Annual Report 2010 Eng

Annual Report 2010
COnsTAnTine BRidge
Algeria
A Bridge to Partnerships
This years Annual Report theme A Bridge to Partnerships, is inspired by Al Barakas values and beliefs. Our belief of participation in our customers success and sharing in the development of societies is an enormous responsibility and can be achieved by establishing long lasting relationships. We believe that the mutual trust, the common vision we share is the bridge to building lasting partnerships. This is how we create more value for the businesses, families and the communities we serve.
Contents
shAikh isA BRidge

Financial Highlights Unified Corporate Identity Board of Directors and Sharia Supervisory Board Executive Management Directors Report President & Chief Executives Report Corporate Governance Corporate Social Responsibility Unified Sharia Supervisory Board Report Independent Auditors Report Consolidated Financial Statements Additional Public Disclosures 6 10 16 25 30 33 64 75 78 80 81 138
Bahrain
Financial highlights
16
15.9
12
11.4
13.2
EARNINGS (US$ Millions)

Total Operating income net Operating income net income net income Attributable to equity shareholders of the Parent
14 12 10
1.6 1.6 1.8
13.6
2010 659 316 193 106 13
2009
634 325 167 92
2008
586 314 201 114
2007
444 215 201* 144*
2006
340
10.1 10.9
14
12
11.0
10
9.4
173 124
7.6
8.1
1.5
8.9
8
5.5
7.4
1.7
8.1
10
80
8
1.2
6.1
4 4
BASIC AND DILUTED EARNINGS PER SHARE - US CENTS**
12
14
18*
10
4 0.5
FINANCIAL POSITION (US$ Millions)

Total Assets Total Financing and investments Total Customer deposits Total equity equity Attributable to shareholders of the Parent
2 0 2008 2008 2006 2006 2009 2009 2007 2007 2010 2010 0 2008 2006 2009 2007 2010
15,880 11,392 13,571 1,818 1,225
13,166 9,431 10,999 1,737 1,214
10,920 8,088 8,872 1,550 1,131
10,104 7,389 8,084 1,570 1,144
7,626
2008 2006 2009 2007 2010
5,466 6,147 1,211 979
Total Assets
Total Equity
Total Customer Deposits
Total Financing and Investments
CAPITAL (US$ Millions)

Authorised subscribed and Fully Paid-up
1,500 790.5
1,500 744
1,500 697.5
1,500 651
1,500 630
250 350
325 370
400 350
8.5 201 201 193
10
PROFITABILITY
Return on Average equity Return on Average shareholders equity Return on Average Assets Operating expenses to Operating income
9% 1.3% 52%
8% 1.4% 49%
10% 1.9% 46%
14%* 2.3%* 52%
10% 1.8%
215
283
289
167
150
216
243
124
49%
173
200 150 100 50 50 0 2008 2008 0 100
200 150 100
5.4
6.1
250
250
6.7
7.3
11%
10%
13%
14%*
13%
316
314
300
200
300
FINANCIAL POSITION
equity to Assets Ratio Total Financing and investments as a multiple of equity (times) net Book Value per share (Us$) **
11% 6.3 1.56
13% 5.4 1.54
14% 5.2 1.43
16% 4.7 1.45
16% 4.5 1.24

2006 2009 2007 2010
2 50 0 2008 2008 2006 2006 2009 2009 2007 2007 2010 2010 0
2006
2009
2007
OTHER INFORMATION
Total number of employees Total number of Branches
8,503 370
7,250 289
6,746 283
6,128 243
5,435 216
Net Operating Income
Net Income
2010
Total Number of Branches
Total Number of Employees
* net income for 2007 includes exceptional profit from deemed disposal of a stake in a subsidiary amounting to Us$ 54 million. ** Adjusted for treasury and bonus shares.
Wadi Rum Bridge - Jordan
Msaylha Bridge - Lebanon
Bosphorus Bridge - Turkey
Constantine Bridge - Algeria
Shaikh Isa Bridge - Bahrain
The Nelson Mandela Bridge - South Africa
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11
Unified Corporate identity
Your Partner Bank

One Vision One Identity One Group
Early in 2009, Al Baraka Banking Group commenced the methodical rollout of its new Unified Corporate Identity to all parts of the Group, the launch of which was well received by the markets. While propelling the Al Baraka brand to the forefront of Islamic banking, and emphasizing the Groups commitment to becoming the natural global leader in Islamic banking, the new corporate identity is also a strong symbol of the uniting of all subsidiaries under a single banner. Today the Al Baraka Group stands apart as an institution, with its own unique and unified philosophy, regulations, procedures and corporate culture in place. The Unified Corporate Identity is not merely a cosmetic change to the logo, its aesthetics or consistency of colour, but goes far beyond that. It is nothing less than an attempt to link the philosophical dimension upon which Islamic banking is based - participation and partnership and the equitable sharing of risk and reward through the projection of a unified and modern identity. We see this re-launch of our brand as the first step on a journey, as we work towards the creation of a unified banking group whose many subsidiaries are focused jointly on a single unifying vision.
The unified identity has helped the Group to prioritise its values and ambitions, raising them above the mere attainment of corporate size or product range and delivery. Instead, we believe that as we build our customer relationships based on the spirit of true partnership, our growth will be both inevitable and natural. We at Al Baraka believe that banking has, or ought to have, a crucial role to play in society, one in which as bankers we have an incredible responsibility of stewardship for the resources placed in our hands. To meet this responsibility and use these resources wisely, we rely on Sharia principles to guide us as we participate in our customers successes, sharing in the social development of families, businesses and society at large. By partnership, therefore, we mean that our success and that of each of our customers are as intertwined as our jointly held beliefs. Taking part in the joint effort is therefore our reward. We view money as a means to capitalise on opportunities and create a better society for all. Money becomes the conduit by which we enter into new opportunities together and take part in common effort for mutual reward; as steward of the resources entrusted to us, our efforts contribute to building the community, both at home and in the wider world. We call this concept: Beyond Banking
Our Vision
We believe society needs a fair and equitable financial system: one which rewards effort and contributes to the development of the community
Our Mission
To meet the financial needs of communities across the world by conducting business ethically in accordance with our beliefs, practicing the highest professional standards and sharing the mutual benefits with the customers, staff and shareholders who participate in our business success
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Partnership
Our shared beliefs create strong bonds that form the basis of long-term relationships with customers and staff.
Driven
We have the energy and perseverance it will take to make an impact in our customers lives and for the greater good of society.
Neighbourly
Our Values
We value and respect the communities we serve. Our doors are always open; our customers always experience a warm-hearted, hospitable welcome and accommodating service.
Peace of mind
Our customers can rest assured that their financial interests are being managed by us to the highest ethical standards.
The future of our brand

Al Baraka , with its presence in 13 countries, can claim to have a wide geographical spread extending from Indonesia to Algeria, servicing its customers through a network of 370 branches. Our greatest strength is the enviable bond we have with our customers. Today we have a Unified Corporate Identity that reflects the core values and the intrinsic strengths of the organization. We are continuously building our capacities and strengthening our resources to provide a fair and equitable financial system, not only in the countries we operate in, but also reach out to other parts of the world. Our promise Your partner bank, is aimed at rewarding efforts and contributing to the development of society, thus making Al Baraka the brand of choice for financial services, internationally.
Social contribution
By banking with us our customers make a positive contribution to a better society; their growth and our growth will benefit the world around us.
Our basic strengths, which go back to the earliest days of our foundation 30 years ago, and on which we have depended for moral sustenance throughout that time, may be summarised as: Adherence to Sharia principles Close customer relationships a partnership of equals Financial probity A local bank first and foremost - but with international reach
WAdi RUM BRidge

Jordan Jordan
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Board of directors & sharia supervisory Board Board Committees
Board of directors
Shaikh Saleh Abdullah Kamel Chairman
sharia supervisory Board

Shaikh Dr. Abdul Sattar AbuGuddah
Chairman Member Member Member Member
Board executive Committee

Mr. Abdullah Saleh Kamel
Chairman
Board Affairs and Remuneration Committee

Mr. Ebrahim Fayez Al Shamsi
Chairman Member Member
Mr. Abdulla A. Saudi

Vice Chairman Vice Chairman
Shaikh Abdulla bin Sulieman Al Mannea Shaikh Dr. Abdullatif Al Mahmood Shaikh Dr. Abdulaziz bin Fowzan Al Fowzan Dr. Ahmed Mohiyeldin Ahmed Dr. Eltigani El Tayeb Mohammed
Secretary to the Board
Mr. Adnan Ahmed Yousif

Member Member Member
Mr. Jamal bin Ghalaita Mr. Yousef Ali Fadil bin Fadil
Mr. Abdullah Saleh Kamel Mr. Saleh Al Yousef

Board Member
Mr. Abdul Elah Sabbahi Mr. Yousef Ali Fadil bin Fadil
Board Member and President & Chief Executive Board Member Board Member Board Member Board Member Board Member Board Member Board Member Board Member
Dr. Anwar Ibrahim Mr. Abdul Elah Sabbahi Mr. Ebrahim Fayez Al Shamsi Mr. Jamal bin Ghalaita Mr. Yousef Ali Fadil bin Fadil Mr. Samer Mohammed Farhoud Dr. Bassem Awadallah Mr. Mohyedin Saleh Kamel
independent non-executive directors

Mr. Abdulla A. Saudi
Vice Chairman
Audit and governance Committee

Mr. Saleh Al Yousef
Chairman Member Member
Board Risk Committee

Mr. Abdul Elah Sabbahi
Chairman Member Member Member
Mr. Saleh Al Yousef

Board Member Board Member Board Member Board Member Board Member Board Member
Dr. Anwar Ibrahim Mr. Ebrahim Fayez Al Shamsi Dr. Bassem Awadallah
Member
Mr. Jamal bin Ghalaita Mr. Samer Mohammed Farhoud Mr. Mohyedin Saleh Kamel
Dr. Anwar Ibrahim Mr. Ebrahim Fayez Al Shamsi Mr. Jamal bin Ghalaita Mr. Samer Mohammed Farhoud
Mr. Salah Abuzaid
Secretary to the Board
Dr. Bassem Awadallah
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Board of directors
shaikh saleh Abdullah kamel
Chairman
Shaikh Saleh, Saudi Arabian national, is a well-known and highly respected international businessman from Saudi Arabia. Shaikh Saleh Abdullah Kamel holds a Bachelor of Commerce degree. He is the founder and President of Dallah Al Baraka Group and the founder of the Al Baraka Banking Group. He serves as a director on the boards of a number of organisations and associations across the world. Currently he is Chairman of the following organisations: General Council for Islamic Banks and Financial Institutions; Jeddah Chamber of Commerce & Industry; Council of Saudi Chambers; Federation of GCC Chambers and the Islamic Chamber of Commerce and Industry. As a renowned pioneer of Islamic banking and in recognition of his achievements and his role in promulgating Islamic economic principles encapsulated in the message of his group: Reconstruction of the Earth - Shaikh Saleh Kamel has been awarded the highest of certificates, trophies, and accolades by many countries and organisations over his lifetime.
Mr. Abdullah saleh kamel

Vice Chairman
Mr. Abdulla, Saudi Arabian national, is a respected Saudi businessman, educated in Economic Studies at the University of California, USA. Mr. Abdulla Kamel has held a number of executive positions over the years at Dallah Group. He headed the real estate and property management and central logistics division during the period 1988-1989, was Presidents Assistant for Trade Affairs 1989-1995 and held senior positions at Dallah Al Baraka Holding Company over the period 1995-1999. Mr. Abdulla Kamel is currently the Chairman of Aseer Company, Amlak Real Estate Development and Finance, Al Tawfeek Financial Group, Al Tawfeek Company for Investment Funds and Vice-Chairman of Bank Al-Jazira in Saudi Arabia and King Abdullah Economic City. He is also a Member of the Boards of Saudi Research & Marketing Group and Okaz Corporation for Journalism and Publishing. Mr. Abdulla Kamel has been and remains very active in public activities through his membership in many international and local organizations and associations, such as Jeddah Chamber of Commerce (of which he is a past Member), Young Presidents Organization, Friends of Saudi Arabia, The Centennial Fund and the Board of Trustees of the Prince of Wales Business Leaders Forum. Currently he is the Chief Executive Officer of Dallah Al Baraka Group a position that he has held since 1999.
Mr. Abdulla A. saudi

Vice Chairman
Mr. Saudi, Libyan national, is a world-renowned and respected international Banker. He holds a Certificate in Management and Accounting. He worked at the Central Bank of Libya for 14 years, holding various positions including that of Manager of the Banking Department and Head of the Foreign Investment Department. He was the founder of Libyan Arab Foreign Bank, where he served as Executive Chairman between 1972 and 1980, establishing branches of the Bank worldwide. He was the founder of Arab Banking Corporation (B.S.C.), Bahrain and served as its President & Chief Executive from 1980 to 1994. He also founded Arab Financial Services (E.C.), Bahrain in 1982. In addition to being voted one of the Most Innovative Bankers by the representatives of governments and international commercial bankers attending the International Monetary Fund and World Bank meetings in 1980, Mr. Saudi has won many international accolades, including an award at Georgetown University and the award Best Banker from the Association of Arab American Banks in New York in 1991. He was the first to receive the Arab Banker of the Year award, in 1993, from the Union of Arab Banks. In recognition of his role in the development of banking relationships between Arab and European states, Mr. Saudi has received, over his career, several gold medals and awards, notable amongst which are those awarded in 1977 by the King of Spain and the President of Italy and that given to him by the President of Tunis in 1996. He is currently the Executive Chairman of ASA Consultants W.L.L., Bahrain.
Mr. saleh Al Yousef

Member
Mr. Al Yousef, Kuwaiti national, holds a Bachelors Degree in Commerce from Kuwait University. Mr. Al Yousef is a Kuwaiti businessman with extensive experience in the Banking industry. He served as Chairman and Managing Director of The Industrial Bank of Kuwait K.S.C. from 1988 to 2005. Prior to that, Mr. Al Yousef held a number of executive positions with The Industrial Bank of Kuwait and the Central Bank of Kuwait. He has been Chairman of ABC Islamic Bank (E.C.), Bahrain and Chairman of ABCs consultants council, Frankfurt. He served as a Director of the Financial Securities Group during 1986. He has also served on the boards of a large number of other financial institutions, including Gulf Bank K.S.C., Kuwait, Arab Banking Corporation (B.S.C.), Bahrain and Ahli United Bank B.S.C., London. He was Chairman and Managing Director of Afkar Holding Co. until September 2010 and a Director of Gulf Investment Corporation until April 2010. He currently serves as a Commissioner with the Kuwaiti Capital Markets authority.
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Board of directors (Continued)

Mr. Adnan Ahmed Yousif Mr. ebrahim Fayez Al shamsi
Member
Mr. Al Shamsi, U.A.E. national, holds a Bachelor Degree in Commerce. He brings with him over 37 years varied experience in the financial services industry and in service of the U.A.E. Government. He is currently Chief Executive Officer of Emirates Islamic Bank and has been a Director of Arab Fund for Economic & Social Development, Kuwait since 1983. Mr. Al Shamsi has been a Director of Al Baraka Banking Group since August 2006.
Board Member and President & Chief executive

Mr. Yousif, Bahraini national, holds a Master Degree in Business Administration, University of Hull, UK. Mr. Yousif has been a Director of Al Baraka Banking Group since its inception and President & Chief Executive since August 2004. He is also Chairman of Jordan Islamic Bank, Banque Al Baraka DAlgrie, Al Baraka Turk Participation Bank, Al Baraka Bank Ltd., South Africa, Al Baraka Bank Egypt, Al Baraka Bank, Lebanon, Al Baraka Bank Syria and Al Baraka Bank (Pakistan) Ltd., whilst holding directorships in Al Baraka Bank Sudan, Al Baraka Islamic Bank, Bahrain and Al Baraka Bank Tunisia. He has over 34 years international banking experience and has twice been the recipient of the Islamic Banker of the Year Award at the World Islamic Banking Conference, in December 2004 and December 2009. He was appointed Chairman of the Union of Arab Banks in May 2007 and has been re-elected for a further four year term in May 2010.
dr. Anwar ibrahim

Member
Dr. Ibrahim, Malaysian national,is a well-known and respected international figure. He resides in Malaysia, where he is a Member of Parliament. He has served his country in many ministerial capacities including those of Education Minister, Finance Minister and deputy Prime Minister of Malaysia. He was formerly a visiting professor at Georgetown University in Washington D.C. and was appointed Honorary President of the London based organization Accountabiltiy (Institute of Social and Ethical Accountability). Dr. Ibrahim has been an independent nonexecutive director of Al Baraka Banking Group since March 2006.
Mr. Jamal bin ghalaita

Member
Mr. Ghalaita, U.A.E. national, holds a Bachelor of Science and Business Administration degree from the University of Arizona, USA. He is a Banker whose career spans over 20 years with Emirates Bank, during which he established a string of specialisations in Corporate banking, Retail banking, Trade Finance, Human Resources, Private Banking, Asset Management and Consumer Finance. He is currently Chairman of Emirates Money and a director of Emirates Islamic Bank, in addition to being Group Deputy CEO and General Manager Consumer Banking and Wealth Management at Emirates NBD.
Mr. Abdul elah sabbahi

Member
Mr. Sabbahi, Saudi Arabian national, holds a Bachelor of Science degree in Accounting from the Faculty of Economics & Administration, King Abdul-Aziz University, Saudi Arabia. Mr. Sabbahi has had over 30 years experience in international banking, the last 20 of which with the Dallah Al Baraka Group in Saudi Arabia. He is currently Vice President, Dallah Al Baraka Group. He also holds positions as Chairman of Al Baraka Bank Tunisia, Arab Leasing International Finance, Saudi Arabia, La Socit de Promotion du Lac de Tunis, and BEST Lease, Tunis. Mr. Sabbahi is also a Member of the Boards of Dallah Al Baraka Holding Co. E.C., Bahrain; Algerian Saudi Leasing Ltd.; Al Amin Investment Co., Jordan; United Albanian Bank, Albania and a number of other international companies.
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Board of directors (Continued)

dr. Bassem Awadallah
Member
Dr. Awadallah, Jordanian national, holds Ph.D. and M.Sc. degrees in Economics from the London School of Economics and Political Science in the United Kingdom (1985 and 1988) and a Bachelor of Science in Foreign Service degree from Georgetown University in the United States of America (1984). Dr. Awadallah worked in the investment banking field in the United Kingdom from 1986 to 1991. He then held a succession of positions in Jordan: as Economic Secretary to the Prime Minister of Jordan (1992-1996); Economic Advisor to the Prime Minister of Jordan (1996-1999); Director of the Economic Department at the Royal Hashemite Court (19992001); Minister of Planning and International Cooperation of Jordan (October 2001-February 2005); Minister of Finance of Jordan (April 2005-June 2005); Director of the Office of His Majesty King Abdullah II of Jordan (April 2006-November 2007) and as Chief of the Royal Hashemite Court, Jordan (November 2007-September 2008). Dr. Awadallah was chosen as a Lee Kuan Yew Fellow and a Young Global Leader, by the World Economic Forum in 2005 and is the recipient of the Al Hussein Medal for Distinguished Service, the Al Kawkab Decoration of the First Order of the Hashemite Kingdom of Jordan and the Al Istiqlal Decoration of the First Order of the Hashemite Kingdom of Jordan. In addition he has been awarded a number of high decorations from several countries in Europe and Asia. Dr. Awadallah is currently the Chief Executive Officer of Tomoh Advisory, a financial and strategic advisory practice based in Dubai, UAE.
Mr. Yousef Ali Fadil bin Fadil

Member
Mr. Fadil, U.A.E. national, is a Banker with a Bachelors Degree in Mathematics & Computer Science from Gonzaga University, Spokane, Washington State, USA. During the period 1985 1998, Mr. bin Fadil held a number of senior positions in the National Bank of Umm Al Quwain. He then served Dubai Islamic Bank as Executive Manager for Investment over the period 20002002. In 2003 he was appointed General Manager of the Emirates Financial Company. During the period 2004-2006 he served Abu Dhabi Islamic Bank as Deputy Chief Executive Officer. Mr. bin Fadil has also served as member of the board of directors of several financial institutions including, amongst others, Union Insurance Company, U.A.E., Bahrain Islamic Bank and Bosnia International Bank. Currently he is the General Manager of Al Sahil Equity Center.
Mr. samer Mohammed Farhoud

Member
Mr. Farhoud, Saudi Arabian national, holds a Bachelor of Computer Science and Engineering Degree from the University of Petroleum and Minerals, Dhahran, Saudi Arabia. Eng. Farhoud has had over 24 years experience in banking and has held a number of senior positions in his career, including that of Deputy Treasurer at Al Rajhi Bank in Riyadh for two years to December 2007 and Chief Executive Officer of Fahad Abdulla Al Rajhi Holding Co., Riyadh between January 2007 and August 2010. Prior to that he held various positions including Head of Treasury Sales and Marketing Unit in Arab National Bank, Riyadh; Manager of Treasury Sales & Services Unit in United Saudi Bank in Riyadh; Senior Corporate Relationship Manager in Saudi American Bank, Riyadh; Senior Dealer in Saudi American Bank in Riyadh and Computer Engineer for SAMBA Data Center in Saudi American Bank. He is currently Chief Executive Officer of Deutsche Gulf Finance.
Mr. Mohyedin saleh kamel

Member
Mr. Mohyedin, Saudi Arabian national, studied economics at the University of San Francisco, USA. He is a prominent Saudi businessman with many years experience, currently serving as Deputy Chief Executive Officer of Dallah Al Baraka Holding Company and Deputy Chief Executive Officer for Projects at Arab Media Company (AMC). Mr. Mohyedin Kamel also serves on the boards of many other companies and institutions, including the following: Chairman of the Board of Directors of Al Rabie Saudi Foods Co. Ltd. and of Dallah Media Production Company; Managing Director of Sports Events International Company and member of the Board of Directors of: Dallah Real Estate Consulting Company Egypt; Almaza Real Estate Development Company Egypt; Arab Company for Real Estate and Tourism Investment Egypt; Arab Radio and Television Network (ART); Arab Digital Distribution Company; Arab Media Company; Arab Advertising and Distribution Company; Jordan Media City; Jabal Omar Development Company and Halawani Brothers; and member of the Management Committee of Dallah Al Baraka Holding Co. He is also active in the field of public and community work in Saudi Arabia and was a member of the Board of Directors of Jeddah Chamber of Commerce and Industry in the past.
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head Office Organization Chart executive Management

Shareholders

Board Member and President & Chief executive Master in Business Administration, University of hull, U.k.
Sharia Supervisory Board Board Executive Committee Board of Directors Audit and Governance Committee
Has been a Board Director since inception, and the President and Chief Executive since August 2004. He is the Chairman of Jordan Islamic Bank, Banque Al Baraka DAlgrie, Al Baraka Turk Participation Bank, Al Baraka Bank Ltd., South Africa, Al Baraka Bank Egypt, Al Baraka Bank, Lebanon, Al Baraka Bank Syria and Al Baraka Bank (Pakistan) Ltd. He also holds directorships in Al Baraka Bank Sudan, Al Baraka Islamic Bank, Bahrain and Al Baraka Bank Tunisia. He has more than 34 years international banking experience and was twice the recipient of the Islamic Banker of the Year Award at the World Islamic Banking Conference in December 2004 and December 2009. He was appointed Chairman of the Union of Arab Banks in May 2007 and re-elected for another four years term in May 2010.
Mr. Othman Ahmed sulieman

deputy Chief executive
President & Chief Executive Board Affairs & Remuneration Committee

Head of Internal Audit Sharia Internal Audit
B.sc. (honours) in economics, University of khartoum, sudan.
Has been in the role since inception with the change in title to Deputy Chief Executive effective January 2007. He is the Chairman of Al Baraka Bank Sudan, member of the boards of Al Wafaa Mauritanian Islamic Bank, Mauritania, Jordan Islamic Bank, Jordan, Al Baraka Bank Limited, South Africa, Egyptian Saudi Finance Bank, Egypt, Al Baraka Turk Participation Bank, Turkey, Al Baraka Bank Lebanon and Al Baraka Islamic Bank, Bahrain. His career with Dallah Al Baraka began in 1988 following more than 24 years in banking in Sudan, that led to his appointment as Chairman of the Board and General Manager of El Nilein Bank. Since 1988 he has served the Dallah Al Baraka Group, based in Jeddah, representing its interests worldwide. In the final 7 years prior to his appointment to ABG in 2002, he was responsible for all the Groups banking interests in Africa, in addition to lending his considerable experience on the boards of Group banks in Asia and Europe and of the parent company. Mr. Sulieman is responsible for Coordination and Planning in ABG, in addition to his overall executive responsibilities.
Deputy Chief Executive
Mr. Majeed h. Alawi

senior Vice President head of internal Audit
Head of Financial Control Head of Credit & Risk Management Head of Operations & Administration Head of Legal & Compliance Head of Strategic Planning Head of Treasury & Investments Head of Financial Institutions
FCCA Fellow of the Chartered Association of Certified Accountants, U.k.
Has over 30 years of international banking experience mostly in audit and as Head of Operations. He began his career at Banque National de Paris in Bahrain in 1981 as Head of Operations, and moved to Arab Banking Corporation (B.S.C.)s Internal Audit Department in 1988 as an audit team leader, where he carried out audits of the Head Office, its branches and subsidiaries spread over Europe, Americas, Far East and in the Arab World. He joined ABG in 2000, when it was still under formation, to establish the internal audit department. He now heads the department which reviews the activities of all the subsidiary banks as well as Al Baraka Banking Groups Head Office in Bahrain, and also covers the review of control of IT as well as Sharia aspects. He reports directly to the Audit and Governance Committee of the Board of ABG, and acts as Secretary to it. He also participates in all the meetings of the Audit Committees of all the subsidiaries of ABG as an observer member.
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executive Management (Continued)

Has over 33 years of experience in financial and management reporting, corporate and structured finance, credit, strategic planning, project management, equity research and fund management and administration. He has worked in the Middle East as well as in North America. After spending several years in the accountancy field in India and Bahrain, he joined Arab Banking Corporation (B.S.C.)s investment banking subsidiary, where he served for 11 years before moving to the parent banks Treasury Department to manage its mutual fund investment portfolio and the Treasury Mid-Office. After 2 years as a partner in a regional investment bank in the Gulf, and a further period heading the worldwide banking solutions business of a major Canadian IT solutions company in Toronto, in 2004 he took up his position at ABG initially as Head of Financial Control and in mid-2006 as Senior Vice President - Head of Strategic Planning.
Mr. k. krishnamoorthy
senior Vice President head of strategic Planning ACA Associate of the institute of Chartered Accountants of india; B.Com., Osmania University, india.
Mr. salah Othman Abuzaid

First Vice President head of Legal Affairs & Compliance LLB, Faculty of Law University of khartoum
Has over 27 years of professional experience as a judge, practicing advocate or professional legal consultant serving a wide spectrum of local, regional and international clientele. After 20 years of practice in these various capacities in Sudan, he moved to the Sultanate of Oman in 2001 to work for an Omani law firm associated with an International law firm and was admitted to practice before all Omani courts by the Omani Advocates Admission Committee. In 2004, he moved to the Kingdom of Bahrain to join Al Baraka Islamic Bank (AIB) as Manager, Legal Affairs, which was followed in 2007 by his move to ABG to be First Vice President - Head of Legal Affairs & Compliance. He also serves as Secretary to the Board of Directors of ABG.
Has over 37 years of banking experience gained in senior positions with various international financial institutions, both Islamic and conventional. He commenced his career with Habib Bank Ltd in 1973, later worked with (then) Chase Manhattan Bank, Bahrain, Bank of America, Bahrain, American Express Bank, Bahrain and Bahrain Middle East Bank, Bahrain. After a successful career with Shamil Bank of Bahrain (formerly Faysal Islamic Bank of Bahrain), he was appointed as Assistant Chief Executive Officer Operations at Bahrain Islamic Bank in 2002, and thereafter joined ABG in May 2006. Mr. Shehab is a Board member of Banque Al Baraka DAlgrie and Al Baraka Bank (Pakistan) Ltd.
Mr. Abdulrahman shehab

senior Vice President head of Operations and Administration Master in Business Administration, University of hull, U.k.
Mr. khalid Al Qattan

First Vice President head of Treasury and investments Master in Business Administration University of hull, Uk
Has over 25 years of banking experience in Treasury and Operations. He commenced his banking career at United Gulf Bank as an Operations Clerk in 1983. In 1988, he joined Shamil Bank (formerly Faysal Islamic Bank of Bahrain) as Operations clerk and was promoted to Manager in charge of the Treasury operations of the bank. He was later Treasury Manager in Eskan Bank from April 2006 to May 2007 where he handled the overall liquidity management of the bank and was involved in several committees. In June 2007 he joined as Vice President and rose to the position of First Vice President - Head of Treasury and Investment in 2008.
Has over 17 years experience in financial control and auditing. Prior to joining ABG in February 2005, he worked at Shamil Bank as Senior Manager, Internal Audit. Prior to this role, he was a member of the Assurance and Business Advisory team at Arthur Andersen. He is the Deputy Chairman of the Accounting and Auditing Standards Board of the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI). He is also a Board and Audit Committee member of Al Baraka Turk Participation Bank, Jordan Islamic Bank and Banque Al Baraka DAlgrie and member of the Board Risk Committee of Banque Al Baraka DAlgrie.
Mr. hamad Abdulla Ali eqab

senior Vice President head of Financial Control Certified Public Accountant (CPA)
Mr. Adel Abd Allah Al-Balushi

First Vice President head of Financial institutions Master in Business Administration University of hull, U.k.
Has over 28 years of banking experience in Credit and Marketing. He began his banking career in 1981 at Bank of Bahrain and Kuwait (BBK) in the Credit and Marketing Departments and rose to a managerial level. He joined Al Baraka Islamic Bank in 1994 as Department Head in charge of Credit Administration and Analysis. From 2000 to 2007, he was Assistant General Manager of Credit, Marketing and Financial Institutions. During his period with Al Baraka Islamic Bank, he was a member of several committees. In November 2007, he joined Al Baraka Banking Group as First Vice President- Head of Financial Institutions
Has over 35 years of international banking experience involving credit, risk management, commercial banking and trade finance. He commenced his banking career with Bank of Montreal, Canada in international banking and was later its Middle East Representative, initially in Beirut, Lebanon and thereafter in London. He joined Gulf International Bank B.S.C. (GIB) in 1979 as Regional Marketing and Credit Officer for Central Europe based in London. He worked in various capacities in GIB within Credit and Business Development. In 2001, he was appointed Chief Credit Officer of GIB in Bahrain covering the areas of credit administration, economics, legal and credit review. He was also member of the Group Risk Committee. His most recent position with GIB was as Executive VicePresident, Head of International Banking with the responsibility for commercial banking business outside the GCC and thereafter joined ABG in September 2006.
Mr. Jozsef Peter szalay

senior Vice President head of Credit and Risk Management M.A. (econ.) University of Budapest; Banking Certificate The institute of Canadian Bankers; Advanced Management Program inseAd France.
The neLsOn MAndeLA BRidge

South Africa
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directors Report
(All figures in US dollars unless otherwise stated)
shaikh saleh Abdullah kamel

Chairman
content to let the laws of supply and demand reassert themselves in tandem with the re-emergence from recession of the oil importers, so that in due course their current account surpluses would once again rise. Still others, even if not so well endowed with natural riches, were able to continue along the path of modernisation, economic reform and progress that they had earlier adopted, and so steered a cautious and balanced course through the choppy waters. A few statistics necessarily only estimates at this time of writing but indicative nonetheless will help to illustrate the extent of progress over the year. China once again led the large economies with a storming 10.3% growth rate, followed not far behind by India which turned in a respectable 9.1%. Compared with them, the US economy, struggling to regain the early momentum of its initial re-emergence in 2009 from the wastelands of the global recession, managed a relatively feeble 2.9% over the year, evincing a rising trend strengthening towards the end of the year, compelling a renewal of the Feds quantitative easing programme, albeit much reduced at only $600 billion in comparison with the $1.75 trillion of the earlier programme. Canada and Australia remained healthy with 2.9% growth in each case. Among the large European economies, Germany was of course the best performer with 3.5% growth and, what is more, a buoyant mood which promises to take it through the next few years with internal growth supporting export performance. Others, such as France, Italy and the Netherlands, showed positive performance while those which had unwisely allowed their hitherto robust economic expansion to be increasingly based on borrowed money, consumerism and rising house prices paid the price, having to be bailed out on account of their mounting debt burden being serviced out of stagnating resources: Greece whose GDP fell by a precipitous 3.9% - Ireland with a 1.0% overall drop, Spain with a 0.2% fall. The Far East showed the way forward with perhaps a foretaste of the future with a blistering 14.7% growth rate by Singapore, followed by 10.1% by Taiwan, Thailand with 7.0%, Malaysia with 6.8%, Indonesia 5.9% and South Korea 4.8%. Many of the Latin American countries had a similar story to tell: Argentinas economy recording growth of 8.2%, Brazils by 7.7%, Mexicos by 5.0%. Closer to home, Egypt stood out with 5.1% growth, while Saudi Arabia turned in a respectable 3.8%. The UAE managed collectively to grow by 2.4% as Abu Dhabi demonstrated its intrinsic strengths and ability to shoulder the burdens of Dubai and other members by turning in a strong 3.6% growth. Early estimates are that in the territories within which ABG operates, in addition to Egypts, Turkeys economy showed the world its resilience as it bounced back from 2009s negative growth rate by recording 8.1% expansion, while South Africa managed 2.8% on rising international gold and commodity prices, Lebanon recorded a most impressive 8.0% growth rate, followed by Sudan with 5.5%, Algeria and Tunisia with 3.8%, Jordan 3.4%, Bahrain 3.0% and Pakistan 4.8%.
Global and Regional Economies

