Annual Report - Emirates Islamic

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2007-Year in Review

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Content

Vision & Mission 4-5

Message from the Chairman 6-7

Message from the CEO 8-11

Board of Directors 12-13

The Management Team 14-15

Ensuring Success

Key trust areas: 16-17

Shari’ah 18-19

Innovation 20-21

Customer Service 22-23

Technology 24-25

People 26-27

Strategic Alliances 28-29

Financial Strength 30-31

Community Service 32-33

The UAE Islamic Finance Industry 34-41

Board of Directors’ Report 40-42

Fatwa & Shari’ah Supervisory Report 43-44

Shares’ Zakat 45

Report of the Auditors 46

Income Statements 47

Balance Sheet 48

Statement of Cash Flows 49

Statement of Changes in Shareholders’ Equity 50

Notes to the Financial Statements 51-83

Network of Branches 84

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Vision is the art of seeing the invisible !

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Vision

To be the leading provider of high standard Shari’ah compliant innovative financial products, quality service

and superior value for its customers, shareholders, employees and the community

Mission

Our 3S mission is to provide innovative and high standard financial products and services governed by Islamic

Shari’ah provision to enrich the society

Service

Shari’ah

Society

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Strong convictions precede great actions !

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Message from the Chairman

“The year 2007 saw Emirates Islamic Bank firmly establish itself as a leading player in the various lines of business

it operates in. The impact of the diligent implementation of the Bank’s Vision and Mission clearly reflected in

the outstanding results (both Qualitative and Quantitative) achieved by the Bank, which could only be achieved

by a dynamic, business as well as a community development oriented organisation. The ongoing unflinching

support of both customers and shareholders in our endeavours continued to be a source of immense pride and

encouragement and one that propels us to achieve even greater heights of performance.

2007 saw various developments in both global and domestic financial markets which brought forth both

challenges and opportunities which were very effectively handled by the Bank to ensure optimal returns for

all the stakeholders i.e. customers, shareholders, staff and the community at large. Commitment to looking

after the interests of all our stakeholders and ensuring strict Shari’ah compliance continues as an unwaivering

passion in our minds and as a core value in our hearts. And we will continue to do all that is within our means

to further better ourselves on an ongoing basis on these fronts.

Our focus on corporate governance and ensuring that we continue to be a role model from a corporate

citizenship perspective remains among our top priorities. We are also set to further reinforce undertaking

environment friendly initiatives in all aspects of our operations and supporting any external activities as well

in the coming days.

The future looks very promising and the achievements of 2007 backed by our robust 2008 business and

project plans based on our strategic priorities should augur well for the coming days. I take this opportunity

to thank the entire Emirates Islamic Bank fraternity for all that has been accomplished and close with

renewed hope and a prayer that the coming days will be blessed as well, Insha Allah.”

Saeed Mohd Al Sharid,

Chairman, Emirates Islamic Bank.

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Genius is the ability to reduce the complicated to the simple

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Message from the CEO

It is my pleasure to report to you for the third time in a row, the exemplary performance of the Bank (EIB). Such

performance has repeatedly proven that the decision of the shareholders to transform the Middle East Bank

to EIB, to be both timely and farsighted. EIB has continued to grow at an impressive rate and I am pleased to

report that the Bank’s Assets grew by 54 percent, Deposits by 62 percent, Profit by 103 percent and Equity grew

at 38 percent. And, that too without any increase in paid-up capital. It is also gratifying to see that EIB’s pace

of growth outstripped that of its peers on various performance parameters.

Equally importantly, the cost indicators have been declining continously for the last three years. This is vindicated

by the following ratios: Expenditure/Asset ratio declined from 2.12 percent in 2005 to 1.88 percent, Expenditures/

Income ratio declined from 53.8 percent in 2005 to 33.2 percent in 2007. The main efficiency indicators confirm

that the Bank has been creating Assets and mobilising Deposits with as little internal resources as possible. The

Asset/Equity and Deposit/Equity ratios have been rising over time with the former reaching 12.7 percent

in 2007, compared to 4.6 percent in 2005 and the latter reaching 10.4 percent in 2007 compared to 4.2

percent in 2005.

As a newfound bank, we had to spend on the establishment of robust infrastructure and invest substantially

in people. Therefore, during the founding period, it is only to be expected that the bank cost ratios would rise

on account of founding expenditures. However, the performance of the Bank during the last three years has

defied standard logic. Both the business lines i.e. Retail and Corporate and Investment Banking have shown

sterling performances on both Revenue and Cost fronts.

(Continued)

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Our ability to launch innovative products and services and dynamic approach to the market place in key aspects

has held us in good stead. Of course, all this would not have been possible without a dedicated and enlightened

workforce. This has proved our belief that an enlightened Vision, supported by a meaningful Mission and

impeccable execution is an effective route to success.

With the strong foundation in place, we are optimistic about making 2008 an even more successful year Insha

Allah. We have crafted our strategy for this year as well, keeping in view our core values and anticipated/

evolving realities of the environment we operate in and are confident that this will further reinforce our quest

of sustainable market leadership.

I would also like to take this opportunity to thank our customers and shareholders for their ongoing and

valued support.

Ebrahim Fayez Al Shamsi,

Chief Executive Officer

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Saeed Mohd Al Sharid

Chairman since 17th April 2005

Ahmad Bin Hassan Mohamed Bin Al Shaikh

Director since 23rd April 2005

Vice Chairman since 27th September 2005

Member

Dubai Council for Economics Affaires

Dubai Municipal Council (Rent

Committee Member

Dubai Export Development Corporation

DUCAB Dubai Cable Company

Chairman

Printing & Publishing Group

Advisory Council of Dubai University

Jamal Saeed Juma Bin Ghalaita

Director since 17th April 2005

Chairman

Emirates Islamic Financial Brokerage

LLC

Director

Albaraka Banking Group, Bahrain

Board of Directors

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Sulaiman Hamed Salem Al Mazroui


Director

Diners Club (UAE) LLC

Network International LLC

Dubai World

Executive Member

Al Tomooh Scheme for Financing Small

National Businesses

Mahdi Abdulnabi Hussain Kazim


Vice Chairman

Emirates Islamic Financial

Brokerage LLC

H.H. Sheikh Mohammed Bin Ahmed Al Maktoum


Chairman

Top Furniture Factory

Salah Bukhatir


Chairman

Al Buraq Trading & Enterprises Co.

Ltd

Emitac Mobile Solutions (EMS)

Bukhatir International Realty

Development & Investment

Company (BIRDIC)

Noble Quran and Sunnah Est.,

Sharjah

Sedco Company

Vice Chairman

Bukhatir Group

Director

Emitac Company

Awqaf Trust, Sharjah

Sahara Centre

Al Nahda Real Estate

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The Management Team

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General Manager

Corporate & Investment Banking

Abdulla Showaiter

General Manager

Retail Banking

Faisal Aqil

Chief Financial Officer

Ahmad Fayez Al Shamsi

Head, Credit Division

Zahid Rashid

Chief Executive Officer

Ebrahim Fayez Al Shamsi

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Success

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Making success a habit !

At Emirates Islamic Bank, success is defined as a continuous endeavour to ensure

unmatched advantages for our customers, stakeholders and the community at large.

Success we believe is not the end, but the path to a worthy goal, one that epitomises

the values that govern us, coupled with a burning desire to succeed. Ever-striving to

enrich society through simple but advanced financial services solutions and through

being a socially responsible corporation, we welcome challenges that push our limits

and demand creative solutions. All this culminates in the development of innovative

products that exceed the expectations of our valued customers, in a fast-paced modern

society and fully adhere to the enduring laws of Shari’ah.

Working as a successful team, our experienced professionals are consistently ensuring

progress in our journey towards becoming one of the most widely recognised Banks in

the region.

At Emirates Islamic Bank, ensuring dynamic growth is our passion, innovation our

strength, service our forte and ensuring success a habit.

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Shari’ah

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Our guiding philosophy !

As trailblazers in the world of Islamic financial services, we look to the principles

of Shari’ah as the guiding light that leads us every step of the way. As opposed to

conventional interest-based banking systems, we do not become creditors, nor do we

indulge in levying interest. The time-tested and friendly Shari’ah compliant financing

methods such as Murabaha, Ijarah, Ististna, Salam, etc., form the foundation of our

business approach and guiding values.

Adherence to the Shari’ah guidelines is reflected in our fee structure, where no interest is

charged on any of our financing products. Islamic profit-sharing structures and Islamic

investment funds also enable us to share profits and risks so as to help establish a viable

Islamic economic model.

As we continue to move ahead guided by our philosophy of Shari’ah compliance and

value-based banking, our customers continue to experience an enriched banking

experience that stems from both Shari’ah compliance and our strong customer focus.

Shari’ah compliance is and will remain our guiding philosophy !

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Innovation

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A way of life for us !

We set ourselves apart by constantly taking the lead in innovation. Keeping in mind the

needs of our lifestyle customers, we were the first bank in the country to introduce the

Visa Infinite Card – the classiest card ever ! With unique features such as Priority Pass

to VIP airport lounges across the world, international concierge service and worldwide

travel, dining and retail offers were developed to specifications to complement the

truly sophisticated lifestyle of this segment of our clientele.

Providing the widest choice possible for our customers is another vital rule that we

adhere to. This is why for Manzili Home Finance product, our unique model of product

structuring allows customers to opt for large finance amounts through ‘Maximizer’, or

to save a substantial amount of profit through ‘Saver Plus’ which offers our customers

a truly unique opportunity ! This is a true reflection of being a financial provider of

choice for our customers.

Generating of handsome profits from investments for our customers is another challenge

that we have met successfully with the introduction of our new open ended Emirates

Islamic Bank Equity Trading Fund. This innovative fund seeks to generate long-term

capital growth and strong risk-adjusted returns, by investment in Shari’ah compliant

equities across the globe, employing quantitative strategies. We are also proud to

have launched the new Shari’ah compliant Islamic Alternative Strategies Fund and the

“Mudarabha” product to meet the working capital/short-term liquidity requirements of

contractors.

Another value added innovation is our special banking offering for the woman of

today. Complete with special privileges and comforts, Al Reem Ladies banking is a

truly unique service innovation meant for the women of today who have demonstrated

a huge contribution to the society. Al Reem is our tribute to this woman of today!

At Emirates Islamic Bank, we continue to generate creative ideas to match the

requirements of the modern banking world while staying true to our values.

After all, innovation is a way of life for us !

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Customer Service

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An everlasting passion !

As a customer-centric bank we always go the extra mile to guarantee greater customer

satisfaction. In terms of returns we have already proven our commitment to our

customers as the highest profit distributor in the UAE for three consecutive years.

Moving beyond financial results, our aim is to better our banking standards by listening

to our customers, by understanding them and by addressing their needs with total

solutions.

In keeping with the philosophy of ensuring greater proximity to our customers, our

growth has seen tremendous success over the last year. The 5 new branches and 16

ATMs that we opened in 2007 are testimony to our ongoing efforts leading to us have

22 branches in a short span of 3 years. And yet the best is yet to come.

In a constantly changing world, the requirements of our customers are also changing

rapidly. To cater to these new needs, we have introduced convenient solutions such as

24/7 banking through different alternative channels. We have also extended the official

branch timings for some branches in Dubai from 8 am to 8 pm, six days a week and will

be introducing this change across some other branches shortly. Such proactive changes

enable our customers to bank even after office hours, so that they don’t have to take

time off from work to complete their transactions.

Most customers take time out from busy schedules to fulfill their commitment of paying

monthly bills. Now customers have the easier time saving option of paying their utility

bills through the ATM, using their credit cards. Our SMS notification service is also

another initiative to assist our customers in keeping quick track of their transactions.

When it comes to serving our customers well, we ensure excellence of such an order

that it remains our “claim to fame” by our customers’ word of mouth.

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Technology

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Ensuring leadership by quantum leaps !

Being one of the leading players with new technological innovations, in a world where

ground-breaking solutions are introduced on a regular basis, is no easy task. However,

to us it’s second nature ! Thus it is no surprise that choosing the best in class and most

friendly and advantage-filled technologies to ensure optimal benefits for our customers,

while minimising cost is among our key strengths.

We have pioneered futuristic banking innovations, such as the advanced technology-

based MasterCard™ chip-based Debit Card. This product is designed to provide best in

class security and data protection for our customers, while also enhancing convenience.

This was yet another “First” that we have introduced to the Islamic banking industry.

Another shining example of taking a technological leap in order to give our customers

the edge is our all-in-one machines SDM (Smart Deposit Machine), with combined cash

withdrawal and cheque and cash deposit features in one machine. In addition, busy

customers on tight schedules can now also make their Du and Salik payments very

quickly and easily through our alternative banking channels such as the ATM, internet

banking, phone banking, and mobile banking. This ensures that customers find us where

and whenever they need us.

The concept of anytime anywhere banking for our customers is now a visible reality as

well with our cutting-edge e-branch concept. Equipped with an Internet kiosk for online

banking, cash, cheque deposit machine, cash withdrawal machine, a hotline to the EIB

Call Centre and a plasma screen showcasing our entire range of value based banking

products. Our e-branch is truly a revolution for the banking industry as a whole.

We believe that sustainable leadership only comes by ensuring competitive advantage

by quantum leaps !

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People

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Nurturing talent, spreading knowledge !

