ARAB-BYZANTINE DINAR

Transcription

1 Annual Report 2011

2 Annual Report 2011

3 ARAB-BYZANTINE DINAR Face of an Arab-Byzantine Dinar; Latin type minted probably in Carthage coinage workshop before 85H by Umayyad Governor Mûsâ b. Nusayr (CBT,4)

4 About the Bank 3 Tunis International Bank Burgan Bank Description KIPCO Group Description Board of Directors Senior Management Selected Financial Information Chairman s Statement 15 Bank s Performance Bank s Strategy Tunisia Outlook International Environment Gratitude Business Performance Loans and Advances Investment Income Foreign Exchange Profit Off Balance Sheet Funding Capitalisation Liquidity Net Income Auditors Report Financial Statements Consolidated Balance Sheet Consolidated Income Statement Statement of Sonsolidated Comprehensive Income Consolidated Cash Flow Statement Consolidated Statement of Changes in Shareholders Equity Notes to the Consolidated Financial Statements

5 Face of an Arab-Byzantine Dinar; Latin type minted probably in Carthage coinage workshop before 85H by Umayyad Governor Mûsâ b. Nusayr (CBT,4) Tunis International Bank (TIB) Tunis International Bank (TIB), was created in June 1982 and was the first bank established in Tunisia as a fully licensed banking corporation under the Tunisian Law of 12th July 1976 replaced on 14th August TIB operates under the supervision of the Central Bank of Tunisia (CBT). It is a member of Tunisia s Clearing House Association. TIB is a private offshore commercial bank, its main shareholder being Burgan Bank SAK - Kuwait, itself a subsidiary of the Kuwait Investment Projects Company (Holding) KIPCO. Burgan Bank (BB), a subsidiary of KIPCO (Kuwait Projects Company), is a regional bank with majority owned subsidiaries in the MENA region. BB has acquired a leading role in the retail, corporate and investment banking sector through innovative product offers and technologically advanced delivery channels. Burgan Bank offers both retail and commercial banking services and is active both in the Gulf region and internationally. Besides TIB, Burgan Bank has three other majorities owned subsidiaries: Jordan Kuwait Bank (Jordan), Gulf Bank Algeria (Algeria), Bank of Baghdad (Iraq), collectively known as the Burgan Bank Group KIPCO is one of the most important diversified holding companies in the Middle East and North Africa. It has substantial ownership interests in a portfolio of 60 companies operating across 26 countries. Its group companies are very diversified, with particular concentration in two areas of activity: the financial sector and the Media sector. With these credit risk assessment, KIPCO enjoys the highest ratings for any similar private corporate sector company within the MENA region. Our bank s reputation has been fully established as a local provider of the highest quality products and services. TIB provides a comprehensive range of international financial services for corporations, financial institutions, governments and individuals both in Tunisia and abroad including the following: Foreign Exchange and Money Market operations in all convertible currencies including Tunisian dinars, International Trade Finance, Private Banking Services, Syndicated loans

6 and Forfating, Commercial Banking, Investment, Visa and American Express Cards. Our product range is constantly reviewed to ensure that we are able, within our credit and procedural policies,to meet our customers requirements, to meet the range of needs in our local market base. This includes maximising the products and services we are able to offer as a result of the synergies we have, and are further developing, with co-members of the KIPCO group. The bank continues to be an innovative institution both internationally and domestically dedicated to banking services of the highest standards. As a Tunisian bank based in Tunis, TIB s traditional and natural marketplace is the Maghreb countries. Maghreb countries will remain TIB s primary target market by maximising the opportunities available to us through working with our subsidiary Gulf Bank Algeria in Algeria and also through the bank s representative office in Tripoli, Libya. Looking towards the future, TIB aims to play a key role in promoting business and partnerships between Gulf investors and the Maghreb. In addition to this area, business has also been developed involving Western European and other Mediterranean countries. The bank s traditional and natural customer base in Tunisia has been the offshore companies usually majority owned by foreigners, exporting most if not all of their manufactured products, and able to deal freely in foreign currencies. Tunis international Bank has won the Arch of Europe Award for quality and technology by Business Initiative Directions in the gold category for the year The Bank s website : 5

7 Reverse of an Arab-Byzantine Dinar; Latin type minted probably in Carthage coinage workshop before 85H by Umayyad Governor Mûsâ b. Nusayr (CBT,4) Burgan Bank Description Tunis International Bank is a subsidiary of the Burgan Bank SAK Kuwait group which is a subsidiary of the KIPCO Holding Company - Kuwait. Burgan Bank, a subsidiary of KIPCO (Kuwait Projects Company), is a regional bank with majority owned four subsidiary banks in the MENA region, including Tunis International Bank. Burgan Bank is the youngest and most dynamic conventional commercial bank, established in 1977, the Bank has acquired a leading role in the retail, corporate and investment banking sector through innovative product offers and technologically advanced delivery channels with growing Private Banking business. Burgan Bank offers both retail and commercial banking services and is active both in the Gulf region and internationally. As of 31st December 2011, Burgan Bank had four subsidiaries whose financial statements are consolidated into the Bank s financial statements. Its subsidiaries include, 60% of Gulf Bank Algeria (Algeria), 52% of Bank of Baghdad (Iraq), 51.1% of Jordan Kuwait Bank (Jordan) and 86.6% of Tunis International Bank (Tunisia). It has continuously improved its performance over the years by applying a sustained revenue structure, good asset quality, diversified funding sources and a strong capital base. The adoption of state-of-the-art services and ground-breaking technology has positioned it as a trendsetter in the domestic market and within the MENA region. The bank has been growing at a consistent pace; Burgan Bank standalone has 23 branches, 93 ATMs and advance Internet Banking service which is a testament to their customer focus. The bank currently employs 733 employees, comprising both Kuwaitis and Non-Kuwaitis that demonstrates the fabric of globalisation and openness in the organisation s culture. The bank is currently committed to developing its banking activities and getting ready to play a key role in the coming Kuwait Development Plan and supporting its clients needs, with innovative and diversified investment and financial products, enhancing treasury operations, increasing syndication activities, and expanding the bank s retail products. The brand has been created on a foundation of real values of trust, commitment, excellence and progression. People come first is the foundation on which its products and services are developed and are further augmented by its three pillars of innovative technology, staff competency and customer service. It is committed to offering an enhanced banking experience. The bank is rated by internationally reputed rating agencies like S&P, Moodys, Capital Intelligence and enjoys the following ratings:

8 Rating agency Rating highlights Rating Standard & Poor s Counterparty Credit Rating BBB+ / A-2 (Long / Short Term) Moody s Bank Deposit Rating ( long term) A2 Bank Financial Strength Rating D+ Capital Intelligence Foreign Currency A-/A2 (Long / Short Term) Financial Strength A- The Bank was recertified in 2010 with ISO 9001:2008 certification in all its banking businesses, making it the only bank in the GCC to receive such accreditation. It also has to its credit the distinction of being the only bank in Kuwait to have won the JP Morgan Chase Quality Recognition Award, 12 year in succession. Further, in 2010 Burgan Bank was awarded with the Best Internet Banking Service award from Banker Middle East. Burgan Bank won the prestigious Banking Web Awards Prize in the Commercial and Corporate Category for Kuwait. Burgan Bank was recognized in 2011 Kuwait s Best Private Bank, by World Finance. The bank also won, in 2011, the coveted International Platinum Star for Quality award from Business Initiative Directions, and The Best Technical Award from Banking Web Awards. Recently, in April 2012, Burgan Bank has received the prestigious Best Banking Group in MENA 2012 award by Global Banking & Finance Review. Burgan Bank s website : 7

