AnnualReport2013 English

His Royal Highness His Majesty His Royal Highness
Prince Khalifa bin Salman King Hamad bin Isa Prince Salman bin Hamad
Al Khalifa Al Khalifa Al Khalifa
The Prime Minister of the The King of the The Crown Prince,
Kingdom of Bahrain Kingdom of Bahrain Deputy Supreme Commander
& First Deputy Prime Minister
Forts - Their symbolic role in governance, from defense to the court of
law, from warehouses for precious assets to capital of administrations,
they have been consistently delivering on expectations.
4 AL SALAM BANK - BAHRAIN

CONTENTS
Vision and Mission 6
Coporate Overview 7
Annual Highlights 8
Board of Directors 10
Fatwa and Sharia Supervisory Board 15
Executive Management T eam 17
Board of Directors Report to the Shareholders 22
Message from Chief Executive Officer 24
Management Review of Operations and Activities 26
Corporate Governance Report 2013 32
Risk Management and Compliance 47
Corporate Social Responsibility 50
Fatwa and Sharia Supervisory Board Report to the Shareholders 51
Independent Auditors Report to the Shareholders 54
The Consolidated Financial Statements 56
Notes to the Consolidated Financial Statements 60
AL SALAM BANK - BAHRAIN 5

Our Vision
To become a regional force in the Islamic financial services industry by providing

differentiated Sharia 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
Dynamic - Diversified - Differentiated

Corporate Overview
Headquartered in the Kingdom of Bahrain, Al Salam Bank-Bahrain (B.S.C.) is a dynamic, diversified and differentiated
Islamic bank.
Key factors that contribute to the Banks distinct market differentiation include:
Strong paid-up capital base;

Pre-eminent founding shareholders;
High-caliber management team;
State-of-the-Art IT infrastructure;
Universal business model covering deposits, financing and
investment services;
Innovative, tailor-made Sharia-compliant solutions;
Firm commitment to corporate and social responsibility;
Incorporated on 19 January 2006 in the Kingdom of Bahrain and commenced commercial operations on 17 April 2006,
the Bank operates under Sharia principles in accordance with regulatory requirements for Islamic banks set by the
Central Bank of Bahrain.
Al Salam Bank-Bahrain was listed on the Bahrain Bourse on 27 April 2006, and subsequently on the Dubai Financial Mar-
keton 26 March 2008. The Banks high-caliber management team comprises highly qualified and internationally-experi-
enced professionals with proven investment expertise in key areas of banking, finance and related fields; all supported
by a world-class Information Technology (IT) infrastructure and the latest smart working environment. In 2009, the Bank
acquired a significant majority stake in Bahraini Saudi Bank BSC. Established with a paid-up capital of BD120 million,
the Groups total equity has crossed BD 200 million (US$530 million)with total assets crossing the US$2 billion mark.
Al Salam Bank-Bahrain is committed to adopting internationally recognized standards and best practices in Corporate
Governance and operates with highest levels of integrity, transparency and trust. The Bank is committed to its role as a
concerned corporate citizen, actively seeking ways to contribute and add value to the social and economic well-being of
the local communities in which it invests and operates.

Annual Highlights
(US$69.2)
(US$32.8)
BD26.1
BD12.4
(US$63.8)
BD 24.1
(US$59.4)
(US$27.3)
BD22.4
BD10.3
(US$19.4)
BD7.3
(US$33.8)
BD12.7
(US$1.3)
BD0.5
2010 2011 2012 2013 2010 2011 2012 2013
Total Operating Income Net Profit
(million) (million)
(US$2,886)
(US$652.8)
BD1,088
BD246.1
(US$2,499)
(US$2,451)
(US$551.9)
BD942
(US$537.4)
(US$532.2)
BD208.1
BD 924
BD202.6
BD200.6
(US$2,273)
BD857
2010 2011 2012 2013 2010 2011 2012 2013

Total Assets Total Equity
(million) (million)
8.3 91%
6.9
60.6%
5
43.7% 43.7%
0.2
2010 2011 2012 2013 2010 2011 2012 2013

Earnings Per Share Cost to Income Ratio

Bahrain Fort
This fort was at the centre of the Dilmun civilization.

Located on the northern shore of the main island on
artificial mound, it covers an area as big as 16,723 square
meters. Since 2300 B.C up to the eighteenth century the
Bahrain Fort was the trace of seven different civilizations
that occupied Bahrain. The precious archaeological place
is registered as UNESCO World Heritage Site in 2005.
Excavations revealed residential, public, commercial,
religious and military structures as part of its existence. A
rich and perfect mix of what we at Al Salam strive to achieve
in our offerings to our partners - being open- minded and
flexible in our approach.

Board of Directors
H.H. Shaikha Hessa bint Khalifa bin Hamad Al Khalifa
Chairperson
Independent and non-executive

Director since: 18 April 2009
Term started: 20 March 2012
An active member of the royal family of the Kingdom of Bahrain, H.H. Shaikha Hessa gained
her Bachelors 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 Councils 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.
Mr. Hamad Tarek Alhomaizi
Vice-Chairman

Mr. Hamad Alhomaizi is a businessman with experience in a number of areas including

direct investments, funds, real estate and start-up businesses. He has worked in various
capacities in a number of companies and is a founding board member in companies
including Zaleej Real Estate Company (Kuwait), Ishraq Real Estate Company (Bahrain /
UAE) and AlShaab Holding Company (Kuwait). He is also a board member with Global
Investment House (Kuwait). He has a BS in Computer Science and Business Administration
from The George Washington University.

Board of Directors (Continued)
Mr. Hussein Mohammed Al Meeza
Director

Director Since: 20 March 2012
Hussein Mohammed Al Meeza is considered one of the renowned personalities in the

Islamic banking sectors and Islamic finance and insurance. Al Meezas 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, 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 banks services. His landmark achievement was the
establishment of the Al Salam Banks in Sudan, Bahrain and Algeria. Al Meeza is currently
Vice Chairman and Chairman of the Executive Committee of Al Salam Bank- Algeria, Board
member of the General Council of Islamic Banks and Financial Institutions, Chairman of the
founding committee of Islamic Insurance and Re-Insurance Companies, Vice Chairman
of Emirates Cooperative Society Dubai. He is also a Board Member of Emirates Society
for Insurance. He was a founder member of Emaar properties, Amlak finance, Emaar
Industries & Investments, Emaar Financial services, Dubai Islamic Insurance & Reinsurance
Company (AMAN). 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.
Mr. Habib Ahmed Kassim
Director

Director Since: 17 April 2006
Mr. Habib Ahmed Kassim is the Chairman of Almahd Investment Company, Bahrain Ferro
Alloys, Bahrain Electricity Supply & Transmission Company, Capital Growth Management
and Quality Wire Products Company. He is also the Chairman of Almahd Day Boarding
School. Mr. Habib Ahmed Kassim was Minister of Commerce and Agriculture, Kingdom of
Bahrain from 1976 to 1995, and Member of the GCC Consultative Council for the Supreme
Council from 1997-2007.

Mr. Salman Saleh Al Mahmeed
Director

Director since: 15 February 2010
Mr. Salman Al Mahmeed is the Acting Chief Executive Officer of Bahrain Airport Services,
the Deputy Chairman of Dar Albilad, the Managing Director and Owners 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 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 Al Muhaidib is CEO of Al Muhaidib Group. He is also Board Member in several
organizations having interests in Banking, FMCG & Retail, Building Material & Construction,
Industrial, Food, Real Estate, Power & Water. Savola Group, ACWA Power, Nestle Waters,
Azizya Panda United Co, Herfy Foods Services Co, Emmar Middle East, Rafal Real Estate, Al
Oula Real Estate Development, Amwal Al Khaleej, Bloom Invest Saudi Arabia Saudi Tabreed
Co, Al Latfia Trading & Contracting Co, Bawan Co, are few to name. Moreover, he is also a
member in the governance council of selected charitable, non-profitable & educational
organizations such as King Fahad University of Petroleum & Minerals Endowment Fund,
Saudi Food Bank, Patients committee of eastern province, Benevolence society in eastern
province as well as Husn Al Jawar charitable society in the kingdom of Bahrain. In addition,
he is also a member of the Eastern Province Governance Council in Saudi Arabia.

Mr. Fahad Sami Al Ebrahim
Director

Mr. Fahad Sami Al Ebrahim Received his Bachelors of Arts in Journalism and Communication
Studies 2000 from the University of Oregon-Eugene, Oregon, USA. He also has an MBA
degree from the Maastricht School of Management in 2008 and he has successfully
completed the 10th session of the General Management Program at Harvard Business
School in 2011 .
He has over 12 years of professional experience. Mr. Al Ebrahim heads the International
Wealth Management Group of Global Investment House, Kuwait as Senior Vice President,
where he had played a major role in increasing assets under management and had been
an active participant to establish one of the leading wealth management groups in the
region.
He was mandated in early 2010 as Acting CEO of Global Investment House Saudi for the
first half of the year were he was able to downstream the operation in the Kingdom and
position the company in the Saudi market and played a major role in increasing AUM and
revenue of the Saudi operations.
Mr. Al-Ebrahim began his career with Global in the Marketing Department. Later on, he
pursued Business Development positions in the Investment Funds Department focused
on Alternative Investments including Hedge Funds, Real Estate Funds and Private Equity.
Prior to joining Global, Mr. Al-Ebrahim worked in a semi-government institution for
approximately two years. In addition, he is a member of numerous boards of directors
in the financial and real estate arenas. His board memberships include Al-Mazaya
Holding Company, Kuwait as Vice Chairman; First Securities Brokerage Company S.A.K.,
Kuwait; Investment House, Qatar and Global Investment House Saudi, and Investment
Committee member in Macro Fund.
Mr. Mohammed Omeir Bin Yussef Al Mehairi
Director

Director since: 20 March 2012
Mr. Mohammed Omeir Bin Yussef holds M.Sc. from University of Cairo and B.Sc. in Political
Science & Business Administration from U.A.E. University, Al Ain. He is currently the Vice
Chairman & Managing Director, Omeir Bin Youssef Group, Chairman of Al Salam Bank-
Sudan, Chairman of Al Salam Bank-Algeria, Chairman of Dubai Islamic Insurance and Re-
Insurance Company (AMAN), the Chief Executive Officer of Bin Omeir Holding Group. He is
also the CEO of United Investment Group and the CEO of Emirates National Group.

H. E. Mohamed Ali Rashid Alabbar
Director

H.E. Mohamed Alabbar is the founding member 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
chairs RSH, the leading Singapore-based pan-Asian marketer, distributor and retailer of
international fashion and lifestyle brands. The Chairman of Dubai Events Council, Mr.
Alabbar is a Board Member of Noor Investment Group, an affiliate of Dubai Group, focused
on Sharia compliant financial services. A graduate in Finance and Business Administration
from Seattle University in the United States, Mr. Alabbar works closely with regional NGOs,
and is especially committed to the cause of educational reform and social housing. A keen
sportsman, he is Chairman of the UAE Golf Association.
Mr. Adnan Abdulla Al Bassam
Director

Mr. Adnan Al Bassam is a Certified Public Accountant (CPA) and holds B.S. in Business
Administration with specialization in Accounting from Oregon State Board of Accountancy.
His years of experience in the financial and investment sector go back to 1994. Currently
he holds the positions of Vice Chairman and Managing Director of Al Bassam Investment
Company W.L.L., Board member in each of Jordan Islamic Bank, Al Baraka Bank - Sudan,
Esterad Investment Company B.S.C., Al Salam Bank - Algeria, Vice Chairman of Muharraq
Mall Company W.L.L. Prior to joining the Board Adnan worked for Messrs Ernst & Young
and Bahrain Islamic Bank in various capacities.
Mr. Yousif Abdulla Taqi
Director and Chief Executive Officer
Executive and non-independent

Director Since: 05 May 2008
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 to 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,
and also a board member of the Housing Bank (Bahrain), Aluminium Bahrain (ALBA) and
Tadhamon Capital.

Fatwa and Sharia Supervisory Board
Dr. Hussain Hamid Hassan
Chairman
Dr Hassan holds a Ph.D. from the Faculty of Sharia, Al Azhar University, Cairo, Egypt;
and a Masters in Comparative Jurisprudence and Diploma in Comparative Law (both of
which are the equivalent of a Ph.D.) from the International Institute of Comparative Law,
University of New York, USA. He also holds a Masters in Comparative Juries, and Diplomas
in Sharia and Private Law, from the University of Cairo; and an LL B in Sharia from Al Azhar
University. He is the Chairman and member of the Sharia 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 AlQurra Daghi
Member
Dr. AlQurra Daghi holds a Ph.D. in Sharia and Law, and a Masters in Sharia and
Comparative Fiqh, from Al Azhar University, Cairo, Egypt. He also holds a BSc. in Islamic
Sharia 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 Sharia law and Islamic Studies
at the University of Qatar. He sits on the Boards of Sharia Supervisory Boards for several
banks and financial institutions. Dr. AlQurra 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 Masters degree in the Quran and Hadith from the University
of Um Al-Qura, Makka, Kingdom of Saudi Arabia; and Bachelors degree in Islamic Sharia
from the Islamic University, Madeena, Saudi Arabia. Shaikh Al Qattan is also a Judge in
the Sharia Supreme Court, Ministry of Justice Kingdom of Bahrain. Shaikh Al Qattan is
a Member of Sharia 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.

Fatwa and Sharia Supervisory Board (Continued)
Dr. Mohamed Abdulhakim Zoeir
Member & Secretary to the Board
Dr. Zoeir holds Ph.D. in Islamic Economy; Masters degree in Islamic Sharia (Economy);
Bachelors 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
experience with Egypt Central Bank. Dr. Zoeir was also the Head of Sharia compliance in
Dubai Islamic Bank.
Dr. Mohammed Burhan Arbouna
Member
Dr. Mohammed Burhan Arbouna holds a Ph.D. 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 Sharia 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 Sharia Head and Sharia Board
member in the Seera Investment Bank BSC Bahrain. Prior to that, he worked as the Head
of Sharia department in the Kuwait Finance House-Bahrain. Also, Dr. Arbouna worked as
Sharia 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.