Looking back on the past year, it seems to us that there were times when the future was shrouded in mist and we had no way of knowing which way the global economy was going to go. There were fears of a slip back into recession, whilst at the same time there was much to be optimistic about. As the year progressed, however, and we were able to see a little more clearly, our innate confidence was increasingly justified and, as we see it, the year ended on a positive note notwithstanding the weakness of the recovery in some economies. The uncertainties felt as we began the year 2010 were of course - as we had indicated in our 2009 overview - partly due to the fact that different economies had suffered from the global recession in different ways and those economies had each, in turn, adopted specific mechanisms to counter the impact as it had affected them. Thus, the great economies of the US, China and Japan had all in their way adopted stimulus packages: the US through quantitative easing that rather ungainly term for the injection of huge sums of cash into the economy to enable the domestic financial institutions to continue to provide credit; Japan largely through a continuation of its previously adopted fiscal strategies and China through a combination of measures aimed at maintaining its breakneck rush for modernisation via its expanding export markets. On the other side of the world, Germany the largest and by far the strongest of the European Union economies - preferred to rely, as it has always done, on the locomotive economies a term now expanded to include China and many of the larger Asian economies to pull them through by virtue of the revival of their imports as they re-emerged from recession; a strategy that worked yet again, leading to Germany being the first to emerge from recession and able, thus, with the aid of France and one or two others to stimulate recovery in at least part of the remainder of the EU. Not that the rest of the EU can be said to have recovered far from it, as first Greece and then Ireland succumbed to the heavy weight of their debt and were forced to accept rescue packages from their EU fellow members, in particular their Euro zone partners. A few others of the weaker EU countries meanwhile appear to be teetering on the brink of requiring rescue themselves. Many emerging economies did not suffer so badly. Some actually prospered, partly from the continuing strong demand for commodities and raw materials and partly, in the case of a few, due to being able to offer a reasonably safe if albeit temporary - home for investment for some of the excess liquidity slushing around the global economy as a result of quantitative easing and continuing trade imbalances amongst the biggest economies. Others, the hydrocarbon-producers and exporters for example, were
We are confident that the political situation in the North Africa, which continues to evolve as we write, will not adversely affect the Group in light of its strong foundations, soundness and financial strength. For the immediate future, our main concerns centre around the fact that the impact of all the austerity measures announced over the last 12 months is really only going to hit us in 2011. Like 2009, this last year has largely been focused on stimulus packages, but the whole developed world is now speaking of a new age of austerity and, collectively, what is to come has been said by some to represent the largest synchronised budget contraction in more than 40 years. What this will do for global demand, and the repercussions for growth, remains hazy. However, it is be hoped that what faces us is at worst the prospect of a new global slowdown and not renewed recession. We shall see. Nevertheless, as is in our nature, we continue to view the future with optimism, albeit tempered with caution and a determination to husband our resources for our stakeholders sakes and to ensure that we continue to prosper and to deliver consistently rising shareholder value.
2010 Review
The Groups income from jointly financed accounts and investments, together with its share as Mudarib, was $299.9 million, some 5% below that for 2009. Income from self-financed contracts and investments and Mudarib share from managing restricted investment accounts was however 11% higher at $152.5 million. Including other operating income and revenues from banking services, the Groups total operating income was $658.6 million, 4% higher than that for 2009. Operating expenses of $342.3 million brought the net income before provisions and taxation to $316.3 million compared with $324.6 million the previous year. After allocating prudential provisions and taxation, the net income of the Group for the year was $193.2 million, a rise of 15% over the $167.4 million earned in 2009. An 23% expansion of the customer deposit including URIA, which grew to $13.6 billion, reflects the international markets confidence in the Al Baraka name, fuelled a general expansion in the Groups banking assets in all categories other than the Salam portfolios, and in its cash and liquid assets which ended the year 22% higher at $4.3 billion. The Groups total assets consequently rose to $15.9 billion, a 21% increase over 2009.
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directors Report (Continued)

We were pleased to note that despite the negative impact on the incomes of those of our units operating in currencies other than the US dollar, brought about by the decline of their local currencies vis--vis the dollar over the year, all but two reported a positive net outcome. Moreover, both of these subsidiaries Al Baraka Lebanon and the newly established Al Baraka Syria - managed a significant improvement over the previous year. It is also noteworthy that, when viewed through the prism of their own local currencies, only one unit Al Baraka South Africa - reported a reduced position compared with last year which, in what was a difficult year in the majority of the economies in which the Group operates, was no mean feat. In light of the Groups performance in 2010, the Board of Directors has recommended a cash dividend distribution to the shareholders of 5% of the paid up capital, amounting to $39.5 million, and a bonus dividend of one share for every 10 shares held. The Board has also recommended a transfer of $10.6 million to legal reserves, with $55.5 million being allocated to retained earnings. The Board has further recommended a remuneration distribution of $750 thousand, to be charged to expenses following the approval of shareholders at the Annual General Meeting.
President & Chief executives Report

(All figures in US dollars unless otherwise stated)
Board Member and President & Chief executive
Looking Ahead...
ABG has emerged from 2010 stronger than before. Its liquidity is sound and its core business is healthy. The events of 2010 have set a positive tone for ABGs continuing growth and organic expansion, enabling it to take advantage of the opportunities in the markets where it is present whilst looking ahead towards new ones. Having met its early targets, the Group is now well on track to meet its medium term strategic objectives: Planned geographical expansion: ABGs new subsidiary in Syria further consolidated its advent into this market, following the opening of its head office and one branch in 2010, by completing the establishment of its back office operations, now boasting a brand new core banking system and having absorbed the knowledge transfer of procedures and practices from other ABG units. The intention is to open more branches in 2011 in order to continue to gain market share. In addition to expansion in Syria, ABG completed the merger of the branch operations of Al Baraka Islamic Bank in Pakistan with Emirates Global Islamic Bank, to form one of the largest Islamic banks in Pakistan. The future augers well for 2011 as the Group expects to further consolidate its presence under the new banner of Al Baraka Bank (Pakistan) Limited. We are also in the process of opening a representative office in Libya and expect the formalities in this regard to be completed during 2011. Thus, we maintain our consistent search for expansion opportunities, both within and outside of our established markets. Increased profitability: 2010 was a year when we continued to strengthen our internal and external operation and business capabilities in order to enhance profitability, as amply reflected in our results for the year. With prudent management and cautious, low risk growth, we are confident of maintaining the trend towards sustainable, increasing profitability. Product innovation: The strength of the Groups well-knit operations was further evidenced in 2011 by the exchange of innovative product ideas between its units, with many of the subsidiaries introducing new products offering new and exciting financing options to customers. We confidently anticipate the continuing spread of this symbiotic relationship to continue. Advanced IT systems and processes: State-of-the-art systems have been implemented in most operating units, designed to meet the Groups demands into the next decade and achieve optimum management efficiency and customer satisfaction. Continuous strengthening of the risk management and corporate governance culture: Our risk management processes and corporate governance practices are continuously being upgraded to ensure that they remain at the level of best industry practice.
Introduction
In 2010 the Groups total assets in US dollars expanded by 21%, despite the effect of the depreciation of many of the local currencies in which our subsidiaries operate the impact of which is estimated at an overall 2.8%. Growth was, moreover, unevenly spread, ranging widely among the established units between Al Baraka Pakistans 104% expansion (due in part to its acquisition of Emirates Global Islamic Bank), to Al Baraka Turkeys 27% asset build up, to Al Baraka Sudan whose assets in US dollar terms declined by a net 5% over the year despite achieving 6% growth in local currency terms. The reasons were as varied as that of the growth. Al Baraka Turkey has now reached the position of being a big hitter in the Turkish market and is capitalising on the public perception to expand rapidly. During the year it raised $240 million through a highly successful syndicated murabaha facility, which alone was responsible for 5.6% of the expansion in its asset base. Jordan Islamic Bank grew its assets by 19% via the expansion of its murabaha and Ijara Muntahia Bittamleek portfolios. Al Baraka Egypts assets expanded by 11% through the combined growth of its murabaha and mudaraba portfolios and its non-trading investments. Al Baraka Algerias assets rose by 18%, despite Central Bank curbs on personal finance, due to expansion of its Ijara Muntahia Bittamleek business. Bahrains 10% asset base growth reflected increased mudaraba and Ijara Muntahia Bittamleek business and in its non-trading investments, compensating for a fall in its murabaha portfolio. Our South African subsidiary managed to expand its base by 32% in US dollar terms but less so in Rand terms as the local currency strengthened against the dollar mainly through a 39% increase in its musharaka product line and a 21% increase in its traditional murabaha business. Lebanon reported a 10% overall asset rise reflecting its successful entry into musharaka financing, adding to a 29% growth in its murabaha portfolio. Sudans drop in total assets reflected a 22% reduction in its murabaha portfolio and a 30% decrease in its non-trading investments, compensated by the introduction of its new mudaraba business. Finally, our newest Group member, Syria, got off to a good start with a 92% growth in total assets. Of the Groups financing portfolio, the largest increase in absolute terms occurred in the traditional murabaha sales financings, with mudaraba following. In relative terms, however, growth was highest in the Groups mudaraba financings, which expanded by 60%. The musharaka portfolios also exhibited relatively high growth, at 47%, while Istisnaa financings rose by 43%. Ijara Muntahia Bittamleek financings grew by 31%, murabaha financings by 15%, while Salam financings fell by 31% in aggregate compensated in part by an increase in Ijara Muntahia Bittamleek, the last two a consequence of the restrictions on personal financing imposed in Algeria. This growth was fuelled by an average growth of 23% in the Groups customer deposits (including unrestricted investment accounts), which rose to $13.57 billion. Unrestricted investment accounts grew by 24% to $10.24 billion and equalled 75% of total customer deposits. Off balance sheet, aggregate restricted investment accounts grew by 8% to $553 million, while contingencies and commitments increased by 16% to $4.5 billion.
In conclusion, I should like as always to take this opportunity to extend, on behalf of the Board and Executive Management, our appreciation to our Sharia Supervisory Board, the Central Bank of Bahrain, the Ministry of Commerce and Industry and all of our subsidiaries regulatory authorities, for their support and guidance during 2010. For and on behalf of the Board of Directors
saleh Abdullah kamel Chairman
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President & Chief executives Report (Continued)

Total operating income of the Group rose by 4% to $659 million. This result was affected by an estimated 1% average rate of decline in our subsidiaries respective local currencies against the US dollar. Total operating expenses, on the other hand, increased by 12% mainly on account of increases in staff and other operating costs in support of the Groups branch network expansion. The net operating income therefore decreased by 4% to $313 million. Provisions of $56 million represented a reduction of 46% from those pertaining to 2009, while taxation charge was increased by 20% to $64 million. The net income was therefore $193 million, a healthy 15% increase over 2009. Despite the continuance of testing economic conditions, albeit amidst growing signs of recovery, it was a matter of pride for ABG to see its rating by Standard & Poors (S&P) maintained at the same level as last year, reflecting the strong improving fundamentals of the Group, its sustainable business model, strong liquidity and growing balance sheet. 2010 saw the beginning of commercial operations by Al Baraka Syria and, in Pakistan, the acquisition of Emirates Global Islamic Bank (EGIB), a Pakistan based Islamic Bank, by our Bahrain based subsidiary Al Baraka Islamic Bank and the merger of EGIB into its own network, to create one of the largest Islamic banks in Pakistan. In addition to these strategic moves, we have also progressed well towards the opening of our second representative office, in Libya during 2011. During the year the Group continued to demonstrate its leading role in supporting the development of the Islamic finance industry, participating at the Head Office level and through three of its subsidiaries Al Baraka Bank Egypt, Jordan Islamic Bank and Al Baraka Trk Participation Bank in the sponsorship of the very successful 7th Islamic Financial Services Board summit which took place in Bahrain in April. We were also immensely proud to be awarded the Mediterranean Award for Global Excellence in Islamic Finance during the Malta Islamic Finance Conference held in the Republic of Malta in October 2010 - the first award of this newly created international prize - signalling as it does the recognition by our peers of the distinguished regional and global position in Islamic banking held by our Group and the part it plays as a role model for the pure and perfect approach to Islamic banking for which it stands. The Group was also honoured to receive the top prize awarded at the Growth of Corporate Governance in the Region conference held in the Sultanate of Oman in November 2010, for its implementation of and compliance with corporate governance principles. The Group was chosen for the prize - the Hawkamah Union of Arab Banks 2010 Bank Corporate Governance award from 35 competing banks from the MENA region by a distinguished panel of corporate governance experts. Finally, Al Baraka Banking Group was distinguished by the accolade Best Regional Bank at the prestigious Annual Islamic Business & Finance Awards ceremony held in Bahrain in December 2010.
Review of Units
The following is a brief review of each of our subsidiaries, their activities and performance over the past year. All figures are stated in the US dollar equivalents of the audited local currency-based balance sheets and income statements, prepared in accordance with the Islamic Accounting Standards issued by the Accounting and Auditing Organisation for Islamic Financial Institutions (and IFRS, where AAOIFI was silent) and without any Group level consolidation adjustments. Each unit is managed by its respective Board of Directors, whose reporting lines are ultimately to the Parent, ABG, but whose decision-making is decentralised within the Groups overall strategic direction and in full compliance with the regulations of the respective countries Central Banks.
Libya Representatvie Office (under formation)
Al Baraka Global Network
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Al Baraka Trk Participation Bank
Founded 1985 - Turkey
A vibrant Turkish economy bounced back from the fall of -4.75% of GDP in 2009, exhibiting a solid performance in 2010 culminating in an estimated growth rate of 8.1%. The authorities quick and effective action in 2009, introducing early tax incentives and steadily reducing interest rates throughout the year, aided the expansion of credit demand, the beneficial effect of which continued through 2010, raising domestic demand for goods and services in an atmosphere of high consumer confidence and surging private sector investment. However, this did have an adverse impact on the rate of inflation, pushing consumer prices up by 8.6% year-on-year, significantly above 2009s 6.5% and the 6.0% anticipated at the start of the year. The current account deficit, which had been successfully and steadily reduced to only about -1.9% of GDP by the end of 2009, trended upwards in 2010 to end the year at an estimated -6.4% of GDP. Fuelled by negative real interest rates, and despite an appreciating currency but with a stable political scenario, the Turkish economy is currently enjoying growth unequalled in the region and even rivalling the bigger global emerging economies. Nevertheless its very success exposes its weaknesses, as the divergence between the strong domestic performance and weak external demand continues to drive capital inflows, leading to an ever-widening current account deficit. It is likely, though, that 2011 will see a gradual falling off of the growth rate, encouraging a belief in an ultimately soft landing. In 2010 Al Baraka Turkeys total assets rose by 27% in US dollar terms to $5.45 billion, as aggregate financings and investments rose by 30% to $4.36 billion. The impact of local currency devaluation on asset growth was around 3%. While the banks traditional murabaha business continued to expand, with related sales receivables increasing by 31% to reach $3.98 billion, the musharaka portfolio and non-trading investments also grew steadily, by 72% and 27% respectively, compensating for a 53% decline in the Ijarah Muntahia Bittamleek portfolio. The bank increased its liquid assets by 14% to $0.93 billion. The growth was funded mainly by a 29% increase in its customer deposits (including unrestricted investment accounts) to $4.70 billion together with the proceeds of a highly successful syndicated murabaha facility, which raised $240 million, reflecting the banks status as a major player on the Turkish banking scene. Notwithstanding the portfolio growth, Al Baraka Turkeys total income from jointly financed accounts and investments fell back a little, by 5% to $318 million. After distribution to the unrestricted investment account holders of their share of the income, amounting to $230 million, the same as in 2009, the banks share as fund owner and as Mudarib of $89 million was 16% lower than that for 2009. With the inclusion of income from its own sales and investments which grew by 31% - and from banking services and other operating income, however, its total operating income was 3% higher at $281 million. After operating expenses, 14% higher at $127 million and mainly reflecting the banks continuing network expansion, net operating income was $154 million, 5% below that of the previous year. However, after accounting for significantly lower provisions and notwithstanding an increased taxation charge, the net profit realised was $94 million, 35% up on 2009s result. The unit also showed a significant increase in its Letters of Credit and Letters of Guarantee during the year, which in aggregate increased by 16% to reach $3.8 billion. Consequently, the revenue from banking services increased by 9%. On the other hand, there was little or no impact on 2010s earnings from local currency devaluation against the dollar. With Al Baraka Turkeys continuing and steady growth over the past decade, reflected in 2010 by the opening of 8 new branches and the addition of 13 more ATMs, the bank has now passed the threshold of a small bank and can be said to qualify as a major player in the Turkish participation banking market. Reaching such maturity has prompted the bank to review both its Vision and its Mission, with a view to redefining its ambitions and future growth aspirations. This exercise in turn has required that it revise its organisational structure and all its internal processes, a major task which will engage it for some time to come. It has commenced the restructuring by systematically centralising all its operations, intending thereby to increase efficiency and productivity. Another outcome of the review has been the initiation of a major restructuring of its IT systems and hardware, while yet another is its embarkation on a new phase of organic growth, as it aims to expand its branch network from the present 109 to 200 within the next 5 years. In focusing on growth, Al Baraka Turkey intends to concentrate more on musharaka projects and retail credit, initially targeting a 30% increase in the latter category. It will also shortly be launching a new credit card, called Albaraka World Card, in addition to bringing in new services such as money transfer, bill payment and gold trading by Internet, participation accounts for children and minors and a Gold Participation account. New products already initiated include a Gold Deposit account, a Flexible Term Participation account and a variety of special funds to assist its customers in planning for retirement and saving towards their pension, in addition to facilities to enable payment of their utility bills and social security payments at any branch of the bank. As its ongoing expansion will naturally require an increase in staff levels both centrally and in its branch network, thus leading to greater demand for space, the bank has moved to a new headquarters building in the last quarter of 2010, fully fitted out with state of the art technologies and facilities. In July 2010 Al Baraka Turkey was proud to be able to announce that Standard & Poors had reaffirmed its long term counterparty credit rating of BB/B (Short Term), with Stable Outlook. S&P remarked that the ratings reflected the good track record of the bank in the participation banking market in Turkey, its adequate funding resources supported by a strong deposit franchise and limited market risk and that it expected the bank to maintain its asset quality and capitalisation at current levels. S&P further pointed out that the banks ratings were themselves only constrained by the BB country rating of Turkey.
Al Baraka Turk Participation Bank

Al Baraka Trk Participation Bank was established in 1985 and started operations in the same year. Al Baraka Trk currently renders its services through its 109 branches throughout Turkey, 44 of which are in Istanbul and 65 in the leading industrial and commercial cities.
Unit Head Title Address Telephone Fax Website
Mr. Faherettin Yahsi Board Member & General Manager Buyukdere Cad No.78 34394 Mecidiyekoy, Istanbul, Turkey +90 212 274 99 00 +90 212 272 44 70 www.albarakaturk.com.tr
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Jordan Islamic Bank
Founded 1978 - Jordan
Building on the previous years 3.2% GDP growth, the Jordanian economy expanded by an estimated 4.1% in 2010, supported by a reduction in the Central Bank of Jordans rediscount rate to 4.25%. However, inflationary trends reasserted themselves as consumer prices rose on average by some 5.0% compared with the -0.7% year-on-year enjoyed in 2009 as a result of the drop in international commodity prices. The current account deficit, although improved over 2009, remained stubbornly high. The results of the November elections to Jordans lower house represented a vote of confidence in the government, with progovernment loyalists capturing a large proportion of the seats. Despite some local demonstrations following recent events in Tunisia and Egypt, Jordan continues to enjoy relative peace and stability, which in turn should ensure the continuation of international donors support. Meanwhile, a new tax law enacted in 2010 reduced the rate of taxation on banks profits by 5% to 30%, which will have done much to encourage credit expansion by Jordans established banks, as well as the three new foreign banks one of them a major Islamic banking competitor which opened for business in 2010. Total assets at Jordan Islamic Bank (Al Baraka Jordan) expanded over the year by 19% to $3.67 billion as its outstanding financings and investments rose in aggregate by 16% to $2.06 billion, of which the main contributors were the murabaha sales receivables and the Ijara Muntahia Bittamleek portfolios. This expansion was in turn funded by a 21% increase in its total customer deposits and unrestricted investment accounts which ended the year at $3.30 billion in aggregate, as the URIAs ended the year at $2.30 billion or 21% up on the previous year while customers current and other accounts rose in total to $943 million, an increase of 12%. The banks total income from jointly financed contracts and investments rose slightly to $142 million. After accounting to the URIA investors for their share, which amounted to $66 million, the balance earned by the bank including its share as Mudarib was 11% higher than in 2009 at $76 million. The income earned from its own sales and investments, Mudarib share from the restricted investment accounts, revenue from banking services and other operating income contributed a further $25 million, bringing the total operating income for the year to $101 million, 6% higher than 2009s $96 million. Operating expenses at $44 million were nearly identical to those for 2009, leaving the bank with a net operating income of $57 million which, after provisions and taxation charge, produced a net profit for the year of $41 million, 4% higher than the profit recorded for 2009. During 2010 Al Baraka Jordan opened four new branches and three new cash offices, expanding its network to 60 branches and 12 cash offices. It also added 9 machines to its ATM network, bringing the total to 84, all linked to the Jordanian national payment network and to Visa International worldwide. It intends to further expand these networks over the next 5 years, opening 3 more branches in 2011 followed by a further 8 by 2015. Adding to Al Baraka Jordans already successful product range, the bank set up a brokerage subsidiary which was well received in the market. It also extended its SMS and e-banking services, in addition to expanding its Ijara Muntahia Bittamleek and murabaha portfolios. Meeting its Basel II implementation deadlines, it completed the integration of Pillar 2 and the internal capital adequacy assessment process (ICAAP), while also strengthening its Know Your Customer (KYC) and AntiMoney Laundering (AML) processes. In accordance with the Groupwide Unified Corporate Identity programme, the bank successfully completed its transition to the Groups unified identity in June 2010 and unveiled its new Al Baraka logo. This move will undoubtedly help to reinforce the already strong brand equity enjoyed by Jordan Islamic Bank in the Jordanian market. In August Al Baraka Jordan was rated by Standard & Poors for the first time. S&P assigned it a long term counterparty credit rating of BB/B (Short Term) with Stable Outlook. However, in view of the political developments in the country in February 2011 S&P lowered Jordans sovereign long term and short term local currency ratings to BB+/B and the outlook to Negative from Stable. Due to these changes in the sovereign ratings for Jordan, the outlook for Al Baraka Jordan was lowered in tandem from Stable to Negative. However, in view of Al Baraka Jordans strong financial position, S&P nevertheless affirmed its original ratings, in doing so remarking on the banks overall resilience, good track record in terms of asset quality, satisfactory funding and liquidity profile supported by a strong retail franchise and its leading position in the Islamic banking market in Jordan. S&P also hailed the banks strategy, with its emphasis on sustained growth, the further enhancement of its systems and integration within the Group.
Jordan Islamic Bank

Jordan Islamic Bank was the first Islamic bank in Jordan that was established in 1978 to carry on all types of financing, banking and investment activities in compliance with the provisions of the glorious Islamic Sharia. The bank offers its banking, investment and financing services through its 60 branches and 12 cash offices, in addition to a bonded office, distributed through out Kingdom of Jordan.
Mr. Musa Shihadeh Vice Chairman & Chief Executive Officer P.O Box 926225, Amman Jordan Tele: + 9626 567 7377 Fax: + 9626 566 6326 www.jordanislamicbank.com
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Al Baraka Bank Egypt S.A.L Founded 1980 - egypt
2010 saw the Egyptian economy growing by an estimated 5.1% compared with 4.7% in 2009. The rate of inflation also fell back a little from the 12.6% recorded in fiscal 2009 to around 11.4%. The current account deficit was little changed at an estimated -2.0% of GDP. Whilst the events of February 2011 have brought about a momentous change in both the leadership and the political organisation of the country, and no doubt these will be followed by further changes of great significance, it is to be hoped that the economy will soon recover its momentum and return to its normal health. Al Baraka Egypt, in the meantime, does not foresee any substantial hiatus in the economic activity as a result of the developments, both recent and yet to come. Total assets at Al Baraka Egypt grew in 2010 by 11% to reach $2.36 billion, driven by a 10% increase in total financings and investments to $2.05 billion, despite the impact on the asset base value of the depreciation of the Egyptian Pound against the US dollar of some 5.5%. The growth was fuelled in turn by 12% overall growth in the customer deposits and unrestricted investment accounts to $2.09 billion (of which URIAs accounted for $1.89 billion). The banks total income from joint financings and investments rose by 10% to $166 million, of which the investors share amounted to $116 million, increasing their return by 17% compared with 2009s $99 million. The banks share, including its share as Mudarib, amounted to $50 million, some 3% less than in 2009. Including its income from fees and commissions, including Mudarib fees from RIAs, together with other operating income, the total operating income was $64 million compared with $65 million in 2009. After accounting for operating expenses of a little under $32 million - an increase of 8% - net operating income was 9% lower than the previous year at $33 million. Following deductions for (substantially lower) provisions together with taxation charge, however, the net profit for the bank amounted to $20 million, a noteworthy result compared with the $14 million recorded in 2009 and notwithstanding the impact of local currency depreciation against the dollar, estimated to have been about 2.5%. Al Baraka Egypt opened 2 new branches during the year, bringing the total network to 21 branches and foreign exchange bureaus, while its ATM network was expanded to 20 from 18 the year before. During the year it launched several new products, including its E50 million Al Mutawazin investment fund which met with an enthusiastic response and was oversubscribed 125% - as well as a time share leasing finance scheme to assist customers in the purchase of real estate, together with (non-profit) Umrah and Hajj loan schemes. It also progressed in its plans for its MasterCard debit and credit card services, which it will be launching in 2011. The banks strong social commitment, evidenced through its Zakat Fund, was also evidenced through the establishment of three new medical units to provide medical treatment free of charge to the poor and the needy. During the year Al Baraka Egypt increased its issued share capital by $6.0 million to reach a total paid up capital of $92 million. Under its strategic 5-year expansion plan, Al Baraka Egypt means to open a further 19 branches and foreign exchange bureaus to create a total network of 40 by 2015. It aims to continue expanding its overseas correspondent bank associations, the better to service its business customers. Its range of specialist financial services offered to retail customers will also be broadened over the medium term. Amongst the planned products to be introduced are prepaid cards, for use in ATM machines worldwide, telephone banking and e-banking services, Ijarah facilities for its corporate clients and new savings and investment products. It intends to expand its syndicated loan portfolio, including Islamic syndicated facilities arranged on behalf of its own clients, whilst growing its musharaka book, concentrating especially on diminishing musharaka for its key customers. The bank completed the rebranding process under the Groups unified corporate Identity programme in March 2010, announcing the change of identity along with the name change.
Al Baraka Bank Egypt S.A.L

Al Baraka Bank Egypt commenced its activities in accordance with Sharia principles over 20 years ago and has grown as an Islamic institution to become one of the foremost in the Egyptian market. It provides a variety of services, products and savings deposit options to suit different requirements and financing programmes to meet the requirements of various sectors of the Egyptian market, in addition to credit facilities for companies and joint financings for large and important national projects. The bank currently has 21 branches and 4 foreign exchange offices, spread across the major Egyptian cities.
Mr. Ashraf Al Ghamrawi Vice Chairman & Chief Executive Officer 60, Mohie Elddin Abu Elezz Street P.O. Box 455 Dokki, Cairo, Egypt +2023 748 1222 +2023 761 1436/7 www.albaraka-bank.com.eg
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Banque AlBaraka DAlgerie S.P.A Founded 1991 - Algeria
Algerias economic growth rebounded somewhat in 2010 from the 2.1% slump experienced in 2009 (compared with an average for 2003-08 of 3.5% annual growth), to an estimated 3.8% growth in 2010. The current account surplus, which had fallen in 2009 to only 2.7% of GDP compared with over 22% in each of the prior two years, likewise rose, to an estimated 20.7% of GDP or $34.5 billion. Algerias foreign exchange reserves now stand at $148.1 billion, compared with total external debt of $5.5 billion. The average rate of inflation however deteriorated, to an estimated 5.5% from 4.6% in 2009. The latest 5-year plan (2011-15) envisages aggregate public expenditure rising to $286 billion. As part of this plan, the government has permitted a slight relaxation in foreign trade procedures, in that manufacturers will now be allowed to import raw materials to the value of DZD2 million each year without the need for an import letter of credit to be established (in 2009 it had decreed that all imports had to be backed by letters of credit). Under other recent changes, the State will in future own a share in all banks and financial institutions and will be represented on their boards (albeit without voting). Al Baraka Algerias total assets rose in 2010 by 18% to $1.6 billion, despite a drop of 10% in its total financings and investments to $726 million resulting from Central Bank regulations introduced in 2009 to curb personal financings, and the impact of local currency depreciation against the US dollar, estimated to have reduced the dollar value of assets by 3.5%. The impact of the new regulations was to cause the murabaha and Salam portfolios to decline by 11% and 38% respectively. However, the bank was able to expand its Ijara Muntahia Bittamleek portfolio partly in compensation, and this portfolio grew by some 44% in total. Also as a consequence, liquid assets grew by 62% to $761 million. Asset growth was funded by the rise in unrestricted investment accounts and customer current and other accounts which together rose by 13% to $1.20 billion (unrestricted investment accounts expanding by 21% to $613 million). Due to the impact of the restrictions on new financings, the banks joint income from sales receivables and jointly financed contracts and investments aggregated $62 million, 3% below the equivalent for 2009. After accounting for the investors share of this income, which however rose by 11% over the year to $17 million, the banks own share including its share as Mudarib amounted to $44 million, 8% less than the previous year. Including revenue from banking services and other operating income, however, its total operating income was 17% higher than in 2009 at $105 million. Largely due to reduced staff costs, the operating expenses were 7% lower at $27 million, leaving a net operating profit of $78 million, 28% higher than the previous years $61 million. Following deductions for the years provisions and taxation charges, both of which were higher than in 2009, the net profit arrived at was $44 million, 10% above 2009s result. Overall, the Algerian dinars depreciation against the US dollar had a 3.5% negative impact on the banks net income. The unit significantly expanded its trade finance business over the year, showing a significant increase in its issuance of Letters of Credit and Letters of Guarantee, which surged by 179% to reach $1.04 billion in aggregate. Consequently, its revenues from banking services increased 64% in 2010. Al Baraka Algeria also returned to network expansion in 2010, as the year saw preparatory work completed on 5 branches, one of which opened for business in 2010 while 4 others awaited only the approval of the authorities before opening. Under its strategic plan the bank intends to expand its network from the present 21 branches to 47 by 2015, all with ATMs installed. Products newly introduced in 2010 included musharaka, Qard Hasan and Ijarah micro finance loans (under which scheme small loans more than doubled over the course of the year) and real estate finance (which expanded by nearly 30%). Looking to 2011 and beyond, the bank intends to launch Takaful insurance, Hajj and Umrah savings accounts and to promote lease purchase facilities, a new international withdrawal card and e-banking services. It will also start work on its new 15-storey headquarters building, which should be ready for occupation in 2013.
Banque Al Baraka DAlgerie S.P.A

Banque Al Baraka DAlgerie was incorporated in May 1991 as an Islamic Bank and operates under a commercial banking license issued by the Bank of Algeria. The main activities of the bank are retail and commercial banking. The Bank operates 21 branches.
Mr. Mohammed Seddik Hafid Board Member & General Manager Hai Bouteldja Houidef, Villa No.1 Rocade Sud, Ben Aknoun, Algiers, Algeria +21321916 450 to 56 +21321 916 458/57 +21321 91 27 63 www.albaraka-bank.com
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Al Baraka Islamic Bank B.S.C. Founded 1984 - Bahrain
Al Baraka Bahrain operates in Bahrain, where it was one of the first Islamic banks to be established, under a retail banking licence, and in Pakistan, where it commenced operations in 1991 as a foreign bank established under a commercial banking licence from the State Bank of Pakistan. As part of its growth strategy, in October 2010 the bank completed the acquisition of Emirates Global Islamic Bank (EGIB), merging the Pakistan branch networks to create one of the largest Islamic banks in Pakistan, the resultant new entity emerging as a subsidiary of Al Baraka Bahrain: Al Baraka Bank (Pakistan) Limited. The Bahraini economy maintained the steady growth pattern seen over recent years, as the rate of GDP expansion rose from 2009s 3.0% to an estimated 4.0% in 2010. Per capita GDP now stands at some $27,500, up from an estimated $25,000 in 2009. At the same time, efforts to contain inflationary trends proved quite successful, with the rate of inflation recorded over the year falling to around 2.6% compared with 2.8% in 2009. The current account surplus rose from 2.7% of GDP to an estimated 5.2% of GDP. Efforts continue to reduce the extent of dependency on the oil and gas sector and to reduce the countrys unemployment rate by encouraging greater direct investment. In light of recent events in the MENA region, the government is seeking greater stability and security for the country, given the huge strides that have been made in the Kingdom over the last decade and more to encourage overseas investment, in particular in the area of banking which enjoys the grounding of legal and regulatory infrastructure which has been put in place and which is second to none in the region. The impact of the devastating floods that hit Pakistan in 2010 not only resulted in huge human suffering at the time, but continues today to affect everyday life: frequent power outages and a deteriorating security situation being among the consequences. Some 310,000 businesses are estimated to have suffered, quite apart from the agricultural sector accountable for some 20% of the national economy and especially the cotton fields, which have suffered some 14 million bales lost through damage. Sugar, chipboard, paper, leather, rice, livestock, power plants were also deeply affected. At the same time, in accordance with Pakistans agreement with the IMF, the removal of fuel subsidies and, accordingly, the upward adjustment of electricity tariffs, continue to bring rising energy costs, which naturally have a knock-on effect on those industries that are heavy energy users textiles and cement for example. Higher commodity prices are unavoidable in the short term. Continuing worries over inflation 13.6% in 2009 and currently projected to be around 13.9% yearon-year - have compelled the State Bank of Pakistan to raise its policy rate (which directly affects the inter-bank rate) to 13.5%. Consequently, current economic growth is estimated to have fallen to 4.8%. Following a comprehensive internal review, Al Baraka Bahrain is in the process of adopting a new Strategic Plan, the implementation of which has occupied and will continue to occupy much of its attention. The acquisition of EGIB and merger of its Pakistan branches represented an important part of its plan to go for growth, in addition to demonstrating its ongoing commitment to the Pakistan market. For the Bahrain operations, its growth strategy has involved the introduction of new products to broaden the product portfolio and thereby increase its customer base. The success of this exercise can be judged by the 18% increase in the number of financings and investments accounts; likewise, the number of deposit accounts expanded by over 6%. Building on the success of its Taqseet (instalment) product introduced last year, the bank launched a new product in November 2010 - the Taqseet Card, believed to be unique in the market; this product offers multiple murabaha finance transactions through a single card, which has so far evinced solid interest from the retail market. Residential mortgage finance, launched in 2009, remained in demand. The bank has also introduced several new financing products related to car financing and goods financing. On the commercial side, letter of credit issuance increased by over 50% above that of 2009. Revenues from banking services meanwhile almost doubled due to the increase in the banks foreign trade business and increased income from packaging and booking transactions. As a consequence of this increased activity, Al Baraka Bahrains total Bahrain-based assets increased by 10% over 2009 to reach $690 million, as total financings and investments grew by 28% to $608 million. Deposits and unrestricted investment accounts grew by 12% to $522 million, mostly on account of a 22% rise in URIAs. Income from jointly financed contracts and investments however declined by 11% to $19 million, of which the banks share, including its share as Mudarib, was $9 million, compared with $10 million from this source in 2009. Together with income from its own sales and investments, however, which soared to $12 million from $2 million in 2009, mainly attributable to $9.8 million arising from the merger of its Pakistan based branches with EGIB, and revenue from banking services and other income, the banks total Bahrain-based operating income rose by 77% to $26 million. Operating expenses meanwhile fell by nearly 2% to $17 million, producing a net operating profit of $8 million compared with a $3 million operating loss in 2009. After application of provisions significantly lower than had been necessary in 2009 - Bahrain operations recorded a small net profit of $1 million, compared with 2009s net loss of $24 million.
Al Baraka Islamic Bank B.S.C.