9 Reverse of an Arab-Byzantine Dinar; Latin type minted probably in Carthage coinage workshop before 85H by Umayyad Governor Mûsâ b. Nusayr (CBT,4) Kipco Group Description Kuwait Projects Company (Holding) K.S.C (KIPCO) is a closed shareholding company organised under the laws of the State of Kuwait. KIPCO was registered as an investment company with the Central Bank of Kuwait and its shares are traded on the Kuwait Stock Exchange. On September 29, 1999, the legal status of the company was changed from an investment shareholding company to a holding shareholding company. The major shareholder of the company is Alfutooh Investments Co. W.L.L. In April 2011, KIPCO was awarded a BBB- / A3 rating from Standard & Poors and a Baa2 / P-3 rating from Moody s in June The KIPCO Group is one of the biggest diversified holding companies in the Middle East and North Africa, with assets worth more than US$ 20.8 billion under management or control. The Group has substantial ownership interests in a portfolio of over 60 companies operating across 26 countries. The company s main business sectors are financial services and media. Through the subsidiaries and affiliates of its core companies, KIPCO also has interests in real estate, industry, healthcare and the management & advisory sector. Kuwait Projects Company has earned a reputation for quality and excellence as a premier investment holding company in the Middle East and North Africa (MENA) region. The company s talented and committed workforce of 8,000 employees worldwide helps it create ideas, connect people, foster an entrepreneurial culture and uphold standards of professional excellence, and most importantly, its commitment to clients. KIPCO group is an important and well respected Kuwaiti group. Company strategists centre their activities on two business sectors: Financial Services and Media and communications. The group is committed to investment in capital, manpower and technology in these sectors. Through its subsidiaries and affiliated companies the group has a presence in four of the five continents. Most of its investments are based in the Middle East region. The group companies utilise the synergies that exist within each sector as well as across sectors and act as responsible corporate citizens in each of their markets. Investments of the group in the financial sector include commercial and investment banking, asset management and insurance. In the Media and Information Technology sector investments include broadcasting and computer industries. The Industrial sector is a widely diversified investment. It varies from dairy products to chemicals.

10 In the Real Estate business the group has sizeable investments in both the Arab world and the United States of America. Group entities are also involved in property development as well as property management. Management and Advisory services include direct investment, finance, private placement, mergers and acquisitions, derivatives and corporate restructuring. Kipco s website : 9

11 Reverse of an Arab-Byzantine Dinar; Latin type minted probably in Carthage coinage workshop before 85H by Umayyad Governor Mûsâ b. Nusayr (CBT,4) BOARD OF DIRECTORS Masaud Hayat Chairman KIPCO CEO Banking Chairman of the Executive Committee Mohamed Fekih Deputy Chairman Managing Director Member of the Executive Committee Rabih Soukarieh Member of the Board Member of the Executive Committee Acting CEO, United Gulf Bank, Bahrain Fethi Houidi Independent Member of the Board Chairman of the Board Audit Committee Mohammed Al Qumaish Member of the Board UGB representative Abdelmajid Karoui Board Advisor

12 SENIOR MANAGEMENT Mohamed Fekih Nabil Chahdoura Moncef Chehaibi Zouheir Bhar Manoubi Zouaoui Ali Tebib Mounir Karoui Sami Fezzani Fehmi Ben Amar Moez Ayachi Anas Labidi Managing Director Deputy Chairman Assistant General Manager Head of Investment, ALM and BDU Assistant General Manager CFO, Head of IT Senior Manager Head of Operations Senior Manager Head of Administration and HR Senior Manager CRO, Compliance Officer Senior Manager Head of Treasury Manager Trade Finance, Financial Institutions and Private Banking Manager Corporate Banking Manager Head of Internal Control MLRO Head of Internal Audit 11

13 Reverse of an Arab-Byzantine Dinar; Latin type minted probably in Carthage coinage workshop before 85H by Umayyad Governor Mûsâ b. Nusayr (CBT,4) SELECTED FINANCIAL INFORMATION The following is selected consolidated financial information (in US$000 s) of the Bank for the year ending December 31st. Profit & Loss Net Interest income Other income Operating costs Operating profit Provisions Net profit after provisions Dividend Balance Sheet Cash Time deposits Investment Loans and advances Other assets Total Assets Deposits from banks Deposits from customers Other liabilities Total liabilities Shareholders funds Capitalization Share capital Reserves Retained earnings Net Profit Shareholders equity Total capitalization

14 NET PROFIT (US$ millions) SHAREHOLDER S EQUITY (US$ millions) OPERATING INCOME (US$ millions)

15 AGHLABID CURRENCY Reverse of an Aghlabid dinar minted in 281 H by Abû Ibrâhîm Ahmed (BCT, 204)

16 CHAIRMAN S STATEMENT

17 Reverse of an Aghlabid dinar minted in 281 H by Abû Ibrâhîm Ahmed (BCT, 204) CHAIRMAN S STATEMENT Dear Shareholders, In presenting the 2011 report to you, I am delighted to announce the successful achievements of Tunis International Bank (TIB). It was a year of accomplishment in which the Bank reached all of its targeted objectives. Indeed the year 2011 has been yet another year of steady and sustained progress for our bank, confirming its well established leading role in the Tunisian off shore banking sector and meeting the objectives set by the Board of Directors. This result was achieved during a challenging year in terms of economic contraction coupled with a political and social unrest in Tunisia and Libya in addition to the European debt and liquidity crisis. Despite the global economic slowdown, except for the year 2010, the Bank has continued to show strong performance over the past five years. Through its parent company Burgan Bank SAK Kuwait BB Group, TIB is proud to belong to the solid and highly reputable Kuwaiti group Kuwait Investment Projects Company (Holding) (KIPCO) with a US$21 billion Assets and major activities in financial services and media and a variety of other business sectors across the Middle East and North Africa. The group has substantial ownership interests in a portfolio of some 60 companies operating across 26 countries. BB group, the commercial banking subsidiary of the KIPCO Group, has announced another historical record with a net profit of KD 50.6 million approx. US$200 million for the year ended 31 December 2011, a tenfold increase from In 2012, The Bank was awarded the International Arch of Europe Award for excellence in business management, quality standards and durable market growth. BANK S PERFORMANCE TIB is pleased to announce that its underlying performance continues to deliver steady value increases to its shareholders, maintaining the trend established over recent years. At 19.49%, return on equity is strong, net earnings per share work out at 3.14US$ and the return on average assets (ROAA) is 2.94%. It is our business to ensure that these fundamentals are maintained, as they form the bedrock for future value accretion. The bank maintained a strong balance sheet with

