ﻦـﻴـﺷﺪـﺗ كﺎــﺑرا ﺔﻴﻟﺎﻤﻟا تﺎﻴﻨﻘﺘﻠﻟ disruption ·...

2016 Annual General Meeting and Extraordinary General Meeting Report

Enabling Fintech Disruption

تقرير اجتماع الجمعية العمومية العادية وغير العادية للعام 2016م

شركة الخدمات المالية العربية ش.م.ب. (مقفلة)

مملكة البحرين 22 مايو 2017م

2016

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للتقنيات المالية

Kingdom of Bahrain, 22nd May 2017

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BAHRAIN'S FIRST NFC ENABLED FRICTIONLESS

PAYMENT SERVICES.

خـدمـة الـدفـع بدون احتكاكعبر تـقـنـيـات المجـال القـريـب

)NFC( الأولـى مـن نـوعـهـافـي البحـــريـن

C O N T E N TS

Annual General Meeting

Invitation to the Annual General Meeting 2

Directors’ Report 4

Independent Auditors’ Report 6

Consolidated Financial Statements 10

Corporate Governance Report to Shareholders 40

Extraordinary General Meeting

Invitation to the Extraordinary General Meeting 42

Note to shareholders on Amendments 44

2 2016 AGM/EGM REPORT

Invitation to the Annual General Meeting

INVITATION

2016 AGM/EGM REPORT 3

INVITATION TO THE ANNUAL GENERAL MEETING

The Board of Directors of Arab Financial Services Company B.S.C. (c) (the “Company”) is pleased to invite you to attend the Company’s annual general meeting to be held at 12:00 noon on Monday 22nd May 2017, at 52nd Floor – Capital Club, Bahrain Financial Harbour, East Tower, Manama, Kingdom of Bahrain.

The Agenda for the meeting is as follows:

1. ToconsidertheReportoftheBoardofDirectorsabouttheactivitiesoftheCompanyforthefinancialyearended31December2016.

2. To consider and acknowledge the Report of the Auditors concerning the Balance Sheet for the financial year ended 31 December2016.

3. TodiscussandapprovetheBalanceSheetandtheProfitandLossAccountforthefinancialyearended31December2016.

4. SubjecttoapprovalofCentralBankofBahrain(the“CBB”),toconsidertheappropriationofprofitasproposedbytheBoardofDirectors forthefinancialyearended31December2016,whichisasfollows:

a. TransferanamountofUS$743,098toLegalReserve; b. Cash payment of 8% as Dividends of the nominal value of the shares at US$0.42 cents for each share for a total of US$2,400,000 (subject to approval of the CBB). c. TransferanamountofUS$4,287,886toRetainedEarnings.

5. Toconsiderandapprovetheproposed2016RemunerationoftheMembersoftheBoardofUS$122,417.

6. ToabsolvemembersoftheBoardfromliabilityrelatedtothefinancialyearended31December2016.

7. To consider and approve (subject to the approval of the CBB) of the appointment of Ernst & Young as the independent auditors of the Companyfortheyearending31December2017andtoauthorisetheBoardtofixtheirremuneration.

8. To note the Corporate Governance Disclosure

9. To consider the appointment of the following persons for a new three-year Board term (subject to the approval of the CBB):

1. Mr. Sael Al Waary

2. Dr. Tarik Yousef

3. Mr. Elmabruk Alrogbani

4. Mr. Maher Kaddoura

5. Ms. Simona Bishouty

6. Mr.WaleedAbdulShakoor

Sael Al Waary, Kingdom of BahrainChairman of the Board of Directors 30th April, 2017


DIRECTORS’ REPORT31December2016

Delivering sustained value to the shareholders


DIRECTORS’ REPORT

Dear Shareholders,

OnbehalfoftheBoardandDirectors,Iampleasedtoinformyouallthat2016wasyetanotherconsecutiveyearofprofitablegrowthforAFSandwewereabletodelivermorevaluetotheshareholdersin2016.

AFSachievedanetprofitofUS$7.4million in2016ascomparedtoUS$6.01millionin2015reflectinga24%growth.Totalnetrevenuesgrewby12%toUS$32.8millionin2016fromUS$29.4millionin2015.

In2016, thecompany increased itsclientbasebysecuringnewclients inAfrica and the GCC and won several awards – Best Payment Processing Services and Solutions Provider – Middle East, Best Electronic Payment Service Provider – Bahrain and Best Islamic Payment Solution Provider – Middle East.

AFSpioneeredthelaunchofthefirstfrictionlesspaymentsolutionforTapandPayinBahraininpartnershipwithleadingproviders,thisisthefirstofseveralinitiatives in aiding the move towards a cashless society in many countries. AFS is leading the way in the Financial Technology (FinTech) sector within the region and has organized the First Middle East and Africa Fintech Forum in March 2017 – an event that has attracted industry key note speakers from theFintechindustrygloballyandtheleadersoffinancialinstitutionsinAfricaand the Middle East.

I would like to convey my sincere appreciation and thanks to our valued shareholders, customers and my fellow board members. I would also like to thank the Central Bank of Bahrain for their continued support and the AFSmanagementteamandstafffortheircommitmentandprofessionalismthroughout2016.

Yours Sincerely,

Sael Al WaaryChairman of the Board of Directors


Embracing a strong control environment

INDEPENDENT AUDITORS’ REPORT31December2016


INDEPENDENT AUDITORS’ REPORT TO THE SHAREHOLDERS OF ARAB FINANCIAL SERVICES COMPANY B.S.C. (c)

Report on the Audit of the Consolidated Financial Statements

Opinion WehaveauditedtheaccompanyingconsolidatedfinancialstatementsofArabFinancialServicesCompanyB.S.C.(c)(“theCompany”)anditssubsidiary(together“theGroup”),whichcomprisetheconsolidatedstatementoffinancialpositionasat31December2016,andtheconsolidatedstatementsofincome,comprehensiveincome,cashflowsandchangesinequityfortheyearthenended,andnotestotheconsolidatedfinancialstatements,includingasummaryofsignificantaccountingpolicies. Inouropinion,theaccompanyingconsolidatedfinancialstatementspresentfairly,inallmaterialrespects,theconsolidatedfinancialpositionoftheGroupasat31December2016,anditsconsolidatedfinancialperformanceanditsconsolidatedcashflowsfortheyearthenendedinaccordancewithInternationalFinancialReportingStandards(IFRSs). Basis for opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the consolidated financial statementssection of our report. We are independent of the Group in accordance with the International Ethics Standards Board for Accountants’CodeofEthicsforProfessionalAccountants(IESBACode),andwehavefulfilledourotherethicalresponsibilitiesinaccordancewiththeIESBACode.Webelievethattheauditevidencewehaveobtainedissufficientandappropriatetoprovide a basis for our opinion.

Other information The other information obtained at the date of the auditor’s report is the Directors Report, set out on page 5.The Board of Directors is responsible for the other information. Ouropinionontheconsolidatedfinancialstatementsdoesnotcovertheotherinformationandwedonotexpressanyformof assurance conclusion thereon. Inconnectionwithourauditoftheconsolidatedfinancialstatements,ourresponsibilityistoreadtheotherinformationand,indoingso,considerwhether theother information ismaterially inconsistentwith theconsolidatedfinancialstatementsor our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed,weconcludethatthereisamaterialmisstatementofthisotherinformation,wearerequiredtoreportthatfact.We have nothing to report in this regard. Responsibilities of the Board of Directors for the consolidated financial statements TheBoardofDirectors is responsible for thepreparationand fairpresentationof theconsolidatedfinancialstatementsin accordance with IFRSs, and for such internal control as the Board of Directors determines is necessary to enable the preparationofconsolidatedfinancialstatementsthatarefreefrommaterialmisstatement,whetherduetofraudorerror. Inpreparingtheconsolidatedfinancialstatements,theBoardofDirectorsisresponsibleforassessingtheGroup’sabilitytocontinue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis ofaccountingunlesstheBoardofDirectorseitherintendstoliquidatetheGrouportoceaseoperations,orhasnorealisticalternative but to do so.


Auditor’s responsibilities for the audit of the consolidated financial statements Ourobjectivesaretoobtainreasonableassuranceaboutwhether theconsolidatedfinancialstatementsasawholearefree from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs willalwaysdetectamaterialmisstatementwhenitexists.Misstatementscanarisefromfraudorerrorandareconsideredmaterialif,individuallyorintheaggregate,theycouldreasonablybeexpectedtoinfluencetheeconomicdecisionsofuserstakenonthebasisoftheseconsolidatedfinancialstatements.

As part of an audit in accordancewith ISAs,we exercise professional judgment andmaintain professional skepticismthroughout the audit. We also: • Identifyandassesstherisksofmaterialmisstatementoftheconsolidatedfinancialstatements,whetherduetofraudor

error,designandperformauditproceduresresponsivetothoserisks,andobtainauditevidencethatissufficientandappropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate

in thecircumstances,butnot for thepurposeofexpressinganopinionon theeffectivenessof theGroup’s internalcontrol.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related

disclosures made by the Board of Directors. • Conclude on the appropriateness of the Board of Directors’ use of the going concern basis of accounting and, based

on theauditevidenceobtained,whetheramaterialuncertaintyexists related toeventsorconditions thatmaycastsignificantdoubtontheGroup’sabilitytocontinueasagoingconcern.Ifweconcludethatamaterialuncertaintyexists,wearerequiredtodrawattentioninourauditor’sreporttotherelateddisclosuresintheconsolidatedfinancialstatementsor,ifsuchdisclosuresareinadequate,tomodifyouropinion.Ourconclusionsarebasedontheauditevidenceobtainedup to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.

• Evaluatetheoverallpresentation,structureandcontentoftheconsolidatedfinancialstatements,includingthedisclosures,

andwhethertheconsolidatedfinancialstatementsrepresenttheunderlyingtransactionsandeventsinamannerthatachieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities

withintheGrouptoexpressanopinionontheconsolidatedfinancialstatements.Weareresponsibleforthedirection,supervision and performance of the Group audit. We remain solely responsible for our audit opinion.

