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Bahrain Association of Banks 1

Content
Chairmans Message Board Members CEOs Review Member Banks Summary of Activities Committees & Participants List of Events Media Briefings Financial Statements 5 7 9 10 11 11-12 13 14 15 - 27

Bahrain Association of Banks

H.H Shaikh Khalifa Bin Salman Al Khalifa


The Prime Minister

H.M King Hamad Bin Isa Al Khalifa


The King of The Kingdom of Bahrain

H.H Shaikh Salman Bin Hamad Al Khalifa


Crown Prince and Deputy Supreme Commander

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Bahrain Association of Banks

Chairmans Message
Dear Members: 2008 was in many respects a landmark and transformational year for us when the erstwhile Bankers Society became the Bahrain Association of Banks (BAB) and changed not just in name but also got a new structure, board, strategy, focus and financing. Upon my election as Chairman of the Board of Trustees in the second half of last year, one of our key challenges has been to substantially enhance the relevance and profile of BAB not just internally with its members but with our business partners, the Central Bank of Bahrain and the many other key players making us more externally focussed and business oriented. Our goal clearly is to meet the prime objective in our constitution which is to professionally represent the banking industry in Bahrain. To better serve our members the Association met a large number of CEOs to determine what their priorities are, revamped the committee structure to focus on key issues and produced a quarterly newsletter and new website to let you know what were doing. We have also been actively engaged with the Central Bank, and the Board has been having consultative meetings with the Governor and Executive Directors as we embark upon this new direction. We have also begun to pace up our activity level with BAB holding ten external events during the year, issuing 34 press releases and attending five events internationally and locally to promote Bahrains banking sector. Some of the highlights of the year included our Annual Gala Dinner with the Crown Prince, the Bahrain reception in Washington prior to the IMF / World Bank Meetings in October and a Networking event for a visiting delegation from Singapore prior to the WIBC. We plan to considerably augment these improvements through 2009 among which will be the recruitment of an expert in Statutory / Regulatory matters and taking over the setting of BHIBOR so that you recognise value for your subscription fee and sponsorship of our events. In closing, I would like to thank Shaikh Mohammed bin Essa Al Khalifa for joining BABs Board of Directors and also to express our gratitude to Dr. Farid Al Mulla for the years of service he put into the predecessor of the Association. We look forward to your contribution to the working of the Association and wish you a successful fiscal 2009. Yours sincerely, Mayank Malik Chairman

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Board Members

Mr. Mayank Malik Chairman


CEO Citibank

Sh. Mohd Bin Essa Al-Khalifa


Chief Executive of EDB

Mr. Saleh Hussain Deputy Chairman


Senior Consultant of Gulf Banking Consultants

Mr. Gary Long


COO of Investcorp

Mr. Adel Ellabban


CEO & Managing Director of Ahli United Bank

Mr. Mohammed Ebrahim Mohammed


CEO of Bahrain Islamic Bank

Mr. Abdulkareem Bucheery


CEO of BBK

Mr. Adnan Ahmed Yousif


President & CEO of Albaraka Banking Group

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Bahrain Association of Banks

CEOs Review

Dear Members; As I wrote in last years annual report, I see 2008 as a year of transformation for the Bankers Society. We plan to rebrand it with a new name Bahrain Association of Banks or BAB to bring it in line with international practices, work under the governance of the new Board of Trustees, create a new, fresh logo and website, produce a quarterly newsletter, provide a more wellrounded service to you and be very proactive in promoting the financial industry in Bahrain and internationally I believe that we accomplished those objectives and more. One of the more difficult challenges was putting the accounting policies and procedures into proper shape. We retained the services of KPMG-Fakhro to do all the accounting for the year including preparation of management reports for the quarterly board meetings. We will continue that through 2009 to provide a solid two years of credible accounting records. Financial highlights in 2008 were a surplus for the year of BD 142,344 that erased an accumulated deficit of BD 54,556 at the end of 2007 leaving a net surplus of BD 87,788. Prepayments of subscription fees were lower due to the extensive holidays in December, but by the end of March 2009 the Association had received BD 227,000 in subscriptions for a good start to the year with another BD 42,000 yet to be received. Other payables and accruals were lower from cleaning up the accounts and paying what the old Bankers Society owed. Staff costs were higher with the addition of a CEO, Events and PR Manager and another clerical staff member. In addition, two pre-existing staff were never registered with GOSI or covered by medical and life insurance. Advertising had a number of costs allocated to it that will be segregated in the future. Professional fees represented outstanding legal fees not paid in 2007 for work drafting the new constitution and EGA resolution. Accounting and audit fees were higher due to the reasons noted above. General and Administrative costs were reduced by BD 74,362. The financial affairs of the Association are now in proper shape, and all of us value your contribution and support as we move forward. Yours sincerely, Robert Ainey Chief Executive Officer

