cooperative and agricultural credit bank[2]

8/8/2019 Cooperative and Agricultural Credit Bank[2]

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COOPERATIVE AND AGRICULTURAL CREDIT BANK

FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2006AND INDEPENDENT AUDITORS REPORT


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FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2006AND INDEPENDENT AUDITORS REPORT

TABLE OF CONTENTS

Page

1. Independent Auditors Report 1

2. Balance Sheet 2

3. Statement of Income 3

5. Statement of Cash Flows 4

6. Statement of Changes in Equity 6

7. Notes to the Financial Statements 7 - 38


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INDEPENDENT AUDITORS REPORT

TO THE CHAIRMAN AND BOARD OF DIRECTORSOF THE COOPERATIVE AND AGRICULTURAL CREDIT BANK

Report on the Financial Statements

We have audited the accompanying financial statements of the Cooperative and Agricultural Credit Bank (theBank), which comprise the balance sheet as at 31 December 2006, and the income statement, statement of changes in equity and cash flow statement for the year then ended, and a summary of significant accounting

policies and other explanatory notes.

Managements Responsibility for the Financial Statements

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

Auditors Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conductedour audit in accordance with International Standards on Auditing. Those standards require that we complywith ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financialstatements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in thefinancial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making thoserisk assessments, the auditor considers internal control relevant to the Banks preparation and fair

presentation of the financial statements in order to design audit procedures that are appropriate in thecircumstances, but not for the purpose of expressing an opinion on the effectiveness of the Banks internalcontrol. An audit also includes evaluating the appropriateness of accounting policies used and thereasonableness of accounting estimates made by management, as well as evaluating the overall presentationof the financial statements.

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


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Opinion

In our opinion, the financial statements present fairly, in all material respects, the financial position of theCooperative and Agricultural Credit Bank as of 31 December 2006, and of its financial performance and itscash flows for the year then ended in accordance with International Financial Reporting Standards.

Report on Other Legal and Regulatory Requirements

We further report that during the course of our audit, we have not become aware of any material violation of the Commercial Banks Law No. (38) of 1998, the Corporative Agricultural Credit Bank Law No. (39) of 1982 and the instructions of the Central Bank of Yemen, which would have had a material effect on the

business of the Bank or on its financial position.

Deloitte Touche (M.E.) & Partner

Sanaa Republic of Yemen23 April 2007


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The attached notes from 1 to 40 form an integrated part of these financial statements3

BALANCE SHEETAS OF 31 DECEMBER 2006

Notes31 December

2006

31 December

2005YER YER

ASSETS

Cash on hand and reserve balances with Central Bank 6 7,927,053,936 1,824,092,606

Due from banks 7 8,773,008,238 8,574,998,358

Certificates of deposit with Central Bank of Yemen 8 8,750,000,000 600,000,000

Treasury bills 9 7,640,991,265 1,396,751,390

Government bonds 10 4,460,866,408 -

Investments 11 57,000,000 57,000,000

Loans and advances to customers (net of provision) 12 15,398,775,497 13,818,103,264

Debit balances and other assets 13 829,281,479 350,238,353

Property and equipment 14 1,756,175,146 1,270,129,197

Total assets 55,593,151,969 27,891,313,168

LIABILITIES AND EQUITY

Liabilities

Due to banks 82,460,836 -

Customers deposits 15 48,426,392,155 21,783,315,356

Credit balances and other liabilities 16 1,578,360,770 677,403,954

Other provisions 17 289,563,842 192,345,736Long-term debts 18 142,805,616 657,236,318

Total liabilities 50,519,583,219 23,310,301,364

Equity

Capital 19 4,875,769,692 4,523,221,077

Reserves 20 197,799,058 43,971,472

Accumulated profits - 13,819,255

Total equity 5,073,568,750 4,581,011,804

Total liabilities and equity 55,593,151,969 27,891,313,168

CONTINGENT LIABILITIES AND COMMITMENTS

Liabilities for documentary credits, letters of guarantees and other commitments 21 31,147,228,332 21,733,834,060

These financial statements were approved by the Banks Board of Directors and authorised for issue on 23April 2007, they were signed on its behalf by:

Naser Al-Marqab Ahmed Al-Medhwahi Yahay Al-Sabri Hafeidh MaiaydManager of Central Accounting Deputy

GM - FinanceGeneral Manager Chairman


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STATEMENT OF INCOMEFOR THE YEAR ENDED 31 DECEMBER 2006

Notes

Year Ended31 December

2006


2005

YER YER

Interest on loans and due from banks 22 2,278,429,888 1,309,816,238

Interest on certificates of deposit, treasury bills andGovernment bonds 23 1,376,118,895 581,188,129Cost of deposits and borrowings 24 (907,057,892) )485,420,620(

Net interest income 2,747,490,891 1,405,583,747

Income from commissions and fees on banking services 25 826,687,565 389,552,038

Profit on foreign currency transactions 26 328,327,675 219,453,316

Grants 27 60,000,000 60,000,000

Other income 28 50,041,132 84,571,694

4,012,547,263 2,159,160,795

General and administrative expenses and depreciation 29 (2,954,136,386) )1,807,567,546(

Provisions 30 (535,652,255) )344,593,249(

(3,489,788,641) )2,152,160,795(

Profit for the year before Zakat 522,758,622 7,000,000

Zakat (10,000,000) (7,000,000)

Net profit for the year 512,758,622 -


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5

STATEMENT OF CASH FLOWSFOR THE YEAR ENDED 31 DECEMBER 2006


2006


2005

YER YER

OPERATING ACTIVITIES

Profit for the year before Zakat 522,758,622 7,000,000

Adjustments for:

Depreciation 219,937,301 102,531,537

Provisions 535,652,255 344,593,249

Uncollected interest added during the year 365,258,678 429,283,530

Uncollected interest used during the year (56,909,688) )43,964,929(

Provisions written off (74,507) )11,591,240(

Employees annual leave provision - )2,428,163(

Zakat paid (10,000,000) )7,000,000(

Profit on sale of property and equipment (3,301,874) )627,978(

1,573,320,787 817,796,006

Net (increase) decrease in assets

Reserve balances with Central Bank (5,078,038,420) -

Treasury bills maturing after three months (18,082,293) )71,757,707(

Loans and advances (6,679,999,124) )8,600,619,640(

Debit balances and other assets (587,291,275) )25,233,132(

Net increase (decrease) in liabilities

Due to banks 82,460,836 -

Customers deposits 26,643,076,799 8,333,851,536

Credit balances and other liabilities 900,956,816 380,992,617

Net cash flows from operating activities 16,836,404,126 835,029,680

INVESTING ACTIVITIESAcquisition of property and equipment (714,205,163) )596,014,598(

