Salam 2015

CREATIVELY OUTLINING SUCCESS
ANNUAL REPORT 2015

The epitome of beauty and aesthetics, calligraphy is the
art of beautiful writing, stated to be the basis of religious
expression. It was first used to honour the words of the
Holy Quran. As mankind’s earliest known alphabet, it has
always captivated the imagination of royals, intellectuals,
writers, poets, artists and the common man. We at
Al Salam Bank-Bahrain pay homage to this timeless
and unheralded art which draws a comparison with our
ethos and values. We continue our quest to transcend
the boundaries of possibilities and build new paradigms,
journeying towards the destination of success.
His Royal Highness His Majesty His Royal Highness
Prince Khalifa bin King Hamad bin Isa Prince Salman bin
Salman Al Khalifa Al Khalifa Hamad Al Khalifa
The Prime Minister of the The King of the Kingdom The Crown Prince,
Kingdom of Bahrain of Bahrain Deputy Supreme
Commander and First
Deputy Prime Minister
Annual Report 2015 Al Salam Bank-Bahrain B.S.C. 1

CONTENTS
Vision and Mission 3
Corporate Overview 4
Annual Highlights 6
Board of Directors 8
Fatwa and Shari’a Supervisory Board 14
Executive Management Team 16
Board of Directors’ Report to the Shareholders 24
Message from the Group Chief Executive Officer 28
Management Review of Operations and Activities 32
Corporate Governance Report 2015 40
Remuneration Policy 58
Risk Management and Compliance 68
Corporate Social Responsibility 71
Fatwa and Shari’a Supervisory Board Report to the Shareholders 74
Independent Auditors’ Report to the Shareholders 76
The Consolidated Financial Statements 78
Notes to the Consolidated Financial Statements 82
2 Al Salam Bank-Bahrain B.S.C. Annual Report 2015

OUR VISION
To become a regional force in the Islamic financial services
industry by providing differentiated Shari’a compliant
products to focused segments.
OUR MISSION
• Become a “one-stop-shop” for Islamic
financial services.
• Create a strong onshore presence in select
countries.
• Develop a premier brand image as an Islamic
financial shaper.
• Achieve high returns for stakeholders
commensurate with the risks undertaken.

Corporate Overview
CORPORATE OVERVIEW
Al Salam Bank-Bahrain (ASBB) was established on 19 January 2006 in the Kingdom of
Bahrain with paid-up capital of BD120 million (US$ 318 million) and was the largest Initial
Public Offering (IPO) in the Kingdom’s history with subscriptions reaching over BD2.7 billion
(US$ 7 billion). Currently, ASBB paid-up capital is BD214 million (US$ 567 million). The Bank
commenced commercial operations on 17 April 2006. ASBB was listed in Bahrain Bourse on
27 April 2006 and subsequently in Dubai Financial Market (DFM) on 26 March 2008.
Al Salam Bank-Bahrain B.S.C (ASBB)

is headquartered in the Kingdom of
Bahrain and regulated by the Central
Bank of Bahrain.
Following a resolution of ASBB’s Extraordinary General Assembly meeting held on 4 May

2009, ASBB completed its merger with the Bahraini Saudi Bank (BSB) on 22nd of December
2011. On 31st March 2014, Al Salam Bank-Bahrain and BMI Bank B.S.C (c) confirmed the
conclusion of a business combinations between the two institutions after receiving the approval
from their shareholders at their respective extraordinary general assembly meetings by way of
exchanging 11 ASBB shares for each BMI Bank share wherein ASBB acquired 58,533,357
BMI Bank shares of BD1 each and issued 643,866,927 ASBB shares of 100 fils each. As of
the 30th of March 2014, both Banks updated their respective CRs to give effect to the share
swap and consequently BMI Bank became a wholly owned subsidiary of ASBB.
ASBB offers its customers a complete range of innovative and unique Shari’a-compliant
financial products and services through its extended network of 11 branches and 35 ATMs
utilizing the latest technologies to meet various banking requirements. In addition to its retail
banking services, the Bank also offers Corporate Banking, Private Banking, Investment as well
as Treasury services. The Bank’s high-calibre management team comprises of a highly qualified
and internationally experienced professionals with proven expertise in key areas of banking,
finance and related fields.

Corporate Overview (continued)
Key factors that contribute to the Bank’s distinct market differentiation include:
• Strong paid-up capital base;

• Pre-eminent founding shareholders;
• High-calibre management team;
• State-of-the-art IT infrastructure;
• Innovative, tailor-made Shari’a-compliant product solutions;
• Universal business model covering deposits, financing and investment
products and services;
ASBB is adopting internationally recognized standards and best practices in areas such as
corporate governance, compliance and risk management, operating with the highest levels of
integrity, transparency and trust.
A dynamic, diversified and differentiated

Islamic Bank.

ANNUAL
Total Operating HIGHLIGHTS
Income Net Profit
(million)
Total Operating Income (million)
Net Profit
(million)
Total Operating Income (million)
Net Profit
2011
(million) BD12.7 (US$33.8) 2011
(million) BD0.5 (US$1.3)
2011 BD12.7 (US$33.8) 2011 BD0.5 (US$1.3)
2011 BD12.7 BD24.1
2012 (US$33.8)
(US$63.8) 2011
2012 BD0.5 (US$1.3)BD10.3 (US$27.3)
2012 BD24.1 (US$63.8) 2012 BD10.3 (US$27.3)
2012
2013 BD24.1
BD26.1 (US$63.8)
(US$69.2) 2012
2013 BD10.3
BD12.4 (US$27.3)
(US$32.8)
2013 BD26.1 (US$69.2) 2013 BD12.4 (US$32.8)
2013
2014 BD26.1
BD46.1 (US$69.2)
(US$122.2) 2013
2014 BD12.4 BD15.8
(US$32.8)(US$42.0)
2014 BD46.1 (US$122.2) 2014 BD15.8 (US$42.0)
2014
2015 BD46.1 BD57.8
(US$122.2)
(US$153.3) 2014
2015 BD15.8(US$27.9)
BD10.5 (US$42.0)
2015 BD57.8 (US$153.3) 2015 BD10.5 (US$27.9)
2015 BD57.8 (US$153.3) 2015 BD10.5 (US$27.9)
Total Assets Total Equity

(million)
Total Assets (million)
Total Equity
(million)
Total Assets (million)
Total Equity
2011
(million) BD924 (US$2,451) 2011
(million) BD200.6 (US$532.2)
2011 BD924 (US$2,451) 2011 BD200.6 (US$532.2)
2011
2012 BD924
BD942 (US$2,451)
(US$2,499) 2011
2012 BD200.6
BD208.1 (US$532.2)
(US$551.9)
2012 BD942 (US$2,499) 2012 BD208.1 (US$551.9)
2012
2013 BD942 (US$2,499)
BD1,088 (US$2,886) 2012
2013 BD246.1BD208.1 (US$551.9)
(US$652.8)
2013 BD1,088 (US$2,886) 2013 BD246.1 (US$652.8)
2013
2014 BD1,088 (US$2,886)
BD1,955 (US$5,186) 2013
2014 BD246.1 BD328.8
(US$652.8)(US$872.2)
2014 BD1,955 (US$5,186) 2014 BD328.8 (US$872.2)
2014
2015 BD1,955
BD1,657 (US$5,186)
(US$4,395) 2014
2015 BD328.8 (US$872.2)
BD320 (US$848.8)
2015 BD1,657 (US$4,395) 2015 BD320 (US$848.8)
2015 BD1,657 (US$4,395) 2015 BD320 (US$848.8)
Earnings per Share Cost to Income Ratio

(fils)
(fils)
2011 0.2
(fils) 2011 91%
2011 0.2 2011 91%
2011
2012 0.2 6.9 2011
2012 43.7% 91%
2012 6.9 2012 43.7%
2012
2013 6.9 8.3 2012
2013 43.7%
43.7%
2013 8.3 2013 43.7%
2013
2014 8.3
8.0 2013
2014 43.7%57.3%
2014 8.0 2014 57.3%
2014
2015 5.8 8.0 2014
2015 43.7%57.3%
2015 5.8 2015 43.7%
2015 5.8 2015 43.7%

Majestic in its disposition, the Muhaqqaq
script is a combination of beauty and
complexity. The script is one of the main
six calligraphic scripts and is often
acknowledged as a complete piece of
calligraphy.
It means clear and complete, drawing a
parallel to the corporate stance of the
Al Salam Bank-Bahrain brand.
Our posture of delivering on the promise
is testimony to the creative ideas and work
involved in designing the intricate and
diversified portfolios - striving to keep our
clients happy.
H.H. Shaikha Hessa bint Khalifa bin Hamad Al Khalifa
Chairperson
Chairperson of the Remuneration, Nomination and Corporate Governance

Committee
Independent and non-executive
Director since: 18 April 2009
Term started: 24 February 2015
Experience: more than 17 years
An active member of the royal family of the Kingdom of Bahrain, H.H. Shaikha
Hessa gained her Bachelor’s degree in Management (1998), and her Master
degree in Social Policy and Planning (2002) both from the London School of
Economics and Political Science. Gained a MSc Development Finance 2010
from University of London. She joined the Supreme Council for Women in 2001
as a member of the Social Committee. Since 2004 she has been a Permanent
Member of the Council’s Board. In 2005, she founded “INJAZ Bahrain”
which is an international organization to inspire and prepare young Bahrainis
to succeed in a global economy and is presently its Executive Director. With
her experience and active role in enterprise education and developing skills
of young women, she has been invited as speaker and panelist at various
occasions including the UN, and the World Economic Forum.

H. E. Shaikh Khalid bin Mustahail Al Mashani
Vice Chairman

Director since: 5 May 2014
H.E. Shaikh Khalid bin Mustahail Al Mashani holds a BSc. in Economics
and a Masters Degree in International Boundary Studies from the School of
Oriental and African Studies (SOAS), University of London. Shaikh Khalid is
the Chairman of the Board of Directors of Bank Muscat S.A.O.G.; Deputy
Chairman of Al Omaniya Financial Services Company and Chairman of Dhofar
International Development & Investment Holding Company S.A.O.G.
H. E. Mohamed Ali Rashid Alabbar

Director (resigned as of 9 February 2016)
Non-independent and non-executive

Director since: 14 March 2013
H.E. Mohamed Alabbar is the founder and Chairman of Emaar Properties
PJSC, the Dubai-based global property developer. He is also the founder
and Chairman of Africa Middle East Resources (AMER), a private company
operating to unlock the value of natural resource opportunities in Africa and
link them with large consumer markets in Asia. He also chairs Tradewinds
Corporation, a premier leisure and hospitality owner- operator in Malaysia,
developing world-class real estate developments in the country and Southeast
Asia.
Mr. Alabbar is the founder and major shareholder of RSH, the leading Singapore-based pan-Asian marketer,
distributor and retailer of some 60 international fashion and lifestyle brands through more than 70 outlets in
more than 20 countries.
He is also a board member of Eagle Hills, a UAE-based real estate development company focused on large-
scale projects in high-growth international markets. He serves on the board of Manara Developments in Bahrain
and Noor Investment Group, an affiliate of Dubai Group, the leading diversified financial company of Dubai
Holding.
A member of the Dubai World Expo 2020 Preparatory Committee, Mr. Alabbar is actively involved in the
developmental work being undertaken in preparation to host the event.
Mr. Alabbar is a graduate in Finance and Business Administration from the Seattle University in the US,
and holds an Honorary Doctorate from the University in addition to serving on its Board of Trustees. A keen
sportsman, Mr. Alabbar is an active member of the UAE’s endurance horse racing community.

Board of Directors (continued)
Mr. Hussein Mohammed Al Meeza

Director
Chairman of the Executive Committee

Director since: 20 March 2012
Mr. Hussein Mohammed Al Meeza is considered one of the renowned
personalities in the Islamic banking sectors and Islamic finance and insurance.
Mr. Al Meeza’s outstanding career success was crowned in December 2006
when the International Conference of Islamic Bankers chose him as the
2006 Best Islamic Banking Personality. Having graduated from the Beirut
Arab University in 1975, Mr. Al Meeza started his professional career at the
Dubai Islamic Bank (DIB) where he spent 27 years during which he played a
pioneering role in enhancing and developing the bank’s services. His landmark
achievement was the establishment of the Al Salam Banks in Sudan, Bahrain
and Algeria. Mr. Al Meeza is currently Vice Chairman and Chairman of the
Executive Committee of Al Salam Bank- Algeria. He was a founder member
of Emaar properties, Amlak finance, Emaar Industries & Investments, Emaar
Financial services, Dubai Islamic Insurance & Reinsurance Company (AMAN).
Mr. Al Meeza occupied the positions of the CEO and Managing Director of
Dubai Islamic Insurance and Reinsurance Company (AMAN), Vice Chairman
and Chairman of the Executive Committee of Al Salam Bank-Sudan, Chairman
of LMC Bahrain, Chairman of the executive committee of Islamic Trading
company in Bahrain, Board member and chairman of the Executive committee
in Amlak Finance – Dubai and Chairman of Emaar Financial Services – Dubai,
Vice Chairman of Emirates Cooperative Society – Dubai. Board member of the
General Council of Islamic Banks and Financial Institutions, Chairman of the
founding committee of Islamic Insurance and Re-Insurance Companies. He was
also a Board Member of Emirates Society for Insurance.
Mr. Salman Saleh Al Mahmeed

Director
Chairman of the Audit and Risk Committee

Director since: 15 February 2010
Mr. Salman Al Mahmeed is the Deputy Chief Executive Officer of Bahrain
Airport Services, the Deputy Chairman of Dar Albilad, the Managing Director
and Owner’s Representative of Global Hotels, Global Express and Movenpick
Hotel in Bahrain. He was a Board Member of the Bahraini Saudi Bank as
well as being a member of its Investment, Executive and Strategic Options
Committees. He was also the Investment Director of Magna Holdings.
Mr. Al Mahmeed holds an MBA in Business Administration, Master in Hotel
Management and Management BSc. Degree and he is currently a Board
member of Al Salam Bank and Chairman of the Audit Committee.

Mr. Essam bin Abdulkadir Al Muhaidib

Director

Director since: 17 April 2006
Mr. Essam A. Al Muhaidib is the Board Member and Group CEO of Al Muhaidib
Group. In addition, he sits in the Board of Directors of multiple FMCG, Banking,
Financial, Real Estate, Industrial and Contracting companies. Savola Group,
ACWA Power, Nestle Waters, Bawan, Al Salam Bank, Blominvest KSA, Rafal
Real Estate, Emmar Middle East, Al Balad Al Ameen Development Co, are
few of them. He is also the Chairman of Panda Retail Company, Herfy Foods
Services Co, The Economic & Industrial Development Committee under the
Eastern Province Governance Council. He is a Board Member in Eastern
Province Governance Council and member in the Board of various charity,
benevolence and educational institutions like Educational Services Company
of Prince Mohamed bin Fahad University, King Fahad University for Petroleum
and Minerals Endowment Fund, Saudi Food Bank and Husan Al Jawar
Society, Bahrain. He holds a Bachelor of Science in Statistics from King Saud
University.
Mr. Sulaiman bin Mohamed Al Yahyai

Director

Mr. Sulaiman bin Mohamed Al Yahyai is the Deputy Chairman of the Board of
Directors of Bank Muscat since June 2011, a member of the Board’s Risk
Committee and a member of the Board’s Nomination and Compensation
Committee. Mr. Al Yahyai holds a certificate in Assets Management-Lausanne
University, Switzerland (2002), MBA – Institute of Financial Management –
University of Wales, UK (2000), and a certificate in Financial Crisis – Harvard
University, USA (1999). Mr. Al Yahyai is an Investment Advisor at the Royal
Court Affairs, Chairman – Oman Chlorine Co. “SAOG”, Director – Al Madina
Real Estate Co. “SAOC”, Director – Falcon Insurance “SAOC”, Chairman of
Oman Fixed Income Fund, Chairman of Integrated Tourism Projects Fund,
Chairman of Telecom Oman, Chairman of the National Bank of Oman GCC
Fund.

Mr. Hisham Saleh Al Saie

Director

Mr. Hisham Saleh Al Saie is a representative of Overseas Investment
Company S.P.C. and has vast experience in Investment Management and the
Corporate Finance fields. He holds an MBA from London Business School, a
BA in Accounting from the University of Texas at Arlington and has attended
a number of executive education courses at INSEAD and other reputable
institutions. Hisham is a Board member of Investcorp Bank, Nass Corporation
B.S.C.. Al-Khaleej Commercial Bank (Qatar), and Diyar Al Muharraq B.S.C.
(c),. Prior to his current responsibilities, Hisham was head of Corporate Finance
at SICO Investment Bank, where he was responsible for structuring key
local and regional equity and debt capital market transactions. He also held
previous positions at BDO Jawad Habib, Price Waterhouse Coopers and Arthur
Andersen.
Mr. Mohamed Shukri Ghanem

Director

With more than 16 years of extensive experience in the regional financial
market and in global energy sector, Mr. Ghanem is the Chief Executive Officer
and Board Member of First Energy Bank in Bahrain, he is responsible for the
overall management of the Bank in line with the Bank’s strategic plan and also
responsible for monitoring organisational performance against the strategic
plan. Mr. Ghanem is currently a Board member of Alizz Islamic Bank in Oman
and Al Salam Bank in Bahrain. Prior to joining FEB, Mr. Ghanem worked at
Arab Banking Corporation (BSC) (“ABC”) as part of the North African business
development team at the Global Project and Structured Finance division, and
with GED Handles G.m.b.H., Vienna in the risk and asset management in
the energy and metals sectors. Mr. Ghanem holds a Bachelor of Arts (Major
in Business) from Webster University (School of Business and Technology) in
Vienna and holds an MBA from Glamorgan University.

Mr. Khalid Salem Al-Halyan

Director

Mr. Al-Halyan has more than 30 years senior level experience in several
industries and is currently the group Chief Audit Executive at Dubai Aviation City
Corporation (DACC). He started his career at the UAE Central Bank and moved
to the Department of Economic Development (DED) in Dubai before joining the
aviation industry in 1996; initially to establish the new Dubai Airport Free Zone
(DAFZA) and head up the Finance Department, before moving on to establish
the Group Internal Audit & Risk Assessment (GIARA) function at DACC. He
has been involved in establishing DED, Emaar Properties, the UAE Internal
Audit Association, the UAE Golf Association and worked on restructuring
projects for DUBAL, Dubai World Trade Centre, Dubai Civil Aviation, UAE
Central Bank Banking Supervision, and realized the construction of a new
facility for the Al Noor Special Needs Centre in Dubai. Mr. Al-Halyan currently
serves as Vice President of the UAE Internal Audit Association (affiliated to the
Institute of Internal Auditors (IIA), USA) and as Chairman of Al Noor Special
Needs Centre in Dubai. He holds an MBA degree from Bradford University in
the UK and BBA from UAE University, Al Ain.
Mr. Yousif Abdulla Taqi

Director and Group Chief Executive Officer
Executive
A Certified Public Accountant (CPA), Mr. Taqi has been active in the banking
and financial services industry since 1983. During his career, Mr. Taqi worked
in leading positions for a number of institutions in the Kingdom of Bahrain.
Prior to joining Al Salam Bank-Bahrain, he was Deputy General Manager of
Kuwait Finance House (Bahrain), where he was responsible for establishing
Kuwait Finance House Malaysia. Prior to this, Mr. Taqi spent 20 years with
Ernst & Young, during which time he provided professional services for many
regional and international financial institutions. During his career with Ernst &
Young, Mr. Taqi was promoted as Partner, responsible for providing auditing and
consultancy services to the Islamic financial firms. He is currently the Chairman
of Manara Developments Company B.S.C.(c), Amar Holding Company
B.S.C.(c), affiliates of ASBB, board member of the Housing Bank (Bahrain),
Aluminium Bahrain (ALBA), and the Deputy Chairman of King Faisal Corniche
Development Co.

Dr. Hussein Hamid Hassan
Chairman
Dr. Hussein Hamid Hassan holds a PhD from the Faculty of Shari’a, Al Azhar
University, Cairo, Egypt; and a Master’s in Comparative Jurisprudence and
Diploma in Comparative Law (both of which are the equivalent of a PhD) from
the International Institute of Comparative Law, University of New York, USA.
He also holds a Masters in Comparative Juries, and Diplomas in Shari’a and
Private Law, from the University of Cairo; and an LL B in Shari’a from Al Azhar
University. He is the Chairman and member of the Shari’a Supervisory Board in
many of the Islamic Financial Institutions. In addition, Dr. Hassan is Chairman of
the Assembly of Muslim Jurists, Washington, USA; a member of the European
Islamic Board for Research & Consultation, Dublin, Ireland; and an Expert at the
Union of Islamic Banks, Jeddah, Kingdom of Saudi Arabia.
Dr. Ali Mohuddin Al’Qurra Daghi

Member
Dr. Ali Daghi holds a PhD in Shari’a and Law, and a Master’s in Shari’a and
Comparative Fiqh, from Al Azhar University, Cairo, Egypt. He also holds
a BSc. in Islamic Shari’a from Baghdad University, Iraq; a certificate of
traditional Islamic Studies under the guidance of eminent scholars in Iraq;
and is a graduate of the Islamic Institute in Iraq. He is currently Professor of
Jurisprudence in the faculty of Shari’a law and Islamic Studies at the University
of Qatar. He sits on the Boards of Shari’a Supervisory Boards for several banks
and financial institutions. Dr. Al’qurra Daghi is also a member of the Islamic
Fiqh Academy, the Organisation of Islamic Conference, the European Muslim
Council for Efta and Researches, the International Union of Muslim Scholars,
and the Academic Advisory Committee of the Islamic Studies Centre, Oxford
University, UK. He also has published several research papers tackling various
types of Islamic Finance, Islamic Fiqh, Zakah and Islamic Economy.
Shaikh Adnan Abdulla Al Qattan

Member
Shaikh Adnan Al Qattan holds Master’s degree in the Quran and Hadith from
the University of Um Al-Qura, Makka, Kingdom of Saudi Arabia; and Bachelor’s
degree in Islamic Shari’a from the Islamic University, Madeena, Saudi Arabia.
Shaikh Al Qattan is also a Judge in the Shari’a Supreme Court, Ministry
of Justice – Kingdom of Bahrain. Shaikh Al Qattan is a Member of Shari’a
Supervisory Boards for several Islamic banks and he is also Chairman of Al
Sanabil Orphans Protection Society, Chairman of the Board of Trustees of the
Royal Charity Establishment under the Royal Court - Kingdom of Bahrain, and
President of the Kingdom of Bahrain Hajj Mission. In addition, he is a Friday
sermon orator at Al-Fatih Grand Mosque. Shaikh Al Qattan contributed to
drafting the Personal Status Law for the Ministry of Justice and is a regular
participant in Islamic committees, courses, seminars and conferences.

Dr. Mohamed Abdulhakim Zoeir
Member & Secretary to the Board
Dr. Mohamed Zoeir holds PhD in Islamic Economy; Master’s degree in Islamic
Shari’a (Economy); Bachelor’s degree in Management Sciences; and a Higher
Diploma in Islamic Studies. He is Member of the Fatwa Board in a number of
Islamic financial institutions and has 18 years of experience with Egypt Central
Bank. Dr. Zoeir was also the Head of Shari’a compliance in Dubai Islamic
Bank.
Dr. Mohammed Burhan Arbouna

Member
Group Head of Shari’a Compliance
Dr. Mohammed Burhan Arbouna holds a PhD in laws with specialization in

Islamic banking and finance from International Islamic University Malaysia,
and Master’s in Comparative Laws. He also holds BA degree in Shari’a and
Higher Diploma in Education from Islamic University, Medina. He is an expert
in Islamic banking and finance since 1997. Before joining Al Salam Bank-
Bahrain, Dr. Arbouna was the Shari’a Head and Shari’a Board member in
the Seera Investment Bank B.S.C Bahrain. Prior to that, he worked as the
Head of Shari’a department in the Kuwait Finance House-Bahrain. Also, Dr.
Arbouna worked as Shari’a researcher and consultant for the Accounting and
Auditing Organization for Islamic Financial Institutions (AAOIFI) – Bahrain.
Dr. Arbouna lectures on Islamic banking and finance and gives consultancy
on orientation and professional programs for a number of professional and
educational institutions. Dr. Arbouna is a member of Islamic Money Market
Framework (IMMF) steering committee initiated by Central Bank of Bahrain for
management of liquidity among Islamic banks.

Mr. Yousif Abdulla Taqi
Director and Group Chief Executive Officer

A Certified Public Accountant (CPA), Mr. Yousif Taqi has been active in the
banking and financial services industry since 1983. During his career, Mr.
Taqi worked in leading positions for a number of institutions in the Kingdom
of Bahrain. Prior to joining Al Salam Bank-Bahrain, he was Deputy General
Manager of Kuwait Finance House (Bahrain), where he was responsible for
establishing Kuwait Finance House Malaysia. Prior to this, Mr. Taqi spent 20
years with Ernst & Young, during which time he provided professional services
for many regional and international financial institutions. During his career with
Ernst & Young, Mr. Taqi was promoted as Partner, responsible for providing
auditing and consultancy services to the Islamic financial firms. He is currently
the Chairman of Manara Developments Company B.S.C.(c), Amar Holding
Company B.S.C.(c), affiliates of ASBB, board member of the Housing Bank
(Bahrain), Aluminium Bahrain (ALBA), and the Deputy Chairman of King Faisal
Corniche Development Co.
Dr. Anwar Khalifa Al Sadah

Deputy Group CEO - Business

Dr. Anwar Al Sada has more than 26 years of distinguished central banking
career. Before joining Al Salam Bank-Bahrain, he was The Deputy Governor
of Central Bank of Bahrain (CBB). Along with his current position at Al Salam
Bank-Bahrain, Dr. Al Sada was also Chairman of Bahraini Saudi Bank and
Vice Chairman of Eskan Bank. He served in a number of national, regional
and international committees. His previous posts held were Chairman of
Investment Committee at CBB, Vice Chairman of Bahrain Stock Exchange,
Chairman of Bahrain’s Policy Committee for Prohibition and Combating of
Money Laundering and Terrorist Financing, Member of the Future Generation
Fund and Member of Promotion Board. Dr. Al Sada has attended the Harvard
Management Development course, also received his Master degree and the
PhD degree both in Philosophy from University of Surrey, UK.