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Member Banks
Member Banks of The Bahrain Association of Banks -2008
Bank ABC Islamic Bank Addax Bank Ahli United Bank Arab Banking Corporation Al Baraka Banking Group Bsc Al Salam Bank Allied Banking Corporation American Express Bank Ltd. Arab Bank Plc (Retail) Arab Bank Plc (Wholesale) Arab Financial Services Arab Investment Co Arcapita Bank Askari Commercial Bank Ltd Awal Bank Bahrain Development Bank Bahrain International Bank Bahrain Islamic Bank Bahraini Saudi Bank Bank Al Habib Limited Bank Alfalah Limited Bank of Bahrain & Kuwait Bank of Tokyo Mitsubishi, UFJ Ltd. Bank Muscat International BMB Investment Bank BNP Paribas (Retail) BNP Paribas (Wholesale) Calyon Capital Investment Holding Co Capital Management House Capital Union Bank Ec Capivest Citi Islamic Investment Bank Citibank (Retail) Citibank (Wholesale) Deutsche Bank Elaf Bank Eskan Bank Finansbank As First Investment Bank First Leasing Bank Future Bank Gulf Finance House Bsc Gulf International Bank Habib Bank Ltd Hongkong And Shanghai Banking Corp. Ltd. Conventional Banks (Retail) Conventional Banks (Wholesale) Investment Business Firms Islamic Banks (Retail) Islamic Banks (Wholesale) Representative Offices (Rep) Specialised: Financing Companies Total Banks 10 Bahrain Association of Banks Bank Housing Bank for Trade & Finance HSBC Bank Middle East Limited ICICI Bank Ltd ING Bank International Banking Corporation Bsc International Investment Bank Bsc Investcorp Bank Investment Dar Bank Investors Bank Ec Ithmaar Bank JP Morgan Chase Bank Khaleeji Commercial Bank Korea Exchange Bank Kuwait Finance House Kuwait Turkish Participation Bank Inc Liquidity Management Centre Maybank Merrill Lynch International Bank Ltd Mizuho Corporate Bank Ltd. National Bank of Abu Dhabi National Bank of Bahrain National Bank of Kuwait (Retail) National Bank of Kuwait (Wholesale) National Bank of Pakistan National Finance House Nomura Investment Banking Reef Real Estate Finance Company Robeco Institution Asset Management BV Sakana Holistic Housing Solutions Saudi National Commercial Bank Securities & Investment Co Shamil Bank of Bahrain Standard Chartered Bank State Bank of India (Retail) State Bank of India (Wholesale) Sumitomo Mitsui Banking Corporation Taib Bank Bsc UBS Ag UBS Global Asset Management Unicorn Investment Bank United Bank Ltd United Gulf Bank Bsc Ec United International Bank Venture Capital Bank Woori Bank Yapi Ve Kredi Bankasi 19 44 1 5 14 6 3 92

Summary of Activities
Summary of general issues handled on behalf of banks during 2008
Security Measures Bank Charges Bank Holidays Cheque Clearing BHIBOR Business Continuity Plan

Consultation reviewed for CBB


Proposed Pre-funded Deposit Protection Scheme Cooperation & Exchange of Information with Overseas Authorities Developing a Capital Market Supervision Directorate Framework for Clearing, Settlement and Depository Developing a Framework for the Prohibition of Market Abuse and Manipulation Prohibition of Market Abuse & Manipulation Module

