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Oman International Bank S.A.O.G - Pakistan BranchesBalance Sheet

As at 31 December 2007

2007 2006

Note

ASSETS

Cash and balances with treasury banks 6 2,391,751 2,304,786Balances with other banks 7 42,807 67,683Lendings to financial institutions - -Investments - -Advances 8 220,506 368,321Operating fixed assets 9 5,646 4,583Deferred tax assets 10 - -Other assets 11 33,221 17,253

2,693,931 2,762,626

LIABILITIES

Bills payable 12 2,754 4,415Borrowings 13 178,000 98,000Deposits and other accounts 14 459,937 618,017Sub-ordinated loans - -Liabilities against assets subject to finance lease - -Deferred tax liabilities - -Other liabilities 15 19,617 17,065

660,308 737,497

NET ASSETS 2,033,623 2,025,129

REPRESENTED BY:

Head office capital account 16 2,289,217 2,188,856Reserves - -

Accumulated losses (255,594) (163,727)

2,033,623 2,025,129

Surplus / (deficit) on revaluation of assets - -

2,033,623 2,025,129

CONTINGENCIES AND COMMITMENTS 17

The annexed notes 1 to 42 form an integral part of these financial statements.

________________________

Country Manager Senior Manager

---- Rupees in '000 ----

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Oman International Bank S.A.O.G - Pakistan BrancheProfit and Loss AccountFor the year ended 31 December 2007

2007 2006

Note

19 38,268 47,204

Mark-up / return / interest expensed 20 (47,636) (41,313)

Net mark-u / interest ex ense / income (9,368) 5,891

Provision against non-performing loans and advances 8.4 (40,468) (1,183)

Provision for diminution in the value of investments - -

Bad debts written off directly - -

(40,468) (1,183)

(49,836) 4,708

NON MARK-UP / INTEREST INCOME

Fee, commission and brokerage income 2,329 4,004

Dividend income - -Income from dealing in foreign currencies 622 52

Gain / loss on sale of securities - -Unrealized gain / (loss) on revaluation of investments classified

as held for trading - -

Other income 21 1,520 2,177

Total non-marku / interest incom 4,471 6,233(45,365) 10,941

NON MARK-UP/INTEREST EXPENSES

Administrative expenses 22 (44,273) (35,501)

Other reversals / (provisions) / (write offs) - 29

Other charges 23 (2,229) (23)

Total non-markup / interest expense (46,502) (35,495)

(91,867) (24,554)

Extra ordinary / unusual items - -

(91,867) (24,554)

Taxation - Current - -

- Prior years - -

- Deferred - -

24 - -

(91,867) (24,554)

Earnings / (loss) per share - Basic and diluted 25 - -


Country Manager

---- Rupees in '000 ----

Senior Manager

LOSS BEFORE TAXATION

Mark-up / return / interest earned

LOSS AFTER TAXATION

Net Mark-up/ interest (expense) / income after provisions

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Oman International Bank S.A.O.G - Pakistan BranchesStatement of Changes in EquityFor the year ended 31 December 2007

Head office

capital Accumulated

account loss Total

Balance as at 01 January 2006 1,168,934 (139,173) 1,029,761

Loss after taxation for the year ended 31December 2006 - (24,554) (24,554)

Remittances received from head office 999,409 - 999,409

Exchange adjustments on revaluation of capital 20,513 - 20,513

Balance as at 01 January 2007 2,188,856 (163,727) 2,025,129

Loss after taxation for the year ended 31 December 2007 - (91,867) (91,867)

Remittances received from head office 79,904 - 79,904

Exchange adjustments on revaluation of capital 20,457 - 20,457

Balance as at 31 December 2007 2,289,217 (255,594) 2,033,623


_____________________


------------------- Rupees in '000 -------------------

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Oman International Bank S.A.O.G - Pakistan BranchesCash Flow StatementFor the year ended 31 December 2007

2007 2006

Note

CASH FLOWS FROM OPERATING ACTIVITIES

Loss before taxation (91,867) (24,554)

Adjustments:

Depreciation 22 1,624 1,389

Amortisation 22 82 20

Provision against non-performing advances 8.4 40,468 1,183

Provision / (reversal) against other assets 11.1 2,654 (29)

44,828 2,563

(47,039) (21,991)

(Increase) / decrease in operating assets

Advances 107,347 149,428

Others assets (excluding advance taxation) (21,821) 3,21085,526 152,638

Increase/ (decrease) in operating liabilities

Bills payable (1,661) 2,718

Borrowings 80,000 (172,700)

Deposits (158,080) 124,591

Other liabilities 2,552 (971)

(77,189) (46,362)

(38,702) 84,285

Income tax refunded / (paid) 3,199 (111)

Net cash (used in) / flow from operating activities (35,503) 84,174

CASH FLOWS FROM INVESTING ACTIVITIES

Investments in operating fixed assets 9.1 & 9.2 (2,769) (3,049)

Net cash used in investing activities (2,769) (3,049)

CASH FLOWS FROM FINANCING ACTIVITIES

Remittances received from head office 79,904 999,409

Net cash flow from financing activities 79,904 999,409

Effects of exchange adjustment on revaluation of capital 20,457 20,513

Increase / (decrease) in cash and cash equivalents 62,089 1,101,047

Cash and cash equivalents at beginning of the year 2,372,469 1,271,422

Cash and cash equivalents at end of the year 26 2,434,558 2,372,469



---- Rupees in '000 ----

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Oman International Bank S.A.O.G - Pakistan BranchesNotes to the Financial StatementsFor the year ended 31 December 2007

1. STATUS AND NATURE OF BUSINESS

1.1

1.2

2. BASIS OF PRESENTATION

2.1

2.2

3. STATEMENT OF COMPLIANCE

3.1

Oman International Bank S.A.O.G. is an Omani Joint Stock Company incorporated and domiciled in the Sultanate of Oman. The

Oman International Bank S.A.O.G. presently operates through two branches in Pakistan i.e. at Karachi and Lahore. The Pakistan

branches (the Bank) operate as branches of a foreign entity in Pakistan and are engaged in banking activities permissible under the

Banking Companies Ordinance, 1962. The registered office of the Bank is located at Nadir House, I.I. Chundrigar Road, Karachi.

The Bank obtained a rating of BBB for its medium to long-term debt and A2 for short-term debt, from JCR-VIS Credit Rating

Agency.