Executive Management Team
Mr. Yousif Abdulla Taqi
Director and Chief Executive Officer
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 to 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,
and also a board member of the Housing Bank (Bahrain), Aluminium Bahrain (ALBA) and
Tadhamon Capital.
Dr. Anwar Khalifa Al Sadah
Deputy CEO - Business
Dr. Anwar Al Sadah has over 20 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 Sadah 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 Bahrains 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 Sadah has attended the Harvard Management Development
course, also received his Master degree and the Ph.D. degree both in Philosophy from
University of Surrey, UK.
Mr. Mukundan Raghavachari
Deputy CEO - Support
A Chartered Accountant and a Certified Public Accountant (CPA) from the State of
Colorado, USA, Mr. Raghavacharis experience in the financial services industry goes
back to 1988. During his career, he has worked for two Big 4 firms in the region and the
United States. Prior to joining Al Salam Bank-Bahrain, he held the position of Group Head
of Strategic Development at Ahli United Bank. Mr. Raghavachari is an Associate Member
of the Institute of Chartered Accountants of India.

Executive Management Team (Continued)
Dr. Mohammed Burhan Arbouna
Head of Sharia Compliance
Dr. Mohammed Burhan Arbouna holds a Ph.D. 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 Sharia 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 Sharia Head and
Sharia Board member in the Seera Investment Bank BSC Bahrain. Prior to that, he
worked as the Head of Sharia department in the Kuwait Finance House-Bahrain. Also, Dr.
Arbouna worked as Sharia 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. Janaka Mendis
Chief Operating Officer
Janaka Mendis joined Al Salam Bank-Bahrain in October 2008 with 15 years of experience
in the financial services industry. He spent 2 years focusing on deal structuring and
transaction due diligence before assuming the current role. Prior to joining Al Salam, he
has held various senior management positions at Investcorps finance group and with
the audit and business advisory practice of Ernst & Young in Bahrain and in Sri Lanka.
Janaka is a MBA from TRIUM jointly offered by NYU Stern, LSE and HEC Paris. He is also a
member of the Chartered Institute of Management Accountants (UK) and the Institute of
Chartered Accountants of Sri Lanka..
Mr. Essa Abdulla Bohijji
Chief Auditor and Board Secretary
Mr. Bohijji has over 13 years of consulting and industry experience in the financial
services, commercial entities, governmental bodies, and internal audit. During his
employment with Al Salam Bank, 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
in late 2012. Prior to joining Al Salam Bank, 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 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. Bohijji is also a non-executive Audit Committee member
in Manara Developments B.S.C. (c).

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. Anwar Mohammed Murad
Head of Private Banking
Mr. Murad has 18 years of experience in the areas of Private Banking, Treasury, Market
Risk Management and Retail Banking. Mr. Murad has served as Senior 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
Sharia-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 20 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 Group
Mr. Turki is a well-rounded banker with more than 30 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 Banks
core banking system in addition to being a member in other Banks 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.
Ms. Nicole Philips
Head of Legal
Nicole Phillips is an Islamic finance lawyer with over 12 years experience in corporate
and commercial law, cross-border project financing and investments, Nicole has a
unique blend of commercial and legal knowledge garnered from her work in-house and
with law firms in the Kingdom of Bahrain and Australia. Prior to joining Al Salam Bank,
Nicole worked with Baker & McKenzie, advising regional and multinational clients (both
borrowers and lenders) on their project financing needs. A member of the Queensland
Law Society, Nicole received her Bachelor of Laws and Graduate Diploma of Legal Practice
from Bond University in Queensland, Australia.

They have silently defined a period in
time, being a revered heritage of the
nation.

Board of Directors Report to the Shareholders
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 2013.
The recently ended financial year offered a very good indication of global economic recovery. Although, Asia and
Australasia regions gave indications of slowed down, the Eurozone lead by the United Kingdom appears to be coming
out the debt crisis and registering economic recovery with the US showing prospects of imminent recovery. The US is
forecast to grow relatively quickly in the near term on account of improvement in unemployment, the housing and
reduced trade deficit on the back of a QE tapering.
Regionally, Saudi Arabias non-oil sector continues to grow at a healthy pace, sustained by government stimulus as well
as rapid credit growth. Similarly, the outlook for the UAE economy is positive with accelerated growth supported by
stability in oil prices, brisk trade and tourism, as well as persistent efforts to curb spending. Regional growth fundamentals,
including current account surplus, fiscal balance, and large foreign exchange reserves, remain at healthy levels. There are
similar signs in the local economy, although relatively modest, the economic activity is starting to gather pace lead by
housing/real estate recovery. We remain hopeful that 2014 will see more of such activities in Bahrain.
The Bank has taken positive steps for consolidating its market position in Bahrain through inorganic growth towards
achieving our vision to become a regional force in Islamic financial services industry. Driven by this vision, and strong
belief that consolidation is key for Bahraini banks in order to remain competitive in the aftermath of the recent financial
crisis, your Bank had concluded a business combination with BMI Bank BSC (c), a local commercial bank based in Bahrain.
The business combination has now reached the final stages of execution with your support and guidance to the Board
of Directors and senior management.
Although our business environment remained challenging throughout 2013, the Bank has achieved a substantial growth
of 15% in total assets from BD 942.2 million (US$2.5 billion) as of 31 December 2012 to BD1,088.2 million (US$2.9 billion)
as of 31 December 2013.
As a result of the continuous efforts made to focus on core-banking initiatives, retail, corporate and commercial banking
activities saw a marked improvement. This had resulted in a growth in financing portfolio by 19.5% to BD391.5 million
in 2013. During the year, Bahrains real estate sector witnessed a dramatic recovery consequent to the Governments
renewed support and commitment to resolving the residual social housing needs. The Bank took advantage of this
environment to exit real estate in excess of BD47 million while complementing the retail banking arm in terms of
additional housing finance opportunities.
Customer deposits increased from BD624.1 million to BD680.7 million for the same period reflecting a 9% increase over
2012. Such an increase in customer deposits is a reflection of market confidence and trust in your Bank.
The gross operating income, before one-off items, rose by 44.5% from BD18.1 million in 2012 to a record BD26.1 million
in 2013. The continued emphasis on core banking activities has resulted in increase in income from these activities
during 2013. The net profit of BD12.4 million, a 20% increase as compared to 2012, is after taking into consideration asset
provisions of BD3.2 million on account of write down of investments and additional provisions for financing. Consequent
to prudent measures adopted by the management, the operating costs remained at 2012 level.
During the year, the Banks venture in alternative energy sector for production of biodiesel in Hong Kong reached
completion with its inauguration in October 2013. The biodiesel plant is capable of producing 100,000 tonnes of
biodiesel using multiple feedstock technology including grease trap waste and used cooking oil and will be compliant
with European standard requirements for biodiesel. The biodiesel produced will offset 3.6% of annual carbon dioxide
emissions of Hong Kong.
The Banks continued to source investment transactions which generate a running yield to its investors in 2013. During
2013, the Bank successfully consummated several investments, including an investment in the education services sector
in the Kingdom of Saudi Arabia (KSA).
The year 2013 also saw investment in two state of the art logistics properties in Australia. The properties are leased to a
subsidiary of one of the largest listed industrial group in Australia with a market capitalization of over A$1 billion.
The Bank acquired significant stake in a luxury residential redevelopment in Mayfair, London.
The Bank also made an investment in a mid-rise residential development of 142 residential units including villas and
apartments in a prime district in Jeddah, KSA.
In line with its commitment to provide timely exit to its investors, the Bank successfully exited its stake in Canada Square,
a prime commercial real estate property in Canary Wharf, London in 2013 at a multiple of 1.48x.
Your Bank continued to be a net lender to the system with a net lending position of BD97.5 million as of 31 December
2013 while holding a large portfolio of the Central Bank of Bahrain Sukuk which are eligible for re-purchase. The Bank
continues to maintain a comfortable liquidity position with a healthy liquidity ratio of 14% as of 31 December 2013, net
of due to banks and interbank deposits and excluding Sukuk issued by the Central Bank of Bahrain (CBB).
The Banks capital adequacy ratio remains strong at 21.4% as of 31 December 2013 (2012: 20.9%), while the minimum
requirement is 12%.

Board of Directors Report to
the Shareholders (Continued)
Although signs of improvement in the market have begun to appear, the Directors are mindful of potential challenges
that may be faced by the Bank due to rising interest rates. The Directors and management are committed to maximize
Banks capabilities in order to build a stronger financial institution and deliver improved results in 2014 from its core
business.
Your Bank has produced stronger financial results for the fiscal year 2013 with a net profit of BD 12.4 million in comparison
with BD 10.3 million reported for 2012, an increase of 20%. The gross operating income increased by 8.5% to BD 26.1
million (2012: BD24.1 million) while the operating expenses were BD 11.4 million (2012: BD 11.5 million). Earnings per
share (EPS) for 2013 amounted to 8.3 fils (2012: 6.9 fils).
Retained earnings and appropriation of net income:
BD000
Balance at beginning of the year 39,583
Net profit for the year 2013 12,372
Transfer to statutory reserve (1,237)
Transfer 39
Proposed dividends (7,485)
Balance at end of the year 43,272
Directors and senior management interest:

As required by the Central Bank of Bahrain rule book 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 2013.
31/12/2013
Directors' shares 156,168,210
Senior managers' shares 7,255,121
163,423,331
Directors remuneration for 2013 amounted to BD364,948.

% of total
No. of Outstanding
Percentage of shares held No. of shares Shareholders shares
Less than 1% 840,247,914 23,181 56.13

1% up to less than 5% 485,782,116 16 32.45
Over 5% 171,033,800 1 11.42
Total 1,497,063,830 23,198 100.00
Shareholders holding over 5%: Nationality Holding

Gimbal Holding Company S.P.C. Bahrain 11.42%
The directors would like to express their thanks and appreciation to HM King Hamad bin Isa Al Khalifa, HRH the Prime
Minister Prince Khalifa bin Salman Al Khalifa and HRH the Crown Prince, the First Deputy Prime Minister and Deputy
Supreme Commander 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 2014.
30 January 2014 Shaikha Hessa bint Khalifa bin Hamad Al Khalifa

Chairperson
Manama, Kingdom of Bahrain

Message from the CEO
Al Salam Bank Bahrain recorded a strong overall performance

in 2013. The current fiscal year saw the Bank achieve a steady
growth in its balance sheet size as well as income derived from
core banking activities. In order to consolidate our market
position, we have taken bold steps to create the fourth largest
financial institution in the Kingdom. In line with the vision of
the leadership and the regulators, we have reached the final
stages of completing a business combination with BMI Bank,
a commercial bank based in Bahrain. The combined bank with
its larger underwriting capacity is expected to emerge as a
stronger player in the regional market place.
As a result of focusing on our core business of providing financing facilities through corporate, private
and retail banking businesses, I am pleased to report that we have achieved a net profit of BD12.4 million
(2012: BD10.3 million) for fiscal year 2013, a 20% increase over the previous year. Income from core
banking activities rose by 21% over the same period of last year. Total assets grew from BD942.2million
(US$2.5 billion) to BD1,088.2 million (US$2.9 billion) recording a 15.5% growth (2012: 2%) over the last
year. The impressive growth in total assets was largely due to the growth in new financing contracts as
well as participation in carefully selected investment opportunities.
Cost control initiatives implemented during the height of the global financial crisis is still in place and
is reflected in the level of our operating costs. The Bank has successfully maintained the same level of
operating costs as the last fiscal year.
Expanding the retail banking business continued to be a top priority and a number of initiatives were
launched during the year to increase our suite of retail products and improve our level of customer
service. Customer deposits grew by BD56.6 million to BD680.7 million during fiscal year 2013 (2012:
BD624.1 million). As part of the retail banking drive for continuous improvement, a new platinum credit
card aimed to meet the needs of high net worth customers, a 24/7 credit card fraud monitoring system
and a range of Takaful products were introduced and were well received by our customer base.
During the year, our investment teams successfully concluded seven deals and deployed in excess
of BD50 million. ASBB continued to stay focused on income producing assets and diversified income
streams. The Banks portfolio comprises of investments across various industries including real estate,
aviation, alternate energy, education services, manufacturing, retail and hospitality across multiple
geographic locations. Income from investment activities for the fiscal year 2013 amounted to BD5.4
million, compared to BD7.9 million in 2012.
New investments in 2013 include an investment in the education sector in the Kingdom of Saudi
Arabia (KSA), a joint venture in a mid-rise residential development project in KSA, an acquisition of two
logistics properties in Australia and entered into a partnership in an upscale residential redevelopment
in Mayfair, London.

