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ANNUAL REPORT

FORTY YEARS YOUNG

The Late His Highness Sheikh Zayed Bin Sultan Al NahyanFirst President of the United Arab Emirates

His Highness Sheikh Khalifa Bin Zayed Al NahyanPresident of the UAE and Ruler of Abu Dhabi

His Highness Lt. General Sheikh Mohamed Bin Zayed Al NahyanCrown Prince of Abu Dhabi and Deputy Supreme Commander

of the UAE Armed Forces

CONTENTS

Board of Directors and Senior Management 02

Chairman’s Report to the Shareholders 06

Chief Executive Review 12

Consolidated Financial Statements 22

Independent Auditors’ Report 23

Consolidated Balance Sheet 24

Consolidated Income Statement 25

Consolidated Statement of Cash Flows 26

Consolidated Statement of Changes in Equity 27

Notes to the Consolidated Financial Statements 28 - 76

Risk Management And Basel II Compliance 78

NBAD Corporate Social Responsibility (CSR) Report 82

Group Network 96

Vision, Mission, Customer Pledge, Values and CSR Policy 108

BOARD OF DIRECTORS ANDSENIOR MANAGEMENT

BOARD OF DIRECTORS & SENIOR MANAGEMENT

Chairman H.E. KHALIFA MOHAMMED AL KINDI

Deputy Chairman H.E. DR. JAUAN SALEM AL DHAHERI

Members H.E. NASSER AHMED KHALIFA AL SUWEIDI

MR. EISSA MOHAMMED GHANEM AL SUWEIDI

MR. AHMED ATEEQ AL MAZROUI

H.E. MOHAMMED OMAR ABDULLA

MR. KHALIFA SULTAN AL SUWEIDI

MR. MOHAMMED BIN JAUAN RASHED AL BADI AL DHAHERI

MR. MOHAMMED KHALIFA AL YOUSUF AL SUWEIDI

MR. SULTAN BIN RASHED AL DHAHERI

SHEIKH AHMED BIN MOHAMMED SULTAN AL DHAHERI

SHEIKH MOHAMMED BIN SEIF BIN MOHAMMED AL NAHYAN

Risk Management Committee:


Members H.E. DR. JAUAN SALEM AL DHAHERI

MR. EISSA MOHAMMED GHANEM AL SUWEIDI

MR. AHMED ATEEQ AL MAZROUI

MR. SULTAN BIN RASHED AL DHAHERI


Compensation and Nomination Committee:

Chairman MR. EISSA MOHAMMED GHANEM AL SUWEIDI

Members MR. AHMED ATEEQ AL MAZROUI

MR. KHALIFA SULTAN AL SUWEIDI



SHEIKH AHMED BIN MOHAMMED SULTAN AL DHAHERI

BOARD OF DIRECTORS & SENIOR MANAGEMENT

Audit Committee:

Chairman SHEIKH MOHAMMED BIN SEIF BIN MOHAMMED AL NAHYAN

Members MR. KHALIFA SULTAN AL SUWEIDI


Corporate Governance Committee:


Members MR. KHALIFA SULTAN AL SUWEIDI


Remedial Advances Committee:

Chairman MR. SULTAN BIN RASHED AL DHAHERI

Members SHEIKH AHMED BIN MOHAMMED SULTAN AL DHAHERI


Senior Management

Chief Executive MR. MICHAEL H. TOMALIN

Group Chief Operating Officer MR. ABDULLA MOHAMMED SALEH ABDULRAHEEM

Senior GM Domestic Banking Division MR. SAIF ALI MOHAMMED MUNAKHAS AL SHEHHI

Senior GM International Banking Division MR. QAMBER ALI AL MULLA

Senior GM & Chief Risk Officer MR. ABHIJIT CHOUDHURY

Senior GM Financial Markets Division MR. MAHMOOD AL ARADI

GM & Chief Audit & Compliance Officer MR. JOHN GARRETT

Senior GM Corporate & InvestmentBanking Division MR. AKRAM-MARK YASSIN

CHAIRMAN’S REPORT

For the financial year 2007

Dear Shareholders,

On behalf of the Board of Directors of National Bank of Abu Dhabi, I am happy to report net profits of AED 2,505 million for the year ending 31 December 2007. Accordingly, the Board of Directors has recommended the distribution of a 40% cash dividend and 20% bonus shares to shareholders.

In 2007, the global economy grew by an estimated 4.9%. A moderation to 4.1%, revised down based on developments, is expected in 2008 as a housing sector correction sweeps parts of the world and the US, in particular.

Closer to home, the brisk pace of economic activity continued in 2007 in the markets where NBAD is operating supported by high energy prices and a strong diversification drive sweeping the GCC region. Economic activity is expected to continue to remain above global growth levels. Real GDP growth in the United Arab Emirates is expected to moderate from 9.4% in 2006, but remain strong circa the 7% range in 2007 and 2008 even by conservative estimates. The overall growth figure masks, to some extent, the true strength of activity. The moderation is based essentially on relatively static oil sector output, while non-oil sector growth is expected to remain circa the 10.5% annual average achieved in the last five years.

The US$ weakened against major currencies in 2007 which translated to Dirham weakness versus major currencies because of the long standing fixed exchange rate arrangement contributing to higher inflation which was also fueled by wage increases in the public sector and sharp rent

increases despite efforts by authorities to guide expectations through rent hike controls. The addition of new housing units starting from 2008 is expected to ease inflation in the UAE, although the phenomenon may linger slightly longer because of its dynamics.

GCC equity markets were well positioned at the start of the year because of attractive valuations and the diversification opportunities they present in a global portfolio context. The catalyst to ignite a renewed boom was three consecutive interest rate cuts by the US Federal Reserve starting in August. The cuts were in response to what quickly became apparent was the widespread exposure by major financial institutions in the US to sub-prime lending and, in general, the mortgage market against the background of rising delinquency. GCC Central Banks largely matched these rate cuts despite already strong credit growth. Financial institutions in the region have largely been immune from the US fall-out because of their relatively insignificant exposure to problem structured products. The UAE was not significantly affected by the US sub-prime crisis.

2007 was notable for the UAE banking system as sector assets surpassed that of Saudi Arabia to become the largest in the GCC. This is a reflection of the sharp growth in the non-oil sector and the emerging status of the country as a financial sector hub. Banking system assets also exceeded AED 1 trillion for the first time. Strong growth and a buoyant sector attracted new entrants in a period where GCC economic integration is deepening. The number of banks in the UAE has thus risen from 46 in the middle of 2006 to 51 and competition is expected to further increase. Three GCC banks have since opened branches in the UAE, while two new National banks have

Chairman’s Report to the Shareholders

also been launched. An additional licence has also been granted by the UAE Central Bank. The number of Islamic banks has risen with both new entrants and an existing conventional bank recasting itself as an Islamic bank. Moreover, corporates have also increasingly been tapping non-bank sources of finance creating some degree of loan disintermediation. These are some of the challenges that NBAD will rise to meet in the year ahead as the bank furthers its foray into the region’s geography.

Looking ahead, a further US slowdown may impact energy prices, though these are expected to remain at elevated levels. Additional US rate cuts appear inevitable and likely to test GCC policies in key areas. All in all, the balance of factors continue to indicate significant potential and opportunities for growth.

Our strategic focus remains on organic growth. The restructured businesses in 2007 will be further reorganized in 2008 and will comprise six principal business groupings:

• Domestic Banking will focus on retail and elite banking business as well as small and medium size enterprises;

• Corporate & Investment Banking will look after corporate banking, investment banking, wholesale banking, regional syndications, trade finance, real estate and the leasing business through our fully owned subsidiary Abu Dhabi National Leasing LLC. Our real estate subsidiary is at the final stage of formation.

• Financial Markets will comprise international money markets, institutional and corporate coverage, debt and capital markets, portfolio management and foreign exchange;

• International Banking will be responsible for Arab world banking through our existing

networks in Egypt, Oman, Sudan, Bahrain and Kuwait, and expansion elsewhere in the region, and international banking through operations in the United Kingdom, France and the United States plus further expansion especially into Asia. Expanding horizontally and vertically remains a cornerstone of our strategy and our wholsesale offices are set to intermediate trade and business flows between our region and the rest of the world;

• Wealth Management which will include global private banking, asset management, and the brokerage services offered by our subsidiary, Abu Dhabi Financial Services; and

• Islamic finance and banking services will be offered through our new subdidiary Abu Dhabi National Islamic Finance and the Bank’s current Islamic finance division.

The new divisions will continue to be supported by the Group support functions for audit and compliance, finance, human resources, legal, information technology, risk management, investor relations, corporate communications and strategic planning.

The restructured businesses began to bear fruit. Three funds managed by our Asset Management Group were the top three performers in the UAE in 2007 and amongst the best performers in the MENA region. Trading through Abu Dhabi Financial Services, our brokerage company, increased and ranked first in ADSM and second in DFM. Electronic trading and call centre services also started in 2007 and the trading platform expanded to cover Saudi Arabia and Qatari markets thus giving investors better diversification and investment opportunities. For 2008, we plan to extend the coverage to 7 more markets in the MENA region. During 2007 our wholly owned private banking subsidiary in

Chairman’s Report to the Shareholders for the financial year 2007

Switzerland was established, and our corporate finance team won some key mandates.

Total assets increased by 38% to AED 140 billion, with loans increasing by 39% to AED 80 billion and customers deposits by 16% to AED 82 billion. Liquidity is comfortable with over AED 30 billion in UAE Central Bank CDs. Our asset quality remains high and no additional provisions were required as the Bank had no exposure to CDOs, SIVs or the US sub-prime mortgage market. Capital resources, excluding tier 2 capital, of AED 11.2 billion and regulatory capital adequacy ratio of 16.2% allow us to expand the business further without straining any regulatory ratios. I feel good about the level of profitability achieved year after year and the efforts to diversify income sources with net interest income increasing by 19% and non interest income increasing by 35%.

NBAD continued to play a pivotal role in the development of UAE and Abu Dhabi and in 2007 invested heavily to develop our operational capabilities to take advantage of arising opportunities, increase revenue and provide a better service to our valued customers. We strengthened risk management systems, hired qualified and experienced staff for our corporate finance, brokerage and asset management businesses, and built new state of the art dealing room. We have also adopted a new core banking system which is more friendly and customer centric and continue to improve our operational efficiency. We manage our operating costs for future growth and develop our human resources with specific emphasis on UAE national.

February 2008 marks our 40th banking anniversary and while much has been achieved, we have ambitious plans for long term growth. International Rating agencies recognized our flagship position and, in 2007, we received an S&P upgrade to A+, and Fitch upgrade to AA-, Moody’s rating stands at Aa3. We contribute to

the communities where we live and work and our “green” initiatives demonstrate our corporate social responsibility.

The solid performance has resulted from the efforts exerted by the board committees and the dedication of the Bank’s management and staff. I should also like to express my appreciation to our loyal customers for their valued business with the Bank.

Finally, on behalf of the shareholders, the members of the Board of Directors and the management and staff of the Bank, I wish to extend our most sincere appreciation and gratitude to His Highness Sheikh Khalifa Bin Zayed Al Nahyan, President of the UAE and Ruler of Abu Dhabi, to His Highness Sheikh Mohammed Bin Rashed Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, and to His Highness Sheikh Mohamed Bin Zayed Al Nahyan, Abu Dhabi Crown Prince and Deputy Supreme Commander of the UAE Armed Forces, for their continued support and interest in the Bank’s activities.

Khalifa Mohammed Al Kindi

Chairman

Chairman’s Report to the Shareholders for the financial year 2007

CHIEF EXECUTIVE REVIEW

Chief Executive ReviewFor the Year 2007

2007 was the 3rd year of our second 5-year strategic plan which started in 2005. The objectives of our plan remain: maintain the return on equity at around 25% and grow the profit by 20% on average each year. The corner stone of our strategy is to put the customer at the heart of the business.

Our ratings remained the highest assigned by international credit rating agencies to a UAE bank with upgrades from Standard & Poor’s, Fitch and Capital Intelligence in 2007.

The turmoil in financial markets resulting from the sub-prime credit crisis affected most of the western economies. The UAE and the Gulf generally proved resilient.

The Bank has no direct or indirect exposure to CDOs, SIVs or the US sub prime mortgage market although of course it does have exposure to financial institutions that do.

COMMITMENT TO OUR COMMUNITIESAs the bank celebrates its 40th anniversary, we remain committed to supporting the needs of the community. In 2007, NBAD widened the scope and significance of its Corporate Social Responsibility strategy (CSR) by identifying a variety of additional areas and new partners through which NBAD could further contribute. NBAD contributed AED 38 million to sponsorship including AED 25 million to the new Khalifa University for Science and Technology Research. NBAD believes education is a key to a sustainable society in the long term.NBAD was acknowledged as one of the few UAE publicly listed firms with an explicit CSR policy.

OUR PEOPLEWe value our people and encourage them to think and act like owners, taking care of the Bank and its customers.

We motivate and reward top performers. We plan to introduce a new Stock option scheme in 2008.

We are committed to increasing the proportion of our UAE nationals, and hired 170 UAE nationals during 2007. Overall our talented and diverse staff numbers increased 17% to 2984 by the end of 2007.

We have restructured our Human Resources Group and reinforced it with new talent to meet the increasing demands of our businesses in a more diverse and complex market.

We are committed to creating a learning environment. We have taken the first steps to establish the “NBAD Academy”: a banking school in Abu Dhabi for the development of our people.

Chief Executive Review for the Year 2007

CUSTOMERS AT THE HEART OF THE BUSINESSCustomers are at the heart of our business and we witnessed continued growth in our customer base during the year. NBAD received valuable recognition by winning the prestigious Mohammed Bin Rashid Al Maktoum Business Award for 2007 in the Finance Sector.

RISK MANAGEMENT AND BASEL II COMPLIANCEDuring 2007 we have invested in Risk Management people and systems to keep pace with the business and the rapidly changing operating environment.

Regulatory risk compliance, including Basel II implementation, is of paramount importance to our Bank. The Basel II capital charge for the bank stood at a comfortable level of 16.46% as at December 2007 as against the minimum UAE requirement of 10%. We plan to move to higher approaches.

The bank has introduced a state of the art rating methodology as part of its credit underwriting process. The corporate exposures are rated through the Moody’s Risk Advisor (MRA). MRA has been rolled out to all domestic and international branches of the Bank. The risk scoring model is being used for risk pricing, determining risk-adjusted returns on capital, risk based monitoring, implementing risk based delegation of powers and estimating collective provisions. Similarly risk scoring models for different retail segments are used.

TECHNOLOGYFor most of 2007, much of our effort was directed on the rollout of our new core banking system which was successfully introduced in the UAE in the latter part of the year. We continue to invest in technology throughout the group, with dedicated systems for each of our businesses.

GROUP RESULTS AND BALANCE SHEET2007 was another excellent year with solid results.

• With net profits reaching AED 2,505 million, we have achieved a 29.8% CAGR since the start of our first 5-year strategic plan in 1999 and 30.1% CAGR from the start of the 2nd phase of the plan Earnings per issue reached AED 1.57 and our return on equity, excluding proposed dividend, at 26.3% is one of the highest in UAE and the region.

• Operating income reached AED 3.66 billion with operating expenses of AED 1.05 billion resulting in a cost income ratio of 28.8%. We will continue to invest in our network, systems and people while at the same time keep a close watch on our costs.

• Net interest income increased 19% to AED 2.4 billion during the year due to higher volumes and stable margins despite severe competition. • Non-interest income at AED 1.3 billion was 35% higher than 2006 reflecting stronger UAE equity markets. The Group’s strategy remains to focus on fee income.• Capital resources at the end of 2007 reached AED 13.7 billion, 19.4% up on 2006, including the AED 2.5 billion tier 2 convertible subordinated notes issued in March 2006.

44.35%

28.76%

35% Cap

2007

2,505

CAGR 99-07: 29.8% 04-07: 30.1%

2007


• Total year end assets increased by 38% from AED 101 billion to AED 139 billion.

• The 39% increase in loans and advances to AED 79.7 billion reflects primarily our relationship led credit strategy to support our customers both in the UAE and abroad. • Non-trading investments remained around AED 10.1 billion. These securities include loans to prime names in securities form to facilitate balance sheet management, and AAA marketable securities such as US Treasuries and Supra-nationals. Repo balances were AED 5.3 billion.• Total customer deposits increased by 16% to AED 81.7 billion.• Off balance sheet liabilities rose to AED 80 billion. The Weighted risk of these contingent liabilities however, was AED 25.4 billion in 2007.• The Bank’s loan portfolio continues to be well provided with a 106% cover against impaired loans, and excluding the value of any collateral held.

The Bank remains well capitalised with a 16.16% capital adequacy ratio on UAE Central Bank formula, and 16.46% on Basel II Accord principles, considerably in excess of the required 10% and 8% respectively. The Bank became fully compliant with Basel II guidelines by the end of 2007.

DOMESTIC BANKING DIVISIONDomestic Banking operating Profit increased to AED 1,454 million in 2007, contributing 57% to the Group operating profits.

The Domestic Banking Division with its four segments, Retail Banking Group (RBG), Corporate Banking Group (CBG)and Small Medium Enterprise (SME) and Elite Banking, delivers a complete range of banking and financial services to every segment of the UAE market. In 2007, RBG continued to focus on offering better value to the retail customers revamping different

schemes and introducing more added value features to deposit accounts, credit cards and loans to meet every aspect of the client’s financial needs.RBG launched the pre-paid Payroll Card “Ratibi” which is an innovative solution to meet the UAE Governments requirement to mandate salary transfer to all employees through a Bank.

To support our clients to own their dream home, new Developers have been included under our approved “Escan” NBAD Housing Loan List. Furthermore a second degree mortgage scheme was created to serve Abu Dhabi UAE Nationals.

We are partnering with Visa to pilot the launch of Visa Contact-less card reducing the time for payment at the counter. During 2007, a Direct Sales Unit was formed to support the branch network.

During 2007 NBAD opened nine new offices in the UAE to reach 74 offices in all seven Emirates. The total number of ATM’s increased by 26 to reach 189 by year end representing one of the largest ATM networks in the UAE.

NbadOnline, already established as one of the UAE’s leading internet banking providers continued to witness impressive growth with the number of online users rising by over 40%. The Bank’s state of the art 24x7 call centre experienced strong growth with the introduction of new IVR system. The call centre now handles more than 300,000 calls via IVR per month, in addition to an average 80,000 incoming calls per month.

NBAD Direct, the bank that comes to the customer, continued to serve customers throughout the UAE. NBAD Direct is equipped to provide the highest levels of convenience and service direct to retail customers.

The Corporate Banking Group once again, made a very significant contribution to the growth of the Domestic Banking Division. The business strategy

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2007


to strengthen existing relationships and to develop new ones is working well. The Key Client Strategy Committee comprising senior management from different business divisions enables us to provide a coordinated and quick response to the complex needs of our major corporate clients. Staying in touch with our relationships and understanding their needs remains our topmost priority.

Our core commercial lending business continued its steady growth, driven by the significant demand for real estate financing as well as by the growth in the number of commercial, manufacturing and infrastructure projects being established in the UAE. Our trade financing activities have also benefited from the strong growth which the UAE economy enjoyed in 2007.

Our Project Finance and Syndicated Loan team had another busy and successful year resulting in strong balance sheet and fee income growth. Financing involved government-sponsored projects in the oil and natural gas sectors and other construction and infrastructure projects in the UAE. NBAD acted as a lead arranger in several UAE project financings during the 2006 financial year, and continues as a leading participant in the growing syndicated corporate loan market.

The Small and Medium Sized Enterprise (“SME”) unit also made good progress and will be repositioned as a strategic business in 2008.

Our fully owned leasing Subsidiary – Abu Dhabi National Leasing (ADNL) which was established in 2003, offers a variety of leasing products to its customers.

Elite Banking which provides red carpet personal banking enjoyed another year of strong growth.

INTERNATIONAL BANKING DIVISIONThe operating profits of the International Banking Division (IBD), rose 11% to AED 424 million.The increase was mainly driven by our operations

in Egypt, Oman and the UAE based Abu Dhabi International Group. Our Egypt operations continued to perform well with Operating profit increasing by 13% to AED 131 million. We opened a new branch in Assuit giving us 21 branches in Egypt at year end.

As a part of our business strategy in Oman, we established two new branches in Sohar and in Al Khuwair area during 2007 increasing our network to 4 offices in Oman.

In line with our network expansion plan in Sudan, we have established an Office in Khartoum North in 2007.

During 2007 we established a full Branch in Bahrain which will also cover our interests in Saudi Arabia.

The Division’s locally based Abu Dhabi International Group maintained its leading position in arranging and underwriting regional syndicated facilities.

The Financial Institutions Group, responsible for managing Institutional and Correspondent Banking relationships, has successfully marketed NBAD in 2007 through risk participations and correspondent bank relationships.

London and Paris Branches continued their strong position in property financing. Our United States subsidiary focuses on supporting US companies with business in the Gulf and Gulf companies looking to grow in North America.

FINANCIAL MARKETS DIVISION With its five distinct businesses, we aspire to be one of the premier Treasury operations in the Arab world.

The International Money Markets Group (IMM) plays a leading role in the AED spot, cash and forward market. We are also now focusing on enhancing our


penetration and reach in the other GCC currencies, in addition to the role of meeting the Group’s funding requirements through an extensive and on-going ALM evaluation.

Our prominent position in the local Dirham markets, spot FX, Forwards and Money Markets enabled us to take full advantage of the increased volatility in the markets and allowed us to capitalise fully on managing the speculative flows which were attracted to the AED through out the year.

The Debt and Capital Markets Group (DCM) has built a strong track record in fixed income portfolio management. In addition the team has developed a market leading position in secondary market trading in GCC debt instruments and has now established the first fully dedicated GCC / MENA bond syndication team.

Following on from a successful year in 2006 DCM has continued to produce exceptional returns on its core portfolio whilst at the same time consolidating the new businesses of GCC Fixed Income Trading and Syndications.

The Foreign Exchange Group (FX) is an efficient foreign exchange execution and proprietary trading activity utilizing the latest technology in e-trading and leveraging on our solid market access to provide an unrivalled service to our customers, branches and regional banks.

FX had a successful year and the team has been expanded to improve the level of experience and amount of coverage in terms of hours.