Consistent with prior years, expenses of the head office allocable to the Pakistan branches are not incorporated in the books of

account.

These financial statements have been prepared in accordance with approved accounting standards as applicable in Pakistan.

Approved accounting standards comprise of such International Financial Reporting Standards issued by the International

Accounting Standards Board as are notified under the Companies Ordinance, 1984, provisions of and directives issued under the

Companies Ordinance, 1984, Banking Companies Ordinance, 1962 and the directives issued by State Bank of Pakistan (SBP). In

case the requirements differ, the provisions of and directives issued under the Companies Ordinance, 1984 and Banking Companies

Ordinance, 1962 and the directives issued by SBP shall prevail.

In accordance with the directives of the Federal Government regarding shifting of the banking system to the Islamic modes, the

State Bank of Pakistan has issued various circulars from time to time. Permissible form of trade related mode of financing includes

purchase of goods by the bank from its customers and immediate resale to them at appropriate mark-up in price on deferred

payment basis. The purchases and sales arising under these arrangements are not reflected in these financial statements as such but

are restricted to the amount of facility actually utilised and the appropriate portion of mark-up thereon.

Standards, interpretations and amendments to published approved accounting standards that are not yet

effective

The following standards, amendments and interpretations of approved accounting standards will be effective for accounting periods

beginning on or after 01 January 2008:

Revised IAS 1 - Presentation of financial statements (effective for annual periods beginning on or after 01 January 2009). T

objective of revising IAS 1 is to aggregate information in the financial statements on the basis of shared characteristics. The

changes affect the presentation of owner changes in equity and of comprehensive income. It introduces a requirement to

include in a complete set of financial statements a statement of financial position as at the beginning of the earliest

comparative period whenever the entity retrospectively applies an accounting policy or makes a retrospective restatement of

items in its financial statements, or when it reclassifies items in its financial statements.

The Securities and Exchange Commission of Pakistan (SECP) has approved and notified the adoption of International Accounting

Standard 39 - Financial Instruments; Recognition and Measurement and International Accounting Standard 40 - Investment

Property. The requirements of these standards have not been followed in preparation of these financial statements as the State Bank

of Pakistan has deferred the implementation of these standards, vide its BSD Circular No.10 dated 26 August 2002, for banks inPakistan till further instructions. Accordingly, the requirements of these standards have not been considered in the preparation of

these financial statements. However, investments have been classified and valued in accordance with the requirements prescribed by

the State Bank of Pakistan through various circulars.

Amendment to IAS 1 - "Presentation of Financial Statements - Capital Disclosures", introduces new disclosures about the level of

an entity's capital and how it manages capital. Adoption of this amendment has only resulted in additional disclosures given in note

33 to the financial statements.

International Financial Reporting Standard (IFRS) 2 - Share Based Payment, IFRS 3 - Business Combinations, IFRS 5 - Non-

current Assets Held for Sale and Discontinued Operations, IFRS 6 - Exploration for and Extraction of Mineral Resources, IFRIC

Scope of IFRS 2 Share Based Payment and IFRIC 10 - Interim Financial Reporting and impairment became effective during the

year. The application of these standards and interpretations did not have any material effect on the Bank's financial statements.

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4. BASIS OF MEASUREMENT

5. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

5.1 Lendings/ borrowings to financial institutions

Purchase under resale obligation

Sale under repurchase obligation

The Bank enters into transactions of reverse repos and repos at contracted rates for a specified period of time. These are recorded

under:

Securities purchased with a corresponding commitment to resell at a specified future date (reverse repos) are not recognised in the

balance sheet. Amounts paid under these obligations are included in reverse repurchase agreement lendings. The difference between

purchase and resale price is accrued as income over the term of the reverse repos agreement.

Securities sold with a simultaneous commitment to repurchase at a specified future date (repos) continue to be recognised in the

balance sheet and are measured in accordance with accounting policies for investments. Amounts received under these agreements

are recorded as repurchase agreement borrowings. The difference between sale and repurchase price is amortised as expense over

the term of the repos agreement.

These financial statements have been prepared under the historical cost convention except for certain financial assets and derivative

financial instruments which are stated at fair values.

The financial statements are presented in Pakistan Rupees, which is the Bank's functional and presentation currency. The amounts

are rounded to nearest thousand

The preparation of financial statements in conformity with the approved accounting standards requires the use of certain critical

accounting estimates. It also requires the management to exercise its judgment in the process of applying the Bank's accounting

policies. Estimates and judgments are continually evaluated and are based on historical experience, including expectations of future

events that are believed to be reasonable under the circumstances. Judgements made by management in the application of

accounting policies that have significant effect on the financial statements and estimates with a significant risk of material

adjustment are explained in note 40 to these financial statements

IFRIC 14 IAS 19 - The Limit on Defined Benefit Asset, Minimum Funding Requirements and their interaction (effective for

annual periods beginning on or after 01 January 2008). IFRIC 14 clarifies when refunds or reductions in future contributions

in relation to defined benefit assets should be regarded as available and provides guidance on minimum funding requirements

(MFR) for such asset.

IFRIC 13 - Customer Loyalty Programmes (effective for annual periods beginning on or after 01 July 2008). IFRIC 13

addresses the accounting by entities that operates, or otherwise participate in, customer loyalty programmes for their

IFRIC 11 - IFRS 2 - Group and Treasury Share Transactions (effective for annual periods beginning on or after 01 March

2007). IFRIC 11 requires that a share based payment arrangement in which an entity receives goods or services as

consideration for its own equity instruments to be accounted for as equity settled share based payment regardless of how the

equity instruments are obtained. IFRIC 11 is not expected to have any material impact on the Banks financial statements.

IFRIC 12 - Service Concession Arrangements (effective for annual periods beginning on or after 01 January 2008). IFRIC 12

provides guidance on certain recognition and measurement issues that arise in accounting for public-to-private concession

arrangements. IFRIC 12 is not relevant to the Banks operations.

IFRIC 9 - Reassessment of embedded derivatives. The IFRIC is effective during the year and will be applied together with

application of IAS 39.

Revised IAS 23 - Borrowing costs (effective from 01 January 2009). Revised IAS 23 removes the option to expense

borrowing costs and requires that an entity capitalize borrowing costs directly attributable to the acquisition, construction or

production of a qualifying asset as part of the cost of that asset. The application of the standard is not likely to have an effect

on Bank's financial statements.