We communicate with audit committee regarding, among other matters, the planned scope and timing of the audit and significantauditfindings,includinganysignificantdeficienciesininternalcontrolthatweidentifyduringouraudit.

INDEPENDENT AUDITORS’ REPORT TO THE SHAREHOLDERS OF ARAB FINANCIAL SERVICES COMPANY B.S.C. (c) (continued)


Report on Other Legal and Regulatory Requirements AsrequiredbytheBahrainCommercialCompaniesLawandVolume5oftheCentralBankofBahrain(“theCBB”)RuleBook, we report that: a) theCompanyhasmaintainedproperaccountingrecordsandtheconsolidatedfinancialstatementsareinagreement

therewith; b) thefinancialinformationcontainedintheDirectors'reportisconsistentwiththeconsolidatedfinancialstatements;

c) wearenotawareofanyviolationsoftheBahrainCommercialCompaniesLaw,theCentralBankofBahrainandFinancial

InstitutionsLaw,theCBBRuleBook(Volume5andapplicableprovisionsofVolume6)andtheCBBdirectivesorthetermsoftheCompany’smemorandumandarticlesofassociationduringtheyearended31December2016thatmighthavehadamaterialadverseeffectonthebusinessoftheCompanyoronitsconsolidatedfinancialposition;and

d) satisfactoryexplanationsandinformationhavebeenprovidedtousbymanagementinresponsetoallourrequests.

Partner’s registration no. 117 28 March 2017 Manama, Kingdom of Bahrain.

INDEPENDENT AUDITORS’ REPORT TO THE SHAREHOLDERS OF ARAB FINANCIAL SERVICES COMPANY B.S.C. (c) (continued)


CONSOLIDATED FINANCIAL

STATEMENTS31December2016


2016 2015 Note US$ 000 US$ 000ASSETS Cash in hand and balances with banks andtheCentralBankofBahrain 6 5,680 7,327 Depositswithbanksandotherfinancialinstitutions 7 34,080 28,373 Investments 8 13,933 14,065Accounts receivable, prepayments and other assets 9 13,798 8,792 Propertyandequipment 10 11,149 9,550 TOTAL ASSETS 78,640 68,107 LIABILITIES AND EQUITY

Liabilities Travellers’chequesawaitingredemption 11 2,715 2,825 Accounts payable and accruals 12 11,004 6,112Other liabilities and provisions 13 1,325 1,168 Total liabilities 15,044 10,105

Equity Share capital 14 30,000 30,000 Treasury shares 14 (2,535) (2,438)Statutory reserve 15 12,526 11,783 Capital reserve 15 150 150 General reserve 15 1,997 1,997 Retained earnings 19,125 14,837 Cumulative changes in fair values (67) (127)Proposedappropriations 16 2,400 1,800 Total equity 63,596 58,002

TOTAL LIABILITIES AND EQUITY 78,640 68,107

Sael Al Waary Simona Bishouty B. Chandrasekhar Chairman Director Chief Executive Officer

CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAt31December2016

The attached notes 1 to 29 form part of these consolidated financial statements


CONSOLIDATED STATEMENT OF INCOMEYearended31December2016

2016 2015 Note US$ 000 US$ 000

Card centre revenue 17 45,221 28,133 Investment income - net 18 570 384 Travellers’chequesrevenue 165 137 Other income 19 192 736(Impairment) / write back of accounts receivable 9 (13,324) 32

32,824 29,422 Staffexpenses 10,274 9,352 Depreciation 10 2,499 2,149 Otheroperatingexpenses 20 12,435 11,913 Impairment loss on available for sale Investments 185 -

25,393 23,414

PROFIT FOR THE YEAR 7,431 6,008

Basic and diluted earnings per share (US$) 21 1.31 1.06

Dividend per share (US$) 22 0.42 0.32

Sael Al Waary Simona Bishouty B. Chandrasekhar Chairman Director Chief Executive Officer



2016 2015 US$ 000 US$ 000

Profitfortheyear 7,431 6,008

Other comprehensive income to be reclassified to profit or loss in subsequent periods: Change in fair values of available-for-sale investments 60 (337)

TOTAL COMPREHENSIVE INCOME FOR THE YEAR 7,491 5,671

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEYearended31December2016



CONSOLIDATED STATEMENT OF CASH FLOWSYearended31December2016

2016 2015 Note US$ 000 US$ 000

OPERATING ACTIVITIES Profitfortheyear 7,431 6,008Adjustments for: Depreciation 10 2,499 2,149 (Impairment) / write back of accounts receivable 9 13,324 (32) Impairment loss on available for sale Investments 185 -

Operatingprofitbeforechangesinoperatingassetsandliabilities 23,439 8,125 Changes in operating assets and liabilities: Depositswithbanksandotherfinancialinstitutions with an original maturity of more than 90 days or maintained as collateral (7,731) (4,726) Accounts receivable, prepayments and other assets (18,330) (648) Travellers’chequesawaitingredemption (110) (77) Accounts payable and accruals 4,892 33 Other liabilities and provisions 157 154

Net cash from operating activities 2,317 2,861

INVESTING ACTIVITIES Purchase of investments - (4,500)Purchaseofpropertyandequipment 10 (4,098) (2,421)

Net cash used in investing activities (4,098) (6,921)

FINANCING ACTIVITIES Dividend paid (1,800) (1,800)Purchase of treasury shares (97) -

Netcashusedinfinancingactivities (1,897) (1,800

Foreign currency translation adjustments 7 10

NET CHANGE IN CASH AND CASH EQUIVALENTS (3,671) (5,850)

Cashandcashequivalentsat1January 9,298 15,148

CASH AND CASH EQUIVALENTS AT 31 DECEMBER 23 5,627 9,298



CONSOLIDATED STATEMENT OF CHANGES IN EQUITYYearended31December2016

Cumulative Share Treasury Statutory Capital General Retained Changes in Proposed Total Capital shares reserve reserve reserve earnings fairvalues appropriations equity Note US$ 000 US$ 000 US$ 000 US$ 000 US$ 000 US$ 000 US$ 000 US$ 000 US$ 000

Balance at 1January2016 30,000 (2,438) 11,783 150 1,997 14,837 (127) 1,800 58,002

Profitfortheyear - - - - - 7,431 - - 7,431

Other comprehensive incomefortheyear - - - - - - 60 - 60

Total comprehensive incomefortheyear - - - - - 7,431 60 - 7,491

Transfer to statutory reserve 15 - - 743 - - (743) - - -

Purchase of treasury shares - (97) - - - - - - (97)

Dividend paid for 2015 - - - - - - - (1,800) (1,800)

Proposed dividend for2016 16 - - - - - (2,400) - 2,400 - Balance at 31 December 2016 30,000 (2,535) 12,526 150 1,997 19,125 (67) 2,400 63,596 Balance at 1January2015 30,000 (2,438) 11,182 150 1,997 11,230 210 1,800 54,131 Profitfortheyear - - - - - 6,008 - - 6,008

Other comprehensive income for the year - - - - - - (337) - (337)

Total comprehensive incomefortheyear - - - - - 6,008 (337) - 5,671

Transfer to statutory reserve 15 - - 601 - - (601) - - -

Dividend paid for 2014 - - - - - - - (1,800) (1,800)

Proposed dividend for2015 16 - - - - - (1,800) - 1,800 -

Balance at 31 December 2015 30,000 (2,438) 11,783 150 1,997 14,837 (127) 1,800 58,002



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS At31December2016

1 CORPORATE INFORMATION Incorporation Arab Financial Services Company B.S.C. (c) (the Company) is a closed joint stock company incorporated on 18 April 1984 in the Kingdom of Bahrain and registered with the Ministry of Industry and Commerce under commercial registration number 14777. The Company is a 54.7%(2015:54.6%)ownedsubsidiaryofArabBankingCorporation(B.S.C.)(theParent).ThepostaladdressoftheCompany’sregisteredofficeisPOBox2152,Manama,KingdomofBahrain. Activities The Company and its subsidiary (the Group) are engaged in electronic bureau processing and the sponsoring and marketing of personal paymentinstructions.Effective1March2011,theCentralBankofBahrainamendedtheCompany’soperatinglicencefrom‘wholesalebanking’to‘ancillaryservices’. The Company has established a wholly owned subsidiary, AFS Processing Services DMCC (the Subsidiary). The Subsidiary was incorporatedon23July2015intheUnitedArabEmirates.TheSubsidiaryisengagedinactivitiessuchaspaymentservicesprovider,callcentersservicesandcustomercarecenter.Subsidiary’sregisteredofficeisUnitno.AG-23-1,AGTower,Plotno:JLTPH1-I1A,JumairaLakesTowers,Dubai,UnitedArabEmirates. TheconsolidatedfinancialstatementswereauthorisedforissuebytheBoardofDirectorson23February2017. 2 BASIS OF PREPARATION Statement of compliance TheconsolidatedfinancialstatementshavebeenpreparedinaccordancewithInternationalFinancialReportingStandards(IFRS)asissuedbytheInternationalAccountingStandardsBoard(IASB)andtheapplicableprovisionsoftheBahrainCommercialCompaniesLawandtheCentralBankofBahrain(theCBB)andFinancialInstitutionsLaw,theCBBRuleBook(Volume5andapplicableprovisionsofVolume6)andthe relevant CBB directives. Accounting convention Theconsolidatedfinancialstatementshavebeenpreparedunderthehistoricalcostconventionasmodifiedforthemeasurementatfairvalueofavailable-for-saleinvestmentsandderivativefinancialinstruments. Functional and presentation currency TheconsolidatedfinancialstatementshavebeenpresentedinUnitedStatesDollarsbeingtheGroup'sfunctionalcurrency,roundedtothenearestthousand(US$000),exceptwhenotherwiseindicated. Basis of consolidation TheconsolidatedfinancialstatementscomprisethefinancialstatementsoftheCompanyanditsSubsidiaryasat31December2016.ControlisachievedwhentheGroupisexposed,orhasrights,tovariablereturnsfromitsinvolvementwiththeinvesteeandhastheabilitytoaffectthosereturnsthroughitspowerovertheinvestee.Specifically,theGroupcontrolsaninvesteeifandonlyiftheGrouphas:

• Powerovertheinvestee(i.e.existingrightsthatgiveitthecurrentabilitytodirecttherelevantactivitiesoftheinvestee);• Exposure,orrights,tovariablereturnsfromitsinvolvementwiththeinvestee,and • Theabilitytouseitspowerovertheinvesteetoaffectitsreturns.

