Annual Report 2016 يﻮﻨﺴﻟا ﺮﻳﺮﻘﺘﻟا 2016 · Shakir Mahmoud Ali Chairman of the...

1Ashur International Bank for InvestmentAnnual Report 2016

Annual Report 20162016 التقرير السنوي

نبني الطموح We Build Ambition

2 Ashur International Bank for InvestmentAnnual Report 2016


Our VisionTo be the leading provider of innovative financial services with a commitment to excellence at local and international levels.

Our Mission • To commit to providing the highest standards of banking services in accordance

with Iraqi laws and legislations, and using cutting-edge technologies in all transactions; including computer, communication and IT technologies.

• To carefully manage investments with a view to achieving better, rather than higher, profits to both the bank and its clients.

• To commit to fully cooperate and coordinate with other financial institutions and entities that are also committed to providing their best in all their transactions; in order to strengthen the bases of the investment financial system.

• To commit to developing communities in all economic areas by investing in the industrial, agricultural, commercial, real estate, service and other sectors; which would help create more job opportunities.

• To commit to social responsibility and services in line with the nature of communities.

• To participate in the development of communities, particularly in providing social safety and security, and strive to improve communities and promote social justice.

• To encourage saving and proper well-informed investment of funds as per sound investment principles; through investment and financial products that meet the customers’ requirements.

• To provide investors with the funds they need for their economic projects, and develop subsidiary instruments to supplement financing activities in line with customers’ needs.

Ashur International Bank for InvestmentAnnual Report 2016


Table of Contents

Board of Directors

Message from the Chairman

Board of Directors’ Report 2016

Consolidated Financial Statements for the Year Ended 31 December 2016

Additional Statements as per the Requirements of the Iraqi Securities Commission for the Year 2016

Branches of Ashur International Bank

4

5

8

32

73

74

Ashur International Bank for Investment

An Iraqi private shareholding company established in 2005 under commercial registration No. CC / 25812 with a subscribed capital of 250 billion Iraqi dinars as of the end of 2016.

Iraq – Baghdad – Oqba Ibn Naffi’ Square – District 903 Str. 99 Building 87 B. O. Box 3636

Tel. 009647704447355 / 009647704447366

E-mail: [email protected]

Web Site: www.ashurbank.com

www.facebook.com/AshurBank


Chairman of the Board of Directors

* Mr. Shakir Mahmoud Ali

* Mr. Wadee Nouri Ayed Al-Handal

Deputy Chairman of the Board of Directors

Mr. Ali Dia Al-Husseini

Members of the Board of Directors

Mr. Abbas Hadi Al-Bayyati

Mr. Atheer Ghassan Hamed

Mrs. Bushra Bashir Sharif

Managing Director

Mr. Adnan Kan’an Al-Jalabi

Auditors

Mustafa Abbas & Co.

Mr. Sameer Matta

External Audit Consultant

Ernst & Young Iraq

* On 8/11/2016, Mr. Shakir Ali was appointed chairman of the board of directors upon the resignation of Mr. Wadee Nouri

Ayed Al-Handal.

Board of Directors


Shakir Mahmoud AliChairman of the Board of Directors

Dear shareholders of Ashur International Bank,

2016 witnessed numerous economic and political events and persistent challenges in the economic and security environment with varying effects on all economic activities in Iraq. At the economic level, despite the growth achieved according to the figures and data of international organizations as a result of the growth in production and sales in the energy sector, the pressure on the general budget of the state continued due to low oil prices and security conditions; which affected all economic sectors and not only the general budget of the state, including the macroeconomic growth of other sectors; thus increasing the unemployment rate to 16% according to local statistics.

For the last three years, budget deficit continued to overshadow the economic landscape affecting all sectors including the financial sector which suffered the consequences of these conditions in terms of decreased business volume, increased risks and debt, decreased liquidity and inability to utilize available liquidity in operational processes in the region; which led to declining profits in the banking sector in general and private sectors in particular.

In the same context, only in a different direction, the IMF approved a 5.34 billion dinar in a three-year conditional loan to Iraq to help the Iraqi economy achieve financial stability; which would help the state reduce its budget deficit, overcome the economic challenges caused by declining oil prices and funding operating expenses, and move towards financial stability to address the burdens and consequences of political and economic conditions.

Driven by its sound vision, the Central Bank of Iraq managed to enhance monetary stability despite the conditions affecting the region, including Iraq, for more than four years. As part of this role, the CBI strove to overcome these conditions and promote sustainable growth through the targeted procedures introduced last year which provided short and medium term credit lines within a preferential interest rate for various economic sectors; including SMEs and the industrial sector and the obligations settelled for banks into its branch in Mosul so that the banking sector can have the necessary liquidity to cover the shortage in this area, in addition to assisting in contractor payment procedures by issuing relevant regulations. These initiatives were not limited to liquidity, but the CBI also developed a series of procedures and regulations to keep up with global developments in the banking industry in terms of adopting the International Accounting Standards, as well as the Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR), in addition to developing the risk, compliance and anti-money laundering departments. The CBI also continued to cooperate with Iraqi banks and relevant institutions on the localization of government employees and entities.

Message from the Chairman


As for main economic events in international markets, the Brexit referendum resulted in the UK’s withdrawal from the EU which affected capital markets and led the WB to reduce the expected global growth rate to 3.4%. On a positive note, however, the US economy; which is the main driver of global economy; showed a number of positive indicators.

Dear shareholders,Our bank has maintained its solid financial position and the quality of its assets by seeking qualitative and quantitative achievements that reflect the Board’s vision of maintaining the quality of the bank’s sound financial position, in addition to administrative and organizational achievements reflecting its prudent policies which, despite affecting profitability, helped maintain the bank’s liquidity and asset quality to deal with the difficult conditions of the country in general and the Iraqi banking sector in particular.

In financial terms, financial results show that the bank has realized (14,742) billion dinars in net profit due to a (3.5%) increase in income as compared to the previous year. On the other hand, expenses increased by (7,102) billion dinars or (60.4%) as a result of the bank’s conservative policy under which over (9) billion dinars of provisions were used. As for asset quality, the bank’s liquidity ratio reached (118%) and non-performing loan coverage ratio less outstanding interest increased to (83.9%) compared to (51%) at the end of 2015. In addition, the capital adequacy ratio exceeded both local and international standards and reached (52%). As for credit activities, the bank has suspended approximately 3 billion dinars in interest and continued to follow up on bad loans from which the bank collected 12 billion dinars and opened borrowing outlets for low-risk categories and areas. It is worth mentioning that the majority of income was from banking operations.

In the same context but at a different level, the bank used provisions to fully cover cash requirements in hot spots which reached 632 million dinars, in addition to using 286 million dinars as a provision for judicial expenses relating to customers, and more than 8 billion dinars in credit provisions to maintain a solid financial position.

Dear shareholders,Our bank has continued its policy of developing and improving work methods, procedures and regulations in line with its 2014 – 2017 strategy in order to keep up with international best practices at organization, operation, human resources and working environment levels; which will help improve the performance of services provided to customers as the customer is the center of our operations and our true capital in the long term, and enhance the bank’s ability to meet the requirements and aspirations of our clients and shareholders.

Our 2016 business plan was set to carry out certain projects and programs and launch specific products. Under this plan, the bank developed, established and reconstructed some of its departments, and strove to enhance transparency and the bank’s image by establishing the Banking Awareness and Customer Protection Department by setting up its policies and procedures and appointing its staff, in addition to developing the risk, compliance and anti-money laundering departments.

As part of the bank’s human resources policy which views its human resources as its true capital, and in line with its slogan “We Build Ambition”, the bank developed its training plan which covers both internal and external training courses by attracting competent and capable people. Furthermore, the bank was the first Iraqi bank to launch the outstanding employee award initiative under which the winning employee for this year was awarded a Land Cruiser.


As for our network of branches and distribution outlets, under the bank’s principle of continuous leadership, we established and launched the first mobile branch in Iraq and enhanced our network of branches by operating Almansour and Karbala branches. Furthermore, we completed the design of the bank’s new web site which was launched in the first quarter of 2016.

As for services, we completed the issuance of clients’ prepaid cards (MasterCard) in 2016, enabling clients to make purchases online or at points of sale throughout the world in a secure manner. Five categories were offered; including the USD 50, USD 100, USD 200, USD 300 and USD 500. As for wire transfers, the bank completed the preparations for and launched the MoneyGram service which enables clients to transfer funds in US dollars within ten minutes to anywhere in the world through 65 thousand points of receipt at a preferential rate of exchange.

Under the principle of transparency and in order to enhance confidence in the bank’s financial statements and meet the requirements of the CBI which call for the adoption of IFRS by the end of 2016, the bank was among the first institutions in this regard as it issued its first audited financial statements and was the first bank in Iraq to be audited by one of the most reputable auditing and financial consultancy companies in the world and issued its financial statements for 2015 and 2016 in accordance with IFRS and the unified accounting system of relevant authorities..

As part of its social role, Ashur Bank continued to fulfill its social responsibility and support the local community in line with its consistent approach based on the bank’s policy and adopted values by continuing to support and care for the most vulnerable populations. The bank took part in “Alaq Baghdad” project for rehabilitating public squares in Baghdad through financial and logistic support, in addition to rehabilitating the historical Alrasheed street and paving and rehabilitating Ashur street. On the cultural side, the bank provided support in organizing the celebrations of the International Day of Peace in cooperation with the Iraqi Private Banks League, and sponsored the inauguration, rehabilitation and development of the Martyrs’ Monument through the bank’s technical staff. We also continued to support the Iraqi refugees and displaced people relief campaign.

Dear shareholders,We in Ashur International Bank are keen on seizing every opportunity to maintain minimum risk levels and maximum return in order to maintain the bank’s competitive position despite the country’s instability; hoping that in 2017 the economic and security conditions will improve and the government’s efforts to restore stability will pay off for the good of the country and business in general.

Finally, personally and on behalf of the Board of Directors, I would like to express my thanks to our shareholders for their continuous support of the bank, and our clients for their confidence in the bank. I would also like to thank all public and private establishments, on top of which is the Prime Minister; economic team; Central Bank of Iraq; Iraq Stock Exchange, Iraqi Securities Commission and Companies Control Department, for their kind efforts in overcoming the current economic conditions and contributing to Iraq’s economic growth. My thanks also extends to all employees of Ashur International Bank for Investment in all positions and locations for their dedication and hard work to achieve positive results for the bank and their tireless giving and sincere efforts for the improvement and development of our bank.

Shakir Mahmoud AliChairman of the Board of Directors


Activities and Achievements in 2016

Analysis of the Financial Position and Business Results in 2016

Objectives of the Future Plan for 2017

Board of Director’s Report 2016


Activities and Achievements in 2016Despite the numerous challenges at the economic and security levels, the bank achieved very good qualitative and quantitative results; taking its record of achievements to new levels in terms of growth and development in all areas of administration, service, operation and finance; which helped protect the bank’s achievements and enhance its role in the Iraqi banking sector. The bank maintained its approach of continuous renovation and development by undertaking and implementing several strategic projects and products aimed at improving the banking services offered to all clients in line with international developments in the banking sector.

In 2015, to emphasize its solid performance and strong financial position, as well as its compliance with international standards; disclosure requirements and the regulations issued by control bodies, the bank adopted IFRS and issued its first financial statements audited by Ernst and Young International; making Ashur International Bank the first Iraqi-owned bank to complete the conversion to IFRS through one of the most prominent international companies; which ads credibility to its statements and enables investors to make informed decisions based on their knowledge of the bank’s real financial position.

In 2016, despite economic and political instability, the bank achieved (14,741,576) in profits compared to (17,788,439) at the end of the previous year. This decline in profits was the result of the bank’s prudent policy of creating provisions to cover any potential losses despite the increase in revenues.

The Board hereby presents its comprehensive report on audited final accounts for the year ended 31/12/2016; including data and information about the bank’s work and activities and the outcomes of its annual plan in accordance with the provisions of the Companies Law, IAS, IFRS, Banking Law and regulations of the Iraqi Securities Commission.

Bank’s Activities in 2016The bank achieved good qualitative and quantitative results in 2016; taking its record of achievements to new levels in terms of growth and development in all areas of administration, service, operation and finance; which strengthened its competitive position as a leading high-class financial institutions at local level. The bank maintained its continuous approach of constant development and renovation by implementing several strategic projects aimed at continuous development of products and services, electronic systems, distribution outlets, electronic distribution channels and electronic payment systems; in order to provide clients with outstanding services in line with the developments in information technologies in the banking industry throughout the world.

In terms of capital base, and as a part of the bank’s strategy, the bank has been working on strengthening this base in line with its plan to expand its work and fulfill CBI’s requirements.

Board of Directors’ Annual Report on Bank’s ActivitiesDuring the Year Ended 31/12/2016


Year 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006

Paid-in Capital 250 250 250 210 150 66.7 57٫5 50 25 25 25

Evolution of Capital

Financial ResultsThe financial results of Ashur International Bank for Investment are the result of its adoption of a conservative policy that is reflected in the quality of its assets and minimal exposure to risks in a rapidly changing environment; by balancing returns with risks in light of the conditions and challenges affecting economy in Iraq and the region in general. The financial results demonstrate unchanged key ratios as per the requirements of control bodies. Capital adequacy reached (52%) and statutory liquidity (118%); while non-performing loan coverage ratio less outstanding interest increased to (83.9%) compared to (51%) at the end of 2015.

The bank’s financial results for 2016 showed the impact of the aforementioned on profitability; as the bank achieved (14,741,576) thousand dinars in net profit due to a (3.5%) increase in total income which equals (1,152,160) thousand dinars, despite a (60.3%) increase in expenses which reached (18,865,300) thousand dinars due to a (6,243,421) thousand dinars (at the rate of 214.7%) increase in provisions which, eventually, lead to a (17.1%) decline in profits.

Bank’s liquidity increased to (88.9%) of its total assets compared to (83.1%) at the end of 2015 as a result of the bank’s conservative policy to deal with emergencies. The bank’s net credit portfolio dropped to (9.6) billion dinars compared to (28.4) billion at the end of the previous year; due to the increase in the provisions for credit facilities and the collection of a large portion of the facilities granted in the region and hot spots. As for sources of funds, clients’ deposits reached (94.8) billion dinars of which (76.8) billion dinars are demand deposits and (11) and (6.9) billion dinars are saving deposits and time deposits respectively.

As for the main line items of the income statement, total income reached (34.3) billion dinars with an increase of (1.152) billion dinars (at the rate of 3.5%) compared to the previous year 2015. Net operating income from interest and commissions reached (29.9) billion dinars accounting for (86.5%) of total income. Returns and cash distributions from investment reached (2.85) billion dinars, while foreign currency earnings reached approximately (1.79) billion dinars. Total expenses increased by (60.3%) compared to 2015 reaching (18.865) billion dinars.

2008 2007 20060

50,000

100,000

150,000

200,000

250,000

300,000250250 250

210

150

66.7 57.5 5025 2525

20092010201120122013201420152016


Bank’s Products and ServicesThe bank continued its good performance during 2016 by implementing its strategic plan for restructuring its business and products to utilize its available resources to achieve growth based on its abilities and capabilities which enables it to grow in the retail market by implementing the latest techniques and models in the banking business in order to enhance its status and improve the quality and timeliness of its services. In 2016, the bank worked on increasing the efficiency and timeliness of its operations and standardizing its procedures in order to increase their efficiency and improve their performance.

The Retail Banking Department, through its branches throughout Iraq, continued to offer new products and services to meet clients’ needs and improve service quality. On the other hand, the bank enhanced its foreign trade services by providing companies with credit facilities through its dedicated business centers.

Retail ServicesThe bank continued to provide its clients with a range of products and services that meet their expectations. The Retail Banking Department continued to offer products and services that meet clients’ requirements in line with the best banking practices in order to strengthen the bank’s leading position in the Iraqi market.

In 2016, the bank offered a number of programs in line with clients’ preferences; including the personal loan against jewelry program which enabled employees in both the public and private sectors to obtain loans up to (20) million Iraqi dinars without a guarantor or salary transfer for a maximum repayment period of 12 months. This product was activated in Karbala and Baghdad. In the same context, the bank launched the personal loan program for employees whose salaries are paid into the bank with new features; including an extended of the repayment period of five years and an increased loan of up to (25) million Iraqi dinars. In addition, and in order to meet the short-term needs of employees whose salaries are transferred to the bank, the travel loan was introduced in cooperation with Abr Almasafat Travel Agency (Emirates Airlines).