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Other lendings/ borrowings

5.2 Investments

-

-

-

5.3 Advances

5.4 Operating fixed assets and depreciation

Tangible

Gains and losses on the disposal of fixed assets are included in income currently.

Normal repairs and maintenance are charged to income as and when incurred. Major renewals and improvements are capit

Subsequent costs are included in the asset carring amounts or recognised as a separate asset, as appropriate, only when it i

probable that future economic benefits associated with the item will flow to the Bank and the cost of the item can be meas

reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the in

statement during the financial period in which they are incurred.

The assets' residual values, useful lives and method of depreciation are reviewed, and adjusted if appropriate, at each bala

sheet date.

All investments acquired by the Bank are initially recognised at fair value.

The Bank classifies its investment portfolio into held-for-trading, held-to-maturity and available-for-sale portfolios as foll

Gains and losses on disposal of investments are dealt with through the profit and loss account in the year in which they ari

Advances are stated at cost less any amount written off and specific and general provisions made, if any. Provision for spe

non-performing advances (and relevant mark-up) is determined on the basis of the Prudential Regulations issued by the St

Bank of Pakistan and according to the Bank's own criteria. General provisions are made based on the requirements of the

Bank of Oman.

Held-for-trading These are securities which are acquired with the intention to trade by taking advantage of short-ter

market / interest rate movements and are to be sold within 90 days. These are carried at market value, with the related

/ deficit being taken to profit and loss account.

Held-to-maturity These are securities with fixed or determinable payments and fixed maturity that are held with the

intention and ability to hold to maturity. These are carried at amortised cost, less provision for impairment in value, if

Available-for-sale These are investments that do not fall under the held-for-trading or held-to- maturity categories. T

are carried at market value with the surplus / deficit taken to surplus/deficit on revaluation of assets account below e

On derecognition or impairment in available for sale investments the cumulative gain or loss previously reported as 'Surpl

(deficit) on revaluation of assets' is included in the income statement for the year.

These are recorded at the time of receipt / payment. Mark-up received / paid on such lending / borrowings is charged to th

and loss account over the period of lending / borrowings.

Premium and discount on debt securities classified as available-for-sale or held-to-maturity are amortised using the effecti

interest rate method and taken to interest income or expense.

The Bank as a policy believes in full recovery of all outstanding amounts. Only when all possible avenues for recovery of

are fully exhausted the Bank considers write-off.

These are stated at cost less accumulated depreciation and impairment losses, if any. Depreciation is charged to income ap

the straight line method whereby the cost of an asset is written off over its estimated useful li fe. The rates used are specifie

note 9.1to the financial statements.

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5.5 Taxation

Income tax expense comprises of current and deferred tax. Income tax expenses are recognised in profit and loss

account except to the extent that i t relates to the items recognised directly in equity, in which case it is recognised in

equity.

Current

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively

enacted at the balance sheet date and any adjustments to the tax payable in respect of previous years.

Deferred

Deferred tax is provided using the balance sheet liability method providing for all temporary differences between the

carrying amounts of assets and liabilities for financial reporting purposes and amounts used for taxation purposes. The

amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of

assets and liabilities using tax rates enacted or substantively enacted at the balance sheet date. A deferred tax asset is

recognised only to the extent that it is probable that future taxable profits will be available and the credits can be utilized.Deferred tax assets are reviewed at each balance sheet date and are reduced to the extent that it is no longer probable

that the related tax benefits will be realised.

5.6 Staff retirement benefits

Defined benefit plan

Defined contribution plan

5.7 Provisions

5.8 Revenue recognition

Mark-up income and expenses are recognized on a time proportion basis taking into account effective yield on the

instrument, except in case of advances classified under the Prudential Regulations issued by the State Bank of Pakistan

on which mark-up is recognized on receipt basis.

Fee, commission and brokerage income are recognized as services are performed.

5.9 Foreign currencies

Foreign currency transactions are translated into rupees at the exchange rates prevailing on the date of transaction. Moneta

assets and liabilities denominated in foreign currencies are translated into rupees at the exchange rates prevailing at the ba

sheet date. Outstanding forward foreign exchange contracts and foreign bills purchased are valued at the market rates appl

Intangible

Provision for guarantee claims and other off balance sheet obligations is recognised when intimated and reasonable certai

exists for the Bank to settle the obligation. Expected recoveries are recognised by debiting the customers account. Char

profit and loss account is stated net-of expected recoveries.

The Bank operates an approved funded gratuity scheme. Annual contribution to the scheme are made on the basis of actua

valuation using Projected Unit Credit Method.

These are stated at cost less accumulated amortisation and impairment losses, if any. The cost of the intangible assets repr

their purchase cost, together with any incidental costs. Amortisation is charged to income applying the straight line metho

whereby the cost of an asset is written off over the estimated useful life at the rates specified in note 9.2 to the financial

statements.

Actuarial gains and losses are recognised as income or expense when the cumulative unrecognised actuarial gains or losse

exceed 10% of the higher of defined benefit obligation and the fair value of plan assets. These gains or losses are recognis

the expected average remaining working lives of the employees participating in the plan.

The Bank operates an approved contributory provident fund for all its permanent employees. Contributions are made mon

accordance with the fund rules.

Other provisions are recognized when the Bank has a legal or constructive obligation as a result of past events, it is proba

an outflow of resources will be required to settle the obligation and a reliable estimate of the amount can be made. Provisi

reviewed at each balance sheet date and are adjusted to reflect the current best estimate.

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5.10 Off Setting of financial assets and financial liabilities

5.11 Impairment of non-financial assets

5.12 Derivatives

5.13 Cash and cash equivalents

5.14 Fiduciary assets

5.15 Segment reporting

A segment is a distinguishable component of the Bank that is engaged in providing product or services (business

segment), or in providing products or services within a particular economic environment (geographical segment), which is

subject to risk.

Business segments

Retail banking

It consists of retail lending, deposits and banking services to private individuals and small businesses. The retail banking

activities includes provision of banking and other financial services, such as current and savings accounts, etc to

individual customers, small merchants and SMEs.

Commercial banking

The commercial banking represents provision of banking services including International Trade related activities to large

corporate customers, multinational companies, government and semi government departments and institut ions and SMEs

treated as corporate under the Prudential Regulations issued by the State Bank of Pakistan.

Trading & sales

Trading business represents lending and borrowing from money markets and other treasury operations.

Geographical segments

to the respective maturities. Exchange gains and losses are includes in income currently.