Executive Management Team (continued)
Mr. Anwar Mohammed Murad

Head of Private Banking

Mr. Anwar Murad has 22 years of experience in the areas of Private Banking,
Treasury, Market Risk Management and Retail Banking. Mr. Murad has
served as Executive Vice President - Head of Private Banking at Al Salam
Bank - Bahrain since May 2006. His responsibilities were to establish the
Private Banking and Retail Banking divisions for Al Salam Bank. In addition
to the standard banking products, he managed to structure and launch many
Shari’a-compliant products. Prior to joining Al Salam Bank, he was the Head
of Private Banking at BMI Bank Bahrain. Earlier, Mr. Murad was the Regional
Market Risk Manager for the MENA region at ABN AMRO Bank and also
headed the Treasury Operations in Bahrain. From 1994 to 1998 he had various
positions with Citibank in Bahrain as Authorized Signer, Money Market and
Debt Derivatives followed by Assistant Manager, Global Consumer Banking.
Mr. Murad has extensive knowledge and experience in Treasury and Investment
products starting from Money Market, Foreign Exchange, Debt Derivatives and
Structured Products.
Mr. Arif Mohammed Janahi

Head of Corporate Banking
Mr. Arif Janahi is a well-nurtured commercial banker with more than 21 years
of experience in Operations and Corporate Banking. He started his career with
a well-known conventional bank before expanding his exposure with another
conventional commercial bank where he was responsible to promote Corporate
Banking products and services in the local market and the GCC. In 2006, Mr.
Janahi joined Al Salam Bank – Bahrain as Head of Corporate Banking where
he was responsible to establish the Department in liaison with the concerned
committees and other departments in Al Salam Bank. Throughout the last 20
years of banking, Mr. Janahi gained a good experience in both conventional
and Islamic banking backed by strong market network, knowledge of banking
products, and credit assessment. Mr. Janahi holds an MBA from the University
of Hull, UK.

Mr. Abdulkarim Turki

Head of Retail Banking

Mr. Abdulkarim Turki is a well-rounded banker with more than 31 years’
experience in Treasury, Operations, Audit, Internal Controls and Risk
Management. He joined Al Salam Bank-Bahrain in 2006 as Senior Vice
President, Head of operations. He was heavily involved in the incorporation and
structuring of the Bank and the Operation Department. He was appointed as
a key member in the Selection and Implementation Committee of the Bank’s
core banking system in addition to being a member in other Bank’s committees
such as Basel II, Bank Asset Liability Committee (ALCO) and the Public
Relations Committee (PRC). Prior to joining the Bank, he held the position of
Vice President - Head of Treasury Support Operations at Citibank Bahrain,
where he gained his experience through the occupation of several managerial
positions heading different departments and units. He was also involved in the
launch of Citi Islamic Investment Banking as he was responsible for formulating
all operational procedures, devising the chart of accounts and products
accounting. Mr. Turki holds an MBA in Investment & Finance from University of
Hull, UK.
Mr. Talal Abdul Aziz Al Mulla

Head of Investment

A Certified Public Accountant (CPA), Mr. Talal Al Mulla has been active in the
banking and financial services industry since 1999. Mr. Al Mulla worked with
Ernst & Young Bahrain being responsible for audit and consulting assignments
for major financial institutions in the region. He joined Al Salam Bank setting
up the Internal Audit function in 2006. In 2009, Mr. Al Mulla moved to the
Investment Department where he has been sourcing and managing investment
opportunities to the Bank. He also sits on the board of Directors of a number
affiliates and subsidiary companies in which the bank has invested.
Mr. Hussain Abdulhaq

Head of Treasury and Financial Markets

Mr. Hussain Abdulhaq is an experienced Treasurer in the area of Islamic
banking and Capital markets. He spent most of his 14 years career as
treasury specialist where he was involved in different areas, like Islamic liquidity
management, Islamic capital markets instruments, development of Islamic
complaint investment products and hedging instruments. He joined Al Salam
Bank in 2007 as a senior member in the treasury team and he was involved
in establishing the different functions and business lines of the unit as well
as in charge for the ALCO function. Hussain lead the treasury integration
process of Al Salam Bank and Bahrain Saudi Bank in 2010 and handling the
same responsibility with BMI Bank. Prior joining Al Salam Bank, He worked
for Kuwait Finance House (Bahrain), a leading Islamic Financial institution in
the region, for more than 5 years where he was in charge of the dealing room
activities. Hussain as a holder of MBA degree in Banking & Finance with a first
honor from University of Bahrain and CFA charted holder as well.

Mrs. Muna Al Balooshi

Group Head of Human Resources and Administration

Mrs. Muna Al Balooshi Joined Al Salam Bank, Bahrain Since 2006 as Group
Head of Human Resources. She had a major role in the Bank’s two acquisitions
of the Bahraini Saudi Bank and BMI Bank in regard to the merger of the Bank’s
resources with those two banks. Mrs. Al Balooshi has an excellent knowledge
of HR policies and Labor Law regulations due to her long experience as she
was the Head of Human Resources at the Court of HRH the Crown Prince
from 2001 till 2006 and prior to that she was working in HR department at
KPMG. She has full responsibility of the Human Resources division and forming
the division strategy as well as assisting directors in top confidential tasks. Mrs.
Muna holds an MBA degree from De Paul University – Chicago and she’s a
CIPD Associate.
Mr. Qassim Taqawi

Group Head of Legal

Mr. Qassim Taqawi is a veteran legal counsel with more than 12 years of
experience in the field of Investment Banking, Islamic Banking, Retail Banking,
Finance, Company Law, Labor Law, Real Estate and Construction. During his
career, Mr. Taqawi has handled and attained regional exposure in legal matters
covering the GCC, USA, Europe and MENA region. Following the merger with
Al Salam Bank-Bahrain, Mr. Taqawi was appointed in his current position at
Al Salam Bank as the Group Head of Legal handling the group’s legal affairs.
Since 2003, Mr. Taqawi has held a number of senior executive positions in the
region with various Banking & Financial Institutions. In addition to his current
executive responsibilities, Mr. Taqawi serves as a member in management
committees including Investment Committee and Remedial Committee. Mr.
Taqawi holds a Bachelor degree (LLB) in law and is a registered lawyer with the
Ministry of Justice & Islamic Affairs in the Kingdom of Bahrain.

Group Head of Shari’a Compliance

Dr. Mohammed Burhan Arbouna holds a PhD in laws with specialization in
Islamic banking and finance from International Islamic University Malaysia,
and Masters in Comparative Laws. He also holds BA degree in Shari’a and
Higher Diploma in Education from Islamic University, Medina. He is an expert
in Islamic banking and finance since 1997. Before joining Al Salam Bank-
Bahrain, Dr. Arbouna was the Shari’a Head and Shari’a Board member in
the Seera Investment Bank B.S.C Bahrain. Prior to that, he worked as the
Head of Shari’a department in the Kuwait Finance House-Bahrain. Also, Dr.
Arbouna worked as Shari’a researcher and consultant for the Accounting and
Auditing Organization for Islamic Financial Institutions (AAOIFI) – Bahrain.
Dr. Arbouna lectures on Islamic banking and finance and gives consultancy
on orientation and professional programs for a number of professional and
educational institutions. Dr. Arbouna is a member of Islamic Money Market
Framework (IMMF) steering committee initiated by Central Bank of Bahrain for
management of liquidity among Islamic banks.

Mr. Essa Abdulla Bohijji

Chief Auditor and Board Secretary

Mr. Essa Bohijji has more than 15 years of consulting and industry experience
in the financial services, commercial entities, governmental bodies, and internal
audit. Prior to joining Al Salam Bank Bahrain, Mr. Bohijji was the Chief Auditor
and Board Secretary of an Islamic investment Bank in Bahrain. Mr. Bohijji had
also spent seven years with Ernst & Young where he worked in the Audit and
Assurance Services Group before shifting to the Business Advisory Services
that was responsible for Internal Audit and Risk Management assignments and
left as a Senior Manager. Mr. Bohijji currently serves as a Board member of
BMI Bank, a Board and Audit Committee member of Al Salam Bank Algeria, an
interim Board member in BMIO Bank in Seychelles, and a non-executive Audit
Committee member in Manara Developments B.S.C. (c). In addition to that,
Mr. Bohijji served from year 2009 as a Board and Audit Committee Member for
Bahraini Saudi Bank prior to the full merger with Al Salam Bank Bahrain in late
2012. Mr. Bohijji is a qualified Certified Public Accountant, licensed from the
state of New Hampshire and is a member of the American Institute of Certified
Public Accountants. He also holds a B.Sc. in Accounting from University of
Bahrain.
Mr. Isa Hasan Maseeh

Group Chief Risk Officer

Mr. Isa Maseeh is a risk professional with more than 17 years of experience
in the financial sector. His exposure spans across commercial and investment
banking sectors in Bahrain. Mr. Maseeh joined ASBB as Group Chief Risk
Officer in 2015 with the primary objective of consolidating the risk activities
across the Bank. Prior to joining ASBB, he was the Chief Risk Officer at BMI
Bank. Earlier, Mr. Maseeh held various senior risk management positions with
Islamic and conventional banks including Gulf Finance House and United Gulf
Bank. Having had the opportunity to work across different segments of the
financial industry and be actively involved in the setup of financial institutions,
Mr. Maseeh has managed to develop a well-rounded knowledge and experience
base in banking. Mr. Maseeh holds an MBA (Hons) from DePaul University,
USA and a bachelor’s degree in finance from Concordia University, Canada.
He also holds the Chartered Financial Analyst (CFA) and Professional Risk
Manager (PRM) designations.
Mohammed Khalid Ateeq

Acting Head of Compliance and MLRO

Mr. Ateeq has over 10 years of experience in the Retail and Investment Banking
sector. He joined Al Salam Bank Bahrain in 2008. Mr. Ateeq is a Certified
Anti-Money Laundering Specialist (CAMS), FIBA - FIU Anti Money Laundering
Certified Associate (AMLCA) from Florida International University, and is an
International Diploma in Compliance holder from the University of Manchester
Business School, UK. He also has a bachelor’s degree in Banking and Finance
from the University of Bahrain.

An integral part of Mosque decorations, the
Al Thulth script is a perfect confluence
of elegance and sophistication. Its curved
and oblique lines are a part of the rich
islamic heritage story. The script is an
admired valued art. We at Al Salam Bank-
Bahrain foster refinement and intelligence
in our dealings and performance. We will
continue in our endeavors of preserving and
promoting our Islamic culture and aesthetics
with focus on unity, harmony and Peace to
all mankind.

The Directors of Al Salam Bank-Bahrain BSC (“the Bank”) have the pleasure in submitting
their report to the shareholders accompanied by the consolidated financial statements for the
year ended 31 December 2015. The consolidated financial statements comprise the financial
statements of the Bank and its subsidiary, BMI Bank BSC (c) (together known as “the
Group”).
Global growth was subdued in 2015 and was exacerbated by a crash in oil prices during the
last quarter of the year. The challenges of the global economic meltdown continued in 2015
lead by a Chinese downturn due to weaker demand of commodities which negatively impacted
their prices. In a development unprecedented since the 1980s, most of the largest emerging
economies in each region have been slowing simultaneously for three consecutive years.
The economic re-balancing in China is a major concern to global economic recovery. Brazil
and Russia have been going through severe adjustments in the face of external and domestic
challenges. This coupled with geopolitical tensions casts a serious question on timing of
recovery.
The IMF World Economic Outlook report forecasted global growth of 3.1% in 2015, 0.3%
lower than in 2014 and projected a growth of 3.4% and 3.6% for 2016 and 2017 respectively.
The Gulf Cooperation Council markets too felt the impact with a significant drop in foreign
exchange reserves with intensifying regional conflicts impeding growth.
The full impact of the adverse economic developments of 2015 is likely to be felt in 2016 in
terms of challenging medium-term fiscal sustainability.
In spite of the increased pessimism about the global growth outlook, confidence
in the GCC economy has held up well. GCC economy continues to depend
on non-oil sector for its growth drivers and higher-than-expected activity in
the oil sector. Activity in Bahrain has continued to benefit from the ongoing
implementation of a substantial infrastructure project pipeline supporting
confidence in the face of unusual market volatility. Bahrain’s non-oil growth
remained robust with consistent growth of approximately 4.5% with major
contribution in year-on-year growth in construction sector of 7% in the first half
of 2015. However, challenges continue to remain for taking necessary steps to
manage budgetary deficits.

The continued drop in oil prices has impacted the asset growth with fewer lending opportunities
in banking sector in the region. Due to the uncertainties in market conditions, the Bank has
shifted its focus towards high quality assets. This is evidenced by increased exposure to
sovereign Sukuks from BD145.8 million at end of 2014 to BD313.1 million at end of 2015. In
view of the market conditions, the Group had been selective in financing in order to maintain
or enhance asset quality. As a result, shedding liquidity by running off expensive deposits and
deploying liquidity in sovereign assets was a strategy pursued by the Group in 2015. This
had resulted in the Group consciously reducing its customer deposits by circa 20% in 2015
to reduce the cost of liabilities. Limited availability of investment grade Shari’a compliant fixed
income instruments was another major factor that drove management to pursue this strategy.
Balance sheet footing was optimized by reducing total assets of the Group to BD1,656.6
million at 31 December 2015 from BD1,955.3 million at 31 December 2014.
The Group reported a 25% increase in gross operating income from BD46.1 million in 2014 to
BD57.8 million in 2015, due to renewed focus on core banking activities comprising corporate,
commercial and retail banking. Strict cost control measures were implemented in 2015 to bring
the total operating expenses of the Group from BD26.4 million to BD25.3 million, a decrease
of 4.4%. The net profit attributable to shareholders of the Bank for the year was BD12.3 million
after taking into consideration asset provisions of BD22.9 million.
In the backdrop of a challenging business climate, the above results are by any measure
impressive and were achieved by focusing on timely exit from investments and Sukuks while
thrusting on core banking optimization.
The business combination with BMI has underpinned the

Group’s position as the second largest retail Islamic Bank in
Bahrain, benefiting from a diversified customer portfolio, strong
capital base and differentiated products and services with an
even more expanded branch and ATM network in 2015.

Board of Directors’ Report to the Shareholders (continued)
The Directors of the Bank believe that the Group is poised to achieve its vision of being
a regional force in the Islamic financial services industry. We express our gratitude to the
shareholders and the senior management for their relentless efforts taken in successfully
executing the strategy to put the respective systems and operational controls in place.
In terms of investments, the Bank adopted a cautious approach in selecting investments in line
with the Board’s risk appetite and prevailing market conditions. Due to the continued slump
in oil prices, the Group adopted a prudent and conservative policy of providing BD9.4 million
towards its exposures to alternative energy assets. Exposures to investments in aviation sector
were also affected due to declaration of bankruptcy by a leading Southeast Asian airline. Due
to the failure of this carrier to honour its lease obligations, the underlying value of an aircraft fell,
warranting a provision of BD7.6 million. On a positive note, the Group successfully acquired
equity interest in Boeing777-300ER aircraft with a lease to a leading regional airline and exited
the same on a profitable note.
The year also saw another successful exit of the Group’s participation in a prime retail property
in France at a gain.
In summary, the investment business experienced ups and downs during the fiscal year with
gains assisting in partially mitigating the losses from aviation and alternative energy assets.
The Bank continued to expand its financial institution group network with a net lending position
of BD135 million as of 31 December 2015 and holding a large portfolio of sovereign Sukuks.
Financially, fiscal year 2015 saw the Group earning a net profit of BD12.3 million, as compared
to a net profit of BD15.6 million in 2014. The gross operating income amounted to BD57.8
million compared to BD BD46.1 million in 2014, representing an increase of 25%. The
earnings per share (EPS) for the year amounted to 5.8 fils against 8.0 fils achieved in 2014.
The total operating expenses of the Group decreased from BD26.4 million in 2014 to BD25.3
million in 2015.
Retained earnings and appropriation of net income:
BD’000
Balance at beginning of the year 46,497

Net profit for the year – 2015 12,346
Transfer to statutory reserve (1,235)
Proposed dividends (10,705)
Charitable contributions (100)
Balance at end of the year 46,803

Board of Directors’ Report to the Shareholders (continued)
Directors’ and senior management interest:
As required by the Central Bank of Bahrain rulebook set out below are the interests of directors
and senior managers in the shares of Al Salam Bank-Bahrain B.S.C. and the distribution of the
shareholdings as of 31 December 2015.
31/12/2015
Directors’ shares 1,691,553
Senior managers’ shares 96,999
1,788,552
Directors’ remuneration for 2015 amounted to BD365,000 (2014: BD329,000)
2015
% of total
No. of Outstanding
No. of shares Shareholders Shares
Percentage of shares held
Less than 1% 884,333,208 23,137 41.31
1% up to less than 5% 812,329,368 16 37.94
More than 5% 444,268,176 2 20.75
Total 2,140,930,752 23,155 100.00
Shareholders holding over 5%: Nationality Holding

Bank Muscat S.A.O.G. Oman 14.74%
Overseas Investment S.P.C. Bahrain 6.01%
The directors take this opportunity to express their appreciation to the leadership led by HM
King Hamad bin Isa Al Khalifa, HRH the Prime Minister Prince Khalifa bin Salman Al Khalifa
and HRH the Crown Prince, Deputy Supreme Commander and First Deputy Premier Prince
Salman bin Hamad Al Khalifa, the Ministry of Finance, the Ministry of Industry and Commerce,
the Central Bank of Bahrain, the Bahrain Bourse, correspondents, customers, shareholders
and employees of the Bank for their support and collective contribution since the establishment
of the Bank and we look forward to their continued support in the fiscal year 2016.
Shaikha Hessa bint Khalifa bin Hamad Al-Khalifa

Chairperson
9 February 2016
Manama, Kingdom of Bahrain

On the backdrop of falling crude oil prices, Al Salam Bank-Bahrain B.S.C. (“ASBB”,”Bank”)
managed to close the fiscal year 2015 on a positive note. Pursuant to its business combination
with BMI Bank BSC © (“BMI”), ( “Group”), the Group continues to be the second largest
Islamic retail bank in the Kingdom of Bahrain with an expanded branch and ATM network.
I believe that the Group is ideally poised to achieve its vision of becoming a regional force
in Islamic financial services industry. I would like to thank the shareholders and senior
management for their strong support and relentless efforts taken in successfully implementing a
strategy to put the respective systems and operational controls in place.
The continued drop in oil prices impacted the asset growth in 2015 with fewer lending
opportunities in the banking sector and in the region and also created uncertainties in market
conditions. In light of the above, the Group shifted its focus towards high quality assets and
adopted a wise strategy of running off expensive deposits and deploying liquidity in sovereign
assets. This led to the surge in CBB sukuks to BD313.1 million at end of 2015 as compared
to BD145.8 million at the end of 2014. The Bank also adopted this strategy due to limited
availability of Sharia compliant fixed income instruments. Balance sheet footing was optimized
by reducing total assets of the Group to BD1,656.6 million at 31 December 2015 from
BD1,955.3 million at 31 December 2014.
Your Bank’s continued focus on core banking

initiatives including corporate, commercial and
retail banking resulted in an impressive increase
in gross operating income of BD57.8 million
for 2015 as compared to BD46.1 million in
2014. Stringent cost control measures were
implemented in 2015 to bring the total operating
expenses of the Group from BD26.4 million to
BD25.3 million, a decrease of 4.4%. The net
profit attributable to shareholders of the Bank
for the year was BD12.3 million after taking into
consideration asset provisions of BD22.9 million.

The results are considered to be impressive against a backdrop of global uncertainties and
challenging market conditions. This has been possible due to the timely exit of investments and
Sukuks with continued emphasis on core banking initiatives.
On the retail front, the Bank enhanced its presence in the Capital and Southern
Governorates of Kingdom of Bahrain in 2015 with the opening of branch in Seef
Al Muharraq Mall and three new ATMs. The Bank branches and ATM network
now include 11 branches and 35 ATMs positioned strategically across Kingdom
of Bahrain.
On investments, the Bank adopted a cautious approach in selecting investments

in line with the Board’s risk appetite and prevailing market conditions. Due to the
continued slump in oil prices, the Group adopted a prudent and conservative
policy of providing BD9.4 million towards its exposures to alternative energy
assets. Exposures to investments in aviation sector were also affected due to
declaration of bankruptcy by a leading Southeast Asian airline. Due to the failure
of this carrier to honor its lease obligations, the underlying value of an aircraft
fell, warranting a provision of BD7.6 million. On a positive note, the Group
successfully acquired equity interest in Boeing777-300ER aircraft with a lease to
a leading regional airline and exited the same on a profitable note.
The year also saw another successful exit of the Group’s participation in a prime retail property
in France at a gain.
In summary, the investment business experienced ups and downs during the fiscal year with
Our Private Banking Department has an outstanding year exiting some investments whilst
managing its total placements of more than 100 million dollars, stabilizing the overall financing
assets and deposits.
Overall the Group maintained a moderate approach to banking practices and relied on its
core competencies in financing activities. The emphasis was on adherence to prudent risk
management practices in granting new financing facilities and acquiring investments.

Message from the Group CEO (continued)
The capital adequacy continued to reflect a healthy ratio of 20.1% as of the end of the fiscal
year against a mandatory Central Bank of Bahrain requirement of 12.5%.
Our ability to mobilize and integrate the merger

at a quick pace, the ability of sustaining a larger
capital base, a broader and competent talent
pool, extended presence in the region and
access to a wider customer base are undoubtedly
the winning ingredients for the next stage of our
growth.

Message from the Group CEO (continued)
As we continue our journey in 2016, on behalf of all the shareholders and the Board of
Directors, I would like to take this opportunity to express my heartfelt appreciation to the wise
leadership of the Kingdom of Bahrain led by His Majesty King Hamad bin Isa Al Khalifa, HRH
the Prime Minister Prince Khalifa bin Salman Al Khalifa and HRH the Crown Prince, Deputy
Supreme Commander and First Deputy Premier Prince Salman bin Hamad Al Khalifa for their
firm support. I am also grateful to the Board of Directors, Ministry of Industry, Commerce and
Tourism, Central Bank of Bahrain, Bahrain Bourse for their continued support and guidance.
I thank our valuable shareholders and loyal customers whose continued support is vital for
the Bank’s future growth. Finally, I express my sincere gratitude to the team at Al Salam Bank
Bahrain BSC for their teamwork and perseverance which forms the key to our success till date.
Yousif Abdulla Taqi

Director & Group CEO

Operating Environment
The challenges of the world economy continued in 2015 with global growth severely restrained
due to weakening of commodity prices (i.e. oil, etc.), by the Chinese downturn, meltdown of
global trade capital flows and a continued deceleration of economic activity amongst emerging
economies. The slowdown in China, the challenges in Brazil and Russia, the legacy of debt
and disharmony in Europe and the US and battered global markets have added to the gloomy
outlook of the markets. The IMF World Economic Outlook report forecasted global growth of
3.1% in 2015, 0.3% lower than in 2014.
Business Environment
Against the backdrop of a bleak world economy and the fall in oil prices, the GCC economy
maintained its resilient posture, standing firm. The decline in foreign exchange reserves
concurrent with the region’s conflicts impacted growth but the planned diversification to the
non-oil sector has reaped dividends for the GCC economy.
The implementation of the infrastructure project pipeline benefitted Bahrain against the weak
market dynamics. Bahrain’s non-oil growth remained robust with consistent growth of
approximately 4.5% with major contribution in year-on-year growth in construction sector of 7%
in the first half of 2015. However, challenges continue to remain for taking necessary steps to
manage budgetary deficits. The Kingdom’s Gross Domestic Product (GDP) expanded to 2.4%
in the third quarter of 2015, despite market volatility.
Financial Performance
The Bank shifted its focus towards high quality assets due to the uncertainties in market
conditions. This was evidenced by increased exposure to sovereign Sukuks from BD145.8
million at the end of 2014 to BD313.1 million at the end of 2015. In view of the market
conditions, the Group had been selective in financing in order to maintain or enhance asset
quality. As a result, shedding liquidity by running off expensive deposits and deploying liquidity
of sovereign assets was a strategy pursued by the Group in 2015. This had resulted in the
Group consciously reducing its customer deposits by circa 20.8% in 2015 to reduce the cost
of liabilities. Limited availability of investment grade Shari’a compliant fixed income instruments
was another major factor that drove management to pursue this strategy. Balance sheet footing
was optimized by reducing total assets of the Group to BD1,656.6 million from BD1,955.3
million at 31 December 2014.

Against the backdrop of a gloomy global economic climate, the Group reported a 25%
increase in gross operating income from BD46.1 million in 2014 to BD57.8 million in 2015,
due to the focus on core banking activities comprising corporate, commercial and retail
banking. Stringent cost control measures were implemented in 2015 to bring the total operating
expenses of the Group from BD26.4 million to BD25.3 million, a decrease of 4.4%.
The Bank continued to expand its financial institution, group network with a net lending position
of BD135 million as of 31 December 2015 and holding a large portfolio of sovereign sukuks.
Financially, fiscal year 2015 saw the Group earning a net profit attributable to the shareholders
of BD12.3 million, as compared to a net profit of BD15.6 million in 2014. The earnings per
share (EPS) for the year amounted to 5.8 fils against 8.0 fils achieved in 2014.
The net profit attributable to shareholders of the Bank for the year was BD12.3 million after
taking into consideration recognition of provision of asset impairment of BD22.8 million.
Capital Adequacy
Al Salam Bank-Bahrain B.S.C. continues to enjoy strong financial solvency and liquidity.
In accordance with the Basel III capital adequacy guidelines, the Bank’s capital adequacy
continued to reflect a healthy ratio of 20.1% as of the end of the fiscal year against a mandatory
Central Bank of Bahrain requirement of 12.5%.
Asset Quality
The Bank continues to maintain a conservative approach in selecting new assets for financing
and investments. As at the end of the fiscal year, 79.3% of the financing portfolio has been
classified under the “satisfactory” category. Total provisions for financing portfolio was BD29.6
million (2014: BD9.8 million). Additionally, the Bank has set up a dedicated Asset Remedial and
Collection Unit and put in place a robust mechanism to closely monitor past due facilities.

