Annual Report - Investbank · 6ccjVa GZedgi 9 Consolidated Statement Of Financial Position December 31, Note 2009 2008 ASSETS JD JD Cash and balances at the Central Bank 4 50,985,465

1

Notes to the Consolidated Financial Statements 2009Annual Report

Twenty Seventh

2

Notes to the Consolidated Financial Statements

His Majesty King Abdullah the Second Bin Al Hussien


His Royal Highness Crown Prince Hussien Bin Abdallah

4

Notes to the Consolidated Financial StatementsAqaba

5

Notes to the Consolidated Financial StatementsPetra

6

Notes to the Consolidated Financial StatementsAl Salt

7

Table of Contents

Page

Independent Auditor’s Report 8

Consolidated Statement of Financial Position 9

Consolidated Statement of Income 10

Consolidated Statement of Comprehensive Income 11

Consolidated Statement of Changes in Owners’ Equity 12

Consolidated Statement of Cash Flows 13-58

8

Independent Auditor’s Report

AM/ 31664

To the Shareholders of Invest BankAmman – The Hashemite Kingdom of Jordan

We have audited the accompanying consolidated financial statements of Invest Bank (a public shareholding company), which comprise of the consolidated statement of financial position as of December 31, 2009, and the consolidated statement of income, consolidated statement of comprehensive income, consolidated statement of changes in owners> equity and consolidated statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes.

Management’s Responsibility for the consolidated Financial StatementsManagement is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditor’s ResponsibilityOur responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Bank>s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Bank>s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OpinionIn our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of Invest Bank as of December 31, 2009, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards. We recommend that the General Assembly of Shareholders approve these consolidated financial statements.

Report on Other Legal and Regulatory RequirementsThe Bank maintains proper accounting records and the accompanying consolidated financial statements are in agreement therewith and with the financial data presented in the Board of Directors’ report.

The accompanying consolidated financial statements are a translation of the statutory financial statements which are in the Arabic language to which reference should be made.

Amman – JordanJanuary 27, 2010

Deloitte & Touche (M.E.) – Jordan

9

Consolidated Statement Of Financial Position

December 31,

Note 2009 2008

ASSETS JD JD

Cash and balances at the Central Bank 4 50,985,465 94,357,848

Balances at banks and financial institutions 5 83,671,126 120,793,768

Deposits at banks and financial institutions 6 3,898,842 2,455,034

Trading financial assets 7 898,016 8,541,216

Financial derivatives 36 19,418 -

Direct credit facilities - net 8 299,598,411 303,259,965

Available-for-sale financial assets 9 195,214,678 125,908,510

Fixed assets - net 10 16,654,238 16,881,279

Intangible assets 11 1,566,129 780,181

Deferred tax assets 18 768,371 1,560,372

Other assets 12 13,440,342 8,744,090

TOTAL ASSETS 666,715,036 683,282,263

LIABILITIES AND OWNERS’ EQUITY

LIABILITIES

Banks and financial institutions deposits 13 41,815,473 68,813,264

Customers deposits 14 477,606,270 447,972,925

Cash margins 15 34,820,636 33,741,932

Borrowed funds 16 5,797,036 31,587,210

Financial derivatives 36 - 825

Sundry provisions 17 2,224,635 2,434,336

Provision for income tax 18 3,484,443 4,038,294

Deferred tax liabilities 18 843,185 1,070,074

Other liabilities 19 6,873,996 7,870,605

TOTAL LIABILITIES 573,465,674 597,529,465

OWNERS’ EQUITY (Shareholders)

Paid-up capital 20 70,000,000 61,325,000

Statutory reserve 21 11,716,629 10,621,559

General banking risks reserve 21 2,859,887 3,071,182

Cumulative change in fair value 22 352,035 93,756

Retained earnings 23 8,320,811 10,641,301

TOTAL OWNERS’ EQUITY (Shareholders) 93,249,362 85,752,798

TOTAL LIABILITIES AND OWNERS’

(SHAREHOLDERS’) EQUITY 666,715,036 683,282,263

The Accompanying Notes From (1) To (48) Constitute An Integral Part of These Consolidated Financial Statements and Should be Read with t hem. Chairman of Board of Directors General Manger

10

Consolidated Statement Of Income

For the Year EndedDecember 31,

Note 2009 2008

JD JD

Interest income 25 37,546,049 40,964,276

Less: Interest expense 26 22,649,327 28,087,554

Net Interest Income 14,896,722 12,876,722

Commission income - net 27 5,818,833 6,928,329

Net Interest and Commission Income 20,715,555 19,805,051

Foreign currency exchange income 28 1,459,987 1,552,638

(Loss) from trading financial assets 29 (700,806) (2,682,834)

Income from available-for-sale financial assets 30 1,133,582 623,984

Other income 31 1,312,513 2,315,079

Gross Income 23,920,831 21,613,918

Employees expenses 32 4,293,510 3,649,718

Depreciation and amortization 10 & 11 1,015,940 751,023

Other expenses 33 3,249,553 2,573,478

Impairment loss on available-for-sale financial assets 2,497,818 800,000

Provision for impairment in direct credit facilities 8 1,974,633 2,282,792

Other sundry provisions 17 260,240 3,691

Total Expenses 13,291,694 10,060,702

Net Income Before Taxes 10,629,137 11,553,216

Less: Income tax 18 3,390,852 2,678,170

Income for the Year 7,238,285 8,875,046

Earnings per Share (shareholders)

Basic and diluted 34 0.103 0.127

The Accompanying Notes From (1) to (48) Constitute an Integral Part of these Consolidated Financial Statements and Should be Read with them.

Chairman of Board of Directors General Manger

11

Consolidated Statement of Comprehensive Income

For the Year Ended

December 31,

2009 2008

JD JD

Income for the Year 7,238,285 8,875,046

Comprehensive income items:

Change in fair value - available-for-sale financial assets net of tax 258,279 (2,352,192)

Total Comprehensive income for the Year 7,496,564 6,522,854

The Accompanying Notes From (1) to (48) Constitute an Integral Part of These Consolidated Financial Statements and Should be Read with them.

12

Consolidated Statement of Changes in Owners’ Equity

Res

erve

s

Gen

eral

Cum

ulat

ive

Pai

d-up

Ban

king

C

hang

e in

Fai

r R

etai

ned

Cap

ital

Stat

utor

y V

olun

tary

R

isks

Val

ue

Earn

ings

Tot

al

For

the

Year

End

ed D

ecem

ber

31, 2

009

JDJD

JD

JD

JD

JD

JD

Bal

ance

- b

egin

ning

of t

he y

ear

61,3

25,0

00

10,6

21,5

59

-

3,07

1,18

2 93

,756

10

,641

,301

8

5,75

2,79

8

Cha

nge

in fa

ir v

alue

-

-

-

-

(2

,239

,539

) -

(2

,239

,539

)

Impa

irm

ent l

oss

on a

vaila

ble-

for-

sal

e fin

anci

al a

sset

s,

tra

nsfe

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to th

e st

atem

ent o

f inc

ome

-

-

-

-

2,4

97,8

18

-

2,4

97,8

18

Inco

me

for

the

year

-

-

-

-

-

7,2

38,2

85

7,2

38,2

85

T

otal

Com

preh

ensi

ve In

com

e fo

r th

e Ye

ar 0

0

0

0

2

58,2

79

7,2

38,2

85

7,4

96,5

64

Tran

sfer

red

to p

aid-

up c

apita

l (N

ote

24)

8,6

75,0

00

-

-

-

-

(8,6

75,0

00)

0.0

0

Tran

sfer

red

to /

(fro

m) r

eser

ves

-

1,0

95,0

70

-

(211

,295

) -

(8

83,7

75)

0.0

0

B

alan

ce -

End

of t

he Y

ear

70,

000,

000

11,

716,

629

0

2,8

59,8

87

352

,035

8

,320

,811

9

3,24

9,36

2

For

the

Year

End

ed D

ecem

ber

31 2

008

Bal

ance

- b

egin

ning

of t

he y

ear

55,

000,

000

9,4

29,3

62

300

,000

2

,706

,701

2

,445

,948

9

,347

,933

7

9,22

9,94

4

Cha

nge

in fa

ir v

alue

-

-

-

-

(3

,152

,192

) -

(3

,152

,192

)

Impa

irm

ent l

oss

on a

vaila

ble-

for-

sal

e fin

anci

al a

sset

s,

tra

nsfe

rred

to th

e st

atem

ent o

f inc

ome

-

-

-

-

800

,000

-

8

00,0

00

Inco

me

for

the

year

-

-

-

-

-

8

,875

,046

8

,875

,046

T

otal

Com

preh

ensi

ve In

com

e fo

r th

e Ye

ar 0

0

0

0

(2

,352

,192

) 8

,875

,046

6

,522

,854

Tran

sfer

red

to p

aid-

up c

apita

l (N

ote

24)

6,3

25,0

00

-

(300

,000

) -

-

(6

,025

,000

) -

Tran

sfer

red

to r

eser

ves

-

1,1

92,1

97

-

364

,481

-

(1

,556

,678

) -

B

alan

ce -

End

of t

he Y

ear

61,

325,

000

10,

621,

559

0

3,0

71,1

82

93,

756

10,

641,

301

85,

752,

798

- In

clud

ed in

inco

me

for

the

year

and

the

reta

ined

ear

ning

s is

an

amou

nt o

f JD

768

,371

as

of D

ecem

ber

31, 2

009

rest

rict

ed b

y th

e C

entr

al B

ank

of J

orda

n ag

ains

t de

ferr

ed ta

x as

sets

(JD

1,

560,

372

as o

f Dec

embe

r 31

, 200

8).

- U

se o

f the

gen

eral

ban

king

ris

ks r

eser

ve is

res

tric

ted

and

requ

ires

the

prio

r ap

prov

al o

f the

Cen

tral

Ban

k of

Jor

dan.

The

acco

mpa

nyin

g no

tes

from

(1) t

o (4

8) c

onst

itute

an

inte

gral

par

t of t

hese

con

solid

ated

fina

ncia

l sta

tem

ents

and

sho

uld

be r

ead

with

them

.

13

Consolidated Statement of Cash Flows

Note 2009 2008

CASH FLOWS FROM OPERATING ACTIVITIES: JD JD

Net income before taxes 10,629,137 11,553,216

Adjustments:

Depreciation and amortization 1,015,940 751,023

Impairment loss on available-for-sale financial assets 2,497,818 800,000

Provision for impairment in credit facilities 1,974,633 2,282,792

Provision for employees end-of-service indemnity 407 3,691

Provision for lawsuits against the Bank 23,891 -

Provision for contingent liabilities 235,942 -

(Gains) from sale of fixed assets - (8,913)

Unrealized loss from evaluation of trading financial assets 357,497 3,369,129

Effect of exchange rate fluctuations on cash and cash equivalents (262,064) (387,827)

Total 16,473,201 18,363,111

Changes in Assets and Liabilities:

Decrease in deposit at central bank due after 3 months 1,000,000 2,500,000

(Increase) in deposits at banks and financial institutions due after 3 months

(1,443,808) (2,415,673)

Decrease in trading financial assets 7,285,703 8,254,538

(Increase) decrease in financial derivatives (20,243) 825

Decrease (increase) in direct credit facilities 1,686,921 (17,910,282)

(Increase) decrease in other assets (4,696,252) 1,132,855

(Decrease) increase in banks and financial institutions deposits due after 3 months

(8,203,749) 1,970,452

Increase in customers deposits 29,633,345 36,041,904

Increase in cash margins 1,078,704 3,636,152

(Decrease) in other liabilities (996,609) (1,670,278)

Net Cash Flows from Operating Activities before Tax and Employees Indemnities Paid

41,797,213 49,903,604

Employees indemnities paid - (7,779)

Income tax paid (4,004,609) (1,202,242)

Net Cash from Operating Activities 37,792,604 48,693,583

CASH FLOWS FROM INVESTING ACTIVITIES:

(Decrease) increase in available-for-sale financial assets (71,390,630) 12,916,960

Proceeds from sale of fixed assets - 9,002

(Purchases) of fixed assets and payment on purchases of fixed assets and projects

under construction (680,911) (9,485,034)

(Purchases) of intangible assets (893,936) (555,203)

Net Cash Flows (used in) from Investing Activities (72,965,477) 2,885,725

CASH FLOWS FROM FINANCING ACTIVITIES:

(Decrease) increase in borrowed funds (25,790,174) 6,590,884

Net Cash Flows (used in) from Financing Activities (25,790,174) 6,590,884

Effect of exchange rate fluctuations on cash and cash equivalents 262,064 387,827

Net (Decrease) Increase in Cash and Cash Equivalents (60,700,983) 58,558,019

Cash and cash equivalents - beginning of the year 153,572,368 95,014,349

Cash and Cash Equivalents - End of the Year 35 92,871,385 153,572,368

The accompanying notes from (1) to (48) constitute an integral part of these consolidated financial statements and should be read with them.

14


INVESTBANK(A PUBLIC SHAREHOLDING COMPANY)

AMMAN – JORDANNOTES TO THE Consolidated FINANCIAL STATEMENTS

1. General Invest Bank was established as a Jordanian public shareholding company under number (173) during the year 1982 in accordance with the Companies Law No. 12 for the year 1964. Moreover, the Bank’s headquarters is in Amman, Issam Ajluni Street, Shmesani, Tel: 5665145, P.O. Box 950601, Amman – 11195 Jordan.

The Bank is engaged in banking and related financial operations through its headquarters, branches in the Hashemite Kingdom of Jordan totaling 8 branches, and the subsidiary companies.

Invest Bank is a public shareholding company listed in Amman Stock Exchange.

The consolidated financial statements have been approved by the Bank’s Board of Directors, in its meeting held on January 27, 2010, pending the approval of the General Assembly of Shareholders.

2. Significant Accounting PoliciesBasis of Presentation

- The accompanying consolidated financial statements of the Bank and its subsidiary companies are prepared in accordance with the standards issued by the International Accounting Standards Board (IASB), interpretations issued by the Committee of the IASB, prevailing local laws, and regulations of the Central Bank of Jordan.