The Institutional and Corporate Coverage Group (ICC) is a fully dedicated “one stop shop” providing full treasury product coverage and tailor-made hedging and investment solutions. Coverage expanded in 2007 to include regional and institutional relationships as well as medium to large corporate accounts and financial institutions including Central Banks in the region, both conventional and Islamic.

The ICC team is currently in the process of forming a Dubai Coverage Department to leverage on existing relationships and introduce new clients.

The Portfolio Management Group (PM) will manage a portfolio of diversified assets narrowly correlated to regional markets and economies to generate capital gains on our own proprietary investments. The group is aiming to develop a solid track record to allow us to package and place our asset allocation and portfolio management concepts onward to our key investors.

In 2007, Financial Markets Division earned a profit of AED 283 million.

ASSET MANAGEMENT GROUPWith a new management in 2007, the Asset Management Group (AMG) primary objective was to transform the business into a world class asset management operation capable of competing with international asset management companies.

Assets under management increased from AED 3.5 billion at the beginning of 2007 to AED 7.2 billion at year end. Products managed by AMG consist of four mutual funds focused on UAE equities, five Global Growth Funds and dedicated portfolio mandates. AMG profit of AED 72 million is in line with budget expectations.

Three of the UAE funds ranked as first, second and third best performing funds in the UAE as rated by Dow Jones Zawya.

Two new funds are planned for 2008; the first of which will be launched in the first quarter of 2008. We remain committed to developing this strategically important business and will continue to add resources and develop capabilities in the business to solidify our position as UAE’s premier Asset Management institution.


INVESTMENT BANKING GROUPThe Corporate Finance business was expanded during 2007 and renamed the Investment Banking Group “IBG” to better reflect the breadth of NBAD’s service offerings in this area. Dedicated teams were established to cover the full range of investment banking products; Debt Capital Markets origination, Equity Capital Markets origination, Financial Advisory, Product Development and Institutional Sales.

Several additional mandates were signed over the course of 2007 and the pipeline of transactions due to close in 2008 looks healthy.

2007 profits from the business were AED 82 million.

ABU DHABI FINANCIAL SERVICES (ADFS)Abu Dhabi Financial Services LLC a wholly owned subsidiary of the National Bank of Abu Dhabi, is one of the primary brokerage service providers in the UAE with more than 85,000 registered investor accounts and seven active branches across the UAE, as well as its own dedicated call center and online trading service which were launched during 2007.

ADFS with its new management is a market-focused, process centered business that delivers innovative brokerage related services, in the UAE and the GCC.

The strategy is to transform ADFS from a local brokerage house into a regional brokerage operation which is able to offer its customers services in local, regional and international equity markets.

2007 saw a recovery in the UAE equity markets and ADFS was able to maintain its strong presence in the market despite increasing competition. ADFS was ranked number one in the Abu Dhabi Securities Market (ADSM) with a combined ranking of number two on both ADSM and Dubai Financial Market (DFM) as measured by traded values.

ADFS earned a profit of AED 75 million in 2007.

GLOBAL PRIVATE BANKINGIn 2007, NBAD launched a private banking business with its center of gravity being our wholly owned private banking subsidiary in Geneva, which commenced operations in mid 2007 as a fully independent Swiss private bank subject to Swiss laws and regulations. The private banking business focuses on offering high net worth individuals tailor-made private banking and wealth management services including asset management (advisory and discretionary portfolio management), wealth and estate planning, and banking services.

The Global Private Banking business also provides wealth protection vehicles through the NBAD Group Trust Company in Jersey, Channel Islands and offers an onshore UAE private banking through its dedicated private banking offices in Abu Dhabi, Al Ain and Dubai.

ISLAMIC BANKINGDuring 2007 we received the UAE Central Bank License for our 100% owned Abu Dhabi National Islamic Finance subsidiary (ADNIF). We also received the approval to operate an Islamic window within our existing network.

We have plans to open the first retail branch in the 2nd quarter of 2008. The Corporate Division has started its operations as a soft launch and the prospects for new business are promising.

ABU DHABI NATIONAL PROPERTYTo take advantage of the UAE property market, especially in Abu Dhabi, a 100% property subsidiary has been established. 2008 will be the first year of its operations.


SUPPORTING THE BUSINESSESWe manage Head Office as a business providing support services on commercial terms governed by internal service level agreements.

Head Office also manages the Bank’s capital, which is employed in the businesses, fixed assets, cash and bond markets.

In 2007, Head Office earned AED 420 million compared with AED 305 million in 2006.

INCREASING SHAREHOLDER VALUEThe return on equity in 2007 was 26.3%, ahead of our medium term target return of 25% set in the 5 year plan. A cash dividend of 40% and a 20% bonus shares was paid. Our strategy remains to have a 2.5x cover of cash dividend paid to strike a balance between rewarding our shareholders and retaining cash for future growth.

PROSPECTS FOR 2008During 2008 the bank will reorganize its business to meet the new challenges, shaping Domestic Banking Division to focus on the retail, elite and consumer markets and creating a new Corporate and Investment Banking division bringing together Corporate Banking, Investment Banking, Leasing and International Wholesale under one umbrella. This will allow the International Banking Division to focus on our network and its expansion both in the region and globally. A Global Wealth Group has been formed to encompass the asset management, private banking and stock brokerage business. The Financial Markets Division has been established as a separate division of the group, so the new shape of the group can be illustrated:

Our underlying business is strong and we are firmly establishing our brand. Our domestic and international network allows us to meet customer needs and increase our business. We are proud of the record achievements since we started our strategic plan in 1999 and we are confident about our future. We have the liquidity, capital adequacy and the people to allow us to grow our business further. We expect good growth in 2008 and we will continue to invest in our businesses to maintain our competitive advantage.

Michael H Tomalin

Percent

National Bank of Abu Dhabi PJSC Consolidated financial statements

31 December 2007

Independent Auditors’ ReportTo the Shareholders of National Bank of Abu Dhabi - Public Joint Stock Company

REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS

We have audited the accompanying consolidated financial statements of National Bank of Abu Dhabi PJSC (the “Bank”) and its subsidiaries (the “Group”), which comprise the consolidated balance sheet as at 31 December 2007, and the consolidated income statement, the consolidated statement of cash flows and the consolidated statement of changes in equity for the year then ended, and a summary of significant accounting policies and other explanatory notes.

BOARD OF DIRECTORS’ RESPONSIBILITY FOR THE CONSOLIDATED FINANCIAL STATEMENTS

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

AUDITORS’ RESPONSIBILITY

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with relevant ethical requirements and plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the group’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances,

but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting principles used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

OPINION

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Group as at 31 December 2007, and of its financial performance and its consolidated cash flows for the year then ended, in accordance with International Financial Reporting Standards and comply with the Articles of Association of the Bank and the UAE Federal Law No. 8 of 1984 (as amended).

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

As required by the UAE Federal Law No. 8 of 1984 (as amended), we further confirm that we have obtained all information and explanations necessary for our audit, that proper financial records have been kept by the Group and that the contents of the Chairman’s report which relate to these consolidated financial statements are in agreement with the Group’s financial records. We are not aware of any violation of the above mentioned Law and the Articles of Association having occurred during the year ended 31 December 2007 which may have had a material adverse effect on the business of the Group or its financial position.

KPMGMunther DajaniRegistration No. 268 28 January 2008

Consolidated Balance SheetAs at 31 December 2007

2007 2006 Note AED’000 AED’000

AssetsCash and balances with central banks 7 36,399,339 7,761,065Investments at fair value through profit or loss 8 1,200,725 408,261Due from banks 9 8,158,270 22,268,144Loans and advances 10 79,729,100 57,485,714Non-trading investments 11 10,054,224 10,526,691Other assets 12 3,305,764 2,092,060Premises and equipment 13 583,296 424,051 Total assets 139,430,718 100,965,986

LiabilitiesDue to banks 14 27,041,015 6,068,882Repurchase agreements with banks 15 5,305,965 6,009,778Euro commercial paper 16 105,912 - Customers’ deposits 17 81,736,671 70,737,899Medium-term floating rate notes 18 7,405,149 3,590,031Other liabilities 19 4,182,093 3,121,664 125,776,805 89,528,254Subordinated convertible notes 20 2,439,681 2,432,468 Total liabilities 128,216,486 91,960,722

EquityShare capital 21 1,591,304 1,224,080Statutory and special reserves 21 1,591,304 1,327,440Other reserves 21 7,158,698 5,730,818Subordinated convertible notes - equity component 20 72,926 72,926Retained earnings 800,000 650,000 Total equity 11,214,232 9,005,264

Total liabilities and equity 139,430,718 100,965,986

______________________________________________ ________________________________________

Khalifa Mohamed Al Kindi Michael H. TomalinChairman Chief Executive

The notes 1 to 38 are an integral part of these consolidated financial statements.

Consolidated Income StatementFor the year ended 31 December 2007

2007 2006 Note AED’000 AED’000

Interest income 22 7,084,126 5,457,794Interest expense 23 (4,679,169) (3,436,847) -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Net interest income 2,404,957 2,020,947 -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Fee and commission income 932,395 765,309Fee and commission expense (47,118) (32,886) -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Net fee and commission income 24 885,277 732,423 -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Net investment income 25 118,667 20,231Net foreign exchange gain 26 218,990 142,842Other operating income 37,713 39,384 -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 375,370 202,457 -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Operating income 3,665,604 2,955,827

General, administration and other operating expenses 27 (1,054,369) (699,877) -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Profit before net impairment charge and taxation 2,611,235 2,255,950

Net impairment charge on financial assets 28 (41,690) (99,019) -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Profit before taxation 2,569,545 2,156,931

Overseas income tax expense 29 (64,408) (51,046) -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Net profit for the year 2,505,137 2,105,885 =========== ===========Basic and diluted earnings per share (AED) 35 1.57 1.32 =========== ===========


Consolidated Statement of Cash FlowsFor the year ended 31 December 2007

2007 2006 Note AED’000 AED’000

Cash flows from operating activitiesProfit before taxation 2,569,545 2,156,931Adjustments for:Depreciation 13 67,992 59,220Accreted interest 20 7,213 5,394Write-offs and impairment charge on financial assets 28 148,432 174,390Write back of allowance for impairment of financial assets 28 (66,101) (62,027) -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 2,727,081 2,333,908Change in investments at fair value through profit or loss (792,464) (19,967)Change in due from banks and central banks (16,530,194) (3,111,268)Change in loans and advances (22,295,739) (6,179,229)Change in other assets (1,107,154) (174,961)Change in due to banks 20,972,133 2,440,865Change in repurchase agreements with banks (703,813) (925,954)Change in customer deposits 10,998,772 11,171,388Change in other liabilities 1,005,653 (1,229,832) -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- (5,725,725) 4,304,950Overseas income tax paid, net of recoveries 19 (63,414) (38,944) -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Net cash (used in) / from operating activities (5,789,139) 4,266,006 -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Cash flows from investing activitiesPurchase of non-trading investments (5,484,196) (6,256,945)Proceeds from sale / maturity of non-trading investments 6,047,285 5,019,983Purchase of premises and equipment, net of disposals 13 (227,237) (94,822)

-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- Net cash from / (used in) investing activities 335,852 (1,331,784) -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Cash flows from financing activitiesDividends paid 21 (489,632) (376,640)Issue of euro commercial paper 16 105,912 - Issue of medium term floating rate notes 18 3,815,118 467,981Foreign currency translation adjustment 20,095 8,476Issue of subordinated convertible notes 20 - 2,500,000 -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Net cash from financing activities 3,451,493 2,599,817 -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Net increase in cash and cash equivalents (2,001,794) 5,534,039

Cash and cash equivalents at 1 January 26,347,111 20,813,072 -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Cash and cash equivalents at 31 December 30 24,345,317 26,347,111 =========== ===========


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Notes to the Consolidated Financial Statements

1 LEGAL STATUS AND PRINCIPAL ACTIVITIES

National Bank of Abu Dhabi PJSC (the “Bank”) was established in Abu Dhabi in 1968 with limited liability and is registered as a Public Joint Stock Company in accordance with the United Arab Emirates Federal Law No. 8 of 1984 (as amended) relating to Commercial Companies.

Its registered office address is P. O. Box 4, Abu Dhabi, United Arab Emirates. The consolidated financial statements as at and for the year ended 31 December 2007 comprise the Bank and its subsidiaries (the “Group”). The Group is primarily engaged in corporate, retail, private and investment banking activities and carries out its operations through its local and overseas branches and subsidiaries located in Bahrain, Egypt, France, Oman, Kuwait, Sudan, the United Kingdom, Switzerland and the United States of America.

The consolidated financial statements were approved by the Board of Directors on 28 January 2008.

2 BASIS OF PREPARATION

(a) STATEMENT OF COMPLIANCE

The consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRSs) and the requirements of UAE Federal Law No. 8 of 1984 (as amended).

(b) BASIS OF MEASUREMENT

The consolidated financial statements are prepared under the historical cost basis except for the following:

• derivative financial instruments are measured at fair value;

• investments at fair value through profit or loss are measured at fair value;

• non-trading investments classified as available for sale are measured at fair value;

• the carrying values of recognised assets and liabilities that are hedged items in fair value and cash flow hedges, and are otherwise carried at amortised cost, are adjusted to record changes in fair values attributable to risks that are being hedged; and

• non-financial assets acquired in settlement of loans and advances are measured at the lower of their fair value less costs to sell and the carrying amount of the loan.

(c) FUNCTIONAL AND PRESENTATION CURRENCY

These consolidated financial statements are presented in United Arab Emirates Dirhams (“AED”), which is the Bank’s functional currency. Items included in the financial statements of each of the Bank’s overseas subsidiaries and branches are measured using the currency of the primary economic environment in which they operate. These consolidated financial statements are presented in AED, which is the Group’s presentation currency. Except as indicated, information presented in AED has been rounded to the nearest thousand.

(d) USE OF ESTIMATES AND JUDGEMENTS

The preparation of consolidated financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.

In particular, information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amount recognised in the financial statements are described in notes 5.

3 SIGNIFICANT ACCOUNTING POLICIES The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements and havebeen applied consistently by Group entities.

(a) BASIS OF CONSOLIDATION

(i) Subsidiaries

Subsidiaries are entities controlled by the Group. Control exists when the Group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until thedate that control ceases.

The consolidated financial statements of the Group comprise the Bank and its fully ownedsubsidiaries as listed below:

(ii) Special purpose entities

Special purpose entities are entities that are created to accomplish a narrow and well defined objective. The financial statements of special purpose entities are not included in the Group’s consolidated financial statements except when the substance of the relationship is that the Group controls the special purpose entity. Information about the Group’s special purpose entities is set out in note 37.

(iii) Fund management

The Group manages and administers assets held in trust or in fiduciary capacity on behalf of investors. The financial statements of these funds are not included in these consolidated financial statements. Information about the Group’s fund management and fiduciary activity is set out in note 36.

(iv) Transactions eliminated on consolidation

The carrying amount of the Bank’s investment in each subsidiary and the equity of each subsidiary are eliminated on consolidation. All significant intra-group balances, and unrealised income and expenses arising from intra-group transactions are eliminated on consolidation.

(b) FINANCIAL ASSETS AND LIABILITIES

(i) Recognition

The Group initially recognises loans and advances, customers’ deposits, medium term

and subordinated debt on the date that they are originated. All other financial assets and liabilities are initially recognised on the balance sheet when, the Group becomes a party to thecontractual provisions of the instrument.

All regular way purchases and sales of financial assets are recognised on the settlement date, i.e. the date the asset is delivered to or received from the counterparty. Regular way purchases or sales of financial assets are those that require delivery of assets within the time frame generally establishedby regulation or convention in the market place.

(ii) Derecognition The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. The Group derecognises a financial liability when its contractual obligations are discharged orcancelled or expired.

The Group enters into transactions whereby it transfers assets recognised on its balance sheet, but retains risks and rewards of the transferred assets. In such transactions, the transferred assets are not derecognised from the balance sheet. Transfers of assets with retention of all risks and rewardsinclude repurchase transactions (Refer note 15).

The Group also derecognises certain assets when it writes off balances pertaining to the assets deemedto be uncollectible (Refer note 4).(iii) Designation at fair value through profit or lossThe Group has designated financial assets at fair value through profit or loss when either: • the assets or liabilities are managed, evaluated and reported internally on a fair value basis; or • the designation eliminates or significantly reduces an accounting mismatch which would otherwise arise.(iv) Held for tradingTrading assets are those assets that the group acquires or incurs principally for the purpose of selling or repurchasing in the near term, or holds as part of a portfolio that is managed together for short-term profit or position taking.Trading assets are initially recognised and subsequently measured at fair value in the balance sheet with transaction costs taken directly to the income statement. All changes in fair value are recognised as part of net trading income in the income statement. Trading assets are not reclassified subsequently to their initial recognition.

(v) Designation as available for sale

The Group has non-derivative financial assets designated as available for sale when these are

Country of Incorporation

Abu Dhabi Curacao, International Netherlands Antilles Bank Inc.

Abu Dhabi Abu Dhabi, Financial United Arab Emirates Services LLC

Abu Dhabi Abu Dhabi, National United Arab Emirates Leasing LLC

NBAD Trust Jersey, Company Channel Islands (Jersey) Ltd.

NBAD Private Geneva, Bank (Suisse) SA Switzerland

Abu Dhabi Abu Dhabi,National Islamic United Arab EmiratesFinance Company


not classified as loans and receivables, held-to- maturity investments or financial assets at fairvalue through profit or loss.

(vi) Offsetting Financial assets and liabilities are set off and the net amount reported in the balance sheet when the Group has a legally enforceable right to set off the recognised amounts and intends to settle either on a net basis, or to realise the asset andsettle the liability simultaneously.

(vii) Amortised cost measurement The amortised cost of a financial asset or liability is the amount at which the financial asset or liability is measured at initial recognition, minus principal repayments, plus or minus the cumulativeamortisation using the effective interest method.(viii) Fair value measurement

The determination of fair values of financial assets and liabilities is based on quoted market prices or dealer quotations for financial instruments traded in active markets. Quoted bid prices are used for financial assets and quoted ask prices are used for financial liabilities. For financial instruments not traded on an active market, fair value is determined based on recent transactions or brokers’ quotes. The Group uses widely recognised valuation models for determining the fair value of derivative financial instruments suchas interest and currency swaps.

(ix) Identification and measurement of impairment An assessment is made at each balance sheet date and periodically during the year to determine whether there is any objective evidence that financial assets, not carried at fair value through profit or loss, are impaired. Financial assets are impaired when objective evidence indicates that a loss event has occurred after the initial recognition of the asset and that the loss event has an impact on the future cash flows on the asset that can be estimated reliably. The Group considers evidence of impairment at both a specific asset and collective level. All individually significant assets are assessed for specific impairment. All significant assets found not to be specifically impaired are then collectively assessed for any impairment that has been incurred but not identified. Assets that are not individually significant are then collectively assessed for impairment by grouping together financial assets with similar credit risk characteristics. In assessing collective impairment the Group uses statistical modelling of historical trends of the probability of default, timing of recoveries and the amount of loss incurred, adjusted for management’s judgement as to whether current economic and credit conditions are such that the actual losses are likely to be greater or less than suggested by historical modelling. Default rates, loss rates and the expected timing of future

recoveries are regularly benchmarked against actual outcomes to ensure that they remainappropriate.

Impairment losses on financial assets carried at amortised cost are measured as the difference between the carrying amount and the present value of estimated cash flows discounted at the original effective interest rate. Impairment losses are recognised in the income statement and reflected in an allowance account against such financial assets. When a subsequent event causes the amount of impairment loss to decrease, the impairment loss is reversed through the incomestatement.

Impairment losses on available for sale investment securities are recognised by transferring the difference between the amortised acquisition cost and current fair value out of equity to the income statement. When a subsequent event causes the amount of impairment loss on available-for-sale debt security to decrease, the impairment loss is reversed through the income statement.

Impairment losses on an unquoted equity instrument that is carried at cost because its fair value cannot be reliably measured, is measured as the difference between the carrying amount of the financial asset and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Suchimpairment losses shall not be reversed.

(c) CASH AND CASH EQUIVALENTS

For the purpose of consolidated statement of cash flows, cash and cash equivalents comprise cash, balances with central banks and due from banks with original maturity of three months or less fromthe date of placement.

Cash and cash equivalents are carried at amortisedcost in the balance sheet.

(d) INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

These are financial assets classified as held for trading or designated as such upon initial recognition. These are initially recognised and subsequently measured at fair value with transaction costs taken directly to the income statement. All related realised and unrealised gains or losses areincluded in net investment income.

(e) DUE FROM BANKS

These are stated at amortised cost, less any allowance for impairment.

(f) LOANS AND ADVANCES

Loans and advances are non-derivative financial assets with fixed or determinable payments that


are not quoted in an active market and that the Group does not intend to sell immediately or in the near term.

These are initially recognised at fair value (being the transaction price at inception) plus incremental direct transaction costs and subsequently measured at amortised cost using the effective interest method, adjusted for effective fair value hedges, net of interest suspended and provisions for impairment.

(g) NON-TRADING INVESTMENTS

Non-trading investments are classified as available for sale and are initially recognised at fair value plus incremental transaction costs directlyattributable to the acquisition.

After initial recognition, these investments are remeasured at fair value. For investments which are not part of an effective hedge relationship, unrealised gains or losses are reported as a separate component of equity until the investment is derecognised or until the investment is determined to be impaired, at which time the cumulative gain or loss previously recognised in equity, is included in the income statement for the period. For investments which are part of an effective fair value hedge relationship, any unrealised gain or loss arising from a change in fair value is recognised directly in the income statement to the extent ofthe changes in fair value being hedged.

For the purpose of recognising foreign exchange gains and losses, a monetary available-for-sale financial asset is treated as if it were carried at amortised cost in the foreign currency. Accordingly, for such a financial asset, exchange differences are recognised in the income statement.

For unquoted equity investments where fair value cannot be reliably measured, these are carried at cost less provision for impairment in value. Upon subsequent derecognition, the profit or loss on sale is recognised in the income statement for the period.

(h) PREMISES AND EQUIPMENT

(i) Recognition and measurement

All items of premises and equipment are measured at cost less accumulated depreciation and impairment losses, if any. Capital projects in progress are initially recorded at cost, and upon completion are transferred to the appropriate category of premises and equipment and thereafterdepreciated.