In 2016, we completed the issuance of clients’ prepaid cards (MasterCard), enabling clients to make purchases online or at points of sale throughout the world in a secure manner. Five categories were offered; including the USD 50, USD 100, USD 200, USD 300 and USD 500. As for wire transfers, the bank completed the preparations for and launched the MoneyGram service which enables clients to transfer funds in US dollars within ten minutes to anywhere in the world through 65 thousand points of receipt.

To encourage clients to save, the bank continued to offer the best rates of interest on savings accounts, and is expected to issue the all new savings account product in 2017 which meets the requirements of many groups of clients in terms of the holding period, interest rate and interest payment intervals.


Corporate BankingThe bank activated corporate business development centers using the CBI’s initiative for SME loans under which the bank offers SMEs loans up to (50) million Iraqi dinars at an interest rate of (4%) plus CBI’s and guarantee company’s commissions.

The bank offers companies comprehensive financial solutions by providing them with the necessary financing services and activating foreign trade services through business centers which employ a complete team of specialized employees with the best banking experience in the region to meet all corporate clients’ needs and requirement while maintaining the highest standards of banking services and solutions in a manner that enables constant communication and comprehensive and outstanding management of their relations with the bank.

Network of Branches and Distribution OutletsIn order to reach target groups, the bank’s first mobile branch was established this year to serve clients in areas without branches, as well as university students. The bank also continued his plan to cover southern governorates with a network of branches by opening Karbala branch in the first quarter of 2016. In the same context, only in Baghdad, the bank opened a branch in Almansour district in the third quarter of 2016.


Online Distribution PortalsThe bank is always striving to keep up with the latest developments in banking technology. To this end, the bank continued to develop online distribution portals and payment systems to enable clients to receive banking services and carry out banking transactions in an easy and secure manner. Among the bank’s key achievements in this area is the connection between the bank’s system and the RTGS system to enable timely and accurate transactions.

As for online distribution channels, the bank completed the development of its website and launched it in the first quarter of 2016 in line with the bank’s vision and needs in the upcoming phase. It is also worth mentioning that the bank is planning to update and develop its online payment service via its website to meet clients’ expectations. As for online portals, the bank managed to increase its online portals to 14 and is expected to increase them to 24 by the end of 2017.

Regulations and Technological ResourcesThroughout 2016, the bank continued to improve its procedures and regulatory environment by completing its strategic plan to become the leading bank in the Iraqi banking sector in terms of regulatory methods, technology base, communication systems and work procedures, both in branches and departments, as the general unified approach for the bank as a whole to enable it to operate effectively and efficiently.

As for the development of its regulatory environment, the bank amended its organizational structure at headquarter departments level; amending the structure of the compliance and risk management departments by making them report to the Board of Directors and its committees to provide them with independence and enhance the effectiveness of the bank’s control systems. Furthermore, the Banking Awareness Department was created and provided with its own organizational structure, in addition to developing the organizational structures of the risk management, compliance and anti-money laundering departments.

As for work mechanisms, a number of work procedures and mechanisms were developed in line with the requirements of the current phase by completing the development of work procedures relating to import and export letters of credit and bills for collection. In order to complete the procedures associated with the credit issuance process, the bank developed procedures for credit documentation, collection and follow-up to ensure credit portfolio safety and control, in addition to legal action initiation procedures which complement the bank’s credit related procedures and the entire credit cycle from issuance to collection. As for day-to-day transactions, the bank developed portfolio’s day-to-day procedures and work procedures and mechanisms for canceling and reversing activities such that they are regulated in a clear fashion with minimal error, in addition to SWIFT related procedures. The bank also developed procedures for cards, ATMs, key holders and exchange companies auctions in line with CBI’s requirements. On the other hand, the Central Cash Unit was activated along with cash limits and management procedures by preparing the Count and Sort Center’s infrastructure and launching its services during the first month of 2016, in addition to issuing its work mechanisms and procedures. In terms of authorities, the authorities relating to the functions in each group were regulated in line with the nature of their work by establishing them in the system and linking them to the authorities policy in place within the bank’s administrative composition and in line with the requirements of the upcoming phase.


As for policy development, the bank developed the Legal Affairs Department’s policy and issued the risk management, anti-money laundering and compliance policies in line with current developments. The bank is also planning to develop work procedures for the day-to-day portfolio next year, in addition to a number of other procedures relating to the work of control departments.

As for the consolidation of banking statements in order to assist decision makers and facilitate processes and monitoring, the MIS system was activated and borrowers’ guarantees were automated to help retrieve the information required by decision makers in a timely and accurate manner. This process was utilized in the development of several daily reports that help carry out relevant work and follow up on clients. Furthermore, in order to develop communications, the bank acquired its own exchange server.

In the same context, the bank is working on the conversion to the central version of the system by completing the technical requirements, including the bank’s communication infrastructure, in addition to completing the negotiations with relevant companies. As for updating the databases for all bank’s systems, work has been initiated to convert to Oracle 11, in addition to implementing AML and FATCA systems and commencing the establishment of the DWH project which enables decision makers to retrieve and analyze historical information in a timely manner.

Furthermore, Ashur International Bank’s Board of Directors – driven by its core values – has been keen on implementing corporate governance due to its realization of its importance in enhancing bank’s performance and improving its risk management system; in line with the establishment of strong relations based on transparency, communicating with all stakeholders and protecting the rights of bank’s shareholders and depositors. To this end, the Board of Directors activated its committees as set out in the corporate governance clause in order to develop the bank and enhance its institutional work, in addition to establishing the Risk Management and Compliance Department in collaboration with relevant consultants and experts; as the overall risk management, monitoring and alleviation system and compliance with the regulations of control authorities is a common and joint responsibility of several parties in the bank; including the Board of Directors and its committees and all the departments and branches of the bank.

The bank completed the development of the overall structure of the Risk Management Department and its work procedures, and manages banking risks by identifying potential risks and ways to deal with and alleviate them within the overall risk management framework in line with the best banking standards, norms and practices; by separating the risk management, credit and operations departments.

The Bank’s Risk Management Department, in accordance with adopted policies, focuses on identifying current and potential financial and non-financial risks and ways to deal with them, and submit the necessary relevant reports and recommendations periodically to help the bank achieve its strategic objectives within acceptable levels of risk,

The Board of Directors’ Higher Committee for Risks and Compliance was set up to ensure an effective internal control system and review the Board’s performance. The Risk Management Department undertakes several responsibilities to manage various types of risks in terms of:• Developing policies and obtaining Board of Director’s approval of the same.• Analyzing all types of risks (credit, market and operation risks).• Developing the measurement and control methodology for each type of risks.• Providing the Board of Directors and Higher Committee for Risks and Compliance with the

necessary reports relating to qualitative and quantitative measurement of bank’s risks, along with the necessary relevant recommendations.


The Department measures bank’s risks as follows:A. Credit Risk:

In this context, the bank enhances the institutional frameworks governing the Credit Department by:1. A set of separate specialized departments that manage business requirements through the

Corporate Banking Department which manages corporate and SME credit and the Retail Banking Department which manages individual credit portfolios.

2. Separating between various (retail and corporate) banking departments and credit departments.3. A set of adopted policies and procedures setting the bases for identifying and measuring this

type of risks.’4. Defining credit concentrations in terms of credit type, economic sector and geographical

distribution. Credit risk departments, each as per its jurisdiction, are responsible for monitoring these concentrations.

5. Adopting an authorities matrix that includes a mechanism for granting and monitoring authorities and managing the relationship between various credit activities.

6. Preparing for applying IFRS 9 to necessary reports as of the beginning of 2018.7. Adopting various credit risk alleviation methods; including:• Providing an appropriate credit structure in line with purposes and repayment methods.• Studying and evaluating credit transactions by credit risk departments.• Ensuring the completion of all control aspects relating to credit utilization and repayment sources.• Fulfilling the proper guarantees against any relevant risks, along with proper documentation

of the same.• Assessing the guarantees periodically as per their nature, type and risk level; in order to

enhance them and ensure their continuous coverage of the credit granted.• Setting up dedicated committees to approve credit.

8. Credit execution departments that monitor the execution of credit as per credit approvals, in addition to a unit that is responsible for documenting credits, completing statutory audits and notifying execution departments.

9. Having a dedicated department to follow up on the collection of dues and bad debts.10. Defining the duties of various credit departments in terms of the control mechanism and frequency

and retrieved statements and the mechanism for presenting them to higher committees.11. Analyzing economic fluctuations and changes in the structure and type of the credit portfolio.12. Credit departments, each as per its jurisdiction, monitor and evaluate all credit transactions

through a series of monitoring reports: Daily reports and reports relating to credit exceedings, outstanding account balances … etc.

13. Monitoring the quality and distribution of the credit portfolio by means of classification according to credit risk, economic sector, credit type, guarantees, credit concentrations, credit asset quality trends, total exposure at client level, geographical area, due date and type of guarantee, and reporting the same to the Higher Committee for Credit and Higher Committee for Risks and Compliance on a monthly basis.

Credit guarantees and exposure alleviation measures include:• Fulfillment and proper documentation of appropriate guarantees against any relevant risks; including cash

and in-kind guarantees such as real estate mortgage deeds and possessory pledge of vehicles, in addition to personal guarantees that are binding on all parties and enforceable before all competent courts.

• Periodic evaluation of guarantees according to their nature, type and risk level; in order to enhance them and ensure their continuous coverage of the credit granted.

• Legal review of all guarantee contracts and supporting documents and their enforceability in accordance with the laws and legislations governing bank’s work.


B. Operational Risk:Risks arising from the inefficiency or failure of internal processes and employees or from external events; including legal and online banking risks.

The bank manages operational risks as follows:1. Developing an operational risk policy and approving it by the Board of Directors.2. The Internal Audit Department assesses the accuracy of monthly examinations that are based

on self-evaluation of various bank departments, ranks them as per adopted ranking criteria, incorporates the same in the internal audit report and submits the report to the Higher Committee for Audit on a timely basis.

3. Building a database for operational errors and analyzing and periodically reporting on the concentration and types of errors to the Higher Committee for Risks and Compliance.

4. Creating a risk portfolio including all types of operational risks and their control procedures and examination frequency; to ensure their efficiency and continuous operation at department level.

C. Compliance Risk:Risks arising from the bank’s potential failure to comply with applicable laws, regulations and legislations and professional and ethical banking regulations issued by local and international control bodies; including the bank’s internal policies. In this context, the bank established the Compliance Department which is an independent department responsible for managing this type of risk as follows:1. Developing a compliance policy; including the bases for identifying, measuring and monitoring

such risks; and having it approved by the Board of Directors.2. Evaluating and reviewing all work policies and procedures, and ensuring their compliance with the

laws and regulations governing bank’s work.3. Developing and approving a policy for dealing with FATCA.4. Communicating with several companies to acquire an automated system for managing FATCA requirements.5. Modifying account opening forms in line with FATCA requirements.6. Developing a mechanism and procedures for updating clients’ data on a continuous basis using the

Know Your Client (KYC) form and in accordance with CBI’s requirements.7. Applying and communicating the Code of Professional Conduct to all bank employees.8. Developing and implementing compliance matrices which minimize violations of, and ensure

compliance with, laws and regulations9. Training and qualifying all bank employees at all levels.10. Providing the Higher Committee for Risks and Compliance with periodic unit-specific reports on

violations and non-compliance.

As for anti-money laundering activities, an independent unit was established to combat money laundering and terrorism financing as follows:1. Developing an anti-money laundering and terrorism financing policy and approving the same by

the Board of Directors in accordance with the Anti-money Laundering Law No. (39) for 2015 and relevant regulations, and implementing it.

2. Communicating with several companies to acquire an automated system checks all clients’ day-to-day transactions and categorizes clients according to risk level.

3. Checking bank clients against blacklists in an automated and periodic manner.4. Checking high-risk clients on a periodic basis.5. Continuously educating all bank employees, each as per their jurisdiction, and raising their

awareness by means of internal and external training courses.


D. Market Risk:The risk of exposure of the bank’s financial position, on and off consolidated financial statements, to losses arising from fluctuations in the fair value or future cash flows of financial instruments as a result of changes in market prices such as interest rates, foreign exchange rates and securities prices. Market risk arises as a result of open positions of interest rates, foreign exchange rates and investment in securities, and is monitored in accordance with specific policies and procedures and through specialized committees and relevant business centers. Market risk includes:1. Interest Rate Risk.2. FX Risk.3. Securities Price Movements Risk.

Market risk may include liquidity risk which is the bank’s potential inability to meet its obligations when they accrue due to its inability to provide the necessary funding, as well as the bank’s inability to finance the increase in assets without having to liquidate assets at unfair prices or resorting to high-cost sources of funds.

Market risk arises from:• Changes in the political and economic conditions of markets.• Interest rate fluctuations.• Fluctuations in sale or purchase prices of future financial instruments.• Foreign exchange rate fluctuations.• Gaps in the maturity of assets and liabilities and re-pricing.• Acquisition of naked positions.

1. Interest Rate Risk:Interest rate risk arises from the potential impact of changes in interest rates on the value of other financial assets. The bank is exposed to interest rate risk due to inconsistency or a gap between its assets and liabilities as per various terms or as a result of reviewing interest rates in a given period. The bank manages these risks by reviewing the interest rate on assets and liabilities through the risk management policy undertaken by the Assets and Liabilities Committee. The bank follows a hedging policy, relating to expected future risks, for financial assets and liabilities whenever necessary.

The bank develops and analyzes scenarios to measure sensitivity to interest rate risk, in addition to providing a system for monitoring variances in re-pricing dates to ensure that disks are controlled and reduced within acceptable levels and maturity dates of assets are balanced with maturity dates of liabilities, as well as addressing interest gaps and hedging against interest rates.

2. FX Risk:These risks arise from changes in the value of financial instruments due to fluctuations in foreign exchange rates. The bank follows a well-informed policy in managing it foreign currency positions.

The bank’s investment policy provides a set of controls minimizing this type of risk and monitored by the Market Risk Unit; including:• Caps may not be exceeded in any case, and any portion that exceeds the maximum limit for any

currency is liquidated.• Every dealer must close the position immediately once its loss reaches the allowed maximum limit.• The Treasury and Investment Department analyzes and monitors open positions on a daily basis

and closes the positions in the event the caps or loss limits are exceeded or risks are increased; based on market movements.


3. Stock Price Movements Risk :Stock price movements risk arises from changes in the fair value of investments in stock. The bank manages these risks by diversifying investments in several geographical areas and economic sectors.

- Liquidity Risk :Risks arising from the bank’s potential inability to provide the necessary funding to fulfil its obligations in their due dates or finance its activities without assuming high costs or incurring losses. Liquidity risk is divided into:a. Funding Liquidity Risk :

The risk of the bank’s inability to convert assets into cash or obtain funding to settle its obligations.

b. Market Liquidity Risk :The risk of inability to sell an asset in the market, or sell it with a significant financial loss due to weak liquidity or demand in the market.

The bank manages liquidity risk as per the following factors:• A set of policies and procedures approved by the Board of Directors setting the bases for identifying,

monitoring, following up on and managing liquidity risk.• Developing tools for measuring, managing and monitoring liquidity risk by means of:

– The report on liquidity risk as per the maturity ladder. – Monitoring the caps and quality of the investment portfolio. – Identifying, categorizing and analyzing sources of funds according to their nature. – Monitoring the statutory liquidity which is to maintain a sufficient amount of liquid assets (cash

and cash equivalents) to cover obligations. – Balancing the maturity dates of assets and liabilities and taking all cash inflows and outflows

into consideration. – Stress Testing.

As for internal audit, the bank developed and adopted the Higher Control Charter and internal audit policies and procedures, in addition to developing and activating standard forms for audit action plans, as well as structuring work of the Legal Affairs Department, providing it with local staff and approving its policies and work procedures.


Social Responsibility:Ashur Bank continued to fulfill its social responsibility and support the local community in line with its consistent approach based on the bank’s policy and adopted values by continuing to support and care for the most vulnerable populations that are most affected by the events and circumstances engulfing the country in order to alleviate their impact on deprived populations that are affected by terrorism and instability. The bank has been striving to alleviate their suffering by providing them with direct support and aid by adopting the Our People campaign and providing it with financial and moral support and participating in the distribution of food and construction of houses for people who are displaced due to hostilities in hot spots. The bank also supports the families of martyrs in all affected areas, as well as martyrs of the armed forces.

On the other hand, the bank participated in the development and rehabilitation of areas where it operates; by working with the CBI and Iraqi Private Banks League on the “Alaq Baghdad” project for rehabilitating public squares in Baghdad through financial and logistic support to rehabilitate 20 squares in Baghdad to reflect the civilized and aesthetic character of the city of Baghdad, in addition to rehabilitating and restoring the historical Alrasheed street and paving and rehabilitating Ashur street.

