Annual Report 2013 - TIBtib.prod2020.com/sites/default/files/rapport tib 2013.pdf · TIB operates...

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Annual Report 2013

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Tunis International Bank 4

Burgan Bank 6

KIPCO Group 8

Board of Directors 10

Senior Management 15

Financial Highlights 16

Chairman’s Statement 18

I. Bank’s Activity 18

II. Gratitude 19

Financial Review 20

I. Business Performance 20

II. Income 21

III. Capitalisation 23

IV. Assets and Liabilities 23

V. Loans and Advances 24

VI. Funding 25

Auditors’ Report 26

Financial Statement 28

I. Consolidated Balance Sheet 29

II. Consolidated Income Statement 30

III. Statement of Consolidated Comprehensive Income 30

IV. Consolidated Cash Flow Statement 31

V. Consolidated Statement of Changes in Shareholders’ Equity 32

VI. Notes to the Consolidated Financial Statements 34

Risk Management Report 34

I. Introduction 34

II. Capital Structure 34

III. Capital Adequacy 35

IV. Risk Management 35

V. Credit Exposures 58

VI. Credit Risk Mitigation 60

Corporate Governance Report 62

I. Corporate Governance 65

II. Chairman and Chief Executive Officer 65

III. Number, Structure and Independ-ency of the Committees Estab-lished within the Board 65

IV. Board Activities 67

V. Duties of Directors, Related-Party Transactions and Conflicts of Interest 68

VI. Public Disclosure and Transpar-ency 69

VII. Ethical Principles and Social Responsibility 69

VIII.Anti-Money Laundering 70

IX. Risk Management and Internal Control 70

X. Attendance at Meetings of the Board of Directors and its Committees in 2013 71

XI. Training of Directors and Information Programme 71

KIPCO Group Banks 74

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The Bank continues to be an innovative institution both internationally and domestically and is dedicated to providing banking services of the highest standards. As a Tunisian bank based in Tunis, TIB’s traditional and natural marketplace has been the Maghreb countries. The Maghreb countries will remain TIB’s primary target market by maximising the opportunities available to us by working with our subsidiary Algeria Gulf Bank in Algeria and also with our bank’s representative office in Tripoli, Libya.

Looking ahead, TIB aims to play a key role in promoting business and partnerships between Gulf investors and the Maghreb. In addition to this region, business has also been developed involving Western European and other Mediterranean countries. The bank’s traditional and natural customer base in Tunisia has been off-shore companies, which are usually majority owned by foreigners, exporting most, if not all, of their manufactured products and able to deal freely in foreign currencies.

w w w . t i b . c o m . t n

Tunis International Bank (TIB) was created in June 1982 and was the first bank established in Tunisia as a fully licensed banking corporation under the Tunisian Law of July 12th, 1976 replaced on August 14th, 2009. TIB operates under the supervision of the Central Bank of Tunisia (CBT) and is a member of Tunisia’s Clearing House Association. TIB is a private offshore commercial bank and its main shareholder is Burgan Bank SAK - Kuwait, which is a subsidiary of the Kuwait Investment Projects Company (Holding) ‘‘KIPCO’’.

As a subsidiary of KIPCO (Kuwait Projects Company), Burgan Bank is a regional bank with majority owned subsidiaries in the MENA region. Burgan Bank was established in 1977 as a public shareholding company. Despite the fact that it is the youngest commercial bank in Kuwait, today, it ranks among the top Kuwaiti banks. Burgan Bank has acquired a leading role in the retail, corporate and investment banking sector through innovative product offers and technologically advanced delivery channels. Burgan Bank offers both retail and commercial banking services and is active both in the Gulf region and internationally. Besides TIB, Burgan Bank has three other majority owned subsidiaries: Jordan Kuwait Bank (Jordan), Gulf Bank Algeria (Algeria), Bank of Baghdad (Iraq) and the fully owned Burgan Bank Turkey collectively known as the “Burgan Bank Group.”

KIPCO is one of the most important diversified holding companies in the Middle East and North Africa. It has substantial ownership interests in a portfolio of 60 companies operating across 26 countries. Its group companies are very diversified, but with particular concentration in two activity areas: the financial and media sectors. KIPCO was assigned a long-term credit rating of BBB+ and a short-term rating of A2 by Standard & Poor’s. With these credit risk assessments, KIPCO enjoys the highest ratings when compared to similar private corporate sector companies within the MENA region.

Our bank’s reputation has been fully established as a local provider of the highest quality products and services. TIB provides a comprehensive range of international financial services for corporations, financial institutions, governments and individuals both in Tunisia and abroad including the following: Foreign Exchange and Money Market operations in all convertible currencies including Tunisian dinars, International Trade Financing, Private Banking Facilities, Loan Syndications and Forfaiting, Commercial Banking, Investments, Visa Card and American Express Card. Our product range will be constantly reviewed to ensure that we are able, within our credit and procedural policies, to meet the range of needs in our local market base. This will include maximising the products and services that we are able to offer as a result of the synergies that we have and are further developing, with co-members of the KIPCO group.

TUNIS INTERNATIONAL BANK

TIB’s Website is:

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The Bank is rated by internationally reputed rating agencies like S&P, Moody’s, Capital Intelligence and enjoys the following ratings:

Rating Agency Rating Highlights

Standard & Poor’s Counterparty Credit Rating BBB+ / A-2 (Long / Short Term)Moody’s Bank Deposit Rating:

Bank Financial Strength Rating:A3/P-2D+

Capital Intelligence Foreign CurrencyFinancial Strength

A-/A-2 (Long / Short Term) BBB

In 2012, Burgan Bank won the coveted “Best Bank in Kuwait” by EMEA Finance, a prominent publication and information source in the finance industry. Moreover, the Bank won the “Best Deal of the Year” award from Acquisition International for its acquisition of Eurobank Tekfen. Furthermore, Global Banking and Finance Review online magazine recognized Burgan Bank on two important fronts, the “Best Banking Group in the MENA” as well as the “Best Corporate Bank in Kuwait.”

The Bank was re-certified in 2010 with the ISO 9001:2008 certification in all its banking businesses, making it the first bank in the GCC and the only bank in Kuwait to receive such an accreditation. The Bank also has to its credit the distinction of being the only Bank in Kuwait to have won the JP Morgan Chase Quality Recognition Award for twelve consecutive years.

Burgan Bank’s streak of accolades also included the “Best Bank Branding” award by the Banker Middle East. World Finance, one of the world’s most influential and leading financial magazines has also awarded Burgan Bank with the prestigious “Best Banking Group in Kuwait.” For the second consecutive year in 2012, Burgan Bank won World Finance’s “Best Private Bank” award along with the “Best Private Bank in Kuwait” in 2012 and 2013 from Capital Finance International. In addition, Burgan Bank received in 2012 the COMMERZBANK award for maintaining high standards of quality, efficiency and reliability while processing Euro currency transactions.

w w w . b u r g a n . c o m

Burgan Bank SAK – Kuwait group, which is a subsidiary of the KIPCO Holding Company - Kuwait. Burgan Bank, a subsidiary of KIPCO (Kuwait Projects Company), is a regional bank with majority owned five subsidiary banks in the MENA region, including Tunis International Bank. Established in 1977, Burgan Bank is the youngest commercial Bank and third largest by assets in Kuwait, with a significant focus on the corporate and financial institutions sectors, as well as having a growing retail and private bank customer base. Burgan Bank is active both in the Gulf region and internationally.

Burgan Bank has five majority owned subsidiaries, which include Gulf Bank Algeria - AGB (Algeria), Bank of Baghdad - BOB (Iraq & Lebanon), Jordan Kuwait Bank - JKB (Jordan) Tunis International Bank – TIB (Tunisia) and fully owned Burgan Bank – Turkey, (collectively known as the “Burgan Bank Group”). Burgan Bank has continuously improved its performance over the years by applying a sustained revenue structure, good asset quality, diversified funding sources and a strong capital base. The adoption of state-of-the-art services and ground-breaking technology has positioned it as a trendsetter in the domestic market and within the MENA region.

The Bank has been growing at a consistent pace; Burgan Bank standalone has 24 branches, 93 ATMs and advanced Internet Banking service which is a testament to their customer focus. The Bank currently employs 733 employees, comprising both Kuwaitis and Non-Kuwaitis which demonstrates the fabric of globalisation and openness in the organisation’s culture.

During 2013, the Bank reported a solid growth in the underlying performance and a significant improvement in the asset quality despite the complexity of the local and regional operating environments. Compared to the same period last year, operating income surged to KD 254 million, registering a growth of 33%, while operating profits before provisions soared to register KD 141 million, reflecting a growth of 18.3%. The solid consistent growth over the past quarters clubbed with the positive leading indicators, enabled the Bank to accelerate the reserves build up out of prudence. Reserves outstanding in 2013 reached KD 232.5 million. The Group’s net profit for the year 2013 reported at KD 20.1 million.

BURGAN BANK

Burgan Bank’s Website:

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In the Real Estate business the group has sizeable investments in both the Arab world and the United States of America. Group entities are also involved in property development as well as property management. Management and Advisory services include direct investment, finance, private placement, mergers and acquisitions, derivatives and corporate restructuring. These services are provided by KIPCO group’s American and British based operations to both group companies and external clients.

w w w . k i p c o . c o m

Kuwait Projects Company (Holding) K.S.C (KIPCO) is a closed shareholding company organised under the laws of the State of Kuwait. KIPCO was registered as an investment company with the Central Bank of Kuwait and its shares are traded on the Kuwait Stock Exchange. On September 29, 1999, the legal status of the company was changed from an investment shareholding company to a holding shareholding company. The major shareholder of the company is Alfutooh Investments Co. W.L.L. In February 2014, KIPCO was awarded a BBB- /A3 rating with a stable outlook from Standard & Poor’s and a Baa3/P-3 rating from Moody’s in September 2013. KIPCO generated a net profit of KD 40.1 million (US$ 142.2 million) for the year ended 31 December 2013—an increase of 27 % on the KD 31.3 million (US$ 111.3 million), reported in 2012.

The KIPCO Group is one of the biggest diversified holding companies in the Middle East and North Africa, with consolidated assets worth more than US$ 30.5 billion under management or control. The Group has substantial ownership interests in a portfolio of over 60 companies operating across 26 countries. The company’s main business sectors are financial services and media. Through the subsidiaries and affiliates of its core companies, KIPCO also has interests in real estate, industry, healthcare, education and the management and advisory sectors.

Kuwait Projects Company has earned a reputation for quality and excellence as a premier investment holding company in the Middle East and North Africa region. The company’s talented and committed workforce of 12,000 employees worldwide helps it create ideas, connect people, foster an entrepreneurial culture and uphold standards of professional excellence and most importantly, its commitment to clients.

KIPCO group is an important and well respected Kuwaiti group. Company strategists centre their activities on two business sectors: Financial Services and Media and Communications. The group is committed to investment in capital, manpower and technology in these sectors. Through its subsidiaries and affiliated companies the group has a presence in four of the five continents. Most of its investments are based in the Middle East region, especially in the countries of the Gulf Cooperation Council (GCC). The group companies utilise the synergies that exist within each sector as well as across sectors and act as responsible corporate citizens in each of their markets. Investments of the group in the financial sector include commercial and investment banking, asset management and insurance. In the Media and Information Technology sector investments include broadcasting and computer industries. The Industrial sector is a widely diversified investment. It varies from dairy products to chemicals.

KIPCO GROUP

KIPCO’s Website

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Higher Institute of Management of Tunis (Institut Supérieur de Gestion de Tunis). He has also participated in various courses and seminars with well-known international institutions in the United States and Europe. Mr. Mohamed Fekih was granted the Best Banker Award of the year 2004 in Tunisia.

Rabih Soukarieh Member of the BoardMember of the Executive CommitteeChairman of the Compensation CommitteeActing CEO, United Gulf Bank, Bahrain

Board Member of FIMBank MaltaBoard and Executive Committee Member of Gulf Bank Algeria,AlgeriaChairman and Chief Executive Officer of Millennium Private Equity, Dubai Board and Executive Committee Member of North Africa Holdings Company, Kuwait Board Member of International Innovative Technologies, United Kingdom Board Member of Virgin Mobile Middle East Company, U.A.E.

Mr. Soukarieh is the Chief Executive Officer of United Gulf Bank having held a number of executive positions within the bank and its subsidiaries intermittently over the past ten years. His career extends for over 20 years in the areas of corporate, commercial and investment banking as well as mobile telecommunications.

Mr. Soukarieh is a Chartered Financial Analyst; he holds an MBA from Northeastern University and a BSc from Indiana University-Bloomingtone

Fethi Houidi Member of the Board Member of the Board Audit Committee

Honorary Chairman of Nessma TV, Tunisia since 2008Mr. Houidi Chaired the Board Audit Committee of TIB (2008-2012)Chairman of the Board of Ooredoo, Tunisia (2002 - 2008)Mr. Houidi occupied high ranking duties in the public sector. He was Ambassador of Tunisia in Beirut (2000-2002)

Mr. Houidi holds a doctorate degree in Science of Communication from the University of Paris II, Paris and Bachelor degree in French Literature from the University of Paris Sorbonne, Paris, France

Masaud M.J. Hayat Chairman of the BoardChairman of the Executive CommitteeKIPCO CEO Banking

Chairman of United Gulf Bank, BahrainChairman of Syria Gulf Bank, SyriaVice Chairman of FIMBank Malta,Vice Chairman of Gulf Bank Algeria, AlgeriaVice Chairman of North Africa Holding Company, KuwaitVice Chairman Royal Capital Group, UAEBoard Member of Jordan Kuwait Bank, JordanBank of Baghdad, IraqBoard Member of KAMCO, Kuwait

Mr Hayat joined KIPCO as CEO, Banking in 2010. He has served the KIPCO Group in a number of key positions since 1997 and has extensive experience in the region’s commercial & investment banking and asset management sector.Mr Hayat has a degree with a major in Economics from Kuwait University, a High Diploma in Banking Studies from the Institute of Banking Studies, Kuwait and attended different courses in Economy, Management and Money in Kuwait and abroad.

