Board of Directors responsibility statement

Transcription

1 Prospectus

2 Board of Directors responsibility statement The Directors of ABG whose names appear herein, accept responsibility, both jointly and severally, for the information contained in this Prospectus. To the best of the knowledge and belief of the Directors (who have taken all reasonable care to ensure such is the case) this Prospectus complies with the Law and information contained in this Prospectus is in accordance with the facts and does not omit anything likely to make this Prospectus or any statement herein misleading or deceptive. Director s Name Director s Position Director s Signature Sheikh Saleh Abdullah Kamel Chairman and Non-executive Member of the Board Mr. Abdulla Ammar Al Saudi Non-executive Member of the Board and Vice Chairman Mr. Abdullah Saleh Kamel Member of the Board and Chairman of the Board s executive committee Mr. Saleh Mohamed Al-Yousef Independent Non-executive Member of the Board and Chairman of the audit committee Mr. Adnan Ahmed Yousif Chief Executive Officer and Member of the Board Dr. Anwar Ibrahim Independent Non-executive Member of the Board Mr. Mahmoud Jameel Hassoubah Member of the Board Mr. Abdul Elah A. Sabbahi Member of the Board 2

3 Important Notice A copy of this Prospectus, which has been prepared in accordance with the Bahrain Monetary Agency s Disclosure Standards ODG/407/03, has been delivered to the Bahrain Monetary Agency and the Bahrain Stock Exchange for registration. The Bahrain Stock Exchange and the Bahrain Monetary Agency assume no responsibility for the contents of this Prospectus and shall not have any liability to any person for damage or loss resulting from reliance on any statements or information contained herein or for the performance of any obligations of the Albaraka Banking Group B.S.C. Application has been made to both the Bahrain Monetary Agency and the Dubai Financial Services Authority (in respect of the Dubai International Financial Exchange) for all of the Shares of Albaraka Banking Group B.S.C. to be admitted to trading on both the Bahrain Stock Exchange and the Dubai International Financial Exchange. The Offer is not intended for, and the Shares are not being offered, distributed, sold, transferred or delivered, directly or indirectly, to, or for the account or benefit of, any person in the Dubai International Financial Center and the Offer to such person will not constitute an offer in accordance with the Dubai Financial Services Authority Offered Securities Rules. This Prospectus is not intended for distribution to any person in the Dubai International Financial Center and any such person that receives a copy of this Prospectus should not act or rely on this Prospectus and should ignore the same. Prospective investors should read the entire Prospectus and in particular, section 11, Risk Factors when considering an investment in the Group. This Prospectus does not constitute an offer to sell or the solicitation of an offer to buy Shares to any person in any jurisdiction to whom or in which such offer or solicitation is unlawful. The Shares have not been, and will not be, registered under the United States Securities Act of 1933 as amended (the Securities Act ), or under the applicable securities laws of Canada, Australia or Japan or under any other securities laws and, subject to certain exceptions, may not be offered or sold, directly or indirectly, within the United States, Canada, Australia or Japan or to any resident of the United States, Canada, Australia or Japan. The Shares are being offered in the United States only to qualified institutional buyers ( QIBs ) (as defined in Rule 144A under the Securities Act ( Rule 144A )) pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act, and are being offered outside the United States in accordance with Regulation S of the Securities Act ( Regulation S ). Each purchaser of Shares offered hereby pursuant to Regulation S or an exemption under the Securities Act, in making a purchase will be deemed to have made certain acknowledgements, representations and agreements as set out in section 17, Terms and Conditions of the Offer. This Prospectus is only being distributed to and is only directed at (i) persons who are outside the United Kingdom or (ii) to investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the Order ) or (iii) high net worth entities and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as Relevant Persons ). The Shares are only available to Relevant Persons, and no invitation or offer to subscribe, purchase or otherwise acquire Shares will be engaged in with anyone who is not a Relevant Person. Any person who is not a Relevant Person shall not act or rely on this Prospectus or any of its contents. The contents of this Prospectus are not to be construed as legal, financial or tax advice. Each prospective Applicant should consult his, her or its own legal adviser, financial adviser or tax adviser for legal, financial or tax advice. In addition to appointing GIB as Lead Manager and Financial Advisor, the Company has appointed a team of legal and financial advisors (including Norton Rose as Lead Legal Advisor) to carry out the financial due diligence and legal due diligence of the Group. Investors should rely only on the information in this Prospectus. No person has been authorised to give any information or make any representations other than as contained in this Prospectus and, if given or made, such information or representations must not be relied on as having been authorised by the Founders, the Board, the Company or any of the Selling Shareholders. Neither the delivery of this Prospectus nor any purchase made under this Prospectus shall, under any circumstances, create any implication that there has been no change in the affairs of the Group since, or that the information contained herein is correct as of any time subsequent to, the date of this Prospectus. The distribution of this Prospectus in jurisdictions other than the United Kingdom and the United States of America may also be restricted by law and therefore persons into whose possession this Prospectus comes should inform themselves about and observe any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdictions. The Offer and the distribution of this Prospectus are subject to the restrictions set out in section 17, Terms and Conditions of the Offer. 3