Cost includes expenditures that are directly attributable to the acquisition of the asset. Purchased software that is integral to the functionality of the

related equipment is capitalised as part of thatequipment.

(ii) Depreciation

Depreciation is recognised in the income statement on a straight-line basis over the estimated useful lives of all premises and equipment. Freehold landand capital work in progress are not depreciated.

The estimated useful lives of assets for the currentand comparative period are as follows:

Depreciation methods, useful lives and residual values are reassessed at the reporting date.(iii) Impairment

The carrying amounts are reviewed at each balance sheet date for indication of impairment. If any such indication exists then the asset’s recoverable amount is estimated. An impairment loss is recognised in the income statement to the extent that carryingvalues exceed the recoverable amounts.(i) COLLATERAL PENDING SALENon-financial assets acquired in settlement of loans and advances are recorded as assets held for sale and reported in “Other assets”. The asset acquired is recorded at the lower of its fair value less costs to sell and the carrying amount of the loan (net of impairment allowance) at the date of exchange. No depreciation is provided in respect of assets held for sale. Any subsequent write-down of the acquired asset to fair value less costs to sell is recorded as an impairment loss and included in the income statement. Any subsequent increase in the fair value less costs to sell, to the extent this does not exceed the cumulative impairment loss, is recognised in the income statement. The Groups collateral disposal policy is in line with the respective regulatory requirement of the regions in which the Group operates.

(j) DUE TO BANKS, CUSTOMERS’ DEPOSITS, EURO COMMERCIAL PAPER AND MEDIUM- TERM FLOATING RATE NOTES

Due to banks, customer deposits, euro commercial paper and medium-term floating rate notes are initially recognised at their fair value plus transaction costs and subsequently measured at their amortised cost using the effective interestmethod.

Buildings 20 years Office furniture and equipment 1 to 5 years Alteration to premises 4 years Safes 10 to 20 years Computer systems and equipment 3 to 7 years

Vehicles 3 Years


(k) REPURCHASE AGREEMENTS

Assets sold with a simultaneous commitment to repurchase at a specified future date (repos) are not derecognised. The liability to the counterparty for amounts received under these agreements is shown as repurchase agreements with banks in the balance sheet. The difference between sale and repurchase price is treated as interest expense and accrued over the life of the repurchase agreement and charged to the income statement using the effective interest method.

(l) SUBORDINATED CONVERTIBLE NOTES

Subordinated convertible notes that can be converted into share capital at the option of the holder, where the number of shares issued do not vary with changes in their fair value, are accounted for as compound financial instruments. The equity component of the subordinated convertible notes is calculated as the excess of issue proceeds over the present value of the future interest and principal payments, discounted at the market rate of interest applicable to similar liabilities that donot have a conversion option.

(m) INTEREST

Interest income and expense are recognised in the income statement using the effective interest method. The effective interest rate is the rate that exactly discounts the estimated future cash flows through the expected life of the financial asset or liability to the carrying amount of the financial asset or liability. The effective rate is established on initial recognition of the financial asset andliability and is not revised subsequently.

The calculation of the effective interest rate includes all fees paid or received, transaction costs, and discounts and premiums that are an integral part of the effective interest rate. Transaction costs are incremental costs that are directly attributable to the acquisition, issue or disposal of a financialasset or liability.

Interest income and expense presented in theincome statement include:

• interest on financial assets and liabilities at amortised cost on an effective interest rate basis.

• interest on available-for-sale investment securities on an effective interest basis.

• interest on held for trading securities.

(n) FEE AND COMMISSION

The Group earns fee and commission income from a diverse range of services provided to its customers. Recognition of revenue for fee and commission income depends on the purposes

for which the fees are assessed and the basis of accounting for the associated financial instrument. Fee and commission income is accounted for asfollows:

• income which forms an integral part of the effective interest rate of a financial instrument is recognised as an adjustment to the effective interest rate (for example, loan commitment fees) and recorded in “Interest income”;

• income earned from the provision of services is recognised as revenue as the services are provided (for example, loan processing fees, investment management fees and loan syndication fees); and

• income earned on the execution of a significant act is recognised as revenue when the act is completed (for example, commission on the allotment of shares to a client, placement fees for arranging a loan between the borrower and an investor).

Fees and commission expense relates mainly to transaction and service fees which are expensedas the services are received.

(o) NET INVESTMENT INCOME

Net investment income comprise gains less losses relating to realised and unrealised gains and losses on investments at fair value through profit or loss, realised gains and losses on non-trading investments and dividend income. Dividend income is recognised when the right to receivepayment is established.

(p) FOREIGN CURRENCY

(i) Foreign currency transactions

Foreign currency transactions are translated to the respective functional currencies of the Group entities at exchange rates at the dates of thetransactions.

Monetary assets and liabilities denominated in foreign currencies are retranslated to the functional currency at rates of exchange at the balance sheet date. Resulting gains and losses are taken to theincome statement.

(ii) Foreign operations

The activities of subsidiaries and branches based outside the UAE are not deemed an integral part of the head office operations, as they are financially and operationally independent of the head office. The assets and liabilities of the subsidiaries and overseas branches are translated into UAE Dirhams at rates of exchange at the balance sheet date. Income and expense items are translated at average rates, as appropriate, at the dates of transactions. Exchange differences (including those on transactions which hedge such


investments) arising from retranslating the opening net assets, are taken directly to foreign currencytranslation adjustment account in equity.

(q) OVERSEAS INCOME TAX

Income tax expense is provided for in accordance with fiscal regulations of the respective countries in which the Group operates and is recognised in the income statement. Income tax expense is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date and any adjustment to taxpayable in respect of previous years.

Deferred tax is provided using the balance sheet liability method on all temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on laws that have beenenacted at the balance sheet date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allowall or part of the deferred tax asset to be utilised.

(r) DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING

Derivatives are initially recognised, and subsequently measured at fair value with transaction costs taken directly to the income statement. The fair value of a derivative is the equivalent of the unrealised gain or loss from marking to market the derivative or using valuation techniques, mainly discounted cash flow models.

Derivatives with positive fair values (unrealised gains) are included in other assets and derivatives with negative fair values (unrealised losses) areincluded in other liabilities.

The method of recognising the resulting fair value gains or losses depends on whether the derivative is held for trading, or is designated as a hedging instrument and, if so, the nature of the risk being hedged. All gains and losses from changes in fair value of derivatives held for trading are recognised in the income statement. When derivatives are designated as hedges, the Group classifies them as either: (i) fair value hedges which hedge the exposure to changes in the fair value of a recognised asset or liability; (ii) cash flow hedges which hedge

exposure to variability in cash flows that is either attributable to a particular risk associated with a recognised asset or liability. Hedge accounting is applied to derivatives designated as hedging instruments in a fair value or cash flow, providedcertain criteria are met.

Hedge accounting

It is the Group’s policy to document, at the inception of a hedge, the relationship between hedging instruments and hedged items, as well as risk management objective and strategy. The policy also requires documentation of the assessment, at inception and on an ongoing basis,of the effectiveness of the hedge.

Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised, or no longer qualifies for hedgeaccounting.

Fair value hedge

In relation to fair value hedges, any gain or loss from remeasuring the hedging instrument to fair value, as well as related changes in fair value of the item being hedged, are recognised immediatelyin the income statement.

Cash flow hedge

In relation to effective cash flow hedges, the gain or loss on the hedging instrument is recognised initially in equity and transferred to the income statement in the period in which the hedged transaction impacts the income statement. Gain or loss, if any, relating to the ineffective portion is recognised immediately in the income statement. If the hedged transaction is no longer expected to occur, the net cumulative gain or loss recognisedin equity is transferred to the income statement.

Other derivatives

All gains and losses from changes in the fair values of derivatives that do not qualify for hedge accounting or are not designated as such are recognised immediately in the income statementas a component of net investment income.

(s) PROVISIONS

A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Where the effect of time value of money is material, provisions are determined by discounting the expected future cash flows that reflects current market assessments of the time value of money and, where appropriate,the risks specific to the liability.


(t) STAFF TERMINAL BENEFITS

UAE operations: UAE nationals employed by the Group are registered in the scheme managed by Abu Dhabi Retirement Pensions & Benefits Fund in accordance with Law number (2) of 2000. Staff terminal benefits for expatriate employees are accounted for on the basis of their accumulated services at the reporting date and in accordance with the Group’s internal regulations, whichcomply with the UAE federal labour law.

An actuarial valuation is not performed on staff terminal and other benefits as the net impact of the discount rate and future salary and benefits level on the present value of the benefits obligation arenot expected by management to be significant.

Foreign operations: the Group provides for staff terminal benefits for its employees based overseasin accordance with the applicable regulations.

(u) DIRECTORS’ REMUNERATION

In accordance with the Ministry of Economy and Commerce interpretation of Article 119 of Federal Law No. 8 of 1984 (as amended), Directors’ remuneration has been treated as an appropriationfrom equity.

(v) FIDUCIARY ACTIVITIES

Assets held in trust or in a fiduciary capacity are not treated as assets of the Group and, accordingly, are not included in these consolidated financialstatements.

(w) FINANCIAL GUARANTEES

Financial guarantees are contracts that require the Group to make specified payments to reimburse the holder for a loss it incurs because a specified party fails to meet its obligation when due inaccordance with the contractual terms.

Financial guarantee contracts which were previously asserted explicitly as insurance contractscontinue to be accounted as such under IFRS 4.

For other financial guarantee contract, financial guarantees are initially recognised at their fair value, (which is the premium received on issuance). The received premium is amortised over the life of the financial guarantee. The guarantee liability (the notional amount) is subsequently carried at the higher of this amortised amount and the present value of any expected payment (when a payment under the guarantee has become probable). The premium received on these financial guarantees isincluded within other liabilities.

(x) EARNINGS PER SHARE

The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss

attributable to ordinary shareholders of the Bank by the weighted average number of ordinary shares outstanding during the year. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, which comprise subordinatedconvertible notes.

(y) SEGMENT REPORTING

A segment is a distinguishable component of the Group that is engaged either in providing products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments. The Group’s primary format for segment reporting is based on businesssegments.

(z) LEASE PAYMENTS

Payments made under operating leases are recognised in the consolidated income statement on a straight-line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease expense, over theterm of the lease.

(aa) NEW STANDARDS AND INTERPRETATIONS NOT YET ADOPTED

A number of new standards, amendments to standards and interpretations are not yet effective for the year ended 31 December 2007 and have not been applied while preparing theseconsolidated financial statements:

IFRS 8 ‘Operating Segments’ introduces the “management approach” to segment reporting. IFRS 8, which becomes mandatory for the Group’s 2009 consolidated financial statements, will require the disclosure of segment information based on the internal reports regularly reviewed by the Group’s chief operating decision maker in order to assess each segment’s performance toallocate resources to them.

Revised IAS 23: Borrowing Costs removes the option to expense borrowing costs and requires that an entity capitalise borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset. The revision will become mandatory for the Group’s2009 consolidated financial statements.

IFRIC 13: Customer Loyalty Programs addresses the accounting by entities that operate, or otherwise operate participate in, customer loyalty programmes. IFRIC 13 becomes mandatory for the Group’s 2009consolidated financial statements.


4 FINANCIAL RISK MANAGEMENT4.1 Risk management organisation

(a) INTRODUCTION AND OVERVIEW

The Group has exposure to the following risks from its use of financial instruments:

• credit risk• liquidity risk• market risk• operational risk

This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and processes for measuring and managing risk, and the Group’s managementof capital.

Risk management framework

The Board of Directors (the “Board”) has overall responsibility for the establishment and oversight of the Group’s risk management framework and they are assisted by three board committees andthree management committees.

Board Committees:

a) Risk Management Committee (RMC), comprising members from the Board, and are responsible for recommending and setting the Group’s risk strategy and policy guidelines, and thereafter monitor and adherence. RMC is also set-up to monitor the Group’s credit, operational and market risks, to take credit decisions above management’s discretionary powers and to set market risk limits under which the Group’s management operates.

b) Remedial Advances Committee (RAC) identifies, monitors and takes corrective action on impaired credits including restructured loans of the Group. The RAC reports to the RMC for impaired amounts that exceed its delegation authority.

c) Audit Committee (AC) is responsible for monitoring compliance with the Group’s risk management policies and procedures, and for reviewing the adequacy of the risk management framework. The Group audit committee is assisted in these functions by the Audit and Compliance Division

Management committees:

The Risk Management Committee has further set up from within management:

i) Assets and Liabilities Committee (ALCO);

ii) Group Credit Committee (GCC); and

iii) Operational Risk Management Committee (ORMC).

The execution responsibilities are delegated to the management committees, which are responsible for implementing the risk management framework. The major function of the three management

committees is given below:

i) Asset Liability Committee (ALCO): The principle aim of ALCO is to achieve sustainable and stable profits within a framework of acceptable financial risks, which includes liquidity risk, interest rate risk, and foreign exchange risk and capital management.

ii) Group Credit Committee (GCC) is responsible for approving credit proposals under authority delegated by the Board. Credit proposals exceeding the authority of the GCC are referred to the RMC. The GCC also recommends credit policy and strategy issues and periodically monitors the credit portfolio of the Group. The provisioning for the assets also forms part of the GCC function. The GCC in turn delegates authority to divisional credit committees.

iii) Operational Risk Management Committee (ORMC): The primary objective of ORMC is to steer and align the operational risk management activities in the bank. ORMC acts as the central point in co-ordinating various efforts and initiatives that relate to operational risk management including alignment with other operational risk mitigating strategies such as Business Continuity Management, Information Securities, Anti Money Laundering, Process improvement, Internal Audit. The ORMC is the main source of operational risk management input for RMC.

A separate Risk Management Division (RMD), reporting to the Risk Management Committee, assists in carrying out the oversight responsibility of the Board. There are three main independent functions of the RMD, which are: (i) Credit Underwriting; (ii) Credit Administration and (iii) and Independent Portfolio Risk Management. The Credit underwriting function deals with independent underwriting of domestic, international and remedial advances. There is clear segregation between the credit approval and independent risk management, with a middle office straddling between the two areas, to provide logistical support from an administrative, systems and compliance perspective.

All risk management policies are reviewed and approved regularly by the applicable committee of the Board and / or management to reflect changes in market conditions, products and services offered.

(b) CREDIT RISK

Credit risk is the risk that a customer or counterparty to a financial asset fails to meet its contractual obligations and cause the Group to incur a financial loss. It arises principally from the Group’s loans and advances, due from banks and non-trading investments.


For risk management purposes, credit risk arising on trading investments is managed independently, but reported as a component of market risk exposure.Management of credit riskThe Group’s credit risk management framework includes:

• Establishment of authorisation structure and limits for the approval and renewal of credit facilities;• Reviewing and assessing credit exposures in accordance with authorisation structure and limits, prior to facilities being committed to customers. Renewals and reviews of facilities are subject to the same review process;• Diversification of lending and investment activities;• Limiting concentrations of exposure to industry sectors, geographic locations and counterparties; and• Reviewing compliance, on an ongoing basis, with agreed exposure limits relating to counterparties, industries and countries and reviewing limits in accordance with risk management strategy and market trends.

The RMC is responsible for sanctioning high value credits and the Group Credit Committee is responsible for the formulation of credit policies and processes in line with growth, risk management and strategic objectives.The Group uses an internal risk rating system to assess the credit quality of borrowers and counterparties. Each exposure in the Sovereign, Banks and Corporate asset classes is assigned a rating. The risk rating system has 11 grades, further segregated into 24 notches. Grades 1-7 are performing, Grade 8 is Other Loans Especially Mentioned (OLEM) and Grades 9-11 are non – performing each with a rating description.

• For Sovereign and Banks, rating grades are mapped to Long-Term External Credit Assessment Agency Ratings. • For Corporate, these are mapped to an Internal Rating Based (IRB) expert system, tuned for GCC conditions. • Each grade in the rating system is linked to a statistical Probability of Default (PD). The risk rating system plays a significant role in efficient use of credit risk measurement and management including:• Risk based pricing and determination of Risk adjusted return on capital • Risk based monitoring (Frequency and intensity of monitoring)

• Determining risk based delegation of powers at various sanction authority levels

• Impairment testing

• In due course the rating is also designed towards estimation of regulatory capital as per Basel II The rating system is subject to annual review and verification process.

Retail lending business is governed by the product programs vetted by the risk management department and employs credit scoring technique to process small scale, large volume credit decisions. The scores are combined with management judgement to ensure effective ongoing process of approval, review and enhancement.

Credit risk monitoring is performed at various levels:i) Monitoring of risk quality (Obligor level): The Group has a process for risk rating review relative to initial rating grade bands. More frequent reviews are made for the poorer credits and less frequent reviews for the superior credits. The Group has a process of defining and reporting all the potential problem account.ii) Monitoring of risk quality (Portfolio Level): Group monitors the existing portfolio based on the economic sectors, industry, geography, ratings and business lines. These portfolio reports are generated periodically and the senior management is informed on the same. iii) Monitoring of past dues on principal and interest: All the past dues on principal and interest on loans and advances portfolio of the Group are reported periodically to the senior management. Measures to realise the accounts are initiated and close follow up is done.iv) Monitoring of excess over limits: Group has a policy of monitoring of all excesses over limits. The monitoring reports are submitted to the senior management and processes are initiated to realise the accounts.v) Monitoring of potential loss accounts (OLEM): This category comprises of accounts where principal or interest are past due for more than 30 days or accounts which show some potential weakness in the borrower’s financial position and credit worthiness, which requires greater follow-up and monitoring.

In addition, the Group manages the credit exposure by obtaining security where appropriate and limiting the duration of exposure. In certain cases, the Group may also close out transactions or assign them to other counterparties to mitigate credit risk. Credit risk in respect of derivative financial instruments is limited to those withpositive fair values.

Regular audits of business units and Group credit processes are undertaken by Internal Audit and Compliance Division.


4- FINANCIAL RISK MANAGEMENT (continued)

(b) CREDIT RISK (continued)

IMPAIRMENT: The Group measures its exposure to credit risk by reference to the gross carrying amount of financial assets less amounts offset, interest suspended and impairment losses, if any.

Due from Banks Loans and advances Non trading investments 2007 2006 2007 2006 2007 2006 AED’000 AED’000 AED’000 AED’000 AED’000 AED’000

Individually impairedSubstandard - - 87,451 109,408 - - Doubtful 1,369 1,369 936,109 1,014,271 20,055 20,055Loss - - 1,757,232 1,621,030 - - -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Gross amount 1,369 1,369 2,780,792 2,744,709 20,055 20,055 -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Interest suspended - - (1,921,867) (1,795,349) - - -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Specific allowance for impairment (1,369) (1,369) (665,428) (716,663) (16,712) (16,712) -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Carrying amount - - 193,497 232,697 3,343 3,343 -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Past due but not impairedWatch list - overdueby less than 90 days* Carrying amount - - 192,464 69,543 - - -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Neither past due nor impaired 8,158,270 22,268,144 79,587,842 57,384,435 10,050,881 10,523,348 -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Collective allowance for impairment - - (244,703) (200,961) - - -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Carrying amount 8,158,270 22,268,144 79,729,100 57,485,714 10,054,224 10,526,691 =========== =========== =========== =========== =========== ===========

* The Group’s policy is to classify loans and advances past due for more than 90 days as substandard, which comply with the Central Bank of the UAE requirements.


4 FINANCIAL RISK MANAGEMENT (continued)


Impaired loans and advances and non-trading investments

Impaired loans and advances and non-trading investments are financial assets for which the Group determines that it is probable that it will be unable to collect all principal and interest due according to the contractual terms of the agreements. The Group financial assets that are neither past due nor impaired mainly fall within the grade 3-4 in accordance with the internal grading system.

Allowances for impairment

The Group establishes an allowance for impairment losses that represents its estimate of incurred losses in its loan portfolio. The main components of this allowance are a specific loss component that relates to individually significant exposures, and a collective loan loss allowance for losses that have been incurred but not identified, established for groups of homogeneous assets with similar risk characteristics that are indicative of the debtor’s ability to pay amounts due according to the contractual terms on the basis of a credit risk evaluation or grading process that considers asset type, industry, geographical location, collateral type, past due status and other relevant factors. Future cash flows in a group of financial assets that are collectively evaluated for impairment are estimated on the basis of historical loss experience for assets with credit risk characteristics similar to those in the group.

Individually assessed loans are required to be classified as impaired as soon as there is objective evidence that an impairment loss has been incurred. Objective evidence of impairment includes observable data such as when contractual payment of principal or interest is overdue or there is known difficulties in the cash flows of counterparties, credit rating downgrades or original terms of the contractual repayment are unable to be met.

Write-off policy

The Group writes off a loan / investment balance (and any related allowances for impairment) when the Remedial Advances Committee determines that the loans / investments are uncollectible. This is determined after all possible efforts of collecting the amounts have been exhausted.

Collateral

The Group holds collateral against loans and advances in the form of mortgage interests over property, other securities over assets and guarantees. The Group accepts guarantees mainly from well reputed local or international banks, well established local or multinational large corporate and high net-worth private individuals. Collateral generally is not held against non-trading investments and due from banks, and no such collateral was held at 31 December 2007 or 2006

Management estimates the fair value of collaterals and other security enhancements held against individually impaired loans and advances to reasonably approximate AED 477 million (2006): AED 345 million) as at the reporting date.




The Group monitors concentrations of credit risk by industry sector, counterparty and geographic location.

An analysis of concentrations of credit risk at the reporting date is shown below:

Loans and advances 2007 2006 AED’000 AED’000

Carrying amount 79,729,100 57,485,714 =========== ===========Concentration by industry sector:

Agriculture 100,384 10,778Energy 8,306,231 5,532,495Manufacturing 4,789,738 2,652,686Construction 3,789,815 2,473,768Real estate 22,164,106 12,601,268Trading 5,278,832 4,038,106Transport 5,166,806 2,463,479Banks and financial institutions 7,618,000 5,282,671Services 4,973,929 1,201,770Government 1,812,506 5,785,162Personal loans for consumption / other finance 8,868,310 8,020,758Personal/private loans for business / investments 9,094,990 9,934,535Others 597,451 201,211 -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 82,561,098 60,198,687

Less: interest suspended (1,921,867) (1,795,349)Less: allowance for impairment (910,131) (917,624) -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Net loans and advances 79,729,100 57,485,714 =========== ===========




Due from banks Non-trading investments 2007 2006 2007 2006 AED’000 AED’000 AED’000 AED’000

Carrying amount 8,158,270 22,268,144 10,054,224 10,526,691 =========== =========== =========== =========== Concentration by counter party:Government - - 1,681,961 3,732,621Supranational - - 537,909 502,932Public sector - - 440,918 540,035Banks 8,159,639 22,269,513 6,652,615 4,891,408Corporate sector - - 757,533 876,407 -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 8,159,639 22,269,513 10,070,936 10,543,403Less: Allowance for impairment (1,369) (1,369) (16,712) (16,712) -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Total carrying amount 8,158,270 22,268,144 10,054,224 10,526,691 =========== =========== =========== ===========

The concentration by counter party for loans and advances is disclosed in note 10.

