indicators (KRIs).  The capture and reporting of operational risk Loss Data Collection and Incident Management is established as a firm process across all business and support units.  The practice of running an annual Risk Control Self‐Assessment (RCSA) for all business and support units complements the risk budgeting program.  A comprehensive Business Continuity Management program has been implemented in order to handle business disruptions and major disasters.  A broad Insurance / Risk Transfer program has been put in place to handle catastrophic losses.  Operational Risk leads the Process Management and Control function across the group to ensure control gaps are minimized across the various key processes of the Bank.  Operational Risk Reporting is escalated periodically to the Executive Committee, Group Credit and Investment Committee, Group Operational Risk Committee, and the Compliance & Risk Committee of the Board to ensure proper oversight and review is conducted by relevant members of the Board of Directors and Senior Management.

3.7 Capital management The Group maintains a strong capital base to support the development of its business and to meet its regulatory capital requirements at all times. The Group manages its capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of its activities. The Qatar Central Bank supervises the Group on a consolidated basis and, as such, receives information on the capital adequacy of, and sets capital requirements for, the Group as a whole. Individual banking subsidiaries are directly regulated by their local supervisors, who set their capital adequacy requirements. The table below summarises the composition of regulatory capital and the ratios of the Group. The individual entities in the Group and the Group complied with the externally imposed capital requirements to which they are subject: 2011 2010 QAR’000 QAR’000 Tier 1 capital 4,567,613 4,563,840 Tier 2 capital 278,479 263,746 Total regulatory capital 4,846,092 4,827,586 Risk weighted assets 20,805,395 17,868,436 Tier 1 capital adequacy ratio 22.0% 25.5% Total capital adequacy ratio 23.3% 27.0%

Tier 1 capital includes issued paid‐up capital, statutory reserves, and retained earnings (including the profit for the reporting period), adjusted for goodwill. Tier 2 capital includes risk reserve (limited to 1.25% of risk weighted assets), fair value reserves and foreign currency translations reserve (limited to 45% if positive, 100% if negative), and subordinated debt (limited to 50% of Tier 1 capital). The minimum required capital adequacy ratio is 10% as determined by the Qatar Central Bank.

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F-107 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2011 4 Cash and balances with central banks 2011 2010 QAR’000 QAR’000 Cash 65,410 64,251 Balances with central banks other than mandatory cash reserves 208,330 878,567 Cash and balances with central bank included in cash and cash equivalents 273,740 942,818 Mandatory cash reserves with central banks 585,804 444,413 Cash and balances with central banks 859,544 1,387,231 Cash reserves with central banks amounting to QAR 585.8 million (2010: QAR 444.4 million) are mandatory reserves and are not available for use in the Bank’s day‐to‐day operations.

5 Due from banks and financial institutions 2011 2010 QAR’000 QAR’000 Demand accounts 502,389 363,642 Deposits 1,684,857 1,146,966 Balances with banks included in cash and cash equivalents 2,187,246 1,510,608 Long term deposits 13,151 403,408 Loans and advances to banks 917,280 408,189 Less allowance for impairment ‐ (352) Total due from banks and financial institutions 3,117,677 2,321,853

Movement in allowance for impairment Balance at beginning of the year 352 372 Amounts written off (370) ‐ Foreign currency movement 18 (20) Balance at the end of the year ‐ 352

6 Loans, advances and financing activities to customers 2011 2010 QAR’000 QAR’000 (a) Conventional banking loans and advances Loans 10,110,286 6,162,829 Overdrafts 784,111 646,687 Discounted notes 386,734 298,612 Gross loans and advances 11,281,131 7,108,128 Less allowance for impairment (185,078) (161,567) Net conventional loans and advances 11,096,053 6,946,561 (b) Islamic financing activities Receivables and balances of Islamic financing activities 218,250 319,075 Deferred income (422) (8,927) Net Islamic financing activities to customers 217,828 310,148 Total net loans, advances and financing activities to customers 11,313,881 7,256,709

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F-108 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2011 The total non‐performing loans, advances and financing activities at 31 December 2011 amounted to QAR 62.4 million (2010: QAR 100.3 million), representing 0.5% (2010: 1.3%) of the total gross loans, advances and financing activities. Interest in suspense amounted to QAR 14.2 million (2010: QAR 12.0 million). 6.1 By industry: Islamic Loans Overdrafts Discounted financing Total notes activities QAR’000 QAR’000 QAR’000 QAR’000 QAR’000 At 31 December 2011 Government agencies 1,476,043 ‐ ‐ ‐1,476,043 Industry 706,853 113,486 77,188 ‐897,527 Commercial 763,519 248,853 164,032 ‐1,176,404 Services 4,082,381 79,818 27,156 57,931 4,247,286 Contracting 847,893 220,384 99,333 ‐1,167,610 Real Estate 1,616,571 977 ‐ 159,897 1,777,445 Personal 609,989 74,865 256 ‐685,110 Others 7,037 45,728 18,769 ‐71,534 Gross loans, advances and financing 10,110,286 784,111 386,734 217,828 11,498,959 Less allowance for impairment (note 6.2) (153,699) (27,872) (3,507) ‐(185,078) Net loans, advances and financing activities 9,956,587 756,239 383,227 217,828 11,313,881