On the cultural side, the bank provided support in organizing the celebrations of the International Day of Peace in cooperation with the Iraqi Private Banks League, the International musician Naseer Shamma and Global Band, and sponsored the inauguration, rehabilitation and development of the Martyrs’ Monument through the bank’s Engineering and Technical Affairs Department staff.


Network of Correspondent BanksAs for correspondent banks, the bank enhanced its worldwide network of correspondents this year to 16 banks to cover all its foreign banking activities; particularly in the areas of documentary credit and money transfer.

Name of Bank Country

Abu Dhabi Islamic Bank UAE

National Bank of Abu Dhabi UAE

Capital Bank Jordan

Housing Bank for Trade and Finance Jordan

Bank al Etihad Jordan

Jordan Kuwait Bank Jordan

Fransabank Lebanon

Bank of Beirut Lebanon

Arab African International Bank UAE

IS BONK Turkey

Bank of Jordan Jordan

International Bank of Qatar Qatar

Aktif Bank Turkey

Human Resources:Ashur International Bank always strives to implement the best administrative practices to develop its human resources to improve the productivity of its human capital, achieve bank’s objectives and stand out from the competition as the key to any real change and development. In 2016, job descriptions were developed for all positions, and the bank continued to implement its strategies which aim to develop and unleash the potentials of its employees and develop their skills in order to enhance the bank’s human resources and qualify them to undertake their roles efficiently by providing training courses and recruiting Arab competencies to manage activities, share their experience with bank employees and train them on all banking processes in accordance with international standards.

In accordance with the Human Resources Department’s policy which is based on the bank’s slogan of building ambition for clients and employees alike, the bank launched the first initiative among all Iraqi banks to reward outstanding employees by offering valuable prizes. This year, the winner was awarded a Land Cruiser in a ceremony attended by all bank employees.


Categories and Number of Employees by Job Grade

# Job Grade Job Title No.

1 Special Grade Managing director / assistant managing director / advisor

5

2 Executive Department manager 10

3 Administrative Head of department / unit / section / branch 12

4 Supervisory Supervisor 21

5 Technical & Advisory Project and maintenance manager / attorney / engineer

12

6 Basic Senior employee / employee 100

7 Uncategorized Security officer / transport officer / administrative assistant / follow-up officer

32

Total 192


AssetsBy the end of 2016, the bank’s assets declined by (33,019) million dinars at the rate of (8.1%) reaching (374,711) million dinars compared to (407,730) million dinars at the end of the previous year; as the bank continued to focus on asset quality, balancing profitability with safe investment, avoiding high-risk investments and securing liquidity to cover financial obligations and deal with economic conditions in a manner that maintains a solid financial position.

By analyzing the relative significance of assets line items, we find that the cash and property, plant and equipment line items account for (96.5%) of total assets at the rate of (88.9%) and (7.6%) respectively. Cash at hand and with banks declined by (1.7%) to (333,070) million, yet the bank maintained its sound liquidity status and considerable ability to deal with conditions despite this decline; as liquidity ratio reached (118%). On the other hand, direct credit facilities – in net figures – declined by (66.2%) due to the bank’s efforts to collect outstanding loans; as (12) billion dinars were collected. These figures indicate a highly efficient collection process which seeks to decrease the bank’s credit portfolio in light of the current conditions, in addition to settling several cases and outstanding accounts. Although the bank has sufficient guarantees, this has affected the quality of its assets and used more provisions than required under CBI’s regulations and guidelines to deal with any risks that may arise in this period; as the non-performing loans coverage ratio reached more than (83.9%) of bad credit compared to (51%) at the end of the previous year.

As for fixed assets, they dropped by (0.4%) to (28,453) million dinars as a result of the decline in project in progress and the increase of depreciation amounts as some assets entered into operation; despite the increase in the cost of fixed assets, as the bank invested in modernizing its means of transportation and increased its investment in IT infrastructure, in addition to acquiring a number of ATMs to enhance the bank’s electronic distribution network.

In the same context, investments in the bank dropped by (76.4%) to (2,566) billion dinars as a result of paying the Ministry of Finance for investment bonds from the bank’s statutory reserve held by CBI under Ministry of Finance bills; as (6.7) billion dinars were paid, in addition to selling a portion of the bank’s investment in the Iraqi Company for Financing SMEs (ICF – SME).

Materiality of the Elements of the Bank’s Financial Position in 2016 Compared to 2015

Figure in 1,000 dinars

2016 Materiality % 2015 Materiality % Growth %

Cash at hand and with banks 333,069,974 88.9% 338,978,585 83.1% -1.7%

Financial assets portfolio 2,566,169 0.7% 11,053,709 2.7% -76.8%

Direct credit facilities - Net 9,623,272 2.6% 28,440,001 7.0% -66.2%

Property, plant and equipment - Net

28,452,650 7.6% 28,554,121 7.0% -0.4%

Other assets 998,643 0.3% 703,681 0.2% 41.9%

Total assets 374,710,708 100% 407,730,097 100.00% -8.10%

Analysis of the Financial PositionAnd Business Results for 2016


88.9%

Cash at hand and with banks

Financial assets portfolio

Direct credit facilities - Net

Property, plant and equipment - Net

Other assets

0.7%

2.6%7.6% 0.3%

LiquidityCash at hand and with banks dropped by (5,909) million to (333,070) million dinars as at the end of 2016. By analyzing the elements of liquidity, we find that cash with local and foreign banks accounts for (35.5%) and (56.4%) respectively with (118,162) and (187.9) million dinars due to the increase in foreign trade financing. On the other hand, cash at hand accounts for (8.1%) and statutory deposits with CBI (4%).


Type of Cash 2016 Materiality % 2015 Materiality %

Cash at hand 26,953,373 8.1% 21,889,573 6.5%

Statutory deposits with CBI 116,651,200 35.0% 165,004,279 48.7%

Cash with local banks 1,511,061 0.5% 1,320,632 0.4%

Cash with foreign banks 187,954,340 56.4% 150,764,101 44.5%

Total 333,069,974 100.0% 338,978,585 100.0%

Including cheques and transfers. Cash at hand in hot spots reached (632,856) million Iraqi dinars and the bank used provisions

for this purpose for the amount of (426,500) Iraqi dinars in 2016, in addition to the carried-forward balance of (206,457); bringing the provision’s balance to (632,957) dinars as at 31st of December 2016.

32%Cash at hand

Statutory deposits with CBI

Cash with local banks

Cash with foreign banks

8% 4%

56%


Financial Assets PortfolioBy the end of the year, bank’s investments dropped to (2,566) million dinars compared to (11,053) in 2015. This was mainly due to the decline in the bank’s investment in treasury bills and the sale of a portion of its investment in ICF – SME as the bank’s share dropped by (24%) to (18.98%). The following table shows these investments.

Name of Company Bank’s Share Cost per Share No. of Shares

Iraqi Company for Bank Guarantees 7.9% 1.00 623,149

Erbil Stock Exchange 2.5% 1.00 250,000

ICF - SME 20.0% 1.10 3,288,709

Amwal for Electronic Banking Services 33.3% 1.00 60,000

Total 4,221,858

Credit Facilities

a. Direct FacilitiesIn 2016, direct credit facilities dropped by (7,526) million dinars at the rate of (12.4%) to (52,989) million dinars; as the bank followed a conservative credit policy due to market risk and credit portfolio quality, as well as the collection of outstanding loans; with (12) billion dinars being collected from non-performing loans. Loans granted accounted for (98.2%) of total credit, whereas receivable current accounts accounted for (1.8%) of total credit.

On the other hand, the bank used provisions for the credit portfolio for the sum of (8,438) billion dinars; exceeding CBI’s requirements. Furthermore, the bank suspended (2,853) million dinars of interest accrued on the credit portfolio in 2016.


Description 2016 2015 Change

Total direct credit facilities 52,989,524 60,515,558 -7,526,034

Suspended interest 9,120,665 6,267,762 2,852,903

Provisions for credit impairment 34,245,587 25,807,795 8,437,792

Net direct credit facilities 9,623,272 28,440,001 -18,816,729

b. Indirect Facilities (Contractual Credit)Contractual credit (letters of guarantee and documentary credit) grew due to the bank’s expansion in foreign trade financing and in line with CBI’s regulations relating to auctions; which affected the revenues and business volumes of companies in this line item by the end of 2016.

Liabilities and EquityThe bank’s shareholders’ equity increased to (252,641) billion with an increase of (14,741) billion at the rate of (6.2%), and the Board of Directors decided to submit a recommendation to the General Assembly to carry current year’s profits forward to upcoming years.


Capital AdequacyThe bank’s capital adequacy ratio reached (52%) compared to (118%) in the previous year which exceeds international standards represented by the requirements of the Basel Committee and CBI of (12%) and (8%) respectively. This decline was the result of increased credit activity; particularly indirect facilities.



Current accounts & deposits 94,829,661 25.3% 115,498,358 28.3% -17,9%

Cash security deposits 6,052,698 1.6% 5,128,560 1.3% 18,0%

Long-term loans 4,455,820 1,2% 6,690,715 1,6% -33,4%

Misc. provisions & tax 11,792,349 3,1% 39,358,997 9,7% -70,0%

Other liabilities 4,939,686 1,3% 3,154,549 0.8% 56,6%

Shareholders’ equity 252,640,494 67,4% 237,898,918 58,3% 6.2%

Total liabilities and shareholders’ equity

374,710,708 100% 407,730,097 100% -8,1%

Materiality of Liabilities and Shareholders' Equity

68%

3%1%2%

25%

1%69%

Long-term loans

Cash security deposits

Current accounts & deposits

Shareholders’ equity

Other liabilities

Misc. provisions & tax

Current Accounts and DepositsTotal amounts (current accounts and deposits) deposited with the bank by the end of 2016 reached (94,830) billion dinars with a decline of (17.9%) due to the decline in current accounts. Current accounts and deposits accounted for (23.4%) of total liabilities. Deposits can be detailed as follows:



Current and demand accounts 76,850,116 81.0% 95,550,659 82.7% -19.6%

Saving deposits 11,024,175 11.6% 12,730,870 11.0% -13.4%

Time deposits 6,955,370 7.3% 7,216,829 6.2% -3.6%

Total deposits 94,829,661 100% 115,498,358 100% -17.9%


Provisions BalancesThe bank continues to follow a clear policy to hedge for any expected losses, and create a provision for impairment of non-performing loans individually and at the entire portfolio level beyond CBI’s requirements. Credit risk provisions to non-performing facilities coverage ratio, less suspended interest, reached (83.9%); noting that the provisions for branches in hot spots are used over a period of 10 years.

As for miscellaneous provisions, the bank used provisions for the amount of (630) million dinars which is (100%) of total cash balances in hot spots to hedge for potential loss. Judicial expenses relating to clients were covered at the rate of (50%) of total balances plus provisions. As for tax provisions, the bank demonstrated its compliance with Iraqi tax legislations by obtaining a tax clearance for 2015 and completing all its tax accounting processes.

Figures in 1,000 dinars

2016 2015

Provision for cash credit risk 26,185,640 23,512,522

Provision for contractual credit risk 8,059,947 2,295,273

Miscellaneous provisions 11,157,760 35,705,746

Tax provisions 634,589 3,653,251


Income Statement As a result of the bank’s policy of maintaining the quality of its assets and creating sufficient provisions to deal with emergencies in Iraq, the bank’s total profit before tax dropped by (20.7%), which equals (3,047) million dinars, to (14,742) million dinars compared to (17,788) million dinars as at the end of the previous year. Accordingly, the bank achieves net profit after tax equal to (5.9%) of capital.

The main reason for this decline in profits was the increase in utilized provisions to deal with potential losses, particularly in hot spots, so as to cover potential losses in the credit portfolio, in addition to (713) million dinars in provisions for potential loss of cash in hot spots, in addition to covering (50%) of judicial expenses charged to clients.

As for revenue, bank’s revenues increased by (1,152,160) at the rate of (3.5%) compared to the previous year; which indicates that realized losses are provisions and non-recurring expenses, and that revenue in general increased beyond plans and expectations.

Revenue The bank’s total income for the year ended 31/12/2016 increased by (3.5%) to (34,343) billion dinars compared to (33,191) billion in 2015. Revenue from interest and commission ranked first with (29,696) billion dinars accounting for (86.5%) of total revenues as illustrated in the following table and chart.



Net revenue from interest and commission

29,696,022 86.5% 26,408,705 79.6% 12.4%

Net profit from foreign currency conversion

1,793,034 5.2% 4,613,066 13.9% -61.1%

Capital loss 0 0.0% -373,958 -1.1% -100.0%

Net profit from other operations 2,853,400 8.3% 2,542,753 7.7% 12.2%

total 34,342,456 100% 33,190,566 100% 3.5%

Net revenue from interest and commission

Net profit from foreign currency conversion

Capital loss

Net profit from other operations

5%0%

8%

87%


ExpensesIn 2016, expenses increased by (60.3%) to (18,865) billion dinars compared to (11,763) billion dinars in 2015. This increase was mainly the direct result of the increase in provision expenses to cover potential losses in the credit portfolio and expected loss of cash in hot spots. Other operating expenses came second to provision expenses; as they increased to (4,325) billion from (3,662) billion as at the end of 2015 due to the increase in donation expenses, in addition to rent due to the opening of new branches.

Conversely, expenses arising from employees’ salaries dropped to (4,550) billion; which was mainly due to restructuring salaries and reducing relevant expenses.


2016 Share % 2015 Share % Change %

Employees’ salaries and the like 4,549,592 24.1% 4,774,168 40.6% -4.7%

Other operating expenses 4,325,251 22.9% 3,661,967 31.1% 18.1%

Depreciations 839,643 4.5% 419,031 3.6% 100.4%

Provision for credit loss 8,437,792 44.7% 2,700,936 23.0% 212.4%

Miscellaneous provisions 713,022 3.8% 206,457 1.8% 245.4%

Total 18,865,300 100% 11,762,559 100% 60.4%

Expenses

22.9%44.7%

24%

3.8%

4.5%

Employees’ salaries and the like

Other operating expenses

Depreciations

Provision for credit loss

Miscellaneous provisions


Key Financial Indicators of the Bank’s Activity for the years 2006 - 2016Figures in billion dinars

Year Capital Total

Assets

Deposits Investment Cash

Credit

Shareholders’

Equity

Net Profit No. of Branches

Baghdad Governorates

2006 25 30.881 4.718 0.400 2.596 25.859 1.011 1 0

2007 25 79.699 4.658 0.505 4.318 31.258 5.006 1 2

2008 50 161.114 94.927 113.505 1.978 59.561 7.888 1 3

2009 57.5 160.435 86.055 103.748 3.128 69.903 9.254 1 3

2010 66.7 139.371 55.265 56.879 16.372 76.561 6.896 1 3

2011 66.7 169.295 69.753 3.767 43.932 84.608 7.510 1 3

2012 150 267.893 71.553 112.608 50.698 170.524 15.792 2 3

2013 210 355.83 83.164 12.608 96.974 230.925 14.968 2 5

2014 250 385.529 101.505 3.189 61,283 229,860 2.710 2 5

2015 250 407.730 115.498 11.053 28.440 237.899 17.788 2 6

2016 250 374.711 94.83 2.566 9.623 252.640 14.742 3 7

The statement for the years 2014 – 2016 are presented in accordance with IAC and IFRS upon CBI’s request to convert to international standards instead of the Iraqi Unified System; with 2014 as the base year.


Financial Statements andIndependent Auditor’s Report

Independent Auditor’s Report

Statement of Financial Position for 2016

Income Statement

Statement of Changes in Equity

Cash Flow Statement


Independent Auditors’ Report

Ref.: 12/1

Date 22nd of May 2017

To the General Assembly of Ashur International Bank for Investment (PSC)

Subject: Report of the Auditor of the Financial Statements

We have audited the financial statements of Ashur International Bank for Investment (the Bank) as of

December 31, 2016 which included the statement of financial position, statement of profit and loss,

comprehensive statement of income, statement of changes in shareholders’ equity and statement of

cash flows, and the notes to the financial statements No. (1 – 33) for the fiscal year then ended.

Management’s Responsibility

The management is responsible for the preparation and fair presentation of these financial statements

in accordance with International Financial Reporting Standards (IFRS) and the interpretations issued by

IFRS Interpretations Committee of the International Accounting Standards Board (IASB), in addition to

its responsibility for the preparation and implementation of internal control; particularly with respect to

the preparation and fair presentation of financial statements that are free from material misstatements

due to error or fraud. This responsibility also includes selecting and implementing appropriate accounting

policies and using appropriate accounting estimates.