18 a high liquidity ratio of 113% and a robust capital adequacy ratio of 39.01%. By year-end 2011 and despite a competitive operating environment, a global economic slow recovery and historical low of major currencies interest rates, the Bank achieved its objective of joining the ranks of the most profitable banks in Tunisia. This was achieved whilst maintaining more than adequate equity levels, implementing rigorous risk management policies and continuous build up of a solid customer base. TIB s consolidated profit reached US$ 15,682, in 2011 compared to US$ 12,019,647.- in TIB pursued its strategy of performance achievement. Total revenue has increased by US$6.23 million or 28.48% to US$28 million in As at this date, TIB generated a high operating income of US$25.42 million, which represents an increase of 29.21% on a year on year basis. Net operating income before write downs and provisions rose by 42.03% to US$ million in Earnings per share were US$ 3.14 cents while return on shareholder s equity reached 19.49%. These figures demonstrate the continued performance of the Bank to deliver steady value increases to its shareholders, thereby maintaining the trend established over recent years. The Bank is however cognizant of the importance of building up customer loyalty and continues to emphasise its customer service. This focus was maintained throughout the year and is an integral principle in our core banking activities. BANK S STRATEGY TIB has adapted its strategy to take into account the much greater degree of competition which it will encounter from the liberalisation of the financial sector. TIB s focus is on corporate banking, retaining its existing clientele and attracting new corporate clients by continuing to expand the products and services it offers. Personal accounts will be offered on a selective basis primarily to business professionals and high net worth individuals. In terms of international expansion, the Maghreb countries (Algeria, Libya, Morocco and Tunisia) will remain TIB s primary target market, maximising the opportunities available to TIB through working with Gulf Bank Algeria, the established TIB s representative office in Tripoli, Libya and also through the net work of BB Group in the Middle East. TUNISIA OUTLOOK Before the popular uprising in early 2011, Tunisia had implemented a number of structural reforms to boost competitiveness and establish robust and diversified economy. Some progress had been made in lowering barriers to foreign investment and promoting an evolving entrepreneurial sector. Tunisia achieved an average economic growth rate of nearly 5 per 17

19 Reverse of an Aghlabid dinar minted in 281 H by Abû Ibrâhîm Ahmed (BCT, 204) cent during the last decade, outpacing other countries in the Middle East and North Africa. However, these economic achievements had failed to bring tangible benefits to the impoverished interior regions and bring down high unemployment. As a result, a spontaneous outpouring of public anger in Tunisia over economic conditions took place. On the political, economic and social side, the period post revolution has been very difficult for Tunisia, given the sharp decline in domestic economic activity, as well as regional instability and high prices for fuel and food on the international market. However keeping pace with the Tunisian miracle and despite these difficulties, the interim government has managed to preserve a decent level of foreign exchange reserves, and control inflation. The consumer price index is expected to drop to 3.5% against 4.4%. Tunisia now faces a double-sided obstacle: a lack of liquidity and a high cost of external financing that resulted from the downgrading of sovereign debt ratings. As the Tunisian economy is undergoing a challenging transition, deeper reforms to enhance governance and strengthen the foundations of economic freedom are critically needed. The outlook is not as bleak as might be suggested. Despite these difficulties, most analysts are confident; Tunisia has often proved its resilience, even during a challenging economic environment. Tunisia has a diverse, market-oriented economy, with important agricultural, mining, tourism, and manufacturing sectors. The country s prudent macroeconomic policies and structural reforms coupled with World Bank and IMF support, resulted in lower public and external indebtedness, a stronger debt coverage ratio, and acceptable level of reserves. According to the draft budget, the economy is expected to recover and grow by 3.5 percent in In order to reassure businesses and investors, bring budget and current account deficits under control, shore up the country s financial system, the country s newly elected government has confirmed to continue the diversification program, stabilizing the economy, reducing both income disparities across the country and unemployment among university graduated people. The Central Bank of Tunisia (CBT) continued to introduce reforms in order to revive the economy, strengthen the financial sector whose main weakness consists of the liquidity squeeze and stress the high quality of bank governance. To tackle these issues, during 2011, the CBT reduced its principal rate to 3.5 %, it is the first adjustment in many years, eased the liquidity in the financial system by reducing the rate of obligatory reserve to 2% and it is expected to continue its policy of exchange rate flexibility to improve the competitiveness of the Tunisian economy. INTERNATIONAL ENVIRONMENT The recovery of economic activity at the global level was weaker and slower than projected. Economic recovery is also uneven across countries. The recovery of the

20 world economy has started to lose momentum since the middle of 2010, and all indicators point at weaker global economic growth, according to a new United Nations report. World growth in real terms is expected to be 4.2% in 2011, down from 4.7% in Economic performance, however, will vary widely. Far from sufficient to enable recovering the jobs lost because of the crisis, real GDP growth in advanced economies is now expected to be just 1.6% in 2011 while GDP growth will reach 6.3% in emerging and developing countries, The contraction in overall economic activity will likely continue in early Most analysts expect the Euro area economy to shrink by 0.75%. Bolstered by unprecedented government support worldwide, global financial markets have progressively stabilized. Systemic risks in the world financial system have abated notably. However, important weaknesses remain in the world economy. Despite the huge amount of liquidity that was injected into the financial system, credit flows to non-financial sectors in many economies, particularly the major developed economies, remain subdued. While the rebound in equity prices has mitigated the losses of many financial institutions, the process of establishing sounder balance sheets through write downs of troubled assets and de-leveraging is still ongoing. At the same time, public finances of many developed countries have deteriorated rapidly owing to the impact of the crisis and the policy responses. In some, such as Greece, Portugal, Spain and Ireland, they have already become a new source of financial instability. Developing countries and the economies in transition continue to drive the global recovery, but their output growth is also expected to moderate during Developing Asia continues to show a stronger growth performance. Strong growth in major developing economies, especially China, is an important factor in the rebound of global trade The Basel Committee on Banking Supervision announced steps to strengthen the implementation of supervisory standards and guidance taken by the Basel Committee. Recently, the Committee proposed additional standards to promote more rigorous supervision and risk management of risk concentrations, off-balance sheet exposures, securitisations and related reputation risks. The rules will require banks to hold more and better quality capital and liquid assets to protect against the excessive risk taking that led to the biggest financial meltdown in 80 years. Banks will have to retain more of their profits, raise additional capital and reduce their exposure to riskier assets to meet the additional capital and liquidity requirements. In addition, the Committee is promoting improvements to valuations of financial instruments, the management of funding liquidity risks and firm-wide stress testing practices. GRATITUDE Finally, on behalf of the Board of Directors, I would like to express our special gratitude to the Tunisian Authorities. I would also like to express my sincere gratitude to our shareholders for their unrelenting support, to our customers for their trust and confidence and last, but by no means least, to our Management and staff for their loyalty, dedication, professionalism and teamwork which contributed enormously to the positive results in 2011, and upon whom we continue to rely every day. 19