Committees & Participants


Consumer Banking Committee Bank Citibank Bank Muscat International BBK Standard Chartered Bank Future Bank National Bank of Bahrain HSBC Bank Al Ahli United Bank Banking Operations Committee Bank Al Salam Bank Bank Muscat International BBK Standard Chartered Bank Investcorp Bank BNP Paribas Future Bank National Bank of Bahrain BBK HSBC Bank Members Name Ahmed Sheikh Marco Wolters Ali Haqiqi Stefan Corera Stuart Marshall Fabien Ribette Abbas Fatemi Jassim Hammadi Jamal Al Sabbagh Hana Sarwani Title EVP COO COO Senior Manager - Central Operations CIO MD, Head of IT Regional Head of IT Assistant to CEO AGM - Credit Operations IT Operations Head of Support Services Members Name Ashish Bhugra Kumaran Pather Mohammed Zainalabedin B. Chandrasekar Shahram Razavi Subhodip Ghose Shakofa Asghar Abdulla Al-Raeesi Title Country Business Manager Head of Retail Retail Banking Division Regional Head, Consumer Banking Assistant to CEO Head of Marketing & Planning Head of Personal Financial Services DGCEO - Retail Banking

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Committees & Participants


Professional Development Committee Bank Ahli United Bank Bank Muscat International BBK Gulf International Bank Investcorp Bank BNP Paribas Robeco Oasis Capital Bank Statutory / Regulatory Committee Bank Gulf Banking Consultants Ahli United Bank Citibank Bank Muscat Intl BBK Gulf International Bank Investcorp Bank BNP Paribas National Bank of Bahrain Oasis Capital Bank Risk Management Committee Bank Ahli United Bank Bank Muscat International BBK Investcorp Bank BNP Paribas Al Salam Bank HSBC Bank Corporate Banking Committee Bank Ahli United Bank Bank Muscat International BBK Standard Chartered Bank Investcorp Bank BNP Paribas State Bank of India HSBC Bank Members Name Christopher Wilmot Karl Stumke Yaser Sabt Vivek Uberoi Jonathan Minor Eric Jesserand P. K. Gupta Dudley Leelananda Title Head of Treasury Wholesale Banking Director Corporate Banking Division Head, Orig. & Client Coverage MD, Head of Treasury & Investor Relations Head, Fixed Income Middle East Regional Head & CE Senior Manager Members Name Charles Brody Huw Evans C. V. Murthy Hassan Chehime Yves Jean Noyalet Ahmed Sheikh Arun Fernandes Title Group Head Risk Risk Director Risk Management Dept MD, Head of Risk Management Head of Internal Audit EVP - COO Sr. Manager Credit & Risk Mgmt Members Name Saleh Hussain Sanjeev Baijal Jairaj Nalamutt El-Tahir Nimir Dr. Mukund Ballal Georges Djandji Stephanie Bess Erik Stroet Fatima Budhaish Sudha Tilani Title Senior Consultants DGCEO, Finance, Operations & IT Compliance Officer Group Head of Compliance & AML Compliance Officer & MLRO Sr. VP & Head of Compliance MD, Head of Compliance Regional COO Sr. Manager, Head-Credit Review Principal Compliance & MLRO Members Name Neville Pearsall Mohammed Bushehri Ravi Mohanty Hassan Abdul Ghani Mufeed Rajab Abdelhakim Doukkali Douglas Hansen-Luke Malcolm Harris Title Group Head HR & Development Head of Human Capital Manager, Train& Dev. MD Operations & Admin Principal, Head of Admin Regional HR Director CEO ME Partner HR & TM

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List of Events
Smart Card Presentation 2nd GCC Regulators Summit Middle East Association, London - Bahrain 2008 Seminar on Integrated Risk and Capital Management 5th World Islamic Funds and Capital Market Conference Global Finance & Corporate Governance UN Sanctions Delegation Annual General Assembly Annual BAB Gala Dinner University of Bahrain - Fifth Mentoring Program Middle East Association, London - City & GCC Conference World Islamic Banking Conference, London Personal Assistants Luncheon IMF/World Bank, Washington 16th World Islamic Banking Conference Vision 2030 Bahrain & Singapore Networking Event Bahrain Bankers - UK Inward Visit

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Media Briefings

Mayank Briefing the Press

Robert Discussing Our Mission

Singaporean Delegates with Reporters

Briefing and Q&A for Bahrains Media

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Financial Statements

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Financial Statements
31 December 2008 Registration number : 36/6/M (According to the provisions of the Law of Social and Cultural Societies and Clubs, Associations carrying on Youth and Sports activities and Private Organisations promulgated by Legislative Decree no. 21 of 1989) Board of Trustees Chairman Office Principal bankers Auditors : : : : Mr Mayank Malik PO Box 1034, Telephone 1782 3000 Fax 1782 0700 Bank of Bahrain and Kuwait National Bank of Bahrain KPMG