Mohamed Fekih Deputy ChairmanMember of the Executive CommitteeManaging Director

Board Member of FIMBank MaltaBoard and Executive Committee Member of Gulf Bank Algeria,AlgeriaChairman of UGFS – North Africa, Tunisia (Asset Management Company)Chairman of SACEM Industries, Tunisia Chairman of the Board Audit Committee of Ooredoo, Tunisia Board Member of Hannibal Lease, Tunisia

Mr. Mohamed Fekih has over 35 years of banking experience. His banking career began in 1976 when he joined Citibank Tunis. Mr. Mohamed Fekih graduated from the University of Law, Political and Economic Sciences of Tunis and holds a Diploma of higher Management Studies from the

BOARD OF DIRECTORS

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Yacoub Algusane Independent Member of the Board Chairman of the Board Risk and Corporate Governance Committee

Mr. Alghusain is owner and proprietor of Coubi group, Oakville Canada. The company’s main business sectors are financial services: wealth management, trading and investment.

Mr. Alghusain was:Board member of Hempel Marine Paints in Kuwait, Bahrain, Qatar & KSA.Board member of Sands Pharmaceutical in Canada and Fujeira Investment Group in Fujeira, United Arab Emirates. Managing Director of Danish Saudi Dairy and Member of the Board of Directors of Kuwait Danish Dairy.Chief Executive Officer of EPFM Management Training, Algeria.

Mr. Alghusain held management positions in various companies in USA, United Kingdom and Kuwait. Mr. Alghusain holds an MBA from Colombia Graduate School of Business, New York and a BA from International Business Law Tokai University, Japan.

Khalid Al Zouman Member of the BoardMember of the Board Risk and Corporate Governance CommitteeBurgan Bank Representative Mr. Al Zouman is the Chief Financial Officer at Burgan Bank Group, Kuwait. Mr. Al Zouman joined Burgan in 2000. Prior to joining Burgan, Mr. Al Zouman was a Manager at Ernst & Young, Kuwait Office. He joined E&Y in September 1988.During his experience in E&Y, Mr. Al Zouman was trained in Pittsburg office, Pennsylvania, USA during two years where he passed his Certified Public Accountant (CPA) examination.Mr. Al Zouman was appointed in January 2013 as Head of GM’s in Kuwait Bank’s Association CommitteeMr. Al Zouman holds a degree of Computer Science from Kuwait University.

Bader Alawadhi Independent Member of the Board Chairman of the Board Audit Committee

Investment and Financial Management Consultant and Representative for Private Companies. Independent Director at United Gulf Bank, Member of the Board Audit Committee and Member of the Nominating & Remuneration Committee. Member of the Board of Directors since 2012.Board Member of Manar Interholdings SL, Spain; Founder and Board Member of MADA Real Estate Development Company, Kingdom of Saudi Arabia; Former Board Member at National International Investment Holding Company, Kuwait; He holds a BSc in Industrial Engineering from the University of Miami, Florida, United States of America and has completed the General Manager Program of Harvard Business School, United States of America. He has over 30 years of experience in the banking sector.

Mohammed Member of the Board Audit CommitteeMember of the Compensation CommitteeUGB Representative

Board and Board Audit Committee member of KIPCO Asset Management Company (KAMCO), Kuwait Board and Board Audit Committee Member Gulf Bank Algeria, Algeria Board and Board Audit Committee Member of Syria Gulf Bank, Syria

Mr. Al Qumaish has been with United Gulf Bank / KIPCO Group since September 2001 and has more than 16 years of commercial and investment banking experience in Internal Auditing, Risk Assessment, Compliance, Corporate Governance and Quality Assurance Services. He was previously employed by Ahli United Bank and Shamil Bank of Bahrain.Mr. Al Qumaish holds an MBA from the University of Strathclyde Business School, United Kingdom, is a Certified Internal Auditor (CIA) and a Certified Information Systems Auditor (CISA).

Al Qumaish

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Mohamed Fekih Managing DirectorDeputy Chairman

Nabil Chahdoura Assistant General ManagerHead of Investment, ALM and BDU Department

Moncef Chaibi Assistant General ManagerCFO, Head of Systems

Zouhair Bhar Senior ManagerHead of Operations

Ali Tebib Senior ManagerChief Risk OfficerCompliance Officer

Mounir Karoui Senior ManagerHead of Treasury

Sami Fezzani ManagerTrade Finance, Financial Institution and Private Banking Department

Fehmi Ben Amar ManagerCorporate Banking Department

Moez Ayachi ManagerHead of Internal ControlMLRO

Anas Labidi Head of Internal Audit

Amr El Kasaby Member of the BoardMember of the Board Risk and Corporate Governance CommitteeBurgan Bank Representative

Mr. El Kasaby is the Group Chief Internal Auditor, Internal Audit Department at Burgan Bank Group, Kuwait. El Kasaby joined Burgan in March 2007. Prior to joining Burgan Bank, El Kasaby was Acting Chief Internal Auditor of Internal Audit Department at Kuwait Finance House, Kuwait from October 2001 through February 2007. While there, he was responsible for managing engagement teams which provide professional auditing services to all departments within KFH.

Prior to joining KFH, El Kasaby was a Senior Manager at Ernst & Young, Kuwait Office. He joined E&Y in September 1988. During his thirteen and a half years, he gained experience in various industries: Banking, Manufacturing, Trading, Investments, Automotive, Oil and Gas.

Mr. El Kasaby graduated from Kuwait University in 1988 with a major in Accounting and Auditing. He is also a Certified Public Accountant since 1993, Certified Fraud Examiner since 2002 and Certified Internal Control Auditor since 2011.

Abdelmajid Karoui Board Advisor

SENIOR MANAGEMENT

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Profit & Loss

2010 2011 2012 2013

Net Interest Income 3 151 3 675 2 429 1 955

Non Interest Income 16 519 21 741 25 888 30 891

Operating Costs 6 675 6 959 7 225 7 198

Operating Profit 12 995 18 457 21 093 25 648

Provisions 975 2 775 2 500 2 973

Net Profit after Provisions 12 020 15 682 18 592 22 675

Dividend Proposed/Paid 5 000 5 000 - 4 000

Balance Sheet

2010 2011 2012 2013

Cash 7 782 14 766 72 793 72 320

Time Deposits 262 070 279 126 252 975 284 641

Investment 141 441 125 016 134 561 133 720

Loans and Advances 119 835 105 964 98 784 126 422

Other Assets 5 425 4 645 4 055 6 186

Total Assets 536 553 529 517 563 168 623 289

Deposits from Banks 180 757 178 432 188 472 184 678

Deposits from Customers 252 565 244 816 258 757 295 886

Other Liabilities 8 443 10 118 9 538 15 398

Total Liabilities 441 765 433 366 456 767 495 962

Shareholders’ Equity 94 788 96 151 106 401 127 327

Capitalization

2010 2011 2012 2013

Share Capital 50 000 50 000 50 000 50 000

Reserves 22 918 17 202 19 882 23 623

Retained Earnings 9 850 13 267 17 927 31 029

Net Profit 12 020 15 682 18 592 22 675

Shareholders’ Equity 94 788 96 151 106 401 127 327

Total Capitalization 94 788 96 151 106 401 127 327

The following is selected consolidated financial information (in US$000’s) of the Bank for the year ending December 31, 2013 :

2011 2012 2013

NET

PRO

FIT

(US$

mill

ions

)SH

AREH

OLDE

R’S

EQUI

TY

(US$

mill

ions

)OP

ERAT

ING

INCO

ME

(US$

mill

ions

)

FINANCIAL HIGHLIGHTS25

20

15

10

5

02011 2012 2013

120

100

80

40

20

0

30

20

10

02011 2012 2013

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The Bank has adapted its strategy to take into consideration the growing competition due to the liberalisation of the financial sector. An emphasis on maintaining customer service and building customer loyalty is of utmost importance. This integral principle forms one of the cornerstones of our operating mode.

The Board of Directors and the management of the Bank are committed to governing and maintaining the Bank’s operations in accordance with the regulatory environment in an effective and efficient manner. Corporate governance policies are regularly reviewed for incorporating best practice and are reinforced to strengthen the ability of the Board to effectively supervise management, enhance long-term shareholder value and protect depositors’ interests. It is the Bank’s policy to strictly abide by the all laws and regulations of the jurisdictions in which it operates.

GRATITUDE

Prior to closing and on behalf of the Board of Directors, I would like to express our special gratitude to the Tunisian Regulatory and other Authorities, especially the Central Bank of Tunis for their continued and valued support, in these unusual times.

I also wish to extend my sincere appreciation to our shareholders for their unrelenting support and to our customers for their continued trust and confidence. Last and by no means least, I would like to acknowledge the loyalty, dedication, professionalism and teamwork of our Senior Management and staff members, who contributed to the positive results in 2013 and upon whom we continue to rely.

Dear Shareholders,

On behalf of the Board of Directors, I am pleased to present the audited and consolidated financial statements of Tunis International Bank (“TIB”, “Bank”) for the year ended December 31st, 2013. Despite Tunisia’s unprecedented and challenging economic conditions over the last year, our bank achieved a profit of US$ 22.68 million, a 20-year record profit. Indeed, 2013 has been yet another year of steady and sustained progress for our bank, underpinning our well established leading role in the Tunisian off-shore banking sector.

BANK’S ACTIVITY

TIB is pleased to announce that its underlying performance continues to deliver steady value increases to its shareholders and thus maintaining the trend established over recent years. TIB’s return on equity reached a strong 21.67%, net earnings per share stands at US$ 4.54, while return on average assets (ROAA) is 3.82 %. We intend to ensure that these fundamentals are maintained, as they form the bedrock for future value accretion. These strong results also helped the Bank reach its objective of joining the ranks of the most profitable banks in Tunisia. This was achieved against a backdrop of more than adequate equity levels, an implementation of rigorous risk management policies and the continued focus on building up a solid customer base.

In 2013, the Bank achieved a consolidated operating income of US$ 32.85 million—a historical high record for the Bank—which is an increase of 16% compared to 2012. Net operating income before write downs and provisions rose by 21.6% reaching US$ 25.65 million. Despite the allowance of loan loss provisions taken on exposure to financial institutions impacted by the economic down turn, net income for the year increased by 21.96%, an equivalent of US$ 22.68 million. The financial review, presented on the following pages, goes over the main issues relating to the year in detail.

We are determined to prevent any temporary setbacks from slowing down the Bank’s progress and development. Through the increasing synergy amongst the banks of Burgan Group, we are considering the feasibility of extending our activities geographically to our neighbouring countries. This strategy will open the door to larger markets holding greater business opportunities with diversified placement and funding sources.

We aim to improve our ability to deliver superior performance in order to exceed our customers’ expectations, optimize shareholders’ value and gain recognition from our clients and community to be amongst the best service providers in our industry. We reiterate that the executive team and your Board of Directors continue to be fully dedicated to achieving these objectives.

CHAIRMAN’S STATEMENT

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FINANCIAL REVIEW 2013

I. BUSINESS PERFORMANCE

Total revenue for the year was US$ 34.31 million while total consolidated assets reached US$ 623.29 million. TIB generated an impressive high operating income of US$ 32.85 million, an increase of 16% on a year-on-year basis. Net operating income before write-downs and provisions rose by 21.6% to US$ 25.65 million. Return on average assets (ROAA) was 3.82% compared to 3.4% in 2012 and return on equity (ROE) was 21.67% compared to 21.17% in 2012.

The effect of maintaining the leading interest rate currencies at their lowest level coupled with the persistent weak global context had an impact on the interest income of the Bank. Over the course of last year, net interest income decreased by US$ 473K. These results are attributed to the pending receipt of a number of interest income transactions, but given the successful fulfillment of a number of loan transactions in the third and fourth quarters, we expect a stronger performance in the coming year.

Income was primarily generated from non-interest earning assets. By diversifying its income sources, the Bank saw a significant increase in non-interest income. The gradual switch from interest revenue to non-interest revenue in the banking income is imposed by the range of zero maintained over interest rates of major currencies.

The increase of the Bank’s commercial activities both locally and abroad generated a noticeable FX trading volume leading to an increase in FX profit by 38.9% over the same period last year. Fees generated from commercial businesses increased by 12.05% and share profit from associated companies increased by 210.84% reaching US$ 18.96 million. Despite the range of zero maintained over interest rates of major currencies, TIB’s interbank placement was consciously increased by US$ 31 million compared to last year’s figures reaching US$ 284.6 million in order to secure its good standing relationship with major European banks.

As the case has been over the past years, the bank maintained tight control over non-interest expenses, which ensured continued success in keeping figures slightly below the ones from the same period last year.

II. INCOME

Net income stands at US$ 22.68 million in 2013 having increased by 21.96% since the previous year. In order to overcome the tight economic conditions and declining interest rates, the Bank initiated a conscious strategy of diversifying income sources. As a result, non-interest income recorded an increase of US $ 30.89 million, rising 19.32% compared to last year. Interest income, which accounted for 55.83% of the bank’s total revenue in 2007 and for 74% in 2000, represented no more than 15.1% in 2013. When compared to 2000 and 2007, the significant change in the proportion of interest income as part of the Bank’s total revenue in 2013 reflects the efforts made to better utilise funds in more profitable opportunities. The strong growth in non-interest income stimulated the Bank’s operating profit and net operating profit.