21 AGHLABID CURRENCY Face of an Aghlabid dinar minted in 196 H (BCT, 219)

22 Business Performance 2011

23 Face of an Aghlabid dinar minted in 196 H (BCT, 219) Business Performance 2011 The year 2011 has been another year of steady and sustained progress for our Bank, confirming our well established leading role in the Tunisian offshore banking sector. Despite the tight global economic condition, the Bank pursued its strategy of performance achievement. TIB s consolidated profit reached US$ 15,682, in 2011 compared to US$ 12,019, in 2010 and year to date total assets, decreased by 1.33% to US$ 529,517 million. This decrease was due mainly to the decline in Tunisian offshore activity and the stagnation of the major capital markets. Indeed, as prudent measure, the bank reduced its loan and investment portfolio to avoid possible potential increase of non- performing and/or devaluated assets. While other earning assets on the balance sheet registered an increase year on year basis, TIB s investment and loan portfolio decreased respectively by 13.14% to US$125 million and 13.09% to US$106 million Total Assets

24 LOANS AND INVESTMENT Loans and advances net were decreased by 13.09% to reach US$ 106 million. The Bank has no significant concentration by economic sectors; credits to banks and financial institutions represent 75% of the total credit portfolio. The remaining 25% are mostly related to corporate. A large part of these loans is secured by liquid assets or bank guarantees. The loans as proportion of the customer deposits have reached 43.28% in 2011 (47.45% in 2010). A specific provision amounting to US$ 2.78 million has been allocated to non performing loans during the year The net interest income amounted to US$ 3,675,000.- in 2011 reflecting an increase of 16.63% compared to 2010 figures. 150 Earning Assets: Loans & investment* (US$ million ) Investment Loans The bank s strategy has been adapted to take into account the much greater degree of competition encountered from the liberalization of the financial sector. This was mainly due to the fact that restrictions on the activities of resident banks, which are primarily related to foreign exchange laws, are being eased. Local banks are already offering a full range of services and products, both in local dinars and in foreign currencies, and both to resident companies and to the offshore sector (the bank s traditional market). 23

25 Face of an Aghlabid dinar minted in 196 H (BCT, 219) In order to strengthen its presence within the Tunisian marketplace and being able now to access part of the resident market niche, the bank is in the process to identify, develop and market products and services to offer to resident Tunisian exporting companies. The bank is positioning itself and developing relationships with as many of the major local groups as possible that would, at a later stage, be able to conduct their banking business with any bank without restriction. Under the current foreign exchange legislation, resident exporting companies are allowed to retain 100% of the export revenues in foreign currency, which is offering to our bank the opportunity to strengthen business relationships with them. INVESTMENT INCOME During the year 2011, the bank reduced its investment portfolio to avoid possible potential devaluation of its assets. This decrease was due mainly to the stagnation of the major capital markets. Consequently, investment portfolio decreased by 13.14% to US$ million versus $141.4 million in Despite this drop, the investment portfolio core performance had been better off in 2011 than in Investment revenue increased to US$2,791 k compared to US$1,162 k in Total revenue from associated company Gulf Bank Algeria, experienced a significant increase by 43.9% to US$10.64 million from US$7.4 million in FOREIGN EXCHANGE PROFIT The increase of the commercial activities either locally or outside, added to the volatility of the Euro, US$ and TND exchange rates during the year 2011, generated a noticeable FX trading volume. Despite this increase, FX income reached US$ 3,649, in 2011, a decrease of 10% over 4,060,000.- in This decrease was due mainly to the frozen banking activity from Libya consequent to the various financial sanctions. OFF BALANCE SHEET Fees generated from commercial business: Letters of credit, letters of guarantee and documentary collections increased by 51% to reach US$ 1,311 k versus US$ k in L/Cs, L/Gs and Documentary Collections business volumes reached US$ 518 million US$ compared to 201 million in 2010 and 140 million in Following the strategy to develop business relationship with Tunisian local exporting companies dealing particularly with Algeria, Libya and Jordan. FUNDING As a result of the cognizance of the importance of building up customer loyalty and

26 the continued emphasise on customer service, TIB s customer deposits reached US$244.8 million a slight decrease of 3.17% or US$7.7 million. This focus was maintained throughout the year and is an integral principle in our core banking activities. Bank deposits went slightly down by 1.3% to US$ million; consequently, total deposits amounted to US$ million down by 2.38%. 300 Deposits (US$ million ) Customer deposits Bank deposits CAPITALISATION Shareholders funds before appropriation totaled US$96.15 million, an increase of 1.42% or US$1.36 million over the last year. Return on average assets (ROAA) was 2.94% and return on equity (ROE) was an impressive 19.49%. The policy of the Bank has always been to maintain a good balance sheet structure and a strong capital base. It is supervised by the tunisian financial authority (Central Bank of Tunisia or CBT) and is required to maintain a minimum capital ratio of 8% known as the risk asset ratio. TIB s capital adequacy ratio of about 39.01% is significantly above the CBT and the internationally agreed threshold of 8%. TIB is ranked among the top banks in Tunisia when classified by risk asset ratio. The after tax profit for the year 2011 was US$15.68 million, i.e. US$3.14 per US$10.00, confirming TIB s commitment to constantly enhancing value to its shareholders. Return on Equity Vs. Earnings per Share % , ,45 7,84 20,02 20,73 19,49 6,56 15,45 14,86 5,4 6,02 14,52 12,95 3,67 3,14 2,45 2,68 2,4 2, EPS ROE 25

27 Face of an Aghlabid dinar minted in 196 H (BCT, 219) *Starting 2010, the paid up capital of the bank was increased from US$ 25 million to US$ 50 million. Consequently the number of shares increased from 2.5 million shares to 5 million shares. LIQUIDITY TIB s average liquidity ratio of 113% during the year is significantly above the CBT minimum requirements of 100% and the internationally agreed standards. The Bank continues to maintain a liquid balance sheet by having a high proportion of liquid assets at all times. Liquidity is actively managed through dealings in the major world markets through the Bank s extensive network of international and reputable counterparties. Liquidity and capital adequacy ratios are viewed by bank regulators authorities and credit analysts as one of the key indicators of a bank s financial conditions. It indicates the margin of protection available to both depositors and creditors against unanticipated financial difficulties that may be experienced by a bank. NET INCOME Net income at US$ million in 2011 was 30.47% up compared to the previous year. To overcome the tight economic conditions and the general trend of declining interest rates, the Bank is diversifying its income sources. As a result non interest income recorded an increase of 31.61% to US $ 21.7million compared to last year. Interest income, which used to account for around 51.5% in 2007, represented no more than 40% in 2011, reflecting the efforts made to better utilise funds in more profitable opportunities. The strong growth in non-interest income helped to propel the Bank s operating profit and net operating profit. Operating Income (US$ million)

28 Sources of revenues Associated %38 %10 %22 %13 %17 Interest income Fees & commissions Investments Fx.revenues A 29.21% year on year increase in operating income to US$25.42 million reflects the Bank s efficiency in dealing with a challenging market environment. Total Revenue Vs. Total Expenses( US$ million ) Total revenue Total expenses 27

29 DIRHAM Face of a Dirham, minted in 183 H. in Maghra coinage workshop by Ibrâhîm the 1 st ; one year before the foundation of the Aghlabid Emirate (CBT 219)