Financial Statements for the year ended 31 December 2008

Contents Independent auditors report to the members Financial statements Balance sheet Statement of income and expenses Statement of cash flows Notes to the 2008 Financial Statements

Page 17

18 19 20 21-27

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Auditors Report
Independent Auditors Report To The Members of The Bankers Society of Bahrain Manama, Kingdom of Bahrain Report on the financial statements We have audited the accompanying financial statements of The Bankers Society of Bahrain (the Society), which comprise the balance sheet as at 31 December 2008, and the statement of income and expenses, statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes. On the financial statements for the year ended 31 December 2007, we did not express an opinion as we were unable to satisfy ourselves as to the fairness of the financial statements due to the inadequacy of the societys internal controls relevant to the preparation and fair presentation of the financial statements. Responsibility of the Board of trustees for the financial statements The Board of trustees of the Society are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards. This responsibility includes designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of financial statements that are free from material misstatements, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditors responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with relevant ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal controls relevant to the entitys preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entitys internal control. An audit also includes evaluating the appropriateness of accounting principles used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of the Society as at 31 December 2008, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards. 4 March 2009

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Balance Sheet
as at 31 December 2008 Bahraini Dinars Note Assets Furniture and equipment Total non-current assets Receivables Cash and cash equivalents Total current assets Total assets Members fund and liabilities Accumulated fund / (deficiency) Provision for employees benefits Total non-current liabilities Accrued expenses and advances Total current liabilities Total liabilities Total member fund and liabilities 7 5 6 87,789 2,635 2,635 14,587 14,587 17,222 105,011 (54,556) 179,522 179,522 179,522 124,966 4 18,209 18,209 5,297 81,505 86,802 105,011 4,157 120,809 124,966 124,966 2008 2007

Mayank Malik Chairman

Robert Ainey Chief Executive Officer

The Board of trustees approved the financial statements consisting of pages 18 to 27 on 27 April 2009

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Statement of Income and Expenses


for the year ended 31 December 2008 Bahraini Dinars Note Income Staff cost General and administrative expenses Functions and event expenses Total expenses Net surplus/(deficit) for the year 8 9 10 11 2008 358,499 102,895 65,658 47,601 216,154 142,345 2007 190,847 58,890 06,036 50,081 215,007 (24,160)

Mayank Malik Chairman

Robert Ainey Chief Executive Officer

The Board of trustees approved the financial statements consisting of pages 18 to 27 on 27 April 2009

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Statement of Cash Flows


for the year ended 31 December 2008 Bahraini Dinars Note Operating activities Receipts from subscriptions Payments for operating cost and overheads Cash flows from operating activities Investing activities Acquisition of furniture and equipment Cash flows from investing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at 1 January Cash and cash equivalents at 31 December 4 (20,169) (20,169) (39,304) 120,809 81,505 116,412 4,397 120,809 215,599 (234,734) (19,135) 327,347 (210,935) 116,412 2008 2007

The financial statements consist of pages 18 to 27.

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Notes to the 2008 Financial Statements


for the year ended 31 December 2008 Bahraini Dinars 1 Status and Operations The Bankers Society of Bahrain was established in the Kingdom of Bahrain in 1979 and re-registered on 27 January 1991 under registration no. 36/6/M according to the provisions of the Law of Social and Cultural Societies and Clubs, Associations carrying on Youth and Sports activities and Private Organisations promulgated by Legislative Decree no 21 of 1989. The principal activity of the Society is to promote the interests of the Bahrain banking community in Bahrain and abroad. 2 Basis of Preparation a) Statement of compliance The financial statements have been prepared in accordance with the International Financial Reporting Standards. b) Basis of measurement The financial statements are drawn up from the accounting records of the Society and are prepared under the historical cost convention. The accounting policies of the Society have been consistently applied and are consistent with those used in the previous year. c) Functional and presentation currency Items included in the financial statements of the Society are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The financial statements are presented in Bahraini dinars, which is the Societys functional and presentation currency.