Auditor’s Responsibility

Our responsibility is to express an unbiased technical opinion on the financial statements presented to

us in accordance with local auditing manuals and standards which require that we plan and perform

the audit to obtain reasonable assurance whether the financial statements are free from any material

misstatement. The audit involves an examination of the supporting documents of the amounts and

disclosures in the financial statements for 2016. It also includes evaluating the accounting principles,

and we believe that our audit provides a reasonable basis for our opinion.

Mustafa Fouad Abbas & Co.Certified Public Accountants

Members of Iraqi ACA

Samir M. AzizCertified Public Accountants



Mustafa Fouad Abbas & Co.Certified Public Accountants


Samir M. AzizCertified Public Accountants


Samir M. AzizCertified Public Accountant & Auditor

Aziz J. HasanCertified Public Accountant & Auditor

We have the following notes and comments:1. By examining the accounting records and reviewing the nature of the banking operations, we did

not find any indication of any banking operations associated with money laundering or terrorism financing.

2. Capital adequacy ratio is 52%.

3. We have reviewed the Internal Control Department’s report and no material issues attracted our attention.

4. The set of books used by the Bank comply with bookkeeping requirements and include, in our opinion, recording all the Bank’s assets, liabilities, resources and applications for the fiscal year.

5. The stocktaking of cash assets was properly carried out by the management under our supervision (stocktaking of cash in the main office and treasury), but the stocktaking of fixed assets and inventory was carried out by the management by virtue of sheets that were presented to us.

6. The Board of Director’s report complies with the provisions of the Companies Law No. 21 for 1997 as amended.

Opinion

In our opinion, taking into consideration all the notes and comments presented in our report and based

on the information and notes made available to us, the financial statements and accompanying Board

of Directors’ report are in agreement with the records, satisfy the legal requirements and, to the extent

of the performance indicators included therein, clearly and fairly present the Bank’s financial position

as of December 31, 2016 and its business results and cash flows for the year then ended; in accordance

with International Financial Reporting Standards and the interpretations issued by IFRS Interpretations

Committee of the International Accounting Standards Board.

Yours sincerely,


STATEMENT OF FINANCIAL POSITIONAS AT 31 DECEMBER 2016

Notes 2016IQD (000)

2015IQD (000)

Assets

Cash and balances with Central Bank 3 143,604,573 186,893,852

Due from banks and other financial institutions 4 189,465,401 152,084,733

Direct credit facilities, Net 5 9,623,272 28,440,001

Investment in associates 6 57,000 3,255,337

Financial assets at fair value through other com-prehensive income

7 2,509,169 1,098,372

Financial assets at amortized cost 8 - 6,700,000

Property and equipment , Net 9 14,888,703 14,017,238

Projects in progress 9 13,563,947 14,536,883

Other assets 10 998,643 703,681

Total assets 374,710,708 407,730,097

Liabilities And Shareholder’s Equity

Liabilities

Customers’ accounts 11 94,829,661 115,498,358

Margin accounts 12 6,052,698 5,128,560

Long-term loans 13 4,455,820 6,690,715

Miscellaneous provisions 14 11,157,760 35,705,746

Income tax liability 15 634,589 3,653,251

Other liabilities 16 4,939,686 3,154,549

Total liabilities 122,070,214 169,831,179

Shareholders’ Equity

Paid in capital 17 250,000,000 250,000,000

Statutory reserve 18 6,290,052 5,552,973

Other reserves 18 2,816,477 2,816,477

Fair value reserve 7 (259,115) (259,115)

Accumulated losses (6,206,920) (20,211,417)

Total shareholders’ equity 252,640,494 237,898,918

Total liabilities and shareholders’ equity 374,710,708 407,730,097

CHAIRMAN OF BOARD OF DIRECTORS–ASHUR INTERNATIONAL BANK FOR INVESTMENT

CHIEF EXECUTIVE OFFICER-ASHUR INTERNATIONAL BANK FOR INVESTMENT

Pursuant to Resolution No. 12/1 Dated May 22, 2017

Samir M. AzizCertified Public Accountant & Auditor

Aziz Ja'far HasanCertified Public Accountant & Auditor

The accompanying notes from 1 to 33 are an integral part of these financial statements


INCOME STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2016

Notes 2016IQD (000)

2015IQD (000)

Interest income 19 2,131,861 7,972,846

Interest expense 20 (682,954) (678,620)

Net interest income 1,448,907 7,294,226

Net fees and commissions 21 28,247,115 19,114,479

Net interest and commission income 29,696,022 26,408,705

Net gains from foreign currency exchange 1,793,304 4,613,066

Capital loss - (373,958)

Other operating income 2,853,400 2,542,753

Gross profit 34,342,726 33,190,566

Employees’ expenses 22 (4,549,592) (4,774,168)

Other operating expenses 23 (4,325,251) (3,661,967)

Depreciation 9 (839,643) (419,031)

Provision of credit losses 5 (8,437,792) (2,700,936)

Miscellaneous provisions 14 (713,022) (206,457)

Total expenses (18,865,300) (11,762,559)

Profit before tax 15,477,426 21,428,007

Income tax expense 15 (735,850) (3,639,568)

Profit for the year 14,741,576 17,788,439

IQD/Fils IQD/Fils

Basic and diluted earnings per share 24 0/060 0/070



2016IQD (000)

2015IQD (000)


Other comprehensive income to be classified to profit or loss in subsequent periods:

- -

Change in fair value of financial assets at fair value through other comprehensive income

- -

Total other comprehensive income - -

Total comprehensive income for the year 14,741,576 17,788,439

STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2016



STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2016

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Notes 2016IQD (000)

2015IQD (000)

Operating activities:

Profit before tax 15,477,426 21,428,007

Adjustments for Non-Cash items

Depreciation 839,643 419,031

Provision for credit losses 8,437,792 2,700,936

Loss from sale of property and equipment - 373,958

Operating cash flows from Operating activities before changes in assets and liabilities

24,754,861 24,921,932

Changes in assets and liabilities:

Decrease in direct credit facilities 10,378,937 30,142,492

Increase in other assets (294,962) (90,767)

(Decrease) increase in customers’ accounts (20,668,697) 13,992,994

Increase (Decrease) in margin accounts 924,138 (1,522,152)

Increase in other liabilities 1,785,137 282,964

Decrease in provisions (24,547,986) (535,168)

Net cash flows (used in) from operating activities before income tax

(7,668,572) 67,192,295

Paid Income tax (3,754,512) (3,952,600)

Net cash flows (used in) from operating activities (11,423,084) 63,239,695

Investing activities:

Proceeds from sale of financial assets at amortized cost 6,700,000 -

Purchase of financial assets at amortized cost - (6,700,000)

Investment in associates - (1,264,351)

Proceeds from sale financial assets at fair value through other comprehensive income

1,787,540 100,000

Purchase of property and equipment (1,746,065) (6,476,054)

Proceeds from sale of property and equipment 34,957 (292,500)

Projects in progress 972,936 3,893,406

Net cash flows from (used in) investing activities 7,749,368 (10,739,499)

Financing Activities:

(Decrease) Increase in long-term loans (2,234,895) 2,257,315

Dividends paid - (9,750,000)

Net cash flows used in financing activities (2,234,895) (7,492,685)

Net (decrease) increase in cash and cash equivalents (5,908,611) 45,007,511

Cash and cash equivalents at 1 January 338,978,585 293,971,074

Cash and cash equivalents at 31 December 25 333,069,974 338,978,585

STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2016



1. CORPORATE INFORMATIONAshur International Bank for Investment (the “Bank”) is a private shareholding company registered and incorporated in Iraq in 2005 in accordance with the registration certificate number 25812, and its registered office is located in Baghdad with paid in capital 250 billion.

The Bank provides its banking services through its main branch in Baghdad (Karrada), and its eight branches across Iraq, and provides brokerage and exchange services in Iraq.

The financial statements were authorized for issuance by the Bank’s Board of Directors in their meeting held on June 20, 2017.

2. SIGNIFICANT ACCOUNTING POLICIES2.1 Basis of PreparationThe accompanying financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS) and interpretations issued by IFRIC using the historical cost basis, except for financial assets at fair value through other comprehensive income and financial assets at fair value through profit or loss that have been measured at fair value at the date of the financial statements.

The financial statements are presented in Iraqi Dinar (IQD) which is the functional currency of the Bank, and all values are rounded to the nearest thousand Dinars except otherwise indicated.

The bank prepares and issues another set of financial statements in accordance with laws and regulations of Iraq that are audited by other auditors.

2. 2 Summary of Significant Accounting PoliciesRevenue and expense recognitionInterest income is recorded using the effective interest rate method except for fees and interests on non performing facilities, on which interests are transferred to the interests in suspense account and not recognized in the statement of profit or loss.

Expenses are recognized on the accrual basis of accounting.

Commission income is recognized upon rendering of services. Dividends are recognized once the right to receive them is established (once approved by the General Assembly).

Use of estimatesThe preparation of the financial statements and implementation of accounting policies require management to make estimates and assumptions that affect the reported amounts of financial assets and liabilities and disclosure of contingent liabilities. These estimates and assumptions also affect the revenues and expenses and the resultant provisions as well as fair value changes reported in other comprehensive income. In particular, considerable judgment by management is required in the estimation of the amount and timing of future cash flows. Such estimates are necessarily based on assumption about several factors involving varying degrees of judgment and uncertainty and actual results may differ resulting in future change in such provision.

NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2016


The management of the Bank believes that the estimates are reasonable and are as follows:• Provision for impairment of direct credit facilities: the provision of loans is reviewed upon the

basis set by the Central Bank of Iraq and in accordance with IFRS.• Impairment losses on collaterals acquired by the Bank are determined based on appraisal

reports prepared by certified appraisers. Valuation is performed on a regular basis.• Tax provisions are calculated based on the tax rates and laws that are applicable at the

statement of financial position date.• A periodic review is performed by the management to reassess the useful lives of property and

equipment for the purpose of annual depreciations and amortizations based on the general condition of the assets and the estimations of the expected useful lives, and any identified impairment is recorded in the statement of profit or loss.

• The management periodically reviews financial assets that are stated at cost to assess any impairment, and any identified impairment is recorded in the statement of profit or loss.

• Lawsuits provision is calculated for any legal liabilities according to the lawyer’s opinion.

Segment informationBusiness segment represents distinguishable components of the Bank that are engaged in providing products or services that are subject to risks and returns that are different from those of other segments.

The geographical segment provides services and products in a certain economic environment that is subject to risks and returns that differ from other segments that operate in other economical environments.

Cash and cash equivalentsCash and cash equivalents comprise cash on hand and cash balances with banks and financial institutions that mature within three months, less banks and financial institutions deposits that mature within three months and restricted balances.

Recognition of financial assetsPurchases and sales of financial assets are recognized on the trade date (the date at which the sale or purchase takes place).

Direct credit facilities• Direct credit facilities are shown net of allowance of credit losses and interest and commissions

in suspense.• Impairment of direct credit facilities is recognized in the allowance for credit losses when

events occur after the initial recognition of the facility that have an impact on the estimated future cash flows of the facilities that can be reliably estimated. The impairment is recorded in the income statement.

• Interest and commission arising on non-performing facilities are suspended when loans become impaired according to the Central Bank of Iraq’s regulations

• Loans and the related allowance for credit losses are written off when collection procedures become ineffective. The excess in the allowance of possible loan losses, if any, is transferred to the income statement, and cash recoveries of loans that were previously written off are credited to the income statement.



Financial assets at amortized cost • Financial assets that are measured at amortized cost only if these assets are held within a

business model whose objective is to hold the asset to collect their contractual cash flows and that the contractual terms of the financial asset give rise, on specified dates, to cash flows constituting solely principal and interest on the outstanding principal amount; and

• Debt instruments meeting these criteria are initially measured at amortized cost plus transaction costs. Subsequently they are amortized using the effective interest rate method, less allowance for impairment. The losses arising from impairment are recognized in the income statement.

• The amount of the impairment consists of the difference between the book value and present value of the expected future cash flows discounted at the original effective interest rate.

• It is not permitted to reclassify assets to or from this category except in certain circumstances determined IFRS 9.

• If these assets are sold before maturity date gain and loss from sale is recorded in the income statement.

Financial assets at fair value through profit or lossFinancial assets, which do not meet the business model for financial assets at amortized cost, and are purchased with the aim of resale in the near future in order to generate profit from the short-term market prices fluctuation or the trading profit margins.

Financial instruments at fair value through profit or loss are initially measured at fair value, unless if the Bank classified the financial investments as not for trading at fair value through other comprehensive income at the purchase date. Subsequently, these assets are revalued at fair value. Gains or losses arising on subsequent measurement of these financial assets including the change in fair value arising from non-monetary assets in foreign currencies are recognized in the income statement. When these assets or portion of these assets are sold, the gain or loss arising are recorded in the income statement.

Dividend and interest income are recorded in the income statement.

Financial assets at fair value through other comprehensive incomeThe Bank has the final right to value each financial instrument as an equity instrument at fair value through other comprehensive income; however, this classification is not permitted if the investment is an equity instrument held for trading.

These financial instruments are initially measured at their fair value plus transaction costs. Subsequently, they are measured at fair value. Gains or losses arising on subsequent measurement of these equity investments including the change in fair value arising from non-monetary assets in foreign currencies are recognized in other comprehensive income in the statement of changes in equity. The gain or loss on disposal of the asset is reclassified from fair value reserve to retained earnings. These financial assets are not subject to impairment testing. Dividend income is recognized in the income statement.



Fair value• The Bank values the financial instruments, such as derivatives and non-financial assets, at fair

value at the date of the financial statements.• The fair value represents the price that will be realized when selling the assets or the amount

that will be paid to transfer the commitment of the regulated transaction between the participants in the market.

• In the absence of the primary market, the most suitable market will be used to trade the assets and liabilities.

• The bank needs the opportunities to reach the primary or most suitable markets.• The entity values the fair value for the properties or the commitment to use the market

participants’ assumptions for valuing the properties or, a fair value measurement of a non–financial assets takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

• The Bank uses valuation techniques that are appropriate and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.

Impairment of financial assetsAssessment is made at the date of the statement of financial position to determine whether there is objective evidence that a specific financial assets is impaired. If such evidence exist, any impairment loss is recognized in the income statement.

Impairment is determined as follows:• For assets carried at amortized cost: impairment is the difference between the carrying value

and the estimated cash flows discounted at the original effective interest method.• Impairment is recognized in the income statement. Any subsequent recovery of a previously

recorded impairment of financial assets is charged to the income statement.

OffsettingFinancial assets and financial liabilities are only offset and the net amount reported in the statement of financial position when there is a legally enforceable right to set off the recognized amounts and the Bank intends to either settle on a net basis, or to realize the asset and settle the liability simultaneously.



Property and EquipmentProperty and equipment are measured at cost, less accumulated depreciation and any depreciation is calculated using the straight-line method to write down the cost of property and equipment to their residual values over their estimated useful lives. Land is not depreciated. The estimated useful lives are as follows:

Useful life Years

Buildings 50

Equipment and furniture 5

Vehicles 5

Computer systems 5

An item of Property, Plant and Equipment is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset is recognized in ‘Other operating income’ or ‘Other operating expenses’ in the income statement in the year the asset is derecognized.

Useful life is reviewed for property and equipment at the end of each year, if revised estimates are different than the old ones the change recorded in the period as change in estimits.

The residual values of assets, useful lives and depreciation methods are reviewed every year and subsequently adjusted if necessary.

De-recognition of financial assets and financial liabilitiesFinancial Assets A financial asset (or, where applicable a part of a financial assets or part of group of similar financial assets) is derecognized when:• The rights to receive cash flows from the asset have expired; or• The Bank has transferred its rights to receive cash flows from the asset or has assumed an

obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; or

• Either: (a) the Bank has transferred substantially all the risks and rewards of the asset, or (b) the Bank has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset

When the Bank transfers the rights to receive cash flows from the asset and has neither transfer nor retain substaintialy all of the risks and rewards of the asset or transfer of control over the asset, the asset is recognized to the extent that the Bank continues to control of the asset. The continuous control that takes the form of collateral over the transferred asset is measured at the lower of the original curring amount of that asset or the maximum amount of consideration that the bank could be requied to repay.



Financial liabilitiesA financial liability is derecognized when the obligation under the liability is discharged, cancelled or expired. Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability.