Message from CEO (Continued)
Im pleased to highlight that we have successfully commissioned the biodiesel plant in Hong Kong
during the year which is capable of producing 100,000 tonnes of European standard biodiesel per
annum using state of the art multiple feedstock technology.
Two investments were successfully exited during the year, one where the Bank provided an innovative
Sharia compliant mezzanine financing for 5 Canada Square in Canary Wharf in the heart of the financial
district of London and the second being sale of a sea front luxury real estate development in the Penang
Island of Malaysia.
Banks ongoing investment in Burj Al Safwa and Burj Al Jewar, two hospitality towers in the Holy City
of Mecca, continue to perform well and provide regular cash flows to investors. Our investments in
the aviation sector comprising two Boeing 777-300ERs and one Boeing 777-200ER leased to Emirates
Airlines and Malaysian Airlines respectively are providing attractive cash-on-cash yield to investors.
Mezzanine financing provided to acquire an upscale retail property let to eight reputable luxury retailers
in the heart of Cannes in France during the last fiscal year, continues to generate attractive cash coupon
to investors.
We continue to maintain a conservative approach to banking practices and rely on our core competencies
in lending activities. We adopt prudent risk management practices in granting new financing facilities
and acquiring new investments.
The Bank continues to maintain a healthy Capital Adequacy Ratio of 21.4% (2012: 20.9%) as of the end
of the fiscal year against a mandatory Central Bank of Bahrain requirement of 12% and is expected
to remain at healthy levels with the impending introduction of Basel III guidelines. We maintained a
comfortable liquidity position of 14% (2012:13%) and continue to be a net lender to the inter-bank
market.
With continued guidance and support from the Board, Management is confident that the Bank is ready
to move into the next phase of growth through our business combination with BMI Bank. Our ability to
mobilize the larger capital base, a broader talent pool, extended presence in the region and access to a
wider customer base will be used as a platform for this phase of growth.
As always, I would like to take this opportunity to express my deep appreciation of the Al Salam Bank-
Bahrain team. Your teamwork and commitment to the success of the Bank are crucial to achieving our
goals. I am thankful to the Board of Directors and the Central Bank of Bahrain for their unwavering
support and guidance and to our shareholders and customers for their continued trust, loyalty and
support. I would also like to express my sincere appreciation to the Government of the Kingdom of
Bahrain and its astute leadership.
Yousif Abdulla Taqi

Director & CEO

Management Review of Operations and Activities
Operating Environment
On the back of encouraging monetary policies in most of the developed economies, and strong economic
performance led by the US and Eurozone, there are clear signs of economic recovery across the globe. The
developed markets are already seen to be discussing possible interest rate hikes on the back of QE tapering in
the US. However, it should not be ignored that there is still some amount of sluggishness seen in Asia led by
slowdown in China.
Guarded optimism also prevailed in the GCC markets, with most regional economies enjoying a solid growth
with real GDP at 3.7% and non-oil GDP growth close to 6%, led by accelerated growth in the Kingdom of
Saudi Arabia. This strong growth registered in non-oil sectors and expansionary fiscal and monetary policies
together with effort to curb spending seen in the UAE has also seen to be boosting the regional economic
recovery. Regional growth prospects remain strong as steady oil prices have continued to support current
account surpluses and large foreign currency reserves.
Business Environment
Year 2013 saw the economic activity in the Kingdom of Bahrain gathering some pace on the back of real
estate activities and increased government spending. However, continued political instability experienced
in the Kingdom is holding back the steady growth otherwise expected by the business community. The
Governments continued effort to improve non-oil business activities and increase reliance on a diversified
economy has supported the increased job creation. The Kingdom recorded a GDP growth of 5.4% during the
year up from 3.4% in 2012.
Financial Performance
In the back drop of global economic recovery and the positive signs of the economic activity in the Kingdom,
ASBB has achieved substantial growth in 2013. Total assets of the Bank grew by 15.5% (2012: 2.0%) to BD1,088.2
million (2012: BD942.2 million) over the last fiscal year. Financing portfolio grew by BD64 million (2012: BD56.3
million) to BD391.5 million (2012: BD327.5 million). The investment portfolio recorded a growth of BD61.3
million (2012: decrease of BD11.5 million) to BD 275.6 million (2012: BD214.3 million) during the fiscal year.
Customer deposits increased by BD56.6 million to BD 680.7 million in 2013 from BD 624.1 million in 2012,
reflecting a 9.1% growth (2012: 4.4%). Substantial growth recorded in both financing and customer deposits
is a reflection of the market confidence placed in the Bank.
The operating income recoded a substantial growth of 8.3% to BD 26.1 million in 2013 from BD 24.1 million in
2012, attributed to the growth in income from core banking activities, comprising corporate, commercial and
retail banking businesses.
Income from financing contracts and Sukuk grew by 20.8% (2012: 22.1%) which is a testimony to the Banks
effort to establish its footprint as a formidable Islamic banking force in the market. As a result of the effective
cost management measures undertaken by the Bank since the global economic crisis, the operating expenses
were maintained at the same levels as 2012 and 2011. Additional provisions were taken against non-performing
financing contracts and investment portfolio amounting to a net of BD 3.2 million (2012: BD 3.1 million). The
Bank recorded an impressive net profit of BD 12.4 million for the fiscal year 2013 (2012: BD 10.3 million).
Capital Adequacy
The Bank continues to enjoy strong financial solvency and abundance of liquidity. In accordance with the
Basel II capital adequacy guidelines, capital adequacy continued to reflect a healthy ratio of 21.4% (2012:
20.9%) as of the end of the fiscal year against a mandatory Central Bank of Bahrain requirement of 12%.
Asset Quality
The Bank maintains a conservative approach in selecting new assets for financing and investments. As a result
more than 88.3% (2012: 88.1%) of the financing asset portfolio has been classified under the satisfactory
category while an amount of BD14.3 million (2012: BD12.7 million) has been set aside as provisions for
classified facilities, although such assets are covered by adequate collateral. Such provision has been made in
line with the banks conservative risk management policy.

Management Review of Operations
and Activities (Continued)
BANKING ACTIVITIES
Corporate Banking
The Banks dedicated Corporate Banking team continued to serve its strong relationships, both locally and
internationally established business partners while continuously looking to expand the client base. The team
worked tirelessly to ensure the Banks corporate relationships continue to receive the support they required
to take advantage of the revived economic activities in their respective markets. In addition to meeting
financing needs of our customers, the team has also successfully lead arranged syndicated facilities where
the financing need exceeds our underwriting capacity. The Corporate Banking team booked more than BD63
million assets during the year.
The Bank continued to collaborate with Tamkeen in order to provide support to private sector businesses in
the Kingdom of Bahrain in line with the Government initiative to encourage entrepreneurship among the
business community. The team uses Tamkeen program to support the SME business segment in order to
provide Sharia compliant facilities to the private sector businesses.
Retail Banking
Our customer centric retail business philosophy is the driving force behind the continuous effort to enhance
offering of Sharia compliant retail products and growing range of convenient banking services. Aligned with
our mission to provide customers with better products, greater service through a secured environment, a
number of retail banking launches took place in 2013. One such significant launch was mobile. Leveraging
on cutting edge technology, the mobile banking service provides customers with what is in effect a virtual
branch. The mobile banking application allows customers to view account balances, account statements,
view financing and deposit details, as well as pay utility bills, add beneficiaries and carry out internal, local and
international fund transfers at the push of a button. During the year, the Bank entered into a partnership with
a leading regional Takaful provider to offer tailor-made Takaful solutions to safeguard our customers financial
interest. As such customers are now offered competitive and affordable Takaful products to the bouquet
of product and service offerings. Such products include motor Takaful (Siyarati), home Takaful (Baiti), travel
Takaful (Travel Safe) and personal accident Takaful (Personal Accident Cover).
A new 24/7 card protection service was introduced during the year to enhance the security offered to our
credit card customers.
Together with product and service enhancements, the retail banking team continued to improve the level
of customer service provided throughout the branch network. A number of in-house workshops were
conducted to focus on providing the right tools to customer service representatives. Areas such as customer
service skills; attitude and product knowledge was the key focus of these workshops.
Private Banking
The primary objective of the Private Banking team is to provide a dedicated customized products and services
to the high net worth customers of the Bank. The products offered are tailored to their investment appetite
taking into consideration their risk profiles. These investment opportunities range from development and
income producing real estate, equities listed on recognized stock exchanges and opportunities to invest in
private equity transactions with value creation in mind. A significant portion of the investments sourced by
the Banks investment team is offered to such investors who seek alternative investment opportunities while
minimizing market risk through diversification.
Investments
The Bank continues to maintain a careful approach to new investment selection, with investment protection
remaining a major consideration in the investment strategy in order to address the downside risk and preserve
investment valuation. All potential opportunities are subjected to rigorous internal review, independent due
diligence and analysis prior to presentation to the Banks Investment Committee.
In line with the Banks strategy to provide opportunities that produce regular income and continuous cash
flows to investors, the investment team continued to seek opportunities that diversify the income stream
through investments across a range of industries including, but not limited to, real estate, aviation, biofuel,
education, retail and hospitality.

During the year, the Banks venture in the alternative energy sector was inaugurated. The biodiesel plant is
capable of producing 100,000 tonnes of European standard biodiesel using multiple feedstock technology
including grease trap waste and used cooking oil. This is the first of its kind to be established in Hong Kong.
Availability of a range of feedstock and the close proximity to mainland China is expected to play a key role in
producing biodiesel at competitive prices.
Furthermore, the Bank successfully consummated several investments in 2013, including an investment in the
education sector in the Kingdom of Saudi Arabia (KSA). The education sector in KSA is expected grow rapidly
underpinned by the favorable demographic profile and focus to provide more employment to Saudi nationals.
The Bank invested in a company that provides foundation-year courses to students in undergraduate programs
in major public universities in KSA and provides training programs to government entities, and private and
public companies. The company employs more than 1,500 employees.
The Bank also participated in acquiring two state of the art logistics properties in Australia. The properties,
located in Queensland and Victoria, are on long leases to a subsidiary of a large cap diversified industrial group
in Australia with a market capitalization of A$1 billion, listed on the Australian Stock Exchange.
Londons Mayfair district continues to attract many international high net worth property buyers. In order
to take advantage of this market opportunity, the Bank acquired significant stake in a luxury residential
redevelopment in Mayfair. The project is expected to be completed in Q4 2014.
The Bank also made an investment in a mid-rise residential development project consisting of 142 residential
units including villas and apartments in a prime location in Jeddah, KSA.
In line with our commitment to provide timely exits to its investors, the Bank successfully exited its 38 million
Sharia compliant mezzanine facility extended to the refinancing of 5 Canada Square, a landmark commercial
Property located in the heart of Canary Wharf, the financial district of London. The successful exit of this
transaction demonstrates ASBBs ability to provide its clients with differentiated investment opportunities
with attractive terms that are structured to take advantage of market conditions.
The Bank also successfully completed and sold Martinique Villas By-the-Sea, a joint venture comprising
seventy three villas worth an estimated gross development value of RM260.6 million (US$86 million), in one
of Malaysias Penang Islands largest seafront residential developments. Successful completion of the project
was a result of a tripartite venture involving Al Salam Bank-Bahrain, Eastern & Oriental Bhd (E&O) and CIMB-
Mapletree Management Sdn Bhd (CIMB-Mapletree),
The Banks investments in the hospitality sector, comprising leasehold interest in Burj Al Safwa and Burj Al
Jewar residential and commercial towers in the Holy City of Mecca, continue to perform well with positive
cash flows and enjoying sustained occupancy rates throughout the year.
The Banks investments in the aviation sector continue to provide attractive cash-on-cash yield to its investors.
The Bank has entered into three long-term operating leases including two Boeing 777-300ERs with Emirates
Airlines in 2012 and a Boeing 777-200ER with Malaysian Airlines in 2007. The average remaining lease period
on the portfolio is in excess of 8 years.
Information Technology
Throughout 2013 the Information Technology team supported the Banks business strategy through the
maintenance and upgrade of the Banks IT infrastructure. The team continued to leverage cutting edge
technology to enhance the customer experience, while providing international standards of customer security
and ensuring compliance with regulatory as well as internal control requirements.

Corporate Governance and Risk Management

During the year, significant initiatives were undertaken to improve the knowledge and practice of Corporate
Governance within the Bank. Compliance with the Central Bank of Bahrain guidelines and other regulatory
guidelines is a fundamental element of the Banks operating environment.
Know Your Customer

The Bank complies with Financial Crimes Module of Central Bank of Bahrains rulebook. The module contains
Bahrains 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.
The Bank places significant emphasis in understanding its customers and their financial activities. The Bank
has implemented world-class systems to support the monitoring activities. Proper due diligence is conducted
to ensure that financial activities of its customers are performed in accordance with the guidelines issued by
the regulatory authorities.
Human Capital
Superior human capital is a key element in the successful implementation of our business strategy, achievement
of the Banks objectives and the realisation of our corporate vision. In 2013 the Bank continued to invest
heavily in the development of its staff and a number of initiatives to develop the skills and competencies of
the Banks staff were implemented. An executive leadership program comprising interactive workshops was
held during the year for the Banks management. The workshops focused on areas to enhance management
and leadership skills and addressed areas such as motivation, productivity, effective communication, stress
and energy management and team building.
The annual summer trainee initiative continues to be a great success. Championed by the HR department, the
Bank hosted 25 graduates from various universities across the Kingdom for two-months during summer. The
program provided graduates with an invaluable on-the-job experience designed to bridge the gap between
academia and employment, preparing graduates to become competent members of the Kingdoms workforce.
The program included workshops, as well as graduate placements in various departments throughout the
Bank. The program was highly acclaimed by the participating graduates who gained an insight into the world
of Islamic Banking as well as learning first hand how different departments within a Bank function.
ASBB is a strong believer of local talent and continues to attract, nurture and develop young Bahrainis. As of
31 December 2013, Bank employees comprised of 88.5% (88.1% in 2012) Bahraini employees out of a total of
191 (201 in 2012) across Bahrain and Singapore offices.

Arad Fort
A typical islamic fort built in the 15th century A.D. Surrounded by

a trench, which would once have been filled with water, the square
shaped fortress acted as a shield, being compact and defensive
on Muharraqs seashores. Along the years, it has protected the
island from any breaches by foreigner ships. At Al Salam we take
inspiration with the characteristics of this wonder which shields
and protects our portfolios are designed to assure and build
confidence with our partners, as we help them grow with us.

Corporate Governance Report
31 December 2013
CORPORATE GOVERNANCE COMPLIANCE
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 Banks 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 on 31 December 2013
Name Country of origin No. of shares % Holding
1 Gimbal Holding Company S.P.C BAH 171,033,800 11.42

2 Mohammed bin Ahmed bin Mohammed Al Qassimi UAE 62,980,897 4.21
3 Leader Capital (L.L.C). UAE 57,976,149 3.87
4 Alrushid Investments L.L.C. UAE 52,500,000 3.51
5 Mariam Ahmed Abdullah Abdool Al Khamiri UAE 52,049,565 3.48
6 Independent Enterprises & Co. Representation UAE 44,101,670 2.95
7 Al Asuban Company UAE 26,250,000 1.75
8 HRH Prince Mohammed bin Fahad bin Abdulaziz KSA 21,708,750 1.45
9 Al Salam Bank - Sudan SDN 21,000,000 1.4
10 Global Express Company W.L.L BAH 19,762,561 1.32
11 Noim Properties Ltd UK 18,375,000 1.23
12 Mohammed Omeir Yussef UAE 18,100,000 1.21
13 Emaar Properties PJSC UAE 15,750,000 1.05
14 Social Insurance Org.(Pension)-Civil BAH 15,381,635 1.03

31 December 2013 (Continued)
Shareholding 31 December 2013
Category No. of shares No. of shareholders % of outstanding shares
Less than 1% 840,247,914 23,181 56.13

1% to less than 5% 485,782,116 16 32.45
5% to less than 10% - - -
10% to less than 20% 171,033,800 1 11.42
20% up to less than 50% - - -
50% and above - - -
Total 1,497,063,830 23,198 100.00
The outstanding ordinary share ownership of the Bank is distributed as follows:
Nationality No. of shares Ownership percentage
Bahraini
Government 26,557,556 1.77%
Institutions 308,595,269 20.61%
ASBB treasury Stock 7,705,906 0.51%
Individuals 158,593,602 10.6%
GCC
Government 5,179,864 0.35%
Institutions 291,338,979 19.46%
Individuals 577,350,270 38.57%
Other
Institutions 48,561,001 3.24%
Individuals 73,181,383 4.89%
Total 1,497,063,830 100.00%

BOARD OF DIRECTORS
The Board of Directors shall provide central leadership to the Bank, establish its objectives and develop the strategies
that direct the ongoing activities of the Bank to achieve these objectives. Directors shall 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 Banks performance and can be
removed from office by them.
The primary responsibility of the Board is to provide effective governance over the Banks 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 Banks senior executives and external advisors and
auditors.
Changes during the year
His Excellency Mr. Mohamed Ali Rashid Alabbar has joined the Board of Directors on 18 March 2013 being the first
substitute member after Mr. Salem Rashed Saeed Al Mohannadi stepped down from the Board on 15 October 2012.
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 Remuneration and Nomination Committee and 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 Banks 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, financing and borrowing
activities including annual operating plan and budget, ensuring regulatory compliance and reviewing the adequacy
and integrity of internal controls. All policies pertaining to the Banks 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 Chairperson and/or Deputy Chairman)
are required to attend the Board meetings in order to ensure a quorum.

