1

Interim Condensed Consolidated Financial Information (Unaudited)Ahlan Ahli 1 899 899

www.eahli.com 30 June 2011

2

INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION (UNAUDITED) 30 June 2011

30 June 2011

(Audited)31 December

2010 30 June 2010

Note KD 000 KD 000 KD 000

ASSETS

Cash and balances with banks 200,775 312,252 271,049

Kuwait Government treasury bills and bonds 201,172 259,000 297,029

Central Bank of Kuwait bonds 213,847 129,918 182,193

Loans and advances 1,991,974 2,005,785 1,966,951

Investments securities 193,590 180,189 110,091

Other assets 38,243 32,494 36,424

Premises and equipment 29,343 29,460 32,180

TOTAL ASSETS 2,868,944 2,949,098 2,895,917

LIABILITIES AND SHAREHOLDERS’ EQUITY

LIABILITIES

Due to banks and other financial institutions 438,278 397,334 566,831

Customers’ deposits 1,901,040 2,022,052 1,822,899

Other liabilities 61,954 61,076 67,533

TOTAL LIABILITIES 2,401,272 2,480,462 2,457,263

SHAREHOLDERS’ EQUITY

Share capital 144,118 144,118 144,118

Share premium 108,897 108,897 108,897

Treasury shares (8,517) (8,410) (8,371)

Reserves 223,174 195,501 194,010

Proposed dividend 3 - 28,530 -

TOTAL SHAREHOLDERS’ EQUITY 467,672 468,636 438,654

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 2,868,944 2,949,098 2,895,917

Ahmed Yousuf Behbehani Chairman

Colin PlowmanChief General Manager and Chief Executive Officer

The attached notes 1 to 25 form part of these consolidated financial statement

3

INTERIM CONDENSED CONSOLIDATED INCOME STATEMENT (UNAUDITED) For the period ended 30 June 2011

NotesThree months ended

30 JuneSix months ended

30 June

2011 2010 2011 2010

KD 000 KD 000 KD 000 KD 000

Interest income 29,944 28,910 59,779 59,352

Interest expense (8,790) (11,046) (18,535) (22,662)

NET INTEREST INCOME 21,154 17,864 41,244 36,690

Net fees and commission income 6,711 5,909 13,867 11,899

Net foreign exchange gain 950 1,071 1,600 2,100

Net (loss) / gain on sale of investment securities (164) (278) (273) 364

Dividend income 1,650 735 2,303 1,473

Other income 188 483 413 775

OPERATING INCOME 30,489 25,784 59,154 53,301

Staff expenses (5,834) (5,358) (10,990) (9,860)

Other operating expenses and depreciation (3,143) (2,833) (6,976) (6,150)

OPERATING EXPENSES (8,977) (8,191) (17,966) (16,010)

OPERATING PROFIT FOR THE PERIOD BEFORE PROVISION / IMPAIRMENT LOSSES 21,512 17,593 41,188 37,291

Charge for credit provision (8,181) (4,203) (10,012) (6,857)

Impairment losses on investments available for sale (231) (1,665) (587) (2,449)

PROFIT FOR THE PERIOD BEFORE TAXATION 13,100 11,725 30,589 27,985

Taxation 4 (952) (773) (2,145) (1,750)

NET PROFIT FOR THE PERIOD 12,148 10,952 28,444 26,235

BASIC AND DILUTED EARNINGS PER SHARE 5 9 fils 8 fils 20 fils 20 fils

The attached notes 1 to 25 form part of these consolidated financial statement

4

INTERIM CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED) For the period ended 30 June 2011

Three months ended 30 June

Six months ended 30 June

2011 2010 2011 2010

KD 000 KD 000 KD 000 KD 000

NET PROFIT FOR THE PERIOD 12,148 10,952 28,444 26,235

Other comprehensive income

Effect of changes in fair values of investments available for sale (706) (3,758) (1,105) (1,486)

Net gain on sale / impairment losses on investments available for sale 150 1,784 385 2,065

Exchange difference on translation of foreign operations (41) 11 (53) 18

Other comprehensive (expense) /income for the period (597) (1,963) (773) 597

TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 11,551 8,989 27,671 26,832

The attached notes 1 to 25 form part of these consolidated financial statement

5

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The attached notes 1 to 25 form part of these consolidated financial statement

INTERIM CONDENSED CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED) For the period ended 30 June 2011

Six months ended 30 June

2011 2010

KD 000 KD 000

OPERATING ACTIVITIES Net profit for the period 28,444 26,235

Adjustments for:

Net gain on sale of investments available for sale (202) (384)

Dividend income (2,303) (1,473)

Depreciation 799 890

Charge for credit provision 10,012 6,857

Impairment losses on investments available for sale 587 2,449

Operating profit before changes in operating assets and liabilities 37,337 34,574

Changes in operating assets and liabilities

Deposits with banks 29,183 112,774

Kuwait Government treasury bills and bonds 57,828 (90,614)

Central Bank of Kuwait bonds (83,929) (60,484)

Investments at fair value through profit or loss 455 25

Loans and advances 3,992 50,493

Other assets (5,385) (9,089)