At 31 December 2010 Government agencies 364,000 ‐ ‐ ‐364,000 Industry 224,999 62,114 45,272 ‐332,385 Commercial 381,420 209,865 151,150 ‐742,435 Services 3,061,661 98,865 16,471 531 3,177,528 Contracting 341,094 129,429 84,687 ‐555,210 Real Estate 1,016,982 1,046 ‐ 309,617 1,327,645 Personal 508,614 89,021 98 ‐597,733 Others 264,059 56,347 934 ‐321,340 Gross loans, advances and financing activities 6,162,829 646,687 298,612 310,148 7,418,276 Less allowance for impairment (132,729) (28,838) ‐ ‐ (161,567) Net loans, advances and financing activities 6,030,100 617,849 298,612 310,148 7,256,709

6.2 Movement in allowance for impairment 2011 2010 QAR’000 QAR’000 Balance at the beginning of the year 161,567 237,452 Provided during the year 109,605 119,930 Recoveries during the year (71,570) (190,095) Net impairment during the year 38,035 (70,165) Amounts written off (8,587) (6,851) Foreign exchange translation (5,937) 1,131 Balance at the end of the year 185,078 161,567

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F-109 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2011 7 Financial investments 2011 2010 QAR’000 QAR’000 Available‐for‐sale financial investments 9,623,896 6,298,005 Financial investments at fair value through profit / loss 38,626 40,043 Held‐to‐maturity financial investments 1,378,106 745,393 Gross financial investments 11,040,628 7,083,441 Less allowance for impairment (note 7.3) (11,721) ‐ Net financial investments 11,028,907 7,083,441 Debt securities with a carrying value of QAR 5,868.5 million (2010: QAR 2,971.1 million) are pledged as collateral under repurchase and other borrowing agreements with other banks.

7.1 By type 2011 2010 Quoted Unquoted Quoted Unquoted QAR’000 QAR’000 QAR’000 QAR’000 Available‐for‐sale financial investments State of Qatar securities 4,702,148 920,419 1,671,068 1,464,530 Other debt securities 3,459,649 4,697 2,193,358 25,175 Mutual funds ‐399,066 ‐ 308,049 Equities 137,908 9 635,815 10 Financial investments at fair value through profit / loss Other debt securities ‐38,626 ‐ 40,043 Held‐to‐maturity financial investments State of Qatar securities 525,490 453,026 ‐ 442,673 Other debt securities 364,427 23,442 180,757 121,963 Net financial investments 9,189,622 1,839,285 4,680,998 2,402,443

7.2 By interest rate 2011 2010 QAR’000 QAR’000 Available‐for‐sale financial investments Fixed rate 9,466,508 5,642,748 Floating rate 19,480 19,432 Fair value through profit or loss Fixed rate 38,626 40,043 Held‐to‐maturity financial investments Fixed rate 1,366,385 618,806 Floating rate ‐ 126,587 Net interest bearing financial investments 10,890,999 6,447,616 Equities 137,908 635,825 Net financial investments 11,028,907 7,083,441 The Group has hedged fixed rate financial investments with a nominal value of QAR 4,068,543 (2010: QAR 2,069,613) for changes in fair value (note 17).

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F-110 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2011 7.3 Specific allowance for impairment against held‐to‐maturity investments: 2011 2010 QAR’000 QAR’000 Balance at the beginning of the year ‐ ‐ Provided during the year (12,683) ‐ Foreign exchange translation 962 ‐ Balance at the end of the year (11,721) ‐

8 Intangible assets Goodwill Software Total QAR’000 QAR’000 QAR’000 At 31 December 2011 Cost: Balance at beginning of the year 137,733 300,954 438,687 Additions ‐ 1,456 1,456 Adjustments ‐(383) (383) Foreign currency translation (3,764) (220) (3,984) Total cost 133,969 301,807 435,776 Accumulated amortisation: Balance at beginning of the year ‐103,088 103,088 Charged during the year ‐49,500 49,500 Foreign currency translation ‐ (127) (127) Total accumulated amortisation ‐152,461 152,461 Net carrying amount 133,969 149,346 283,315

At 31 December 2010 Cost: Balance at beginning of the year 149,906 291,328 441,234 Additions ‐ 9,212 9,212 Adjustments ‐(10) (10) Foreign currency translation (12,173) 424 (11,749) Total cost 137,733 300,954 438,687 Accumulated amortisation: Balance at beginning of the year ‐59,886 59,886 Charged during the year ‐43,667 43,667 Foreign currency translation ‐ (465) (465) Total accumulated amortisation ‐103,088 103,088 Net carrying amount 137,733 197,866 335,599 8.1 Goodwill Goodwill represents the difference between the net carrying amount of assets and the considerations given for all the shares of Al Khaliji France, formerly known as BLC Bank (France) S.A., at date of acquisition, amounting to EUR 28.6 million (approximating QAR 136.3 million).