Assets held in a fiduciary capacity are not treated as assets of the Bank in these financial statements.

Cash and cash equivalents comprise of cash and balances with treasury banks and balances with other banks.

Assets that have an indefinite useful life are not subject to amortisation but are tested annually for impairment. Assets that

subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carryin

amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount ex

its recoverable amount.

Derivative financial instruments are recognized at fair value on the date on which the derivative contract is entered into an

subsequently remeasured at fair value using appropriate valuation techniques. Derivatives with positive market values (un

gains) are included in other assets and derivatives with negative market values (unrealised losses) are included in other lia

in the balance sheet. The resultant gains and losses are taken to income currently.

The Bank operates in Pakistan only.

Financial assets and financial liabilities are only off-set and the net amount reported in the financial statements when there

legally enforceable right to set-off the recognised amount and the Bank intends either to settle on a net basis, or to realise t

assets and to settle the liabilities simultaneously. Income and expense items of such assets and liabilities are also off-set a

net amount is reported in the financial statements.

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2007 2006

------ Rupees in '000 ------

6. CASH AND BALANCES WITH TREASURY BANKS

In hand:

Local currency 14,653 18,117

Foreign currency 3,211 4,790

With State Bank of Pakistan in:

Local currency current account 6.1 77,796 77,494

Local US Dollar collection account 6.2 1,346 733

Foreign currency deposit account:Capital deposit with the SBP 2,289,217 2,188,856

Cash reserve 6.3 2,764 3,653

Special cash reserve - Remunerative 6.4 2,764 11,143

2,391,751 2,304,786

6.1

6.2

6.3

6.4

7. BALANCES WITH OTHER BANKS 2007 2006------ Ru ees in '000 ------

In Pakistan

On current accounts 699 476

Outside Pakistan

On current accounts - remunerative 7.1 42,108 67,207

42,807 67,683

7.1

8. ADVANCES

Loans, cash credits, running finances, etc.

- In Pakistan 8.1 280,948 388,295

- Outside Pakistan - -

280,948 388,295

Bills discounted and purchased (excluding treasury bills)

- Payable in Pakistan - -

- Payable outside Pakistan - -- -

Advances - gross 280,948 388,295

Provision for non-performing advances

- specific (55,905) (15,437)

- general (4,537) (4,537)

8.4 (60,442) (19,974)

Advances - net of provisio 220,506 368,321

8.1

8.2 Particulars of advances (Gross)

8.2.1 In local currency 280,948 388,295In foreign currencies - -

280,948 388,295

8.2.2 Short term ( for upto one year) 275,353 261,659

Long term ( for over one year) 5,595 126,636

280,948 388,295

This includes a house loan to the Country Manager - Pakistan of Rs. 3.390 million (2006: 3.552) carrying a mark-up rate of

4.00% per annum. The loan is secured against the related property.

This includes Rs. 21.851 million (2006: Rs. 29.593 million) held with the Bank's head office Oman International Bank S.A.O.G.

Muscat, Sultanate of Oman.

This represents current account maintained with SBP under the requirements of section 22 (Cash Reserve Requirement) of the

Banking Companies Ordinance, 1962.

This represents US Dollar settlement account opened with the SBP in accordance with FE Circular No. 2 and is remunerated at

the rate of 4.24% (2006: 4.32%).

This represents statutory cash reserve (at nil return) in the current account maintained with the SBP under the requirements of the

SBP.

This represents statutory cash reserve maintained against foreign currency deposits mobilised under FE 25 Circular issued by theSBP and is remunerated at the rate of 4.24% (2006: 4.32%).

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8.3

Domestic Overseas Total Domestic Overseas Total Domestic Overseas Total

Category of ClassificationSubstandar - - - - - - - - -Doubtful - - - - - - - - -Loss 56,166 - 56,166 55,905 - 55,905 55,905 - 55,905

56,166 - 56,166 55,905 - 55,905 55,905 - 55,905

Domestic Overseas Total Domestic Overseas Total Domestic Overseas Total

Category of ClassificationSubstandar 885 - 885 156 - 156 156 - 156Doubtful - - - - - - - - -Loss 15,281 - 15,281 15,281 - 15,281 15,281 - 15,281

16,166 - 16,166 15,437 - 15,437 15,437 - 15,437

8.4 Particulars of provision against non-performing advances

Specific General Total Specific General Total

Opening balance 15,437 4,537 19,974 15,281 3,510 18,791Charge for the year 40,468 - 40,468 156 1,027 1,183Amounts written off - - - - - -Reversals - - - - - -

Closing balance 55,905 4,537 60,442 15,437 4,537 19,974

8.4.1 Particulars of provisions against non-performing advances

Specific General Total Specific General Total

In local currenc 55,905 4,537 60,442 15,437 4,537 19,974In foreign currencie - - - - - -

55,905 4,537 60,442 15,437 4,537 19,974

8.4.2

8.5 Particulars of write offs

8.6 PARTICULARS OF LOANS AND ADVANCES

TO COUNTRY MANAGER, ASSOCIATED COMPANIES, ETC.

Debts due by country manager, executives or officers of the Bank or any o

them either severally or jointly with any other persons

Balance at beginning of year

Loans granted during the year

RepaymentsBalance at end of year

5,117 5,480

2,095

3,790(405)

5,480

5,480

-

(363)

5,117

----- Rupees in '000 -----

2006

In terms of sub-section 3 of section 33A of the Banking Companies Ordinance, 1962, there were no written off loans or any other

financial relief allowed to a person(s) during the year ended December 31, 2007.

2007

The Central Bank of Oman vide its Circular No. BM 977 requires that all banks create a 1% and 2% general provision on its corporate

and retail loans respectively. To meet this requirement, the Bank has created the said provision.