Due to banks and other financial institutions 40,944 (173,482)

Customers› deposits (121,012) (14,774)

Other liabilities 685 9,410

Net cash used in operating activities (39,902) (141,167)

INVESTING ACTIVITIESPurchase of investments available for sale (34,864) (16,138)

Proceeds from sale of investments available for sale 19,539 13,991

Net purchase of premises and equipment (682) (1,284)

Dividend income received 2,303 1,473

Net cash used in investing activities (13,704) (1,958)

FINANCING ACTIVITIES Proceeds from issue of shares - 100,883

Dividends paid (28,528) (17,125)

Treasury shares purchased (107) (2,422)

Net cash (used in) from financing activities (28,635) 81,336

Foreign currency translation difference (53) 18

NET DECREASE IN CASH AND CASH EQUIVALENTS (82,294) (61,771)

Cash and cash equivalents at 1 January 204,725 265,144

CASH AND CASH EQUIVALENTS AT 30 JUNE 122,431 203,373

Cash and cash equivalents comprise:

Balances with the Central Bank of Kuwait 8,964 1,278

Cash in hand and in current account with other banks 30,544 18,179

Deposits with banks with original maturity up to thirty days 82,923 183,916

122,431 203,373

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1 ACTIVITIES

Al Ahli Bank of Kuwait K.S.C. (“the Bank”) is a public shareholding company incorporated in Kuwait on 23 May 1967 and is registered as a Bank with the Central Bank of Kuwait. Its registered office is at Al Safat Square, Ahmed Al Jaber Street, Kuwait City. It is engaged in banking, primarily in Kuwait and in the United Arab Emirates.

The Bank has a wholly owned subsidiary company, Ahli Capital Investment Company K.S.C. (Closed) (“the Subsidiary”). The Subsidiary is engaged in investment management and advisory activities and is under the supervision of the Central Bank of Kuwait.

The interim condensed consolidated financial information of the Bank and its Subsidiary (collectively “the Group”) were approved by the Board of Directors on 14 July 2011.

2 BASIS OF PRESENTATION

(a) The interim condensed consolidated financial information of the Group has been prepared in accordance with International Accounting Standard 34 “Interim Financial Reporting” except as noted below.

The annual consolidated financial statements for the year ended 31 December 2010 were prepared in accordance with the regulations of the State of Kuwait for financial services institutions regulated by the Central Bank of Kuwait. These regulations require adoption of all International Financial Reporting Standards (IFRS) except for the IAS 39 requirement for collective impairment provision, which has been replaced by the Central Bank of Kuwait’s requirement for a minimum general provision.

The accounting policies used in the preparation of the interim condensed consolidated financial information are consistent with those used in the preparation of the annual consolidated financial statements for the year ended 31 December 2010 except for the amendments to standards as below which are applicable for the Group from 1 January 2011 :

IAS 24 Related party disclosures (Revised) The amended Standard clarified the definition of a related party and laid down additional requirement for disclosure of outstanding commitments to related parties. The adoption of the amendment did not have any impact on the financial position or performance of the Group.

IAS 34 Interim Financial Reporting Improvement to IAS 34 introduces the concept of “Significant events and transactions” and has brought in additional disclosures for changes in business and economic circumstances, transfers between levels of the fair value hierarchy used and changes in the classification of financial assets resulting from change in the purpose or use of those assets. Adoption of this improvement did not have any material impact on the financial position or performance of the Group.

Additionally, the following new IFRS have been issued in May 2011 and are effective for annual periods beginning on or after 1 January 2013:

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2 BASIS OF PRESENTATION (continued)

IFRS 10 Consolidated Financial StatementsIFRS 10 replaces the consolidation guidance in IAS 27 Consolidated and Separate Financial Statements and SIC-12 Consolidation - Special Purpose Entities by introducing a single consolidation model for all entities based on control, irrespective of the nature of the investee (i.e., whether an entity is controlled through voting rights of investors or through other contractual arrangements as is common in special purpose entities). Under IFRS 10, control is based on whether an investor has 1) power over the investee; 2) exposure, or rights, to variable returns from its involvement with the investee; and 3) the ability to use its power over the investee to affect the amount of the returns.

IFRS 12 Disclosure of Interests in Other EntitiesIFRS 12 requires enhanced disclosures about both consolidated entities and unconsolidated entities in which an entity has involvement. The objective of IFRS 12 is to require information so that financial statement users may evaluate the basis of control, any restrictions on consolidated assets and liabilities, risk exposures arising from involvements with unconsolidated structured entities and non-controlling interest holders’ involvement in the activities of consolidated entities.

IFRS 13 Fair Value MeasurementIFRS 13 Fair Value Measurement replaces the guidance on fair value measurement in existing IFRS accounting literature with a single standard. IFRS 13 defines fair value, provides guidance on how to determine fair value and requires disclosures about fair value measurements. However, IFRS 13 does not change the requirements regarding which items should be measured or disclosed at fair value.

The application of the above standards is not expected to have a material impact on the financial position or performance of the Group as and when they become effective or early adopted.