OperatingProfit

Total Revenues

No Interest Income

Net Interest Income

2012

2013

Main Income Indicators2012/2013

US $million

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Operating Income (US$ million)

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The Bank maintained its tight control over non-interest expenses and thus succeeding to keep figures lower than the same period last year to date. Non-interest expenses decreased by 0.37% dropping to US$ 7.2 million and total expenses, including interest expenses, decreased by 9.32%. Total revenue increased significantly by 11.96%. The Bank continues to make considerable efforts in controlling expenses while keeping the same high standards of service and while seeking more profitable opportunities. A 16% year-on-year increase in operating income, adding up to US$ 34.31 million, reflects the Bank’s efficiency in dealing with a challenging market environment.

III. CAPITALISATION

Shareholders’ funds before appropriation totalled US$ 127.33 million, an increase of 19.67%, or US$ 20.93 million over the last year. The policy of the Bank has always been to maintain a solid balance sheet structure and a strong capital base. The Bank is supervised by the Central Bank of Tunisia (CBT) and is required to maintain a minimum capital ratio of 9%, also known as the Risk Asset Ratio (RAR). TIB’s capital adequacy ratio, which is slightly in excess of 26% is significantly above the CBT and the internationally agreed threshold. TIB is ranked among the top banks in Tunisia when classified by RAR.

Profit after Tax for the year 2013 was US$ 22.68 million i.e. US$ 4.54 per US$ 10. TIB is committed to constantly enhancing value to its shareholders.

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Total Revenue vs. Total Expenses (US$ million)

Total Revenue Total Expenses

Sources of Revenues

Interest icome10 %

Fees & Commissions16 %

Fx. Income11 %

Investment8 %

Associated55 %

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Return on Equity vs. Earning per Share

15,45

2,68

3,67

20,02

28 27,45

31,47

20,73

14,52

19,49

21,17 21,67

5,4

6,56

7,84

6,02

2,43,14

3,72

4,54

ROE EPS

% US$

In 2010, the paid up capital of the Bank has increased from US$ 25 million to US$ 50 million. Consequently, the number of shares increased from 2.5 million shares to 5 million shares.

IV. ASSETS AND LIABILITIES

Balance sheet figures showed positive improvement compared to last year’s same date figures. The Bank’s consolidated balance sheet stands at US$ 623.29 million and up by US$ 60.12 million or 10.68% compared to the previous year. This performance was mainly achieved by 27.98% and 12.52 % jumps in lending activities and interbank placement respectively compared to the same period last year. On the funding side, TIB’s customer deposits reached a historical record of US$ 295.9 million, marking an increase of 14.35%, or US$ 37.13 million over the course of the year 2013.

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The increase of general and legal reserves and the retention of retained earnings contributed to an increase in the Bank’s shareholders’ funds. As of December 31st, 2013, total shareholders’ funds was US$ 127.33 million (up by US$ 20.93 million in 2012), which includes US$ 22.68 million in net profit before distribution.

TIB’s average liquidity ratio of about 122% during the year is significantly above the CBT’s minimum requirements of 100% and the internationally agreed standards. The Bank continues to maintain a liquid balance sheet by having a high proportion of liquid assets at all times. Liquidity is actively managed through dealings in the major world markets through the Bank’s extensive network of international and reputable counterparties. Liquidity and capital adequacy ratios are viewed by bank regulatory authorities and credit analysts as one of the key indicators of a bank’s financial conditions. It indicates the margin of protection available to both depositors and creditors against unanticipated financial difficulties that may be experienced by a bank.

V. LOANS AND ADVANCES

The Bank has no significant concentrations by economic sector, in neither its loans nor its advances portfolio. Credits to banks and financial institutions represent 76% of the total portfolio. The remaining 24% are loans to corporations and individuals. A large part of these loans is secured by liquid assets or bank guarantees. The Bank continues to provide loans on a selective and prudent basis, in order to maintain a low insolvency risk and preserve the value of the Bank.

Subject to proper credit analysis, the Bank started to bring its financial support to companies of good standing, character and positive historical performance in their needs to purchase equipment by providing machinery purchasing loans and/or partially finance their construction requirements. This support differs from what the Bank used to offer up to now, which was mainly working capital and short-term self liquid facilities. It actually offers more suitable project financing facilities with higher amounts and for longer periods. This support will allow the Bank to finance the self-liquidating manufacturing cycle of these companies and to have their turnover domiciled at the Bank.

The Tunisian location of TIB coupled with the location of the Bank’s shareholders has influenced the geographic distribution of its loans and advances. Almost the entire portfolio is within the Middle Eastern and North African countries and with no significant concentration in any single country.

2007 2008 2009 2010 2011 2012 2013

InvestmentLoans

Earning Assets: Loans & Investment (US$ million)

Based on a maturity profile analysis, almost 72% of TIB’s loan portfolio, amounting to US$ 90.8 million, is due to mature within one year. The remaining 28% of facilities have a maturity greater than one year but less than five years. Most of these loan facilities are syndicated loans for banks established in OECD countries.

The method of loan provisioning was set in conformity with IAS regulations and Central Bank of Tunisia directives. Consistent with its policy of prudent provisioning, allowance for loan losses of the Bank fully covers adequately all exposures under noncurrent loans. All exposures pertaining to non performing loans that are over 90 days past due, or in a nonaccrual status have been provided for in compliance with both international and local regulatory requirements.

VI. FUNDING

Funding of the assets were made up essentially of total deposits of US$ 495.96 million (77% of total assets) of which customers’ deposits and interbank deposits amounted to US$ 184.7 million and US$ 295.9 million respectively. As a result of the cognizance of the importance of building up customer loyalty and the continued emphasis on customer service, TIB’s customer deposits rose by 14.35%, or US$ 37.13million reaching a total of US$ 295.9 million. This focus was maintained throughout the year and is an integral principle in our core banking activities. Customers’ deposits represent almost 61.5% of total deposits and 47.4 % of total assets. These deposits continue to remain a relatively stable and permanent source of funding.

The Bank continues to attract deposits on a selective basis and to focus on high net worth individuals and corporate clients with stable resources. With a ratio of customer loans to customer deposits of about 42.71% up from 38.5%, TIB will seek to increase its customer commitments in order to improve the ratio of customer related funding to its loan portfolio. While customer deposits with a tenor of less than a month comprise the majority of total deposits, these deposits are rolled over regularly and constitute a core source of funding for the Bank. An analysis of the customer deposits by currency indicates that the composition of Euro denominated deposits represent roughly 56% of total deposits; the US Dollar ranks second to the Euro representing about 35% of deposits.

Bank DepositsCustomer Deposits

2007 2008 2009 2010 2011 2012 2013

Deposits (US$ million)

26 27

AUDITORS’ REPORT

28 29

FINANCIAL STATEMENTS

SUMMARY

Page

Consolidated Balance Sheet 29Consolidated Income Statement 30Statement of Consolidated Comprehensive Income 30Consolidated Cash Flow Statement 31Consolidated Statement of Changes in Shareholders’ Equity 32Notes to the Consolidated Financial Statements 34

I. CONSOLIDATED BALANCE SHEET

As of December 31, 2013(Amounts in US Dollars)

Notes 2013 2012

ASSETS

Bank Demand and Call Deposits 3 72 320 447 72 793 033

Time Deposits 4 284 640 817 252 974 719

Financial Assets Designated at Fair Value Through P&L 1 870 281 2 036 455

Financial Assets at Fair Value Through Other ComprehensiveIncome 5 18 662 640 28 523 594

Financial Assets Measured at Amortized Cost 6 32 275 328 35 385 118

Investments in Associated Companies 7 80 911 750 68 616 231

Loans and Advances, Net 8 126 421 745 98 784 462

Accrued Interest and Other Assets 9 3 235 578 1 136 192

Property and Equipment, Net 10 2 950 335 2 918 640

TOTAL ASSETS 623 288 921 563 168 444

LIABILITIES AND SHAREHOLDERS’ EQUITY

LIABILITIES 495 961 931 456 767 150

Deposits from Banks and Financial Institutions 11 184 677 779 188 471 616

Deposits from Customers 12 295 886 291 258 757 346

Accrued Interest and Other Liabilities 13 15 397 861 9 538 188

SHAREHOLDERS’ EQUITY 14 127 326 990 106 401 294

Share Capital 50 000 000 50 000 000

Reserves 24 601 593 21 280 547

Foreign Currency Translation Reserve -978 607 -1 398 820

Retained Earnings 53 704 004 36 519 567

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 623 288 921 563 168 444

30 31

II. CONSOLIDATED INCOME STATEMENT

For the Year Ended December 31, 2013(Amounts in US Dollars)

Notes 2013 2012

TOTAL INCOME 34 306 064 30 640 291

Interest Income 15 3 415 448 4 751 499

Other Income, Net 16 11 927 571 10 324 876

Share of Results of Associated Companies 18 963 045 15 563 916

INTEREST EXPENSES 1 460 073 2 322 992

Interest Expenses 17 1 460 073 2 322 992

OPERATING INCOME 32 845 991 28 317 299

Salaries and Benefits 18 4 032 278 4 266 294

General and Administrative Expenses 19 3 165 985 2 958 637

NET OPERATING INCOME(BEFORE WRITE DOWNS AND PROVISIONS) 25 647 729 21 092 368

Allowance for Doubtful Loans 2 972 616 2 500 000

NET INCOME FOR THE YEAR 22 675 113 18 592 368

Number of Shares 5 000 000 5 000 000

Earnings per Share 20 4,54 3,72

III. STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME


2013 2012

PROFIT FOR THE YEAR 22 675 113 18 592 368Net Fair Value (loss) Gain from Financial Assets at Fair Value Through other Comprehensive Income -544 056 -206 486

Other Comprehensive (loss) Income for the Year -544 056 -206 486

TOTAL COMPREHENSIVE INCOME FOR THE YEAR 22 131 057 18 385 882

IV. CONSOLIDATED CASH FLOW STATEMENT


2013 2012

OPERATING ACTIVITIES

Net income of the year 22 675 113 18 592 368

Adjustments for :

Depreciation 437 552 451 612

Social Fund -200 000 -200 000

Share of Profit from Associated Companies -13 300 876 -9 941 299

Operating Profit Before Changes in Operating Assets and Liabilities 9 611 789 8 902 681

CHANGES IN OPERATING ASSETS AND LIABILITIES

Time Deposits -31 666 098 26 151 507

Loans and Advances -27 637 283 7 179 905

Accrued Interest and Other Assets -2 099 386 692 439

Deposits from Banks and Financial Institutions -3 793 837 10 039 271

Deposits from Customers 37 128 945 13 941 794

Accrued Interest and Other Liabilities 5 859 672 -580 074

Net Cash Provided by Operating Activities -12 596 198 66 327 523

INVESTING ACTIVITIES

Sales of Financial Assets Designated at Fair Value Through P&L 166 175 6 419

Purchase of Financial Assets at Fair value Through Other Comprehensive Income -3 036 980 -406 186

Sales of Financial Assets at Fair Value Through Other Comprehensive Income 12 353 875 824 939

Purchase of Financial Assets Measured at Amortized Cost -5 001 493 -6 851 709

Sale of Financial Assets Measured at Amortized Cost 8 111 283 3 679 797

Purchase of Fixed Assets Net -469 247 -553 647

Net Cash Used by Investing Activities 12 123 613 -3 300 387

FINANCING ACTIVITIES

Dividends Paid - -5 000 000

Net Cash Used by Financing Activities - -5 000 000

Increase / Decrease in Cash and Cash Equivalents -472 585 58 027 136

Cash and Cash Equivalents as of 1st January 72 793 033 14 765 898

Cash and Cash Equivalents as of 31 December 72 320 447 72 793 033

32 33

V. CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITYFor the Year Ended December 31, 2013(Amounts in US Dollars)

Share Capital Statutory Reserve GeneralReserve Revaluation Reserve Investment FV

Reserve Foreign Currency

Reserve Retained Earnings Total

Balance as of December 31st, 2011 50 000 000 5 660 556 18 400 000 1 000 000 -7 604 284 - 253 725 28 948 899 96 151 446

Net Income for the Period 18 592 368 18 592 368

Other Comprehensive Income -206 486 -206 486

Absoption of Investment Revaluation Reserve -7 604 288 7 604 284 -4

Total Comprehensive Income -7 604 288 7 397 798 18 592 368 18 385 878

Transfer to Statutory Reserve 1 030 765 -1 030 765 -

Transfer to General Reserve 1 000 000 -1 000 000 -

Transfer to General Reserve (others) 2 000 000 -2 000 000 -

Dividends Distributed -5 000 000 -5 000 000

Transfer to Social Fund -200 000 -200 000

Share of Changes Recognised Directly in Associate’s Equity -1 145 095 -1 790 935 -2 936 030

Balance as of December 31st, 2012 50 000 000 6 691 321 13 795 712 1 000 000 -206 486 -1 398 820 36 519 567 106 401 294

Net Income for the Period 22 675 113 22 675 113

Other Comprehensive Income -544 056 -544 056

Resorption Investment Revaluation Reserve -206 490 206 486 -4

Total Comprehensive Income -206 490 -337 570 22 675 113 22 131 053

Transfer to Statutory Reserve 865 106 -865 106 -

Transfer to General Reserve 1 000 000 -1 000 000 -

Transfer to General Reserve (Others) 2 000 000 -2 000 000 -

Transfer to Social Fund -200 000 -200 000

Share of Changes Recognised Directly in Associate’s Equity 420 213 -1 425 570 -1 005 357

Balance as of December 31st, 2013 50 000 000 7 556 427 16 589 222 1 000 000 -544 056 -978 607 53 704 004 127 326 990

34 35

VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. CORPORATE INFORMATION

The consolidated financial statements of Tunis International Bank for the year ended December 31, 2013 were authorised for issue in accordance with the resolution of the Board of Directors on January 2014.