Due from banks Loans and advances Non trading investments 2007 2006 2007 2006 2007 2006 AED’000 AED’000 AED’000 AED’000 AED’000 AED’000

Concentration by locationUAE 1,317,543 1,346,917 52,436,013 35,296,100 1,578,638 1,158,330Europe 5,025,003 16,711,591 15,206,557 15,425,654 6,197,767 5,587,230Arab countries 1,059,716 1,721,398 11,443,996 6,339,899 1,303,097 1,203,778USA 696,836 1,504,587 387,740 384,405 776,310 2,397,580Asia 51,209 982,587 246,793 39,191 18,321 18,121Others 7,963 1,064 8,001 465 180,091 161,652

-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 8,158,270 22,268,144 79,729,100 57,485,714 10,054,224 10,526,691 =========== =========== =========== =========== =========== ===========

Concentration by location for loans and advances and due from banks is measured based on the residential status of the borrower. Concentration by location for non-trading investments is measured based on the location of the issuer of the security.




Settlement risk

The Group’s activities may give rise to risk at the time of settlement of transactions and trades. Settlement risk is the risk of loss due to the failure of a counter party to honour its obligations to deliver cash, securities or other assets as contractually agreed.

Derivative related credit risk

Credit risk in respect of derivative financial instruments arises from the potential for a counterparty to default on its contractual obligations and is limited to the positive market value of instruments that are favourable to the Group, which are included in other assets. The positive market value is also referred to as the “replacement cost” since it is an estimate of what it would cost to replace transactions at prevailing market rates if a counterparty defaults. The majority of the Group’s derivative contracts are entered into with other financial institutions.

Commitments and contingencies related credit risk

Credit risk arising from commitments and contingencies is discussed in note 31.

(c) LIQUIDITY RISK

Liquidity or funding risk is the risk that the Group will encounter difficulty in meeting obligations associated with financial liabilities. Liquidity risk can be caused by market disruptions or credit downgrades which may cause certain sources of funding to dry up immediately.

Management of liquidity risk

The Group’s approach to managing liquidity risk is to ensure that, management has diversified funding sources and closely monitors liquidity to ensure adequate funding. The Group maintains a portfolio of short-term liquid assets, largely made up of short-term liquid trading investments, and inter-bank placements. All liquidity policies and procedures are subject to review and approval by ALCO.

Exposure to liquidity risk

The key measure used by the Group for measuring liquidity risk is the ratio of net liquid assets, i.e., total assets by maturity against total liabilities by maturity.

Details of the Group’s net liquid assets is summarised in the table below by the maturity profile of the Group’s assets and liabilities based on the contractual repayment arrangements and does not take account of the effective maturities as indicated by the Group’s deposit retention history. The contractual maturities of assets and liabilities have been determined on the basis of the remaining period at the balance sheet date to the contractual maturity date. The maturity profile is monitored by management to ensure adequate liquidity is maintained.



(c) LIQUIDITY RISK (continued)

The maturity profile of the assets and liabilities at 31 December 2007 was as follows:

Up to 3 month 1 to 5 over 5 Unspecified Total 3 months to 1 year years years maturity AED’000 AED’000 AED’000 AED’000 AED’000 AED’000AssetsCash and balances with central banks 36,399,339 25,590,630 10,785,000 - 23,709 - Investments at fair value through profit or loss 1,200,725 1,200,725 - - - - Due from banks 8,158,270 7,323,328 754,942 80,000 - - Loans and advances 79,729,100 25,997,011 9,531,236 18,017,249 26,183,604 - Non-trading investments 10,054,224 413,529 317,619 3,237,350 6,085,726 - Other assets 3,305,764 2,442,586 757,769 103,860 1,549 - Premises and equipment 583,296 - - - - 583,296 -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 139,430,718 62,967,809 22,146,566 21,438,459 32,294,588 583,296 =========== =========== =========== =========== =========== ===========Liabilities and equityDue to banks 27,041,015 25,410,466 1,630,549 - - - Repurchase agreements with banks 5,305,965 5,305,965 - - - - Euro commercial paper 105,912 105,912 - - - - Customers’ deposits 81,736,671 74,910,282 5,230,525 1,346,853 249,011 - Medium-term floating rate notes 7,405,149 144,624 332,834 6,927,691 - - Other liabilities 4,182,093 3,126,520 1,014,109 37,237 4,227 - Subordinated convertible note 2,439,681 - - - 2,439,681 - Equity 11,214,232 - - - - 11,214,232 -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 139,430,718 109,003,769 8,208,017 8,311,781 2,692,919 11,214,232 =========== =========== =========== =========== =========== ===========

The maturity profile of the assets and liabilities at 31 December 2006 was as follows:

Up to 3 month 1 to 5 over 5 Unspecified Total 3 months to 1 year years years maturity

AED’000 AED’000 AED’000 AED’000 AED’000 AED’000AssetsCash and balances with central banks 7,761,065 7,197,926 550,000 - 13,139 - Investments at fair value through profit or loss 408,261 408,261 - - - - Due from banks 22,268,144 21,488,447 779,697 - - - Loans and advances 57,485,714 25,354,821 6,270,923 14,882,141 10,977,829 - Non-trading investments 10,526,691 827,848 124,548 3,242,224 6,332,071 - Other assets 2,092,060 1,607,056 471,568 12,867 569 - Premises and equipment 424,051 - - - - 424,051 -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 100,965,986 56,884,359 8,196,736 18,137,232 17,323,608 424,051 =========== =========== =========== =========== =========== ===========Liabilities and equityDue to banks 6,068,882 5,998,441 70,441 - - - Repurchase agreements with banks 6,009,778 5,917,953 91,825 - - - Customers’ deposits 70,737,899 66,878,184 2,640,829 703,245 515,641 - Medium-term floating rate notes 3,590,031 - - 3,590,031 - - Other liabilities 3,121,664 2,346,292 729,659 41,506 4,207 - Subordinated convertible note 2,432,468 - - - 2,432,468 - Equity 9,005,264 - - - - 9,005,264 -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 100,965,986 81,140,870 3,532,754 4,334,782 2,952,316 9,005,264 =========== =========== =========== =========== =========== ===========



(c) LIQUIDITY RISK (continued)

The previous table shows undiscounted cash flows on the Group’s financial assets and liabilities on the basis of their earliest possible contractual maturity. The Group’s expected cash flows may vary from this analysis. For example, demand deposits from customers are expected to maintain a stable or increasing balance.

(d) MARKET RISKS

Market risk is the risk that the Group’s income and / or value of a financial instrument will fluctuate because of changes in market prices such as interest rates, foreign exchange rates and market prices of equity.

Management of market risks

The Board of Directors has set risk limits based on sensitivity analysis and notional limits which are closely monitored by the Risk Management Division, reported weekly to Senior Management and discussed fortnightly by the Assets and Liabilities Committee.

The Group separates its exposure to market risk between trading and non-trading portfolios. Trading portfolios include positions arising from market making and proprietary position taking, together with financial assets and liabilities that are managed on a fair value basis.

Interest rate risk

Interest rate risk arises from interest bearing financial instruments and reflects the possibility that changes in interest rates will adversely affect the value of the financial instruments and the related income. The Group manages this risk principally through monitoring interest rate gaps and by matching the re-pricing profile of assets and liabilities.

Overall interest rate risk positions are managed by using derivative instruments to manage overall position arising from the Group’s interest bearing financial instruments. The use of derivatives to manage interest rate risk is described in note 32.

The substantial portion of the Group’s assets and liabilities are re-priced within one year. Accordingly there is a limited exposure to interest rate risk.

The effective interest rate of a monetary financial instrument is the rate that, when used in a present value calculation, results in the carrying amount of the instrument. The rate is an original effective interest rate for a fixed rate instrument carried at amortised cost and a current market rate for a floating instrument or an instrument carried at fair value.


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(d) MARKET RISKS (continued)

Interest rate risk is also assessed by measuring the impact of reasonable possible change in interest rate movements. The Group assumes a fluctuation in interest rates of 50 basis points (2006: 25 basis points) and estimates the following impact on the net profit for the year and equity at that date:

Net profit Net profit for the year Equity for the year Equity AED’000 AED’000 AED’000 AED’000 2007 2007 2006 2006

Fluctuation in yield 152,270 146,555 38,529 26,378

=========== =========== =========== ===========

The interest rate sensitivities set out above are illustrative only and employ simplified scenarios. They are based on AED 128,657 million (2006: AED 95,132 million) interest bearing assets and AED 98,203 million (2006: AED 79,828 million) interest bearing liabilities. The sensitivity does not incorporate actions that could be taken by management to mitigate the effect of interest rate movements.

CURRENCY RISK

Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates and arises from financial instruments denominated in a foreign currency. The Group’s functional currency is the UAE Dirham. The Board of Directors has set limits on positions by currency. Positions are closely monitored and hedging strategies are used to ensure positions are maintained within established limits. At 31 December, the Group had the following significant net exposures denominated in foreign currencies:

Net spot Forward Total Total position position 2007 2006 (Short)/long (Short)/long (Short)/long (Short)/long AED’000 AED’000 AED’000 AED’000 Currency US dollar (14,537,545) 10,979,954 (3,557,591) 4,350,036 Sterling pound 9,269,047 (9,272,073) (3,026) 18,207 Euro (4,365,102) 4,455,714 90,612 211,731 Kuwaiti Dinar 13,819 203,102 216,921 189,815 Omani Riyal 222,632 (172,397) 50,235 160,418 Saudi Riyal 40,109 62,280 102,389 1,761 =========== =========== =========== ===========

The exchange rate of AED against US Dollar is pegged since November 1980 and the Group’s exposure to currency risk is limited to that extent. Exposure to other foreign currencies is insignificant.

EQUITY PRICE RISK

Equity price risk arises from the change in fair values of equity investments. The Group manages this risk through diversification of investments in terms of geographical distribution and industry concentration.



(e) OPERATIONAL RISKS

Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the Group’s processes, personnel, technology and infrastructure, and from external factors other than credit, market and liquidity risks such as those arising from legal and regulatory requirements and generally accepted standards of corporate behaviour. Operational risks arise from all of the Group’s operations and are faced by all business entities.

The Group’s objective is to manage operational risk so as to balance the avoidance of financial losses and damage, to the Group’s reputation with overall cost effectiveness and to avoid control procedures that restrict initiative and creativity.

The Board has oversight responsibilities for operational risk management in the Group. These responsibilities are exercised through ORMC with established framework of policies and procedures to identify, assess, monitor, control, manage and report risks. The ORMC employs clear internal policies and procedures to reduce the likelihood of any operational losses. Where appropriate, risk is mitigated by way of insurance. The framework also provides the interrelation with other risk categories.

Compliance with policies and procedures is supported by periodic reviews undertaken by the Audit and Compliance Division. The results of these reviews are discussed with the management of the business unit to which they relate, with summaries submitted to the Audit Committee and senior management of the Group.

(f) CAPITAL MANAGEMENT

The Group’s lead regulator, the Central Bank of the UAE, sets and monitors regulatory capital requirements. The overseas branches and subsidiaries are directly supervised by their local regulators.

The Group’s objectives when managing capital are:

• safeguard the Group’s ability to continue as a going concern and increase the returns for the shareholders; and

• comply with regulatory capital requirements set by the Central Bank of the UAE and the respective regulators where the overseas units operate.

During 2007, the Group’s strategy, which was unchanged from 2006, was to:

• increase capital resources by way of issuing convertible subordinated notes that is treated as Tier 2 capital;

• maintain a cash dividend payout ratio of 40% to increase capital through retention;

• maintain capital adequacy ratios above the minimum specified by the Central Bank of the UAE and Basel accord guidelines;

• maintain highest credit rating in the Middle East; and

• efficiently allocate capital to various businesses.



(f) CAPITAL MANAGEMENT (continued)The Group has set up a committee, namely, the Bank Equity Committee, to manage the investment of capital funds in sovereign bonds and short term money market placements with either the Central Bank of the UAE or above investment grade financial institutions.In implementing current capital requirements, the Group calculates its risk asset ratio in accordance with capital adequacy guidelines established by the Central Bank of the UAE prescribing the ratio of total capital to total risk-weighted assets. Further, the Group also calculates its capital adequacy ratio in accordance with Basel II Accord which was adopted by the Central Bank of the UAE with effect from 31 December 2007. The Group’s regulatory capital adequacy ratios, set by the Central Bank of the UAE at a minimum level of 10%, is analysed into two tiers as follows:

2007 2006 AED’000 AED’000Tier 1 capitalOrdinary share capital 1,591,304 1,224,080Retained earnings 800,000 650,000Statutory and special reserve 1,591,304 1,327,440General reserve 7,148,899 5,926,879Foreign currency translation reserve 34,183 14,088Subordinated convertible notes - equity component 72,926 72,926 -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Total 11,238,616 9,215,413 -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Tier 2 capitalFair value reserve (24,384) (199,817)Qualifying subordinated liabilities 2,439,681 2,432,468 -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Total 2,415,297 2,232,651 -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Deductions from Tier 1 and Tier 2Investments in associates (3,342) (3,342) -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Total (3,342) (3,342) -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Total capital base 13,650,571 11,444,722 =========== ===========

Risk weighted assets:On balance sheet 58,865,541 39,681,495Off balance sheet 25,628,371 14,990,183 -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Risk weighted assets 84,493,912 54,671,678 =========== ===========

Risk asset ratio 16.16% 20.93% =========== ===========



(f) CAPITAL MANAGEMENT (continued)

The Group’s capital adequacy ratio as per effective regulatory framework, Basel II (2006: Basel I),

at a minimum level of 8%, is analysed into two tiers as follows:

Basel II Basel I 2007 2006 AED’000 AED’000Tier 1 capitalOrdinary share capital 1,591,304 1,224,080Retained earnings 800,000 650,000Statutory and special reserve 1,591,304 1,327,440General reserve 7,148,899 5,926,879Foreign currency translation reserve 34,183 14,088Subordinated convertible notes - equity component 72,926 72,926 -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Total 11,238,616 9,215,413 -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Tier 2 capitalFair value reserve (24,384) (199,817)Qualifying subordinated liabilities 2,439,681 2,432,468Allowance for collective impairment 244,703 200,961

-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Total 2,660,000 2,433,612 -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Deductions from capitalInvestment in unconsolidated associate (3,342) - -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Total capital base 13,895,274 11,649,025 =========== ===========

Risk weighted assets:Credit risk 75,193,414 75,269,732Market risk 4,228,086 - Operational risk 5,016,328 - -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Risk weighted assets 84,437,828 75,269,732 =========== ===========

Risk asset ratio 16.46% 15.48% =========== ===========

The Bank and its overseas branches and subsidiaries have complied with all externally imposed capital requirements for all periods presented.


5 USE OF ESTIMATES AND JUDGEMENTS

In the process of applying the Group’s accounting policies management has made the following estimates and judgements, which have the most significant effect on the amounts recognised in the consolidated financial statements.

key sources of estimation uncertainty

(i) IMPAIRMENT CHARGE ON LOANS AND ADVANCES AND INVESTMENTS

Impairment losses are evaluated as described in accounting policy 3(b) (viii).

The Group evaluates impairment on loans and advances and investments on an ongoing basis and a comprehensive review on a quarterly basis to assess whether an impairment charge should be recognised in the income statement. In particular, considerable judgement by management is required in the estimation of the amount and timing of future cash flows when determining the level of impairment charge required. In estimating these cash flows, management makes judgements about counterparty’s financial situation and other means of settlement and the net realisable value of any underlying collateral. Such estimates are based on assumptions about several factors involving varying degrees of judgement and uncertainty, and actual results may differ resulting in future changes to such impairment charges.

(ii) COLLECTIVE IMPAIRMENT CHARGE ON LOANS AND ADVANCES

In addition to specific impairment charge against individually impaired assets, the Group also maintains a collective impairment allowance against portfolios of loans and advances with similar economic characteristics which have not been specifically identified as impaired. In assessing the need for collective impairment charge, management considers concentrations, credit quality, portfolio size and economic factors. In order to estimate the required allowance, assumptions are made to define the way inherent losses are modelled and to determine the required input parameters, based on historical and current economic conditions.

(iii) CONTINGENT LIABILITY ARISING FROM LITIGATIONS

Due to the nature of its operations, the Group may be involved in litigations arising in the ordinary course of business. Provision for contingent liabilities arising from litigations is based on the probability of outflow of economic resources and reliability of estimating such outflow. Such matters are subject to many uncertainties and the outcome of individual matters is not predictable with assurance.

Critical accounting judgements in applying the Group’s accounting policies include:

1) FINANCIAL ASSET AND LIABILITY CLASSIFICATION

The Group’s accounting policies provide scope for financial assets and liabilities to be designated on inception into different accounting categories in certain circumstances:

In classifying financial assets as “fair value through profit or loss”, “held for trading” or “available for sale”, the Group has determined it meets the description as set out in accounting policy 3(b) (iii, iv & v).

2) QUALIFYING HEDGE RELATIONSHIPS

In designating financial instruments as qualifying hedge relationships, the Group has determined that it expects the hedge to be highly effective over the life of the hedging relationship.

6 FINANCIAL ASSETS AND LIABILITIES

Fair value of financial instruments

All financial assets and liabilities are measured at amortised cost except for derivatives, trading and non-trading investments which are measured at fair value by reference to published price quotations in an active market or from prices quoted by counterparties or through use of valuation techniques such as discounted cash flow method.

Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable willing parties in an arm’s length transaction. Consequently, differences can arise between book values and the fair value estimates. Underlying the definition of fair value is the presumption that the Group is a going concern without any intention or requirement to materially curtail the scale of its operation or to undertake a transaction on adverse terms.

The fair values of due from banks, due to banks, repurchase agreements and customers’ deposits, which are predominantly short term in tenure and issued at market rates, are considered to reasonably approximate their book value.

The Group estimates that the fair value of its loans and advances portfolio is not materially different from its book value since majority of loans and advances carry floating market rates of interest and are frequently re-priced. For loans considered impaired, expected cash flows, including anticipated realisation of collateral, were discounted using an appropriate rate and considering the time of collection, the net result of which is not materially different from the carrying value.


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7 CASH AND BALANCES WITH CENTRAL BANKS

2007 2006 AED’000 AED’000

Cash on hand 521,516 482,523Balances with the Central Bank of the UAE cash reserve deposits 2,916,333 2,182,231 certificates of deposits 30,135,000 4,335,000 other deposit and balance 1,606,346 - Balances with other central banks cash reserve deposits 385,811 567,372 other deposits and balances 834,333 193,939 -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 36,399,339 7,761,065 =========== ===========

Cash reserve deposits are not available for the day to day operations of the Group.

8 INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS Investments held for trading

2007 2006 AED’000 AED’000

Managed portfolios 360,882 261,891Debt instruments 821,162 112,652 -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 1,182,044 374,543 =========== ===========

Debt instrument under repurchase agreements included in trading investments as at 31 December 2007 amounted to AED 182 million (2006: AED nil) (refer note 15).

Investments designated at fair value through profit or loss

2007 2006 AED’000 AED’000

Equity securities 18,681 33,718 =========== =========== 1,200,725 408,261 =========== ===========

9 DUE FROM BANKS

2007 2006 AED’000 AED’000

Current, call and notice deposits 632,314 318,514Fixed deposits 7,525,956 21,949,630 -------------------------------------------------------------------- --------------------------------------------------------------------

8,158,270 22,268,144 =========== ===========


10 LOANS AND ADVANCES

2007 2006 AED’000 AED’000

Gross loans and advances 82,561,098 60,198,687Less: allowance for impairment (910,131) (917,624)Less: interest suspended (1,921,867) (1,795,349) -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Net loans and advances 79,729,100 57,485,714 =========== ===========

An analysis of gross loans and advances by sector at the reporting date is shown below:

2007 2006 AED’000 AED’000

Government sector 1,812,506 5,785,162Public sector 13,353,112 7,373,255Banking sector 988,885 721,267Corporate / private sector 52,140,390 34,332,583Retail sector 14,266,205 11,986,420 -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Gross loans and advances 82,561,098 60,198,687 =========== ===========

The movement in the allowance for impairment during the year is shown below:

2007 2006 AED’000 AED’000

At 1 January 917,624 848,243Charge for the year 143,171 169,042Recoveries (38,870) (12,455)Write-back during the year (66,101) (60,925)Amounts written off (45,693) (26,281) -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------At 31 December 910,131 917,624 =========== ===========


11 NON-TRADING INVESTMENTS

2007 2006 AED’000 AED’000Available-for-sale investmentsUnquoted investments 297,643 102,150Less: allowance for impairment (16,712) (16,712) -------------------------------------------------------------------- --------------------------------------------------------------------

280,931 85,438Quoted investments 9,773,293 10,441,253 -------------------------------------------------------------------- --------------------------------------------------------------------

Total non-trading investments 10,054,224 10,526,691 =========== ===========

Unquoted investments include unquoted equity securities amounting to AED 65,141 thousand (2006: 61,405 thousand) which are carried at cost as their fair value cannot be reliably estimated.

Debt instruments under repurchase agreements included in quoted available for sale investments at 31 December 2007 amounted to AED 5,124 million (2006: AED 5,958 million) (refer note 15).