Dedication, determination and a ready willingness to meet challenges “head on” are a

few of the differentiating characteristics that set our employees apart from the rest.

It goes without saying that we make every effort to nurture the growth and talent of

these valuable professionals. Little wonder that complementing the growing success of

Emirates Islamic Bank, the number of our team members has also increased from 600 in

year 2006 to 843 in year 2007.

The multi-cultural, open environment that we encourage ensures a work ambience

filled with merit-based, good teamwork and a work ethics enabling environment. To

instill a healthy competitive mindset in our team, we promote a merit-based culture,

offering fast-paced growth for robust performance.

We emphasise a great deal on developing our team by providing intensive training

programs on all key areas such as Shari’ah compliant products, relationship management

areas, credit skills, etc. During the year, in co-ordination with our Global Training Centre,

we also initiated the OMEGA program for middle level staff, which provides ‘Credit

Skill’ enhancement opportunities. Our Global Training Centre offers a series of courses

designed and tailored for our staff. From “Islamic Banking Operations” to “Becoming a

Leader” and more, these training programs are essential for helping our professionals

gain a cutting-edge advantage in their area of expertise.

We believe and know that our tomorrow is going to be reflective of the seeds of

talent we sow today. Thus, nurturing talent is a strategic imperative for us !

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Strategic Alliances

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Partnering for leadership !

Strategic partnerships are key factors in generating changes for the better. When two

or more giants of industry join forces to synergistically offer combined advantages,

the results are enormous. To reap the benefits of such symbiotic alliances, Emirates

Islamic Bank has partnered with some of the biggest corporations and Governmental

concerns.

We have a prestigious portfolio of agreements with major property developers in the

country so that aspiring home owners can enjoy our comprehensive range of Manzili

Home Finance Schemes. In line with a new Governmental law, we have opened Escrow

accounts for some of the major developers. The mandatory Escrow account, designed to

protect consumer payments on existing properties and properties under development

are expected to significantly raise the standard of the real estate industry in Dubai,

while also raising the confidence levels of investors.

Our Investment Department has shown remarkable growth through playing an important

role in several sukuk issues, syndications and by participating in direct equities and

investment funds in the regional and international market. Among the most important

initiatives, we played a joint lead arranger role in both the Berber Cement sukuk and

the Thani Investment sukuk issues. For the well-known Saudi German Hospital Group

syndication, we were the sole arranger.

We have also provided financing for some important projects including the Wakala

facility with Tamwheel PJSC, the Energy City Development project in Qatar, Sahara

Centre Expansion project in Sharjah, UAE, Danat India Investment Development project

in India and the Jawhra Green Development project in Qatar.

Looking ahead we see such strategic partnerships playing a key role in sustaining

our leading player role in the financial services industry.

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Financial Strength

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The building block of tomorrow !

Growth and greater profits are end results of a dynamic vision and the tireless efforts we

direct towards ensuring excellence. As we continue to prove ourselves to be a leading

force in the world of financial services, we are attracting more and more customers by

offering them unsurpassed value. This is one of the main reasons for the impressive

financial strength we have developed in a short span of time.

The excellent financial results for 2007 may be credited to the hard work of every single

individual in our team and the unflinching support of our customers and shareholders.

Over the last year, Emirates Islamic Bank earned an impressive profit of AED 238.5

million, after depositors’ shares, registering an increase of 103% over the net profit

earned in the previous year.

Our total Assets grew by 62%, reaching AED 16.95 billion, while our Investment portfolio

increased by 145% to reach AED 4.9 billion as compared to AED 2 billion at the end of

2006. Our Deposits touched AED 13.9 billion at the end of 2007 showing an increase of

54% over the deposits figure for the earlier year.

Reflecting the increasing popularity of Emirates Islamic Bank, our total income grew

from AED 553.8 in 2006 to AED 961.48 in 2007, registering a creditable increase of

74%.

In 2008, we hope to see our finances surge even more. We understand that by improving

ourselves, we also better the banking experience for customers, thereby reaching our

financial and community goals. This is the path we prefer to follow on our journey to

success.

After all, a strong financial foundation will be the building block to the huge future

of tomorrow.

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Community Service

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Our humble contribution !

As we grow and advance, we firmly believe in sharing our success and our prosperity

by contributing towards the development of the community at large and by extending

a helping and brotherly hand to assist the needy. As a leading financial institution we

consider doing our bit to make the world a better place, a very serious responsibility. We

proactively support worthy causes, sponsor events that help make a positive impact in

the society and contribute towards spreading knowledge in the society at large.

Over the year, we have done this in various ways, from sponsorship of the Zakat Fund and

generating awareness about the fund’s activities, to promoting Islamic values through

a symposium on Al Sunna Alnabaweya values, at the Islamic & Arabic studies college.

We were also happy to help organise an Art Exhibition for physically and mentally

challenged children, appropriately named ‘Creations 2007’. Other community service

initiatives included sponsoring of Umra trips for 30 scouts from the Emirates Scout

Association and taking 40 orphans from Human Appeal International on a tour to our

branches and showing them how a financial institution operates. Last year, we also

organised special Ramadan activities at Ajman.

We hope in the future to further support even more worthy causes and make our

contribution to society an ever-increasing barometer for our measurement of our

overall success.

Serving the community will always be among the core reasons of our existence.

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The UAE Islamic Finance Industry

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The UAE Islamic Finance Industry - Key Indicators

The UAE economy, with its liberalised atmosphere, modern social infrastructure, and level playing field has

provided the enabling environment for a highly sophisticated Islamic finance sector, which continues to play

an important role in insuring sustainable economic development and improving socio-economic welfare. Since

the turn of the current century, the UAE Islamic finance thrived, while continuing to provide innovative Islamic

financial services at a high level of excellence. The charts below give an indication of the market dynamics.

ASSET GROWTH

DEPOSIT GROWTH

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35


PROFIT GROWTH

EQUITY GROWTH

EQUITY GROWTH

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ISLAMIC FINANCE PROFITABILITY

THE RATE OF RETURN ON ASSETS, ROA

RATE OF RETURN ON EQUITY

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EXPENDITURES/INCOME RATIO

ISLAMIC FINANCE EFFICIENCY

EXPENDITURES/ASSET RATIO

EXPENDITURES/INCOME RATIO

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MARKET SHARE OF ISLAMIC FINANCE

THE MARKET SHARE OF ISLAMIC FINANCE

EQUITY & PROFIT SHARES OF ISLAMIC FINANCE

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TRANSFORMATION TO ISLAMIC FINANCE, THE EMIRATES ISLAMIC BANK CASE:

MAIN INDICATORS 2004-2007

BEFORE AND AFTER CONVERSION

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Dear Shareholders,

Peace and blessings be upon you..

The Board of Directors is pleased to present the 2007 year end report on the Bank’s activities. With the Grace

of Almighty Allah, the Bank achieved numerous outstanding results across all its sectors, surpassed more than

double as compared with 2006 figures. However, the most important accomplishment was winning the Sheikh

Mohammad Bin Rashid Al Maktoum Business Award 2007 in the Finance category and become the first Bank

across the country to win this prestigious award within three years after its establishment.

During the year 2007, The Bank continued its relentless efforts, in light of the approved strategy, to gain a

larger market share in the Banking industry, diversify its financing and investing portfolio and provide more and

new products and services making a wide range of options for present and potential customers. Furthermore,

the Bank’s Mudaraba Pool continues generating – praise to Almighty Allah- the best profit rates on investment

accounts in the UAE, which result in a considerable increase in such accounts of 58% compared to previous

year.

As for the segmental performance, the corporate achieved an extraordinary growth of 80% in 2007. The corporate

financing portfolio exceeded AED 5 Billions including a great contribution in developing the infrastructure of

the Emirate of Sharjah providing a finance of AED 350 Million to the Electricity & Water Authority in this

Emirate. This segment has successfully won two major contracts, for real estate development in Jumeira district

for AED 290 Million, and for establishing a cement factory in Al Ain city amounting AED 150 Million.

The Investment segment achieved a tremendous increase in its various activities by 145% that a portfolio

reached AED 4.9 Billion compared to AED 2 Billion in previous year. Fees and commissions realized from this

segment reached AED 32.6 Million from facilitating the issuance of Sukuk on behalf of some VIP customers,

and from leading and participating in syndication finance transactions, in addition to sharing in a number of

investment funds and companies in the Gulf region and international market.

The Bank’s Real Estate activity increased to AED 2.2 Million, a growth of 121% than previous year, realizing

income of AED 134 Million. The Bank’s investment properties moved up to AED 496 Million, achieving an

increase of 347% and income of AED 38 Million.

The Bank’s Retail Segment continued its vital role in attracting more new customer’s deposits; current, investment

and saving accounts increased to AED 9.7 Billion, making a significant growth of 83% than previous year. Retail

has launched a number of new products to meet customer’s requirements; such “Small and Medium Enterprises

(SME)” and “Al REEM” Ladies Banking. On top of that, the Bank through this segment, has succeeded to be the

first bank across the country to offer ATM smart chip based cards and VISA Infinite credit card, distinguished

benefits for VIP customers and to be among the first three banks offering the ESCROW accounts for real estate

developers.

Furthermore, the management of the Bank expanded the networks of both branches and ATMs, continuing its

geographical expansion plan in the country, aiming to make Bank’s services available for all types of customers.

Four new branches were opened during 2007, increasing the number of branches to 22 against 18 branches in

the previous year. The number of ATMs increased to 70 machines compared to 39 machines in previous year.

According to the plan, the number of branches is expected to reach 34 branches, and ATMs to 86 machines

during 2008, God willing.

Board of Directors’ Report For the year 2007

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Board of Directors’ Report For the year 2007(Cont.)

The Bank has paid real efforts to increase its nationalization manpower, to comply with the country’s policy

aiming to raise the national employees in the banking sector to 40%. By the end of 2007, the national staff

reached 33% of the Bank’s total manpower.

Financial performance:

First: Total income amounted to AED 961 Million, against AED 554 Million in 2006; an increase of 73%, resulted from the following activities:

• Financing activities: AED 498 Million

• Investing activities: AED 110 Million

• Murabaha with Group Holding Company: AED 130 Million

• Investments properties: AED 27 Million

• Commissions and fees: AED 196 Million

Second: Total expenses (including depreciation on investment properties) amounted to AED 277 Million, compared to AED 164 Million in 2006, an increase of 69%, due to the following:

• Higher staff cost by AED 76 Million at 65% as a result of new recruits and rise of staff salaries and benefits during the year.

• Increase in other general & administrative expenses by AED 26 Million at 68%, due to the expansion of the Bank’s activities.

• Increase in depreciation on fixed assets by AED 3 Million, due to furnishing the new head office and new branches.

Third: Net profit for the year (after depositors’ share of profit) reached AED 239 Million, against AED 117 Million in the previous year, a great growth of 103%, pushed the earnings per share up to AED 0.32 from AED 0.16 in the year 2006.

Fourth: Total assets reached AED 17 Billion, against AED 10.5 Billion in the previous year, an increase of 62%, represented in the raise of the following:

• Cash, and balances with banks, amounted AED 399 Million at 81%, due to higher compulsory cash reserves on customer accounts with the Central Bank.

• Financing and investing portfolio (including transactions with the group holding company), amounted AED 5.6 Billion at 58%.

• Prepayments and other assets, amounted AED 502 Million at 161%, basically due to increase in: Temporary overdraft, AED 132 Million. Acceptances, AED 133 million. And fixed assets, AED 213 Million, including the valuation of the land donated by government of Dubai

Fifth: Total customers’ accounts moved up to AED 14 Billion, an increase of 54% compared to the previous year, broken down to; investment accounts AED 9.6 Billion, savings accounts AED 1.2 Billion, and current accounts and others AED 3.1 Billion.

Sixth: Total Shareholders’ Equity amounted to AED 1.3 Billion, compared to AED 966 Million in the previous year, an increase of 38%, resulted from the significant growth in the net profit for the year and accounting for the donated land revaluation reserve.

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Recommendations:

The Board of Directors recommends the following:

1. To approve the consolidated Financial Statements for the year ended 31 December 2007.

2. To appropriate the net profit for the year and retained earnings of the previous year as follows:

• Transfer 10% of the net profit to statutory reserve in accordance with Article (72.a) of Articles of Association - AED 23.9 Million.

• Transfer 10% of the net profit to general reserve in accordance with Article (72.a) of Articles of Association - AED 9.8 Million.

• Transfer to Mudaraba Pool Reserve, as per standard 11 of AAOIFI standards - AED 6.2 Million.

• Discharge of Zakat on Shareholders’ Equity (excluding paid up capital) in accordance with Article (72.g) of Articles of Association - AED 12.7 Million.

• Dividends at 25% of paid up capital as bonus shares - AED 186.9 Million.

• Approve Board of directors’ remuneration - AED 2.8 Million.

• Transfer the balance to Retained Earnings - AED 26 Million.

We pray to Almighty Allah to guide us to all the best.

Board of Directors

Board of Directors’ Report For the year 2007(Cont.)

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Fatwa & Shari’ah Supervisory Board’s Report

The Articles of the Association of the “Bank” have entrusted the Fatwa and Shari’a Supervisory Board (the

“Shari’a Board”) of the Bank with the task of preparing a detailed annual report on the activities of the Bank

and its transactions for the financial year. The objective of the report is to determine the extent to which the

Bank is complying with its Articles of Association and the principles of Shari’a as well as the pronouncements

of the Shari’a Board.