When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

• Thecontractualarrangementwiththeothervoteholdersoftheinvestee; • Rightsarisingfromothercontractualarrangements;and • The Group’s voting rights and potential voting rights.



2 BASIS OF PREPARATION (continued)

Basis of consolidation (continued) The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when theGrouplosescontrolofthesubsidiary.Assets,liabilities,incomeandexpensesofasubsidiaryacquiredordisposedofduringtheyearare included in the statement of comprehensive income from the date the Group gains control until the date the Group ceases to control the subsidiary. Profitorlossandeachcomponentofothercomprehensiveincome(OCI)areattributedtotheequityholdersoftheparentoftheGroupandtothenon-controllinginterests,evenifthisresultsinthenon-controllinginterestshavingadeficitbalance.Whennecessary,adjustmentsaremadetothefinancialstatementsofsubsidiariestobringtheiraccountingpoliciesintolinewiththeGroup’saccountingpolicies.Allintra-Groupassetsandliabilities,equity,income,expensesandcashflowsrelatingtotransactionsbetweenmembersoftheGroupareeliminated in full on consolidation. Achangeintheownershipinterestofasubsidiary,withoutalossofcontrol,isaccountedforasanequitytransaction.IftheGrouplosescontrol over a subsidiary, it:

• Derecognisestheassets(includinggoodwill)andliabilitiesofthesubsidiary; • Derecognisesthecarryingamountofanynon-controllinginterests; • Derecognisesthecumulativetranslationdifferencesrecordedinequity; • Recognisesthefairvalueoftheconsiderationreceived; • Recognisesthefairvalueofanyinvestmentretained; • Recognisesanysurplusordeficitinprofitorloss;and • Reclassifiestheparent’sshareofcomponentspreviouslyrecognisedinOCItoprofitorlossorretainedearnings,asappropriate,

aswouldberequirediftheGrouphaddirectlydisposedoftherelatedassetsorliabilities.

3 SIGNIFICANT ACCOUNTING POLICIES

Theaccountingpoliciesusedinthepreparationoftheseconsolidatedfinancialstatementsareconsistentwiththoseusedinpreviousyear.CertainamendmentstoIFRSbecameeffectivefortheyearended31December2016.However,noneofthesehadanyimpactontheGroup’sconsolidatedfinancialstatementsoraccountingpolicies. Amendments to IAS 16 and IAS 38: Clarification of Acceptable Methods of Depreciation and Amortisation TheamendmentsclarifytheprincipleinIAS16Property,PlantandEquipmentandIAS38IntangibleAssetsthatrevenuereflectsapatternofeconomicbenefitsthataregeneratedfromoperatingabusiness(ofwhichtheassetisapart)ratherthantheeconomicbenefitsthatareconsumedthroughuseoftheasset.Asaresult,arevenue-basedmethodcannotbeusedtodepreciateproperty,plantandequipmentand may only be used in very limited circumstances to amortise intangible assets. The amendments are applied prospectively and do not have any impact on the Group, given that it has not used a revenue-based method to depreciate its non-current assets. Amendments to IAS 27: Equity Method in Separate Financial Statements Theamendmentsallowentities touse theequitymethod toaccount for investments in subsidiaries, joint venturesandassociates intheirseparatefinancialstatements.EntitiesalreadyapplyingIFRSandelectingtochangetotheequitymethodintheirseparatefinancialstatementshavetoapplythatchangeretrospectively.TheseamendmentsdonothaveanyimpactontheGroup’sconsolidatedfinancialstatements.



3 SIGNIFICANT ACCOUNTING POLICIES (continued)

Annual Improvements 2012-2014 Cycle Theseimprovementsareeffectiveforannualperiodsbeginningonorafter1January2016andarenotexpectedtohaveamaterialimpacton the Group. They include:

• IFRS5Non-currentAssetsHeldforSaleandDiscontinuedOperations; • IFRS7FinancialInstruments:Disclosures; • IAS19EmployeeBenefits;and • IAS 34 Interim Financial Reporting.

Amendments to IAS 1 Disclosure Initiative TheamendmentstoIAS1clarify,ratherthansignificantlychange,existingIAS1requirements.Theamendmentsclarify:

• ThematerialityrequirementsinIAS1; • Thatspecificlineitemsinthestatement(s)ofprofitorlossandOCIandthestatementoffinancialpositionmaybedisaggregated;• Thatentitieshaveflexibilityastotheorderinwhichtheypresentthenotestofinancialstatements;and • ThattheshareofOCIofassociatesandjointventuresaccountedforusingtheequitymethodmustbepresentedinaggregateas

asinglelineitem,andclassifiedbetweenthoseitemsthatwillorwillnotbesubsequentlyreclassifiedtoprofitorloss.

Amendments to IFRS 10, IFRS 12 and IAS 28 Investment Entities: Applying the Consolidation Exception Theamendmentsaddress issues thathavearisen inapplying the investmententitiesexceptionunder IFRS10ConsolidatedFinancialStatements.TheamendmentstoIFRS10clarifythattheexemptionfrompresentingconsolidatedfinancialstatementsappliestoaparententity that is a subsidiary of an investment entity, when the investment entity measures all of its subsidiaries at fair value. Furthermore, the amendments to IFRS 10 clarify that only a subsidiary of an investment entity that is not an investment entity itself and that provides support services to the investment entity is consolidated. All other subsidiaries of an investment entity are measured at fair value. TheamendmentstoIAS28InvestmentsinAssociatesandJointVenturesallowtheinvestor,whenapplyingtheequitymethod,toretainthe fair value measurement applied by the investment entity associate or joint venture to its interests in subsidiaries. This did not have any impactontheGroupasitdoesnotuseinvestmententityexception. Cash and cash equivalents Forthepurposeoftheconsolidatedstatementofcashflows,cashandcashequivalentscomprisecashinhand,balanceswithbanks,depositswith banks and other financial institutions and theCentral Bank of Bahrainwith originalmaturities of less than ninety days(excludingstatutoryandcollateraldeposits). Deposits with banks and other financial institutions Depositswithbanksandotherfinancialinstitutionsareinitiallymeasuredatcost,beingthefairvalueoftheconsiderationgiven. Followinginitialrecognition,depositswithbanksandotherfinancialinstitutionsarestatedatcostlessanyamountwritten-offandspecificprovisions for impairment, if any. Investments Available-for-sale investmentsarethosenon-derivativefinancialassetsthataredesignatedasavailable-for-sale.Theseinvestmentsareinitially recognised at fair value including directly attributable transaction costs. After initial measurement, available-for-sale investments are subsequently measured at fair value with unrealised gains or losses being recognised directly in the consolidated statement ofcomprehensive income until the investment is derecognised, at which time the cumulative gain or loss recorded in the consolidated statement of comprehensive income is recognised in the consolidated statement of income, or determined to be impaired, at which time the cumulative loss recorded in the consolidated statement of comprehensive income is recognised in the consolidated statement of income.




Accounts receivable Accounts receivable are stated at original invoice amount less a provision for any uncollectible amounts. An estimate for doubtful debts is madewhencollectionofthefullamountisnolongerprobable.Baddebtsarewrittenoffwhenthereisnoprobabilityofrecovery. Property and equipment Propertyandequipmentisstatedatcostlessaccumulateddepreciationandanyimpairmentinvalue.Freeholdlandisnotdepreciatedasitisdeemedtohaveanindefiniteusefullife. Thecarryingvaluesofpropertyandequipmentarereviewedforimpairmentwheneventsorchangesincircumstancesindicatethecarryingvaluemaynotberecoverable.Ifanysuchindicationexistsandwherethecarryingvaluesexceedtheestimatedrecoverableamount,theassets are written down to their recoverable amount, being the higher of their fair value less costs to sell and their value in use. Expenditureincurredtoreplaceacomponentofanitemofpropertyandequipmentthatisaccountedforseparatelyiscapitalisedandthecarryingamountofthecomponentthatisreplacediswrittenoff.Othersubsequentexpenditureiscapitalisedonlywhenitincreasesfutureeconomicbenefitsoftherelateditemofpropertyandequipment.Allotherexpenditureisrecognisedintheconsolidatedstatementofincomeastheexpenseisincurred.

Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets, as follows:

- Building 30 years -Furniture,equipmentandvehicles 3-10years

Travellers’ cheques awaiting redemption Travellers’chequesawaitingredemptionarestatedatcostlessprovisionforunclaimedamounts. Provisionfortravellers’chequesawaitingredemption,basedontheGroup’spastexperience,ismadefortheestimatednetcosttotheGroupoflosttravellers’chequesunpaidasofthedateoftheconsolidatedstatementoffinancialposition.Adjustmentstotheprovisionsarereflectedintheconsolidatedstatementofincomeastheybecomenecessary. Accounts payable and accruals Liabilitiesarerecognisedforamountstobepaidinthefutureforgoodsorservicesreceived,whetherbilledbythesupplierornot. Provisions Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that anoutflowofresourcesembodyingeconomicbenefitswillberequiredtosettletheobligationandareliableestimatecanbemadeoftheamount of the obligation. Employees’ end of service benefits TheGroupprovidesendofservicebenefitstoitsemployeesinaccordancewiththerelevantregulations.Theentitlementtothesebenefitsisbasedupontheemployees’finalsalariesandlengthofservice.Theexpectedcostsofthesebenefitsareaccruedovertheperiodofemploymentbasedonthenotionalamountpayableifallemployeeshadleftattheconsolidatedstatementoffinancialpositiondate. With respect to its national employees, the Group makes contributions to the Social Insurance Organisation calculated as a percentage of the employees’ salaries in accordance with the relevant regulations. The Group’s obligations are limited to these contributions, which are expensedwhendue. Treasury shares Own equity instrumentswhich are reacquired (treasury shares) are recognised at cost and deducted from equity.No gain or loss isrecognisedintheconsolidatedstatementofincomeonthepurchase,sale,issueorcancellationoftheGroup’sownequityinstruments.Anydifferencebetweenthecarryingamountandtheconsiderationisrecognisedintheconsolidatedstatementofchangesinequity.