Tunis International Bank S.A. (TIB) was established in June 1982 in Tunisia as a fully licensed Bank operating mainly with non residents under the current Tunisian law 2009-64 of August 12th, 2009 and under the supervision of the Central Bank of Tunisia. The main activity of the Bank is corporate and private banking and Money Market operations. The Bank is exempted from corporate tax for activities with non residents. The Bank’s registered address is 18, avenue des Etats Unis d’Amerique P.O. Box 81 – Le Belvedere 1002, Tunis, Tunisia.

TIB is a subsidiary of Burgan Bank (Kuwait), member of KIPCO Group (Kuwait).

2. ACCOUNTING POLICIES

2.1. Basis of Preparation

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the International Accounting Standards Board (IASB).

The consolidated financial statements have been prepared on a historical cost basis except for financial assets measured at fair value and financial assets measured at amortized cost.

The consolidated financial statements have been presented in US Dollars being the functional currency of the Bank.

2.2. Principles of Consolidation

TIB has an associated company located in Algeria. For the preparation of the consolidated financial statement of the Bank, TIB has consolidated its shares in AGB using equity method. The associated company included in the consolidated financial statements of TIB is the following:

Name of Associated Company Country Year of Incorporation

Gulf Bank Algeria Algeria 2003

An associated company is one in which the Bank exercises significant influence (but not control) over its operations, generally accompanying, directly or indirectly, a shareholding between 20% and 50% of the equity share capital. Under the equity method, the investment in an associate is initially recognised at cost and adjusted thereafter for the post-acquisition change in the Bank’s share of net assets of the investee. The Bank recognises in the consolidated statement of income its share of the total recognised profit or loss of the associate from the date that influence or ownership effectively commences until the date that it effectively ceases.

Distributions received from an associate reduce the carrying amount of the investment. Adjustments to the carrying amount may also be necessary for changes in the Bank’s share in the associate arising from changes in its equity that have not been recognised in the associate’s profit or loss. The Bank’s share of those changes is recognised directly in equity.

Whenever impairment requirements of IAS 36 indicate that investment in an associate may be impaired, the entire carrying amount of the investment is tested by comparing its recoverable amount with its carrying value. Goodwill is included in the carrying amount of an investment in an associate and, therefore, is not separately tested for impairment.

Unrealised gains on transactions with an associate are eliminated to the extent of the Bank’s share in the associate. Unrealised losses are also eliminated unless the transaction provides evidence of impairment in the asset transferred. An assessment of an associate is performed when there is an indication that the asset has been impaired, or that impairment losses recognised in prior years no longer exist.

2.3. Significant Accounting Judgments and Estimates

In the process of applying the Bank’s accounting policies, management has used its judgment and made estimates in determining the amounts recognised in the consolidated financial statements. The most significant use of judgment and estimates are as follows:

Impairment Allowances on Loans and Advances

The Bank reviews its non performing portfolio at each reporting date to assess whether an allowance for impairment should be recorded in the income statement. In particular, judgement by management is required in the estimation of the amount and timing of future cash flows when determining the level of allowance required. Such estimates are based on assumptions about a number of factors and actual results may differ, resulting in future changes to the allowance.

In addition to specific allowances against individual significant loans and advances, the Bank also makes a collective impairment allowance against exposures which, although not specifically identified as requiring a specific allowance, have a collectivel risk of default.

Impairment of Financial Assets at Amortised Cost

Where there is objective evidence that an identified financial asset is impaired, specific provisions for impairment are recognised in the income statement. Impairment is quantified as the difference between the carrying amount of the asset and the net present value of expected future cash flows discounted at the asset’s original effective interest rate where applicable. The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the income statement. The carrying amount of the asset is reduced directly only upon write-off. The criteria that the Bank uses to determine that there is objective evidence of impairment loss include:

● Delinquency in contractual payments of principal or interest● Cash flow difficulties experienced by the borrower● Breach of loan covenants or conditions● Initiation of bankruptcy proceedings● Deterioration in the borrower’s competitive position● Deterioration in the value of collateral.

36 37

Financial Assets Measured at Amortized Cost:

Financial assets which held within a business model whose objective is to hold assets in order to collect contractual cash flow and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding are carried at amortised cost, less allowance for impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition. Any gain or loss on such investments is recognised in the income statement.

C- Deposits with Banks and Other Financial Institutions

Deposits with banks and other financial institutions are stated net of any amounts written off and allowance for impairment.

D- Allowance for Possible Losses on Income Earning Assets

The Bank provides for possible losses on its income earning assets based upon a review and evaluation of its exposures, taking into consideration the applicable regulations of Central Bank of Tunisia. Income earning assets include placements with other banks, loans and advances, marketable securities investments and commitments and contingencies arising from off balance sheet items.

The Bank has estimated the allowance for possible losses on income earning assets based upon all the circumstances and events known at the date of these financial statements. The allowance for loan losses comprises specific allowances against loans and advances and a collective impairment allowances.

Specific allowances are calculated based on the borrowers’ debt servicing ability and adequacy of security. Specific allowances are made as soon as the debt servicing of the loan has been identified as doubtful and when management considers the estimated repayment realisable from the borrower is likely to fall short of the amount of principal and interest outstanding. These are treated as non-performing loans.

A collective impairment allowance is maintained for losses that are not yet identified but can reasonably be expected to arise, based on historical experience, from the existing overall credit portfolio over its remaining life. In determining the level of the collective impairment allowances, management also refers to the composition of the portfolio, industry and the Tunisian Central Bank requirements.

E- Cash and Cash Equivalents

Cash and cash equivalents comprise cash and those balances of the demand and call deposits with banks including Central Banks and financial institutions.

F- Offsetting

Consolidated financial assets and consolidated financial liabilities are only offset and the net amount reported in the balance sheet when there is a legally enforceable right to set off the recognised amounts and the Bank intends to either settle on a net basis, or to realise the asset and settle the liability simultaneously.

2.4. Summary of Significant Accounting Policies

A- Foreign Currency Translation

Translation of Foreign Currency Transactions

Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency rate of exchange ruling at the balance sheet date. All differences are recognised in the income statement. Income and expenses items incurred in foreign currencies are translated, into the functional currency monthly using the functional currency rate of exchange prevailing at that date.

Translation of Financial Statements of Foreign Operations

Assets and liabilities of foreign operations are translated at exchange rates prevailing at the balance sheet date. Income and expense items are translated at average exchange rates for the relevant period. All resulting exchange differences are taken directly to a foreign currency translation reserve the consolidated statement of changes in equity table.

B- Investments

All investments are initially recognised at cost being the fair value of consideration given and including acquisition charges associated with the investments. After the initial recognition, investments, other than investments in associated companies, are measured as follows:

Financial Assets Designated at Fair Value Through P&L : Investments classified as “Financial assets designated at fair value through P&L” are measured at fair value. Fair value is determined by reference to quoted bid prices. Fair value of investments listed on inactive markets and unlisted investments are determined using other generally accepted methods such as discounted cash flows or adjusted prices of similar investments. Realised and unrealised gains and losses on “Financial assets at fair value through P&L ” are included in the income statement .

Financial Assets at Fair Value Through Other Comprehensive Income : Investments have been presented in financial assets at fair value through other comprehensive income in accordance with IFRS 9 to better reflect the Bank’s business model for managing such assets. Investments classified as “Financial assets at fair value through other comprehensive income” are measured at fair value. Fair value of investments listed on active markets is determined by reference to quoted bid prices. Fair value of investments listed on inactive markets and unlisted investments are determined using other generally accepted methods such as discounted cash flows or adjusted prices of similar investments. Investments whose fair value cannot be reliably measured are booked at cost. All fair value gain or losses are recognised in the statement of comprehensive income and not recycled through the income statement. Dividend income is recognized in the income statement. The derecognition of the financial assets at fair value through other comprehensive income is recognised in profit or loss for the difference between: (a) The carrying amount as of December 31, 2012; and(b) The consideration received.

38 39

5. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME

A- By Nature

2013 2012

Listed Securities 3 373 113 12 619 771

Unlisted Securities 15 289 527 15 903 823

18 662 640 28 523 594

B- By Currency

2013 2012

Kuwaiti Dinars 11 194 896 22 090 301

US Dollars 2 042 785 1 720 390

Bahraini Dinars 3 133 302 3 133 289

United Arab Emirates Dirhams 219 984 824 939

Jordanian Dinars 635 635

Tunisian Dinars 2 071 038 754 675

18 662 640 28 523 594

6. FINANCIAL ASSETS MEASURED AT AMORTIZED COST

A- By Nature

2013 2012

Government Bonds and Debt Securities 967 143 4 133 646

Other Bonds and Debts Securities 31 308 185 31 251 472

32 275 328 35 385 118

B- By Currency

2013 2012

Euros - 3 183 646

USD 26 860 923 26 860 923

KWD - 5 340 549

32 275 328 35 385 118

G- Trade and Settlement Date Accounting

All purchases and sales of consolidated financial assets including “regular way” ones are recognised on settlement date.

H- Interest Income and Expenses

The Bank recognises interest income and expenses on an accrual basis. The Bank does not recognise interest income on loans or other income earning assets which are classified as non-performing.

Loans and other income earning assets are classified as non-performing when these are classified as doubtful or loss, respectively class 2, 3 and 4 following the regulations issued by Central Bank of Tunisia, or when in the opinion of management, collection of interest and/or principal is doubtful.

When a loan is classified as non-performing, any interest income previously recognised but not yet collected is reversed. Interest on non-performing loans and other income earning assets under Central Bank of Tunisia guidelines is recognised in the statement of income only to the extent of cash received.

I- Fixed Assets and Depreciation

Fixed assets are stated at cost less accumulated depreciation. Expenditures which extend the future useful life of assets or provide further economic benefits are capitalised and depreciated. Fixed assets are depreciated using the straight line method over their estimated useful life.

3. BANK DEMAND AND CALL DEPOSITS

2013 2012

Cash 898 441 943 955

Due from Banks 71 422 006 71 849 078

72 320 447 72 793 033

4. TIME DEPOSITS

2013 2012

Up to 3 months 281 594 451 248 397 566

From 3 months to 1 year 3 046 366 4 577 153

284 640 817 252 974 719

40 41

8.2 Maturity Analysis

2013 2012

Up to 3 Months 20 309 287 13 461 201

From 3 Months to 1 Year 70 463 880 70 609 198

Over 1 Year 35 648 578 14 714 063

126 421 745 98 784 462

8.3 Allowances for Loan Losses

The movements of allowance for loan losses are as follows :

SpecificAllowance

GeneralAllowance Total

Balance at 31 December 2012 5 473 763 662 649 6 136 412

Allowances of the Year 2 472 616 500 000 2 972 616

Exchange Adjustment 43 800 - 43 800

Balance at 31 December 2013 7 990 179 1 162 649 9 152 828

In line with Central Bank instruction addressed to all banks in order to build up collective provision to cover potential risks arising from the ongoing, local as well as international, economic and financial environment. TIB has made a collective provision allocation amounting to 663 KUS$. This amount has been calculated using, as a minimum, the model indicated in the CBT circular N°2012-02 of January 11, 2011 followed by the circular N°2012-8 of March 2, 2012.

8.4 Non-Performing Loans

Loans andAdvances

InterestSuspended Provisions Collateral Held

Against NPL

Bank and Financial Institutions 21 160 455 1 669 228 6 625 663 4 000 000

Corporate Businesses, Private and Others 4 445 361 1 053 863 1 364 516 2 071 000

25 605 816 2 723 091 7 990 179 6 071 000

C- By Maturity

2013 2012

Up to 3 Months - 3 183 646

From 3 Months to 1 Year - 5 340 549

Over 1 Year 32 275 328 26 860 923

32 275 328 35 385 118

7. INVESTMENTS IN ASSOCIATED COMPANIES

The Bank has a participation in Gulf Bank Algeria (AGB), a Bank incorporated in Algeria. The sharesof AGB are not listed in any public exchange. Summarised financial information of AGB is set out below:

2013 2012

Total Assets 1 843 405 051 1 345 762 048

Total Liabilities (1 601 715 413) (1 145 057 474)

Net Assets 241 689 638 200 704 574

Revenues 148 886 021 135 955 550

Profit for the Year 63 210 150 51 879 721

8. LOANS AND ADVANCES, NET

2013 2012

Bank and Financial Institutions 103 883 058 84 793 034Corporate Businesses, Private and Others 31 691 515 20 127 840

135 574 574 104 920 874Allowances for Loan Losses (9 152 828) (6 136 412)

126 421 745 98 784 462

8.1 Geographical Analysis

2013 2012

Middle East/Africa 126 421 745 98 784 462

126 421 745 98 784 462

42 43

13. ACCRUED INTEREST AND OTHER LIABILITIES

2013 2012

Accrued Interest Payable 230 914 273 644

Waiting for Settlement 7 161 776 834 910

Accrued Expenses 2 276 364 2 352 995

Retirement Benefits Provision 2 818 699 2 896 596

Other Liabilities 2 910 108 3 180 043

15 397 860 9 538 188

14. SHAREHOLDERS’ EQUITY

2013 2012

Share Capital 50 000 000 50 000 000

Reserves (a) 24 601 593 21 280 547

Foreign Currency Translation Reserve (b) -978 607 -1 398 820

Retained Earnings 31 028 891 17 927 199

Part of Reserve in Associated Company 13 772 161 5 295 984

Net Profit of the Period 22 675 113 18 592 368

127 326 990 106 401 294

a- Reserves are detailed as follows :

2013 2012

Statutory Reserves 7 556 427 6 691 321

General Reserve 16 589 222 13 795 712

Revaluation Reserve 1 000 000 1 000 000

Fair Value Reserve -544 056 -206 486

24 601 593 21 280 547

b- The foreign currency translation reserve represents the net foreign exchange gain (loss) arising from translating the financial statements of the associated companies from their functional currencies into US Dollars.