Al Baraka Islamic Bank was incorporated in Bahrain in February 1984 and operates as a retail and investment Islamic bank. It obtained a commercial banking license in Pakistan in 1991.The bank operates 5 branches in Bahrain and 89 branches in Pakistan.
Mr. Mohammed Al Mutaweh Board Member & Chief Executive Officer Al Baraka Tower, P.O. Box 1882 Manama, Kingdom of Bahrain +97317 535 300 +97317 533 993 www.barakaonline.com
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Al Baraka Islamic Bank B.S.C. (continued) Al Baraka Bank (Pakistan) Ltd. Founded 2010 - Pakistan
The Pakistan-based operations, on the other hand, closed the year with total assets of $701 million, compared with $344 million a year earlier, primarily due to consolidation of the EGIB assets into the accounts. The absorption of the new branches together with organic growth in the original branches operations resulted in a 158% increase in total financings and investments to $496 million, of which murabaha sales receivables accounted for the largest share at $215 million, but non-trading investments at $183 million recorded the greatest overall growth. These assets were funded by the unrestricted investment accounts and customers current and other accounts which together equalled $613 million. Income from jointly financed contracts and investments grew 9% to $33 million, of which the investors share was $24 million, while the banks income from this source, including its share as Mudarib, was $8 million or 72% higher than that for 2009. After including income from its own sales and investments, fees and commission income and other operating income, the banks total Pakistan-based operating income was $14 million, 41% above that for 2009. Operating expenses rose by 16% to exceed $8 million, leaving a net operating income of $5 million. After accounting for provisions and taxation charge, moreover, the banks net profit from Pakistan operations amounted to $3 million, comparing well with 2009s loss of $2 million. As presaged in last years annual report, Al Baraka Bahrain recommenced network growth, opening one new branch in Bahrain to add to the existing 4-branch network there. The merger in Pakistan added EGIBs 60 branches to the banks existing 29. The ATM network was also expanded through the installation of 3 more units in Bahrain; EGIB meanwhile contributed a further 31 units in Pakistan. The banks 5-year programme now envisages having some 186 branches spread between the two countries by 2015. For 2011 Al Baraka Bahrain intends to make substantial inroads into its operating costs, through the streamlining of current processes and controls by leveraging on its new, modern, core banking system. It will also be increasingly focusing on expansion of the mortgage financing product and the provision of more facilities to the middle-sized and small enterprises in Bahrain, including trade finance. Meanwhile, integration of the two parts of the new Al Baraka Pakistan is progressing well under several different committees dealing with Human Resources, IT, Operations, Finance, Credit and other areas of operation. Implementation of the new Misys Islamic Equation core banking system is proceeding on schedule, as is Disaster Recovery implementation.
Al Baraka Bank (Pakistan) Ltd.

Has been present in its erstwhile form of 29 branches of Al Baraka Islamic Bank B.S.C. since 1991. In October 2010, it acquired Emirates Global Islamic Bank to form Al Baraka Bank (Pakistan) Ltd with a total of 89 branches.
Mr. Shafqaat Ahmed Board Member & Chief Executive Officer 162, Bangalore Town, Main Shahrah-e-Faisal, Karachi, Pakistan +92 21 34315851 +92 21 34546465 www.albaraka.com.pk
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Al Baraka Bank Tunisia
Founded 1983 - Tunisia
From a lacklustre 3.0% GDP growth in 2009 in the wake of the global slowdown, the Tunisian economy improved in 2010, growing by an estimated 3.8% over the year. This growth reflected the emergence from recession of its most important European Union trading partners and the resulting increase in trade activity. Its current account deficit, which had reached a low point of $1.7 billion or -4.2% of GDP in 2008, improved upon 2009s $1.5 billion or -3.8% of GDP to end the year at $1.2 billion or -2.9%. Inflation increased a little to an estimated 4.5% compared with 3.5% the previous year. As expected, the government established Tunisia Holding during the year to act as holding company for three of its largest national banks, in order to better control the strategies and activities of the constituent public sector banks. It also created a mega financial institution, called Al Mubadarah (meaning taking initiative) to specialise in financing small and medium sized enterprises in addition to acting as holding company for the states ownership of the SME financing bank Tunisian Dhaman and other investment companies. The government also completed the first phase of the setting up of the Tunisian Foreign Bank, involving the restructuring of the capital of the former UTB (Union of Tunisian Banks) and increasing it by Euro 30 million. The Tunisian Foreign Bank meanwhile has prepared a 5-year business plan which includes plans for the establishment of a branch network in Europe, commencing with France, Italy and Germany. It is hoped that the peoples revolution of January 2011 which culminated in the removal of President Ben Ali from office has ushered in a new era of transparent and democratic government to the benefit of the people. It awaits to be seen whether the new government will continue to implement the policies of economic reform that were being followed by the last government and, indeed, to renew efforts to reduce unemployment and increase economic activity among small and medium sized businesses. In 2010 Al Baraka Tunisias total assets grew by 12% to reach $553 million, attributable mostly to the financings and investments portfolios which grew by 7.0% to aggregate $496 million, mostly attributable to the murabaha portfolio, as the sales receivables outstanding at the end of the year rose by 7% to $344 million, and to the mudaraba financings, which also rose by 7% to equal $143 million. The assets were funded primarily by $454 million of customer deposits (including unrestricted investment accounts) which rose in aggregate by 13% as the total number of customer accounts grew to nearly 35,000. The portfolio increase translated into a similar increase in the joint income from sales receivables and jointly financed contracts and investments, which reached $18 Unit Head Title Address Telephone Fax Website Mr. Laroussi Bayoudh Vice Chairman & Managing Director 88, Avenue Hedi Chaker 1002 Tunis, Tunisia +21671 790000 +21671 780235 www.albarakabank.com.tn million, resulting in a net return to the bank from this source of $13 million. Other sources of income contributed $6 million, mostly from banking services, so that the total operating income ended the year at $19 million. Operating expenses were about the same as in 2009 at $8 million so that, after a net provision write back and a slightly higher taxation charge, the bank reported a net profit of $11 million, the same as that for 2009. Looking to the future, Al Baraka Tunisias strategy will be to leverage on its new state-of-the-art core banking systems in order to enhance the banking services offered to its customers, including e-banking. It also plans to launch a Gold MasterCard. Its network will be expanded from the current 8 branches to 13 by 2015, in addition to the installation of ATMs at each of the new branches. Mr. Laroussi Bayoudh, Vice Chairman & Managing Director of Al Baraka Bank Tunisia retired at the end of his term on 31st March 2011.
Al Baraka Bank Tunisia

Al Baraka Bank Tunisia was established in 1983. The bank has both offshore and local retail activities. The bank operates 8 branches.
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Al Baraka Bank Limited Founded 1989 - south Africa
The South African economy continued to recover well from the after-effects of the global slowdown in 2008-09, recording an estimated 2.8% growth in GDP compared with an overall 2.2% drop in 2009. The current account deficit was slightly reduced from the previous years -5.0% of GDP to -4.6%. Inflation, moreover, continued to moderate, closing the year at an estimated 4.4% compared with 2009s 6.3%. Both tourism revenues and retail sales benefited from the successful staging of the FIFA World Cup in the middle of the year. In addition, gold prices reached record levels, while at the same time crude oil prices tended to remain fairly stable. Partly on account of the improved economic performance, the Rand strengthened substantially over the course of the year, resulting in lower import costs and reduced inflation, in turn permitting the Reserve Bank to start to reduce interest rates. Pursuant to Basel II implementation, effective 1st January 2010 the Reserve Bank increased the minimum Capital Adequacy Ratio (Pillar 1 and Pillar 2) required of South African banks to 14%. Al Baraka South Africa is in the process of enhancing its capital to meet the minimum CAR requirements. Another development significantly affecting the banking industry was the promulgation of the National Credit Act, which seeks to regulate the manner in which financial institutions operate in order to curtail unhealthy and excessive consumer borrowing. Al Baraka South Africas total assets grew by 32% to $426 million, due in part to the effect of an 11.3% appreciation of the Rand in US dollar terms on the total asset base, supported by 30% growth in its financings and investments portfolios, which reached $363 million. The expansion was funded largely by a 34% increase in the banks unrestricted investment accounts and customer current and other accounts, which rose in aggregate to $387 million. This business growth resulted in 16% higher income from jointly financed contracts and investments to $30 million. After accounting for the investors share, the banks income from this source, including its share as Mudarib, was likewise 16% higher, at $13 million. Including income from self financing and investment, revenue from banking services and other operating income, its total operating income rose by 21% to $15 million. After operating expenses which rose by 25% to $13 million, reflecting the higher staff costs and investment in infrastructure over the past year, the net operating income was unchanged at $2 million and, following provisions and a taxation charge, the bank returned a net profit of $1.5 million compared with $2.0 million in 2009. Rand appreciation accounted for a 14% enhancement of the banks net income in US dollar terms. Full implementation of the new Misys Islamic Equation banking system was achieved during the year, Equation going live in August 2010. As a consequence, Al Baraka South Africa was able, after completing the process of converting savings accounts to electronic banking via debit cards, to commence offering e-banking products to its customers. The first to benefit were its small business customers, but the bank is working towards extending these products to its corporate customers early in 2011. It will also now be able to conduct a reevaluation exercise to leverage up on its new state-of-the-art core banking system and reduce its operating expenses, aiming for a cost to income ratio of less than 60% within 4 years. It has meanwhile submitted an application to the authorities for a full foreign exchange licence, which it hopes will be granted by the end of the year. Among a number of new products to be introduced shortly are a Hajj investment account and a property diminishing musharaka financing facility, both of which it expects will be well received by clients.
Al Baraka Bank Ltd

Al Baraka Bank Ltd was established in 1989 and operates as a commercial Islamic bank. The bank has 4 corporate offices and 6 retail branches.
Mr. Shabir Chochan Board Member & Chief Executive Officer Kingsmead Office Park, Stalwart Simelane (Stanger) Street Durban 4001, South Africa +2731 364 9000 +2731 364 9001 www.albaraka.co.za
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Al Baraka Bank Sudan Founded 1984 - sudan
Against an actual increase in GDP for 2009 of 4.0% - which in itself had been a substantial shortfall in the originally targeted growth rate of 10.0%, subsequently revised to 6.0% - the Sudanese economy grew by an estimated 5.5% in 2010, a not inconsiderable achievement in a year of reduced foreign currency earnings as oil prices stabilised at lower levels than had obtained the previous year. The current account deficit also improved, from -11.2% of GDP to -9.1%, while the rate of inflation fell back slightly from 11.0% to around 10.0%. As a result of 2010s lower foreign currency earnings, the exchange rate of the Sudanese pound on the international exchanges declined, prompting the authorities to implement a number of defensive measures, notable among which were the raising of customs duties on a range of goods and an increase to 100% to the cash margins required on letters of credit opened for purposes other than importation of agricultural, industrial and medicinal goods. The Central Bank of Sudan also imposed a limit of four branches per bank on the number of bank branches in the capital authorised to deal in foreign currencies. Meanwhile the Central Bank has also been overseeing the development and upgrading of the payment and settlement system introducing real time settlement for the first time in addition to a number of corporate governance measures and the introduction of a new bank audit system. The Central Bank is taking steps to enhance the inter-bank market and has also activated open market operations to manage liquidity. It has announced that it is raising the minimum paid-up capital of banks to SP100 million from the current SP80 million. A Development and Reconstruction Bank of Darfur is also being established. 2011 was a turning point in the history of Sudan, as the people of south Sudan voted in January in a referendum to break away from the north and form a separate state. The vote for secession, the details of which are expected to be worked out in negotiations over the next 6 months, will undoubtedly adversely impact the economy of north Sudan due to the loss of the major part of the foreign exchange revenues from oil production, as the greater proportion of the current oil development fields lay in the south. This in turn will impact on Sudans balance of payments and the international exchange rate of the Sudanese pound. However, drilling operations are currently under way in north Sudan which, it is hoped, will lead to the identification of new oil reserves in economic quantities, while mining operations are also expanding in the north, especially in the development of gold and chromium reserves. These measures, together with intensification of existing efforts to develop further the agricultural and livestock export markets, should lead to an improvement over the period 2013-15. Al Baraka Sudans total assets grew in 2010 by 6% in Sudanese pound terms. However in US dollar terms the value of total assets fell by 5% to $303 million on account of the 10.6% decline of the Sudanese pound against the US dollar over 2009. In US dollar terms, its total financings and investments suffered a 15% reduction, to $192 million. The assets were funded chiefly by customer deposits, 12% lower at $220 million again on account of the fall in the value of the Sudanese pound. In view of this, the joint income from sales receivables and jointly financed contracts and investments was 10% less than in 2009 so that, after accounting to the investors for their share and including its own share as Mudarib, the banks income from this source was also 10% lower at $16 million. When added to its income from own sales and investments, revenues from banking services and other income, the total operating income was 7% lower at $26 million and, after operating expenses of $20 million, net operating profit was $6 million or 31% below that applicable to 2009. However, after a net write back of prior years provisions and a lower taxation charge, the bank returned a net profit of just over $7 million, 12% up on the equivalent result for 2009, despite the negative impact of local currency depreciation against the US dollar, accounting for 5% of net income. Al Baraka Sudan launched a number of new products during the year. It added to its Takaful (insurance) products introduced in 2009 and now offers a range of products covering, amongst others, income protection, mortgage protection, debt or finance protection, medical and education costs and Hajj and Umrah costs. Internet banking, SMS banking and Parallel Salam were also introduced and have all made a good start. For the future, it is to introduce an education financing product and is currently awaiting Central Bank approval before offering Ijarah Muntahia Bittamleek. It is presently preparing for the issuance of Hajj and Umrah cards, which it hopes to be able to launch in the medium term. Its plans for network expansion remain in place, as it intends to open at least 5 new branches and cash offices over the next 5 years. Al Baraka Sudan completed the rebranding of its operations during April 2010, in accordance with the Groupwide Unified Corporate Identity strategy.
Al Baraka Bank Sudan

Al Baraka Bank Sudan was established in 1984 and its activities comprise retail, corporate, commercial and investment banking. The bank operates 25 branches.
Mr. Abdullah Khairy Hamid General Manager Al Baraka Tower, P.O. Box 3583, Khartoum, Sudan +249183 780 688 +249183 788 585 www.albaraka.com.sd
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Al Baraka Bank Lebanon S.A.L. Founded 1991 - Lebanon
Driven largely by tourism and construction activity, Lebanons economy grew by an estimated 8.0% in 2010, a little up on the growth of 7.0% recorded in 2009. At the same time, its current account deficit remained stable at $3.7 billion or -10.5% of GDP, a small improvement over the -11.3% of GDP recorded in 2009. The average rate of inflation increased moderately to 3.5% from 2.5%, although on a year-to-year basis it was unchanged at 2.9%. Lebanon continues to benefit from inward capital transfers arising from expatriate Lebanese remittances and some foreign direct investment emanating from the Gulf states. Its public debt remains high at $50 billion, although much of this is held by domestic banks and the Central Bank holds over $30 billion in foreign currency reserves to ensure that it can always meet local demand for dollars. The year saw a 10% rise in assets to $200 million at Al Baraka Lebanon, as its financings and investments portfolios rose by 84% to $123 million, marking a shift away from the inter-bank market. On the liabilities side, customer deposits including the unrestricted investment accounts grew by 13% to reach $162 million. The actual number of current and other customer accounts nevertheless grew by some 20%, reflecting the success of the banks drive to widen its customer base. Income from jointly financed contracts and investments in turn grew, by 55% to a little less than $9 million and, after accounting for the unrestricted investment account holders share, the banks share including that as Mudarib rose to over $4 million, more than double the revenue from this source in 2009. This income, together with income from its own investments and sales and banking services, amounted to a little under $8 million. Operating expenses on the other hand rose by only 2% to slightly more than $8 million, resulting in a substantially reduced operating loss of only $0.4 million which, as there was no taxation charge and only a small provision charge for the year, resulted in a net loss for the year of $0.9 million, a significant improvement over the $2.5 million loss realised in 2009. Products introduced during the year include ATM Online services; Baraka Surf which enables clients to access the Internet at reduced cost; Baraka Net a rechargeable prepaid Internet card enabling clients to purchase goods and services over the Internet within a preset limit and Baraka Dental a programme to finance dentists equipment and patients serious dental work. Several more new products are planned to be launched in 2011, amongst the most important are a credit card specifically tailored for women, featuring free gifts and store discounts among other benefits; a Hajj prepaid card carrying a variety of benefits; a murabaha financing scheme introduced for young couples getting married to finance the ceremonies, home set-up costs and similar expenditure, Unit Head Title Address Telephone Fax Website Mr. Mutasim Mahmassani Board Member & General Manager Rashid Karameh Street, Verdun 2000 Centre, Beirut, Lebanon + 9611 808008 + 9611 806499 www.al-baraka.com featuring special discounts from photographers, travel agencies, wedding planners, etc.; Al Baraka Green to finance the installation of solar panels to produce electricity in the home and Baraka Online a safe Web application permitting clients to access their accounts and execute transactions from anywhere in the world. In the meantime, implementation of the new Misys Islamic Equation core banking system has been largely completed. Full implementation in early 2011 will then enable the bank to expand its Internet banking services, including SMS banking. The banks medium term network expansion strategy aims at increasing the number of branches from the present 7 offices to 12, whilst adding a further 11 ATM units, by 2015.
Al Baraka Bank Lebanon S.A.L.

Al Baraka Bank Lebanon S.A.L. was founded in 1991 and operated under a commercial banking license until 2004 when an Islamic Banking Law was instituted and the Bank obtained an Islamic banking license. Its activities comprise retail and commercial banking in accordance with Islamic Sharia principles. The Bank operates 7 branches.
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Al Baraka Bank Syria s.a. Founded 2009 - syria
Syrias GDP expanded in 2010 by an estimated 5.0% compared with 3.0% in 2009. However, its current account deficit rose to -4.3% of GDP from -3.2%. Inflation continued to be managed downward and is estimated to have averaged 5.0% in 2010, down from an estimated 7.5% in 2009 and 15.2% in 2008. At the close of its first year of operations, Al Baraka Syria had increased its total assets by 92% to $108 million, including financings and investments aggregating $55 million. This growth was funded by its equity of $53 million and customer deposits including unrestricted investment accounts totalling $58 million. Its total operating income was just above $2 million and, with operating expenses totalling nearly $5 million, the bank managed to reduce its net loss from $4 million in 2009 to a little over $2 million, a not inconsiderable achievement for a new operation. Al Baraka Syria is the first of ABGs subsidiaries to have been founded since the Group came into existence through the merger of the individual banks established by Shaikh Saleh Abdullah Kamel. Since its foundation in 2009, Al Baraka Syria has opened one branch, in the Al Mazzeh area of Damascus, in addition to its head office premises in the Saba Bahrat area of Damascus. Plans are at an advanced stage for the unveiling of branches in Aleppo (3), Homs and Hama, so that by the end of the first quarter of 2011 the bank should have 6 operating branches in addition to its head office. Its rolling 5-year plan aims to have 50 branches established by the end of 2015, of which 12 will be in place by the end of 2011. The bank has commenced business offering a range of facilities to assist clients in the purchase of real estate, equipment, furniture and motor vehicles. From this base it plans to extend the range by introducing musawama (the purchase from retailers of specific goods at a discount which are then offered to consumers for payment over a period) and to introduce to targeted large corporates its payroll system which will be handled by its new core banking system. A money exchange and remittance service will also be offered to Syrian expatriates working in the Kingdom of Saudi Arabia, via its correspondent bank there. In addition to the implementation of its core banking system, Al Baraka Syria also plans to have implemented Basel II in full by 2012.
Al Baraka Bank Syria s.a.

Al Baraka Bank Syria s.a. was formally incorporated in December 2009 and started commercial operations in 2010.
Mr. Mohammed Halabi Chief Executive Officer Abdel Rahman Shahabnder Street, P. O. Box: 100, Damascus, Syria +96311 4437820 +96311 4437810 www.albarakasyria.com
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Al Baraka Banking Group Indonesia (Representative Office)
Founded 2008 - indonesia
In 2010 the Indonesian economy grew by an estimated 6.1%, compared with a growth rate of 4.5% in 2009 and an average 5.7% annual rate over the 5-year period 2003-08. The current account was essentially in balance but inflation, estimated to have exceeded 5.5% in 2010, compared with 4.6% in 2009, has recently been rising fast, forcing the Central Bank to increase interest rates in early 2011. The Indonesian government has over the years taken several regulatory steps to encourage the expansion of Islamic banks in the country. The target is to increase Islamic banking assets to 5% of total banking assets over time. Due to the favourable regulatory environment, the growing economy and the largest Muslim population in the world, Indonesia thus offers a very attractive destination for Islamic banks. ABGs representative office serves as a base for the Group to conduct research on local banks and their potential for acquisition and for assessing the business potential of the country from the Groups perspective. The representative office is also responsible for maintaining contact with regulators and major banking groups in Indonesia and for preserving the image and brand value of the Group. With trade flows between Indonesia and many of the countries where the Group operates growing rapidly, the Indonesia Representative Office proactively identifies business opportunities and generates leads that are directed towards ABG subsidiaries.
Al Baraka Banking Group Indonesia (Representative Office)
Unit Head Title Address
Mr. Moesfian Mokhtar Chief Representative Ravindo Building, 10th Floor, Jalan Kebon Sirih No. 75, Jakarta Pusat 10340, Indonesia +62 21 316 1345 +62 21 316 1074 www.albarakaindonesia.com
Telephone Fax Website
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Al Baraka Banking Group Libya (Representative Office) Under Formation
As of the end of 2010, the Group was at an advanced stage in its application to open a representative office in Libya, one of its aims under its medium term expansion strategy. The countrys GDP estimated at $74 billion for 2010 or $11,500 per capita - and the scope for economic expansion for the benefit of its population, renders it an attractive proposition for the Group. However, the political events of early 2011 have given rise to much uncertainty concerning the near term future in this country, although it is to be hoped that ultimately these events will find a peaceful solution. ABG intends to pursue its application for a licence and participating in the future development and prosperity of Libyan people in the fullness of time.
Al Baraka Banking Group Libya (Representative Office)

(Under Formation)
Unit Head Title Address
Mr. Wafik Al Shater Chief Representative Office No.144, 14th Floor, Al Fatah Tower 1, P.O. Box 91331, Tripoli, Libya +218 (21) 336 2310 +218 (21) 336 2311 +218 (21) 336 2312 www.albarakalibya.com.ly
Telephone Fax Website
MsAYLhA BRidge
Lebanon
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Corporate governance
The Board of Directors
The Board of Directors is responsible for the Groups overall management; in particular, the Board is responsible for approving the Groups business strategy, monitoring its operations and making critical business decisions. Under ABGs Articles of Association the Board of Directors shall consist of not less than five and not more than fifteen members. Members of the Board of Directors hold office for a three-year renewable term, although the term of office may be extended at the request of the Board for a period not exceeding six months with the approval of the Minister of Industry & Commerce of Bahrain, The current Board commenced its present term on 26 March 2008 except Dr. Bassem Awadallah and Mr. Moheydin Saleh Kamel who joined the Board on 24 March 2010. There is no maximum age limit at which a Director must retire from the Board of Directors. Each Directors membership of the Board shall terminate upon the expiry of his/her term, or upon the resolution of the shareholders in General Meeting, or as a result of one of a number of specified events or circumstances, such as the original appointment being found to be contrary to the provisions of ABGs Articles of Association, or the abuse by the individual of his/her position as director, or the individuals failure to attend three consecutive Board meetings without lawful excuse notified in writing to the Board, or upon the individuals formal resignation from the Board following reasonable prior notice, or occupation of any other remunerative office within ABG unless specifically approved by the Board of Directors. When an announcement is made requesting nominations for the position of membership of the Board of Directors whose three year term is due to expire, such nominations must be submitted to the Chairman of the Board within the time frame provided in the announcement. As part of the nomination process, each nomination must comply with local rules and regulations and must be submitted to the Central Bank of Bahrain (CBB) in order to ensure compliance with the CBBs Fit and Proper requirements. The names of all nominated individuals so approved by the CBB are then submitted to the shareholders at the next AGM for election. Election of ABG Directors takes place in accordance with the rules and procedures as set out in the Commercial Companies Law and ABGs Articles of Association. There are currently thirteen Directors on the Board, who have varied backgrounds and experience and who individually and collectively exercise independent and objective judgement. Other than the President & Chief Executive all Directors are non-executive. The posts of Chairman and President & Chief Executive are held by different Directors and each has separate, clearly defined responsibilities. The Board, its Committees and individual Directors are regularly assessed with respect to their effectiveness and contribution. In line with international best practice, the Board has instituted corporate governance measures to ensure that the interests of the shareholders are protected, including the appointment to the Board of seven independent non-executive directors, defined as a person who is not: a controller of ABG as the term is defined by the Bahrain Stock Exchange; an associate of a Director or a member of Executive Management of ABG; a professional advisor to ABG (such as external auditors); a large depositor with or large borrower from ABG (i.e. one whose deposits or borrowings exceed 10% of ABGs capital base); or in a significant contractual or business relationship with ABG which could be seen to interfere materially with his/her capacity to act in an independent manner. The Board of Directors meets regularly (at least four times a year) and has a formal schedule of matters reserved to it, considering key aspects of the Groups affairs referred to it for decision. The Board reviews the Groups strategy and financial plans, all proposed material changes to the Groups policies, structure and organisation, reports provided to it on the operations of the Group (with emphasis on organisational development, risk management and information technology development) and the performance of Executive Management Among other responsibilities, the Board is responsible for setting the Groups overall strategy and for: setting corporate goals and objectives, which it reassesses periodically; establishing policies to further the achievement of corporate goals and objectives; monitoring management effectiveness including its ability to plan and execute strategies; holding Executive Management accountable for results; establishing and approving policies and procedures designed to ensure ethical behaviour and compliance with laws and regulations, auditing and accounting standards and the Groups own corporate governance policy; ensuring that ABG and its subsidiaries operations are supported by an appropriate control environment i.e. that compliance, risk management and financial control and reporting functions are well resourced and structured; recognising and communicating to Executive Management the importance of the internal audit function at ABG and its units, periodically reviewing internal control procedures and taking measures to enhance the function of internal audit and to act in a timely and effective manner on its findings; ensuring that the Groups operations are supported by a reliable, sufficient and well integrated information system; approving the writing off of credit facilities and investments where appropriate, in accordance with the Groups policies and procedures; ensuring the preparation of the Groups financial statements on a regular and consistent basis and reviewing and approving its periodic financial statements and annual reports; approving strategic investments by ABG and/or its subsidiaries; approving all significant changes in the Groups accounting and reporting policies; ensuring compliance at all times with all relevant requirements of Sharia and AAOIFI standards; ensuring that the Group establishes and maintains an approved employee Code of Conduct and is at all times in full compliance therewith; performing any other functions required of the Board of Directors under applicable laws and regulations; and approving material transactions outside the normal course of business.
The Board and its Committees are supplied with full and timely information to enable them to discharge their responsibilities. In this respect, the Board, its Committees and all Directors individually have access to Executive Management, external consultants and advisors and the Board Secretary, who is responsible for ensuring that the Board procedures and applicable rules and regulations are observed. As part of the Boards responsibility to ensure efficient governance in all matters related to ABG, it has established a written compliance policy governing ABGs compliance with all laws and regulations, in particular those enunciated by the Central Bank of Bahrain and other local regulators, which inter alia cover risk-taking appetite, capital adequacy and liquidity thresholds, reporting requirements and protection against unsafe and unsound banking practices. The Board has delegated responsibility for monitoring compliance to the President & Chief Executive, which responsibility is carried out through a dedicated Compliance Department, whose mandate covers all aspects of compliance including assisting Executive Management and staff in managing risk, advising on laws and regulations and applicable standards, disseminating compliance guidelines to ABG staff members, ensuring an effective compliance methodology, providing periodical reports to the Board in connection with compliance controls and implementing operational controls, Know Your Customer (KYC) and other anti-money laundering methodologies. In October 2010 the CBB introduced new requirements to be met by all licensees under Module HC of its Rule Book, with respect to corporate governance principles in line with the Principles relating to the Corporate Governance Code issued by the Ministry of Industry and Commerce of the Kingdom of Bahrain, international best practice corporate governance standards set by bodies such as the Basel Committee for Banking Supervision and related high level controls and policies. ABG has conducted detailed internal assessments to ensure compliance with these new requirements and has set specific milestones for implementation of any identified shortfalls. The Board of Directors and Executive Management have been fully apprised of the amendments to the requirements and the specific milestones set. The Board of Directors has overall responsibility for the Groups system of internal control and its effectiveness and for defining and enforcing standards of accountability that enable Executive Management to achieve the Groups corporate objectives. There are established and ongoing procedures in place for identifying, evaluating and managing significant risks faced by the Group, which are regularly reviewed by the Board. The Groups system of internal control provides for a documented and auditable trail of accountability and applies across its operations, is designed to ensure effective and efficient operation and compliance with all applicable laws and regulations, and seeks to manage risk with a view to avoiding material errors, losses and fraud. In 2010 the members of the Board were: Non-Executive Directors 1. Shaikh Saleh Abdullah Kamel Chairman 2. Mr. Abdullah Saleh Kamel Vice Chairman 3. Mr. Abdul Elah Sabbahi 4. Mr. Yousef Ali Fadil bin Fadil 5. Mr. Mohyedin Saleh Kamel Independent Non-Executive Directors 1. Mr. Abdulla A. Saudi Vice Chairman 2. Mr. Saleh Al Yousef 3. Dr. Anwar Ibrahim 4. Mr. Jamal bin Ghalaita 5. Mr. Ebrahim Fayez Al Shamsi 6. Mr. Samer Mohammed Farhoud 7. Dr. Bassem I. Awadallah
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Corporate governance (Continued)