Management Review of Operations and Activities (continued)
BANKING ACTIVITIES
Corporate Banking
The Corporate Banking business for the year 2015 remained upbeat. The division laid strong
emphasis on functional & structural changes - enhancement of its processes & systems,
aligning of expertise and focus on human resources, to optimize cost and efficiency. A series
of diligent studies allowed for a subsequent strategy resulting in implementation of an optimal
production framework. The framework enabled a focused and high quality customer service
offering with efficient working controls. The year witnessed the ongoing successful execution of
the merging Islamic with the Conventional Corporate Banking Systems vis a vis the BMI Bank
merger.
A calculated risk approach was adhered to in selecting new asset bookings. The department
strengthened its liquidity position by prudent portfolio diversification. Exposure to gain security
in financing and loans enhanced credit quality. We reduced concentration on the contracting
sector due to market volatility.
The Corporate Banking department was the first to aid in the conversion of assets into Shari’a-
compliant facilities, streamlining it under the Al Salam Brand. Financing was extended to
government, semi-government and private sector entities. The Group continued its support to
Tamkeen providing support to SME business segment. In lieu of the changes and the support,
a positive change was witnessed in the credit practice for SME’s underlining the value and role
of the Group. The essence of 2015 was in facilitating and enhancing relationships with its core
customer clientele whilst also being cautious in streamlining the client base, so as to have a
positive impact on the bottom line.
Retail Banking
Retail Banking accomplished significant milestones from the business association between
Al Salam Bank – Bahrain and BMI Bank - ensuring a unified and superior customer experience
across the group network. These milestones included 100% conversion of BMI Bank
performing conventional portfolio to Shari’a compliance; the launch of a refreshed savings
scheme which served the group combined customer base featuring the largest prize pool in the
scheme history; introduction of a unified credit card offering, including market leading loyalty
schemes of up to 1% instant cash back; launch of the Go Green campaign and standardization
of the Group’s offerings.
In addition, Retail Banking signed two strategic agreements supporting its plan to differentiate
itself through improved customer experience. The first was with Visa International to support
the bank’s efforts in introducing new and innovative card products. The second was with Eskan
Bank for the extension of special financing schemes to include joint mortgage finance “Pari
Passu” and the social housing scheme.
The year 2015 saw the launch of a new Branch in Seef Al Muharraq Mall and three new ATMs
to enhance our presence in the Capital and Southern Governate, a total of 11 branches and 35
ATMs.

Private Banking
The Private Banking Department had another outstanding year, profitable in terms of its
performance and contribution to the bottom-line. The department continued to attract new
deposits and book strong financial assets.
The Private Banking Department focused on the value proposition of its exclusive clientele
namely: bespoke service, speed and confidentiality. It leveraged its position to perform
remarkably as an independent unit with its own legal, credit and administration department. The
dedicated business unit with the highest level of discretion required has seen the strategy pay
rich dividends. The Department exited some investments whilst its total placements managed,
amounted to more than US$100 million, stabilizing the overall financing assets and deposits.
The focus on creative products was a value add in the overall strategy. The department offered
alternative Shari’a-compliant investment products guaranteeing a steady income with minimum
market volatility. This resulted in a substantial increase of the customer base. The Government’s
Sukuk Scheme leveraged by the department also witnessed tremendous success.
Investments
The prevailing market conditions in 2015 necessitated a cautious approach in selecting

investments in line with the Board’s risk appetite. The Group successfully acquired equity
interest in Boeing777-300ER aircraft with a lease to a leading regional airline and exited the
same on a profitable note. Due to the continued slump in oil prices, the Group adopted a
prudent and conservative policy of providing BD9.4 million towards its exposures to alternative
energy assets. Exposures to investments in aviation sector were also affected due to a
declaration of bankruptcy by a leading Southeast Asian airline. Due to the failure of this carrier
to honour its lease obligations, the underlying value of an aircraft fell, warranting a provision of
BD7.6 million.
On its Exit strategy, the year also saw another successful exit of the Group’s participation in a
prime retail property in France at a gain.
On the whole, the investment business experienced ups and downs during the fiscal year with

Information Technology
The Information Technology Department’s stellar performance continued in 2015 adhering

to the holistic mandate of actual integration of the network systems, whilst enabling cost
rationalization.
New and improved methods in maintaining high customer service standards continued to be
the focus in 2015. The team worked tirelessly to ensure efficiency and progress of the network,
service and resource levels whilst facilitating a smooth functioning of the departments and
unifying the processes of both banks.
The IT department’s comprehends its role of being the core nerve center of the group and
has left no stone unturned in meeting and adhering to the varied needs of all concerned
departments, meeting the corporate strategy mandate.
Corporate Governance and Risk Management
Strong emphasis on Corporate Governance has been the mandate of the Management.
The Management continued to support initiatives to improve the knowledge and practice
of Corporate Governance within the Group. Compliance with the Central Bank of Bahrain
guidelines and other regulatory guidelines is a fundamental element of the Group’s operating
environment.
The focus during 2015 has been on integration and enhancement of the Risk Management
framework at the Group level. Policies and procedures underwent a thorough review and
particular focus was placed on enhancing the Basel III and ALM – Asset Liability Management
systems to be in sync with the development of the industry and the vision of the Group.
Know Your Customer
The Group is seeking to continue enhancing its world-class systems to support the monitoring
activities. The Group adheres to the Financial Crimes Module of Central Bank of Bahrain’s
rulebook. The module contains Bahrain’s current anti-money laundering legislation, developed
under the directives of the Financial Action Task Force, which is the international organization
responsible for developing global anti-money laundering policies.
During the year, in line with the Central Bank of Bahrain guidelines, the Group and its
subsidiaries successfully completed its registration under Foreign Account Tax Compliant Act
(“FATCA”). The Group places significant emphasis on understanding its customers and their
financial activities. The new customer onboarding process of the Group has been updated
to identify US persons. The Group has implemented state of the art world-class systems to
support the monitoring activities. Proper due diligence is conducted to ensure that the financial
activities of its customers are performed in accordance with the guidelines issued by the
regulatory authorities.

Human Capital
Attracting, retaining and developing the best local talent is a key focus for the Bank’s Human
Resource team. Testament to the Bank’s commitment to enhancing the pool of local talent is
the fact that the Group achieved an impressive Bahranization rate of 90% as of 31 December
2015. During the year the Group continued to focus on training and development, dedicating
almost 9,003 hours to staff training programs.
While providing the necessary training and skills to employees, the Group continues its
commitment to developing the Kingdom’s future generation. During the year the Group worked
in collaboration with leading educational institutions and youth leadership programs in order to
prepare the youth of Bahrain for the workforce.
Aligned with this endeavor, Al Salam Bank-Bahrain lent its support to INJAZ Bahrain, a
prominent Bahraini Youth Leadership program, with 18 of the Group’s staff volunteering their
time and energies to various INJAZ programs. As well as providing staff, volunteers, ASBB also
hosted a number of INJAZ students including 21 students from the University of Bahrain and
other Secondary Schools as part of “The Company” program, and 15 students as part of “The
Shadow” Program. These programs add immense value to the youth of Bahrain and the Bank
is committed to their ongoing support.
The annual summer trainee program was a great success again in 2015. As part of the
program, the Bank hosted 33 graduate students from various universities across the Kingdom
for two months. The program included workshops as well as graduate placements in various
departments.
The Group’s initiatives was highly appreciated by the participating graduates who gained
invaluable preparation for their future careers. In addition, the Bank hosted a number of
students under the Ithra program, a program sponsored by Al Mobarah Al Khalifia.
The Bank has nominated three Executives to attend the Leadership Grooming Program through
CBB’s Prestigious Waqf Fund. This program has been delivered by IVY Business School
in Hong Kong and Canada with 34 other Bahrainis from different Islamic Banks, aimed at
developing the next generation of Islamic banking industry leaders and to improve leadership
skills, strategic thinking and ethical orientation of the participants.

The Kufi Al Mashreqi script is known for
its smooth and organic flow. It has played
a significant role in the writings of the Holy
Quran. The beauty and simplicity of its
script underlines its magnificent aura. At
Al Salam Bank-Bahrain we propagate a
‘user friendly’ and ‘easy to understand’
approach to banking . Our simplistic
approach has enabled us to carve a unique
niche in the Islamic Banking Industry.

CORPORATE GOVERNANCE PRACTICE
The Bank aspires to the highest standards of ethical conduct: doing what it says; reporting
results with accuracy and transparency and maintaining full compliance with the laws, rules and
regulations that govern the Bank’s business. Since 2010 when the new Corporate Governance
Code was introduced by the Central Bank of Bahrain, the Bank has been implementing several
measures to enhance its compliance with the corporate governance rules. A separate section
on the status of compliance with the corporate governance rules and High Level Controls
Module is included in this report.
SHAREHOLDERS
Major Shareholders as of 31 December 2015
Country of
Name No. of shares % Holding
origin
Bank Muscat ( S.A.O.G. ) Oman 315,494,795 14.74
Overseas Investment S.P.C. Bahrain 128,773,381 6.01
Al Rushd Investments W.L.L. UAE 105,000,000 4.90
Tasameem Real Estate Company L.L.C. UAE 102,264,615 4.78
D S L Yachts W.L.L. UAE 77,450,000 3.62
Gimbal Holding Company S.P.C Bahrain 75,553,633 3.53
First Energy Bank B.S.C. Bahrain 73,884,098 3.45
Royal Court Affairs, Sultanate of Oman Oman 70,825,359 3.31
Securities and Investment Company Bahrain 62,965,798 2.94
B.S.C. (c)
National Bank of Abu Dhabi PJSC UAE 38,500,000 1.80
Aabar Investments PJSC UAE 38,000,000 1.77
Al Sueban Company Bahrain 26,250,000 1.23
Global Express Company W.L.L. Bahrain 25,000,000 1.17
Falcon Private Bank Ltd. UAE 24,149,435 1.13
HRH Prince Mohammed Bin Fahad Bin Saudi Arabia 21,708,750 1.01
Abdulaziz

Shareholding – 31 December 2015
No. of No. of % of outstanding

Category shares shareholders shares
Less than 1% 884,333,208 23,137 41.31

1% to less than 5% 812,329,368 16 37.94
5% to less than 10% 128,773,381 1 6.01
10% to less than 20% 315,494,795 1 14.74
20% up to less than 50% - - -
50% and above - - -
Total 2,140,930,752 23,155 100.00
The outstanding ordinary share ownership of the Bank is distributed as follows:
No. of Ownership
Nationality shares percentage
Bahraini
Government - -
Institutions 462,609,907 21.61
Individuals 125,252,725 5.85
GCC
Government 70,825,359 3.31
Individuals 425,399,845 19.87
Other
Individuals 93,717,277 4.38
Total 2,140,930,752 100.00

Corporate Governance Report (continued)
BOARD OF DIRECTORS
The Board of Directors provides central leadership to the Bank, establishes its objectives and
develop the strategies that direct the ongoing activities of the Bank to achieve these objectives.
Directors determine the future of the Bank through the protection of its assets and reputation.
They will consider how their decisions relate to “stakeholders” and the regulatory framework.
Directors shall apply skill and care in exercising their duties to the Bank and are subject to
fiduciary duties. Directors shall be accountable to the shareholders of the Bank for the Bank’s
performance and can be removed from office by them.
The primary responsibility of the Board is to provide effective governance over the Bank’s affairs
for the benefit of its shareholders, and to balance the interests of its diverse constituencies
including its customers, correspondents, employees, suppliers and local community. In all
actions taken by the Board, the directors are expected to exercise their business judgment
in what they reasonably believe to be in the best interests of the Bank. In discharging that
obligation, directors may rely on the honesty and professional integrity of the Bank’s senior
executives and external advisors and auditors.
Board Composition
The Board consists of members of high-level professional skills and expertise. Furthermore,
in compliance with the corporate governance requirements, the Board Committees consist
of Members with adequate professional background and experience. The Board periodically
reviews its composition and the contribution of Directors and Committees.
The appointment of Directors is subject to prior screening by the Remuneration, Nomination

and Corporate Governance Committee and the Board of Directors as well as approval by
the Shareholders and the Central Bank of Bahrain. The classification of “executive”, “non-
executive” and “independent non-executive” directors is as per definitions stipulated by the
Central Bank of Bahrain.
Mandate of the Board of Directors and Directors’ Roles and Responsibilities
The principal role of the Board of Directors (the Board), is to oversee the implementation of the
Bank’s strategic initiatives and its functioning within the agreed framework, in accordance with
relevant statutory and regulatory structures. The Board is also responsible for the consolidated
financial statements of the Group. The Board ensures the adequacy of financial and operational
systems and internal control, as well as the implementation of corporate ethics and the code
of conduct. The Board has delegated responsibility for overall management of the Bank to the
Chief Executive Officer.
The Board reserves a formal schedule of matters for its decision to ensure that the direction
and control of the Bank rests with the Board. This includes strategic planning, performance
reviews, material acquisition and disposal of assets, capital expenditure, authority levels,
appointment of auditors and review of the financial statements and financing activities including

annual operating plan and budget, ensuring regulatory compliance and reviewing the adequacy
and integrity of internal controls. All policies pertaining to the Bank’s operations and functioning
are to be approved by the Board.
Each Director holds the position for three years, after which he must present himself to the
Annual General Meeting of shareholders for re-appointment. The majority of ASBB Directors
(including the Chairman and/or Vice Chairman) are required to attend the Board meetings in
order to ensure a quorum.
Board Elections System
Article 26 of the Bank’s Articles of Association provides the following:
1. The Bank shall be administered by a Board of Directors consisting of not more than
fourteen members and not less than five members. The Board’s term shall be three years
which may be renewed.
2. Each shareholder owning 10% or more of the capital may appoint whoever represents him
on the Board to the same percentage of the number of the Board members. His right to
vote shall be forfeited for the percentage he has exercised to appoint his representative. If
a percentage is left after exercising his right to nominate, he may use such percentage to
vote.
3. Other members of the Board shall be elected by the General Assembly by secret ballot.
The Board of Directors shall elect, by secret ballot, a Chairman and one or more Vice Chairman
every three years. The Vice Chairman shall act for the Chairman during his absence or if there
is any barrier preventing him.
Article 29 of the Article of Association covered the “Termination of Membership in the Board of
Directors”. It provided the following:
A Director shall lose his office on the Board in the event that he:
a. Fails to attend four consecutive meetings of the Board in one year without an acceptable
excuse, and the Board of Directors decides to terminate his membership;
b. Resigns his office by virtue of a written request;
c. Forfeits any of the provisions set forth in Article 26 of the Articles of Association;
d. Is elected or appointed contrary to the provisions of the Law; and
e. Has abused his membership by performing acts that may constitute a competition with the
Company or caused actual harm to the Company.

Independence of Directors
An independent director is a director whom the Board has specifically determined, has no
material relationship which could affect his independence of judgment, taking into account all
known facts. The Directors have disclosed their independence by signing the Directors Annual
Declaration whereby they have declared that during 2015 that they have met all the conditions
stipulated under Appendix A of the Corporate Governance Code.
In 2015, the members of the Board were:
Independent Non-executive Directors

1. H.H. Shaikha Hessa bint Khalifa Al Khalifa - Chairperson
2. H.E. Shaikh Khalid bin Mustahail Al Mashani - Vice Chairman
3. Mr. Hussein Mohammed Al Meeza
4. Mr. Salman Saleh Al Mahmeed
5. Mr. Essam bin Abdulkadir Al Muhaidib
6. Mr. Sulaiman bin Mohamed Al Yahyai
7. Mr. Hisham Saleh Al Saie
8. Mr. Mohamed Shukri Ghanem
9. Mr. Khalid Salem Al-Halyan
Non-independent and Non-executive Directors

1. H.E. Mohamed Ali Rashid Alabbar
Executive and Non-independent Directors

1. Mr. Yousif Abdulla Taqi
All current Directors were elected for a three-year term on 24 February 2015.
Induction and Orientation for New Directors
When the new Board of Directors was elected on 24 February 2015 all directors were
provided with information related to the Corporate Governance Guidelines and the Board
Charter, Committee and the Code of Conduct, policies and other documents were reviewed.
Evaluation of Board Performance
Members of the Board of Directors have been requested to assess their self-performance,
how the Board of Directors’ operate, evaluate the performance of each committee in light of
the purposes and responsibilities delegated to it, their attendance and their involvement in the
decision making process.

Remuneration of Directors
Remuneration of the Directors as provided by Article 36 of the Articles of Association states the
following:
“The General Assembly shall specify the remuneration of the members of the Board of
Directors. However, such remunerations must not exceed in total 10% of the net profits after
deducting statutory reserve and the distribution of dividends of not less than 5% of the paid
capital among the shareholders. The General Assembly may decide to pay annual bonuses to
the Chairman and members of the Board of Directors in the years when the Company does not
make profits or in the years when it does not distribute profits to the shareholders, subject to
the approval of the Minister of Industry and Commerce.”
“The Board, based upon the recommendation of the Remuneration and Nomination Committee
and subject to the laws and regulations, determines the form and amount of director
compensation subject to final approval of the shareholders’ at the Annual General Assembly
meeting. The Remuneration and Nomination Committee shall conduct an annual review of
directors’ compensation.”
Per the Directors’ Appointment Agreement, the structure and level for the compensation for the
Board of Directors consist of the following:
1. Annual remuneration subject to the annual financial performance of the Bank and as per the
statutory limitation of the law.
2. The total amount payable to each Board member with respect to Board and Committee
meetings attendance shall be taken into consideration when determining each member’s
annual remuneration.
3. The remuneration of the Board of Directors will be approved by the shareholders at the
Annual General Assembly.
In addition to the above, Directors who are employees of the Bank shall not receive any
compensation for their services as directors. Directors who are not employees of the Bank
may not enter into any consulting arrangements with the Bank without the prior approval of
the Board. Directors who serve on the Audit Committee shall not directly or indirectly provide
or receive compensation for providing accounting, consulting, legal, investment banking or
financial advisory services to the Bank.
The Board Charter
The Board has adopted a Charter which provides the authority and practices for governance
of the Bank. The Charter was approved by the Board with the beginning of its term in 2012
and includes general information on the composition of the Board of Directors’, classification
of Directors’, Board related Committees, Board of Directors’ roles and responsibilities, Board
of Directors’ code of conduct, Board remuneration and evaluation process, insider dealing,
conflict of interest and other Board related information.

Conflict of Interest
The Bank has a documented procedure for dealing with situations involving “conflict of interest”
of Directors. In the event of Board or its Committees considering any issues involving “conflict
of interest” of Directors, the decisions are taken by the full Board/Committees.The concerned
Director abstains from the discussion/ voting process. These events are recorded in Board/
Committees proceedings. The Directors are required to inform the entire Board of (potential)
conflicts of interest in their activities with, and commitments to, other organisations as they arise
and abstain from voting on the matter. This disclosure includes all material facts in the case of a
contract or transaction involving the Director.
Code of Conduct
The Board has an approved Code of Conduct for ASBB Directors. The Board has also
approved a Code of Ethics for the Executive Management and staff that include “whistle-
blowing” procedures. The responsibility for monitoring these codes lies with the Board of
Directors. The Directors’“Code of Conduct” is published on the Bank’s website. The directors’
adherence to this Code of Conduct is periodically reviewed.
Board Meetings and Attendances
The Board of Directors meets at the summons of its Chairperson or her Deputy (in event of
his absence or disability) or if requested to do so by at least two Directors. According to the
Bahrain Commercial Companies Law and the Bank’s Articles of Associations, the Board meets
at least four times a year. A meeting of the Board of Directors shall be valid if attended by half of
the members in person. During 2015, five Board meetings were held at the Bank’s premises as
follows:
Board Meetings in 2015 - Minimum Four Meetings Per Annum
Members 4 Feb 24 Feb* 27 Apr 28 Sept 7 Dec
H.H. Shaikha Hessa bint Khalifa Al Khalifa a a a a a
H.E. Shaikh Khalid bin Mustahail Al Mashani a a a a a
H.E. Mohammed Ali Al Abbar - a - - -
Mr. Hussein Mohammed Al Meeza a a - a a
Mr. Salman Saleh Al Mahmeed a a a a a
Mr. Essam bin Abdulkadir Al Muhaidib a - a - a
Mr. Suleiman Mohamed Al Yahyai a a a a a
Mr. Hisham Saleh Al Saie a a a a a
Mr. Mohamed Shukri Ghanem N/A a a a a
Mr. Khalid Salem Al-Halyan N/A a a a a
Mr. Yousif Abdulla Taqi a a a a a
Mr. Hamad Tariq Al Humaidi** a N/A N/A N/A N/A
Mr. Habib Ahmed Kassem** a N/A N/A N/A N/A
Mr. Adnan Abdulla Al Bassam** a N/A N/A N/A N/A
Mr. Fahad Sami Al Ebrahim** a N/A N/A N/A N/A
* The second Board meeting was held immediately following the AGM meeting and there was no official invitation to it.
** Director in the previous Board term.

Directors’ Interests
Directors’ shares ownership in two-year comparison as on 31 December:
No. of Shares
Members 2014 2015
H.H. Shaikha Hessa bint Khalifa Al Khalifa 100,000 100,000
H.E. Shaikh Khalid bin Mustahail Al Mashani - -
H.E. Mohammed Ali Alabbar 100,000 100,000
Mr. Hussein Mohammed Al Meeza 462,819 462,819
Mr. Salman Saleh Al Mahmeed 100,000 100,000
Mr. Essam bin Abdulkadir Al Muhaidib 100,000 100,000
Mr. Suleiman Mohamed Al Yahyai - -
Mr. Hisham Saleh Al Saie - -
Mr. Mohamed Shukri Ghanem* N/A -
Mr. Khalid Salem Al-Halyan* N/A 10,000

Mr. Yousif Abdulla Taqi 520,000 818,734
There were no trading activities in the shareholdings of directors during the year except for the purchase of 298,734 shares
by Mr. Yousif Abdullah Taqi.
*Directors were not on the Board during 2014.
Related Entities
The following shareholder is related to Mr. Hussein Al Meeza:

• Top Enterprises L.L.C. owns 925,000 shares
The following shareholder is related to H.E. Mohamed Ali Rashid Alabbar:

• Al Rushed Investments W.L.L. owns 105,000,000 shares
Approval Process for Related Parties’ Transactions
The Bank has a due process for dealing with transactions involving related parties. Any
such transaction will require the approval of the Board of Directors. The nature and extent of
transactions with related parties are disclosed in the consolidated financial statements.

Material Transactions that require Board Approval
While any transaction above BD5 million and up to BD10 million requires the approval of the
Executive Committee of the Board of Directors, any transaction above BD10 million requires
the approval of the Board of Directors of the Bank. In addition, when acquiring 20% of a
company Board approval is required regardless of the amount.
Material Contracts and Financing Involving Directors
A financing facility has been provided to Mr. Hisham Saleh Al Saie. The details of the facility are
as follows:
• Principal amount of financing : BD88,333

• Nature of facility : Diminishing Musharaka
• Profit rate : (6.5% p.a.)
• Value date : 28th August, 2012
• Security : BD394,420
• Principal outstanding : BD55,000
Directorships held by Directors on Other Boards
The High Level Controls Module provides that no director should hold more than three
directorships in Bahrain public companies. All members of the Board of Directors meet this
requirement.
Board Committees
The Board level committees are formed, and the Board of Directors appoints their members, at
the beginning of each Board term. They are considered the high level link between the Board
and the Executive Management. The objective of these committees is to assist the Board in
supervising the operations of the Bank. The Committee reviews issues that are submitted by
the management to the Board and makes recommendations to the Board for their final review.
Below are certain information relating to the work of certain Board Committees during the
year 2015, summary of the dates of Committee meetings held, Directors’ attendance and a
summary of the main responsibilities of each Committee.
The full texts for the Terms of Reference for Board Committees (Executive Committee, Audit
and Risk Committee, and Remuneration, Nomination and Corporate Governance Committee)
are published on the Bank’s website.

Executive Committee
Committee Meetings in 2015 - Minimum four meetings per annum.
Four Committee meetings were held during 2015 as follows:
Members 24 Mar 3 June 19 Oct 22 Nov

Mr. Hussein Mohamed Al Meeza (Chairman) a a a a
Mr. Essam Al Muhaidib - a - a
Mr. Suleiman Mohamed Al Yahyai a - a a
Mr. Hisham Saleh Al Saie a a a -
Mr. Mohamed Shukri Ghanem a - a a
Mr. Yousif Abdulla Taqi a a a a
Summary of responsibilities: Deputizing the Board on matters pending decisions between
Board meetings, considering and reviewing management’s operational reports and regulatory
and strategic developments, reviewing and approving credit and market risk proposals in
excess of the authority limits of the relevant committees, reviewing management’s recovery
procedures for problem loans and requirements for provisioning.
Audit and Risk Committee

Committee Meetings in 2015 - Minimum four meetings per annum.
Four Committee meetings were held during 2015 as follows:
Members 3 Feb 23 April 9 Aug 10 Nov

Mr. Salman Saleh Al Mahmeed (Chairman) a a a a
H.E. Shaikh Khalid bin Mustahail Al Mashani a a a a
Mr. Fahad Sami Al Ebrahim* a N/A N/A N/A
Mr. Khalid Salem Al-Halyan N/A a a a
*Member of the Committee during the previous term.
Summary of responsibilities: Reviews the internal audit program and internal control system,
considers major findings of internal audit review, investigations and management’s response,
ensures coordination among internal and External Auditors, monitors trading activities of
key persons and ensures prohibition of the abuse of inside information and disclosure
requirements and reviews the periodic risk reports.