1. Fatwas and Resolutions:

The Sharia Board has reviewed the questions and inquiries it received from various departments of the Bank, and it has accordingly issued appropriate pronouncements and resolutions, which it has circulated for execution.

2. Structuring Financial Transactions and their Documentation

The Sharia Board has examined all the transactions it received from the Bank’s Structuring Department; it has reviewed the structures and documentation of these transactions and has endorsed them after making the necessary changes.

3. Funds and Investment Portfolios:

The Bank has played a leading role in originating, participating in and managing Sharia compliant funds and investment portfolios such as real estate funds and equity funds.

The Sharia Board has studied the structures, documentation and management of these funds and portfolios, and it has reviewed the mechanisms for trading their units, and it has confirmed their non-violation of Sharia and their compliance with the pronouncements and resolutions of the Sharia Board.

4. Sukuk Issue, Management and Participantion:

The Bank has started issuing, managing and participating in a variety of investment Sukuk. The Sharia Board has reviewed the investment Sukuk presented to it by the Bank’s Structuring Department, and it has adopted their structures, and documentation including their prospectus after making the necessary amendments; and it has confirmed their non-violation of Sharia and their compliance with the pronouncements and resolutions of the Sharia Board.

5. Syndicated Financing:

The Sharia Board has reviewed the financing syndications presented to it, and it has examined the related

structures and documentation; and it has endorsed them after ensuring their Sharia compliance and

consistency with the Sharia Board’s pronouncements and resolutions.

6. Training:

The Bank has implemented training sessions based on foundation courses designed by the Sharia Board, and this has resulted in a noticeable reduction in Sharia violations; in addition, more specialized training sessions are being implemented in both Arabic and English.

7. Product Development:

The Sharia Board, in cooperation with the Structuring Department and other concerned departments in the Bank, has made improvements to the existing products of the Bank and it has developed new products that are in line with the progress and advances in the Islamic financial industry, with the aim of meeting the customers’ interests and satisfying their increasing needs and demands. The Bank is using these products in a smooth and competent manner.

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8. Sharia Supervision and Audit:

8.1. The Sharia Board has reviewed the Sharia audit reports on the transactions executed by the Bank during the financial year 2007, and it has forwarded the relevant comments on these transactions to the Bank’s management who have been very keen to comply with the Sharia Board’s directives.

8.2. The Sharia Board has forfeited profits resulting from any Sharia repugnant transactions.

9. Banking Services Fees and Charges:

The Sharia Board has examined the Sharia audit report on the services offered by the Bank during the year and the related fees, and it has confirmed that these services as well as the related fees and charges do not violate Sharia and are consistent with the Sharia Board’s pronouncements and resolutions.

10. Bank’s Books and Records:

The Sharia Board has gained full access from the Bank to any of the Bank’s books, records and documents it wanted to review, and it has received the data and information it has requested to perform its duties and tasks of Sharia supervision and audit.

11. Financials Review and Zakah Calculation:

11.1. The Bank’s management has prepared the balance sheet and the profit and loss account for the financial year ending December 31st 2007. The Sharia Board has reviewed the balance sheet items, the profit and loss account and the other financial statements; and it has confirmed that the Bank’s Assets and Liabilities are in conformity with the statements presented by the management of the Bank. The Sharia Board has examined the accounting policies adopted in preparing the financial statements; it has also reviewed the basis of profit distribution between shareholders and depositors on the one hand, and amongst the depositors on the other hand. The Sharia Board is of the opinion that these policies as well as the basis of profit distribution do not violate Sharia.

The Sharia Board highly commands the Bank’s management for reporting off-balance sheet the leased assets, which the Bank had already sold, transferred the title thereof to Sukuk holders, and received the sale price (consisting of the proceeds of the Sukuk issue) thereof; this reporting is in accordance with the directives of Sharia Board in this regard, and in compliance with Sharia requirements, as per the resolution of the Sharia Standards Board, which mandate reporting off-balance sheet all the Sukuk assets that are sold to Sukuk holders, and emphasize that the proceeds derived form issuing the Sukuk shall constitute a sale price and not a debt on the Bank’s part. This action from the Bank confirms furthermore its compliance with Sharia.

11.2. The Sharia Board as per the Banks Articles of Association has reviewed the account of Zakah that the Bank should pay out on the shareholders fund retained by the Bank in accordance with the principles of Sharia. However, the Bank’s shareholders are the sole responsible for Zakah on the Bank’s capital and on its profits for the year. The Sharia Board has determined the amount of Zakah due per share in order to inform the shareholder accordingly.

12. Sharia Board’s Opinion:

The Sharia Board, while confirming that the responsibility for adherence to Sharia principles and compliance with the Sharia Board’s pronouncement in all of the Bank’ activities rests mainly with the management of the Bank, and within the cases presented to it, the information it has received, the audit it has performed, and the related observations it has made, as well as the positive response from the various departments of the Bank in complying with these observations, declares that the activities and the transactions of the Bank during the for the year ending December 31st 2007 do not violate Sharia and they are consistent with the pronouncements and resolutions issued by the Sharia Board.

Fatwa and Shari’a Supervisory Board

Fatwa & Shari’a Supervisory Board’s Report (Cont.)

45

Shares’ Zakat

Article (72-G) of the Article of Association stipulates that: “The shareholders shall independently provide

Zakat (Alms) for their money (paid up capital) and the Company shall calculate for them the due Zakat

per share and notify them thereof every year. As for the money held by the Company as reserves, retained

earnings and others, on which Zakat is due, the Company shall pay their Zakat as decided by the Fatwa and

Shari’a Supervisory Board, and transfer such Zakat to the Zakat Fund stipulated in Article (75) of Chapter 10

in the Articles of Association”.

Shares’ Zakat maybe calculated using one of the following methods:

First Method

Zakat on shares purchased for trading purposes (to sell them when the market value rises) is as follows:

Zakat pool per share = Share quoted value + Cash dividends per share for the year

Zakat per share = Zakat pool per share X 2.5775%

Net Zakat per share = Zakat per share – 0.017 Dirham (Zakat on reserves and

retained earnings per

share, paid by the Bank)

Total Zakat payable on shares = Number of shares X Net Zakat per share

* Note: Zakat is calculated at 2.5775% for the Gregorian year, and at 2.5% for Hijri year, due to the eleven

days difference between the two calendars.

Second Method

Zakat on shares purchased for acquisition (to benefit from the annual return):

Shares’ Zakat = Total shares’ dividends for the year X 10%

46

Report on the consolidated financial statements

We have audited the accompanying consolidated financial statements of Emirates Islamic Bank PJSC (“the Bank”) and its subsidiary (“referred to as the Group”), which comprise the consolidated balance sheet as at 31 December 2007, and the consolidated 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.

Management’s responsibility for the consolidated financial statements

Management is 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 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 Group’s internal control. An audit also includes evaluating the appropriateness of accounting principles used and 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 the results of its operations and its cash flows for the year then ended in accordance with International Financial Reporting Standards, also taking cognizance of relevant provisions of Federal Law No. 6 of 1985 applicable to Islamic Banks, and comply with the relevant Articles of the Company and Federal Law No. 8 of 1984 (as amended).

Report on other legal and regulatory requirements

As required by the 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 the contents of the Directors’ 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.

KPMG

Munther Dajani

Registration No: 268

Report of the Auditors’ to the Shareolders

47

Income Statement (Year ended December 31, 2007)

2007 2006

Note AED’000 AED’000

INCOME

Income from financing activities, net 4 498,399 277,407

Income from investment securities 5 40,620 100,684

designated at fair value

Income from other investments 6 69,784 25,391

Income from Group Holding Company, net 7 129,855 42,521

Property related income 27,037 19,921

Commissions and fees income, net 8 110,311 38,683

Other operating income 9 85,474 49,270

TOTAL INCOME 961,480 553,877

EXPENSES

General and administrative expenses 10 271,050 161,695

Depreciation of investment properties 5,817 2,508

Allowances for impairment net of recoveries 11 41,872 33,903

TOTAL EXPENSES 318,739 198,106

NET OPERATING INCOME 642,741 355,771

Depositors’ share of profit 12 (404,208) (238,311)

SHAREHOLDERS’ PROFIT (NET INCOME) 238,533 117,460

Earnings per share (Dirham) 13 0.32 0.16

The attached notes 1 to 43 form part of these financial statements.

The auditors’ report is set out on page 46.

48

Balance Sheet (At December 31, 2007)

2007 2006


ASSETS

Cash, and balances with UAE Central Bank 14 867,912 453,337

Due from banks and other financial institutions 23,340 38,465

Due from Group Holding Company, net 15 985,482 1,182,074

Financing receivables 16 10,836,828 6,558,309

Loans and receivables 17 39,909 42,472

Investment securities designated at fair value 18 1,187,157 994,914

Other investments 19 1,592,993 622,385

Investment properties 20 606,905 270,048 Prepayments and other assets 21 536,353 247,280

Fixed assets 22 277,030 64,466

TOTAL ASSETS 16,953,909 10,473,750

LIABILITIES

Customers’ accounts 23 13,909,058 9,046,095

Due to banks and other financial institutions 24 158,200 55,983

Other liabilities 25 800,319 395,187

Zakat payable 26 13,426 10,613

Investment Wakala 27 740,000 -

TOTAL LIABILITIES 15,621,003 9,507,878

SHAREHOLDERS’ EQUITY

Share capital 28 747,500 650,000

Statutory reserve 29 147,599 123,746

General reserve 29 74,750 65,000

Revaluation reserve 30 144,000 -

Mudaraba pool reserve 31 6,175 -

Retained earnings 212,882 127,126

TOTAL SHAREHOLDERS’ EQUITY 1,332,906 965,872

TOTAL LIABILITES AND SHAREHOLDERS’ EQUITY 16,953,909 10,473,750

COMMITMENTS AND CONTINGENT LIABILIITES 32 2,827,222 1,639,660

ASSETS UNDER MANAGEMENT 33 2,785,550 -

RESTRICTED INVESTMENT ACCOUNTS 34 519,177 -

These financial statements were authorized for issue in accordance with a resolution of the Board of Directors on, 29 January 2008

Chairman Director Chief Executive Officer

The attached notes 1 to 43 form part of these financial statements. The auditors’ report is set out on page 46.

49

Statement of Cash Flows (Year ended December 31, 2007)

2007 2006


OPERATING ACTIVITIES

Profit for the year 238,533 117,460

Adjustments:

Allowances for impairment on financing receivables 73,728 47,122

Gain on sale of investments (8,937) (4,697)

Gain on sale of investment properties (10,678) (12,822)

Loss/Gain on revaluation of investment securities 5,065 (66,033)

Gain on redemption of investment securities - (661)

Depreciation on investment properties 5,817 2,508

Depreciation on fixed assets 14,162 7,670

Zakat paid (10,613) (5,704)

Operating profit before changes in assets and liabilities 307,077 84,843

Increase in reserves with UAE Central Bank (368,282) (197,852)

Decrease/increase in due from Group Holding Company 2,804,344 (750,473)

Increase in financing receivables (4,352,247) (4,494,878)

Decrease in loans and receivables 2,563 2,302

Increase in prepayments and other assets (289,073) (103,315)

Increase in customers’ accounts 4,862,963 5,446,539

Increase in other liabilities 403,063 78,528

Net cash from operating activities 3,370,408 65,694

INVESTING ACTIVITIES

Purchase of investment properties (367,045) (241,353)

Proceeds from sale of investments properties 35,045 110,314

Purchase of investment securities (1,370,711) (916,653)

Proceeds from sale of investment securities 211,733 31,086

Additions to fixed assets (82,726) (50,178)

Proceed from sale of fixed assets - 31

Net cash used in investing activities (1,573,704) (1,066,753)

FINANCING ACTIVITIES

Investment Wakala 740,000 -

Net cash from financing activities 740,000 -

Increase/decrease in cash and cash equivalents 2,536,704 (1,001,059)

Cash and cash equivalents at the beginning 318,609 1,319,668

of the year

Cash and cash equivalents at the end of the year 35 2,855,313 318,609

The attached notes 1 to 43 form part of these financial statements. The auditors’ report is set out on page 46.

50

Statement of Changes in Shareholders’ Equity (Year ended December 31, 2007)

Share Statutory General Revaluation Mudaraba Retained capital reserve reserve reserve pool reserve earnings Total AED’000 AED’000 AED’000 AED’000 AED’000 AED’000 AED’000

As of 1st January 2006 650,000 112,000 55,075 - - 42,766 859,841

Net income for the year - - - - - 117,460 117,460

Transfer to reserves - 11,746 9,925 - - (21,671) -

Zakat payable - - - - - (9,329) (9,329)

Directors’ remuneration - - - - - (2,100) (2,100)

As of 31st December 2006 650,000 123,746 65,000 - - 127,126 965,872

As of 1st January 2007 650,000 123,746 65,000 - - 127,126 965,872

Issue of bonus shares 97,500 - - - - (97,500) -

Fair value revaluation - - - 144,000 - - 144,000

Net income for the year - - - - - 238,533 238,533

Transfer to reserves - 23,853 9,750 - 6,175 (39,778) -

Zakat payable - - - - - (12,699) (12,699)

Directors’ remuneration - - - - - (2,800) (2,800)

As of 31st December 2007 747,500 147,599 74,750 144,000 6,175 212,882 1,332,906

In accordance with the Ministry of Economy & Commerce interpretation of Article (118) of Commercial Companies Law No: (8) of 1984, Directors’ remuneration has been treated as an appropriation from equity.