- The consolidated financial statements are prepared under the historical cost convention except for financial assets/liabilities held for trading, financial assets available for sale, and financial derivatives stated at fair value on the date of the consolidated financial statements. Hedged assets and liabilities are also stated at fair value.

- The reporting currency of the consolidated financial statements is the Jordanian Dinar, which is also the functional currency of the Bank.

- The accounting policies for the current year are consistent with those used in the year ended December 31, 2008 except that the Bank has adopted the following new and revised standards:

- IFRS 7 ‘Financial instruments: Disclosures’ The IASB published amendments to IFRS 7 in March 2009, which became effective in 2009. The amendment requires enhanced disclosures about fair value measurements and liquidity risk. In particular, the amendment requires disclosure of fair value measurements by level of a fair value measurement hierarchy. The adoption of the amendment results in additional disclosures but does not have an impact on the consolidated financial position or the consolidated comprehensive income of the Bank.

- IFRS 8 – Operating Segments. This standard, which replaced International Accounting Standard No. 14 “segment reporting”, requires the adoption of the “management style in the presentation of internal reports” in the presentation of operating segments. This resulted in the presentation of additional operating segments. Moreover, these operating segments will be presented in a manner consistent with internal reports presented to decision makers. This standard has had no impact on the Bank’s consolidated results of operations or consolidated financial position.

- IAS 1 Presentation of Financial Statements – Revised. This standard segregates the changes in shareholders’ equity from changes in other equity. The statement of changes in equity shall include the details of transactions with shareholders while all the other changes in equity are shown in a single item separately (comprehensive income). This requires that all other changes (income and expenditures) be shown in the comprehensive income statement, and does not allow any of these items to be shown in the consolidated statement of changes in equity.

Basis of Consolidation- The consolidated financial statements include the financial statements of the Bank and the wholly owned subsidiary companies controlled by it. Control exists when the Bank has the ability to control the financial and operating policies of the subsidiary companies in order to achieve financial benefits out of their operations. All inter-company transactions, balances, revenues and expenses between the Bank and its subsidiaries are eliminated.

15


- The Bank owns the following subsidiaries as of December 31, 2009:

Company’s Name Paid-up Capital Ownership Nature of Operations Location Date of Acquisition

JD

Al - Mawared for Financial Brokerage Company

10,000,000 100 % Financial Brokerage Amman 2006

Al - Mawared for Financial Lease Company *

1,000,000 100 % Financial Lease Amman 2006

* Established in 2006 and has not yet started its operations.

- The financial statements of the subsidiaries relating to the same financial year of the Bank are prepared using the same accounting policies adopted by the Bank. In case the accounting policies applied by the subsidiaries are different from those adopted by the Bank, then the necessary adjustments to the financial statements of the subsidiaries are effected in order to match those applied by the Bank.

- Results of operations are consolidated in the consolidated statement of income from the date of acquisition which represents

the date when control over the subsidiaries is passed on to the Bank. Moreover, results of operations of the disposed of subsidiaries (if any) are consolidated in the consolidated statement of income until the disposal date which represents the date when the Bank loses control over the subsidiaries.

Segment Information- A business segment is a distinguishable component of an entity engaged in providing an individual product or service or a

group of related products or services subject to risks and returns different from those of other business segments.

- A geographical segment is a distinguishable component of an entity engaged in providing products or services within a particular economic environment subject to risks and returns different from those of components operating in other economic environments.

Financial Assets Held for Trading- Financial assets held for trading represent investments in stocks, funds and bonds of companies in active markets. Moreover,

the purpose of keeping these investments is to generate profits from the fluctuation in short-term market prices or a trading profit margin.

- Financial assets held for trading are initially recognized at fair value when purchased (acquisition costs are taken to the consolidated statement of income). They are subsequently re-measured to fair value as of the date of the consolidated financial statements, and the resulting changes are included in the consolidated statement of income in the period in which they arise. Moreover, fair value differences resulting from the translation of foreign currency non-monetary assets are taken to the consolidated statement of income.

- Distributed income or realized interest is recorded in the consolidated statement of income.

Direct Credit Facilities - A provision for the impairment in direct credit facilities is recognized when it is obvious that the financial assets of the Bank can

not be recovered, there is an objective evidence of the existence of an event negatively affecting the future cash flows of the direct credit facilities, and the impairment amount can be estimated. The provision is taken to the consolidated statement of income.

- Interest and commissions on non-performing credit facilities are suspended in accordance with the regulations of the Central Bank of Jordan.

- Impaired credit facilities, for which specific provisions have been taken, are written off by charging the provision after all efforts have been made to recover the assets. Any surplus in the provisions is taken to the consolidated statement of income, while debt recoveries are taken to income.

Available-for-Sale Financial AssetsAvailable-for-sale financial assets are financial assets held by the Bank and classified as neither trading nor held-to-maturity financial assets.

- Available-for-sale financial assets are initially recorded at fair value including acquisition costs. They are subsequently re-measured to fair value as of the date of the consolidated financial statements. Moreover, change in fair value is recorded in a separate account within the consolidated statement of comprehensive income. In case these assets are fully or partially sold, disposed of, or determined to be impaired, the income or losses are recorded in the consolidated statement of income, including the related amounts previously recorded within owners’ equity. The loss resulting from the impaired value of the debt instruments is reversed when it is objectively evident that the increase in their fair value occurred after the losses had been recognized and recorded in the consolidated statement of income. Impairment losses resulting from the decline in the value of equity securities are reversed through the cumulative change in fair value.

16


- Income and losses from foreign exchange of interest-bearing debt instruments within available - for - sale financial assets are included in the consolidated statement of income. Differences in the foreign currency of equity instruments are included in the cumulative change in fair value within consolidated statements of comprehensive of income.

- Interest from available-for-sale financial instruments is recorded in the consolidated statement of income using the effective interest rate method. Impairment in such assets is recorded in the consolidated statement of income when incurred.

- Financial assets for which fair value cannot be reliably determined are shown at cost. Any impairment is recorded in the consolidated statement of income.

Held-to-Maturity Financial AssetsHeld-to-maturity investments are financial assets with fixed or determinable payments and the Bank has the positive intent and ability to hold to maturity.

Held-to-maturity investments are recorded at cost (fair value) plus acquisition costs. Premiums and discounts are amortized in the consolidated statement of income according to the effective interest rate method. Provisions associated with irrecoverable impairment in their value, partially or totally, are deducted. Any impairment in assets is recorded in the consolidated statement of income.

Fair ValueFair value represents the closing market price of financial assets and derivatives on the date of the consolidated financial statements. In case declared market prices do not exist, active trading of some financial assets and derivatives is not available, or the market is inactive, fair value is estimated by one of several methods including the following:

- Comparison with the fair value of another financial asset with similar terms and conditions.- Analysis of the present value of expected future cash flows for similar instruments.- Adoption of the option pricing models.

The valuation methods aim to provide a fair value reflecting the expectations of the market, and take into consideration market factors, risks and expected benefits.

Financial assets, the fair value of which can not be reliably measured, are stated at cost less any impairment.

Impairment in the Value of Financial AssetsThe Bank reviews the values of financial assets on the date of the consolidated statement of financial position in order to determine if there are any indications of impairment in their value individually or in the form of a portfolio. In case such indications exist, the recoverable value is estimated in order to determine the impairment loss.

Impairment is determined as follows:- Impairment in financial assets recorded at amortized cost represents the difference between the book value and the present

value of the expected cash flows discounted at the original interest rate.- Impairment in financial assets available for sale recorded at fair value represents the difference between book value and fair value. - Impairment in financial assets recorded at cost represents the difference between the book value and the present value of the

expected cash flows discounted at the market interest rate of similar instruments.

The impairment in value is recorded in the consolidated statement of income. Any surplus in the following period resulting from previous impairment in value of financial assets is taken to the consolidated statement of income except for the impairment in available-for-sale equity securities which is reversed through the cumulative change in fair value.

Fixed Assets- Fixed assets are stated at cost net of accumulated depreciation and any impairment in value. Moreover, fixed assets (except for

land) are depreciated according to the straight-line method over their estimated useful lives using the following rates:

Buildings 2 %

Equipment and furniture 15% – 20 %

Vehicles 15%

Computers 20%

Decorations 25%

- When the carrying values of fixed assets exceed their recoverable values, assets are written down to the recoverable value, and impairment losses are recorded in the consolidated statement of income.

17


- The useful lives of fixed assets are reviewed at the end of each year. In case the expected useful life is different from what was determined before, the change in estimate is recorded in the following years, being a change in estimate.

- Fixed assets are derecognized when disposed of or when there is no expected future benefit from their use or disposal.

Provisions- Provisions are recognized when the Bank has an obligation on the date of the consolidated statement of financial position as a

result of past events, it is probable to settle the obligation, and a reliable estimate of the amount of the obligation can be made.

Provision for Employees End-of-Service Indemnities- The employees’ end-of-service indemnities provision is calculated at a rate of one month per service year for contracted

employees more than 60 years old.

- The required provision for end-of-service indemnities for the year is recorded in the consolidated statement of income while payments to departing employees are deducted from the provision amount.

Income Tax- Income tax expenses represent accrued taxes and deferred taxes.

- Income tax expenses are accounted for on the basis of taxable income. Moreover, taxable income differs from income declared in the consolidated financial statements because the latter includes non-taxable revenue or tax expenses not deductible in the current year but deductible in subsequent years, accumulated losses acceptable by the tax authorities, and items not accepted for tax purposes or subject to tax.

- Taxes are calculated on the basis of the tax rates prescribed according to the prevailing laws, regulations, and instructions in Jordan.

- Deferred taxes are taxes expected to be paid or recovered as a result of temporary timing differences between the value of the assets and liabilities in the consolidated financial statements and the value of the taxable amount. Deferred tax is calculated on the basis of the liability method in the consolidated statement of financial position according to the rates expected to be applied when the tax liability is settled or tax assets are recognized.

- Deferred tax assets are reviewed as of the date of the consolidated financial statements, and reduced in case it is expected that no benefit will arise therefrom, partially or totally.

Accounts Managed on Behalf of CustomersThis item represents the accounts managed by the Bank on behalf of its customers and is not part of the Bank’s assets. The fees and commissions for managing these accounts are shown in the consolidated statement of income. Furthermore, a provision is taken against the decline in the value of capital-guaranteed portfolios managed on behalf of customers.

OffsettingFinancial assets and financial liabilities are offset, and the net amount is reflected in the consolidated statement of financial position only when there are legal rights to offset the recognized amounts, the Bank intends to settle them on a net basis, or assets are realized and liabilities settled simultaneously.

Realization of Income and Recognition of Expenses- Interest income is realized and expenses are recognized using the effective interest rate method, except for interest and

commission on non-performing loans which are not recognized as revenue but recorded in the interest and commission in suspense account until they are received in cash.

- Expenses are recognized on the accrual basis.

- Commission is recorded as revenue when the related services are provided.

- Dividends are recorded when realized (decided upon by the General Assembly of Shareholders).

Recognition of Financial Assets Financial assets are recognized on the trading date which is the date the Bank commits itself to purchase or sell the financial assets.

Financial Derivatives and Hedge AccountingFor hedge accounting purposes, financial derivatives are stated at fair value. Hedges are classified as follows:

- Fair value hedge: hedge for the change in the fair value exposures of the Bank’s assets and liabilities.

When the conditions of effective fair value hedge are met, the resulting gain or loss from re-measuring the fair value hedge is recognized in the consolidated statement of income.

18


When the conditions of effective portfolio hedge are met, the gain or loss resulting from the revaluation of the hedging instrument at fair value as well as the change in the fair value of the assets or liabilities portfolio are recorded in the consolidated statement of income for the same period.

- Cash flow hedge: hedge for the change in the current and expected cash flows exposures of the Bank’s assets and liabilities.

- When the conditions of effective cash flow hedge are met, the gain or loss of the hedging instruments is recognized in owners’ equity. Such gain or loss is transferred to the consolidated statement of income in the period in which the hedge transaction impacts the consolidated statement of income.

- Hedge for net investment in foreign entities: When the conditions of the hedge for net investment in foreign entities are met, fair value is measured for the hedging instrument of the hedged net assets. In case of an effective relationship, the effective portion of the loss or profit related to the hedging instrument is recognized in the consolidated statement of comprehensive income. The ineffective portion is recognized in the consolidated statement of income. The effective portion is recorded in the consolidated statement of income when the investment in foreign entities is sold.

- When the conditions of the effective hedge do not apply, gain or loss resulting from the change in the fair value of the hedging instrument is recorded in the consolidated statement of income in the same period.

Financial Derivatives for Trading:The fair value of financial derivatives for trading such as forward foreign currency contracts, future interest rate contracts,

swap agreements, and foreign currency options is recorded in the consolidated statement of financial position under other assets or other liabilities as the case may be. Fair value is measured according to the prevailing market prices, and if they are not available, the measurement method should be disclosed. The change in their fair value is recognized in the consolidated statement of income.

Repurchase and Resale Agreements- Assets sold with a simultaneous commitment to repurchase them at a future date continue to be recognized in the consolidated

financial statements as a result of the Bank’s continuous control over these assets and as the related risks and benefits are transferred to the Bank upon occurrence. They also continue to be measured in accordance with the adopted accounting policies. Amounts received against these contracts are recorded within liabilities under borrowed funds. The difference between the sale price and the repurchase price is recognized as an interest expense amortized over the contract period using the effective interest rate method.

- Purchased assets with corresponding commitment to sell at a specific future date are not recognized in the consolidated financial statements because the Bank has no control over such assets and the related risks and benefits are not transferred to the Bank upon occurrence. Payments related to these contracts are recorded under deposits with banks and other financial institutions or loans and advances in accordance with the nature of each case. The difference between the purchase price and resale price is recorded as interest revenue amortized over the life of the contract using the effective interest rate method.

Assets Seized by the BankAssets seized by the Bank are shown under “other assets” at the acquisition value or fair value, whichever is lower. As of the consolidated statement of financial position date, these assets are revalued individually at fair value. Any decline in their market value is taken to the consolidated statement of income whereas any such increase is not recognized. A subsequent increase is taken to the consolidated statement of income to the extent it does not exceed the previously recorded impairment.