Executive Directors Mr. Adnan Ahmed Yousif President & Chief Executive frequently at the request of the Chairman of the Committee. It can call for the attendance of the President & Chief Executive, Head of Credit and Risk Management and other senior executives of the Group at any of its meetings. The Groups risk appetite is determined by the Board based on the recommendations of the Board Risk Committee. The Board Risk Committee is responsible for setting acceptable levels of risks to which the Group may be exposed, for approving managements strategy for the managing of risk and for ensuring that all necessary steps are taken by management to identify, measure, monitor and control risk. The Committees objective is to oversee the Groups risk management systems, practices and procedures to ensure effective risk identification and management and compliance with internal guidelines and external requirements. The Committee reviews issues identified by the Internal Audit and Compliance departments of ABG and/or any of its subsidiaries, such as weaknesses or breakdowns in controls. The number of meetings held in 2010 by the Board of Directors and its Committees, and those attending, were: No. of meetings Dates of the No. of meetings Name of Board/Committees Members name in 2010 meetings Attended Sh. Saleh Abdullah Kamel 1 Mr. Abdullah A. Saudi 5 Mr. Abdullah Saleh Kamel 4 Mr. Saleh Al Yousef 6 24/02/2010 Mr. Adnan Ahmed Yousif 6 24/03/2010 Dr. Anwar Ibrahim 3 11/05/2010 Board of Directors 6 Mr. Abdul Ellah Sabbahi 4 17/08/2010 Mr. Ebrahim Fayez Al Shamsi 6 10/11/2010 Mr. Jamal bin Ghalita 4 29/12/2010 Mr. Yousef Ali Fadil Bin Fadil 6 Mr. Samer Mohammed Farhoud 6 Dr. Bassem Awadallah 4* Mr. Mohyedin Saleh Kamel 3* Mr. Abdullah Saleh Kamel Mr. Abdul Ellah Sabbahi Board Executive Committee Mr. Yousef Ali Fadil Bin Fadil Mr. Adnan Ahmed Yousif Mr. Saleh Al Yousef Dr. Anwar Ibrahim Mr. Ebrahim Fayez Al Shamsi Dr. Bassem Awadallah Mr. Ebrahim Fayez Al Shamsi Board Affairs & Remuneration Mr. Jamal bin Ghalita Committee Mr. Yousef Ali Fadil Bin Fadil Mr. Abdul Elah Sabbahi Mr. Jamal bin Ghalita Mr. Samer Mohammed Farhoud Mr. Mohyedin Saleh Kamel 06/02/2010 27/06/2010 13/12/2010 3 3 3 3 5 3 5 4** 3 3 3 3 2 2 1***
Board Committees
The Board has put in place a number of Board committees, membership of which is drawn from the Board membership and to which it has delegated specific responsibilities. The principal Board committees are:
Board executive Committee
The Executive Committee is chaired by Mr. Abdullah Saleh Kamel and the other members are Mr. Adnan Ahmed Yousif, President & Chief Executive, Mr. Abdul Elah Sabbahi and Mr. Yousef Ali Fadil bin Fadil. The Executive Committee comprises a minimum of four Directors and meets at least two times a year. The Board has delegated to the Executive Committee the responsibility to make recommendations to the Board, for the Boards approval, concerning the Groups overall policies and procedures, strategies and business plan, or any significant change to them, or any major change to its capital or organisation structure, assets or investments. The Executive Committees primary purpose is to consider and recommend for approval of the Board the overall policies and procedures, strategies and business plan of the Group.
Board Affairs and Remuneration Committee
The Board Affairs and Remuneration Committee is chaired by Mr. Ebrahim Fayez Al Shamsi and its other members are Mr. Jamal bin Ghalaita and Mr. Yousef Ali Fadil bin Fadil. The Board Affairs and Remuneration Committee meets at least twice a year and considers all material elements relating to remuneration policy, including, inter alia, the approval of the remuneration and incentivisation of the Board and recommendation to the Board of the level of remuneration of the Executive Management members and other ABG employees and makes recommendations to the board accordingly based on the total performance of the Group. The Committee also performs the role of a Nominations Committee. The Committee conducts an annual evaluation of the Board, Board Committees and the President & Chief Executive. It is also responsible for inducting, educating and orienting new Directors and for conducting seminars and other training programmes from time to time for Members of the Board.
Audit & governance Committee
The Audit & Governance Committee is chaired by Mr. Saleh Al Yousef. Other members are Dr. Anwar Ibrahim, Mr. Ebrahim Fayez Al Shamsi and Dr. Bassem I. Awadallah. The Audit & Governance Committee meets formally at least four times a year and external auditors attend at least one meeting annually. The external auditors, moreover, have unrestricted access to the Audit & Governance Committee and its Chairman throughout the year. The Board of Directors has delegated to the Audit & Governance Committee the responsibility for ensuring that an effective system of accounting and financial control is in place. The Committee achieves this through regular review of the Groups accounting policies, financial reporting and disclosure controls and procedures and the adequacy and effectiveness of the internal control procedures at the Head Office and in ABGs subsidiaries. The Committee considers all matters relating to financial control and reporting, internal and external audits and their scope and results, risk management and compliance with regulatory requirements, accounting standards and Sharia requirements. It also considers and approves the annual audit plans, ensures coordination between the internal and external auditors, monitors the independence, qualifications, effectiveness and performance of the external auditors and their remuneration and makes recommendations to the Board regarding the appointment and retirement of the external auditors. The various internal and financial controls and processes are subject to independent review by the Groups Internal Audit Department and external auditors and regulators as appropriate. The reports of all these bodies are forwarded to the Audit & Governance Committee, who, acting on behalf of the Board, ensures that appropriate corrective action is taken where required. The Committee is informed directly by Internal Audits reports submitted to it and by its discussions with external auditors of the work undertaken by them and their conclusions and recommendations. The Committee reviews the Groups annual and interim financial statements, to recommend their approval to the Board of Directors, the adequacy of provisions and any reports by external consultants on specific investigative or advisory engagements.
Audit & Governance Committee
23/02/2010 11/05/2010 16/08/2010 10/11/2010 29/12/2010 21/01/2010 24/06/2010 19/10/2010
Risk Committee
21/01/2010 24/06/2010 21/10/2010
The Board Risk Committee is chaired by Mr. Abdul Elah Sabbahi, with its other members being Mr. Jamal bin Ghalaita, Mr. Samer Mohammed Farhoud and Mr. Mohyedin Saleh Kamel. Membership of the Committee comprises a minimum of four Directors, all of whom must be non-executive directors. The Board Risk Committee meets formally at least twice a year but will meet more
* Board of Directors: Was not a Member at time of Meetings No. 1 & 2 ** Audit & Governance Committee: Was not a Member at time of Meeting No. 1 *** Risk Committee: Was not a Member at time of Meeting No. 1
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Executive Management
The Groups Executive Management Team has the prime responsibility for implementing the strategy of the Group, identifying and evaluating significant risks to the business of the Group and for the design and operation of appropriate internal controls. Its other responsibilities include: ensuring that resolutions of the Board of Directors are carried out; ensuring that the Group operates at all times in accordance with the principles of Sharia and that the decisions and recommendations of the Sharia Supervisory Board are carried out and providing the Board of Directors with analyses, assessments and recommendations regarding the Groups activities and the CBB with all information required under the CBB Law and relative regulations. In effecting full control over the Group, Executive Management has developed a system for filtering down to Group units the centralised strategic decisions taken at the parent level, thus ensuring the implementation of Groupwide policies and common operational processes and procedures. As at the end of 2010, the Team consisted of the President & Chief Executive, the Deputy Chief Executive and the Heads of Financial Control, Internal Audit, Strategic Planning, Credit and Risk Management, Treasury and Investment, Operations and Administration, Legal Affairs & Compliance and Financial Institutions. Executive Management also exercises control via the following Committees, which have the following specific responsibilities: by the President & Chief Executive and the other members are the Deputy Chief Executive and the Heads of Internal Audit, Legal affairs & Compliance, Operations and Administration and Investors Relations.
Brand guardians
The Brand Guardians are responsible for the introduction, implementation and management of the new Unified Identity and maintenance of a lasting positive image reflecting the dynamic and international nature of the Groups businesses and activities. The Brand Guardians are the Deputy Chief Executive, the Heads of Operations and Administration and Strategic Planning, together with selected senior members of ABG Strategic Planning and a senior member of management from Al Baraka Bahrain.
Other committees
The Executive Management forms ad hoc committees as and when required to address specific initiatives in which the Group may be engaged from time to time.
Compliance, Policies and Procedures

group disclosure Policy
The Group communication strategy aims to help achieve the Groups objective of keeping the market informed of material information. The Groups communications with the market ensures compliance with the CBBs directives as detailed in the Public Disclosure Module of its Rulebook, Volume 2, Part A and the CBB Disclosure Standards as specified under the CBB Capital Markets Regulations. Material information is any information, financial or non-financial, relating to the business and affairs of the Group and ABGs subsidiaries that results in, or would reasonably be expected to result in, a significant change in the market price of the Groups shares or in the decision of a prudent investor either to sell, buy or hold the Groups shares or cause to change a prudent investors decision to transact or refrain from transacting with the Group or its units. Material information consists of, but is not limited to, both material facts and material changes relating to the business and affairs of the Group and ABGs subsidiaries. Examples of information that may constitute material information are given below: Changes in share ownership of the Group; Changes in corporate structure of the Group, such as reorganisations, mergers, etc; Public or private sale of additional securities (such as Sukuk) or planned acquisition; Changes in the Groups dividend policy or other material modifications to the rights of shareholders; Takeover bids; Changes in the capital structure of the Group; Borrowing or lending of a significant amount of funds; Changes in rating agency decisions such as downgrades or upgrades; Development of new products that might consequently affect the Groups existing products or markets; Changes in financial results, including significant increases or decreases in near-term earnings prospects, including all the important financial indicators that affect the Groups earnings, balance sheet, cash flow and liquidity; Material changes in accounting policies; Significant changes in capital investment plans or the Groups corporate objectives and priorities; Significant changes in the Groups capital adequacy; Changes in the Groups Board of Directors or members of Executive Management; Commencement of, or developments in, material legal proceedings or regulatory matters; Major labour disputes; Significant changes in the existing business models of the subsidiaries; Material negative changes of subsidiaries capital adequacy ratios; Material positive or negative earnings, or indicators of such earnings, generated by the subsidiaries; and Major economic or political events in one or more of the subsidiaries countries of operations that the Group reasonably and prudently believes would have a material impact on the financial position of the Group. The Group is committed to complying with the CBBs rules and regulations with regard to the dissemination of the Groups financial information and statements, on a quarterly, semi-annual and annual basis and as applicable to any ad hoc information requirement of the CBB. As a listed company on the BSE and NASDAQ Dubai, ABG is committed to adhering on a timely basis to all periodic information dissemination requirements of the BSE and NASDAQ Dubai, as stipulated in their respective directives and rulebooks in this respect. Additionally, the Group will publicly disclose and broadly disseminate material information immediately upon becoming aware of circumstances or events that underlie such material information or when a decision to implement a material change is made by the Board of Directors or Executive Management of the Group. As a listed company, ABG adheres to a strict policy which delegates to certain specific individuals the authority to issue press releases or
executive Management Committee
The Executive Management Committees role is to oversee the implementation of the strategic objectives of the Group in relation to its business direction, operations, risk, expansion plans and overall policies and procedures. The Committee is chaired by the President & Chief Executive with the remaining membership comprising the Deputy Chief Executive and the Heads of Strategic Planning, Operations and Administration, Credit and Risk Management and Treasury and Investment, with the Heads of Financial Control and Internal Audit as observer-members.
Asset & Liability Committee
The Asset & Liability Committees mandate is to monitor the liquidity and capital adequacy of the Group and review the Groups long term equity investments and its penetration into the different markets. The Committee reviews liquidity and cash flow of ABG and the Group and sets balance sheet growth targets, besides monitoring the distribution of profits to investors. The Committee is chaired by the President & Chief Executive and its remaining members are the Deputy Chief Executive, the Heads of Treasury and Investment, Credit and Risk Management, Strategic Planning, Financial Control and Operations and Administration, together with a senior member from the Bahrain based subsidiary, Al Baraka Islamic Bank (Al Baraka Bahrain).
head Office Credit Committee
The Head Office Credit Committee is the authority that approves credits and considers issues of Group credit policy and Group credit exposures, problem credits and provisioning levels. The Head Office Credit Committee is chaired by the President & Chief Executive, with the remaining membership being drawn from among the Executive Management.
Management Risk Committee
The Management Risk Committees role is to assist the Board Risk Committee in managing and controlling risks and to introduce and support such measures which enhance the efficiency of risk management policies, procedures, practices and controls within the Group. It is chaired by the President & Chief Executive with remaining membership comprising the Heads of Credit and Risk Management, Operations and Administration and Financial Control and the Manager of Credit Review and Analysis.
head Office iT steering Committee
The Head Office IT Steering Committees role is to draw up the Groups short and long term IT strategy and oversee and monitor its implementation throughout the Group with a view to effecting standardisation in information and operation management. The Committee is chaired by the Deputy Chief Executive with remaining membership comprising the Heads of Operations and Administration, Financial Control, Strategic Planning and Credit and Risk Management, together with senior support nominees drawn from the Group.
human Resources & Compensation Committee
The role of the Human Resources & Compensation Committee is to review the Human Resources policies, management and planning at the Groups Head Office. The Committee is chaired by the Deputy Chief Executive with the remaining membership comprising the Heads of Operations and Administration, Strategic Planning and Financial Control.
head Office insiders Committee
The Head Office Insiders Committee was set up in accordance with the guidelines issued by the CBB and the Bahrain Stock Exchange (BSE) aimed at ensuring the maintenance of a fair, orderly and transparent securities market and enhancing and developing the practices relating to the risk management systems and internal controls within listed companies and other similar institutions. The Committee is responsible for monitoring and supervising issues relating to insiders in order to regulate their dealings in the Groups securities and to ensure that Group insiders are acquainted with and aware of the legal and administrative requirements regarding their holdings and dealings in the Groups securities, in addition to preventing the abuse of inside information by such insiders. The Committee is chaired
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announce to the public information, financial or non-financial, on the Group. Only the following persons are authorised to make public information via the media: - Chairman of the Board of Directors - Vice-Chairmen of the Board of Directors - President & Chief Executive In the event that any of the abovementioned persons is requested to make statements relating to the financial statements, financial indicators or general financial performance of the Group, that person will consult and/or confirm with the Head of Financial Control with regard to the accuracy, timeliness and reliability of the information prior to making any public announcements. The Group mails its Financial Statements and Prudential Returns to the CBB, BSE and NASDAQ Dubai on a quarterly and an annual basis, following which the Group makes this information available on its Website. Press releases are posted on the Groups Website and published in a minimum of one local newspaper either in Arabic or English. Persons authorised by the Group to make public disclosures will not make any announcement on a one-to-one basis before disseminating the information on the Groups Website or in local newspapers. The Group is committed to adhering to all the requirements outlined in the CBBs Rulebook, Volume 2, Part A, Public Disclosure Requirements section. In order for the Group to be in full compliance with the CBB disclosure requirements as specified in the abovementioned Rulebook, the Group will disclose all the required information in its published quarterly reviewed financial statements and its annual audited financial statements, which are the responsibility of its Financial Control Department. However, as some of the required information is generated by departments of the Group other than the Financial Control Department, all concerned departments responsible for producing information for the purpose of complying with the CBBs disclosure requirements (for example, the Operations and Administration, Credit and Risk Management, Legal Affairs & Compliance and the Internal Audit Departments) shall provide this information to the Financial Control Department on a timely basis in order for the latter to prepare the Group Financial Statements as stipulated by the CBB.
Financial Performance Monitoring
Executive Management has in place various measures that help monitor and control the activities of the Group worldwide. A comprehensive financial consolidating procedure exists and is working effectively, whereunder all subsidiaries submit their financial data in a format that is compatible with Islamic Accounting Standards issued by the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) and International Financial Reporting Standards (IFRS). These are consolidated quarterly and a consolidated set of financial results is produced. Additionally, subsidiaries submit a monthly return to Group headquarters providing details of their financial performance, measured against approved budgets.
Risk Management
The Group is committed to complying with internationally established principles and policies in relation to risk management. In particular the Group fully subscribes to the guiding principles of risk management for Islamic financial services institutions set down by the Islamic Financial Services Board and the need for a comprehensive risk management and reporting process. ABGs Head of Credit and Risk Management is responsible for formulating and monitoring the Groups policies relating to all aspects of risk, developing the framework for risk measurement and coordinating with the Group subsidiaries all necessary steps for meeting the Basel II requirements under the CBB rules. He is also responsible for introducing risk measurement software, monitoring the Groups compliance with risk measurement standards and providing Group management with reports on the various risks. Risk management is an integral part of the Groups decision-making process. The Board of Directors defines and sets the Groups overall levels of risk appetite, risk diversification and asset allocation strategies. The Management Risk Committee and other executive committees guide and assist with overall management of the Groups balance sheet risks. The Group manages exposure by setting limits approved by the Board of Directors. These risks and the processes employed to mitigate them have not altered significantly over the past year. The Groups risk management has the following objectives: a. b. c. d. e. f. g. Unified Groupwide risk management to enable the Group to calculate risk adjusted return on capital; Inculcation of a professional risk management culture throughout the Group with a prudent, disciplined approach to risk- taking based on comprehensive Groupwide policies, processes and limits; Professionally qualified staff and ongoing credit training; Investing in technology and systems enabling best practice risk management; Throughout the Group, strict segregation of duties and reporting lines between personnel transacting business and personnel processing that business; Strict compliance with all Sharia and legal requirements and regulatory directives; and Maintaining clear, well documented policies via a Group Risk Management Manual and Risk Management Manual in each of the subsidiaries, incorporating the uniform policies and procedures of the Group in addition to the local requirements.
Regulation
The Group complies with all the regulatory requirements governing Islamic Banks issued by the CBB, which include, inter alia, regulations governing the Groups capital adequacy, asset quality and risk management, liquidity and fund management. The CBB as the home supervisor sets and monitors ABGs capital requirements on both a consolidated and an unconsolidated basis, while ABGs individual banking subsidiaries are directly regulated by their local banking supervisors, who set and monitor their capital adequacy requirements. The CBB requires each Bahrain-based bank or banking group to maintain a minimum ratio of total capital to on- and off-balance sheet risk-weighted assets of 8% on a single bank basis and 12% on a consolidated basis, which requirement exceeds the 8% minimum ratio guideline of the Basel Committee on Banking Supervision under its 1988 Capital Accord. However, a new Capital Accord (Basel II) was subsequently announced by the Basel Committee to replace the 1988 Accord, designed to achieve a more sophisticated degree of risk differentiation in establishing the amount of capital that banks should allocate to different categories of their credit risk exposure, in addition to including a capital charge for operational risk and incorporating an earlier guideline in relation to capital charges for market risk. Regulators now have wider discretion to increase or decrease capital requirements for banks according to their individual circumstances. The new rules also require greater transparency of published information relating to bank risk management. The Group took all necessary steps to achieve in time the required degree of sophistication in risk assessment to enable it to comply with the requirements of Basel II as stipulated by the CBB. It has adopted the Standardised Approach applicable to Islamic Banks under the CBBs Rule Book and, following a period of satisfactory parallel reporting to the CBB covering a year from June 2007, the Group has since July 2008 been adhering solely to the requirements of the CBB under Basel II. Pursuant to the Groups Compliance Policy which was approved and adopted by ABGs Board of Directors in November 2009, ABG has appointed a Compliance Officer, whose role is to assist management to ensure the Groups adherence to the Group Compliance Policy, in particular that all Group activities are conducted in conformity with all applicable laws and regulations and in accordance with best practice. The Compliance Officers position is currently held by a senior officer in the Legal Affairs & Compliance Department.
Each of ABGs subsidiaries is managed by its respective Board of Directors. Group subsidiaries follow documented credit policies and procedures which reflect Groupwide policies and thus ensure that sound risk management is in place in all ABGs subsidiaries. An extensive review of the Groups risk management framework was carried out in 2008 by an independent risk management expert at the behest of Executive Management and in line with CBB guidelines. The review entailed a close examination of all policies, procedures, systems and organisation structures within the Group. A number of recommendations were made by the expert consultant, which were accepted by ABG and suitable amendments to policies or processes put in place. In early 2009 ABG completed the selection process in respect of a consolidating system for the calculation of capital adequacy taking into account credit, market and operational risk, all in accordance with Basel II requirements. Following implementation of this system during 2010 the required data is now retrievable automatically at Head Office. During the year the Group made determined efforts to maintain the momentum towards achieving optimal risk management policies, practices and procedures. Pursuing five key objectives established at its 8th Group Strategy Meeting in 2009, it was able to mark the 9th GSM with the following achievements: 1. 2. 3. 4. Continuous improvement in credit and risk management practices and intensified efforts on collections, recoveries and settlement of outstanding debts have resulted in a further improvement in the Groups NPL ratio and provisioning coverage. All subsidiaries have ensured that their non-performing loans provisioning policies have been brought into line with Group policies and local regulatory requirements. Subsidiaries have worked hard to fill vacant positions in their risk management departments and to improve the level of cooperation between their business arms and risk management departments. However, further hiring and training of credit and risk management staff remains an ongoing priority at all units. Each subsidiary has its own approved Credit and Risk Management Manual, covering credit, liquidity, market, operational, profit rate and reputation risk, which accords with Group policies and procedures.
Anti-Money Laundering
The Group has implemented the CBBs anti-money laundering regulations, including the appointment of a Group Money Laundering Reporting Officer (MLRO) - which position is held by the Head of Operations and Administration - who also oversees the individual MLROs in each of the constituent banks. Groupwide overall policies for Know Your Customer (KYC) and anti-money laundering at the Head Office level, complying with CBB regulations, have been disseminated to all subsidiaries for implementation.
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5. All subsidiaries submit timely quarterly risk management reports to Head Office which fully meet regulatory requirements; in addition, reports continue to be expanded to provide Head Office with increasingly comprehensive data to meet its internal requirements. Operations risk is managed through internal procedures and monitoring mechanisms, while management of legal risk is through effective consultation with internal and external legal counsel. Other kinds of operational risk are managed by ensuring that trained and competent people and appropriate infrastructure, controls and systems are in place to ensure the identification, assessment and management of all substantial risks. The Group is also exposed to risks relating to its fiduciary responsibilities towards fund providers. Fiduciary risk arises from the failure to perform in accordance with explicit and implicit standards applicable to an Islamic banks fiduciary responsibilities, leading to losses in investments or failure to safeguard the interests of the investment account holders. Group subsidiaries have in place appropriate mechanisms to safeguard the interests of all fund providers. Where investment account holders funds are commingled with a Group subsidiarys own funds, the respective Group subsidiary ensures that the bases for asset, revenue, expense and profit allocations are established, applied and reported in a manner consistent with the Groups fiduciary responsibilities. As mentioned above, Group policy dictates that the operational functions of booking, recording and monitoring of transactions are carried out by staff independent of the staff initiating the transactions. Group subsidiaries have primary responsibility for identifying and managing their own operational risks. Each subsidiary is guided by policies, procedures, and controls that are relevant for each function. Internal control policies and procedures dictate the segregation of duties, delegation of authorities, exceptions reporting, exposures management and reporting, and reconciliations, and are based on the submission of timely and reliable management reporting. Separate Internal Control units carry out ongoing monitoring of day-to-day procedures and ensure adherence to key control functions. As the Group is rapidly updating its technology base, replacing its legacy systems with new, modern hardware and systems, it is now increasingly possible to integrate the required control functions into the new processing systems. Sharia compliance risk arises from the failure to comply with the rules and principles of Sharia and is therefore akin to reputation risk. Group subsidiaries have in place systems and controls, including their respective Sharia Supervisory Boards, the internal Sharia auditors, and the Groups Sharia auditors, who conduct Sharia audit and prepare their observations and report to the respected units Sharia Supervisory Board. The overall objective is to ensure full compliance with all Sharia rules and principles.
A standard risk management framework has therefore been established across the Group, reflected in operational manuals that closely adhere to Group policy as regards all the major categories of risk faced by the Group in carrying out its business. These major risks are Credit, Liquidity, Market (including Equity, Profit Rate and Foreign Exchange risk), Operational and Sharia Compliance risks, each of which is discussed below in turn.
Credit Risk
Credit risk is the risk that one party to a financial contract will fail to discharge an obligation and cause the other party to incur a financial loss. It applies to the Group in its management of the financing exposures arising out of receivables and leases (for example, murabaha and Ijarah) and working capital financing transactions (Salam, Istisnaa or mudaraba). Each Group subsidiary has in place a framework for credit risk management that includes identification, measurement, monitoring, reporting and control of credit risks. Each subsidiary controls credit risk through the process of initial approval and granting of credit, subsequent monitoring of counterparty creditworthiness and the active management of credit exposures. Authority to approve credits is delegated by the subsidiarys Board of Directors to committees entrusted with the task of credit assessment and evaluation, under specific credit policies and operational procedures in place in that subsidiary. Each subsidiary maintains an internal audit department responsible for carrying out reviews of credit exposures to counterparties and assessing their quality and adherence to laid down approval procedures. Each subsidiary also maintains policies and procedures in covering case by case approval of related party transactions.
sharia Compliance Risk
Liquidity Risk
Liquidity risk is the risk that the Group will be unable to meet its payment obligations when they fall due under normal or stressed circumstances. ABG and its subsidiaries each has in place a liquidity management framework, taking into account its liquidity exposures in respect of its current and savings accounts, deposits from banks and other financial institutions and its restricted and unrestricted investment accounts, so as to ensure that it maintains liquid assets at prudential levels so that cash can quickly be made available to honour all its obligations. Liquidity management also recognises the impact of potential cash outflows arising from irrevocable commitments to fund new assets, as well as the potential risk impact of withdrawals by large single depositors, ensuring that there is no reliance on one customer or small group of customers. In addition to its own internal liquidity management policies, each subsidiary is further required to maintain cash deposits with its respective Central Bank equal to a percentage of its deposits as directed by that Central Bank in most cases 20%. ABG additionally holds substantial liquid funds which are earmarked and available for its subsidiaries in the unlikely event that they should require assistance. Liquidity management reporting conforms to all local regulations.
Capital Management/Capital Adequacy

Capital is managed at ABG with a view to achieving optimum utilisation in the course of carrying out its business, in accordance with its predetermined risk appetite and intended risk profile and with the ultimate aim of maximising shareholders returns. Capital management includes pro-actively making appropriate and necessary adjustments to reflect changes in the economic environment or in the degree or nature of risk associated with the Groups activities, including adjustment to its dividend policy, issue of Tier 1 or Tier 2 securities by way of public issue or private placement, etc. Optimum capital management also addresses such crucial issues as: ensuring that adequate capital is held at all times to meet unexpected calls occasioned by such events as sudden withdrawals by depositors, earlier than expected drawdown of facilities, or unexpected losses; achieving the Groups return on capital objectives; meeting capital adequacy ratio targets; and maintaining the Groups strong credit rating. The Groups capital adequacy ratio as at 31 December 2010 was 19.69%, comfortably above the CBBs minimum regulatory requirement of 12%. Each of ABGs banking subsidiaries is directly regulated by its own home regulator, which stipulates a minimum capital adequacy ratio in respect of that subsidiary. ABG ensures that each subsidiary adheres to these local capital adequacy requirements.
equity Price Risk
Equity price risk is the risk that the fair value of equities decreases as a result of changes in the levels of equity indices and the value of individual stocks. Each Group subsidiary has in place appropriate strategies, risk management and reporting processes in respect of the risk characteristics of equity investments, including mudaraba, musharaka and other investments. Based on Group policies issued during 2010, each subsidiary ensures that its valuation methodologies are appropriate and consistent, and assesses the potential impact of its methods on profit calculations and allocations mutually agreed between that subsidiary and its partners. Further, each subsidiary has defined and established appropriate exit strategies and risk management and reporting processes in respect of its equity investment activities.
Profit Rate Risk or Rate of Return Risk
Profit rate risk or rate of return risk is the risk that the Group will incur a financial loss as a result of a mismatch in the profit rate on the Groups assets and URIA. The Group is not liable to pay any predetermined returns to investment account holders.
Information Technology
The role of the Head Office IT Steering Committee is to govern and support IT strategies, projects and initiatives across all ABG subsidiaries and to ensure that they are in-line with the Groups overall strategic aims as well as each subsidiarys own strategies. The Groups short, medium and long term IT strategies are now well established, building on the decision made in 2008 to standardize around a few carefully chosen core banking solutions for Group-wide implementation. Consequently, the Committee has now approved the formulation of the next stage of the Groups IT strategy and governance framework, which will be developed in collaboration with the subsidiaries and with the assistance of a leading advisory firm.
Foreign exchange Risk
Foreign exchange rate risk arises from the movement of the rate of exchange over a period of time, leading to an adverse impact on the Groups earnings or shareholders equity. The Group is exposed to foreign exchange rate risk in that the value of a financial instrument, or its net investment in its foreign subsidiaries, may fluctuate due to changes in foreign exchange rates. The Groups significant net foreign currency exposures as at 31 December 2010 are detailed in Note 25 to the Financial Statements.
Operational Risk
Operational risk is the risk of financial loss or damage resulting from inadequate or failed internal processes, people and systems or from external events.
74
75
Corporate governance (Continued) Corporate social Responsibility

ABGs initial web-based financial consolidation and reporting application (also used as a corporate performance measurement solution employing Key Performance Indicators (KPI) based on Group strategic objectives) is used to set performance benchmarks for each subsidiary and to monitor their individual performances on a continuous basis and will gradually be integrated with all the core system applications implemented throughout the Group. The monthly, quarterly and annual consolidations are currently performed through the financial consolidation module, which enables the collection, processing, reporting and analysing of data in multiple currencies as well as reporting on the effects of currency fluctuations. ABGs Financial Control department can now consolidate data from many business perspectives, for instance at the subsidiary level, by geographical region or Islamic product line, as well as by multiple structure versions such as year to date, current years results, previous years results and so on. The Strategy Management module was integrated into the Financial Consolidation module to enable retrieval of the required financial data; in this way it has been possible to apply historical financial performance data in constructing the Groups strategic planning scenarios. Following an intensive evaluation of the Groups requirements for risk management systems from both Islamic and regulatory perspectives, the Risk Management team has selected the most suitable of those reviewed; the selection carried with it the additional weight that the product comes highly recommended by several other Islamic institutions using it, both in the Kingdom of Bahrain and abroad. The module relating to capital adequacy calculation based on credit, market and operational risk was implemented during 2010 at the Head Office and at Al Baraka Islamic Bank Bahrain, with implementation being planned at the remaining subsidiaries throughout 2011 and beyond. ABG aims to be in the top tier of banks that are leveraging advanced technologies in communications and progressing towards a totally paperless work environment. As an initial step in this direction, ABGs IT Department has recently implemented a document management system that is integrated with the current collaboration system, which has already proven its efficiency and effectiveness at the Head Office level and has been extended to Al Baraka Islamic Bank Bahrain. Following careful selection by the IT Steering Committee of an approved list of core banking system solutions available to the subsidiaries, each subsidiary has made its own choice of system to suit its individual requirements. Several subsidiaries have chosen the Equation Islamic core banking system from Misys, while other subsidiaries, operating in different markets with different priorities, have adopted iMAL from Path Solutions. Three subsidiaries whose legacy system was the MIDAS core banking system Al Baraka Islamic Bank Bahrain, Al Baraka Bank Limited South Africa and Al Baraka Bank Lebanon opted for the Equation Islamic system, later joined by Al Baraka Islamic Bank Pakistan and Al Baraka Bank Egypt. Al Baraka Islamic Bank Bahrain achieved full implementation during the course of 2009, while Al Baraka Lebanon went live with Equation Islamic during 2010 and achieved full project completion in January 2011 and Al Baraka South Africa is expecting project completion in the first quarter of 2011. Al Baraka Bank Egypt and Al Baraka Islamic Bank Pakistan are meanwhile anticipating going live in the first quarter of 2011. Al Baraka Bank Algeria chose iMAL from Path Solutions, and installation in its case is expected to go live in the first quarter 2011 and be fully completed later in the year. Implementation of Jordan Islamic Banks choice of the NIBRAS Banking System as its core banking system has been achieved and full project completion is expected during 2011. Al Baraka Bank Sudan, who also selected iMAL as its new core banking system, is now live with the application and expects to achieve project sign off by the first quarter of 2011. Al Baraka Bank Tunisia has successfully upgraded its existing core banking system (TEMENOS-T24), which now incorporates e-banking services. Al Baraka Turk Participation Bank, who employed an inhouse solution some time ago and which is working well, is however currently defining a strategy to move to a new core application in the future. Finally, the newly-established Al Baraka Bank Syria, who selected iMAL, has gone live with the application and the project final stage is currently under way, with the first quarter 2011 targeted for final sign off. In 2009 the Group IT Department launched a new initiative to achieve Business Excellence through IT in partnership with leading and respected IT advisory firms. ABG IT has also focused on establishing a standardised global Disaster Recovery Plan (DRP) throughout the Group. Once the new core applications have been fully implemented at all ABG subsidiaries in 2011, and both a global DR Centre and individual local DR centres have been established, each subsidiary will be fully protected against any sudden, unexpected service loss. The success of the contemporary Islamic banking and finance movement owes much to the contribution and patronage of Sheikh Saleh Kamel, the founder of Al Baraka Banking Group. Although the Group is young as a single legal entity, its antecedents go back to the late 1960s, when Sheikh Kamel directed the devising of Islamic contracts for use in his business operations when dealing with conventional banks (there being no Islamic banks in existence at that time), which was his preferred route for doing business with them. This early insistence on strict adherence to fundamental Islamic principles was then quickly overtaken by the next stage of development when, in the early 1970s, Sheikh Kamel oversaw the establishment across the Arab world of a series of Islamic financial institutions bearing the Al Baraka name. Today, Al Baraka Banking Group brings together under one unified grouping the accumulated experience of 11 banks delivering Islamic products and services over three decades. We at ABG are proud to look back on this heritage, whilst at the same time we keenly look forward to the next stage in our development, as we gradually expand into new regions and new markets and build a wider customer base. As members of a banking group founded on Islamic principles and values, we at ABG believe that we have a particular obligation to society, through patronage and sponsorship of educational and social projects, to enhance the living conditions and quality of life of needful individuals in the local communities of which we are part. In meeting this commitment to society we make all possible effort to apply one of the important philosophical pillars of Islamic banking: the concept of construction of land, which means adding tangible value to assets. This concept has a direct relevance to the development of society and its social and economic progress and we seek to apply it through active investment mediation, which complements real and value-added production, and through the exchange of commodities and services, which enables us to offer practical alternatives to those financial intermediaries that provide no benefit to society at large. We consider the role of CSR in our organisation to be essential to the application of the principles derived from divine power and on which our business activities in all the countries in which we operate are based. All our subsidiaries embrace Islamic ethical principles and apply them to their banking operations and services. These principles may be summarised as:
First:
Investments may only be made in sectors and industries that meet ethical standards. The moral values of Islam dictate that Muslims must invest in the production of, and trade in, useful and beneficial goods only. They therefore forbid investment in such activities as, for example, contribute to the production of alcoholic beverages, tobacco or weapons, or are associated in any way with gambling, pornography or the abuse of children, women and minorities, or any other morally questionable practices.
second:
All Islamic banks and financial institutions eschew the payment of interest in their relations with depositors, consumers and businesses, as Islam prohibits the paying or charging of interest. Instead ABGs banking subsidiaries, like all Islamic banks, accept deposits on an investment basis whereby depositors share with the bank in the actual results of the realisation of their investments. Financing is provided to businesses in turn mainly on the basis of instalment sale, leasing or equity participation. In this way, they and their depositors share the financial risk with the entrepreneurs and together they reap the benefits of the investments The prohibition of interest is to be found in the Quran and is fundamental to the ethical standards and core values laid out therein. ABGs subsidiaries, as Islamic banks, firmly adhere to these core values by disallowing the charging or paying of interest, an essential difference between Islamic and conventional banks. Yet, customers of Islamic banks and other financial institutions generally share a similar experience to that of customers of conventional banks - who share profit with their depositors. The essential difference in Islam is that the practice of profit sharing is such that wealth creation is the result of a partnership between investors and entrepreneurs in which both the risks and the rewards are shared: returns on invested capital are based on profits actually generated rather than predetermined interest rates.
Third:
All contracts entered into by ABGs banking subsidiaries, and all their relations with businesses and depositors, must comply with the ethical standards of the Sharia.
BOsPhORUs BRidge
Turkey
Unified Sharia Supervisory Board Report, Report Of The Board Of Directors, Independent Auditors Report And Consolidated Financial Statements
31 December 2009
78
79
Unified sharia supervisory Board Report