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F-111 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2011

9 Property and equipment Capital Land and Leasehold Furniture & Motor work buildings improvements equipment vehicles in progress Total QAR’000 QAR’000 QAR’000 QAR’000 QAR’000 QAR’00 At 31 December 2011 Cost: Balance at beginning of the year 19,621 72,866 110,616 1,298 9,543 213,944 Additions ‐657 2,901 ‐ 7,210 10,768 Disposals ‐‐(21) ‐ (2,374) (2,395) Transfers and adjustments ‐ ‐‐ (59) ‐(59) Foreign currency translation (204) (197) (127) 2 (67) (593) Total cost 19,417 73,326 113,369 1,241 14,312 221,665 Accumulated Depreciation: Balance at beginning of the year 125 19,893 77,099 1,155 ‐98,272 Charged during the year 153 12,306 14,816 115 ‐27,390 Disposals ‐ ‐ (16) (59) ‐(75) Foreign currency translation (11) (58) (46) 3 ‐(112) Total accumulated depreciation 267 32,141 91,853 1,214 ‐ 125,475 Net carrying amount 19,150 41,185 21,516 27 14,312 96,190 At 31 December 2010 Cost: Balance at beginning of the year 12,150 43,458 108,408 1,299 32,820 198,135 Additions 7,471 29,982 3,429 ‐ ‐40,882 Disposals ‐‐(962) ‐ (2,443) (3,405) Transfers and adjustments ‐ ‐‐ ‐ (20,834) (20,834) Foreign currency translation ‐ (574) (259) (1) ‐(834) Total cost 19,621 72,866 110,616 1,298 9,543 213,944 Accumulated Depreciation: Balance at beginning of the year ‐ 8,303 58,077 740 ‐67,120 Charged during the year 125 11,735 19,217 417 ‐31,494 Disposals ‐ ‐ ‐ ‐ ‐‐ Foreign currency translation ‐ (145) (195) (2) ‐(342) Total accumulated depreciation 125 19,893 77,099 1,155 ‐98,272 Net carrying amount 19,496 52,973 33,517 143 9,543 115,672

10 Other assets 2011 2010 QAR’000 QAR’000 Accrued income 228,852 185,881 Derivatives with positive fair value (note 17) 33,676 21,645 Prepaid expenses 25,366 13,829 Other receivables 15,420 15,201 Total other assets 303,314 236,556

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F-112 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2011 11 Due to banks and financial institutions 2011 2010 QAR’000 QAR’000 Demand and call deposits 2,107,970 777,948 Term deposits 1,936,931 1,430,154 Borrowings under repurchase agreements 4,754,527 2,284,107 Total due to banks and financial institutions 8,799,428 4,492,209

12 Customer deposits 2011 2010 QAR’000 QAR’000 By type: Demand and call accounts 1,631,105 1,524,043 Saving accounts 17,688 15,760 Term deposits 10,472,524 6,283,080 Other 7,949 7,739 Total customer deposits 12,129,266 7,830,622 By sector: Government 7,304,564 4,242,357 Corporate 3,599,607 2,412,306 Individuals 1,225,095 1,175,959 Total customer deposits 12,129,266 7,830,622

13 Subordinated debt The subordinated debt consists of a loan amounting to EUR 25 million for an undetermined period, and carries interest at EONIA monthly rate (Euro Overnight index average) payable in arrears on a quarterly basis. This loan will, in the event of the winding‐up of the issuer, be subordinated to the claims of depositors and all other creditors of the issuer. 2011 2010 QAR’000 QAR’000 Balance at the beginning of year 120,503 131,153 Foreign exchange translation (3,293) (10,650) Balance at the end of year 117,210 120,503

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F-113 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2011

14 Other liabilities 2011 2010 QAR’000 QAR’000 Deferred income 7,489 9,890 Accounts payable 64,884 28,664 Derivative with negative fair value (note 17) 197,209 45,689 Provision for staff benefits (note 14.1) 32,418 27,917 Accrued expenses 34,102 50,437 Directors remuneration 2,400 3,000 Other payables 215,032 198,780 Total other liabilities 553,534 364,377 14.1 Provisions for staff benefits 2011 2010 QAR’000 QAR’000 Balance at the beginning of year 27,917 21,485 Provided during the year 8,631 9,791 Utilised during the year (4,034) (3,393) Foreign exchange translation (96) 34 Total provisions for staff benefits 32,418 27,917