Remuneration, Nomination and Corporate Governance Committee

Committee Meetings in 2015 - Minimum two meetings per annum.
Three meetings were convened during 2015:
Members 29 Jan 9 Sept 7 Dec

H.H. Shaikha Hessa bint Khalifa Al Khalifa (Chairperson) N/A a a
H.E. Mohammed Ali Al Abbar N/A a -
Mr. Khalid Salem Al-Halyan N/A a a
(attended part of the meeting related to Corporate Governance) N/A a -
Mr. Habib Ahmed Kassem* a N/A N/A

Mr. Fahad Sami Al Ebrahim* a N/A N/A
Mr. Hisham Saleh Al Saie* a N/A N/A
*Member of the Committee during the previous term.
Summary of responsibilities: Make specific recommendations to the Board of Directors’ on

both remuneration policy and individual remuneration packages for the Chief Executive Officer
and other senior managers. Evaluate senior management’s performance in light of the Bank’s
corporate goals. Make recommendations to the Board from time to time as to the changes the
committee believes to be desirable to the size of the Board or any committee of the Board.
Oversees and monitors the implementation of the governance policy framework. Reviews on
an annual basis the Bank’s compliance with the respective Corporate Governance rules and
regulations as well as the Board’s and subcommittees’ charters. Reviews on an annual basis
the Shari’a Supervisory Board’s compliance with its approved charter.
SHARI’A SUPERVISORY BOARD
Al Salam Bank-Bahrain is guided by a Shari’a Supervisory Board consisting of five

distinguished scholars. The Board reviews the Bank’s activities to ensure that all products and
investment transactions comply fully with the rules and principles of Islamic Shari’a.
The Board meets at least 4 times a year. Its members are remunerated by annual retainer fee
and sitting fees per meeting attended, with travel expenses reimbursed as appropriate. Its
members are not paid any performance-related remuneration.
EXECUTIVE MANAGEMENT
The Board delegates the authority for management of the Bank to the Group Chief Executive
Officer. The Group CEO and Executive Management are responsible for implementation
of decisions and strategies approved by the Board of Directors and the Shari’a Fatwa and
Supervisory Board.

Senior Managers’ Interests
The number of shares held by the senior managers, in two-year comparison, as on 31

December is as follows:
Shares
Staff name 2014 2015
Mr. Abdulkarim Mohammed Turki 168 168
Dr. Mohammed Burhan Arbouna 336 336

Mr. Essa Abdulla Bohijji 96,495 96,495
96,999 96,999
Management Committees
The Chief Executive Officer is supported by a number of management committees each

having a specific mandate to give focus to areas of business, risk and strategy. The various
committees and their roles and responsibilities are:
Committee Roles and responsibilities
Recommending the risk policy and framework to the Board. Its Primary
role is the selection and implementation of risk management systems,
portfolio monitoring, stress testing, risk reporting to Board, Board
Credit/Risk Committee Committees, Regulators and Executive Management. In addition
to these responsibilities, individual credit transaction approval and
monitoring is an integral part of the responsibilities.
This Committee’s primary responsibility is to review the trading and

Asset Liability Committee liquidity policy for the overall management of the balance sheet and its
associated risks.
The role of the Committee is to review and approve all transactions

related to corporate and real estate investments and monitoring their
Investment Committee performance on an ongoing basis. In addition, the Committee is
responsible to oversee the performance of the fund managers and
recommend exit strategies to maximize return to its investors.
TSC oversees the information technology function of the Bank. It

recommends the annual IT budget and plans, drawn up in accordance
Technology Steering with the approved strategy for the Bank, to the CEO for submission
Committee to the Board of Directors for their approval. It supervises the
implementation of the approved IT annual plan within set deadlines and
budgetary allocations.

Executive Management Compensation
The performance bonus of the Chief Executive Officer is recommended by the Remuneration
and Nomination Committee and approved by the Board. The performance bonus of senior
management is recommended by the Chief Executive Officer for review and endorsement by
the Remuneration and Nomination Committee subject to Board approval.
COMPLIANCE
The Bank has in place comprehensive policies and procedures to ensure full compliance with
the relevant rules and regulations of the Central Bank of Bahrain and the Bahrain Bourse, the
Dubai Financial Market, the Emirates Securities & Commodities Authority, including anti-money
laundering, prudential and insider trading reporting. The Bank is in compliance with High Level
Control Module issued by the Central Bank of Bahrain.
INTERNAL CONTROL
Internal control is an active process that is continually operating at all levels within the Bank.
The Bank has established an appropriate culture to facilitate an effective internal control
process and for monitoring its effectiveness on a periodic basis. Every employee of the Bank
participate in the internal control process and contribute effectively by identifying risk at an
earlier stage and implementing mitigating controls at optimum cost. Residual risk is properly
communicated to the senior management and corrective actions are taken.
KEY PERSONS POLICY
The Bank has established a Key Persons’ Policy to ensure that Key Persons are aware of the
legal and administrative requirements regarding holding and trading of the Bank’s shares, with
the primary objective of preventing abuse of inside information. Key Persons are defined to
include the Directors, Executive Management, designated employees and any person or firm
connected to the identified Key Persons. The ownership of the Key Persons’ Policy is entrusted
to the Board’s Audit Committee.
The Key Persons’ Policy is posted on the Bank’s website.

COMMUNICATION POLICY
The Bank recognizes that active communication with different stakeholders and the general
public is an integral part of good business and administration. In order to reach its overall
goals for communication, the Bank follows a set of guiding principles such as efficiency,
transparency, clarity and cultural awareness.
The Bank uses modern communication technologies in a timely manner to convey messages
to its target groups. The Bank shall reply without unnecessary delay, to information requests by
the media and the public. The Bank strives in its communication to be as transparent and open
as possible while taking into account bank confidentiality. This contributes to maintaining a high
level of accountability. The Bank also proactively develops contacts with its target groups and
identifies topics of possible mutual interest. The Bank reinforces clarity by adhering to a well-
defined visual identity in its external communications.
The Bank’s formal communication material is provided in both Arabic and English languages.
The Bank maintains a Legal Policy published on its website: www.alsalambahrain.com that
includes terms and conditions on the use of information published on the site.
The annual reports and quarterly financial statements, Board Charter and Corporate
Governance report are published on the Bank’s website. Shareholders have easy access to
various types of forms including proxies used for the Annual General Meeting. In addition,
forms are also available online to file complaints or make inquiries which are duly dealt with. The
Bank regularly communicates with its staff through internal communications to provide updates
of the Bank’s various activities.
Consumer / Investor Awareness Programmes and Tools
To fulfill its goals for external communications, promoting its products and communicating with
its stakeholders, ASBB employs a variety of communications tools. The most important of them
are listed below.
Seminars, bilateral contacts, website, newsletter, media campaigns,

Customers corporate presentations, speeches, publications, brochures, leaflets,
Radio and TV advertising, banners, unipols, SMS etc.
Publications, road shows (mostly bilateral contacts), Internet, media,

Investors investor presentations, wire services, brochures, leaflets, advertising
etc.
Institutional contacts, seminars, visits, bilateral contacts, Internet,

Regulatory & newsletter, media, publications (in particular the Annual Report),
Governmental Authorities brochures, leaflets, etc.
Media Communications Press releases, interviews, speeches, background seminars, etc.
General Public Media, other key target groups as multipliers

Communications

WHISTLE BLOWING POLICY
The Bank has a whistle blowing policy with designated officials to whom the employee can
approach. The policy provides adequate protection to employees for any reports in good faith.
The Board’s Audit Committee oversees the implementation of this policy.
The directors have adopted the following code of conduct in respect of their behaviour:
• To act with honesty, integrity and in good faith, with due diligence and care, in the best
interest of the Bank and its stakeholders;
• To act only within the scope of their responsibilities;
• To have a proper understanding of the affairs of the Bank and to devote sufficient time to
their responsibilities;
• To keep confidential Board discussions and deliberations;
• Not to make improper use of information gained through the position as a director;
• Not to take undue advantage of the position of director;
• To ensure his/her personal financial affairs will never cause reputational loss to the Bank;
• To maintain sufficient/detailed knowledge of the Bank’s business and performance to make
informed decisions;
• To be independent in judgment and actions and to take all reasonable steps to be satisfied
as to the soundness of all decisions of the Board;
• Not to agree to the Bank incurring an obligation unless he/she believes at the time, on
reasonable grounds, that the Bank will be able to discharge the obligations when it is
required to do so;
• Not to agree to the business of the Bank being carried out, or cause or allow the business
to be carried out, in a manner likely to create a substantial risk of serious loss to the Bank’s
creditors;
• To treat fairly and with respect all of the Bank’s employees and customers with whom they
interact;
• Not to enter into competition with the Bank;
• Not to demand or accept substantial gifts from the Bank for himself/herself or his/her
associates;
• Not to take advantage of business opportunities to which the Bank is entitled for himself/
herself or his/her associates;
• Report to the Board any potential conflict of interest, and
• Absent themselves from any discussions or decision-making that involves a subject in which
they are incapable of providing objective advice or which involves a subject of proposed
conflict of interest.

ORGANIZATION STRUCTURE
SHAREHOLDERS
Fatwa and Shari’a

Supervisory Board
Board of Directors
Executive Committee
Nomination, Remuneration & Cor-

porate Governance Committee
Audit And Risk Committee
Group Chief Executive Officer
Board Secretary Internal Audit
Shari’a Compliance Compliance
Human Resources Risk

& Administration
Deputy Group CEO Deputy Group CEO

Chief Operating Officer
Business Strategic Development & Support
Private Banking Operations Treasury & Capital Markets
Corporate Banking Information Technology Finance
Post Acquisition &

Retail Banking Legal Investment Administration
Corp. Com. &

Investments Investor Relations

PENALTIES
For ASBB (Solo)

During 2015: an amount of BD1.7 thousand was paid as penalty to the Central Bank for the
failure to comply with CBB requirements relating to Paragraphs BR-1.1.4 A and BR-4A.1.1 of
Volume 2 of the CBB Rulebook to submit the following reports to CBB before the respective
deadline dates.
1) Institutional Information System (IIS) update for the period ended 30 June 2015 and the year
ended 31st December 2015.
2) Penalties paid on individual transaction failures relating to Electronic Fund transfer System.
For BMI (Solo)

During 2015: an amount of BD6.2 thousand was paid as penalty to the Central Bank for the
failure to comply with CBB requirements relating to Paragraphs BR-1.1.4 A and BR-4A.1.1 of
volume 2 of the CBB Rulebook to submit the following reports to CBB before the respective
deadline dates.
1) Corporate Governance Report for the year ended 31st December 2015.
2) Institutional Information System update (IIS) for the year ended 31st December 2015.
3) Penalties paid on individual transaction failures relating to Electronic Fund transfer System.

CHANGES IN MANAGEMENT AND REPORTING LINES DURING 2015
Direct Reports to the Group CEO

• Dr. Anwar Al Sada – Deputy Group CEO - Business
• Mukundan Raghavachari – Deputy Group CEO - Strategic Development & Support
• Isa Maseeh – Group Chief Risk Officer
• Muna Al Balooshi – Group Head of Human Resources and Administration
Direct Reports to Deputy Group CEO - Business

• Anwar Murad – Head of Private Banking
• Talal Al Mulla – Head of Investments
• Arif Janahi – Head of Corporate Banking
• Abdulkarim Turki – Head of Retail Banking
Direct Reports to Deputy Group CEO - Strategic Development & Support

• Eyad Sater – Chief Operating Officer – Acting CEO of BMI Bank
• Hussain Abdulhaq – Head of Treasury & Financial Markets
• Khalid Jalili – Acting Head of Finance
• Harish Venkatakrishnan – Head of Investment Administration
• Ahmed Saif – Head of Investment Management

INTRODUCTION
This document has been prepared in accordance with CBB new remuneration disclosure
requirements for Islamic Banks under High Level Controls Module. These requirements are in
addition to the disclosures published in the Annual Report.
CORE REMUNERATION POLICY
The fundamental principles underlying our remuneration policy which has been approved by the
Board of Directors and the shareholders of the bank are:
• The composition of salary, benefits and incentives is designed to align employee and
shareholder interests;
• Remuneration determination takes into account both financial and non-financial factors over
both the short and longer-term;
• Emphasis is on performance evaluations that reflect individual performance, including
adherence to the Bank’s risk and compliance policies in determining the total remuneration
for a position;
• The Bank has set a fixed remuneration of the employees at such a level to reward the
employees for an agreed level of performance and the variable pay or bonus will be
awarded purely at the discretion of the Board’s Remuneration and Nomination Committee
(RNC) in recognition of the employees exceptional effort in any given performance period;
• The Bank shall have a well-defined variable pay scheme in place, to support the RNC,
should they decide to pay variable pay or bonus in any performance period;
• Variable pay will be determined based on achievement of targets at the Bank level, unit level
and individual level;
• Variable pay scheme is designed in a manner that supports sound risk and compliance
management. In order to achieve that goal:
• Performance metrics for applicable business units are risk-adjusted where appropriate;
• Individual award determinations include consideration of adherence to compliance-related
goals.

• The remuneration package of employees in Control and Support functions are designed
in such a way that they can function independent of the business units they support.
Independence from the business for these employees is assured through:
• Setting total remuneration to ensure that variable pay is not significant enough to
encourage inappropriate behaviours while remaining competitive with the market;
• Remuneration decisions are based on their respective functions and not the business
units they support;
• Performance measures and targets are aligned to the Bank and individual objectives that
are specific to the function;
• Respective function’s performance as opposed to other business unit’s performance is a
key component for calculating individual incentive payments.
• Both qualitative and quantitative measures will be used to evaluate an individual’s
performance across the Bank.
The Bank reviews the salaries and benefits periodically, with an objective of being competitive in
the market places, based on salary surveys and market information gathered through secondary
sources.
The Bank does not provide for any form of severance pay, other than as required by the Labour
Law for the Private Sector (Law No.36 of 2012 of the Kingdom of Bahrain), to its employees.

Remuneration Policy (continued)
REGULATORY ALIGNMENT
The Bank reviewed and revised the it’s remuneration policy and especially its variable pay policy
to meet the requirements of the CBB Guidelines on remuneration with the help of external
consultants. Key regulatory areas and the Bank’s response are summarised below:
Regulatory Area Bank’s practice
The composition of RNC is as required by the CBB remuneration guidelines

and is chaired by an Independent Director. The RNC charter has been
revised in line with the requirements of the CBB guidelines and the
Committee will be responsible for the design, implementation and supervision
Governance
of the remuneration policy. The aggregate fees / compensation paid to RNC
members for 2015 amounted to BD70,000 (2014: BD6,000). The Committee
utilised the services of an external consultant to re-design and implement the
revised remuneration policy aligned to the CBB guidelines on remuneration.
The Bank has set the Fixed Remuneration of the employees at such a level
to reward the employees for an agreed level of performance and the variable
pay or bonus is being paid purely at the discretion of the RNC in recognition
of the employees exceptional effort in any given performance period. Should
the RNC decide to award Variable Pay, it will be determined based on risk
adjusted targets set at the Business unit level aggregated to the Bank level.
Risk focussed
The variable pay for the CEO, senior management in Business units and the
remuneration policy
Material Risk takers would be higher as compared to the fixed pay subject
to achieving the risk adjusted targets both at the business unit and the bank
level. For staff in Control and Support functions, the pay mix is structured
as more fixed and lesser variable. Further the variable pay, for staff in
Control and Support Functions, is based on their units target and individual
performance and not linked to bank’s performance.
The bonus or variable pay computation process is designed in such a way

to ensure that it does not impact the Capital and Liquidity as there are
Capital and Liquidity validation checks prior to approval of the RNC. The validation checks are the
bonus pool as compared to the realised profit, impact on capital adequacy
computed as per Basle III guidelines and as compared to the total fixed pay.

Regulatory Area Bank’s practice
The Bonus for the CEO, his deputies and Material Risk Takers and Approved
Persons as per CBB and those whose total remuneration exceeds the
regulatory threshold has a deferral element and share - linked payment.
Phantom or Shadow shares are offered to such staff.
The deferral arrangements are as follows:
CEO, his deputies and top 5 Executive Management members(in terms of
total remuneration) in Business units:
• 40% of the variable pay will be paid in cash at the end of the performance
period; and
• The balance 60% will be deferred over a period of 3 years with 10%
being cash deferral and 50% being phantom or shadow shares and the
Deferral and share entire deferred variable pay will vest equally over a 3 - year period.
linked instruments
For all other employees in Business units and Approved Persons in Control
and Support Functions and whose total remuneration exceeds the regulatory
threshold:
• 50% of the variable pay will be paid in cash at the end of the performance
period; and
• 10% in the form of phantom or shadow shares at the end of the
performance period and the phantom or shadow shares subject to a
minimum share retention period of 6 months from the award date.
• The balance 40% will be deferred over a period of 3 years and paid in
the form of phantom or shadow shares and vests equally over the 3 year
period and the phantom or shadow shares subject to a minimum share
retention period of 6 months from the award date.
The Bank has introduced claw - back and malus clauses whereby the RNC
has the right to invoke these clauses under certain pre-defined circumstances
Claw back and Malus
wherein the bank can claw-back the vested as well as the unvested bonus
paid or payable to a staff.

REMUNERATION COMPONENTS
It is the Bank’s intent to have a transparent, structured and comprehensive remuneration policy
that covers all types of compensation and benefits provided to employees.
The remuneration policy provides a standardised framework for remuneration covering

employees at all levels of the Bank.
Remuneration offered by the Bank shall reflect the Bank’s objective of attracting and retaining
the desired level of talent from the industry
Remuneration will be at a level, which will be commensurate with other Banks of similar activity
in Bahrain, and will allow for changes in the cost of living index. The compensation package
shall comprise of basic salary and benefits and discretionary variable pay. The following table
summarises the total remuneration:
Element of Salary and Benefits

Pay
Rationale To attract and retain the desired level of talent.
Reviewed annually.
Benchmarked to the local market and the compensation package offered to
Summary employee is based on the job content and complexity.
The Bank offers a composite fixed pay i.e. it is not split as Basic and Allowances but
is paid as one lump sum. The benefits are aligned to the local market practice.

Element of Variable Pay/Bonus

Pay
To incentivise the achievement of annual targets set at the bank level and at the
Business unit levels and thereby also make sure that senior management get
Rationale substantial portion as variable pay which is linked to performance.
The Variable pay is deferred to ensure that the management’s interests are aligned
to the shareholder value and to align time horizon of risk.
The Bonus pool is determined based on the bottom up approach i.e. by setting base
multiples of monthly salary per level and aggregating the multiples per unit and then
on to the bank level.
The basis of payment of bonus would be as follows:
CEO and Senior Management Base multiple * Bank score * Individual score
Business units Base multiple * Bank score * Unit score * Individual score
Control & Support units Base multiple * Unit score * Individual score
Computation of Variable Pay - Business Units

Beginning of the financial year:
Targets are set for the Business units and is aggregated to the Bank level target. In
setting targets certain bank wide risk parameters which includes capital, liquidity,
profit and qualitative measure such as reputation risk and the bank and unit specific
KPIs shall be considered.
For achieving this target, total Bonus pool is set based on monthly multiples of salary
across the bank. The Key feature is that bonus is self-funding and the different levels
of targets are not just % increase in profits but profits adjusted for additional bonus.
This Bonus Pool is subject to additional checks for its impact on the capital
adequacy, as a proportion of net profit and realised profit and as a proportion of the
total fixed pay in any given financial year;
At the end of the financial year:
The actual results are evaluated against targets, considering the risk parameters
matrix and adjustments if any to the unit score or the banks score as appropriate are
Summary made and the bonus pool is revised accordingly.
The actual bonus pool is approved by the RNC and the individual Bonus payments
are as per the scoring matrix.
Computation of Variable Pay – Control and Support Units
The Unit targets as set out and agreed with the RNC in the beginning of each
evaluation period will be the base for Variable pay to be paid.
Except in the case of bank making a loss, the variable pay for the staff in the Control
and Support unit, would be payable based on the Unit targets and the individual
performance.
Base Multiples are set for each employee level in each Control and Support unit.
The achievement of unit target is assigned a weight of 1 and scored based on the
level of actual results achieved.
The individual performance score is based on the individual rating and the score is
set to vary between 0 up to a maximum of 1.
The Summary of the Variable pay process is:
Links reward to bank, business unit and individual performance.
Target setting process considers risk parameters which are both quantitative and
qualitative such as reputation.
Aligned to time horizon of risk the bonus has a deferral element and a share linkage
to align the employees interest with that of the shareholders.
Bonus can be lesser or nil if the bank or business units do not achieve the risk
adjusted targets or make losses.
Post risk assessment is carried out to ensure that in case of material losses or
realisation of less than expected income which can be attributed to employees
actions the claw back or malus as appropriate is invoked.

DETAILS OF REMUNERATION
(a) Board of Directors
Amounts in BD 2015 2014
Attendance fee and travel expenses 160,000 135,482

Remuneration 73,000 329,000
ASBB subsidiaries’ Board remuneration, attendance 233,000 70,202
fees and expenses
(b) Employees
31 December 2015 Amounts in BD thousands
Variable Upfront Variable deferred

No. of
staff Fixed Cash Non-cash Cash Non-cash Total
Approved person business

10 1,657 282 - 71 353 2,363
line
Approved person control &
11 665 70 14 - 56 805
support
Other material risk takers 12 464 16 3 - 13 496
Other employees - Bahrain
319 7,714 1,100 - - - 8,814
operations
Other employees - overseas 2 78 12 - - - 90
354 10,578 1,480 17 71 422 12,568
31 December 2014 Amounts in BD thousands
Variable Upfront Variable deferred

No. of
staff Fixed* Cash Non-cash Cash Non-cash Total*
Approved person business

10 1,417 591 - 53 267 2,328
line
Approved person control &
11 718 45 9 - 36 808
support
Other material risk takers 7 341 3 1 - 2 347
Other employees - Bahrain
403 9,706 749 - - - 10,455
operations
Other employees - overseas 2 72 15 - - - 87
433 12,254 1,403 10 53 305 14,025
* includes staff compensation of BMI Bank BSC (c ) from 30 March 2014, date of acquisition.

Fixed remuneration includes all compensation and benefits that are due to employees based on
contractual arrangements.
Severance payments during the payment amounted to BD1,490,000 and the highest severance
payment during the year amounted to BD94,000.
Included in the above, remuneration received by approved person and material risk takers from
SPVs / project companies managed by the Bank amounted to BD94,000 (2014: BD33,000).
The non-cash awards relating to years ended 31 December 2014 and 2015 were awarded
during 2016. Consequently, the disclosure relating movements in non-cash awards are
not applicable. There no movements in deferred cash awards and the balance remained at
BD53,000.

In the great Ottoman empire, the Jelli
Diwani script was the formal calligraphic
style honored by and valued by intellectuals
and the common people. Regarded as the
most decorative script, it weaves the rich
fabric of Islam with subtle grace and style
that is captivating. Inherent in our values at
Al Salam Bank-Bahrain is difference and
uniqueness where we exhibit elegance and
modernity without losing the core essence of
our revered Islamic heritage and ideals.

At Al Salam Bank-Bahrain, we appreciate the fact that we are in the business of taking risks
and our success is largely dependent on how efficiently we identify, measure, control and
manage these risks. Hence, we view risk management as a core competency from a strategic
point of view and the Basel Accord as a catalyst to the successful implementation of the pillars
of risk management in line with industry best practice.
The fundamental principle underlying our risk management framework is ensuring that accepted
risks are within the Board approved risk appetite and the returns are commensurate with the
risks taken. The objective is creating shareholder value through protecting the Group against
unforeseen losses, ensuring maximization of earnings potential and opportunities vis-à-vis the
Group’s risk appetite and ensuring earnings stability.
With this in mind, the Bank’s establishment plan gave priority to the development of an effective
and practical risk management and compliance framework taking into consideration local and
international best practices, the requirements of the Central Bank of Bahrain and the Basel
Accord.
Risk Management Framework
The risk management framework defines the risk culture of Al Salam Bank–Bahrain and sets
the tone throughout the Group to practice the right risk behavior consistently to ensure that
there is always a balance between business profits and risk appetite.
The risk management framework achieves this through the definition of the Group’s key risk
management principles covering credit, market, operational, information security, strategic and
reputation risks, the role and responsibilities of the Board, risk management group and senior
management towards risk management, the risk assessment methodology based on likelihood
and consequences, the major risk policies, procedures and risk limits, the risk management
information systems and reports, the internal control framework and the Group’s approach to
capital management.
The effectiveness of the risk management framework is independently assessed and reviewed
through internal audits, external audits and Central Bank of Bahrain supervision. In addition,
business and support groups carry out periodic control risk self-assessments.
As a result, the risk management framework creates an alignment between business and risk
management objectives.

Capital Management
The cornerstone of risk management framework is the optimization of risk-reward relationship

against the capital available through a focused and well monitored capital management process
involving risk management, finance and business groups.
Risk Management & Corporate Governance Framework
Board Committees
Fatwa and Shari’a Supervisory Board
Risk Management & Compliance Function
Senior Management Committees

Board & Senior Comprehensive Compliance &
Management Internal Control Anti-Money
Oversight Framework Laundering
Risk Assessment Methodology
Risk Policies, Risk Management Capital Management &

Procedures & Limits System Risk Adjusted Pricing
Internal Audit, External Audit, Central Bank of Bahrain

Risk Management and Compliance (continued)
Corporate Governance
The risk management framework is supported by an efficient Corporate Governance

Framework discussed on pages 40 to 57.
Risk Ownership
The implementation of the risk management framework Group-wide is the responsibility of the
Risk Management Department under the supervision of the Board Audit and Risk Committee.
Ownership of the various risks across the Group lies with the business and support heads,
being the first line of defense, and it is their responsibility to ensure that these risks are
managed in accordance with the risk management framework.
Risk Management assists business and support heads in identifying concerns and risks,
identifying risk owners, evaluating risks as to likelihood and consequences, assessing options
for mitigating the risks, prioritizing risk management efforts, developing risk management plans,
authorizing implementation of risk management plans and tracking risk management efforts.
Compliance & Anti-Money Laundering Department
The Bank has established an independent and dedicated unit to coordinate the implementation
of compliance and Anti-Money Laundering and Anti-Terrorist Financing program. The program
covers policies and procedures for managing compliance with regulations, anti-money
laundering, disclosure standards on material and sensitive information and insider trading. In
line with its commitment to combat money laundering and terrorist financing, Al Salam Bank-
Bahrain through its Anti-Money Laundering policies ensures that adequate preventive and
detective internal controls and systems operate effectively. The policies govern the guidelines
and procedures for client acceptance, maintenance and monitoring in line with the Central
Bank of Bahrain and International standards such as FATF recommendations and Basel
Committee papers.
All inward and outward electronic transfers are screened against identified sanction lists issued
by certain regulatory bodies including the UN Security Council Sanctions Committees and US
Department of the Treasury - OFAC, in addition to those designated by the Central Bank of
Bahrain.
The compliance program also ensures that all applicable Central Bank of Bahrain regulations
are complied with and/ or non-compliance is detected and addressed in a timely manner. The
program includes compliance with regulations set by Ministry of Industry & Commerce and
Bahrain Bourse.
The Bank has initiated steps to comply with Foreign Account Tax Compliance Act (FATCA)
requirements as and when required by the regulators.