Intangible Assets- Intangible assets purchased in an acquisition are stated at fair value at the date of acquisition. Intangible assets purchased

other than through acquisition are recorded at cost.

- Intangible assets are to be classified on the basis of either definite or indefinite useful life. Intangible assets with definite useful economic lives are amortized over their useful lives and recorded as an expense in the consolidated statement of income. Intangible assets with indefinite lives are reviewed for impairment as of the consolidated financial statements date, and impairment loss is treated in the consolidated statement of income as an expense for the period.

- No capitalization of internally generated intangible assets resulting from the Bank’s operations is made. They are rather recorded as an expense in the consolidated statement of income for the period.

- Any indications of impairment in the value of intangible assets as of the consolidated financial statements date are reviewed. Furthermore, the estimated useful lives of the impaired intangible assets are reassessed, and any adjustment is made in the subsequent period.

- The following is the accounting policy for each item of the intangible assets owned by the Bank and its subsidiaries:

Softwares and computer programs are amortized over their estimated useful economic lives at a rate of 20% annually.

19


Foreign CurrencyTransactions in foreign currencies during the year are recorded at the exchange rates prevailing at the date of the transaction.

- Financial assets and financial liabilities denominated in foreign currencies are translated at the average rates prevailing on the consolidated statement of financial position date and declared by the Central Bank of Jordan

- Non-monetary assets and liabilities denominated in foreign currencies and recorded at fair value are translated on the date when their fair value is determined.

- Gains or losses resulting from foreign currency translation are recorded in the consolidated statement of income.

- Translation differences on non-monetary assets and liabilities denominated in foreign currencies are recorded as part of the change in fair value.

Cash and Cash EquivalentsCash and cash equivalents comprise cash balances with the Central Bank of Jordan and balances with banks and financial institutions maturing within three months, less balances due to banks and financial institutions maturing within three months and restricted funds.

3. Accounting Estimates Preparation of the consolidated financial statements and the application of the accounting policies require the Bank’s management to perform assessments and assumptions that affect the amounts of financial assets and liabilities and the disclosure of contingent liabilities. Moreover, these assessments and assumptions affect revenues, expenses, provisions, and changes in the fair value shown within the consolidated statement of comprehensive income. In particular, this requires the Bank’s management to issue significant judgments and assumptions to assess future cash flow amounts and their timing. Moreover, the said assessments are necessarily based on assumptions and factors with varying degrees of consideration and uncertainty. In addition, actual results may differ from assessments due to the changes resulting from the conditions and circumstances of those assessments in the future.

- A provision is set against the lawsuits raised against the Bank. This provision is subject to an adequate legal study prepared by the Bank’s legal advisors. Moreover, the study highlights potential risks that the Bank may encounter in the future. Such legal assessments are reviewed periodically.

- A provision for performing and non-performing loans is taken on the bases and estimates approved by the Bank’s management in conformity with International Financial Reporting Standards (IFRS). The outcome of these bases and estimates is compared against the adequacy of the provisions as per the Central Bank of Jordan’s instructions. The most strict outcome that conforms with International Financial Reporting Standards is used for determining the provision.

- Impairment loss (if any) is taken after a sufficient and recent evaluation of the assets seized by the bank has been conducted by approved surveyors. The impairment loss is reviewed periodically.

- Management periodically reassesses the economic useful lives of tangible and intangible assets for the purpose of calculating annual depreciation and amortization based on the general condition of these assets and the assessment of their useful economic lives expected in the future. Impairment loss (if any) is taken to the consolidated statement of income.

Management frequently reviews the financial assets stated at cost to estimate any decline in their value. Impairment loss (if any) is taken to the consolidated statement of income as an expense for the year.

- Management estimates the impairment in fair value when the market value reaches a certain limit indicative of the amount of impairment loss.

- Fair value hierarchy- The Bank determines and discloses the level in the fair value hierarchy into which the fair value measurements are categorized

in their entirety, segregating fair value measurements in accordance with the levels defined in IFRS. Differentiating between Level 2 and Level 3 fair value measurements, i.e., assessing whether inputs are observable and whether the unobservable inputs are significant, may require judgment and a careful analysis of the inputs used to measure fair value, including consideration of factors specific to the asset or liability.

We believe that our estimates adopted in the preparation of the consolidated financial statements are reasonable.

20


4. Cash and Balances at Central Banks:

This item consists of the following:

December 31,

2009 2008

JD JD

Cash in vaults 6,059,595 4,012,160

Balances at the Central Bank:

Current accounts 18,149,638 45,592,021

Mandatory cash reserve 26,776,232 31,753,667

Certificates of deposit * - 13,000,000

Total 50,985,465 94,357,848

- Except for the mandatory cash reserve, there are no restricted balances as of December 31, 2009 and December 31, 2008. * This item does not include any amount due after 3 months as of December 31, 2009 against JD one million as of December 31, 2008.

5. Balances at Banks and Financial Institutions


Local Banks & Financial Institutions

Banks & Financial Institutions Abroad

Total

December 31, December 31, December 31,

2009 2008 2009 2008 2009 2008

JD JD JD JD JD JD

Current and demand accounts 5,052,988 49,137 43,372,136 19,236,270 48,425,124 19,285,407

Deposits due within 3 months 9,932,210 57,931,979 25,313,792 43,576,382 35,246,002 101,508,361

Total 14,985,198 57,981,116 68,685,928 62,812,652 83,671,126 120,793,768

- Non-interest bearing balances at banks and financial institutions amounted to JD 345,861 as of December 31, 2009 against JD 189,194 as of December 31, 2008. - There are no restricted balances as of December 31, 2009 and 2008.

6. Deposits at Banks and Financial Institutions


Local Banks & Financial Institutions

Banks & Financial Institutions Abroad

Total

December 31, December 31, December 31,

2009 2008 2009 2008 2009 2008

Description JD JD JD JD JD JD

Deposits - - 3,898,842 2,455,034 3,898,842 2,455,034

Total - 0 3,898,842 2,455,034 3,898,842 2,455,034

- There are no restricted deposits as of December 31, 2009 and 2008.

21


7. Trading Financial Assets


December 31,

2009 2008

JD JD

Quoted investment funds in financial markets - 192,338

Quoted shares in financial markets 898,016 8,348,878

Total 898,016 8,541,216

8 . Direct Credit Facilities


December 31,

2009 2008

JD JD

Individuals (retail)

Overdraft 6,727,351 5,666,519

Loans and promissory notes* 22,586,202 21,359,492

Credit Cards 798,886 438,840

Property loans 61,253,634 47,458,394

Companies

Large Companies


Overdraft 23,928,592 42,757,970

Medium and small companies


Overdraft 15,188,356 18,084,729

Government and public sector 3,309,157 3,719,094

Total 315,277,141 324,109,733

Less: Provision for impairment in direct credit facilities 13,917,302 18,166,433

Suspended interest 1,761,428 2,683,335

Net Direct Credit Facilities 299,598,411 303,259,965

* Net after deducting interest and commissions received in advance of JD 4,363,502 as of December 31, 2009 against JD 6,172,017 as of December 31, 2008.

Non-performing credit facilities amounted to JD30,914,177, which is equivalent to (9.8%) of total direct credit facilities as of December 31, 2009 against JD 25,620,723, which is equivalent to (7.9%) of total credit facilities as of December 31, 2008.

Non- performing credit facilities excluding interest and commissions in suspense amounted to JD29,152,749, which is equivalent to (9.3%) of total direct credit facilities as of December 31, 2009 against JD 22,937,388, which is equivalent to (7.1%) of total credit facilities as of December 31, 2008.

Direct credit facilities granted to / guaranteed by the Government of Jordan amounted to JD 3,309,157, which is equivalent to (1%) of total direct facilities as of December 31, 2009 against JD 3,719,094, which is equivalent to (1.2%) at the end of the year 2008.

22


Provision for impairment in direct credit facilities the movement on the provision for impairment indirect credit facilities was as follows:

Companies

2009 IndividualsProperty

LoansLarge

CompaniesSmall & Medium

CompaniesTotal

JD JD JD JD JD

Balance – beginning of the year 3,836,787 223,720 8,994,475 5,111,451 18,166,433

Provision for the year taken from revenues 263,019 375,600 880,296 455,718 1,974,633

Used during the year (written-off) * 696,907 - 4,548,707 978,150 6,223,764

Balance – End of the Year 3,402,899 599,320 5,326,064 4,589,019 13,917,302

2008


Provision for the year taken from revenues 1,934,864 26,701 101,315 219,912 2,282,792

Used during the year (written-off) * 1,715,625 - 815,620 747,192 3,278,437

Balance – End of the Year 3,836,787 223,720 8,994,475 5,111,451 18,166,433

- The provisions no longer needed due to settlements or repayments of debts and transferred against other debts amounted to JD 2,447,315 against JD 1,130,255 for the previous year.The provision for impaired credit facilities representing underwatch and non-performing loans are calculated based on the individual customer and not the portfolio.During the third quarter of the year 2009, the Bank bought several plots of land, not mortgaged, from one of its clients as partial settlement of his debts.

Interest in Suspense- The movement on interest in suspense is as follows:

Companies

2009 IndividualsReal Estate

LoansLarge

CompaniesSmall & Medium

CompaniesTotal

JD JD JD JD JD

Balance – beginning of the year 676,002 17,625 421,739 1,567,969 2,683,335

Add: Interest in suspense for the year 725,141 65,715 688,702 507,788 1,987,346

Less: Interest taken to income 490,068 - 115,959 158,988 765,015

Less: Interest and commission in suspense written-off

97,808 - 795,984 1,250,446 2,144,238

Balance - End of the Year 813,267 83,340 198,498 666,323 1,761,428

2008


Add: Interest in suspense for the year 332,160 25,615 1,134,383 481,320 1,973,478

Less: Interest taken to income 126,689 9,028 333,875 90,902 560,494

Less: Interest and commissionin suspense written-off

1,073,856 - 1,402,405 2,724,519 5,200,780

Balance - End of the Year 676,002 17,625 421,739 1,567,969 2,683,335

* The Board of Directors resolved to write-off bad debts and interest in suspense amounting to JD 8,368,002 (against JD8,479,217 for the year 2008).

23


9. Available-for-Sale Financial Assets

The details of this item are as follows:

December 31,

2009 2008

Quoted Available-for-Sale Financial Assets: JD JD

Governmental bonds or bonds guaranteed by the Government * 156,362,725 84,824,602

Companies bonds and debentures 18,481,388 10,497,789

Companies shares 16,372,720 9,355,255

Total Quoted Available-for-Sale Financial Assets 191,216,833 104,677,646

Unquoted Available-for-Sale Financial Assets:

Governmental bonds * - 17,000,000

Companies shares 3,997,845 4,230,864

Total Unquoted Available-for-Sale Financial Assets 3,997,845 21,230,864

Total Available-for-Sale Financial Assets 195,214,678 125,908,510

Bonds and bills Analysis:

Fixed return 174,844,113 112,322,391

Variable return - -

Total 174,844,113 112,322,391

- Available-for-sale financial assets are recorded at cost/amortized cost as their fair values cannot be reliably determined. These assets amounted to JD 3,997,845 as of December 31, 2009 against JD 21,230,864 as of December 31, 2008.

*Government bond does not include repurchase transactions with the Social Security Corporation as of December 31, 2009, pledged to be sold to the Social Security Corporation by the Bank according to the sale agreement (JD 25,000,000 as of December 31, 2008).

The financial crisis that occurred in international financial markets has been considered as an extraordinary event. According to IAS (39) and IFRS (7) (Revised), financial assets can be reclassified based on specific terms in such circumstances. Consequently, the Bank has reclassified some of its investments in trading financial assets of JD 6,419,960 to available-for-sale financial assets effective from April 1, 2009. Had such reclassification not been done, income for the year would have decreased by JD 312,121.

24


10.

Fixe

d A

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s

The

deta

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m a

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Year

200

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Ass

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Tota

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JDJD

JDJD

JD

Cos

t:

Bal

ance

- b

egin

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of t

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2,2

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19

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805

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9

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231

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-

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Add

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1

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14

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7 2

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82

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907

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Dis

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-

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5 33

2,64

5 15

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0 26

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16

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Year

200

8

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Bal

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- b

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2,24

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Acc

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Dep

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Bal

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- b

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-

667,

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545,

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50

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-

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25


11. Intangible Assets


Computer Software and Applications

2009 2008

Description JD JD

Balance-beginning of the year 780,181 342,606

Additions 893,936 555,203

Less : Amortization for the year 107,988 117,628

Balance - End of the Year 1,566,129 780,181

12. Other AssetsThis item consists of the following:

December 31,

2009 2008

JD JD

Accrued interest 2,945,824 2,480,509

Prepaid expenses 356,600 422,600

Assets seized by the Bank * 9,219,409 5,244,212

Refundable deposits 562,408 435,318

Other 356,101 161,451

Total 13,440,342 8,744,090

*According to the Banks Law, buildings and plots of land seized by the Bank against debts due from customers are to be sold within two years from the ownership date. For exceptional cases, the Central Bank of Jordan can extend this period for two consecutive years at maximum.

- The movement on assets (properties) seized by the Bank was as follows:

2009 2008

JD JD

Balance - beginning of the year 5,244,212 5,619,392

Additions 4,161,525 19,577

Disposals 186,328 394,757

Balance - End of the Year 9,219,409 5,244,212

13. Banks and Financial Institutions DepositsThis item consists of the following:

December 31, 2009 December 31, 2008

InsideJordan

OutsideJordan

TotalInsideJordan

OutsideJordan

Total

JD JD JD JD JD JD

Current accounts and demand deposits 1,083,486 28,593,868 29,677,354 14,278,452 7,335,739 21,614,191

Time deposits * 2,145,264 9,992,855 12,138,119 38,746,187 8,452,886 47,199,073

Total 3,228,750 38,586,723 41,815,473 53,024,639 15,788,625 68,813,264

* This account includes JD 30,267 due within a period exceeding 3 months as of December 31, 2009 against JD 8,234,016 as of December 31, 2008.