4 Important Notice continued Forward-looking Statements This Prospectus includes statements that are, or may be deemed to be, forward-looking statements. These forward-looking statements can be identified by the use of forward-looking terminology, including the terms believes, estimates, plans, anticipates, targets, aims, continues, expects, intends, may, will, would or should or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this Prospectus and include statements regarding the Group s intentions, beliefs or current expectations concerning, among other things, the Group s results of operations, financial condition, liquidity, prospects, growth, strategies and the industries in which the Group operates. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. A number of factors could cause actual results and developments to differ materially from those expressed or implied by the forwardlooking statements including, without limitation, the factors set out in section 11, Risk Factors, which should be read in conjunction with the other cautionary statements that are included in this Prospectus. Forward-looking statements may and often do differ materially from actual results. Any forward-looking statements in this Prospectus reflect the Group s current view with respect to future events and are subject to risks relating to future events and other risks, uncertainties and assumptions relating to the Group s operations, results of operations, growth, strategy and liquidity. Investors should specifically consider the factors identified in this Prospectus which could cause actual results to differ before making an investment decision. Unless otherwise indicated all references in this document to Bahraini Dinar or BD are to the lawful currency of the Kingdom of Bahrain and references to US$, $ or US Dollars are to the lawful currency of the United States of America. The financial statements included in this Prospectus have been prepared in accordance with the Islamic Accounting Standards issued by the AAOIFI and for matters not covered by AAOIFI, in accordance with the IFRS. AAOIFI was established on 27 March 1991 with the purpose of developing and issuing accounting and auditing standards for Islamic financial institutions. In accordance with the requirements of the Bahrain Monetary Agency, all Islamic banks licenced in Bahrain are required to report in accordance with Financial Accounting Standards issued by AAOIFI and where AAOIFI standards do not cover a particular item, the relevant IFRS. In order to comply with the requirements of the Bahrain Monetary Agency, ABG prepares its annual financial statements in accordance with AAOIFI and IFRS (for matters not covered by the Islamic Accounting Standards issued by AAOIFI). Certain terms used in this Prospectus, including all capitalised terms and certain technical and other items, are defined or explained in section 1, Definitions and Glossary of Technical Terms. 4

5 Investor Identification and Anti Money Laundering ABG, the Lead Manager, and the Receiving Banks reserve the absolute right to require further verification of the identity of each Applicant or that of any beneficial owner upon whose behalf an Applicant applies for Shares pursuant to the Offer. The Applicant will provide satisfactory evidence of identity and if so required the source of funds within a reasonable time period determined by ABG or a Receiving Bank. Pending the provision of such evidence, an application to subscribe for Shares will be postponed. If the Applicant fails to provide satisfactory evidence within the time specified, or if the Applicant provides evidence but ABG or the relevant Receiving Bank is not satisfied therewith, the application may be rejected in full in which event any money received by way of application will be returned to the Applicant by the relevant Receiving Bank at the Applicant s risk and expense and without accounting for any profit derived from such funds. ABG and the Receiving Banks will comply with Bahrain s Legislative Decree No.(4) of 2001 with respect to Prohibition and Combating of Money Laundering and the various Ministerial Orders issued thereunder including, but not limited to, Ministerial Order No. 7/2001 and Ministerial Order No. 23/2002 with respect to Institutions Obligations Concerning the Prohibition and Combating of Money Laundering and Ministerial Order No.(1) of 2004 with respect to Directives Relating to the Prevention and Prohibition of Money Laundering at the BSE. ABG and the Receiving Banks will also comply with international anti-money laundering requirements existing from time to time. Under the above domestic or international requirements, ABG and or one or more Receiving Banks may be obliged to report certain information to governmental or regulatory agencies and all Applicants consent to such disclosure. 5