3 Significant Accounting Policies a) Furniture and equipment (i) Owned assets Items of furniture and equipment are stated at cost less accumulated depreciation and any impairment losses. Cost includes all costs directly attributable to bringing the assets to their present location and condition for their intended use. An assets carrying amount is written down immediately to its recoverable amount if the assets carrying amount is greater than its estimated recoverable amount. The residual value and useful life are reviewed at each financial year end and adjusted where appropriate. (ii) Subsequent measurement Expenditure incurred to replace a component of an item of furniture and equipment that are accounted for separately, is capitalised. Other subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the item of furniture and equipment. All other expenditure is recognised in the income and expense statement as an expense as incurred. (iii) Depreciation Depreciation is provided on a straight-line method at annual rates which are intended to write off the cost of the assets over their estimated useful lives of 4 years. b) Receivables Receivables are carried at the invoiced amount, being the fair value, less impairment allowances. c) Cash and cash equivalents Cash and cash equivalents represent cash on hand and bank balances

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Notes to the 2008 Financial Statements


Bahraini Dinars 3 Significant accounting policies (continued) d) Impairment The carrying amounts of the Societys assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the assets recoverable amount is estimated. An impairment loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount. All impairment losses are recognised in the income statement. e) Foreign currency transactions Transactions in foreign currencies are translated to Bahraini dinars at the foreign exchange rates ruling at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated into Bahraini dinars at the foreign exchange rate ruling at that date. All foreign exchange differences arising on conversion and translation are recognised in the income statement. f) Provision A provision is recognised in the balance sheet when the Society has a legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. g Employee benefits Pensions and other social benefits for Bahraini employees are covered by the General Organisation for Social Insurance scheme to which employees and employers contribute monthly on a fixed-percentage-of-salaries basis. The entitys contribution to this scheme, which represents a defined contribution scheme under International Accounting Standard 19 Employee Benefits, is expensed as incurred. Expatriate employees are entitled to leaving indemnities payable under the Bahrain Labour Law for the Private Sector of 1976, based on length of service and final remuneration. Provision for this unfunded commitment which represents a defined benefit plan under International Accounting Standard 19 Employee Benefits, has been made by calculating the notional liability had all employees left at the balance sheet date. h) Income Membership subscriptions are accounted for on an accrual basis and subscription received in advance are included in current liabilities. Income from event sponsorship is accounted for on an accrual basis when the event is conducted. i) Operating lease Operating lease is recognised in the statement of income and expenses on a straight-line basis over the term of the lease.

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Notes to the 2008 Financial Statements


Bahraini Dinars 4 Furnitures and Equipment Cost At 1 January Additions Impairment At 31 December Depreciation At 1 January Charge for the year At 31 December Net carrying value at 31 December 5 Accumulated Fund/(Deficiency) At 1 January Net surplus/(deficit) for the year (page 18) At 31 December 6 Provision for Employees Benefits At 1 January Charge for the year Indemnities paid during the year At 31 December 7 Accrued Expenses and Advances Accrued expenses Subscriptions received in advance 39,590 1,960 41,550 18,209 2008 (54,556) 142,345 87,789 2008 2,635 2,635 2008 9,587 5,000 14,587 8 Income Membership subscription Event income Donations Other 2008 272,875 65,519 20,000 105 358,499 39,590 39,590 2007 (30,396) (24,160) (54,556) 2007 24,257 1,672 (25,929) 2007 30,522 149,000 179,522 2007 67,178 103,380 20,000 289 190,847 39,590 20,169 59,759 41,545 (1,955) 39,590 2008 2007

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Notes to the 2008 Financial Statements


Bahraini Dinars 9 Staff Cost Salaries Bonus Training Social insurance Leaving indemnity Others 2008 77,474 5,610 4,345 8,321 2,635 4,510 102,895 10 General and Administrative Expenses Advertising Repairs and maintenance Utilities Depreciation Office expenses Magazines and publications Business travel expenses Office rent Professional fees Miscellaneous expenses Impairment of furniture and equipment Other expenses 2008 12,247 816 5,714 1,960 4,801 7,580 3,600 24,247 4,693 65,658 2007 39,740 6,225 2,552 1,672 8,701 58,890 2007 1,495 1,015 6,809 4,114 3,957 10,688 1,955 76,003 106,036

Other expenses in 2007 relate to unauthorised expenses that were not part of the operations of the society due to the inadequacy of the societys internal controls. The board of trustees have concluded its review and satisfied itself as to the completeness of the payments and were charged off in the year in which they arose. 11 Functions and Event Expenses These represents expenses incurred for conducting various functions and events in Bahrain and abroad by the Society during the year. 12 Critical Accounting Estimates and Judgement In Applying Accounting Policies The Society makes estimates and assumptions that affect the reporting amounts of assets and liabilities within the next financial year. Estimates and judgements are continually evaluated and are based on among other factors historical experience and other factors, including expectation of the future events that are believed to be reasonable under the circumstances. Impairment of receivables The Society reviews the carrying amounts of the receivables at each reporting date to determine whether the receivables have been impaired. The Society identifies the receivables, which have been impaired based on among other factors, the age of the receivables, the receivables recoverable amount is estimated based on past experience and estimated cash flow.