2007 2006

2007

---------------------------------------------- Rupees in '000 --------------------------------------------

Specific Provision Require Specific Provision Held

---------------------------------------------- Rupees in '000 --------------------------------------------

----------------------- Rupees in '000 -----------------------

----------------------- Rupees in '000 -----------------------

2006

Advances include Rs.56.166 million (2006: Rs. 16.166 million) which have been placed under non-performing status as detailed below:

2007

Classified Advances Specific Provision Required Specific Provision Held

2006Classified Advances

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2007 2006

Note

9. OPERATING FIXED ASSETS

Property and equipment - tangible 9.1 4,984 4,504

Intangible assets 9.2 662 79

5,646 4,583

9.1 Property and equipment - tangible

COST ACCUMULATED DEPRECIATION Book Value

As at Additions/ As at As at Charge for As at as at

January 01, (Deletions) December 31, January 01, the year / December 31, December 31, Rate of

2007 2007 2007 (Deletions) 2007 2007 Depreciation

%

Leasehold improvements 10,804 - 10,804 9,795 473 10,268 536 10

Furniture and fixture 5,081 - 5,081 4,637 223 4,860 221 10

Electrical, office and

computer equipments 10,413 1,549 11,962 10,022 294 10,316 1,646 20

Vehicles 5,411 555 5,966 2,751 634 3,385 2,581 20

31,709 2,104 33,813 27,205 1,624 28,829 4,984

COST ACCUMULATED DEPRECIATION Book Value


January 01, (Deletions) December 31, January 01, the year / December 31, December 31, Rate of 2006 2006 2006 (Deletions) 2006 2006 Depreciation

%

Leasehold i mprovements 10,804 - 10,804 9,322 473 9,795 1,009 10

Furniture and fixture 5,040 41 5,081 4,407 230 4,637 444 10

Electrical, office and

computer equipments 10,301 112 10,413 9,702 320 10,022 391 20

Vehicles 2,611 2,800 5,411 2,385 366 2,751 2,660 20

28,756 2,953 31,709 25,816 1,389 27,205 4,504

9.1.1 The gross carrying value of fully depreciated items in use amounts to Rs. 20.821 million (2006: Rs. 20.821 million).

9.1.2

9.2 Intangible assets

COST ACCUMULATED AMORTISATION Book Value

As at Additions/ As at As at Charge for As at as atJanuary 01, (Deletions) December 31, January 01, the year / December 31, December 31, Rate of

2007 2007 2007 (Deletions) 2007 2007 Amortisation

%

Computer software 632 665 1,297 553 82 635 662 33.33

632 665 1,297 553 82 635 662

COST ACCUMULATED AMORTISATION Book Value


January 01, (Deletions) December 31, January 01, the year / December 31, December 31, Rate of

2006 2006 2006 (Deletions) 2006 2006 Amortisation

%

Computer software 536 96 632 533 20 553 79 33.33

536 96 632 533 20 553 79

9.2.1

9.2.2

10. DEFERRED TAX ASSETS

The gross carrying value of intangible assets (computer software) not capitalized but still in use amounts to Rs. 2.103 million (2006: Rs. 2.103 million).

The gross carrying value of fully amortized intangible assets in use amounts to Rs. 0.536 million (2006: Rs. 0.536 million).

At year end net deductible temporary differences amounted to Rs. 61.218 million (2006: Rs. 25.838 million) which result in a net deferred tax asset of Rs.

21.426 million (2006: Rs. 9.044 million). Furthermore, as at year-end unused tax losses amounted to Rs. 117.944 million (2006: Rs. 70.244 million), which

results in a deferred tax asset of Rs.41.280 million (2005: Rs.24.586 million). However, the net deferred tax asset has not been recognised for, as per the

accounting policy of the Bank, as it is not probable that taxable profits will be available in the future against which the deductible temporary differences and tax

losses can be utilised.

Rupees in '000

---------------------------------------------------- Rupees in '000 ----------------------------------------------------

---------------------------------------------------- Rupees in '000 ----------------------------------------------------

2007

The fair value of property and equipment as per the managements estimate is not materially different from the carrying amount.

---------------------------------------------------- Rupees in '000 ----------------------------------------------------

---------------------------------------------------- Rupees in '000 ----------------------------------------------------

2006

2007

2006

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2007 200611. OTHER ASSETS

Income/ mark-up accrued in local currenc 8,512 11,772Advances, deposits, advance rent and other prepayment 21,930 2,417Advance taxation (payments less provisions 160 3,359Receivable from staff gratuity fun 28.1.4 - 104Stationery and stamps in han 256 281Others 5,700 3

36,558 17,936

Provision held against other asset 11.1 (3,337) (683)Other Assets (net of provisions 33,221 17,253

11.1 Provision against other assets

Opening balance 683 712Charge for the year 2,654 43Reversals - (72)Amount written off 2,654 (29)Closing balance - -

3,337 683

12. BILLS PAYABLE

In Pakistan 2,754 4,415Outside Pakistan - -

2,754 4,415

13. BORROWINGS

In Pakistan 178,000 98,000Outside Pakistan - -

178,000 98,000

13.1 Particulars of borrowings with respect to Currencies

In local currency 178,000 98,000In foreign currencies - -

178,000 98,000

13.2 Details of borrowings

Secured

Borrowings from State Bank of Pakistaunder export refinance scheme 13.2.1 28,000 40,000

Unsecured

Call borrowings 13.2.2 150,000 58,000

178,000 98,000

13.2.1

13.2.2

14. DEPOSITS AND OTHER ACCOUNTS 2007 2006

Customers

Fixed deposits 261,361 327,071Savings deposits 63,949 96,942Current Accounts - Remunerativ 66,614 23,835Current Accounts - Non-remunerative 64,808 49,393Margin Deposits 1,105 1,819

457,837 499,060Financial Institutions

Remunerative deposits 538 110,047Non-remunerative deposits 14.2 1,562 8,910

2,100 118,957459,937 618,017

Rupees in '000

These represents borrowings from SBP under export refinance scheme at the rate of 6.5% (2006: 6.5%) per annu

These represents borrowings at the rate of 10.25% & 11% (2006: 10%) per annum having maturities upto January 2007

Rupees in '000

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2007 2006

14.1 Particulars of deposits

In local currency 416,727 555,669In foreign currencies 43,210 62,348

459,937 618,017

14.2

2007 200615. OTHER LIABILITIES

Mark-up / Return / Interest payable in local currenc 8,157 6,150Accrued expenses 2,118 1,860Due to head office 15.1 8,904 8,904Others 438 151

19,617 17,065

15.1

16. HEAD OFFICE CAPITAL ACCOUNT 2007 2006

Capital held as:

Interest free deposit in foreign currencRemitted from head office 16.1 2,007,923 1,928,019Revaluation surplus allowed by the State Bank of Pakista 281,294 260,837

2,289,217 2,188,856

16.1

17. CONTINGENCIES AND COMMITMENTS

17.1 Direct Credit Substitutes

2007 2006

Government 28,834 41,593Others 6,329 2,052

35,163 43,645

17.2 Transaction-related contigent liabilities

Government 19,830 24,089Others 19,447 16,497

39,277 40,586

17.3 Trade-related Contingent Liabilities

Others 11,275 15,748

17.4 Commitments in respect of forward exchange contracts

Purchase - 7,002Sale - 6,089

Represents an amount of US Dollar 37.272 million (2006: US Dollar 35.95 million) deposited with SBP in compliance with sub-

section (3) of Section 13 of the Banking Companies Ordinance, 1962 and the requirements of the SBP issued from time to time.