15 Unrestricted investment accounts 2011 2010 QAR’000 QAR’000 By type Term deposits 1,000 674,714 By sector Corporate ‐ 650,000 Individuals 1,000 24,714 Profit distribution rates for the investment account holders 6 months term 2.0% 4.5%

16 Shareholders' equity

16.1 Issued Capital The authorised, issued and fully paid up share capital of the Group totalling QAR 3,600 million consists of 360 million ordinary shares of QAR 10 each. Qatar Holding Co. holds 10.0% of the ordinary shares of al khaliji at 31 December 2011 (2010: 10%). Other Qatar Government related entities hold 35.5% (2010: 35.2%) of the ordinary shares of al khaliji, with the remaining 54.5% (2010: 54.8%) held by institutional investors and members of the public. All shares in issue are of the same class and carry equal rights.

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F-114 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2011 16.2 Statutory Reserve In accordance with the Central Bank Law, 10% of the net profit for the year is required to be transferred to the statutory reserve until the reserve equals 100% of the paid up capital. The transfer to the statutory reserve is required until the statutory reserve equals the paid up capital, and is not available for distribution except in circumstances specified in the Qatar Commercial Companies Law No. 5 of 2002 and after Qatar Central Bank approval. The statutory reserve includes the share premium received on issuance of new shares.

16.3 Risk Reserve In accordance with the Qatar Central Bank regulations, a risk reserve is made to cover contingencies on loans, advances and financing activities to customers, with a minimum requirement of 1.5% of the total direct facilities after excluding provisions for credit losses, deferred profits, exposures granted to or guaranteed by the Government and exposures against cash collateral. This reserve is not available for distribution without the prior approval of the Qatar Central Bank. Circular 102/2011 of Qatar Central Bank, requires that the risk reserve ratio should be increased to a minimum of 2% for 2012. The Group has increased its Risk Reserve to 1.75% for 2011.

16.4 Fair Value Reserve Fair value reserve comprises the cumulative change in fair value of available‐for‐sale financial assets (mark to market) until these assets are derecognised or impaired. The movement in fair value reserve during the year is as follows: 2011 2010 QAR’000 QAR’000 Balance at beginning of the year 76,427 810 Gain on revaluation 203,708 164,385 Net amount transferred to the consolidated statement of income (165,950) (88,768) Net change in fair value of available‐for‐sale investments 37,758 75,617 Balance at the end of the year 114,185 76,427 Fair value reserve for available‐for‐sale investments at 31 December 2011 includes negative fair value of QAR 11.4 million (2010: QAR 13.5 million).

16.5 Contribution to Social and Sports fund Pursuant to Qatari law no. 13 of 2008 and further clarification of the law issued in 2010, the Group made appropriation of QAR 12.1 million (2010: QAR 11.4 million) from retained earnings for its contribution to the Social and Sports Activities Support Fund of Qatar. This amount represents 2.5% of the net profit earned from Group’s consolidated operations for the year ended.

16.6 Proposed dividends The Board of Directors has proposed a cash dividend of 10% (QAR 1 per share) for the year 2011 (2010: 10% or QAR 1 per share). The proposed cash dividends are subject to approval of the shareholders at the forthcoming Annual General Assembly. During 2011, the shareholders approved the dividend of QAR 1 per share totalling QAR360 million in respect of the year ended 31 December 2010.

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F-115 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2011 17 Derivative financial instruments The Group transacts in derivatives as principal either as a trading activity or to manage risk. The Group's objectives and policies on managing the risks that arise in connection with derivatives are included in Note 3 under the headings 'Market Risk', 'Credit Risk' and 'Liquidity Risk'. The notional amounts of certain types of financial instruments provide a basis for comparison with instruments recognised on the statement of financial position but do not necessarily indicate the amounts of future cash flows involved or the current fair value of the instruments and, therefore, do not indicate the Group's exposure to credit or price risks. The fair value of a derivative contract represents the amount at which that contract could be exchanged in an arms‐length transaction, calculated at market rates ruling at the reporting date. The fair values and notional amounts of derivative instruments are set out in the following table:

Notional Fair value Notional amount by amount term to maturity Assets Liability Within 3 3 months 1 to months to 1 year 5 years QAR’000 QAR’000 QAR’000 QAR’000 QAR’000 QAR’000 At 31 December 2011 Derivatives held for trading Forward exchange contracts 1,915,025 556 (10,303) 1,915,025 ‐ ‐ Interest rate swaps 915,332 11,808 (8,880) ‐ 728,000 187,332 Cross currency swaps 1,456,000 8,083 (142) 364,000 ‐ 1,092,000 Options contracts 91,000 ‐ (673) 54,600 ‐ 36,400 Derivatives held for risk management Interest rate swaps 3,904,449 ‐ (162,965) ‐ ‐ 3,904,449 Cross currency swaps 164,094 13,229 (14,246) ‐ 164,094 Derivative assets/(liabilities) 8,445,900 33,676 (197,209) 2,333,625 728,000 5,384,275 At 31 December 2010 Derivatives held for trading Forward exchange contracts 625,847 863 (665) 475,587 150,260 ‐ Interest rate swaps 728,000 20,276 (20,276) ‐ ‐ 728,000 Cross currency swaps 910,000 48 ‐ ‐ ‐ 910,000 Options contracts 254,800 ‐ ‐ ‐ 254,800 ‐ Derivatives held for risk management Interest rate swaps 1,341,613 ‐ (20,046) ‐ ‐ 1,341,613 Cross currency swaps 728,000 458 (4,593) 364,000 364,000 ‐ Derivative assets/(liabilities) 4,588,260 21,645 (45,580) 839,587 769,060 2,979,613 The Group uses both interest rate swaps and cross currency swaps to hedge its exposure to changes in the fair value of fixed rate debt securities, attributable to changes in market interest rates. These swaps are matched to specific issuance of fixed rate debt securities. The net fair value of swaps held for purposes of risk management at 31 December 2011 was a QAR 164.0 million liability (2010: QAR 24.8 million liability). The net loss for the year on the hedging instrument was QAR 152.6 million (2010: QAR 36.1 million). The net gain for the year on the hedged items attributable to the hedged risks was QAR 148.4 million (2010: QAR 36.9 million). Hedge effectiveness is calculated on a cumulative basis.

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F-116 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2011 18 Contingent liabilities and commitments To meet the financial needs of customers, the Group issues various commitments and contingent liabilities. Even though these obligations may not be recognised in the consolidated statement of financial position, they do contain credit risk and are therefore part of the overall risk of the Group. In many instances, the amount recognised in the consolidated statement of financial position for incurred obligations do not represent the potential loss of the arrangement in full. The total outstanding commitments and contingent liabilities are as follows:

2011 2010 QAR’000 QAR’000

Contingent liabilities Guarantees 3,705,479 3,113,086 Unutilised credit facilities 3,813,732 4,395,916 Letters of credit and acceptances 666,629 892,093 Total contingent liabilities 8,185,840 8,401,095 Other commitments Operating lease commitment 25,647 48,663 Capital commitments 8,151 1,463 Foreign exchange contracts (note 17) 1,915,025 625,847 Interest rate swaps (note 17) 4,819,781 2,069,613 Cross currency swaps (note 17) 1,620,094 1,638,000 Option contracts (note 17) 91,000 254,800 Total other commitments 8,479,698 4,638,386

18.1 Guarantees , letters of credit and acceptances Guarantees , letters of credit and acceptances commit the Group to make payments on behalf of customers contingent upon the failure of the customer to perform under the terms of the contract. Guarantees and standby letters of credit carry the same risk as loans. Credit guarantees can be in the form of irrevocable letters of credit, advance payment guarantees and endorsement liabilities from bills rediscounted.

18.2 Unused facilities Commitments to extend credit represent contractual commitments to make loans and revolving credits. Commitments generally have fixed expiry dates, or other termination clauses. Since commitments may expire without being drawn upon, the total contract amounts do not necessarily represent future cash requirements. However, the potential credit loss is less than the total unused commitments since most commitments to extend credit are contingent upon customers maintaining specific standards. The Group monitors the term to maturity of credit commitments because longer‐term commitments generally have a greater degree of credit risk than shorter‐term commitments.

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F-117 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2011 18.3 Capital commitments The capital commitments represent refurbish commitments relating to a new branch building, as well as contractual commitments in respect of software development.

18.4 Operating lease commitments The Group has entered into commercial leases on certain buildings. These leases have an average life between three and five years. There are no restrictions placed upon the Group by entering into these leases.

Future minimum lease payments under operating leases are as follows: 2011 2010 QAR’000 QAR’000 No later than one year 11,022 10,746 Later than one year and no later than 5 years 14,625 37,917 Total operating lease commitments 25,647 48,663

18.5 Litigation and claims The Group has contingent liabilities in respect of legal claims arising in the ordinary course of business amounting to QAR 10.0 million (2010: QAR 8.2 million). Based on legal advice, the Group does not expect the outcome of the legal claims to have a material effect on the Group’s financial position.