Adjustments on accumulated deprecation (286,564) )2,046,648(

Proceeds on sale of property and equipment 11,810,351 6,164,780

Available for sale investments - )57,000,000(

Net cash flows used in investing activities (702,681,376) )648,896,466(


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STATEMENT OF CASH FLOWSFOR THE YEAR ENDED 31 DECEMBER 2006 - continued


2006


2005

FINANCING ACTIVITIES YER YER

(Decrease) increase in long-term debts (514,430,702) 31,113,989

Increase in capital - 1,500,053,654

Dividends paid (20,201,676) )10,000,000(

Net cash flows(used in) from financing activities (534,632,378) 1,521,167,643

NET INCREASE IN CASH AND CASH EQUIVALENTS 15,599,090,372 1,707,300,857

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 12,324,084,647 10,616,783,790

CASH AND CASH EQUIVALENTS AT END OF YEAR 27,923,175,019 12,324,084,647

Cash and cash equivalents at end of year comprise of the following:

Cash on hand 2,849,015,516 1,824,092,606

Due from banks 8,773,008,238 8,574,998,358

Treasury bills due within three months 7,551,151,265 1,324,993,683

Certificates of deposits with Central Bank due within three months 8,750,000,000 600,000,000

27,923,175,019 12,324,084,647


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STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED 31 DECEMBER 2006

2005 CapitalStatutoryReserve

GeneralReserve

AccumulatedProfits Total

YER YER YER YER YER

Balance at 1 January 3,023,167,423 41,958,575 2,012,897 23,819,255 3,090,958,150

Transfer to capital from agriculturefund 1,500,000,000 - - - 1,500,000,000

Transfer to capital from thecollecteddue instalments of fishing loans

53,654 - - - 53,654

Dividends paid - - - )10,000,000( )10,000,000(

Balance at 31 December 4,523,221,077 41,958,575 2,012,897 13,819,255 4,581,011,804

2006 CapitalStatutoryReserve

GeneralReserve

AccumulatedProfits Total

YER YER YER YER YER

Balance at 1 January 4,523,221,077 41,958,575 2,012,897 13,819,255 4,581,011,804

Net profit for the year - - - 512,758,622 512,758,622

Transfer to statutory reserve(note 20-1) - 76,913,793 - )76,913,793( -

Transfer to general reserve(note 20-2) - - 76,913,793 )76,913,793( -

Increase in capital 352,548,615 - - )352,548,615( -

Dividends paid - - - )20,201,676( )20,201,676(

Balance at 31 December 4,875,769,692 118,872,368 78,926,690 - 5,073,568,750


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NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2006

1. GENERAL INFORMATION

The Cooperative and Agricultural Credit Bank (or Bank) was established in January 1982, as a resultof the merger of the Agricultural Credit Bank (ACB) (which was established in 1975) and the

National Co-operation Development Bank (NCDB), (which was established in 1979). The Bank operates through its head office in Sanaa and 42 branches spread all over the governorates of Yemen.

As of 31 December 2006 the Bank employed 1460 staff (2005: 1175 staff).

2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS

The financial statements were prepared in accordance with International Financial Reporting

Standards (IFRS) issued by the International Accounting Standards Board (the IASB) and their Interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC) of the IASB and the applicable local rules and regulations . There are no significant differences betweenthe IFRS and the local rules and instructions issued by the Central Bank of Yemen except for thefollowing:

The adoption of minimum fixed percentages for loans and advances provision in accordancewith Central Bank of Yemen circular No. 6 of 1996 and No. 5 of 1998, rather than applying therelated provisions of International Accounting Standard (39).

The recording of provision for general risks calculated on performing loans under loans

provision and not under shareholders equity. The reversal of uncollected interest on non-performing loans and advances, for the three months

prior to classifying the loan as non-performing to the year end; from income to uncollectedinterest.

The effect of these deviations is immaterial on the financial statements of the Bank as of 31 December 2006.

Amendments to Published Standards and Interpretations Effective 1 January 2006

The application of the amendments and interpretations listed below did not result in substantial

changes to the Banks accounting policies: IAS 19 Amendment Actuarial Gains and Losses, Group Plans and Disclosures;

IAS 21 Amendment Net Investment in a Foreign Operation;

IAS 39 Amendment Cash Flow Hedge Accounting of Forecast Intra-group Transactions;

IAS 39 Amendment The Fair Value Option;

IAS 39 and IFRS 4 Amendment Financial Guarantee Contracts;

IFRS 1 (Amendment) - First-time Adoption of International Financial Reporting Standards, and


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NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2006 continued

9

IFRS 6 (Amendment) - Exploration for and Evaluation of Mineral Resources;

IFRIC 4 - Determining whether an Arrangement contains a Lease;

IFRIC 5 - Rights to Interests arising from Decommissioning, Restoration and EnvironmentalRehabilitation Funds; and

IFRIC 6 - Liabilities arising from Participating in a Specific Market Waste Electrical andElectronic Equipment.

Standards and Interpretations Issued but not yet Effective

The Bank has chosen not to early adopt the following standards and interpretations that were issued

but not yet effective for accounting periods beginning on 1 January 2006:

IFRS 7 - Financial instruments: Disclosures (effective 1 January 2007);

IFRS 8 - Operating Segments (effective 1 January 2008);

IAS 1 (Amendment) - Capital disclosures (effective 1 January 2007);

IFRIC 7 - Applying the Restatement Approach under IAS 29 (effective 1 March 2006);

IFRIC 8 - Scope of IFRS 2 (effective 1 May 2006);

IFRIC 9 - Reassessment of embedded derivative (effective 1 June 2006);

IFRIC 10 - Interim Financial Reporting and Impairment (effective 1 November 2006);

IFRIC 11 - IFRS 2 Group Treasury Share Transactions (effective 1 March 2007); and

IFRIC 12 - Service Concession Arrangements (effective 1 January 2009).

Management anticipates that, except for IFRS 7, which will require major additional disclosuresabout the financial instruments and their related risk, the application of these new standards andinterpretations will not have a material impact on the Banks financial statements in the period of initial application.

3. SIGNIFICANT ACCOUNTING POLICIES

The financial statements have been prepared based on the historical cost convention. The significantaccounting policies adopted by the Bank are set out below:

Management Estimates

The preparation of financial statements requires the management of the Bank to make estimates andassumptions that affect the reported amounts of the financial assets and liabilities at the date of thefinancial statements and the reported amounts of revenue and expenses during the reporting period.Actual results could differ from those estimates. The most significant estimates with regard to these

financial statements relate to the provisions for loans and advances.


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Settlement Date Accounting

All regular way purchases and sales of financial assets are recognised initially at cost, representingthe fair value plus cost of the transaction, on the settlement date.