Board Elections System
Article 26 of the Banks 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 Boards 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 2013 that they have
met all the conditions stipulated under Appendix A of the Corporate Governance Code.
In 2013, the members of the Board were:
Independent Non-Executive Directors
1. H.H. Shaikha Hessa bint Khalifa bin Hamad Al Khalifa Chairperson
2. Mr. Hamad Tarek Alhomaizi Vice Chairman
3. Mr. Hussein Mohammed Al Meeza
4. Mr. Habib Ahmed Kassim
5. Mr. Essam bin Abdulkadir Al Muhaidib
6. Mr. Salman Saleh Al Mahmeed
7. Mr. Fahad Sami Al Ebrahim
8. Mr. Mohammed Omeir Yussef
9. H. E. Mohamed Ali Rashid Alabbar
10. Mr. Adnan Abdulla Al Bassam

Executive Directors
1. Mr. Yousif Abdulla Taqi
All current Directors were elected for a three-year term on 20 March 2012, except Mr. Alabbar who joined the Board of
Directors on 18 March 2013 being the first substitute member after Mr. Salem Rashed Saeed Al Mohannadi stepped
down from the Board on 15 October 2012.
Induction and Orientation for New Directors
In March 2012, when the new Board was elected, all Board members were requested to attend a comprehensive course
in relation to the implementation of the new Corporate Governance Code (with the Bank bearing the expenses of such
training). The new directors have also been provided with a binder containing, Board charter, Banks code of ethics and
policies and other documents.
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. Below is a summary of the evaluation results:
The directors self-assessment results were either above expectation or satisfactory in most areas, including
directors skills and experience, understanding of the Banks business and Board operations.
Board members have identified certain objectives moving forward such as enhancing the organic growth of the
Bank, building a strong succession plan, emphasize on diversified revenue stream, sourcing quality investments
in addition to the focusing on the strategic plans of the Bank.
The performance results of the Chairperson, Committee chairs and the performance of different Board committees
were mostly above expectation.
Committee chairs and members have identified different objectives moving forward; including but not limited to:
1. Guide Management to accomplish the Boards objectives and adhere to policies and long term goals.
2. Avoiding troublesome potential investments.
3. Assist Management in focusing on profitable investments.
4. Resolving long outstanding and legacy matters
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 members 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 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 DirectorsCode of Conduct is published on the Banks 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 Banks Articles
of Association 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 2013, four Board meetings were held at the Banks premises as follows:
Quarterly Board Meetings 2013 - Minimum Four Meetings Per Annum
Members 30 January 29 April 13 June 31 October
H.H. Shaikha Hessa bint Khalifa Al Khalifa a a a a

Mr. Hamad Tarek Alhomaizi a a a -
Mr. Hussein Mohammed Al Meeza a a a a
Mr. Habib Ahmed Kassim a a a a
Mr. Essam bin Abdulkadir Al Muhaidib a a a a
Mr. Salman Saleh Al Mahmeed a a a a
Mr. Fahad Sami Al Ebrahim a a a a
Mr. Mohammed Omeir Yussef - a - -
Mr. Adnan Abdulla Al Bassam a a a a
H.E. Mohamed Ali Alabbar N/A a a a
Mr. Yousif Abdulla Taqi a a a a
Directors interests
The number of shares held by Directors as at 31 December 2013 is as follows:
Members No. of Shares

H.H. Shaikha Hessa bint Khalifa Al-Khalifa 100,000
Mr. Hamad Tarek Al Homaizi 100,000
Mr. Hussain Mohammed Al Meeza 462,819
Mr. Habib Ahmed Qassim 3,202,489
Mr. Essam Bin Abdulkadir Al Muhaideb 100,000
Mr. Salman Saleh Al Mahmeed 100,000
Mr. Fahad Sami Al Ebrahim 100,000
Mr. Mohammed Omeir Yussef 18,100,000
Mr. Mohamed Ali Rashid Alabbar 100,000
Mr. Adnan Abdulla Al Bassam 100,000

Mr. Yousif Abdulla Taqi 100,000
There were no trading activities in the shareholdings of directors during the year except for the acquisition of 1,100,000 shares
by Mr. Habib Ahmed Kassim and sale of 22,694,981 shares by Mr. Mohammed Omeir Yussef.

Related entities
The following shareholders are related to Mr. Habib Kassim:
Al Mahd Investment Company owns 959,742 shares
The following shareholder is related to Mr. Essam Al Muhaideb:
Al Muhaideb Holding Company owns 4,314,522 shares
The following shareholder is related to Mr. Yousif Taqi:
Capital Service House owns 420,000 shares
The following shareholder is related to Mr. Hussein Al Meeza:
Top Enterprise owns 1,475,000 shares
The following shareholder is related to Mr. Mohamed Ali Rashid Alabbar:
Leader Capital (L.L.C) owns 57,976,149 shares
Al Rushed Investments (W.L.L.) owns 52,500,000 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 BD 5 million and up to BD 10 million requires the approval of the Executive Committee of
the Board of Directors, any transaction above BD 10 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.
Senior Managers Shares ownership Two-year comparison

as on 31 December
2012 2013
Staff Name No. of Shares
Abdulkarim Mohammed Turki 77,448 168
Ali Habib Qassim 2,489 2,489
Khalid Mustafa Jalili 42,000 43,000
Dr. Mohammed Burhan Arbouna 336 336
Essa Abdulla Bohijji 96,495 96,495
Hafedh Abdulrahman Ebrahim Buali 157,500 -
Harish Venkatakrishnan 52,500 52,500
Janaka Mendis 30,000 -
Khalid Ahmed Al Ashar 52,500 -

Material contracts and financing involving Directors:
A financing facility has been provided to Mr. Mohammed Omeir Yussef. The details of the facility are as follows:
Principal amount of financing : USD 12,734,440
Nature of facility : Lease Agreement
Purpose of financing : Purchase a Cessna aircraft
Profit rate : ( Libor + 2.35% p.a )
Security : Aircraft
Principal outstanding : USD 5,258,797
A financing facility has been provided to Mahmood Thiam (Guaranteed by H.E. Mohamed Alabbar). The details of the
facility are as follows:
Principal amount of financing : USD2 million
Nature of facility : Commodity Murabaha
Purpose of financing : Bridge financing for immediate personal and business obligations
Profit rate : 8% p.a.
Security : Guarantee from H.E. Mohamed Alabbar
Principal outstanding : USD2 million
A financing facility has been provided to Zaleej Real Estate (Partly owned by Hamad Tarek Alhomaizi). The details of the
facility are as follows:
Principal amount of financing : AED10 million
Nature of facility : Lease Agreement
Purpose of financing : Sale and Leaseback
Profit rate : 6.0% p.a.
Security : Building in Sharjah
Principal outstanding : BD997,479
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 issues of concern to report relating to the work of certain Board Committees during the year 2013,
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 Committee, and Remuneration
and Nomination Committees) are published on the Banks website.

Executive Committee
Quarterly Committee meetings 2013 -Minimum four meetings per annum.
Five Committee meetings were held during 2013 as follows:
Members 21 January 21 April 9 June 7 October 9 December

Mr. Hussein Mohammed Al
Meeza (Chair) a a a a a
Mr. Hamad Tarek Alhomaizi a a a a a
Mr. Adnan Abdulla Al Bassam a a a a a
Mr. Essam bin Abdulkadir Al
Muhaidib - a a a a
Mr. Yousif Abdulla Taqi a a a a a
Summary of responsibilities: Deputizing the Board on matters pending decisions between Board meetings, considering
and reviewing managements 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 managements
recovery procedures for problem loans and requirements for provisioning.
Audit Committee
Quarterly Committee meetings in 2013 - Minimum four meetings per annum.
Four Committee meetings were held during 2013 as follows:
Members 29 January 28 April 12 June 30 October
Mr. Salman Saleh Al Mahmeed (Chair) a a a a

Mr. Fahad Sami Al Ebrahim a a a a
Mr. Mohamed Ali Rashid Alabbar N/A N/A - a
Mr. AbdulRahman Al Sayed (Committee
Expert Non-Voting) a a a a
Summary of responsibilities: Reviews the internal audit program and internal control system, considers major findings
of internal audit review, investigations and managements 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.
Note: Mr Alabbar joined the Audit Committee as a member on 6 May 2013.

Remuneration and Nomination Committee
Quarterly Committee meetings in 2013 - Minimum two meetings per annum.
Four meetings were convened during 2013
Members 30 January 29 April 12 June 8 December
Mr. Habib Ahmed Kassim (Chair) a a a a

Mr. Fahad Sami Al Ebrahim a a a -
Mr. Adnan Abdulla Al Bassam N/A a a a
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
managements performance in light of the Banks 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.
Note: Adnan Al Bassam joined the Remuneration and Nomination Committee as a member on 30 January 2013 replacing
Mr. Salem Rashed Saeed Al Mohannadi who had stepped down from the Board on 15 October 2012.
Corporate Governance Committee
Committee meetings in 2013 - Minimum one meeting per annum.
One meeting was convened during 2013
Members 15 April
H.H. Shaikha Hessa bint Khalifa Al Khalifa (Chair) a

Mr. Adnan Abdulla Al Bassam a
Dr. Mohammed Burhan Arbouna a
Summary of responsibilities: Oversees and monitors the implementation of the governance policy framework. Reviews
on an annual basis the Banks compliance with the respective Corporate Governance rules and regulations as well as the
Boards and subcommittees charters. Reviews on an annual basis the Sharia Supervisory Boards compliance with its
approved charter.

SHARIA SUPERVISORY BOARD
Al Salam Bank-Bahrain is guided by a Sharia Supervisory Board consisting of five distinguished scholars. The Board
reviews the Banks activities to ensure that all products and investment transactions comply fully with the rules and
principles of Islamic Sharia.
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 Chief Executive Officer. The CEO and Executive
Management are responsible for implementation of decisions and strategies approved by the Board of Directors and the
Sharia Fatwa and Supervisory Board.
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

Credit/Risk Committee 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 Committees,
Regulators and Executive Management. In addition to these responsibilities,
individual credit transaction approval and monitoring is an integral part of
the responsibilities.
Asset Liability Committee This Committees primary responsibility is to review the trading and liquidity
policy for the overall management of the balance sheet and its associated
risks.
Investment Committee The role of the Committee is to review and approve all transactions related
to corporate and real estate investments and monitoring their 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.
Technology Steering Committee TSC oversees the information technology function of the Bank. It recommends
the annual IT budget and plans, drawn up in accordance with the approved
strategy for the Bank, to the CEO for submission 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 Executive Management 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 endorsed 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.

REMUNERATION AND APPOINTMENT OF THE EXTERNAL AUDITORS
During the Annual General Ordinary Meeting held on 20 February 2013, the shareholders approved the appointment
of Ernst & Young as external auditors for the year ending 31 December 2013 and authorized the Board of Directors to
determine their remuneration.
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 Banks 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
Boards Audit Committee.
The Key Persons Policy is posted on the Banks 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 pro-actively 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 Banks 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 Banks 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 Banks
various activities.

Consumer/ Investor Awareness Programmes and Tools
To fulfil 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.
Customers seminars, bilateral contacts, website, newsletter,

media campaigns, corporate presentations, speeches,
publications, brochures, leaflets, Radio and TV advertising,
banners, unipols, SMS etc.
Investors publications, road shows (mostly bilateral contacts),
Internet, media, investor presentations, wire services,
brochures, leaflets, advertising etc.
Regulatory & Governmental authorities institutional contacts, seminars, visits, bilateral contacts,
Internet, newsletter, media, publications (in particular
the Annual Report), brochures, leaflets, etc.
Media Communications press releases, interviews, speeches, background
seminars, etc.
General public Communications media, other key target groups as multipliers
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 Boards 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 Banks 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 Banks creditors;
To treat fairly and with respect all of the Banks employees and customers with whom they interact;
Not enter into competition with the Bank;
Not demand or accept substantial gifts from the Bank for himself/herself or his/her associates;
Not 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 Sharia

External Auditors
Supervisory Board
Board of Directors
Executive Committee
Corporate Governance
Committee
Renumeration and Nomination

Committee
Audit Committee
Chief Executive Officer
Risk & Compliance

Management Committees
Risk / Credit
Investment Internal Audit Department
Asset Liability
Information Technology
Sharia Compliance
Department
BUSINESS GROUP SUPPORT GROUP
Banking HR, Operations, IT, Legal &

Support Services
Investment Finance & Strategic

Development
Treasury & Financial Markets
There were no changes made to the management structure during the year.

Risk Management and Compliance
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 II Accord as a catalyst to the successful implementation
of the pillars of risk management.
The fundamental principle underlying our risk management framework is ensuring that accepted risks are within 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--vis the Groups risk appetite and ensuring earnings stability.
With this in mind, the Banks establishment plan gave priority to the development of an effective and practical risk
management framework and independent risk management and compliance function in line with best risk management
practice locally and internationally, the requirements of the Central Bank of Bahrain and the Basel II Accord.
Risk Management Framework
The risk management framework defines the risk culture of Al Salam BankBahrain 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 Groups key risk management principles
covering credit, market, operational, 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 Groups 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.