19 Net interest income 2011 2010 QAR’000 QAR’000 Interest income Due from banks and financial institutions 15,258 24,486 Financial investments 316,136 242,376 Loans and advances to customers 452,500 498,076 Total interest income 783,894 764,938 Interest expense Due to banks and financial institutions (48,599) (56,369) Customer deposits (158,469) (245,347) Total interest expense (207,068) (301,716)

Net interest income 576,826 463,222

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F-118 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2011 20 Net fee and commission income 2011 2010 QAR’000 QAR’000 Fee and commission income Loans, advances to customers 68,804 59,846 Indirect credit facilities 47,221 38,851 Bank service fees 14,425 7,655 Total fee and commission income 130,450 106,352 Fees paid (10,065) (5,121) Total fee and commission expense (10,065) (5,121)

Net fee and commission income 120,385 101,231

21 Net gains from foreign currency transactions 2011 2010 QAR’000 QAR’000 Profits from foreign currency transactions 11,948 11,619 Profit from revaluation of assets and liabilities (4,619) 30 Net income from foreign currency transactions 7,329 11,649

22 Other operating income During the period the Group received QAR 54.1 million as part of a successful insurance claim. The full amount was recognised as income in the current year.

23 General and administration expenses 2011 2010 QAR’000 QAR’000 Salaries, allowances and other staff costs 179,281 199,498 Employee end of service benefits 7,217 7,806 Directors’ remuneration and meeting attendance fees 2,978 3,578 Advertising, marketing and promotional expenses 10,365 11,257 Legal and professional fees 9,912 16,691 Rent and maintenance 39,478 38,600 Computer and IT costs 36,065 29,761 Travelling expenses 1,374 1,896 Licences and subscriptions 3,019 2,761 Other expenses 7,689 7,667 Total general and administration expenses 297,378 319,515

24 Other operating expenses The Group has expensed all merger related costs amounting to QAR 15.2 million in 2011 for consultants and advisors in connection with the discontinued merger with IBQ (refer note 1 above).

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F-119 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2011 25 Income tax expense According to the laws and regulations effective in France and United Arab Emirates, income tax expense of QAR 13.1 million (2010: QAR 10.6 million) was calculated for the subsidiary companies in France and United Arab Emirates for the year ended 31 December 2011. The subsidiary company in France has previously accumulated tax losses amounting to EUR 5.2 million (2010: EUR 6.8 million) which it intends to utilise against the company’s future taxable income. The benefit of the tax losses has not been recognised by raising a deferred tax asset as the exact amount of the benefit is uncertain.

26 Earnings per share 2011 2010 QAR’000 QAR’000 Profit attributable to equity holders 487,001 426,703 Basic weighted average number of shares in issue (shares) 360,000,000 360,000,000 Basic and diluted earnings per share (in QAR) 1.35 1.19 Basic and diluted earnings per share is calculated by dividing the profit for the year attributable to ordinary equity holders of the Group by the weighted average number of ordinary shares outstanding during the year. No potential dilutions of ordinary shares existed at 31 December 2011.

27 Related party transactions The Group has carried out transactions in the ordinary course of business with directors and members of the senior management team, their close family members, and affiliated companies which have significant influence in the Group’s financial and operating decisions. These transactions include loans, financing activities, deposits and foreign currency transactions. At the reporting date the balances for such transactions were as follows:

27.1 Statement of financial position items Key management Others Total QAR’000 QAR’000 QAR’000 31 December 2011 Loans and advances 6,443 364,000 370,443 Customer deposits 3,594 1,097 4,691 Subordinated debt ‐117,210 117,210 31 December 2010 Loans and advances 6,473 364,000 370,473 Customer deposits 20,846 889 21,735 Subordinated debt ‐120,503 120,503

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F-120 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2011 27.2 Statement of income items Key management Others Total QAR‘000 QAR‘000 QAR‘000 Year ended 2011 Interest income 273 12,498 12,771 Interest expense 74 3,146 3,220 Commission income 4 ‐ 4 Income from Islamic financing activities 76 ‐ 76 Year ended 2010 Interest income 316 55,941 56,257 Interest expense 83 2,667 2,750 Commission income 5 48 53 Income from Islamic financing activities 1,401 25,543 26,944

27.3 Compensation of key management personnel 2011 2010 QAR’000 QAR’000 Salaries, allowances and other benefits 38,725 26,947 End of service benefits 1,545 1,006 Total compensation paid to key management personnel 40,270 27,953

27.4 Board of Directors’ fees The Board of Directors' fees for 2011 amounted to QAR 3.0 million (2010: QAR 3.6 million) which is subject to the approval of the Annual General Assembly.

28 Cash and cash equivalents Cash and cash equivalents for purpose of the consolidated statement of cash flows, comprise the following: 2011 2010 QAR’000 QAR’000 Cash and balances with central banks (note 4) 273,740 942,818 Due from banks and financial institutions (note 5) 2,187,246 2,238,608 Cash and cash equivalents 2,460,986 3,181,426 Cash and balances with central banks do not include mandatory cash reserves.