Foreign Currencies

The Bank maintains its records in Yemeni Riyals. Transactions in foreign currencies are recorded atthe exchange rate prevailing on the date of the transaction. Monetary assets and liabilitiesdenominated in foreign currencies are retranslated at the rate of exchange prevailing at the balancesheet date. Gains and losses arising on exchange are taken to the statement of income.

Revenue Recognition

Revenue is recognized on accrual basis. To comply with the requirements of the Central Bank of Yemen circular No. 6 of 1996, the Bank does not accrue interest income on non-performing loansand advances. When an account is classified as non-performing, all uncollected interest relating to thethree months prior to classifying the loan as non-performing is reversed from income and recorded asuncollected interest.

Commission and fee income are accounted for when earned.

Grants

Cash grants are recognised at their fair value in the statement of income statement when there is anobjective bases that the grants will be received and the Bank will comply with the conditions relatedto the grants. Non-cash grants are recognised as deferred income, and amortized as per the useful lifeof the related assets.

Treasury Bills

Treasury bills are presented in the balance sheet at their nominal value less any unearned discountoutstanding at the balance sheet date.

Government Bonds

Government bonds issued by the Ministry of Finance are presented in the balance sheet at their nominal value. The accrued interest on these bonds is included under "debit balances and other assets".

Deposits and Balances Due from Banks

Deposits and balances due from banks are presented at cost after deducting any amount that has beenwritten off and any impairment in their value.


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NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2006- continued

11

Investments

Investments are recognised initially cost, including transaction costs. At subsequent reporting dates,investments in associates are amended by the increase or decrease in the Banks share of the equity of the companies in which the Bank has investment. This movement is recorded in the statement of income.

As of the financial statements date, investments classified as available for sale are recorded at fair value. Investments for which fair values cannot be measured reliably are recognised at cost less anyimpairment.

Certificates of Deposit with Central Bank

Certificates of deposit issued by the Central Bank of Yemen are presented at cost. The accruedinterest on certificates of deposit is included under "debit balances and other assets".

Provision for Loans and Advances and Contingent Liabilities

In compliance with the Central Bank of Yemen circulars No 6 of 1996 and No. 5 of 1998, provision ismade for specific loans and advances and contingent liabilities, in addition to a provision for generalrisks calculated based on the total of other loans and contingent liabilities after deducting balancessecured by deposits, and bank guarantees issued by worthy banks.

The provision is determined, based on periodic comprehensive reviews of the loans and advances andcontingent liabilities, at the following rates:

Performing loans and advances and contingent liabilities 1%

Non-performing loans and advances and contingent liabilities:

- Substandard loans and advances and contingent liabilities 15%

- Doubtful loans and advances and contingent liabilities 45%

- Bad loans and advances and contingent liabilities 100%

Loans and advances appear net of provisions and uncollected Interest. These loans are written off if procedures taken towards their collection prove useless, or if directed by the Central Bank of Yemenupon its review of the Banks portfolio. Proceeds from loans and advances previously written off in

prior years are credited to "other income".

Contingent Liabilities and Commitments

Contingent liabilities and commitments, in which the Bank is a party, are presented off balance sheetnet of margins, under contingent liabilities and commitments as they do not represent actual assetsor liabilities at the balance sheet date.


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Leasing

Leases are classified as finance leases whenever the terms of the lease transfer substantially all therisks and rewards of ownership to the lessee. All other leases are classified as operating leases.

To date, all the leases entered into by the Bank are operating leases. Rentals payable under this leaseare charged to statement of income on a straight-line basis over the term of the relevant lease.

Cash and Cash Equivalents

For the purpose of preparing the statement of cash flows, cash and cash equivalents consist of cash onhand, balances with the Central Bank of Yemen, balances due from banks, and investments incertificates of deposit and treasury bills maturing within three months from the date of the balancesheet.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation and any impairment.

Property and Equipment residual values, useful lives and turnover are reviewed at each balance sheetdate, in order to indicate any sign of impairment. The recoverable amount for the property andequipment is estimated and compared to the residual value. The carrying amount is written downimmediately to its recoverable amount if the assets carrying amount is greater than its estimatedrecoverable amount. The recoverable amount is the higher of the assets fair value less costs to sell

or value in use, whichever is greater.Impairment of Assets

The Bank assess at each reporting date whether there is an indication that an asset may be impaired.If any indication exists, or when annual impairment testing for an asset is required, the Bank makesan estimate of the assets recoverable amount.

An assets recoverable amount is the higher of an assets fair value less costs to sell or cashgeneration units fair value less costs to sell and its value in use and determined for an individualassets, unless the asset does not generate cash inflows that are largely independent of those fromother assets or group of assets.

When the carrying amount of an asset exceeds its recoverable amount, the asset is consideredimpaired and is written down to its recoverable amount. Impairment losses of continuing operationsare recognised in the statement of income consistent with the function of the impaired asset.

An assessment is made at each reporting date as to whether there is any indication that previouslyrecognised impairment losses may no longer exit or may have decreased. If such indication exits, therecoverable amount is estimated.

A previously recognised impairment loss is reversed only if there has been a change in the estimatesused to determine the assets recoverable amount since the last impairment loss was recognised. If

that is the case the carrying amount of the asset is increased to its recoverable amount. That increased


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amount can not exceed the carrying amount that would have been determined, net of depreciation,had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in thestatement of income unless asset is carried at revalued amount, in which case the reversal is treated asa revaluation increase. After such a reversal, the depreciation charge is adjusted in future periods toallocate the assets revised carrying amount, less any residual value, on a systemic basis over itsremaining useful life.

Long-Term Debts

Long-term debts are presented at their nominal value.

Employees End of Service Benefits

The Bank does not provide for end of service benefits since its employees are contributing the socialsecurity scheme according to the Social Security Law.

Social Security Provision

The employees of the Bank are contributing to the social security scheme in accordance with theSocial Security Law.

Offsetting the financial assets and liabilities

Offsetting the financial assets and liabilities, to appear at net value in the balance sheet is only

applicable if there is statuary right, or when the Bank intends to reconcile on the basis of net value basis or when agreed to recover the asset and settle the obligation at the same time.

Commercial and Industrial Profit Tax

In accordance to Article No. 21 of the Corporative and Agricultural Credit Bank Low No. 39 of 1982,the Bank is exempted from commercial and industrial profit tax.

Zakat on Equity

The Bank pays Zakat on equity in accordance with the Zakat Law and based on the mutualagreements with the Zakat Authority.

4. CRITICAL ACCOUNTING ASSUMPTIONS AND KEY SOURCES OF ESTIMATION OFUNCERTAINTY

While applying the accounting assumptions policies as stated in Note 3, the management of the Bank has made certain assumptions. These may have a significant effect on the carrying amounts in thefinancial statements. The significant judgements made by the management are those relating to thedetermination of the provisions for loans and advances. Note 3 to the financial statements details theaccounting policies adopted by the Bank to determine these provisions.