The attached notes 1 to 43 form part of these financial statements

51

Notes to the Financial Statement (As of 31 December 2007)

1. ACTIVITIES

Emirates Islamic Bank formerly Middle East Bank (the “Bank”) was incorporated by a decree of His Highness the Ruler of Dubai as a conventional Bank with limited liability in the Emirate of Dubai on 3rd of October 1975. The Bank was reregistered as a Public Joint Stock Company in July 1995.

At an extraordinary general meeting held on 10th of March 2004, a resolution was passed to transform the Bank’s activities to be in full compliance with the Islamic Sharia. The entire process was completed on 9th of October 2004 (the “Transformation Date”) when the Bank obtained UAE Central Bank and other UAE authorities’ approvals.

The Bank is a subsidiary of Emirates Bank International PJSC, Dubai (the “Group Holding Company”).

In addition to its head office in Dubai, the Bank operates through 21 branches in the UAE. The accompanying consolidated financial statements combine the activities of the Bank’s head office and its branches and its subsidiary. During the year ended December 31, 2006, the Bank setup a brokerage company <Emirates Islamic Financial Brokerage> (the “Subsidiary”) a wholly owned subsidiary.

The Bank provides full banking services, and a variety of products through Islamic financing and investing instruments.

As of 31st of December 2007 the Bank employed 923 employees (2006: 801 employees).

The Bank’s registered office address is P.O. Box 6564, Dubai, United Arab Emirates.

2. SIGNIFICANT ACCOUNTING POLICIES

Accounting convention

The consolidated financial statements have been prepared under the historical cost convention as modified for the re-measurement of financial assets carried at fair value through income statement and available for sale investments.

Basis of preparation

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards, Sharia rules and principles as approved by the Bank’s Fatwa and Sharia Supervisory Board, and the requirements of Federal Law number 6 (of 1985) regarding Islamic Banks, Financial Institutions and Investment companies.

The financial statements have been presented in UAE Dirham, rounded to the nearest thousand.

Basis of consolidation

A subsidiary is an entity over which the Bank exercises control, directly or indirectly over the financial and operating policies so as to obtain benefits from its activities. A subsidiary is fully consolidated from the date on which the Bank exercises control. It is de-consolidated from the date that control ceases. These consolidated financial statements include the operations of the subsidiary over which the Bank has control.

Inter-company transactions, balances and unrealized gain on transactions between the Bank and the subsidiary are eliminated. Unrealized losses are also eliminated unless the transaction provides evidence of impairment of the asset transferred.

Due from banks and other financial institutions

Represents the Bank’s balances with correspondent banks, and are stated at cost less allowance for impairment, if any.

52

Notes to the Financial Statement (As of 31 December 2007) Cont.

Financial instruments

(i) Classification

The Bank’s classification of financial assets include the following categories: financing receivables, leased assets (“Ijarah”), loans and receivables, held-to-maturity, financial assets at fair value through profit or loss and available for sale financial assets. Management determines the classification of its investment at initial recognition.

Financing receivables

• Murabaha: An agreement whereby the Bank sells to a customer a commodity or a property which the Bank has purchased and acquired based on a promise received from the customer to buy the item purchased according to specific terms and conditions. The selling price comprises of the cost of the commodity and an agreed profit margin.

• Financing Ijarah: An agreement whereby the Bank (lessor) leases an asset to a customer (lessee), for a specific period against certain rent installments. Ijarah could end in transferring the ownership of the asset to the lessee at the end of the lease period. Also, the Bank transfers substantially all the risks and returns related to the ownership of the leased asset to the lessee.

• Mudaraba: An agreement between two parties; one of them provides the funds and is called Rub-Ul-Mal, and the other provides efforts and expertise and is called Mudarib who is responsible for investing such funds in a specific enterprise or activity in return for a pre-agreed percentage of profit as Mudaraba fee. In case of normal loss; Rab-Ul-Mal would bear the loss of his funds while Mudarib would bear the loss of his efforts. However, in case of default, negligence or violation of any of the terms and conditions of the Mudaraba agreement, the Mudarib would bear the losses. The Bank may acts as Mudarib when accepting funds from investors, and as Rub-Ul-Mal when investing such funds on Mudaraba basis.

• Istisnaa: An agreement between the Bank and a customer, whereby the Bank develops and sells a property to the customer according to agreed upon specifications. The Bank may develop the property on its own or through a subcontractor, and then hand it over to the customer on a pre agreed date and against fixed price.

• Wakala: An agreement whereby the Bank provides a certain sum of money to an agent, who invests it according to specific conditions in return for a certain fee (a lump sum of money or a percentage of the amount invested). The agent is obliged to guarantee the invested amount in case of default, negligence or violation of any of the terms and conditions of the Wakala.

Loans and receivables

Loans and receivables are non derivative financial assets not quoted in active market granted by the Bank providing money to a debtor other than those granted for the intention of short term profit taking. Loans and receivables were originated by the Bank before the transformation date of the Bank’s activities to be in full compliance with the Islamic Sharia. These are reported net of impairment allowance to reflect the estimated recoverable amounts. These products have been discontinued since the Bank transformed to the Islamic Banking system.

Financial assets at fair value through income statement

Financial assets are classified under this category if acquired principally for the purpose of short term profit taking or derivative instrument or so designated by management.

Held-to-maturity investments

Held-to-maturity investments are non derivative financial assets with fixed or determinable payment and fixed maturities that the Bank’s management has the positive intent and ability to hold to maturity. In case the Bank sells other than an insignificant amount of held to maturity assets, then the entire category would be reclassified as available for sale.

53


Available-for-sale investments

Available-for-sale investments are non derivative investments that are not designated as another category of financial assets. Unquoted equity securities for which fair value can not be reliably measured are carried at cost. All other available for sale investments are carried at fair value.

Sukuk

Sukuk, Islamic products governed by Shari’a rules and approved by the Bank’s Fatwa and Shari’a Supervisory Board, are certificates of equal value representing undivided shares in ownership of tangible assets, usufruct and services or in the ownership of the assets of particular projects or special investment activity.

Investment Wakala

Investment Wakala is an agreement whereby one party (the «Muwakkil» / «Principal») appoints an investment agent (the «Wakeel» / «Agent») to invest the Muwakkil <s funds (the «Wakala Capital») on the basis of an agency contract (the «Wakala») in return for a specified fee. The agency fee can be a lump sum or a fixed percentage of the Wakala Capital and is payable regardless the said Wakala generates profit or loss; while the share of the profit, if any, is an incentive for the Wakeel to achieve a return higher than expected. The Wakala profit, if any, goes to the Muwakkil, and he bears the loss. However, the Wakeel bears the loss in cases of fraud, negligence or violation of the terms of the Investment Wakala.

The Bank, as an agent, is not bearing any substantial underlying risks, therefore the investment Wakala are excluded from these financial statements.

(ii) Recognition

Financing receivables are recognized on the day the risk on underlying asset is transferred to the counter party or in accordance with the contractual terms.

The Bank recognizes the assets at fair value through income statement on the date it commits to purchase the asset. From this date, any gains and losses arising from the change in the fair value of the asset is recognized. These assets are derecognized and the corresponding receivable from the buyer is recognized as of the date the Bank commits to sell the asset.

The financial liabilities are recognized on the date the Bank becomes a party to contractual provisions of the instruments.

The financial assets are derecognized when the Bank loses control over the contractual rights that comprise those assets. This occurs when the rights are realized, expire or are surrendered. A financial liability is derecognized when it is extinguished.

(iii) Measurement

All financial instruments are recognized initially at cost including transactions cost except investment at fair value through income statement which is recognized at cost excluding transaction cost.

All Financial receivables and loans and receivables are measured at amortized cost less impairment losses if any. Amortized cost is calculated on the effective profit / interest rate method. Transaction cost is included in the carrying amount of the instrument and is amortized based on the effective profit / interest rate of the instrument.

(iv) Fair value measurement principles

Subsequent to initial measurement all assets at fair value through income statements are measured at fair value, except for instruments that do not have quoted market price in an active market and their fair value can not be measured which are stated at cost, including transaction cost, less any impairment losses.

The fair value of financial instruments is based on their quoted market price at the balance sheet date without any deduction for transaction costs. If a quoted market price is not available, the fair value of the instrument is estimated using pricing models or discounted cash flow techniques.

54


Where discounted cash flow techniques are used, estimated future cash flows are based on management’s best estimate and the discount rate is a market related profit rate at the balance sheet date for an instrument with similar terms and conditions. Where pricing models are used, inputs are based on market related measures at the balance sheet date.

(v) Gains and losses on subsequent measurement

Gains and losses arising from a change in the fair value of the assets at fair value through income statement are recognized in the income statement. Gains and losses on available for sale investments are recognized through owners equity.

Key accounting estimates and judgments in applying accounting policies

The Bank makes estimates and assumptions that affect the reported amounts of assets and liabilities within the next financial year and the resultant provisions and fair value. Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Impairment

Financial assets are reviewed at each balance sheet date to determine whether there is an objective evidence of impairment. If any such indication exists, the asset’s recoverable amount is estimated.

The recoverable amount of Islamic financial instruments and loans and receivables are measured at the present value of the expected future cash flows, discounted at the instrument’s original effective profit/interest rate. Short term balances are not discounted.

Financing receivables and loans and receivables are presented net of allowances for impairment. Specific allowance are made against the carrying amount of financing receivables and loans and receivables that are identified as being impaired based on regular reviews of outstanding balances to reduce these financing receivables and loans and receivables to their estimated recoverable amounts at the balance sheet date. The expected cash flows for portfolio of similar assets are estimated based on previous experience and considering the credit rating of the underlying customers and late payments or penalties. When a receivable or loan is known to be uncollectible, all the necessary legal procedures have been completed, and the final loss has been determined, the receivable is written off directly.

If in a subsequent period the amount of impairment loss decreases and the decrease can be linked objectively to an event occurring after the write-down, the write-down or allowance is reversed through the income statement.

Investment properties

Properties acquired by the Bank for development or to be leased out, are classified as investment properties. Investment properties are recognized at cost less accumulated depreciation and impairment allowance, if any. Buildings are depreciated over the period of 20 years.

Fixed assets

Fixed Assets are recorded at cost, less impairment allowance, if any. Depreciation is provided on a straight-line basis over estimated useful lives of all fixed assets, other than freehold land which is not depreciated.

The rates of depreciation are based upon the following estimated useful lives:

Leasehold improvement 4 years

Other assets 4 years

55


Revenue recognition

Murabaha

The profit is quantifiable and contractually determined at the commencement of the contract; profit is recognized as it accrues over the period of the contract on effective profit rate method on the balance outstanding.

Ijarah

Income from Ijarah is recognized on an accrual basis over the period of the contract.

Wakala

Estimated income from Wakala is recognized on an accrual basis over the period, adjusted by actual income when received. Losses are accounted for on the date of declaration by the agent.

Dividend income

Dividend income is recognized when the right to receive it, is declared.

Commissions and fees

Commissions and fees are recognized when the related services are rendered.

Forfeited income

Forfeited income is resulting from transactions deemed to be incompliant with Islamic Sharia, as per the Fatwa and Sharia Supervisory Board. The Bank’s management has to separate such income and set aside from the Bank’s income and disclose it in the financial statements. This income is directed towards local social activities.

Provisions

Provisions are accounted for when the Bank has an obligation (legal or constructive) arising from a past event, and the costs to settle the obligation are both probable and can be reliably measured.

Employees’ end of service benefits

The Bank provides end of service benefits to its expatriate employees in accordance with the UAE labor law. The entitlement of these benefits is based upon the employees’ basic salary and length of service, subject to a completion of a minimum service period. Costs of these benefits are accrued over the period of employment. Provision for employees’ end of service benefits at the balance sheet date is included under “Other Liabilities”.

With respect to its national employees, the Bank makes contributions to a pension fund established by the General Pension and Social Security Authority as a percentage of the employees’ salaries. The Bank’s obligations are limited to these contributions, which are recognized in the statement of income.

New standards and interpretation not yet adopted

The financial statements have been prepared in accordance with International Financial Reporting Standards («IFRS») and interpretations adopted by the Standing Interpretations Committee of the International Accounting Standards Board («IASB»).

New standards and interpretations that are issued but not yet effective for accounting periods beginning on 1 January 2007 are as follows:

• IFRS - 8: Operating Segments (effective 1 January 2009); • IAS – 23 (Revised): Borrowing costs (1 January 2009);• IAS – 1 (Revised): Presentation of financial statements (1 January 2009); • IFRIC - 13: Customer loyalty programs (1 July 2008); and• IFRIC - 12: Service Concession Arrangements (effective 1 January 2008).

56


Zakat

The Bank discharges Zakat (Alms) as per its Articles of Association. The Bank calculates Zakat based on the guidance of its Fatwa and Sharia Supervisory Board as follows:

• Zakat on shareholders’ equity (except paid up capital) is discharged from the net profit of the year.• Zakat is disbursed to Sharia channels through a committee formed by management. • Shareholders themselves are responsible to pay Zakat on their paid up capital.• Zakat on the general provision or on other reserves, if any, is calculated and discharged from the share

of profit of the respective parties participating in the Mudaraba Pool.