Includes general guarantees of indebtedness, bank acceptances guarantees, serving as financial guarantees for loans and securities

issued in favour of:

Rupees in '000

Rupees in '000

Including performance bonds, bid bonds:

Short-term self-liquidating trade-related arising from the movement of goods, such as documentary credits where the underlying

shipment is used as security.

Rupees in '000

Rupees in '000

This includes deposit of Rs. 0.330 million (2006: Rs.0.621 million) held by the Bank's Head Office Oman International Bank,

S.A.O.G, Muscat, Oman.

Represent expenses incurred by the head office at the time of establishment of branches in Pakistan.

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18. DERIVATIVE INSTRUMENTS

18.1 Product Analysis

Counterparties No. of Notional No. of Notional No. of Notional

Contracts Principal Contracts Principal Contracts Principal

Rs. in '000 Rs. in '000 Rs. in '000

With Banks for

Hedging - - - - - -

Market making - - - - - -

Total

Hedging - - - - - -

Market making - - - - - -- - - - - -

Counterparties No. of Notional No. of Notional No. of Notional

Contracts Principal Contracts Principal Contracts Principal

Rs. in '000 Rs. in '000 Rs. in '000

With Banks for

Hedging - - - - - -

Market making - - 3 913 - -

Total

Hedging - - - - - -

Market making - - 3 913 - -- - 3 913 - -

18.2 Maturity Analysis

Forward Rate Agreements

Remaining maturity No. of Notional Mark to Market

Contracts Principal Negative Positive Net

Upto 1 month - - - - -

Forward Rate Agreements

Remaining maturity No. of Notional Mark to Market

Contracts Principal Negative Positive Net

Upto 1 month 3 913 16 16 -

2007 2006

Rupees in '000

19. MARK-UP / RETURN / INTEREST EARNED

On loans and advances to:

Customers 22,906 26,342

Financial institutions 7,696 18,002

On deposits with financial institutions 7,666 2,860

38,268 47,204

20. MARK-UP / RETURN / INTEREST EXPENSED

Deposits 40,771 29,047

Other short term borrowings 6,865 12,266

47,636 41,313

-------------------- (Rs. in '000) --------------------

The Bank carried out derivative transactions in respect of forward foreign exchange contracts and foreign exchange swaps.

The management is committed to managing risk and controlling business and financial activities in a manner which enables it to maximize profitable

business opportunities, avoid or reduce risks, which can cause loss or reputation damage, ensure compliance with applicable laws and regulations and

resilience to external events. The Bank's business is conducted within a develop control framework, duly approved by the management. The management

has developed a structure that clearly defined roles, responsibilities and reporting lines.

The management regularly reviews the Bank's risk profile in respect of derivatives. Operational procedures and controls have been established to facilitate

complete, accurate and timely processing of transactions and derivative activities. These controls include appropriate segregation of duties, regular

reconciliation of accounts, and the valuation of assets and positions. The Bank has established trading l imits, allocation processes, operating controls andreporting requirements that are specifically designed to control risk of aggregate positions, assure compliance with accounting and regulatory standards and

provide accurate management information regarding these activities.

Accounting policies in respect of derivative financial instruments are prescribed in note 5.12.

2007

Interest Rate Swaps Forward Rate Agreements FX Options

2007

2006

2006

Interest Rate Swaps Forward Rate Agreements FX Options

-------------------- (Rs. in '000) --------------------

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2007 2006

21. OTHER INCOME Rupees in '000

Service charges 661 972

Others 21.1 859 1,205

1,520 2,177

21.1

22. ADMINISTRATIVE EXPENSES

Salaries, allowances, etc. 18,617 13,593

Charge for defined benefit plan 28.1.5 217 256

Contribution to defined contribution plan 717 567

Rent, taxes, insurance, electricity, etc. 5,765 5,641

Legal and professional charges 1,743 502

Communications 3,358 3,052

Repairs and maintenance 2,446 1,574

Stationery and printing 618 595

Advertisement and publicity 403 342

Auditors' remuneration 22.1 814 1,452

Depreciation 9.1 1,624 1,389Amortization 9.2 82 20

Brokerage and commission 86 142

Fees and subscription 949 1,167

Travelling & Entertainment 1,515 975

Vehicle running expenses 362 669

Security charges 840 959

Training 37 19

Bank Charges 650 753

Others 3,430 1,834

44,273 35,501

22.1 Auditors' remuneration

Audit fee - statutory 300 273

Special certifications, reviews and other services 500 727

Tax services - 386

Out-of-pocket expenses 14 66

814 1,452

23. OTHER CHARGES

Penalties imposed by State Bank of Pakistan 2,229 23

24. TAXATION

Includes income from various general banking services such as cheque book charges, cheque return charges, cheque

handling charges, recovery of telex, courier and postage charges

As the Bank has accumulated tax losses, no provision for taxation is required. Assessments for the assessment years 1996-

1997 to 2002-2003 have been finalised. Appeals had been filed against the orders of Taxation Officer (TO) toCommissioner Income-Tax (Appeals) [CIT-A]. Subsequent to the orders of CIT-A for assessment years 1996-1997 to 199

2000, appeals have been filed by the tax department and the Bank to the Income Tax Appellate Tribunal (ITAT) against

orders of CIT-A. These appeals have been decided by the ITAT partly in favour and partly against the Bank. The Bank has

now filed a reference to the High Court through the ITAT for the assessment years 1996-1997, 1997-1998, 1998-1999 an

1999-2000 in respect of matters decided against the Bank.