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In addition to the above, the Bank takes into consideration the following factors when determining atthe provisions for loans and advances and contingent liabilities:

- The overall customers financial position.

- Risk percentage i.e. the ability of the customer to conduct profitable business activities andcollect enough money to pay the debt.

- Value of the collateral and possibility of transferring ownership to the Bank.

- Cost of settling the debt.

5. FINANCIAL INSTRUMENTS AND MANAGING THEIR RELATED RISKS

5.1. Financial Instruments

(a) The Banks financial instruments are represented in financial assets and liabilities. Financialassets include cash balances, current accounts and deposits with banks including balances withthe Central Bank of Yemen, investments, certificates of deposit, treasury bills, government

bonds and loans and advances to customers. Financial liabilities include balances due to banks,customers deposits and long-term debts. Financial instruments also include rights andobligations stated in contingent liabilities and commitments.

Note 3 to the financial statements includes the significant accounting policies applied for recording and measuring financial instruments and the recognition of their related revenues andexpenses.

(b) Based on the valuation of the Banks assets and liabilities stated in the notes to the financialstatements, the fair value of the financial instruments does not differ materially from their book values at the balance sheet date.

5.2. Managing Financial Instrument Related Risks

(a) Interest Rate Risk

Interest rate risk arises from the possibility that changes in interest rates will affect the value of financial instruments. The Bank performs a number of procedures to limit the effect of suchrisk to the minimal level.

Significant procedures applied by the Bank are:

- Correlating interest rates on borrowing with interest rates on lending.

- Considering the discount rates for different currencies when determining interest rates.

- Controlling the matching of maturity dates of financial assets and liabilities.

Notes 31 and 32 to the financial statements state the maturity dates of the Banks financialassets and liabilities and their related average interest rates prevailed during the year,

respectively.


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(b) Credit Risk

Loans and advances to customers, current accounts and deposits with banks and rights andobligations due from others are considered financial assets exposed to credit risk. Credit risk represents the inability of these parties to meet their obligations when they are due. In order tocomply with the Central Bank of Yemen circular No. 10 of 1997 relating to the management of credit risk exposure, the Bank adheres to certain minimum standards in order to properlymanage its credit risk.

The procedures applied by the Bank to minimize the credit risk exposure consist of thefollowing:

- Studying the credit worthiness of customers and determining their related credit risks prior to commencing transactions.

- Obtaining sufficient collaterals to minimize the credit risk exposure.

- Following up and carrying out periodical reviews of customers in order to evaluate their financial positions.

- Making the required provision for non-performing loans and advances.

- Distributing credit portfolio and balances with banks over diversified sectors within certainlimits for each sector to minimize concentration of credit risk.

Notes 33 and 34 to the financial statements indicate the sartorial and geographical distributionof the Banks assets, liabilities, contingent liabilities and commitments.

(c) Exchange Rate Risk

Due to the nature of its activity, the Bank deals in different foreign currencies, accordingly it isexposed to foreign exchange rate risk. The Bank attempts to maintain a balanced foreigncurrency position in compliance with the Central Bank of Yemen instructions and therequirements of its circular No. 6 of 1998, which specifies that the individual foreign currency

position shall not exceed 15% of the Banks capital and reserves, and that the aggregated positions for all foreign currencies shall not exceed 25% of the Banks capital and reserves.

Note 35 to the financial statements indicate the significant foreign currency positions at the balance sheet date.


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6. CASH ON HAND AND RESERVE BALANCES WITH CENTRAL BANK

31 December2006

31 December2005

YER YER

Cash on hand

Local currency 1,324,711,533 869,732,492

Foreign currencies 1,524,303,983 954,360,114

2,849,015,516 1,824,092,606

Reserve balances with the Central Bank of Yemen

Local currency 4,196,257,000 -

Foreign currency 881,781,420 -

5,078,038,420 -

7,927,053,936 1,824,092,606

In accordance with the Central Bank of Yemen (CBY) instructions, the Bank is required to maintainmandatory reserve deposits with the CBY at the rate of 20% and 10% of its customer deposits inforeign currencies and local currency respectively. Reserve balances in local currency carry aneffective interest rate of 13% and the balances in foreign currency are non- interest bearing.

7. DUE FROM BANKS

31 December2006

31 December2005

YER YER Current accounts with the Central Bank of Yemen

Local currency 3,260,838,499 431,007,923

Foreign currencies 465,174,092 2,184,759,479

3,726,012,591 2,615,767,402

Local BanksCurrent accounts 2,225,830 2,638,046

Foreign BanksCurrent accounts 3,633,529,644 2,279,748,700

Time deposits 1,411,240,173 3,676,844,210

5,044,769,817 5,956,592,910

8,773,008,238 8,574,998,358

Current accounts and time deposits with foreign banks carry variable interest rates while currentaccounts with the Central Bank of Yemen and local banks do not carry any interest.


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8. CERTIFICATES OF DEPOSIT WITH CENTRAL BANK OF YEMEN

31 December2006

31 December2005

YER YER

Certificates of deposit due within 90 days 8,750,000,000 600,000,000

The certificates of deposit carry variable interest rates.

9. TREASURY BILLS

31 December2006

31 December2005

YER YER

Treasury bills due within 90 days 7,700,000,000 1,350,000,000

Treasury bills due within 180 days 89,840,000 71,757,707

7,789,840,000 1,421,757,707

Unearned discount (148,848,735) (25,006,317)

7,640,991,265 1,396,751,390

Treasury bills carry an average variable interest rate of 15.60% (2005: 15.21%).

10. GOVERNMENT BONDS

31 December2006

31 December2005

YER YER

Government bonds 4,460,866,408 -

Based on the Council of Ministers Resolution No. 145 of 2006, it was agreed that the Ministry of Finance (the Ministry) should buy the agricultural loans portfolio of the Bank as of 31 December 2005. Based on this resolution, and according to the Agreement between the Bank and Ministry, the

Central Bank of Yemen issued government bonds on behalf of the Ministry maturing on 11 April2016. These bonds carry an average interest rate that is applied on the three months maturing treasury

bills.


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11. INVESTMENTS

Percentageof Interest 31 December

200631 December

2005 IndustrySector

% YER YER

Investments in associatedcompanyMareb Poultry Company(Note 11.1) 23.20% 78,744,000 78,744,000

Selling poultry and

eggsAvailable for sale investments

Yemen Financial ServicesCompany (under establishment) 15.00% 57,000,000 -

Financial services

Investments in other companies(Note 11.2) 31,559,299 31,559,299

Various

88,559,299 31,559,299 167,303,299 110,303,299

Impairment Provision (110,303,299) (60,450,940)

57,000,000 49,852,359

11.1. Mareb Poultry Company

The Bank holds 23.2% of the share capital of Mareb Poultry Company (the Company). The Companyhas suffered losses and financial difficulties and facing many difficulties, which raise substantialdoubt about the Companys ability to continue as a going concern. Therefore, a 100% impairment

provision was made for the investment value.