Impairment of financial assets Anassessment ismadeat eachstatementof financialpositiondate todeterminewhether there isobjectiveevidence that a specificfinancialassetmaybeimpaired.Afinancialassetisdeemedtobeimpairedif,andonlyif,thereisobjectiveevidenceofimpairmentasaresultofoneormoreeventsthathasoccurredaftertheinitialrecognitionoftheasset(anincurred‘lossevent’)andthatlosseventhasanimpactontheestimatedfuturecashflowsofthefinancialassetthatcanbereliablyestimated.Evidenceofimpairmentmayincludeindicationsthatthedebtororgroupofdebtorsisexperiencingsignificantfinancialdifficulty,defaultordelinquencyininterestorprincipalpayments,theprobabilitythattheywillenterbankruptcyorotherfinancialreorganisationandwhereobservabledataindicatesthatthereisameasurabledecreaseintheestimatedfuturecashflows,suchaschangesinarrearsoreconomicconditionsthatcorrelatewithdefaults.Ifsuchevidenceexists,anyimpairmentlossisrecognisedintheconsolidatedstatementofincome. Impairment is determined as follows: (a) Forassetscarriedatfairvalue,impairmentisthedifferencebetweencostandfairvalue,lessanyimpairmentlosspreviouslyrecognised

intheconsolidatedstatementofincome;

(b) Forassetscarriedatcost,impairmentisthedifferencebetweencarryingvalueandthepresentvalueoffuturecashflowsdiscountedatthecurrentmarketrateofreturnforasimilarfinancialasset;and

(c) Forassetscarriedatamortisedcost,impairmentisthedifferencebetweencarryingamountandthepresentvalueoffuturecashflowsdiscountedattheoriginaleffectiveinterestrate.

Derecognition of financial assets and financial liabilities Financial assets Afinancialasset(or,whereapplicableapartofafinancialassetorpartofagroupofsimilarfinancialassets)isderecognisedwhere: (i) therightstoreceivecashflowsfromtheassethaveexpired;or

(ii) theGrouphastransferreditsrightstoreceivecashflowsfromtheassetorhasassumedanobligationtopaythereceivedcashflows

infullwithoutmaterialdelaytoathirdpartyundera'pass-through'arrangement;andeither(a)theGrouphastransferredsubstantiallyall the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

When theGrouphas transferred its rights to receivecashflows fromanassetorhasentered intoapass-througharrangement,andhas neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognisedtotheextentoftheGroup'scontinuinginvolvementintheasset. Financial liabilities Afinancialliabilityisderecognisedwhentheobligationundertheliabilityisdischargedorcancelledorexpires.Whereanexistingfinancialliabilityisreplacedbyanotherfromthesamelenderonsubstantiallydifferentterms,orthetermsofanexistingliabilityaresubstantiallymodified,suchanexchangeormodificationistreatedasaderecognitionoftheoriginalliabilityandtherecognitionofanewliability,andthedifferenceintherespectivecarryingamountsisrecognisedintheconsolidatedstatementofincome. Revenue recognition Revenue is recognised to theextent that it isprobable thateconomicbenefitswill flow to theGroupand the revenuecanbe reliablymeasured.Revenueismeasuredatthefairvalueoftheconsiderationreceived,excludingdiscounts,rebates,andsalestaxesorduty.Thefollowingspecificrecognitioncriteriamustalsobemetforrevenuetoberecognised:




Derecognition of financial assets and financial liabilities (continued)

Revenue recognition (continued)

Card centre revenue (a) Electronic bureau processing Incomefromelectronicbureauprocessingisrecognisedovertheperiodinwhichtheservicesarerendered,netofwithholdingtax.

(b) Sponsored programmes Annualcardfeesarebilledtocardmembersonamonthlybasisandaretakentoincomenetofcollectionfeesandwithholdingtax.

Revenue related to card utilisation and other incidental revenues are recognised when earned.

(c) Development and customisation Revenue from software customisation and development contracts is recognised using the stage of completion method. If a contract

isalossmakingcontractthenexpectedlossesarerecognisedimmediatelyandiftheoutcomeofthecontractcannotbemeasuredreliably,thenrevenueisbookedonlytotheextentcosthasbeenincurred.

Travellers’ cheques revenue Revenuefromtravellers’chequesrepresentsincomeearnedonthefloatoftravellers’chequesawaitingredemptionandisaccountedforonaneffectiveyieldbasis. Interest income Interestincomeisrecognisedusingtheeffectiveyieldmethod. Dividends Dividend is recognised when Group’s right to receive the payment is established. Rental income Rental income arising from operating leases on property is accounted for on a straight line basis over the lease terms. Foreign currencies Transactions in foreign currencies are initially recorded at the rate ruling at the date of the transaction. Monetary assets and liabilities denominatedinforeigncurrenciesareretranslatedattherateofexchangerulingatthedateoftheconsolidatedstatementoffinancialposition.Alldifferencesaretakentotheconsolidatedstatementofincome.Non-monetaryitemsthataremeasuredintermsofhistoricalcostinforeigncurrencyareretranslatedusingtheexchangeratesasatdatesoftheinitialtransactions.Non-monetaryitemsmeasuredatfairvalueinaforeigncurrencyaretranslatedusingtheexchangeratesatthedatewhenthefairvalueisdetermined.Whenagainorlossonanon-monetaryitemisrecognisedintheconsolidatedstatementofcomprehensiveincome,anyexchangecomponentofthatgainor loss is recognised in the consolidated statement of comprehensive income. Conversely, when a gain or loss on a non-monetary item isrecognisedintheconsolidatedstatementofincome,anyexchangecomponentofthatgainorlossisrecognisedintheconsolidatedstatement of income. Trade and settlement date accounting Purchasesandsalesoffinancialassetsarerecognisedonthetradedate,i.e.thedatethattheGroupcommitstopurchaseorselltheasset. Offsetting Financialassetsandfinancialliabilitiesareonlyoffsetandthenetamountreportedintheconsolidatedstatementoffinancialpositionwhenthereisalegallyenforceableright(andnecessaryregulatoryapprovals,ifrequired)tosetofftherecognisedamountsandtheGroupintendsto either settle on a net basis, or to realise the asset and settle the liability simultaneously.




Derivative financial instruments TheGroupusesinterestrateswapstocoveritsinterestraterisks.Suchderivativefinancialinstrumentsareinitiallyrecognisedatfairvalueonthedateonwhichthederivativecontract isentered intoandaresubsequentlyre-measuredat fairvalue.Derivativesarecarriedasfinancialassetswhenthefairvalueispositiveandasfinancialliabilitieswhenthefairvalueisnegative. Any gains or losses arising from changes in the fair value of derivatives are taken directly to the consolidated statement of income. Fair values TheGroupmeasuresfinancialinstrumentsatfairvalueateachconsolidatedstatementoffinancialpositiondate. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

- Intheprincipalmarketfortheassetorliability;or - In the absence of a principal market, in the most advantageous market for the asset or liability.

The principal or the most advantageous market must be accessible to by the Group. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their best economic interests. Forinvestmentstradedinanactivemarket,fairvalueisdeterminedbyreferencetoquotedmarketbidprices.Thefairvalueofinterest-bearingitemsisestimatedbasedondiscountedcashflowsusinginterestratesforitemswithsimilartermsandriskcharacteristics. Forunquotedequity investments, fairvalue isdeterminedusingappropriatevaluation techniques.Such techniquesmay includeusingrecent arm’s length market transactions or reference to the current fair value of another instrument that is substantially the same. In cases wherethefairvalueofunquotedequityinstrumentscannotbedeterminedreliably,theinstrumentsarecarriedatcostlessimpairment. AnanalysisoffairvaluesoffinancialinstrumentsandfurtherdetailastohowtheyaremeasuredareprovidedinNote28. Operating leases Leaseswherethelessorretainssubstantiallyalltherisksandbenefitsofownershipoftheassetareclassifiedasoperatingleases.Operatingleasepaymentsarerecognisedasanexpenseintheconsolidatestatementofcomprehensiveincomeonastraight linebasisoverthe lease term. 4 SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS

IntheprocessofapplyingtheGroup’saccountingpolicies,managementhasexercisedjudgementandmadeestimatesindeterminingtheamountsrecognisedintheconsolidatedfinancialstatements.Themostsignificantusesofjudgementsandestimatesareasfollows: Going concern TheGroup’smanagementhasmadeanassessmentoftheGroup’sabilitytocontinueasagoingconcernandissatisfiedthattheGrouphas the resources to continue in business for the foreseeable future. Furthermore, management is not aware of any material uncertainties thatmaycastsignificantdoubtupontheGroup’sabilitytocontinueasagoingconcern.Therefore,theconsolidatedfinancialstatementscontinue to be prepared on the going concern basis.