For the year ended 31 december 2010 in the name of Allah, The Beneficent, The Merciful, ever Merciful Praise be to Allah and peace be upon our Prophet Mohamed, his Apostles and Companions and explanations they considered necessary in order to provide them with sufficient evidence to provide reasonable assurance that the group and its Units have not violated sharia Rules and Principles.
Zakah Calculation for the year ended 31 December 2010
US Dollars (000)
In our opinion:
1. The Contracts, transactions and dealings entered into by the group and its Units during the year ended 31st december 2010 are made in compliance with sharia Rules and Principles. The allocation of profit and charging of losses relating to investment accounts conform to the basis that have been approved by the Units sharia supervisory Boards in accordance with sharia Rules and Principles. All earnings realized from sources or by means prohibited by islamic sharia Rules and Principles have been committed by the Management to dispose it off to Charitable Causes. The attached Zakah calculation was prepared in accordance with the provisions and principles of islamic sharia according to the net invested Fund Method in accordance to sharia standard number (35) issued by the Accounting and Audit of the islamic Financial institutions and according to what was approved by the Unified sharia supervisory Board. since the group and the Units are not empowered to pay Zakah, shareholders should pay their share of Zakah. The Zakah per share is 2.18 Us cents. in case of unavailability of liquidity, it is allowed to postpone the Zakah and become a debt until the liquidity become available.
To: Al Baraka Banking Group Shareholders
equity Attributable to shareholders Less: investment of the parent on the shareholding of Al Baraka Bank egypt and Al Baraka Bank sudan net Zakatable equity Attributable to shareholders Less: Musharaka underlined by unzakatable assets investment in islamic sukook underlined by unzakatable assets ijarah Muntahia Bittamleek Long-term investment in real estate Properties and equipment intangible assets investment in Associates Add:
1,224,665 (138,054) 1,086,611
May peace and gods Mercy and Blessings Be upon You in accordance with Article (58) of the Articles of Association of Al Baraka Banking group, we are required to submit the following report: We have reviewed the principles applied by the group and reviewed the 2010 sharia reports issued by the group Units sharia supervisory Boards. We have also reviewed their financial statements when needed. in addition, we examined the groups financial position as of 31 december 2010 and statement of income and their notes. We have queried from some of the Technicals on the points that need explanation and statement. We have also reviewed the process of calculating Zakah in accordance with the sharia standard number (35) issued by the Accounting and Audit of the islamic Financial institutions and according to what was approved by the Unified sharia supervisory Board. The group and Units management are responsible for the execution and implementation of the Unified sharia supervisory Board resolutions and to bring to the attention of the Unified sharia supervisory Board any transactions or issues that require sharia approval. The Unified sharia supervisory Board is responsible for supervising the implementation of the resolution from a sharia point of view and issue opinion based on the group and Units sharia reports and financial statements. The Units sharia supervisory Boards, as is clear from their report, have supervised the Units business activities including examining on test basis documentations and procedures applied by the group and its Units. The Units sharia supervisory Boards, as is clear from their reports, planned and performed reviews so as to obtain all the information 2.
3.
(53,813) (48,888) (49,552) (7,507) (166,523) (86,887) (63,454)
4.
Praise be to god issued on 14 Rabia Al Awal 1432 h, corresponding to 17 February 2011 Ad.
shareholders share on Zakatable Assets by Associates sale of long-term investment in real estate during the year Zakatable amount Zakah Percentage Total Zakah due number of shares (thousands) Zakah per share (US$ cents)
53,324 129 663,440 2.5775% 17,100 783,972 2.18
Shaikh Dr. Abdul Sattar Abu Guddah Chairman
Shaikh Abdulla Al Mannea Member
Shaikh Dr. Abdullatif Al Mahmood Member
Shaikh Dr. Abdulaziz Al Fowzan Member
Shaikh Dr. Ahmed Mohiyeldin Ahmed Member
80
81
independent Auditors Report to the shareholders of Al Baraka Banking group B.s.C. COnsOLidATed sTATeMenT OF FinAnCiAL POsiTiOn
31 december 2010
Report on the Consolidated Financial Statements We have audited the accompanying consolidated financial statements of Al Baraka Banking Group B.S.C. (the Bank) and its subsidiaries (the Group) which comprise the consolidated statement of financial position as at 31 December 2010 and the consolidated statements of income, cash flows, changes in equity and restricted investment accounts for the year then ended, notes, comprising a summary of significant accounting policies and other explanatory information. Board of directors and managements responsibility for the consolidated financial statements The Banks board of directors and management are responsible for the preparation and fair presentation of these consolidated financial statements in accordance with the Financial Accounting Standards issued by the Accounting and Auditing Organisation for Islamic Financial Institutions and for such internal control as the board of directors and the management determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. In addition, the board of directors and the management are responsible for the Groups undertaking to operate in accordance with Islamic Sharia rules and principles. Auditors Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with both the Auditing Standards for Islamic Financial Institutions and International Standards on Auditing. Those standards require that we comply with relevant 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 our 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, we consider internal control relevant to the entitys 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 entitys internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Groups board of directors and 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. Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at 31 December 2010, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with Financial Accounting Standards issued by the Accounting and Auditing Organisation for Islamic Financial Institutions. Report on Other Regulatory Requirements We confirm that, in our opinion, proper accounting records have been kept by the Group and the consolidated financial statements, and the contents of the Report of the board of directors relating to these consolidated financial statements, are in agreement therewith. We further report, to the best of our knowledge and belief, that no violations of the Bahrain Commercial Companies Law, nor of the Central Bank of Bahrain and Financial Institutions Law, nor of the memorandum and articles of association of the Bank, have occurred during the year ended 31 December 2010 that might have had a material adverse effect on the business of the Bank or on its consolidated financial position and that the Bank has complied with the terms of its banking license and has also complied with the Islamic Sharia Rules and Principles as determined by the Sharia Supervisory Board of the Group. Notes ASSETS Cash and balances with banks Receivables Mudaraba and Musharaka financing Investments Ijarah Muntahia Bittamleek Property and equipment Other assets TOTAL ASSETS LIABILITIES, UNRESTRICTED INVESTMENT ACCOUNTS AND EQUITY LIABILITIES LIABILITIES Customer current and other accounts Due to banks Other liabilities Total liabilities UNRESTRICTED INVESTMENT ACCOUNTS EQUITY EQUITY ATTRIBUTABLE TO PARENTS SHAREHOLDERS Share capital Treasury shares Share premium Reserves Cumulative changes in fair values Foreign currency translations Retained earnings Proposed appropriations Equity attributable to parents shareholders Non-controlling interest Total equity TOTAL LIABILITIES, UNRESTRICTED INVESTMENT ACCOUNTS AND EQUITY 11 12 10 3 4 5 6 7 8 9
2010 US$ 000
2009 US$ 000
3,813,903 8,063,331 1,538,632 1,350,481 439,801 298,852 374,933 15,879,933
3,158,273 7,027,064 981,112 1,088,036 335,333 227,101 349,358 13,166,277
2,906,172 424,477 490,988 3,821,637 10,240,106
2,607,844 152,662 430,302 3,190,808 8,238,624
790,500 (6,528) 15,866 96,738 (2,876) (24,360) 236,750 118,575 1,224,665 593,525 1,818,190 15,879,933
744,000 99,390 82,293 17,301 (9,165) 189,401 91,140 1,214,360 522,485 1,736,845 13,166,277
23 February 2011 Manama, Kingdom of Bahrain
saleh Abdullah kamel Chairman
The attached notes 1 to 29 form part of these consolidated financial statements.
Adnan Ahmed Yousif Member of the Board and President and Chief executive
82
83
Consolidated statement of income

Year ended 31 december 2010
Consolidated statement of Cash Flows

Notes Income net income from jointly financed contracts and investments gross return to unrestricted investment accounts groups share as a Mudarib Return on unrestricted investment accounts groups share of income from jointly financed contracts and investments (as a Mudarib and as fund owner) Mudarib share for managing restricted investment accounts net income from self financed contracts and investments Other fees and commission income Other operating income TOTAL OPERATING INCOME staff expenses depreciation and amortisation Other operating expenses TOTAL OPERATING EXPENSES NET INCOME FOR THE YEAR BEFORE PROVISIONS AND TAXATION Provisions NET INCOME BEFORE TAXATION Taxation NET INCOME FOR THE YEAR Attributable to: equity shareholders of the parent non - controlling interest 19 17 18 13 15 16 14 13
2010 US$ 000 808,707 (745,405) 236,627 (508,778)
2009 US$ 000 812,647 (709,417) 213,421 (495,996) OPERATING ACTIVITIES Net income before taxation Adjustments for: Depreciation and amortisation Impairment loss Depreciation on Ijarah Muntahia Bittamleek Unrealised gain on trading securities Gain on sale of property and equipment Gain on sale of investment in real estate Gain on sale of available for sale investments Gain on sale of trading securities Provisions Income from associates Gain on sale of associates Operating profit before changes in operating assets and liabilities Net changes in operating assets and liabilities: Reserves with central banks Receivables Mudaraba and Musharaka financing Ijarah Muntahia Bittamleek Other assets Customer current and other accounts Due to banks Other liabilities Unrestricted investment accounts Taxation paid Net cash from operating activities INVESTING ACTIVITIES Net purchase of investments Net purchase of property and equipment Net sale (purchase) of investment in associate Dividend received from associates Net cash used in investing activities
Notes
2010 US$ 000
2009 US$ 000
256,710 17 9(a) 13.4 13.3 16 13.3 13.3 19 13.3 22,798 762 49,676 (611) (9,961) (2,729) (139) (132) 59,581 (2,629) (22) 373,304 (217,180) (1,101,417) (563,194) (154,144) (27,022) 298,328 271,815 21,217 2,020,603 (32,871) 889,439 (301,214) (83,522) 13,622 244 (370,870) (44,640) (10,700) 2,322 (53,018) (27,101) 438,450 2,550,250 21 2,988,700
220,504 20,882 353 63,709 (52) (2,347) (273) (731) 104,068 (3,376) 402,737 10,179 (942,645) (182,445) (94,218) (24,488) 529,089 91,802 (37,951) 1,512,899 (87,365) 1,177,594 (272,824) (83,535) (13,072) 2,457 (366,974) (27,900) 15,080 (12,820) 16,800 814,600 1,735,650 2,550,250
299,929 4,702 147,827 151,067 55,049 658,574 196,583 22,798 122,902 342,283 316,291 (59,581) 256,710 (63,547) 193,163
316,651 6,850 130,905 123,865 55,242 633,513 179,619 20,882 108,440 308,941 324,572 (104,068) 220,504 (53,118) 167,386
105,607 87,556 193,163
91,758 75,628 167,386 11.61
FINANCING ACTIVITIES Dividends paid to equity holders of parent Movement in treasury shares Net changes in non-controlling interest Net cash used in financing activities Foreign currency translation adjustments INCREASE IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at 1 January CASH AND CASH EQUIVALENTS AT 31 DECEMBER
Basic and diluted earnings per share - Us cents
20
13.46
84
85
Consolidated Statement of Changes in Changes in equity Consolidated statement of Equity

Attributable to equity Reserves
holders of the parent
Share capital US$ 000 Balance at 1 January 2010 Bonus shares issued (note 12) Movement in treasury shares Net movement in cumulative change in fair value Net movement in other reserves Foreign currency translation Net income for the year Transfer to statutory reserve Dividends paid Proposed dividends Proposed bonus shares Dividends of subsidiaries Net movement in non-controlling interest Balance at 31 December 2010 744,000 46,500 790,500
Treasury shares US$ 000 (6,528) (6,528)
Share premium US$ 000 99,390 (4,474) (79,050) 15,866
Statutory reserve US$ 000 42,986 10,561 53,547
Other reserves US$ 000 39,307 3,884 43,191
Cumulative changes in fair values US$ 000 17,301 (20,177) (2,876)
Foreign currency translations US$ 000 (9,165) (15,195) (24,360)
Retained earnings US$ 000 189,401 302 (8,474) 105,607 (10,561) (39,525) 236,750
Proposed appropriations US$ 000 91,140 (46,500) (44,640) 39,525 79,050 118,575
Total US$ 000 1,214,360 (10,700) (20,177) (4,590) (15,195) 105,607 (44,640) 1,224,665
Noncontrolling interest US$ 000 522,485 (6,932) (3,399) (11,906) 87,556 (23,990) 29,711 593,525
Total equity US$ 000 1,736,845 (10,700) (27,109) (7,989) (27,101) 193,163 (44,640) (23,990) 29,711 1,818,190
86
87
Consolidated Statement of Changes in Changes in equity Consolidated statement of Equity

Attributable to equity Reserves Share premium US$ 000 145,890 (46,500) 99,390 Statutory reserve US$ 000 33,810 9,176 42,986 Other reserves US$ 000 29,650 9,657 39,307 Cumulative changes in fair values US$ 000 9,435 7,866 17,301
holders of the parent Foreign currency translations US$ 000 (18,118) 8,953 (9,165) Noncontrolling interest US$ 000 419,479 2,634 1,817 7,847 75,628 (25,621) 40,701 522,485
Share capital US$ 000 Balance at 1 January 2009 Bonus shares issued (note 12) Directors remuneration paid Net movement in cumulative change in fair value Net movement in other reserves Foreign currency translation Net income for the year Transfer to statutory reserve Dividends paid Proposed dividends Proposed bonus shares Dividends of subsidiaries Net movement in non-controlling interest Balance at 31 December 2009 697,500 46,500 744,000
Retained earnings US$ 000 157,615 (6,156) 91,758 (9,176) (44,640) 189,401
Proposed appropriations US$ 000 74,900 (46,500) (500) (27,900) 44,640 46,500 91,140
Total US$ 000 1,130,682 (500) 7,866 3,501 8,953 91,758 (27,900) 1,214,360
Total equity US$ 000 1,550,161 (500) 10,500 5,318 16,800 167,386 (27,900) (25,621) 40,701 1,736,845
88
89
Consolidated statement of Changes in Restricted investment Accounts

Cash US$ 000
Sales receivables US$ 000
Mudaraba financing US$ 000
Investment in real estate US$ 000
Investments US$ 000
Others US$ 000
Total US$ 000
Balance at 1 January 2010 Deposits Withdrawals Income net of expenses Mudaribs share Foreign exchange translations Balance at 31 December 2010 Balance at 1 January 2009 Deposits Withdrawals Income net of expenses Mudaribs share Foreign exchange translations Balance at 31 December 2009
48,482 1,350 (4,912) 44,920 52,815 56,887 (61,220) 48,482
276,277 109,498 (251,787) 15,605 (2,500) 147,093 325,534 105,240 (166,405) 17,007 (5,099) 276,277
17,786 95,906 (67,887) 606 46,411 33,509 2,988 (19,012) 339 (38) 17,786
27,156 1,197 (362) 326 (62) 28,255 19,314 12,192 (4,653) 400 (97) 27,156
110,624 25,926 (26,632) 4,256 (1,491) (626) 112,057 112,073 57,887 (62,376) 4,630 (1,350) (240) 110,624
29,726 217,033 (171,160) 2,043 (649) (391) 76,602 27,269 4,551 (2,845) 1,017 (266) 29,726
510,051 450,910 (522,740) 22,836 (4,702) (1,017) 455,338 570,514 239,745 (316,511) 23,393 (6,850) (240) 510,051
90
91
notes To The Consolidated Financial statements

31 december 2010
ACTIVITIES
SIGNIFICANT ACCOUNTING POLICIES (continued)
Al Baraka Banking Group B.S.C. (the Bank) is a joint stock company incorporated in the Kingdom of Bahrain on 27 June 2002, under Commercial Registration (CR) number 48915. The Bank is engaged in banking activities in the Middle East, Europe, North African and South African region. The address of the Banks registered office is P.O. Box 1882, Diplomatic Area, Manama, Kingdom of Bahrain. The Bank is listed on Bahrain Stock Exchange and NASDAQ Dubai. The Bank operates under an Islamic wholesale banking license issued by the Central Bank of Bahrain (the CBB). The principal activities of the Bank and its subsidiaries (the Group) comprise of international and commercial banking, financing, treasury and investment activities. The Bank is supervised and regulated by the CBB. The consolidated financial statements were approved by the Board of Directors on 23 February 2011.
c. Basis of consolidation (continued) Non-controlling interests consist of the amount of those interests at the date of the original business combination and the noncontrolling interests share of changes in equity since the date of combination. Losses applicable to the non-controlling interest in excess of the non-controlling interest in a subsidiarys equity are allocated against the interests of the Group except to the extent that the non-controlling interest has a binding obligation and is able to make an additional investment to cover the losses. Changes in the ownership interest in a subsidiary that do not result in a loss of control are accounted for as an equity transaction. The following are the principal subsidiaries of the Bank, which are consolidated in these consolidated financial statements: No. of branches/ offices at 31 December 2010 21 94* 8 21 7 72 109 10 25 2
SIGNIFICANT ACCOUNTING POLICIES
Bank Held directly by the Bank Banque Al Baraka DAlgerie (BAA) Al Baraka Islamic Bank - Bahrain (AIB) Al Baraka Bank Tunis (ABT) Al Baraka Bank Egypt [formerly Egyptian Saudi Finance Bank (ESFB)] Al Baraka Bank Lebanon (ABBL) Jordan Islamic Bank (JIB) Al Baraka Turk Participation Bank (ATPB) Al Baraka Bank Limited (ABL) Al Baraka Bank Sudan (ABS) Al Baraka Bank Syria (ABBS)
Ownership for 2010 55.90% 91.12% 78.40% 73.68% 98.50% 66.01% 56.64% 56.29% 82.08% 23.00%
Ownership for 2009 55.90% 91.12% 78.40% 73.68% 99.98% 66.50% 56.64% 56.29% 82.08% 23.00%
Year of incorporation 1991 1984 1983 1980 1991 1979 1985 1989 1984 2009
Country of incorporation Algeria Bahrain Tunisia Egypt Lebanon Jordan Turkey South Africa Sudan Syria
The significant accounting policies adopted in the preparation of the consolidated financial statements are set out below: a. Basis of preparation The consolidated financial statements have been prepared on a historical cost basis, except for investment in real estate, trading and available for sale investments that have been measured at fair value. The consolidated financial statements are presented in United States Dollars being the reporting currency of the Group. All values are rounded to the nearest US Dollar thousands unless otherwise indicated. b. Statement of compliance The consolidated financial statements are prepared in accordance with the Financial Accounting Standards issued by the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI), the Sharia Rules and Principles as determined by the Sharia Supervisory Board of the Group, the Bahrain Commercial Companies Law, the Central Bank of Bahrain and Financial Institutions Law. In accordance with the requirements of AAOIFI, for matters for which no AAOIFI standard exists, the Group uses the relevant International Financial Reporting Standards (the IFRS) issued by International Accounting Standards Board. c. Basis of consolidation The consolidated financial statements comprise the financial statements of the Bank and its subsidiaries as at and for the year ended 31 December each year. The financial statements of the subsidiaries are prepared for the same reporting year as the Bank, using consistent accounting policies. All intra-group balances, transactions, income and expenses and profits and losses resulting from intra-group transactions are eliminated in full. Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that control ceases. Control is achieved where the Group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. Non-controlling interest in a subsidiarys net assets is reported as a separate item in the Groups equity. In the consolidated statement of income, non-controlling interest is included in net profit, and shown separately from that of the shareholders.
* Including 89 branches of Al Baraka Bank (Pakistan) Limited. Subsidiary held through AIB JIB JIB JIB JIB JIB BAA ABL Effective Ownership for 2010 58.90% 59.40% 62.31% 66.01% 66.01% 66.01% 56.29% Effective Ownership for 2009 59.85% 63.04% 66.50% 66.50% 66.50% 55.90% 53.60%
Company/ Bank Held indirectly by the Bank Al Baraka Bank (Pakistan) Limited * Al- Rizq Trading Company Al-Omariya School Company Al-Samaha Real Estate Company Future Applied Computer Technology Company Sanable Alkhair for Financial Investment Dar Al Baraka Al Baraka Properties (Pty) Ltd.
Year of incorporation 2010 1994 1987 1998 1998 2006 2003 1991
Country of incorporation Pakistan Jordan Jordan Jordan Jordan Jordan Algeria South Africa
* During the year, the shareholders of Al Baraka Islamic Bank approved the merger of Pakistan branches of AIB with and into the Emirates Global Islamic Bank Limited (EGIBL) under a Scheme of Amalgamation after necessary approval from the regulatory authorities. The effective date of amalgamation was announced by the State Bank of Pakistan (SBP) as close of business on 29 October 2010. Further, the name of EGIBL was changed to Al Baraka Bank (Pakistan) Limited with effect from close of business on 29 October 2010 as notified by SBP and the separate existence of Pakistan branches ceased. The merger resulted in a goodwill of US$ 21,598 thousand and a gain of US$ 9,833 thousand which are disclosed in note 9(a) and 16 respectively.
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g. Investments (continued) Trading securities These are initially recognised at cost, being the fair value of the consideration given excluding acquisition costs. These are subsequently re-measured at fair value. All related realised and unrealised gains or losses are included in the consolidated statement of income. All other investments are initially recognised at cost, being the fair value of the consideration given including acquisition costs. Available for sale investments Subsequent to acquisition, available for sale investments are re-measured at fair value with unrealised gains or losses recognised proportionately in owners equity and unrestricted investment accounts until the investment is derecognised or determined to be impaired at which time the cumulative gain or loss previously recorded in equity or unrestricted investments accounts is recognised in consolidated statement of income. Held to maturity investments Investments which have fixed or determinable payments and where the Group has both the intent and ability to hold to maturity are classified as held to maturity. Such investments are carried at amortised cost, less provision for impairment in value. Amortised cost is calculated by taking into account any premium or discount on acquisition. Any gain or loss on such investment is recognised in the consolidated statement of income, when the investment is de-recognised or impaired. h. Ijarah Muntahia Bittamleek Assets acquired for leasing (Ijarah) are stated at cost, less accumulated depreciation. Depreciation is provided on the straight line method over the useful life of the asset or the period of the lease, whichever is lower. i. Property and equipment Property and equipment are initially recognised at cost. The cost of additions and major improvements are capitalised; maintenance and repairs are charged to the consolidated statement of income as incurred. Gains or losses on disposal are reflected in other operating income. Depreciation is provided on the straight-line basis over the estimated useful lives of the assets other than freehold land, which is deemed to have an indefinite life. The calculation of depreciation is on the following basis: Buildings Office furniture and equipment Vehicles Others 30 years 4 - 10 years 3 years 4 - 5 years
d. Cash and cash equivalents Cash and cash equivalents as referred to in the consolidated statement of cash flows comprise cash and cash in transit, balances with central banks excluding mandatory reserves and balances with other banks with an original maturity of three months or less. e. Receivables Receivables comprise Sales (Murabaha) receivables, Ijarah receivables, Salam receivables and Istisnaa receivables. Sales (Murabaha) receivables Sales (Murabaha) receivables consist mainly of Murabaha and international commodities stated net of deferred profits and provision for doubtful amount. Ijarah receivables Ijarah receivables is the outstanding rental at the end of the year less any provision for doubtful amount. Salam receivables Salam receivables is the outstanding amount at the end of the year less any provision for doubtful amount. Istisnaa receivables Istisnaa receivables is the outstanding amount at the end of the year less any provision for doubtful amount. f. Mudaraba and Musharaka financing Mudaraba and Musharaka financing are partnerships in which the Bank contributes capital. These are stated at the fair value of consideration given less impairment. g. Investments Investments comprise investment in real estate, investment in associates, trading securities, available for sale investments and held to maturity investments. Investment in real estate Real estate held for rental or for capital appreciation purposes, or both, are classified as investment in real estate. These are initially recognised at cost including transaction cost and subsequently re-measured at fair value with the resulting unrealised gains/losses being recognised in the consolidated statement of changes in equity under cumulative changes in fair values to the extent of the portion of the fair value relating to equity and under unrestricted investment accounts in the consolidated statement of financial position to the extent of the portion of the fair value relating to unrestricted investment accounts until the investment is derecognised or determined to be impaired at which time the cumulative gain or loss previously recorded in equity or in unrestricted investment account is recognised in the consolidated statement of income. Investment in associates The Groups investment in its associates is accounted for under the equity method of accounting. An associate is an entity in which the Group has significant influence and which is neither a subsidiary nor a joint venture. Under the equity method, the investment in the associate is carried in the consolidated statement of financial position at cost plus post-acquisition changes in the Groups share of net assets of the associate. Goodwill relating to an associate is included in the carrying amount of the investment and is not amortised. The consolidated statement of income reflects the Groups share of the results of operations of the associate. Where there has been a change recognised directly in the equity of the associate, the Group recognises its share of any changes and discloses this, when applicable, in the consolidated statement of changes in equity. Profits and losses resulting from transactions between the Group and the associate are eliminated to the extent of the interest in the associate. The reporting dates of the associates and the Group are identical and the associates accounting policies conform to those used by the Group for like transactions and events in similar circumstances.
j. Fair values For investments actively traded in organised financial markets, fair value is determined by reference to quoted market bid prices. For investment where there is no quoted market price, a reasonable estimate of the fair value is determined by reference to the current market value of another instrument, which is substantially the same or is based on the assessment of future cash flows. The cash equivalent values are determined by the Group at current profit rates for contracts with similar term and risk characteristics. For Sales (Murabaha) receivables the fair value is determined at Bank or subsidiary level at the end of the financial period at their cash equivalent value. k. Goodwill Goodwill acquired in a business combination is initially measured at cost being the excess of the cost of the business combination over the Groups interest in the net fair value of the identifiable assets, liabilities and contingent liabilities. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is reviewed for impairment, annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired.
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k. Goodwill (continued) For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to the cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units or groups of units. Impairment is determined by assessing the recoverable amount of the cash-generating unit, to which the goodwill relates. Where the recoverable amount of the cash-generating unit is less than the carrying amount, an impairment loss is recognised. l. Intangible assets Intangible assets comprise principally the value of computer software. Intangible assets acquired are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. m. Collateral pending sale Collateral acquired in settlement of certain financing facilities is stated at the lower of the net realisable value of the related financing facilities and the current fair value of such assets. Gains or losses on disposal, and revaluation losses, are recognised in the consolidated statement of income. n. Employees end of service benefits The Group provides for end of service benefits to its employees. Entitlement to these benefits is based upon the employees length of service and the completion of a minimum service period. The expected costs of these benefits are accrued for over the period of employment. o. Provisions Provisions are recognised when there is a present obligation (legal or constructive) arising from a past event and the costs to settle the obligation are both probable and able to be reliably measured. p. Dividends Dividends to shareholders are recognised as liabilities in the year in which they are declared. q. Unrestricted investment accounts All unrestricted investment accounts are carried at cost plus accrued profit and related reserves. Investment risk reserves and profit equalisation reserves are made at the Bank or subsidiary level. r. Investment risk reserve Investment risk reserves are amounts appropriated out of the income of unrestricted investment account holders, after allocating the mudarib share, in order to cater against future losses for unrestricted investment account holders. s. Profit equalisation reserve Profit equalisation reserves are amounts appropriated out of the Mudaraba income, before allocating the mudarib share, in order to maintain a certain level of return on investments for unrestricted investment account holders. t. Restricted investment accounts Restricted investment accounts represent funds received by the Group from third parties for investment in specified products as directed by the investment account holders. These assets are managed in a fiduciary capacity and the Group has no entitlement to these assets. Clients bear all of the risks and earn all of the rewards on these investments. Restricted investments are not included in the consolidated statement of financial position since the Group does not have the right to use or dispose these investments except within the conditions of the contract between the Group and holders of restricted investment accounts.
u. Treasury shares Own equity instruments which are reacquired (treasury shares) are deducted from equity of the parent and accounted for at weighted average cost. Consideration paid or received on the purchase, sale, issue or cancellation of the Groups own equity instruments is recognised directly in equity. No gain or loss is recognised in consolidated statement of income on the purchase, sale, issue or cancellation of own equity instruments. v. Revenue recognition Sales (Murabaha) receivables Profit from Sales (Murabaha) receivables is recognised when the income is both contractually determinable and quantifiable at the commencement of the transaction. Such income is recognised on time-apportioned basis over the period of the transaction. Where the income from a contract is not contractually determinable or quantifiable, it is recognised when the realisation is reasonably certain or when actually realised. Income related to accounts that are 90 days overdue is excluded from the consolidated statement of income. Salam and Istisnaa receivables Income on Salam and Istisnaa is recognised on time-apportioned basis when the income from a contract is contractually determinable or quantifiable. Mudaraba and Musharaka financing Income on Mudaraba and Musharaka financing is recognised when the right to receive payment is established or on distribution by the Mudarib. Income related to accounts that are 90 days overdue is excluded from the consolidated statement of income. Ijarah Muntahia Bittamleek Income net of depreciation is recognised on a time-apportioned basis over the lease term. Fee and commission income Fee and commission income is recognised when earned. Other Income Other income on investments is recognised when the right to receive payment is established. Groups share as a Mudarib The Groups share of profit as a Mudarib for managing unrestricted investment accounts is based on the terms and conditions of the related mudarib agreements. Mudaribs share of restricted investment accounts The Group shares profit for managing restricted investment accounts based on the terms and conditions of related contracts. w. Return on unrestricted investment accounts Unrestricted investment accounts holders share of income is calculated based on the applicable local laws and based on the underlining individual Mudaraba contract. It represents the income generated from joint investment accounts and after deducting other expenses. Other expenses include all expenses incurred by the Group including specific provisions. The Groups share is deducted before distributing such income. x. Joint and self financed Investments, financing and receivables that are jointly owned by the Group and the unrestricted investment accounts holders are classified under the caption jointly financed in the consolidated financial statements. Investments, financing and receivables that are financed solely by the Group are classified under self financed. y. Taxation There is no tax on corporate income in the Kingdom of Bahrain. Taxation on foreign operations is provided in accordance with the fiscal regulations of the respective countries in which the subsidiaries operate. The Group accounts for its share of associates profit after accounting for corporate taxation. Deferred income tax is provided using the liability method on temporary differences at the financial position date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.
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z. Sharia supervisory board The Groups business activities are subject to the supervision of a Sharia supervisory board consisting of five members appointed by the general assembly. aa. Zakah The responsibility of payment of Zakah is on individual shareholders of the Group, its unrestricted investment account holders and other account holders except for few subsidiaries where the responsibility of payment of Zakah is on the individual subsidiary as a single entity. The calculation of Zakah per share is presented as an attachment to the Sharia Supervisory Board Report. bb. Earnings prohibited by Sharia The Group is committed to avoid recognising any income generated from non-Islamic source. Accordingly, all non-Islamic income is credited to a charity account where the Group uses these funds for various social welfare activities. cc. Impairment of financial assets An assessment is made at each financial position date to determine whether there is objective evidence that a specific financial asset or a group of financial assets may be impaired. If such evidence exists, the estimated recoverable amount of that asset is determined and any impairment loss, based on the assessment by the Group of the estimated cash equivalent value, is recognised in the consolidated statement of income. Specific provisions are created to reduce all impaired financial contracts to their realisable cash equivalent value. Financial assets are written off only in circumstances where effectively all possible means of recovery have been exhausted. 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 value was recognised, the previously recognised impairment loss is reversed. Any subsequent reversal of an impairment loss is recognised in the consolidated statement of income. In addition, the Group maintains a provision to reflect a potential loss that may occur as a result of currently unidentifiable risks in relation to receivables, financings or investment assets. The amount reflects estimated losses affecting these assets attributable to events that have already occurred at the date of the financial statements, and not estimated losses attributable to future events. dd. Offsetting Financial assets and financial liabilities are only offset and the net amount reported in the consolidated statement of financial position when there is a religious or legal right to offset the recognised amounts and there is actual expectation of the Group to settle on a net basis. ee. Foreign currencies Foreign currency transactions at the subsidiary level Transactions in foreign currencies are recorded at the rate of exchange ruling at the date of the transaction. The monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the financial position date. All differences are taken to income statement at the entity level. Foreign currency translations As at the reporting date, the assets and liabilities in foreign currencies are translated into the presentation currency of the Group (United States Dollars) at the rate of exchange ruling at the financial position date and their income statements are translated at the average exchange rates for the year. The exchange differences arising on the translation are taken directly to a separate component of equity. On disposal of a foreign entity, the deferred cumulative amount recognised in equity relating to that particular foreign entity is recognised in the consolidated statement of income.
ff. Judgments In the process of applying the Groups accounting policies, management has made the following judgments, apart from those involving estimations, which effects the amounts recognised in the financial statements: Classification of investments Management decides on acquisition of an investment whether it should be classified as trading, held to maturity or available for sale. gg. Use of estimates in preparation of the consolidated financial statements The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of financial assets and liabilities at the date of the consolidated financial statements. The use of estimates is used primarily to the determination of provisions for sales (Murabaha) receivable, mudaraba financing, musharaka financing, available for sale investments, ijarah receivable and other assets. hh. Derecognition A financial asset (or, where applicable a part of a financial asset or part of a Group of similar financial assets) is derecognised when: (i) the right to receive cash flows from the asset have expired; (ii) the Group retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a pass through arrangement; or (iii) the Group has transferred its rights to receive cash flows from the asset and either (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. A financial liability is derecognised when the obligation specified in the contract is discharged, cancelled or expired. 3 CASH AND BALANCES WITH BANKS 2010 US$ 000 Balances with central banks* Balances with other banks Cash and cash in transit 2,737,421 842,568 233,914 3,813,903 2009 US$ 000 2,157,750 775,562 224,961 3,158,273
* Balances with the central banks include mandatory reserves amounting to US$ 825,203 thousand (2009: US$ 608,023 thousand). These amounts are not available for use in the Groups day-to-day operations. 4 RECEIVABLES 2010 US$ 000 Sales (Murabaha) receivables (4.1) Ijarah receivables (4.2) Salam receivables (4.3) Istisnaa receivables (4.4) 7,939,881 18,496 80,292 24,662 8,063,331 2009 US$ 000 6,882,870 10,964 115,954 17,276 7,027,064
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4 4.1
RECEIVABLES (continued) Sales (Murabaha) receivables 2010 Jointly financed US$ 000 417,854 8,056,025 2009 Jointly financed US$ 000 410,755 7,039,904
4 4.3
RECEIVABLES (continued) Salam receivables 2010 Jointly financed US$ 000 83,911 (3,619) 80,292 2009 Jointly financed US$ 000 119,478 (3,524) 115,954 2010 US$ 000 3,949
Self financed US$ 000 International commodity murabaha Other murabaha Gross Sales (Murabaha) receivables Provisions (note 19) Deferred profits 58,401 678,020
Total US$ 000 476,255 8,734,045
Self financed US$ 000 97,941 486,229
Total US$ 000 508,696 7,526,133
Gross Salam receivables Provisions (note 19)
Self financed US$ 000 -
Total US$ 000 83,911 (3,619) 80,292
Total US$ 000 119,478 (3,524) 115,954 2009 US$ 000 4,110
736,421 (50,343) 686,078 (84,817) 601,261
8,473,879 (274,872) 8,199,007 (860,387) 7,338,620
9,210,300 (325,215) 8,885,085 (945,204) 7,939,881
584,170 (30,838) 553,332 (65,277) 488,055
7,450,659 (246,169) 7,204,490 (809,675) 6,394,815 2010 US$ 000 459,317
8,034,829 (277,007) 7,757,822 (874,952) 6,882,870 2009 US$ 000 431,276
non-performing 4.4 Istisnaa receivables 2010 Jointly financed US$ 000 24,958 (296) 24,662
non-performing
The group considers the promise made in sales (Murabaha) receivables to the purchase orderer as obligatory.
Gross Istisnaa receivables Provisions (note 19)
Total US$ 000 24,958 (296) 24,662
2009 Jointly financed US$ 000 17,427 (151) 17,276 2010 US$ 000 483
Total US$ 000 17,427 (151) 17,276 2009 US$ 000 386
4.2
Ijarah receivables 2010 Jointly financed US$ 000 20,402 (2,515) 17,887 2009 Jointly financed US$ 000 12,353 (2,100) 10,253 2010 US$ 000 14,335
non-performing 5 Total US$ 000 13,951 (2,987) 10,964 2009 US$ 000 3,738 5.1 Mudaraba financing 2010 Jointly financed US$ 000 1,086,908 (4,098) 1,082,810 Mudaraba financing (5.1) Musharaka financing (5.2) MUDARABA AND MUSHARAKA FINANCING
Self financed US$ 000 Gross Ijarah receivables Provisions (note 19) 1,496 (887) 609
Total US$ 000 21,898 (3,402) 18,496
Self financed US$ 000 1,598 (887) 711
2010 US$ 000 1,186,564 352,068 1,538,632
2009 US$ 000 740,798 240,314 981,112
non-performing
Gross Mudaraba financing Provisions (note 19)
Self financed US$ 000 105,709 (1,955) 103,754
Total US$ 000 1,192,617 (6,053) 1,186,564
Self financed US$ 000 70,612 70,612
2009 Jointly financed US$ 000 670,804 (618) 670,186 2010 US$ 000 6,645
Total US$ 000 741,416 (618) 740,798 2009 US$ 000 5,971
non-performing
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5 5.2
MUDARABA AND MUSHARAKA FINANCING (continued) Musharaka financing 2010 Jointly financed US$ 000 272,293 (10,809) 261,484 2009 Jointly financed US$ 000 187,333 (1,858) 185,475 2010 US$ 000 25,269
6 6.2
INVESTMENTS (continued) Investment in associates
Self financed US$ 000 Gross Musharaka financing Provisions (note 19) 90,584 90,584
Total US$ 000 362,877 (10,809) 352,068
Self financed US$ 000 54,839 54,839
Investments in associates comprise the following:
Total US$ 000 242,172 (1,858) 240,314 2009 US$ 000 6,449 Investment Banking Al Amin for Investment Insurance
2010 Ownership % 2010 Quoted Country of incorporation Self financed US$ 000 Jointly financed US$ 000 Total US$ 000 Market value US$ 000
non-performing
29.7
Jordan
6,697
6,697
6,622
INVESTMENTS 2010 US$ 000 116,304 26,876 8,966 485,270 713,065 1,350,481 2009 US$ 000 101,324 38,091 8,192 354,297 586,132 1,088,036
The Islamic Insurance Company Others Jordan International Trading Centre Arabian Steel Pipes Manufacturing Company Limited
33.2
Jordan
7,459
7,459
10,350
Investment in real estate (6.1) Investment in associates (6.2) Trading securities (6.3) Available for sale investments (6.4) Held to maturity investments (6.5)
28.4
Jordan
1,886
1,886
1,264
26.0
Jordan
5,461 21,503
5,461 21,503
8,086 26,322
6.1
Investment in real estate 2010 Jointly financed US$ 000 82,877 113,264 2009 Jointly financed US$ 000 74,670 95,342
Unquoted Real Estate Self financed US$ 000 Self financed US$ 000 8,689 5,982 Egyptian Saudi Finance Real Estate Insurance Aman Takaful Insurance Others BEST Lease 2009 Jointly financed US$ 000 28,198 67,144 95,342 28.0 Tunisia 3,398 4,981 4,981 Total US$ 000 32,812 68,512 101,324 392 21,895 3,398 5,373 26,876 38.7 Lebanon 1,583 1,583 40.0 Egypt 392 392
Total US$ 000 88,624 116,304
Total US$ 000 83,359 101,324
At cost At fair value
5,747 3,040
Investment in real estate at fair value at 31 December consist of the following: 2010 Jointly financed US$ 000 40,006 73,258 113,264
Self financed US$ 000 Land Buildings 1,560 1,480 3,040
Total US$ 000 41,566 74,738 116,304
Self financed US$ 000 4,614 1,368 5,982
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6 6.2
INVESTMENTS (continued) Investment in associates (continued)
6 6.3
INVESTMENTS (continued) Trading securities 2010 Jointly financed US$ 000 3,000 2009 Jointly financed US$ 000 5,237
2009 Ownership % 2009 Quoted Investment Banking Al Amin for Investment Sanabel for Financial Investment Company Insurance The Islamic Insurance Company Others Jordan International Trading Centre Arabian Steel Pipes Manufacturing Company Limited 28.4 26.0 Jordan Jordan 591 Unquoted Real Estate Baraka Development Immobile Egyptian Saudi Finance Real Estate Insurance Aman Takaful Insurance Others BEST Lease 28.0 Tunisia 3,379 4,938 5,529 1,245 32,562 3,379 6,183 38,091 38.7 Lebanon 1,138 1,138 Unquoted investments Sukook and similar items Provisions (note 19) 20.0 40.0 Algeria Egypt 421 1,245 421 1,245 6.5 1,569 7,232 31,317 1,569 7,232 31,908 1,713 7,756 27,980 Provisions (note 19) Unquoted investments Equities Sukook Managed funds 33.2 Jordan 12,378 12,378 10,963 29.7 20.0 Jordan Jordan 591 10,138 10,138 591 6,957 591 Quoted investments Equities Sukook Managed funds Country of incorporation Self financed US$ 000 Jointly financed US$ 000 Total US$ 000 Market value US$ 000 Quoted equities 6.4
Self financed US$ 000 5,966
Total US$ 000 8,966
Self financed US$ 000 2,955
Total US$ 000 8,192
Available for sale investments 2010 Jointly financed US$ 000 21,221 55,858 33,775 110,854 2009 Jointly financed US$ 000 48,861 33,734 39,318 121,913
Self financed US$ 000 4,042 12,192 16,234
Total US$ 000 25,263 55,858 45,967 127,088
Self financed US$ 000 10,249 9,948 20,197
Total US$ 000 59,110 33,734 49,266 142,110
84,359 164,099 808 249,266 (4,343) 261,157
15,364 71,882 31,309 118,555 (5,296) 224,113
99,723 235,981 32,117 367,821 (9,639) 485,270
102,998 19,054 919 122,971 (5,028) 138,140
36,563 30,052 28,915 95,530 (1,286) 216,157
139,561 49,106 29,834 218,501 (6,314) 354,297
Held to maturity investments 2010 Jointly financed US$ 000 428,806 (502) 428,304 2009 Jointly financed US$ 000 355,511 355,511
Self financed US$ 000 284,761 284,761
Total US$ 000 713,567 (502) 713,065
Self financed US$ 000 230,621 230,621
Total US$ 000 586,132 586,132
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IJARAH MUNTAHIA BITTAMLEEK 2010 Jointly financed US$ 000 408,335 (105,769) 302,566 2009 Jointly financed US$ 000 298,133 (72,410) 225,723
PROPERTY AND EQUIPMENT Office furniture and equipment US$ 000 102,011 17,290 (2,143) 951 118,109 28,084 (3,683) (2,151) 140,359
Self financed US$ 000 Land and building Cost Accumulated depreciation Net book value Equipment Cost Accumulated depreciation Net book value Others Cost Accumulated depreciation Net book value 22,249 (15,719) 6,530
Total US$ 000 430,584 (121,488) 309,096
Self financed US$ 000 23,455 (13,313) 10,142
Total US$ 000 321,588 (85,723) 235,865
Land and buildings US$ 000 Cost: At 1 January 2009 Additions Disposals Foreign exchange translations 141,510 59,616 (708) 2,452 202,870 67,390 (3,401) (4,759) 262,100
Vehicles US$ 000 9,245 991 (461) 63 9,838 3,408 (1,644) (355) 11,247
Others US$ 000 19,606 7,485 (2,789) 462 24,764 10,221 (3,037) (731) 31,217
Total US$ 000 272,372 85,382 (6,101) 3,928 355,581 109,103 (11,765) (7,996) 444,923
16,621 (16,533) 88
344,434 (235,558) 108,876
361,055 (252,091) 108,964
17,123 (16,141) 982
297,030 (211,174) 85,856
314,153 (227,315) 86,838
At 31 December 2009 Additions Disposals Foreign exchange translations
2,714 (2,560) 154
30,611 (9,024) 21,587
33,325 (11,584) 21,741
2,714 (2,288) 426
17,251 (5,047) 12,204
19,965 (7,335) 12,630
At 31 December 2010 Depreciation: At 1 January 2009
30,994 5,826 (47) 310 37,083 6,378 (58) (899) 42,504
67,500 9,286 (1,758) 636 75,664 10,620 (31) (1,112) 85,141
4,614 1,425 (353) 24 5,710 1,514 (738) (228) 6,258
8,914 2,594 (1,742) 257 10,023 3,220 (806) (269) 12,168
112,022 19,131 (3,900) 1,227 128,480 21,732 (1,633) (2,508) 146,071
TOTAL Cost Accumulated depreciation Net book value 41,584 (34,812) 6,772 783,380 (350,351) 433,029 824,964 (385,163) 439,801 43,292 (31,742) 11,550 612,414 (288,631) 323,783 655,706 (320,373) 335,333
Provided during the year (note 17) Relating to disposals Foreign exchange translations At 31 December 2009 Provided during the year (note 17) Relating to disposals Foreign exchange translations At 31 December 2010 Net book values: At 31 December 2010 At 31 December 2009
219,596 165,787
55,218 42,445
4,989 4,128
19,049 14,741
298,852 227,101
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OTHER ASSETS 2010 US$ 000 2009 US$ 000 153,403 69,911 49,625 18,120 26,998 17,948 29,683 365,688 (16,330) 349,358
10
OTHER LIABILITIES 2010 US$ 000 2009 US$ 000 169,855 90,245 6,180 32,279 18,298 28,729 10,486 74,230 430,302
Bills receivables Goodwill and intangible assets (note 9(a)) Collateral pending sale Good Faith Qard Deferred taxation Prepayments Others
123,924 93,770 60,237 15,256 43,865 24,255 27,897 389,204
Payables Cash margins Other provisions (note 19) * Current taxation ** Deferred taxation ** Accrued expenses Charity fund Others
208,024 96,835 12,128 52,643 11,743 48,779 5,035 55,801 490,988
Provisions (note 19)
(14,271) 374,933
* Other provisions mainly comprise of general provisions and specific provisions on commitment and contingent items. ** In view of the operations of the Group being subject to various tax jurisdictions and regulations, it is not practical to provide a reconciliation between the accounting and taxable profits together with the details of effective tax rates.
9 (a) Goodwill and intangible assets Intangible assets 2010 US$ 000 7,488 4,016 (1,066) (762) 302 9,978 Intangible assets 2009 US$ 000 5,770 3,304 (1,751) (353) 518 7,488
Goodwill 2010 US$ 000 At 1 January Additions Amortisation charge for the year Impairment loss for the year Foreign exchange translations At 31 December 62,423 21,598 (229) 83,792
Total 2010 US$ 000 69,911 25,614 (1,066) (762) 73 93,770
Goodwill 2009 US$ 000 46,906 15,517 62,423
Total 2009 US$ 000 52,676 18,821 (1,751) (353) 518 69,911
11
UNRESTRICTED INVESTMENT ACCOUNTS (URIA) 2010 US$ 000 2009 US$ 000 8,151,379 2,304 65,226 19,715 8,238,624
Unrestricted investment accounts Profit equalisation reserve (note 11.1) Investment risk reserve (note 11.2) Cumulative changes in fair value attributable to unrestricted investment accounts (11.3)
10,140,981 2,667 87,004 9,454 10,240,106
Goodwill acquired through business combinations with indefinite lives have been allocated to four individual cash-generating units. The carrying amount of goodwill allocated to each of the cash-generating units is as follows: 2010 US$ 000 Al Baraka Turk Participation Bank Al Baraka Bank Egypt Jordan Islamic Bank Al Baraka Bank (Pakistan) Limited 33,084 2,464 26,646 21,598 83,792 2009 US$ 000 33,380 2,532 26,511 62,423
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11
11.1
UNRESTRICTED INVESTMENT ACCOUNTS (URIA) (continued)