30 Tunis International Bank (TIB) STATUTORY AUDITORS REPORTS ON CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31 ST, 2011 MARCH 2012 CONTENTS Page I- STATUTORY AUDITORS REPORT 30

31 Face of a Dirham, minted in 183 H. in Maghra coinage workshop by Ibrâhîm the 1 st ; one year before the foundation of the Aghlabid Emirate (CBT 219) I- STATUTORY AUDITORS REPORT TUNIS INTERNATIONAL BANK STATUTORY AUDITORS REPORT Consolidated financial statements as at December 31 st, 2011 To the Shareholders of Tunis International Bank, In compliance with the assignment entrusted to us by your General Meeting held in in March 26, 2010, we present below our report on the consolidated financial statements of Tunis International Bank for the year ended December 31 st, 2011 and on the specific procedures as prescribed by law and professional standards. I. Report on the Financial Statements We have audited the accompanying consolidated financial statements of Tunis International Bank which comprise the balance sheet as at December 31 st, 2011, the income statement, the statement of comprehensive income, the cash flow statement and the statement of changes in shareholders equity for the year then ended, and a summary of significant accounting policies and other explanatory information. The financial statements present positive equities of USD , including a net income of USD Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards. This responsibility includes the design, the implementation and the monitoring of such internal control as the management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and for making accounting estimates that are reasonable in the circumstances. 2. Statutory Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in Tunisia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from

32 material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 3. Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Tunis International Bank as at December 31 st, 2011 and of the results of its operations and its cash flows for the year then ended in accordance with International Financial Reporting Standards. II. Specific examinations We have also carried out the specific procedures prescribed by law and professional standards. We have nothing to report on with respect to the consistency of the financial information included in the Board of Directors report with the financial statements. Tunis, March 30, 2012 AMC Ernst & Young Fehmi LAOURINE Cabinet Mourad GUELLATY Mourad GUELLATY 31

33 HAFSID CURRENCY(XIII th - XVI th ) CENTURY Face of a quarter of a Dinar, squared coin (A/), called ushâriyyat al-sarf minted under the ruling of Abû Abd Allâh Mûhammad the 1 st in 673 H./ (CBT, 350)

34 FINANCIAL STATEMENTS

35 Reverse of a quarter of a Dinar, squared coin (A/), called ushâriyyat al-sarf minted under the ruling of Abû Abd Allâh Mûhammad the 1 st in 673 H./ (CBT, 350) II- FINANCIAL STATEMENTS Page II-1- Consolidated Balance Sheet 35 II-2- Consolidated Income Statement 36 II-3- Statement of Consolidated Comprehensive Income 36 II-4- Consolidated Cash Flow Statement 37 II-5- Consolidated Statement of changes in shareholders equity 38 II-5- Notes to the consolidated financial statements 40

36 CONSOLIDATED BALANCE SHEET As at December 31, 2011 (Amounts in US Dollars) Notes ASSETS Bank demand and call deposits Time deposits Financial assets designated at fair value through P&L Financial assets at fair value through other comprehensive income Financial assets measured at amortized cost Investments carried at fair value through P&L Investments carried at fair value through equity Held to maturity investments Investments in associated companies Loans and advances, net Accrued interest and other assets Property and equipment, net TOTAL ASSETS LIABILITIES AND SHAREHOLDERS EQUITY LIABILITIES Deposits from banks and financial institutions Deposits from customers Accrued interest and other liabilities SHAREHOLDERS EQUITY Share capital Reserves Foreign currency translation reserve Retained earnings TOTAL LIABILITIES AND SHAREHOLDERS EQUITY

37 Reverse of a quarter of a Dinar, squared coin (A/), called ushâriyyat al-sarf minted under the ruling of Abû Abd Allâh Mûhammad the 1 st in 673 H./ (CBT, 350) CONSOLIDATED INCOME STATEMENT For the year ended December 31, 2011 (Amounts in US Dollars) Notes TOTAL INCOME Interest income Other income, net Share of results of associated companies INTEREST EXPENSES Interest expenses OPERATING INCOME Salaries and benefits General and administrative expenses NET OPERATING INCOME (BEFORE WRITE DOWN AND PROVISIONS) Allowance for doubtful loans NET INCOME FOR THE YEAR Number of shares Earnings per share 20 3,14 2,40 STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME For the year ended December 31, 2011 (Amounts in US Dollars) PROFIT FOR THE YEAR Net fair value (loss) gain from financial assets at fair value through other comprehensive income Other comprehensive (loss) income for the year TOTAL COMPREHENSIVE INCOME FOR THE YEAR CONSOLIDATED CASH FLOW STATEMENT

38 For the year ended December 31, 2011 (Amounts in US Dollars) OPERATING ACTIVITIES Net income of the year Adjustments for : Depreciation Social fund Share of profit from associates companies Operating profit before changes in operating assets and liabilities Changes in operating assets and liabilities Time deposits Loans and advances Accrued interest and other assets Deposits from banks and financial institutions Deposits from customers Accrued interest and other liabilities Net cash provided by operating activities INVESTING ACTIVITIES Purchase of financial assets designated at fair value through P&L Sales of financial assets at fair value through other comprehensive income Purchase of financial assets measured at amortized cost Sale of financial assets measured at amortized cost Purchase of held to maturity investments Sale of held to maturity investments Purchase of investments available for sale Sale of investments available for sale Purchase of investments in associated companies Purchase of fixed assets net Net cash used by investing activities FINANCING ACTIVITIES Dividends paid Net cash used by financing activities Increase / Decrease in cash and cash equivalents Cash and cash equivalents as of 1st January Cash and cash equivalents as of 31 December

39 Reverse of a quarter of a Dinar, squared coin (A/), called ushâriyyat al-sarf minted under the ruling of Abû Abd Allâh Mûhammad the 1 st in 673 H./ (CBT, 350) CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY For the year ended December 31, 2011 (Amounts in US Dollars) Share Capital Statutory Reserve General Reserve Balance at December 31, Net income for the period Other comprehensive income Total comprehensive income Transfer to statuary reserve Transfer to general reserve Transfer to general reserve (Others) Dividends distributed Transfer to social fund Capital increase Share of changes recognised directly in associate s equity Balance at December 31, Net income for the period Other comprehensive income Total comprehensive income Transfer to statuary reserve Transfer to general reserve Transfer to general reserve (Others) Dividends distributed Transfer to social fund Change in accounting policies Share of changes recognised directly in associate s equity Balance at December 31,