4 SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS (continued)

Classification of investments Managementdecidesonacquisitionofaninvestmentwhetheritshouldbeclassifiedascarriedatfairvaluethroughconsolidatedstatementofincome,held-to-maturityoravailable-for-sale.TheGroupclassifiesinvestmentsasfairvaluethroughconsolidatedstatementofincomeiftheyareacquiredprimarilyforthepurposeofmakingshorttermprofit.Classificationof investmentsdesignatedasfairvaluethroughstatement of consolidated income depends on how management monitors the performance of these investments. Investments are classifiedasheld-to-maturitywhentheGrouphasthepositiveintentionandabilitytoholdittomaturity.Allotherinvestmentsareclassifiedas available-for-sale. Impairment of available-for-sale financial assets For available-for-sale investments, the Group assesses at each reporting date whether there is objective evidence that an investment or agroupofinvestmentsisimpaired.Inthecaseofequityinvestmentsclassifiedasavailable-for-sale,objectiveevidencewouldincludeasignificantorprolongeddeclineinthefairvalueoftheinvestmentbelowitscost.Thedeterminationofwhatis‘significant’or‘prolonged’requires judgement. Inmaking this judgement, theGroup evaluates, among other factors, historical share pricemovements and thedurationorextenttowhichthefairvalueofaninvestmentislessthanitscost.Inthecaseofdebtsecuritiesclassifiedasavailable-for-saleinvestments,managementjudgementisrequiredintheestimationoftheamountandtimingoffuturecashflowswhendeterminingtheimpairmentloss.Theseestimatesarebasedonassumptionsaboutanumberoffactorsandactualresultsmaydiffer,resultinginfuturechanges to the allowance. Provision for accounts receivable The Group makes a collective impairment provision against accounts receivable based on a percentage allowance applied according to the length of time past due. The percentages are determined by the Board of Directors based on historical recovery rates. The actual impairmentlosscoulddifferfromestimatesduetoanumberoffactors. 5 PROSPECTIVE CHANGES IN ACCOUNTING POLICIES

Standards and interpretations that are issued, but not yet effective, up to the date of issuanceof theGroup’s consolidated financialstatements are disclosed below: IFRS 9 Financial Instruments InJuly2014,theIASBissuedthefinalversionof IFRS9Financial InstrumentsthatreplacesIAS39Financial Instruments:RecognitionandMeasurementandallpreviousversionsofIFRS9.IFRS9bringstogetherallthreeaspectsoftheaccountingforfinancialinstrumentsproject:classificationandmeasurement,impairmentandhedgeaccounting.IFRS9iseffectiveforannualperiodsbeginningonorafter1January2018,withearlyapplicationpermitted.Exceptforhedgeaccounting,retrospectiveapplicationisrequiredbutprovidingcomparativeinformationisnotcompulsory.Forhedgeaccounting,therequirementsaregenerallyappliedprospectively,withsomelimitedexceptions.TheGroupplanstoadoptthenewstandardontherequiredeffectivedate.TheadoptionofIFRS9willhaveaneffectontheclassificationandmeasurementoftheGroup’sfinancialassets,butnoimpactontheclassificationandmeasurementoftheGroup’sfinancialliabilities.ManagementisconsideringtheimplicationsofthisstandardanditsimpactontheGroup'sfinancialpositionandresults. IFRS 15 Revenue from Contracts with Customers IFRS15wasissuedinMay2014andestablishesanewfive-stepmodelthatwillapplytorevenuearisingfromcontractswithcustomers.UnderIFRS15revenueisrecognisedatanamountthatreflectstheconsiderationtowhichanentityexpectstobeentitledinexchangefortransferring goods or services to a customer. The principles in IFRS 15 provide a more structured approach to measuring and recognising revenue. ThenewrevenuestandardisapplicabletoallentitiesandwillsupersedeallcurrentrevenuerecognitionrequirementsunderIFRS.Eitherafullormodifiedretrospectiveapplicationisrequiredforannualperiodsbeginningonorafter1January2018,withearlyadoptionpermitted.TheGroupiscurrentlyassessingtheimpactofIFRS15andplanstoadoptthenewstandardontherequiredeffectivedate.



5 PROSPECTIVE CHANGES IN ACCOUNTING POLICIES (continued)

IFRS 16 Leases TheIASBissuedthenewstandardforaccountingforleases-IFRS16LeasesinJanuary2016.Thenewstandarddoesnotsignificantlychangetheaccountingforleasesforlessors.However,itdoesrequirelesseestorecognisemostleasesontheirbalancesheetsasleaseliabilities,withthecorrespondingright-of-useassets.Lesseesmustapplyasinglemodelforallrecognisedleases,butwillhavetheoptionnottorecognise‘short-term’leasesandleasesof‘low-value’assets.Generally,theprofitorlossrecognitionpatternforrecognisedleaseswillbesimilartotoday’sfinanceleaseaccounting,withinterestanddepreciationexpenserecognisedseparatelyinthestatementofprofitor loss. IFRS16 iseffective forannualperiodsbeginningonorafter1January2019.Earlyapplication ispermittedprovidedthenewrevenuestandard,IFRS15,isappliedonthesamedate.LesseesmustadoptIFRS16usingeitherafullretrospectiveoramodifiedretrospectiveapproach.TheGroupdoesnotanticipateearlyadoptingIFRS16andiscurrentlyevaluatingitsimpact. Amendments to IAS 12 Income Taxes In January2016, through issuing amendments to IAS12, the IASBclarified the accounting treatment of deferred tax assetsof debtinstrumentsmeasuredatfairvalueforaccounting,butmeasuredatcostfortaxpurposes.Theamendmentiseffectivefrom1January2017. The Group is currently evaluating the impact, but does not anticipate that adopting the amendments would have a material impact onitsconsolidatedfinancialstatements.

Amendments to IAS 7 Statement of Cash Flows InJanuary2016,theIASBissuedamendmentstoIAS7StatementofCashFlowswiththeintentiontoimprovedisclosuresoffinancingactivitiesandhelpuserstobetterunderstandthereportingentities’liquiditypositions.Underthenewrequirements,entitieswillneedtodisclosechangesintheirfinancialliabilitiesasaresultoffinancingactivitiessuchaschangesfromcashflowsandnon-cashitems(e.g.,gainsandlossesduetoforeigncurrencymovements).Theamendmentiseffectivefrom1January2017.TheGroupiscurrentlyevaluatingthe impact. Managementisconsideringtheimplicationsofthesestandardsandamendments,theirimpactontheGroup’sfinancialpositionandresultsand the timing of their adoption by the Group.


6 CASH IN HAND AND BALANCES WITH BANKS AND THE CENTRAL BANK OF BAHRAIN 2016 2015 US$ 000 US$ 000

Cash in hand and balances with banks 5,627 7,274 Statutory deposit with the Central Bank of Bahrain 53 53

5,680 7,327

7 DEPOSITS WITH BANKS AND OTHER FINANCIAL INSTITUTIONS 2016 2015 US$ 000 US$ 000

Depositswithbanksandotherfinancialinstitutions with original maturity of: -Lessthan90days - 2,024 - More than 90 days 22,186 14,593

22,186 16,617

Deposits with banks which are maintained as collateral against personal- payment instrument activities, with original maturity of: -Lessthan90days 963 963 - More than 90 days 10,931 10,793

34,080 28,373

8 INVESTMENTS 2016 2015 US$ 000 US$ 000Available-for-sale Quoted bonds 13,933 13,873 Unquoteddebtsecurity-gross 999 999 Less:Provisionforimpairment (999) (807)Unquoted debt security - net - 192

13,933 14,065

9 ACCOUNTS RECEIVABLE, PREPAYMENTS AND OTHER ASSETS 2016 2015 US$ 000 US$ 000Due from Card programme customers* 23,723 6,280 Travellers’chequessalesagents 3,176 3,180

26,899 9,460Provision for impairment Card programme customers* (13,806) (531) Travellers’chequessalesagents (3,176) (3,180)

Net accounts receivable 9,917 5,749 Prepaidexpenses 1,557 1,756Interest receivable 273 176Other assets 2,051 1,111

13,798 8,792

* This includes a receivable balance of US$ 20,272 thousand, which was billed as per signed contract and is being disputed by the Company'scustomer.TheGrouphasprovidedaspecificprovisionofUS$13,380thousandagainst this receivablebalance.Asof31December2016,theCompanywasinnegotiationsfortherecoveryofthisamount.




9 ACCOUNTS RECEIVABLE, PREPAYMENTS AND OTHER ASSETS (continued) The gross value of impaired accounts receivable was as follows: 2016 2015 US$ 000 US$ 000

Due from card programme customers 7,943 801 Duefromtravellers’chequessalesagents 3,176 3,180

11,119 3,981

Movements in the allowance for impairment of accounts receivable were as follows: 2016 2015 US$ 000 US$ 000

At1January 3,711 3,771 Writtenoffduringtheyear (53) (28)Written back during the year (6) (171)Addition during the year 13,330 139

At 31 December 16,982 3,711

Thetablebelowshowsthecreditqualityofaccountsreceivable,interestreceivableandotherassets:

Past due Neither but not past due impaired Past due and impaired nor impaired (1 to 90) (1 to 90) (91 to 120) (Over 120) At 31 December (Current) days days days days Total2016 US$ 000 US$ 000 US$ 000 US$ 000 US$ 000 US$ 000

Accounts receivable 3,839 5,031 5,127 3,178 9,724 26,899 Interest receivable 273 - - - - 273 Other assets 2,051 - - - - 2,051

6,163 5,031 5,127 3,178 9,724 29,223 Past due Neither but not past due impaired Past due and impaired nor impaired (1 to 90) (91 to 120) (Over 120) (Current) days days days TotalAt 31 December 2015 US$ 000 US$ 000 US$ 000 US$ 000 US$ 000

Accountsreceivable 3,782 1,896 71 3,711 9,460Interestreceivable 176 - - - 176Other assets 1,111 - - - 1,111

5,069 1,896 71 3,711 10,747



10 PROPERTY AND EQUIPMENT Furniture, equipment Capital Freehold and work in land Building vehicles progress Total US$ 000 US$ 000 US$ 000 US$ 000 US$ 000Cost At1January2016 1,326 8,351 23,866 919 34,462 Additions - - 705 3,393 4,098 Transfer during the year - - 1,005 (1,005) -

At 31 December 2016 1,326 8,351 25,576 3,307 38,560

Depreciation At1January2016 - 6,444 18,468 - 24,912 Provided during the year - 302 2,197 - 2,499

At 31 December 2016 - 6,746 20,665 - 27,411

Net book value At 31 December 2016 1,326 1,605 4,911 3,307 11,149 Furniture, equipment Capital Freehold and work in land Building vehicles progress Total US$ 000 US$ 000 US$ 000 US$ 000 US$ 000Cost At1January2015 1,326 8,344 21,924 447 32,041Additions - 7 906 1,508 2,421Transferduringtheyear - - 1,036 (1,036) -

At31December2015 1,326 8,351 23,866 919 34,462

Depreciation At1January2015 - 6,139 16,624 - 22,763 Provided during the year - 305 1,844 - 2,149

At31December2015 - 6,444 18,468 - 24,912

Net book value At31December2015 1,326 1,907 5,398 919 9,550



11 TRAVELLERS’ CHEQUES AWAITING REDEMPTION The Group has written back travellers'chequesinprioryearsoutstandingforaperiodof20yearsormore.Thesewritebackswere inaccordance with the policy of the Group that had been approved by the Central Bank of Bahrain and were made after obtaining the approval of the Board of Directors. As per this policy, the total write back was capped at 75% of the total outstanding balance as at 31 December 2012. Travellers'chequesoutstandingasat31December2016arenetofthecumulativewritebackofUS$6,336thousand(31December2015:US$6,355thousand).