Movement in profit equalisation reserve
12
EQUITY 2010 US$ 000 2009 US$ 000 1,500,000 2009 US$ 000 697,500 46,500 744,000
2010 US$ 000 Balance at 1 January Amount apportioned from income allocable to unrestricted investment account holders Amount used during the year Foreign exchange translations Balance at 31 December 2,304 424 (61) 2,667
2009 US$ 000 2,271
Share capital Authorised 1,500,000,000 shares of US$ 1 each
1,500,000 2010 US$ 000
Issued and fully paid up 62 (29) 2,304 At beginning of the year 744,000,000 (2009: 697,500,000) shares of US$1 each Issued during the year 46,500,000 Bonus shares (2009: 46,500,000) of US$1 each At end of the year 790,500,000 (2009: 744,000,000) shares of US$1 each 744,000 46,500 790,500
11.2
Movement in investment risk reserve
The Bank issued bonus shares at one bonus share for each 16 (2009: 15) shares held following shareholders approval and the Board of Directors resolution in its meeting on 24 February 2010 (2009: 25 February 2009). This was also approved by the Ministry of Industry and Commerce and the CBB. 2010 US$ 000 2009 US$ 000 58,371 (6,736) 12,717 874 65,226 Treasury shares Purchase of treasury shares Sale of treasury shares At 31 December 2010 No. thousand 7,295 (767) 6,528 US$ 000 7,295 (767) 6,528
Balance at 1 January Amount appropriated to provision (note 19) Amount apportioned from income allocable to unrestricted investment account holders Foreign exchange translations Balance at 31 December
65,226 (19,121) 42,363 (1,464) 87,004
The market value of the treasury shares is US$ 9,792 thousand and it represents 0.8% of the outstanding shares. Additional information on shareholding pattern i) Names and nationalities of the major shareholders and the number of shares in which they have an interest of 5% or more of outstanding shares: At 31 December 2010
11.3
Movement in accumulated changes in fair value attributable to URIA
2010 US$ 000 Balance at 1 January Change in fair values during the year Realised gain transferred to consolidated statement of income Deferred taxation effect Transfer from shareholders equity 19,715 (9,936) (946) (859) 1,480 9,454 Attributable to investment in real estate Attributable to available for sale 8,958 496 9,454
2009 US$ 000 24,563 (7,442) (10,543) (5,493) 18,630 19,715 14,281 5,434 19,715
Names Saleh Abdulla Kamel Dallah AlBaraka Holding Company E.C. Altawfeek Company For Investment Funds Abdulla AbdulAziz AlRajihi At 31 December 2009 Names Saleh Abdulla Kamel Dallah AlBaraka Holding Company E.C. Altawfeek Company For Investment Funds Abdulla AbdulAziz AlRajihi
Nationality/ Incorporation Saudi Bahrain Cayman Island Saudi
No. of shares 238,023,291 194,746,842 163,166,649 53,822,253
% holding 30.11% 24.64% 20.65% 6.81%
Nationality/ Incorporation Saudi Bahrain Cayman Island Saudi
No. of shares 224,021,921 183,291,145 153,661,796 50,656,238
% holding 30.11% 24.64% 20.65% 6.81%
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12
EQUITY (continued)
12
EQUITY (continued)
Additional information on shareholding pattern (continued) ii) The Bank has only one class of shares and the holders of these shares have equal voting rights. iii) Distribution schedule of shares, setting out the number and percentage of holders in the following categories: At 31 December 2010 No. of shareholders 1,115 8 1 3 1,127 % of total outstanding shares 5.41% 12.39% 6.81% 75.39% 100.00% % of total outstanding shares 5.40% 12.39% 6.81% 75.40% 100.00%
Additional information on shareholding pattern (continued) f. Proposed Appropriations 2010 US$ 000 Cash dividend 5% (2009: 6%) Bonus shares 39,525 79,050 118,575 2009 US$ 000 44,640 46,500 91,140
Categories: Less than 1% 1% up to less than 5% 5% up to less than 10% 20% up to less than 50% At 31 December 2009
No. of shares 42,793,835 97,947,130 53,822,253 595,936,782 790,500,000
The above proposed appropriations exclude appropriations to the statutory reserve as mentioned above and will be submitted for formal approval at the Annual General Meeting subject to regulatory approval. The proposed appropriations for the year 2009 was approved at the Annual General Meeting on 24 March 2010 and was effected in 2010 following that approval. g. Net movement in non-controlling interest This mainly includes the effect of changes in capital of subsidiaries, buying (selling) by the non-controlling interest from (to) the Group. 13 NET INCOME FROM JOINTLY AND SELF FINANCED CONTRACTS AND INVESTMENTS 2010 US$ 000 Receivables (note 13.1) Mudaraba and Musharaka financing (note 13.2) Investments (note 13.3) Ijarah Muntahia Bittamleek (note 13.4) Others 781,282 40,006 91,492 34,512 9,242 956,534 Net income from jointly financed contracts and investments Net income from self financed contracts and investments 808,707 147,827 956,534 2009 US$ 000 782,717 34,089 88,531 27,649 10,566 943,552 812,647 130,905 943,552
Categories: Less than 1% 1% up to less than 5% 5% up to less than 10% 20% up to less than 50%
No. of shares 40,171,130 92,197,770 50,656,238 560,974,862 744,000,000
No. of shareholders 1,139 8 1 3 1,151
a. Share premium/Equity transaction cost Amounts collected in excess of the par value of the issued share capital during any new issue of shares, net of issue costs, are treated as share premium. This amount is not available for distribution, but can be utilised as stipulated in the Bahrain Commercial Companies Law. Equity transaction cost, represent costs incurred by the Bank that are directly related to raising capital and have been incurred in cash. The Bank proposed issuance of bonus shares from the share premium at one bonus share for each 10 shares held. This will be submitted for formal approval at the Annual General Meeting subject to regulatory approval. b. Statutory reserve In accordance with the Bahrain Commercial Companies Law and the Banks articles of association, 10% of the net income for the year is transferred to the statutory reserve until such time as the reserve reaches 50% of the Banks paid-up share capital. c. Cumulative changes in fair values This represents the net unrealised fair value gains relating to the equity of the parent on available-for-sale investments and investment in real estate. d. Foreign currency translations The foreign currency translations are used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries. e. Other reserves Other reserves mainly consist of general banking risk reserves maintained by the subsidiaries in accordance with local regulations.
112
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13
13.1
NET INCOME FROM JOINTLY AND SELF FINANCED CONTRACTS AND INVESTMENTS (continued)
Receivables
14
GROUPS SHARE AS A MUDARIB
Groups share as a Mudarib is determined at the level of each subsidiary and is based on the terms and conditions of the related agreements. 2010 US$ 000 2009 US$ 000 771,867 9,495 1,355 782,717 Banking fees and commissions Letters of credit Guarantees 2010 US$ 000 2009 US$ 000 11,306 22,783 34,089 Foreign exchange gain 2010 US$ 000 2009 US$ 000 29,083 52,226 52 273 731 2,790 3,376 88,531 Property and equipment depreciation (note 8) Intangible assets amortisation (note 9(a)) 17 DEPRECIATION AND AMORTISATION 2010 US$ 000 21,732 1,066 22,798 2010 US$ 000 2009 US$ 000 91,358 (63,709) 27,649 General and administration Professional and business expenses Premises related expenses 18 OTHER OPERATING EXPENSES 2010 US$ 000 74,560 18,202 30,140 122,902 2009 US$ 000 64,988 22,046 21,406 108,440 2009 US$ 000 19,131 1,751 20,882 Gain on sale of property and equipment Gain arising on merger of Pakistan branches Others 16 OTHER OPERATING INCOME 2010 US$ 000 33,799 9,961 9,833 1,456 55,049 2009 US$ 000 34,923 2,347 17,972 55,242 Acceptances 15 OTHER FEES AND COMMISSION INCOME 2010 US$ 000 73,498 40,073 36,077 1,419 151,067 2009 US$ 000 61,848 28,166 32,357 1,494 123,865
Sales (Murabaha) receivables Salam receivables Istisnaa receivables
772,050 5,913 3,319 781,282
13.2
Mudaraba and Musharaka financing
Mudaraba financing Musharaka financing
18,633 21,373 40,006
13.3
Investments
Available for sale investments Held to maturity investments Unrealised gain on trading securities Gain on sale of available for sale investments Gain on sale of trading securities Rental income Investment in associates
20,271 66,784 611 139 132 926 2,629 91,492
13.4
Ijarah Muntahia Bittamleek
Income from Ijarah Muntahia Bittamleek Depreciation on Ijarah Muntahia Bittamleek
84,188 (49,676) 34,512
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19
PROVISIONS Sales (Murabaha) receivables US$ 000 (note 4.1)
2010
Ijarah receivables US$ 000 (note 4.2) 2,987 962 (373) 589 3,576 (174) 3,402
Salam receivables US$ 000 (note 4.3) 3,524 915 (749) 166 3,690 (71) 3,619
Istisnaa receivables US$ 000 (note 4.4) 151 169 (1) 168 319 (3) (20) 296
Mudaraba financing US$ 000 (note 5.1) 618 5,635 (49) 5,586 6,204 (151) 6,053
Musharaka financing US$ 000 (note 5.2) 1,858 1,740 (1,675) 65 1,923 (289) 23 9,152 10,809
Investments US$ 000 (note 6.4 & 6.5) 6,314 4,614 (558) 4,056 10,370 (87) (142) 10,141
Other assets US$ 000 (note 9) 16,330 1,117 (1,498) (381) 15,949 (2) (1,676) 14,271
Other liabilities US$ 000 (note 10) 6,180 8,295 (4,092) 4,203 10,383 (128) 1,873 12,128
Total US$ 000
Provisions at 1 January Charged during the year Written back during the year
277,007 82,066 (36,937) 45,129 322,136
314,969 105,513 (45,932) 59,581 374,550 (15,562) 19,121 7,825 385,934
Written off during the year Amount appropriated from investment risk reserve (note 11.2) Foreign exchange translations/others Provisions at 31 December 2009 Provisions at 1 January Charged during the year Written back during the year
(15,053) 19,098 (966) 325,215
196,543 131,592 (28,329) 103,263 299,806
3,202 1,796 (355) 1,441 4,643 (1,633) (4) (19) 2,987
4,466 748 (1,622) (874) 3,592 (2) (66) 3,524
236 4 (34) (30) 206 (50) (5) 151
561 17 (38) (21) 540 78 618
2,396 (688) (688) 1,708 (62) 12 200 1,858
5,026 812 (125) 687 5,713 471 130 6,314
16,249 4,566 (5,623) (1,057) 15,192 (4) 1,142 16,330
7,151 1,582 (235) 1,347 8,498 (2,345) 27 6,180
235,830 141,117 (37,049) 104,068 339,898 (34,802) 6,736 3,137 314,969
Written off during the year Amount appropriated from investment risk reserve (note 11.2) Foreign exchange translations/others Provisions at 31 December
(30,710) 6,183 1,728 277,007
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19
PROVISIONS (continued)
These provisions relate to the following geographical areas: Sales (Murabaha) receivables US$ 000 167,826 30,850 102,466 24,073 325,215
2010 Middle East North Africa Europe Others Total 2009 Middle East North Africa Europe Others Total
Ijarah receivables US$ 000 2,068 1,334 3,402
Salam receivables US$ 000 3,543 76 3,619
Istisnaa receivables US$ 000 112 184 296
Mudaraba financing US$ 000 5,411 642 6,053
Musharaka financing US$ 000 286 54 10,469 10,809
Investments US$ 000 7,085 2,570 143 343 10,141
Other assets US$ 000 4,922 3,167 610 5,572 14,271
Other liabilities US$ 000 11,598 513 18 (1) 12,128
Total US$ 000 199,196 41,451 103,237 42,050 385,934
127,884 30,401 100,802 17,920 277,007
1,477 1,327 183 2,987
3,505 19 3,524
2 149 151
618 618
263 1,595 1,858
2,588 2,509 710 507 6,314
5,079 4,298 696 6,257 16,330
5,894 267 19 6,180
143,185 42,927 102,227 26,630 314,969
The fair value of collateral that the Group holds relating to non performing facilities at 31 December 2010 amounts to US$ 373.7 million (31 December 2009: US$ 347.2 million). The collateral consists of cash margin, securities and properties.
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20
BASIC AND DILUTED EARNINGS PER SHARE
22
RELATED PARTY TRANSACTIONS (continued)
Basic and diluted earnings per share amounts are calculated by dividing net income for the year attributable to equity holders of the parent by the weighted average number of shares outstanding during the year as follows: 2010 Net income attributable to the equity shareholders of the parent for the year - US$ 000 Weighted average number of shares outstanding at the beginning of the year (in thousands) Treasury shares effect (in thousands) Bonus shares effect (in thousands)* Weighted average number of shares outstanding at the end of the year (in thousands) Earnings per share - US cents 105,607 790,500 (5,956) 784,544 13.46 2009 91,758 744,000 46,500 790,500 11.61
Compensation of key management personnel of the Bank, included in consolidated statement of income, is as follows: 2010 US$ 000 Short term employee benefits Long term employee benefits Directors remuneration for the year ended 31 December 2010 amounted to US$ 750 thousand. The significant balances with related parties at 31 December were as follows: Directors and key management personnel US$ 000 644 305 97 205 4,519 340 2009 US$ 000 4,156 317
*The weighted average number of shares of the previous year has been adjusted on account of the bonus issue made in 2010 and 2009. 21 CASH AND CASH EQUIVALENTS 2010 US$ 000 Balances with central banks excluding mandatory reserve Balances with other banks Cash and cash in transit 1,912,218 842,568 233,914 2,988,700 22 RELATED PARTY TRANSACTIONS 2009 US$ 000 1,549,727 775,562 224,961 2,550,250 Assets: Cash and balances with banks Receivables Mudaraba and Musharaka financing Investments Ijarah Muntahia Bittamleek Other assets Liabilities: Customer current and other accounts Other Liabilities Unrestricted investment accounts Other related parties US$ 000 Restricted investment accounts 2010 US$ 000 2009 US$ 000
Associated companies US$ 000 177 43,569 34,425 81,020 532
Parent and its major shareholders US$ 000 305 -
Other related parties US$ 000 181 2,033 297 24 212
2010 US$ 000 177 44,394 36,763 81,622 121 949
2009 US$ 000 255 26,816 32,822 89,323 174 1,324
Related parties comprise major shareholders, directors of the Group, entities owned or controlled, jointly controlled or significantly influenced by them and companies affiliated by virtue of shareholding in common with that of the Group and Sharia supervisory board members. The income and expenses in respect of related parties were as follows: Directors and key management personnel US$ 000
20,887 2,056
1,987 -
1,310 -
139 25
24,323 2,081
12,617 2,382
11,008 10,611
3,158 8,130
571 613
4,359 -
19,096 19,354
7,056 8,130
Associated companies US$ 000 Net income from jointly financed contracts and investments Net income from self financed financing and investments Return on unrestricted investment accounts Other fees and commission income Other operating income
Parent and its major shareholders US$ 000
All related party exposures are performing and are free of any provision for possible credit losses. Details of Directors interests in the Banks shares as at the end of the year were: 2010 No. of shares 546,440 238,023,291 238,569,731 As of 31 December 2010, Executive Management owned 51,823 shares of the Bank. 2009 No. of shares 338,136 224,021,921 224,360,057
3,668 713 593 376
127 31 -
61 6 -
90 179 -
3,946 713 809 376
3,532 2,024 99 107 -
Categories: Less than 1% 20% up to less than 50%
No. of directors 4 1 5
No. of directors 3 1 4
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23
COMMITMENTS AND CONTINGENCIES 2010 US$000 2009 US$ 000 945,241 2,486,035 49,251 296,392 48,674 3,825,593
24
SEGMENTAL ANALYSIS (Continued)
Segment operating income, net operating income and net income was as follows:
2010 Total operating income US$ 000 Segment Middle East North Africa Europe Others 217,817 124,216 274,486 42,055 658,574 25 RISK MANAGEMENT 82,944 82,140 143,966 7,241 316,291 15,871 66,257 103,482 7,553 193,163 189,402 108,599 283,120 52,392 633,513 Net operating income US$ 000 Net income US$ 000 Total operating income US$ 000
2009 Net operating income US$ 000 68,776 69,384 172,045 14,367 324,572 Net income US$ 000 14,752 56,754 88,946 6,934 167,386
Letters of credit Guarantees Acceptances Undrawn Commitments Others
1,144,767 2,854,794 72,353 361,067 17,247 4,450,228
24
SEGMENTAL ANALYSIS
Segmental information is presented in respect of the Groups geographical segments. The geographical segments are based upon the location of the units responsible for recording the transactions and reflects the manner in which financial information is evaluated by the Banks management and the Board of Directors. For financial reporting purposes, the Group is divided into the following geographic segments: Middle East North Africa Europe Others The results reported for the geographic segments are based on the Groups internal financial reporting systems. The accounting policies of the segments are the same as those applied in the preparation of the Groups consolidated financial statements as set out in Note 2. Transactions between segments are conducted at estimated market rates on an arms length basis. No business segment are presented as that is not applicable to the Group. Segment assets, liabilities and unrestricted investment accounts was as follows: 2010 Unrestricted investment accounts US$ 000 4,608,896 920,957 3,763,013 947,240 10,240,106 2009 Unrestricted investment accounts US$ 000 4,030,776 770,778 3,026,560 410,510 8,238,624
Risk management is an integral part of the Groups decision-making process. The management risk committee and executive committees guide and assist with overall management of the Groups balance sheet risks. The Group manages exposures by setting limits approved by the Board of Directors. These risks and the processes to mitigate these risks have not significantly altered from the previous year. The most important types of risk are liquidity risk, credit risk, market risk and other operational risk. Market risk includes currency risk, equity price risk and profit rate risk. a) Liquidity risk Liquidity risk is the risk that the Group will be unable to meet its payment obligations when they fall due under normal and stress circumstances. To limit this risk, management has arranged diversified funding sources, manages assets with liquidity in mind, and monitors liquidity on regular basis. Each of the Groups subsidiaries has a documented and implemented domestic and foreign currency liquidity policies and procedures appropriate to the nature and complexity of its business. The policy addresses the subsidiaries goal of protecting financial strength even for stressful events. The table next page summarises the maturity profile of the Groups assets and liabilities based on contractual repayment arrangements. The contractual maturities of assets and liabilities have been determined on the basis of the remaining period at the financial position date to the contractual maturity date and do not take account of the effective maturities as indicated by the Groups retention history of its investment account holders and the availability of bank lines.
Assets US$ 000 Segment Middle East North Africa Europe Others 6,920,049 2,105,346 5,425,503 1,429,035 15,879,933
Liabilities US$ 000 1,528,672 852,847 1,104,352 335,766 3,821,637
Assets US$ 000 6,051,048 1,855,912 4,273,508 985,809 13,166,277
Liabilities US$ 000 1,219,473 780,986 769,257 421,092 3,190,808
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RISK MANAGEMENT (continued)
a) Liquidity risk (continued) The consolidated maturity profile at 31 December 2010 was as follows: Up to 1 Month US$ 000 ASSETS Cash and balances with banks Receivables Mudaraba and Musharaka financing Investments Ijarah Muntahia Bittamleek Property and equipment Other assets Total assets LIABILITIES Customer current and other accounts Due to banks Other liabilities Total Liabilities Unrestricted investment accounts Total liabilities and unrestricted investment accounts Net liquidity gap Cumulative net liquidity gap Restricted Investment Accounts 2,967,891 1,165,644 649,938 426,072 9,597 64,689 5,283,831 1 to 3 months US$ 000 20,809 1,050,981 418,728 45,935 9,243 19,604 1,565,300 3 to 6 months US$ 000 1,154,247 23,856 62,296 51,384 3,923 1,295,706 6 months to 1 year US$ 000 1,484,525 32,019 96,525 26,681 23,785 1,663,535 1 to 3 years US$ 000 2,034,115 182,736 254,513 60,663 84,938 2,616,965 3 to 5 years US$ 000 990,869 136,647 120,366 77,139 16,624 1,341,645 5 to 10 years US$ 000 177,865 88,954 107,407 2,231 376,457 10 to 20 years US$ 000 3,787 5,754 8,551 97,687 115,779 20 years and above US$ 000 1,298 255,359 36,523 293,180
Undated US$ 000 825,203 80,864 298,852 122,616 1,327,535
Total US$ 000 3,813,903 8,063,331 1,538,632 1,350,481 439,801 298,852 374,933 15,879,933
2,906,172 424,477 229,288 3,559,937 3,569,685 7,129,622 (1,845,791) (1,845,791) 89,420
15,685 15,685 1,157,237 1,172,922 392,378 (1,453,413) 68,823
13,785 13,785 772,190 785,975 509,731 (943,682) 35,591
28,637 28,637 1,597,402 1,626,039 37,496 (906,186) 47,993
66,693 66,693 2,225,289 2,291,982 324,983 (581,203) 11,903
30,045 30,045 870,070 900,115 441,530 (139,673) 106,061
701 701 48,233 48,934 327,523 187,850 -
115,779 303,629 -
106,154 106,154 106,154 187,026 490,655 -
1,327,535 1,818,190 95,547
2,906,172 424,477 490,988 3,821,637 10,240,106 14,061,743 1,818,190
455,338
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25
a) Liquidity risk (continued) The consolidated maturity profile at 31 December 2009 was as follows: Up to 1 Month US$ 000 ASSETS Cash and balances with banks Receivables Mudaraba and Musharaka financing Investments Ijarah Muntahia Bittamleek Property and equipment Other assets Total assets LIABILITIES Customer current and other accounts Due to banks Other liabilities Total Liabilities Unrestricted investment accounts Total liabilities and unrestricted investment accounts Net liquidity gap Cumulative net liquidity gap Restricted Investment Accounts 2,541,026 986,377 465,189 436,495 6,870 72,785 4,508,742 1 to 3 months US$ 000 9,224 868,964 99,214 43,726 6,126 8,637 1,035,891 3 to 6 months US$ 000 1,021,340 21,324 183,981 10,658 9,242 1,246,545 6 months to 1 year US$ 000 1,100,921 28,089 92,306 24,955 6,540 1,252,811 1 to 3 years US$ 000 1,748,716 129,060 134,244 45,493 67,354 2,124,867 3 to 5 years US$ 000 1,179,995 174,267 81,641 37,070 36,156 1,509,129 5 to 10 years US$ 000 113,120 48,955 2,556 55,793 21,398 241,822 10 to 20 years US$ 000 5,682 15,014 480 148,368 169,544 20 years and above US$ 000 1,949 14,331 58,520 74,800
Undated US$ 000 608,023 98,276 227,101 68,726 1,002,126
Total US$ 000 3,158,273 7,027,064 981,112 1,088,036 335,333 227,101 349,358 13,166,277
2,607,844 152,662 136,942 2,897,448 2,929,437
24,821 24,821 1,229,794
25,492 25,492 684,537
69,192 69,192 835,642
23,000 23,000 2,174,099
140,102 140,102 345,373
10,753 10,753 39,742
2,607,844 152,662 430,302 3,190,808 8,238,624
5,826,885 (1,318,143) (1,318,143) 81,651
1,254,615 (218,724) (1,536,867) 28,756
710,029 536,516 (1,000,351) 28,272
904,834 347,977 (652,374) 147,808
2,197,099 (72,232) (724,606) 91,381
485,475 1,023,654 299,048 132,183
50,495 191,327 490,375 -
169,544 659,919 -
74,800 734,719 -
1,002,126 1,736,845 -
11,429,432 1,736,845
510,051
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b) Credit risk Credit risk is the risk that one party to a financial contract will fail to discharge an obligation and cause the other party to incur a financial loss. The Group controls credit risk by monitoring credit exposures, and continually assessing the creditworthiness of counterparties. Financing contracts are mostly secured by the personal guarantees of individuals who own the counterparty, by collateral in form of mortgage of the objects financed or other types of tangible security. Type of credit risk Financing contracts mainly comprise Sales (Murabaha) receivables, Salam receivables, Istisnaa receivables, Mudaraba financing, Musharaka financing and Ijarah Muntahia Bittamleek. Sales (Murabaha) receivables The Group finances these transactions through buying a commodity which represents the object of the Murabaha and then resells this commodity to the murabeh (beneficiary) at a profit. The sale price (cost plus the profit margin) is repaid in instalments by the murabeh over the agreed period. The transactions are secured at times by the object of the Murabaha (in case of real estate finance) and other times by a total collateral package securing all the facilities given to the client. Salam receivables Salam is a contract whereby the Group makes an immediate payment to a seller for the future delivery of a commodity. To protect itself from risk associated with the commodity the Group simultaneously enters into Parallel Salam contract whereby it sells the commodity for deferred delivery for immediate payment. Istisnaa receivables Istisnaa is a sale agreement between the Group as the seller and the customer as the ultimate purchaser whereby the Group undertakes to have manufactured (or acquire) goods and sell it to the customer for an agreed upon price on completion at future date. Mudaraba financing The Group enters into Mudaraba contracts by investing in funds managed primarily by other banks and financial institutions for a definite period of time. Musharaka financing An agreement between the Group and a customer to contribute to a certain investment enterprise, whether existing or new, or the ownership of a certain property either permanently or according to a diminishing arrangement ending up with the acquisition by the customer of the full ownership. The profit is shared as per the agreement set between both parties while the loss is shared in proportion to their shares of capital or the enterprise. Ijarah Muntahia Bittamleek This is a lease whereby the legal title of the leased asset passes to the lessee at the end of the Ijarah (lease) term, provided that all Ijarah instalments are settled. Maximum exposure to credit risk before collateral held or other credit enhancements Maximum exposure 2010 2009 US$ 000 US$000 Receivables Mudaraba and Musharaka financing Investments Ijarah Muntahia Bittamleek Other assets Total Commitments and contingencies 8,063,331 1,538,632 1,350,481 439,801 152,806 11,545,051 4,450,228 15,995,279 7,027,064 981,112 1,088,036 335,333 184,876 9,616,421 3,825,593 13,442,014
b) Credit risk (continued) Credit quality by type of islamic financing contracts The table below shows the credit quality by type of islamic financing contracts, based on the Groups credit rating system as of: 31 December 2010 non performing Neither past islamic due nor non Past due but financing performing performing contracts Total Type of Islamic Financing Contracts US$000 US$000 US$000 US$000 Receivables Mudaraba and Musharaka financing Other assets 7,854,313 1,479,068 142,198 9,475,579 63,466 44,512 383 108,361 478,084 31,914 24,496 534,494 8,395,863 1,555,494 167,077 10,118,434
31 December 2009 Neither past due nor non performing US$000 6,686,912 964,539 179,713 7,831,164 non performing islamic financing contracts US$000 439,510 12,420 19,783 471,713
Type of Islamic Financing Contracts Receivables Mudaraba and Musharaka financing Other assets
Past due but performing US$000 184,311 6,629 1,710 192,650
Total US$000 7,310,733 983,588 201,206 8,495,527
Aging analysis of past due but performing Islamic financing contracts The following table summarises the aging of past due but performing islamic financing contracts as of: 31 December 2010 Less than 30 days 31 to 60 days 61 to 90 days Type of Islamic Financing Contracts US$000 US$000 US$000 Receivables Mudaraba and Musharaka financing Other assets 34,172 34,424 3 68,599 10,515 6,132 7 16,654 31 December 2009 Less than 30 days US$000 9,323 5 42 9,370 31 to 60 days US$000 79,628 40 8 79,676 61 to 90 days US$000 95,360 6,584 1,660 103,604 18,779 3,956 373 23,108
Total US$000 63,466 44,512 383 108,361
Type of Islamic Financing Contracts Receivables Mudaraba and Musharaka financing Other assets
Total US$000 184,311 6,629 1,710 192,650
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b) Credit risk (continued) Credit Risk Mitigation All the Groups subsidiaries, with exposures secured by real estate or other collateral carry out regular and periodic collateral verification and evaluation. This collateral verification and valuation is conducted by an independent qualified assessor or Collateral Analyst at the subsidiary. The frequency of such collateral verification is determined as a part of the credit or investment policy and approval process. The Groups subsidiaries allow cars, ships, aircraft, satellites, railcars, and fleets as collateral for a credit and investment product but do not accept perishable assets or any other assets with depreciable life of less than five years. Subsidiaries do not accept any assets as collateral if the assets are susceptible for obsolescence in case they are moved (e.g. furniture). Subsidiaries also ensure that these assets are insured in order to be accepted as collateral. Third party cheques are accepted as collateral by the Groups subsidiaries. However, they are not eligible collateral for capital adequacy calculation. The Groups subsidiaries accept commercial papers as qualifying collateral if they are issued by banks or corporations of good credit standing. Since the maturity tenor of the commercial papers are generally short in nature (maximum of 270 days), they are not accepted as collateral for longterm facilities (i.e. the financing tenor should not exceed the commercial papers maturity tenor). The subsidiaries do not accept vehicle or equipments, if new, as qualifying collateral for more than 80% of its market value. No vehicles or equipments, if used, are accepted as qualifying collateral for more than 50% of its insured value. Collaterals listed hereunder may attract capital relief from capital adequacy requirements as per the Central Bank of Bahrains stipulations: 1. Hamish Jiddiyyah (Good faith deposit): Subsidiaries take this type of collateral in the transactions for which non-binding promises to perform is given by the customer. If a customer does not honour his promise to perform, the subsidiary has recourse to the deposit. 2. Third party guarantee: The subsidiary should have recourse to the guarantor in case of customers default. In order to qualify as eligible collateral, the guarantee should be unconditional and irrevocable. The guarantor must be solvent and, if applicable of investment grade rating. Urbon: This is the amount that should be taken from a purchaser or lessee when a contract is established and it is the first line of defence for the subsidiary if the purchaser or lessee breaches the contract. Underlying assets of the lease contract: The underlying asset must be of monetary value and the subsidiary must have legal access to it, own it and sell it to cover the open exposure with the customers in question. The assets have also to be free of any of any kind of encumbrance. Any excess amount resulting from the closure of the pledge by the subsidiary should be returned to the customer (pledgor). The subsidiary should conduct at least annual evaluation of the pledged assets and keep adequate documentation of this evaluation. 5. 6. Cash deposit free from any legal encumbrance with the subsidiary either in the form of restricted or unrestricted investment accounts. Rated and unrated senior sukook issued by first class financial institutions or by GCC sovereigns.
b) Credit risk (continued) Credit Quality (continued) The CRS at the Bank has also been designed to be comparable to the rating system of major international rating agencies (Moodys, Standard & Poors, Fitch) in respect of their foreign currency rating of countries, governments and financial institutions. Accordingly, countries, governments and financial Institutions will be rated on the basis of their unsecured medium term foreign currency obligations. This means that for governments and financial institutions the cross-border risk will also be part of the rating and the countrys rating will be, in most cases, the ceiling on the financial institutions rating. Corporates will be rated on their senior unsecured medium term local currency obligations, unless the credit granted is across border or in foreign currency. In the latter case, the obligors countrys rating will be the ceiling on corporates rating. Where all credit to a government is in local currency, the rating for that government is the best i.e. 1 on the rating scale, however, if the exposure to the government includes foreign currency, the rating for that government will be the same as the countrys rating. A rating is a forward looking indication of creditworthiness. It is based on an evaluation of past performance, present conditions and outlook for the future. The basic approach of the major credit rating agencies to rating is the same as what the Group credit policies require i.e. a comprehensive fundamental analysis of all relevant quantitative and non quantitative factors aimed at identifying actual and potential vulnerability. Credit rating will be applied to countries and single obligors. Single obligors, in turn are categorised as financial institutions, corporates, governments and retail. CRS therefore rates obligors (issuers) and not facilities. The obligor rating of countries and single obligors will identify the relative probability of default but will not take into account the impact of collateral security and other mitigants in the event of default. Facility ratings by contrast, combine both the probability of default and loss severity in case of defaults. However, initially the Group wide policy will be to set up obligor ratings only (which does not prevent individual subsidiaries internally to also rate facilities if they so wish). c) Concentration risk Concentrations arise when a number of counterparties are engaged in similar business activities, or activities in the same geographic region, or have similar economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions. Concentrations indicate the relative sensitivity of the Groups performance to developments affecting a particular industry or geographical location. In order to avoid excessive concentrations of risk, the Group policies and procedures include specific guidelines to focus on country and counter party limits and maintaining a diversified portfolio. Identified concentrations of credit risks are controlled and managed accordingly. The distribution of assets, liabilities and unrestricted investment account items by economic sectors was as follows: Assets US$ 000 Manufacturing Mining and quarrying Agriculture Construction and real estate Financial Trade Personal and consumer finance Government Other Services 1,873,433 228,785 92,884 2,176,827 1,990,192 1,725,507 1,726,214 3,718,712 2,347,379 15,879,933 2010 Liabilities US$ 000 49,827 14 2,270 8,481 260,201 42,714 1,810,525 24,237 1,623,368 3,821,637 URIA US$ 000 173,660 504 22,165 36,621 1,335,235 246,975 6,411,571 44,835 1,968,540 10,240,106 Assets US$ 000 1,526,887 116,970 81,518 1,658,632 2,362,513 890,982 1,474,447 2,912,215 2,142,113 13,166,277 2009 Liabilities US$ 000 27,165 1 348 8,012 190,342 35,790 1,627,077 18,465 1,283,608 3,190,808 URIA US$ 000 113,741 70 1,447 7,659 911,642 1,862,741 3,652,896 70,675 1,617,753 8,238,624
3. 4.
Credit Quality Credit Risk Management at the Group will be based upon the creation and maintenance of a Credit Rating System (CRS) for the non-retail business i.e. obligors or counterparties with more than US$663,130 in total credit facilities. All the Groups units are to incorporate into their respective credit policies the CRS as the framework for credit management taking into consideration the methodology requirements of their local central banks, in this respect. The methodology for obligor (issuer) rating will reflect the specifics of the Groups main business and the geographical diversity of its operations. Ratings of countries, governments and financial institutions are carried out in centralised fashion at the Bank in Bahrain whereas rating of corporates is done at the subsidiaries level, unless the exposure to the corporate involves cross-border risk, in which case, that rating will also be at the Bank as part of the credit limit approval.
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d) Market risk Market risk arises from fluctuations in profit rates, equity prices and foreign exchange rates. Under Market Risk Policies currently implemented the management of the Group have set certain limits on the level of risk that may be accepted. This is monitored by the local management at the subsidiary level. Profit rate risk Profit rate risk is the risk that the Group will incur a financial loss as a result of mismatch in the profit rate on the Groups assets and on URIA. The profit distribution to URIA is based on profit sharing agreements. Therefore, the Group is not subject to any significant profit rate risk. However, the profit sharing agreements will result in displaced commercial risk when the Groups results do not allow the Group to distribute profits in line with the market rates. Equity price risk Equity price risk is the risk that the fair values of equities decrease as the result of changes in the levels of equity indices and the value of individual stocks. The equity price risk exposure arises from the investment portfolio. The Group manages this risk through diversification of investments in terms of geographical distribution and industry concentration. The Group has total equity portfolio of US$ 494,236 thousand (2009: US$ 362,489 thousand) comprising of available for sale investments amounting to US$ 485,270 thousand (2009: US$ 354,297 thousand) and trading securities amounting to US$ 8,966 thousand (2009: US$ 8,192 thousand). Variation of 10% increase or decrease in the portfolio value will not have a significant impact on the Groups net income or equity.
d) Market risk (continued) Foreign exchange risk Foreign exchange risk arise from the movement of the rate of exchange over a period of time. Poitions are monitored on a regular basis to ensure positions are maintained within established approved limits. Following is the Groups exposure to different currencies in equivalent US dollars: Operational equivalent Long (short) US$ 000 Currency Turkish Lira Jordanian Dinar Egyptian Pound Sudanese Pound Algerian Dinar Lebanese Pound Pound Sterling Tunisian Dinar Euro South African Rand Pakistani Rupees Syrian Pound Others (48,072) 16,563 (20,184) (2,233) (89,994) 23,419 17,917 2,104 (4,153) (892) (39,223) 1,856 2010 Strategic equivalent Long (short) US$ 000 316,155 186,241 98,681 39,373 131,192 16,551 19,758 40,363 10,983 2009 Strategic equivalent Long (short) US$ 000 270,586 190,245 92,955 40,573 119,480 14,642 17,350 35,159 14,978 Total equivalent Long (short) US$ 000 268,083 202,804 78,497 37,140 41,198 39,970 17,917 2,104 (4,153) 19,758 39,471 (28,240) 1,856
Operational equivalent Long (short) US$ 000 Currency Turkish Lira Jordanian Dinar Egyptian Pound Sudanese Pound Algerian Dinar Lebanese Pound Pound Sterling Tunisia Dinar Euro South African Rand Pakistani Rupees Syrian Pound Others The strategic currency risk represents the amount of equity of the subsidiaries. 11,394 87,217 (28,163) (850) (85) (16,347) (2,799) (242) (2,555) (21,195) (14,978) 26,278
Total equivalent Long (short) US$ 000 281,980 277,462 64,792 39,723 119,395 (1,705) (2,799) (242) (2,555) 17,350 13,964 26,278
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d) Market risk (continued) Foreign exchange risk (continued) Foreign currency risk sensitivity analysis In order to measure its exposures to currency risk, the Group stress tests its exposures following the standard shocks adopted by Derivatives Policy Group in this respect which calculates the effect on assets and income of the Group as a result of appreciation and depreciation in foreign currencies in relation to the reporting currency of the Group. This is done using various percentages based upon the judgement of the management of the Group. Following is the sensitivity analysis that calculates the effect of a reasonable possible movement of the currency exchange rate against the US Dollar with all other variables held constant on the consolidated statement of income and the consolidated statement of equity. The impact of a similar increase in exchange rates will be approximately opposite to the impact disclosed below. Change in net income and equity US$ 000 (2,648) (11,176) (1,909) (17,469) (13,498) (72,801) (280) (2,284) (205) (4,578) 233 (4,341) (14) (8,211) Change in net income and equity US$ 000 (2,208) (10,178) (642) (6,008) (11,602) (62,308) (335) (2,354) (295) (4,020) 286 (4,695)
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. This definition includes legal risk, but excludes strategic and reputational risk. Operational Risk Management Framework The Group guidelines have the following sections: (1) Operational Risk Appetite, (2) Operational Risk Management Structure and Rules, (3) Risk and Control Assessment, (4) Internal Audit, (5) Operational Risk and Basel II and (6) Operational Risk Capital Requirement. The Groups Operational Risk Appetite is defined as the level of risk which the Group chooses to accept in its identified risk categories. Operational risk appetite is expressed in terms of both impact (direct loss) and the probability of occurrence. The Operational Risk framework will be subject to periodic Internal Audit. The Group categorizes operational risk loss events into the following categories: Infrastructure Risks Availability of information technology is of paramount importance to the Groups infrastructure. The operations of the Group and the subsidiaries might be disrupted and severe operational risks could occur and an extreme possibility is the threat of a subsidiarys existence. In order to hedge the subsidiaries from the infrastructure risk as outlined above, every subsidiary must take all the necessary measures indicated in the Business Continuity Plan and/or Disaster Recovery Plan (BCP and DRP) to cater for these risks. Information Technology Risks The main risks that the Group is exposed to in this context is from inadequate software and hardware quality, unauthorized access by third parties or employees, etc. Staff risk The main risks that arises from staff risks are risks due to larceny, fraud, corruption, crime, etc. In order to prevent these risks from occurring, the Group has established Group Human Resources Policies and Code of Conduct which entails constructive ways in dealing with mistakes and frauds. The Group has also established approval control steps in business processes as well as creating separate internal control processes. Further, the Group has established measures of organizational structure in terms of segregation of duties as well as diverse training measures to reduce human errors and frauds, etc. Business risk This risk may take on the following forms: 1. 2. 3. Processes without clear definitions, for example, when insufficient time was spent on documenting or updating the already documented processes. Outdated process descriptions in cases where reality already strongly differs from the guidelines laid down in the past. The extreme case of a completely missing documentation. To hedge this risk, the Group adopts sound documentation policies of business processes as it is a basic requirement for a well functioning process organization. The process description are up to date and clear; furthermore, it is accessible to all employees.
At 31 December 2010 Currency Algerian Dinar Egyptian Pound Turkish Lira Sudanese Pound S.African Rand Syrian Pound Pakistani Rupees Particular Net Income Total Equity Net Income Total Equity Net Income Total Equity Net Income Total Equity Net Income Total Equity Net Income Total Equity Net Income Total Equity
Exposures in US$ 000 55,599 103,502 14,636 35,249 103,482 241,983 5,875 8,598 1,572 15,344 (2,568) 36,768 108 22,589
Variance % (5%) (5%) (15%) (15%) (15%) (15%) (5%) (5%) (15%) (15%) (10%) (10%) (15%) (15%)
At 31 December 2009 Currency Algerian Dinar Egyptian Pound Turkish Lira Sudanese Pound S.African Rand Syrian Pound Particular Net Income Total Equity Net Income Total Equity Net Income Total Equity Net Income Total Equity Net Income Total Equity Net Income Total Equity
Exposures in US$ 000 46,365 94,263 13,486 33,204 88,946 207,105 7,039 8,860 2,263 13,473 (3,147) 36,669
Variance % (5%) (5%) (5%) (5%) (15%) (15%) (5%) (5%) (15%) (15%) (10%) (10%)
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EARNINGS PROHIBITED BY SHARIA
f) Corporate governance Board of Directors The Board of Directors is responsible for approving the Groups overall business strategy, monitoring its operations and taking critical business decisions. In line with international leading practices, the Board has instituted corporate governance measures to ensure that the interests of the shareholders are protected, including the appointment to the Board of four independent nonexecutive directors as defined in the Rule Book of the CBB. The Bank is administered by a Board of Directors consisting of not less than five and not more than fifteen members. However, subject to the provisions of the law, the shareholders at an Ordinary General Meeting may determine that the number of directors shall exceed fifteen in certain circumstances. Members of the Board of Directors hold office for a three-year renewable term, although the term of office may be extended at the request of the Board for a period not exceeding six months by resolution of the Bahrain Minister of Industry and Commerce. There are currently thirteen Directors on the Board, who have varied backgrounds and experience and who individually and collectively exercise independent and objective judgment. Other than the President and Chief Executive, all Directors are nonexecutive. The posts of Chairman and President and Chief Executive are held by different Directors and each has separate, clearly defined responsibilities. The Board of Directors meets regularly (usually four times a year) and has a formal schedule of matters reserved to it, considering key aspects of the Groups affairs referred to it for decision. The Board reviews the Groups strategy and financial plans, all proposed material changes to the Groups policies, structure and organisation, reports provided to it on the operations of the Group (with emphasis on organisational development, risk management and information technology development) and the performance of executive management. The Board and its committees are supplied with full and timely information to enable them to discharge their responsibilities. All Directors have access to the advice and services of the secretary, who is responsible for ensuring that the Board procedures and applicable rules and regulations are observed. The Board of Directors has overall responsibility for the Groups system of internal control and its effectiveness. There are established and ongoing procedures in place for identifying, evaluating and managing significant risks faced by the Group, which are regularly reviewed by the Board. The Groups system of internal control provides for a documented and auditable trail of accountability and applies across its operations, is designed to ensure effective and efficient operation and compliance with all applicable laws and regulations, and seeks to manage risk with a view to avoiding material errors, losses and fraud. 26 FAIR VALUE OF FINANCIAL INSTRUMENTS
Earnings realised during the year from transactions that were not permitted by Sharia amounted to US$ 6.8 million (2009: US$ 9 million). This amount has been taken to charity. 28 COMPARATIVE FIGURES
Certain of the prior years figures have been reclassified to conform to the presentation adopted in the current year. Such reclassification did not affect previously reported consolidated income or consolidated equity. 29 EVENT AFTER FINANCIAL POSITION DATE The Group has operations in Egypt and Tunis. Subsequent to the year end these countries have witnessed unparalleled political crisis that may have far reaching effect on the world economy in general and the regional economy in particular. The management is closely monitoring the situation in these two countries and have done an assessment of its operations in these two countries and can confirm that the crisis has no impact on the Groups operations and results as at 31 December 2010. The Group has formed a high level committee consisting of senior management personnel to closely monitor the situation and assess its affect on the future operations and performance. The team is to advise the Board of Directors and the President & Chief Executive of the necessary steps to be taken to minimize the risks associated with such events.
Fair value is the amount for which an asset could be exchanged or a liability settled between knowledgeable, willing parties in an arms length transaction. Consequently, differences can arise between carrying values and fair value estimates. Included under investments are unquoted available for sale investments amounting to US$ 367.8 million (2009: US$ 218.5 million) which are carried at cost due to lack of other reliable methods for arriving at a reliable fair value for these investments. The fair values of other on-balance sheet financial instruments are not significantly different from the carrying values included in the financial statement.
The 6Th OCTOBeR BRidge