CORPORATE SOCIAL RESPONSIBILITY
The Bank is committed to fulfilling its obligations as a good corporate citizen in the communities
in which it operates. We endeavor to support the Bahrain Government in its efforts to enhance
the quality of life of the people of the Kingdom of Bahrain.
ASBB underscore this commitment to our community by supporting initiatives

that add value to the Island’s housing, education and health infrastructure, as
well as encouraging future economic growth and prosperity through supporting
entrepreneurship and the development of our youth.
During the year, charitable donations were made to medical facilities and other
charities that care for the less fortunate and supported cultural initiatives in order
to preserve the traditions of the Kingdom for generations.

THE SHARI’A AND SUPERVISORY BOARD
REPORT FOR AL SALAM BANK-BAHRAIN
PRESENTED TO THE AGM FOR THE FINANCIAL
YEAR 2015
The Shari’a Fatwa and Supervisory Board (“the Board”) has reviewed the Bank’s transactions
during the year 2015, as well as the Consolidated Statement of Financial Position,
Consolidated Income Statement, Consolidated Statement of Cash Flows and Changes
in Owner’s Equity for the year ended 31 December 2015. The Board met with the Bank’s
management and submitted its annual report as follows:
Firstly:
1. The Board has supervised the Banks’activities and transactions during the year, and carried
out its role by advising the various departments to adhere to the Shari’a principles and the
Board’s legal opinions in respect to those activities and transactions. The Board held, for
this purpose, several meetings with the Banks’ management. The Board hereby confirms
the Bank’s management keenness to adhere to the Shari’a principles and the Board’s legal
opinions.
2. The Board has studied the transactions presented to it during the year, and approved
the contracts and documents relating to those transactions. The Board responded to
questions and queries and issued appropriate decisions and legal opinions relevant to the
transactions. The decisions and legal opinions were circulated to the pertinent departments
for execution.
Secondly:
The Board reviewed what it requested of documents and files, and received the data which
helped it to perform the supervisory and audit work.
Thirdly:
The Board has reviewed samples of contracts and agreements that were presented and
requested the Management to adhere to them.
Fourthly: Balance Sheet

The Board has reviewed the Consolidated Statement of Financial Position and appended data
and notes and made its observations on them.
In line with the available information and disclosures that are presented by the Banks’
management, the consolidated statement of financial position reviewed by the Board represents
the Banks’ assets, liabilities, equity of investment accountholders, and owner’s equity. The
accuracy of the information and data provided are the responsibility of the Banks’ management.
The Board believes that the consolidated financial statements for the year ended 31 December
2015 along with the distribution of profit to depositors and dividends to shareholders had been
prepared in conformity with the Islamic Shari’a regulations.

The Shari’a And Supervisory Board Report (continued)
Fifthly: Zakah
Since the Articles of Association of the Bank does not require the Bank to pay Zakah on behalf
of the Shareholders, thus, the Board has calculated the Zakah due on the shareholders in order
to inform them, and which is disclosed in the notes to the consolidated financial statements
(note 39).
Sixthly: Conversion of BMI Bank

The Bank acquired the full stake in BMI Bank with the aim of converting it to a Shari’a-
compliant bank. This conversion took effect as of 1st January 2016, and BMI Bank started
exercising its business in a Shari’a-compliant manner. Attached is the Board’s report on the
conversion of BMI Bank.
Seventhly: Prohibited Income

According to the Board’s decision that the start of calculation and discharge of prohibited
income is from the date of complete conversion of BMI Bank which was set at 1st January
2016, the subtraction of the prohibited income from BMI Bank does not oblige Al Salam Bank-
Bahrain to discharge it.
The Shari’a Board decided to ward off the Shari’a non-compliant income from the transactions
executed during the year and have it spent on Charity.
The Board hereby emphasizes that management has the primary responsibility to comply
with the Rules and Principles of Shari’a in all activities and transactions of the Bank. The
Board confirms that the executed transactions that are submitted by management of the
Bank for the Board’s review during the year were generally in compliance with Rules and
Principles of Shari’a. The management has shown utmost interest and willingness to fully
comply with the recommendations of the Board.
Board Members
Dr. Hussein Hamed Hassan

Chairman
Dr. Ali Al Qura Daghi Shaikh Adnan Al Qattan

Board Member Board Member
Dr. Mohammed Zoeir Dr. Mohammed Arbouna

Board Member & Secretary Board Member

Ernst & Young Tel: +973 1753 5455
P.O. Box 140 Fax: +973 1753 5405
14th Floor, South Tower manama@bh.ey.com
Bahrain World Trade Centre ey.com/mena
Manama C.R. No. 6700
Kingdom of Bahrain
INDEPENDENT AUDITORS’ REPORT TO

THE SHAREHOLDERS OF
AL SALAM BANK-BAHRAIN B.S.C.
Report on the consolidated financial statements
We have audited the accompanying consolidated statement of financial position of Al Salam

Bank-Bahrain B.S.C. [“the Bank”] and its subsidiaries [together “the Group”] as of 31
December 2015, and the related consolidated statements of income, cash flows and changes
in equity for the year then ended. These consolidated financial statements and the Group’s
undertaking to operate in accordance with Islamic Shari’a Rules and Principles are the
responsibility of the Bank’s Board of Directors. Our responsibility is to express an opinion on
these consolidated financial statements based on our audit.
We conducted our audit in accordance with Auditing Standards for Islamic Financial
Institutions issued by the Accounting and Auditing Organisation for Islamic Financial
Institutions [“AAOIFI”]. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amount
and disclosures in the consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by the Bank’s Board of Directos, as
well as evaluating the overall consolidated financial statements presentation. We believe that
our audit provides a reasonable basis for our opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all materail respects,
the consildated financial position of the Group as of 31 December 2015, the results of its
operations, its cash flows and changes in equity for the year then ended in accordance with the
Financial Accounting Standards issued by AAOIFI.

Independent Auditors’ Report (continued)
Other matters
As required by the Bahrain Commercial Companies Law and the Central Bank of Bahrain
(CBB) Rule Book (Volume 2), we report that:
a) the Bank has maintained proper accounting records and the consolidated financial
statements are in agreement therewith; and
b) the financail information contained in the report of the Board of Directors is consistent with
the consolidated financial statements.
We are not aware of any violations of the Bahrain Commercial Companies Law, the Central
Bank of Bahrain and Financial Institutions Law, the CBB Rule Book (Volume 2 and applicable
provisions of Volume 6) and CBB directives, regulations and associated reolutions, rules and
procedures of the Bahrain Bourse of the terms of the Bank’s memorandum and articles of
association during the year ended 31 December 2015 that might have had a material adverse
effect on the business of the Bank or on its consolidated financial position. Satisfactory
explanations and information have been provided to us by management in response to all
our requests. The Bank has also complied with the Islamic Shari’a Rules and Principles as
determined by the Shari’a Supervisory Board of the Bank.
Partner’s Registration No. 115

9 February 2016
Manama, Kingdom of Bahrain

31 December 2015
2015 2014
Note BD’000 BD’000
ASSETS
Cash and balances with banks and Central Bank 5 152,572 277,751
Sovereign Sukuk 313,109 145,789
Murabaha and Wakala receivables from banks 6 103,345 182,110
Corporate Sukuk 7 64,157 88,193
Murabaha financing 8 268,848 270,428
Mudaraba financing 8 239,031 189,601
Ijarah Muntahia Bittamleek 10 155,217 141,052
Musharaka 7,154 10,851
Assets under conversion 11 32,032 308,659
Non-trading investments 12 123,514 147,096
Investments in real estate 13 68,786 65,149
Development properties 14 49,021 59,262
Investment in associates 15 9,994 10,492
Other assets 16 43,892 32,893
Goodwill 3 25,971 25,971
TOTAL ASSETS 1,656,643 1,955,297
LIABILITIES, EQUITY OF INVESTMENT

ACCOUNTHOLDERS AND OWNERS’ EQUITY
LIABILITIES
Murabaha and Wakala payables to banks 120,795 121,266
Murabaha and Wakala payables to non-banks 842,570 1,034,052
Current Accounts 224,366 226,648
Liabilities under conversion 11 2,327 149,621
Term financing 17 35,986 21,337
Other liabilities 18 48,246 45,418
TOTAL LIABILITIES 1,274,290 1,598,342
EQUITY OF INVESTMENT ACCOUNTHOLDERS 19 62,351 28,152
OWNERS’ EQUITY
Share capital 20 214,093 214,093
Reserves and retained earnings 94,140 93,777
Proposed appropriations 20 10,705 10,705
Total equity attributable to shareholders of the bank 318,938 318,575
Non-controlling interest 1,064 10,228
TOTAL OWNERS’ EQUITY 320,002 328,803
TOTAL LIABILITIES, EQUITY OF INVESTMENT ACCOUNTHOLDERS AND
OWNERS’ EQUITY 1,656,643 1,955,297
Shaikha Hessa bint Khalifa Al Khalifa Yousif Taqi

Chairperson of the Board Director & Group CEO
The attached notes 1 to 42 form part of these consolidated financial statements.

Year Ended 31 December 2015
2015 2014
OPERATING INCOME
Income from financing contracts 22 48,230 51,494
Income from sukuk 13,109 7,120
Gains on sale of investments and sukuk 23 8,334 12,282
Income from investments 24 3,249 2,863
Fair value changes on investments 399 (6,413)
Dividend income 820 758
Foreign exchange gains 870 1,578
Fees, commission and other income - net 25 9,184 6,650
84,195 76,332
Profit on murabaha and wakala payables to banks (931) (1,035)
Profit on wakala payables to non-banks (23,805) (28,040)
Profit on term financing (839) (974)
Return on equity of investment accountholders before
Group’s share as a Mudarib 19 (1,471) (391)
Group’s share as a Mudarib 19 662 176
(809) (215)
Total operating income 57,811 46,068
OPERATING EXPENSES
Staff cost 12,474 13,991
Premises and equipment cost 2,752 2,415
Depreciation 1,821 1,507
Other operating expenses 8,220 8,505
Total operating expenses 25,267 26,418
PROFIT BEFORE PROVISIONS AND RESULTS OF ASSOCIATES 32,544 19,650

Provision for impairment - net 9 (22,851) (4,198)
Share of profit from associates 15 855 369
NET PROFIT FOR THE YEAR 10,548 15,821
Attributable To:
- SHAREHOLDERS OF THE BANK 12,346 15,550
- Non-Controlling Interest (1,798) 271
10,548 15,821
Weighted average number of shares (in ‘000) 2,140,931 1,982,531
Basic and diluted earnings per share (fils) 5.8 8.0
Shaikha Hessa bint Khalifa Al Khalifa Yousif Taqi

Chairperson of the Board Director & Group CEO

2015 2014
OPERATING ACTIVITIES
Net Profit for the year 10,548 15,821
Adjustments:
Depreciation 1,821 1,507
Amortisation of premium on Sukuk 1,945 3,509
Fair value changes on investments (399) 6,413
Provision for impairment - Net 22,851 4,198
Share of profit from associates (855) (369)
Operating income before changes in operating assets and liabilities 35,911 31,079
Changes in operating assets and liabilities:
Mandatory reserve with Central Bank 10,109 (22,400)
Sovereign Sukuk (168,112) 79,767
Murabaha and Wakala receivables from banks with original maturities of
8,976 4,358
90 days or more
Corporate Sukuk 22,883 (41,342)
Murabaha financing 52,916 (102,733)
Mudaraba financing (4,886) (59,890)
Ijarah Muntahia Bittamleek 11,033 (2,319)
Musharaka financing 4,272 8,294
Assets under conversion 140,870 130,707
Other Assets (20,187) (2,901)
Murabaha and Wakala payables to banks (471) (38,874)
Wakala fron non-banks (245,716) 91,894
Current Accounts (2,282) 105,438
Liabailities under conversion (64,855) (59,800)
Other Liabilities 2,729 3,216
Net cash (used in) from operating activities (216,810) 124,494
INVESTING ACTIVITIES
Investments and investment in associates, net 21,464 (13,604)
Investments in real estate and development properties, net 8,153 9,238
Cash flow arising on acquisition of a subsidiary 3 - 127,670
Sale of treasury stock - 1,754
Purchase of premises and equipment (237) (1,015)
Net cash from investing activities 29,380 124,043
FINANCING ACTIVITIES
Term Financing 14,649 (2,300)
Equity of investment accountholders 5,994 (84)
Share issue expenses - (125)
Dividends paid (10,705) (7,446)
Dividends paid to non-controlling interest (566) (345)
Net movements in non-controlling interest (6,800) (742)
Net cash from (used in) financing activities 2,572 (11,042)
NET CHANGE IN CASH AND CASH EQUIVALENTS (184,858) 237,495
Cash and cash equivalents at 1 January 408,535 171,040
CASH AND CASH EQUIVALENTS AT 31 DECEMBER 223,677 408,535
Cash and cash equivalents comprise of:
Cash and other balances with Central Bank of Bahrain 5 81,448 187,313
Balances with other banks 5 38,884 48,088
Murabaha and Wakala receivables from banks with original maturities of less than 90 days 103,345 173,134
223,677 408,535

Attributable to Shareholders of the Bank Amounts in BD’000
Real Foreign
Share Non- Total
Share Treasury Statutory Retained Changes in estate exchange Total Proposed
premium Total controlling owners’
capital stock reserve earnings fair value fair value translation reserves appropriations
reserve interest equity
reserve reserve
Balance as of 1 January 2015 214,093 - 12,481 46,497 1,287 22,704 (1,401) 12,209 93,777 10,705 318,575 10,228 328,803
Net profit for the year - - - 12,346 - - - - 12,346 - 12,346 (1,798) 10,548
Net changes in fair value - - - - (1,435) 1,549 - - 114 - 114 - 114
Foreign currency re-translation - - - - - - (1,292) - (1,292) - (1,292) (180) (1,472)
Dividend paid - - - - - - - - - (10,705) (10,705) - (10,705)
Proposed dividend for 2015 - - - (10,705) - - - - (10,705) 10,705 - - -
Dividend relating to subsidiaries - - - - - - - - - - - (566) (566)
Net movements in non-controlling
- - - - - - - - - - (6,620) (6,620)
interest
Transfer to statutory reserve - - 1,235 (1,235) - - - - - - - - -
Charitable donations - - - (100) - - - - (100) - (100) - (100)
Balance at 31 December 2015 214,093 - 13,716 46,803 (148) 24,253 (2,693) 12,209 94,140 10,705 318,938 1,064 320,002
Balance as of 1 January 2014 149,706 (492) 10,926 43,272 651 21,659 (501) 2,573 78,580 7,485 235,279 10,818 246,097
Net profit for the year - - - 15,550 - - - - 15,550 - 15,550 271 15,821
Net changes in fair value - - - - 636 1,045 - - 1,681 - 1,681 - 1,681
Foreign currency re-translation - - - - - - (900) - (900) - (900) 81 (819)

Dividend paid - - - - - - - - - (7,446) (7,446) - (7,446)
Proposed dividend for 2014 - - - (10,705) - - - - (10,705) 10,705 - - -
Dividend relating to subsidiaries - - - - - - - - - - - (345) (345)
Shares issued on acquisition 64,387 - - - - - - 8,499 8,499 - 72,886 - 72,886
Share issue expenses - - - - - - - (125) (125) - (125) - (125)
Net movements in non-controlling
- - - (4) - - - - (4) - (4) (597) (601)
interest
Sale of treasury stock - 492 - - - - - 1,262 1,262 - 1,754 - 1,754
Transfer to statutory reserve - - 1,555 (1,555) - - - - - - - - -
Transfer - - - 39 - - - - 39 (39) - - -
Charitable donations - - - (100) - - - - (100) - (100) - (100)
Balance at 31 December 2014 214,093 - 12,481 46,497 1,287 22,704 (1,401) 12,209 93,777 10,705 318,575 10,228 328,803
Annual Report 2015 Al Salam Bank-Bahrain B.S.C.

81
31 December 2015
1 INCORPORATION AND PRINCIPAL ACTIVITIES

Al Salam Bank-Bahrain B.S.C. (“the Bank”) was incorporated in the Kingdom of Bahrain
under the Bahrain Commercial Companies Law No. 21/2001 and is registered with Ministry
of Industry and Commerce (“MOIC”) under Commercial Registration Number 59308 on 19
January 2006. The Bank is regulated and supervised by the Central Bank of Bahrain (“the
CBB”) and has an Islamic retail banking license and is operating under Islamic principles, and
in accordance with all the relevant regulatory guidelines for Islamic banks issued by the CBB.
The Bank’s registered office is P.O. Box 18282, Bahrain World Trade Centre East Tower, King
Faisal Highway, Manama 316, Kingdom of Bahrain.
On 30 March 2014, the Bank acquired 100% stake in BMI Bank B.S.C.(c) (“BMI”), a closed
shareholding company in the Kingdom of Bahrain, through exchange of shares. The current
year numbers include the effect of consolidation of BMI and the comparatives include the
results of BMI for the period from 1 April 2014 to 30 September 2014 as the acquisition
was completed on 30 March 2014. BMI operates under a retail conventional banking license
issued by the CBB. BMI’s Shari’a Supervisory Board approved BMI to be an Islamic Bank
effective 1 January 2015 and approved all conventional income of BMI to be recognised in the
consolidated income statement for the year ended 31 December 2015.
The Bank and its subsidiary BMI operate through eleven branches in the Kingdom of Bahrain
and offers a full range of Shari’a-compliant banking services and products. The activities of the
Bank include managing profit sharing investment accounts, offering Islamic financing contracts,
dealing in Shari’a-compliant financial instruments as principal/agent, managing Shari’a-
compliant financial instruments and other activities permitted for under the CBB’s Regulated
Islamic Banking Services as defined in the licensing framework. The Bank’s ordinary shares are
listed in the Bahrain Bourse and Dubai Financial Market.
In addition to BMI, the principal subsidiaries are as follows:
% holding
Name of Entity Nature of Entity 2015 2014
Al Salam Leasing Two Ltd (“ASL II”) Aircraft under lease (note 16) 76 76
Auslog Holding Trust Investment in real estates 90 90
Al Salam Asia REIT Fund Open-ended mutual fund - 44
The Bank together with its subsidiaries is referred to as “the Group”.

These consolidated financial statements have been authorised for issue in accordance with a
resolution of the Board of Directors dated 9 February 2016.

31 December 2015
2 ACCOUNTING POLICIES
2.1 BASIS OF PREPARATION
The consolidated financial statements are prepared on a historical cost basis, except for
investments held at fair value through profit or loss, available-for-sale equity investments and
investments in real estates which are held at fair value. These consolidated financial statements
incorporate all assets, liabilities and off balance sheet financial instruments held by the Group.
These consolidated financial statements are presented in Bahraini Dinars, being the functional
and presentation currency of the Group, rounded to the nearest thousand [BD ’000], except
where otherwise indicated.
2.1a Statement of compliance

The consolidated financial statements of the Group are prepared in accordance with the
Financial Accounting Standards (FAS) issued by the Accounting and Auditing Organisation for
Islamic Financial Institutions (“AAOIFI”), the Islamic Sharia› rules and principles as determined
by the Sharia› Supervisory Board of the Group and in conformity with the Bahrain Commercial
Companies Law and the CBB and Financial Institutions Law. Matters for which no AAOIFI
standards exist, the Group uses the relevant International Financial Reporting Standard.
The Group presents its consolidated statement of financial position broadly in order of liquidity.
An analysis regarding recovery or settlement within 12 months after the consolidated statement
of financial position date (current) and more than 12 months after the consolidated statement of
financial position date (non-current) is presented in Note 32.
2.1b Basis of consolidation

The consolidated financial statements comprise the financial statements of the Bank and its
subsidiaries as at 31 December 2015. 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 unrealised gains and losses resulting from
intra-group transactions are eliminated in full.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group
and continue to be consolidated until the date when such 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. The results of subsidiaries acquired or disposed of
during the year, if any, are included in the consolidated statement of income from the date of
acquisition or up to the date of disposal, as appropriate. A change in the Group’s ownership of
a subsidiary, without a loss of control, is accounted for as an equity transaction.

Notes to the Consolidated Financial Statements (continued)
2 ACCOUNTING POLICIES (continued)

2.1 BASIS OF PREPARATION (continued)
2.1b Basis of consolidation (continued)
Share of minority stakeholder’ interest (non-controlling interest) represents the portion of profit
or loss and net assets not held by the Group and are presented separately in the consolidated
statement of income and within owners’ equity in the consolidated statement of financial
position, separately from the equity attributable to shareholders of the parent.
2.2 SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES

The preparation of the consolidated financial statements requires management to make
judgements and estimates that affect the reported amount of financial assets and liabilities and
disclosure of contingent liabilities. These judgements and estimates also affect the revenues
and expenses and the resultant provisions as well as fair value changes reported in equity.
Classification of investments
Management decides upon acquisition of an investment whether it should be classified as fair
value through profit or loss, available for sale or held-to-maturity.
Estimation uncertainty
The key assumptions concerning the future and other key sources of estimating uncertainty
at the date of the consolidated statement of financial position, that have a significant risk of
causing a material adjustment to the carrying amounts of assets and liabilities within the next
financial year are discussed below:
Impairment of goodwill
Impairment exists when carrying value of an asset or cash generating unit (CGU) exceeds its
recoverable amount, which is the higher of its fair value less costs of disposal and its value in
use.
The recoverable amount of each cash-generating unit’s goodwill is based on value-in-use
calculations using cash flow projections from financial budgets approved by the Board of
Directors, extrapolated for five year projections using nominal projected Gross Domestic
Product growth rate.
The methodology and assumptions used for estimating future cash flows are reviewed regularly
to reduce any differences between loss estimates and actual loss experience.
Collective impairment provisions on financial contracts

In addition to specific provisions against individually significant financial contracts, the Group
also considers the need for a collective impairment provision against financial contracts which
although not specifically identified as requiring a specific provision, have a greater risk of
default than when originally granted. This collective provision is based on any deterioration
in the status, as determined by the Group, of the financial contracts since they were granted
(acquired). The amount of the provision is based on the historical loss pattern for other
contracts within each grade and is adjusted to reflect current economic changes.


2.2 SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES (continued)
Impairment losses on financial contracts

The Group reviews its financial contracts on a regular basis to assess whether a provision
for impairment should be recorded in the consolidated statement of income. In particular,
considerable judgement by management is required in the estimation of the amount and timing
of future cash flows when determining the level of provisions required. Such estimates are
necessarily based on assumptions about several factors involving varying degrees of judgment
and uncertainty, and actual results may differ resulting in future changes to such provisions.
During the last interim period of the year, the Group re-assessed its previous estimates and
made provisions for financing facilities and other assets.
Impairment of available-for-sale equity investments

The Group treats available-for-sale equity investments as impaired when there has been
a significant or prolonged decline in the fair value below its cost or where other objective
evidence of impairment exists. The determination of significant or prolonged decline and other
objective evidence involves judgement. In addition, the Group evaluates other factors, including
normal volatility in share price for quoted equities and the future cash flows and the present
value calculation factors for unquoted equities.
Valuation of unquoted private equity and real estate investments

Valuation of above investments involves judgement and is normally based on one of the
following:
• valuation by independent external valuers;
• recent arm’s length market transactions;
• current fair value of another instrument that is substantially the same;
• present value of expected cash flows at current rates applicable for items with similar terms
and risk characteristics; or
• other valuation models.
The Group calibrates the valuation techniques periodically and tests these for validity using
either prices from observable current market transactions in the same instrument or other
available observable market data.
Going concern
The Group has made an assessment of the Group’s ability to continue on a going concern
and is satisfied that the Group has the resources to continue in business for the foreseeable
future. Furthermore, the management is not aware of any material uncertainties that may cast
significant doubt upon the Group›s ability to continue as a going concern. Therefore, the
consolidated financial statements continue to be prepared on the going concern basis.


2.2 SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES (continued)
Control over special purpose entities

The Group sponsors the formation of special purpose entities (SPEs) primarily for the purpose
of allowing clients to hold investments. The Group does not consolidate SPEs that it does not
have the power to control. In determining whether the Group has the power to control an SPE,
judgements are made about the objectives of the SPEs activities, Group›s exposures to the risk
and rewards, as well as its ability to make operational decisions of the SPEs.
2.3 SIGNIFICANT ACCOUNTING POLICIES

2.3.1 New standards, interpretations and amendments
These consolidated financial statements have been prepared using accounting policies,
which are consistent with those used in the preparation of the annual consolidated financial
statements for the year ended 31 December 2014, except for FAS 27 and amendment to FAS
23 which have been issued by AAOIFI and are effective 1 January 2016.
- Amendment to FAS 23 – Consolidation

The amendment introduced to FAS 23 is to give clarification on the way an Islamic financial
institution (IFI) should determine if financial statements of an investee company, or a subsidiary,
should be consolidated with its own. The amendment provides clarification that, in addition
to the existing stipulations in the standard, control may also exist through rights arising from
other contractual arrangement, voting rights of the Islamic financial institutions that give de
facto power over an entity, potential voting rights, or a combination of these factors. In terms of
voting rights, the amendment also clarifies that an Islamic financial institution shall consider only
substantive voting rights in its assessment of whether the institution has power over an entity.
In order to be substantive, the voting rights need to be exercisable when relevant decisions
are rquired to be made and the holder of such rights must have the practical ability to exercise
those rights. Determination of voting rights shall include current substantive voting rights and
currently-exercisable voting rights.
The amendments and clarifications are effective for the annual financial periods ending on
or after 31 December 2015. The transition provision requires retrospective application
including restatement of previous period comparatives. The amendment had no impact on the
consolidated financial statements of the Group.
- FAS 27 – Investment Accounts

FAS 27 will replace FAS 5 - ‘Disclosures of Bases for Profit Allocation between Owner’s Equity
and Investment Account Holders’ and FAS 6 - ‘Equity of Investment Account Holders and
their Equivalent’. Upon adoption of this standard certain disclosures with respect to investment
account holders and bases of profit allocation will be enhanced without having any significant
impact on the financial statements of the Group.