40 Revaluation Reserve Investment FV reserve Foreign Currency reserve Retained Earnings Total

41 Reverse of a quarter of a Dinar, squared coin (A/), called ushâriyyat al-sarf minted under the ruling of Abû Abd Allâh Mûhammad the 1 st in 673 H./ (CBT, 350) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. CORPORATE INFORMATION The consolidated financial statements of Tunis International Bank for the year ended December 31, 2011 were authorised for issue in accordance with resolution of the Board of Directors on 13 February Tunis International Bank S.A. (TIB) was established in June 1982 in Tunisia as a fully licensed Bank operating mainly with non residents under the current Tunisian law of August 12 th, 2009 and under the supervision of the Central Bank of Tunisia. The main activity of the Bank is corporate and private banking and Money Market operations. The Bank is exempted from corporate tax for activities with non residents. The Bank s registered address is 18, avenue des Etats Unis d Amerique P.O. Box 81 Le Belvedere 1002, Tunis, Tunisia. TIB is a subsidiary of Burgan Bank (Kuwait), member of KIPCO Group (Kuwait). 2. ACCOUNTING POLICIES 2.1. BASIS OF PREPARATION The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the International Accounting Standards Board (IASB). The consolidated financial statements have been prepared on a historical cost basis except for financial assets measured at fair value and financial assets measured at amortized cost. The consolidated financial statements have been presented in US Dollars being the functional currency of the Bank PRINCIPLES OF CONSOLIDATION TIB has an associated company located in Algeria. For the preparation of the consolidated financial statement of the Bank, TIB has consolidated its shares in AGB using equity method. The associated company included in the consolidated financial statements of TIB is the following: Name of associated company Country Year of incorporation Gulf Bank Algeria Algeria 2003 An associated company is one in which the Bank exercises significant influence (but not control) over its operations, generally accompanying, directly or indirectly, a shareholding of between 20% and 50% of the equity share capital. Under the equity method, the investment in an associate is initially recognised at cost and adjusted thereafter for the post-acquisition change in the Bank s share of net assets of the

42 investee. The Bank recognises in the consolidated statement of income its share of the total recognised profit or loss of the associate from the date that influence or ownership effectively commences until the date that it effectively ceases. Distributions received from an associate reduce the carrying amount of the investment. Adjustments to the carrying amount may also be necessary for changes in the Bank s share in the associate arising from changes in its equity that have not been recognised in the associate s profit or loss. The Bank s share of those changes is recognised directly in equity. Whenever impairment requirements of IAS 36 indicate that investment in an associate may be impaired, the entire carrying amount of the investment is tested by comparing its recoverable amount with its carrying value. Goodwill is included in the carrying amount of an investment in an associate and, therefore, is not separately tested for impairment. Unrealised gains on transactions with an associate are eliminated to the extent of the Bank s share in the associate. Unrealised losses are also eliminated unless the transaction provides evidence of impairment in the asset transferred. An assessment of an associate is performed when there is an indication that the asset has been impaired, or that impairment losses recognised in prior years no longer exist SIGNIFICANT ACCOUNTING JUDGMENTS AND ESTIMATES In the process of applying the Bank s accounting policies, management has used its judgment and made estimates in determining the amounts recognised in the consolidated financial statements. The most significant use of judgment and estimates are as follows: Impairment allowances on loans and advances The Bank reviews its non performing portfolio at each reporting date to assess whether an allowance for impairment should be recorded in the income statement. In particular, judgement by management is required in the estimation of the amount and timing of future cash flows when determining the level of allowance required. Such estimates are based on assumptions about a number of factors and actual results may differ, resulting in future changes to the allowance. In addition to specific allowances against individual significant loans and advances, the Bank also makes a collective impairment allowance against exposures which, although not specifically identified as requiring a specific allowance, have a collectively risk of default CHANGE IN ACCOUNTING POLICY AND DISCLOSURE The following standard was adopted by the Bank for the current year: IFRS 9, Financial Instruments: Classification and Measurement, was issued in October 2010 with mandatory application from 1 January 2015 with permitted early adoption. The bank decided to adopt IFRS 9 early, as well as the related amendments to other IFRSs, because the new accounting standard better reflects the Bank s business model for managing such assets. The Bank chose 1 January 2011 as the date of initial application of IFRS 9. In accor- 41

43 Reverse of a quarter of a Dinar, squared coin (A/), called ushâriyyat al-sarf minted under the ruling of Abû Abd Allâh Mûhammad the 1 st in 673 H./ (CBT, 350) dance with the transition provisions of the standard, comparative figures have not been restated. IFRS 9 replaces some disclosures of IAS 39 related to the classification and measurement of financial assets. It requires financial assets to be classified, at the point of initial recognition, into two measurement categories: those measured at fair value and those measured at amortized cost. The classification depends on both the entity s business model for managing the assets and their contractual cash flow characteristics. The main effects resulting from an assessment of the financial assets held by the Bank at the date of initial application of IFRS 9 are shown in the table below: IAS 39 carrying amount US$ Classification differences US$ Measurement differences US$ IFRS 9 carrying amount US$ Financial assets designated at fair value through P&L Financial assets at fair value through other comprehensive income Financial assets measured at amortized cost Investments carried at fair value through P&L Investments carried at fair value through equity Held to maturity investments Impairment of financial assets Financial assets at amortised cost: Where there is objective evidence that an identified financial asset is impaired, specific provisions for impairment are recognised in the income statement. Impairment is quantified as the difference between the carrying amount of the asset and the net present value of expected future cash flows discounted at the asset s original effective interest rate where applicable. The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the income statement. The carrying amount of the asset is reduced directly only upon write-off. The criteria that the Bank uses to determine that there is objective evidence of impairment loss include: Delinquency in contractual payments of principal or interest Cash flow difficulties experienced by the borrower Breach of loan covenants or conditions Initiation of bankruptcy proceedings

44 Deterioration in the borrower s competitive position Deterioration in the value of collateral SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Foreign currency translation Translation of foreign currency transactions Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency rate of exchange ruling at the balance sheet date. All differences are recognised in the income statement. Income and expenses items incurred in foreign currencies are translated, into the functional currency monthly using the functional currency rate of exchange prevailing at that date. Translation of financial statements of foreign operations Assets and liabilities of foreign operations are translated at exchange rates prevailing at the balance sheet date. Income and expense items are translated at average exchange rates for the relevant period. All resulting exchange differences are taken directly to a foreign currency translation reserve the consolidated statement of changes in equity table. (b) Investments All investments are initially recognised at cost being the fair value of consideration given and including acquisition charges associated with the investments. After the initial recognition, investments, other than investments in associated companies, are measured as follows: Financial assets designated at fair value through P&L : Investments classified as Financial assets designated at fair value through P&L are measured at fair value. Fair value is determined by reference to quoted bid prices. Fair value of investments listed on inactive markets and unlisted investments are determined using other generally accepted methods such as discounted cash flows or adjusted prices of similar investments. Realised and unrealised gains and losses on Financial assets at fair value through P&L are included in the income statement. Financial assets at fair value through other comprehensive income : Investments have been presented in financial assets at fair value through other comprehensive income in accordance with IFRS 9 to better reflect the Bank s business model for managing such assets. Investments classified as Financial assets at fair value through other comprehensive income are measured at fair value. Fair value of investments listed on active markets is determined by reference to quoted bid prices. Fair value of investments listed on inactive markets and 43