Foreign currencies • Transactions in foreign currencies are initially recorded in the functional currency at the rate of

exchange prevailing at the date of the transaction.• Financial assets and financial liabilities denominated in foreign currencies are translated at the

average rate prevailing on the date of the statement of financial position and declared by the Central Bank of Iraq .

• Non-monetary assets and liabilities measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

• Gains or losses resulting from foreign currencies translation are charge to the income statement.• Translation differences for non-monetary assets and liabilities in foreign currencies (such as

equity instruments) are recorded as part of the change in fair value.

ProvisionsProvisions are recognized when the Bank has a present obligation arising from a past event and the costs to settle the obligation are both probable and able to be reliably measured.

Income TaxesTax expense comprises current tax and deferred taxes.

Current tax is based on taxable profits, which may differ from accounting profits published in the financial statement. Accounting profits may include non-taxable profits or tax non-deductible expenses which may be exempted in the current or subsequent financial years or items not subject to deduction for tax purposes.

Taxes are calculated based on tax rates confirmed under the Iraqi laws and regulations.

The Deferred taxes are taxes expected to be paid or recovered as a result of the temporary differences between assets and liabilities – in the financial statements and the carrying value of the tax basis. Deferred taxes are measured by adhering to the financial position statement and calculated based on tax rates that are expected to be applied in the period when deferred assets are realized or deferred liabilities are settled.

The amount of the deferred assets or liabilities are reviewed at the date of the financial statements and are reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax assets be utilized.Assets seized by the BankAssets seized by the Bank through calling upon collateral are shown in the statement of financial position under “Other assets” at the lower of their carrying value or fair value. Assets are revalued at the statement of financial position date on an individual basis and losses from impairment are



transferred directly to the statement of income, while revaluation gains are not recognized as income. Reversal of previous impairment losses shall not result in a carrying value that exceeds the carrying amount that would have been determined had no impairment loss been recognized for the asset in prior years.

2.3 Change in accounting policiesThe accounting policies followed in the preparation of the financial statements of the Bank were consistent with those used in the preparation of prior year financial statements, except for the adoption of certain amendments to the IFRSs that have become effective.

The adoption of these amendments had not cause any impact on the bank’s financial statements.

The IASB issued certain standards and amendments that are still ineffective and have not been adopted by the Bank yet. The management expects that the implementation of the following standards would have an effect on the financial position and performance or the bank’s financial statements and disclosures. These standards will be applied when they become effective.

IFRS 9 Financial Instruments (Implemented IFRS 9)During July 2014, the IASB issued IFRS 9 “Financial Instruments” with all the three phases. IFRS 9 sets out the requirements for recognizing and measuring the financial assets, the financial liabilities and some contracts to buy or sell non-financial items. IFRS 9 replaces IAS 39 “Financial Instruments: Recognition and Measurement”. The Bank has implemented the first phase of IFRS 9 as issued during 2009. The date of initial implementation of the first phase of IFRS 9 was 1 January 2012. The new version of IFRS 9 will be implemented at the mandatory date on 1 January 2018, which will have an impact on the recognition and measurement of the financial assets.

IFRS 15 Revenue from Contracts with CustomersIFRS 15 specifies the accounting treatment for all revenue arising from contracts with customers. It applies to all entities that enter into contracts to provide goods or services to their customers, except the contracts are in the scope of other IFRSs, such as IAS 17 Leases.

IFRS 15 supersedes the following standards:• IAS 11 Construction Contracts. • IAS 18 Revenue. • IFRIC 13 Customer Loyalty Programs.• IFRIC 15 Agreements for the Construction of Real Estate.• IFRIC 18 Transfers of Assets from Customers.• SIC-31 Revenue—Barter Transactions Involving Advertising Services.



The standard is effective for annual periods beginning on or after 1 January 2018, and early adoption is permitted.

IFRS 16 LeasesDuring January 2016, the IASB issued IFRS 16 “Leases” which sets out the principles for the recognition, measurement, presentation and disclosure of leases.

IFRS 16 substantially carries forward the lessor accounting requirements in IAS 17. Accordingly, a lessor continues to classify its leases as operating leases or finance leases, and to account for those two types of leases differently.IFRS 16 introduced a single lessee accounting model and requires a lessee to recognize assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. A lessee is required to recognize a right-of-use asset representing its right to use the underlying leased asset and a lease liability representing its obligation to make lease payments.

The new standard will be effective for annual periods beginning on or after 1 January 2019. Early application is permitted.

(3) CASH AND BALANCES WITH CENTRAL BANK

2016IQD (000)

2015IQD (000)

Cash on hand 26,953,373 21,889,573

Balances with Central Bank of Iraq 116,651,200 165,004,279

143,604,573 186,893,852

The Bank has an amount of IQD 632,856 thousands as cash on hand located in unsecured provinces. The Bank

has booked a provision against these balances by an amount of IQD 426,500 thousands during 2016 in addition to

the accumulated balance of IQD 206,457 to have a balance of IQD 632,957 as of 31 December 2016.

Balances at Central Bank of Iraq branches in Erbil and Sulaymania were IQD 3,607,065 thousands and IQD

6,169,614 thousands respectively as at 31 December 2016 (31 December 2015: IQD 3,607,806 thousands and IQD

6,944,776 thousands respectively). The use of these balances is limited due to political and economic situations

common in Iraq, noting that there is no official restriction on these balances.

Current accounts at the Central Bank of Iraq include statutory reserve of IQD 13,294,076 thousands as at 31

December 2016 (2015: IQD 7,713,925 thousands), whereas such amounts are being held at the Central Bank of

Iraq and cannot be used.



(4) DUE FROM BANKS AND OTHER FINANCIAL INSTITUTIONS

2016IQD (000)

2015IQD (000)

Local Banks 1,511,061 1,320,632

Foreign Banks 187,954,340 150,764,101

189,465,401 152,084,733

(5) DIRECT CREDIT FACILITIES, NET

2016IQD (000)

2015IQD (000)

Loans 52,934,210 60,405,957

Overdrafts 55,314 109,601

52,989,524 60,515,558

Less: Interest in suspense (Note 5A) 9,120,665 6,267,762

Provision for credit losses (Note 5B) 34,245,587 25,807,795

Credit facilities, Net 9,623,272 28,440,001

A. Loans Loans are presented net of interest received in advance amounted to IQD 6,157,929 thousands as at 31 Decem-

ber 2016 (2015: IQD 8,820,411 thousands).

Non-performing credit facilities amounted to IQD 56,059,551 thousands as at 31 December 2016, representing 95% of gross direct credit facilities.

Non-performing credit facilities in unsecured provinces amounted to IQD 29,538,703 thousands, before deducting the interests in suspense, interest received in advance and provisions amounted to IQD 8,684,233 thousands (net of IQD 20,854,470 thousands) as at 31 December 2016.

Non-performing credit facilities after deducting the interests in suspense amounted to IQD 46,938,886 thousands as at 31 December 2016, represents 94% of gross direct credit facilities after deducting the interest in suspense.



B. Interest in Suspense The movement of interest in suspense on direct credit facilities is as follows:

RetailsIQD (000)

CorporatesIQD (000)

TotalIQD (000)

At 1 January 2016 6,145,373 122,389 6,267,762

Additions during the year 2,884,285 (31,382) 2,852,903

At 31 December 2016 9,029,658 91,007 9,120,665

C. Provision for credit losses The movement of provision for credit losses of direct credit facilities is as follows:

RetailsIQD (000)

CorporateIQD (000)

TotalIQD (000)

At 1 January 2016 19,312,674 6,495,121 25,807,795

Additions during the year 8,437,792 - 8,437,792

At 31 December 2016 27,750,466 6,495,121 34,245,587

(6) INVESTMENT IN ASSOCIATES

Unquoted shares Country of origin

Ownership % 2016IQD (000)

2015IQD (000)

Iraqi Company for SMEs Financing Iraq - - 3,379,635

Amwal Co. for Limited Electronic exchange Services

Iraq 33٪ 60,000 60,000

60,000 3,439,635

Impairment of investments (3,000) (184,298)

57,000 3,255,337

Further to the Companies Registrar rejection of purchasing the shares of the North Bank for Financing and

Investment in the Iraqi Company for SMEs Financing (the Company) by Ashur International Bank for Investment

by an amount of (697,870,378), the Bank’s ownership in the Company has decreased from 24% to 19.9%. This

investment was transferred by the Bank’s management to financial assets at fair value through other comprehen-

sive income.



(7) FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME

2016IQD (000)

2015IQD (000)

Unquoted shares 2,509,169 1,098,372

2,509,169 1,098,372

The movements of financial assets at fair value through other comprehensive income is as follows:

2016IQD (000)

2015IQD (000)

At 1 January 1,098,372 1,198,372

Transfers 3,198,337 -

Disposals (1,787,540) -

At 31 December 2,509,169 1,098,372

The unquoted shares are recorded at cost since the management is unable to reliably obtain the fair value of these investments.

(8) FINANCIAL ASSETS AT AMORTIZED COST:These financial assets represent the Bank’s investment in short-term treasury bills with the Iraqi Government (Iraqi Ministry of Finance) through the Central Bank of Iraq (CBI), which issued instructions that allow the banking sector to invest 50% of their statutory reserve with CBI. Accordingly, the Bank purchased these treasury bills after the approval of CBI on 13 October 2015 by an amount of IQD6.7 billion at deferred interest rate of 2% due after (364) days, to be paid at the maturity date for those bills on 15 November 2016, noting that the amount of these amounts of interest and treasury bills were settled to the Bank on 15 November 2016.



(9) PROPERTY AND EQUIPMENT, NET

Land Buildings Tools and equipment

Computers, Equipment, Furniture & Fixtures

Vehicles Computer Systems

Total

IQD (000) IQD (000) IQD (000) IQD (000) IQD (000) IQD (000) IQD (000)

2016

Cost:

At 1 January 5,836,586 6,258,862 997,011 1,855,263 365,138 180,185 15,493,045

Additions - 255,264 304,571 784,176 236,704 165,350 1,746,065

Disposals - - (35,121) (2,350) (34,050) (4,283) (75,804)

At 31 December 2016 5,836,586 6,514,126 1,266,461 2,637,089 567,792 341,252 17,163,306

Accumulated Depreciation

At 1 January - 315,765 352,653 599,963 186,973 20,453 1,475,807

Charge for the year - 119,188 162,081 388,622 126,144 43,608 839,643

Disposals - - (30,543) (1,792) (8,512) - (40,847)

At 31 December - 434,953 484,191 986,793 304,605 64,061 2,274,603

Net book value 5,836,586 6,079,173 782,270 1,650,296 263,187 277,191 14,888,703

Projects in progress* 12,598,298 965,649 - - - - 13,563,947

Net book value 18,434,884 7,044,822 782,270 1,650,296 263,187 277,191 28,452,650

Projects in progress represent fixtures, fittings and renovation costs for sites that will be opened as new branches to the bank.

Land Buildings Tools and equipment

Computers, Equipment, Furniture & Fixtures

Vehicles Computer Systems

Total


2015

Cost:

At 1 January 3,463,798 4,086,728 462,972 954,543 325,362 - 9,293,403

Additions 15,600 884,230 575,858 1,079,367 185,621 90,286 2,830,962

Disposals - - (41,819) (88,748) (145,845) - (276,412)

Transfers from projects

in progress

2,357,188 1,287,904 - - - - 3,645,092

Reclassifications - - - (89,899) - 89,899 -

At 31 December 2015 5,836,586 6,258,862 997,011 1,855,263 365,138 180,185 15,493,045

Accumulated Depreciation

At 1 January - 217,885 299,393 519,913 214,539 - 1,251,730

Charge for the year - 97,880 73,906 174,956 59,576 12,713 419,031

Disposals - - (20,646) (87,166) (87,142) - (194,954)

Reclassifications - - - (7,740) - 7,740 -

At 31 December - 315,765 352,653 599,963 186,973 20,453 1,475,807

Net book value 5,836,586 5,943,097 644,358 1,255,300 178,165 159,732 14,017,238

Projects in progress* 12,492,907 2,043,976 - - - - 14,536,883

Net book value 18,329,493 7,987,073 644,358 1,255,300 178,165 159,732 28,554,121

Projects in progress represent fixtures, fittings and renovation costs for sites that will be opened as new branches to the bank.



(10) OTHER ASSETS

2016IQD (000)

2015IQD (000)

Legal fees 573,043 532,785

Accrued interest on deposits 167,117 -

Prepaid expenses 166,762 137,820

Margin accounts 91,621 6,566

Advances for operational activities - 2,500

Non-employees advances - 9,422

Others 100 14,588

998,643 703,681

(11) CUSTOMERS’ ACCOUNTS

RetailsIQD (000)

CorporatesIQD (000)

TotalIQD (000)

2016

Current account and demand deposits 26,209,659 50,640,457 76,850,116

Saving accounts 11,021,944 2,231 11,024,175

Term deposits 1,872,196 5,083,174 6,955,370

Total 39,103,799 55,725,862 94,829,661

RetailsIQD (000)

CorporatesIQD (000)

TotalIQD (000)

2015

Current accounts and demand deposits 32,516,858 63,033,801 95,550,659

Saving accounts 11,241,663 1,489,207 12,730,870

Term deposits 3,088,443 4,128,386 7,216,829

Total 46,846,964 68,651,394 115,498,358

Non-interest bearing deposits amounted to IQD 76,850,116 thousand as at 31 December 2016 representing 81% of total deposits (2015: IQD 95,550,659 thousand representing 83%).



(12) MARGIN ACCOUNTS

2016IQD (000)

2015IQD (000)

Margins against LG’s 4,431,619 4,920,191

Others 1,621,079 208,369

6,052,698 5,128,560

(13) LONG TERM LOANS

2016IQD (000)

2015IQD (000)

Loan of Central Bank of Iraq - 1,000,000

Loan of Iraqi Company for SMEs Financing 4,417,613 5,681,964

Loan of Guarantees Company 38,207 8,751

4,455,820 6,690,715

The bank has settled the loan which has been granted by the Central Bank of Iraq (CBI) in its letter No 6/842 dated 16 December 2015, for the purpose of achieving economic and social development through granting loans to support small and medium projects with low interest rates and administrative margins that do not exceed 5.5%, as follows:1. Interest received by the Bank shall not exceed 4%.2. Interest received by loan guarantor shall not exceed 0.8%.3. Interest received by CBI shall not exceed 0.7%.

Based on the terms of the agreement signed between the Bank and the Iraqi Company for SMEs Financing on 5 June 2012, the Iraqi Company grants the Bank amounts to be agreed periodically, and the Bank then lends these amounts to small and medium enterprises under Tijara and Inma’a Project and the Program of Supporting the Disadvantaged Groups in Iraq according to the agreement terms, in return for an interest and administrative fees collected from these groups. In return, the Bank shall pay administrative fees to the Iraqi Company on each one of the projects, 3% for Tijara and Inma’a Project, and 1.5% for the Program of Supporting the Disadvantaged Groups in Iraq, on quarterly basis. The rate of interest collected by the bank shall not exceed 10%.



(14) MISCELLANEOUS PROVISIONS

2016IQD (000)

2015IQD (000)

Provisions for cash in unsecured areas 632,957 206,457

Provisions for currency exchange loss 10,238,282 35,499,289

Legal expense provision 286,521 -

11,157,760 35,705,746

(15) INCOME TAX LIABILITIES A- Income Tax Provision The movements on income tax liability as follows:

2016IQD (000)

2015IQD (000)

At 1 January 3,653,251 3,966,283

Paid during the year (3,754,512) (3,952,600)

Charge for the year 735,850 3,639,568

At 31 December 634,589 3,653,251

B- Income Tax The reconciliation between the tax profit and the accounting profit for the years ended 2016 and 2015 is as follows

2016IQD (000)

2015IQD (000)

Accounting (loss) profit (as per Iraqi Unified Accounting System) (4,306,376) 14,424,896

Non-taxable income 1,231,338 -

Non-deductible expenses 9,323,000 9,838,889

Taxable profit 3,785,286 24,263,785

Current income tax at Iraqi statutory income tax rate of (15%) for the year

567,793 3,639,568

Tax settlement of previous years 168,057 -

735,850 3,639,568

• The amount of the tax was computed according to the Iraqi Tax Law, with a percentage of 15% of taxable income, and the amount of tax was adopted in accordance with the figures of the Unified Iraqi Accounting System.

• The Bank paid the tax liabilities for the years until 2015 and the Bank received a receipt that supports the payment from the General Commission for Taxes for the year. The tax liabilities for the year ended 31 December 2016 will be paid during 2017.