The movement in the allowance for impairment during the year was as follows:

2007 2006 AED’000 AED’000

At 1 January 16,712 17,814Write-back during the year - (1,102) -------------------------------------------------------------------- --------------------------------------------------------------------

At 31 December 16,712 16,712 =========== ===========

12 OTHER ASSETS

2007 2006 AED’000 AED’000

Interest receivable 1,228,348 764,726Acceptances 994,975 918,417Sundry debtors and other receivables 711,605 186,364Deferred tax asset 19,211 16,352Positive fair value of derivatives (note 32) 351,625 206,201

-------------------------------------------------------------------- --------------------------------------------------------------------

3,305,764 2,092,060 =========== ===========


13 PREMISES AND EQUIPMENT

Furniture, Land, Computer equipment, Capital building & systems & safes and work in alterations equipment vehicles progress Total AED’000 AED’000 AED’000 AED’000 AED’000

CostBalance at 1 January 2006 482,299 157,367 107,004 27,581 774,251Acquisitions 33,782 14,233 16,376 30,771 95,162Transfer 4,693 12,450 602 (17,745) - Disposals (563) (2,311) (3,275) - (6,149)

-------------------------------------------------------------------- -------------------------------------------------------------------- -------------------------------------------------------------------- -------------------------------------------------------------------- --------------------------------------------------------------------

Balance at 31 December 2006 520,211 181,739 120,707 40,607 863,264

Acquisitions 116,421 15,185 29,172 68,742 229,520Transfer 1,320 16,257 970 (18,547) - Disposals / write off (11,082) (4,977) (4,073) - (20,132) -------------------------------------------------------------------- -------------------------------------------------------------------- -------------------------------------------------------------------- -------------------------------------------------------------------- --------------------------------------------------------------------

Balance at 31 December 2007 626,870 208,204 146,776 90,802 1,072,652 =========== =========== =========== ========== ===========

Accumulated DepreciationBalance at 1 January 2006 191,205 115,130 79,467 - 385,802Charge for the year 24,470 18,247 16,503 - 59,220Disposals (314) (2,248) (3,247) - (5,809) -------------------------------------------------------------------- -------------------------------------------------------------------- -------------------------------------------------------------------- -------------------------------------------------------------------- --------------------------------------------------------------------

Balance at 31 December 2006 215,361 131,129 92,723 - 439,213

Charge for the year 26,855 22,775 18,362 - 67,992Disposals (9,541) (4,497) (3,811) - (17,849) -------------------------------------------------------------------- -------------------------------------------------------------------- -------------------------------------------------------------------- -------------------------------------------------------------------- --------------------------------------------------------------------

Balance at 31 December 2006 232,675 149,407 107,274 - 489,356 =========== =========== =========== =========== ===========

Carrying amountsAt 1 January 2006 291,094 42,237 27,537 27,581 388,449 =========== =========== =========== =========== ===========At 31 December 2006 304,850 50,610 27,984 40,607 424,051 =========== =========== =========== =========== ===========At 31 December 2007 394,195 58,797 39,502 90,802 583,296 =========== =========== =========== =========== ===========


14 DUE TO BANKS

2007 2006 AED’000 AED’000Banks Current, call and notice deposits 9,909,713 557,247Fixed deposits 12,245,243 4,435,516 ------------------------------------------------------------------ ------------------------------------------------------------------

22,154,956 4,992,763 ------------------------------------------------------------------ ------------------------------------------------------------------

Central banks Current and call 969 66,044Fixed deposits 4,885,090 1,010,075 ------------------------------------------------------------------ ------------------------------------------------------------------

4,886,059 1,076,119 ------------------------------------------------------------------ ------------------------------------------------------------------

27,041,015 6,068,882 =========== ===========

15 REPURCHASE AGREEMENTS WITH BANKS The Group enters into repurchase agreements in the normal course of business by which it transfers recognised financial assets directly to third parties.

The carrying amount of financial assets at the reporting date amounted to AED 5,306 million (2006: AED 5,958 million) (refer note 11) and their associated financial liabilities amounted to AED 5,306 million (2006: AED 6,010 million).

16 EURO COMMERCIAL PAPER The Bank established US$ 2,000,000 thousand Euro-Commercial Paper Programme (the “ECP Programme”) for the issuance of Euro-commercial paper under the agreement dated 13 September 2006 with CITIBANK, N.A. The notes outstanding as at the reporting date are denominated in USD carrying interest rates of 5.41% per annum (2006: nil). The original maturity of these notes is 12 months (2006: nil).

17 CUSTOMERS’ DEPOSITS 2007 2006 AED’000 AED’000By account:Current accounts 16,216,528 11,576,760Savings accounts 2,117,568 1,665,320Notice and time deposits 62,101,832 57,062,242Certificates of deposit 1,300,743 433,577 ------------------------------------------------------------------ ------------------------------------------------------------------

81,736,671 70,737,899 =========== ===========By sector:Government sector 31,273,703 24,962,201Public sector 15,493,613 24,071,659Corporate / private sector 19,426,286 10,018,164Retail sector 15,543,069 11,685,875 ------------------------------------------------------------------ ------------------------------------------------------------------

81,736,671 70,737,899 =========== ===========

Customers’ deposits include NBAD 3 Year 100% UAE Principal Protected Notes issued during 2007 having a nominal value of AED 713 million (2006: AED nil). These notes are 100% principal protected at maturity by the Bank and are linked to Standard & Poor’s International Finance Corporation Global Index for the United Arab Emirates. The Bank has purchased call options to cover this exposure.


18 MEDIUM-TERM FLOATING RATE NOTES

The Group established a Euro Medium Term Note (EMTN) programme for US$ 5,000 million (AED 18,365 million) under agreement dated 7 December 2005 with Barclays Capital and Credit Suisse First Boston.

The following notes are outstanding at 31 December:

Year of 2007 2006Currency Interest maturity AED’000 AED’000

US$ 5.525 per cent (fixed) 2009 73,460 - US$ 3 M USD LIBOR+30bps 2010 3,122,050 3,122,050JPY 3 M JPY LIBOR 2008 236,418 227,896JPY 0.05 per cent (fixed) 2009 112,580 - JPY 0.22 per cent (fixed) 2009 32,166 - JPY 3 M JPY LIBOR 2009 128,302 - CHF 3 M CHF LIBOR + 10bps 2009 257,213 240,085CHF 3 M CHF LIBOR + 10bps 2010 642,518 - GBP 5.875 % (fixed) 2012 2,559,401 - AUD 3 M AUD-BBSW 2008 64,278 - AUD 3 M AUD-BBSW +1bps 2008 80,347 - AUD 3-month AUD-BBSW 2008 96,416 - ------------------------------------------------------------------ ------------------------------------------------------------------

7,405,149 3,590,031 =========== ===========


19 OTHER LIABILITIES

2007 2006 AED’000 AED’000

Interest payable 681,803 534,312Acceptances 994,975 918,417Provision for staff terminal benefits 293,171 255,758Accounts payable, sundry creditors and other liabilities 1,878,001 1,130,959Negative fair value of derivatives (note 32) 252,831 206,082Overseas income tax 81,312 76,136 ------------------------------------------------------------------ ------------------------------------------------------------------

4,182,093 3,121,664 =========== ===========

The movement in the provision for employees’ staff terminal benefits was as follows:

2007 2006 AED’000 AED’000

Balance at 1 January 255,758 240,424Provided during the year 52,919 40,096Paid during the year (15,506) (24,762) ------------------------------------------------------------------ ------------------------------------------------------------------

Balance at 31 December 293,171 255,758 =========== ===========

The Group has provided for the overseas income tax in accordance with management’s estimate of the total amount payable based on tax rates enacted or substantially enacted as at the reporting date. Where appropriate the Group has made payments of tax on account in respect of these estimated liabilities.The overseas income tax charge for the year is calculated based upon the adjusted net profit for the year. The movement in the provision was as follows:

2007 2006 AED’000 AED’000

At 1 January 76,136 63,642Charge for the year (note 29) 68,590 51,438Overseas income tax paid, net of recoveries (63,414) (38,944) ------------------------------------------------------------------ ------------------------------------------------------------------

At 31 December 81,312 76,136 =========== ===========


20 SUBORDINATED CONVERTIBLE NOTESThe Extraordinary General Meeting held on 22 November 2005 approved the issue of subordinated convertible notes (in part or in full), provided their total value shall not exceed AED 2,500 million. The notes were issued for AED 2,500 million in a private placement on 15 March 2006 due on 15 March 2016. The notes bear an interest rate equal to 3 months EBOR plus 0.25% paid quarterly.The convertible notes are presented in the consolidated balance sheet as follows:

2007 2006 AED’000 AED’000

Proceeds from issue of convertible notes 2,500,000 2,500,000 Equity component pertaining to conversion feature (72,926) (72,926) -------------------------------------------------------------------- --------------------------------------------------------------------

Carrying amount of liability component on initial recognition 2,427,074 2,427,074 Cumulative Accreted interest 12,607 5,394 -------------------------------------------------------------------- --------------------------------------------------------------------

Carrying amount of liability component at end of year 2,439,681 2,432,468 -------------------------------------------------------------------- -------------------------------------------------------------------- -------------------------------------------------------------------- --------------------------------------------------------------------

The carrying amount of the liability component of the convertible notes reflects its current fair value.Interest on the notes is calculated on an effective yield basis by applying the effective interest rate for an equivalent non-convertible notes to the liability component of the convertible notes. The effective interest rate as at reporting date was 5.3069% (2006: 6.0462%). At the option of the holder, the notes may be converted into ordinary shares of the Bank, on the anniversaries of the 2nd, 3rd, 4th and 5th year at respective conversion prices. The Bank has an option to redeem these notes on the last conversion date and on a quarterly basis thereafter.


21 CAPITAL AND RESERVES

SHARE CAPITAL

The authorised share capital of the Bank comprise 2,000 million ordinary shares of AED 1 each (2006: 2,000 million shares of AED 1 each). The issued and fully paid share capital at 31 December 2007 comprises 1,591.30 million ordinary shares of AED 1 each (2006:1,224.08 million ordinary shares of AED 1 each).

STATUTORY RESERVE

The UAE Commercial Companies Law No. (8) of 1984 (as amended) and Article 56 of the Bank’s Articles of Association require that 10% of the annual net profit to be transferred to a statutory reserve until it equals 50% of the paid-up share capital. The statutory reserve is not available for distribution to the shareholders.

SPECIAL RESERVE

Transfers to the special reserve are made in accordance with Union Law No. 10 of 1980 and Article 56 of the Bank’s Articles of Association under which not less than 10% of the annual net profit is to be transferred to this reserve until it equals 50% of the paid-up share capital. The special reserve is not available for distribution to the shareholders.

GENERAL RESERVE

The general reserve is available for distribution to the shareholders at the recommendation of the Board of Directors to the shareholders.

DIVIDENDS

The following cash dividend was paid by the Group during the year ended 31 December:

2007 2006 AED’000 AED’000

AED 0.4 per ordinary share (2006: AED 0.4) 489,632 376,640 =========== ===========

On 28 January 2008, a cash dividend of AED 0.4 per ordinary share and bonus shares of 20% (2006 AED 0.4 cash dividend per ordinary share and 30% bonus share) was proposed by the Board of Directors in respect of 2007 which is subject to the approval of the shareholders at the Annual General Meeting.


21 CAPITAL AND RESERVES (continued)

FAIR VALUES RESERVE

The fair value reserve includes the cumulative net change in the fair value of non-trading investments, until the investment is derecognised or impaired, and cash flow hedge reserve.

2007 2006 AED’000 AED’000Revaluation reserve – non-trading investmentAt 1 January (199,817) (85,822)Increase in unrealised losses during the year (20,201) (112,109)Net realised losses / (gains) recognised in the income statement during the year 93,266 (1,886) ------------------------------------------------------------------ ------------------------------------------------------------------

At 31 December (126,752) (199,817) ------------------------------------------------------------------ ------------------------------------------------------------------

Hedging reserve – cash flow hedgeAt 1 January (10,332) - Changes in fair value 112,700 (10,332) ------------------------------------------------------------------ ------------------------------------------------------------------

At 31 December 102,368 (10,332) ------------------------------------------------------------------ ------------------------------------------------------------------

------------------------------------------------------------------ ------------------------------------------------------------------

Total at 31 December (24,384) (210,149) =========== ===========

The cash flow hedges are primarily against the medium term floating rate notes. The period when the cash flow are expected to occur and when they are expected to effect profit or loss is same that of the medium term floating rate notes (see note 4c).

22 INTEREST INCOME

2007 2006 AED’000 AED’000

Due from central banks 977,477 170,233Due from other banks 890,760 781,560Held for trading investments 17,004 7,211Non-trading investments 647,492 626,404Loans and advances to customers 4,551,393 3,872,386 ------------------------------------------------------------------ ------------------------------------------------------------------

7,084,126 5,457,794 =========== ===========


23 INTEREST EXPENSE

2007 2006 AED’000 AED’000

Due to banks 661,060 276,083Repurchase agreements with banks 350,646 357,619Euro commercial paper 30,073 - Customers’ deposits 3,057,757 2,475,742Certificates of deposit 67,477 37,181Medium-term floating rate notes 362,100 171,179Subordinated convertible bonds 150,056 119,043 ------------------------------------------------------------------ ------------------------------------------------------------------

4,679,169 3,436,847 =========== ===========

24 NET FEE AND COMMISSION INCOME

2007 2006 AED’000 AED’000Fee and commission income Letters of credit 89,789 94,769Letters of guarantee 118,506 85,188Brokerage income, net 94,523 77,695Initial Public Offerings (IPO) 3,734 31,356Assets management and investment services 163,802 160,590Risk participation fees 24,883 22,071Retail and corporate lending fees 237,171 107,081Low credit balance fees 44,118 24,059Commission on transfers 29,575 34,532Others 126,294 127,968 ------------------------------------------------------------------ ------------------------------------------------------------------

Total fee and commission income 932,395 765,309 ------------------------------------------------------------------ ------------------------------------------------------------------

Fee and commission expenseBrokerage commission 1,842 907Handling charges 3,925 3,783Credit card charges 33,492 21,984Other commission 7,859 6,212 ------------------------------------------------------------------ --------------Total fee and commission expense 47,118 32,886 ------------------------------------------------------------------ ------------------------------------------------------------------

------------------------------------------------------------------ ------------------------------------------------------------------

Net fee and commission income 885,277 732,423 =========== ===========

Asset management and investment service fees include fees earned by the Group on trust and fiduciary activities where the Group holds or invests assets on behalf of its customers.


25 NET INVESTMENT INCOME

2007 2006 AED’000 AED’000

Net realised / unrealised gains on investments at fair value through profit or loss and derivatives 103,435 14,314Net gain from sale of non-trading investments 13,595 3,904Dividend income 1,637 2,013 ------------------------------------------------------------------ ------------------------------------------------------------------

118,667 20,231 =========== ===========

26 NET FOREIGN EXCHANGE GAIN

2007 2006 AED’000 AED’000

Trading and retranslation gain 164,331 118,444Dealings with customers 54,659 24,398 -------------------------------------------------------------------- --------------------------------------------------------------------

218,990 142,842 =========== ===========

27 GENERAL, ADMINISTRATION AND OTHER OPERATING EXPENSES

2007 2006 AED’000 AED’000

Staff costs 620,191 414,114Other general and administration expenses 328,014 219,745Depreciation 67,992 59,220Donations and charity 38,172 6,798 -------------------------------------------------------------------- -------------------------------------------------------------------- 1,054,369 699,877 =========== ===========

The number of employees as at 31 December 2007 was 2,984 (2006: 2,544).


28 NET IMPAIRMENT CHARGE ON FINANCIAL ASSETS 2007 2006 AED’000 AED’000

Provision for impaired loans and advances (note 10) 143,171 169,042Write back of provisions for loans and advances (note 10) (66,101) (60,925)Recovery of loan loss provisions (note 10) (38,870) (12,455)Write-off of impaired loans and advances to income statement 5,261 5,348Recovery of loans previously written off (1,771) (889)Write back of provisions for non-trading investments (note 11) - (1,102) -------------------------------------------------------------------- --------------------------------------------------------------------

41,690 99,019 =========== ===========

29 OVERSEAS INCOME TAX EXPENSE

In addition to adjustments relating to deferred taxation, the charge for the year is calculated based upon the adjusted net profit for the year at rates of tax applicable in respective overseas locations.

The charge to the income statement for the year was as follows:

2007 2006 AED’000 AED’000

Charge for the year (note 19) 68,590 51,438Adjustments relating to deferred taxation (4,182) (392) -------------------------------------------------------------------- --------------------------------------------------------------------

64,408 51,046 =========== ===========

30 CASH AND CASH EQUIVALENTS

Cash and cash equivalents included in the consolidated statement of cash flows comprise the following amounts maturing within three months of the date of the acquisition / placement:

2007 2006 AED’000 AED’000

Cash and balances with central banks 22,379,160 7,197,926Due from banks 1,966,157 19,149,185 -------------------------------------------------------------------- --------------------------------------------------------------------

Cash and cash equivalents 24,345,317 26,347,111 =========== ===========


31 COMMITMENTS AND CONTINGENCIES

2007 2006 AED’000 AED’000

Letters of credit 23,127,711 19,959,194Letters of guarantee 32,753,194 27,919,289Undrawn commitments to extend credit 20,413,092 3,211,408Credit default swaps and risk participation 2,973,357 3,141,095Others 1,113,161 246,642 -------------------------------------------------------------------- --------------------------------------------------------------------

80,380,515 54,477,628 -------------------------------------------------------------------- --------------------------------------------------------------------

Capital and operating lease commitments at the reporting date is shown below:

2007 2006 AED’000 AED’000

Commitments for future capital expenditure 83,044 68,567Commitments for future operating lease payments for premises 17,577 36,730 -------------------------------------------------------------------- --------------------------------------------------------------------

100,621 105,297 -------------------------------------------------------------------- --------------------------------------------------------------------

-------------------------------------------------------------------- --------------------------------------------------------------------

Total commitments and contingencies 80,481,136 54,582,925 =========== ===========

Letters of credit and guarantee commit the Group to make payments on behalf of customers contingent upon the production of documents or the failure of the customer to perform under the terms of the contract.

Commitments to extend credit represent contractual commitments to extend loans and revolving credits. Commitments generally have fixed expiration dates or other termination clauses and may require a payment of a fee. Since commitments may expire without being drawn upon, the total contracted amounts do not necessarily represent future cash requirements.

Undrawn loan commitments, as at the reporting date, maturing after one year amounted to AED 2,643 million (2006: AED 2,392 million).

Commitments for operating lease payments falling due in more than one year amounted to AED 6.9 million (2006: AED 25.2 million).


32 DERIVATIVE FINANCIAL INSTRUMENTSIn the ordinary course of business the Group enters into various types of transactions that involve derivative financial instruments. Derivative financial instruments include forwards, futures, swaps and options.

Forwards and futures contracts are commitments to either purchase or sell foreign currencies, commodities or financial instruments at a specified future date for a specified price.

Swaps are the agreements between the Group and other parties to exchange future cash flows based upon agreed notional amounts. Swaps most commonly used by the Group are interest rate swaps and credit default swaps.

Options are contractual agreements that convey the right, but not the obligation, to either buy or sell a specific amount of a commodity or financial instrument at a fixed price either at fixed future date or at any time within a specified period.

Derivatives are measured at fair value by reference to published price quotations in an active market or counterparty prices or valuation techniques such as discounted cash flows.

The table below shows the positive and negative fair values of derivative financial instruments, which are equivalent to their fair values, together with the notional amounts analysed by the term to maturity. The notional amount is the amount of a derivative’s underlying, reference rate or index and is the basis upon which changes in the value of derivatives are measured. The notional amounts indicate the volume of transactions outstanding at year end and are neither indicative of the market risk nor credit risk.


32 D

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32 D

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32 DERIVATIVE FINANCIAL INSTRUMENTS (continued)

The positive / negative fair value in respect of derivatives represents the gain / loss respectively, arising on fair valuation of the hedging instrument. These amounts are not indicative of any current or future losses, as a similar positive / negative amount has been adjusted to the carrying value of the hedged loans and advances and non-trading investments.

DERIVATIVES HELD FOR TRADING

The Group uses derivatives, not designated in a qualifying hedge relationship, to manage its exposure to foreign currency, interest rate and credit risks. The instruments used mainly include interest rate and currency swaps and forward contracts. The fair values of those derivatives are shown in the table above.

DERIVATIVES HELD AS FAIR VALUE HEDGE

The Group uses interest rate swaps, to hedge against the changes in fair value arising from specifically identified interest bearing assets such as loans and advances and non-trading investments. The Group uses forward foreign exchange contracts and currency swaps to hedge against specifically identified currency risks.

DERIVATIVES HELD AS CASH FLOW HEDGE

The Group uses cross-currency interest rate swaps to hedge the foreign currency and interest rate risk arising from its issuance of Euro medium term floating rate notes in foreign currencies. The Group has substantially matched the critical terms of the cross-currency swaps and the Euro medium term floating rate notes.

33 RELATED PARTIES

IDENTITY OF RELATED PARTIES

Related parties comprise major shareholders, directors and key management of the Group and their related concerns. The terms of these transactions are approved by the Group’s management and are made on terms agreed by the Board of Directors or management.

PARENT AND ULTIMATE CONTROLLING PARTY

Pursuant to the provisions of Law No. 16 of 2006 concerning establishment of Abu Dhabi Investment Council (the “Council”), the previous parent has transferred its 72.96% share of the capital to the Council with effect from 1 February 2007.


33 RELATED PARTIES (continued)

Compensation of directors and key management personnel

2007 2006 AED’000 AED’000Key management compensationShort term employment benefits 23,916 15,616Post employment benefits 581 406Termination benefits 799 627 =========== ===========Directors’ remuneration 3,710 3,710 =========== ===========

TERMS AND CONDITIONSInterest rates earned on loans and advances extended to related parties during the year have ranged from 5.00% to 15.00% per annum (2006: 1% to 15% per annum).Interest rates incurred on customers’ deposits placed by related parties during the year have ranged from nil (non-interest bearing accounts) to 5.06% per annum (2006: nil to 4.30% per annum).Fees and commissions earned on transactions with related parties during the year have ranged from 0.50% to 1.00% per annum (2006: 0.50% to 1% per annum).Collaterals against lending to related parties range from being unsecured to fully secure.

BALANCES

Balances with related parties at the reporting date are shown below:

Directors and key Major 2007 2006 management shareholder Others Total Total AED’000 AED’000 AED’000 AED’000 AED’000

Loans and advances 765,605 - 1,649,857 2,415,462 1,490,544 ========== ========== ========== ========== ========== Customers’ deposits 1,004,819 2,107,897 11,847,094 14,959,810 10,155,200 ========== ========== ========== ========== ========== Contingent liabilities 392,255 - 574,891 967,146 743,468 ========== ========== ========== ========== ==========

Others comprise Government of Abu Dhabi entities.