26


14. Customers Deposits


December 31, 2009

IndividualsLarge

Companies

Small and Medium

Companies

Government and Public

SectorTotal

JD JD JD JD JD

Current accounts and demand deposits 61,568,161 41,614,723 18,292,031 12,663,588 134,138,503

Saving deposits 1,429,031 7,591 3,253 - 1,439,875

Time deposits subject to notice 185,013,348 71,779,693 30,762,725 47,645,709 335,201,475

Deposits certificates 3,856,035 2,079,267 891,115 - 6,826,417

Total 251,866,575 115,481,274 49,949,124 60,309,297 477,606,270

December 31, 2008

IndividualsLarge

Companies

Small and Medium

Companies


SectorTotal

JD JD JD JD JD

Current accounts and demand deposits 54,758,101 26,052,823 13,427,230 8,255,590 102,493,744

Saving deposits 1,591,334 18,273 7,831 - 1,617,438

Time deposits subject to notice 163,947,329 94,009,902 40,289,958 41,596,064 339,843,253

Deposits certificates - 2,812,943 1,205,547 - 4,018,490

Total 220,296,764 122,893,941 54,930,566 49,851,654 447,972,925

a. Public sector deposits inside Jordan amounted to JD 60,309,297, which is equivalent to (12.6%) of total customers deposits as of December 31, 2009 against JD 49,851,654, which is equivalent to (11.1%)of total customers deposits as of December 31, 2008.

b. Non-interest bearing deposits amounted to JD 52,662,108, which is equivalent to (11%) of total customers deposits as of December 31, 2009 against JD 20,844,134, which is equivalent to (4.7%) of total customers deposits as of December 31, 2008.

c. Restricted deposits amounted to JD 11,708,883 , which is equivalent to (2.45%) of total customers deposits as of December 31, 2009 against JD 8,872,071, which is equivalent to 2% as of December 31, 2008.

d. Frozen deposits amounted to JD 1,411,060 as of December 31, 2009 against JD 1,776,346 as of December 31, 2008.

15. Cash Margins


December 31,

2009 2008

JD JD

Cash margins on direct credit facilities 14,238,104 15,238,587

Cash margins on indirect credit facilities 16,772,598 17,287,261

Marginal deposits 3,809,934 1,216,084

Total 34,820,636 33,741,932

27


16. Borrowed Funds


Number of Installments

Year 2009Amount Total Remaining

Frequency of Installments

GuaranteesInterest

Rate

JD JD %

Overdraft * 5,797,036 1 1 One payment on August 20, 2010

- 8.5

Total 5,797,036

Year 2008

Borrowings form local institutions - Repurchase agreement

15,500,000 1 1 One payment on January 29, 2009

Jordanian treasury bills

and bonds 6.7




and bonds 6.7




and bonds 6.7

Overdraft * 6,587,210 1 1 One payment on August 20, 2009

- 8.5

Total 31,587,210

* This amount represents credit facilities granted to the subsidiary company Al Mawared for Financial Lease Co. by Capital Bank against the guarantee of the Company’s net worth.

17. Sundry Provisions


Beginning Balance

Additions DisposalsReturned to

IncomeEnding

Balance

Year 2009 JD JD JD JD JD

Provision for employees indemnity 3,987 407 - - 4,394

Provision for lawsuits against the Bank 2,019,637 278,528 - 254,637 2,043,528

Provision for contingent liabilities 410,712 469,942 469,941 234,000 176,713

Total 2,434,336 748,877 469,941 488,637 2,224,635

Year 2008

Provision for employees indemnity 8,075 3,691 7,779 - 3,987

Provision for lawsuits against the Bank 2,019,637 - - - 2,019,637

Provision for contingent liabilities 410,712 - - - 410,712

Total 2,438,424 3,691 7,779 - 2,434,336

28


18. Income Tax

A. Provision for income tax:The movement on the provision for income tax was as follows:

2009 2008

JD JD

Beginning balance 4,038,294 1,437,475

Income tax paid (3,534,668) (1,202,242)

Payment on account (amortized) / payment on account - (546,325)

Prior years’ income tax - 243,701

Income tax for the year 2,980,817 4,105,685

Ending Balance 3,484,443 4,038,294

- Income tax for the year consists of the following:

2009 2008

JD JD

Income tax for the year 2,980,817 4,105,685

Accrued income tax - prior years - 243,701

Deferred tax liabilities for the year - 899

Amortization of deferred tax liabilities (381,966) (1,168,179)

Deferred tax assets - (673,735)

Amortization of deferred tax assets 792,001 169,799

3,390,852 2,678,170

- Income tax has been settled with the Income and Sales Tax Department up to the end of the year 2007 except for the year 2000 which is still pending in the concerned court and has been submitted to the tax advisor. Moreover, the Sales and Income Tax Department has assessed the tax on the Bank for JD 590,313, and the Bank has paid an amount of JD 415,933 of which JD 175,952 is held as deposits at the Ministry of Finance at 50% of the disputed amount.

- The tax return for the year 2008 has been submitted properly within the specified legal period. However, no final settlement has been reached with the Sales and Income Tax Department yet.

- In the opinion of management and its tax advisor, the tax liabilities relating to those years do not exceed the provisions taken as of the end of the year 2009.

- Al - Mawared for Financial Brokerage Company (subsidiary company) has properly submitted its tax return within the specified period for the period from inception on March 5, 2006 until December 31, 2006 and for the years 2007 and 2008 but no final settlement has been issued thereon yet. In the opinion of management and its tax advisor, the tax liabilities relating to those years do not exceed the provision taken as of the end of the year 2009.

- Al - Mawared for Financial Lease Company (subsidiary company) has not submitted its tax return within the period from inception on October 31, 2006 to January 31, 2007and 2008. In the opinion of management and its tax advisor, no tax liabilities shall arise against this company as it has incurred losses for those years.

29


b- Deferred Tax Assets / Liabilities: The details of this item are as follows:

2009 December 31,

Amounts 2009 2008

Beginning Amounts Ending Deferred Deferred

Accounts Included Balance Released Additions Balance Tax ** Tax **

JD JD JD JD JD JD

1- Deferred Tax Assets

Provision for impairment in credit facilities

2,434,581 1,921,265 - 513,316 153,995 852,103

Provision for employees end-of-service indemnities

3,987 - 407 4,394 1,318 1,396

Provision for lawsuits against the Bank 2,019,637 254,637 278,528 2,043,528 613,058 706,873

4,458,205 2,175,902 278,935 2,561,238 768,371 1,560,372

2- Deferred Tax Liabilities

Unrealized profit on trading financial assets

1,438,263 1,438,263 - - - 381,966

Cumulative change in fair value * 2,550,223 661,438 921,831 2,810,616 843,185 688,108

3,988,486 2,099,701 921,831 2,810,616 843,185 1,070,074

* Deferred tax liabilities include JD 843,185 as of December 31, 2009 against JD 688,108 for the previous year resulting from the revaluation gain on available-for-sale financial assets presented at a net amount within the cumulative change in fair value under owners’ equity.

**According to the New Tax Law affective from the beginning of 2010, 30% is taken for the deferred tax as of December 31,2009 (against 35% as of December 31, 2008), Moreover, 35% has been taken for the income tax provision for the year 2009.

- The movement on deferred tax assets / liabilities was as follows:

2009 2008

Assets Liabilities Assets Liabilities

JD JD JD JD

Beginning balance 1,560,372 1,070,074 1,056,436 2,850,503

Additions during the year - 336,532 673,735 118,062

Deductions 792,001 563,421 169,799 1,898,491

Ending Balance 768,371 843,185 1,560,372 1,070,074

C- The summary of the reconciliation between accounting profit and taxable income is as follows:

2009 2008

JD JD

Accounting profit for the year 10,629,137 11,553,216

Non taxable income (6,168,329) (5,947,611)

Expenses not deductible for tax purposes 4,866,943 7,034,592

Taxable income 9,327,751 12,640,197

Income tax percentage 35% 35%

Percentage of deferred taxes 30% 35%

Income tax percentage for the subsidiaries 25% 25%

Deferred tax interest for the subsidiaries 24% 25%

30


19. Other Liabilities


December 31,

2009 2008

JD JD

Brokerage receivable 1,388,507 1,817,240

Accepted and certified checks 808,102 387,763

Accrued interest 2,584,795 2,889,249

Various creditors 392,483 380,646

Head Office-branches off-setting - 450,038

Shareholders’ deposits 263,175 284,931

Deposits on safe deposit boxes 28,425 24,865

Credit accounts in suspense 25,652 122,108

Accrued expenses 527,512 559,678

Jordanian universities fees 101,777 110,616

Scientific research and vocational training 287,331 431,773

Vocational and Technical Education and

Training Support Fund fees 118,656 134,354

Board of Directors’ remunerations 54,792 55,000

Other liabilities 292,789 222,344

Total 6,873,996 7,870,605

20. Paid-up Capital

Paid-up capital amounted to JD70 million distributed over 70 million shares at a par value of JD 1 per share as of the end of the year 2009 (against JD 61.325 million distributed over 61.325 million shares at a par value of JD 1 per share as of December 31, 2008).

21. Reserves

The details of the reserves as of December 31, 2009 are as follows:

a- Statutory Reserve:This account represents the accumulated amount of appropriations from income before tax at 10% at the end of the year 2009 according to the Banks Law. This amount is not to be distributed to shareholders.

b- General Banking Risks ReserveThis item represents the general banking risks reserve according to the Central Bank of Jordan’s instructions.

c- The details of the restricted reserves are as follows:

December 31, Nature

Reserve 2009 2008 of Restriction

JD JD

Statutory reserve 11,716,629 10,621,559 Restricted according to

the Banks Law

General banking risks reserve 2,859,887 3,071,182 Restricted according

to the Central Bank of Jordan Regulations

31


22. Cumulative Change in Fair Value This item consists of the following:

2009 2008

Available-for-Sale Financial Assets Available-for-Sale Financial Assets

Shares Bonds Total Shares Bonds Total

JD JD JD JD JD JD

Beginning balance 828,665 (734,909) 93,756 3,244,235 (798,287) 2,445,948

(Losses) unrealized net profits (2,274,588) 285,918 (1,988,670) (3,915,009) 52,489 (3,862,520)

Deferred tax liabilities (180,698) 25,622 (155,076) 595,943 17,206 613,149

Realized net losses (profit) transferred to the statement of income

390 (96,183) (95,793) 103,496 (6,317) 97,179

Impairment loss on available -for-sale financial assets

2,497,818 - 2,497,818 800,000 - 800,000

Ending Balance * 871,587 (519,552) 352,035 828,665 (734,909) 93,756

*The cumulative change in fair value is presented as a net amount after deducting deferred tax liabilities of JD 843,185 against JD 688,108 for the previous years.

23. Retained Earnings- Included in retained earnings is an amount of JD 768,371 restricted by the Central Bank of Jordan against deferred tax assets

as of December 31, 2009 compared to JD 1,560,372 as December 31, 2008.

24. Proposed Dividends:a. The Board of Directors decided to recommend to the General Assembly of Shareholders to distribute JD 7.5 million as

free shares, about 10.714% of capital. In addition, the General Assembly of Shareholders approved the Board of Directors’ recommendation to distribute JD 8.675 million as free shares for the year 2008, equivalent to 14.146% of capital, through capitalizing part of retained earnings. Moreover, the free shares have been listed effective from June 28, 2008 after obtaining the approval of the Jordan Securities Commission.

32


25. Interest Income


2009 2008

Direct credit facilities: JD JD

Individuals (retail):

Loans and promissory notes 2,659,576 2,742,129

Credit cards 17,234 18,465

Overdraft 241,029 258,324

Margin accounts 598,713 419,481

Property loans 3,055,571 3,273,782

Companies

Large companies


Overdraft 2,271,138 2,461,083

Medium and small companies


Overdraft 1,014,553 1,086,993

Government and public sector 365,472 391,557

Balances at central banks 91,962 958,481

Balances and deposits at banks and financial institutions 1,427,846 4,597,554

Available-for-sale financial assets * 10,008,826 8,172,433

Total 37,546,049 40,964,276

* This item includes an amount of JD 578,194 relating to interest from the treasury bills sale agreement in 2009 against JD 821,011 in 2008

26. Interest Expense


2009 2008

JD JD

Deposits at banks and financial institutions 964,568 3,863,980

Customers Deposits:

Current and demand deposits 2,780,862 3,162,631

Saving accounts 5,348 7,484

Time and notice deposits 17,364,358 18,907,768

Certificates of deposit 223,556 104,679

Cash margins 120,412 157,351

Borrowed funds * 367,689 1,271,836

Deposit guarantee fees 822,534 611,825

Total 22,649,327 28,087,554

* This item represents an amount of JD146,849 relating to interest from the treasury bills sale agreement against JD 943,012 for the year 2008.