12 ACCOUNTS PAYABLE AND ACCRUALS 2016 2015 US$ 000 US$ 000

Accruedexpenses 2,765 2,474 Due to customers, suppliers and agents 6,964 2,442 Other payables 1,275 1,196

11,004 6,112

13 OTHER LIABILITIES AND PROVISIONS 2016 2015 US$ 000 US$ 000

Employees’endofservicebenefits 1,009 865Provisionfortravellers’chequeslosses 316 303

1,325 1,168 Movementintheprovisionfortravellers’chequeslosseswasasfollows: 2016 2015 US$ 000 US$ 000At1January 303 291 Provided during the year 13 12

At 31 December 316 303 14 SHARE CAPITAL 2016 2015 US$ 000 US$ 000Authorised 10,000,000 (2015: 10,000,000) shares of US$ 5 (2015: US$ 5) each 50,000 50,000

Issued and fully paid 6,000,000(2015:6,000,000)sharesofUS$5(2015:US$5)each 30,000 30,000 Treasury shares Asat31December2016,theCompanyheld319,750treasuryshares(31December2015:309,750shares).Thesesharesdonotcarryany voting rights and are not entitled to dividend.



15 RESERVES Statutory reserve AsrequiredbytheBahrainCommercialCompaniesLawandtheCompany’smemorandumandarticlesofassociation,10%oftheprofitforthe year has been transferred to a statutory reserve. The Company’s shareholders may resolve to discontinue such annual transfers when thereserveequals50%ofthepaidupsharecapitaloftheCompany.ThereserveisnotdistributablebutmaybeusedassecurityforthepurposeofadistributioninsuchcircumstancesasstipulatedintheBahrainCommercialCompaniesLawandfollowingtheapprovaloftheCentral Bank of Bahrain.

Capital reserve Thisreserverepresentsprofitsonsaleofpropertyandequipmentinpastyears.ThisreservecanbedistributedasdividendsafterapprovaloftheAnnualGeneralMeetingoftheshareholders,subjecttotheprovisionthatthiswillnotaffecttheCompany’sabilitytorestoretheassetstotheiroriginalconditionortoacquirenewpropertyandequipment.

General reserve This reserve is only distributable following a resolution of the Annual General Meeting of the shareholders and the approval of the Central Bank of Bahrain. 16 PROPOSED APPROPRIATIONS

TheBoardofDirectorshasproposedfortheyear2016adividendofUS$0.42pershare(2015:US$0.32pershare)amountingtoUS$2,400 thousand (2015: US$ 1,800 thousand), which will be submitted for formal approval at the Annual General Meeting.

During the year a dividend of US$ 0.32 per share aggregating to US$ 1,800 thousand for the year 2015 (2015: US$ 0.32 per share aggregatingtoUS$1,800thousandfortheyear2014)wasapprovedattheAnnualGeneralMeetingheldon27April2016. 17 CARD CENTRE REVENUE 2016 2015 US$ 000 US$ 000

Income from electronic bureau processing 37,909 21,815 Income from sponsored card programmes 5,039 3,412 Income from development and customisation 2,273 2,906

45,221 28,133

IncomefromelectronicbureauprocessingisstatednetofwithholdingtaxofUS$837thousand(2015:US$669thousand). 18 INVESTMENT INCOME - NET 2016 2015 US$ 000 US$ 000

Interest income on: - Available-for-sale investments 356 279 -Fixeddeposits 214 105

570 384



19 OTHER INCOME 2016 2015 US$ 000 US$ 000

Write back of liabilities - 525 Rental income 111 165Other miscellaneous income 81 46

192 736

20 OTHER OPERATING EXPENSES 2016 2015 US$ 000 US$ 000

Electronicdataprocessingexpenses 5,305 5,417 Cardrelatedexpenses 3,892 3,615Otherexpenses 3,238 2,881

12,435 11,913 21 BASIC AND DILUTED EARNINGS PER SHARE

Basicearningspershareiscalculatedbydividingtheprofitfortheyearbytheweightedaveragenumberofsharesoutstandingduringtheyear as follows: 2016 2015

Profitfortheyear(US$000) 7,431 6,008

Weighted average number of shares outstanding during the year, net of treasury shares (thousand) 5,690 5,690

Basic and diluted earnings per share (US$) 1.31 1.06

22 DIVIDEND PER SHARE

Dividend per share is calculated by dividing the proposed dividend for the year by the number of shares outstanding, net of treasury shares at the year end as follows: 2016 2015

Dividendfortheyear(US$000)[note16] 2,400 1,800

Number of shares outstanding at the year end, net of treasury shares (thousand) 5,680 5,690

Dividend per share (US$) 0.42 0.32

23 CASH AND CASH EQUIVALENTS

Cashandcashequivalentsincludedintheconsolidatedstatementofcashflowscomprisethefollowingconsolidatedstatementoffinancialposition amounts: 2016 2015 US$ 000 US$ 000

Cashinhandandbalanceswithbanks(note6) 5,627 7,274 Depositswithbanksandotherfinancialinstitutions with original maturity of less than 90 days (note 7) - 2,024

5,627 9,298



24 DERIVATIVES The Group entered into interest rate swaps.

Notional amounts by term to maturity

Positive fair Negative Notional value fair value amount Total 1 - 5 yearsInterest rate swaps US$ 000 US$ 000 US$ 000 US$ 000

31 December 2016 4 (76) 14,000 14,000

31 December 2015 - (133) 14,000 14,000

TheGroupusesinterestrateswapstomanagesomeofitsinterestrateexposures.Theseinterestrateswapsarenotdesignatedascashflowhedgesandareenteredintoforperiodsconsistentwithunderlyinginstrumentexposures. Swapsarecontractualagreementsbetweentwopartiestoexchangeinterestdifferentialsbasedonaspecificnotionalamount.Forinterestrateswaps,counterpartiesgenerallyexchangefixedandfloatingrateinterestpaymentsbasedonanotionalvalueinasinglecurrency. 25 RISK MANAGEMENT

Risk governance TheGroup’sriskgovernanceismanifestedinasetofestablishedpolicies,proceduresandcontrolswhichusestheexistingorganisationalstructure to meet strategic targets. The Group’s philosophy revolves on willing and knowledgeable risk acceptance commensurate with the riskappetiteandstrategicplanapprovedbytheBoard.TheGroupisexposedtocredit,market,legal,operationalandliquidityrisks. Risk management structure A cohesive organisational structure is established within the Group in order to identify, assess, monitor and control risks. Board of Directors Theapexof riskgovernance is thecentralisedoversightof theBoardofDirectorsprovidingdirectionand thenecessaryapprovalsofstrategiesandpoliciesinordertoachievedefinedcorporategoals. Senior management SeniormanagementisresponsibleforthedaytodayoperationstowardsachievingthestrategicgoalswithintheGroup’spre-definedriskappetite. Audit Committee and Internal Audit Department Riskmanagement processes throughout theGroup are audited annually by the Internal Audit Departmentwhich examines both theadequacyoftheproceduresandtheGroup’scompliancewiththeprocedures.TheInternalAuditDepartmentdiscussestheresultsofallassessmentswithseniormanagement,andreportsitsfindingsandrecommendationsdirectlytotheAuditCommittee. a) Credit risk Creditriskistheriskthatonepartytoafinancialinstrumentwillfailtodischargeanobligationandcausetheotherpartytoincurafinancialloss. TheGroupattempts to control credit riskbymonitoring credit exposures, limiting transactionswith specific counterparties, andcontinually assessing the credit worthiness of counterparties.



25 RISK MANAGEMENT (continued)

a) Credit risk (continued) Concentrations of credit risk arise when a number of counterparties are engaged in similar business activities, or activities in the same geographicregion,orhavesimilareconomicfeaturesthatwouldcausetheirabilitytomeetcontractualobligationstobesimilarlyaffectedbychanges in economic, political or other conditions. Concentrations of credit risk indicate the relative sensitivity of the Group’s performance todevelopmentsaffectingaparticularindustryorgeographiclocation.