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CAPITAL STRUCTURE AND CAPITAL ADEQUACY
The primary objectives of the Groups 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 the light of changes in economic conditions and the risk characteristics of its activities. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividend payment to shareholders, return capital to shareholders or issue capital securities. No changes were made in the objectives, policies and processes from the previous year. The Groups capital structure is primarily made of its paid-up capital, including the share premium and reserves, and the unrestricted investment account reserves. From regulations perspective, the significant amount of the Groups capital are in Tier I as defined by the CBB, i.e., most of the consolidated capital are of permanent nature. To assess its capital adequacy requirements in accordance with the CBB requirements, the Group adopts the standardised approach for its Credit Risk, Basic Indicator Approach for its Operational Risk and Standardised Measurement Approach for its Market Risk. To calculate its capital adequacy, the Group follows the accepted approaches approved by the CBB Rulebook. The Group consolidates all subsidiaries for Capital Adequacy Ratio (CAR) calculation. The Group strives to sustain reasonably higher capital cushion that strikes the balance between its business conduct and the regulatory requirements stipulated in the CBB capital adequacy requirements as a minimum accepted level of capital adequacy. Table 1. Capital Structure (PD-1.3.12, 1.3.13, 1.3.14 & 1.3.15) The following table summarises the eligible capital after deductions for calculation as of:
31 December 2010 Tier 1 Tier 2 US$ 000 US$ 000 Tier 1 Capital Components Issued and fully paid up ordinary shares Disclosed reserves Legal / statutory reserves Share premium Others Retained profit brought forward Unrealized gains arising from fair valuing equities (45% only) Non-controlling interest in consolidated subsidiaries Less: Goodwill Unrealized gross losses arising from fair valuing equity securities Tier 1 Capital before PCD deductions Tier 2 Capital Components Asset revaluation reserve - Property, plant, and equipment (45% only) Unrealized gains arising from fair valuing equities (45% only) Profit equalization reserve Investment risk reserve Tier 2 Capital before PCD deductions Total Available Capital 783,972 53,547 15,866 137,335 236,739 5 593,525 83,792 38,545 1,698,652 31 December 2009 Tier 1 Tier 2 US$ 000 US$ 000 744,000 42,986 99,390 121,282 189,401 4,542 522,485 62,423 114 1,661,549 -
Additional Public Disclosures

31 December 2010
(Unaudited)
(4,521)
16,083 2,667 87,004 105,754 1,804,406 (4,521)
3,294
(6,758)
2,304 65,226 70,824 1,732,373 (6,758)
Deduction Investment in insurance entity greater than or equal to 20% Net Available Capital TOTAL ELIGIBLE CAPITAL
1,694,131
101,233 1,795,364
1,654,791
64,066 1,718,857
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CAPITAL STRUCTURE AND CAPITAL ADEQUACY (continued)
CAPITAL STRUCTURE AND CAPITAL ADEQUACY (continued)
Table 2. Capital requirement for different type of risks (PD - 1.3.18, 1.3.19) The following table summarises the capital requirements for credit risk, market risk and operational risk as of: 31 December 2010 Risk Minimum weighted capital assets requirements US$ 000 US$ 000 Credit Risk Market Risk Operational Risk 7,197,042 754,821 1,167,578 9,119,441 863,645 90,579 140,109 1,094,333 31 December 2009 Risk Minimum weighted capital assets requirements US$ 000 US$ 000 5,627,059 862,594 1,039,899 7,529,552 675,247 103,511 124,788 903,546
Legal Restrictions on capital and income mobility (PD-1.3.6 (c)) There are no major restrictions in distributing profits by the subsidiaries to the Bank. Such distribution should go through the legal and regulatory channels applicable in each jurisdiction. Mobilisation of capital, reserves and equivalent funds out of the subsidiaries to the parent is subject to the local rules and regulations. The parent is not subject to any restriction to support its subsidiary in the form of deposits or capital. However, as a procedure, a prior written approval has to be obtained from the CBB for increasing investments in subsidiaries.
Table - 6. Distribution of ownership of shares by nationality / incorporation (PD-1.3.10 (i))
The following table summarises the distribution of ownership of shares by nationality / incorporation as of 31 December 2010: Nationality / Incorporation Bahraini Saudi Cayman Islands Emirati Kuwaiti Others 2 RISK MANAGEMENT % Holding 25.87 44.81 20.64 5.16 1.11 2.41
Table 3. Capital requirement by type of Islamic financing contracts (PD-1.3.17) The following table summarises the capital requirements by type of Islamic financing contracts as of: 31 December 2010 Risk Minimum weighted capital assets requirements US$ 000 US$ 000 Islamic financing contracts Receivables Mudaraba and Musharaka financing Ijarah Muntahia Bittamleek 3,041,284 617,380 166,694 3,825,358
Table 4. Capital Adequacy Ratios (PD-1.3.20 (a)) The following are Capital adequacy ratio for total capital and Tier 1 capital as of:
31 December 2009 Risk Minimum weighted capital assets requirements US$ 000 US$ 000 3,119,370 526,576 54,280 3,700,226 374,324 63,189 6,514 444,027
364,954 74,086 20,003 459,043
The Groups risk management strategies have been effectively implemented and the objectives outlined at the beginning of year 2010 across subsidiaries were successfully achieved. The Group is striving to bolster and instil the best practices of risk management in subsidiaries risk management functions for the next reporting period by ensuring prudent implementation of risk management policies which entails risk identification, limit controls, monitoring and reporting. a) Liquidity risk The liquidity management policy at a minimum includes the following: a. Provide clear guidance on the composition and role of the asset/liability committee or such other committee or department responsible for managing liquidity. b. Establish approval processes to ensure adherence to liquidity risk management processes. c. Require periodic calculations to determine the extent to which the subsidiary is funding long-term assets with short-term liabilities. d. Establish liquidity ratio benchmarks, e.g. parameters for the funding of long-term assets with short-term liabilities to guide liquidity management and the method for computing liquidity indicators. e. Establish limits on the degree of concentrations that are deemed acceptable. This should: i) Ensure diversification of funding by origin and term structure by, for example, guarding against concentration by individuals or groups of depositors, types of deposit instruments, market sources of deposit, geographical sources, term to maturity, and deposit currencies. Where concentrations occur, the Groups subsidiaries manage their assets and liquidity profile to mitigate the risk; and ii) Set procedures for the orderly restoration of the liquidity position in the event of loss of funding where such concentrations are unavoidable. In addition, the Groups subsidiaries conduct an impact analysis on its dependency on any such concentrations. f. Provide for periodic review of the deposit structure. The review should include the volume and trend of various types of deposits offered, maturity distributions of time deposits, profit rate paid on each type of deposit, prevailing market profit rate, limits on large time deposits, public funds, and non-resident deposits. g. Provide for the review of alternate funding sources including stand-by facilities and lines of credit. h. Establish a framework for the composition of assets. i. Assess the acceptable mismatch in combination with currency commitments. The Groups subsidiaries undertake separate analysis of their strategy for each currency individually. They set and regularly review limits on the size of cash flow mismatches over particular time horizons for foreign currencies in aggregate, and for each significant currency.
31 December 2010 Total capital ratio Tier 1 capital ratio