6 Parties Involved Issuer Albaraka Banking Group B.S.C. Albaraka Tower, P.O. Box 1882, Manama, Kingdom of Bahrain Lead Manager, Financial Adviser and Sponsor Gulf International Bank B.S.C. Al-Dowali Building, 3 Palace Avenue, P.O. Box 1017, Manama, Kingdom of Bahrain Legal Advisors to the Issuer Norton Rose Unitag House, Government Avenue, Manama, Kingdom of Bahrain Norton Rose 8th Floor, Emirates Towers, P.O. Box , Dubai, United Arab Emirates Legal Advisors to the Issuer on matters of Bahrain Law Al Mahmood & Zu bi Bab Al Bahrain Building, 150 Government Road, Manama, Kingdom of Bahrain Lead Receiving Bank Standard Chartered Bank P.O. Box 29, Manama, Kingdom of Bahrain Underwriters Gulf International Bank B.S.C.(c) Al-Dowali Building, 3 Palace Avenue P. O. Box 1017, Manama, Kingdom of Bahrain Emirates Bank Group Beniyas Road, P. O. Box 2923, Deira, Dubai, UAE National Bank of Bahrain B.S.C. Diplomatic Area Branch, Ground Floor, Building 170, Road No. 1703, Diplomatic Area 317,Manama, Kingdom of Bahrain Bahrain Islamic Bank B.S.C. Al Salam Tower, P.O. Box 5240, Diplomatic Area, Manama, Kingdom of Bahrain Auditors and Reporting Accountants Ernst & Young 14th Floor, The Tower, Sheraton Commercial Complex, Government Road, P.O. Box 140, Manama, Kingdom of Bahrain Registrar KPMG Fakhro, Bahrain P.O. Box 710, Manama, Kingdom of Bahrain Receiving Banks Abu Dhabi Commercial Bank PJSC Ahli United Bank B.S.C. AlBaraka Islamic Bank B.S.C. (EC) Bahrain Islamic Bank B.S.C. Bank of Bahrain & Kuwait B.S.C. Commercial Bank of Qatar Q.S.C. Emirates Bank International PJSC Emirates Financial Services PSC Emirates Islamic Bank PJSC First Gulf Bank, Mashreq Bank PJSC National Bank of Bahrain B.S.C. National Bank of Oman S.A.O.C. Please refer to Appendix for the address details of the above Receiving Banks. 6

7 Contents

8 Contents 1 Definitions and Glossary of Technical Terms Definitions Glossary of Technical Terms Resolutions and Approvals Time Table of the Offering Summary of the Offering Information about ABG and the Group Introduction Letter from the Chairman Board of Directors Core Management Team ABG Functional Organisation Chart Corporate Governance Shari a Supervisory Board ABG Organisational Structure Definitions of ABG Units Information on each Group Company and group-wide Initiatives Information on each Group Company Group-wide Initiatives Islamic Financial Markets Summary Market Snapshot Current Trends Growth Dynamics Future Opportunities The Group s Financial Summary Letter from Reporting Accountants Audited Financial Statements 2003 to Financial Discussion for the years 2003 to The Group s Consolidated Financial Statements Consolidated Financial Statements 31 December Subsidiaries not audited by Ernst & Young details of Audit Firms as at 31 December Dividend Policy Risk Factors General Risks Risks relating to the Group s business Legal and Regulatory Risks Litigation Albaraka Bank Lebanon ( ABBL ) Banque Al Baraka d Algérie ( BABD ) Albaraka Türk Participation Bank ( ABTPB ) The Egyptian Saudi Finance Bank S.A.E ( ESFB ) Bank Et-Tamweel Al-Tunisi Al-Saudi ( B.E.S.T. ) Albaraka Bank Sudan ( ABBS )

9 13 Details of the Private Sale and Initial Public Offering The Shares - Pre IPO Founders Trading Restrictions The Private Sale The Initial Public Offering Use of Proceeds Dual Listing of Shares All Applicants must have a CSD Account with the BSE Applicants wishing to hold Shares on the DIFX must have a DIFX custodian Trading of shares on the BSE and the DIFX Introduction to the BSE and the DIFX The Bahrain Stock Exchange The Dubai International Financial Exchange Terms and Conditions of the Offer How to Apply for Shares through the IPO The Application Procedure Calculation of Subscription Funds Allotments Dispatch of Refunds Application of Proceeds Applicable Law Additional Information Summary of ABG s Memorandum and Articles of Association Working capital Trading Position No Material Change in accounts Borrowing Powers Fees and Expenses Underwriting of the Offer Financial Assistance to Directors Taxation Documents Available for Inspection APPENDIX receiving banks and approved branches