Risk Management and Compliance (Continued)
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 Sharia Supervisory Board
Senior Management Committees

Risk Management & Compliance Function
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
Corporate Governance
The risk management framework is supported by an efficient Corporate Governance Framework discussed on pages 32
to 46.
Risks Ownership
The implementation of the risk management framework Group-wide is the responsibility of the Risk Management &
Compliance Departments. Ownership of the various risks across the Group lies with the business and support Heads
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.

Risk Management and Compliance (Continued)
The Bank has the following Policies, Procedures and Limits relating to the Risk Management Framework:
Compliance &
Credit Risk Market Risk Operational Risk Capital Anti-Money
Management Management Management Management Laundering
Exposures and Positioning Control Self Basel ll Compliance

limits Monitoring and Limits Assessments Compliance Monitoring
Monitoring
Portfolio Risk Key Risk Risk Adjusted Anti-Money

Management Measurement Indicators Pricing Laundering
Methodology Monitoring Control
Timely Timely Reporting Risk & Loss Reporting to Training and

Reporting to Risk to ALCO Events Database Board Executive Awareness
Committee Committee
Internal Rating IT Security Scenario Analysis AML System

Methodology Managements Controls
Periodic Stress Business

Testing and Continuity
Scenario Analysis Planning
Outsourcing Risk
Management
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 Islands 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 Sharia and Supervisory Board Report for
Al Salam Bank-Bahrain presented to the AGM
for the financial year 2013
The Sharia Fatwa and Supervisory Board (the Board) has reviewed the Banks transactions during the year, as well as the
Financial Position, Income, Cash Flows and Changes in Equity statements. The Board met with the Banks management
and submitted its annual report as follows:
First:
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 Sharia principles and the Boards 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 Banks management keenness to adhere to the Sharia principles and the Boards 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.
Second:
The Board has reviewed samples of contracts and agreements that were presented and requested the Management to
adhere to them.
Third: Financial Statements:
The Board has reviewed the financial statements and notes and made its observations on them.
In line with the available information and disclosures that are presented by the banks management, the financial
statement reviewed by the Board represents the Banks assets, liabilities, revenues, equity, customers accounts and
operational expenses. The accuracy of the information and data provided are the responsibility of the Banks management.
The Board believes that the consolidated balance sheet, profit and loss account and the distribution of profits to
depositors and shareholders had been prepared in conformity with the Islamic Sharia.
Fourth: Zakah:
Since the articles of association of the Bank did not require the Bank to pay Zakah on behalf of the Shareholders, the
Board has calculated the Zakah due on shareholders in order to inform them, and which should be disclosed in the notes
to the financial statements.
Fifth: Prohibited Income:
The Sharia Board has set aside the Sharia non-compliant income and directed it to the Charity Account.
The Board hereby emphasizes that management has the primary responsibility to comply with the Rules
and Principles of Sharia 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 Boards review during the year were generally
in compliance with Rules and Principles of Sharia. 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

Board Member Dr. Mohammed Arbouna
Board Member

Standing the test of time!

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 Center 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 2013, and the related consolidated statements of income, cash flows and changes
in equity for the year then ended. These consolidated financial statements and the Groups
undertaking to operate in accordance with Islamic Sharia Rules and Principles are the
responsibility of the Banks 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 amounts and disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the Banks Board
of Directors, 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 material respects,
the consolidated financial position of the Group as of 31 December 2013, 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 TO THE SHAREHOLDERS OF
AL SALAM BANK-BAHRAIN B.S.C. (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 financial 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 resolutions, rules and
procedures of the Bahrain Bourse or the terms of the Banks memorandum and articles of
association during the year ended 31 December 2013 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 Sharia Rules and Principles as
determined by the Sharia Supervisory Board of the Bank.
30 January 2014
Manama, Kingdom of Bahrain

Consolidated Statement of Financial Position
Year Ended 31 December 2013
31 December 2013 31 December 2012

Note BD 000 BD 000
ASSETS
Cash and balances with banks and Central Bank of
Bahrain 4 86,097 66,843
Central Bank of Bahrain Sukuk 102,937 117,612
Murabaha and Wakala receivables from banks 5 118,227 103,290
Corporate Sukuk 6 91,106 74,993
Murabaha financing 7 147,616 127,537
Mudaraba financing 7 114,084 99,572
Ijarah Muntahia Bittamleek 9 110,631 82,954
Musharaka 19,145 17,467
Non-trading investments 10 125,923 204,202
Investment properties 11 77,736 2,500
Development properties 12 63,399 -
Investment in an associate 13 8,537 7,573
Other assets 14 22,814 37,675
TOTAL ASSETS 1,088,252 942,218
LIABILITIES, EQUITY OF INVESTMENT
ACCOUNTHOLDERS AND OWNERS EQUITY
LIABILITIES
Murabaha and Wakala payables to banks 106,796 90,852
Wakala payables to non-banks 584,365 521,929
Customers' current accounts 70,532 83,921
Term financing 15 23,637 -
Other liabilities 16 30,979 19,175
TOTAL LIABILITIES 816,309 715,877
EQUITY OF INVESTMENT ACCOUNTHOLDERS 17 25,846 18,276
OWNERS EQUITY
Share capital 18 149,706 149,706
Treasury stock (492) (492)
Reserves and retained earnings 78,580 51,366
Proposed appropriations 18 7,485 7,485
Total equity attributable to shareholders of the Bank 235,279 208,065
Non-controlling interest 10,818 -
TOTAL OWNERS EQUITY 246,097 208,065
TOTAL LIABILITIES, EQUITY OF INVESTMENT
ACCOUNTHOLDERS AND OWNERS EQUITY 1,088,252 942,218
These consolidated financial statements have been authorised for issue in accordance with a resolution of the Board of
Directors dated 30 th January 2014.
Shaikha Hessa bint Khalifa Al Khalifa Yousif Taqi

Chairperson of the Board Director & CEO
The attached notes 1 to 36 form part of these consolidated financial statements.

Consolidated Income Statement

Note BD 000 BD 000
OPERATING INCOME
Income from financing contracts 20 26,132 20,545
Income from Sukuk 9,448 8,899
Gains on sale of investments and Sukuk 3,833 10,876
Income from FVTPL investments 2,424 635
Fair value changes on FVTPL investments (1,398) (7,021)
Net gain from available-for-sale investments 13 - 2,088
Dividend income 570 1,275
Foreign exchange gains 793 644
Fees, commission and other income - net 21 2,305 7,104
44,107 45,045
Profit on Murabaha and Wakala payables to banks (682) (599)
Profit on Wakala payables to non-banks (17,190) (20,228)
Profit relating to equity of investment accountholders 17 (148) (166)
Total operating income 26,087 24,052
OPERATING EXPENSES
Staff costs 6,469 6,350
Premises and equipment cost 1,147 1,179
Depreciation 280 394
Other operating expenses 3,505 3,541
Total operating expenses 11,401 11,464
PROFIT BEFORE PROVISIONS AND RESULTS OF AN
ASSOCIATE 14,686 12,588
Provision for impairment - net 8 (3,208) (3,058)
Share of profit from an associate 13 894 778
NET PROFIT FOR THE YEAR 12,372 10,308
Attributable to:
Shareholders of the Bank 12,372 10,272
Non-controlling interest - 36
12,372 10,308
WEIGHTED AVERAGE NUMBER OF SHARES (in 000) 1,491,372 1,491,372
BASIC AND DILUTED EARNINGS PER SHARE (FILS) 8.3 6.9
Shaikha Hessa bint Khalifa Al Khalifa Yousif Taqi

Chairperson of the Board Director & CEO

Consolidated Statement of Financial Position
Year ended 31 Year ended 31

December 2013 December 2012
BD000 BD000
OPERATING ACTIVITIES
Net profit for the year 12,372 10,308
Adjustments:
Depreciation 280 394
Fair value changes and gain on investments 1,398 4,933
Provision for impairment - net 3,208 3,058
Share of profit from an associate (894) (778)
Operating income before changes in operating assets and liabilities 16,364 17,915
Changes in operating assets and liabilities:
Mandatory reserve with Central Bank of Bahrain 115 (795)
Central Bank of Bahrain Sukuk 14,675 7,415
Murabaha and Wakala receivables from banks with original maturities of 90
days or more (12,279) (37)
Corporate Sukuk (16,113) (25,343)
Murabaha financing (21,436) 6,100
Mudaraba financing (14,512) (41,866)
Ijarah Muntahia Bittamleek (27,701) (16,499)
Musharaka financing (1,678) (5,756)
Non-trading investments, net 75,885 7,751
Development properties (63,399) -
Other assets 14,390 5,819
Murabaha and Wakala payables to banks 15,944 (13,721)
Wakala from non-banks 62,436 6,782
Customers' current accounts (13,389) 17,336
Other liabilities 11,804 (5,738)
Net cash from (used in) operating activities 41,106 (40,637)
INVESTING ACTIVITIES
Purchase of premises and equipment (81) (72)
Purchase of investment properties - net (53,577) -
Net cash used in investing activities (53,658) (72)
FINANCING ACTIVITIES
Term financing 23,637 -
Equity of investment accountholders 7,570 2,020
Purchase of treasury stock - (27)
Dividends (7,446) -
Non-controlling interest 10,818 -
Net cash from financing activities 34,579 1,993
NET CHANGE IN CASH AND CASH EQUIVALENTS 22,027 (38,716)
Cash and cash equivalents at 1 January 149,013 187,729
CASH AND CASH EQUIVALENTS AT 31 DECEMBER 171,040 149,013
Cash and cash equivalents comprise of:
Cash and other balances with Central Bank of Bahrain (Note 4) 58,727 35,912
Balances with other banks (Note 4) 7,420 10,866
Murabaha and Wakala receivables from banks with original maturities of
less than 90 days 104,893 102,235
171,040 149,013

CONSOLIDATED STATEMENT OF CHANGES IN OWNERS EQUITY
Year ended 31 December 2013
Attributable to Shareholders of the Bank Amounts in BD000

Foreign
Property exchange Share Non- Total
Share Treasury Statutory Retained Changes in fair value translation premium Total Proposed controlling owners'
capital stock reserve earnings fair value reserve reserve reserve reserves appropriations Total interest equity
Balance as of 1 January 2013 149,706 (492) 9,689 39,583 92 - (571) 2,573 51,366 7,485 208,065 - 208,065
Net profit for the year - - - 12,372 - - - - 12,372 - 12,372 - 12,372

Net change in fair value - - - - 559 21,659 - - 22,218 - 22,218 - 22,218
Non-controlling interest arising on
consolidation - - - - - - - - - - - 10,818 10,818
Changes on investment in an
associate - - - - - - 70 - 70 - 70 - 70
Transfer to statutory reserve - - 1,237 (1,237) - - - - - - - - -
Proposed dividend for 2013 - - - (7,485) - - - - (7,485) 7,485 - - -
Dividend paid - - - - - - - - - (7,446) (7,446) - (7,446)
Transfer - - - 39 - - - 39 (39) - - -
Balance at 31 December 2013 149,706 (492) 10,926 43,272 651 21,659 (501) 2,573 78,580 7,485 235,279 10,818 246,097
Balance as of 1 January 2012 149,706 (465) 8,662 37,823 (1,830) - - 2,573 47,228 - 196,469 4,156 200,625
Net profit for the year - - - 10,272 - - - - 10,272 - 10,272 36 10,308
Net change in fair value - - - - 1,922 - - - 1,922 - 1,922 - 1,922
Changes on investment in an
associate - - - - - - (571) - (571) - (571) - (571)
Treasury shares purchased - (27) - - - - - - - - (27) - (27)
Transfer to statutory reserve - - 1,027 (1,027) - - - - - - - - -
Proposed dividend for 2012 - - - (7,485) - - - - (7,485) 7,485 - - -
Transfer to other liabilities (note 16) - - - - - - - - - - - (4,192) (4,192)
Balance at 31 December 2012 149,706 (492) 9,689 39,583 92 - (571) 2,573 51,366 7,485 208,065 - 208,065
AL SALAM BANK - BAHRAIN

59
Notes to the Consolidated Financial Statements
31 December 2013
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 Banks registered office is P.O. Box 18282,
Building 22, Avenue 58, Block 436, Al Seef District, Kingdom of Bahrain.
The Bank operates through eight branches in the Kingdom of Bahrain and offers a full range of Sharia-compliant banking
services and products. The activities of the Bank include managing profit sharing investment accounts, offering Islamic
financing contracts, dealing in Sharia-compliant financial instruments as principal/agent, managing Sharia-compliant
financial instruments and other activities permitted for under the CBBs Regulated Islamic Banking Services as defined
in the licensing framework. The Banks ordinary shares are listed in the Bahrain Bourse and Dubai Financial Market. The
Bank together with its subsidiaries are referred to as the Group.
The Group has control over the following entities:
Name of entity % holding Nature of entity

Al Salam Leasing Two Ltd ("ASL II") 76% Aircraft under lease
Auslog Holding Trust 90% Investment properties
Kenaz Al Hamala Real Estate Investment W.L.L. ("Hamala") 83% Development properties
These consolidated financial statements have been authorised for issue in accordance with a resolution of the Board of
Directors dated 30 January 2014.
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 investment properties 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.
2.1.a 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 28.
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.

2 ACCOUNTING POLICIES (continued)

2.2 SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES (continued)
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:
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.
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.
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
(judgemental) decline in the fair value below its cost or where other objective evidence of impairment exists. 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 is normally based on one of the following:
valuation by independent external valuers;
recent arms 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 Groups 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 Groups ability to continue as a going concern.
Therefore, the consolidated financial statements continue to be prepared on the going concern basis.

Basis of consolidation
The consolidated financial statements comprise the financial statements of the Bank and its subsidiaries as at 31
December 2013. 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 Groups ownership of a subsidiary, without a loss of control,
is accounted for as an equity transaction.
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.
2.3 SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies applied in the preparation of these consolidated financial statements, are consistent
with those of prior year except as set out in 2.3.1.
2.3.1 Adoption of Financial Accounting Standards FAS 26 - Investment in Real Estate
AAOIFI issued a new accounting standard, Financial Accounting Standard 26 - Investment in real estate (FAS 26) and
is effective for financial periods beginning 1 January 2013. This standard shall apply in the recognition, measurement
and disclosure of the entitys direct investment in real estate that is acquired for the purpose of earning periodical
income or held for future capital appreciation or both. In accordance with FAS 26, the investment in real estate is initially
recognized at cost and subsequently measured based on intention whether the investment in real estate is held-for-use
or held for sale. For held-for-use investments, an entity shall choose as its accounting policy either the fair value model
or the cost model. 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 investment 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. Investment in real estate held-for-sale is carried at lower of its carrying value and
expected fair value less costs to sell.
2.3.2 Summary of significant accounting policies
a) Financial contracts
Financial contracts consist of balances with banks and the CBB, CBB 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) Corporate Sukuk
These are quoted 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 have purchased the asset based on the Purchasers 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 amortised cost, net of deferred profits, provision for impairment, if any, and amounts
settled.