33


27. Commission Income - Net


2009 2008

Commission Income: JD JD

Direct credit facilities commissions 2,544,705 2,674,891

Indirect credit facilities commissions 2,263,304 3,032,475

Brokerage commissions 772,077 1,187,293

Other commissions 494,070 524,913

Total Commissions Income 6,074,156 7,419,572

Less: Commissions expense 255,323 491,243

Net Commissions Income 5,818,833 6,928,329

28. Income from Foreign Currencies


2009 2008

JD JD

Foreign currencies trading 1,197,923 1,164,811

As a result of evaluation 262,064 387,827

Total 1,459,987 1,552,638

29. (Loss) from Trading Financial Assets


Year 2009 Realized (Loss) Unrealized (Loss) Dividends Income Total

JD JD JD JD

Companies shares (528,635) (357,397) 185,226 (700,806)

(528,635) (357,397) 185,226 (700,806)

Year 2008

Companies shares (48,072) (3,369,129) 734,367 (2,682,834)

(48,072) (3,369,129) 734,367 (2,682,834)

30. Income from Available-for-Sale Financial Assets


2009 2008

JD JD

Dividends income 872,232 639,503

Income from the sale of available-for-sale financial assets 261,350 97,376

Amortized loss on financial assets - (112,895)

Total 1,133,582 623,984

34


31. Other Income


2009JD

2008JD

Rental of safe deposit boxes 10,170 9,880

Credit cards income 293,124 230,887

Net income (bonded) 275,409 230,539

Telex income 480,548 425,077

Rental of banks real estate 134,675 201,081

Other 118,587 1,217,615

Total 1,312,513 2,315,079

32. Employees Expenses


2009JD

2008JD

Salaries, bonuses and employees’ benefits 3,587,025 3,104,198

Bank’s share in social security 349,142 274,528

Medical expenses 98,463 87,630

Bank’s share in savings fund 215,103 157,515

Per diems 3,798 910

Travel expenses 12,911 10,109

Training and research 10,664 -

Employees life insurance 16,404 14,828

Total 4,293,510 3,649,718

35


33. Other Expenses


2009JD

2008JD

Rent 329,586 241,186

Stationery 136,888 168,808

Advertisements 104,724 32,423

Subscriptions 328,705 327,675

Telecommunication expenses 415,313 283,417

Maintenance and repair 258,686 234,031

Insurance expenses 42,399 84,184

Legal fees and expenses 116,104 59,540

Water, electricity and heating 103,037 113,712

Professional fees 105,593 100,776

Concentration expenses 298,502 64,743

Fine expenses 1,750 7,908

Board of Directors’ transportation 53,289 54,990

Donations 24,991 90,530

Jordanian universities fees 101,777 110,616

Scientific research and vocational training fees 101,777 110,616

Vocational and Technical Education and Training Support Fund fees 62,056 77,753

Board of Directors’ remunerations 54,792 55,000

Provision for the decline in fair value of seized assets 186,328 -

Other 423,256 355,570

Total 3,249,553 2,573,478

34. Earnings Per Share - Bank Shareholders

The details of this item are as follows:

2009 2008

JD JD

Income for the year 7,238,285 8,875,046

Shares Shares

Weighted average number of shares * 70,000,000 70,000,000

JD/ Share JD/ Share

Income per share for the year 0.103 0.127

* The weighted average number of shares for the year 2008 has been amended to 70 million shares instead of 61.325 million shares as the increase represents bonus shares .

35. Cash and Cash Equivalents

The details of this items are as follows:

2009 2008

JD JD

Balances at central banks due within 3 months 50,985,465 93,357,848

Add: Balances at banks and financial institutions due within 3 months 83,671,126 120,793,768

Less: Banks and financial institutions deposits due within 3 months 41,785,206 60,579,248

Cash and Cash Equivalents 92,871,385 153,572,368

36


36. F

inan

cial

Inst

rum

ents

The

deta

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f fina

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l der

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ives

out

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as

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Mat

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Nom

inal

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Year

200

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Fair

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Valu

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omin

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Am

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Form

3 M

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to

3 Y

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Mor

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JDJD

JDJD

JDJD

JD

Trad

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62,

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62,

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(140

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) (1

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-

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31

-

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,225

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-

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204

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* T

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8

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11,

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-

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-

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11,

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-

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-

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674

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6

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39

-

-

-

37


37. Transactions with Related Parties

The Bank entered into transactions with companies owned by members of the Board of Directors ,major shareholders and executive management within the normal banking practice according to the commercial interest rates and commissions.

All credit facilities granted to related party companies represent performing credit facilities and no provision has been taken thereon (except as mentioned below). The following represents a summary of tractions with related parties during the year:

Total

Related Party December 31,

Subsidiaries*

Board of Directors Members

and Executive

Management

Relatives of Members of the Board of

Directors and Executive

Management

2009 2008

JD JD JD JD JD

On-Financial Position Items:

Credit facilities 456,656 2,394,263 35,360,210 38,211,129 57,848,678

Provision for impairment in direct credit facilities

- - 185,000 185,000 1,564,639

Deposits and current accounts 1,060,679 3,354,248 19,613,608 24,028,535 23,127,253

Off-Financial Position Items:

Letters of guarantee - 1,138,844 - 1,138,844 991,683

Letters of credit 840,000 9,661,269 - 10,501,269 13,703,494

Statement of Income:

Interest and commission received 26,114 151,585 2,877,352 3,055,051 4,677,910

Interest and commission paid 93,922 77,170 760,228 931,320 1,313,062

Provision for impairment in direct credit facilities

- - 145,361 145,361 (419,310)

Additional Information

Underwatch credit facilities - - 10,133,365 10,133,365 417,658

Provision for underwatch credit facilities - - 152,000 152,000 6,257

Non-performing credit facilities - - 33,000 33,000 1,845,631

Provision for non-performing credit facilities

- - 33,000 33,000 1,558,382

Interest in suspense - - - - -

* All those amounts and transactions are eliminated from the consolidated financial statements and are shown for explanatory purposes only.

Maximum credit interest rates 15% Maximum credit commission 1%

Minimum credit interest rates 5% Minimum credit commission 0.5%

Maximum debit interest rates 6.75% Maximum debit commission 1%

The following is a summary of the executive management salaries and benefits

2009 2008

JD JD

Salaries and benefits 1,510,565 981,854

38


38. Fair Value of Financial Assets and Financial Liabilities

Not Shown at Fair Value in the Financial StatementsAvailable-for-sale financial assets include financial assets not listed on financial markets of JD 3,997,845 as of December 31, 2009, of which JD 2,019,369 is recorded at cost as their fair value can not be reliably determined.

39. Risk Management

General framework of risk managementThe Risk Management and Compliance Committee has set the risk management framework for the Bank. Moreover, the Board of Directors has established the Risk Management and Compliance Committee, formed by the Board members and executive management. Its objective is to monitor and control the various risks (credit risks, operating risks, market risks and compliance risks) or any other risks the Bank might be exposed to. Moreover, the Risk Management and Compliance Committee has supervised the preparation of the management risk policies of the Bank to cover all types of main risks to which the Bank might be exposed and to determine their limits and appropriate ways to monitor them, so as to control these risks and ensure adherence to the limits. Moreover, the Bank periodically and continuously reviews these policies which reflect the changes in market circumstances, products and services provided.

The main duty of the Risk Management and Compliance Department is to manage risks with the task of “identifying, measuring, and monitoring all types of risks to which the Bank is or might be exposed; hedging against these risks to mitigate their effect on the Bank’s various activities; and ensuring their good management in compliance with the Bank’s strategy to maximize owners’ equity and maintain the Bank’s growth within the risks framework.

The Risk Management and Compliance Committee’s tasks are as follows:

1- To supervise the management of the risk policy and ensure that the Risk Management and Compliance Department achieves its objectives according to the approved policies.

2- To ensure appropriate and sufficient support for the Risk Management and Compliance Department in achieving its objectives in accordance with the approved policies and procedures and the Central Bank’s instructions.

3- To ensure the availability of work procedures for risk management in compliance with the various management risk policies at the Bank.

4- To verify the adoption of new methods in managing and evaluating the Bank’s risks such as stress testing, what if analysis, and economic capital.

5- To determine the bases and principles of managing risks regarding risk acceptance, risk rejection, risk transfer and risk mitigation.6- To review the periodical reports of the Risk Management and Compliance Department. 7- To ensure that the Bank adheres to the Central Bank of Jordan instructions.

The department manages the Bank’s various risks (credit risk, operating risk, market risk, compliance risk, and other risks) within the general framework of risks management. The role of the department can be summarized as follows:

1. Risk Identification.2. Risk Assessment.3. Risk Control / Mitigation.4. Risk Monitoring.

39. a. Credit RisksCredit risks are defined as the probability of not fully recovering the debt or interest in the specified time causing financial losses to the Bank.

Moreover, credit risk represents the major portion banks are exposed to in general (representing 60% or 70% of the risks banks are exposed to). In recognition of this reality, the Bank has accorded credit risk management great significance through managing credit risks at the portfolio level, economic sector level, group level, or single customer level, taking into consideration the achievement of an appropriate return on the risks the Bank is exposed to.

To achieve this, based on the risk management strategy, the Bank has performed the following:

1.The risk appetite and ceilings are based on credit risk commensurate with the acceptable risk limits, adopted by the Board of Directors and Risks and Compliance Department. Risk limits are set for each client, group and economic sector, in order to mitigate the Bank’s exposure to credit risk concentrations.

2. A risk rating system is prepared. It consists of 12 degrees and takes into account all factors leading to increased credit risk for the client. In addition, it helps the Bank to detect the credit risk early on so that it can address and mitigate the risk before it increases.

3. The risk adjusted return on risk adjusted capital (RARRAC) is applied to the pricing of credit to customers, groups, or economic sectors. This enables the Bank to obtain adequate rates of return compared to risks and attracts clients or economic sectors with low risk.4. Credit risk is mitigated through credit risk factors (collaterals such as real estate, shares or cash ...) commensurate with the credit risk faced by the Bank to cover any unexpected subsequent events.5. Proper legal and credit documentation is applied for all conditions associated with the credit facilities.

39


1. Credit risk exposure (less the impairment provision and interest

in suspense and before guarantees and other risk - mitigating factors):

December 31,

2009 2008

On Financial Position Items JD JD

Balances at the Central Bank 44,925,870 90,345,688

Balances at banks and financial institutions 83,671,126 120,793,768

Deposits at banks and financial institutions 3,898,842 2,455,034

Direct credit facilities:

Individuals 25,896,273 22,952,062

Property loans 60,570,974 47,217,049

Companies

Large Companies 148,666,265 165,491,947

Small and medium institutions 61,155,742 63,879,813

Government and public sector 3,309,157 3,719,094

Bonds, Bills and Debentures:

Included in trading financial assets - -

Included in available-for-sale financial assets 174,844,113 112,322,391

Financial derivatives 19,418 -

Other assets 3,470,332 3,338,427

Off Financial Position Items

Letters of guarantee 95,869,572 98,781,660

Letters of credit 18,063,148 25,316,211

Letters of acceptance 7,659,274 12,168,763

Unutilized facility ceilings 34,979,172 21,025,804

Total 766,999,278 789,807,711

To cover the above credit risk exposures, the Bank uses the following risk mitigationfactors within the conditions of the credit policy set by the Bank:1. Cash collaterals.2. Accepted bank letters of guarantee.3. Real estate mortgages.4. Listed shares.5. Vehicles and equipment.

40


2. Credit exposures according to the degree of risk are categorized according to the following table:

Companies

December 31, 2009 Individuals Property Loans

Large Companies

Small and Medium

Companies


Sector

Banks and Other Financial

Institutions

Total

JD JD JD JD JD JD JD

Low risk 3,048,875 - 3,929,095 - 159,671,882 119,671,390 286,321,242

Acceptable risk 14,013,294 48,933,075 143,793,117 47,676,338 - 12,824,448 267,240,272

Of which is due:* 0

within 30 days 52,315 752,447 1,242,564 453,654 - - 2,500,980

from 31 to 60 days 25,235 145,653 784,236 237,895 - - 1,193,019

Under watch 2,401,465 4,632,456 30,871,175 3,726,055 - - 41,631,151

Non-performing: 0

Below level 543,287 2,590,267 1,564,948 1,855,405 - - 6,553,907

Allowance provided 498,667 645,739 4,093,499 1,357,298 - - 6,595,203

Bad debt 1,287,966 3,452,097 10,370,020 2,654,984 - - 17,765,067

Total 21,793,554 60,253,634 194,621,854 57,270,080 159,671,882 132,495,838 626,106,842

Less: Impairment provision

3,402,899 599,320 5,326,064 4,589,019 - - 13,917,302

Less: Interest in suspense

813,267 83,340 198,498 666,323 - - 1,761,428

Net 17,577,388 59,570,974 189,097,292 52,014,738 159,671,882 132,495,838 610,428,112

December 31, 2008

Low risk 1,475,400 - 8,356,840 1,693,208 105,540,746 196,506,931 313,573,125

Acceptable risk 22,912,833 48,754,913 140,584,708 54,088,905 - 17,087,559 283,428,918

Of which is due:*

within 30 days 43,897 90,845 2,349,632 1,296,346 - - 3,780,720

from 31 to 60 days 56,219 110,767 563,209 231,987 - - 962,182

Under watch 3,561,661 5,280,875 15,589,766 6,309,973 - - 30,742,275

Non-performing: 0

Below level 3,000,633 550,610 - 878,884 - - 4,430,127

Allowance provided 1,322,639 584,220 - 368,902 - - 2,275,761

Bad debt 3,029,798 615,220 10,815,024 4,454,793 - - 18,914,835

Total 35,302,964 55,785,838 175,346,338 67,794,665 105,540,746 213,594,490 653,365,041

Less: Impairment provision

3,836,787 223,720 8,994,475 5,111,451 - - 18,166,433

Less: Interest in suspense

676,002 17,625 421,739 1,567,969 - - 2,683,335

Net 30,790,175 55,544,493 165,930,124 61,115,245 105,540,746 213,594,490 632,515,273

* The whole debt balance becomes due when one of the installments or interest is due. Moreover, the overdraft account becomes due whenever it exceeds the ceiling.