10 1 Definitions and Glossary of Technical Terms 1.1 Definitions AAOIFI means Accounting and Auditing Organisation for Islamic Financial Institutions; ABG or Company or Issuer means the Albaraka Banking Group B.S.C.; Allotment Announcement Date means Wednesday, 5 July 2006; Allotment Date means Monday, 3 July 2006; Accepted Applicant means an Eligible Investor who applies for Shares through the Offer and whose application is accepted in whole or in part; Applicant means a person who applies for Shares through the Offer; Approved Branch means a branch of a Receiving Bank at which applications for Offered Shares can be made, details of which are set out in the Appendix to this Prospectus, further details of which may be advised through public advertisement; Articles of Association means the Company s Articles of Association; Bank Charges means transfer charges, cashier charges or cheque fees; BMA means the Bahrain Monetary Agency; Board means the Board of Directors of the Group, the details of which are set out in section 5, Information about the Group ; BSE means the Bahrain Stock Exchange; CDS Account or CSD Account means the depositary account in which Shares are placed for trading on either the BSE or the DIFX, as the context may require; CMSD means the BMA s Capital Markets Supervision Directorate; Closing Date means Thursday, 15 June 2006, which is the last day upon which Subscription Application Forms for the Offered Shares pursuant to the Offer will be received by the Receiving Banks; Core Management Team means the senior management of the Company as set out in section 5, Information about ABG and the Group and as amended from time to time by the Board with reference to the nomination committee; DIFC means the Dubai International Financial Centre; DIFX means the Dubai International Financial Exchange; Director means a member of the Board or any of them as the context may require; Dispatch of Refunds Date means Monday, 17 July 2006; DFSA means the Dubai Financial Services Authority; Eligible Investor means a person of any nationality over the age of 21 years, or a person of any nationality under the age of 21 years whose guardian applies for Shares on their behalf; Founders means Sheikh Saleh Abdullah Kamel and/or Dallah Al Baraka Holding Company E.C., as the context may require; GIB means Gulf International Bank B.S.C.(c); Group, Group Company and Unit means the Albaraka Banking Group B.S.C. and/or one or more of the subsidiaries of the Albaraka Banking Group B.S.C., as the context may require; IFRS means International Financial Reporting Standards; Independent Non-executive Directors means those of the Non-executive Directors that are independent of the management while also being free from any business or other relationship that could interfere with the exercise of their independent judgement,mr. Saleh Mohamed Al-Yousef and Dr. Anwar Ibrahim are currently Independent Non-executive Directors; Individual means an Applicant that is a real person; Institution means an Applicant that is a not a real person, but rather is some other form of legal person such as an incorporated body; Investor Fee means the fee payable by Applicants to the BSE to open a BSE CSD Account; Investor Number means an investor s BSE CSD Account number; Issue Fees means US$0.05 per Offered Share; IPO or Initial Public Offering or Offer means the initial public offering of Shares pursuant to the terms and conditions set out in this Prospectus and the Subscription Application Form; Law means the Bahrain Commercial Companies Law issued by Decree law No. (21) for the year 2001; 10

11 Offer Period means the period starting on the Opening Date and ending on the Closing Date (inclusive), during which Subscription Application Forms and Subscription Funds for Offered Shares pursuant to the Offer will be received by the Receiving Banks; Offer Price means US$3.08 per Offered Share, which is inclusive of an Issue Fee of US$0.05 per Offered Share; Offered Shares means all of the Shares offered to the public pursuant to the IPO; Opening Date means Saturday, 27 May 2006, which is the first day upon which Subscription Application Forms for Offered Shares pursuant to the Offer will be received by Receiving Banks; New Shares means newly created Shares that are issued to Applicants pursuant to the Offer, not including any Shares currently owned by the Selling Shareholders; New Shareholders means those Shareholders who apply for and are allocated Offered Shares pursuant to the IPO; Non-executive Directors means those Directors that have no administrative or management responsibilities in the Company, the current Non-Executive Directors of the Company are Sheikh Saleh Abdullah Kamel, Mr. Saleh Mohamed Al-Yousef, Dr. Anwar Ibrahim and Mr. Abdulla Ammar Al Saudi (note that Mr. Saleh Mohamed Al-Yousef and Dr. Anwar Ibrahim are both Independent Nonexecutive Directors); Private Sale means the pre-ipo sale of Shares from the Founders to Strategic Investors; Private Sale Shares means those shares sold to Strategic Investors prior to the IPO, that are not offered to the public through the Offer; Prospectus means this document; Receiving Banks means those Receiving Banks that are listed in the Appendix; Selling Shareholders means Sheikh Saleh Abdullah Kamel and Dallah Al Baraka Holding Company E.C.; Shareholders means the holders of Shares; Shares means Shares in the capital of the Company each with a nominal value of US$1.00; Strategic Investors means the strategic investors who have agreed to purchase Shares through the Private Sale; Subscription Application Form means the form that is available at Receiving Banks during the Offering Period, and which Applicants must complete and submit to an Approved Branch, together with their Subscription Funds; Subscription Funds means the amount calculated in accordance with the formula set out at section 18, How to apply for Shares through the IPO ; and Terms and Conditions means the Terms and Conditions set out in section 17, Terms and Conditions of the Offer and/or appended to the Subscription Application Form, as the context may require. 1.2 Glossary of Technical Terms Diminishing Musharaka means a contract by way of joint ownership of an asset by two parties whereby one party undertakes to purchase the other party s share progressively; Fatwa means a religious ruling issued by a Shari a Supervisory Board opining on a particular transaction or matter that is intended to be in conformity with the Islamic Shari a; Ijara Muntahia Bittamleek means a contract for the leasing of a specified asset on terms whereby at the end of the lease period, the lessee acquires ownership of the asset (through a separate sale undertaking); Istisna a means a contract for works between the customer and his bank; Mudarib means a manager of an account or agent acting on behalf of certain investors; Mudaraba means a contract where investors (the rabb al-maals) provide capital (on a restricted or unrestricted basis) for investment to the Mudarib; Murabaha means the purchase by a bank of an asset at cost price and resale to the customer with a mark-up on a deferred payment basis; Musharaka means a form of Islamic joint venture; Shari a and Shariah means the laws of Islam derived from the Quran and the sayings, practice and traditions of the Prophet Mohammed, peace be upon him; Sukuk means a certificate of investment based on a securitised Islamic lease; and Zakah means the compulsory tax payable by every Muslim in accordance with the principles of the Shari'a. 11