2.3 SIGNIFICANT ACCOUNTING POLICIES (continued)
2.3.2 Summary of significant accounting policies (continued)
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 customers request and promise to lease) against certain rental payments for a specific lease term/periods, payable
on fixed or variable rental basis.
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 amortised cost, less any impairment.
g) Non-trading investments
These are 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.
Following the initial recognition of investments, the subsequent period-end reporting values are determined as follows:


g) Non-trading investments (continued)
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 Groups 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 FVTPL investments in the consolidated income
statement.
h) Investments in associates
The Groups investments in its 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, the investment in the associate is carried in the consolidated statement of financial position
at cost plus post-acquisition changes in the Groups share of net assets of the associate. Losses in excess of the cost of
the investment in an associate 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 Groups 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.
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 equity.
i) Investment properties
Properties held for rental, or for capital appreciation purposes, or both, are classified as investment properties. Refer to
note 2.3.1 for detailed accounting policy relating to investment in real estate.


j) Development properties
Properties acquired exclusively for development are classified as development properties and are measured at the lower
of cost and net realisable value.
k) 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 5 years
- Leasehold Improvements Over the lease period
l) 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 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.
m) Business combinations and goodwill
Business combinations are accounted for using the purchase method of accounting. This involves recognising identifiable
assets (including previously unrecognised intangible assets) and liabilities (including contingent liabilities and excluding
future restructuring) of the acquired business at fair value. Any excess of the cost of acquisition over the fair values of
the identifiable net assets acquired is recognised as goodwill. If the cost of acquisition is less than the fair values of the
identifiable net assets acquired, the discount on acquisition (negative goodwill) is recognised directly in the consolidated
income statement in the year of acquisition.
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 arising from a business combination is initially measured at cost, being the excess of the cost of the business
combination over the Groups interest in the net fair value of the identifiable assets, liabilities and contingent liabilities
acquired. Gain on business combination, being the excess of the Groups interest in the net fair value of the identifiable
assets, liabilities and contingent liabilities acquired over the cost of business acquisition is recognised as gain in the
consolidated statement of income.
Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is reviewed
for impairment annually, or more frequently, if events or changes in circumstances indicate that the carrying value may
be impaired.
n) 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.


n) Impairment and uncollectability of financial assets (continued)
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.
For available-for-sale equity investments reversal of impairment losses are recorded as increases in cumulative changes
in fair value through equity.
o) 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.
p) 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.
q) 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 Groups obligations are limited to these contributions, which are expensed when due.
r) 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.
Corporate Sukuk
Income on Corporate 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 Groups share of loss is recognised to the extent that such
losses are being deducted from its share of the Mudaraba capital.
Dividends
Dividend income is recognised when the Groups right to receive the payment is established.
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.


r) Revenue recognition (continued)
Musharaka
Income on Musharaka is recognized when the right to receive payment is established or on distributions. In case of losses
in Musharaka, the Groups 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.
s) 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 arms 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 investments with similar terms and risk characteristics.
t) 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. 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.
u) 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.
v) 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.


w) 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.
x) 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.
y) Dividends on ordinary shares
Dividend on ordinary shares is recognised as a liability and deducted from equity when it is approved by the Groups
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.
z) 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.
aa) Zakah
In accordance with the revised Articles of Association of the Group, the responsibility to pay Zakah is on the shareholders
of the Group.
ab) 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.
ac) 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.
ad) 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 Murabaha and Wakala receivables from banks.
ae) 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.
af) Earnings prohibited by Sharia
The Group is committed to contributing to charity any income generated from non-Islamic sources. Accordingly, any
earning prohibited by Sharia is credited to charity funds to be used for social welfare purposes.


ag) Profit on Murabaha and Wakala payables to banks and 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 CLASSIFICATION OF ASSETS, LIABILITIES AND EQUITY OF INVESTMENT ACCOUNTHOLDERS
31 December 2013
At fair
value through Available for At amortised
profit or loss sale cost /others Total
BD000 BD000 BD000 BD000
ASSETS
Cash and balances with banks and the CBB - - 86,097 86,097
CBB Sukuk - - 102,937 102,937
Murabaha and Wakala receivables from
banks - - 118,227 118,227
Corporate Sukuk - - 91,106 91,106
Murabaha and Mudaraba financing - - 261,700 261,700
Ijarah Muntahia Bittamleek - - 110,631 110,631
Musharaka - - 19,145 19,145
Non-trading investments 112,205 13,718 - 125,923
Investment properties - - 77,736 77,736
Development properties - - 63,399 63,399
Investment in an associate - - 8,537 8,537
Other assets - 2,656 20,158 22,814
112,205 16,374 959,673 1,088,252
At fair
BD000 BD000 BD000 BD000
LIABILITIES AND EQUITY OF

INVESTMENT ACCOUNTHOLDERS
Murabaha and Wakala payables to banks - - 106,796 106,796

Wakala from non-banks - - 584,365 584,365
Customers' current accounts - - 70,532 70,532
Term financing - - 23,637 23,637
Other liabilities - - 30,979 30,979
Equity of investment accountholders - - 25,846 25,846
- - 842,155 842,155

3 CLASSIFICATION OF ASSETS, LIABILITIES AND EQUITY OF INVESTMENT ACCOUNTHOLDERS (continued)
31 December 2012
At fair
BD000 BD000 BD000 BD000
ASSETS
Cash and balances with Banks and the CBB - - 66,843 66,843
CBB Sukuk - - 117,612 117,612
Murabaha and wakala receivables from
banks - - 103,290 103,290
Corporate Sukuk - - 74,993 74,993
Murabaha and Mudaraba financing - - 227,109 227,109
Ijarah Muntahia Bittamleek - - 82,954 82,954
Musharaka - - 17,467 17,467
Non-trading investments 193,168 11,034 - 204,202
Investment properties - - 2,500 2,500
Investment in an associate - - 7,573 7,573
Other assets - 3,056 34,619 37,675
193,168 14,090 734,960 942,218
At fair
BD000 BD000 BD000 BD000
LIABILITIES AND EQUITY OF INVESTMENT

ACCOUNTHOLDERS
Murabaha and Wakala payables to banks - - 90,852 90,852

Wakala from non-banks - - 521,929 521,929
Customers' current accounts - - 83,921 83,921
Other liabilities - - 19,175 19,175
Equity of investment accountholders - - 18,276 18,276
- - 734,153 734,153

4 CASH AND BALANCES WITH BANKS AND THE CBB
2013 2012
BD000 BD000
Mandatory reserve with the CBB 19,950 20,065

Cash and other balances with the CBB 58,727 35,912
Balances with other banks 7,420 10,866
86,097 66,843
5 MURABAHA AND WAKALA RECEIVABLES FROM BANKS
2013 2012
BD000 BD000
GCC 112,949 98,012
Europe 5,278 5,278
118,227 103,290
This includes certain Wakala receivables for investment in commodity Murabaha. In addition to above amounts, deferred
profits on Murabaha receivables from banks amounted to BD 12 thousands (2012: BD 14 thousands).
This consists of BD 21,969 thousands (2012: BD 18,276 thousands) of jointly financed assets and BD 96,258 thousands
(2012: BD 85,014 thousands) of self financed assets.
6 CORPORATE SUKUK
2013 2012
BD000 BD000
Investment grade 72,540 59,146
Non-investment grade 984 421
Un-rated Sukuk 17,582 15,426
91,106 74,993

7 MURABAHA AND MUDARABA FINANCING

7.a Murabaha Financing
2013 2012
BD000 BD000
Murabaha financing - gross 152,372 130,936
Less: Provision (4,756) (3,399)
Murabaha financing - net 147,616 127,537
Murabaha financing are shown net of deferred profits of BD 29,845 thousands (2012: BD 21,708 thousands).
7.b Mudaraba Financing
2013 2012
BD000 BD000
Murabaha financing - gross 114,084 99,572
Less: Provision - -
Murabaha financing - net 114,084 99,572
8 MOVEMENTS IN PROVISIONS
Financing facilities & Available-for-sale
other assets investments Total
2013 2012 2013 2012 2013 2012
BD000 BD000 BD000 BD000 BD000 BD000
Balance at beginning of the year:
Specific provision 3,721 1,653 2,483 5,325 6,204 6,978
Collective provision 500 500 - - 500 500
Reversed on de-recognition - - - (3,832) - (3,832)
Provision for impairment:
Charge for the year - specific 940 2,202 1,555 990 2,495 3,192
Charge for the year - collective 794 - - - 794 -
Recoveries for the year (81) (134) - - (81) (134)
1,653 2,068 1,555 990 3,208 3,058
Balance at end of the year:
Specific provision 4,580 3,721 4,038 2,483 8,618 6,204
Collective provision 1,294 500 - - 1,294 500
In addition to the provisions held above, the financing portfolio and other assets acquired through Bahraini Saudi
Bank (B.S.C.) (BSB) business combination were subject to specific write down of BD 5,321 thousands and a collective
impairment write down of BD 3,175 thousands.

9 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 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.
2013 2012
BD000 BD000
Movements in Ijarah Muntahia Bittamleek assets are as follows:
At 1 January 82,954 66,477
Additions during the year 35,719 24,194
Ijarah assets depreciation (8,018) (7,695)
Provision (24) (22)
At 31 December 110,631 82,954
2013 2012
BD000 BD000
The future minimum lease receivable in aggregate are as follows:
Due within one year 13,837 18,213
Due in one to five years 55,831 56,851
Due after five years 40,963 7,890
110,631 82,954
2013 2012
BD000 BD000
Ijarah Muntahia Bittamleek is divided into the following asset classes:
Land and buildings 86,738 77,603
Aircraft 21,352 2,310
Machinery 2,541 3,041
110,631 82,954
The accumulated depreciation on Ijarah Muntahia Bittamleek assets amounted to BD 19,294 thousands (2012: BD
11,812 thousands).

10 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:
31 December 2013
Level 1 Level 2 Level 3 Total

BD000 BD000 BD000 BD000
Financial assets at fair value through profit
or loss 9,058 - 103,147 112,205
Available-for-sale financial assets 6,455 - 7,263 13,718
15,513 - 110,410 125,923
31 December 2012
Level 1 Level 2 Level 3 Total

BD000 BD000 BD000 BD000
Financial assets at fair value through profit
or loss 9,736 445 182,987 193,168
Available-for-sale financial assets 11,034 - - 11,034
20,770 445 182,987 204,202
During the years ended 31 December 2013 and 2012, there were no transfers between Level 1, Level 2, and Level 3 fair
value measurements.

11 INVESTMENT PROPERTIES
2013 2012
BD000 BD000
Cost
At 1 January 2,500 2,500
Additions / transfers 54,877 -
Disposals (1,300) -
At 31 December 56,077 2,500
Fair value adjustment
At 1 January - -
Net unrealised gain on investment properties 21,659 -
At 31 December 21,659 -
Total 77,736 2,500
2013 2012
BD000 BD000
Buildings 33,975 -
Lands 43,761 2,500
77,736 2,500
12 DEVELOPMENT PROPERTIES
These represents properties acquired through investment vehicles exclusively for development in the Kingdom of
Bahrain. The carrying amounts include purchase price and related construction costs.
13 INVESTMENT IN AN ASSOCIATE
The Bank has a 14.4% stake in Al Salam Bank Algeria (ASBA), an unlisted bank incorporated in Algeria. The investment
was earlier classified as non-trading investment due to lack of significant influence. In the Banks Annual General
Assembly Meeting (AGM) held during 2012 some directors of ASBA were elected to the Board of the Bank. Due to
common directorship ASBA is significantly influenced by the Bank. Consequently, the non-trading investment has been
derecognised and an investment in an associate has been recognised during 2012 with the related gains included under
gain from available-for -sale investments.
The following table illustrates the summarised financial information of the Groups investment in ASBA:
2013 2012
BD000 BD000
Associate's statement of financial position:
Total assets 190,133 158,214
Total liabilities 128,594 101,219
Net assets 61,539 56,995
Total revenue 18,076 14,510
Total expenses 11,868 9,110
Net profit for the year 6,208 5,400
Banks share of associates net profit 894 778

14 OTHER ASSETS
2013 2012
BD000 BD000
Assets under conversion
Non-trading-investments - Debt 3,835 3,777
Non-trading-investments - Available for sale - equity 2,656 3,056
Loans and advances to customers 1,520 11,560
8,011 18,393
Repossed assets 3,445 6,425
Profit receivable on Murabaha and Mudaraba 3,687 2,454
Profit receivable on Sukuk 2,101 1,883
Premises and equipment 568 767
Prepayments 471 365
Rental receivable on Ijarah Muntahia Bittamleek assets 418 438
Other receivables 4,113 6,950
22,814 37,675
The assets under conversion of BD 8,011 thousands (2012: BD 18,393 thousands) represent non-Sharia compliant assets
resulted from acquisition of BSB.
The above available for sale equity investments are classified as Level 3 in the fair value hierarchy (note 10).
During the year ended 31 December 2012, the Group received cash and repossessed certain collaterals amounting to
a total of BD 6,925 thousands from its customers. These repossessed collaterals are included in other assets net of
disposals.
Other receivables include nil (2012: BD 1,369 thousands) relating to sale of investments.
15 TERM FINANCING
Term financing relate to investments and are subject to the following key terms:
a) BD 9,606 thousands carries profit rate of LIBOR plus 3.25% and matures on 13 December 2018. The collateral for this
facility is an aircraft under lease, with a carrying value of BD 19,370 thousands; and
b) BD 14,031 thousands carries profit rate of Bank Bill Swap Bid rate (BBSY) plus 1.93% and matures on 21 August 2016.
The collateral for this facility is investment property with a carrying value of BD 22,957 thousands.
16 OTHER LIABILITIES
2013 2012
BD000 BD000
Accounts payable and accruals 14,103 5,631
Profit payable 5,061 4,259
Development cost payable and advance received from customers 6,700 2,225
Dividends payable 3,377 2,394
Non-controlling interest of ex-BSB shareholders * 1,101 4,192
End of service benefits 637 474
30,979 19,175
* The shareholders of BSB in an Extraordinary General Assembly Meeting held on 22 December 2011 resolved to merge
BSBs operations with those of the Group. Consequently, on 24 April 2012, the Commercial Registration of BSB was
cancelled by MOIC. Following this, the Group acquired all the assets, and assumed all the liabilities of BSB, with effect
from 25 April 2012 and integrated BSBs operations with those of the Group. The Groups financial obligations to the non-
controlling interest of BSB have been transferred to other liabilities in the consolidated statement of financial position,
pending settlement.