2.3 SIGNIFICANT ACCOUNTING POLICIES (continued)
2.3.2 Summary of significant accounting policies

a) Financial contracts
Financial contracts consist of balances with banks and the Central Bank, Sovereign Sukuk,
Corporate Sukuk, Murabaha financing (net of deferred profit), Mudaraba, Musharaka and
Ijarah Muntahia Bittamleek. Balances relating to these contracts are stated net of provisions for
impairment.
b) Sovereign Sukuk and corporate sukuk
These are quoted / unquoted securities and classified as investments at amortised cost in
accordance with FAS 25 issued by AAOIFI.
c) Murabaha receivables
Murabaha is a contract whereby one party (“Seller”) sells an asset to the other party
(“Purchaser”) at cost plus profit and on a deferred payment basis, after the Seller has
purchased the asset based on the Purchaser’s promise to purchase the same on such
Murabaha basis. The sale price comprises the cost of the asset and an agreed profit margin.
The sale price (cost plus the profit amount) is paid by the Purchaser to the Seller on installment
basis over the agreed finance tenure. Under the Murabaha contract the Group may act either
as a Seller or a Purchaser, as the case may be.
The Group considers the promise to purchase made by the Purchaser in a Murabaha
transaction in favour of the Seller to be binding.
Murabaha receivables are stated at cost, net of deferred profits, provision for impairment, if any,
and amounts settled.
d) Mudaraba financing
Mudaraba is a contract between two parties whereby one party is a fund provider (Rab Al Mal)
who would provide a certain amount of funds (Mudaraba Capital), to the other party (Mudarib).
Mudarib would then invest the Mudaraba Capital in a specific enterprise or activity deploying its
experience and expertise for a specific pre-agreed share in the resultant profit. The Rab Al Mal
is not involved in the management of the Mudaraba activity. The Mudarib would bear the loss in
case of its default, negligence or violation of any of the terms and conditions of the Mudaraba
contract; otherwise the loss would be borne by the Rab Al Mal. Under the Mudaraba contract
the Group may act either as Mudarib or as Rab Al Mal, as the case may be.
Mudaraba financing are recognized at fair value of the Mudaraba assets net of provision for
impairment, if any, and Mudaraba capital amounts settled. If the valuation of the Mudaraba
assets results in difference between fair value and book value, such difference is recognized as
profit or loss to the Group.
e) Ijarah Muntahia Bittamleek
Ijara (Muntahia Bittamleek) is an agreement whereby the Group (as lessor) leases an asset to
the customer (as lessee) (after purchasing/acquiring the specified asset, either from a third
party seller or from the customer itself, according to the customer’s request and promise to
lease) against certain rental payments for a specific lease term/periods, payable on fixed or
variable rental basis.


2.3.2 Summary of significant accounting policies (continued)
e) Ijarah Muntahia Bittamleek (continued)
The Ijara agreement specifies the leased asset, duration of the lease term, as well as, the basis
for rental calculation, the timing of rental payment and responsibilities of both parties during the
lease term. The customer (lessee) provides the Group (lessor) with an undertaking to renew
the lease periods and pay the relevant rental payment amounts as per the agreed schedule and
applicable formula throughout the lease term.
The Group (lessor) retains the ownership of the assets throughout the lease term. At the end
of the lease term, upon fulfillment of all the obligations by the customer (lessee) under the Ijara
agreement, the Group (lessor) will sell the leased asset to the customer (lessee) for a nominal
value based on sale undertaking given by the Group (lessor). Leased assets are usually
residential properties, commercial real estate or aircrafts.
Depreciation is provided on a systematic basis on all Ijarah Muntahia Bittamleek assets other
than land (which is deemed to have an indefinite life), at rates calculated to write off the cost of
each asset over the shorter of either the lease term or economic life of the asset.
f) Musharaka
Musharaka is used to provide venture capital or project finance. The Group and customer
contribute towards the capital of the Musharaka. Usually a special purpose company or
a partnership is established as a vehicle to undertake the Musharaka. Profits are shared
according to a pre-agreed profit distribution ratio but losses are borne by the partners
according to the capital contributions of each partner. Capital contributions may be in cash or in
kind, as valued at the time of entering into the Musharaka.
Musharaka is stated at cost, less any impairment.
g) Assets and liabilities under conversion
Assets under conversion:
Due from Banks and financial institutions
At amortised cost less any amounts written off and provision for impairment, if any.
Loans and advances
At amortised cost less any amounts written off and provision for impairment, if any.
Non-trading investments
These are classified as available-for-sale investments and are fair valued based on criteria set
out in Note 2.3.2 h. Any changes in fair values subsequent to acquisition date are recognized in
total comprehensive income (note 26).
Liabilities under conversion:
These are remesured at amortised cost.
h) Non-trading investments
These classified as available-for-sale or fair value through profit or loss.
All investments are initially recognised at cost, being the fair value of the consideration
given including acquisition costs associated with the investment. Acquisition cost relating to
investments designated as fair value through profit or loss is charged to consolidated income
statement.


h) Non-trading investments (continued)
Following the initial recognition of investments, the subsequent period-end reporting values are
determined as follows:
Investments available-for-sale
After initial recognition, equity investments which are classified as investments at fair
value through equity are disclosed as “available-for-sale investments». These are normally
remeasured at fair value, unless the fair value cannot be reliably determined, in which case
they are measured at cost less impairment. Fair value changes are reported in equity until the
investment is derecognised or the investment is determined to be impaired. On derecognition
or impairment the cumulative gain or loss previously reported as “changes in fair value” within
equity, is included in the consolidated income statement.
Impairment losses on available-for-sale investments are not reversed through the consolidated
statement of income and increases in their fair value after impairment are recognised directly in
owners’ equity.
Investments carried at fair value through profit or loss
Investments in this category are designated as such on initial recognition if these investments
are evaluated on a fair value basis in accordance with the Group›s risk management policy
and its investment strategy. These include all private equity investments including those in joint
ventures and associates which are not strategic in nature.
Investments at fair value through profit or loss are recorded in the consolidated statement
of financial position at fair value. Changes in fair value are recorded as «Fair value changes
on investments» in the consolidated income statement. Gain on sale of these investments is
included in «Gain on sale of investments and sukuk» in the consolidated income statement.
Income earned on these investments is included in «Income from investments» in the
consolidated income statement.
i) Investments in associates
The Group’s investments in associates, that are acquired for strategic purposes, are accounted
for under the equity method of accounting. Other equity investments in associates are
accounted for as fair value through profit or loss by availing the scope exemption under FAS
24, Investments in Associates. An associate is an entity over which the Group has significant
influence and which is neither a subsidiary nor a joint venture. An entity is considered as an
associate if the Group has more than 20% ownership of the entity or the Group has significant
influence through any other mode.
Under the equity method, investment in associate is carried in the consolidated statement of
financial position at cost plus post-acquisition changes in the Group’s share of net assets of the
associate. Losses in excess of the cost of the investment in associates are recognised when
the Group has incurred obligations on its behalf. Goodwill relating to an associate is included in
the carrying amount of the investment and is not amortised. The consolidated income statement
reflects the Group’s share of 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.


i) Investments in associates (continued)
The reporting dates of the associate and the Group are identical and the associates accounting
policy conform to those used by the Group for like transactions and events in similar
transactions.
After application of the equity method, the Group determines whether it is necessary to
recognise an additional impairment loss on its investment in associates. The Group determines
at each reporting date whether there is any objective evidence that the investment in
associates are impaired. If this is the case, the Group calculates the amount of impairment
as the difference between the recoverable amount of the associate and its carrying value and
recognises the amount in the consolidated income statement.
Profit and losses resulting from transactions between the Group and the associates are
eliminated to the extent of the interest in associates.
Foreign exchange translation gains/losses arising out of the above investment in the associate
are included in the consolidated statement of changes in equity.
j) Investments in real estate
Properties held for rental, or for capital appreciation purposes, or both, are classified as
investments in real estate. In accordance with FAS 26, the investments in real estate is initially
recognized at cost and subsequently measured based on intention whether the investments
in real estate is held-for-use or held for sale. The Group has adopted the fair value model for
its investments in real estate. Under the fair value model any unrealized gains are recognized
directly in owners’ equity. Any unrealized losses are adjusted in equity to the extent of the
available credit balance. Where unrealized losses exceed the available balance in owners’
equity, these are recognized in the consolidated income statement. In case there are unrealized
losses relating to investments in real estate that have been recognized in the consolidated
income statement in a previous financial period, the unrealized gains relating to the current
financial period is recognized to the extent of crediting back such previous losses in the
consolidated income statement. Investments in real estate held-for-sale is carried at a lower of
its carrying value and expected fair value less costs to sell.
k) Development properties
Properties acquired exclusively for development are classified as development properties and
are measured at the lower of cost or net realisable value.
l) Premises and equipment
Premises and equipment are stated at cost less accumulated depreciation and any impairment
in value. Depreciation is provided on a straight-line basis over the estimated useful lives of all
premises and equipment, other than freehold land and capital work-in-progress.
• Computer equipment 3 to 5 years
• Furniture and office equipment 3 to 5 years
• Motor vehicle 4 to 5 years
• Leasehold improvements Over the lease period
• Computer software 10 years


m) Subsidiaries acquired with a view to sell

A subsidiary acquired with a view to subsequent disposal within twelve months is classified as
“held-for-sale” when the sale is highly probable. Related assets and liabilities of the subsidiary
are shown separately on the consolidated statement of financial position as “Assets held-for-
sale” and “Liabilities relating to assets classified as held-for-sale”. Assets that are classified as
held-for-sale are measured at the lower of carrying amount and fair value less costs to sell. Any
resulting impairment loss reduces the carrying amount of the assets. Assets that are classified
as held-for-sale are not depreciated.
n) Business combinations and goodwill
Business combinations are accounted for using the acquisition method. The cost of an
acquisition is measured as the aggregate of the consideration transferred measured at
acquisition date fair value and the amount of any non-controlling interests in the acquiree. For
each business combination, the Group elects whether to measure the non-controlling interests
in the acquiree at fair value or at the proportionate share of the acquiree’s identifiable net
assets.
When the Group acquires a business, it assesses the financial assets and liabilities assumed
for appropriate classification and designation in accordance with the contractual terms,
economic circumstances and pertinent conditions as at the acquisition date.
In a business combination in which the Bank and the acquiree exchange only equity interests,
the acquisition-date fair value of the acquiree›s equity interests is used to determine the amount
of goodwill.
Investments acquired but do not meet the definition of business combination are recorded
as financing assets or investment in properties as appropriate. When such investments
are acquired, the Group allocates the cost of acquisition between the individual identifiable
assets and liabilities based on their relative fair values at the date of acquisition. Cost of such
assets is the sum of all consideration given and any non-controlling interest recognised. If the
non-controlling interest has a present ownership interest and is entitled to a proportionate
share of net assets upon liquidation, the Group recognises the non-controlling interest at its
proportionate share of net assets.
Goodwill is initially measured at cost, being the excess of the aggregate of the consideration
transferred and the amount recognised for non-controlling interests, and any previous interest
held, over the net identifiable assets acquired and liabilities assumed. If the fair value of the net
assets acquired is in excess of the aggregate consideration transferred, the Group re-assesses
whether it has correctly identified all of the assets acquired and all of the liabilities assumed
and reviews the procedures used to measure the amounts to be recognised at the acquisition
date. If the re-assessment still results in an excess of the fair value of net assets acquired over
the aggregate consideration transferred, then the gain is recognised in consolidated income
statement.


n) Business combinations and goodwill (continued)
After initial recognition, goodwill is measured at cost less any accumulated impairment losses.
Goodwill is tested for impairment at least annually. Any impairment is recognised immediately
in the consolidated income statement. Goodwill is allocated to each of the Group’s cash-
generating units that are expected to benefit from the combination, irrespective of whether other
assets or liabilities of the acquiree are assigned to those units.
Goodwill is tested for impairment at least annually. Any impairment is recognised immediately
in the income statement. Subsequent reversals of impairment losses for goodwill are not
recognised.
Impairment exists when carrying value of an asset or cash generating unit (CGU) exceeds its
recoverable amount, which is the higher of its fair value less costs of disposal and its value in
use.
The methodology and assumptions used for estimating future cash flows are reviewed regularly
to reduce any differences between loss estimates and actual loss experience.
Impairment of goodwill is determined by assessing the recoverable amount of the cash
generating unit (or group of cash-generating units), to which the goodwill relates. Where the
recoverable amount of the cash generating unit (or group of cash-generating units) is less
than the carrying amount, an impairment loss is recognised immediately in the consolidated
statement of income.
For the purpose of impairment testing, goodwill acquired in a business combination is, from the
acquisition date, allocated to each of the Group’s 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 Group are assigned to those units or groups of units.
Each unit or group of units to which the goodwill is allocated:
- represents the lowest level within the Group at which the goodwill is monitored for
internal management purposes; and
- is not larger than a segment based on either the Group’s primary or the Group’s
geographic segment reporting format.
o) Impairment and uncollectability of financial assets
An assessment is made at each reporting date to determine whether there is objective evidence
that a specific financial asset may be impaired. If such evidence exists, any impairment loss, is
recognised in the consolidated income statement.
Impairment is determined as follows:
(i) for assets carried at amortised cost, impairment is based on estimated cash
flows based on the original effective profit rate;
(ii) for assets carried at fair value, impairment is the difference between cost and fair
value; and
(iii) for assets carried at cost, impairment is based on present value of anticipated cash
flows based on the current market rate of return for a similar financial asset.


o) Impairment and uncollectability of financial assets (continued)
For available-for-sale equity investments reversal of impairment losses are recorded as

increases in cumulative changes in fair value through equity.
p) Offsetting
Financial assets and financial liabilities can only be offset with the net amount being reported in
the consolidated statement of financial position when there is a religious or legally enforceable
right to set off the recognised amounts and the Group intends to either settle on a net basis, or
intends to realise the asset and settle the liability simultaneously.
q) Provisions
Provisions are recognised when the Group has 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.
r) Employees’ end of service benefits
The Group provides end of service benefits to its expatriate employees. Entitlement to these
benefits is based upon the employees’ final salary and length of service, subject to completion
of a minimum service period. The expected costs of these benefits are accrued over the period
of employment.
For Bahraini employees, the Group makes contributions to Social Insurance Organisation
calculated as a percentage of the employees’ salaries. The Group’s obligations are limited to
these contributions, which are expensed when due.
s) Revenue recognition
Murabaha receivables
As the income is quantifiable and contractually determined at the commencement of the
contract, income is recognized on a straight-line basis over the deferred period. Recognition
of income is suspended when the Group believes that the recovery of these amounts may be
doubtful or normally when the payments of Murabaha installments are overdue by 90 days,
whichever is earlier.
Sukuk
Income on Sukuk is recognized on a time-proportionate basis based on underlying rate of
return of the respective type of sukuk. Recognition of income is suspended when the Group
believes that the recovery of these amounts may be doubtful or normally when the payments
are overdue by 90 days, whichever is earlier.
Mudaraba
Income on Mudaraba transactions are recognised when the right to receive payment is
established or these are declared by the Mudarib, whichever is earlier. In case of losses in
Mudaraba, the Group’s share of loss is recognised to the extent that such losses are being
deducted from its share of the Mudaraba capital.
Dividend
Dividend income is recognised when the Group’s right to receive the payment is established.


s) Revenue recognition (continued)
Ijarah Muntahia Bittamleek

Ijarah Muntahia Bittamleek income is recognised on a time-proportionate basis over the lease
term. Income related to non-performing Ijarah Muntahia Bittamleek is suspended. Accrual of
income is suspended when the Group believes that the recovery of these amounts may be
doubtful or normally when the rental payments are overdue by 90 days, whichever is earlier.
Musharaka
Income on Musharaka is recognized when the right to receive payment is established or on
distributions. In case of losses in Musharaka, the Group’s share of loss is recognized to the
extent that such losses are being deducted from its share of the Musharaka capital.
Fees and commission income
The Group earns fee and commission income from a diverse range of services it provides to its
customers. Fee income can be divided into the following main categories:
Fee income on financing transactions: Fee earned on financing transactions including up-front
fees and early settlement fees are recognised when earned. To the extent the fees are deemed
yield enhancement they are recognised over the period of the financing contracts.
Fee income from transaction services: Fee arising from corporate finance, corporate advisory,
arranging the sale of assets and wealth management are recognised when earned or on a
time proportionate basis when the fee is linked to time. Other fee income is recognised when
services are rendered.
t) Fair value of financial assets
For investments that are traded in organised financial markets, fair value is determined by
reference to the prevailing market bid price on the reporting date.
For investments where there is no quoted market price, a reasonable estimate of fair value is
determined by reference to valuation by independent external valuers or based on recent arm’s
length market transactions. Alternatively, the estimate would also be based on 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 by calculating the
present value of future cash flows at current profit rates for contracts with similar terms and risk
characteristics.
For investments having fixed or determinable payments, fair value is based on the net present
value of estimated future cash flows determined by the Group using current profit rates for
instruments with similar terms and risk characteristics.
u) Foreign currencies
Foreign currency transactions are recorded at rates of exchange prevailing at the dates of the
transactions. Monetary assets and liabilities in foreign currencies at the consolidated statement
of financial position date are retranslated at market rates of exchange prevailing at that date.
Gains and losses arising on translation are recognised in the consolidated income statement.


u) Foreign currencies (continued)
Non-monetary assets that are measured in terms of historical cost in foreign currencies are
recorded at rates of exchange prevailing at the value dates of the transactions. Translation gains
or losses on non-monetary items classified as “available-for-sale” and investment in associates
are included in consolidated statement of changes in equity until the related assets are sold
or derecognised at which time they are recognised in the consolidated income statement.
Translation gains on non-monetary assets classified as “fair value through profit or loss” are
directly recognised in the consolidated income statement.
v) Translation of foreign operation
Assets and liabilities of foreign subsidiaries whose functional currency is not Bahraini Dinars are
translated into Bahraini Dinars at the rates of exchange prevailing at the reporting date. Income
and expense items are translated at average exchange rates prevailing for the reporting period.
Any exchange differences arising on translation are included in “foreign exchange translation
reserve” forming part of other comprehensive income except to the extent that the translation
difference is allocated to the non-controlling interest. On disposal of foreign operations,
exchange differences relating thereto and previously recognised in other comprehensive
income are recognised in the consolidated income statement.
w) Repossessed assets
Repossessed assets are assets acquired in settlement of dues. These assets are carried at the
lower of carrying amount and fair value less costs to sell and reported within ‘other assets’.
x) Trade and settlement date accounting
Purchases and sales of financial assets and liabilities are recognised on the trade date, i.e. the
date that the Group contracts to purchase or sell the asset or liability.
y) Derecognition of financial assets
Financial assets are derecognised when the rights to receive cash flows from the financial
assets have expired or where the Group has transferred substantially all risk and rewards of
ownership.
Continuing involvement that takes the form of a guarantee over the transferred asset is
measured at the lower of the original carrying amount of the asset and the maximum amount of
consideration that the Group could be required to pay.
z) Derecognition of financial liabilities
A financial liability is derecognised when the obligation under the liability is discharged or
cancelled or expires. Where an existing financial liability is replaced by another from the same
source on substantially different terms, or the terms of an existing liability are substantially
modified, such an exchange or modification is treated as a derecognition of the original liability
and the recognition of a new liability, and the difference in the respective carrying amounts is
recognised in the consolidated statement of income.
aa) Fiduciary assets
Assets held in a fiduciary capacity are not treated as assets of the Group and are accordingly
not included in the consolidated statement of financial position.


ab) Dividend on ordinary shares

Dividend on ordinary shares is recognised as a liability and deducted from equity when it
is approved by the Group’s shareholders. Dividend for the year that is approved after the
reporting date is included in the equity and is disclosed as an event after the balance sheet
date.
ac) Equity of investment account holders
All equity of investment accountholders are carried at cost plus profit and related reserves less
amounts settled.
Share of income for equity of investment accountholder is calculated based on the income
generated by the assets funded by such investment accounts after deducting Mudarib share
(as Mudarib and Rabalmal). Operating expenses are charged to shareholders’ funds and are
not included in the calculation.
The basis applied by the Group in arriving at the equity of investment accountholders’ share of
income is total investment income less shareholders’ income. Portion of the income generated
from equity of investment accountholders is transferred to profit equalization reserve, mudarib
share and investment risk reserve and the remaining is distributed to the equity of investment
accountholders.
ad) Treasury Stock
Own equity instruments that are reacquired, are recognised at cost and deducted from equity.
No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation
of the Bank’s own equity instruments. Any difference between the carrying amount and the
consideration, if reissued, is recognised in share premium.
ae) Zakah
In accordance with the Articles of Association of the Group, the responsibility to pay Zakah is
on the shareholders of the Bank.
af) Cash and cash equivalents
Cash and cash equivalents comprise of cash and balances with the CBB and Murabaha
receivables from banks with original maturities of less than 90 days.
ag) Wakala payables
The Group accepts funds from banks and customers under Wakala arrangement in which a
return is payable to customers as agreed in the agreement. There is no restriction on the Group
for the use of funds received under wakala agreement.
ah) Jointly financed and self financed
Investments, financing and receivables that are jointly funded by the Group and the equity of
investment accountholders are classified under the caption “jointly financed” in the consolidated
financial statements. Investments, financing and receivables that are funded solely by the Group
are classified under “self financed”.
The equity of investment accountholders is used to finance the assets of the Group as
appropriate.


ai) Investment risk reserve

This is the amount appropriated by the Group out of the income of investment account holders,
after allocating the Mudarib share, in order to compensate future losses for investment account
holders.
aj) Earnings prohibited by Shari’a
The Group is committed to contributing to charity any income generated from non-Islamic
sources. Accordingly, any earning prohibited by Shari’a is credited to charity funds to be used
for social welfare purposes.
ak) Profit on Murabaha and Wakala payables to banks non-banks
Profit on these is accrued on a time-apportioned basis over the period of the contract based on
the principal amounts outstanding.
3 BUSINESS COMBINATION
During 2014, the Bank made an offer to acquire 100% of the issued and paid up shares
of BMI, at an exchange ratio of eleven new shares of the Bank for each share of BMI.
The acquisition through share exchange was approved by the shareholders of the Bank in
their Extraordinary General Assembly Meeting held on 8 October 2013. The Bank issued
643,866,927 to former shareholders of the Bank. The total proceeds amounted to BD72,886
thousands from the new issue, including a share premium of BD8,499 thousands. The goodwill
arising out of above acquisition amounted to BD25,971 thousands.
The management carried out an annual impairment test of goodwill by comparing the carrying
amount with its recoverable amount (value-in-use) as of 31 December 2015. The detemination
of value-in-use involved the use of various assumptions including estimating discounted cash
flows. The discount rate applied to cash flow projections represent the cost of capital adjusted
for an appropriate risk premium.
The key assumptions used in estimating recoverable amounts of cash generating units were
sensitised to test the resilience of value-in-use calculations. On this basis, management believes
that reasonable changes in the key assumptions used to determine the recoverable amount of
the Group’s cash-generating units will not result in an impairment.

4 CLASSIFICATION OF ASSETS, LIABILITIES AND EQUITY OF INVESTMENT

ACCOUNTHOLDERS
31 December 2015
At fair value Available for
through sale/fair value At amortised
profit or loss through equity cost/others Total
BD ’000 BD ‘000 BD ‘000 BD ‘000
ASSETS
Cash and balances with banks and
- - 152,572 152,572
Central Bank
Sovereign Sukuk - - 313,109 313,109
Murabaha and Wakala receivables from
- - 103,345 103,345
banks
Corporate Sukuk - - 64,157 64,157
Murabaha financing - - 268,848 268,848
Mudaraba financing - - 239,031 239,031
Ijarah Muntahia Bittamleek - - 155,217 155,217
Musharaka - - 7,154 7,154
Assets under conversion - 41 31,991 32,032
Non-trading investments 115,008 8,506 - 123,514
Investments in real estates - 68,786 - 68,786
Development properties - - 49,021 49,021
Investment in associates - - 9,994 9,994
Other assets - 2,037 41,855 43,892
Goodwill - - 25,971 25,971
115,008 79,370 1,462,265 1,656,643

BD ’000 BD ‘000 BD ‘000 BD ‘000
LIABILITIES AND EQUITY OF INVESTMENT

ACCOUNTHOLDERS
Murabaha and Wakala payables to banks - - 120,795 120,795
Murabaha and Wakala payables to
- - 842,570 842,570
non-banks
Current accounts - - 224,366 224,366
Liabilities under conversion - - 2,327 2,327
Term financing - - 35,986 35,986
Other liabilities - - 48,246 48,246
Equity of investment accountholders - - 62,351 62,351
- - 1,336,641 1,336,641

4 CLASSIFICATION OF ASSETS, LIABILITIES AND EQUITY OF INVESTMENT

ACCOUNTHOLDERS (continued)
31 December 2014
BD ’000 BD ‘000 BD ‘000 BD ‘000
ASSETS
- - 277,751 277,751
Central Bank
Sovereign Sukuk - - 145,789 145,789
Murabaha and Wakala receivables from banks - - 182,110 182,110
Corporate Sukuk - - 88,193 88,193
Murabaha financing - - 270,428 270,428
Mudaraba financing - - 189,601 189,601
Ijarah Muntahia Bittamleek - - 141,052 141,052
Musharaka - - 10,851 10,851
Assets under conversion - 75,189 233,470 308,659
Non-trading investments 125,779 21,317 - 147,096
Investments in real estates - 65,149 - 65,149
Development properties - - 59,262 59,262
Investment in associates - - 10,492 10,492
Other assets - 2,412 30,481 32,893
Goodwill - - 25,971 25,971
125,779 164,067 1,665,451 1,955,297

BD ’000 BD ‘000 BD ‘000 BD ‘000
LIABILITIES AND EQUITY OF INVESTMENT

ACCOUNTHOLDERS
Murabaha and Wakala payables to banks - - 121,266 121,266
Murabaha and Wakala payables to
- - 1,034,052 1,034,052
non-banks
Current accounts - - 226,648 226,648
Liabilities under conversion - - 149,621 149,621
Term financing - - 21,337 21,337
Other liabilities - - 45,418 45,418
Equity of investment accountholders - - 28,152 28,152
- - 1,626,494 1,626,494

5 CASH AND BALANCES WITH BANKS AND CENTRAL BANK
2015 2014
BD ‘000 BD ‘000
Mandatory reserve with Central Bank* 32,240 42,350
Cash and other balances with Central Bank 81,448 187,313

Balances with other banks 38,884 48,088
152,572 277,751
* This balance is not available for use in the day-to-day operations of the Group.
6 MURABAHA AND WAKALA RECEIVABLES FROM BANKS
2015 2014
BD ‘000 BD ‘000
GCC 103,345 176,455
Europe - 5,655
103,345 182,110
In addition to above amounts, deferred profits on Murabaha receivables from banks amounted to BD12 thousands
(2014: BD30 thousands).
This consists of BD62,351 thousands (2014: BD24,281 thousands) of jointly financed assets and BD40,994 thousands
(2014: BD157,829 thousands) of self financed assets.
7 CORPORATE SUKUK
2015 2014
BD ‘000 BD ‘000
Investment grade 45,518 70,011
Non-investment grade 10,330 9,364
Un-rated Sukuk 8,309 8,818
64,157 88,193
This consists of nil (2014: BD3,871 thousands) of jointly financed assets and BD64,157 thousands (2014: BD84,322
thousands) of self financed assets.