11.2. Investments in other companies

Investments in other companies represent the Banks investment in Yemen Marketing Company,Yemen Hotels Company, Yemen British Company for Investments, Yemen Pumps ManufacturingCompany, and Tuhaita Dates Factory. A 100% impairment provision was made for these investmentssince no profits were generated from these investments during the prior years.


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12. LOANS AND ADVANCES TO CUSTOMERS (NET OF PROVISIONS)

At 31 December 2006 non-performing loans and advances amounted to YER000 5,117,839 (2005:YER 5,181,684).

31 December2006

31 December2005

YER YER

Agricultural loans

Short term 80,739,098 276,915,268

Medium term 131,273,004 1,996,674,274

Long term 4,838,174 922,787,249

Rural development and environment protection loans 30,799,880 260,611,041

Accrued due interest on agricultural loans - 1,629,144,495

247,650,156 5,086,132,327

Other loans and advances

Debit and overdraft accounts 12,886,690,416 8,189,548,626

Commercials loans 1,134,081,535 1,807,040,313

Personal loans 2,666,986,838 761,784,297

Employees loans 187,877,538 106,111,756

LCs financing 850,382,933 235,904,293

Purchased checks 431,984,912 -

18,158,004,172 11,100,389,285

Less:

Agricultural loans provisions (Note12.1) (2,476,502) -

Other loans and advances provisions (Note12.1) (2,266,769,809) )1,939,134,818(

Uncollected interest on other loans and advances (Note12.2) (737,632,520) )429,283,530(

(3,006,878,831) (2,368,418,348)

15,398,775,497 13,818,103,264


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12.1 LOANS AND ADVANCES PROVISION31 December 2006

Agricultural Loans Provision Other Loans and Advances Provision

General Specific Total General Specific Total

YER YER YER YER YER YER

Balance at 1 January - - - 46,068,206 21,893,066,61 1,939,134,818

Provided during the year (Note 30) 2,476,502 - 2,476,502 35,592,657 292,116,841 327,709,498

Provisions written of during the year - - - - (74,507) )74,507(

Balance at 31 December 2,476,502 - 2,476,502 81,660,863 2,005,108,946 2,266,769,809

31 December 2005

Agricultural Loans Provision Other Loans and Advances Provision

General Specific Total General Specific Total

YER YER YER YER YER YER

Balance at 1 January 28,862,568 1,601,267,929 1,630,130,497 - - -

Transfer fromuncollected interest - - - - 227,248,356 227,248,356

Transfers )17,271,328( (1,601,267,929) (1,618,539,257) 17,271,328 1,601,267,929 1,618,539,257

Provided during the year (Note 30) - - - 828,796,87 64,550,327 93,347,205

Provisions written of during the year (11,591,240) - (11,591,240) - - -

Balance at 31 December - - - 46,068,206 21,893,066,61 1,939,134,818

In accordance with the Central Bank of Yemen (CBY) instructions, the loans and advances provisions

are classified to general and specific provisions. In accordance with these instructions the general provision is equal 1% of performing loans and advances which are not subject to specific provisionsand without considering certain types of guarantees. In accordance with International AccountingStandard No. 39, this provision should be provided only to face any specific impairment in loans andadvances future cash flows.


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21

Based on the Council of Ministers Resolution No. 145 of 2006, it was agreed that the Ministry of Finance (the Ministry) will buy the agricultural loans portfolio of the Bank that appear in the Bank'sfinancial statements as of 31 December 2005, amounting to YER 5,086,132,327. Accordingly, theMinistry issued government bonds with interest rates and maturity dates agreed upon between theMinistry and the Bank. The Bank will keep managing and following up the collection of these loans,and will transfer amount collected to the Ministry. In addition, it was agreed that the foreign long-term debts as of 31 December 2005, that was granted to the Bank through the Ministry will betransferred to the Ministry as part of the settlement of the agricultural loans.

In addition to the above, during the year ended 31 December 2006, the Ministry issued a guarantee of YER 1,243,433 thousand to the Bank for a loan granted to a public sector entity.

12.2 UNCOLLECTED INTEREST

31 December2006

31 December2005

YER YER

Balance at beginning of year 429,283,530 -

Used during the year )56,909,688( -

Additions during the year 365,258,678 429,283,530

737,632,520 429,283,530


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13.

DEBIT BALANCES AND OTHER ASSETS31 December

200631 December

2005YER YER

Interest receivable 142,611,876 31,821,161

Prepaid expenses 59,048,294 22,500,986

Insurances and advances 83,536,516 46,759,150

Inventory- for sale 91,995,302 55,048,399

Other inventory 32,803,199 18,995,063

Advances to purchase property and equipment 12,109,862 23,139,679

Work in progress projects 227,729,388 25,879,508

Other debit balances 296,743,140 135,142,356

946,577,577 359,286,302

Less: provision for other assets (Note 13.1 ) (117,296,098) (9,047,949)

829,281,479 350,238,353

13.1.

Provision for other assets 31 December

200631 December

2005YER YER

Balance at beginning of year 9,047,949 -

Provisions made during the year (Note 30) 108,248,149 9,047,949

Balance at end of year 117,296,098 9,047,949


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14. PROPERTY AND EQUIPMENT

Land Buildings

Furnitureand

Fixture

Machineryand

EquipmentMotor

Vehicles

ATMsand Pointof Sales

Improvementson Leasehold

Properties Total

YER YER YER YER YER YER YER YER

Cost

At 1 January 2005 55,365,273 564,736,593 160,141,726 115,572,780 175,346,072 - 4,840,710 1,076,003,154

Additions 5,926,832 51,892,648 90,471,770 178,100,637 5,744,290 198,521,253 65,357,168 596,014,598

Disposals - (40,000) (19,243,122) (18,151,760) (904,841) - - (38,339,723)

At 31 December 2005 61,292,105 616,589,241 231,370,374 275,521,657 180,185,521 198,521,253 70,197,878 1,633,678,029

Additions 16,800,000 32,372,278 92,243,306 214,863,802 92,638,052 145,839,243 119,448,482 714,205,163

Disposals (160,000) (325,000) (5,397,568) (1,904,701) (12,711,656) - - (20,498,925)

At 31 December 2006 77,932,105 648,636,519 318,216,112 488,480,758 260,111,917 344,360,496 189,646,360 2,327,384,267