41


Fair value of guarantees categorized against the facilities given:

Companies

2009 Individuals Property

Loans Large

Companies

Small and Medium

Companies

Public Sector

Total

JD JD JD JD JD JD

Guarantees against:

Low risk 3,048,875 - 3,929,095 - - 6,977,970

Acceptable risk 5,858,917 43,587,822 99,392,240 22,100,548 - 170,939,527

Under watch 1,657,898 4,365,987 22,428,890 2,456,893 - 30,909,668

Non-performing:

Below level 766,624 3,744,496 3,816,278 1,935,109 - 10,262,507

Allowance provided 997,525 514,767 2,486,988 1,082,003 - 5,081,283

Bad debt 1,178,901 2,355,693 6,601,684 1,811,747 - 11,948,025

Total 13,508,740 54,568,765 138,655,175 29,386,300 - 236,118,980

Of it:

Cash Margins 3,048,875 - 3,929,095 - - 6,977,970

Accepted letters of guarantee - - - - - -

Trade stocks 213,459 - 24,631,801 127,659 - 24,972,919

Real estate 7,786,531 54,568,765 109,856,780 28,908,765 - 201,120,841

Vehicles and equipment 2,459,876 - 237,498 349,876 - 3,047,250

Total 13,508,741 54,568,765 138,655,174 29,386,300 - 236,118,980

2008

Guarantees against:

Low risk 1,475,400 - 8,356,840 1,693,208 - 11,525,448

Acceptable risk 22,912,833 50,185,885 91,210,416 42,293,615 - 206,602,749

Under watch 3,561,661 5,280,875 15,589,766 6,309,973 - 30,742,275

Non-performing:

Below level 2,584,125 550,610 - 878,884 - 4,013,619

Allowance provided 1,322,639 584,220 - 368,902 - 2,275,761

Bad debt 2,629,798 615,220 10,815,024 4,454,793 - 18,514,835

Total 34,486,456 57,216,810 125,972,046 55,999,375 - 273,674,687

Of it:

Cash Margins 915,225 - 7,515,220 995,003 - 9,425,448

Accepted letters of guarantee - - 2,100,000 - - 2,100,000

Trade stocks 224,531 9,826,078 - - 10,050,609

Real estate 6,674,354 57,216,810 98,548,312 42,436,838 - 204,876,314

Vehicles and equipment 5,872,346 - 7,982,436 12,567,534 - 26,422,316

Total 13,686,456 57,216,810 125,972,046 55,999,375 - 252,874,687

42


Scheduled Debts:These debts are debts previously classified as non-performing credit facilities but taken out therefrom according to proper scheduling. These debts have been classified as “debts under control”, which amounted to JD 7,001,692 as of December 31, 2009 (against JD 10,240,238 for the year 2008).

Restructured Debts: Restructuring means rearranging credit facilities installments through increasing their duration, postponing some installments, or increasing the grace period, which amounted to JD19,595,719 as of December 31, 2009 (against JD 30,649,899 for the year 2008).

3. Bonds, Bills, and DebenturesThe following table illustrates the classification of bonds, bills, and debentures according to external rating institutions:

Rating Grade Rating InstitutionWithin Trading

Financial Assets

Within Available-for- Sale Financial

Assets Total

JD JD JD

B-Fitch

- 2,058,188 2,058,188

Unclassified - 16,423,200 16,423,200

Governmental - 156,362,725 156,362,725

- 174,844,113 174,844,113

4. Credit Risk Exposure According to Geographical Areas:

Geographical AreaInside Jordan

Middle East

CountriesEurope Asia * America

Other Countries

Total

JD JD JD JD JD JD JDBalances at Central Bank 44,925,870 - - - - - 44,925,870

Balances at banks and financial institutions

19,118,568 6,860,987 31,897,549 6,819,654 18,974,368 - 83,671,126

Deposits at banks and financial institutions

-- - - 3,898,842 - 3,898,842

Credit facilities:

Individuals 25,896,273 - - - - 25,896,273

Real estate loans 60,570,974 - - - - 60,570,974

Companies :

Major companies 148,666,265 - - - - 148,666,265

Small to medium size

companies 61,155,742 - - - - 61,155,742

Government and public

sector 3,309,157 - - - - 3,309,157

Bonds, bills, and debentures:

Within trading financial

assets - - - - - -

Within available-for-sale-

financial assets 172,218,416 2,625,697 - - - 174,844,113

Financial derivatives - - 19,418 - 19,418

Other 3,470,332 - - 3,470,332

Total for the current year 539,331,597 9,486,684 31,916,967 6,819,654 22,873,210 - 610,428,112

Total/comparative figures 564,015,448 11,826,518 24,943,807 13,239,314 16,007,705 2,482,481 632,515,273

* Excluding Middle East Countries.

43


Expo

sure

Acc

ordi

ng to

Eco

nom

ic S

ecto

r:

Econ

omic

Sec

tor

Item

Fina

ncia

lIn

dust

rial

Trad

ing

and

Serv

ices

Rea

l Est

ate

Agr

icul

tura

lSh

ares

Indi

vidu

als

Gov

ernm

ent

and

Pub

lic

Sect

orTo

tal

JDJD

JDJD

JDJD

JDJD

JD

Bal

ance

s at

cen

tral

ban

ks44

,925

,870

--

--

--

-44

,925

,870

Bal

ance

s at

ban

ks a

nd fi

nanc

ial i

nstit

utio

ns

83,6

71,1

26-

--

--

--

83,6

71,1

26

Dep

osits

at b

anks

and

fina

ncia

l i

nstit

utio

ns3,

898,

842

--

--

--

-3,

898,

842

Cre

dit f

acili

ties

28,0

10,9

3338

,277

,662

72,4

07,0

4665

,655

,628

5,57

0,52

034

,302

,521

52,0

64,9

443,

309,

157

299,

598,

411

Bon

ds, b

ills

and

debe

ntur

es:

With

in tr

adin

g fin

anci

al a

sset

s-

--

--

--

--

With

in a

vaila

ble-

for-

sale

fina

ncia

l ass

ets

-

-1,

515,

000

1,00

0,00

0-

--

172,

329,

113

174,

844,

113

Fin

anci

al d

eriv

ativ

es19

,418

--

--

--

-19

,418

Oth

er a

sset

s3,

470,

332

--

--

--

-3,

470,

332

T

otal

for

the

curr

ent y

ear

163,

996,

521

38,2

77,6

6273

,922

,046

66,6

55,6

285,

570,

520

34,3

02,5

2152

,064

,944

175,

638,

270

610,

428,

112

T

otal

/com

para

tive

figur

es

159,

866,

385

28,6

53,3

5872

,454

,766

56,1

47,0

605,

232,

082

22,6

56,9

5883

,206

,524

204,

298,

140

632,

515,

273

44


39. b. Operating RiskOperating risk is defined as “the loss resulting from the failure or inadequacy of the internal procedures, the human factor, and systems, or from external events including legal risks.

Operating risks at banks constitute from 15% to 20% of the risks banks are exposed to. These risks directly or indirectly impact the banks net profits through either decreasing the expected profits or increasing the expected expenses. To manage these risks, the Bank has set up an automatic system for the identification of these risks, determination of the adequacy of the internal control system and procedures, and efficiency of the human element to mitigate these risks, in addition to the identification of operating risks that confronted the Bank or other banks in the past, and consequently, spotting the events causing them. This is to enable the Bank to remedy them and to benefit from the mistakes causing these risks. In this regard, the Bank has implemented the following:

• Control & Risk Self Assessment (CRSA).• Key Risk Indicator.• Key Risk Driver (KRD).

Compliance Risk This represents the risks that arise from the probability that the Bank may not comply with (violate / transgress) the prevailing laws, regulations, instructions, banks laws, and code of ethics issued by international and local regulatory authorities.

Compliance with the regulations and prevailing laws issued by the regulatory authorities represents one of the most important risks which the Bank might be exposed to, due to the major financial losses resulting from the violation of the laws and instructions that affect the Bank>s reputation. Moreover, the past few years witnessed many new regulations, instructions and laws organizing the work of the various institutions. Accordingly, the need for managing the compliance risk of the Bank was necessary. Moreover, compliance enhances the efficiency of managing risks and decreases the risk the Bank might be exposed to as a result of noncompliance with the prevailing laws and instructions.

39.c Market RiskMarket risk is the potential losses that may arise from the changes in market prices such as the change in interest rates, foreign currency exchange rates, and prices of shares and products.

The Board of Directors has set limits for the acceptable risk levels for managing the financial portfolio market risks. Moreover, the Bank periodically applies the appropriate methodology to evaluate market risks and sets estimates for the probable economic losses based on a set of assumptions and changes in market conditions. The following are the methods used by the Bank to measure market risks : 1-Value at Risk (VaR)

2-Daily Earnings at Risk (DEaR)

3-Stress Testing

4- Scenario Analysis

c.1. Interest Rate Risk: Interest rate risk results from the potential change in interest rates, and consequently, the potential impact on the cash flows or the fair value of financial instruments.

The Bank is exposed to interest rate risks as a result of the timing gaps of repricing assets and liabilities. These gaps are periodically monitored by the Assets and Liabilities Committee (ALCO). Moreover, various hedging methods are used to remain within the acceptable interest rate gap limits.

45


Sensitivity analysis:

December 31, 2009 Increase in Interest RateImpact on Profit and

(Loss)Owners’ Equity Sensitivity

Currency: % JD JD

US Dollar 2 (109,756) (12,312)

Euro 2 (11,654) (21,476)

GBP 2 4,648 (17,458)

Japanese Yen 2 (56) -

Other currencies 2 4,387 -

Decrease in Interest RateImpact on Profit and


Currency: % JD JD

US Dollar 2 98,567 8,387

Euro 2 7,865 1,287

GBP 2 (1,289) 9,287

Japanese Yen 2 28 -

Other currencies 2 (2,385) -

December 31, 2008 Increase in Interest RateImpact on Profit and


Currency: % JD JD

US Dollar 2 (126,507) -

Euro 2 (12,735) (23,982)

GBP 2 5,574 (14,772)

Japanese Yen 2 (34) -


Decrease in Interest RateImpact on Profit and


Currency: % JD JD

US Dollar 2 108,796 -

Euro 2 10,952 3,649

GBP 2 (4,794) 1,298

Japanese Yen 2 29 -

Other currencies 2 (2,581) -

46


c.2. Foreign currencies riska. The following table illustrates the currencies to which the Bank is exposed and the potential and reasonable change in their

rates against the Jordanian Dinar and the related impact on the profit and loss statement. The currencies positions are monitored daily to ensure that they are within the determined limits. Moreover, the related reports are submitted to the Assets and Liabilities Committee and Board of Directors.

December 31, 2009Change in Foreign

Currency Exchange Rate Effect on Income and

LossesEffect on Owners’ Equity

Currency: % JD JD

Euro 5 176,987 45,987

GBP 5 43,769 98,056

Japanese Yen 5 27 -


December 31, 2008Change in Foreign

Currency Exchange Rate Effect on Income & Losses Effect on Owners’ Equity

Currency: % JD JD

Euro 5 287,345 89,657

GBP 5 53,298 132,876

Japanese Yen 5 324 -


c.3. Risks of Changes in Shares Prices:This represents the risk resulting from the decline in the fair value of the investment portfolio of the shares due to the changes in the value of the shares indicators and the change in the value of shares individually.

December 31 2009

Indicator of Change in Indicator Impact on Profit and LossImpact on Owners’

Equity

% JD JD

Amman Stock Exchange 5 44,500 786,589

Palestine Stock Exchange 5 - 45,876

December 31 2008

Indicator of Change in Indicator Impact on Profit and LossImpact on Owners’

Equity

% JD JD

Amman Stock Exchange 5 377,578 451,379

Palestine Stock Exchange 5 32,254 26,211

47

Notes to the Consolidated Financial StatementsIn

tere

st R

ate

Rep

rici

ng G

apTh

e B

ank

adop

ts th

e as

sets

- li

abili

ties

com

patib

ility

pri

ncip

le a

nd th

e su

itabi

lity

of m

atur

ities

to n

arro

w g

aps

thro

ugh

cate

gori

zing

ass

ets

and

liabi

litie

s in

to v

ario

us m

atur

ities

or

pric

e re

view

mat

uriti

es,

whi

chev

er a

re n

eare

r, to

low

er r

isks

in in

tere

st r

ates

, stu

dyin

g ga

ps in

the

rela

ted

inte

rest

rat

es, a

nd u

sing

hed

ging

pol

icie

s th

roug

h th

e ad

optio

n of

adv

ance

d fin

anci

al in

stru

men

ts s

uch

as d

eriv

ativ

es.

The

inte

rest

rat

e se

nsiti

vity

is a

s fo

llow

s:

Inte

rest

Rat

e Se

nsit

ivit

y

2009

Les

s th

an

One

Mon

th

Mor

e th

an 1

M

onth

Up

to 3

M

onth

s

Mor

e th

an

3 M

onth

s U

p

to 6

Mon

ths

Mor

e th

an

6 M

onth

s U

p

to 1

Yea

r

Fro

m 1

Yea

r U

p to

3 Y

ears

M

ore

than

3 Ye

ars

Non

-Int

eres

t B

eari

ng

Tota

l

JD

J

D

JD

J

D

JD

JD

JD

JD

Ass

ets:

Bal

ance

s at

cen

tral

ban

ks -

-

-

-

-

-

50

,985

,465

50,9

85,4

65B

alan

ces

at b

anks

and

fina

ncia

l ins

titut

ions

83,3

25,2

65 -

-

-

-

-

34

5,86

183

,671

,126

Dep

osits

at b

anks

and

fina

ncia

l ins

titut

ions

-

-

-

3,89

8,84

2 -

-

-

3,

898,

842

Trad

ing

finan

cial

ass

ets

-

-

-

-

-

-

898,

016

898,

016

Fina

ncia

l der

ivat

ives

6,63

2 3

,179

9

,607

-

-

-

-

19

,418

Dir

ect c

redi

t fac

ilitie

s36

,712

,475

20,6

33,4

8836

,339

,104

71,4

31,7

2633

,211

,780

98,1

71,6

543,

098,

184

299,

598,

411

Ava

ilabl

e-fo

r-sa

le fi

nanc

ial a

sset

s -

2,

250,

001

12,5

00,0

0026

,615

,000

109,

570,

913

23,9

08,1

9920

,370

,565

195,

214,

678

Fixe

d as

sets

-

-

-

-

-

-

16

,654

,238

16,6

54,2

38In

tang

ible

ass

ets

-

-

-

-

-

-

1,56

6,12

91,

566,

129

Def

erre

d ta

x as

sets

-

-

-

-

-

-

768,

371

768,

371

Oth

er a

sset

s -

-

-

-

-

-

13

,440

,342

13,4

40,3

42

Tot

al A

sset

s 1

20,0

44,3

72

22,

886,

668

48,

848,

711

101

,945

,568

1

42,7

82,6

93

122

,079

,853

1

08,1

27,1

71

666

,715

,036

Li

abili

ties:

Ban

ks a

nd fi

nanc

ial i

nstit

utio

ns d

epos

its28

,340

,621

3,21

8,34

6 -

30

,267

-

-

10,2

26,2

3941

,815

,473

Cus

tom

ers’

dep

osits

194,

157,

304

186,

279,

001

30,7

36,3

5113

,771

,506

-

-

52,6

62,1

0847

7,60

6,27

0C

ash

mar

gins

2,80

6,17

53,

524,

583

2,83

1,79

02,

231,

861

6,65

3,62

9 -

16

,772

,598

34,8

20,6

36B

orro

wed

fund

s -

-

-

5,

797,

036

-

-

-

5,7

97,0

36

Sund

ry p

rovi

sion

s -

-

-

-

-

-

-

-

Fina

ncia

l der

ivat

ives

-

-

-

-

-

-

2,22

4,63

52,

224,

635

Inco

me

tax

prov

isio

n -

-

-

-

-

-

3,

484,

443

3,48

4,44

3D

efer

red

tax

liabi

litie

s -

-

-

-

-

-

84

3,18

584

3,18

5O

ther

liab

ilitie

s -

-

-

-

-

-

6,

873,

996

6,87

3,99

6

Tot

al L

iabi

litie

s 2

25,3

04,1

00

193

,021

,930

3

3,56

8,14

1 2

1,83

0,67

0 6

,653

,629

-

93,

087,

204

573

,465

,674

I

nter

est R

ate

Rep

risi

ng G

ap (1

05,2

59,7

28)

(170

,135

,262

) 1

5,28

0,57

0 8

0,11

4,89

8 1

36,1

29,0

64

122

,079

,853

1

5,03

9,96

7 9

3,24

9,36

2

2008

T

otal

Ass

ets

149

,801

,698

5

0,83

2,78

7 7

0,82

9,34

0 9

1,17

8,90

3 9

1,02

0,22

9 92

,617

,300

1

37,0

02,0

06

683

,282

,263

Tot

al L

iabi

litie

s 2

62,8

92,6

02

208

,910

,718

1

9,90

2,50

8 2

3,84

1,87

0 6

,831

,313

-

7

5,14

9,62

9 5

97,5

29,4

65

Int

eres

t Rat

e R

epri

cing

Gap

(113

,090

,904

) (1

58,0

77,9

31)

50,

926,

832

67,

337,

033

84,

188,

916

92,

617,

300

61,

852,

377

85,

752,

798

48


Concentration in foreign currencies risk:

Currency (Equivalent in Jordanian Dinars)

2009 US Dollar Euro Sterling

Pound Japanese

Yen Others Total

JD JD JD JD JD JD

Assets:

Cash and balances at the Central Bank 10,208,373 3,679,405 1,167,687 - 5,576 15,061,041


44,652,134 6,662,957 8,490,447 287,170 18,525,432 78,618,140


3,695,062 203,780 - - - 3,898,842

Trading financial assets - - - - - -

Direct credit facilities 21,953,494 2,688,120 - - - 24,641,614

Available-for-sale financial assets 2,454,197 2,058,188 906,724 - 567,509 5,986,618

Other assets 21,214 - - - - 21,214

Total Assets 82,984,474 15,292,450 10,564,858 287,170 19,098,517 128,227,469

Liabilities:

Banks and financial institutions deposits 26,297,990 5,168,288 777,289 245,651 409,301 32,898,519

Customers’ deposits 73,711,494 10,345,442 9,627,062 331,680 16,932,508 110,948,186

Cash margins 4,571,022 222,503 274,851 1 2,112,307 7,180,684

Other liabilities 499 10 33 - 9 551

Total Liabilities 104,581,005 15,736,243 10,679,235 577,332 19,454,125 151,027,940

Net Concentration on-Balance Sheet

for the Current Year (21,596,531) (443,793) (114,377) (290,162) (355,608) (22,800,471)

Off-balance Sheet Contingent Liabilities

for the Current Year 26,286,855 15,355,385 275,328 - 72,526,470 114,444,038

2008

Assets:

Cash and balances at the Central Bank 15,154,694 599,405 2,872 - 54,026 15,810,997


77,840,005 12,881,360 8,281,111 154,183 1,587,972 100,744,631


2,455,034 - - - - 2,455,034

Trading financial assets 192,338 - - - - 192,338

Direct credit facilities 18,474,926 972,023 - - - 19,446,949

Available-for-sale financial assets 2,075,829 1,847,197 906,724 - 503,340 5,333,090

Other assets - - - - 134,588 134,588

Deferred tax assets - - - - - 0.000

Total Assets 116,192,826 16,299,985 9,190,707 154,183 2,279,926 144,117,627

Liabilities:

Banks and financial institutions deposits 36,804,062 3,425,618 681,777 1,013 82,948 40,995,418

Customers’ deposits 73,567,718 13,468,924 7,874,259 30,212 2,363,191 97,304,304

Cash margins 8,815,616 2,035,627 167,471 29,834 17 11,048,565

Other liabilities - - - - 157,715 157,715

Total Liabilities 119,187,396 18,930,169 8,723,507 61,059 2,603,871 149,506,002

Net Concentration on-Balance Sheet

for the Current Year (2,994,570) (2,630,184) 467,200 93,124 (323,945) (5,388,375)

Off-balance Sheet Contingent Liabilities

for the Current Year 38,311,859 4,726,945 1,339,298 6,620 2,586,064 46,970,786

49


39. d

. Li

quid

ity

Ris

k:

Liqu

idity

ris

k re

pres

ents

the

Ban

k’s

inab

ility

to m

eet i

ts o

blig

atio

ns o

n th

eir

mat

urity

dat

es. T

o w

ard

off t

hese

ris

ks, i

nclu

ding

the

man

agem

ent o

f Ass

ets

and

Liab

ilitie

s, m

atch

ing

and

anal

yzin

g th

eir

mat

uriti

es, m

atch

ing

the

mat

uriti

es o

f sho

rt a

nd lo

ng-t

erm

ass

ets

and

liabi

litie

s, d

iver

sify

ing

sour

ces

of fu

nds,

and

mai

ntai

ning

an

adeq

uate

fund

of c

ash

and

cash

equ

ival

ents

and

ded

uctib

le

secu

ritie

s, li

quid

ity is

man

aged

and

rev

iew

ed p

erio

dica

lly a

t diff

eren

t lev

els.

Acc

ordi

ng to

the

Cen

tral

Ban

k of

Jor

dan

inst

ruct

ions

, the

Ban

k m

aint

ains

cas

h re

serv

es to

miti

gate

liqu

idity

ris

ks.

Firs

t : T

he fo

llow

ing

tabl

e ill

ustr

ates

the

dist

ribu

tion

of li

abili

ties

(und

isco

unte

d) o

n th

e ba

sis

of th

e re

mai

ning

per

iod

to th

e co

ntra

ctua

l mat

urity

at t

he d

ate

of th

e fin

anci

al s

tate

men

ts.

2009

Less

than

O

ne M

onth

Mor

e th

an 1

M

onth

up

to 3

M

onth

s

Mor

e th

an

3 M

onth

s up

to

6 M

onth

s

Mor

e th

an

6 M

onth

s up

to

1 Y

ear

Fro

m 1

Yea

r U

p to

3 Y

ears

M

ore

than

3

Yea

rs

Non

-Int

eres

t B

eari

ng

Tota

l

JD J

D

JD

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Liab

ilitie

s:

Ban

ks a

nd fi

nanc

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nstit

utio

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3,21

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30

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73

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ers’

dep

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246,

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001

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row

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ry p

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ives

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2,22

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me

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prov

isio

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484,

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-

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-

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Def

erre

d ta

x lia

bilit

ies

-

843

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-

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-

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-

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3,18

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er li

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ties

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10,5

24

1,95

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9 -

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6,

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otal

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295,

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ets

172,

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102,

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125,

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4866

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6

2008

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s:

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ks a

nd fi

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utio

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00

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280,

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2,92

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row

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31,

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ry p

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s -

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2,

434,

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ives

-

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82

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-

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otal

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otal

Ass

ets

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50


Second: Financial DerivativesThe following table summarizes the maturities of financial derivatives on the basis of the remaining period to the contractual maturity date from the date of the financial statements:

2009 Up to One MonthFrom One Month to

3 MonthsFrom 3 Months to 6

MonthsTotal

JD JD JD JD

Trading derivatives:

Currency derivatives 6,632 3,179 9,607 19,418

2008

Trading derivatives:

Currency derivatives - 825 - 825

Third: Off-balance sheet items:

2009Up to One Year

From One Year to 5 Years

More than 5 Years Total

JD JD JD JD

Letters of credit and acceptances

25,722,422 - - 25,722,422

Unutilized credits 34,979,172 - - 34,979,172

Guarantees 95,869,572 - - 95,869,572

Operating lease contract liabilities 329,586

- -329,586

Capital liabilities 1,574,847 - - 1,574,847

Total 158,475,599 - - 158,475,599

2008

Letters of credit and acceptances

37,484,974 - - 37,484,974

Unutilized credits 21,025,804 - - 21,025,804

Guarantees 98,781,660 - - 98,781,660

Operating lease contract liabilities

231,186 - - 231,186

Capital liabilities 12,472,987 - - 12,472,987

Total 169,996,611 - - 169,996,611

40. Sector Analysis

a. The Bank is organized, for managerial purposes, into three major sectors. Moreover, the Bank owns two subsidiaries one in the financial brokerage sector and the other in the financial lease:

- Individuals accounts: include following up on individual customers accounts, and granting them loans, credit, credit cards, and other services.

-Corporate accounts: include following up on deposits, credit facilities, and other banking services related to customers.

- Treasury: include providing dealing services and management of the Bank’s funds.

51


Tota

lFo

r th

e Ye

ar E

nded

D

ecem

ber

31,

Indi

vidu

als

Cor

pora

tion

s T

reas

ury

Oth

ers

2009

2008

JD

J

D

JD

J

D

JD

J

D

Gro

ss in

com

e3,

045,

447

7,10

6,04

210

,996

,842

2,77

2,50

0 2

3,92

0,83

1 2

1,61

3,91

8

Impa

irm

ent l

oss

on a

vaila

ble

-for

-sal

e

fina

ncia

l ass

ets

-

-

(2,4

97,8

18)

-

(2,4

97,8

18)

(800

,000

)

Pro

visi

on fo

r cr

edit

faci

litie

s (3

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81)

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52)

-

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(1,9

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33)

(2,2

82,7

92)

Res

ults

of B

usin

ess

Sect

or 2

,675

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5

,501

,590

8

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2

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1

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8,38

0 1

8,53

1,12

6

Les

s: U

ndis

trib

uted

Exp

endi

ture

s -

-

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8

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,243

8

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6

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ome

befo

re T

axes

10,

629,

137

11,

553,

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: Inc

ome

tax

3,3

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com

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8

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092,

044

194,

506,

367

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916

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635

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6

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14

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ets

not d

istr

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ver

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ors

-

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31,6

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31,

660,

709

26,

405,

549

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l Ass

ets

105

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1

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67

335

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3

1,66

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9 6

66,7

15,0

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683

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Lia

bilit

ies

358,

698,

834

153,

728,

072

48,4

55,6

94

-

560

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5

83,1

86,2

30

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ilitie

s no

t dis

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r se

ctor

s -

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12

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2,58

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573

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ital E

xpen

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Dep

reci

atio

n an

d am

ortiz

atio

n1,

015,

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b. I

nfor

mat

ion

on th

e ge

ogra

phic

al a

lloca

tion

:

This

sec

tor

repr

esen

ts th

e ge

ogra

phic

al d

istr

ibut

ion

of th

e B

ank’

s op

erat

ions

. Th

e B

ank

perf

orm

s its

ope

ratio

ns m

ainl

y in

the

Kin

gdom

, and

thes

e op

erat

ions

rep

rese

nt th

e lo

cal o

pera

tions

. In

form

atio

n on

the

geog

raph

ical

allo

catio

n:

Insi

de J

orda

nO

utsi

de J

orda

nTo

tal

2009

2008

2009

2008

2009

2008

JD

J

D

JD

J

D

Tota

l Rev

enue

46,

825,

481

50,

192,

715

-

-

46,

825,

481

50,

192,

715

Tota

l Ass

ets

666

,715

,036

6

83,2

82,2

63

-

-

666

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,036

6

83,2

82,2

63

Cap

ital E

xpen

ditu

res

1,5

74,8

47

12,

472,

987

-

-

1,5

74,8

47

12,

472,

987

52


41. Capital Management

a. Description of CapitalAccording to the Central Bank of Jordan Law and in compliance with the capital adequacy requirements, capital consists of many parts: Primary capital made up of paid-up capital, declared reserves, (including statutory reserve, voluntary reserve, share premium (discount), treasury share premium, and other reserves), retained earnings, and equity (if any) minus loss for the period, acquisition costs of treasury stock, provisions required by the Central Bank of Jordan, full amount of goodwill, and any other amounts provided that this part of capital is not less than 50% of the regulatory capital; and Support capital representing supplementary capital consisting of undeclared reserves, general banking risks reserve, subordinated debts, and the positive cumulative change in fair value at 45%, less the negative change balance provided that this part of capital does not exceed 100% of regulatory capital

The third part consists of short-term subordinated loans to meet market risks. This part supplements capital and is utilized to face the potential losses from market risks. Additionally, the Bank complies with Article (62) of the Banks Law which requires the Bank to appropriate 10% of its net profits in the Kingdom and continue to do so until the reserve equals the Bank’s paid-up capital.

b. Regulatory Authorities Requirements Concerning Capital and Method of Fulfilling ThemThe Bank considers the compatibility of the size of capital with the nature of risks it is exposed to provided that paid-up capital is not less than the minimum required by the Central Bank of Jordan and regulatory capital not less than 12% of the weighted value of credit and operating market risks. Furthermore, the minimum leverage ratio ( equity to total assets) should not be less than 6%. Moreover, not less than 28.5% of market risks should be covered by regulatory capital.

c. The Bank’s management aims at achieving the Bank’s capital management objectives, a surplus in operating income and revenues, and the optimal utilization of the available sources of funds so as to reach the targeted growth in shareholders’ equity through the increase in the statutory reserve, recognized profits, voluntary reserve, and retained earnings.