TRANSACTIONS

Transactions carried out during the year with related parties are shown below:

Directors and key Major 2007 2006 management shareholder Others Total Total AED’000 AED’000 AED’000 AED’000 AED’000Fee and commission income 2,507 - 2,402 4,909 1,257Interest income 40,147 - 112,566 152,713 95,636Interest expense 9,507 16,258 101,075 126,840 118,740 ========== ========== ========== ========== ==========


34 SEGMENTAL INFORMATION

Segment information is presented in respect of the Group’s business and geographical segments. The primary format, business segments, is based on the Group’s management and internal reporting structure.

Segment capital expenditure is the total cost incurred during the year to acquire premises and equipment.

PRIMARY SEGMENTAL INFORMATION:

The Group is organised into the following four major business segments, which form the basis on which the primary segment information is reported:

• Domestic BankingIncludes loans and advances, investments, deposits, and other transactions and balances with corporate and retail customers.• International Banking Includes loans and advances, investments, deposits, and other transactions and balances with corporate and retail customers outside the UAE.

• Investment Banking Includes investments, corporate finance, brokerage and asset management activities. Undertakes borrowings issue of debt securities, use of derivates for risk management purposes, and investing in liquid assets such as short term placement.• Head Office Support Functions / othersIncludes certain loans and advances, deposits, investments and manages the Group’s capital, certain corporate costs and start up costs of new units. Cost – sharing agreements are used to allocate central costs to business segments on a reasonable basis. The assets and reportable profit or loss of the Global private banking business are not reported separately due to insignificance.

Transactions between segments, and between branches within a segment, are conducted at estimated market rates on an arm’s length basis. Interest is charged or credited to branches and business segments either at contracted or pool rates, both of which approximate the replacement cost of funds.


34 SEGMENTAL INFORMATION (continued)

Segmental information for the year ended 31 December 2007 was as follows:

Domestic Int’l Investment Headoffice Banking Banking Banking support functions/other Total AED’000 AED’000 AED’000 AED’000 AED’000

(a) Income statement:

Operating income 1,843,003 722,076 671,116 429,409 3,665,604 =========== =========== =========== =========== ===========Profit from operations before impairment charge and taxation 1,456,150 481,607 556,658 116,820 2,611,235Net impairment charge on financial assets (1,905) (57,354) (1,196) 18,765 (41,690)Profit from operations -------------------------------------------------------------------- -------------------------------------------------------------------- -------------------------------------------------------------------- -------------------------------------------------------------------- --------------------------------------------------------------------

before taxation 1,454,245 424,253 555,462 135,585 2,569,545Overseas taxation - (70,160) - 5,752 (64,408) =========== =========== =========== ===========Net profit for the year 2,505,137 ===========

(b) Assets:

Segment total assets 55,448,529 34,192,641 56,112,214 17,378,964 163,132,348 =========== =========== =========== ===========Inter segment balances (23,701,630)

=========== 139,430,718 =========== Segment capital expenditure 9,756 34,262 3,294 182,208 229,520 =========== =========== =========== =========== ===========Segment depreciation 20,876 18,595 5,701 22,820 67,992 =========== =========== =========== =========== ===========

(c) Liabilities:

Segment liabilities 49,803,359 34,141,083 55,568,931 12,404,743 151,918,116 -------------------------------------------------------------- -------------------------------------------------------------- -------------------------------------------------------------- -------------------------------------------------------------- -------------------------------------------------------------- -------------------------------------------------------------- -------------------------------------------------------------- --------------------------------------------------------------

Inter segment balances (23,701,630) --------------------------------------------------------------

128,216,486 ===========


Domestic Int’l Investment Headoffice Banking Banking Banking support functions/other Total AED’000 AED’000 AED’000 AED’000 AED’000



before taxation 1,454,245 424,253 555,462 135,585 2,569,545Overseas taxation - (70,160) - 5,752 (64,408) =========== =========== =========== ===========Net profit for the year 2,505,137 ===========

(b) Assets:

Segment total assets 55,448,529 34,192,641 56,112,214 17,378,964 163,132,348 =========== =========== =========== ===========Inter segment balances (23,701,630)

=========== 139,430,718 =========== Segment capital expenditure 9,756 34,262 3,294 182,208 229,520 =========== =========== =========== =========== ===========Segment depreciation 20,876 18,595 5,701 22,820 67,992 =========== =========== =========== =========== ===========

(c) Liabilities:

Segment liabilities 49,803,359 34,141,083 55,568,931 12,404,743 151,918,116 -------------------------------------------------------------- -------------------------------------------------------------- -------------------------------------------------------------- -------------------------------------------------------------- -------------------------------------------------------------- -------------------------------------------------------------- -------------------------------------------------------------- --------------------------------------------------------------

Inter segment balances (23,701,630) --------------------------------------------------------------

128,216,486 ===========


Segmental information for the year ended 31 December 2006 was as follows:

Domestic Int’l Investment Headoffice Banking Banking Banking support Division Division Division functions/other Total AED’000 AED’000 AED’000 AED’000 AED’000



before taxation 1,221,467 383,478 374,609 177,377 2,156,931Overseas taxation - (51,046) - - (51,046) =========== =========== =========== ===========Net profit for the year 2,105,885

=========== (b) Assets:

Segment total assets 37,038,131 35,978,581 63,174,337 20,086,107 156,277,156 =========== =========== =========== ===========Inter segment balances (55,311,170) -------------------------------------------------------------- --------------------------------------------------------------

100,965,986 -------------------------------------------------------------- --------------------------------------------------------------

Segment capital expenditure 11,167 31,995 3,528 48,472 95,162 =========== =========== =========== =========== ===========Segment depreciation 19,518 14,539 4,091 21,072 59,220 =========== =========== =========== =========== ===========

(c) Liabilities:

Segment liabilities 35,772,278 35,638,374 62,847,437 13,013,803 147,271,892 =========== =========== =========== ===========Inter segment balances (55,311,170) --------------------------------------------------------------------

91,960,722 ===========



The Group is based primarily on its business segments; Further, the Group operates in two geographical markets, the UAE and Overseas. The geographical analysis has been based primarily upon the location of reporting branches and subsidiaries.

United Arab Emirates Overseas Total 2007 2006 2007 2006 2007 2006 AED’000 AED’000 AED’000 AED’000 AED’000 AED’000

Net profit for the year 2,348,085 1,917,657 157,052 188,228 2,505,137 2,105,885 ========= ========= ========= ========= ========= =========

Total assets 118,911,435 129,418,687 41,412,274 26,858,469 160,323,709 156,277,156 ========= ========= ========= =========

Inter segment balances (20,892,991) (55,311,170) ========= ========= 139,430,718 100,965,986 ========= =========

35 EARNINGS PER SHARE

Earnings per share is calculated by dividing the net profit for the period attributable to equity shareholders by the weighted average number of ordinary shares in issue during the period as set out below:

2007 2006Basic earnings per share:Net profit for the year attributable to equity shareholders (AED ‘000) 2,505,137 2,105,885 =========== ===========Weighted average number of ordinary shares:Ordinary shares as at 1 January (‘000s) 1,224,080 941,600Effect of bonus shares issued during 2006 (‘000s) - 282,480Effect of bonus shares issued during 2007 (‘000s) 367,224 367,224

-------------------------------------------------------------------- --------------------------------------------------------------------

Weighted average number of ordinary shares (‘000s) 1,591,304 1,591,304 =========== ===========

Basic earnings per share (AED) 1.574 1.323 =========== ===========Diluted earnings per share:Net profit for the year attributable to equity shareholders (AED ‘000) 2,505,137 2,105,885Add: Interest on subordinated convertible notes (AED ‘000) 150,056 119,043Net profit for the period attributable to equity -------------------------------------------------------------------- --------------------------------------------------------------------

shareholders for diluted earnings per share (AED ‘000) 2,655,193 2,224,928 -------------------------------------------------------------------- --------------------------------------------------------------------

Weighted average number of ordinary shares (‘000s) 1,591,304 1,591,304Effect of dilutive potential ordinary shares issued (‘000s) 100,604 100,604Weighted average number of ordinary shares -------------------------------------------------------------------- --------------------- in issue for diluted earnings per share (‘000s) 1,691,908 1,691,908 -------------------------------------------------------------------- --------------------------------------------------------------------

Diluted earnings per share (AED) 1.569 1.315 =========== ===========


36 FIDUCIARY ACTIVITIES

The Group held assets in trust or in a fiduciary capacity for its customers at 31 December 2007 amounting to AED 12,675 million (2006: AED 7,068 million). Furthermore, the Group provides custodian services for certain of its customers.

The underlying assets held in a custodial or fiduciary capacity are excluded from the consolidated financial statements of the Group.

37 SPECIAL PURPOSE ENTITIES

The Group has created Special Purpose Entities (SPEs) with defined objectives to carry on fund management and investment activities on behalf of customers. The equity and investments managed by the SPEs are not controlled by the Group and the Group does not obtain benefits from the SPEs’ operations, apart from commissions and fee income. In addition, the Group does not provide any guarantees or assume any liabilities of these entities. Consequently, the SPEs’ assets, liabilities and results of operations are not included in the consolidated financial statements of the Group. The SPEs are as follows:

Country of Holding HoldingLegal name Activities incorporation 2007 2006

NBAD Fund Managers (Guernsey) Limited Fund management Bailiwick of Guernsey 100% 100%NBAD Global Growth Fund PCC Limited Fund management Bailiwick of Guernsey 100% 100%NBAD Private Equity 1 Fund management Cayman Islands 58% 58%NBAD Nominees Limited Dormant England 100% 100%

-------------------------------------------------------------- -------------------------------------------------------------- -------------------------------------------------------------- --------------------------------------------------------------

38 COMPARATIVE FIGURES

Comparative figures have been reclassified to conform with the presentation for the current year.


RISK MANAGEMENT AND BASEL II COMPLIANCE

Risk Management continues to be one of the focus areas of your Bank. The Bank has consistently invested in people, systems and analytics to keep pace with the business and changing operating environment.

Risk Management Division (RMD), reporting to the Risk Management Committee, assists in carrying out the oversight responsibility of the Board. There are three main independent functions of the RMD, which are: (i) Credit Underwriting; (ii) Credit Administration and (iii) Independent Risk Management. The Credit underwriting function deals with independent underwriting of domestic, international and the management and oversight of remedial advances. There is clear segregation between the credit approval and independent risk management, the latter constituted of Credit, Market & Operational Risk, with a middle office i.e. Credit Administration, straddling between the two areas, to provide logistical support from an administrative, systems and compliance perspective.

RISK MANAGEMENT AND BASEL II COMPLIANCE

Regulatory risk compliance, including Basel II implementation, is of paramount importance to the Bank. The Bank views the regulatory compliance from the overall perspective of Enterprise-wide Risk Management. The Bank has conducted six rounds of parallel computation on Basel II and submitted the findings to the Central Bank of UAE. The Basel II capital charge for the bank stands at a comfortable level of 16.46% as at December 2007 as against the minimum requirements of 10%. The Bank plans to go to higher approaches and has already initiated concrete steps.

Notwithstanding the above specific regulatory initiatives and progress, the bank has embarked on an overall ambitious journey to advance the risk infrastructure, in keeping with the industry best practices. I am delighted to share that the Bank has made rapid progress in this regard. Today the bank employs the state of the art rating methodology as part of its credit underwriting process. The corporate exposures are rated through the Moody’s Risk Advisor (MRA). MRA has been rolled out to all domestic and international branches of the Bank.

Specifically, in 2007, the Bank initiated the exercise of verifying the results of the corporate Model along with Moody’s Analytics. The risk scoring model is being used for risk pricing, determining risk-adjusted return on capital, risk based monitoring, implementing risk based delegation of powers and estimating collective provisions. Similarly bank has implemented risk scoring models for different retail segments.

NBAD CORPORATE SOCIAL RESPONSIBILITY (CSR)

REPORT

NBAD Corporate Social Responsibility Report

At National Bank of Abu Dhabi (NBAD) we have been serving the nation since we were established in 1968. The extent of our involvement in issues relating to the Economy, Environment and Society has steadily increased over the decades. We realise that corporate social responsibility (CSR) has a direct impact on our business decisions, the products and services that we offer and the way we in which we manage our business relationships with key stakeholders. We have supported the needs of the community for the past 40 years and in 2003 we introduced our CSR Policy “To act as a role model in the social and environmental development of the UAE.”

NBAD is engaged in a significant number of community activities that reach beyond the world of banking. These include donations and sponsorships, corporate philanthropy, CSR projects, and through the employee volunteering. Our community support is based on strictly defined principles, and focuses on the areas of education, community development, art, music and sports and environment.

WHAT CSR AT NBAD MEANS

In 2006, NBAD issued its very first CSR report. We used this step to demonstrate a move from good intention, to tangible measurement. It also further solidified our commitment to embarking upon CSR on a much larger scale and as voluntary step towards creating an interest in the concepts of CSR.

2007 began a new phase in our efforts to create a relevant, achievable and sustainable CSR strategy, and while we acknowledge that there is still a lot of work ahead, we are pleased to report that we have made progress in a number of areas including the closer alignment of internal and external CSR activities with our business objectives.

We hope to use our strength as a leading UAE bank, including our learning and commitment to responsible and sustainable business to create a positive impact within the UAE and other countries in which NBAD operates. We are encouraged by the fact that the CSR and the sustainability agenda are generating greater attention not only within the UAE, but throughout the entire Middle East.

As we enter our fortieth year of operation, we will be looking at the risks and opportunities such challenges present to ensure that NBAD continues to be at the forefront of the banking and finance sector regionally. It is our intention to ensure that we create, develop and provide just as many opportunities for the next

generation as those that we have enjoyed, in the most sustainable manner.

SCOPE

The scope of the 2007 CSR report shows our approach, our business aspirations and examines our overall contributions and impacts to the economy, environment and community. The areas covered in the report are overviews and do not reflect all of our CSR related activities but rather, serves as a snapshot of the direction NBAD has taken with regards to our CSR approach and serves our firm and confirmed continued commitment in this area.

Internally, we use our CSR report as a tool to further enhance our activities year on year and as a benchmark for measuring the involvement of our people, identification of key sustainability performance indicators and future target setting. Externally, we hope that it will serve to contribute to the enhancement of policies and management systems within the entire UAE banking industry. We encourage healthy reflection by our peers about how CSR can be integrated successfully into the business.

It is also anticipated that this report will work to increase NBAD’s ability to attract and retain the best human resources talent and build an inclusive culture which will engage our people as individual members of the NBAD corporate family.

NBAD’s 2007 report, now in its second year, highlights specific areas that highlight our commitment to corporate social responsibility and sustainable business practices within the bank.

We present what we consider to be a balanced account of those activities and the types of results these initiatives achieved in 2007.

This report relates to activities undertaken by NBAD throughout the United Arab Emirates.

CSR APPROACH

We recognize that for NBAD to be successful, we must ensure that we take a leadership approach to our business with the aim to be “the number one Arab bank.”Organizational excellence is at the core of our values, and we believe that by embedding CSR into the way we carry out our business we will engage our people, raise understanding and awareness and show its value not only to our business but also to our stakeholders.

Furthermore, by recognizing and taking responsibility for our business activities and resulting impacts, taking


the needs of our stakeholders into consideration and, where possible, partnering in initiatives to achieve greater impact, we hope to ensure that our approach to CSR is not only beneficial to NBAD, but is culturally and regionally relevant and therefore ultimately sustainable. As indicated in the above diagram, NBAD is currently at wave 2 or the 2nd level of CSR implementation.

1. EXTERNAL COMMITMENTS AND PARTNERSHIPS:Over the last few years, we have made external commitments confirming our wish to contribute to UAE’s CSR growth as well as sustainable development. In July 2005, we were one of the first banks to sign up for the Emirates Environmental Group’s (EEG) Corporate Social Responsibility Network which is a multi-stakeholder forum for dialogue and sharing of knowledge and good practice in CSR. Involvement in a number of other partnering initiatives such as the MENA-OECD Regional Dialogue on Responsible Business Conduct, EEG’s wastepaper recycling program, initiatives through the Red Crescent aimed at funding victims of natural disaster, such as Tsunami, and philanthropic funding for sustainable initiatives carried out through government endowment body, Emirates Foundation who provide financial support to specific key target areas such as education,

science and technology, Arts and Culture, social development, environmental development and public awareness.

Throughout 2007, we remained committed to our existing partnerships and affiliations. We engaged in discussion and dialogue in areas of mutual concern to better understand the risks and opportunities driving development of sustainable business in the UAE and the region. Furthermore, we established new relationships and participated in cross-sector dialogue where we were able to identify and evaluate opportunities to build relationships to achieve higher impact in CSR projects, initiatives and awareness in our UAE market.

Listening to external needsTo ensure that our corporate responsibility and sustainable development approach is in line with business and society’s expectations, we actively encourage our external customers to provide feedback into our CSR initiatives. Partnerships with organizations such as Red Crescent, Environment Agency Abu Dhabi (EAD) Shell, Dubai CSR Committee, UAE Genetic Diseases Association and the Dubai Chamber Centre for Responsible Business, confirm our commitment to creating a lasting dialogue with multiple stakeholders.

Little or no CSR awareness/business

practices unsustainable

2nd Wave 3rd Wave

Sustainable business

1st Wave

Where we are now…

• Bringing CSR onto the Agenda• Activities adhoc and reactive

Looking to the future• CSR & Sustainability risks included in strategy• Supply chain engaged• Indicators embedded• Leading and mentoring• Setting new standards

Building greater awareness and embedding into core business• Educating employees• Beginning to consider impacts of activities and risks• Commencing alignment of activities with corporate strategy• Evaluating and implementing standards/setting benchmarks • Measuring outcomes• Reporting


2. MANAGING RISKOur management of credit risk continued to be robust throughout 2007, and is reported on in the financial statements. However, in terms of non-financial risk, the bank devotes substantial attention to operational risk, which includes reputational risk management.

2008 TARGET: We plan to gain a better understanding of environmental risk as part of our CSR strategy, including employee training in this area, if appropriate.

Relationships 2006 Relationships 2007 Planned for 2008

1. EEG – Environmental NGO• Recycling programs• Environmental programs• CSR Network

• Ongoing • Existing projects ongoing• New - GCC UN Global

Compact Group2. Environmental Friends

Society – Environmental NGO

• Ongoing • Ongoing

• Establish one additional membership with environmental NGO

3. Abu Dhabi Blood Bank• Annual blood drive • Ongoing • Ongoing

1. UAE Genetic Diseases Association

• Include Thalassemia awareness in annual blood drive

4. New Medical Centre Hospital

• Annual NBAD Health Day• Ongoing

• Ongoing, with at least two new partners to take part in NBAD Health Day 2008

2. Engagement with Zayed University volunteer group

5. Memorandum of Understanding (MoU) for student sponsorships

• Zayed University• Al Hosn University• UAE University• Abu Dhabi University• Higher Colleges of

Technology


6. Emirates Institute for Banking and Financial Studies (EIBFS)

• Staff training courses


1. Member of the regional network of the MENA-OECD Regional Dialogue on Responsible Business Conduct

• Ongoing

2. Member of the Dubai CSR Committee • Ongoing

3. Dialogue and interaction with Dubai Chamber Centre for Responsible Business

• Ongoing


Corporate governance

The National Bank of Abu Dhabi has always been genuinely committed to the principles of Corporate Governance. Established in 1968 by Royal decree, NBAD is in its 40th year of successful and profitable operations for the benefits of its stakeholders.

Even in the absence of official corporate governance guideline requirements prior to 2007, successive NBAD Boards of Directors in the past and up to the present time have always ensured that the bank adhered to the highest standards of corporate governance. This has translated into a regimen of exemplary practices in the management and operation of NBAD. NBAD’s Board of Directors watchfulness, scrutiny, guidance and constant observation, has enabled the executive management to keep NBAD, risk and reputation protected from financial misfortune over the last four decades.

NBAD demonstrates a correlation between good corporate governance and superior financial performance, and is an outstanding example of this. For 2007, the bank achieved Return on Equity (ROE) 2007: 26.3% one of the highest in the UAE and the region, and a net profit of AED 2,505 million up 19% on 2006 with a compound annual growth rate (CAGR) from 1999 to 2007 of 30%. In addition, our credit rating remained the highest assigned by international credit rating agencies to a UAE bank, which compares favorably with ratings of banks in Europe, North America and Australasia.

Corporate governance is at the heart of the bank. The Board of Directors and the Executive management already implement a number of corporate governance ‘best practices’ with regard to the Structure and Functioning of the Board of Directors, the Control Environment and Processes relating to Internal Control, Internal Audit and External Audit; with regard to overall Transparency and Disclosure, and the Treatment of Minority Shareholders.

To improve the bank’s performance and services offered to its customers and the community, the Board established the Corporate Governance Committee (CGC) in 2006, headed by the

Chairman and two board members. The CGC assists the Board in shaping and monitoring the corporate governance policies and practices, and evaluating compliance of them. It ensures that borrowing by directors and senior management is always transparent, and that directors and senior management of the bank avoid trading in NBAD shares during the stipulated ‘closed’ period prior to the bank’s scheduled earnings and other market announcements.

To increase the effectiveness and independence of the review of the bank’s internal controls, the Internal Audit & Compliance department reports independently to the Audit Committee of the Board.

The Board of Directors through its sub-committees is also closely involved in the review of the bank’s long term strategy and the extent of its implementation, as well as review of issues relating to executive remuneration, succession planning, staff welfare, corporate social responsibility and the protection of shareholders interests.

ACHIEVEMENTS: We see ourselves as a role model with respect to Corporate Governance practice as we have already implemented a number of Corporate Governance ‘best practices’ as directed by the various Board committees:

• Risk Management Committee

• Compensation and Nomination Committee

• Audit Committee

• Corporate Governance Committee

• Remedial Advances Committee

2008 TARGETS: We have taken a proactive approach towards implementing stringent corporate governance throughout the bank. In 2008, we expect to continue to engage with local practitioners and experts of corporate governance for the purposes of achieving better understanding. We see this interaction and dialogue as a vital means of keeping abreast of local and regionally relevant best practices in order to implement stringent corporate governance in line with developments and requirements in the UAE.