The interim condensed consolidated financial information does not contain all information and disclosures required for full financial statements prepared in accordance with IFRS, and should be read in conjunction with the Group’s annual consolidated financial statements for the year ended 31 December 2010. Further, results for the six month period ended 30 June 2011 are not necessarily indicative of the results that may be expected for the financial year ending 31 December 2011.

3 DIVIDENDS PAID

The shareholders at the Annual General Meeting held on 12 March 2011 approved the distribution of cash dividend of 20 per cent amounting to KD 28,530 thousand for the year ended 31 December 2010. Treasury shares are not entitled to any cash dividends.

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4 TAXATION

Three months ended 30 June Six months ended 30 June

2011 2010 2011 2010

KD 000 KD 000 KD 000 KD 000

Kuwait Foundation for the Advancement of Sciences 115 103 268 247

National Labour Support Tax 318 286 744 686

Zakat 128 114 298 274

Tax on overseas branches 391 270 835 543

952 773 2,145 1,750

5 BASIC AND DILUTED EARNINGS PER SHARE

Basic and diluted earnings per share are computed by dividing the net profit for the period by the weighted average number of shares outstanding during the period, calculated as follows:

Three months ended 30 June Six months ended 30 June

2011 2010 2011 2010

Net profit for the period (KD 000) 12,148 10,952 28,444 26,235

Weighted average number of the Bank’s issued and paid-up shares 1,441,180,449 1,385,484,913 1,441,180,449 1,306,299,174

Less: weighted average number of treasury shares (14,818,554) (14,559,847) (14,765,336) (12,754,157)

Adjusted weighted average number of shares outstanding during the period 1,426,361,895 1,370,925,066 1,426,415,113 1,293,545,017

Basic and diluted earnings per share 9 fils 8 fils 20 fils 20 fils

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6 SEGMENTAL INFORMATION

The Group is organised into segments that engage in business activities which earns revenue and incurs expenses. These segments are regularly reviewed by the chief operating decision maker for resource allocation and performance assessment. For the purposes of segment reporting the management has grouped the products and services into the following operating segments:

Commercial Banking - Comprising a full range of credit, deposit and related banking services provided to its commercial customers.

Treasury and Investment - Comprising money market, foreign exchange, treasury bonds, asset and surplus fund management and invest-ment securities.

Operating income includes operating revenue directly attributable to a segment. Segment results include revenue and expenses directly attributable to a segment. Segment assets comprise those operating assets that are directly attributable to the segment.

Segmental information for the six month period ended 30 June is as follows:

Commercial Banking Treasury and Investment Total

2011 2010 2011 2010 2011 2010

KD 000 KD 000 KD 000 KD 000 KD 000 KD 000

Operating income 50,961 47,579 8,193 5,722 59,154 53,301

Segment result 32,930 33,131 6,642 2,388 39,572 35,519

Unallocated expenses (8,983) (7,534)

Profit for the period before taxation 30,589 27,985

Segmental assets 2,112,070 2,049,520 689,288 777,793 2,801,358 2,827,313

Unallocated assets 67,586 68,604

Total assets 2,868,944 2,895,917

7 RELATED PARTY TRANSACTIONS

These represent transactions with certain related parties (major shareholders, directors and senior management of the Group, close members of their families and companies of which they are principal owners or over which they are able to exercise significant influence) who were customers of the Group during the period. The terms of these transactions are approved by the Group’s management.

In the normal course of business, directors, senior management and parties related to them have deposits with the Bank and credit facilities granted to them by the Bank. The balances included in the interim condensed consolidated financial information are as follows:

(Audited)

30 June 31 December 30 June

2011 2010 2010

KD 000 KD 000 KD 000

Loans and advances 1,070 762 1,437

Customers’ deposits 11,332 8,718 8,792

Commitments and contingent liabilities 907 1,080 1,086

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8 COMMITMENTS AND CONTINGENT LIABILITIES

Financial instruments with contractual amounts representing credit risk.

(Audited)

30 June 31 December 30 June

2011 2010 2010

KD 000 KD 000 KD 000

Acceptances 56,815 70,212 109,019

Letters of credit 230,693 179,543 135,991

Guarantees 651,216 663,834 646,816

938,724 913,589 891,826

Commitments to extend credit at the statement of financial position date amounted to KD 202,148 thousand (31 December 2010: KD 201,289 thousand and 30 June 2010: KD 142,046 thousand).

9 DERIVATIVE INSTRUMENTS

The notional or contractual amounts of outstanding derivative instruments are as follows:

(Audited)

30 June 31 December 30 June

2011 2010 2010

KD 000 KD 000 KD 000

Derivatives held for hedging:

Fair value hedges

Interest rate swaps 15,919 3,648 3,782

Derivatives held for trading:

Forward foreign exchange contracts 108,005 94,287 89,707

Interest rate swaps 97,843 100,036 -

Credit default swap 27,033 16,836 32,144

248,800 214,807 125,633

Annual Report 2012Ahlan Ahli 1 899 899

www.eahli.com

Al A

hli Bank of K

uwait K

.S.C. A

nnual Report 2012