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F-121 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2011 29 Segmental reporting The Group is organised into three main operating segments for management purposes, which comprise conventional banking, Islamic banking and foreign operations. The results of each of the operating segments which are reviewed regularly by the Group’s management, are as follows: Conventional Islamic Al Khaliji Unallocated Banking Banking France Total QAR'000 QAR'000 QAR'000 QAR'000 QAR'000 At 31 December 2011 Net interest income 476,666 ‐ 100,160 ‐576,826 Net income from Islamic financing activities ‐10,628 ‐ ‐ 10,628 Net fee and commission income 85,392 ‐ 34,993 ‐120,385 Net gains from foreign currency transactions 345 ‐ 6,984 ‐7,329 Other operating income 219,760 ‐ 5,316 ‐225,076 Net operating income 782,163 10,628 147,453 ‐940,244 General and administration expenses (60,712) (5,080) (61,240) (170,346) (297,378) Depreciation and amortisation (4,696) (6,762) (1,436) (63,996) (76,890) Impairment losses (34,473) ‐ (16,245) ‐(50,718) Other income (15,201) ‐ 5 ‐(15,196) Segment results 667,081 (1,214) 68,537 (234,342) 500,062 Tax ‐‐(13,061) ‐(13,061) Net profit 667,081 (1,214) 55,476 (234,342) 487,001 Assets and liabilities Total assets 23,267,716 217,919 3,138,015 379,178 27,002,828 Total liabilities and unrestricted investment accounts 18,196,332 69,133 2,385,313 949,660 21,600,438 At 31 December 2010 Net interest income 379,063 ‐ 84,159 ‐463,222 Net income from Islamic financing activities ‐88,827 ‐ ‐ 88,827 Net fee and commission income 70,360 ‐ 30,871 ‐101,231 Net gains from foreign currency transactions 4,157 ‐ 7,492 ‐11,649 Other operating income 93,891 ‐ 1,529 ‐95,420 Net operating income 547,471 88,827 124,051 ‐760,349 General and administration expenses (77,484) (7,873) (59,383) (174,775) (319,515) Depreciation and amortisation (3,584) (663) (2,163) (68,751) (75,161) Impairment losses 71,246 ‐ (1,081) ‐70,165 Other income ‐‐300 1,175 1,475 Segment results 537,649 80,291 61,724 (242,351) 437,313 Tax ‐‐(10,610) ‐(10,610) Net profit 537,649 80,291 51,114 (242,351) 426,703 Assets and liabilities Total assets 14,513,985 989,626 3,082,106 151,344 18,737,061 Total liabilities and unrestricted investment accounts 10,032,392 688,088 2,580,155 181,790 13,482,425

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F-122 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2011

29.1 Segmental reporting by geographical location The geographical analysis of operating income and non‐current assets is based on the location of the entity in which the transactions and assets are recorded.

Net Total Total assets operating income non‐current assets QAR’000 Share % QAR’000 Share % QAR’000 Share % 31 December 2011 Qatar 792,791 84.3% 363,942 95.9% 23,864,813 88.4% United Arab Emirates 106,351 11.3% 3,569 0.9% 1,543,423 5.7% France 41,102 4.4% 11,994 3.2% 1,594,592 5.9% Total 940,244 379,505 27,002,828 31 December 2010 Qatar 637,390 83.8% 437,613 97.0% 15,498,983 82.7% United Arab Emirates 93,910 12.4% 815 0.2% 1,917,665 10.2% France 29,049 3.8% 12,843 2.8% 1,320,413 7.1% Total 760,349 451,271 18,737,061

Non‐current assets consist of property, equipment, and intangible assets.

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F-123 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2011 30 Financial statements of the Parent Company

30.1 Statement of financial position of the Parent Company as at 31 December 2011 2010 QAR’000 QAR’000 Assets Cash and balances with central banks 628,478 1,095,096 Due from banks and financial institutions 2,651,489 3,029,886 Loans, advances and financing activities to customers 9,736,559 6,063,448 Financial investments 10,326,264 6,453,095 Investment in subsidiaries 691,571 691,571 Intangible assets 147,718 196,999 Property and equipment 82,255 102,881 Other assets 267,366 213,817 Total assets 24,531,700 17,846,793

Liabilities Due to banks and financial institutions 8,483,470 5,754,862 Customer deposits 10,388,989 6,113,809 Other liabilities 359,760 162,778 Total liabilities 19,232,219 12,031,449 Unrestricted investment account 1,000 674,714 Total liabilities and unrestricted investment accounts 19,233,219 12,706,163

Shareholders' equity Share capital 3,600,000 3,600,000 Statutory reserves 1,015,344 967,068 Risk reserve 195,821 108,851 Fair value reserve 102,330 67,978 Proposed dividends 360,000 360,000 Retained earnings 24,986 36,733 Total shareholders' equity 5,298,481 5,140,630 Total liabilities, unrestricted investment accounts and shareholders' equity 24,531,700 17,846,793