Furthermore, we are working towards becoming fully compliant with the ESCA requirements by 2010.

Our commitment to proactive and responsive engagement with the UAE Central Bank and other local and international regulators on issues of concern to the financial sector in general and the banking industry in particular, remained a priority in 2007, and will continue in 2008.

Complaints about latepayment of

bills

Number of customercomplaints

Averagetime to

paybills

Levels ofcustomer

satisfaction

Accessibilityto special

needscustomers

3. EXTERNAL STAKEHOLDER ENGAGEMENT

Communication and engagement with our external stakeholders is imperative to achieving NBAD’s mission. Engagement assists us in understanding concerns, so that we can continuously review our services, products and policies to ensure that we inspire trust in our external stakeholder relationships.

Suppliers

In 2007 we realised that we can play a proactive role in influencing our suppliers, in areas such as packaging, environmental effects of their waste and creating a demand for recycled and renewable consumables. We also began to understand the growing expectations by stakeholders to work with responsible suppliers.

2008 TARGET: By the end of 2008, we expect to have implemented the CSR criteria that can be implemented along our supply chain in 2009.

Customer engagement

NBAD’s Official Customer pledge is as follows:

We will listen to youWe will understand your needs

We will dedicate all our energies to serving you

At NBAD, the starting point for everything we do, begins with our customers. Our business is to serve them and help them achieve their needs. During 2007 we reviewed our standards for customer service across the bank, implementation mechanisms for monitoring the quality of service across our branch network and call center. We plan to continue to monitor the effectiveness of these approaches in 2008.

ProductsWe are committed to developing the right products and services for our customers. While we are an Arab bank, in the UAE our customers come from a wide and diverse background. We are continually examining, reviewing and exploring new ways that we can personalize the customer experience and introduce products and services that meet the needs of our dynamic and diverse customer base. We also continue to remain diligent in ensuring that our product information is straightforward and clear to make certain that all our customers find the information accessible.

During 2007, we launched ‘Ratibi’, a payroll ATM card which was designed in response to the UAE Labor Law objective of providing salary payments to low paid laborers and employees through a bank account. The benefits of Ratibi are expected to be:

• A reduction in the traffic in NBAD branches

• The replacement the payment of employee wages which were being settled in through cash or cheque payments through the provision of a pre- paid ATM card

• Providing Ratibi customers with the flexibility of making cash withdrawals via ATMs as well as using the card for debit purchases on POS machines.

Treating our customers fairlyOur aim is to handle all issues quickly and fairly. We spent time throughout 2007 reviewing our complaint

handling procedures, and the background of the complaints received in order to develop the effectiveness of our response and resolution process. We also looked at the levels of training our employees received and how we can invest more to achieve an improved experience for our customers.


Community engagement became increasingly significant for NBAD in 2007. We looked beyond the traditional methods of donating and sponsoring events, to consider the value of setting a measurable, accountable strategy aligned to our core business activities, expertise, networks and resources. Moreover, we began to consider the key issues affecting the communities within the UAE where

we have branches and operations. We have worked hard to design a strategy for 2008 that will result in initiatives that will strengthen the relationships between our business, members of the community and the government whilst providing our people with the opportunities to get involved and at the same develop their skills.

4. NBAD IN THE COMMUNITY

Improved educational

knowledge or number of jobs

created

Value of employee

volunteer time, management

costs

NBAD as a ‘good

neighbour’perception

Cross-sectordialogue

Conservation of natural

resources andenvironment

Media comment on

activities

Increase in employee

engagement/morale

2008 targets: To establish a dedicated team focusing on identifying and resolving systematic issues through a strategic customer excellence programme.

ATMs and branchesWe have a significant branch network across the UAE, backed up by an ATM network. During 2007, we looked at the issues of refurbishment, accessibility for disabled people and investment in more branches and ATMs.

2008 TARGETS: • open 28 new branches to bring our total number of branches in the UAE to 103• expand our ATM network from 193 to 320 • install 20 cash and cheque deposit machines in our leading branches• install internet kiosks in 10 leading branches to provide access to NBAD website and nbadOnline directly from branches• improve security of ATMs

Internet Banking Unit: We will continue the development of online banking services and supporting banking security features.

2008 TARGETS:• New corporate website • New online banking system project to be initiated• Ongoing campaign to educate customers of the convenience of online banking. “Why wait in line when you can go online?”

Call Center: During 2007 the Call Center underwent a restructuring process, with a new Call Center Manager appointed to ensure greater levels of efficiency and higher delivery levels.

2008 TARGETS:• Number of Call Center agents to be increased to 100• Implementation of new protocol and procedures to strengthen relationship with NBAD branch network• Physical relocation of the Call Center • New incentive program for Call Center staff


The ultimate aim of our community development strategy is to encourage sustainable growth through responsible behavior and by building partnerships to achieve greater societal contribution and bigger impact.

We also reviewed our process for managing the high number of adhoc sponsorship requests we receive. As a leading national bank, we need to ensure that we follow a transparent process to evaluate and approve sponsorship requests. As a result we are moving towards a more risk-based approach.2008 TARGETS: To implement initiatives that support:• financial literacy, community learning, knowledge sharing, inclusion• community well-being• conservation of natural resources and the environment• employee volunteering During 2008, we expect to finalize the sponsorship and donation request evaluation criteria for use by NBAD. The process will be used in all departments and information and application forms and the applications forms and details of the application criteria and evaluation process will be available on both the web and intranet pages.

We aim to attract, motivate and retain the most talented people with the aim to be an ‘employer of

choice’. To achieve this we recognize that we must provide our employees with an exceptional working environment, offer them attractive incentives, treat them with respect and provide them with opportunities for both career and personal development.

Employees are the heart of our success as a bank. Due to the highly competitive and rapidly changing UAE financial environment, NBAD people are the key to our competitive success. As we continually examine ways of being a socially responsible employer, we consider the importance of employee rights at the top of our agenda. With this in mind, we make every effort to provide a safe and healthy workplace, fair and accessible policies and procedures and encourage an environment which nurtures and supports open employee dialogue.

We provide attractive and fair compensation and benefits, and invest in our employees through career development programs, on the job training, career succession opportunities and ongoing training and professional development.

ACHIEVEMENTS: As a responsible employer, we work hard to promote a strong culture of work-life balance to ensure our employees well-being. At the end of 2007, we changed our annual leave entitlement policy to ensure that NBAD employees were utilizing their full annual vacation allowance. We saw this as an important step in encouraging our employees to spend time with their families, supporting work-life balance and thereby increasing levels of productivity and efficiency. We also saw it as a way to encourage empowerment within NBAD the risk of over dependence on certain employees.

Compensation and benefitsNBAD’s Human Resources Group provides policies

5. NBAD EMPLOYEES

Value of employee

training anddevelopment

Workforce profile

(nationality, gender, age, disability, etc)

Perception measures of

NBAD

Staffgrievances

Pay, benefits, and conditions

compared against thelocal market

Employeeabsenteeism

Employeeattrition/

turnover rate


and practices that create a workplace capable of motivating, developing and rewarding employees to achieve success, encourage teamwork and provide opportunities for continued professional development.

We are committed to continuously reviewing our total compensation package, particularly with a view to making our benefits as attractive as possible, especially amongst our peers. We believe this will allow NBAD to attract and retain the best employees.

ACHIEVEMENTS:

• Improved employee medical insurance offering

• Increased employees’ life insurance from three times annual salary to four times annual salary, this made a particular impact to staff employed in lower grades

• Participated and conducted a number of salary surveys to benchmark NBAD with peers in the market, with the aim to be positioned in the upper market quartile 2008 TARGETS:

• Increase housing allowances for all grades in a phased approach, commencing with the junior grades

• Increase employee’s cost of living allowance

• Conduct research into regional housing market conditions to align housing allowances across all Emirates

Annual training program

In 2007, the annual training program, managed by the Learning and Development department, specifically

addressed the development of the core competencies required to enable our people to perform effectively and productively. The training programme is accessible to employees via the intranet.

Learning and development

We are committed to continual investment in developing the skills of our people to ensure that we maintain levels of excellence. In addition to the annual training programme, we provide all of our people with ample annual competency based, structured training opportunities to develop themselves. Each employee receives an allowance to attend a minimum of three training courses per annum.

Building a talented and diverse workforce

The UAE government sets quotas for banks operating in the UAE to provide jobs for Emiratis. At NBAD we take this responsibility seriously. However, we are committed to a proactive approach by providing not only competitive salaries and compensation to attract Emiratis, but a clear career progression plan. The career progression plan covers development, training and learning to build knowledge and capacity within the national workforce.

Additionally, our commitment to providing equal opportunity to all our employees remains strictly in accordance with all UAE Central Bank laws, directives and regulations and is constantly reaffirmed through our policies and ongoing review, measurement and improvement.

31 December 2007

Total employees 2,249

Employee turnover in 2007 249

Nationalities represented 49

Female employees 738

Male employees 1,299

UAE Nationals 533

At the end of 2007 our workforce comprised of 49 nationalities. Female employees totaled 738 representing 36 per cent of the workforce. Females also made up 69 per cent of employees undertaking Chartered Banker and Chartered Accountant training.

We believe that diversity and inclusion will enable us to become more creative and innovative, resulting in benefits to our customers. During 2008, we will be considering how we can take a more proactive approach towards creating better understanding of the importance of diversity and inclusion, particularly in terms of integrating disabled employees into our workforce. We aim to implement a programme for encouraging disabled and special needs people to apply for employment at NBAD and are currently exploring partnerships with UAE national employment programs and special needs Centers in the country.


Health Day 2006 Health Day 2007 Plans for Health Day 2008

Health service provider:

• New Medical Center

Health service provider:

• New Medical Center

Prospective health service providers increased to 3:

• UAE Genetic

Diseases Association

• Two others to be confirmed

Health checks carried out:

• Blood pressure

• Blood sugar

• BMI (Body Mass Index)

• Lipid profile

Health checks carried out:

• Blood pressure

• Blood sugar

• BMI (Body Mass Index)

• Lipid profile

Health checks to be finalized, but expected to include:

• Genetic screening, including Thalassemia, Sickle Cell anemia

• Blood sugar

• Blood pressure

• BMI

• Well woman check

Raising awareness of the benefits of a healthy diet

Raising awareness of the benefits of a healthy diet

We expect to build on the last two years and are entering discussion with nutritionists, dieticians and healthy food caterers and organic food suppliers.

Health seminars

• Diabetes

• Health Awareness for Women

Health seminars

• Good nutrition

• Cancer

• Cosmetic surgery

• Depression

Health seminar subjects to be decided based on the current challenges and needs faced by NBAD as an employer and the health and well-being of our people and their families.

Engaging our people

Our employees are our most important asset. Effective employee engagement results in increased productivity, loyalty and ultimately higher revenue.

We carry out employee engagement surveys annually, and use the results to plan our human resource strategy and improve our existing engagement action plan.

Employee wellbeing

Happy and healthy employees result in an efficient and productive workforce. Our employees’ health inside and outside the workplace is a top priority. To this end, we conduct an annual Head Office, NBAD Health Day, which is part of the ASK annual lecture series.

In 2007 over 164 employees attended and underwent medical screening during the event. The focus in 2007 was on raising employee awareness of different health issues, including health screening for blood pressure and diabetes and lipid profile tests.

2008 TARGETS:

In 2008, one of our primary goals will be to encourage higher attendance from the NBAD branches network, and increase the overall attendance by 10% per year. We will focus on particular health challenges faced by NBAD as an employer and those conditions prevalent across all communities in the UAE. We will provide information learning to raise awareness and encourage our employees to take a proactive and preventative approach to their health and well being, whilst promoting the need for staff to maintain a healthy balance between work and personal life.

The UAE health authorities are particularly concerned about the high levels of diabetes, obesity, and Thalassaemia amongst people residing in the country. As a responsible employer, we will work towards providing awareness material for our employees to ensure that they minimize their health risks in these areas. These issues will be included in the 2008 NBAD Health Day.


6. HELPING CUSTOMERS TO MEET THEIR FINANCIAL NEEDSNBAD’s large and diverse customer base is the lifeline of our business. We take customer engagement and feedback seriously and we accept responsibility for how each individual customer experience takes place with the aim of achieving customer delight. Listening to and understanding the needs of our customers is our primary focus and we encourage feedback from our stakeholders. We have a number of ladies branches staffed entirely by ladies. We also provide customers with a wide variety of saving and investment opportunities and assist them in managing their borrowing needs by advising them on loan repayment options. We try hard to understand the needs of our customers so the financial products and services we offer are suitable for each individual customer. Some of the specific customer initiatives we have undertaken over the last two years include:

• The concept and practice of online customer engagement enable NBAD rapidly respond to the fundamental changes in customer behavior. • Creation of banking and financial products which are designed to the needs of the customer (Doctors banking, student banking, start up loans, Ladies banking).• Improving our customer’s service and complaint management systems at branches and via the Call Center.• Extending the Call Center service to a 24 X 7 Call Center to support customers round the clock.• Establishing a mobile sales force called NbadDirect, where the staff visits the customer to complete all banking formalities. • Introducing money transfer services between a customer’s NBAD cards. • Enhancing internet banking security with the introduction of Secure ID tokens.• Establishing wealth management services, besides many other services.

7. ENVIRONMENT We are continuously looking at how we can approach environmental issues with a view to creating positive influence amongst our stakeholders. During 2007, we considered the implementation of robust environmental impact management and conservation activities and realized that information on an organization’s carbon footprint and CO2 emissions is becoming increasingly important to stakeholders.To further develop employee awareness of the importance of environmental issues, we endorsed employee attendance at free community seminars with topics ranging from resource conservation, climate change and global warming. These opportunities are communicated on a monthly basis through our intranet. We recognize that there are limits to the natural environment’s ability to provide materials and meet all our needs. We gained a better understanding of

the difficulty in responsibly balancing the use and the conservation of natural resources. Throughout 2007, and continuing in 2008, we will continue to focus on raising internal awareness to encourage and embed a culture of Reduce, Re-use, and Recycle. We will also engage with our stakeholders to gain a better understanding of their, needs and concerns. NBAD continued to work with local environmental NGOs including Emirates Environmental Group, Emirates Wildlife Society-WWF, Friends of the Environment and the EAD throughout 2007. The aim was to involve the bank in community activities which raised environmental awareness amongst school children and college students, while engaging NBAD employees in the clean-up campaigns.

NBAD planned environmental impact approach 2008

• Engage in environment and climate change debate

• Increase our use of renewable/recycled products where possible

• Understand, identify and manage future environmental risks and opportunities such as climate change• Raise awareness of environmental issues and engage NBAD people in Reduce, Re-use, Re-cycle initiatives within the bank and throughout the community.• Partner with environmental NGOs to raise awareness of environmental issues and concerns

Clean up UAE campaign 2007

2006 2007Total number of

participants in Abu Dhabi 3900 4500

Total number of schools participated in Abu Dhabi 70 45

Total number of waste collected in Abu Dhabi

32tons

25tons

Total number of participants – entire UAE

16700 17500

Total amount of waste collected – entire UAE

70.2tons

115tons


NBAD has supported the annual EEG ‘Clean Up the UAE’ campaign since 2005 as a sponsor and through the active participation of NBAD employees at the event. In 2007, we took a more proactive approach by preparing an educational fact sheet for the students to promote learning relating to the types of waste collected during the event, and how it has a greater impact on the planet. Whilst the number of schools participating in Abu Dhabi decreased in comparison with 2006 figures, the overall participants increased, and on a national level the tonnage of waste and number of participants increased significantly.

2008 TARGETS:During 2008 we expect to take an incremental and strategic approach which will involve awareness-raising and engaging employees in volunteering in environmental initiatives at NBAD. By continuing to support the Clean Up UAE campaign, we expect to see a 10 per cent increase in the number of NBAD volunteers, and we will be implementing an internal process to measure the outcomes of our participation by the end of Q3, 2008.

Reduce, Re-use, RecycleRecycling at NBAD was initiated in 2003 and a partnership with EEG was established to commence collection and measurement of wastepaper in 2004.

Our existing wastepaper recycling programme has been redesigned and launched with a supporting awareness campaign. The purchase and installation of new recycling bins in all UAE branches and supporting information and facts will be placed on the NBAD intranet. This will continue throughout 2008.

2008 TARGETS: • Installation of new wastepaper recycling bins in all UAE branches with robust measurement system in place.• Implementation of toner cartridge recycling program.• Implementation of mobile phone recycling program in partnership with the Envirofone national mobile phone initiative• Implementation of an intra-branch competition to encourage employee engagement and recruit ‘recycling champions’.

• Evaluation and target setting to reduce paper use, paper waste and active recycling as much as possible. • Employee recognition and reward scheme for active recyclers/recycle champions.• Review of other forms of waste, and feasibility to introduce the use of recycled/renewable products, such as recycled paper, re-manufactured toners, reduced use of disposable items and waste generation. • Implementation of ISO14000 certification • Review of the feasibility of recycling defunct IT equipment

Energy, water and buildingsAs a bank, we have already been looking at our existing water and electricity usage. In line with government requirements, our new buildings will be increasingly more sustainable with plans to implement a more stringent approach to our environmental management.

2008 TARGETS: Engagement by NBAD people will be a key element of reducing wastage of water, electricity as well as generating new ideas for conservation. In 2008, we will post a comprehensive employee awareness

questionnaire, which will provide us with feedback on the attitudes and engagement of our people in this area.

Environmental risks and opportunitiesWith the launch of local government and federal government strategic plans, there is more emphasis on sustainability in business especially in terms of conservation and use of natural resources.

Throughout 2007, we gained a better understanding of the new and ever-more complex challenges facing us in terms of environmental issues.

During 2008, we will look at the opportunities of such risks and see if there are opportunities to turn them to our competitive advantage. New standards and guidelines are emerging which are encouraging growth in areas such as socially responsible investments, guidelines to exploit corporate financing of environmental projects – we will consider how we can approach and if relevant integrate these new ways of doing business with a planned strategy of implementation.

Achievement through EEG:

Name Jan Feb March April May June July August Sept October Nov Dec Total

National Bank of AUH 240 370 320 340 440 620 1510 1910 1420 1690 1500 1320 11680

Name Jan Feb March April May June July August Sept October Nov Dec Total

National Bank of AUH 1260 1300 1480 980 760 2400 2520 2790 880 1440 2320 1190 19320

6th Cycle-Paper Collection report 2006

7th Cycle-Paper Collection report 2007


Initiatives – 2007 Details Outcome / expected outcome

Environment Exhibition – January 2007 Abu Dhabi

We set up an environment stand, distributed give aways, and usedNBAD branded buses for transporting exhibitors and press to/from exhibition

• Demonstrated NBAD’s commitment to the environment

NBAD Blood Drive - Head Office, Abu Dhabi February 2007

Set up tents and decorated Head Office to promote the event

• Over 250 donors including NBAD employees • Raised awareness of the benefits of being a blood donor

Sponsorship and participation in the Terry Fox Run, February 2007, Abu Dhabi

1. Supported community event 2. Build team spirit amongst employees 3. Support cancer awareness and research

• 180 NBAD people participated • Received “Highest Staff Participated Award”• Publicity • Raised employee morale

Al Dheeya Rehabilitation Center, Abu Dhabi

NBAD made a AED 50,000 donation to this centre for children’s rehabilitation

Awareness Sharing Knowledge (ASK) lectures held at Head Office1. Driving Excellence through CSR and Sustainability Management, March 20072. Prospects of the UAE Real Estate, June 2007

1. Organized and hosted lectures on business related issues.2. Lecture by Aldar CEO Ron Barrot helped to deepen our relationship with this premier developer in UAE.

• Engaged with the community and business to share and transfer knowledge• Provided opportunities for learning • Topics aligned with NBAD areas of expertise and/ or development • Opportunities for NBAD people to use their knowledge and skills too benefit others

Donation of EEGRecycling Centres

Purchase and donation of EEG recycling centre to Dubai Modern High School and The Petroleum Institute (1 each for male and female campuses)

• Involve students in recycling activities • Raise and spread awareness of the importance of recycling • Raise and spread awareness of environmental challenges affecting individuals/UAE/planet

World Blood Donors Day June2007

Provided decoration and give –aways to the Abu Dhabi Blood Bank

• Supported blood donation and awareness raising

NBAD Health Day August 2007

Engaged New Medical Centre to provide health checks and health awareness sessions for employees and families

• Raised employee morale and loyalty • Raised awareness of healthy lifestyle options• Screening for various medical conditions• Improve management of risk to NBAD from ‘lost time’ through poor employee health• Provision of learning opportunities

NE Blood DriveDecember 2007

Blood collection drive in Dubai at Al Wasl Hospital , Dubai

• Raise awareness of the benefits of being a blood donor

UAE Clean Up drive in Abu Dhabi December 2007

Co-sponsorship of AED 50,000/- to EEG for the clean up event in Abu Dhabi in liaison with the EEG.

NBAD supports a greener and cleaner UAE through the active involvement of people.

• Raise awareness of environmental challenges• Engage with the community through schools• NBAD environmental fact sheet to provide learning to participating students• NBAD promoting healthier diet through distribution of ‘organic’ snacks and drinks• Team building through NBAD employee participation

8. PHILANTHROPY, CHARITY AND COMMUNITY ACTIVITIES

GROUP NETWORK

Branches - UAE

Abu DhabiMain Branch

Telephone: 02 - 6111111 / 6111414

Telefax: 02 - 6275738

P.O.Box: 2993, Abu Dhabi

ADIA *

Telephone: 02 - 6211973

Telefax: 02 - 6212157

P.O. Box: 2993, Abu Dhabi

KHALIDIYA

Telephone: 02 - 4105623 / 4105601

Telefax: 02 - 6667480


Dept. of Social Services & Commercial Buildings*

Telephone: 02 - 6346673

Telefax: 02 - 6326257


ADCO*

Telephone: 02 - 6672642

Telefax: 02 - 6653057


ADMA*

Telephone: 02 - 6263225

Telefax: 02 - 6263295


ADNOC*

Telephone: 02 - 6669143

Telefax: 02 - 6679869


Abu Dhabi Municipality*

Telephone: 02 - 6744749 / 6744750

Telefax: 02 - 6767136


ZADCO*

Telephone: 02 - 6768821

Telefax: 02 - 6768851


HILTON*

Telephone: 02 - 6812280

Telefax: 02 - 6667480


Abu Dhabi Municipality – Al Karama*

Telephone: 02 - 4450568

Telefax: 02 - 4450712

P.O. Box: 46175, Abu Dhabi.