12 2 Resolutions and Approvals 1. The Extraordinary General Assembly of ABG decided, during its 4th meeting held on 16 November 2005, to approve the conversion of Al Baraka Banking Group B.S.C.(c) from a closed shareholding company into a public shareholding company, and to list its shares on the Bahrain Stock Exchange and on regional and global markets. 2. Al Baraka Banking Group B.S.C.(c) submitted an application to the Ministry of Industry and Commerce seeking approval of its conversion into a public shareholding company and the Ministry approved this application in pursuance of the Council of Minister's approval dated 8 January No objection was received to the conversion of the Company to an open joint stock company within the time allowed for such objections and final approval for the completion of the conversion process was granted by the decision of the Minister of Industry and Commerce No. (49) Issued on 15 April The Issuer has obtained a no objection letter from the CMSD dated 4 May 2006 stating that it has no objection to the use of this Prospectus in relation to the Offer. 4. The Issuer has obtained a no objection letter from the DFSA addressed to the DIFX dated 2 May 2006, stating that the DFSA has no objection to the admission of the Shares to the DIFX. 5. Application has been made to the BSE and the DIFX to list the Shares. Trading of the Shares on the BSE and the DIFX will commence as soon as practicable following the Closing Date. An announcement will be made by each of the BSE and the DIFX confirming the date that trading of Shares will commence. 12

13 3 Time Table of the Offering Opening Date Saturday, 27 May 2006 Closing Date Thursday, 15 June 2006 Allotment Date Monday, 3 July 2006 Allotment Announcement Date Wednesday, 5 July 2006 Dispatch of Refunds Date Monday, 17 July 2006 Commencement of Trading Trading of the Shares on the BSE and the DIFX will commence as soon as practicable following the Closing Date. An announcement will be made by each of the BSE and the DIFX confirming the date that trading of Shares will commence. 13

14 4 Summary of the Offering The Issuer Albaraka Banking Group B.S.C., a Bahraini joint stock company incorporated on 27 June 2002 with Commercial Registration Number and holding BMA Operating Licence Number OBU/060. Offer Price The Offered Shares will be offered at an Offer Price of US$3.08 per Offered Share. Issue Fee The Offer Price is inclusive of an Issue Fee of US$0.05 per Offered Share. Nominal Value The nominal value per Share is US$1.00. Share Premium The share premium for each of the Offered Shares (which is the Offer Price, less the Issue Fee and less the nominal value per Offered Share) is US$2.03 per Offered Share. Number of Shares in the Offer 188,908,587 Offered Shares comprising of: (i) 68,908,587 Shares being Offered by the Selling Shareholders; and (ii) 120,000,000 New Shares. The Offer Price is US$3.08 per Offered Share, which is inclusive of an Issue Fee of US$0.05 per Offered Share. The nominal value of each Offered Share is US$1 per Offered Share. The resulting share premium to be paid to the Company in relation to each of the New Shares is US$2.03 per New Share. Authorised share capital US$1,500,000,000, which is made up of 1,500,000,000 Shares each with a nominal value of US$1.00. Issued and paid up share capital before the Offer The issued and paid up share capital of ABG before the Offer is US$510,000,000. Issued and paid up share capital after the Offer The issued and paid up share capital of ABG after the Offer is expected to be US$630,000,000. Rights of Offered Shares The Company has one class of Share, and all Shares (including Offer Shares) carry equal rights and obligations. The Shares are indivisible but two or more persons may jointly hold title to one or several Shares provided that they shall be represented in relation to the Shares by one person. Joint owners of Shares shall be jointly responsible for liabilities arising from such ownership. Eligibility Applicants of all nationalities over the age of 21 are eligible to subscribe to the Offer. Applicants under the age of 21 should make their application through their legal guardian. Opening Date Saturday, 27 May 2006 (at the commencement of normal banking hours) Closing Date Thursday, 15 June 2006 (at the cessation of normal banking hours) 14 Allotment Date Monday, 3 July 2006 Allotment Announcement Date Wednesday, 5 July 2006 dispatch of refunds Date Monday, 17 July 2006 Offer Period The Offer Period opens on Saturday, 27 May 2006 and closes on Thursday, 15 June 2006 inclusive. Minimum Subscription Individual Applicants must apply for a minimum of 1500 Shares, and in multiples of 100 Shares thereafter. Institutional Applicants must apply for more than 3000 Shares, and in multiples of 100 Shares thereafter. Allotment BASIS If the total number of Shares applied for exceeds the number of Offered Shares, ABG shall, in consultation with the Lead Manager and the Bahrain Monetary Agency, establish an allotment basis. It is currently intended that the allotment basis will be as follows: 1) Tranche A will consist of 38,000,000 Offered Shares (approximately 20% of the Offered Shares) which will be allocated to Individual Applicants pro-rata to the number of Offered Shares they have applied for, up to a maximum of 3000 Shares per Individual Applicant; 2) Tranche B will consist of the remaining 150,908,587 Offered Shares (approximately 80% of the Offered Shares), together with all Tranche A Shares that have not been allocated through Tranche A. Tranche B Shares will be alloted to Institutional Applicants, pro-rata to the number of Offered Shares that they have applied for, and Individual Applicants, pro rata to the number of Shares they have applied for and not been allotted under Tranche A; 3) The basis of allotment will be published in newspapers published in the Kingdom of Bahrain, and certain other regional newspapers in the GCC as determined by ABG. The decision of ABG on the basis of allotment and on each individual allotment shall be final; 4) Applicants under the age of 21 should make their applications through their legal guardian; 5) Allotment of the Shares is expected to be completed on the Allotment Announcement Date; and 6) No Shares shall be distributed pursuant to this Prospectus at any date falling 12 months after the date of this Prospectus. DisPAtch of Refunds to Applicants Following the allotment of the Offered Shares, each Receiving Bank shall distribute Allotment Letters to those Applicants who applied for Offered Shares through their respective Approved Branches, informing them of their respective allotments of Offered Shares pursuant to the IPO. In the event that an application is rejected in whole or in part or if the Offer does not proceed, the Subscription Funds or the balance thereof will be returned to the Applicant in the currency in which they were initially remitted by the Applicant to the relevant Approved Branch, at the risk and cost of the Applicant and without accounting for profit.