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25. EARNINGS / (LOSS) PER SHARE

2007 2006

Rupees in '000

26. CASH AND CASH EQUIVALENTS

Cash and balance with treasury banks 6 2,391,751 2,304,786

Balance with other banks 7 42,807 67,683

2,434,558 2,372,469

27. STAFF STRENGTH

Permanent 26 21

Temporary / on contractual basis 2 1

Total Staff Strength 28 22

28. DEFINED BENEFIT AND CONTRIBUTION PLAN

28.1 Defined benefit plan

28.1.1 General description

28.1.2 Principal actuarial assumptions

Following are significant actuarial assumptions used in the valuation:

2007 2006

Discount rate - percent (per annum) 10 10

Estimated rate of increase in salaries of the

employees - percent (per annum) 9 9

Estimated rate of return on plan assets - percent (per annum) 10 10

Normal retirement age - years 58 58

2007 2006

Rupees in '000

28.1.3 Reconciliation of payable to defined benefit plan

Present value of defined benefit obligations 1,484 1,553

Fair value of any plan assets (3,189) (3,506)

Net actuarial gain / (loss) not recognised 1,705 1,953

- -

The scheme provides for terminal benefits for all its permanent employees, equivalent to thirty days of last drawn basic

salary for each year of service or part thereof for employees who have completed the qualifying period of three years.

Annual contribution is based on actuarial valuation carried out on December 31, 2006, using the Projected Unit Credit

Method. An actuarial valuation is conducted once every three years.

The orders have been finalised by the CIT-A for the assessment year 2000-2001, 2001-2002 and 2002-2003 and approval

of the final order is pending. The returns for the tax years 2003, 2004, 2005, 2006 and 2007 have been filed and the same

deemed as assessed, as per Section 120 of the Income Tax Ordinance, 2001. However, the cases of the tax years 2003,

2004 and 2005 has been re-opened under section 122 of the Income Tax Ordinance, 2001 of which appeals are pending.

Notwithstanding the above appeals, full provision for taxation has been made in the financial statements on the basis of

latest assessment for the respective years.

The Bank operates as a branch of a foreign entityand does not have share capital. Hence, no figures of basic and diluted

earnings / (loss) per share have been reported in these financial statements.

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2007 2006

28.1.4 Movement in defined benefit obligation Rupees in '000

Opening balance 1,553 1,779

Current service cost 521 414

Interest cost 160 162

Benefits paid (645) -

Actuarial gain (103) (802)Closing balance 11 1,486 1,553

28.1.5 Movement in plan assets

Opening balance 3,506 2,860

Expected return 350 264

Contribution made by bank 217 360

Benefits paid (645) -

Actuarial (loss) / gain (239) 22

Closing balance 11 3,189 3,506

28.1.6 Charge for defined benefit plan

Current service cost 521 414

Interest cost 160 162

Expected return on plan assets (350) (264)

Actuarial (gain) / loss recognized (114) (56)

22 217 256

28.1.7 Actual return on plan asset 111 390

28.2 Defined contribution plan

28.3 Five year data on surplus / (deficit) of

the plans and experience adjustments

2007 2006 2005 2004 2003

Defined benefit obligation 1,484 1,553 1,779 1,256 1,943

Fair value of plan assets (3,189) (3,506) (2,860) (2,542) (3,149)

(Surplus) / deficit (1,705) (1,953) (1,081) (1,286) (1,206)

Experience adjustments(loss) / gain - net 114 56 50 44 60

---------------(Rupees in '000)---------------

The Bank operates a contributory provident fund for all its permanent employees. Equal contributions are made monthly by

the Bank and the employees at the rate of 10% of basic salary.

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29. COMPENSATION OF COUNTRY MANAGER AND EXECUTIVES

Executives

2007 2006 2007 2006

Fees - - - -Managerial remuneratio 2,188 1,912 1,604 1,179Charge for defined benefit pla 190 160 80 48Contribution to defined contribution pla 219 158 152 118

Rent and house maintenanc 875 765 642 471Utilities 219 191 160 118Medical 37 13 54 35Bonus 175 145 143 205

3,903 3,344 2,835 2,174

Number of persons 1 1 2 2

29.1

29.2

30. FAIR VALUE OF FINANCIAL INSTRUMENTS

30.1

On-balance sheet financial instruments

Book value Fair value Book value Fair value

Assets

Cash balances with treasury bank 2,391,751 2,391,751 2,304,786 2,304,786Balances with other bank 42,807 42,807 67,683 67,683Lending to financial institution - - - -

Investments - - - -Advances 220,506 220,506 368,321 368,321Other assets 14,212 14,212 11,879 11,879

2,669,276 2,669,276 2,752,669 2,752,669

Liabilities

Bills payable 2,754 2,754 4,415 4,415Borrowings 178,000 178,000 98,000 98,000Deposits and other accounts 459,937 459,937 618,017 618,017Sub-ordinated loans - - - -Liabilities against assets subject to finance leas - - - -Other liabilities 17,499 17,499 15,205 15,205

658,190 658,190 735,637 735,637

Off-balance sheet financial instruments

Forward purchase of foreign exchange - - 7,002 7,002

Forward sale of foreign exchange - - 6,089 6,089

The table below as set out carrying value and estimated fair value of on-balance sheet and off-balance sheet financial instruments.

----------------------Rupees in '000-------------------

Fair value of fixed term financing, other assets, other liabilities and fixed term deposits cannot be calculated with sufficient

reliability due to absence of current and active market for assets and liabilities and reliable data regarding market rates for similar

instruments. The provision for non-performing advances has been calculated in accordance with the Bank's accounting policy as

stated in note 5.3 of these financial statements.

Country Manager

Rupees in '000 Rupees in '000

2007 2006

The Country Manager and certain executives have been provided with free use of Bank maintained cars in accordance with their

terms of em lo ment.

Executives means employees, other than Country Manager, whose basic salary exceeds five hundred thousand rupees in a financi

ear.

Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable willing parties in an

arm's len th transaction.