Abu Dhabi International Airport

Telephone: 02 - 5757303 / 5757963

Telefax: 02 - 5757593


Sheikh Rashed Bin Saeed Al Maktoum Road Telefax: 02 - 6419800 / 6415341

Telefax: 02 - 6416677


Abu Dhabi Mall

Telephone: 02 - 6452200 / 6452559

Telefax: 02 - 6452424


Arabian Gulf Road

Telephone: 02 - 4103000 / 4474156

Telephone: 02 - 4478344


Baniyas

Telephone: 02 - 5831625 / 5834374

Telefax:02 - 5833359

P.O. Box: 11700, Baniyas

* Denotes cash offices

Branches - UAE

Abu Dhabi Municipality – Al Wathba*

Telephone: 02 - 5831720

Telefax: 02 - 5831740


Bateen

Telephone: 02 - 6658332 / 6675128

Telefax: 02 - 6663925


Between The Two Bridges

Telephone: 02 - 5589446 / 5588795

Telefax: 02 - 5589447


Corniche

Telephone: 02 - 6919711 / 6919777

Telefax: 02 - 6819122

P.O. Box: 4, Bel-Ghailam Tower, Corniche Rd. Abu Dhabi

Delma Island

Telephone: 02 - 8781240 / 8781605

Telefax: 02 - 8781331

P.O. Box: 50670, Delma, Abu Dhabi

Government Complex (TAMM, Delma)*

Telephone: 02 - 8945528

Telefax: 02 - 8945570

P.O. Box: 50670, TAMM Center,

Delma, Abu Dhabi

Das Island

Telephone: 02 - 8731099 / 6068331

Telefax: 02 - 8731448


Liwa

Telephone: 02 - 8822388 / 8829055

Telefax: 02 - 8822188

P.O. Box: 50419, Western Area, Abu Dhabi

Madinat Zayed

Telephone: 02 - 8846146 / 8846061

Telefax: 02 - 8846496

P.O. Box: 50019, Madinat Zayed, Abu Dhabi

Government Complex (TAMM, MZD)*

Telephone: 02 - 8945428

Telefax: 02 - 8846981

P.O. Box: 50019, Madinat Zayed, Abu Dhabi.

Al Mirfaa

Telephone: 02 - 8836506 / 8836311

Telefax: 02 - 8836313

P.O. Box: 77110, Al Mirfaa, Abu Dhabi

Paris Gallery

Telephone: 02 - 6654900 / 6651215

Telefax: 02 - 6650563

P.O. Box: 110818, Khalidiya Center, Abu Dhabi.

Al Ruwais

Telephone: 02 - 8776343 / 8776271

Telefax: 02 - 8776453

P.O. Box: 11875, Al Ruwais, Abu Dhabi

Al Muroor

Telephone: 02 - 4104202 / 4485833

Telefax: 02 - 4481994


Mussafah

Telephone: 02 - 5553357 / 5554425

Telefax: 02 - 5559997


Dept. of Social Services & Commercial Buildings (Mussafah)*

Telephone: 02 - 5520681



Branches - UAE

NPCC*

Telephone: 02 - 5549282

Telefax: 02 - 5549193


Mussafah Municipality*

Telephone: 02 - 5540300 Ext. 259

Telefax: 02 - 5549193


Industrial City of Abu Dhabi

Telephone: 02 - 5501125 / 5500971

Telefax: 02 - 5501262

P.O. Box: 90855, Mussafah, Abu Dhabi

Al Salam Street

Telephone: 02 - 4103900

Telefax: 02 - 6446050


Al Shahama

Telephone: 02 - 5632411 / 5635707

Telefax: 02 - 5633508

P.O. Box: 76142, Al Shahama

New Al Shahama

Telephone: 02 - 5635695 / 5634542

Telefax: 02 - 5630806


Shahama Municipality*

Telephone: 02 - 5631385

Telefax: 02 - 5631409


National Exhibition Centre

Telephone: 02 - 4493220 / 4494996

Telefax: 02 - 4493788


Marina Mall

Telephone: 02 - 6816002 / 6816013

Telefax: 02 - 6816018


Mina Road

Telephone: 02 - 6761877 / 6767665

Telefax: 02 - 6714143


Al Etihad

Telephone: 02 - 41049450 / 4104951

Telefax: 02 - 6417812


Emirates Palace

Telephone: 02 - 6908900

Telefax: 02 - 6818699


Al Ain

Al Ain Clock Tower

Telephone: 03 - 7642400 / 7642829

Telefax: 03 - 7668150

P.O.Box: 1138, Al Ain

Al Ain

Telephone: 03 - 7516900 / 7516955

Telefax: 03 - 7511616

P.O.Box: 17822, Al Ain

Al Nada Ladies*

Telephone: 03 - 7661221 / 7518300

Telefax: 03 - 7661551

P.O. Box: 17822, Al Ain


Branches - UAE

Al Ain Cement*

Telephone: 03 - 7828060

Telefax: 03 - 7517911


Al Ain International Airport*

Telephone: 03 - 7855511

Telefax: 03 - 7855588


Al Ain Defence*

Telephone: 03 - 7688824

Telefax: 03 - 7688879


Al Sanaiya

Telephone: 03 - 7213222 / 7213111

Telefax: 03 - 7212155


Sweihan

Telephone: 03 - 7347919 / 7347050

Telefax: 03 - 7347414

P.O. Box: 10033, Sweihan

Al Hayer

Telephone: 03 - 7322400 / 7321414

Telefax: 03 - 7322500

P.O. Box: 17087, Al Hayer, Al Ain

Al Maqam

Telephone: 03 - 7684313 / 7684009

Telefax: 03 - 7684451

P.O. Box: 85313, Al Maqam

Al Ain Mall

Telephone: 03 - 7519900 / 7512626

Telefax: 03 - 7513636


Ajman

Ajman

Telephone: 06 - 7422996 / 7472525

Telefax: 06 - 7425750

P.O. Box: 988, Ajman

Dubai

Deira

Telephone: 04 - 7033770

Telefax: 04 - 2243777

P.O. Box: 4436, Deira, Dubai

Dubai Side

Telephone: 04 - 3599111 / 3599922

Telefax: 04 - 3517388

P.O. Box: 2372, Dubai Side, Dubai

Jebel Ali

Telephone: 04 - 8815655 / 8816700

Telefax: 04 - 8815181

P.O. Box: 17177, Jebel Ali Area, Dubai

Sheikh Zayed Road

Telephone: 04 - 7071111

Telefax: 04 - 3430527

P.O. Box: 33317, Dubai

Al Qusais

Telephone: 04 - 7058500

Telefax: 04 - 2673960

Address: P.O.Box: 48111, Dubai

Jumeirah

Telephone: 04 - 3499001 / 3445050

Telefax: 04 - 3499012

P.O.Box: 333314, Jumeriah, Area 1, Dubai

* Denotes Cash offices

Mall of the EmiratesTelephone: 04 - 3413888 / 3413111

Telefax: 04 - 3413889


Dubai Health Care CityTelephone: 04 - 4245600

Telefax: 04 - 4298354


Fujairah

FujairahTelephone: 09 - 2222458 / 2222633

Telefax: 09 - 2227241

P.O. Box: 79, Fujairah

Dibba (Al Hisn)Telephone: 09 - 2440677

Telefax: 09 - 2440688

P.O. Box: 144900 – Dibba Al Hisn, Fujairah

Dibba (Muhallab)Telephone: 09 - 2444223 / 2443450

Telefax: 09 - 2442217

P.O. Box: 11500, Dibba, Fujairah

Ras Al Khaimah

Al NakheelTelephone: 07 - 2281753 / 2288654

Telefax: 07 - 2281305

P.O. Box: 5744, Al Nakheel, Ras Al Khaimah

Ras Al Khaimah Telephone: 07 - 2335522 / 2334333

Telefax: 07 - 2330950

P.O.Box: 350, Ras Al Khaimah

Sharjah

Bourj Avenue

Telephone: 06 - 5695500 / 5695400

Telefax: 06 - 5695511

P.O. Box: 20606, Sharjah

Sharjah

Telephone: 06 - 5722292 / 5721111

Telefax: 06 - 5721100


Al Falah Camp Office*

Telephone: 06 - 5385969 / 5389985

Telefax: 06 - 5583455


Al Dhaid

Telephone: 06 - 8822929 / 8823789

Telefax: 06 - 8826006

P.O. Box: 13443, Al Dhaid, Sharjah

Al Madam

Telephone: 06 - 8861212

Telefax: 06 - 8861813

P.O. Box: 48100, Al Madam, Sharjah

Khorfakkan

Telephone: 09 - 2385250 / 2383533

Telefax: 09 - 2383735

P.O. Box: 10092, Khorfakkan, Sharjah

Kalba

Telephone: 09 - 2772112 / 2772481

Telefax: 09 - 2772712

P.O. Box: 11979, Kalba, Sharjah

Umm Al Quwain

Umm Al Quwain

Telephone: 06 - 7660033 / 7667355

Telefax: 06 - 7667577

P.O.Box: 733, Umm Al Quwain


Branches - UAE

Bahrain

Bahrain – Full Commercial Branch

Telephone: +973 17 560870

Telefax: +973 17 583281

Telex: 8982 BAZABI BN

Swift: NBADBHBMBRA

P.O. Box: 5247, Manama,

Kingdom of Bahrain

Address: Building No. 2611, Road No 2833, Al Seef District 428, Manama,

Kingdom of Bahrain

Bahrain - Offshore Banking Unit

Telephone: +973 17 560870

Telefax: +973 17 583281

Telex: 8982 BAZABI BN

Swift: NBADBHBM

P.O. Box: 5886, Manama 304,

Kingdom of Bahrain

Address: Building No. 2611, Road No .2833, Al Seef District 428, Manama,

Kingdom of Bahrain

Egypt

Egypt Regional Office

Telephone: +20 2 37609720 / 37575300 37475330 / 37475000 / 37475102

Telefax: +20 2 37475295

Telex: 93822/3 BNZAB UN

Swift: NBADEGCAXXX

Address: Nile Tower (18th Floor), 21 Giza/Charles de Gaulle Street, Cairo, Egypt

6th October - Main Branch

Telephone: +20 2 38328922/3/8

Telefax: +20 2 38328928

Telex: 20250

Swift: NBADEGCAOCT

Address: 52, H. Al Mahwar Al Markazy, Banks District, 6th October City, Egypt

Giza Branch - Elite Banking Unit

Telephone: +20 2 37475000 / 37475300 / 35735337/42/62

Telefax: +20 2 37475296 / 35705425


Swift: NBADEGCAGZA

Address: Nile Tower, 1st & 3rd Floors, 21 Giza/Charles de Gaulle Street, Cairo, Egypt

Talaat Harb Branch

Telephone: +20 2 23934196 / 53

Telefax: +20 2 23931527 (General)

+20 2 23914958 (Clearing House)

+20 2 23936644 (Forex Exchange)


Swift: NBADEGCATHB

Address: 22, Kasr El Nil Street, Talaat Harb, Cairo, Egypt

Mohandessin Branch

Telephone: +20 2 33365572 / 3 / 4 / 6

Telefax: +20 2 33365569

Telex: 20138 BNZAB UN

Swift: NBADEGCAMHD

Address: 35, Mohie el Din Abu el Izz St., El Mohandessin, Giza, Cairo, Egypt

Heliopolis Branch

Telephone: +20 2 26902657 / 24177631 Telefax: +20 2 24177632 Telex: 22226 UN Swift: NBADEGCAHLP

Address: 13A, Ramsis Street, From Salah Salem Road, Heliopolis, Cairo, Egypt

City Stars Branch

Telephone: +20 2 4802182

Telefax: +20 2 4802183

Swift: NBADEGCAHLP (through Heliopolis branch)

Address: Unit No. 148, City Stars Mall, Nasr City, Cairo, Egypt


Branches - Overseas

Branches - Overseas

Maadi Branch

Telephone: +20 2 23596459 / 22359573 / 23595731

Telefax: +20 2 23583887 / 23588945

Telex: 20047 UN

Swift: NBADEGCAMAD

Address: Crossing of Roads 151/152 (near Horreya Square) Maadi, Cairo, Egypt

Maadi City Center Branch

Telephone: +20 2 25204375 / 76 / 77

Telefax: +20 2 25204378

Swift: NBADEGCAMAD (through Maadi branch)

Address: Maadi City Center, Ring Road, Medinat El Mirage 11435, Unit No. 27, Katameya Road, Cairo, Egypt

Salah Salem Branch - Alexandria

Telephone: +20 3 4846302/4879903

Telefax: +20 3 4847114

Telex: 54366 ALZAB UN

Swift: NBADEGCAALX

Address: 28, Salah Salem Street, Alexandria, Egypt

Sporting Branch - Alexandria

Telephone: +20 3 4203401 / 02 / 03

Telefax: +20 3 4203409

Telex: 54211 ALZAB UN

Swift: NBADEGCASPT

Address: 243, El Horreya Avenue, Sporting, Alexandria, Egypt

Alexandria City Center Branch

Telephone: +20 3 3970080 / 82 / 83 / 84

Telefax: +20 3 3970081

Swift: NBADEGCASPT (through sporting branch)

Address: City Center, Alexandria, Egypt

Port Said Branch

Telephone: +20 66 3322017 / 3223797

Navigation Section: +20 66 3224984

Telefax: +20 66 3235814

Telex: 63242 PORZAB UN / 63018 PSHIP UN

Swift: NBADEGCAPSD

Address: El Salam Tower, Sultan Mahmoud Street, Tarh el Bahar No. 4, Port Said, Egypt.

Mansoura Branch

Telephone: +20 50 2329971 / 72 / 73 / 74

Telefax: +20 50 2329980

Telex: 21219 MNZAB UN

Swift: NBADEGCAMNS

P.O. Box: 350, Mansoura, Egypt

Address: 242, AL GUESH STREET, Mansoura, Egypt

Hurghada Branch

Telephone: +20 65 3443424 / 86 / 85 / 75

Client Servicing:+20 65 3443446

Telefax: +20 65 3443475

Swift: NBADEGCAHRG / NBADEGCAHUR

Address: West Side Tourism Center, Shop 1-3, Al Mashaia Area, Hurghada, Red Sea, Egypt

Sharm El Sheikh Branch

Telephone: +20 69 3601216 / 17 / 18 / 21

Telefax: +20 69 3601219

Swift: NBADEGCASHK

Address: Golden Center, Unit No. 19, Ground Floor, Al Salam Street, Na’ama Bay, Sharm El Sheikh, South Sinai, Egypt

Sharm El Sheikh Cash Office*

Telephone: +20 69 3602696

Telefax: +20 69 3602693

Address: Sanafir Hotel, Unit No: 2, Na’ama Bay, Sharm El Sheikh, South Sinai, Red Sea, Egypt

Al Akkad Branch

Telephone: +20 2 22752236 / 22752207 / 22752382

Telefax: +20 2 22752376

Swift: NBADEGCAAKD

Address: 36, Al Akkad Street, Nasr City, Cairo, Egypt

San Stefano Branch

Telephone: +20 3 4690017 / 4690029

Telefax: +20 3 4690028

Address: San Stefano Grand Plaza, Alexandria, Egypt

Luxor Branch

Telephone: +20 95 2272712 / 2272618 / 2382618 / 2382712

Telefax: +20 95 2272521

Swift: NBADEGCALUX

Address: Khaled Ibn Al Waleed Street, Sonesta St. George Hotel, Luxor, Egypt

Dandy Mall Branch

Telephone: +20 2 35391897 / 35390386 / 35391867

Telefax:+20 2 35391868

Swift : NBADEGCAOCT

Address: K.M. 28 Cairo Alex., Desert Road Unit No: 23, Dandy Mall directly before Toll Station, Giza, Egypt

Assiut Branch

Telephone: +20 88 2285396 / 97 / 98 / 99 Telefax: +20 88 2285394 Swift : NBADEGCAASU Address: 32A, Tanzeam 40 Awaed El Gomhoria Street, Assiut, Upper Egypt

Tanta Branch

Telephone: +20 40 3357331 / 3357362 Telefax: +20 40 3357365 Swift: NBADEGCATNT Address: 22, El Geish Street, Al Sarayah Tower, Tanta, Gharbia, Egypt

France

Paris Branch

Telephone: +33 1 53230280

Telefax: +33 1 47208160

Telex: 642710 ABUDHBD / 642712 ABUDHBK

Swift: NBADFRPP

Guichet: 17989 00001

Address: 125, Avenue des Champs Elysees, 75008, Paris, France

Kuwait

Kuwait Branch Telephone: +965 2477173 Telefax: +965 2495196 / 97 / 98 Swift: NBADKWKW P.O. Box: 2620, Safat, Kuwait Postal Code: 13027, Safat, Kuwait Address: Al Bahar Tower, Ahmed Al Jaber Street, Sharq, Kuwait

Oman

Oman Main Branch

Telephone: +968 24761000

Telefax: +968 24761010 / 24789101

Telex: 3740 ALMASRAF ON

Swift: NBADOMXXXX

P.O. Box: 393, Ruwi, Sultanate of Oman

Postal Code:112, Ruwi, Sultanate of Oman

Address: Al Safa Building, Ruwi,

Sultanate of Oman

Branches - Overseas

Al Khoudh Branch

Telephone: +968 24545901 / 02

Telefax: +968 24545904

P.O. Box: 1092, Al Khoudh,

Sultanate of Oman

Postal Code: 132, Al Khoudh,

Sultanate of Oman

Address: Al Khoudh Commercial Street, Building No. 356, Al Khoudh,

Sultanate of Oman

Sohar Branch

Telephone: +968 26845567 / 26845323 / 26845272 Telefax: +968 26845644

P.O. Box: 25, Sohar, Al-Traif,

Sultanate of Oman

Postal Code: 321, Sohar, Al-Traif,

Sultanate of Oman

Address: Sohar, Al-Traif, Sultanate of Oman

Al Khuwair Branch

Telephone: +968 24482689 / 24481569

Telefax: +968 24482329

P O Box: 458, Al Khuwar, Sultanate of Oman

Postal Code: 130, Al Khuwar,

Sultanate of Oman

Address: Al Khuwar, Ice-Skating building,

Sultanate of Oman

Qurum Branch

Telephone: +968 24565277 / 24563948 / 24564773

Telefax: +968 24563935

Address: Al Qurum, ROP Parking area, Sultanate of Oman

Nizwa Branch

Telephone: +968 24761381

Telefax: +968 24761380

Address: Nizwa, Sultanate of Oman

Sudan

Sudan Regional Office

Telephone: +249 183 787750

Telefax: +249 183 761170

Telex: 22249 NBAK SD / 22676 NBAK SD

Swift: NBADSDKH

P.O.Box: 12147, Khartoum, Republic of Sudan

Address: Taka building, Atbara Street, 4th floor Apartment # 41- 42, Khartoum,

Republic of Sudan

Khartoum Branch

Telephone: +249 183 787203 / 778517 / 772345

Telefax: +249 183 774892

Telex: 22249 NBAK SD / 22676 NBAK SD

Swift: NBADSDKH

P.O. Box: 2465, Khartoum, Republic of Sudan.

Khartoum North Cash Office

Telephone: +249 185 343833 Telefax: +249 185 343227

P. O. Box:1138, Khartoum North,

Republic of Sudan Postal Code: 13311, Khartoum North,

Republic of Sudan Address: Sinaat Street, Khartoum North, Republic of Sudan

United Kingdom

London Branch

Telephone: +44 207 3933600

Telefax: +44 207 3933636

Telex: 290475 MASRAF G / 896867 NBAD WE G

Swift: NBADGB2L

Address: One Knightsbridge, London SW1X 7 LY, U.K

Branches - Overseas

Branches - Subsidiaries

Subsidiaries

United Kingdom

NBAD Nominees Limited

Telephone: +44 207 3933600

Telex: 290475 MASRAF G

Address: One Knightsbridge, London SW1X 7 LY

United States of America

Abu Dhabi International Bank Inc.

Telephone: +1 202 8427900

Telefax: +1 202 8427955

Telex: 197655/56/57 ADIB WSH

Swift: ADIBUS33

Address: 1020, 19th Street, N.W., Suite 500, Washington D.C. 20036, U.S.A.

Netherlands Antilles

CuracaoOffice

Address: W.F.G. (Jombi) Mensing 36,

P.O. Box: 3141, Curacao, Netherlands Antilles

Switzerland

NBAD Private Bank (Suisse) SA

Telephone: +41 22 7075000

Telefax: +41 22 7075010

Address: 5 Quai de l’lle, 1211 Geneva 11, Switzerland

P.O. Box: 5055, 1211 Geneva 11, Switzerland

Jersey Channel Islands

NBAD Trust Company (Jersey) Limited

Telephone: +44 1534 609000

Telefax: +44 1534 609333

Address: C/O Mourant Private Wealth, 22 Grenville Street, St. Helier, Jersey JE4 8PX, Channel Islands

P.O. Box: 87, Jersey, Channel Islands

United Arab Emirates

Abu Dhabi National Leasing LLC

Telephone: +971 2 6111629

Telefax: +971 2 6269111

P.O. Box: 4, Abu Dhabi, United Arab Emirates

Address: One NBAD Tower, Sheikh Khalifa Street, Abu Dhabi, United Arab Emirates

Abu Dhabi National Islamic Finance Pvt. JSC

Telephone: +971 2 6115111

Telefax: +971 2 6220949

P.O. Box: 40057, Abu Dhabi,


Abu Dhabi Financial Services Company

Telephone: +971 2 6161600

Telefax: +971 2 6273285

P.O. Box: 28400, Abu Dhabi,


VISION, MISSION, CUSTOMER PLEDGE, VALUESAND CSR POLICY

OUR VISION

To be the number one Arab Bank

OUR MISSION

To provide our customers with the best services

OUR CUSTOMER PLEDGE

We will listen to you

We will understand your needs

We will dedicate all our energies to serving you

OUR VALUES

Value our stakeholders

Accessible to our customers 24 x 7

Loyal to our heritage but global in our outlook

Understand our customers needs

Empower our people

Strive constantly for organizational excellence

OUR CORPORATE SOCIAL RESPONSIBILITY POLICY

To act as a role model in the social and environmental development of the UAE.

www.nbad.ae

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