45 Reverse of a quarter of a Dinar, squared coin (A/), called ushâriyyat al-sarf minted under the ruling of Abû Abd Allâh Mûhammad the 1 st in 673 H./ (CBT, 350) unlisted investments are determined using other generally accepted methods such as discounted cash flows or adjusted prices of similar investments. Investments whose fair value cannot be reliably measured are booked at cost. All fair value gain or losses are recognised in the statement of comprehensive income and not recycled through the income statement. Dividend income is recognized in the income statement. Financial assets measured at amortized cost: Financial assets which held within a business model whose objective is to hold assets in order to collect contractual cash flow and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding are carried at amortised cost, less allowance for impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition. Any gain or loss on such investments is recognised in the income statement. Financial assets classification prior to 1 January 2011 All investments are initially recognised at cost being the fair value of consideration given and including acquisition charges associated with the investments. After the initial recognition, investments, other than investments in associated companies, are measured as follows: Investments carried at fair value through P&L : Investments classified as Investments carried at fair value through P&L are measured at fair value. Fair value is determined by reference to quoted bid prices. Realised and unrealised gains and losses on Investments carried at fair value through P&L are included in the income statement. Investments carried at fair value through equity : Investments classified as Investments carried at fair value through equity are measured at fair value. Fair value of investments listed on active markets is determined by reference to quoted bid prices. Fair value of investments listed on inactive markets and unlisted investments are determined using other generally accepted methods such as discounted cash flows or adjusted prices of similar investments. Investments whose fair value cannot be reliably measured are booked at cost. The fair value changes of Investments carried at fair value through equity are directly recognised in equity. Realised gains and losses on Investments carried at fair value through equity are included in the income statement. Investments held to maturity: Investments which have fixed or determinable repayments and which are intended to be held to maturity are carried at amortised cost, less allowance for impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition. Any gain or loss

46 on such investments is recognised in the income statement if the investment is derecognised or impaired. Impairment of investments The Bank treats 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. (c) Deposits with banks and other financial institutions Deposits with banks and other financial institutions are stated net of any amounts written off and allowance for impairment. (d) Allowance for possible losses on income earning assets The Bank provides for possible losses on its income earning assets based upon a review and evaluation of its exposures, taking into consideration the applicable regulations of Central Bank of Tunisia. Income earning assets include placements with other banks, loans and advances, marketable securities investments and commitments and contingencies arising from off balance sheet items. The Bank has estimated the allowance for possible losses on income earning assets based upon all the circumstances and events known at the date of these financial statements. The allowance for loan losses comprises specific allowances against loans and advances and a collective impairment allowances. Specific allowances are calculated based on the borrowers debt servicing ability and adequacy of security. Specific allowances are made as soon as the debt servicing of the loan has been identified as doubtful and when management considers the estimated repayment realisable from the borrower is likely to fall short of the amount of principal and interest outstanding. These are treated as non-performing loans. A collective impairment allowance is maintained for losses that are not yet identified but can reasonably be expected to arise, based on historical experience, from the existing overall credit portfolio over its remaining life. In determining the level of the collective impairment allowances, management also refers to the composition of the portfolio, industry and the Tunisian Central Bank requirements. (e) Cash and cash equivalents Cash and cash equivalents comprise cash and those balances of the demand and call deposits with banks including Central Banks and financial institutions. 45

47 Reverse of a quarter of a Dinar, squared coin (A/), called ushâriyyat al-sarf minted under the ruling of Abû Abd Allâh Mûhammad the 1 st in 673 H./ (CBT, 350) (f) Offsetting Consolidated financial assets and consolidated financial liabilities are only offset and the net amount reported in the balance sheet when there is a legally enforceable right to set off the recognised amounts and the Bank intends to either settle on a net basis, or to realise the asset and settle the liability simultaneously. (g) Trade and settlement date accounting All purchases and sales of consolidated financial assets including regular way ones are recognised on settlement date. (h) Interest income and expenses The Bank recognises interest income and expenses on an accrual basis. The Bank does not recognise interest income on loans or other income earning assets which are classified as non-performing. Loans and other income earning assets are classified as non-performing when these are classified as doubtful or loss, respectively class 2, 3 and 4 following the regulations issued by Central Bank of Tunisia, or when in the opinion of management, collection of interest and/or principal is doubtful. When a loan is classified as non-performing, any interest income previously recognised but not yet collected is reversed. Interest on non-performing loans and other income earning assets under Central Bank of Tunisia guidelines is recognised in the statement of income only to the extent of cash received. (i) Fixed assets and depreciation Fixed assets are stated at cost less accumulated depreciation. Expenditures which extend the future useful life of assets or provide further economic benefits are capitalised and depreciated. Fixed assets are depreciated using the straight line method over their estimated useful life. 3. Bank demand and call deposits Cash Due from Banks Time deposits Up to 3 months From 3 months to 1 year

48 5. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME A - By nature (*) Listed securities Unlisted securities (*) This category of investment was presented in 2010 under investment carried at fair value through equity. B - By currency Kuwaiti Dinars US Dollars Bahrain Dinars EURO United Arab Emirate Dirhams Tunisian Dinars JOD FINANCIAL ASSETS MEASURED AT AMORTIZED COST A - By nature (*) Government bonds and debt securities Other bonds and debts securities (*) This category of investment was presented in 2010 under held to maturity investments. B - By currency Euros USD KWD C - By maturity From 3 months to 1 year Over 1 year

49 Reverse of a quarter of a Dinar, squared coin (A/), called ushâriyyat al-sarf minted under the ruling of Abû Abd Allâh Mûhammad the 1 st in 673 H./ (CBT, 350) 7. INVESTMENTS IN ASSOCIATED COMPANIES The Bank has a participation in Gulf Bank Algeria (AGB), a Bank incorporated in Algeria. The shares of AGB are not listed in any public exchange. Summarised financial information of AGB is set out below: Total assets Total liabilities ( ) ( ) Net assets Revenues Profit for the year LOANS AND ADVANCES, NET Bank and financial institutions Corporate businesses, private and others Allowances for loan losses ( ) ( ) GEOGRAPHICAL ANALYSIS Middle East/Africa MATURITY ANALYSIS Up to 3 months From 3 months to 1 year Over 1 year

50 8.3 Allowances for loan losses The movements of allowance for loan losses are as follows: Specific allowance Collective allowance Balance at 31 December Allowances of the year Balance at 31 December In line with Central Bank instruction addressed to all banks in order to build up collective provision to cover potential risks arising from the ongoing, local as well as international, economic and financial environment. TIB has made a collective provision allocation amounting to KUS$. This amount has been calculated using the model as indicated in the CBT circular N of January 11, 2011 followed by the circular N of March 2, Total 8.4 Non-performing loans Loans and advances Suspended interest Provisions Collateral held against NPL Bank and financial institutions Corporate businesses, private and others Accrued interest and other assets Accrued interest receivable Prepayments

51 Reverse of a quarter of a Dinar, squared coin (A/), called ushâriyyat al-sarf minted under the ruling of Abû Abd Allâh Mûhammad the 1 st in 673 H./ (CBT, 350) 10. Property and equipment Net value 2011 Net value 2010 Land Building Office furniture and other fixed assets Total net Deposits from banks and financial institutions Repayable on demand Up to 3 months From 3 months to 1 year Deposits from customers Up to 3 months From 3 months to 1 year Accrued interest and other liabilities Accrued interest payable Waiting for settlement Accrued expenses Retirement benefits provision Other liabilities