17 EQUITY OF INVESTMENT ACCOUNTHOLDERS

Equity of investment account holders funds is commingled with the Banks 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 Mudaribs share of profit ranges between 40% and 50%. Operating
expenses are charged to shareholders funds and not included in the calculation.
The balances consists savings accounts of BD 11,186 thousands (2012: BD 10,511 thousands) and call accounts of BD
14,660 thousands (2012: BD 7,765 thousands).
The return on jointly invested assets and distribution to investment account holders were as follows:
2013 2012
BD000 BD000
Gross return from commingled assets 279 301
Banks share as Mudarib (131) (135)
Distributions to investment account holders 148 166
The average profit rate for the holders is 0.6% (2012: 0.7%).
18 OWNERS EQUITY
2013 2012
BD000 BD000
18.1 Share capital
Authorised:
2,500,000,000 ordinary shares (2012: 2,000,000,000 shares) of BD 0.100 each 250,000 200,000
Issued and fully paid at BD 0.100 per share:
Balance at beginning and end - 1,497,063,825 shares 149,706 149,706
In an Extraordinary General Assembly Meeting held on 8 October 2013, the shareholders resolved to increase the
authorised share capital to 2,500,000,000 shares of nominal value BD 0.100 each. The shareholders have also resolved to
acquire all of the issued and fully paid up ordinary shares of BMI Bank B.S.C (c) (BMI), a retail bank incorporated in the
Kingdom of Bahrain, through a share exchange, by offering to issue 643,866,927 new fully paid up ordinary shares of the
Bank translating to 11.0 shares of the Bank for every ordinary share of BMI, subject to obtaining all necessary regulatory
approvals.
18.2 Proposed appropriations
The Board of Directors in its meeting on 30 January 2014 has resolved to recommend a cash dividend of 5 fils per share
or 5% (2012: 5 fils or 5%) of the paid-up capital subject to approval at the forthcoming annual general meeting.
19 STATUTORY RESERVE
As required by Bahrain Commercial Companies Law and the Banks 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 Group. The reserve is not distributable except in such circumstances
as stipulated in the Bahrain Commercial Companies Law and following the approval of the CBB.

20 INCOME FROM FINANCING CONTRACTS
2013 2012
BD000 BD000
Murabaha financing 11,672 10,771
Mudaraba financing 6,673 4,498
Ijarah Muntahia Bittamleek* 6,472 4,236
Musharaka 938 488
Murabaha and Wakala receivables from banks 377 552
26,132 20,545
* Depreciation on Ijarah Muntahia Bitamleek amounts to BD 8,018 thousands (2012: BD 7,695 thousands).
21 FEES, COMMISSION AND OTHER INCOME - NET
2013 2012
BD000 BD000
Financing and transaction related fees and commissions 792 299
Fiduciary and other fees 317 524
Other income * 1,196 6,281
2,305 7,104
* During the year ended 31 December 2012, the Group received cash and repossessed certain collaterals amounting
to a total of BD 6,925 thousands from its customers. These repossessed collaterals are included in other assets. The
excess amount over carrying values amounting nil (2012: BD 6,000 thousands) is included in other income.
22 TOTAL COMPREHENSIVE INCOME
2013 2012
BD000 BD000
NET PROFIT FOR THE YEAR 12,372 10,308
Other comprehensive income:
Net changes in fair value 559 1,922
Changes in properties fair value 21,659 -
Exchange differences on investment in an associate 70 (571)
Other comprehensive income for the year 22,288 1,351
TOTAL COMPREHENSIVE INCOME FOR THE YEAR 34,660 11,659
Attributable to:
Owners of the Bank 34,660 11,623
Non-controlling interest - 36
34,660 11,659

23 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 made on commercial terms.
The significant balances with related parties at 31 December 2013 were as follows:
2013
Associates and Directors
joint and related Senior
ventures entities management Total
BD000 BD000 BD000 BD000
Assets:
Murabaha financing 30,190 27 38 30,255
Mudaraba financing 14,310 80 - 14,390
Ijarah Muntahia Bittamleek - 1,983 227 2,210
Musharaka financing 1,405 - - 1,405
Other assets 1,346 27 7 1,380
Liabilities and equity of investment
accountholders:
Wakala payables to non-banks 2,222 1,564 547 4,333
Customers' current accounts 2,202 1,075 25 3,302
Equity of investment accountholders - 716 106 822
Other liabilities 322 443 2 767
Contingent liabilities 1,647 - - 1,647

2012

BD000 BD000 BD000 BD000
Assets:
Murabaha financing 30,198 13 70 30,281
Mudaraba financing 14,214 100 - 14,314
Ijarah Muntahia Bittamleek - 2,310 - 2,310
Musharaka financing 2,061 - - 2,061
Other assets 822 4 - 826
Liabilities and equity of investment

accountholders:
Wakala payables to non-banks 2,459 926 230 3,615
Customers' current accounts 5,145 154 10 5,309
Equity of investment accountholders 1,866 110 10 1,986
Other liabilities - 325 - 325
Commitments 9,425 - - 9,425
Contingent liabilities 4,273 - - 4,273

23 RELATED PARTY TRANSACTIONS (continued)

The income and expenses in respect of related parties included in the consolidated financial statements are as follows:
2013
BD000 BD000 BD000 BD000
Income:
Income from financing contracts 4,702 269 3 4,974
Expenses:
Profit on Wakala payables to non-banks 60 44 14 118
Share of profits on equity of investment
account holders - 1 - 1
2012
BD000 BD000 BD000 BD000
Income:
Income from financing contracts 2,311 7 8 2,326
Expenses:
Profit on Wakala payables to non-banks 66 33 5 104
Share of profits on equity of investment
account holders 2 1 - 3
As of 31 December 2013, Ijarah Muntahia Bittamleek included nil (2012: BD 2,310 thousands) of facilities provided to
directors and their related entities which are past due and on which profit is not being recognised.
Directors remuneration for 2013 amounted to BD 365 thousands (2012: BD 100 thousands).
Compensation of key management personnel, consisting solely of short-term benefits, for the year was BD 1,326
thousands (2012: BD 1,161 thousands).
24 CONTINGENT LIABILITIES AND COMMITMENTS
2013 2012
BD000 BD000
Contingent liabilities on behalf of customers
Guarantees 6,881 9,744
Letters of credit 70 814
Acceptances 260 275
7,211 10,833
Irrevocable unutilised commitments
Unutilised financing commitments 4,703 20,396
Unutilised non-funded commitments 6,463 6,219
Commitments towards development cost 2,799 -
Unutilised capital commitments - 1,391
13,965 28,006
21,176 38,839

24 CONTINGENT LIABILITIES AND COMMITMENTS (continued)

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 - Bank 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:
2013 2012
BD000 BD000
Within 1 year 659 714
After one year but not more than five years 472 915
1,131 1,629
25 RISK MANAGEMENT
25.1 Introduction
Risk is inherent in the Groups 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 Groups
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 Groups 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.
Sharia Supervisory Board
The Groups Sharia Supervisory Board is entrusted with the responsibility to ensure the Groups adherence to Sharia
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 Groups
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 Groups 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.

25 RISK MANAGEMENT (continued)

25.1 Introduction (continued)
Board Audit Committee
The Audit Committee is appointed by the Board of Directors who are non-executive directors of the Group. The Board
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 relating these to the Groups capital, and the methods for monitoring compliance with laws,
regulations and supervisory and internal policies.
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 Groups 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 Groups 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.
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
the Chief Financial Officer and all other 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 Banks performance to developments affecting a particular industry or geographical location.
In order to avoid excessive concentrations of risk, the Groups policies and procedures include specific guidelines to focus
on maintaining a diversified portfolio. Identified concentrations of credit risks are controlled and managed accordingly.


25.2 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.
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 Gross
maximum maximum
exposure exposure
2013 2012
BD000 BD000
ASSETS
Balances with other banks 7,420 10,866
Murabaha receivables from banks 118,227 103,290
Corporate Sukuk 91,106 74,993
Murabaha and Mudaraba financing 203,691 171,308
Ijarah Muntahia Bittamleek 108,090 79,913
Musharaka financing 19,145 17,467
Other assets 13,852 18,586
Total 561,531 476,423
Contingent liabilities and commitments 22,307 40,468
Total credit risk exposure 583,838 516,891
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 installments over the agreed period.


25.2 Credit risk (continued)
Type of credit risk (continued)
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 installments are settled.
a) The credit quality of balances with banks and Murabaha receivables from banks subject to credit risk is as follows:
31 December 2013
Neither past due nor impaired Past due or

individually
'A' Rated 'B' Rated Unrated impaired Total
BD000 BD000 BD000 BD000 BD000
Balances with banks 6,182 199 1,039 - 7,420
Murabaha and Wakala receivables from banks 38,114 36,114 43,999 - 118,227
44,296 36,313 45,038 - 125,647
31 December 2012
Neither past due nor impaired Past due or

individually
'A' Rated 'B' Rated Unrated impaired Total
BD000 BD000 BD000 BD000 BD000
Balances with Banks 6,486 144 4,236 - 10,866
Murabaha and Wakala receivables from banks 30,670 33,135 39,485 - 103,290
37,156 33,279 43,721 - 114,156
The ratings referred to in the above tables are by one or more of the 4 international rating agencies (Standards & Poors,
Moodys, 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.


25.2 CREDIT RISK (continued)
b) The credit quality of Corporate Sukuk and financing facilities that are subject to credit risk, based on internal credit
ratings, is as follows:
31 December 2013
Neither past due nor impaired Past due

Not
Satisfactory Watch List Substandard impaired Impaired Total
BD000 BD000 BD000 BD000 BD000 BD000
Corporate Sukuk 91,106 - - - - 91,106
Murabaha and Mudaraba
financing 179,610 3,995 3,740 12,720 3,626 203,691
Ijarah Muntahia Bittamleek 92,724 2,683 1,041 10,717 925 108,090
Musharaka financing 10,675 74 - 8,306 90 19,145
Other assets 78 - 190 - 1,252 1,520
374,193 6,752 4,971 31,743 5,893 423,552
31 December 2012
Neither past due nor impaired Past due

Not
Satisfactory Watch List Substandard impaired Impaired Total
BD000 BD000 BD000 BD000 BD000 BD000
Corporate Sukuk 74,993 - - - - 74,993
Murabaha and Mudaraba
financing 151,926 1,284 1,801 8,517 7,780 171,308
Ijarah Muntahia Bittamleek 63,266 655 1,041 13,819 1,132 79,913
Musharaka financing 17,273 - - 100 94 17,467
Other assets 148 - 3,910 1 1,502 5,561
307,606 1,939 6,752 22,437 10,508 349,242
In addition to the above, the financing facilities provided to the Government of Bahrain and its related entities amount
to BD 60,550 thousands (2012: BD 64,841 thousands).
All internal risk ratings are tailored to the various categories and are derived in accordance with the Groups rating policy.
The attributable risk ratings are assessed and updated regularly.


25.2 CREDIT RISK (continued)
c) Past due but not impaired financing facilities are analysed as follows:
31 December 2013
0-30 days 31-90 days > 90 days Total

BD000 BD000 BD000 BD000
Murabaha and Mudaraba financing 916 978 10,826 12,720
Ijarah Muntahia Bittamleek 977 732 9,008 10,717
Musharaka financing 486 - 7,820 8,306
2,379 1,710 27,654 31,743
31 December 2012
0-30 days 31-90 days > 90 days Total

BD000 BD000 BD000 BD000
Murabaha and Mudaraba financing 1,298 1,196 6,023 8,517
Ijarah Muntahia Bittamleek 272 1,819 11,728 13,819
Musharaka financing - - 100 100
Other assets - 1 - 1
1,570 3,016 17,851 22,437
All the past due but not impaired financing facilities are covered by collateral of BD 112,955 thousands (2012: BD 36,579
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 Sharia-compliant netting
agreements, is limited to the amounts on the consolidated statement of financial position plus commitments to
customers disclosed in Note 24 except capital commitments.
During the year BD 14,416 thousands (2012: BD 23,725 thousands) of financing facilities were renegotiated. All
renegotiated facilities are performing and are fully secured.
At 31 December 2013, the amount of credit exposure in excess of 15% of the Banks regulatory capital to individual
counterparties was BD 9,993 thousands (2012: BD 5,453 thousands).
25.3 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 2013, legal suits amounting to BD 1,978 thousands (2012: BD 1,978 thousands) were pending against
the Group. Based on the opinion of the Groups legal counsel, the totalestimated liability arising from these cases is not
considered to be material to the Groups consolidated financial position as the Group also has filed counter cases against
these parties.