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Notes to the 2008 Financial Statements


Bahraini Dinars Useful life and residual value of furniture and equipment The Society reviews the useful life and residual value of the furniture and equipment at each reporting date to determine whether an adjustment to the useful life and residual value is required. The useful life and residual value is estimated based on the similar assets of the industry, and future economic benefit expectations of the management. 13 Financial Instruments and Risk Management The table below sets out the Societys classification of each class of financial assets and financial liabilities: 31 December 2008 Assets Receivables Cash and bank balances Loans and receivables 5,297 81,505 86,802 Liabilities Accrued expenses and advances 31 December 2007 Assets Receivables Cash and bank balances 4,157 120,809 124,966 Liabilities Accrued expenses and advances 179,522 179,522 179,522 179,522 4,157 120,809 124,966 14,587 14,587 14,587 14,587 Others at amortised cost Total carrying amount 5,297 81,505 86,802

The Society has exposure to the following risks from its use of financial instruments: Credit risk Liquidity risk Market risk

This note presents information about the Societys exposure to each of the above risks, the Societys objectives, policies and processes for measuring and managing risk. The note also presents certain quantitative disclosures in addition to the disclosures throughout the financial statements. The Board of trustees has overall responsibility for the establishment and oversight of the Societys risk management framework. The Societys risk management policies are established to identify and analyse the risks faced by the Society, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Societys activities. The accounting policies for financial assets and liabilities are described in note 3.

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Notes to the 2008 Financial Statements


Bahraini Dinars Credit risk Credit risk is the risk that one party to the financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The Society is exposed to credit risk on its receivables and bank balances. a) Credit risk on receivable is minimised as these are mainly membership subscription fees receivable from the Societys members. Appropriate procedures for follow-up and recovery are in place to monitor credit risk. b) The Society limits its exposure to credit risk on bank balances by maintaining balances with banks having high credit ratings. Given these high credit ratings, the Society does not expect any bank to fail to meet its obligations. The maximum exposure to credit risk at the reporting date was: 2008 Subscription and sponsorship fees receivable Bank balances At 31 December 2,900 81,505 84,405 2007 4,000 120,683 124,683

The Society is not exposed to significant credit risk based on geographic area as the Society has no exposure outside Bahrain. Liquidity risk Liquidity risk is the risk that the Society will encounter difficulty in raising funds to meet commitments associated with financial instruments. The Societys approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Societys reputation. The Society does not have any significant financial liabilities other than accrued expenses and advances. Market risk Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates will affect the Societys income or the value of its holdings of financial instruments. (a) Currency risk Currency risk is the risk that the value of a financial instrument will fluctuate due to a change in foreign exchange rates. The Society does not have any significant currency risk as majority of the transactions are in Bahraini dinars. (b) Interest rate risk Interest rate risk is the risk that the Societys earnings will be affected as a result of fluctuations in the value of financial instruments due to changes in market interest rates. The Society is not exposed to significant interest rate risk.

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Notes to the 2008 Financial Statements


Bahraini Dinars Fair values of financial instruments Fair value is the amount for which an asset could be exchanged or a liability settled, between knowledgeable willing parties in an arms length transaction. Differences can therefore arise between book values under the historical cost method and fair value estimates. Underlying the definition of fair value is a presumption that an enterprise is a going concern without any intention or need to liquidate, curtail materially the scale of its operations or undertake a transaction on adverse terms. The fair values of the financial assets and liabilities of the Society are not materially different from their carrying values. 14 New Standards and Interpretation Issued but not yet applied During the year, the following new/amended IFRSs and interpretations relevant to the activities of the Society have been issued which are not effective for early adoption by the Society. IAS 1 Presentation of Financial Statements (annual periods commencing on or after 1 January 2009). The adoption of these standards and interpretations are not expected to have material impact on the financial statements.

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