Profit distribution

Profit distribution between unrestricted investment & saving accounts’ holders and shareholders according to the instructions of Fatwa and Sharia supervisory board:

• Net income of all items of Mudaraba Pool at the end of each quarter, is the net profit distributable between the shareholders and unrestricted investment and saving accounts’ holders.

• The share of unrestricted investment and saving accounts’ holders is calculated out from the net profit at the end of each quarter after deducting the agreed upon and declared Mudarib fee percentage.

• Due to mingling of unrestricted investment & saving funds with the Bank’s funds for the purpose of investment, no priority has been given to either party in the appropriation of profit.

Cash and cash equivalents

For the purpose of preparation of the statement of cash flows, cash equivalents are considered to be cash at bank, current account with the UAE Central Bank, due from banks and Group Holding Company (including short-term Murabaha) less due to banks and Group Holding Company. Cash equivalents are short-term liquid investments that are readily convertible to known amounts of cash with outstanding maturities up to three months from the balance sheet date.

Foreign currencies

The accounting records of the Bank and its subsidiary are maintained in UAE Dirham. Transactions in foreign currencies are translated to UAE Dirham at the foreign exchange rates prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to UAE Dirham at the foreign exchange prevailing at that date. Non-monetary assets and liabilities denominated in foreign currencies that are stated at historical cost, are translated to UAE Dirham at the foreign exchange rates prevailing at the date of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translations at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the income statement. Foreign currency gains and losses arising on translation are recognized in the income statement, except for differences arising on the retranslation of available-for-sale equity instruments, which are recognized directly in equity.

Contingent liabilities

Contingent liabilities are not recognized in the financial statements. These are disclosed unless the possibility of an outflow of resources embodying economic benefits is remote.

3. CHANGE IN ACCOUNTING POLICY

The Bank has changed its accounting policy related to amortization of deferred income on financing receivables. Previously the Bank used to amortize its deferred income on straight line basis (equally over the period of the contract). During 2006, the Bank adopted the effective rate of return method in accordance with IFRS 39.

57


2007 2006

AED’000 AED’000

4. INCOME FROM FINANCING ACTIVITIES, NET

Financing Activities

Commodities Murabaha 111,917 53,374

Vehicles Murabaha 120,166 90,531

Real Estates Murabaha 12,377 10,365

Syndications Murabaha 78,946 35,449

Ijarah 133,440 80,426

Istisnaa 18,130 5,010

Others 23,423 2,252

498,399 277,407

5. INCOME FROM INVESTMENT SECURITIES DESIGNATED AT FAIR VALUE

Realized gain 8,937 5,358

Unrealized loss/ gain (5,065) 66,034

Dividend income 20,082 19,088

Investing income 16,666 10,204

40,620 100,684

6. INCOME FROM OTHER INVESTMENTS

Investing income- available for sale investments 29,401 3,313

Investing income- held to maturity investments 40,383 22,078

69,784 25,391

7. INCOME FROM GROUP HOLDING COMPANY, NET

Short term Murabaha 133,993 42,521

Investment Wakala (4,138) -

129,855 42,521

8. COMMISSIONS AND FEES INCOME, NET

Commissions and fees 103,365 39,805

Portfolio management fees 8,030 -

Others 3,483 127

114,878 39,932

Less: Commissions and fees paid (4,567) (1,249)

110,311 38,683

58


2007 2006

AED’000 AED’000

9. OTHER OPERATING INCOME

Foreign exchange gains, net 15,796 11,753

Credit cards 35,950 14,881

Feasibility study fees 12,506 5,110

Others 21,222 17,526

85,474 49,270

10. GENERAL AND ADMINISTRATIVE EXPENSES

Staff related expenses 192,558 116,358

Operating expenses 34,533 26,256

Administrative expenses 28,833 11,411

Depreciation of fixed assets 15,126 7,670

271,050 161,695

11. ALLOWANCE FOR IMPAIRMENT S NET OF RECOVERIES

Allowances for impairment of financing receivables 73,728 47,123

Recoveries from financing receivables, note 16 (10,093) -

Recoveries from loans and receivables* (21,763) (13,220)

41,872 33,903

* Recoveries from loans and receivables represent the final settlement of old debts that were fully provided for in previous years.

12. DEPOSITORS’ SHARE OF PROFIT

The distribution of profit between depositors (investment and saving accounts’ holders) and shareholders is made, quarterly, in accordance with the method approved by the Bank’s Fatwa and Sharia Supervisory Board.

Paid during the year 298,883 133,611

Payable for the last quarter of 2007 118,556 79,748

Transferred from / to profit equalization reserve during the year (26,847) 24,952

Transferred to Mudaraba pool reserve 13,616 -

404,208 238,311

13. EARNINGS PER SHARE

The calculation of earnings per share is based on earnings of AED 238,533,000 (2006: AED 117,460,000), for the year divided by the weighted average of the number of shares outstanding during the year 2007: 747,500,000 shares (2006: 747,500,000 Shares).

59


2007 2006

AED’000 AED’000

14. CASH, AND BALANCES WITH UAE CENTRAL BANK

Cash in hand 55,894 57,624

Balances with UAE Central Bank:

Current account 53,860 5,837

Reserve requirements 758,158 389,876

867,912 453,337

15. DUE FROM GROUP HOLDING COMPANY, NET

Due from Group Holding Company comprises:

Murabaha, short term 3,391,469 1,347,976

Deposit exchange (profit free), net (2,322,031) 47,711

Other balances (83,956) (213,613)

985,482 1,182,074

16. FINANCING RECEIVABLES

Financing receivables comprise:

Commodities Murabaha 2,006,613 989,023

Vehicles Murabaha 2,177,992 1, 938,264

Syndication Murabaha 360,589 389,407

Real Estates Murabaha 261,262 126,717

Total Murabaha 4,806,456 3,443,411

Istisnaa 739,659 259,278

Ijarah 2,578,078 1,753,197

Credit card receivables 292,089 185,192

Others 847,200 881,438

9,263,482 6,522,516

Less: Deferred income (545,594) (375,964)

Less: Allowances for impairment (157,748) (94,113)

8,560,140 6,052,439

Wakala 2,276,688 505,870

10,836,828 6,558,309

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16. FINANCING RECEIVABLES (continued)

2007 2006

AED’000 AED’000Analysis by Economic Activity

Agriculture and related activities 8,017 23,514

Manufacturing 390,740 166,721

Construction 802,347 1,392,524

Trade 2,646,657 1,429,042

Transportation and communication 137,308 13,059

Services and personal 4,615,735 2,789,404

Real estates 2,472,700 967,555

Others 466,666 246,566

11,540,170 7,028,386

Less: Deferred income (545,594) (375,964)

Less: Allowance for impairment (157,748) (94,113)

10,836,828 6,558,309

Movement in allowances for impairment:

Balance at the beginning of the year 94,113 46,990

Allowances for impairment made during the year 73,728 47,123

Recoveries (10,093) -

Balance at the end of the year 157,748 94,113

17. LOANS AND RECEIVABLES

Overdraft 22,746 23,678

Time loans 68,052 71,977

Loans against trust receipts 9,153 10,209

Bills discounted 1,746 2,442

Others 1,290 1,295

Total loans and receivables 102,987 109,601


39,909 42,472Analysis by Economic Activity:

Agriculture and related activities 2,341 2,276

Manufacturing 15,074 15,351

Construction 10,227 8,974

Trade 12,129 13,327

Transportation and communication 37,413 41,822

Services and Personal 25,803 27,851

Total Loans and receivables 102,987 109,601


39,909 42,472

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2007 2006

AED’000 AED’000

Movement in allowances for impairment:


Recoveries (412) (13,220)

Amount written off (3,639) -


During 2004, the Bank transferred some of its corporate and retail loans at book value with associated allowances for impairment to the Holding Company.

Included in the “Others” above are delinquent loans and receivables that were identified at the time of acquisition of Middle East Bank (PJSC) by the Holding Company. These are managed in a workout situation. The loan balances on these accounts amounted to AED 68,243,000 (2006: AED 233,713,000) against which allowances for impairment of AED 68,243,000 (2006: AED 233,713,000) are applied. Net recoveries of AED 21,652,000 (2006: AED 909,000) were credited to the income statement.

18. INVESTMENT SECURITIES DESIGNATED AT FAIR VALUE

2007 2006

AED’000 AED’000

Equity shares 317,223 322,235

Equity funds 665,388 332,164

Hybrid debt instruments 204,546 340,515

1,187,157 994,914

Investment securities comprise:

Quoted 862,516 670,498

Unquoted 324,641 324,416

1,187,157 994,914

19. OTHER INVESTMENTS

Held to maturity – Sukuk 509,253 501,212

Available for sale 1,083,740 121,173

1,592,993 622,385

Investment securities comprise:

Quoted 75,691 75,757

Unquoted 1,517,302 546,628

1,592,993 622,385

62


2007 2006

AED’000 AED’000

20. INVESTMENT PROPERTIES


Properties purchased 367,045 241,353

Properties sold (24,367) (98,549)

614,211 271,533

Less: Accumulated depreciation (7,306) (1,485)


Investment properties comprise: Lands 452,810 142,263

Buildings, net 154,095 127,785

606,905 270,048

The fair value of investment properties as of December 31, 2007 is AED 648,641,000 (2006: AED 296,652,000), as per valuation conducted by independent valuer.

21. PREPAYMENTS AND OTHER ASSETS

Dividend receivable 9,351 9,111

Overdraft accounts (profit free) 174,773 42,418

Bills under letters of credit 34,817 29,122

Prepaid expenses 10,020 10,975

Deferred sales commissions 20,335 19,263

Contingent customer acceptances 241,329 108,397

Goods available for sale 44,947 13,087

Share application- private placement * - 14,525

Others 5,486 5,087

541,058 251,985

Less: Allowance for impairment (4,705) (4,705)

536,353 247,280

* Share application-private placements represent share application on behalf of customers.

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22. FIXED ASSETS

Capital work in progress & Leasehold Improvement Other Assets Total AED’000 AED’000 AED’000

Cost

As of 1st January 2007 53,171 34,141 87,312

Additions 60,893 23,451 84,344

Revaluation 144,000 - 144,000

Transfers 9,464 (9,464) -

Disposals - (1,002) (1,002)

As of 31st December 2007 267,528 47,126 314,654

Accumulated depreciation

As of 1st January 2007 11,349 11,498 22,847

Charges for the year 7,797 7,329 15,126

Disposals - (349) (349)

As of 31st December 2007 19,146 18,478 37,624

Net book value

31st December 2007 248,382 28,648 277,030

31st December 2006 41,872 22,594 64,466

Capital work in progress includes civil construction work undertaken amounted to AED 82,437,000 (2006: AED 21,772,000).

Capital work in progress and leasehold improvements include a land donated by the Government of Dubai. (note 30).

2007 2006

AED’000 AED’000

23. CUSTOMERS’ ACCOUNTS

Current accounts 2,955,708 1,923,983

Saving accounts 1,180,863 955,417

Investment accounts 9,629,324 6,079,546

Margins 115,681 46,069

Profit equalization reserve 13,866 41,080

Mudaraba pool reserve (note 12 & 31) 13,616 -

13,909,058 9,046,095

Movement in profit equalization reserve:


Transfer to / from depositors’ share of profit (26,847) 24,952

Impact of change in accounting policy (note 3) - 12,064

Zakat payable (367) (1,087)


Profit equalization reserve was made in the year 2005 upon the approval of the Board of Directors and Fatwa and Sharia Supervisory Board. Zakat on this reserve is included under Zakat payable (note 26).

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2007 2006

AED’000 AED’000

24. DUE TO BANKS AND OTHER FINANCIAL INSTITUTIONS

Current accounts 3,415 357

Clearing accounts with UAE Central Bank 44,920 -

Overdraft with correspondents 109,865 55,626

158,200 55,983

25. OTHER LIABILITIES

Depositors’ share of profit for the last quarter of 2007 118,556 79,748

Provision for employees’ benefit 51,657 31,884

Manager cheques 139,908 51,149

Trade payables 44,255 40,616

Contingent customer acceptances 241,329 108,397

Board of directors’ remuneration 2,800 2,100

Contracts’ retentions 46,065 22,056

Forfeited income 723 214

Share application margin - private placements * - 8,489

Tax liability – Egypt, Cairo branch ** 20,000 20,000

Customer - Sukuk redemption 79,865 -

Others 55,161 30,534

800,319 395,187

* Share application margins represent margins collected from customers for share application of private placements.

** Tax liability of AED 20,000,000 represents a provision for a closed branch of the Bank in Cairo. The branch was closed during the 1990’s before the transformation of the Bank’s activities into Islamic Banking. The tax liability is subject to legal jurisdiction.

26. ZAKAT PAYABLE

Zakat on shareholders’ equity (except share capital) 12,699 9,329

Zakat liability due to restatement* - 197

Zakat on profit equalization reserve (Note 23) 367 1,087

Zakat on Mudaraba pool reserve (depositors’ share) 360 -

13,426 10,613

* The amount of AED 197,000 represents the balance of Zakat payable for 2006 as a result of the change in accounting policy (note 3).