(16) OTHER LIABILITIES

2016IQD (000)

2015IQD (000)

Accrued stamps fees 2,773,532 61,698

Certified cheques 875,375 357,876

Balances and compensations of deceased clients 310,654 165,105

Accounts payables 239,202 523,198

Dividends payables 177,326 661,467

Accrued expenses 140,818 311,731

Accrued salaries 134,405 119,707

Amounts received for companies registration 112,000 178,682

Accrued ATM Services fees 73,378 576,232

Restricted balances 70,075 54,472

Others 32,921 144,381

4,939,686 3,154,549

(17) PAID IN CAPITAL

Paid in capital comprises 250,000 billion shares (2016: 250 billion shares) at a par value of 1 Iraqi Dinar per share (2016: 1 Iraqi Dinar per share).

(18) RESERVES

- Statutory ReserveAccording to the Iraqi Companies Law, 5% as a minimum of the annual profit after tax should be transferred to the statutory reserve. This reserve should not exceed 50% of the Bank’s Capital and it is not available for distribution to shareholders. The Bank may resolve to discontinue such annual transfers when the reserve equals the paid in capital.

- Other ReservesThese other reserves are approved by the General Assembly and represent reserves for different banking risks and expansion reserve.



(19) INTEREST INCOME

2016IQD (000)

2015IQD (000)

Direct credit facilities:

Retails 1,977,506 7,280,157

Corporates 32,851 291,525

Small and medium enterprises 121,504 401,164

2,131,861 7,972,846

(20) INTEREST EXPENSE

2016IQD (000)

2015IQD (000)

Current accounts and on demand deposits 270,548 322,465

Saving accounts 412,406 356,155

Total 682,954 678,620

(21) NET COMMISSION INCOME

2016IQD (000)

2015IQD (000)

Bank transfers 24,900,718 16,677,490

Indirect credit facilities 2,173,179 2,446,252

Other commission income 1,263,971 -

Commission income 28,337,868 19,123,742

Commission expense (90,753) (9,263)

28,247,115 19,114,479

(22) EMPLOYEES’ EXPENSES

2016IQD (000)

2015IQD (000)

Salaries and employees’ benefits 4,288,389 4,532,429

Bank’s contribution to social security 227,921 222,357

Employees’ Insurance 33,282 19,382

4,549,592 4,774,168



(23) OTHER OPERATING EXPENSES

2016IQD (000)

2015IQD (000)

Rent expenses 779,877 641,294

Banking services 705,813 604,928

Donations 462,960 200,000

Maintenance 277,224 244,730

Subscriptions, licenses and fees 236,633 193,392

Professional services 167,600 133,105

Fuel expense 190,281 207,968

Communications and internet 182,798 133,027

Stationery 160,790 75,570

Transportation 157,994 158,323

Governmental fees and expense 155,524 190,031

Supplies expenses 86,660 106,168

Legal services 84,010 75,389

Audit fees 75,000 48,000

Water and Electricity 65,727 63,222

Advertising 53,176 122,422

Traveling expense 44,675 111,006

Hospitality 34,043 34,682

Insurance expenses 25,782 -

Establishment cost - 124,902

Others 378,684 193,808

Total 4,325,251 3,661,967



(24) EARNINGS PER SHARE

Basic earnings per share is calculated by dividing the profit for the year by the weighted average number of shares outstanding during the year.

2016IQD (000)

2015IQD (000)


Weighted average number of shares (in thousands) 250,000,000 250,000,000

IQD/Fils IQD/Fils

Basic and diluted earnings per share 0/060 0/070

No cash dividend has been distributed to the shareholders for the financial year ended 31 December 2015.

(25) CASH AND CASH EQUIVALENT

2016IQD (000)

2015IQD (000)

Balances with Central Bank 143,604,573 186,893,852

Due from banks and other financial institutions 189,465,401 152,084,733

333,069,974 338,978,585



(26) RELATED PARTY TRANSACTIONS

The Bank considers the major shareholders, senior management and their subsidiaries with considers the major share of ownership as related parties.

The following related party transactions took place during the year:

Nature of Relationship 2016IQD (000)

2015IQD (000)

Statement of financial position :

Direct credit facilities, Net Entities related to major shareholders - 720,000

Customers’ deposits Shareholders, directors and associates 18,293,442 30,600,004

Margin accounts Entities related to major shareholders 93,500 10,287

Other liabilities - - 83,116

Off balance sheet items:

Letters of credit and guarantees

Entities related to major shareholders 157,250 190,555

Income Statement items:

Interest and commissions income

Shareholders, directors and associates - 152,126

Interest and commissions expense

Shareholders, directors and associates - 278,514

Other operating expenses Shareholders, directors and associates 858,281 872,346

Salaries, bonuses and other benefits

Senior management 956,555 1,222,186



(27) FAIR VALUE OF FINANCIAL INSTRUMENTS

The Bank uses the following hierarchy for determining and disclosing the fair value of financial instruments:• Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities;• Level 2: other techniques for which all inputs which have a significant effect on the recorded fair

value are observable, either directly or indirectly; and• Level 3: techniques which use inputs which have a significant effect on the recorded fair value that

are not based on observable market data.

2016First LevelIQD (000)

Second LevelIQD (000)

Third LevelIQD (000)

TotalIQD (000)

Investment in Associate - 57,000 - 57,000

Financial assets at fair value through other comprehensive income

- 2,509,169 - 2,509,169

Financial assets at amortized cost - - - -

2015First LevelIQD (000)

Second LevelIQD (000)

Third LevelIQD (000)

TotalIQD (000)

Investment in Associate - 3,255,337 - 3,255,337


- 1,098,372 - 1,098,372

(28) FAIR VALUE OF FINANCIAL INSTRUMENTS

There are no material differences between the fair value of financial instruments and their carrying value.

(29) RISK MANAGEMENT

The Bank’s board of director is responsible for general policies of risk management and approval of risk management strategies. The Bank manages its various banking risks in different ways, but there is no documented comprehensive strategy for risks and means of controlling and mitigating them.



Credit Risk, concentration of assets and liabilities

Credit risks are the risks that the Bank will incur a loss because of its customers, clients or counterparties failure to discharge their contractual obligations. The Bank manages and controls credit risks by setting limits on levels of credit facilities in accordance with the Central Bank of Iraq instructions. Also, the Bank obtains adequate collaterals from customers.

The Bank decrease or eliminate the risk of the concentration of assets and liabilities through the distribution of its activities over several sectors. However, the Bank operates in one geographical area, in Iraq.

1. Exposure to credit risk (after deducting impairment losses, suspended interest, collateral and other risk mitigators) is as follows:

2016IQD (000)

2015IQD (000)

Balance sheet items:

Cash and balances at Central Bank 116,651,200 165,004,279

Due from banks and other financial institutions 189,465,401 152,084,733

Direct credit facilities, Net:

Retail 8,064,374 25,694,942

Corporates 740,816 1,899,860

Small and medium enterprises (SMEs) 818,082 845,199

Investment in Associates 57,000 3٫255٫337

Financial assets at fair value through other comprehensive income 2,509,169 1٫098٫372

Financial assets at amortized cost - 6,700,000

Other assets 998,643 703٫681

Total Balance Sheet Items 319,304,685 357,286,403

Off balance sheet items:

Letters of guarantee 9,262,343 27,503,291

Letters of credit 288,610,700 259,845

Total off Balance Sheet Items 297,873,043 27٫763٫136

Total 617,177,728 385,049,539

The above table represents the maximum credit risk for the Bank as of 31 December 2016 and 2015 without taking the collateral or the other credit risk mitigations into consideration. In regard of the assets that were included in the statement of financial position, the above exposure is based on the balance as stated in the statement of financial position.



2. Credit exposures are allocated by the level of risks as of 31 December 2016 according to the following table:

Retail Corporate SMEs Government and public sector

Banks and other Finan-cial Institu-tions

Total

IQD (000) IQD (000) IQD (000) IQD (000) IQD (000) IQD (000)

2016

Low risk 1,467,573 - 56,184 - 333,069,974 334,593,731

Acceptable risk 1,341,969 - 189,720 - - 1,531,689

Past due:

Up to 30 days 727,110 - 75,879 - - 802,989

From 31 to 60 days days 348,474 - 60,194 - - 408,668

Watch list 266,385 - 53,647 - - 320,032

Non performing: 41,419,652 5,351,064 3,163,362 - - 49,934,078

Substandard 687,702 - 134,802 - - 822,504

Doubtful 1,662,843 - 205,848 - - 1,868,691

Loss 39,069,107 5,351,064 2,822,712 - - 47,242,883

Total 44,229,194 5,351,064 2,409,266 - 333,069,974 386,059,498

Less: Interest in suspense (8,580,343) (200,092) (340,230) - - (9,120,665)

Less: Allowance for impairment losses (Direct facilities)

(26,862,311) (5,150,972) (2,232,304) - - (34,245,587)

Net 8,786,540 - 836,732 - 333,069,974 342,693,246

Credit exposures are allocated by the level of risks as of 31 December 2015 according to the following table:

Retail Corporate SMEs Government and public sector

Banks and other Financial Institutions

Total


2015

Low risk - - - 6,700,000 328,283,363 334,983,363

Acceptable risk 1,183,829 720,000 13,522 - 10,695,222 12,612,573

Past due:

Up to 30 days 100,772 4,479 91,566 _ _ 196,817

From 31 to 60 days 159,285 - 209,836 - - 369,121

Watch list 930,508 - 197,108 - - 1,127,616

Non performing: 48,778,595 7,212,472 913,586 - _ 56,904,653

Substandard 3,175,435 321,678 119,445 - - 3,616,558

Doubtful 3,179,931 4,368,847 202,034 - - 7,750,812

Loss 42,423,229 2,521,947 592,107 - - 45,537,283

Total 51,152,989 7,936,951 1,425,618 6,700,000 338,978,585 406,194,143

Less: Interest in suspense 6,145,373 122,389 - - _ 6,267,762

Less: Allowance for impairment

losses (Direct facilities)

19,312,674 3,953,532 246,316 - _ 23,512,522

Less: Allowance for impairment

losses (Indirect facilities)

_ 1,961,170 334,103 _ _ 2,295,273

Net 25,694,942 1,899,860 845,199 6,700,000 338,978,585 374,118,586



3. Regarding the distribution of the fair value of collaterals provided against the facilities (Risk Mitigators), the bank does not have appropriate database regarding the collaterals values provided against the credit facilities. Further, the bank did not record the existence of such collaterals values in its banking system and did not take the effect of these collaterals values when computing the credit loss provisions.

4. Credit Concentration based on geographic distribution is as follows:

Geographic areaInside Iraq

IQD (000)

Other Middle

Eastern

countries

IQD (000)

Europe

IQD (000)

Total

IQD (000)

Cash and balances at Central Bank 116,651,200 - - 116,651,200

Due from banks and other financial institutions 1,511,061 187,954,340 - 189,465,401

Direct credit facilities: 9,623,272 - - 9,623,272

Retail 8,786,540 - - 8,786,540

Corporate:

Large corporates - - - -

Small and medium enterprises (SMEs) 836,732 - - 836,732

Investment in Associates 57,000 - - 57,000

Financial assets at fair value through other

comprehensive income2,509,169 - - 2,509,169

Financial assets at amortized cost - - - -

Other assets 742,276 256,367 - 998,643

Total 2016 131,093,978 188,210,707 - 319,304,685

Total 2015 206,522,302 149,688,874 1,075,227 357,286,403

5. Concentration in credit exposures based on economic sectors is as follows:

Financial Commercial Agriculture Services Retail

Government and public sector Total


2016

Cash and balances at Central Banks

116,651,200 - - - - - 116,651,200

Due from banks and other Financial institutions

189,465,401 - - - - - 189,465,401

Direct credit facilities - 836,732 - - 8,786,540 - 9,623,272

Investment in Associate 57,000 - - - - - 57,000


2,509,169 - - - - - 2,509,169

Other assets 256,367 - - - 742,276 - 998,643

Total 2016 308,939,137 836,732 - - 9,528,816 - 319,304,685

Total 2015 322,146,402 629,960 215,238 1,899,860 25,694,942 6,700,000 357,286,403



Market RiskMarket risk is the risk of fluctuation and changes in the fair value or the cash flows from financial instrument due to changes in market prices, interest rates, currency rates, and shares prices. These risks are monitored based on specific policies and procedures carried out through specialized committees and concerned business units.

Sensitivity analysis is based on estimating the possible loss as a result of changes in the interest and foreign exchange rates. The fair value is calculated based on the present value of future cash flows adjusted for changes in interest rates.

1. Interest rate Risk The Bank seeks to obtain funds such as the long-term investments at fixed interest rates in order to meet any changes in interest rates of sources of funds. The Bank makes short-term investments to offset any changes that may occur

The sensitivity of the statement of profit or loss is the effect of the assumed changes in interest rates on the Bank’s profit for one year, and it is calculated on financial assets and liabilities with variable interest rates as at 31 December 2016

Increase in interest rate Basis Point

Sensitivity of net interest incomeIQD (000)

Sensitivity of equityIQD (000)

2016

Currency

US Dollar 1% 8,250 -

2015Increase in interest rate Basis Point

Sensitivity of net interest incomeIQD (000)

Sensitivity of equityIQD (000)

Currency

US Dollar 1% 6.046 -

In the event of a negative change in the indicator, the effect will remain constant but with an opposite sign. There are no significant risks arising from fluctuations in the interest rates of other currencies due to the small volume of transactions in these currencies.

2. Currency RiskForeign currency risk is the risk of change in the value of financial instruments as a result of change in foreign currency rates. The Iraqi Dinar is the functional currency of the Bank. The Board sets position limits for each foreign currency in the Bank. These positions are monitored on daily basis, and hedging strategies are adopted to ensure that the foreign currency positions held are within the approved limits.

The Bank’s investment policy allows it to hold positions in major foreign currencies as long as it does not exceed 5% of shareholders’ equity in each currency, and the net currencies position of 15% of shareholders’ equity. Foreign currency positions are monitored on daily basis. In addition, market instruments are used to hedge against fluctuations in currency exchange rates in order to protect the Bank from additional risk exposures.



The following table illustrates the possible effect on the statement of profit or loss as a result of fluctuations in exchange rates against the Iraqi Dinar assuming that all other variables remain constant:

Change in currencyexchange rate

Effect on profit and lossIQD (000)

Effect on equityIQD (000)

2016

Currency

Dollar 5% 6,559,452 -

Euro 5% 77,393 -

Total 6,636,845 -

2015

Currency

Dollar 5% 7,769,167 -

Euro 5% 126,560 -

Total 7,895,727 -

In the event of a negative change in the indicator, the effect will remain constant but with an opposite sign. There are no significant risks arising from fluctuations in the interest rates of other currencies due to the small volume of transactions in these currencies.

3. Shares Price Risk

Shares price risk arises from the change in the fair value of shares investments. The Bank manages this risk by distributing its investments over various geographic and economic sectors. All the Bank’s investments are unlisted on the Iraq Stock Exchange.

4. Interest rate re-pricing gap



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5. Concentration in foreign currency risk:

US Dollar Euro GBP AED TL2016Assets

Cash and balances with Central Banks 6,343,927 328,737 - - -

Due from banks and other financial Institutions

139,237,286 1,256,424 7,709 47,499,205 217

Direct credit facilities, Net 7,696,420 - - - -

Property and equipment 2,549 - - - -

Other assets 199,712 - - - -

Total Assets 153,479,894 1,585,161 7,709 47,499,205 217

Liabilities

Customers’ deposits 16,529,568 37,300 - - -

Margin accounts 2,711,733 - - - -

Other liabilities 3,046,997 - - - -

Total Liabilities 22,288,298 37,300 - - -Net concentration in the statement of financial position

131,191,596 1,547,861 7,709 47,499,205 217

Contingent liabilities off the statement of financial position

291,501,000 1,679,579 - - -

US Dollar Euro GBP AED TL2015

Total Assets

Total Liabilities 180,755,177 2,532,736 5 3,221 750

Net concentration in the statement of 24,250,325 1,533 - - -

financial position 156,504,852 2,531,203 5 3,221 750

Contingent liabilities off the state-ment of financial position

9,500,284 2,233,844 - - -



Liquidity Risk

Liquidity risk is the risk that the Bank will be unable to meet its obligations at their maturity dates, the asset and liability management policy is carried out by ALCO which works on diversifying the funding sources and matching between their maturity dates, in addition to maintaining sufficient reserves of cash, cash equivalents and trading investments to militate against liquidity risks.