9. ACCRUED INTEREST AND OTHER ASSETS

2013 2012

Accrued Interest Receivable 462 722 486 783

Prepayments 2 772 856 649 409

3 235 578 1 136 192

10. PROPERTY AND EQUIPMENT

Net value 2013 Net value 2012

Land 700 000 700 000

Building 1 233 766 1 342 593

Office Furniture and Other Fixed Assets 1 016 570 876 047

Total Net 2 950 335 2 918 640

11. DEPOSITS FROM BANKS AND FINANCIAL INSTITUTIONS

2013 2012

Repayable on Demand 14 692 061 1 887 427

Up to 3 Months 167 071 386 182 561 648


184 677 779 188 471 616

12. DEPOSITS FROM CUSTOMERS

2013 2012

Up to 3 Months 290 633 551 253 561 048


295 886 291 258 757 346

44 45

18. SALARIES AND BENEFITS

2013 2012

Wages and Salaries 3 049 173 3 325 934

Social Security Costs 653 923 596 950

Pension Costs 322 800 332 800

Other 6 382 10 610

4 032 278 4 266 294

19. GENERAL AND ADMINISTRATIVE EXPENSES

2013 2012

Depreciation 437 552 451 612

Premises Costs 376 223 357 911

IT Costs 163 252 167 423

Communication 330 034 330 179

Marketing & Advertising Costs 112 444 168 878

Board Fees 160 250 273 000

Tax 121 412 82 493

Administration Costs 1 464 819 1 127 141

3 165 985 2 958 637

20. EARNINGS PER SHARE

2013 2012

Net Profit Attribualble to Ordinary Equity Holders 22 675 113 18 592 368

Weighted Average Number of Ordinary Shares 5 000 000 5 000 000

Basic Earnings per Share 4,54 3,72

21. COMMITMENTS AND CONTINGENCIES

2013 2012

Forward Exchange Contracts Purchases 3 698 281 16 918 948

Forward Exchange Contracts Sales 3 711 614 16 927 485

Letters of Credit, Guarantees and Acceptances 23 176 876 18 047 718

30 586 771 51 894 151

15. INTEREST INCOME

2013 2012

Interest on Interbank Placements 1 424 542 2 241 983

Interest on Loans and Advances 1 990 907 2 509 517

3 415 448 4 751 499

16. OTHER INCOME

2013 2012

Investment Income (16.1) 2 846 246 2 843 387Foreign Exchange 3 614 691 2 602 913Fees and Commissions 5 466 634 4 878 576

11 927 571 10 324 876

16.1 Investment Income

2013

Interest on Financial Assets at Amortized Cost 1 567 769

Dividends from Financial Assets at Fair Value Through Other Comprehensive Income 758 655

Dividends from Financial Assets Designated at Fair Value Through P&L 34 783

Losses on Financial Assets Designated at Fair Value Through P&L -63 039

Gains from Financial Assets at Fair Value Through Other Comprehensive Income 548 078

2 846 246

17. INTEREST EXPENSES

2013 2012

Interest Expenses on Deposits and Collaterals 354 965 490 644

Interest Expenses on Interbank Deposits 1 105 108 1 832 347

1 460 073 2 322 992

46 47

23. INTEREST RATE RISK

Interest rate risk arises from the possibility that changes in interest rates will affect future profitability or the fair values of financial instruments. The Bank’s interest sensitivity position is based on maturity dates and contractual repricing arrangements. As of December 31, 2013 it was as follows:

Up to 3 Months

3 Months to 1 Year

Over 1 Year

Non Interest Bearing Items TOTAL

Bank Demand and Call Deposits 71 422 006 - - 898 441 72 320 447

Time Deposits 281 594 451 3 046 366 - - 284 640 817

Securities Held for Trading - - - 1 870 281 1 870 281

Investments Held at Fair Value Through Equity - - - 18 662 640 18 662 640

Held to Maturity Investments - - 32 275 328 - 32 275 328

Investments in Associated Companies - - - 80 911 750 80 911 750

Loans and Advances, Net 20 309 287 70 463 880 35 648 578 - 126 421 745

Accrued Interest and Other Assets - - - 3 235 578 3 235 578

Property and Equipment - - - 2 950 335 2 950 335

Total Assets 373 325 744 73 510 246 67 923 906 108 529 025 623 288 921

Deposits from Banks and Financial Institutions 181 763 447 2 914 332 - - 184 677 779

Deposits From Customers 290 633 551 5 252 740 - - 295 886 291

Accrued Interest and Other Liabilities - - - 15 397 861 15 397 861

Shareholders’ Equity - - - 127 326 990 127 326 990

Total Liabilities and Shareholders’ Equity 472 396 998 8 167 072 - 142 724 851 623 288 921

22. FAIR VALUE HIERARCHY

IFRS 7 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources; unobservable inputs reflect the Bank’s market assumptions. These two types of inputs have created the following fair value hierarchy:

• Level 1 – Quoted prices in active markets for identical assets or liabilities. This level includes listed equity securities and debt instruments on exchanges.

• Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices).

• Level 3 – Inputs for the asset or liability that are not based on observable market data (unobservable inputs). This level includes equity investments and debt instruments with significant unobservable components.

This hierarchy requires the use of observable market data when available. The Bank considers relevant and observable market prices in its valuations where possible.

Level 1 Level 2 Level 3 TOTAL

Financial Assets Designated at Fair Value Through P&L Equity Securities 1 870 281 - - 1 870 281 Debt Securities - - - -Financial Assets at Fair Value Through Other Comprehensive Income Equity Securities 3 373 113 15 289 527 - 18 662 640 Debt Securities - - - -Financial Assets Measured at Amortized Cost Equity Securities - - - - Debt Securities 32 275 328 - - 32 275 328Investments in Associated Companies Equity Securities - 80 911 750 - 80 911 750 Debt Securities - - - -

37 518 722 96 201 277 - 133 719 999

48 49

25. LIQUIDITY RISK

The maturity profile of the assets and liabilities at December 31, 2013 was as follows :

Up to 3 Months

3 Months to 1 Year

1 Year to 5 Years Undated TOTAL

Bank Demand and Call Deposits 72 320 447 - - - 72 320 447

Time Deposits 281 594 451 3 046 366 - - 284 640 817

Securities Held for Trading 1 870 281 - - - 1 870 281

Investments Held at Fair Value Through Equity - - - 18 662 640 18 662 640

Held to Maturity Investments - - 32 275 328 - 32 275 328

Investments in Associated Companies - - - 80 911 750 80 911 750

Loans and Advances, Net 20 309 287 70 463 880 35 648 578 - 126 421 745

Accrued Interest and Other Assets - - - 3 235 578 3 235 578

Property and Equipment - - - 2 950 335 2 950 335

Total Assets 376 094 466 73 510 246 67 923 906 105 760 303 623 288 921

Deposits from Banks and Financial Institutions 181 763 447 2 914 332 - - 184 677 779

Deposits from Customers 290 633 551 5 252 740 - - 295 886 291

Accrued Interest and Other Liabilities - - - 15 397 861 15 397 861

Shareholders’ Equity - - - 127 326 990 127 326 990

Total Liabilities and Shareholders’ Equity 472 396 998 8 167 072 - 142 724 851 623 288 921

Currency wise interest rates are as follows:

2013 2012

US Dollars % %Assets 0.02 - 8.62 0.05 - 8.60Liabilities 0.06 – 2.00 0.06 – 1.25Kuwaiti Dinars Assets 0.0 – 0.0 2.37 – 2.5Liabilities 2.00 – 2.50 2.00 – 2.50Tunisian Dinars Assets 4.40 – 6.50 3.30 – 6.25Liabilities 3.00 - 5.25 2.25 - 5.00Euros Assets 0.09 - 7.14 0.01 - 7.00Liabilities 0.03 - 2.00 0.06 - 2.30British Pounds Assets 0.35 – 1.00 0.40 – 1.45Liabilities 0.25 – 0.44 0.25 – 0.50

24. CURRENCY RISK

Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. The Bank considers the US Dollar as its functional currency. Positions are monitored on a daily basis and hedging strategies are used to ensure positions are maintained within established limits. The Bank had the following net exposures denominated in foreign currencies as of December 31, 2013:

2013 - 000’USD

Long Position Short Position

Euros - -357Tunisian Dinar 20 -Saudi Riyals 24 -Japanese Yen - -9Canadian Dollar 43 -Kuwaiti Dinar 184 -Bahraini Dinar - -50Danish Kroner 70 -Libyan Dinar 16 -Algerian Dinar 7 -Swiss Francs - -1Arab Emirate Dirham 25 -Other 19 -9

408 -426

50 51

December 2013

Income Statement Major

Shareholder “BB”

Associated Companies

“AGB”

Key Management

Others Related Parties

TOTAL

Interest Income 118 091 - 24 082 405 278 547 451

Other Income - - 1 235 403 1 235 403

Share of Profit of Associates 18 963 045 18 963 045

Interest Expense -488 528 - - -197 388 -685 916

General & Administrative Expenses - - - -630 000 -630 000

-370 437 18 963 045 24 082 813 293 19 429 983

Key Management Compensation

Remuneration paid or accrued in relation to key management, including Directors and other Senior Officers was as follows:

2013 2012

Short Term Employee Benefits - Including Salary & Bonus 679 064 892 030

Accrual for End of Services Indemnity 55 735 64 364

734 799 956 394

26. RELATED PARTY BALANCES & TRANSACTIONS

December 2013

Assets Major

Shareholder “BB”

Associated Companies

“AGB”

Key Management

Others Related Parties

TOTAL

Bank Demand and Call Deposits 36 444 6 596 - 4 599 47 639

Time Deposits 43 645 920 - - 15 000 000 58 645 920

Financial Assets Designated at Fair Value Through P&L - - - 199 011 199 011

Financial Assets at Fair Value Through Other Comprehensive Income

- - - 4 167 930 4 167 930

Financial Assets Measured at Amortized Cost - - - 10 323 935 10 323 935

Investment Managed by a Related Party - - - 805 614 805 614

Investments in Associated Companies - 80 911 750 - - 80 911 750

Loans and Advances, Net - - 1 042 724 - 1 042 724

Accrued Interest Receivable 98 172 - - 20 278 118 450

43 780 536 80 918 346 1 042 724 30 521 367 156 262 973

Liabilities

Deposits from Banks and Financial Institutions 54 915 014 - - 15 420 032 70 335 046

Accrued Interest Payable 32 248 - - 36 537 68 785

54 947 262 - - 15 456 569 70 403 831

Off-Balance Sheet

Letters of Credit, Guarantees and Acceptances - 9 783 893 - - 9 783 893

- 9 783 893 - - 9 783 893

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27. SEGMENTAL INFORMATION

2013 2012

Assets

North America 61 458 308 12 622 000

Europe 157 479 891 138 680 000

Middle East / Africa 404 350 722 411 866 444

623 288 921 563 168 444

Liabilities

Europe 50 000 000 43 842 000


495 961 931 456 767 150

2013 2012

Investment Income


North America 120 015 399 957

Europe - 313 020

2 846 246 2 843 387

Interest Income

Europe 260 702 493 044


3 415 448 4 751 499

Other Income


9 081 325 7 481 489

28. CREDIT RISK

Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The Bank manages credit risk by setting limits for individual counterparties, and groups of counterparties and for geographical and industry segments. The Bank also monitors credit exposures, and continually assesses the creditworthiness of counterparties. In addition, the Bank obtains security, where appropriate, enters into master netting agreements and collateral arrangements with counterparties, and limits the duration of exposures. For details of the composition of the assets by geographic segment refer to note 27.Credit risk in respect of derivative financial instruments is limited to those with positive fair values.

29. CONCENTRATIONS

Concentrations arise when a number of counterparties are engaged in similar business activities, or activities in the same geographic region, or have similar economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions. Concentrations indicate the relative sensitivity of the Bank’s performance to developments affecting a particular industry or geographic location. The distribution of assets and liabilities by geographic region is disclosed in note 27.

30. MARKET RISK

Market risk is defined as the risk of loss in the value of on or off balance sheet financial instruments caused by a change in market.

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III. CAPITAL ADEQUACY

The Bank’s Approach to Capital Adequacy Assessment

The Bank has in place a system under which the capital adequacy of the Bank is being calculated on a monthly basis, based on the CBT circular instructions n°91-24 and subsequent amendments. Based on this system, the CAR of the Bank has been above the required threshold of 9% throughout 2013.