15 Allotment Letters and any refunds due will be dispatched, or made available for collection, by no later than the Dispatch Refunds Date. Commencement of Trading on the Bahrain Stock Exchange and the Dubai International Financial Exchange Trading of Shares on the BSE and the DIFX will commence as soon as practicable following the Closing Date. An announcement will be made by each of the DIFX and the BSE confirming the date that trading of Shares will commence. Founders Trading Restrictions The Founders have agreed that they will not, during the 12 month period following the Allotment Date, sell, contract to sell, grant any option or right to purchase, or otherwise transfer or dispose of, directly or indirectly, any of the Shares held by them following the IPO. Strategic Investor s Trading Restrictions The Strategic Investors have agreed (under the terms of the contract pursuant to which each of them has purchased Shares in the Company) that they will not, during the 6 month period following the Allotment Date, sell, contract to sell, grant any option or right to purchase, or otherwise transfer or dispose of, directly or indirectly, any Shares purchased by them pursuant to the Private Sale. Founders and Principal Shareholders On the Closing Date, Sheikh Saleh Abdullah Kamel will own a 28.24% interest in the Group (177,940,367 Shares) and the Dallah Al Baraka Holding Company E.C. (Bahrain) will own a 23.11% interest in the Group (145,587,574 Shares).99.9% of the shares in the Dallah Al Baraka Holding Company E.C. are owned by Sheikh Saleh Abdullah Kamel (either directly or indirectly). Rank of Offered Shares The Offered Shares will rank pari passu in all respects with all other Shares of ABG. Dividends The Founders have agreed to waive any claims to dividends in respect of Offered Shares sold through the IPO. All Shareholders will be eligible to receive dividends declared for the financial year ending 31 December 2006, in full. Use of Proceeds The net proceeds from the Offer will be used for the expansion of the existing and proposed Islamic banking business of the Group (particularly in Asia, Europe, Africa and the Middle East), to provide additional capital for the purposes of expansion and for general corporate purposes. Risks There are certain risks relating to an investment in the Group. These risks are described in section 11, Risk Factors which should be considered carefully by all Applicants prior to making a decision to invest in the Shares. Subscription Application Forms Subscription Application Forms can be obtained at the Approved Branches of the Receiving Banks. For a list of details concerning the Approved Branches refer to the Appendix to this Prospectus. Payment of subscription funds Applicants must remit to the Approved Branch their cleared Subscription Funds (which includes the Issue Fees) together with any applicable Investor Fee, net of any Bank Charges at the time of submitting their application. If for any reason the instrument by which they have paid their Subscription Funds is returned, or insufficient Subscription Funds are received, or cleared funds are not available within 2 days after the Closing Date, the application may be rejected in whole or in part. Applicants who apply for Shares at a Receiving Bank in the UAE or in Bahrain are entitled to apply only in the local currency (Bahraini Dinar, or UAE Dirhams). Applicants who apply for Shares at a Receiving Bank in Oman or in Qatar are entitled to apply only in United States Dollars. Applicants may make payments as follows: a) by way of internal transfer from an account held with the relevant Receiving Bank; b) by way of Manager's Cheque / Demand Draft (to be drawn in the currency of the country in which the relevant Receiving Bank is located); or c) by way of telegraphic transfer (Payment instructions to clearly mention the related Subscription Application form number and the amount of funds that are payable, net of any Bank Charges). Telegraphic transfers can only be made in United States Dollars and can only be made for amounts greater than US$100,000. Cash deposits or personal cheques will not be accepted. Underwriting Arrangements The Underwriters have, subject to customary terms and conditions included in underwriting agreements entered into with ABG (which include, without limitation, terms and conditions relating to market conditions), agreed to underwrite the issue of approximately 73 million New Shares offered to the public pursuant to the Offer. Listing of the Shares on the BSE and the DIFX Application has been made to the BSE and the DIFX for the listing and admission to trading of the Shares. All Applicants are required to have a CSD Account open with the BSE. Applicants who do not have a CSD Account open with the BSE will be required to apply to open a CSD Account with the BSE through the completion of the relevant section of their Subscription Application Form. Initially, all Shares will be held in Applicants BSE CSD Accounts. 15