The table below summarizes the undiscounted cash flows of the financial liabilities based on the remaining contractual maturity date of the financial statements:

Less than 1

Month

1-3 months 3 – 6

months

6-12 months 1-5 Years No fixed

maturity

Total


2016

Customers’ account 11,022,687 - - 6,871,375 - 76,935,599 94,829,661

Margin accounts 2,444,651 581,409 849,638 2,177,000 - - 6,052,698

Long term loans - - - - 4,455,820 - 4,455,820

Miscellaneous provision - - - - - 11,157,760 11,157,760

Tax provision 66,796 - 567,793 - - - 634,589

Other liabilities 4,358,114 - 217,071 - - 364,501 4,939,686

Total Liabilities 17,892,248 581,409 1,634,502 9,048,375 4,455,820 88,457,860 122,070,214

Total Assets 87,870,975 11,824,037 383,697 767,392 8,088,487 265,776,120 374,710,708

2015

Customers’ account 12,731,581 - - 7,298,043 - 95,468,734 115,498,358

Margin accounts - - 208,369 4,920,191 - - 5,128,560

Long term loans 27,778 55,555 83,333 166,667 6,357,382 - 6,690,715

Miscellaneous provision 741,624 1,483,249 2,224,873 4,449,747 26,599,796 206,457 35,705,746

Tax provision - - 3,653,251 - - - 3,653,251

Other liabilities - - - - - 3,154,549 3,154,549

Total Liabilities 13,500,983 1,538,804 6,169,826 16,834,648 32,957,178 98,829,740 169,831,179

Total Assets 515,570 1,031,139 1,546,709 9,783,995 22,262,588 372,590,096 407,730,097

Off balance sheet items

2016IQD (000)

2015IQD (000)

Letters of Credit 288,610,700 259,845


Total 297,873,043 27,763,136



SEGMENT INFORMATION

A) Information about bank activities

The Bank is organised into four major segments that are measured according to the reports used by the main decision maker at the Bank:• Retail: including handling individual customers’ deposits, and providing consumer type loans,

overdrafts, credit cards facilities and transfer facilities.• Corporate: Principally handling loans and other credit facilities and deposit and current accounts for

corporate and institutional customers.• Treasury: including providing money market foreign currency exchange services to customers.• Brokerage: including providing brokerage services to customers for investing in stock market.

These segments are the basis on which the Bank reports its segment information:Retail Corporate Treasury Other Total

2016 2015


Total income 3,243,814 2,049,255 28,970,412 79,245 34,342,726 34,243,144

Shortage from credit facilities losses (134,928) 8,572,720 - - 8,437,792 (2,700,936)

Segment result 3,378,742 (6,523,465) 28,970,412 79,245 25,904,934 31,542,208

Unallocated expenses 2,392,715 538,360 7,436,615 59,818 10,427,508 10,114,201

(Loss) Profit before tax 986,027 (7,061,825) 21,533,797 19,427 15,477,426 21,428,007

Income tax 127,665 207,028 398,243 2,914 735,850 3,639,568

(Loss) Profit for the year 858,362 (7,268,853) 21,135,554 16,513 14,741,576 17,788,439

Segment assets 9,766,192 2,598,008 331,783,485 30,563,023 374,710,708 407,730,097

Segment liabilities 43,974,511 24,116,931 53,975,859 2,913 122,070,214 146,197,881

Capital expenditure 523,819 349,213 855,572 17,461 1,746,065 2,272,159

Depreciation 75,591 17,008 745,154 1,890 839,643 419,031

B) Geographical Information

This segments represents the geographical distribution of the Bank’s operating income and capital expenditure by geographical segment, and all the bank activities are inside Iraq.

(30) CAPITAL MANAGEMENT

The Bank maintains the capital structure, makes the necessary adjustments to meet its operational risk, and it regularly monitors its capital adequacy to comply with the Central Bank of Iraq›s regulations.

The Bank did not perform any amendments to the objectives, policies and procedures relating to the capital structure during the current year and prior year except the increase of the capital during the year.

Based on Central Bank of Iraq’s instructions, regulatory capital comprises of primary capital which consists of paid in capital, share premium, declared reserves, retained earnings.

The Central Bank of Iraq has issued the resolution No. 9/3/1747 on October 6, 2010, which obligates all the banks operating in Iraq to raise their paid in capital to IQD 250 Billion.

During 2016, the bank has not amended any of its policies and techniques sued in capital management.



CAPITAL ADEQUACY

2016IQD (000)

2015IQD (000)

Primary capital items:

Paid in capital 250,000,000 250,000,000

Adequacy of Capital Reserves 5,552,973 5,552,973

Accumulated losses (5,469,841) (20,211,417)

Total Primary capital 250,083,132 235,341,556

Supplementary Capital:

General reserves 2,816,477 2,816,477

Miscellaneous provisions 11,157,760 35,705,746

Fair value reserve 259,115 259,115

Total Supplementary Capital 14,233,352 38,781,338

Total supplementary and primary Capital 264,316,484 274,122,894

Total risky assets in financial statement 202,653,485 214,299,509

Total risky assets off financial statement 297,873,043 16,704,151

Total 500,526,528 231,003,660

Capital adequacy % 52% 118%



(31) MATURITY ANALYSIS OF ASSETS AND LIABILITIES

The table below shows an analysis of assets and liabilities analysed according to when they are expected to be recovered or settled:

Within1 yearIQD (000)

More than 1 yearIQD (000)

TotalIQD (000)

2016

Assets

Cash and balances at Central Banks 143,604,573 - 143,604,573

Due from banks and financial institutions 189,465,401 - 189,465,401

Direct credit facilities, net 1,534,785 8,088,487 9,623,272

Investment in associates - 57,000 57,000


- 2,509,169 2,509,169

Financial assets at amortized cost - - -

Property and equipment - 14,888,703 14,888,703

Projects in progress 13,563,947 13,563,947

Other assets - 998,643 998,643

Total Assets 334,604,759 40,105,950 374,710,708

Liabilities

Deposits of banks and financial institutions - - -

Customers’ deposits 94,829,661 - 94,829,661

Margin accounts 6,052,698 - 6,052,698

Loan of Central Bank of Iraq - - -

Long term loans from other - 4,455,820 4,455,820

Miscellaneous provision 11,157,760 - 11,157,760

Income tax liabilities 634,589 - 634,589

Other liabilities 4,939,686 - 4,939,686

Total Liabilities 117,614,394 4,455,820 122,070,214

Net 216,990,365 35,650,130 252,640,494



Within1 yearIQD (000)

More than 1 yearIQD (000)

TotalIQD (000)

2015

Assets

Cash and balances at Central Banks 186,893,852 - 186,893,852

Due from banks and financial institutions 152,084,733 - 152,084,733

Direct credit facilities, net 6,177,413 22,262,588 28,440,001

Investment in associates - 3,255,337 3,255,337


- 1,098,372 1,098,372

Financial assets at amortized cost 6,700,000 - 6,700,000

Property and equipment - 28,554,121 28,554,121

Other assets - 703,681 703,681

Total Assets 351,855,998 55,874,099 407,730,097

Liabilities

Deposits of banks and financial institutions - - -

Customers’ deposits 115,498,358 - 115,498,358

Margin accounts 5,128,560 - 5,128,560

Loan of Central Bank of Iraq 333,333 666,667 1,000,000

Long term loans from other - 5,690,715 5,690,715

Miscellaneous provision 35,705,746 - 35,705,746

Income tax liabilities 3,653,251 - 3,653,251

Other liabilities 3,154,549 - 3,154,549

Total Liabilities 163,473,797 6,357,382 169,831,179

Assets 188,382,201 49,516,717 237,898,918

(32) CONTINGENT LIABILITIES AND COMMITMENTS

a) The total outstanding commitments and contingent liabilities are as follows:

2016IQD (000)

2015IQD (000)


Letters of credit 288,610,700 259,845

297,873,043 27,763,136

There are inward LCs that are not considered as an obligation against the Bank amounted IQD (11,852,983) thousand.

b) Annual rent of the Bank’s main building and branches for the fiscal year ended 31 December 2016 amounted IQD (769,452) thousand (2015: IQD641,294 thousand).

(33) LAWSUITS No material lawsuits raised against the Bank as at 31 December 2016.


Ashur International Bank for InvestmentAnnual Report 2016



Members of the Board of Directors and Senior Executive Management

Shares Held by Major Shareholders

Shares Held by Members of the Board of Directors

Shares Held by Senior Executive Management

Bank Branches

General Organizational Structure


A. Chairman’s Statement pp 5 - 7B. Board of Directors’ Report pp 8 - 21

1. Ashur Bank’s Main ActivitiesOffering comprehensive banking and credit products and services, accepting all types of deposits, opening current; savings and time deposit accounts and undertaking retail and corporate financing activities, in addition to trade finance, establishing import and export documentary credits, issuing local and foreign letters of guarantee for all clients on various economic sectors, providing banking services; including local and international transfers, issuing credit and ATM cards, issuing bills of exchange and certified deeds and providing online banking services.

2. Asur Bank’s Geographical Locations

Name of Branch Address Opening Year

Headquarter Baghdad / Oqba Ibn Naffi’ Court 2006

Alsulaimaniyyah Branch

King Mahmoud Circular Str. (Alsitteen Str.) next to City Center Mall 2007

Erbil Branch Erbil / Bukhtiari Str. 2007

Tikrit Branch Tikrit / Opposite to Tikrit Administrative District 2008

Alrubai’ei St. Branch Baghdad / Alruba’ei Str. Opposite to Alraihaniyyah Park 2012

Nineveh Branch Nineveh / Hay Alzohoor– Sayyedati Aljameela Roundabout 2013

Ainkawa Branch Erbil / Ainkawa / Alsaydeen Str. 2013

Basra Branch Aljazaer Str. 2015

Karbala Branch Hay Alnaqeeb – Altarbiyah Square 2016

ALmansour Branch Almansour. 14th of Ramadan Str. 2016



3. Members of the Board of Directors and their Resumes:

On 8/11/2016, Mr. Shakir Mahmoud Ali was elected chairman of the board of directors upon the resignation

of Mr. Wadee Nouri Ayed Al-Handal.

Mr. Shakir Mahmoud AliChairman of the Board of Directors

Date of Birth: 1/7/1962 Member since: 1/1/2013Membership Nature: Personal

Practical Experience• Managing private businesses.• Experience in project establishment and

management.

Current memberships in boards of directors of other companies:• Member of the Board of Directors of Ashur

International Bank

Mr. Wadee Nouri Ayed Al-Handal Chairman of the Board of Directors

Date of Birth: 29/06/1962Member since: 22/9/2005Membership Nature: Personal

Academic Qualifications

Bachelor of Agriculture – Baghdad

Practical Experience • Chairman of the Board of Directors of

Alhanthal International Group• Chairman of the Board of Directors of Ashur

International Bank

Current memberships in boards of directors of other companies: • Chairman of the Iraqi Private Banks League• Chairman of the Advisory Board of ICF - SME• Member of the Board of Directors of the Iraqi

National Business Council• Head of the Finance Team / National Team of

Experts


Ali Dia Al-Husseini Deputy Chairman

Date of Birth: 3/7/1966Member since: 1/1/2013 Membership Nature: Personal

Academic Qualifications• Bachelor of Business Administration

– Baghdad University - 1992• Professional certificate from the

International Institute for Economic• Growth, Agriculture and Trade (EGAT)

in Washington / USA• Professional certificate from the

Business Growth Institute (BGI) in the USA

• Professional certificate from USAID

Practical Experience• Deputy CEO of Alhanthal International

Group since 1/2013 to date• Specialized in the development of

the commercial and financial private sectors.

• Specialized in the design and management of international development projects, and an expert of economic policy reform/

• Director General of the Governorate Economic Development Project – USAID 4/2008 – 12-2012

• Private Sector Development Project Manager – USAID 7/2004 – 4/2008

• Islamic and medium, small and micro finance expert.

• Youth and vulnerable groups’ development projects design and management expert.

• Worked in the following areas: Institutional financial systems reform, institutional system reform, commercial and legal systems reform, international trade and macro economy, institutional capacity and policy enhancement, international economic and commercial projects development, economic growth infrastructure, investment and economic growth in areas of war and conflict, macroeconomic policies, private sector and general economic policy development, trade law reform for private sector growth, trade policies and privatization, general financial system development, project competitiveness enhancement under the Global Financial Crises, value chain mechanisms and concepts application and dialogue between the private and public sectors and businessmen.

Mr. Adnan Kan’an Al-JalabiBoard MemberManaging Director

Date of Birth: 2/7/1945Date of Appointment: 1/2014Member since: 10/08/2014Membership Nature: Personal

Academic Qualifications• Bachelor of Political Science• Specialized course at the

International Institute of Management - France

• Specialized course at the Royal Institute of Management - UK

Practical ExperienceMr. Adnan Al-Jalabi occupied several positions in the Iraqi banking sector, on top of which were his positions in CBI, Bank of Baghdad and Ashur International Bank. His main positions were as follows: • Managing Director at Ashur

International Bank for Investment.

• Managing Director at Bank of Baghdad.

• Banking Operations Manager at Bank of Baghdad.

• Acting Director General of CBI.• Senior Director - CBI

Current and previous memberships in boards of directors of other companies• Member of the Board of

Directors of Ashur International Bank for Investment.

Mr. Abbas Hadi Al-BayyatiBoard Member

Date of Birth: 1/7/1941Date of Appointment: 6/2007Member since: 3/3/2008Membership Nature: Personal

Academic Qualifications• Bachelor’s degree – Faculty

of Economy and Business – University of Baghdad 1963

• Specialized banking course at Standard Chartered Bank 1980

• Specialized banking course at the World Bank – Granada 2004

• Specialized banking course at the Bank of Greece – Greece 2005

Practical ExperienceMr. Abbas Al-Bayyati occupied several positions in Al Rafidain Bank, Baghdad Commercial Bank, Investment Bank and Arab Bank. His main positions included: • Managing Director at Ashur

International Bank.• Managing Director at the

Investment Bank.• Branches Director at the

Investment Bank.• Branches Director at Al

Rafidain Bank.• Manager of Bahrain Branch of

Al Rafidain Bank.

Current and previous memberships in boards of directors of other companies• Member of the Board of

Directors of the Investment Bank in 2005

• Member of the Board of Directors of Bahrain Insurance Company 1980 - 1985


Mr. Atheer Ghassan HamedBoard Member

Date of Birth: 13/12/1975Member since: 8/1/2006Membership Nature: Personal

Academic Qualifications• Bachelor of Engineering

– University of Baghdad – 10/1997

Practical Experience• Managing Director of Amwal

for Electronic Banking Services since 2008

• Managed several projects and consultations in the private sectors.

Other Practical Experience• Experience in project

management and business development

• Experience in banking business development

• Experience in electronic payment service development

• Experience in treasury and investment services

Mrs. Bushra Bashir SharifBoard Member

Date of Birth: 7/11/1957Member since: 2014Membership Nature: Personal

Academic Qualifications• Bachelor of physical education

– University of Baghdad 1967

Practical Experience• Experience in project

management and business development.