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F-124 Al Khalij Commercial Bank (al khaliji) Q.S.C. Notes to the Consolidated Financial Statements For the year ended 31 December 2011

30.2 Statement of Income of the Parent Company for the year ended 31 December 2011 2010

QAR’000 QAR’000 Interest income 666,559 666,772 Interest expense (189,893) (287,709) Net interest income 476,666 379,063 Income from Islamic financing and investing activities 22,434 107,782 Unrestricted investment account holders’ share of profits (11,806) (18,955) Net income from Islamic financing and investing activities 10,628 88,827 Fee and commission income 93,502 73,855 Fee and commission expense (7,330) (3,495) Net fee and commission income 86,172 70,360 Dividend income 59,392 1,666 Net gains from foreign currency transactions 345 4,157 Net (losses)/ gains from financial instruments at fair value (2,426) 4,331 Net profit on sale of available‐for‐sale investments 160,725 87,894 Other operating income 54,661 ‐ Net operating income 846,163 636,298 General and administration expenses (236,138) (258,468) Depreciation of property and equipment (26,474) (29,930) Amortisation of intangible assets (48,980) (43,068) Impairment losses on loans, net of recoveries (34,473) 71,246 Other expenses (15,201) (489) Profit for the year 484,897 375,589

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F-125 REGISTERED OFFICES OF THE ISSUER

AKCB Finance Limited 94 Solaris Avenue Camana Bay P.O. Box 1348 Grand Cayman, KY1-1108 Cayman Islands

REGISTERED OFFICE OF THE GUARANTOR

Al Khalij Commercial Bank (al khaliji) Q.S.C. Asia Street 60 West Bay P.O. Box 28000 Doha Qatar

ARRANGERS

BNP Paribas HSBC Bank plc 10 Harewood Avenue 8 Canada Square London NW1 6AA London E14 5HQ United Kingdom United Kingdom

QNB Capital LLC Standard Chartered Bank Level 14 P.O. Box 999 QNB Al Mathaf Tower Dubai P.O. Box 1000 United Arab Emirates Doha Qatar

DEALERS

Barclays Bank PLC BNP Paribas 5 The North Colonnade 10 Harewood Avenue Canary Wharf London NW1 6AA London E14 4BB United Kingdom United Kingdom

Citigroup Global Markets Limited Commerzbank Aktiengesellschaft Citigroup Centre Kaiserstraße 16 (Kaiserplatz) Canada Square 60311 Frankfurt am Main Canary Wharf Federal Republic of Germany London E14 5LB United Kingdom

Goldman Sachs International HSBC Bank plc Peterborough Court 8 Canada Square 133 Fleet Street London E14 5HQ London EC4A 2BB United Kingdom United Kingdom

Merrill Lynch International National Bank of Abu Dhabi P.J.S.C. 2 King Edward Street One NBAD Tower London EC1A 1HQ Sheikh Khalifa Street United Kingdom P.O. Box 4 Abu Dhabi United Arab Emirates Nomura International plc QNB Capital LLC 1 Angel Lane Level 14 London EC4R 3AB QNB Al Mathaf Tower United Kingdom P.O. Box 1000 Doha Qatar Standard Chartered Bank P.O. Box 999 Dubai United Arab Emirates

LEGAL ADVISERS To the Issuer and the Guarantor as to English law: To the Issuer and the Guarantor as to Qatari law: Allen & Overy LLP Allen & Overy LLP Level 2 Level 23 Gate Village Building GV08 Tornado Tower, Al Funduq Street Dubai International Financial Centre P.O. Box 24205 P.O. Box 506678 Doha Dubai Qatar United Arab Emirates To the Arrangers and the Dealers as to English law To the Arrangers and the Dealers as to Qatari law Clifford Chance LLP SNR Denton & Co Building 6, Level 2 Floor 15 Al Fardan Ofﬁce Tower The Gate Precinct 61 Al Funduq Street Dubai International Financial Centre West Bay, PO Box 64057 PO Box 9380, Dubai Doha United Arab Emirates Qatar To the Issuer and the Guarantor as to Cayman Islands law Mourant Ozannes 8/F Suites A&B Entertainment Building 30 Queen’s Road Central Hong Kong

AUDITORS To Al Khalij Commercial Bank (al khaliji) Q.S.C. since 1 January 2013 prior to 1 January 2013 Ernst & Young Deloitte & Touche Level 24 Al Gassar Tower Al Ahli Bank Head Ofﬁce Building West Bay, P.O. Box 164 P.O. Box 431 Doha Doha Qatar Qatar

FISCAL AGENT AND PAYING AGENT Citibank N.A., London Branch Citigroup Centre 13th Floor Canada Square Canary Wharf London, E14 5LB United Kingdom REGISTRAR AND TRANSFER AGENT Citigroup Global Markets Deutschland AG Reuterweg 16 D-60323 Frankfurt am Main Germany

imprima — C108406