TABLE II: Capital Requirement for each Portfolio US$’000s

Claims on Banks 383,264Claims on Corporate 32,936Retail Exposures 4,310Past due Exposures 22,883Other Exposures -Total 443,393Total Credit Risk Weighted Exposure 161,465Total Capital Ratio (%) 26.59%TierR I Capital Ratio (%) 25.05%

IV. RISK MANAGEMENT

The Bank has set up a Risk Management Structure (RMS) headed by the Chief Risk Officer who reports directly to the Chief Executive Officer, in order to ensure the independence of the function. The RMS does not have any business targets in terms of either levels of business, income, or profits to be achieved, while ensuring its objectivity in analyzing the various risks. The mission of the RMS is to identify, measure and control various risks and report to the top management of the Bank on the effects and, where possible, mitigations. The Bank has a well documented Risk and Disclosure Policy that classifies the risks that it faces in its day-to-day activities into certain families of risks.

Accordingly, specific responsibilities have been given to various officers for the identification, measurement, control and reporting of these identified families of risks. Among the families of risks are:

• Credit Risk, which includes default risk of clients and counterparties;• Market Risk, which includes interest rate, foreign exchange and equity risks;• Operational Risk, which includes risks due to operational failures.

I. INTRODUCTION

Under the directives of the Central Bank of Tunisia (CBT), banks operating in Tunis are required to cover comprehensively the disclosure of information as required by Circular n°2011-06 of May 20th, 2011. This information is similar to the disclosure of information under Pillar 3 of the Revised Capital Adequacy Standard (RCAS) in line with the Basel Committee’s revised capital adequacy framework issued in June 2004, popularly known as Basel II, with effect from 1st of July 2012. Given below are the necessary disclosures pertaining to the Bank’s Capital Structure, Corporate Governance, Risk Management objectives and policies, information relating to the Credit Exposure, Credit Risk Mitigation, Market Risk and Operational Risk, provisioning policy and compensations as required under the CBT regulations.

Circular n°2011-06 of May 20th, 2011 aims to provide a consistent and comprehensive disclosure framework that enhances comparability between banks and further promotes improvements in risk management practices. The Bank has implemented the requirements laid down by CBT disclosure, covering both the qualitative and quantitative items. These are also published in the Bank’s Annual Report and hosted on the Bank’s Website.

II. CAPITAL STRUCTURE

• Number of SharesThe Bank’s share capital on December 31st, 2013 was represented by 5,000,000 shares whose book value was US$ 10 per share. All shares carry the same economic, voting and related rights.

• Main Features of Capital InstrumentsThe Bank’s paid-up capital consists entirely of ordinary shares which have proportionate voting rights. None of these shares are traded in the Tunisian Stock Exchange (TSE).

TABLE I: Consolidated Capital Structure of the BankUS$’000s

Paid-up Share Capital 50,000Reserves 22,534Less: Treasury Shares -Less: Investments in Unconsolidated SubsidiariesTier 1 Capital 40,43845% of Fair Valuation Reserves 827General Provision 663Tier 2 CapitalTotal Eligible Capital after Deductions 42,928

As per CBT regulations, Tier 2 capital cannot exceed 100% of Tier 1 and subordinated debts cannot exceed 50% of Tier 1.

RISK MANAGEMENT REPORT

56 57

to the loan to be granted, the threshold levels for top-up of security and liquidation. The policy and procedures of the Bank also lay down the required methods and intervals for valuation of the different collaterals so as to determine the necessity for top-up by the client and/or procedure for liquidation.

The collaterals accepted by the Bank mainly consist of cash in the form of deposits with the Bank, shares, bonds, insurance and bank guarantees. Other various forms of real estate and equipment are also considered. For the purposes of credit risk mitigation, only collaterals that are permitted by the CBT and where the conditions stipulated are fully met are considered.

As for shares, bonds and the like, the Bank fulfills the stipulated regulatory requirements for their periodic valuation. In regards to real estate assets, the Bank accepts only valuation from professionals and valuers recognized by the government, who are required to assess the value of the collateral before they are accepted as security. The periodicity of the valuation must again be in-line with the regulatory requirements.

B. Market Risk

1. Strategies and Processes

The operations of the Bank’s Treasury and Investment activities give rise to the market risks assumed by the Bank. The Bank has well-defined and CBT compliant Treasury, Investment and ALCO Policies. The Policies cover rules concerning the positions that the Bank assumes in the course of its trading in foreign exchange, equities and interest rate risk positions of its banking book in terms of mismatches in maturity and/or re-pricing periods. Presently, the Bank does not trade in commodities. The ALCO discusses and deliberates on all aspects of credit, market and liquidity risks. These meetings are chaired by the Chief Executive Officer.

The ALCO policy has been framed with due consideration for the respective local regulations that have an effect on the market risks assumed by each of them. While quantifying market risks, the Bank considers risks arising out of movements in interest rates (for each of the currencies in which it holds positions), foreign exchange and price of trading investments.

2. Structure and Organization

The Risk Management, in consultation with both Treasury and Investment Departments, lays down the various market limits and rules. These limits are approved by the Board Executive Committee and the Board of Directors. These limits relate to intra-day and overnight positions as well as positions under different maturity buckets, counterparty exposure limits, etc. While the adherence of these limits is monitored by the Investments and Treasury Departments, they are also independently monitored by the Risk Officer and Internal Control Department 3. Scope and Nature of Reporting Systems

The Bank has software systems that allow independent, on-line monitoring of intra-day positions from outside the Dealing Room. This system also enables the Market Risk Controller to monitor the activities of the various members of the Treasury Dealing Room simultaneously as the dealing transactions are made.

The RSM is responsible for ensuring that relevant details for measurement of the risk and allocation of the appropriate risk weights to the exposures, so that the computation of the RWAs can be made appropriately.

A. Credit Risk


Before extending a loan, a thorough Credit Risk assessment is done. The Credit Risk assessment includes borrower risk analysis, industry risk analysis, historical financial analysis, projected financial performance, the conduct of the account and security of proposed loan. The assessment is initiated by the Relationship Manager or the Account Officer and is approved by the Credit Review Committee. The Credit Committee, which is under elevated authority, approves the credit proposals. The Executive Committee of the Board approves any proposal that surpasses the authority limit of the management. The Board of Directors reviews the proposals approved by the Executive Committee.

In determining a single borrower or a large loan limit, the instructions of the CBT are strictly followed. Segregation of duties has been established for Credit Approval, Relationship Management and Credit Administration. Internal Audit is conducted on periodical intervals to ensure compliance with Bank and Regulatory policies. Loans are classified as per CBT’s guidelines.


The Credit Analysis function is responsible for making independent financial analysis and appraisal of credit proposals that are marketed by the business groups. There are detailed guidelines for financial analysis that are followed in order to provide independent views and recommendations on credit proposals brought by the Relationship Managers of the various business groups. These proposals are then further processed, in accordance with the delegation of powers approved by the Board. The Bank’s structure of delegation of powers envisages that a credit approval requires, in addition to the recommendation of the concerned business group, the concurrence of an official of the CRO. This ensures that the approval process has an in-built mechanism of checks and balances with the concurrence of an independent functionary before a credit proposal can be approved.

3. Scope and Nature of Reporting Systems

After obtaining the approval for the credit proposal, the Credit Control unit (Credit Administration) is entrusted with the responsibility of checking that the conditions precedent for the draw-down of the credit facilities as approved are fulfilled before the facilities are made available to the client or counterparty. This unit, which is independent of the Credit Analysis Unit of the Department, also follows up on the conduct of the accounts by the client or counterparty in accordance with the terms of approval and reports any irregularities necessitating corrective action. The Bank has in place an Internal Credit Rating System. This system, which consists of various steps to be followed by the Credit Analyst, indicates the client score.

4. Hedges and Mitigants

The Credit Policy of the Bank outlines guidelines for mitigating risks in terms of availability of credit enhancements and/or collaterals to support the exposure, the coverage ratio of collateral value

58 59

period of past due is more than 180 days but less than 1 year and 100% if the past due period exceeds 1 year. However, based on the circumstances of a particular exposure, if and when the Bank considers it necessary, a higher level of provisioning is made even if these default periods are not attained.

In all cases of non-performing exposures, the Bank does not recognize any accrued income. Interest or commission on such exposure is recognized as income only on actual receipt.

C. Credit Risk Management Policy

In addition to the financial position of the client or counterparty, the Bank gives them due consideration in their respective sector, as well as the exposure of the Bank to the group to which the client or counterparty belongs, the nature of credit facilities, their purpose and the source of repayment and any other considerations that are essential for the credit assessment. The availability, or otherwise lack of acceptable collateral, the standing and reputation of the client or counterparty, market reports, the exposures assumed by other banks on the same client or counterparty are some of the considerations that are examined before approving credit facilities. As a general rule, all credit exposures are reviewed at least once a year.

TABLE III: Credit Risk ExposureGross Credit Exposure US$’000s

Funded Unfunded

Claims on Sovereigns 30,757

Claims on Banks 334,884 17,623

Claims on Corporate 27,382 5,554

Retail Exposures 4,310

Past due Exposures 22,883

Total 420,216 23,177

TABLE IV: Geographic Distribution of Gross Credit ExposuresUS$’000s

Tunisia Other MENA Countries Europe Turkey Rest of

the World Total

Claims on Sovereigns 30,757 30,757

Claims on Banks 90,730 58,403 141,745 44,006 334,884

Claims on Corporate 27,147 235 27,382

Retail Exposures 2,661 1,442 207 4,310

Past due Exposures 3,391 19,492 22,883

Total 154,686 79,572 141,952 44,006 420,216

4. Hedges and Mitigants

A major part of the banking and trading books of the Bank are in Euro and US Dollars. The Bank uses interest rates and currency swaps to hedge its interest rates and currency positions in foreign currencies.

C. Operational Risk


The Bank has set up an Incident Management System (IMS) under which various incidents of operational risks are noted and registered with all the relevant details. These incidents may relate to either actual or potential loss resulting from an operational failure or dysfunction, either due to external or internal causes. Whether the incident generates a loss, a profit or have no material incidence on the banks’ net income should be reported. This will enable the Bank not only to take corrective action as needed to prevent reocurrence of such incidents, but also to institute adequate systems and procedures to quantify the operational loss that the Bank may be exposed to, in its various departments, functions and service provisions. These incidents are, at appropriate intervals, reported to the top management of the Bank. The Bank also has a Business Continuity and Recovery Plan. This plan stipulates that periodic testing must be conducted to detect events affecting the Bank’s business processes.


The various operational functions of the Bank come under the Operations Group headed by the Chief Operating Officer (COO), who oversees the day-to-day operational and support functions. In order to ensure the independence of the various operating departments, the COO reports directly to the CEO.

V. CREDIT EXPOSURES

A. Definition of Past Due and Impaired Assets

In regards to income recognition, asset classification and provisioning requirements, the Bank, as a matter of policy, follows the relevant regulations of CBT. Where considered appropriate for reasons of prudence, a more conservative policy is followed in regard to the amounts of loan loss provisions instead of using the norms laid down in these regulations. As practiced by the international banking industry and as laid down under the CBT regulations, an exposure is considered as non-performing if it continues to remain past due for more than 90 days.

B. Approaches for Specific and General Provisions

As required by CBT regulations, the Bank maintains two types of loan loss reserves:

1. A general provision called “Provision Collective”: the Bank was required to maintain this provision on the outstanding performing exposure, both on and off-balance sheet.2. In regards to impaired assets, the Bank determines the necessary level of specific provision in terms of the norms laid down under the CBT regulations. These regulations require the Bank to make a provision of at least 20% of the value of the exposure (net of the value of eligible collateral as defined therein) if it remains past due for more than 90 days but less than 180 days; 50% if the

60 61

Thus, if the same legal entity that has obtained credit facilities from the Bank also maintains credit balances in its accounts, the Bank would normally have the legal right to set off the credit balances against its own dues. In respect of some counterparty banks, there are specific agreements that provide for netting on and/or off-balance sheet exposures. Additionally, in specific cases, the Bank approves credit facilities to a client against a pledge or block of his deposits to cover either all or part of his dues.

B. Collateral Policy

It is the Bank’s endeavour to obtain acceptable collateral covers for its exposures as far as commercially practicable. The collateral normally consists of real estate properties, shares listed in leading stock exchanges, other traded and untraded securities such as bonds, etc. Under Tunisian laws, bank guarantees such standby letters of credit (SBLCs).

C. Main Types of Collateral

The Credit Policy of the Bank defines the types of collateral that are acceptable and the collateral coverage ratio, which is the ratio of the value of the collateral to the exposure, for each type of acceptable collateral. The policy also stipulates that the terms of credit facilities should stipulate a top-up level. If the value of collateral falls to a level where the actual coverage available breaches the top-up level, the client is required to either lodge additional collateral or reduce his outstanding dues accordingly. If the client fails to do either of these and if the value of the collateral falls further, the terms also stipulate a liquidation threshold, which is the level of coverage at which the Bank may proceed to liquidate the collateral to realize its dues. These various ratios, after approval, are monitored independently by the Credit Administration Unit and reported to the concerned business group for follow-up with the client.

TABLE VIII: Net Credit Exposure After Risk Mitigation US$’000s

Before CRM CRM Net Exposure

Claims on Sovereigns 30,757 0 30,757

Claims on Banks - Rated 321,350 58,646 262,704

Claims on Banks - Unrated 31,157 0 31,157

Claims on Corporate 32,936 21,792 11,144

Retail Exposures 4,310 876 3,434

Past due Exposures 22,883 6,072 16,811

Total 443,393 87,386 356,007

D. Related Party Exposures In reference to CBT circular n°2012-09, total exposure on related parties should not exceed the Bank’s shareholders’ funds at any time. With a ratio of 17.68%, TIB complies with the local regulation.