8 MURABAHA AND MUDARABA FINANCING
8.a Murabaha Financing
2015 2014
BD ‘000 BD ‘000
Murabaha financing - gross 273,300 275,166
Less: Specific provision (4,452) (4,738)
Murabaha financing - net 268,848 270,428
Murabaha financing is shown net of deferred profits of BD50,310 thousands (2014: BD53,630 thousands).
8.b Mudaraba Financing
2015 2014
BD ‘000 BD ‘000
Mudaraba financing - gross 248,354 189,607
Less: Specific provision (9,323) (6)
Murabaha financing - net 239,031 189,601

9 MOVEMENTS IN PROVISIONS
2015
Financing Available-
facilities & other for-sale
assets investments Total
BD ‘000 BD ‘000 BD ‘000
Balance at beginning of the year:
Specific provision 5,073 4,328 9,401
Collective provision 4,709 - 4,709
Transfer
Specific provision 160 - 160
Collective provision (160) - (160)
Write offs
Specific provision (1,928) - (1,928)
Collective provision - - -
Provision for impairment:
Charge for the year - specific 21,802 1,143 22,945
Charge for the year - collective 500 - 500
Recoveries during the year (594) - (594)
21,708 1,143 22,851
Balance at the end of the year:
2014
Financing
facilities & other Available-for-sale
assets investments Total
BD ‘000 BD ‘000 BD ‘000
Balance at beginning of the year:
Transfer
Specific provision 708 - 708
Collective provision (708) - (708)
Provision for impairment:
Charge for the year - specific 725 290 1,015
Charge for the year - collective 4,123 - 4,123
Recoveries during the year (940) - (940)
3,908 290 4,198
Balance at the end of the year:

10 IJARAH MUNTAHIA BITTAMLEEK
This represents net investments in assets leased for periods which either approximate or
cover major parts of the estimated useful lives of such assets. The majority of the lease
documentations provide that the lessor undertakes to transfer the leased assets to the lessee at
the end of the lease term upon the lessee fulfilling all its obligations under the lease agreement.
2015 2014
BD ‘000 BD ‘000
Movements in Ijarah Muntahia Bittamleek assets are
as follows:
At 1 January 141,052 110,631
Ijarah assets arising on acquisition of BMI - 3,654
Additions during the year - net 48,277 37,887
Ijarah assets depreciation (15,939) (10,101)
Transfer to other assets* (17,729) -
Specific provision (444) (1,019)
At 31 December 155,217 141,052
* On termination of lease, this asset was transferred to other assets.
2015 2014
BD ‘000 BD ‘000
The future minimum lease receivable in aggregate are
as follows:
Due within one year 10,494 41,446
Due in one to five years 62,881 59,141
Due after five years 81,842 40,465
155,217 141,052
2015 2014
BD ‘000 BD ‘000
Ijarah Muntahia Bittamleek is divided into the following
asset classes:
Land and buildings 155,217 119,836
Aircraft - 19,334
Machinery - 1,882
155,217 141,052
The accumulated depreciation on Ijarah Muntahia Bittamleek assets amounted to BD31,236 thousands
(2014: BD23,852 thousands).

11 ASSETS AND LIABILITIES UNDER CONVERSION
These represent interest bearing non-Shari’a compliant assets and liabilities of BMI. These
assets and liabilities have been reported as separate line items on the face of the consolidated
statement of financial position. The details of the assets and liabilities under conversion are as
follows:
2015 2014
BD ‘000 BD ‘000
Assets
Due from banks and financial institutions - 13,949
Loans and advances 31,437 215,438
Non-trading investments - debt 16 75,165
Non-trading investment - available-for-sale - equity* 24 24
Other assets 555 4,083
32,032 308,659
Liabilities
Customers’ deposits - 138,793
Other liabilities 2,327 10,828
2,327 149,621
Note: In addition to the above, “Cash and balances with banks and Central bank of Bahrain” include an amount of BD nil
(2014 : BD54,000 thousands) of conventional balances. These represent short term placements with Central bank of
Bahrain which carries a nominal income on conventional assets.
* The above available-for-sale equity investment is classified as Level 3 (2014: Level 3) in the fair value hierarchy (note 12).
During the year, there were no movements in the fair value of this investment.

12 NON-TRADING INVESTMENTS
Non-trading investments are classified as available-for-sale or fair value through profit or loss.
Fair value hierarchy

The Group uses the following hierarchy for determining and disclosing the fair value of financial
instruments by valuation technique:
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities;
Level 2: other techniques for which all inputs that have a significant effect on the recorded fair
value are observable, either directly or indirectly;
Level 3: techniques that use inputs that have a significant effect on the recorded fair value that
are not based on observable market data.
The following table shows an analysis of the financial instruments carried at fair value in the
consolidated statement of financial position.
Level 1 Level 2 Level 3 Total

31 December 2015
BD ’000 BD ’000 BD ’000 BD ‘000
Financial assets at fair value through profit or

7,646 4,702 102,660 115,008
loss
Available-for-sale financial assets 4,774 - 3,732 8,506
12,420 4,702 106,392 123,514
Level 1 Level 2 Level 3 Total

31 December 2014
BD ’000 BD ’000 BD ’000 BD ‘000
Financial assets at fair value through profit or

18,476 - 107,303 125,779
loss
Available-for-sale financial assets 6,730 - 14,587 21,317
25,206 - 121,890 147,096
During the years ended 31 December 2015 and 2014, there were no transfers between Level
1, Level 2, and Level 3 fair value measurements. The movements in non-trading investments
classified in level 3 of the fair value hierarchy are as follows:
Fair value measurement using significant unobservable inputs

Level 3
2015 2014
BD ’000 BD ‘000
At 1 January 121,890 110,404

Additions during the year - 35,031
Fair value changes (2,426) (6,797)
Repayments during the year (408) (1,303)
Disposals during the year (12,653) (15,020)
Other movements (11) (425)
At 31 December 106,392 121,890

13 INVESTMENTS IN REAL ESTATE
2015 2014
BD ‘000 BD ‘000
Buildings 19,027 20,759
Land 49,759 44,390
68,786 65,149
The above investments are classified under level 3 (2014: level 3) in fair value hierarchy. Movements represent fair value
changes during the year.
14 DEVELOPMENT PROPERTIES
These represent properties acquired and held through investment vehicles exclusively for
development in the Kingdom of Bahrain and the United Kingdom. The carrying amounts include
land price and related construction costs.
15 INVESTMENT IN ASSOCIATES
The Group has a 14.4% (2014: 14.4%) stake in Al Salam Bank Algeria (ASBA), an unlisted
bank incorporated in Algeria. The Bank has representation on the board of ASBA through
which the Bank has a significant influence on ASBA.
The Group has a 20.9% (2014: 20.9%) stake in Gulf African Bank (“GAB”), a private Islamic
bank incorporated in Kenya. This investment is denominated in Kenyan Shillings and is held
through BMI.
The Group’s interest in ASBA and GAB is accounted for using the equity method in the
consolidated financial statements.
The following table illustrates summarised financial information of Group’s investments in ASBA
and GAB:
2015 2014
BD ‘000 BD ‘000
Associates’ statement of financial position:
Total assets 234,168 236,788
Total liabilities 169,231 163,546
Net assets 64,937 73,242
Total revenue 20,484 22,844
Total expenses 16,411 14,837
Net profit for the year 4,073 8,007
Group’s share of associates’ net profit 855 369

16 OTHER ASSETS
2015 2014
BD ‘000 BD ‘000
Assets under conversion (a)
Non-trading-investments - debt 236 3,848
Non-trading investments - available-for-sale -
equity (b) 2,036 2,412
2,272 6,260
Repossessed assets 4,007 3,897
Profit receivable 7,995 6,878
Premises and equipment 3,910 5,494
Prepayments 1,066 1,001
Rental receivable on Ijarah Muntahia Bittamleek 669
assets 685
Other receivables and advances (c) 15,469 8,694

Aircraft
[net of impairment of BD 7,600 thousands (d)] 8,488 -
43,892 32,893
(a) These represent non-Shari’a compliant assets resulted from the acquisition of Bahraini
Saudi Bank B.S.C. (“ex-BSB”).
(b) The above available-for-sale equity investments are classified as Level 3 in the fair value
hierarchy (note 12). Movements in these investments are as follows:
Fair value measurement using significant unobservable inputs

Level 3
2015 2014
BD ’000 BD ‘000
At 1 January 2,412 2,656

Fair value changes 188 20
Repayments during the year (69) (100)
Disposals during the year (334) -
Provision (161) (164)
At 31 December 2,036 2,412
(c) This includes BD10,865 thousands (2014: BD5,687 thousands) relating to receivable from
sale of investments and advances to contractors.
(d) This aircraft was on lease and the lease was terminated during the year. The management is
in the process of re-leasing the aircraft.

17 TERM FINANCING
Term financing is subject to the following key terms:
a) BD7,531 thousands (2014: BD8,446 thousands) carries a profit and is repayable on

quarterly basis with final maturity on 13 December 2018. The collateral for this facility is an
aircraft, with a carrying value of BD8,488 thousands (2014: BD17,728 thousands); and
b) BD11,490 thousands (2014: BD12,891 thousands) carries profit and matures on 21

August 2016. The collateral for this facility is investments in real estate with a carrying value of
BD19,027 thousands (2014: BD20,759 thousands).
c) BD16,965 thousands (2014: nil) carries profit and matures on 28 December 2018. The
collateral for this facility is investments in corporate and sovereign Sukuk with a carrying value
of BD40,710 thousands (2014: nil).
18 OTHER LIABILITIES
2015 2014
BD ‘000 BD ‘000
Advances received from customers for sale of
properties 13,034 14,558
Accounts payable and accruals 19,623 11,704

Profit payable 5,474 8,119
Dividends payable 3,728 3,129
End of service benefits and other employee related
accruals 6,387 7,908
48,246 45,418
19 EQUITY OF INVESTMENT ACCOUNTHOLDERS
Equity of investment account holders funds is commingled with the Group’s funds and used
to fund / invest in Islamic modes of finance and no priority is granted to any party for the
purpose of investments and distribution of profits. According to the terms of acceptance of the
unrestricted investment accounts, 100% of the funds are invested taking into consideration
the relevant weightage, if any. The Mudarib’s share of profit ranges between 40% and 50%.
Operating expenses are charged to shareholders’ funds and not included in the calculation.
The balances consists of savings accounts of BD49,093 thousands (2014: BD17,814

thousands) and call accounts of BD13,258 thousands (2014: BD10,338 thousands).
The average profit rate for the holders is 0.21% (2014: 0.38%).

20 SHARE CAPITAL
2015 2014
BD ‘000 BD ‘000
Authorised:
2,500,000,000 ordinary shares
(2014: 2,500,000,000 shares) of BD0.100 each 250,000 250,000
Issued and fully paid: ( BD0.100 per share )

Balance at the beginning 214,093 149,706
Shares issued - 64,387
214,093 214,093
20.1 Proposed appropriation

The Board of Directors in its meeting on 9 February 2016 has resolved to recommend a cash
dividend of 5 fils per share or 5% (2014: 5 fils or 5%) of the paid-up capital subject to approval
at the forthcoming annual general meeting.
21 STATUTORY RESERVE
As required by Bahrain Commercial Companies Law and the Bank’s articles of association,
10% of the net profit for the year has been transferred to the statutory reserve. The Group may
resolve to discontinue such annual transfers when the reserve totals 50% of the paid up share
capital of the Bank. The reserve is not distributable except in such circumstances as stipulated
in the Bahrain Commercial Companies Law and following the approval of the CBB.
22 INCOME FROM FINANCING CONTRACTS
2015 2014
BD ‘000 BD ‘000
Murabaha financing 15,736 15,192
Mudaraba financing 13,104 7,584
Ijarah Muntahia Bittamleek* 10136 7,930
Musharaka 558 2,807
Murabaha and Wakala receivables from banks 896 725
Income from assets under conversion ** 7,800 17,256
48,230 51,494
* Depreciation on Ijarah Muntahia Bitamleek amounted to BD15,939 thousands (2014: BD10,101thousands).

** The Bank’s shareholders are advised, but not obliged, to contribute this income to charity at their discretion.

23 GAINS ON SALE OF INVESTMENTS AND SUKUK
2015 2014
BD ‘000 BD ‘000
Gain on sale of:
Available-for-sale investments 3,555 -
Development properties* 2,469 941
Sukuk 905 2,970
FVTPL investments 265 7,352
Investment properties - 698
Other investments 1,140 321
8,334 12,282
* Sales: BD17,203 thousands (2014: BD3,934 thousands) and cost: BD14,734 thousands
24 INCOME FROM INVESTMENTS
2015 2014
BD ‘000 BD ‘000
(Loss) / income from FVTPL investments (728) 997
Rental income from investments in real estate 1,687 1,866
Income from assets classified as held-for-sale 2,290 -
3,249 2,863
25 FEES, COMMISSION AND OTHER INCOME - NET
2015 2014
BD ‘000 BD ‘000
Financing and transaction related fees and
commissions 4,336 3775
Fiduciary and other fees 387 268

Other income 4,461 2,607
9,184 6,650

26 TOTAL COMPREHENSIVE INCOME
2015 2014
BD ‘000 BD ‘000
Net profit for the year 10,548 15,821
Other comprehensive (loss) / income:
Items to be reclassified to consolidated income
statement in subsequent periods:
Unrealized gain reclassified to consolidated
income statement on disposal of available-for-sale (965) -
investments
Unrealised (loss) / gain on available-for-sale
investments (470) 636
Changes in fair value of investments in real estate 1,549 1,045

Foreign currency re-translation (1,472) (819)
Other comprehensive (loss) / income for the year (1,358) 862
Total comprehensive income for the year 9,190 16,683
Attributable to:
Equity holders of the Bank 11,168 16,331
Non-controlling interest (1,978) 352
9,190 16,683

27 RELATED PARTY TRANSACTIONS
Related parties comprise major shareholders, directors of the Bank, senior management, close
members of their families, entities owned or controlled by them and companies affiliated by
virtue of common ownership or directors with that of the Bank. The transactions with these
parties were approved by the Board of Directors. All the loans and advances to related parties
are performing and are free of any provision for possible credit losses.
The balances with related parties at 31 December 2015 were as follows:
2015
Associates, Directors
and joint Major and related Senior
ventures shareholders entities management Total
BD ’000 BD ‘000 BD ‘000 BD ‘000 BD ‘000
Assets:
- - - - -
Central Bank
Murabaha and Wakala receivables
- 36 - - 36
from banks
Murabaha financing 32,799 - - 36 32,835
Mudaraba financing 1,885 - - - 1,885
Ijarah Muntahia Bittamleek - - - 187 187
Musharaka financing - - 55 - 55
Other assets 1,924 - 3,660 4 5,588
Liabilities and equity of investment

accountholders:
Murabaha and Wakala due to
1,508 - - - 1,508
banks
Wakala payables to non-banks 2,235 23,400 637 653 26,925
Current accounts 2,216 4,010 163 50 6,439
Equity of investment
- - 153 64 217
accountholders
Other liabilities 911 191 3 3 1,108
Contingent liabilities and
743 - - - 743
commitments

27 RELATED PARTY TRANSACTIONS (continued)
2014
BD ’000 BD ‘000 BD ‘000 BD ‘000 BD ‘000
Assets:
- 28 - - 28
Central Bank
Murabaha financing 30,160 - 20 49 30,229
Mudaraba financing 14,310 - 56 - 14,366
Ijarah Muntahia Bittamleek - - 1,007 207 1,214
Musharaka financing 843 - 65 - 908
Assets under conversion 243 - 404 74 721
Other assets 885 6 3 6 900
Liabilities and equity of investment

accountholders:
Wakala payables to non-banks 9,057 90,015 3,355 946 103,373
Current accounts 941 3,905 1,980 55 6,881
Equity of investment accountholders - - 1,400 121 1,521
Liabilities under conversion 1,554 - 805 - 2,359
Other liabilities 129 4 17 4 154
Contingent liabilities and
1,106 - - - 1,106
commitments

27 RELATED PARTY TRANSACTIONS (continued)
The income and expenses in respect of related parties included in the consolidated financial
statements are as follows:
2015
BD ’000 BD ‘000 BD ‘000 BD ‘000 BD ‘000
Income:
Income from financing contracts 54 - 4 5 63
Other income 80 - - 1 81
Gain on sale of investments & Sukuk 217 - 1,259 - 1,476
Expenses:
Profit on Murabaha and Wakala
3 - - - 3
payables to banks
Profit paid on Wakala from non-

144 2,720 13 16 2,893
banks
Share of profits on equity of

- - 2 - 2
investment account holders
Other operating expenses 6 - 432 - 438
Provision for impairment 9,425 - - - 9,425
2014
BD ’000 BD ‘000 BD ‘000 BD ‘000 BD ‘000
Income:
Income from financing contracts 397 - 115 14 526
Fair value changes on investments (3,799) - - - (3,799)
Other income 195 - - - 195
Expenses:
Profit paid on Wakala from non-
291 1,612 57 32 1,992
banks
Share of profits on equity of

- - 4 23 27
investment account holders
Directors› remuneration for 2015 amounted to BD365 thousands (2014: BD329 thousands).
Compensation of key management personnel, consisting of short-term benefits and non-cash remuneration, for the year
was BD3,142 thousands (2014: BD3,493 thousands).

28 CONTINGENT LIABILITIES AND COMMITMENTS
2015 2014
BD ‘000 BD ‘000
Contingent liabilities on behalf of customers
Guarantees 28,144 37,077
Letters of credit 9,594 9,704
Acceptances 2,275 3,464
40,013 50,245
Irrevocable unutilised commitments
Unutilised financing commitments 79,465 87,337
Unutilised non-funded commitments 37,023 50,023
Commitments towards development cost 6,981 23,880
123,469 161,240
Commitment relating to purchase of investment 4,182 4,182
Capital expenditure commitments

Estimated capital expenditure contracted for at the
consolidated statement of financial position date but 29 45
not provided for
167,693 215,712
Forward foreign exchange contracts - notional
amount 14,448 15,781
Letters of credit, guarantees (including standby letters of credit) commit the Group to make
payments on behalf of customers contingent upon their failure to perform under the terms of the
contract.
Commitments generally have fixed expiration dates, or other termination clauses. Since
commitment may expire without being utilized, the total contract amounts do not necessarily
represent future cash requirements.
Operating lease commitment - Group as lessee

The Group has entered into various operating lease agreements for its premises. Future
minimal rentals payable under the non-cancellable leases are as follows:
2015 2014
BD ‘000 BD ‘000
Within 1 year 1,328 1,789
After one year but not more than five years 2,576 3,517
3,904 5,306

29 RISK MANAGEMENT
29.1 Introduction
Risk is inherent in the Group’s activities but it is managed through a process of ongoing
identification, measurement and monitoring, subject to risk limits and other controls. This
process of risk management is critical to the Group’s continuing profitability and each individual
within the Group is accountable for the risk exposures relating to his or her responsibilities. The
Group is exposed to credit risk, liquidity risk and market risk, the latter being subdivided into
trading and non-trading risks. It is also subject to early settlement risk and operational risks.
The independent risk control process does not include business risks such as changes in
the environment, technology and industry, they are monitored through the Group’s strategic
planning process.
Risk management structure

The Board of Directors is ultimately responsible for identifying and controlling risks; however,
there are separate independent bodies responsible for managing and monitoring risks.
Board of Directors
The Board of Directors is responsible for the overall risk management approach and for
approving the risk strategies and principles.
Executive Committee
The Executive Committee has the responsibility to monitor the overall risk process within the
Bank.
Shari’a Supervisory Board

The Group’s Shari’a Supervisory Board is entrusted with the responsibility to ensure the
Group’s adherence to Shari’a rules and principles in its transactions and activities.
Credit/Risk Committee
Credit/Risk committee recommends the risk policy and framework to the Board. Its primary
role is selection and implementation of risk management systems, portfolio monitoring, stress
testing, risk reporting to the Board, Board Committees, Regulators and Executive management.
In addition, individual credit transaction approval and monitoring is an integral part of the
responsibilities of Credit/Risk Committee.
Asset and Liability Committee

The Asset and Liability Committee establishes policy and objectives for the asset and liability
management of the Group’s financial position in terms of structure, distribution, risk and return
and its impact on profitability. It also monitors the cash flow, tenor and cost/yield profiles of
assets and liabilities and evaluates The Group’s financial position both from profit rate sensitivity
and liquidity points of view, making corrective adjustments based upon perceived trends and
market conditions, monitoring liquidity, monitoring foreign exchange exposures and positions.

29 RISK MANAGEMENT (continued)

29.1 Introduction (continued)
Audit Committee
The Audit Committee is appointed by the Board of Directors who are non-executive directors
of the Group. The Audit Committee assists the Board in carrying out its responsibilities with
respect to assessing the quality and integrity of financial reporting, the audit thereof, the
soundness of the internal controls of the Group, the measurement system of risk assessment,
and the methods for monitoring compliance with laws, regulations and supervisory and internal
policies.
The audit committee reviews Group›s accounting and financial practices, integrity of the
Group’s financial and internal controls and consolidated financial statements. It also reviews the
Group’s compliance with legal requirements, recommends the appointment, compensation and
oversight of the Group’s external and internal auditors.
Internal Audit
Risk management processes throughout the Group are audited by the internal audit function,
that examines both the adequacy of the procedures and the Group’s compliance with the
procedures. Internal Audit discusses the results of all assessments with management, and
reports its findings and recommendations to the Board Audit Committee.
Risk measurement and reporting systems

The Group’s risks are measured using a method which reflects both the expected loss likely
to arise in normal circumstances and unexpected losses, which are an estimate of the ultimate
actual loss based on statistical models. The models make use of probabilities derived from
historical experience, adjusted to reflect the economic environment. The Group also runs worse
case scenarios that would arise in the event that extreme events which are unlikely to occur do,
in fact, occur.
Monitoring and controlling risks is primarily performed based on limits established by the
Group. These limits reflect the business strategy and market environment of the Group as well
as the level of risk that the Group is willing to accept, with additional emphasis on selected
industries. In addition, the Group monitors and measures the overall risk bearing capacity in
relation to the aggregate risk exposure across all risk types and activities.
Information compiled from all the businesses is examined and processed in order to analyse,
control and identify early risks. This information is presented and explained to the Board of
Directors, the Credit/Risk Committee, and the head of each business division. The report
includes aggregate credit exposure, credit metric forecasts, hold limit exceptions, liquidity
ratios and risk profile changes. On a monthly basis detailed reporting of industry, customer
and geographic risks takes place. Senior management assesses the appropriateness of
the allowance for credit losses on a quarterly basis. The Board of Directors receives a
comprehensive risk report once a quarter which is designed to provide all the necessary
information to assess and conclude on the risks of the Group.


29.1 Introduction (continued)
For all levels throughout the Group, specifically tailored risk reports are prepared and
distributed in order to ensure that all business divisions have access to extensive, necessary
and up-to-date information. A daily briefing is given to all relevant members of the Group
on the utilisation of market limits, proprietary investments and liquidity, plus any other risk
developments.
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
Group’s performance to developments affecting a particular industry or geographical location.
In order to avoid excessive concentrations of risk, the Group’s policies and procedures include
specific guidelines to focus on maintaining a diversified portfolio. Identified concentrations of
credit risks are controlled and managed accordingly.
29.2 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 attempts to control credit risk by
monitoring credit exposures, setting limits for transactions with counterparties, and continually
assessing the creditworthiness of counterparties.
In addition to monitoring credit limits, the Group manages the credit exposures by entering into
collateral arrangements with counterparties in appropriate circumstances and by limiting the
duration of the exposure.


29.2 Credit risk (continued)
Maximum exposure to credit risk without taking account of any collateral and other credit
enhancements
The table below shows the maximum exposure (excluding sovereign exposure) to credit risk
for the components of the consolidated statement of financial position. The maximum exposure
is shown net of provision, before the effect of mitigation through the use of master netting and
collateral agreements.
Gross maximum Gross maximum

exposure exposure
2015 2014
BD ‘000 BD ‘000
ASSETS
Balances with other banks 38,884 48,088
Murabaha receivables from banks 103,345 182,110
Corporate Sukuk 64,157 88,193
Murabaha and Mudaraba financing 413,308 376,716
Ijarah Muntahia Bittamleek 154,501 137,719
Musharaka financing 7,154 10,851
Assets under conversion 31,334 290,618
Other assets 23,714 16,753
Total 836,397 1,151,048
Contingent liabilities and commitments 167,693 215,712
Total credit risk exposure 1,004,090 1,366,760
Where financial instruments are recorded at fair value the amounts shown above represent the
current credit risk exposure but not the maximum risk exposure that could arise in the future as
a result of changes in values.
Type of credit risk

Various contracts entered into by the Group comprise Murabaha financing, Mudaraba
financing, Musharaka financing, Sukuk and Ijarah Muntahia Bittamleek contracts. Murabaha
financing contracts cover land, buildings, commodities, motor vehicles and others. Mudaraba
financing consist of financing transactions entered through other Islamic banks and financial
institutions. Mudaraba is a partnership agreement in which the Islamic bank acts as the provider
of funds (the Rabamal) while the recipient of the funds (the Mudarib or the manager) provides
the professional, managerial and technical know-how towards carrying out the venture, trade or
service with an aim of earning profit. The various financial instruments are:
Murabaha financing
The Group arranges Murabaha transactions by buying an asset (which represents the object
of the Murabaha) and then selling this asset to customers (beneficiary) after adding a margin
of profit over the cost. The sale price (cost plus profit margin) is paid in instalments over the
agreed period.