Capital is allocated to work lines and various functions according to assets weighted by risks. Moreover, capital and its adequacy are monitored periodically, and capital adequacy is calculated by the Risk Management and Compliance Department and reviewed by the internal auditor.

The capital adequacy ratio for the years 2009 and 2008 has been calculated according to Basel II Standard, in addition to the instructions of the Central Bank of Jordan

d. Reasons for and sources of change in the Bank’s regulatory capital during the year: Increase in regulatory capital amounted to JD 5,811,753 from the following sources:

- Increase in the statutory reserve of JD 1,095,070.- Decrease in retained earnings of JD 2,320,490.- Decrease in the general banking risks reserve of JD 211,295.

e. The amount the Bank considers as capital and capital adequacy ratio are as follows:

December 31,

2009 2008

JD JD

Primary capital items 85,325,507 78,598,548

Additional capital items 640,871 1,556,077

Auxiliary capital items

Total regulatory capital 85,966,378 80,154,625

Total risk – weighted assets 514,939,430 471,131,878

Capital adequacy ratio %16.69 %17.01

Primary capital ratio %16.57 %16.68

42. Accounts Managed on Behalf of Customers

There are no investment portfolios managed by the Bank on behalf of customers.

53


43. Analysis of the Maturities of Assets and Liabilities:

The following table illustrates the analysis of assets and liabilities according to the expected period of their recoverability or settlement:

Year 2009Up to One Year

JD More than One Year

JD Total

JDASSETS

Cash and balances at central banks 50,985,465 - 50,985,465

Balances at banks and financial institutions 83,671,126 - 83,671,126

Deposits at banks and financial institutions 3,898,842 - 3,898,842

Trading financial assets - 898,016 898,016

Financial derivatives 19,418 - 19,418

Direct credit facilities 165,116,793 134,481,618 299,598,411

Available-for-sale financial assets 41,365,001 153,849,677 195,214,678

Fixed assets - 16,654,238 16,654,238

Intangible assets - 1,566,129 1,566,129

Deferred tax assets 768,371 - 768,371

Other assets 4,220,933 9,219,409 13,440,342

TOTAL ASSETS 350,045,949 316,669,087 666,715,036

LIABILITIES

Banks and financial institutions deposits 41,815,473 - 41,815,473

Customers deposits 477,606,270 - 477,606,270

Cash margins 11,394,409 23,426,227 34,820,636

Borrowed funds 5,797,036 - 5,797,036

Financial derivatives - - -

Sundry provisions - 2,224,635 2,224,635

Provision for income tax 3,484,443 - 3,484,443

Deferred tax liabilities 843,185 - 843,185

Other liabilities 6,873,996 - 6,873,996

TOTAL LIABILITIES 547,814,812 25,650,862 573,465,674

Net (197,768,863) 291,018,225 93,249,362

Year 2008ASSETS

Cash and balances at central banks 94,357,848 - 94,357,848

Balances at banks and financial institutions 120,793,768 - 120,793,768

Deposits at banks and financial institutions 2,455,034 - 2,455,034

Trading financial assets - 8,541,216 8,541,216

Direct credit facilities 179,204,618 124,055,347 303,259,965

Available-for-sale financial assets 47,378,502 78,530,008 125,908,510

Fixed assets - 16,881,279 16,881,279

Intangible assets - 780,181 780,181

Deferred tax assets 1,560,372 - 1,560,372

Other assets 3,348,967 5,395,123 8,744,090

TOTAL ASSETS 449,099,109 234,183,154 683,282,263

LIABILITIES

Banks and financial institutions deposits 68,813,264 - 68,813,264

Customers deposits 447,922,680 50,245 447,972,925

Cash margins 9,682,868 24,059,064 33,741,932

Borrowed funds 31,587,210 - 31,587,210

Financial derivatives 825 - 825

Sundry provisions - 2,434,336 2,434,336

Provision for income tax 4,038,294 - 4,038,294

Deferred tax liabilities 1,070,074 - 1,070,074

Other liabilities 7,670,007 200,598 7,870,605

TOTAL LIABILITIES 570,785,222 26,744,243 597,529,465

Net (121,686,113) 207,438,911 85,752,798

54


44. Fair Value Hierarchy

The table below analyzes financial instruments carried at fair value by the valuation method. The different levels have been defined as follows:• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;• Level 2: inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices);• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

Level 1 Level 2 Level 3 Total

JD JD JD JD

Trading financial assets 898,016 - - 898,016

Available-for-sale financial assets 191,216,833 3,997,845 - 195,214,678

Financial derivatives 19,418 - - 19,418

192,134,267 3,997,845 0.000 196,132,112

45. Commitments and Contingent Liabilities (Off-Financial Position)

a. Credit commitments and contingencies:

December 31,

2009 2008

JD JD

Letters of credit 18,063,148 25,316,211

Acceptances and periodic withdrawals 7,659,274 12,168,763

Letters of guarantee:

Payments 15,101,826 15,765,957

Performance bonds 42,237,421 40,617,956

Other 38,530,325 42,397,747

Unutilized credit facilities 34,979,172 21,025,804

Total 156,571,166 157,292,438

b. Contractual obligations:

December 31,

2009 2008

JD JD

Contracts to purchase fixed assets 348,767 3,500,000

Construction contracts 3,072,265 4,750,000

Total 3,421,032 8,250,000

c. Operating leases amounted to JD 329,586 with periods ranging from 1 to 12 months.46. Lawsuits Against the Banka. The Bank is a defendant in lawsuits amounting to JD 11,734,653 as of the financial statements date against JD 11,232,277 in the prior year. One of these lawsuits is for JD 3,833,521 raised against the Bank by a Jordanian Bank (under liquidation). The lawsuit is still at Amman Court of First Instance pending an expert’s report. The provisions against these lawsuits amounted to JD 2,043,528 as of December 31, 2009 (JD 2,019,637 as of December 31, 2008). In the opinion of the Bank’s management and legal advisor, no additional liabilities would arise against the Bank therefrom.b. There were no lawsuits against the subsidiaries (Al - Mawared for Financial Brokerage Company and Al - Mawared for Financial Lease Company) as of December 31, 2009 and 2008.

55


47. Adoption of New and Revised International Financial Reporting Standards (IFRSs)

47.1Standards affecting presentation and disclosureThe following new and revised standards have been adopted in these financial statements for the current period. The details of other Standards and Interpretations that have been adopted but that have had no effect on the financial statements are set out in section 47.2.

IAS 1 (as revised in 2007) Presentation of Financial Statements

IAS 1 (2007) has introduced terminology changes (including revised titles for the financial statements) and changes in the format and content of the financial statements.

Improving Disclosures about Financial Instruments (Amendments to IFRS 7 Financial Instruments: Disclosures)

The amendments to IFRS 7 expand the disclosures required in respect of fair value measurements and liquidity risk. The Bank has elected not to provide comparative information for these expanded disclosures in the current year in accordance with the transitional reliefs offered in these amendments.

IFRS 8 Operating SegmentsIFRS 8 is a disclosure standard that has resulted in re-designation of the Bank’s reportable segments.

47.2 Standards and Interpretations adopted with no effect on the financial statementsThe following new and revised Standards and Interpretations have also been adopted in these financial statements. Their adoption has not had any significant impact on the amounts reported in these financial statements but may affect the accounting for future transactions or arrangements.

Improving Disclosures about Financial Instruments (Amendments to IFRS 7 Financial Instruments: Disclosures)

The amendments to IFRS 7 expand the disclosures required in respect of fair value measurements and liquidity risk.

IFRS 8 Operating Segments

IFRS 8 is a disclosure Standard that requires re-designation of the Bank’s reportable segments based on the segments used by the Chief Operating Decision Maker to allocate resources and assess performance. [There was no material impact of this Standard on the previous disclosures and reported results or the financial position of the Bank since the business segments reported earlier as per the requirements of IAS 14 Segment Reporting are also used by the General Manager to allocate resources to the segments and to assess their performance.

IFRS for SMEs Small and Medium-sized EntitiesThis Standard is available immediately but its adoption has to be decided by the jurisdiction of implementation

Amendments to IFRS 2 Share-based Payment - Vesting Conditions and Cancellations

The amendments clarify the definition of vesting conditions for the purposes of IFRS 2, introduce the concept of ‘non-vesting’ conditions, and clarify the accounting treatment for cancellations.

IAS 23 (as revised in 2007) Borrowing Costs

The principal change to the Standard was to eliminate the option to expense all borrowing costs when incurred. This change has had no impact on these financial statements because it has always been the Bank’s accounting policy to capitalize borrowing costs incurred on qualifying assets.

Amendments to IAS 32 Financial Instruments: Presentation and IAS 1 Presentation of Financial Statements – Puttable Financial Instruments and Obligations Arising on Liquidation

The revisions to IAS 32 amend the criteria for debt/equity classification by permitting certain puttable financial instruments and instruments (or components of instruments) that impose on an entity an obligation to deliver to another party a pro-rata share of the net assets of the entity only on liquidation, to be classified as equity, subject to specified criteria being met.

IFRIC 13 Customer Loyalty ProgramsThe Interpretation provides guidance on how entities should account for customer loyalty programs by allocating revenue on sale to possible future award attached to the sale.

56


IFRIC 15 Agreements for the Construction of Real Estate

The Interpretation addresses how entities should determine whether an agreement for the construction of real estate is within the scope of IAS 11 Construction Contracts or IAS 18 Revenue and when revenue from the construction of real estate should be recognized.

IFRIC 16 Hedges of a Net Investment in a Foreign Operation The Interpretation provides guidance on the detailed requirements for net investment hedging for certain hedge accounting designations.

IFRIC 18 Transfers of Assets from Customers (adopted in advance of effective date of transfers of assets from customers received on or after 1 July 2009)

The Interpretation addresses the accounting by recipients for transfers of property, plant and equipment from ‘customers’ and concludes that when the item of property, plant and equipment transferred meets the definition of an asset from the perspective of the recipient, the recipient should recognize the asset at its fair value on the date of the transfer, with the credit recognized as revenue in accordance with IAS 18 Revenue.

Improvements to IFRSs (2008)

Amendments to IFRS 3, IFRS 5, IAS 1, IAS 16, IAS 19, IAS 20, IAS 27, IAS 28, IAS 29, IAS 31, IAS 36, IAS 38, IAS 39, IAS 40 and IAS 41 resulting from May and October 2008 Annual Improvements to IFRSs the majority of which is effective for annual periods beginning on or after January 1, 2009.

47.3 Standards and Interpretations in issue not yet effectiveAt the date of authorization of these financial statements, the following new and revised Standards and Interpretations were in issue but not yet effective:

New Standards and Amendments to Standards:

Effective for annual periodsbeginning on or after

IFRS 1 (revised) First time Adoption of IFRS and IAS 27 (revised) Consolidated and Separate Financial Statements – Amendment relating to Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate

1 July 2009

IFRS 3 (revised) Business Combinations – Comprehensive revision on applying the acquisition method and consequential amendments to IAS 27 (revised) Consolidated and Separate Financial Statements, IAS 28 (revised) Investments in Associates and IAS 31 (revised) Interests in Joint Ventures

1 July 2009

IAS 39 (revised) Financial Instruments: Recognition and Measurement – Amendments relating to Eligible Hedged Items(such as hedging inflation risk and hedging with options)

1 July 2009

IFRS 1 (revised) First time Adoption of IFRS – Amendment on additional exemptions for First-time Adopters

1 January 2010

IFRS 2 (revised) Share-based Payment – Amendment relating to Bank cash-settled share-based payments

1 January 2010

IAS 32 (revised) Financial Instruments: Presentation – Amendments relating to classification of Rights Issue

1 February 2010

IAS 24 Related Party Disclosures – Amendment on disclosure requirements for entities that are controlled, jointly controlled or significantly influenced by a Government

1 January 2011

IFRS 9 Financial Instruments: Classification and Measurement (intended as complete replacement for IAS 39 and IFRS 7)

1 January 2013

Amendments to IFRS 2, IFRS 5, IFRS 8, IAS 1, IAS 7, IAS 17, IAS 18, IAS 36, IAS 38 and IAS 39 resulting from April 2009 Annual Improvements to IFRSs.

Majority effective for annual periods beginning on or after 1 January 2010

57


New Interpretations and amendments to Interpretations:

Effective for annual periods beginning on or after

IFRS 17: Distributions of Non-cash Assets to Owners 1 July 2009

IFRIC 19: Extinguishing Financial Liabilities with Equity Instruments 1 July 2010

Amendment to IFRIC 14: IAS 19: The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction

1 January 2011

Amendment to IFRIC 16: Hedges of a Net Investment in a Foreign Operation 1 July 2009

Amendment to IFRIC 9 (revised): Reassessment of Embedded Derivatives relating to assessment of embedded derivatives in case of reclassification of a financial asset out of the ‘FVTPL’ category

1 January 2013

The Bank>s management anticipates that the adoption of these Standards and Interpretations in future periods will have no material impact on the financial statements of the Bank in the period of initial application.

IFRS 9The application of the current version of IFRS 9 would mainly result in applying different classification and measurement criteria for financial assets. The requirements of IFRS 9 apply a consistent approach to classifying financial assets and replace the numerous categories of financial assets in IAS 39, each of which has its own classification criteria. They also result in one impairment method, replacing the numerous impairment methods in IAS 39 that arise from the different classification categories.

IFRS (3) and IAS (27) (28) and (31) - RevisedThe application of these amended standards would mainly result in applying new policies regarding the Bank’s new investments in associates and subsidiaries, partial disposal of its stocks in associates and subsidiaries, and an increase in current investments in associates and subsidiaries.

48. Comparative Figures

Some of the comparative figures for the year 2008 have been reclassified to correspond with the current year presentation. The reclassification has had no impact on the prior year’s results of operations.

58


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Documents

Annual Report - Investbank · 6ccjVa GZedgi 9 Consolidated Statement Of Financial Position December 31, Note 2009 2008 ASSETS JD JD Cash and balances at the Central Bank 4 50,985,465