TABLE V: Gross Credit Risk Exposures by Residual Contractual Maturity US$’000s

Up to 3 Months

3 to 6 Months

6 to 12 Months

Over 12 Months Total

Claims on Sovereigns 30,757 30,757

Claims on Banks 250,838 24,620 45,911 13,515 334,884

Claims on Corporate 1,906 2,284 426 22,766 27,382

Retail Exposures 249 42 227 3,792 4,310

Past due Exposures 22,883 22,883

Total 283,750 26,946 46,564 62,956 420,216

TABLE VI: Impaired loans and Provisions by Standard PortfolioUS$’000s

Impaired Loans (Net of Suspended Interest and Collateral)

Specific Provisions

General Provisions

Specific Provision Charges / Charge-

offs (-)

Claims on Banks 15,491 6,626 1,163 2,224

Claims on Corporate 1,320 1,364 249

Retail Exposures 0 0 0 0

Total 16,811 7,990 1,163 2,473

TABLE VII: Geographical Distribution of Impaired Loans (Net)US$’000s

TunisiaOther MENA

CountriesEurope Turkey

Rest of the

WorldTotal

Claims on Banks 15,491 15,491

Claims on Corporate 1,320 1,320

Retail Exposures

Total 1,320 15,491 16,811

VI. CREDIT RISK MITIGATION (CRM)

The main CRM techniques applied by the Bank are based on eligible collaterals. On and off-balance sheet netting is also used to mitigate client risks.

A. On and Off-Balance Sheet Netting

The generic legal documents that the Bank obtains from its clients normally include a clause that permits the Bank to offset the client’s dues to the Bank against the Bank’s dues to the client.

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TIB’s Senior Management regularly revisits the Bank’s organizational and managerial structures, the technological platform and the operational procedures, in order to adopt the most appro-priate and efficient management and business practices as well as systems. The control and man-agement of the Bank is undertaken through the following bodies:

● The General Assembly of the Bank;● The Board of Directors;● Committees of the Board of Directors, which assist the Board in the discharge of its duties,

include:▪ The Executive Committee,▪ The Board Audit Committee,▪ The Board Risk and Corporate Governant Committee,▪ The Board Compensation Committee;

● Management Committees includes:▪ The Management Committee,▪ The Credit Committee,▪ The Assets and Liabilities Committee,▪ The Internal Audit Committee,▪ The Investment Committee,▪ The IT Risk Committee.

The Board meets on a quarterly basis and additionally when required. The Committees of the Board of Directors meet at least six times a year. The Board Audit Committee and the Board Risk and Corporate Governant Committee are headed by independent directors. All management committees meet on a monthly basis.

ShareholdersOur shareholders are involved in decisions that are of material importance to the Bank, as is legally required, including amendments to the Articles of Association, the appropriation of profit, the authorization to issue new shares and important structural changes.

Voting and Minority RightsTIB has only one class of share, with each share carrying the same voting right. There are explanations on the Bank’s capital structure, qualifications of shares and the rights on shares in the Articles of Incorporation. Currently TIB does not have any Board member elected by the minority shareholders.

Tunis International Bank is subject to banking regulations and provisions of the Corporate Governance Principles which are applicable to Tunisian Banks according to the Central Bank Legislation. During the year, activities particularly with regard to developing Corporate Governance Principles structure that the Bank is subject to have been performed. Effective corporate governance is an important part of our identity. The essential framework for this is provided first and foremost by the Central Bank of Tunisia, which was last amended in June 2012. The adopted corporate governance system ensures a responsible and value-driven management and control of the bank. It has four key elements: good relations with shareholders; effective cooperation between the Management Board and Supervisory Board; a system of performance related compensation; and transparent and timely reporting.

I. CORPORATE GOVERNANCE

The Corporate Governance Manual provides the legal, institutional and regulatory framework for the enterprise risk management activity of the bank. The manual includes:

● Corporate governance, which provides the structure through which the objectives of the company are set and the means of attaining those objectives and monitoring performance are determined. The structure consists of the Board of Directors and its sub-committees along with the management committees.

● Insider Trading, Code of Ethics, Related Party Transactions and Segregation of Duties.

● The Risk Management Infrastructure and System at TIB is managed in accordance with the Risk Policy and Guidelines. These principles, guidelines and procedures reflect the risks inherent in TIB’s businesses. They are reviewed periodically and amended when necessary and ratified by the Board.

Corporate GovernanceThe foundation of TIB’s corporate governance policy is to protect its shareholders’ and depositors’ interests by exercising prudent credit and risk control measures. The Bank’s policy is also to obtain yields that are commensurate with the risks taken. At all times, TIB actively monitors its book of loans and advances and strives to conduct extensive due diligence on its counterparties prior to extending funded or unfunded facilities.

The Board of Directors and the management of the Bank are committed to governing and maintaining the Bank’s operations effectively and efficiently within the regulatory environment. Corporate governance policies are regularly reviewed to ensure that best practice is incorporated and reinforced to strengthen the ability of the Board to effectively supervise management, enhance long-term shareholder value and protect the interests of depositors. It is also the Bank’s policy to strictly abide by the all laws and regulations of the jurisdictions in which it operates. The adopted Code of Conduct applies to all employees, officers, trainees, part-time staff and other Bank representatives including members of the Board of Directors.

CORPORATE GOVERNANCE REPORT

64 65

As stipulated by CBT circular n° 212-06 article, there are two independent non-executive directors on the Board. The rules and regulations of the Board include the definition of independent director established in the Corporate Governance Manual, according to which those non-executive directors that have been appointed based on their personal or professional status and who perform unconditioned by relationships with the Bank, its shareholders or its officers, will be considered independent directors.

II. CHAIRMAN AND CHIEF EXECUTIVE OFFICER

The Chairman of the Board is the highest ranking officer of the Bank and accordingly, all the pow-ers that may be delegated under Law, the by-laws and the rules and regulations of the Board have been delegated to him. He is responsible for directing the Bank’s management team, always in accordance with the decisions and standards set by the shareholders’ acting at a general share-holders’ meeting and by the Board within their respective purview.

The Chief Executive Officer, acting by delegation and reporting to the Board of Directors and the Chairman, as the highest ranking officer of the Bank, is charged with the conduct of the business and highest executive duties.

There is a clear separation of duties between the Executive Chairman, the Chief Executive Officer, the Board and the committees thereof, as well as various checks and balances that assure proper equilibrium in the corporate governance structure of the Bank. The powers delegated to the Chief Executive Officer and those delegated to the Chairman do not include, in either case, those reserved by the Board to itself.

III. NUMBER, STRUCTURE AND INDEPENDENCY OF THE COMMITTEES ESTABLISHED WITHIN THE BOARD

The administrative and organizational structuring required by the Banking Law (CBT Circular n°2011-06 dated May 20, 2011) and related legislation, exists in TIB. A member of the Board can’t be appointed to more than one committee within the framework of the related regulation. In Reference to this Circular, the Board is composed of 9 members including the Chairman and Deputy Chairman. Also, there are two strong and independent and non-executive elements on the Board to exercise objective judgment on the Bank’s affairs independently. The Board has constituted, as a decision-making committee, an executive committee, with delegated general decision-making powers in credit, investment and appointment. The Board also has other committees at its disposal with supervisory, information, advisory and proposal powers (the audit, risk and corporate governance and remuneration committees).

In addition, a communication policy was approved in conformity with the required law. Furthermore, to comply with the new banking regulations of the Corporate Governance Principles in Kuwait, the Board Risk Committee was assigned to act as a Corporate Governance Committee.

With the exception of the Chief Executive Officer, all Board of Directors are considered non-executive members. The election of TIB Board members is implemented according to the Articles of Incorporation and the Banking Law. As per the Banking Law, the Chief Executive Officer of the Bank shall be a natural member of the Board. Backgrounds and terms of office of the Board of Directors of TIB along with the committees in which they take charge are presented in the annual reports.

Dividend RightsDividend distribution is a regular item on the agenda of the General Shareholders’ Meeting and is presented for the approval of shareholders and implemented after the approval at General Shareholders’ Meeting. The distribution of 2013’s operating profit was made in line with the decisions taken at the Ordinary General Shareholders’ Meeting held in 2014.

Transfer of SharesTransfer of shares can be done in accordance with the related legislation and the Articles of Incorporation of TIB.

Board of DirectorsThe Board of Directors is responsible for managing the company and exercises control over TIB. It ensures that all provisions of law and company internal policies are abided by.

The Board heads, leads and controls the Bank. The Board is collectively responsible and ultimately accountable for the affairs and performance of the Bank. All Board members must objectively take decisions in the interest of the Bank.

The Board holds four regular meetings each year, as well as additional meetings as required. Board meetings are usually held at the Bank’s premises or at any other place that is deemed appropriate by the Board members. Meeting agendas are prepared in accordance with the proposals of the Chairman of the Board and the Managing Director. Moreover, various reports requested by the Board of Directors and off the agenda topics put forward by the Board members and discussed during the meetings. Meeting agenda and related documents are delivered to the Board members before the meetings according to the principles determined by the Board. The Board held five meetings during 2013. Should one or more of the members Board members be unable to attend, a meeting via telephone or videoconference may take place.

To ensure that the financial and human resources are in place for the Bank to meet the planned objectives, the Board shall work with the management of the Bank. Management of the Bank remains accountable to the Board. The responsibilities of the Board’s Chairman include ensuring that the Board functions effectively and independently of management and that it meets its obligations and responsibilities. The Board shall ensure that financial disclosures made by the Bank are fair, transparent and comprehensive.

The Board is ultimately responsible for ensuring that the Bank is in compliance with relevant laws and regulations that it is subject to. These laws include the regulations of the Central bank of Tunisia, the Commercial Code, the Labor Law, occupational health and safety, etc.

All Board members and senior management are bound to observe the following best practices:

Board members should not :• Enter into competition with the Bank;• Use company privileged information or take advantage of business opportunities for himself or any relatives;• Misuse the Bank’s assets.

Board members should :• Report to the Board any conflict of interest arising from any of their other activities or commitments to other organizations outside of the Bank.• Declare in writing any directorship positions and/or interests above 5% in other enterprises to the Board on annual basis or immediately after becoming so.

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Risk & Corporate Governance CommitteeRisk Committee is responsible for formulating the risk management strategies and policies. The Committee is the common communication platform with the Board in terms of assessing the risk the Bank is exposed to, making suggestions about the measures to be taken and the methods to be followed. The Committee’s principal duties are published in the Board Committees’ Charter.

The Risk Committee has three members and is chaired by an independent Board member. As per supervisory requirements, the committee should hold at least 6 meeting a year. The head of the Risk Department is appointed as secretary of the committee. Since June 2013 and in compliance with the Kuwaiti regulation, the Risk Committee has been delegated powers by the Board to act as a Corporate Governance Committee.

The Committee’s principal duties are the following:• Recommending the risk profile and risk appetite of the Bank, for approval by the Board;• Approving principles, strategies, policies and processes for managing risk;• Overseeing the process developed by management to identify principal risks, evaluating their potential impact and implementing appropriate strategies to manage those risks;• Reviewing the provisioning policy and the permanent adequacy of the Bank’s net worth and risk exposures;• Receiving and reviewing reports from management regarding resolutions of significant risk exposures and risk events including credit, market, operational and liquidity risks;• Assessing risks arising from the Board’s strategic decisions, reviewing and monitoring the risk implications of new and emerging risks, changes in the banking environment (i.e. rules regulations, competition, etc.), regulatory change and major initiatives.

These matters are not exhaustive and may change from time to time. In 2013, six meetings were held.

Remuneration CommitteeThe Remuneration Committee has been established for the purpose of executing functions and activities related to monitoring and controlling remuneration policies of the Bank on behalf of the Board of Directors. The Committee carries out its activities regarding remuneration policies within the framework of the related banking regulations. The Committee has two members holds a meeting at least once a year and informs the Board of Directors on the results of its own activities and its opinions on other important issues.

IV. BOARD ACTIVITIES

Financial Information Periodically Published by the BankThe Board approved the quarterly financial information, the annual accounts and the management report for 2013. In addition, the Board has approved other documents such as the Annual Report, the new Stress Testing Manual, the Annual Corporate Governance Report, the reports of the audit and risk, compliance, appointments and remuneration committees.

Financial Reporting According to International StandardsShareholders and the public are regularly kept up to date mostly through the Annual Report, which includes the Consolidated Financial Statements. TIB’s consolidated reporting is in accordance with International Financial Reporting Standards (IFRS). This provides for a high degree of transparency and facilitates comparability with Burgan Bank’s financial reporting.

The Board reserves for itself and likewise cannot delegate, the following matters among others: decisions regarding the acquisition and disposition of substantial assets (except when the decisions come within the purview of the shareholders at a general shareholders’ meeting); the determination of the remuneration of each director; the appointment, remuneration, general policies and strategies and, in particular, strategic plans, management objectives and the annual budget, corporate governance, corporate social responsibility and dividend and treasury share policies, the general risk policy and the policies for the provision of information to and for communication with the shareholders, the markets and the public opinion.

Performance-Related CompensationThe compensation of members of the Board is primarily aligned with their contribution to business performance and international industry standards. Part of the Management Board’s compensation is equity-based and this is driven by the performance of the Bank.

Board Executive Committee (EXCO)The executive committee is a basic instrument for the corporate governance of the Bank. It exercises by delegation all the powers of the Board (except those which cannot be legally delegated or which cannot be delegated pursuant to the provisions of the by-laws, the rules and regulations of the Board). The EXCO oversees and advises the Board in its management of the business. Major decisions affecting the Bank’s activities require EXCO approval, such as investment decisions andBoard members’ nominations. The EXCO analyzes the development of the business, discusses matters concerning the Bank’s strategy and makes recommendations for decisions to be taken by the Board of Directors. In addition, EXCO acts as an investment, credit and nomination committee.