Table - 5. The Groups Subsidiaries Capital Adequacy Ratios (PD-1.3.20 (b))
31 December 2009 22.83% 21.98%
19.69% 18.58%
The following are the Groups subsidiaries capital adequacy ratio prepared on the basis of CBB requirements, which may differ form the local requirements of the countries in which the subsidiaries operate as of: 31 December 2010 31 December 2009 Tier 1 capital Total capital Tier 1 capital Total capital ratio ratio ratio ratio Head Office 47% 47% 74% 74% Banque Al Baraka DAlgerie 29% 30% 32% 33% Al Baraka Islamic Bank 21% 21% 22% 22% Al Baraka Bank Tunis 22% 22% 20% 20% Al Baraka Bank Egypt 19% 19% 20% 20% Al Baraka Bank Lebanon 52% 52% 43% 43% Jordan Islamic Bank 23% 23% 21% 22% Al Baraka Turk Participation Bank 17% 20% 22% 22% Al Baraka Bank Limited 22% 23% 26% 26% Al Baraka Bank Sudan 19% 20% 15% 19% Al Baraka Bank Syria 42% 42% 243% 243%
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a) Liquidity risk (continued) Table 7. Liquidity Ratios (PD-1.3.37) The following table summarises the liquidity ratios as of: 31 December 2010 92% 27% 31 December 2009 97% 27%
b) Credit risk (continued) Table - 9. Geographic distribution of the gross funded exposure (PD-1.3.23(b)) The following table summarises the geographic distribution of gross funded exposure as of 31 December 2010, broken down into significant areas by major types of credit exposure:
Self financed North Africa Europe US$ 000 US$ 000 505,340 66,925 9,970 57,191 19,485 658,911 1,646,783 85,150 283,273 9,875 2,660 2,027,741 Financed by URIA North Africa Europe US$ 000 US$ 000 370,892 77,099 34,906 12,759 495,656 2,329,793 6,913 5,643 2,342,349
Short term assets to short term liabilities Liquid assets to total assets b) Credit risk General credit policies and guiding principles
Middle East US$ 000 Receivables Mudaraba and Musharaka financing Investments Ijarah Muntahia Bittamleek Other Assets 895,205 313,274 304,605 105,188 32,781 1,651,053
Others US$ 000 137,426 61,429 223,974 8,564 20,336 451,729
Middle East US$ 000 1,839,866 731,457 476,086 190,974 31,433 3,269,816
Others US$ 000 338,026 203,298 52,573 26,190 27,709 647,796
The following principles summarise the Groups financing and investing policies and form the framework of all financing decisions: a) Financing will be extended when the Group can confidently expect that it will be repaid by the customer as agreed. This necessitates a thorough knowledge of the customer and clear understanding of the risks underlying the credit requests. b) Financing should be extended where there are at least two clear sources of repayments. c) It is generally preferred that the repayments are from cash generated by the customers productive and ongoing income or activities. d) Amounts, profits/other charges and terms under the prevailing market conditions for any proposed financing are to be consistent with the perceived quality of the risk being undertaken. e) Financing should generally be extended where the Groups seniority as creditors is pari passu or better than any other financing. f) Financing should be structured appropriately considering the purpose of the credit and the source of repayment. g) Financing needs to be assessed on a stand alone basis as well as on portfolio basis to assess its impact on the total financing portfolio. h) Compliance with all applicable local statutory and regulatory directives guidelines should be ensured in all cases. i) Propriety and ethical standards should be taken into account in all financing decisions. Table - 8. Gross funded and unfunded exposure (PD-1.3.23(a)) The Groups assets are funded by unrestricted investment accounts (URIA) as well as the Groups own capital and current accounts (Self). The percentage of funding varies for each of the Groups subsidiary based on market conditions and applicable rules and regulations. The following table summarises the amount of gross funded and unfunded credit exposure and average gross funded and unfunded exposure as of: 31 December 2010 31December2009
Self financed Average gross credit exposure over the year* US$ 000 2,712,278 404,504 722,124 161,218 58,357 Financed by URIA Average gross credit exposure over the year* US$ 000 4,779,995 767,929 493,798 238,074 101,587 Self financed Financed by URIA
The following table summarises the geographic distribution of gross funded exposure as of 31 December 2009, broken down into significant areas by major types of credit exposure Self financed North Africa Europe US$ 000 US$ 000 616,411 61,755 8,907 40,401 34,621 762,095 1,187,602 49,614 222,607 18,562 2,993 1,481,378 Financed by URIA North Africa Europe US$ 000 US$ 000 445,470 72,211 23,449 20,879 562,009 1,854,009 17,127 6,892 1,878,028
Middle East US$ 000 Receivables Mudaraba and Musharaka financing Investments Ijarah Muntahia Bittamleek Other Assets 908,589 181,332 302,406 84,031 74,374 1,550,732
Others US$ 000 118,578 24,084 118,831 3,875 13,175 278,543
Middle East US$ 000 1,642,441 461,235 402,706 135,338 22,856 2,664,576
Others US$ 000 253,964 130,881 32,579 12,550 9,086 439,060
Funded Exposure Receivables Mudaraba and Musharaka financing Investments Ijarah Muntahia Bittamleek Other assets Unfunded Exposure Commitments and contingencies
Total gross credit exposure US$ 000 3,184,754 526,778 821,822 180,818 75,262
Total gross credit exposure US$ 000 4,878,577 1,011,854 528,659 258,983 77,544
Totalgross credit exposure

US$ 000 2,831,180 316,785 652,751 146,869 125,163
Average grosscredit exposure overthe year*

US$ 000 1,511,267 265,171 407,393 89,381 68,754
Totalgross credit exposure

US$ 000 4,195,884 664,327 435,285 188,464 59,713
Average grosscredit exposure overthe year*

US$ 000 243,820 22,581 130,799 118,915
4,391,687 9,181,121
4,510,846 8,569,327
58,541 6,814,158
43,387 6,424,770
3,825,593 7,898,341
3,146,925 5,488,891
5,543,673
516,115
*Average Balances are computed based on quarter-end balances.
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b) Credit risk (continued) Table - 10. Exposure by counterparty type (PD-1.3.23(c)) The following table summarises the distribution of funded and unfunded exposure by counterparty type, broken down by major types of credit exposures as of 31 December 2010:
Funded Exposures Receivables Self US$ 000 89,571 1,691 87,219 138,979 2,089,279 708,336 69,679 3,184,754 URIA US$ 000 152,869 4,181 127,173 470,852 2,681,966 1,290,027 151,509 4,878,577 Mudaraba and Musharaka financing Self URIA US$ 000 US$ 000 9,964 34,105 210 96,353 386,146 526,778 65,050 70,317 22,604 11,033 77,758 765,092 1,011,854 Investments Self US$ 000 22,032 5,030 14,825 543,294 129,735 53,764 53,142 821,822 URIA US$ 000 27,375 3,876 325,025 52,744 56,477 63,162 528,659 Ijarah Muntahia Bittamleek Self US$ 000 2,194 51,197 125,795 1,632 180,818 URIA US$ 000 87,475 40,912 129,599 997 258,983 Other Assets Self US$ 000 75,262 75,262 URIA US$ 000 77,544 77,544 Unfunded Expsoures Commitments and contingencies Self US$ 000 88,701 6 65,212 4,033,497 204,271 4,391,687 URIA US$ 000 28,033 30,508 58,541 Funded & Unfunded Expsoures Total Self US$ 000 210,268 1,691 92,255 255,315 6,174,183 1,038,402 71,311 639,647 129,735 53,764 386,146 128,404 9,181,121 URIA US$ 000 180,244 4,181 192,223 632,520 2,773,515 1,450,134 163,539 402,783 52,744 56,477 765,092 140,746 6,814,158
Claims on soveriegns Claims on multi-lateral development banks Claims on investment firms Claims on banks Claims on corporates Claims on retails Past dues receivables Equity investment Sukook Investment in Funds Specialized Lending Other assets Total
The following table summarises the distribution of funded and unfunded exposure by counterparty type, broken down by major types of credit exposures as of 31 December 2009: Funded Exposures Mudaraba and Musharaka Receivables Investments financing Self URIA Self URIA Self URIA US$ 000 US$ 000 US$ 000 US$ 000 US$ 000 US$ 000 Claims on soveriegns 26,296 43,828 Claims on multi-lateral development banks 9,120 15,200 Claims on investment firms 94,428 157,381 6,103 10,171 Claims on banks 189,002 315,003 375 625 Claims on corporates 1,656,286 2,237,727 6,166 10,276 871 1,451 Claims on retails 735,262 1,225,436 Past dues receivables 117,033 195,055 613 1,021 Equity investment 262,592 414,625 124,429 193,729 459,417 126,715 Sukook Investment in Funds 29,662 49,438 Specialized Lending 40,053 226,136 Other assets 3,753 6,254 1,258 2,098 37,997 63,327 Total 2,831,180 4,195,884 316,785 664,327 652,751 435,285
Unfunded Expsoures Ijarah Muntahia Bittamleek Self US$ 000 7,529 497 20,005 116,183 699 1,956 146,869 URIA US$ 000 12,549 827 33,342 138,008 1,166 2,572 188,464 Other Assets Self US$ 000 125,163 125,163 URIA US$ 000 59,713 59,713 Commitments and contingencies Self US$ 000 16,867 127,051 3,488,698 178,966 74 13,937 3,825,593 URIA US$ 000 -
Funded & Unfunded Expsoures Total Self US$ 000 43,163 9,120 108,060 316,925 5,172,026 1,030,411 118,419 387,021 459,417 29,662 40,053 184,064 7,898,341 URIA US$ 000 43,828 15,200 180,101 316,455 2,282,796 1,363,444 197,242 608,354 126,715 49,438 226,136 133,964 5,543,673
The Group is working in a highly regulated environment which monitors high risk credit exposures on a regular basis.
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b) Credit risk (continued) Large Credit Exposure (PD - 1.3.23 (f)) The Group follows the CBBs guidelines with respect to the definition and measurement of large exposures at the consolidated level as stipulated in the CBB Rulebook for Islamic Banks. There are no large exposures to individual counterparties where the exposure is in excess of the 15% individual obligor limit. Past due, non-performing Islamic financing contracts and provisions (PD - 1.3.22 (a)) Past due represents instalments that are not received on the contractual repayments date. The Group considers non-performing islamic financing contracts as the contracts that are overdue for a period of 90 or more days. These exposures are placed on a non-accrual status with profit being recognised to the extent that it is actually received. It is the Groups policy that when an exposure is overdue for a period of 90 or more days, the whole financing facility extended is considered as past due, not only overdue instalments/payments. Table -11.Credit quality of Islamic financing contracts by counterparty type (PD-1.3.23(h), 1.3.24 (b)) The following table summarises the total past due, non performing and neither past due nor non performing Islamic financing contracts and aging of non performing Islamic financing contracts disclosed by counterparty type as of 31 December 2010:
Neither past due nor non performing US$ 000 687,037 967,887 74,711 4,957,434 2,788,510 9,475,579 Past due but performing US$ 000 591 752 20,286 86,732 108,361 non performing Islamic financing contracts US$ 000 583 45,144 315,595 173,172 534,494 Aging of non performing Islamic financing contracts 90 days to 1 year US$ 000 7,772 87,825 80,770 176,367 1 year to 3 years US$ 000 37,372 120,788 69,318 227,478 Over 3 years US$ 000 583 106,982 23,084 130,649
b) Credit risk (continued)

Table -12. Specific provisions by counterparty type (PD-1.3.23 (h), 1.3.24 (d)) The following table summarises the total specific provisions disclosed by counterparty type as of 31 December 2010: Specific provisions Appropriation Foreign Write-Back Write-offs from (to) exchange during the during the URIA during translations/ year year the year others US$ 000 US$ 000 US$ 000 US$ 000 (33,031) (8,809) (41,840) (1,085) (13,969) (380) (15,434) 6,291 12,830 19,121 677 (2,734) 9,208 (1,199) 5,952
Opening Balance US$ 000 Bank Investment Firms Corporates Retail 3,171 2,814 222,459 80,345 308,789
Charges during the year US$ 000 69 3,360 86,589 7,200 97,218
Balance at the end of the year US$ 000 2,832 3,440 277,547 89,987 373,806
The following table summarises the total specific provisions disclosed by counterparty type as of 31 December 2009: Specific provisions Appropriation Write-Back Write-offs from (to) URIA during the during the during the year year year US$ 000 US$ 000 US$ 000 (254) 67 (23,321) (32,457) (320) (13,239) 6,989 (36,814) (32,457) 6,736
Sovereign Bank Investment Firms Corporates Retail
Total US$ 000 687,628 969,222 119,855 5,293,315 3,048,414 10,118,434
The following table summarises the total past due and non performing islamic financing contracts disclosed by counterparty type as of 31 December 2009: non performing Islamic financing contracts US$ 000 775 3,295 312,006 155,637 471,713 Aging of non performing Islamic financing contracts 90 days to 1 year US$ 000 118 128,926 72,745 201,789 1 year to 3 years US$ 000 2,616 66,937 71,986 141,539 Over 3 years US$ 000 775 561 116,143 10,906 128,385
Bank Investment Firms Corporates Retail
Opening Balance US$ 000 2,508 144,743 81,428 228,679
Charges during the year US$ 000 388 2,836 130,634 5,677 139,535
Foreign exchange translations/ others US$ 000 462 (22) 3,180 (510) 3,110
Balance at the end of the year US$ 000 3,171 2,814 222,459 80,345 308,789
Sovereign Bank Investment Firms Corporates Retail
Total US$ 000 94,890 702,848 108,649 5,023,680 2,565,460 8,495,527
Neither past due nor non performing US$ 000 93,659 701,810 105,354 4,567,872 2,362,469 7,831,164
Past due but performing US$ 000 1,231 263 143,802 47,354 192,650
Table -13. General provisions movement (PD-1.3.23 (h), 1.3.24 (d)) The following table summarises the movement of general provisions during the year ended: 31 December 2010 US$ 000 Opening Balance Charges during the year Write-Back during the year Write-offs during the year Foreign exchange translations/ others Balance at the end of the year 6,180 8,295 (4,092) (128) 1,873 12,128 31 December 2009 US$ 000 7,151 1,582 (235) (2,345) 27 6,180
This represents collective provision against exposures which, although not specifically identified, have a greater risk of default than when originally granted.
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Table - 14. Past due and non-performing Islamic financing contracts and provisions by geographic areas (PD-1.3.23(i), PD-1.3.24(c)) The following table summarises the total past due and non performing islamic financing contracts and provisions disclosed by geographical area as of: 31 December 2010 Past due and non performing Islamic financing contracts US$ 000 Middle East North Africa Europe Others 300,282 68,529 120,548 153,496 642,855 31 December 2009 Past due and non performing Islamic financing contracts US$ 000 303,751 219,036 113,730 27,846 664,363

Table - 16. Counterparty Credit (PD-1.3.26 (b)) The following table summarises the counterparty credit risk exposure covered by collateral after the application of haircuts as of: 31 December 2010 US$ 000 Gross positive fair value of contracts Netting Benefits Specific provision US$ 000 137,291 42,660 102,208 26,630 308,789 General provision US$ 000 5,894 267 19 6,180 Netted Current Credit Exposure Collateral held: -Cash -Others -Real Estate 11,392,245 11,392,245 418,215 2,415,825 7,944,054 10,778,094 31 December 2009 US$ 000 9,431,545 9,431,545 309,286 2,454,005 5,884,709 8,648,000
Specific provision US$ 000 187,598 40,938 103,219 42,051 373,806
General provision US$ 000 11,598 513 18 (1) 12,128
c) Market risk
Market risk includes profit rate risk, displaced commercial risk, equity price risk and foreign exchange rate risk. The management of the Group have set limits on the level of risk that may be accepted. This is monitored by the local management at the subsidiary level. Table 17. Market Risk Capital Requirements (PD-1.3.27 (b)) The following table summarises the capital requirement for each category of market risk as of: 31 December 2010 Equity position Foreign risk exchange risk US$ 000 US$ 000 Risk weighted exposure (RWE) Capital requirements (12%) Maximum value of RWE Minimum value of RWE 482 58 482 210 59,904 7,188 115,928 59,904 31 December 2009 Equity position Foreign risk exchange risk US$ 000 US$ 000 149 18 314 149 68,859 8,263 68,859 44,662
Table - 15. Renegotiated Islamic financing contracts (PD-1.3.23(j)) 31 December 2010 US$ 000 Renegotiated Islamic financing contracts 173,879 31 December 2009 US$ 000 90,680
There is no significant impact of the renegotiated Islamic financing contracts on the provisions as well as present and future earnings. In addition, the magnitude of the restructuring activities is immaterial. Others (PD-1.3.23(k), (l), PD-1.3.25(b) & (c)) The Group has no significant obligations with respect to recourse transaction. The Group has not imposed any material penalties on customers for defaults. The Group does not make use of eligible collaterals and guarantees in its credit risk analysis.
Profit rate risk Profit rate risk is the risk that the Group will incur a financial loss as a result of mismatch in the profit rate on the Groups assets and URIA. The profit distribution to URIA is based on profit sharing agreements. Therefore, the Group is not subject to any significant profit rate risk. Displaced Commercial Risk The Group is exposed to displaced commercial risk in the event of having unrestricted investment accounts (URIA) profit rates that are lower than market rates. The Group has mitigated this risk through the setting up of reserves that will be used in case of a drop in URIA profit rates. The policies and procedures for displaced commercial risk are formulated and implemented at the individual subsidiary level. Equity price risk Equity price risk is the risk that the fair values of equities decrease as the result of changes in the levels of equity indices and the value of individual stocks. The equity price risk exposure arises from the Groups investment portfolio. Available for sale investments and investments in real estate are kept for capital gain purposes. If financial instruments qualify to be included in the trading book, these must not exceed 25% of the total subsidiarys assets portfolio. For equity securities, the subsidiaries are required to observe the sectoral concentration limits outlined by the Group and/or their local requirement in this respect. Since trading securities in the trading book would be under marked-to market requirement, the Risk Manager at the subsidiary level should immediately bring to the Credit and Risk Management at the Group as well as the subsidiarys asset/liability committee any volatility of positions value that is 15% or higher than the subsidiarys eligible capital to decide upon the appropriate course of action.
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c) Market risk (continued)

Table 18. Equity Position Risk in Banking Book (PD-1.3.31 (b) (c) & (f)) The following table summarises the total and average gross exposure of equity based financing structures by types of financing contracts and investments as of 31 December 2010: Average gross exposure over the year US$ 000 844,386 204,873 61,502 1,110,761
c) Market risk (continued) Foreign exchange risk

Foreign exchange risk arise from the movement of the rate of exchange over a period of time. Positions are monitored on a regular basis to ensure positions are maintained within established approved limits. d) 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. This definition includes legal risk, but excludes strategic and reputational risk. Table - 20. Operational risk exposure (PD-1.3.30 (a), (b) & (c)) The following table summarises the amount of exposure subject to basic indicator approach of operational risk and related capital requirements: Gross income 2009 2008 US$ 000 US$ 000 633,513 585,871 2010 US$ 000 Indicators of operational risk Average Gross income (US$ 000) Multiplier 625,986 12.5 7,824,825 Eligible Portion for the purpose of the calculation TOTAL OPERATIONAL RISK WEIGHTED EXPOSURE (US$ 000) 31 December 2009 US$ 000 1,004 9,979 114 4,542 The Group has no material legal contingencies including pending legal action. The Group guidelines have the following sections: (1) Operational Risk Appetite, (2) Operational Risk Management Structure and Rules (3) Risk and Control Assessment (4) Internal Audit (5) Operational Risk and Basel II (6) Operational Risk Capital Requirement. The Groups Operational Risk Appetite is defined as the level of risk which the Group chooses to accept in its identified risk categories. Operational risk appetite is expressed in terms of both impact (direct loss) and the probability of occurrence. The Groups policy also lays out the Operational Risk Management structure and the roles of all staff associated with operational risk. The major functional roles are defined for: Risk Management Committee Head of Credit and Risk Management Head of Operational, Liquidity and Market Risk Various departments The Risk Control Self Assessment exercise is viewed as an important part of the Groups Operational Risk Framework. It is proposed to be conducted every year by the Risk Management Department in coordination with the Internal Audit Department. In addition, the assessment shall also be based on the severity of the residual risks identified through Internal Audit reviews. 15% 1,173,724
Total gross exposure US$ 000 Sukook and similar items Equity Investment Funds 1.003,100 150,279 77,787 1,231,166
Publicly held US$ 000 55,858 49,376 45,967 151,201
Privately held US$ 000 947,242 100,903 31,820 1,079,965
Capital requirement US$ 000 4,904 123,599 16,902 145,405
The following table summarises the total and average gross exposure of equity based financing structures by types of financing contracts and investments as of 31 December 2009: Average gross exposure over the year US$ 000 628,654 207,835 60,205 896,694
2010 US$ 000 Total Gross Income 658,574
2007 US$ 000 444,454 2009 US$ 000 554,613 12.5 6,932,663 15% 1,039,899
Total gross exposure US$ 000 Sukook and similar items Equity Investment Funds 668,973 238,166 78,645 985,784
Publicly held US$ 000 33,734 98,282 49,266 181,282
Privately held US$ 000 635,240 139,884 29,378 804,502
Capital requirement US$ 000 64,390 35,308 18,928 118,626
Table 19. Equity gains or losses in Banking Book (PD-1.3.31 (d) and (e)) The following table summarises the cumulative realised and unrealised gains or losses during the year ended: 31 December 2010 US$ 000 Cumulative realised gains arising from sales or liquidations in the reporting year Total unrealized gains recognised in the consolidated statement of financial positions but not through consolidated statement of income Unrealised gross losses included in Tier One Capital Unrealised gains included in Tier One Capital (45% only) 271 (2,805) 38,545 5
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2 RISK MANAGEMENT (continued) d) Operational Risk (continued)

The Key processes identified in a Risk Control Self Assessment are: Risk and Control Identification Process Measurement of Operational Risk Exposures Identifying Unacceptable Risk Exposures Risk Action Plans. The Operational Risk framework will be subject to periodic Internal Audit.
3 CORPORATE GOVERNANCE (continued)

Remuneration (continued) 31 December 2010 US$ 000 750 2,997 83 1,383 396 4,859 206 5,815 31 December 2009 US$ 000 600 2,820 76 1,218 359 4,473 216 5,289
Directors remuneration Executive Management Salary and other remuneration, including meeting allowance Fees Bonus Behefits-in-kind Sharia Committee members fee and remuneration
3 CORPORATE GOVERNANCE Code of business conduct and ethics for members of the board of directors Purpose:
The primary objectives of the following Code of Business Conduct and Ethics ( the Code) are to enable each Director to focus on areas of ethical risks, to help him/her to recognize and deal with ethical issues, to provide mechanisms for reporting unethical conduct, and to foster a culture of honesty and accountability within ABG and each of its Units.
Conflict of interest:
Complaints The Group has adopted a special media approach to ensure that all the Groups stakeholders are well channelled through to the management. The contracted special media watch detect any news or complaints related to the Group and bring them to the attention of the Groups executive management. Related party transactions Related party transactions are governed by the Group corporate governance policy and individual subsidiaries local rules and regulations. All related party transactions were conducted at arms length.
Each Director must avoid any situation which may give rise to a conflict between his/her interests and those of ABG. Any situation which either will or may involve, a conflict of interest should be disclosed promptly to the Board of Directors in writing in advance of the meeting or verbally in the meeting itself. The concerned Director shall abstain from any discussion or decision on the matter of question. A conflict of interest can occur when a Directors personal interest is adverse to or appears to be adverse to the interests of ABG. Conflicts of interest also arise when a Director, or a member of his or her immediate family, receives an improper personal benefit as a result of his or her position as a Director of ABG. Common conflicts which Directors must endeavor to avoid include, but are not limited to, the following: 1. Engagement in any conduct or activity which may conflict with the best interests of ABG, or which may disrupt or impair ABGs standing with any person or entity with whom or which ABG has to proposes to enter into a business or contractual relationship. 2. Acceptance of compensation (in any form) for services performed in relation to ABG from any source other than from ABG. 3. Acceptance by him or her or any member of his/her family of gifts from persons or entities who or which deal with ABG where acceptance of such gifts could generate a sense of obligation and thereby create a potential conflict of interest. 4. Utilization of ABG assets, employees or information for personal use without obtaining the prior approval of the Board of Directors.
4 UNRESTRICTED INVESTMENT ACCOUNT DISCLOSURES

The Group is exposed to some of the price risk on assets funded by unrestricted investment account (URIA). The CBB requires the Group to maintain capital to cover the price risk arising from 30% of assets funded by URIA on a pro-rata basis. URIA funds are invested and managed in accordance with Sharia requirements. Table 21. Unrestricted Investment Account (PD-1.3.33 (a), (b), (c) & (g)) The following table summarises the breakdown of unrestricted investment accounts (URIA) and the analysis of profit equalisation reserve, investment risk reserve and return on URIA as of: 31 December 2010 US$ 000 882,505 9,258,476 232 2,435 7,571 79,433 9,454 10,240,106 Return on average URIA 31 December 2010 % 5.5 8.1 31 December 2009 % 6.6 9.5 31 December 2009 US$ 000 683,285 7,468,094 193 2,111 5,456 59,770 19,715 8,238,624
Confidentiality:
Confidential information includes all non-public information relating to ABG, whether in written or in oral form. Directors are under a continues obligation to maintain the confidentiality of information entrusted directly to them by ABG and any other confidential information about ABG which comes to them, from whatever source, in their capacity as a Director. Directors may disclose confidential information if such disclosures mandated by law. Compliance with Rules, Laws and Regulation: Directors shall, at all times, comply with all laws, rules and regulations applicable to ABG, including insider trading laws. Remuneration The Group incentivise its Board members, executives and senior management and its Sharia Board members in accordance to the remuneration policies and procedures approved by the Board. This policy links the incentives to the performance appraisal. The Groups corporate governance policy details the performance appraisal for the Board members. The following table summarises remuneration of the Groups Directors, Sharia Committee members, President & Chief Executive, Deputy Chief Executive and the Department Heads at Group Headquarter during the year ended:
URIA - Banks URIA - Non-banks Profit equalisation reserve (PER) - Banks Profit equalisation reserve (PER) - Non-banks Investment risk reserve (IRR) - Banks Investment risk reserve (IRR) - Non-banks Cumulative changes in fair value attributable to URIA
Return on average URIA Equity Return on average URIA Assets
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UNRESTRICTED INVESTMENT ACCOUNT DISCLOSURES (continued)
UNRESTRICTED INVESTMENT ACCOUNT DISCLOSURES (continued)
Table 21. Unrestricted Investment Account (PD-1.3.33 (a), (b), (c) & (g)) (continued) Ratio by type of URIA 31 December 2010 % 9 91 31 December 2009 % 8 92
Table - 24. Unrestricted Investment Account by type of Assets (PD-1.3.33 (r) & (s)) The following table summarises the types of assets in which the funds are invested, the actual allocation among various types of assets and the changes in the asset allocation in the last six months of the year ended: 31 December 2010 Opening Actual Allocation US$ 000 Cash and balances with banks 2,827,499 4,349,289 639,942 460,974 228,194 143,371 8,649,269 Closing Actual Allocation US$ 000 3,375,960 4,878,576 1,011,854 528,660 258,983 186,073 10,240,106 Opening Actual Allocation US$ 000 1,488,246 4,658,859 431,447 349,975 204,957 229,172 7,362,656 31 December 2009 Closing Actual Allocation US$ 000 1,840,780 5,143,301 604,559 440,194 209,325 465 8,238,624
URIA - Banks URIA - Non-banks
Movement US$ 000 548,461 529,287 371,912 67,686 30,789 42,702 1,590,837
Movement US$ 000 352,534 484,442 173,112 90,219 4,368 (228,707) 875,968
The appropriation percentage of URIA into profit equalisation reserve and investment risk reserve varies between each of the Groups subsidiary based on market conditions and applicable rules and regulations. Table - 22. Unrestricted Investment Account by Islamic financing product type (PD-1.3.33 (h)) The following table summarises the percentage of URIA financing for each type of Sharia-compliant contract to total URIA financing as of: 31 December 2010 % 80 16 4 31 December 2009 % 86 10 4 Receivables Mudaraba and Musharaka financing Investments Ijarah Muntahia Bittamleek Other assets
Receivables Mudaraba and Musharaka financing Ijarah Muntahia Bittamleek
Table - 23. Unrestricted Investment Account by Counterparty Type (PD-1.3.33 (i)) The following table summarises the percentage of financing for each category of counterparty to total financing as of: 31 December 2010 % 2 8 3 22 65 31 December 2009 % 5 2 64 29
Table - 25. Treatment of Assets financed by Unrestricted Investment Account (PD-1.3.33 (v)) The following table summarises the treatment of assets financed by URIA in the calculation of RWA for capital adequacy purposes as of: 31 December 2010 RWA for Capital adequacy purposes US$ 000 4,435 11,273 627 84,503 1,311,905 203,747 117,756 51,149 188,948 46,982 272,130 2,293,455 31 December 2009 RWA for Capital adequacy purposes US$ 000 32,560 2,459 24,803 1,040,904 21,672 241,049 70,338 62,003 149,310 8,877 230,998 1,884,973
Soverings Bank Investment Firms Corporates Retail
Type of Claims
RWA US$ 000
Capital Charges US$ 000 532 1,353 75 10,140 157,429 24,450 14,131 6,138 22,674 5,638 32,656 275,216
RWA US$ 000 108,533 8,197 82,675 3,469,680 72,241 803,497 234,461 206,677 497,699 29,589 769,994 6,283,243
Capital Charges US$ 000 3,907 295 2,976 124,908 2,601 28,926 8,441 7,440 17,917 1,065 27,720 226,196
Claims on Sovereign Claims on PSEs Claims on MDBs Claims on Banks Claims on Corporates Claims on Investment Firms Regulatory Retail Portfolio Mortgage Past due facilities Investment in securities Holding of Real Estates Other Assets
14,783 37,577 2,091 281,675 4,373,018 679,158 392,520 170,497 629,825 156,606 907,099 7,644,849
Unrestricted Investment Account Share of Profit (PD-1.3.33 (e) & (q)) The Groups share of profit as a Mudarib for managing unrestricted investment accounts and the URIAs share of income is based on the terms and conditions of the related Mudarib agreements. These Mudarib agreements are done at the individual subsidiary level. The rates and return are highly variable based on each of the subsidiaries local environment as well as local rules and regulations. Detailed disclosures on URIA returns are analysed at the local level.
156
157

31 december 2010
5 RESTRICTED INVESTMENT ACCOUNT DISCLOSURES

Restricted investment account (RIA) funds are invested and managed in accordance with Shari,a requirements. The Group as fund manager will manage and administer the investment account in a proper, diligent and efficient manner in accordance with applicable laws and local regulations. The Group as fund manager will manage and administer the investment account in a proper, diligent and efficient manner in accordance with applicable laws and local regulations. The Group has appropriate procedures and controls in place commensurate to the size of its portfolio which includes: a) Organizing its internal affairs in a responsible manner, ensuring it has appropriate internal controls and risk management systems and procedures and controls designed to mitigate and manage such risks; b) Observing high standards of integrity and fair dealing in managing the scheme to the best interest of its investors; and c) Ensuring that the Group has the requisite level of knowledge and experience for the tasks that is undertaken and is competent for the work undertaken. Table - 26. Restricted Investment Account by Islamic Financing product type (PD-1.3.33 (h)) The following table summarises the percentage of RIA financing for each type of Sharia-compliant contract to total RIA financing as of: 31 December 2010 % Receivables Mudaraba and Musharaka financing 76 24 31 December 2009 % 94 6
Table - 27. Restricted Investment Account by Counterparty Type (PD-1.3.33 (i)) The following table summarises the percentage of financing for each category of counterparty to total financing as of: 31 December 2010 % Multinational Development Banks Bank Corporates Retail 5 31 19 45 31 December 2009 % 19 29 52
Restricted Investment Account Share of Profit (PD-1.3.33 (e) & (q)) The Groups share of profit as a Mudarib for managing unrestricted investment accounts and the RIAs share of income is based on the terms and conditions of the related mudarib agreements. These mudarib agreements are done at the individual subsidiary level. The rates and return are highly variable based on each of the subsidiaries local environment as well as local rules and regulations. Detailed disclosures on RIA returns are analysed at the local level.
Al Baraka Banking Group (B.S.C) P.O Box 1882 Manama, Kingdom of Bahrain Tel: +973 17541122 Fax: +973 17536533 C.R.: 48915 www.albaraka.com
(Licensed as an Islamic Wholesale Bank by CBB)
Share Registrar: KPMG Fakhroo AlHedaya Building (2) - 5th Floor, Government Avenue, Manama, Kingdom of Bahrain Tel: +973 17215080 Fax: +973 17212055 Email: [email protected]
Investors Relations: Mr. Ahmed AbdulGhaffar Vice President - Investors Relations Al Baraka Banking Group Kingdom of Bahrain Tel: +973 17520701 / 17541122 Fax: +973 17910911 / 17531074 Email: [email protected]
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Annual Report 2010

shAikh isA BRidge

EARNINGS (US$ Millions)

2010 659 316 193 106 13

BASIC AND DILUTED EARNINGS PER SHARE - US CENTS**

FINANCIAL POSITION (US$ Millions)

15,880 11,392 13,571 1,818 1,225

13,166 9,431 10,999 1,737 1,214

10,920 8,088 8,872 1,550 1,131

10,104 7,389 8,084 1,570 1,144

5,466 6,147 1,211 979

Total Customer Deposits

Total Financing and Investments

CAPITAL (US$ Millions)

10% 1.9% 46%

14%* 2.3%* 52%

200 150 100 50 50 0 2008 2008 0 100

200 150 100

11% 6.3 1.56

13% 5.4 1.54

14% 5.2 1.43

16% 4.7 1.45

16% 4.5 1.24

Net Operating Income

Total Number of Branches

Total Number of Employees

Wadi Rum Bridge - Jordan

Msaylha Bridge - Lebanon

Bosphorus Bridge - Turkey

Constantine Bridge - Algeria

Shaikh Isa Bridge - Bahrain

The Nelson Mandela Bridge - South Africa

Unified Corporate identity

Your Partner Bank

The future of our brand

WAdi RUM BRidge

Board of directors & sharia supervisory Board Board Committees

sharia supervisory Board

Board executive Committee

Board Affairs and Remuneration Committee

Mr. Abdulla A. Saudi

Mr. Adnan Ahmed Yousif

Mr. Abdullah Saleh Kamel Mr. Saleh Al Yousef

Mr. Adnan Ahmed Yousif

independent non-executive directors

Audit and governance Committee

Board Risk Committee

Mr. Saleh Al Yousef

Mr. Salah Abuzaid

Secretary to the Board

Dr. Bassem Awadallah

Mr. Abdullah saleh kamel

Mr. Abdulla A. saudi

Mr. saleh Al Yousef

Board of directors (Continued)

Board Member and President & Chief executive

dr. Anwar ibrahim

Mr. Jamal bin ghalaita

Mr. Abdul elah sabbahi

Board of directors (Continued)