Ijarah Muntahia Bittamleek

The legal title of the leased asset under Ijarah Muntahia Bittamleek passes to the lessee at the
end of the Ijarah term, provided that all Ijarah instalments are settled.
a) The credit quality of balances with banks and Murabaha receivables from banks subject to
credit risk is as follows:
31 December 2015
Neither past due nor impaired Past due or
individually
‘A’ Rated ‘B’ Rated Unrated impaired Total
BD ’000 BD ’000 BD ’000 BD ‘000 BD ‘000
Balances with banks 34,999 2,326 1,559 - 38,884

46,016 27,659 29,670 - 103,345
from banks
81,015 29,985 31,229 - 142,229
31 December 2014
Neither past due nor impaired Past due or
individually
‘A’ Rated ‘B’ Rated Unrated impaired Total
BD ’000 BD ’000 BD ’000 BD ‘000 BD ‘000
Balances with banks 37,365 5,446 5,277 - 48,088

73,275 77,119 31,716 - 182,110
from banks
110,640 82,565 36,993 - 230,198
The ratings referred to in the above tables are by one or more of the 4 international rating
agencies (Standards & Poors, Moody’s, Fitch and Capital Intelligence). The unrated exposures
are with various high quality Middle East financial institutions, which are not rated by a credit
rating agency. In the opinion of the management, these are equivalent to “A” rated banks.


b) The credit quality of Corporate sukuk, financing facilities and other assets that are subject to
credit risk, based on internal credit ratings, is as follows:
31 December 2015
Neither past due nor impaired Past due
Satisfactory Watch List Substandard Not impaired Impaired Total

BD ’000 BD ’000 BD ’000 BD ’000 BD ’000 BD ‘000
Corporate Sukuk 63,514 - - - 643 64,157

Murabaha and Mudaraba
306,449 11,254 - 56,489 39,117 413,309
financing
Ijarah Muntahia Bittamleek 132,171 5,409 - 14,282 2,640 154,502
Musharaka financing 3,790 435 - 2,928 - 7,153
Assets under conversion 983 - - 15,438 14,913 31,334
Other assets 23,714 - - - - 23,714
530,621 17,098 - 89,137 57,313 694,169
31 December 2014
Neither past due nor impaired Past due
Satisfactory Watch List Substandard Not impaired Impaired Total

BD ’000 BD ’000 BD ’000 BD ’000 BD ’000 BD ‘000
Corporate Sukuk 87,550 - - - 643 88,193

Murabaha and Mudaraba
325,576 43,141 - 4,348 3,651 376,716
financing
Ijarah Muntahia Bittamleek 128,547 1,818 967 4,850 1,537 137,719
Musharaka financing 10,274 - - 525 52 10,851
Assets under conversion 214,012 1,167 - 47,736 27,703 290,618
Other assets 16,753 - - - - 16,753
782,712 46,126 967 57,459 33,586 920,850
In addition to the above, the financing facilities provided to the Government of Bahrain, its
related entities and GCC sovereign entities amounts to BD95,964 thousands
All internal risk ratings are tailored to the various categories and are derived in accordance with
the Group’s rating policy. The attributable risk ratings are assessed and updated regularly.


c) Past due but not impaired financing facilities are analysed as follows:
31 December 2015
0-30 days 31-90 days > 90 days Total
BD ’000 BD ’000 BD ’000 BD ‘000
Murabaha and Mudaraba financing 19,447 17,836 19,205 56,488

Ijarah Muntahia Bittamleek 4,600 7,080 2,602 14,282
Musharaka financing 148 2,182 599 2,929
Assets under conversion 1,147 638 13,653 15,438
25,342 27,736 36,059 89,137
31 December 2014
0-30 days 31-90 days > 90 days Total
BD ’000 BD ’000 BD ’000 BD ‘000
Murabaha and Mudaraba financing 2,753 1,420 175 4,348

Ijarah Muntahia Bittamleek 6 195 4,649 4,850
Musharaka financing 73 - 452 525
Assets under conversion 26,598 13,092 8,046 47,736
29,430 14,707 13,322 57,459
All the past due but not impaired financing facilities are covered by collateral of BD186,280
thousands (2014: BD77,935 thousands). The utilisation of the collateral will be on customer by
customer basis and is limited to the customers’ total exposure.
The maximum credit risk, without taking into account the fair value of any collateral and
Shari’a-compliant netting agreements, is limited to the amounts on the consolidated statement
of financial position plus commitments to customers disclosed in Note 28 except capital
commitments.
During the year BD57,899 thousands (2014: BD53,187 thousands) of financing facilities were
renegotiated. Most of the renegotiated facilities are performing and are secured.
At 31 December 2015, the amount of credit exposure in excess of 15% of the Group’s
regulatory capital to individual counterparties was nil (2014: BD3,356 thousands).
29.3 Legal risk and claims

Legal risk is the risk arising from the potential that unenforceable contracts, lawsuits or adverse
judgements can disrupt or otherwise negatively affect the operations of the Group. The Group
has developed controls and procedures to identify legal risks and believes that losses will be
minimised.


As at 31 December 2015, legal suits amounting to BD6,285 thousands (2014: BD2,586

thousands) were pending against the Group. Based on the opinion of the Group’s legal
counsel, the total estimated liability arising from these cases is not considered to be material to
the Group’s consolidated financial position as the Group also has filed counter cases against
these parties.
30 CONCENTRATIONS
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
Group’s performance to developments affecting a particular industry or geographic location.
The Group manages its credit risk exposure through diversification of financing activities to
avoid undue concentrations of risks with customers in specific locations or businesses.
The distribution of assets, liabilities and equity of investment account holders by geographic
region and industry sector was as follows:
Liabilities, Liabilities,
equity of equity of
investment investment
account account
holders and Contingent holders and Contingent
owners’ liabilities and owners’ liabilities and
Assets equity Commitments Assets equity Commitments
2015 2015 2015 2014 2014 2014
BD ’000 BD ’000 BD ’000 BD ’000 BD ’000 BD ’000
Geographic region
GCC 1,470,200 1,266,869 170,087 1,732,319 1,553,152 215,180
Arab World 20,031 26,722 23 7,764 1,887 -
Europe 67,108 21,067 694 51,977 6,038 4,133
Asia Pacific 77,351 15,643 744 117,572 52,728 1,133
North America 10,923 1,302 - 22,179 7,007 4
Others 11,030 5,038 49 23,486 5,682 568
1,656,643 1,336,641 171,597 1,955,297 1,626,494 221,018
Owners’ Equity - 320,002 - - 328,803 -
1,656,643 1,656,643 171,597 1,955,297 1,955,297 221,018

30 CONCENTRATIONS (continued)
Liabilities, Liabilities,
equity of equity of
investment investment
account account
holders and Contingent holders and Contingent
owners’ liabilities and owners’ liabilities and
Assets equity Commitments Assets equity Commitments
2015 2015 2015 2014 2014 2014
BD ’000 BD ’000 BD ’000 BD ’000 BD ’000 BD ’000
Industry sector
Government and public
537,925 107,008 28,168 467,622 119,408 30,642
sector
Banks and financial
303,063 273,763 4,911 554,429 426,788 5,366
institutions
Real estate 407,449 210,969 48,089 410,678 205,966 83,405
Trading and
122,415 103,745 48,678 193,638 104,447 55,553
manufacturing
Aviation 11,171 37,704 - 21,822 47,412 -
Individuals 179,001 499,008 1,456 185,828 547,402 4,186
Others 95,619 104,444 40,295 121,280 175,071 41,866
1,656,643 1,336,641 171,597 1,955,297 1,626,494 221,018
Owners’ Equity - 320,002 - - 328,803 -
1,656,643 1,656,643 171,597 1,955,297 1,955,297 221,018
31 MARKET RISK
Market risk arises from fluctuations in global yields on financial instruments and foreign
exchange rates that could have an indirect effect on the Group’s assets value and equity prices.
The Board has set limits on the risk that may be accepted. This is monitored on a regular basis
by the Asset and Liability Committee of the Group.
31.1 Equity price risk
Equity price risk arises from fluctuations in equity prices. The Board has set limits on the
amount and type of investments that may be accepted. This is monitored on an ongoing basis
by the Group’s Investment Committee.
The effect on income (as a result of changes in the fair values of non-trading investments held
at fair value through profit or loss and available-for-sale investments) solely due to reasonably
possible changes in equity prices, is as follows:

31 MARKET RISK (continued)

31.1 Equity price risk (continued)
2015
10% increase 10% decrease
Effect on Effect on Effect on Effect on
net profit equity net profit equity
BD ’000 BD ’000 BD ’000 BD ’000
Quoted:
Bahrain - 193 (193) -
Saudi 585 - (585) -
Singapore - 284 (284) -
Frankfurt 179 - (179) -
Unquoted 10,736 373 (10,736) (373)
2014
10% increase 10% decrease
Effect on Effect on Effect on Effect on
net profit equity net profit equity
BD ’000 BD ’000 BD ’000 BD ’000
Quoted:
Bahrain - 301 - (301)
Saudi 540 - (540) -
Singapore 1,155 372 (1,155) (372)
Frankfurt 152 - (152) -
Unquoted 10,730 1,502 (10,730) (1,502)
31.2 Profit return risk
The Group has exposure to fluctuations in the profit rates on its assets and liabilities. The
Group recognises income on certain financial assets on a time-apportioned basis. The Group
has set limits for profit return risk and these are monitored on an ongoing basis by the Group’s
Asset Liability Committee (ALCO).
The Group manages exposures to the effects of various risks associated with fluctuations in the
prevailing levels of market profit rates on its financial position and cash flows.
The effect on income solely due to reasonably possible immediate and sustained changes in
profit return rates, affecting both floating rate assets and liabilities and fixed rate assets and
liabilities with maturities less than one year are as follows:

31 MARKET RISK (continued)

31.2 Profit return risk (continued)
2015
Effect on Effect on
Change in Change in
net profit net profit
rate % rate %
BD ’000 BD ’000
Bahraini Dinars 0.10 (237) (0.10) 237

US Dollars 0.10 (191) (0.10) 191
2014
Effect on Effect on
Change in Change in
net profit net profit
rate % rate %
BD ’000 BD ’000
Bahraini Dinars 0.10 (208) (0.10) 208

US Dollars 0.10 (142) (0.10) 142
31.3 Currency risk
Currency risk is the risk that the value of a financial instrument will fluctuate due to changes
in foreign exchange rates. The Board has set limits on positions by currency. Positions
are monitored on a periodic basis by the Asset Liability Committee to ensure positions are
maintained within established limits.
Substantial portion of the Group’s assets and liabilities are denominated in Bahrain dinars, US
dollars or Saudi Riyals. As the Bahraini Dinar and Saudi Riyals are pegged to the US Dollars,
positions in these currencies are not considered to represent significant currency risk as of 31
December 2015 and 2014.
32 LIQUIDITY RISK
Liquidity risk is the risk that the Group will be unable to meet its liabilities as they fall due.
Liquidity risk can be caused by market disruptions or credit downgrades which may impact
certain sources of funding. To mitigate this risk, management has diversified funding sources
and assets are managed with liquidity in mind, maintaining an adequate balance of cash, cash
equivalents and readily convertible marketable securities. Liquidity position is monitored on an
ongoing basis by the Asset Liability Committee.

32 LIQUIDITY RISK (continued)
The table below summarises the expected maturity profile of the Group’s assets and liabilities
as at 31 December 2015 and 2014:
31 December 2015
Upto 3 3 months 1 to 5 Over 5
months to 1 year years years Total
BD ’000 BD ‘000 BD ‘000 BD ‘000 BD ‘000
ASSETS
Cash and balances with banks and the
135,505 11,215 5,852 - 152,572
Central Bank
Sovereign Sukuk 721 46,618 72,206 193,564 313,109
Murabaha & Wakala receivables from
103,345 - - - 103,345
banks
Corporate Sukuk 675 16,566 37,238 9,678 64,157
Murabaha and Mudaraba financing 45,936 153,444 214,864 93,635 507,879
Ijarah Muntahia Bittamleek 4,272 6,222 62,881 81,842 155,217
Musharaka financing 1,951 819 2,793 1,591 7,154
Assets under conversion - - 22,163 9,869 32,032
Non-trading investments - - 123,157 357 123,514
Investments in real estates - - 68,786 - 68,786
Development properties - - 49,021 - 49,021
Investment in associates - - 7,525 2,469 9,994
Other assets 34,590 2,144 3,056 4,102 43,892
Goodwill - - - 25,971 25,971
326,995 237,028 669,542 423,078 1,656,643
31 December 2015
BD ’000 BD ‘000 BD ‘000 BD ‘000 BD ‘000
LIABILITIES AND EQUITY OF

INVESTMENT ACCOUNTHOLDERS
Murabaha and Wakala payables to banks 91,067 13,437 16,291 - 120,795
Wakala payables to non-banks - 84,257 758,313 - 842,570
Current accounts 224,366 - - - 224,366
Liabilities under conversion 2,327 - - - 2,327
Term financing - 7,531 28,455 - 35,986
Other liabilities 19,995 20,329 7,922 - 48,246
Equity of investment accountholders 18,706 12,470 31,175 - 62,351
356,461 138,024 842,156 - 1,336,641

31 December 2014
BD ’000 BD ‘000 BD ‘000 BD ‘000 BD ‘000
ASSETS
Cash and balances with banks and the
256,575 - 21,176 - 277,751
Central Bank
Sovereign Sukuk 10,267 - 87,655 47,867 145,789
Murabaha & Wakala receivables from banks 182,110 - - - 182,110
Corporate Sukuk - 19,902 52,654 15,637 88,193
Murabaha and Mudaraba financing 28,803 121,852 211,206 98,168 460,029
Ijarah Muntahia Bittamleek 28,402 13,044 59,141 40,465 141,052
Musharaka financing 3,010 1,774 3,393 2,674 10,851
Assets under conversion 30,185 21,326 257,148 - 308,659
Non-trading investments - - 145,121 1,975 147,096
Investments in real estates - - 65,149 - 65,149
Development properties - - 59,262 - 59,262
Investment in associates - - 7,753 2,739 10,492
Other assets 23,854 2,096 474 6,469 32,893
Goodwill - - - 25,971 25,971
563,206 179,994 970,132 241,965 1,955,297
31 December 2014
BD ’000 BD ‘000 BD ‘000 BD ‘000 BD ‘000
LIABILITIES AND EQUITY OF

INVESTMENT ACCOUNTHOLDERS
Murabaha and Wakala payables to banks - 44,179 77,087 - 121,266
Wakala payables to non-banks - 103,405 930,647 - 1,034,052
Current accounts 226,648 - - - 226,648
Liabilities under conversion 9,637 14,962 125,022 - 149,621
Term financing 303 935 20,099 - 21,337
Other liabilities 40,568 4,323 527 - 45,418
Equity of investment accountholders 8,445 5,631 14,076 - 28,152
285,601 173,435 1,167,458 - 1,626,494

The table below summarises the maturity profile of the Group’s financial liabilities at 31
December 2015 and 2014 based on contractual undiscounted payment obligation:
31 December 2015
On Upto 3 3 months 1 to 5 Over 5
demand months to 1 year years years Total
BD ’000 BD ’000 BD ‘000 BD ‘000 BD ‘000 BD ‘000

ACCOUNTHOLDERS, COMMITMENTS
AND CONTINGENT LIABILITIES
Murabaha and Wakala payables to banks - 112,366 8,429 - - 120,795
Wakala payables to non-banks - 384,898 427,200 30,472 - 842,570
Current accounts 224,366 - - - - 224,366
Equity of investment accountholders 27,986 34,365 - - - 62,351
Liabilities under conversion - - 2,327 - - 2,327
Term financing - - 7,531 28,455 - 35,986
Unutilised commitments 9,319 23,370 67,062 9,063 7,674 116,488
Contingent liabilities 40,013 291 1,037 2,577 - 43,918
Other financial liabilities - 6,245 12,438 195 - 18,878
Profit on financial liabilities - 1,037 5,986 3,063 - 10,086
301,684 562,572 532,010 73,825 7,674 1,477,765
31 December 2014
On Upto 3 3 months 1 to 5 Over 5
demand months to 1 year years years Total
BD ’000 BD ’000 BD ‘000 BD ‘000 BD ‘000 BD ‘000

ACCOUNTHOLDERS, COMMITMENTS
AND CONTINGENT LIABILITIES
Murabaha and Wakala payables to banks - 103,091 18,175 - - 121,266
Wakala payables to non-banks - 332,009 553,664 147,730 649 1,034,052
Current accounts 226,648 - - - - 226,648
Equity of investment accountholders - 28,152 - - - 28,152
Liabilities under conversion - 58,422 25,511 51,971 13,717 149,621
Term financing 303 935 20,099 - - 21,337
Unutilised commitments 33,594 7,337 50,686 18,358 7,653 117,628
Contingent liabilities 2,199 17,475 24,381 6,190 - 50,245
Other financial liabilities - 5,971 5,855 427 - 12,253
Profit on financial liabilities 81 1,254 9,083 7,888 49 18,355
262,825 554,646 707,454 232,564 22,068 1,779,557

33 SEGMENT INFORMATION
Primary segment information

For management purposes, the Group is organised into four major business segments:
Principally managing Shari’a compliant profit sharing investment accounts,

and offering Shari’a compliant financing contracts and other Shari’a-
Banking
compliant products. This segment comprises corporate banking, retail
banking and private banking and wealth management.
Principally handling Shari’a compliant money market, trading and treasury

Treasury
services including short-term commodity Murabaha.
Principally the Group’s proprietary portfolio and serving clients with a range
Investments
of investment products, funds and alternative investments.
Manages the undeployed capital of the Group by investing it in high quality

Capital financial instruments, incurs all expenses in managing such investments and
accounts for the capital governance related expenses.
These segments are the basis on which the Group reports its primary segment information.
Transactions between segments are conducted at estimated market rates on an arm’s length
basis. Transfer charges are based on a pool rate which approximates the cost of funds.
Segment information is disclosed as follows:
31 December 2015
Banking Treasury Investments Capital Total
BD ’000 BD ‘000 BD ‘000 BD ‘000 BD ‘000
Operating income 32,493 8,969 7,054 9,295 57,811

Segment result 8,998 6,532 (4,458) (524) 10,548
Segment assets 655,372 618,757 219,074 163,440 1,656,643
Segment liabilities, and equity 1,108,457 177,678 39,565 330,943 1,656,643
Goodwill resulting from BMI acquisition is allocated to banking segment.
31 December 2014
Banking Treasury Investments Capital Total
BD ’000 BD ‘000 BD ‘000 BD ‘000 BD ‘000
Operating income 30,931 5,757 8,507 873 46,068

Segment result 7,148 4,448 5,600 (1,375) 15,821
Segment assets 830,396 537,408 356,947 230,546 1,955,297
Segment liabilities, and equity 1,444,201 121,549 62,258 327,289 1,955,297
Secondary segment information

The Group primarily operates in the GCC and derives substantially all its operating income and
incurs all operating expenses in the GCC.

34 FIDUCIARY ASSETS
Funds under management at the year-end amounted to BD80,891 thousands (2014:

BD78,178 thousands). These assets are held in a fiduciary capacity and are not included in the
consolidated statement of financial position.
35 SHARI’A SUPERVISORY BOARD
The Bank’s Shari’a Supervisory Board consists of five Islamic scholars who review the Bank’s
compliance with general Shari’a principles and specific fatwa’s, rulings and guidelines issued
by the Bank’s Shari’a supervisory Board. Their review includes examination of evidence
relating to the documentation and procedures adopted by the Bank to ensure that its activities
are conducted in accordance with Islamic Shari’a principles.
36 FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of sovereign sukuk is BD303,506 thousands (2014: BD147,593 thousands). The
estimated fair values of other financial instruments are not materially different to their carrying
values as of 31 December 2015 and 2014.
37 EARNINGS AND EXPENSES PROHIBITED BY SHARI’A
During the year, the Group received Sharia’ prohibited income totalling BD189 thousands
(2014: BD211 thousands). These include, income earned from the conventional financing and
investments, penalty charges from customers and income on current account balances held
with correspondent banks. These funds were allocated to charitable contributions.
38 SOCIAL RESPONSIBILITY
The Group discharges its social responsibility through charity fund expenditures and donations
to individuals and organisations which are used for charitable purposes. During the year
the Group paid an amount of BD320 thousands (2014: BD225 thousands) on account of
charitable donations.
39 ZAKAH
Pursuant to a resolution of the shareholders in an EGM held on 12 November 2009, it was

resolved to amend the articles of association of the Bank to inform the shareholders of their
obligation to pay Zakah on income and net worth. Consequently, Zakah is not recognized in the
consolidated income statement as an expense. The total Zakah payable by the shareholders
for 2015 has been determined by the Shari’a supervisory board as 3.9 fils (2014: 3.8 fils) per
share.

40 CAPITAL ADEQUACY
The primary objectives of the Group’s capital management policies 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. Capital adequacy for each of the group companies is also managed
separately at individual company level. The Group does not have any significant restrictions on
its ability to access or use its assets and settle its liabilities other than any restrictions that may
result from the supervisory frameworks within which the banking subsidiaries operate.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividend
payment to shareholders or issue capital securities. No changes were made in the objectives,
policies and processes from the previous years.
The regulatory capital and risk-weighted assets have been calculated in accordance with Basel
III as adopted by the CBB.
2015
BD ‘000
Common equity Tier 1 Capital 268,814
Tier 2 capital 32,240
Total capital 301,054
Credit risk-weighted assets 1,381,565
Market risk-weighted assets 19,606
Operational risk-weighted assets 99,967
Total risk-weighted assets 1,501,138
Total capital ratio 20.1%
Minimum requirement 12.5%
Capital adequacy ratio for 2014 was calculated to be 18.7%. This included the regulatory
capital of BD263,222 thousand and risk-weighted assets of BD1,407,346 thousand, calculated
in accordance with Basel II regulations as adopted by the CBB.
41 DEPOSIT PROTECTION SCHEME
Deposits held with the Group’s Bahrain operations are covered by the Deposit Protection
Scheme (the Scheme) which was established by the Central Bank of Bahrain concerning
the establishment of Deposit Protection Scheme and Deposit Protection Board. No liability is
due until one of the member commercial banks of the Scheme is unable to meet its deposit
obligations.
42 COMPARATIVE FIGURES
Certain of the prior year figures have been reclassified to conform to the current year
presentation. Such reclassifications did not affect previously reported net profit, total assets,
total liabilities and total equity of the Group.

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CREATIVELY OUTLINING SUCCESS

ANNUAL REPORT 2015

Annual Report 2015 Al Salam Bank-Bahrain B.S.C. 1

2 Al Salam Bank-Bahrain B.S.C. Annual Report 2015

Annual Report 2015 Al Salam Bank-Bahrain B.S.C. 3

Al Salam Bank-Bahrain B.S.C (ASBB)

Following a resolution of ASBB’s Extraordinary General Assembly meeting held on 4 May

4 Al Salam Bank-Bahrain B.S.C. Annual Report 2015

• Strong paid-up capital base;

A dynamic, diversified and differentiated

Annual Report 2015 Al Salam Bank-Bahrain B.S.C. 5

Total Assets Total Equity

Earnings per Share Cost to Income Ratio

6 Al Salam Bank-Bahrain B.S.C. Annual Report 2015

Chairperson of the Remuneration, Nomination and Corporate Governance

8 Al Salam Bank-Bahrain B.S.C. Annual Report 2015

Independent and non-executive

H. E. Mohamed Ali Rashid Alabbar

Non-independent and non-executive

Annual Report 2015 Al Salam Bank-Bahrain B.S.C. 9

Mr. Hussein Mohammed Al Meeza

Chairman of the Executive Committee

Mr. Salman Saleh Al Mahmeed

Chairman of the Audit and Risk Committee

10 Al Salam Bank-Bahrain B.S.C. Annual Report 2015

Mr. Essam bin Abdulkadir Al Muhaidib

Independent and non-executive

Mr. Sulaiman bin Mohamed Al Yahyai

Independent and non-executive

Annual Report 2015 Al Salam Bank-Bahrain B.S.C. 11

Mr. Hisham Saleh Al Saie

Independent and non-executive

Mr. Mohamed Shukri Ghanem

Independent and non-executive

12 Al Salam Bank-Bahrain B.S.C. Annual Report 2015

Mr. Khalid Salem Al-Halyan

Independent and non-executive

Mr. Yousif Abdulla Taqi

Annual Report 2015 Al Salam Bank-Bahrain B.S.C. 13

Dr. Ali Mohuddin Al’Qurra Daghi

Shaikh Adnan Abdulla Al Qattan

14 Al Salam Bank-Bahrain B.S.C. Annual Report 2015

Dr. Mohammed Burhan Arbouna

Group Head of Shari’a Compliance

Dr. Mohammed Burhan Arbouna holds a PhD in laws with specialization in

Annual Report 2015 Al Salam Bank-Bahrain B.S.C. 15

Experience: more than 32 years

Dr. Anwar Khalifa Al Sadah

Experience: more than 26 years

16 Al Salam Bank-Bahrain B.S.C. Annual Report 2015

Mr. Anwar Mohammed Murad

Experience: more than 22 years

Mr. Arif Mohammed Janahi

Experience: more than 21 years

18 Al Salam Bank-Bahrain B.S.C. Annual Report 2015

Mr. Abdulkarim Turki

Experience: more than 31 years

Mr. Talal Abdul Aziz Al Mulla

Experience: more than 16 years