52 14. Shareholders equity Share capital Reserves (a) Foreign currency translation reserve (b) Retained earnings including : Share of reserves in associated company Net profit of the period a- Reserves are detailed as follows : Statutory Reserves General reserve Revaluation reserve Fair value Reserve b- The foreign currency translation reserve represents the net foreign exchange gain (loss) arising from translating the financial statements of the associated companies from their functional currencies into United States Dollars. 15. Interest income Interest on interbank placements Interest on loans and advances

53 Reverse of a quarter of a Dinar, squared coin (A/), called ushâriyyat al-sarf minted under the ruling of Abû Abd Allâh Mûhammad the 1 st in 673 H./ (CBT, 350) 16. Other income Investment income (16.1) Net foreign exchange gains Fees and commissions Investment income 2011 Interest on financial assets at amortized cost Dividends from financial assets at fair value through other comprehensive income Dividends from financial assets designated at fair value through P&L Losses on financial assets designated at fair value through P&L Interest expenses Interest expenses on deposits and collaterals Interest expenses on interbank deposits Salaries and benefits Wages and salaries Social security costs Pension costs Other

54 19. General and administrative expenses Depreciation Premises costs IT costs Communication Marketing & Advertising costs Board fees Administration costs Earnings per share Net profit attributable to ordinary equity holders Weighted average number of ordinary shares Basic earnings per share 3,14 2, Commitments and contingencies Forward exchange contracts purchases Forward exchange contracts sales Letters of credit, guarantees and acceptances Fair value hierarchy IFRS 7 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources; unobservable inputs reflect the Bank s market assumptions. These two types of inputs have created the following fair value hierarchy: Level 1 Quoted prices in active markets for identical assets or liabilities. This level includes listed equity securities and debt instruments on exchanges. 53

55 Reverse of a quarter of a Dinar, squared coin (A/), called ushâriyyat al-sarf minted under the ruling of Abû Abd Allâh Mûhammad the 1 st in 673 H./ (CBT, 350) Level 2 Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices). Level 3 Inputs for the asset or liability that are not based on observable market data (unobservable inputs). This level includes equity investments and debt instruments with significant unobservable components. This hierarchy requires the use of observable market data when available. The Bank considers relevant and observable market prices in its valuations where possible. Financial assets designated at fair value through P&L Level 1 Level 2 Level 3 TOTAL Equity Securities Debt Securities Financial assets at fair value through other comprehensive income Equity Securities Debt Securities Financial assets measured at amortized cost Equity Securities Debt Securities Investments in associated companies Equity Securities Debt Securities

56 23. Interest rate risk Interest rate risk arises from the possibility that changes in interest rates will affect future profitability or the fair values of financial instruments. The Bank s interest sensitivity position is based on maturity dates and contractual repricing arrangements. As at 31 December 2011 it was as follows: Up to 3 months 3 month to 1 year Over 1 year Non interest bearing items TOTAL Bank demand and call deposits Time deposits Financial assets designated at fair value through P&L Financial assets at fair value through other comprehensive income Financial assets measured at amortized cost Investments in associated companies Loans and advances, net Accrued interest and other assets Property and equipment Total assets Deposits from Banks and financial institutions Deposits from customers Accrued interest and other liabilities Shareholders equity Total liabilities and shareholders equity

57 Reverse of a quarter of a Dinar, squared coin (A/), called ushâriyyat al-sarf minted under the ruling of Abû Abd Allâh Mûhammad the 1 st in 673 H./ (CBT, 350) Currency wise interest rates are as follows: US Dollars % % Assets Liabilities Kuwaiti Dinars Assets - - Liabilities Tunisian Dinars Assets Liabilities Euros Assets Liabilities British Pounds Assets Liabilities

58 24. Currency risk Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. The Bank considers the US Dollar as its functional currency. Positions are monitored on a daily basis and hedging strategies are used to ensure positions are maintained within established limits. The Bank had the following net exposures denominated in foreign currencies as of 31 December 2011: USD Long position Short position Euros Tunisian Dinars - -4 Saudi Riyals 9 - British Pounds Japanese Yen - -3 Moroccan Dirham 9 - Canadian Dollars 54 - Swiss Francs 33 - Arab Emarat Dirham 15 - Others

59 Reverse of a quarter of a Dinar, squared coin (A/), called ushâriyyat al-sarf minted under the ruling of Abû Abd Allâh Mûhammad the 1 st in 673 H./ (CBT, 350) 25. Liquidity risk The maturity profile of the assets and liabilities at 31 December 2011 was as follows : Up to 3 months 3 month to 1 year 1 year to 5 years Undated TOTAL Bank demand and call deposits Time deposits Financial assets designated at fair value through P&L Financial assets at fair value through other comprehensive income Financial assets measured at amortized cost Investments in associated companies Loans and advances, net Accrued interest and other assets Property and equipment Total assets Deposits from Banks and financial institutions Deposits from customers Accrued interest and other liabilities Shareholders equity Total liabilities and shareholders equity

60 26. Related parties balances & transactions December 2011 Assets Major shareholder «BB» Associated companies «AGB» Key management Others Related Parties Total Bank demand and call deposits Time deposits Financial assets designated at fair value through P&L Financial assets at fair value through other comprehensive income Financial assets measured at amortized cost Investement managed by a related party Investments in Associated Companies Loans and advances, net Accrued Interest receivable Liabilities Deposits from Banks and financial institutions Accrued Interest payable Off-Balance sheet Letters of credit, guarantees and acceptances

61 Reverse of a quarter of a Dinar, squared coin (A/), called ushâriyyat al-sarf minted under the ruling of Abû Abd Allâh Mûhammad the 1 st in 673 H./ (CBT, 350) December 2011 Income Statement Major shareholder «BB» Associated companies «AGB» Key management Others Related Parties Total Interest Income Other Income, net Share of profit of associates Interest Expense General & Administrative expenses Key management compensation Remuneration paid or accrued in relation to key management, including Directors and other Senior Officers was as follows: Short term employee benefits - including salary & bonus Accrual for end of services indemnity Segmental information Assets North America Europe Middle East/ Africa Austria Liabilities Europe Middle East/ Africa

62 Investment Income Middle East/ Africa North America Europe Interest Income Europe Middle East/ Africa Other Income Middle East/ Africa Credit risk Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The Bank manages credit risk by setting limits for individual counterparties, and groups of counterparties and for geographical and industry segments. The Bank also monitors credit exposures, and continually assesses the creditworthiness of counterparties. In addition, the Bank obtains security where appropriate, enters into master netting agreements and collateral arrangements with counterparties, and limits the duration of exposures. For details of the composition of the assets by geographic segment refer to note 27. Credit risk in respect of derivative financial instruments is limited to those with positive fair values. 29. 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 Bank s performance to developments affecting a particular industry or geographic location. The distribution of assets and liabilities by geographic region is disclosed in note Market risk Market risk is defined as the risk of loss in the value of on or off balance sheet financial instruments caused by a change in market. 61

63 A Bank draft of 5000 riyâls issued in 1263 H./1847 by Ahmad Bey