26 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 Groups 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. For quoted investments this is analysed with reference to the indices in with the investments are listed.
For unquoted investments, this is analysed by changing the key inputs used in the valuation assumptions.
Liabilities, Liabilities,
equity of equity of
investment investment
account Contingent account Contingent
holders and liabilities holders and liabilities
owners and owners and
Assets equity Commitments Assets equity Commitments
BD000 BD000 BD000 BD000 BD000 BD000
Geographic region
GCC 932,131 822,694 20,660 829,357 713,695 25,379
Arab World 8,582 126 - 7,610 124 -
Europe 47,098 4,123 - 38,135 14,242 -
Asia 97,318 15,133 1,647 63,134 6,083 15,089
North America 3,123 12 - 3,556 9 -
Others - 67 - 426 - -
1,088,252 842,155 22,307 942,218 734,153 40,468
Owners equity - 246,097 - - 208,065 -
1,088,252 1,088,252 22,307 942,218 942,218 40,468
Industry sector
Trading and manufacturing 73,735 28,465 5,264 58,398 44,242 17,255
Banks and financial
institutions 187,791 131,086 55 182,737 114,831 -
Real estate 347,882 114,614 8,623 257,335 86,932 8,679
Aviation 25,520 9,680 - 13,125 - -
Individuals 95,963 418,189 1,287 72,813 361,700 1,829
Government and public
sector 280,697 43,855 - 265,716 51,778 -
Others 76,664 96,266 7,078 92,094 74,670 12,705
1,088,252 842,155 22,307 942,218 734,153 40,468
Owners Equity - 246,097 - - 208,065 -
1,088,252 1,088,252 22,307 942,218 942,218 40,468

27 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 Groups 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.
27.1 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 Groups 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:
2013
10% increase 10% decrease
Effect on Effect on Effect on Effect on
net profit equity net profit equity
BD000 BD000 BD000 BD000
Quoted:
Bahrain - 305 - (305)
Saudi 602 - (602) -
Singapore - 340 (340) -
Frankfurt 304 - (304) -
Unquoted 10,315 992 (10,315) (992)
2012
10% increase 10% decrease
Effect on Effect on Effect on Effect on
net profit equity net profit equity
BD000 BD000 BD000 BD000
Quoted:
Bahrain - 248 (248) -
Saudi 376 - (376) -
Singapore 142 856 (142) (856)
Frankfurt 456 - (456) -
Unquoted 18,343 306 (18,343) (306)

27 MARKET RISK (continued)

27.2 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 Groups 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:
2013
Change in Effect on Change in Effect on
rate net profit rate net profit
% BD000 % BD000
US dollars 0.25 (271) (0.25) 271
Bahraini dinars 0.25 (78) (0.25) 78
2012
% BD000 % BD000
US dollars 0.25 (497) (0.25) 497
Bahraini dinars 0.25 (357) (0.25) 357
In addition to profit generating Islamic financing and investment products considered in arriving at the effect on net
profits, the other assets include assets-under-conversion amounting to BD 5,355 thousands (2012: BD 15,336 thousands)
which are interest bearing. The Group is in the process of converting these into Sharia compliant contracts. If all the
interest bearing assets were converted into Sharia complaint contracts on 1 January 2014, the change in profit rate by
0.25% would result in a profit or loss of BD 13 thousands (2012: BD 38 thousands).
The Group has entered into profit rate swaps for a notional amount of BD 15,080 thousands (2012: BD 15,080 thousands)
with a counterparty to minimise the impact of the fluctuations in the profit rates. The Group pays a fixed rate and
receives floating rates with reference to an index. The maturity of the contract is 1 to 5 years. The fair value adjustment is
included in other assets and is classified as level 2 in fair value hierarchy.

27 MARKET RISK (continued)

27.3 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 Groups Asset
Liability Committee to ensure positions are maintained within established limits.
Substantial portion of the Groups assets and liabilities are denominated in Bahrain dinars or US dollars. The Group had
the following significant net long positions in foreign currencies as of 31 December:
2013 2012
BD000 BD000
US dollars 4,763 -
Saudi riyals 34,419 39,918
The effect on income solely due to reasonably possible immediate and sustained changes in exchange rates is as follows:
2013
% BD000 % BD000
US dollars to Bahraini dinars 1 48 (1) (48)
Saudi riyals to Bahraini dinars 1 344 (1) (344)
2012
% BD000 % BD000
US dollars to Bahraini dinars 1 - (1) -
Saudi riyals to Bahraini dinars 1 399 (1) (399)

28 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 marketable securities. Liquidity position is monitored on an ongoing basis by the Groups
Asset Liability Committee.
The table below summarises the expected maturity profile of the Banks assets and liabilities as at 31 December 2013
and 2012:
31 December 2013
Up to 3 months 1 to 5 Over 5
3 months to 1 year years years Total
BD000 BD000 BD000 BD000 BD000
ASSETS
Cash and balances with banks and the CBB 76,122 6,970 3,005 - 86,097
CBB Sukuk - 18,770 84,167 - 102,937
Murabaha & Wakala receivables from banks 118,227 - - - 118,227

Corporate Sukuk - 12,964 52,473 25,669 91,106
Murabaha and Mudaraba financing 50,540 38,892 141,178 31,090 261,700
Ijarah Muntahia Bittamleek 11,078 2,759 55,831 40,963 110,631
Musharaka financing 7,968 7,821 2,201 1,155 19,145
Non-trading investments - - 125,923 - 125,923
Investment properties - - 77,736 - 77,736
Development properties - - 63,399 - 63,399
Investment in an associate - - 8,537 - 8,537
Other assets 19,526 2,009 1,279 - 22,814
283,461 90,185 615,729 98,877 1,088,252

ACCOUNTHOLDERS
Murabaha and Wakala payables to banks - 10,680 96,116 - 106,796

Wakala payables to non-banks - 58,436 525,929 - 584,365
Customers' current accounts 70,532 - - - 70,532
Term financing 291 900 22,446 - 23,637
Other liabilities 27,545 3,198 236 - 30,979
Equity of investment accountholders 7,754 5,169 12,923 - 25,846
106,122 78,383 657,650 - 842,155

28 LIQUIDITY RISK (continued)

31 December 2012
Up to 3 months 1 to 5 Over 5
3 months to 1 year years years Total
BD000 BD000 BD000 BD000 BD000
ASSETS
Cash and balances with banks and the CBB 57,733 4,255 4,855 - 66,843
CBB Sukuk 8,897 6,143 80,715 21,857 117,612
Murabaha & Wakala receivables from banks 103,290 - - - 103,290
Corporate Sukuk - 3,770 57,813 13,410 74,993
Murabaha and Mudaraba financing 54,767 47,397 89,922 35,023 227,109
Ijarah Muntahia Bittamleek 10,471 7,742 56,851 7,890 82,954
Musharaka financing 5,374 4,759 6,960 374 17,467
Non-trading investments - 11,034 193,168 - 204,202
Investment properties - - - 2,500 2,500
Investment in an associate - - 7,573 - 7,573
Other assets 12,169 8,371 9,451 7,684 37,675
252,701 93,471 507,308 88,738 942,218

ACCOUNTHOLDERS
Murabaha and Wakala payables to banks - 9,085 81,767 - 90,852
Wakala payables to non-banks - 175,126 346,803 - 521,929
Customers' current accounts 83,921 - - - 83,921
Other liabilities 7,306 11,226 197 446 19,175
Equity of investment accountholders 5,483 3,655 9,138 - 18,276
96,710 199,092 437,905 446 734,153

28 LIQUIDITY RISK (continued)

The table below summarises the maturity profile of the Groups financial liabilities at 31 December 2013 and 2012 based
on contractual undiscounted payment obligation:
31 December 2013
On Up to 3 months 1 to 5 Over 5
demand 3 months to 1 year years years Total
BD000 BD000 BD000 BD000 BD000 BD000

ACCOUNT HOLDERS COMMITMENTS AND
CONTINGENT LIABILITIES
Murabaha & Wakala payables to banks - 98,665 8,131 - - 106,796
Wakala payables to non-banks - 332,080 232,919 19,366 584,365
Customers' current accounts 70,532 - - - - 70,532
Equity of investment accountholders - 25,846 - - - 25,846
Term financing - 389 2,036 20,736 4,779 27,940
Unutilised commitments - 5,165 4,579 608 814 11,166
Commitments towards development cost - - 2,799 - - 2,799

Contingent liabilities 6,881 252 78 - - 7,211
Other financial liabilities - 8,246 4,333 3,304 - 15,883
Profit due on financing contracts - 1,334 4,069 1,108 - 6,511
77,413 471,977 258,944 45,122 5,593 859,049
31 December 2012
On Up to 3 months 1 to 5 Over 5
demand 3 months to 1 year years years Total
BD000 BD000 BD000 BD000 BD000 BD000

ACCOUNT HOLDERS COMMITMENTS AND
CONTINGENT LIABILITIES
Murabaha & Wakala payables to banks - 90,852 - - - 90,852
Wakala payables to non-banks - 275,126 232,463 14,340 - 521,929
Customers' current accounts 83,921 - - - - 83,921
Equity of investment accountholders - 18,276 - - - 18,276
Unutilised commitments 14,238 4,026 4,596 3,218 537 26,615
Unutilised capital commitments - - - 1,391 - 1,391
Contingent liabilities 9,923 649 - 261 - 10,833
Other financial liabilities - 5,180 6,587 196 - 11,963
Profit due on financing contracts - 1,331 4,608 953 - 6,892
108,082 395,440 248,254 20,359 537 772,672

29 SEGMENT INFORMATION
Primary segment information
For management purposes, the Group is organised into four major business segments:
Banking principally managing Sharia compliant profit sharing investment accounts, and offering
Sharia compliant financing contracts and other Sharia-compliant products. This segment
comprises corporate banking, retail banking and private banking and wealth management.
Treasury principally handling Sharia-compliant money market, trading and treasury services
including short-term commodity Murabaha.
Investments principally the Groups proprietary portfolio and serving clients with a range of investment
products, funds and alternative investments.
Capital manages the undeployed capital of the Group by investing it in high quality 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 arms length basis. Transfer charges are based on a pool rate
which approximates the cost of funds.
Segment information is disclosed as follows:
31 December 2013
Banking Treasury Investments Capital Total
BD000 BD000 BD000 BD000 BD000
Operating income 15,059 6,633 1,031 3,364 26,087
Segment result 9,591 5,825 (1,957) (1,087) 12,372
Other information
Segment assets 381,307 397,309 208,039 101,597 1,088,252
Segment liabilities, and equity 688,122 107,237 48,872 244,021 1,088,252
31 December 2012
Banking Treasury Investments Capital Total
BD000 BD000 BD000 BD000 BD000
Operating income 7,035 11,437 (2,418) 7,008 23,062
Segment result 826 10,627 (3,852) 2,707 10,308
Other information
Segment assets 348,043 361,628 171,287 61,260 942,218
Segment liabilities, and equity 629,981 90,966 2,547 218,724 942,218

29 SEGMENT INFORMATION (continued)

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.
30 FIDUCIARY ASSETS
Funds under management at the year-end amounted to BD 96,686 thousands (2012: BD 96,973 thousands). These assets
are held in a fiduciary capacity and are not included in the consolidated statement of financial position.
31 SHARIA SUPERVISORY BOARD
The Banks Sharia Supervisory Board consists of four Islamic scholars who review the Banks compliance with general
Sharia principles and specific fatwas, rulings and guidelines issued by the Banks Sharia 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 Sharia principles.
32 FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value of the Banks financial instruments are not significantly different from their carrying values as at
31 December 2013 and 2012.
33 EARNINGS AND EXPENSES PROHIBITED BY SHARIA
During the year, the Group received Sharia prohibited income totaling BD 130 thousands (2012: BD 236 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.
34 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 BD 215 thousands
(2012: BD 77 thousands) on account of charitable donations.
35 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 Group 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 2013 has been determined by the Sharia supervisory board as 4.1 fils (2012: 3.6 fils) per share.
36 CAPITAL ADEQUACY
The adequacy of the Groups capital is monitored using, primarily, the rules and ratios established by the Basel Committee
on Banking Supervision and adopted by the CBB. The primary objective of the Groups capital management is to ensure
that it complies with externally imposed capital requirements. The Group complied in full with all externally imposed
capital requirements during the years ended 31 December 2013 and 31 December 2012.
The risk assets ratio calculations, in accordance with the Basel II capital adequacy guidelines of the CBB are as follows:
2013 2012
BD000 BD000
Capital base (Tier 1) 187,565 145,974
Credit risk weighted exposures 828,766 662,977
Market risk weighted exposures 4,300 1,213
Operational risk weighted exposures 42,064 34,881
Total risk weighted exposure 875,130 699,071
Capital adequacy 21.4% 20.9%
Minimum requirement 12.0% 12.0%

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His Royal Highness His Majesty His Royal Highness

4 AL SALAM BANK - BAHRAIN

Vision and Mission 6

Fatwa and Sharia Supervisory Board 15

Executive Management T eam 17

Board of Directors Report to the Shareholders 22

Message from Chief Executive Officer 24

Management Review of Operations and Activities 26

Corporate Governance Report 2013 32

Risk Management and Compliance 47

Corporate Social Responsibility 50

Fatwa and Sharia Supervisory Board Report to the Shareholders 51

Independent Auditors Report to the Shareholders 54

The Consolidated Financial Statements 56

Notes to the Consolidated Financial Statements 60

AL SALAM BANK - BAHRAIN 5

To become a regional force in the Islamic financial services industry by providing

Become a one-stop-shop for Islamic financial services.

Dynamic - Diversified - Differentiated

6 AL SALAM BANK - BAHRAIN

Strong paid-up capital base;

AL SALAM BANK - BAHRAIN 7

2010 2011 2012 2013 2010 2011 2012 2013

2010 2011 2012 2013 2010 2011 2012 2013

8 AL SALAM BANK - BAHRAIN

This fort was at the centre of the Dilmun civilization.

AL SALAM BANK - BAHRAIN 9

H.H. Shaikha Hessa bint Khalifa bin Hamad Al Khalifa

Independent and non-executive

Mr. Hamad Tarek Alhomaizi

Independent and non-executive

Mr. Hamad Alhomaizi is a businessman with experience in a number of areas including

10 AL SALAM BANK - BAHRAIN

Mr. Hussein Mohammed Al Meeza

Independent and non-executive

Hussein Mohammed Al Meeza is considered one of the renowned personalities in the

Mr. Habib Ahmed Kassim

Independent and non-executive

AL SALAM BANK - BAHRAIN 11

Mr. Salman Saleh Al Mahmeed

Independent and non-executive

Mr. Essam bin Abdulkadir Al Muhaidib

Independent and non-executive

12 AL SALAM BANK - BAHRAIN

Mr. Fahad Sami Al Ebrahim

Independent and non-executive

Mr. Mohammed Omeir Bin Yussef Al Mehairi

Independent and non-executive

AL SALAM BANK - BAHRAIN 13

H. E. Mohamed Ali Rashid Alabbar

Independent and non-executive

Mr. Adnan Abdulla Al Bassam

Independent and non-executive

Mr. Yousif Abdulla Taqi

Director and Chief Executive Officer

Executive and non-independent

14 AL SALAM BANK - BAHRAIN

Dr. Hussain Hamid Hassan

Dr. Ali Mohuddin AlQurra Daghi