Accumulated Depreciation

At 1 January 2005 - 64,053,547 56,363,780 51,178,179 122,862,653 - 1,408,705 295,866,864

Charge for the year - 13,401,414 12,394,597 29,966,828 14,831,352 10,174,410 21,762,936 102,531,537

Disposals - (3,666) (14,734,637) (17,162,268) (902,350) - - (32,802,921)

Adjustments - (803,384) - - (1,243,264) - - (2,046,648)

At 31 December 2005 - 76,647,911 54,023,740 63,982,739 135,548,391 10,174,410 23,171,641 363,548,832

Charge for the year - 14997096 20,873,616 64,435,243 22,262,774 42,112,899 55,255,673 219,937,301

Disposals - (53,365) (1,930,362) (1,889,029) (8,117,692) - - (11,990,448)

Adjustments - - - (38,217) - (248,347) - (286,564)

At 31 December 2006 - 91,591,642 72,966,994 126,490,736 149,693,473 52,038,962 78,427,314 571,209,121

Carrying Amount

At 31 December 2006 77,932,105 557,044,877 245,249,118 361,990,022 110,418,444 292,321,534 111,219,046 1,756,175,146

At 31 December 2005 61,292,105 539,941,330 177,346,634 211,538,918 44,637,130 188,346,843 47,026,237 1,270,129,197

The Bank's land and buildings were revalued as of 31 December 2005 by the Architecture Yemeni Group(independent valuers). The fair value for the land was YER 1,073,588 thousand and for buildings YER 857,846thousand.


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Except for owned land, property and equipment are depreciated using the straight-line basis over their expected useful lives in accordance with the following percentages:

Buildings and constructions 2.5% - 20%

Furniture and fixture 10% - 20%

Machinery and equipment 20%

Motor vehicles 20%

ATMs and points of sale 20%

Improvements on leasehold properties and branches are depreciated based on the lease period or theuseful life whichever is less.

15. CUSTOMERS DEPOSITS

31 December2006

31 December2005

YER YER

Time and demand deposits 13,121,245,261 4,387,318,318

Current accounts 27,061,966,970 11,652,991,080

Savings accounts 457,023,825 120,563,809LCs and LGs Margins 7,531,062,856 4,965,301,857

Other deposits 255,093,243 657,140,292

48,426,392,155 21,783,315,356

16. CREDIT BALANCES AND OTHER LIABILITIES

31 December2006

31 December2005

YER YER

Interest payable 106,095,931 36,310,044

Accrued expenses 145,555,728 115,905,051

Interest collected in advance 290,268,870 257,395,690

Due to Ministry of Finance - Agricultural loans collected 620,624,923 -

Accounts payable - tax authority 25,584,684 52,107,586

Miscellaneous payables 5,393,296 4,925,638

Other credit balances 384,837,338 210,759,945

1,578,360,770 677,403,954


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17. OTHER PROVISIONS

31 December2006

31 December2005

YER YER Provisions for contingent liabilities

Balance at 1 January 192,345,736 -

Provided during the year (Note 30) 97,218,106 192,345,736

Balance at 31 December 289,563,842 192,345,736

18. LONG-TERM DEBTS

31 December2006

31 December2005

YER YER

Arab Fund for Economic and Social Development - 30,918,580

International Fund for Agricultural Development (IFAD) - 570,710,492

Tehama Development Project - Third Phase 6,231,266 -

Raimah Development Project 8,490,000 -

Mahra Rural Development Project 28,084,350 -

Agricultural Promotion Fund 100,000,000 50,000,000Instalments payable - 5,607,246

142,805,616 657,236,318

The Bank, the Ministry of Finance and the Central Bank of Yemen agreed on 15 May 2006, toimplement the Council of Ministers Resolution No. (145) of 2006, regarding the settlement of theBanks agricultural loans, and to settle all the external long-term debts of the Bank as 31 December 2005, by the Ministry of Finance as part of settling the agricultural loans portfolio.

19. CAPITAL

According to the resolution of the Board of Directors dated 23 April 2007, and to the instructions of the Ministry of Finance dated 3 March 2007, to increase the capital of the Bank out of the profits for the year 2006 and the next years, until it reaches YER 6 billion, it was resolved to transfer the amountremained from the net profit for the year, after deducting the transfers to reserves and the dividends

paid to the Government, to capital. Therefore, the paid capital was increased to YER 4,875,769,692(2005: YER 4,523,221,077) owned by to the Government 99.08% and the General AgriculturalConfederation 0.92%.


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26

20. RESERVES

20.1. STATUTORY RESERVE

In accordance with the provisions of the Yemeni Commercial Banks Law No. 38 of 1998, the Bank should transfer 15% of the net profit for the year to the statutory reserve until the reserve equals twotimes the paid up capital. The management of the Bank cannot use this reserve before getting a prior approval from the Central Bank of Yemen.

20.2. GENERAL RESERVE

In accordance with Article No. 11 of the Corporative Agricultural Credit Bank Law No. (39) of 1982and the provisions of the Public Corporations and Companies Law No. 35 of 1991, the Bank transferred 15% of the net profit for the year to general reserve.

21. CONTINGENT LIABILITIES AND COMMITMENTS

31 December2006

31 December2005

YER YER Letters of credit 15,269,985,879 13,318,157,149

Letters of guarantee 21,053,959,243 10,881,718,299

Other contingent liabilities 2,354,346,066 2,499,260,469

38,678,291,188 26,699,135,917

LCs and LGs margins (7,531,062,856) )4,965,301,857(

31,147,228,332 21,733,834,060

22. INTEREST ON LOANS AND DUE FROM BANKS


2006


2005

Interest on loans and advances YER YER Interest on loans 569,588,841 585,925,390

Interest on advances 1,307,866,194 585,641,490

1,877,455,035 1,171,566,880

Interest on balances due from banks

Interest on reserve balances with Central Bank of Yemen 245,720,570 -

Interest on balance due from foreign banks 155,254,283 138,249,358

400,974,853 138,249,358

2,278,429,888 1,309,816,238


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23. Interest on certificates of deposit, treasury bills and Government bonds


2006


2005YER YER

Interest on certificates of deposit 180,762,839 63,423,288

Interest on treasury bills 688,331,536 517,764,841

Interest on government bonds 507,024,520 -

1,376,118,895 581,188,129

24. COST OF DEPOSITS AND BORROWINGS


2006


2005YER YER

Interest on customers deposits

Interest on time and demand deposits 868,777,981 440,868,439

Interest on saving accounts 25,039,403 29,223,412

893,817,384 470,091,851

Interest on balances due to banks 12,256,082 12,526,325

Interest on long-term debts 984,426 2,802,444

907,057,892 485,420,620

25. INCOME FROM COMMISSIONS AND FEES ON BANKING SERVICES


2006


2005YER YER

Commissions on letters of credit 203,734,273 134,077,984

Commissions on letters of guarantee 292,044,358 182,903,961

Commissions on transfers of funds 47,620,544 28,434,496

Commissions on collections 8,921,946 13,312,857

Other commissions 274,366,444 30,822,740

826,687,565 389,552,038


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28

26. PROFIT ON FOREIGN CURRENCY TRANSACTIONS

27. GRANTS


2006


2005YER YER

Agricultural Promotion Fund 60,000,000 60,000,000

60,000,000 60,000,000

The Bank has been granted an amount of YER 60,000,000 (2005: YER 60,000,000) from the

Agricultural Promotion Fund to support its agricultural financing activities.