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27. INVESTMENT WAKALA

The Bank (the «Wakeel») has arranged an Investment Wakala agreement up to AED 1 billion for a term of 10 years, with effect from 27th September 2007 with Deutsche Trust Company Limited (the «Muwakkil»), which is registered in the United Kingdom. The Muwakkil is the trustee pursuant to the Trust Deed made on the same said date between the trustee and the Group Holding Company, a beneficial owner of this Investment Wakala. The Wakeel has received AED 740,000,000 in tranches under the Investment Wakala during the year ended 31st December 2007.

28. SHARE CAPITAL

At the Extraordinary General Meeting of the shareholders of the Bank held on 20th March 2007, the shareholders declared issue of bonus share at par amounting to AED 97,500,000. The issue of bonus shares increased the number of shares to 747,500,000 and correspondingly share capital increased to AED 747,500,000 (31st December 2006: AED 650,000,000).

29. STATUTORY AND GENERAL RESERVES

In accordance with the Bank’s Articles of Association, Article (82) of Union Law no. 10 of 1980 and Federal Commercial Companies Law, the Bank transfers 10% of shareholders’ annual net income, if any, to the statutory reserve until such reserve equals 50% of the paid-up share capital. This reserve is not available for distribution.

A further 10% of shareholders’ annual net income, if any, is transferred to the general reserve until it reaches 10% of the paid-up capital. This transfer may be suspended by an ordinary General Meeting, based on Board of Directors’ recommendation. The Board of Directors proposes the use of the general reserve at its discretion.

30. REVALUATION RESERVE

The Government of Dubai has donated a non-monetary asset in the form of land, which was initially recognized at a nominal value of AED 1 in the financial year ended 31st December, 2006. The value of the donated land is included under fixed assets (Note 22) and as revaluation reserve under shareholders equity at a fair value of AED 144,000,000, as per the valuation of an independent valuer.

31. MUDARABA POOL RESERVE

Mudaraba pool reserve was created at the end of October 2007, out of the Mudaraba Pool income, before the profit distribution between depositors and shareholders, in order to maintain a certain level of return on the investment of Mudaraba Pool funds.

The balance of this reserve at 31st December 2007 was AED 20,149,000. Depositors’ share of the reserve is AED 13,975,000 and shown under Customers’ Accounts. The shareholders’ share of the reserve is AED 6,175,000 and shown under Equity.

32. COMMITMENTS AND CONTINGENT LIABILITIES

The Bank provides letters of guarantee and letters of credit to meet the requirements of its customers. These commitments have fixed limits and expirations, and are not concentrated in any period, and are arising in the normal course of business, as follows:

2007 2006 AED’000 AED’000

Letters of guarantee 2,126,595 1,113,720

Letters of credit 700,627 525,940

2,827,222 1,639,660

The Bank has capital commitment of AED 113,950,000 for the purchase of fixed assets (2006: AED 7,455,000).

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33. ASSETS UNDER MANAGEMENT

Assets under management comprise:

(a) Sukuk assets

During June 2007, the Bank has facilitated issuance of “Investment Sukuk” aggregating to AED

1,285,550,000 (US$ 350,000,000) through the sale of “Ijarah Assets” at carrying value to Emirates

Islamic Bank Sukuk Company Limited (“the Issuer”). These Sukuk are issued by the Issuer who is also acting as the trustee for the Sukuk holders.

The issuer, in his capacity, as a trustee, by the virtue of the Management Agreement, has assigned

the management of assets of the issuer to the Bank. The Bank is managing these assets for

management fees in accordance with the provisions of this agreement.

On maturity of the Sukuk, the Sukuk holder has the option to redeem the Sukuk at face value.

This option is guaranteed by the Group Holding Company of the Bank. The separate Financial Statements of the Bank and its subsidiary have shown these assets as Off Balance Sheet as required by the Bank’s Fatwa and Sharia Supervisory Board.

(b) Wakala assets

The balance of Wakala assets under management as at 31st December 2007 is AED 1,500,000,000; out of which AED 1,300,000,000 belong to the Group Holding Company. The risks of these investments are borne by respective parties.

34. RESTRICTED INVESTMENT ACCOUNTS

The Bank receives funds from certain customers to invest, on their behalf, in certain projects or activities in return for management fees. The risk of such accounts is borne by the customers, unless the Bank defaults, neglects or violates any of the terms and conditions of the agreement.

35. CASH AND CASH EQUIVALENTS

2007 2006 AED’000 AED’000

Cash 55,894 57,624

Current account with UAE Central Bank 53,860 5,837

Due from Group Holding Company maturing within 3 months 2,880,419 272,666

Due from banks 23,340 38,465

Due to banks (158,200) (55,983)

2,855,313 318,609

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2007 2006 AED’000 AED’000

36. RELATED PARTY TRANSACTIONS

The Bank has transactions carried out in the normal course of business with the Emirates Bank International Group and with certain staff, shareholders, directors and entities in which the Bank, its shareholders and directors have significant interests. Related party transactions are as follows:

Balance Sheet

Due from the Group holding company 985,482 1,182,074

Investment Wakala 740,000 -

Investment in funds managed by the Group 665,389 281,708

Financing receivables – Directors 113,610 96,350

Financing receivables - Key management personnel 31,382 36,903

Current and investment accounts - Directors - 4,091

Income Statement

Income from fund managed by the Group Holding Company 54,180 65,337

Sale of investment properties to fund managed by - 100,482

the Group Holding Company

Redemption of units in funds managed by Group Holding Company - 34,080

Income from Group Holding Company, net 129,855 42,521

Key management personal compensations 7,974 6,538

Key management personal compensations- Retirements benefits 337 200

37. SEGMENT REPORTING

The Bank’s activities comprise the following main business segments:

Corporate and Investment

Within this business segment, the Bank provides to corporate customers a range of products and services and accepts their deposits. This segment invests in investment securities, Sukuk, Funds and Real Estate.

Retail

Retail segment provides a wide range of products and services to individuals and accepts their deposits.

Treasury

This segment mainly includes Murabaha deals with Emirates Bank International (PJSC).

Subsidiary

The wholly owned subsidiary ‘Emirates Islamic Financial Brokerage’ (“the subsidiary”), a brokerage company engaged in offering brokerage services for trading in Islamic Sharia compliant shares. The consolidated financial statements include the following items:

Assets AED 140,872,000

Liabilities AED 110,964,000

Net profit AED 3,521,000

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Corporate & Investment Retail Treasury Total

2007 2006 2007 2006 2007 2006 2007 2006

AED’000 AED’000 AED’000 AED’000 AED’000 AED’000 AED’000 AED’000

37. SEGMENT REPORTING (continued)

Income Statement

Segment income 487,641 310,761 148,199 112,642 129,855 42,521 765,695 465,924

Inter segment Wakala income (249,773) (104,060) 242,837 104,060 6,936 - - -

Commissions, fees & other Income 118,609 71,642 77,176 16,311 - - 195,785 87,953

Total income 356,477 278,343 468,212 233,013 136,791 42,521 961,480 553,877

General and administrative expenses (84,899) (40,600) (186,151) (121,095) - - (271,050) (161,695)

Depreciation of investment properties (5,817) (2,508) - - - - (5,817) (2,508)

Total expenses (90,716) (43,108) (186,151) (121,095) - - (276,867) (164,203)

Net operating income 265,761 235,235 282,061 111,918 136,791 42,521 684,613 389,674

Allowances for Impairment 16,168 2,757 (58,040) (36,660) - - (41,872) (33,903)net of recoveries

281,929 237,992 224,021 75,258 136,791 42,521 642,741 355,771

Depositors’ share of profit (146,702) (92,493) (257,506) (145,818) - - (404,208) (238,311)for the year

Shareholders’ profit

(Net profit for the year) 135,227 145,499 (33,485) (70,560) 136,791 42,521 238,533 117,460

Balance Sheet

Assets

Segment assets 11,678,695 6,470,164 2,583,093 2,017,964 1,069,438 1,182,074 15,331,226 9,670,202

Central Bank Reserve Requirements 303,263 134,244 454,895 255,632 - - 758,158 389,876

Unallocated assets - - - - - - 864,525 413,672

Total assets 11,981,958 6,604,408 3,037,988 2,273,596 1,069,438 1,182,074 16,953,909 10,473,750

Liabilities

Segment liabilities 4,363,751 3,747,172 9,661,030 5,298,923 2,075,663 965,872 16,100,444 10,011,967

Unallocated liabilities - - - - - - 853,465 461,783

Total Liabilities and Equity 4,363,751 3,747,172 9,661,030 5,298,923 2,075,663 965,872 16,953,909 10,473,750

38. RISK MANAGEMENT

The activities of the Bank require continuous management of particular risks or combinations of risks. Risk management is the identification, analysis, evaluation and management of the factors that could adversely affect the Bank’s resources, operations and financial results. The main risk factors that concern the Bank are credit, operational, market, liquidity, legal and currency risks. The Bank aims to manage its exposure to these risks conservatively.

The responsibility for overall risk management for the Emirates Bank group (The Group Holding Company and its Subsidiaries) lies with the Group Chief Risk Officer. However, at the Bank level, risk management is overseen by the Assets and Liabilities Committee (ALCO) of the Bank. The Bank is also represented at some Emirates Bank group risk committee levels as well.

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38. RISK MANAGEMENT (continued)

Each department of the Bank is responsible for:

• Identifying and measuring the risks that the Bank is exposed to and considering whether those risks are significant;

• Developing and recommending for approval appropriate risk management policies and procedures regarding those activities and business units which are susceptible to significant risk, including business continuity plans. All risk management policies must be approved by the Board of Directors;

• Providing direction regarding the Bank’s overall risk philosophy and risk tolerance, including considering whether certain new business proposals referred to ALCO are acceptable from a risk management perspective;

• Monitoring compliance with risk management policies and procedures;

• Adherence to risk guidelines under Basel II, and

• Reporting any policy or major practice changes, unusual situations, significant exceptions and new strategies to the Board of Directors for review, approval and/or ratification.

Distributions of profit to shareholders and depositors is subject to a comprehensive risk management system that is reviewed at the management level, the Sharia Board level and ALCO level to ensure the appropriate distribution levels taking into account the Bank’s performance, competitors profit distributions and market conditions.

a. Anti money laundering (AML) and know your client (KYC) policies

The Bank has implemented AML and KYC rules and procedures as required by the UAE Central Bank regulations and other laws. All prospective customers must undergo identity checks based on the Bank’s internal compliance requirements. The Bank arranges regular training for staff members on AML and KYC. The continuous development, control and enforcement of the Bank’s AML and KYC regulations are the responsibility of the Bank’s compliance section.

b. Credit Risk

Credit risk is the risk that a counter party in a financial relationship fails to meet its contractual obligations and causes the Bank to incur a financial loss. The Bank attempts to control credit risk by monitoring credit exposure, limiting transactions with specific counterparties, and continually assessing the creditworthiness of counterparties.

Credit risk concentrations arise when a number of counterparties are engaged in similar business activities, or activities in the same geographical region, or have similar economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions. Credit risk concentrations indicate the relative sensitivity of the Bank’s performance to developments affecting a particular industry or geographical location.

The Bank seeks to manage its credit risk exposure through diversification of financial product offerings and investments to avoid undue concentrations of risks with individuals or groups of customers in specific locations or businesses. The Bank also obtains security for the financial obligations of the counterparties whenever appropriate.

Credit limits are also established for countries and industry sectors to ensure that the Bank’s credit risk profile is diverse. The Bank’s credit risk limits and actual levels of exposure are regularly reviewed by the Bank’s Executive Committee and the Bank’s Board of Directors.

c. Operational Risk

Operational risk is the risk of loss resulting from inadequate or failed internal processes and systems, human error or external events. This type of risk includes fraud, unauthorized activities, errors and settlement risk arising from the large number of daily banking transactions occurring in the normal course of business. There is also a wide variety of business risks such as legal, regulatory, human resources and reputation risks inherent in all business activities.

The Bank has standard policies and procedures for managing each of its divisions, departments and branches so as to minimize loss through a framework which requires all units to identify, assess, monitor and control operational risk. All standard policies and procedures are subject to review and approval by the Board of Directors.

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The Bank manages operational risk through disciplined application and evaluation of internal controls, appropriate segregation of duties, independent authorization of transactions and regular, systematic reconciliation and monitoring of transactions. This control structure is complemented by independent and periodic reviews by the Bank’s internal audit department.

The Bank follows the Emirates Bank group policy in relation to compliance with the Office of Foreign Assets Control (OFAC) regulations which are in line with international practices and guidelines. The Bank maintains a “restricted customer” database which is checked when prospective customers of the Bank are initially assessed. This database is linked to the OFAC list of sanctioned individuals as updated from time to time.

d. Market Risk

Market risk is the risk of loss arising from unexpected changes in financial prices, for instance, as a result of fluctuations in interest rates and/or exchange rates and/or in bond, equity and commodity prices. Consistent with the Bank’s approach to strict compliance with Sharia, the Bank does not enter into speculative foreign exchange and currency transactions. The Bank only enters into a limited amount of foreign exchange and currency transactions to hedge its commercial activities.

The Bank’s market risk is managed through risk limits set by the ALCO and approved by the Bank’s Board of Directors. Risk limits are reviewed by the ALCO on an annual basis. The market risk limits are monitored independently by the Emirates Bank group risk department on a regular basis, and exceptions, if any, are reported to senior management and approved by the ALCO.

e. Liquidity Risk

Liquidity risk is the risk that the Bank will be unable to meet its maturing obligations to counterparty. Liquidity risk can be caused by market disruptions or credit downgrades which may cause certain sources of funding to dry up immediately.