16 5 Information about the Group 5.1 Introduction Albaraka Banking Group B.S.C was incorporated in Bahrain on 27 June 2002 pursuant to the Bahrain Commercial Companies Law, with Commercial Registration number ABG was initially incorporated as a closed Bahrain joint stock company with two shareholders. On 16 November 2005 a resolution was passed at an Extraordinary General Meeting of ABG to authorise the conversion of ABG to a Bahrain public joint stock company in order to allow for Shares to be made available to the public and to permit the listing of the Shares on the BSE and the DIFX. ABG s head office is located at Albaraka Tower, P.O. Box 1882, Manama, Kingdom of Bahrain. ABG has an authorised share capital of US$1,500,000,000 (one and one half billion United States Dollars) divided into 1,500,000,000 (one and one half billion) Shares, each with a nominal value of US$1.00. ABG is 55% owned by Sheikh Saleh Abdullah Kamel and 45% owned by Dallah Al Baraka Holding Company E.C., Bahrain. ABG operates under a banking licence granted to it by the BMA, Licence Number OBU/060 dated 6 January ABG holds interests in ten geographically diverse subsidiaries incorporated in Algeria, Bahrain, Egypt, Jordan, Lebanon, Pakistan, South Africa, Sudan, Tunisia and Turkey. The ownership structure of the Group is set out in section 5.8, ABG Organisational Structure. The creation of the Group arose from the need, identified through the vision of Sheikh Saleh Kamel, for a truly international Islamic banking service worldwide. Through the consolidation of the 10 Units in the Group, an entity has been created that is establishing a name for itself in the Arab and Islamic banking world. As noted in further detail in section 7, Islamic Financial Markets Summary, Islamic finance, as an industry, is still expanding. ABG management estimate that the total assets held by Shari a-compliant structures is approximately US$300 billion. In order to take advantage of the opportunities this situation presents, each Unit offers a wide range of Shari a-compliant products. Further details on the nature of these products, and the particular products offered by each Unit, are set out in section 6.2, Group-wide Initiatives. The joining of the ten constituent banks under a single holding company has not only created a group whose financial strength is greater than the sum of its parts, but has ideally placed it to take advantage of this growth in the industry and to expand to meet the challenges of that growth. ABG sees its mandate as the creation of an Islamic banking conglomerate that will provide its customers worldwide with a growing array of products and services in conformity with the principles of the Shari a. Further details of each Unit are set out in section 6 Information about the Group. Although the Group structure chart sets out details of the subsidiaries of each Unit, none of these entities carries on any significant function. ABG s function is to oversee the smooth running of each of the Units. In addition, ABG will consolidate the Group s operations in Bahrain by rationalising the activities of ABG and Bahrain based Units to effect operational and business synergies. The success of a diverse group of companies such as the Group is measured by how well it coordinates and controls its business and operation strategies. ABG has implemented Group-wide strategic plans to define the Group s business and operational direction. ABG expects to achieve its strategy by increasing cross border business through active intra-group coordination, diversification and innovation in the range of products offered to customers, strengthening of corporate governance across the Group, further tightening of anti-money laundering controls, and upgrading IT systems. It is ABG s function to co-ordinate these strategies across the Units, and to ensure that these strategies are implemented. 16