28. OTHER INCOME


2006


2005YER YER

Priors years income - 19,608,001

Priors years adjustments 45,411,204 2,087,224

Profit on disposal of property and equipment 3,301,874 627,978Other income 1,328,054 62,248,491

50,041,132 84,571,694


2006


2005YER YER

Profit on dealing in foreign currencies 168,340,907 95,736,034

Profit on revaluation of foreign currencies balances 159,986,768 123,717,282

328,327,675 219,453,316


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29

29. GENERAL AND ADMINISTRATIVE EXPENSES AND DEPRECIATION


2006


2005YER YER

Salaries and wages 1,769,094,058 1,150,425,603

Rent 69,025,604 32,055,643

Utilities 36,725,715 22,526,489

Insurance 22,785,854 11,206,221

Legal fees 5,296,371 4,350,030

Communications 54,757,642 26,439,531

Consultancy and professional fees 67,375,491 108,413,377

Maintenance 46,920,475 28,901,070

Printing and stationary 59,049,144 45,371,961

Entertainment 48,454,788 36,309,957

Transportation 147,735,681 98,455,589

Training 77,446,751 56,078,379

Advertisement and publicity 214,082,303 26,142,246

Prior years expenses 19,866,494 21,618,662

Other expenses 95,582,714 36,741,251

Depreciation of property and equipment 219,937,301 102,531,537

2,954,136,386 1,807,567,546

30. PROVISIONS


2006


2005

YER YER

Provision for impairment of investments (Note 11.1) - 49,852,359

Provision for loans and advances (Note 12.1) 330,186,000 93,347,205

Provision for other assets (Note 13.1) 108,248,149 9,047,949

Provision for contingent liabilities (Note 17) 97,218,106 192,345,736

535,652,255 344,593,249


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31. MATURITIES OF ASSETS AND LIABILITIES

The maturity profile of the Banks financial assets and liabilities at 31 December 2006 is as follows:

DuewithinThree

Months

Duewithin Three

to SixMonths

Duewithin

Six Monthsto OneYear

Due afterOne Year Total

YER YER YER YER YER Assets

Cash on hand andreserve balances withCentral Bank 7,927,053,936 - - - 7,927,053,936Due from banks 8,773,008,238 - - - 8,773,008,238

Certificates of deposit 8,750,000,000 - - - 8,750,000,000

Treasury bills 7,551,151,265 89,840,000 - - 7,640,991,265

Government bonds - - - 4,460,866,408 4,460,866,408

Investments - - - 57,000,000 57,000,000

Loans and advances tocustomers (net of

provisions) 9,882,288,087 5,351,245,463 160,452,155 4,789,792 15,398,775,497

42,883,501,526 5,441,085,463 160,452,155 4,522,656,200 53,007,695,344

Liabilities

Due to Banks 82,460,836 - - - 82,460,836

Customers deposits 40,640,236,056 7,786,156,099 - - 48,426,392,155

Long -term debts - - - 142,805,616 142,805,616

40,722,696,892 7,786,156,099 - 142,805,616 48,651,658,607

Gap 2,160,804,634 (2,345,070,636) 160,452,155 4,379,850,584 4,356,036,737


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The maturity profile of the Banks financial assets and liabilities at 31 December 2005 is as follows:

DuewithinThree

Months

Duewithin Three

to SixMonths

Duewithin

Six Monthsto One Year

Due afterOne Year Total

YER YER YER YER YER

Assets

Cash on hand 1,824,092,606 - - - 61,824,092,60

Due from banks 8,574,998,358 - - - 8,574,998,358

Certificates of deposit 600,000,000 - - - 600,000,000

Treasury bills 1,324,993,683 71,757,707 - - 1,396,751,390Investments - - - 57,000,000 57,000,000

Loans and advances tocustomers (net of

provisions) 16,669,047,74 413,866,507 1,925,971,957 4,809,217,059 13,818,103,264

18,993,132,388 485,624,214 1,925,971,957 4,866,217,059 26,270,945,618

Liabilities

Customers deposits 18,473,114,118 3,310,201,238 - - 21,783,315,356

Long -term debts - - - 657,236,318 657,236,318

18,473,114,118 3,310,201,238 - 657,236,318 22,440,551,674Gap 520,018,270 (2,824,577,024) 1,925,971,957 4,208,980,741 3,830,393,944


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32. AVERAGE INTEREST RATES APPLIED DURING THE YEAR

The average interest rates applied on the financial assets and liabilities during the year ended31 December 2006 were as follows:

Yemeni Riyal US Dollar EURO% % %

Assets

Due from banks

Time deposits - 5% -

Demand deposits accounts - 4% 2%

Certificates of deposit 15.50% - -

Government bonds 15.60% - -

Treasury bills 15.60% - -

Loans and advances to customers

Agricultural loans 11% - -

Loans to customers 17.5% 8% -

Advances to customers 17.5% 8% -

Liabilities

Due to banks %15 %7 %2

Customer Deposits

Time deposits 14% 4.7% %1.5

Saving accounts 13% 3% -

Long-term debts %0 3,5% -


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The average interest rates applied on assets and liabilities during the year ended 31 December 2005were as follows:

Yemeni Riyal US Dollar EURO% % %

Assets

Due from banks

Time deposits - 4% -

Demand deposits accounts - 3.5% 2.5%

Certificates of deposit 14.36% - -

Treasury bills 15.21% - -

Loans and advances to customers

Agricultural loans 11% - -

Loans to customers 18% 8% -

Advances to customers 19% 9% -

Liabilities

Customer Deposits

Time deposits 13% 2% -

Saving accounts 13% 2.5% -

Long-term debts %0 3.5% -


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34

33. DISTRIBUTION OF ASSETS, LIABILITIES, CONTINGENT LIABILITIES ANDCOMMITMENTS INDUSTRIAL SECTORS

The distribution of the financial assets, liabilities, contingent liabilities and commitments by industrysector as of 31 December 2006 is as follows:

TotalOthers

Trade,Export

and ImportTourism

Buildingand

ConstructionManufac-turingAgriculturalFinancial


Assets

7,927,053,936------7,927,053,936

Cash on handand reserve

balances withCentral Bank

8,773,008,238------8,773,008,238

Due from banks

8,750,000,000------8,750,000,000

Certificatesof deposit

7,640,991,265------7,640,991,265Treasury bills

4,460,866,4084,460,866,408------

Government bonds

57,000,000------57,000,000Investments

15,398,775,49710,264,142,8051,984,464,4681,394,526,457777,267,262733,200,851245,173,654-

Loans andadvances

to customers(net of provisions)

53,007,695,34414,725,009,2131,984,464,4681,394,526,457777,267,262733,200,851245,173,65433,148,053,439

Liabilities

82,460,836------82,460,836Due to banks

48,426,392,15512,015,023,21419,924,896,133-3,232,247,412269,146,00312,985,079,393-

Customersdeposits

142,805,616------142,805,616

Long-termdebts

48,651,658,60712,015,023,21419,924,896,133-3,232,247,412269,146,00312,985,079,393225,266,452

31,147,228,3323,581,744,31015,170,385,851-12,395,098,171---

Contingentliabilities andcommitment


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35

The distribution of the financial assets, liabilities, contingent liabilities and commitments by industrysector as of

31 December 2005 is as follows:

TotalOthers Trade, Export

and ImportTourism Building andConstruction

Manufac-turingAgriculturalFinancial


Assets

1,824,092,606------ 1,824,092,606Cash on hand

8,574,998,358------ 8,574,998,358Due from banks

600,000,000------ 600,000,000Certificates of deposit

1,396,751,390------ 1,396,751,390Treasury bills

57,000,000------ 57,000,000Investments

13,818,103,264785,540,917 5,591,757,175 1,404,272,079105,544,276 841,232,542 5,086,132,327 3,623,948

Loans andadvances tocustomers (netof provisions)

26,270,945,618785,540,917 5,591,757,175 1,404,272,079105,544,276 841,232,542 5,086,132,327 12,456,466,302

Liabilities

21,783,315,3565,404,636,3578,962,680,815-1,453,939,919121,068,1205,840,990,145-Customersdeposits

657,236,318657,236,318------Long-termdebts

22,440,551,6746,061,872,6758,962,680,815-1,453,939,919121,068,1205,840,990,145-

21,733,834,0602,499,260,46910,585,553,398 -8,649,020,193 ---

Contingentliabilities andcommitment


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34. DISTRIBUTION OF ASSETS, LIABILITIES, CONTINGENT LIABILITIES ANDCOMMITMENTS GEOGRAPHICAL Region

The distribution of the financial assets, liabilities, contingent liabilities and commitments bygeographical regions as at 31 December 2006 is as follows:

Assets LiabilitiesNet Assets

(Liabilities)

ContingentLiabilities andCommitments

YER YER YER YER

Yemen 47,962,925,527 48,569,197,771 (606,272,244) 15,877,242,453

Asia 2,386,304,258 - 2,386,304,258 7,731,134,773Europe 831,887,988 82,460,836 749,427,152 4,157,131,397

USA 1,826,577,571 - 1,826,577,571 3,381,719,709

53,007,695,344 48,651,658,607 4,356,036,737 31,147,228,332

The distribution of the financial assets, liabilities, contingent liabilities and commitments bygeographical regions as at 31 December 2005 is as follows:

Assets Liabilities

Net Assets

(Liabilities)

ContingentLiabilities and

CommitmentsYER YER YER YER

Yemen 20,314,352,708 22,440,551,674 (2,126,198,966) 8,415,676,911

Asia 3,648,227,543 - 3,648,227,543 8,124,075,861

Europe 1,760,604,000 - 1,760,604,000 3,995,447,145

USA 547,761,367 - 547,761,367 1,198,634,143

26,270,945,618 22,440,551,674 3,830,393,944 21,733,834,060


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35. SIGNIFICANT FOREIGN CURRENCIES POSITION

To comply with the Central Bank of Yemen circular No. 6 of 1998, the Bank establishes limits of 15% and 25% of capital and reserves for positions in individual foreign currencies as well as anaggregate limitation for all currencies, respectively. The following schedule reflects the Bankssignificant foreign currencies positions as of the balance sheet date:

31 December 2006 31 December 2005

Surplus(Deficit)

Percentageof Capital

andReserves

Surplus(Deficit)

Percentageof Capital

andReserves

YER % YER %

US Dollar 1,489,201,078 29.35% 4,113,394,411 89.79%

Saudi Riyal 341,782,634 6.74% 514,174,307 11.22%

Euro 246,610,192 4.86% 359,922,013 7.86%

Dirham -UEA 295,975,330 5.83% 154,252,305 3.36%

Others 630,275,824 12.42% - -

3,003,845,057 59.21% 5,141,743,036 112.23%

36.

RELATED PARTY TRANSACTIONSParties are considered related if they have the ability to control or exercise significant influence over the Bank in making financial and operating decisions, The Bank deals with related parties on the same

basis applied with third parties in order to comply with the Commercial Banks Law No. (38) of 1998and CBY circular No. (4) of 1999, which puts limits for credit transactions with related parties.

The following schedule shows balances of related parties as of the balance sheet date:

31December2006

31 December2005

YER YER

Government bonds 4,460,866,408 -

Loans and advances to customers (net of provisions) 6,753,051 1,071,340

Customers deposits 8,338,365,691 5,856,842,635

Due to Ministry of Finance - Agricultural loans collected 620,624,923 -

Long-term debts 100,000,000 50,000,000

Other contingent liabilities 2,346,574,400 2,471,681,316


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37. CAPITAL ADEQUACY

The capital adequacy ratio is calculated in accordance with the guidelines of the Central Bank of Yemen as follows:

31 December2006

31 December2005

YER YER

Capital base 5,447,269,957 4,719,425,746

Risk weighted assets 30,327,865,807 20,244,732,158

Capital adequacy ratio 18% 23%

The core capital consists of share capital, reserves and accumulated profits, while supplementarycapital consists of general provisions.

38. LEGAL CASES

Legal cases were filed against Bank in an amount of YER 65,919,995. The Bank did not make provisions for these cases on the basis of remote probability of the success of any allegation againstthe Bank.

39. CAPITAL COMMITMENTS

The following schedule shows the capital commitments of the Bank as of 31 December 2006:

Capital Commitments Amount

YER

Buildings projects 16,250,000

40. PUBLIC OFFER OF CAPITALThe Council of Ministers Resolved in its meeting dated 18 January 2006, to issue an amount of YER 1,500,000,000 of the Bank's capital to the public offer.

cooperative and agricultural credit bank[2]

Documents