TheGroupseeks tomanage itscredit riskexposure throughdiversificationof itsactivities toavoidundueconcentrationsof riskwithindividualsorgroupsofcustomersinspecificlocationsorbusinesses. a) (i) Maximum exposure to credit risk TheGroup’smaximumexposuretocreditriskbeforemasternettingandcollateralagreementsisasfollows: 2016 2015 US$ 000 US$ 000

Balances with banks 5,627 7,274 Depositswithbanksandotherfinancialinstitutions 34,080 28,373 Investments 13,933 14,065Accounts receivable and other assets 12,241 7,036

65,881 56,748

The tablebelow reflects the risk ratingsof thecredit riskexposures forbalanceswithbanks,depositswithbanksandotherfinancialinstitutions,debtinvestmentsandtradeandinterestreceivables,todifferentcounterpartiesratedbytherelevantExternalCreditAssessmentInstitutions(“ECAIs”).ExposurestocounterpartieswhicharenotratedbyECAIshavebeenclassifiedunderthe“Unrated”category:

2016 2015 US$ 000 US$ 000

Grade A to AAA 42,911 38,137 Grade BBB- to A- 13,170 12,245 Unrated 9,800 6,366

65,881 56,748

The Group receives collateral against third party customer receivables. At 31 December, the Group had the following collateral: 2016 2015 US$ 000 US$ 000

Lettersofguaranteefrombanks 2,750 4,250 Cash collateral 681 1,121

3,431 5,371




Credit risk (continued) a)(ii)TheGroup’sexposureanalysedbygeographicregionsandindustrysectorsasat31December2016and31December2015wereas follows: Assets Liabilities

2016 2015 2016 2015 US$ 000 US$ 000 US$ 000 US$ 000Geographical region Middle East 60,089 48,424 11,835 7,003 Africa 635 484 3,190 3,078 Europe 1,533 1,274 17 22 North America 3,624 6,566 - - Other - - 2 2

65,881 56,748 15,044 10,105

Industry sectors Banksandotherfinancialinstitutions 64,260 56,037 3,301 3,606 Other 1,621 711 11,743 6,499

65,881 56,748 15,044 10,105

b) Market risk Marketriskarisesfromfluctuationsinforeignexchangerates,equitypricesandinterestrates.ThelevelofmarketriskappropriatefortheGroup is as approved by the Board of Directors. This is monitored on a monthly basis by the management. b) (i) Currency risk Currencyriskistheriskthatthevalueofafinancialinstrumentwillfluctuateduetoadversechangesinforeignexchangerates.TheGroupviews itself as a Bahraini entity, with the United States Dollar as its functional currency. The management has set limits on positions by currency which are monitored on a monthly basis to ensure that positions are maintained within established limits.

Thetablebelow indicatesthecurrencies towhichtheGrouphadsignificantexposureat31December2016.Theanalysisshowstheimpact of a 15% movement in the currency rate against the United States Dollar, with all other variables held constant, on the consolidated statement of income. TheGrouphadthefollowingsignificantforeigncurrencyexposuresat31December2016and31December2015: Change in Change in exchange Effect on net exchange Effectonnet Assets rates (+/-) income (+/-) Assets rates (+/-) income (+/-) 2016 2016 2016 2015 2015 2015 US$ 000 % US$ 000 US$ 000 % US$ 000

Great Britain Pounds 219 15 33 486 15 73Euro 134 15 20 36 15 5

353 522



25 RISK MANAGEMENT (continued) b) Market risk (continued) b) (ii) Equity price risk Equitypriceriskarisesfromthechangeinfairvaluesofequityinvestments.At31December2016and31December2015,theGroupwasnotexposedtoequitypricerisk. b) (iii) Interest rate risk Interestrateriskarisesfromthepossibilitythatchangesininterestrateswillaffectthevalueoffinancialinstruments.TheGroupisexposedto interest rate risk as a result of mismatches or gaps in the amounts of assets and liabilities that mature or reprice in a given period. The Group manages this risk by matching the repricing of assets and liabilities through risk management strategies. The following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables held constant, of the Group’s consolidated statement of income.

Thesensitivityoftheconsolidatedstatementofincomeistheeffectoftheassumedchangesininterestratesonthenetinterestincomeforoneyear,basedonfinancialassetsandfinancialliabilitiesheldat31Decemberareasfollows: Increase in Sensitivity of Decrease in Sensitivity of basis statement of basis statement of points income points income US$ 000 US$ 000

2016 25 118 25 (118)

2015 25 104 25 (104) c) Liquidity risk Liquidity risk is the risk thatan institutionwillbeunable tomeet itsnet funding requirements.Liquidity riskcanbecausedbymarketdisruptions or credit downgrades which may cause certain sources of funding to dry up immediately. To guard against this risk, management hasdiversifiedfundingsourcesandassetsaremanagedwithliquidityinmind,maintainingahealthybalanceofcash,cashequivalents,andreadily marketable securities. ThetablebelowsummarisesthematurityprofileoftheGroup’sassetsandliabilities.Thematurityprofileismonitoredbymanagementtoensureadequateliquidityismaintained.Thematurityprofileoftheassetsandliabilitiesattheyearendisbasedoncontractualundiscountedrepayment arrangements.

Basedonpreviousexperience,thematurityprofileoftravellers’chequesawaitingredemptioncannotbereliablydetermined.




c) Liquidity risk (continued) Thematurityprofileofassetsandliabilitiesat31December2016wasasfollows:

US$ 000

On demand / Sub total no fixed Up to 1 1 to 3 3 to 6 6 months up to 1 Over maturity month months months to 1 year year 1 year TotalAssets Cash in hand and balances with banks and Central Bank of Bahrain 53 5,627 - - - 5,627 - 5,680 Deposits with banks and other financialinstitutions - 7,513 12,971 13,596 - 34,080 - 34,080 Investments - - 1,510 - - 1,510 12,423 13,933 Accounts receivable, prepayments and other assets - 11,783 586 885 453 13,707 91 13,798 Propertyandequipment 11,149 - - - - - - 11,149

Total assets 11,202 24,923 15,067 14,481 453 54,924 12,514 78,640

Liabilities Travellers’chequesawaitingredemption 2,715 - - - - - - 2,715 Accounts payable and accruals - 11,004 - - - 11,004 - 11,004 Other liabilities and provisions 1,325 - - - - - - 1,325

Total liabilities 4,040 11,004 - - - 11,004 - 15,044

Thematurityprofileofassetsandliabilitiesat31December2015wasasfollows:

US$ 000

On demand / Sub total no fixed Up to 1 1 to 3 3 to 6 6 months up to 1 Over maturity month months months to 1 year year 1 year TotalAssets Cash in hand and balances with banks and Central Bank of Bahrain 53 7,274 - - - 7,274 - 7,327 Deposits with banks and other financialinstitutions - 962 22,856 4,555 - 28,373 -28,373Investments - - - - - -14,065 14,065Accounts receivable, prepayments andotherassets - 6,697 351 1,066 452 8,566 226 8,792Propertyandequipment 9,550 - - - - - - 9,550

Totalassets 9,603 14,933 23,207 5,621 452 44,213 14,291 68,107

Liabilities Travellers’chequesawaitingredemption 2,825 - - - - - - 2,825Accountspayableandaccruals - 6,112 - - - 6,112 - 6,112Otherliabilitiesandprovisions 1,168 - - - - - - 1,168

Totalliabilities 3,993 6,112 - - - 6,112 -10,105

As the Group does not have any interest bearing liabilities, analysis of undiscounted liabilities is not presented separately as the totals in the tablematchthestatementoffinancialposition.



25 RISK MANAGEMENT (continued) d) Legal risk and claims Legal risk is the risk arising from thepotential that unenforceable contracts, lawsuits or adverse judgments candisrupt or otherwisenegativelyaffecttheoperationsoftheGroup.TheGrouphasdevelopedcontrolsandprocedurestoidentifylegalrisks.

Asat31December2016,legalsuitsforclaimsamountingtoUS$316thousand(31December2015:US$303thousand)werependingagainst the Group. Based on the opinion of the Group’s legal counsel, the total estimated liability arising from these cases is not considered tobematerialtotheGroup’soverallconsolidatedfinancialstatements.

e) Operational risk Operational risk is the risk of loss arising from systems failure, human error, fraud or external events.When controls fail to perform,operationalriskscancausedamagetoreputation,havelegalorregulatoryimplications,orleadtofinancialloss.TheGroupcannotexpectto eliminate all operational risks, but through a control framework and by monitoring and responding to potential risks, the Group is able tomanagetherisks.Controlsincludeeffectivesegregationofduties,access,authorisationandreconciliationprocedures,staffeducationand assessment processes, including the use of internal audit. f) Capital management The primary objective of the Group’s capital management is to maintain healthy capital ratios in order to support its business and to maximiseshareholders’value.

The Group manages its capital structure and makes adjustments to it in the light of changes in business conditions and the risk characteristics of its activities. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividend payment to shareholders or issue capital securities. No changes were made in the objectives, policies and processes from the previous year.

CapitalcomprisesequityandismeasuredatUS$63,596thousandasat31December2016(2015:US$58,002thousand).



26 RELATED PARTY TRANSACTIONS Related parties represent major shareholders, directors and key management personnel of the Group, and entities controlled, jointly controlled or significantly influenced by such parties. Pricing policies and terms of these transactions are approved by the Group’smanagement. Balanceswithrelatedpartiesincludedintheconsolidatedstatementoffinancialpositionareasfollows:

2016 2015

Directors Directors and key Major and key Major management share- management share- Parent personnel holder Parent personnel holder US$ 000 US$ 000 US$ 000 US$ 000 US$ 000 US$ 000

Assets Cash in hand and with banks 553 - - 597 - - Money at call 133 - - 229 - - Accounts receivable 172 107 20,272 182 84 2,766Lessprovisionforimpairment(note9) - - (13,380) - - -

858 107 6,892 1,008 84 2,766

Liabilities Accounts payable and accruals - 134 - - 98 -

OffconsolidatedstatementoffinancialpositionInterestrateswaps 14,000 - - 14,000 - - Income in respect of related parties included in the consolidated statement of income is as follows: Net income from electronicbureau processing 763 - 15,532 608 - 13,640

763 - 15,532 608 - 13,640 2016 2015 US$ 000 US$ 000Compensation of key management personnel of the Group Salariesandotherbenefits 3,535 3,348



27 CLASSIFICATION OF FINANCIAL INSTRUMENTS

At31December2016,financialinstrumentshavebeenclassifiedforthepurposeofmeasurementunderIAS39‘FinancialInstruments:Recognition and Measurement’ as follows:

Financial Available- assets at amortised for-sale cost / receivables Total

US$ 000 US$ 000 US$ 000

ASSETS Cash in hand and balances with banks and the Central Bank of Bahrain - 5,680 5,680 Depositswithbanksandotherfinancialinstitutions - 34,080 34,080 Investments 13,933 - 13,933 Accounts receivable and other assets - 12,241 12,241

13,933 52,001 65,934 Financial liabilities at amortised cost US$ 000

LIABILITIES Travellers’chequesawaitingredemption 2,715 Accounts payable and accruals 11,004

13,719

At31December2015,financialinstrumentshavebeenclassifiedforthepurposeofmeasurementunderIAS39‘FinancialInstruments:Recognition and Measurement’ as follows: Financial Available-for- assets at amortised sale cost / receivables Total US$ 000 US$ 000 US$ 000

ASSETS Cash in hand and balances with banks and the Central Bank of Bahrain - 7,327 7,327 Depositswithbanksandotherfinancialinstitutions - 28,373 28,373Investments 14,065 - 14,065Accountsreceivableandotherassets - 7,036 7,036

14,065 42,736 56,801 Financial liabilities at amortised cost US$ 000LIABILITIES Travellers’chequesawaitingredemption 2,825Accountspayableandaccruals 6,112

8,937



28 FAIR VALUE OF FINANCIAL INSTRUMENTS

TheGroupusesthefollowinghierarchyfordetermininganddisclosingthefairvalueoffinancialinstrumentsbyvaluationtechnique:

Level 1: quoted(unadjusted)pricesinactivemarketsforidenticalassetsorliabilities;

Level 2: othertechniquesforwhichallinputswhichhaveasignificanteffectontherecordedfairvalueareobservable,eitherdirectlyorindirectly;and

Level 3:techniqueswhichuseinputswhichhaveasignificanteffectontherecordedfairvaluethatarenotbasedonobservablemarketdata. Thefollowingtableshowsananalysisoffinancialinstrumentsrecordedatfairvaluebylevelofthefairvaluehierarchy:

At 31 December 2016 Date of valuation US$ 000

Level 1 Level 2 TotalAssets measured at fair value Available-for-salequotedbonds 31December2016 13,933 - 13,933 Assets for which fair values are disclosed Accounts receivable and otherassets 31December2016 - 91 91 Derivative financial instruments Interest rate swaps - Asset - 4 4 Interestrateswaps-Liability 31December2016 - 76 76 At 31 December 2015 Date of valuation US$ 000

Level1 Level2 TotalAssets measured at fair value Available-for-salequotedbonds 31December2015 13,873 192 14,065 Assets for which fair values are disclosed Accountsreceivableandotherassets 31December2015 - 226 226 Derivative financial instruments Interestrateswaps-Liability 31December2015 - 133 133 Management has assessed that the carrying amounts of cash in hand, balances with banks, deposits, accounts receivable and other assets,accountspayableandother liabilitiesapproximatetheir fairvalue largelyduetotheshort-termmaturitiesofthese instruments.Includedinfinancialliabilitiesaretravellers’chequesawaitingredemptionwhicharecarriedatcostasthesearepayableondemand. During theyearsended31December2016and31December2015, therewereno transfersbetweenLevel1andLevel2 fairvaluemeasurements. 29 CONTINGENCIES AND COMMITMENTS At31December2016,theGrouphadcontingentliabilitiesamountingtoUS$1,147thousand(31December2015:US$1,147thousand)in respect of bank and other guarantees and other matters arising in the ordinary course of business from which it is anticipated that no material liabilities will arise.


High Level Corporate Governance Report to Shareholders

• AFS Board believes that the Company complies with all material provisions of CBB’s corporate governance rules

• AFS Corporate Governance Charter has been drafted and adopted by the Board

• The Corporate Governance Charter has been posted on AFS’ website

• AFSwasexemptedfromtheruleHC-1.4.8

• Audit Committee will continue to monitor state of corporate governance in the Company

Director and Committee Evaluations

• Each year, the Board conducts an evaluation of its performance, the performance of each committee and each individual director. The

Boardfoundthatin2016,itfulfilledtheBoard’skeyresponsibilities,thequalityoftherelationshipbetweentheBoardandManagement

wasgood,andtheperformanceofindividualBoardmemberswasverygood.TheBoardfoundthatthe2016performanceofeach

of the Audit Committee and the Nominations and Remuneration Committee was very satisfactory. The Board also concluded that the

performanceofeachcommitteewasinaccordancewiththerequirementssetoutintheirrespectivemandate.

CORPORATE GOVERNANCE REPORT TO SHAREHOLDERS


Invitation to the Extraordinary General Meeting

INVITATION


INVITATION TO THE EXTRAORDINARY GENERAL MEETING

TheBoardofDirectorsofArabFinancialServicesCompanyB.S.C.(c)(the“Company”)ispleasedtoinviteyoutoattendtheCompany’snextExtraordinaryGeneralMeetingtobeheldonMonday,22ndMay2017,at52ndFloor–CapitalClub,BahrainFinancialHarbour,EastTower,Manama, Kingdom of Bahrain immediately following the Annual General Meeting scheduled to take place at 12:00 noon on the same day.

The Agenda for the meeting will be as follows:

1. To ratify the Board of Director’s decision to buy-back the shares held by the below listed shareholders:

Sr. No. Shareholder Name No. of Shares Percentage of holding

1 MashreqBankP.S.C,Dubai,UAE 68,500 1.14%

2 BanqueCentralePopulaire,Morocco 46,434 0.77%

3 BanqueInternationalArabeDeTunisie 27,848 0.46%

4 HSBC Bank Oman SAOG, Oman (previously known Oman International Bank, Oman) 10,000 0.17%

TOTAL 152,782 2.54%

2. ToresolvetoamendArticle21(1)oftheCompany’sArticlesofAssociationtoaligntheArabictextmorecloselywiththeEnglishtext as below: the Company shall be administered by a Board of Directors comprising of up to 12 members to be elected by the General Assembly

3. To resolve to amend Article 7 of the Company’s Memorandum of Association: (a) To reflect thebuy-backof sharesstated in item1above,uponconclusionof each transaction listed from (1) to (4) under item 1 above.

(b) Toreflectthetransferof0.18%sharesofSudaneseInvestmentandProjectsCo.Ltd.,SudantoSudaneseFrenchBank,Sudan.

4. ToauthorizeMr.BalasubramanianChandrasekhar,(IndianNational–CPRnumber631212663)orMr.NeilPavis(BritishNationality–CPR number 590200186) orMr. Ebrahim Jassim (BahrainNationality –CPRnumber 690027494), jointly or singly, as representatives to represent the Company before the Notary Public, Central Bank of Bahrain and Ministry of Industry, Commerce, and Tourism to do the needfultoexecutetheamendmentoftheMemorandumandArticlesofAssociationasdetailedinpoint2and3ofthisAgenda.

Sael Al Waary, Kingdom of BahrainChairman of the Board of Directors 30th April, 2017


Date: 30 April 2017

To: Shareholders Arab Financial Services Company B.S.C.(c)

From: Board of Directors Arab Financial Services Company B.S.C.(c)

Re: Extraordinary General Meeting 2017 of Arab Financial Services Company B.S.C.(c) (the “Company”)

AsperArticle16ofAFSArticlesofAssociationtheBoardproposestoconvenetheExtraordinary General Meeting of the Company on 22 May 2017 in connection to the following:

1. Ratify the buy-back of shares

Certainshareholdershadexpressedtheirintentiontoselltheirshares.ThesewereofferedtoexistingshareholdersinaccordancewithArticle9of the Company’s Articles of Association. Further to Article 9, if the shares remain unsold the Board of Directors is entitled to take such steps asdeemedfitforthecollectionofthevalueofsharesifsuchvaluehasnotbeenpaid.TheBoardthereforeresolvedtobuy-backthesharesofferedbythebelowlistedshareholders(the“Selling Shareholders”). The Company liaised with the Central Bank of Bahrain and Bahrain Ministry of Industry, Commerce and Tourism in relation to its decision to buy-back the shares.

Sr. No. Shareholder Name No. of Shares Percentage of holding

1 MashreqBankP.S.C,Dubai,UAE 68,500 1.14%

2 BanqueCentralePopulaire,Morocco 46,434 0.77%

3 BanqueInternationalArabeDeTunisie 27,848 0.46%

4 HSBC Bank Oman SAOG, Oman (previously known Oman International Bank, Oman) 10,000 0.17%

TOTAL 152,782 2.54%

2. Amendments to the Company’s Memorandum & Articles of Association

(a) Article 21 (1) of the Company’s Articles of Association

The Board of Directors propose to amend the Arabic version of Article 21 (1) of the Company’s Articles of Association to better reconcile it with the English version and thereby avoid confusion and uncertainty. (b) Article 7 of the Company’s Memorandum of Association

Article7oftheCompany’sMemorandumofAssociationrequiresnecessaryamendmentspursuanttothebelow:

• The buy-back of shares by the Company – Upon conclusion of the transaction with individual Selling Shareholders it is incumbentontheCompanytoamendtheArticle7oftheMemorandumofAssociationtoamendtheshareholderslisttoreflect the buy-back shares as Treasury Stock.

• Transfer of 0.18% shares of Sudanese Investment and Projects Co. Ltd. (SIPCO), Sudan to Sudanese French Bank, Sudan (SFB) – Further to the judgement of the Court of First Instance, upheld by the Court of Appeal, the Company is obliged to transferthesharesheldbytheSudaneseInvestmentandProjectsCo.Ltd.,SudantoSudaneseFrenchBank(SFB),Sudan. The Ministry of Industry and Commerce has registered the relevant shares under name of SFB in its records. The Company is obligedtoamendtheArticle7oftheMemorandumofAssociationtoreflectthistransfer.

NOTE TO SHAREHOLDERS ON AMENDMENTS

ﻦـﻴـﺷﺪـﺗ كﺎــﺑرا ﺔﻴﻟﺎﻤﻟا تﺎﻴﻨﻘﺘﻠﻟ disruption ·...

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