To guard against this risk, the Bank has diversified funding sources and assets are managed with liquidity in mind, maintaining a healthy balance of cash and cash equivalents. Liquidity is managed by the Treasury department under guidance from the ALCO, and is monitored using short-term cash-flow reports and medium-term maturity mismatch reports. 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. They do not take into account the effective maturities as indicated by the Bank’s deposit retention history and the availability of liquid funds.

The maturity profile of the Bank’s assets and liabilities is monitored by management to ensure adequate liquidity is maintained (note 43).

f. Legal Risk

The Bank has full-time legal advisor and is actively supported at Group level Legal department who deal, with both routine and more complex legal cases. Situations of a particular complexity and sensitivity are referred to external firms of lawyers, either in the UAE or overseas, as appropriate.

g. Currency Risk

Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. The Bank is not exposed to significant currency risks resulting from foreign currency transactions undertaken by the Bank for its customers. Customers bear the currency risks as per the contractual terms of the transaction. The Bank does not have any substantial assets or liabilities in foreign currencies other than the US Dollar which is currently pegged to the UAE dirham.

The Bank does not deal in derivatives such as foreign exchange contracts and foreign currency swaps nor does it undertake any hedging transactions that are considered to be non-compliant with Sharia.

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As at As at 31 Dec 2007 31 Dec 2006 AED’000 AED’000


h. Capital Adequacy Ratio

The Bank’s capital adequacy ratio is regularly monitored by ALCO and managed by the Group risk, following table shows the Bank’s risk assets and their risk weighted values for capital adequacy ratio purposes as at 31 December 2007 and 31 December 2006, respectively.

TIER I CAPITAL

Share capital 747,500 650,000

Legal reserves 147,599 123,746

General reserves 74,750 65,000

Other reserve 6,175 -

Retained earnings 212,882 127,126

Total tier I capital 1,188,906 965,872

TIER II CAPITAL

Investment Wakala (Subordinated Term Loan) 740,000 -

Asset revaluation reserves 54,000 -

Total tier II capital 794,000 -

CAPITAL BASE 1,982,906 965,872

RISK WEIGHTED ASSETS

Credit risk (on-balance sheet) 15,266,397 7,754,557

Credit risk (off-balance sheet) 1,444,751 753,274

16,711,148 8,507,831

CAPITAL ADEQUACY RATIO (BASEL I) 11.86 12.48

i. Basel II

Implementation of and compliance with the Basel II framework to the satisfaction of the UAE Central Bank, has been undertaken at the Group level. Regular meetings are held between the Bank’s representatives and the risk management division of the Emirates Bank group to understand the scope the requirements of implementing Basel II including changes required to internal systems (in particular changes required to IT systems) and to monitor progress made towards the implementation of Basel II. The Bank has implemented the Moody’s KMV regulatory capital calculator as a credit risk analysis tool allowing the Bank to calculate its regulatory capital on a consistent and continuous basis for the purposes of compliance with Basel II.

j. Risk Rating

The Bank has a risk rating system for transactions and customers. The risk rating system is used as a credit risk management tool whereby any risks taken on the Bank’s books are rated against a set of predetermined standards established in accordance with the UAE Central Bank’s guidelines and international guidelines. The principal objectives of establishing the risk rating system are to:

72



• Ensure the credit quality of the obligors;

• Determine the pricing and the tenor of the credit facility for a particular type of obligor; and

• Act as an effective tool for determining the degree of risk and its mitigating factors.

Risk ratings are reviewed and set by the Bank’s Credit Department on an ongoing basis. Risks are classified according to the risk profile of the asset or risk and the probability of default. The Bank has adopted “10 point rating system” in line with the risk rating system adopted by the Emirates Bank group as per international risk rating parameters.

Below is a table showing the risk rating matrix used by the Bank:

Bank RiskEquivalent

S&P

Equivalent

Moody’s

Grades Classification Rating Rating

1A Excellent investment grade AAA Aaa

1B Very Good investment grade AA+ to AA- Aa1 to Aa3

1C Good investment grade A+ to A- A1 to A3

1DAbove average large size company – investment grade

BBB+ to BBB-

Baa1 to Baa3

1EAverage large size company and excellent medium size company

BB+ to BB- Ba1 to Ba3

2ABelow average large size company

Good – average medium size companyB+ to B- B1 to B3

2B OLEM close follow up CCC+ to CC Caa to C

3 Substandard R C

4 Doubtful SD C

5 Loss D C

k. Collateral management

Separate Corporate and Retail Banking operations units exist to evaluate and maintain the collateral and credit facilities for each client. In the case of certain products, for example, financing covered by a percentage of share securities, there is a mechanism to maintain securities at a specified level and in case there is a shortfall below the “trigger level”, customers are contacted to either reduce their liabilities or cover the margin.

l. Limits on financing

The Bank’s credit limit policies are monitored through a regular reporting system that involves several departments including the credit, finance and business units as well as senior management. Country limits are approved by the Board Credit Investment Committee and Board of Directors and for certain sectors / sub-sectors and limits are implemented for the purposes of diversification and risk control.

73


These limits are determined as part of the overall credit and investment policy based on industry and economic data reviewed at committee / senior management levels and appropriate portfolio strategies are suggested accordingly on a periodical basis.

m. Provision and write-offs

Financing is monitored through a Management Information System (MIS) and periodical reports.

The Bank has formulated what it believes to be a prudent loss provisioning and write-offs policy to ensure the quality of the Bank’s asset portfolio. The risk-rating criteria set out above and the classification of accounts as sub-standard (risk grade 3) and below is used as the basis for the Bank’s provisioning policy.

Financing receivables are presented net of allowances for impairment. Specific allowances are made against the carrying amount of financing receivables that are identified as being impaired based on regular reviews of outstanding balances to reduce these financing receivables and loans (a small amount of “loans” were carried over from Middle East Bank PJSC and have not been converted to Sharia compliant investments at the request of the relevant customers) to their estimated recoverable amounts at the balance sheet date. The expected cash flows for a portfolio of similar assets are estimated based on previous experience with similar assets and considering the credit rating of the underlying customers and the frequency of late payments. When any receivable is known to be uncollectible, all the necessary legal procedures to recover such monies have been exhausted, and the final loss has been determined, the receivable is written-off at various levels within the Bank depending on the amount.

If in a subsequent period the amount of impairment loss decreases and the decrease can be linked objectively to an event occurring after the write-down, the write-down or allowance is reversed through the income statement.

The retail credit portfolio is monitored regularly and accounts are downgraded based upon the number of days amounts are overdue by way of MIS generated reports and subsequently each month end respective report is generated for follow up of necessary cases. The delinquent customers are monitored at an individual level through a centralized collection department on a day-to-day basis.

Corporate accounts are also reviewed regularly through various MIS reports and monthly risk meetings are conducted with the corresponding business units to classify them as per the Bank’s risk rating system.

Provisions under the retail portfolio are done as block provisions at each month based upon the respective risk grades. For Corporate Banking, provisions are based on the International

Accounting Standard (IAS) 39 (Financial Instruments: Recognition and Measurement) based on net present value (NPV) of future cash flows. The exercise is normally conducted at quarter ends.

In the case of Retail Banking, the Bank’s Central Collection Unit follow-up overdue accounts as shown in an automated collection system through the life cycle of such accounts. In the case of

Corporate Banking, affected accounts are initially followed up by the Bank’s Credit Department through the business. Accounts which remain overdue after a follow up by the Bank’s Credit Department are transferred to the Group Special Loans Group unit for further follow-up after being fully provided. Assistance of external collection agencies is also taken in some cases. The Bank adheres to International Financial Reporting Standards which lay down strict principles and guidelines for the recognition and provisioning of impaired financing and advances.


74


2007 2007 2007 2007 AED’000 AED’000 AED’000 AED’000 Financing Loans Receivables Advances Others Total


n. Risk Concentration

Agriculture and allied activities 8,017 2,341 - 10,358

Manufacturing 390,740 15,074 133,936 539,750

Construction 802,347 10,227 - 812,574

Trade 2,646,657 12,129 - 2,658,786

Transport and communication 137,308 37,413 - 174,721

Services and personnel 4,615,735 25,803 1,035,562 5,677,100

Real Estate 2,472,700 - 734,238 3,206,938

Others 466,666 - - 466,666

Banks - - 1,885,236 1,885,236

Total 11,540,170 102,987 3,788,972 15,432,129

Less: Deferred Income (545,594) - - (545,594)

Less: Provisions (157,748) (63,078) - (220,826)

Net Carrying Value 10,836,828 39,909 3,788,972 14,665,709

2006 2006 2006 2006 AED’000 AED’000 AED’000 AED’000 Financing Loans Receivables Advances Others Total

Agriculture and allied activities 23,514 2,276 - 25,790

Manufacturing 166,721 15,351 - 182,072

Construction 1,392,524 8,974 - 1,401,498

Trade 1,429,042 13,327 - 1,442,369

Transport and communication 13,059 41,822 - 54,881

Services and personnel 2,789,404 27,851 441,526 3,258,781

Real Estate 967,555 - 614,382 1,581,937

Others 246,567 - - 246,567

Banks - - 1,781,930 1,781,930

Total 7,028,386 109,601 2,837,838 9,975,825

Less: Deferred Income (375,964) - - (375,964)

Less: Provisions (94,113) (67,129) - (161,242)

Net Carrying Value 6,558,309 42,472 2,837,838 9,438,619

75


Type

of

rece

ivab

le

Car

ryin

g O

f w

hich

nei

ther

im

pair

ed n

or

Of

whi

ch p

ast

due

but

not

impa

ired

O

f w

hich

ind

ivid

ually

im

pair

ed

am

ount

past

due

on r

eport

ing d

ate

on t

he

report

ing d

ate

L

ow

/ Fair

W

atc

h

Rene

goti

ated

<

30

30-6

0

60-9

1

> 9

1

Gro

ss

Inte

rest

A

llow

ance

for

Car

ryin

g

risk

lis

t te

rms

days

da

ys

days

da

ys

amou

nt

susp

ense

im

pair

men

t am

ount

38. RIS

K M

AN

AG

EM

EN

T (c

onti

nued)

o. Port

folio r

evi

ew

-2007

AED

’ 000

Due

from

ban

ks

1,0

08,8

23

1,0

08,8

23

- -

- -

- -

- -

- -

Fin

anci

ng R

ecei

vable

s

Ret

ail

2,3

03,2

59

2,0

13,6

18

- -

166,6

30

67,0

38

29,8

47

- 174,5

78

- 148,0

91

46,4

87

Corp

ora

te

8,5

33,5

69

7,9

91,4

98

- -

181

,083

39,3

54

65,9

95

213,2

30

52,0

66

- 9,6

57

42,4

09

Loans

& r

ece

ivable

s:

Ret

ail

27,0

47

- -

- -

- -

- 152,5

73

81,8

05

43,3

44

27,4

24

Corp

ora

te

12,8

62

- -

- -

- -

- 92,3

33

60,1

14

19,7

34

12,4

85

Fin

anci

al in

vest

men

ts:

Quo

ted-

Gov

ernm

ent

debt

-

- -

- -

- -

- -

- -

-

Quo

ted-

Oth

er d

ebt

secu

ritie

s 75,6

91

75,6

91

- -

- -

- -

- -

- -

Unq

uote

d-D

ebt

secu

riti

es

964,1

92

964,1

92

- -

- -

- -

- -

- -

76


Type

of

rece

ivab

le

Car

ryin

g O

f w

hic

h n

eith

er im

paired

nor

O

f w

hic

h p

ast

due

but

not

im

paired

O

f w

hic

h indi

vidu

ally

im

paired

am

ount

past

due

on r

epor

ting

date

on

the

repo

rtin

g da

te

Lo

w/ Fa

ir

Wat

ch

Ren

egot

iate

d <

30

30-6

0

60-9

1

> 9

1

Gro

ss

Inte

rest

A

llow

ance

for

Car

ryin

g

ri

sk

list

term

s day

s day

s day

s day

s am

ount

susp

ense

im

pai

rmen

t am

ount

38. RIS

K M

AN

AG

EM

EN

T (c

onti

nued

)

o. Po

rtfo

lio r

evie

w -

2006

AED

’ 000

Due

from

ban

ks

1,22

0,53

9 1,

220,

539

- -

- -

- -

- -

- -

Financi

ng R

ecei

vable

s

Ret

ail

1,

919,

176

1,60

0,34

0 -

- 18

2,39

3 63

,841

28

,601

-

131,

855

- 87

,854

44

,001

Cor

pora

te

4,63

9,13

3 4,

303,

530

- -

51,8

17

29,4

15

6,38

4 23

7,61

4 16

,632

-

6,25

9 10

,373

Loan

s &

rec

eiva

ble

s:

Ret

ail

28

,394

-

- -

- -

- -

157,

147

83,8

76

44,8

78

28,3

98

Cor

pora

te

14,0

78

- -

- -

- -

- 77

,915

41

,586

22

,251

14

,078

Financi

al in

vest

men

ts:

Quot

ed-G

over

nm

ent

debt

-

- -

- -

- -

- -

- -

-

Quo

ted-

Oth

er d

ebt s

ecur

ities

75

,757

75

,757

-

- -

- -

- -

- -

-

Unq

uote

d-D

ebt

secu

riti

es

425,

456

425,

456

- -

- -

- -

- -

- -

77


39. FAIR VALUE

- Fair value represents the amount at which an asset can be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction. Difference can therefore arise between book value under the historical cost method and fair value.