Mr. Nour Nouri Ayed Al-HandalAssistant Managing Director – Treasury and Investment Manager

Date of Birth: 04/12/1987Date of Appointment: 1/1/2012

Academic Qualifications• Bachelor of Business

Administration – European University 2010

Practical Experience• Acting Manager of Treasury

and Investment 9/2014 – 8/2015

• Assistant Head of the Transfers Section – Ashur International Bank 1/2013 - 2014

• Employee of the Treasury and Investment Section – Ashur International Bank 1/2012 – 12/2012

• General Manager – Al Khadra for Real Estate Development 1/2009 – 12/2011

Mr. Ahmad Tawfeeq Khaleel Eljada’ AlqawasmiFinancial Department Manager


Academic Qualifications• Master of Bank Management

– The Hashemite University / Zarqa - Jordan

• Bachelor of Accounting – The Hashemite University / Zarqa - Jordan

Practical Experience• Studies and Product

Development Officer – Bank of Jordan (4/2007 – 11/2013)

• Researcher at the SME Center – The Arab Academy for Banking and Financial Sciences (4/2006 – 4/2007)

• Accountant and Auditor – Khalifah & Al Rayyan Financial Consultants (2002 – 4/2006)

• Internal Audit Advisor – Jordan Chamber of Industry (2009 – to date)

• Consultant for a number of international and local establishments and companies (2003 – to date)

Mr. Mutassim Ismaeil Saqf El HaitBanking Operations Department Manager


Academic Qualifications• Bachelor of management

science – 1992 – Mutah University - Jordan

Practical Experience• Head of the Programs Creation

and Development Unit 2012 - 2013

• Head of the Programs Testing Unit 2009 - 2012

• Process Engineering and Work Procedures Department 2005 - 2008

• Head of section and various positions 1992 – 2005: – Facilities Section – Accounting Section – Foreign Currency / Deposits

/ Purchases

Executive Management


Mr. Rami Hussein MahmoudAl-MubassatRisk Department Manager


Academic QualificationsBachelor of Accounting – 1994 – University of Baghdad / Iraq

Practical Experience• Credit Department Manager

– Ashur International Bank 10/2014 – 8/2016

• Senior Client Relations Manager – National Bank of Iraq 11/2013 – 10/2014

• Senior Client Relations Manager / Major Companies Facilities Department – Capital Bank Jordan / Amman 4/2011 – 10/2013

• Credit Center Manager – Bank of Jordan / Amman 3/2007 – 7/2010

• Credit Analyst – Arab Bank / Jordan 8/1998 – 2/2007

• Client Relations Officer – Arab Bank / Jordan 12/1994 – 7/1998

Mrs. Alya Ammir MajeedAl-MoradInternal Audit Department Manager


Academic Qualifications• Bachelor of science /

mathematics 1995, Al-Mustansiriyah University - Baghdad

Practical Experience• Assistant Managing Director

of Financial Affairs for Information Technology – Trans Iraq Bank 2014 / 2015

• Head of the Financial Affairs and Settlements Section – Ashur Bank 2007 / 2014

• Worked in various sections including Customer Service / Accounting / Facilities – Commercial Bank of Iraq 1997 / 2007


4. Shares held by major shareholders for 2016 are as follows:

Name of Shareholder Nationality No. of Shares Percentage of Capital

Al Rafidain Bank Government entity 33,207,908,335 13.28%

Wadee Nouri Ayed Iraqi 24,985,992,254 9.99%

Sama Al Huda for Trade and General Contracting

Iraqi 24,980,000,000 9.99%

Hardan Nouri Ayed Ahmad Iraqi 24,107,801,259 9.64%

Mohammad Nouri Ayed Iraqi 22,540,102,486 9.01%

Wadood Nouri Ayed Iraqi 21,435,271,649 8.57%

Nour Nouri Ayed Iraqi 21,400,211,086 8.56%

Omar Wadee Nouri Ayed Al-Handal Iraqi 19,768,604,982 7.09%

Ayah Wadee Nouri Ayed Al-Handal Iraqi 19,768,604,982 7.9%

5. Neither the bank nor any of its products or services enjoy any government protection or privileges under any laws or regulations.

6. Neither the government nor any international organization has issued any resolutions that have a material impact on the bank’s activities, products or competitiveness.

7. Following is the bank’s organizational structure.


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8. Number of bank employees and their qualification categories

a.

Qualification Number of Employees

Doctorate -

Master 6

Higher diploma -

Bachelor 142

Diploma 12

High school 14

Pre-high school 20

Total 192

Training Courses

Description No. of Courses Beneficiaries

Internal courses 20 48

External courses 1 1

Total 21 49

Course Subject No. of Courses Beneficiaries Venue

CBS 1 2 CBI

International Standards 1 2 CBI

KYC 1 3 CBI

Fundamentals of Financial Accounting 1 4 Iraqi Private Banks League

Behavioral and Administrative Skills for Secretaries

1 1 Sharjah - Dubai

MIS course 1 10 Internal - Erbil

Business Continuity and International Specifications

1 2 CBI

IAC 1 3 CBI

Electronic Clearing 1 2 Internal

Qualifying Course for the Certificate of Anti-money Laundering Professional

2 3 Iraqi Private Banks League

Accounting Basics 1 1 Internal

Introduction to Banks and Credit 1 1 Internal

Foreign Transfers 1 3 Internal

Iraqi Banknotes 1 1 CBI

Certified Anti-money Laundering Specialist 1 1 Iraqi Private Banks League

Liquidity Cover Ratio 1 3 CBI

IAC Workshop 1 1 CBI

Anti-money Laundering Workshop 2 4 CBI


b. Names and job titles of the five highest paid employees

Name Job Grade

Adnan Kan’an Mohammad Al-Jalabi Managing Director

Ahmad Mohammad Osama Human Resources & Administrative Affairs Department Manager

Rami Hussein Mahmoud Risk Department Manager

Mutasem Ismaeil Masoud (Saqf El hait) Banking Operations Department Manager

Ahmad Tawfeeq Khaleel (Eljada Alqawasmi) Financial Department Manager

Following is a summary of senior management’s benefits (salaries, bonuses and other benefits)

2016IQD (000)

2015IQD (000)

Salaries 956,555 1,222,186

956,555 1,222,186

9. Description of risks

A. Credit risk

Credit risk arises from the inability and/or unwillingness of the borrower or third party to fulfil their obligations in a timely manner. This risk includes line items on financial statements such as direct facilities (cash credit) and line items off financial statements such as documentary credit and letters of guarantee; which exposes the bank to financial loss.

B. Operational risk

The risk arising from the inefficiency or failure of internal processes, employees and systems, or as a result of external events; including legal risk.

C. Compliance risk

Risks arising from the bank’s potential failure to comply with applicable laws, regulations and legislations and professional and ethical banking regulations issued by local and international control bodies; including the bank’s internal policies.

D. Liquidity risk

Risks arising from the bank’s potential inability to provide the necessary funding to fulfil its obligations in their due dates or finance its activities without assuming high costs or incurring losses

E. Market risk

The risk of exposure of positions, on and off the bank’s financial statements, to losses arising from fluctuations in market prices such as interest rates, share prices and foreign exchange rates.

Market risk arises from changes in the political and/or economic conditions of markets, foreign exchange rates fluctuations interest rate fluctuations, acquisition of naked positions, gaps in the maturity of assets and liabilities and re-pricing.


f. Interest rate risk

G. FX risk

This risk arises from foreign exchanges rates fluctuations.

H. Stock price risk

Stock price movements risk arises from changes in the fair value of investments in stock.

10. Bank’s activities and achievements:

Described under a separate clause of the Board of Directors’ report (pages 9 to 29) supported with figures and a description of key events that affected the bank in 2016.

11. The financial impact of non-recurring events that are not part of the bank’s main activity:

The bank sustained a financial impact of non-recurring events that took place in 2016. These events were in hot spots in Iraq; particularly the governorates of Mosul and Tikrit; and are part of the bank’s main activity, in addition to the cash with the Central Bank in Kurdistan Province as it cannot be used in banking operations.

12. Analysis of the bank’s financial position and business results:

Described in the analysis of the bank’s business results on pages 22 – 29.

13. Important future developments and the bank’s future plan:

Future developments, bank’s projects and strategic direction and Board of Directors’ expectations regarding the bank’s business results are described in the bank’s future plan for 2016 which is presented separately on pages 8 – 29.

14. A statement of the number of securities issued by the bank

a. Number of securities held by Board members and their relatives:

Name Capacity Nationality No. of Shares

Mr. Wadee Nouri Ayed Al-Handal Chairman Iraqi 24,985,992,254

Mrs. Awatif Nathim Awwad Wife Iraqi 6,648,451,319

Mr. Omar Wadee Nouri Children Iraqi 19,768,604,982

Mrs. Ayah Wadee Nouri Ayid Children Iraqi 19,768,604,982

Mr. Ali Dia Al-Husseini Deputy Chairman Iraqi 1,500,000

Mr. Adnan Kan’an Al-Jalabi Board member (Managing Director)

Iraqi 1,500,000

Mr. Abbas Hadi Al-Bayyati Board member Iraqi 187,265,011

Mr. Feras Abbas Haddi Children Iraqi 31,844,301

Mr. Shakir Mahmoud Ali Chairman Iraqi 1,660,205,745

Nahla Nouri Ayed Wife Iraqi 18,726,501

Mr. Atheer Ghassan Hamed Board member Iraqi 165,771,263

Mrs. Bushra Bashir Sharif Board member Iraqi 250,000,0000

Mr. Nour Nouri Ayed Children Iraqi 21,400,211,086 On 8/11/2016, Mr. Shakir Mahmoud was appointed chairman upon the resignation of Mr. Wadee Nouri Ayed

Al-Handal.


b. Number of securities held by members of the senior executive management and their relatives:

Name Capacity Nationality No. of Shares

Mr. Adnan Kan’an Al-Jalabi Board member (Managing Director) Iraqi 1,500,000

Mr. Nour Nouri Al-Handal Treasury and Investment Manager Iraqi 21,400,211,086

15. Privileges and bonuses enjoyed by members of the Board of Directors and senior executive management:Privileges enjoyed by members of the Board of Directors in 2016

Name Position Annual Salary*

Cash Bonuses*

In-kind Bonuses*

Total Annual Privileges

Mr. Wadee Nouri Ayed Al-Handal Chairman - 8 - 8

Mr. Ali Dia Al-Husseini Deputy Chairman - 7 - 7

Mr. Adnan Al-Jalabi Board member (Managing Director)

83,998 7 - 90,998

Mr. Abbas Hadi Al-Bayyati Board member 24,136 7 - 31,136

Mr. Shakir Mahmoud Ali Chairman - 7 - 7

Mr. Atheer Ghassan Hamed Board member - 7 - 7

Mrs. Bushra Bashir Sharif Board member - 7 - 7

Total 108,134 50 - 122,170

Note that these privileges were granted to members in 2015 and paid in 2016. In 2017, it is expected to pay 11 million dinars to the Chairman and 10 million to members for the year 2016.

on 8/11/2016, MR, Wadee Nouri Ayed resigned and Mr. Shakir Mahmoud Ali was appointed as a chairman.

16. Donations, grants, contributions to society and travel, hospitality and advertising expenses:

a. Donations

Beneficiary Amounts in million dinars

Alaq Baghdad project 300,000

Support for the armed forces and martyrs’ families 100,000

Renovation and maintenance of the streets of Baghdad 47,960

Donations to “Ahlona” campaign 10,000

Support for Baghdad Municipality Sport Club 5,000

Total 462,960

b. Promotion and advertising expenses:

Recipient Amounts in million dinars

Radio Today (Al Yawm) 29,484

Gifts 6,338

Other 90,574

Total 126,396

c. Travel and hospitality expenses:

Expense Amounts in million dinars

Travel expenses 44,675

Hospitality expenses 33,913

Total 78,588


17. Statement of the bank’s contracts, projects and engagements with affiliates, subsidiaries, the Chairman or members of the Board of Directors, Managing Director or bank employees or their relatives:

# Name Nature of Relationship Type of Contract or Service

Amount in Iraqi Dinars

1

Nouri Ayed Ahmad Major shareholders’ relatives

Lease of the headquarter building

240,000,000

2 Lease of Tikrit Branch building

12,000,000

3 Amwal for Electronic Banking Services

A company of which the bank is a shareholder

Electronic card services 81,443,800

4 ICF - SME A company of which the bank is a shareholder

Loan fees 100,756,793

5 Radio Today A company of which Board members are shareholders

Advertising contract 29,484,000

6 Ishtar Security A company of which Board members are shareholders

Protection contract 394,596,419

Total 858,218,012

d. Audit contracts

Description No. of Contracts Annual Value of Contract in million dinars

Mustafa Abbas & Co. and Mr. Sameer Matta

1 75

Ernst & Young - Iraq 1 113,05

18. Reserve balance and utilizations

Detailed reserve balance and utilizations are described as part of the financial analysis of the bank’s results on pages 28 – 38.

c. The bank’s annual financial statements

The bank’s annual financial statements audited by the bank’s auditor Mustafa Abbas & co. and Mr. Sameer Matta, noting that Ernst & Young – Iraq are the bank’s external audit consultants, are provided in part two of the report on pages (30 – 73).

d. Bank Auditors’ Report

The bank auditors’ report which indicates that the audit procedures were carried out in accordance with the regulations and requirements of the Unified Accounting System, as well as the requirements and provisions of the Iraqi Companies Law and Banking Law, is provided in introduction to the financial statements on pages (32 – 33).


e. Cases and lawsuits

There is a number of cases filed against the bank by third parties. Following are the main cases filed by or against the bank:

# Name of Claimant

Name of defendant

Case Status Case Value Comments

1 Ashur

international Bank

Iraqi Customs Determined to the

benefit of the bank

$2,000,000 A judgment was rendered

warding the bank the sum of

120 million dinars in interest

2 Al Rafidain Bank Ashur international

Bank

Determined to the

benefit of the bank

8,000,000,000 The case was determined to

the benefit of the bank

3 Ashur

international Bank

Iraqi Customs In cassation 720,000,000 -

4 Ashur

international Bank

Athamat Al Iraq Co. Ongoing

proceedings

3,378,279,432 -

5 Ashur

international Bank

Nafa Spor

Contracting co.

In appeal 764,117,000 -

According to bank’s management and legal attorney, the bank has allocated sufficient provisions for all possible outcomes of all the cases filed by or against the bank.

f. Land and property

1- Land

# Property No.

Location Land Value Land Area CBI Approval No.

Comments

1 20/1894 Alsuleimaniyya 2,364,433 200 1281883 -

2 35/124 Basra 1,976,890 274 274910 -

3 39/105 Kirkuk 1,612,000 580 605089 -

4 551/1 Dohuk 2,330,069 592 1573712 -

5 592/1 Erbil 2,372,788 213 286222 Operational branch

6 327267 Alarasat 4,314,906 1,002 357090 -

7 4/11527 Alrubaiei 1,586,000 270 9/3/11974 Operational branch

8 9/163 Ainkawa 1,877,798 594 9/3/1643 Operational branch

Total 18,434,884

2- Property

# Property No. Location Property Value

CBI Approval No. Comments

1 592/1 Erbil 3,460,486 - Operational branch

2 284 / 2089 and 2084

Erbil 339,670 - Residential apartments

3 4/11527 Alrubaiei 1,181,040 3/9/4054 Operational branch

4 9/163 Ainkawa 1,277,666 3/9/3926 Operational branch

5 - Other 255,263 - -

Total 6,514,125


Pursuant to Article (24) of Banking Law No. (94) for 2004 and based on the requirements of the bank’s corporate governance which aim to improve the risk management and control system and protect the rights of bank’s shareholders and depositors, we are pleased to present to you our report on the results of the audit for 2016. 1. The committee worked closely with the auditor in 2016 and implemented all the comments and

recommendations included in the auditor’s reports, as well as the auditor’s previous report relating to the statements of 2016 and CBI’s reports on the results of the control and audit activities carried out during 2016.

2. The committee reviewed the reports issued by the Internal Audit Department of Ashur Bank and approved and followed up on the implementation of the recommendations and comments included therein, and reviewed the reports of the bank’s Compliance Controller.

3. The committee supports the expansion in electronic payment transactions in general.

4. The committee supports the bank management’s continued administrative and operational development of the bank’s businesses and distribution of work in a manner that strengthens the internal audit system.

5. The committee supports the development of written work procedures, allocation of authorities, regulation of the Risk and Compliance departments, as well as anti-money laundering departments.

6. We reviewed the accounting procedures relating to bank’s activities and reviewed the bank’s compliance with CBI’s regulations in terms of presenting accounting statements on time, and the bank’s compliance with credit and anti-money laundering guidelines, in addition to credit and investment activities. Therefore, the committee supports all the actions taken by the bank in accordance with CBI’s regulations, and recommends approval of the same.

7. The committee monitors the work of the Legal Section with respect to lawsuits filed by the bank to collect outstanding loans, supports all actions taken and recommends more efforts to collect these loans.

8. We reviewed the annual report for 2016 and the financial reports and performance indicators included therein to check the bank’s compliance with the requirements of the Companies Law in force and the regulations and instructions issued pursuant thereto, and found that its actually and fully reflects the bank’s activity during the aforementioned year and the bank’s compliance with the provisions of the law.

9. The committee followed up on the bank’s adoption of international standards as per CBI’s requirements, and reviewed the details of the conversion process and its financial impact and approval.

10. The committee reviewed the auditor’s report which addressed the bank’s activity in detail in terms of the integrity of all its actions. Therefore, we hereby confirm the integrity of all the actions taken by the bank to protect the rights of its shareholders, and that its performance during the year compared to the Iraqi banking sector was good and the balances presented in the balance sheet reflect its solid financial position.

Abbas Hadi Al-Bayyati Atheer Ghassan Hamed Ali Dia Al-Husseini

Chairman of the Committee Member Member

Audit Committee’s Report for 2016

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Annual Report 2016 يﻮﻨﺴﻟا ﺮﻳﺮﻘﺘﻟا 2016 · Shakir Mahmoud Ali Chairman of the...

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