17 5.2 Letter from the Chairman Grace to Allah whose blessings and good deeds are accomplished, and the prayers and peace of Allah be upon our Prophet, and upon all his descendents and companions. Dear Investor Peace and the mercy of Allah be upon you. On behalf of the Board of Directors of ABG I am pleased to attach our Prospectus detailing the proposed sale of new and existing shares in the capital of ABG. As is outlined more fully in the Prospectus, the mission of ABG is to become a leading Islamic banking group with a truly international presence offering retail, commercial, investment banking and treasury services strictly in accordance with the principles of Shari a. In order to achieve this goal, the Board of Directors has developed a three stage strategy. The first step of this strategy being the consolidation of our existing businesses has already been achieved through the establishment of an integrated business comprising ten subsidiaries located in 10 countries, and with a total of 184 branches in Algeria, Bahrain, Egypt, Jordan, Lebanon, Pakistan, Sudan, South Africa, Tunisia and Turkey. However, we still have ambitious plans to grow the business in both new products and markets, and the implementation of the next stages of our three stage strategy will require both significant financial commitment, and international support. To this end, we believe that the proposed Initial Public Offering of Shares on the Bahrain Stock Exchange and the Dubai International Financial Exchange will act as a catalyst for the injection of capital and the further establishment of our Group identity. Steps to Success The second stage in the fulfilment of our strategic plan is to complete successfully the IPO of ABG. This will enhance the strength of our profile, capital structure and professional resources and will prepare the Group for the challenges of the third, and arguably most important stage of our development strategy that in which we shall deploy the new capital raised through our IPO to leverage off our market leader position in key jurisdictions, cement the consolidated Group and expand into new markets. Already an innovator in the region in terms of creating an integrated Islamic bank, introducing international standards of corporate governance and in approaching new products and markets, we expect to achieve our strategies by: increasing cross border business through active intra-group co-ordination, diversification and innovation in the range of products offered to our customers; strengthening of corporate governance across ABG; further strengthening of our anti-money laundering practices; improving IT systems; and funding research into the development of innovative Islamic financial products, all of which are more fully explained in the Prospectus. Business Integration and Co-ordination ABG recognises that a major measure of the success of any multi-national organisation is by reference to how well it monitors and controls the strategies of its different business units, and how it is able to create a concerted focus for implementing its business initiatives. With this in mind, it has been a priority of ABG to implement a system of financial consolidation and control throughout all its business units, thereby creating a major consolidated banking group which embodies a single identity, yet which still retains the localised, and varied cultural understanding which makes each of the country businesses a leader in its own market. The further development and introduction of new IT, corporate governance, anti-money laundering and compliance systems will see the continued development of this integrated and co-ordinated business. Creation of a single group Previously comprising an informal group of separate independent banks operating in 10 different countries, ABG has since 2003 consolidated all its operations under the umbrella of ABG. ABG will also consolidate its operations in Bahrain by rationalising the activities of the Group s Bahrain based operations to effect operations and business synergies. From the point of view of undertaking our IPO, this process has, importantly, meant the successful consolidation of our financial statements for the years 2003, 2004 and We have also conformed our financial accounting policies to Islamic Accounting Standards (as issued by the AAOIFI) and IFRS.In this way, we believe that ABG is able to create one of the leading international Islamic financial groups - creating a single identity through the implementation of broad policy initiatives (incorporating strategic plans to define business and operational direction) at a Group level, yet retaining a decentralised decision making capability at subsidiary, operational level. 17

18 5 Information about the Group continued The separate operating units of ABG are each managed locally by their respective boards (which involve many of the leading bankers in local markets), with ultimate reporting to ABG s Board of Directors. Functional control over all operating units is achieved through the introduction of standardised ABG Group policies developed, implemented and administered by the Core Management Team, which comprises the Group s Chief Executive Officer (Mr. Adnan Ahmed Yousif), the Deputy General Manager and the Group s Global Heads of Department. Some of the major activities to be undertaken by the Core Management Team, in addition to its existing activities, include: financial control; internal audit; risk management; operations and administration; credit; treasury; marketing; information technology; and research and development. Annual performance targets are set at Group level through a management plan, with each operating unit of the Group being set a return on investment target of 12% to be achieved by the end of the current year (it is intended to raise this to 15% in the subsequent 3 years). Such financial targets have been of fundamental importance to us in considering our intention to undertake the IPO it being our strong conviction that, as a public company, our businesses should perform in a manner which seeks to reward the shareholders of ABG for their belief, and investment, in the Group. Dual Listing As I have explained above, it is our belief that the IPO is the platform on which ABG can launch its diversification and expansion. Reflecting our position as one of the leading regional financial institutions, with extensive international strategic growth plans, we have sought to widen our potential investor base by undertaking dual listings on the Bahrain Stock Exchange and Dubai International Financial Exchange. This will allow, we believe, the maximum flexibility in terms of trading for investors, while accessing the widest possible regional investor base for the Group. Post-IPO Expansion Assuming successful completion of the IPO, ABG intends to embark on an expansion programme. It is our intention to allocate a significant amount of the proceeds of the IPO towards expanding and developing the capital base of existing and future operating units and to undertake an expansion of our business into those countries and regions, such as the GCC, Europe, Africa and the Far East, where we believe opportunities exist for the growth of Islamic banking. Conclusion In addition to outlining our own investment plans and growth strategy, the Prospectus highlights the opportunities which we believe exist more generally in the Islamic banking market worldwide. This market is currently undergoing a period of significant growth, which in turn has given rise to more substantial liquidity levels than previously seen. Market values are at all time highs achieving considerable shareholder value and although there can be no guarantee that such values can be maintained (nor, indeed, that they will continue to rise), we believe that the strong business knowledge, ethos and values of ABG (combining as they do an international vision with local understanding and cultural awareness) will, on the back of a successful IPO, enable us to fulfil our mission of becoming a leading Islamic bank with a global presence. Yours sincerely Sheikh Saleh Abdullah Kamel Any decision by any potential investor to buy the Shares should be based on a consideration of the Prospectus in full and not on the basis of this letter alone. 18