- The fair value of the Bank’s assets and liabilities is not materially different from the carrying value at 31 December 2007 for the reasons set out below:

Due from banks

Due from banks includes current accounts with these banks.

Due from Group Holding Company

Due from Group Holding Company comprises the Bank’s Murabaha, deposit exchange and other balances. Such Murabaha contracts are short term and priced with reference to the market rates at the contractual date. The Murabaha is expected to be realized at maturity.

Financing receivables

- Financing receivables are net of deferred income and allowances for impairment.

- Ijarah facilities are given at a variable rate determined, generally, with reference to the market rates besides the usual parameters of tenor and risk evaluation.

- The average profit rate on financing receivables at the year end is in line with the rate charged for such financing in the local banking market.

Loans and receivables

- Loans and receivables are net of allowances for impairment.

- Loans and receivables were given, prior to Transformation Date, at variable interest rates. Such rates were in line with the local banking market at the granting dates, and based on the usual parameters of tenor and risk evaluation.

Investments securities

Investments securities comprise quoted and unquoted equity securities. The quoted equity securities are valued at fair value through income statement, and the unquoted securities are stated at cost less any provision for impairment. The assessment of the fair value of unquoted investments cannot be determined in an accurate measurement.

Investment properties

Investment properties are stated at cost. The fair value of investment properties is disclosed innote 20.

Customers’ accounts

A significant portion of customers’ accounts comprise investment accounts with an original maturity up to two years. A significant portion of these accounts have been maintained with the Bank for a number of years on a roll over basis.

Customers’ accounts primarily comprising profit bearing saving and investment accounts, paid on quarterly basis, and non-profit bearing current accounts, repayable on demand.

Due to banks

Due to banks includes non-profit bearing current accounts payable on demand.

Other assets and liabilities

Other assets and liabilities primarily comprise assets and liabilities which are primarily short term in nature.

78


2007 2007 2006 2006

AED’000 AED’000 AED’000 AED’000

Financial Assets Carrying Value Fair Value Carrying value Fair Value

39. FAIR VALUE (continued)

Due from banks and other 23,340 23,340 38,465 38,465

financial institutions

Due from Group holding company 985,482 985,482 1,182,074 1,182,074

Financing receivables 10,836,828 10,836,828 6,558,309 6,558,309

Loans & receivables 39,909 39,909 42,472 42,472

Financial assets designated at fair value 1,187,157 1,187,157 994,914 994,914

Other investments 1,592,993 1,592,993 622,383 622,383

Financial Liabilities

Customers’ accounts 13,909,058 13,909,058 9,046,095 9,046,095

Due to banks and other 158,200 158,200 55,983 55,983


Investment Wakala 740,000 740,000 - -

40. FINANCIAL INSTRUMENTS

2007 2007 2007 2007 2007 2007

AED’000 AED’000 AED’000 AED’000 AED’000 AED’000

Financial Assets Designated Available Held to Loans & Amortized

at fair value for sale Maturity receivables Cost Total

Due from banks and other - - - - 23,340 23,340


Due from Group - - - - 985,482 985,482

holding company

Financing receivables - - - - 10,836,828 10,836,828

Loans & receivables - - - 39,909 - 39,909

Financial assets

designated at fair value 1,187,157 - - - - 1,187,157

Other investments - 1,083,740 509,253 - - 1,592,993


Customers’ accounts - - - - 13,909,058 13,909,058

Due to banks and - - - - 158,200 158,200

other financial institutions

Investment Wakala - - - - 740,000 740,000

79


2006 2006 2006 2006 2006 2006

AED’000 AED’000 AED’000 AED’000 AED’000 AED’000

Financial Assets Designated Available Held to Loans & Amortized

at fair value for sale Maturity receivables Cost Total

40. FINANCIAL INSTRUMENTS (Continued)

Due from banks and - - - - 38,465 38,465

other financial institutions

Due from Group - - - - 1,182,074 1,182,074

holding company

Financing receivables - - - - 6,558,309 6,558,309

Loans and receivables - - - 42,472 - 42,472

Financial assets

designated at fair value 994,914 - - - - 994,914

Other investments - 121,173 501,212 - - 622,385


Customers’ accounts - - - - 9,046,095 9,046,095

Due to banks and other

financial institutions - - - - 55,983 55,983

Investment Wakala - - - - - -

41. COMPARATIVE FIGURES

Certain prior year balances have been reclassified to conform to the current year presentation in accordance with

new International Financial Reporting Standards.

80


Oth

er

N

ort

h

G

CC

Mid

dle

Eas

t Euro

pe

Am

eric

a Asia

Far

Eas

t O

ther

s To

tal

AE

D’00

0

AED’

000

AED’

000

AED’

000

AED’

000

AED’

000

AED’

000

AED’

000

42. G

EO

GRA

PH

ICA

L D

ISTR

IBU

TIO

N O

F A

SSETS

AN

D L

IABIL

ITIE

S

2007

ASS

ETS:

Cas

h, a

nd

depo

sits

wit

h

867,

912

- -

- -

- -

867,

912

UA

E Cen

tral

Ban

k

Due

from

ban

ks a

nd

other

1

4,86

4 70

7 2,

010

4,46

5 27

2 37

0 65

2 23

,340

finan

cial

inst

ituti

ons

Due

from

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up

985,

482

- -

- -

- -

985,

482

Hol

ding

Com

pany,

net

Finan

cing

rece

ivab

les

10

,620

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17

1,51

1 -

- 44

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-

- 10

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Loan

s an

d re

ceiv

able

s 39

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-

- -

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- 39

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stm

ent

secu

riti

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2,54

4,40

3 15

2,76

0 27

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-

55,0

95

- -

2,78

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0

Inve

stm

ents

pro

pert

ies

606,

905

- -

- -

- -

606,

905

Prep

aym

ent

and

other

ass

ets

536,

353

- -

- -

- -

536,

353

Fixe

d as

sets

27

7,03

0 -

- -

- -

- 27

7,03

0

TOTA

L A

SSET

S 16,4

93,2

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324,9

78

29,9

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100,3

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370

652

16,9

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LIA

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S:

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13

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-

- -

- -

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Due

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anks

and

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finan

cial

inst

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ons

64,1

59

- -

91,0

85

- 2,

956

- 15

8,20

0

Oth

er li

abili

ties

80

0,31

9 -

- -

- -

- 80

0,31

9

Zaka

t pa

yabl

e 13

,426

-

- -

- -

- 13

,426

Inve

stm

ent

Wak

ala

740,

000

- -

- -

- -

740,

000

Shar

ehol

ders

’ Equ

ity

1,33

2,90

6 -

- -

- -

- 1,

332,

906

TOTA

L LI

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ITIE

S A

ND

SHA

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OLD

ERS’

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UIT

Y

16,8

59,8

68

- -

91,0

85

- 2,9

56

- 16,9

53,9

09

81


Oth

er

N

ort

h

G

CC

Mid

dle

Eas

t Euro

pe

Am

eric

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AE

D’00

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AED’

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AED’

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AED’

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AED’

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AED’

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AED’

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AED’

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42. G

EO

GRA

PH

ICA

L D

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TIO

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F A

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AN

D L

IABIL

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S (

Cont.

)

2006

ASS

ETS:

Cas

h, a

nd

depo

sits

wit

h U

AE

Cen

tral

Ban

k

453,

337

-

-

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45

3,33

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other

finan

cial

inst

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29

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361

5,

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2,

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30

8

440

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7

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ding

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net

1,18

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-

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-

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1,18

2,07

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Finan

cing

rece

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les

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d in

vest

men

ts

6,

344,

592

195,

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-

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18

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6,55

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s

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8

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247,

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-

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L ASSETS

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25,8

27

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30

30,7

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56

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297

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9,04

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3,75

3

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ties

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39

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-

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20,7

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-

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52,2

27

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3

-

10,4

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50

82


Ove

r O

ver

Ove

r

W

ithin

3 m

onth

s 1 y

ear

3 y

ears

O

ver

3 m

onth

s to

1 y

ear

to 3

yea

rs

to 5

yea

rs

5 y

ears

To

tal

2007

AED’0

00

AED’0

00

AED’0

00

AED’0

00

AED’0

00

AED’0

00

43. M

ATU

RIT

Y P

RO

FIL

E O

F A

SSETS

AN

D L

IABIL

ITIE

S

ASSETS

:

Cas

h, a

nd

depo

sits

wit

h

867,

912

- -

- -

867,

912

UA

E Cen

tral

Ban

k

Due

from

ban

ks a

nd

other

23

,340

-

- -

- 23

,340

finan

cial

inst

ituti

ons

Due

from

Gro

up

Hol

ding

Com

pany,

net

47

4,43

2 51

1,05

0 -

- -

985,

482

Finan

cing

rece

ivab

les

3,61

9,60

8 1,

797,

541

1,43

3,33

5 1,

570,

536

2,41

5,80

7 10

,836

,828

Loan

s an

d re

ceiv

able

s 39

,909

-

- -

- 39

,909

Inve

stm

ents

sec

uriti

es

344,

824

144,

802

1,69

4,39

6 40

3,79

5 19

2,33

4 2,

780,

151

Inve

stm

ent

prop

erti

es

- 60

6,90

5 -

- -

606,

905

Prep

aym

ent

and

other

ass

ets

536,

352

- -

- -

536,

352

Fixe

d as

sets

-

-

-

27

7,03

0

-

277

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TOTA

L ASSETS

5

,906,3

77

3,0

60,2

98

3

,127,7

31

2

,251,3

61

2,6

08,1

41

16,9

53,9

09

LIABIL

ITIE

S:

Cust

omer

s’ a

ccou

nts

3,

698,

121

6,15

8,48

3 4,

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454

- -

13,9

09,0

58

Due

to b

anks

and

other

15

8,20

0 -

- -

- 15

8,20

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finan

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Oth

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80

0,31

9 -

- -

- 80

0,31

9

Zaka

t pa

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e 13

,426

-

- -

- 13

,426

Inve

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Wak

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- -

- 74

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0 -

740,

000

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’ Equ

ity

- -

- -

1,33

2,90

6 1

,332

,906

TOTA

L LI

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ITIE

S A

ND

SH

AREH

OLD

ERS’ EQ

UIT

Y

4,6

70,0

66

6

,158,4

83

4

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54

740,0

00

1,3

32,9

06

1

6,9

53,9

09

Liquid

ity

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1, 236,3

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24,7

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1, 511

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1

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35

-

Cum

ula

tive

Liq

uid

ity

gap

1, 236,3

12

(1, 861,8

73)

(2, 786,5

96)

(1, 275,2

35)

-

-

83


Ove

r O

ver

Ove

r

W

ithin

3 m

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ear

3 y

ears

O

ver

3 m

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s to

1 y

ear

to 3

yea

rs

to 5

yea

rs

5 y

ears

To

tal

2006

AED’0

00

AED’0

00

AED’0

00

AED’0

00

AED’0

00

AED’0

00

43. M

ATU

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depo

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Ban

k 45

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7 -

- -

- 45

3,33

7

Due

fro

m b

anks

and

oth

er fi

nanc

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nstit

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ns

38,4

65

- -

- -

38,4

65

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from

Gro

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Com

pany,

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27

3,02

6 90

9,04

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1,18

2,07

4

Finan

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1,63

4,56

6 1,

049,

513

1,93

6,44

3 74

6,37

8 1,

191,

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6,55

8,30

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Loan

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d re

ceiv

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s 42

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- 42

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Inve

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secu

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- 48

6,26

6 82

2,35

9 30

8,67

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1,61

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9

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stm

ent

prop

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es

- 27

0,04

8 -

- -

270,

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Prep

aym

ent

and

other

ass

ets

247,

280

- -

- -

247,

280

Fixe

d as

sets

-

-

-

-

6

4,46

6

64,

466

TOTA

L ASSETS

2,6

89,1

46

2,7

14,8

75

2

,758,8

02

1

,055,0

52

1,2

55,8

75

10,4

73,7

50

LIABIL

ITIE

S:

Cust

omer

s’ a

ccou

nts

2,

859,

382

3,84

2,87

9 2,

343,

834

- -

9,04

6,09

5

Due

to b

anks

and

other

finan

cial

inst

ituti

ons

55,9

83

- -

- -

55,9

83

Oth

er li

abili

ties

39

5,18

7 -

- -

- 39

5,18

7

Zaka

t pa

yabl

e 10

,613

-

- -

- 10

,613

Suku

k -

- -

- -

-

Shar

ehol

ders

’ Equ

ity

-

-

-

-

9

65,8

72

965

,872

TOTA

L LI

ABIL

ITIE

S A

ND

SH

AREH

OLD

ERS’ EQ

UIT

Y

3

,321,1

65

3,8

42,8

79

2,3

43,8

34

-

965,8

72

1

0,4

73,7

50

Liquid

ity

gap

(6

32,0

19)

(1

,128,0

04)

414,9

68

1,0

55,0

52

2

90,0

03

-

Cum

ula

tive

Liq

uid

ity

gap

(6

32,0

19)

(1,7

60,0

23)

(1,3

45,0

55)

(2

90,0

03)

-

-

84

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