EXCO makes resolutions on loan and investment underwriting within its authorization limit, makes decisions regarding requests to change the underwriting conditions within its authorization limit and carries out other assignments given by the Board concerning loans and investments. There are currently three directors sitting in the committee: the Chairman of the Board, the Chief Executive Officer, who is also the Deputy Chairman of the Board and one member from the Board of Directors. The Audit CommitteeThe Audit Committee has three members and is chaired by an independent board member.The Audit Committee is obliged to hold meetings at least 6 times a year. The head of the Internal Audit department is appointed as secretary of the committee. The Board Committees’ Charter contains the duties and responsibilities of the committee. In 2013, the Audit Committee held 6 meetings.

The Audit C ommittee is responsible for carrying out the following duties, among others:• Reviewing the Bank’s financial information and its internal control and risk management systems;

• Serving as a communication channel between the Board and the auditors, ensuring the independent exercise of the latter’s duty;

• Supervising work regarding the internal audit function;

• Ensuring that the Bank’s financial reports are prepared in line with the related legislation,regulations and standards;

• Fulfilling other responsibilities as determined by the related legislations in effect and the dutiesgiven by the Board within this framework.

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as meeting the needs of its customers with fast, efficient and high standard solutions, constantly increasing the value it created for its shareholders and encouraging employees to attain their best performance. The Board of Directors regularly monitors and supervises the performance of the Bank in terms of achieving the strategic goals. The Business Program that includes the yearly objectives formed according to the general strategic goals comes into effect after approval by the Board of Directors. The quarterly performance of the Bank in comparison with the objectives is reported comprehensively to the Board of Directors.

VI. PUBLIC DISCLOSURE AND TRANSPARENCY

Public Information PolicyTIB has designated the Investment Department to submit the required information and disclosures, except for trade secrets, to the shareholders, investors, clients, creditors and other related parties within the framework of related regulations. Public disclosures are under the authority and responsibility of the Board of Directors. The Investment Department has been assigned the function of coordination of disclosure.

Annual ReportEach year, TIB publishes an Annual Report that includes the necessary information and data required by the regulator in English.

TIB Website (www.tib.com.tn)TIB’s website is actively and intensely used for purposes of public disclosures and information. The website will include information and data required by the Corporate Governance Principles and regulatory authorities. Utmost care is given to keep the website updated. Information is provided in English.

VII. ETHICAL PRINCIPLES AND SOCIAL RESPONSIBILITY

TIB has adopted its proper Code of Ethics in conformity with the Tunisian Banking Law and best practice. The Code of Ethics needs to be disclosed to Board members and all of the Bank’s employees. In addition, Board members and employees are required to sign a statement that he or she has read this Code of Conduct and that he or she understands its provisions and agrees to abide by them. As required by law, all Board members have stated on one’s honor that they have no legal restrictions to perform their duties.

Code of ConductThe Board believes that the Board, Executive Officers and the entire Bank’s staff must endorse a culture of strong corporate governance and ethical business conduct. The Code of Conduct addresses many areas of business such as Good Faith, Integrity, Compliance, Quality and Respect. These principles apply equally in dealings with clients, Counterparties, Regulatory Authorities and Business Colleagues and towards the Bank itself. The Board took the lead by endorsing these values for itself, senior management and all employees. Activities and relationships that diminish a proper conduct of corporate governance should be prohibited, such as:

• Conflict of Interest;

• Lending to officers (except on an arm’s length basis) and other forms of self dealings;

• Providing preferential treatment to related parties and other favored entities (lending on highly favorable terms, covering trading losses, waiving commission, etc.);

• Insider trading.

Changes in the Composition and Size of the BoardIn July 2013, Mr. Bader Alawadhi was appointed as an independent Director and head of the Board Audit Committee.

V. DUTIES OF DIRECTORS, RELATED-PARTY TRANSACTIONS AND CONFLICTS OF INTEREST

DutiesThe duties of the directors are governed by the rules and regulations of the Board, which conform w i t h both the provisions of current Tunisian law as well as the Bank’s Governance Code. The rules and regulations expressly provide for the duties of diligent management, loyalty, secrecy and inactivity in the event of knowledge of confidential information.The duty of diligent management includes the directors’ duty to keep themselves adequately up to date of the progress of the Bank and to dedicate the time and effort needed to carry out their duties effectively. The directors must inform the Appointments’ Committee of their other professional obligations and the maximum number of Boards of Directors on which they may sit is governed by the provisions of Law 2001-65, of July 10th, 2001.

Related-Party TransactionsTo the best of the Bank’s knowledge, no member of the Board of Directors, no person represented by a director and no company of which such persons, or persons acting in concert with them or through nominees therein, are directors, members of senior management or significant shareholders, has made any unusual or significant transaction with the Bank during the financial year 2013 and up to the date of publication of this report.

Control MechanismsAs provided in the rules and regulations of the Board, Directors must inform the Board of any direct or indirect conflict of interest with the Banks’ in which they may be involved. If the conflict relates to a transaction, the director should not carry it out. The director involved must refrain from participating in the discussion on the transaction in question.

Specific Situations of ConflictThroughout the financial year 2013, there were no cases in which directors, including those who are members of senior management, abstained from participating and voting in the discussions of the Board of Directors or of the committees thereof.

General Information

External AuditTIB is regularly audited by two independent External Auditors within the framework of the Banking Law in Tunisia along with the international related standards.

General Shareholders’ MeetingsThe General Shareholders’ Meetings Regulations are stated in the Articles of Incorporation and Corporate Governance in conformity with the Tunisian Commercial Law.

Strategic Goals of the BankThe vision and objectives of TIB were approved by the Board of Directors. In this context, TIB’s vision is to be the off-shore bank of preference in Tunisia by customers, shareholders and employees by maintaining its leading, pioneering and reliable position. In general, TIB’s mission, is described

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controlling activities carried out by the Bank’s employees with the awareness of responsibility, are controlled and monitored by the Internal Control Division, who reports to the Managing Director. Risk management activities are performed by the Risk Management Division, who reports to the Board Risk and Corporate Governance Committee. Furthermore, banks have to establish internal audit systems that involve all their branches. In this context, the Compliance Unit within the Risk Management Division investigates the compliance of the banking activities in accordance with the legislation, Articles of Association, internal regulations and banking principles.

TIB’s Internal Control Systems have been established in accordance with the principles and organization structures as required by domestic regulations and in parallel with the best international practices. The units constituting the Internal Control Systems are Internal Control, Risk Management Internal Audit and Compliance Unit. The units constituting the Internal Control Systems work under the Board of Directors and Board Committees.

The basic objective of the Internal Control Division is to contribute the maximum to ensure the Bank’s operations are constantly carried out in accordance with the rules, regulations and standards. In addition, the Internal Control Division, which also works under the Board of Directors on issues regarding the regulation and compliance on prevention of laundering of criminal proceeds and finance of terror, has mutual communication and cooperation with other related divisions and employees.

X. ATTENDANCE AT MEETINGS OF THE BOARD OF DIRECTORS AND ITS COMMITTEES IN 2013

The average attendance rate at the board of directors’ meetings in the financial year 2013 was 90%.

Committees

Board EXCO BRCCG BAC BRCAverage Attendance 90% 100% 100% 100% 100%

Individual Attendance

MASAUD M.J. HAYAT 6/6 6/6

MOHAMED FEKIH 6/6 6/6

RABIH SOUKARIEH 6/6 6/6

FETHI HOUIDI 6/6 6/6

MOHAMMED AL QUMAISH 6/6 6/6

BADER ALAWADHI 2/2 2/2

YACOUB ALGUSANE 5/6 6/6

AMR EL KASABY 4/6 6/6

KHALID AL ZOUMAN 4/6 6/6

XI. TRAINING OF DIRECTORS AND INFORMATION PROGRAMME

Board members have attended a training program as stipulated by the Bank’s corporate governance regarding ongoing director training for directors

The Board of Directors ensures that senior management implements policies that prohibit such conduct and ensures that deviations are reported and establishes a process that allows monitoring compliance with these policies. The adopted Code of Conduct applies to all employees, officers, trainees, part-time staff and other Bank representatives, including members of the Board of Directors.

Insider TradingBy his or her position in the Bank, an employee may have access to “material non-public information”. This non-public information includes information that is not available to the public at large, which would be important for example to an investor in making a decision to buy, sell or retain a security.

This non-public information includes but is not limited to: projections of future earnings or losses or dividend payment; tender offer or exchange offer; news of a significant sale of assets or the disposition of a subsidiary; significant changes in management or shareholdings; significant new products or discoveries; or impending financial liquidity problems. It should be noted that both positive and negative information might be considered material.

Insiders in a position of trust must not pass that information on to others and shall not purchase or sell a security or recommend a security transaction of the employee’s own account, the account of a family member, the account of any customer of the Bank or any other person is such case. In addition to disciplinary procedures which may lead to dismissal, the use or disclosure of such information can result in civil or criminal penalties under Tunisian Law.

VIII. ANTI-MONEY LAUNDERING

The Bank has implemented strict Anti-Money Laundering (AML) policies and procedures that meet local regulatory requirements as well as international best practices. These AML policies include Know Your Customer (KYC) procedures to control and identify both new and existing clients and detailed measures to enable proper detection and reporting of suspicious activities and abnormal transactions. The education and training, both internally and externally, of all of the Bank’s staff forms an integral part of our AML policies.

Internal Audit conducts periodic reviews of the responsibilities of key personnel to minimise areas of potential conflict of interest and ensure that independent checks are in place. TIB has an independent Internal Control Department in place. This department is responsible for verifying, checking and controlling all of the Bank’s operating transactions. The Bank’s Head of Internal Control Department also acts as the Money Laundering Reporting Officer (MLRO) and is responsible for ensuring that adequate Anti-Money Laundering procedures are in place and ensuring effective compliance with CBT regulations and FATF recommendations. Recently the Bank bought a system that provides instantaneous details of potential suspicious transactions. The system is under the supervision of the MLRO.

IX. RISK MANAGEMENT AND INTERNAL CONTROL

As per the Tunisian Banking Law 2001-65 & 2009-64 and CBT regulations (circulars n° 2006-19 & 2011-06), banks are obliged to establish and operate adequate and efficient internal control, risk management and internal audit together internal control systems that are in harmony with the scope and structure of their activities, that can respond to changing conditions and that cover all their branches in order to monitor and control the risks that they may encounter. Internal

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Directors Name Title Representing

COMMITTEES OF THE BOARD

EXCO Audit Remuneration Risk & Corporate Governance

CreditEXCO acts as BCC

InvestmentEXCO acts as BIC

NominationEXCO acts as BNC

MASAUD M.J. HAYAT CHAIRMAN KIPCO, CEO Banking EXCO Chairman

MOHAMED FEKIHDY.

CHAIRMAN / MD

MD - TIB Executive Committee

RABIH SOUKARIEH DIRECTOR CEO, UGB Executive Committee B. Remuneration Committee

FETHI HOUIDI DIRECTOR

BAC

MOHAMMED AL QUMAISH DIRECTOR

Head of Internal Audit,

UGBBAC

B. Remuneration Committee

BADER ALAWADHI DIRECTOR INDEPENDENT BAC - CHAIRMAN

YACOUB ALGUSANE DIRECTOR INDEPENDENT BRC - CHAIRMAN

AMR EL KASABY DIRECTOR Burgan BankGCIA BRC

KHALID AL ZOUMAN DIRECTOR Burgan BankGCFO BRC

BOARD SECRETARY Head of Legal Dept. Head of Credit Dept Board Member Head of Internal Audit Dept Board Member Head of Risk Dept

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KIPCO GROUP BANKS

Burgan BankP.O. Box 5389, Safat13054, KuwaitTelephone: +(965) 243 9000Fax: +(965) 246 1148E-mail: [email protected]: www.burgan.com

United Gulf Bank B.S.C.P.O. Box 5964UGB Tower, Diplomatic AreaManama, Kingdom of BahrainTelephone: +(973) 17 533 233Fax: +(973) 17 533 137Telex: 9556 UGBADM BNEmail: [email protected]: www.ugbbah.com

Jordan Kuwait BankP.O. Box 9776, Amman 11191, JordanTelephone: +(962) 6 568 8814Fax: +(962) 6 569 4105E-mail: [email protected]: www.jordan-kuwait-bank.com

Gulf Bank AlgeriaRoute de Cheragas, Dely IbrahimAlgiers - AlgeriaTelephone: +(213) 21 91 07 81 +(213) 21 91 00 31 +(213) 21 91 03 08 Fax: +(213) 21 91 02 64 +(213) 21 91 02 37Email: [email protected]: www.agb.dz

Syria Gulf BankP.O. Box 373, 29 May StreetDamascus, SyriaTelelephone: +(963) 11 232 6111Fax: +(963) 11 232 6112Email: [email protected]: www.sgbsy.com

Bank of BaghdadKaradaP.O. Box 3192 Alwiya, IraqTelephone: +(964) 171 750 07Fax: +(964) 171 750 06Website: www.bankofbaghdad.com

Burgan Bank TurkeyEski Buyukdere cad.Tekfen tower n° 20934 330 4 levent / IstanbulTelelephone: +(90) 212 371 3737 +(90) 212 357 0809Fax: +(90) 212 289 6565E-mail: [email protected]: www.burgan.com.tr

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