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31. SEGMENT DETAILS WITH RESPECT TO BUSINESS ACTIVITIES

Trading & Retail Commercial Total

Sales Banking Bankin

December 31, 2007

Total income 8,288 1,061 33,390 42,739Total expenses 5,132 9,128 120,346 134,606

Net (loss) / profit 3,156 (8,067) (86,956) (91,867)Segment assets (gross 2,434,808 27,009 295,893 2,757,710Segment non performing loan - 16,166 40,000 56,166Segment provision required - 16,327 44,115 60,442Segment liabilities 150,043 164,352 345,913 660,308Segment return on net assets (ROA) (% 6.68 8.13 10.46Segment cost of funds (%) 9.63 5.34 7.12

December 31, 2006

Total income 3,883 1,476 48,078 53,437Total expenses 11,002 5,674 61,315 77,991

Net loss (7,119) (4,198) (13,237) (24,554)Segment assets (gross 2,373,386 35,158 374,739 2,783,283Segment non performing loan - 16,166 - 16,166

Segment provision required - 15,840 4,134 19,974Segment liabilities 58,016 180,771 498,710 737,497Segment return on net assets (ROA) (% 4.75 6.62 9.93Segment cost of funds (%) 8.52 5.96 8.10

32. RELATED PARTY TRANSACTIONS

Bank balance

At 01 January - 29,593 - 4,631Deposited during the year - 396,485 - 442,437Withdrawn during the year - (404,491) - (417,475)Exchange adjustment 264 -At 31 December - 21,851 - 29,593

Advances

At 01 January 5,480 - 2,095 -Disbursed during the yea - - 3,790 -Repaid during the year (363) - (405) -At 31 December 5,117 - 5,480 -

Deposits

At January 01 551 620 1 1,798Received during the year 7,242 78,816 5,610 62,694Withdrawn during the year (7,600) (79,106) (5,060) (63,872)At December 31 193 330 551 620

Mark-up / return / interest earned 205 753 207 671Remuneration paid 5,688 - 4,003 -Post employment benefits 269 - 258 -

In the opinion of the management, the fair value of the financial assets and financial liabilities are not significantly different from their

carrying values since assets and liabilities are either short term in nature or in the case of customer financing and deposits are frequently

repriced.

The details of transactions with related parties are as follows.

Transactions with related parties comprise of transactions in the normal course of the business with the Bank's head office Oman

International Bank S.A.O.G, Muscat, Sultanate of Oman and key management personnel. These transactions were made on substantially

the same commercial terms as those prevailing at the same time for comparable transactions with unrelated parties and did not involve

more than a normal amount of risk.

2007 2006

---------------------- Rupees in '000 ----------------------

Key management

personnel

OmanInternational

Bank S.A.O.G -

Muscat

Key management

personnel

Oman International

Bank S.A.O.G -

Muscat

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33. CAPITAL ADEQUACY

33.1 Capital management

Goals of managing capital

The goals of managing capital of the Bank are as follows:

-

- Maintain strong ratings and to protect the Bank against unexpected events;

-

Statutory minimum capital requirement and management of capital

33.2 CAPITAL ADEQUACY

2007

Regulatory Capital Base

Tier I Capital

Shareholders capital/assigned capital 2,289,217

Reserves -

Unappropriated / unremitted profits (net of losses) (255,594)

Less: Adjustments -

Total Tier I Capital 2,033,623

Tier II Capital

losses) and have a CAR of 9% (determined as per Basel-I or Basel-II Accord) can be allowed to continu

the minimum assigned capital of Rs. 2 billion (net of losses). All such branches of foreign banks shall, h

required to seek specific permission from the State Bank to maintain the minimum assigned capital (net

Rs 2 billion effective from 31 December, 2005. The Bank has specifically obtained such approval. In ad

banking companies carrying business in Pakistan are also required to maintain a Minimum Capital Ade

(CAR) of 8% of risk weighted exposure of the banking company. The Bank's CAR, as at 31 December

763.15% of its risk weighted assets using Basel-I approach.

The objective of managing capital is to safe guard the Bank's ability to continue as a going concern, so t

continue to generate adequate returns by pricing products and services commensurately with the level o

Bank manages capital with the goal of optimally using its capital in relation to business development pl

competitiveness, overall risk profile and shareholder returns. Measurement of capital is kept as risk-senpossible so that the Bank is adequately capitalised for covering unexpected loss - and hence contributin

stability of the Pakistani financial system we are part of. By doing so, we aim to maintain our external r

be compliant with the State Bank of Pakistan's directives on capital adequacy.

Availability of the adequate capital (including the quantum) at the reasonable cost so as to enable

expand; and achieve low overall cost of capital with appropriate mix of capital elements.

To be an appropriately capitalised institution, as defined by regulatory authorities and comparable

The State Bank of Pakistan through its BSD circular No.6 dated 28 October, 2005 requires the minimu

capital (net of losses) for Banks / Development finance institutions to be raised to Rs. 6 billion by the ye

December 2009. The branches of foreign Banks operating in Pakistan will also be required to increase t

capital to Rs. 6 billion within the above timelines prescribed for the locally incorporated banks / DFIs.

branches of foreign banks whose Head Offices hold a minimum paid up capital of US $ 100 million (ne

Rupees

The risk weighted assets to capital ratio, calculated in accordance with the State Bank's guideli

adequacy was as follows:-

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Subordinated debt (upto 50% of total Tier I Capital) -

General provisions subject to 1.25% of total risk weighted assets 3,336

Revaluation reserve (upto 50%) -

Total Tier II Capital 3,336

Eligible Tier III Capital -

Total Regulatory Capital (a) 2,036,959

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Risk-Weighted Exposures

Book Value Risk Adjusted Book Value

Value

Credit Risk

Balance Sheet Items:-

Cash and other liquid assets 2,434,558 8,562 2,372,469

Money at call - - -

Investments - - -

Loans and advances 179,639 146,348 335,188

Fixed assets 5,646 5,646 4,583

Other assets 36,558 36,398 17,253

2,656,401 196,954 2,729,493

Off Balance Sheet Items

Loan repayment guarantees 35,163 35,163 40,033

Purchase and resale agreements - - -

Performance bonds etc 38,172 19,086 36,313

Revolving underwriting commitments - - -

Stand by letters of credit 11,275 5,638 13,893

Outstanding foreign exchange contracts

- Purchase - - 7,002

- Sale - - 6,088

84,610 59,887 103,329

Credit risk-weighted exposures 256,841

Market Risk

General market risk -

Specific market Risk 10,074

Market risk-weighted exposures 10,074

Total Risk-Weighted exposures (b) 266,915

Capital adequacy ratio [ (a) / (b) x 100) ] 763.15%

33.3 Advances secured against government securities and cash margin amounting to Rs. 44.210 million (20

million) have been deducted from gross advances.

---------------- Rupees in '000 ---------

2007 20

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2006

2,188,856

-

(163,727)

-

2,025,129

e to maintain

owever, be

of losses) of

dition

uacy Ratio

007 was

at it could

risk. The

ns, market

itive asto the

tings and to

he Bank to

to the peers.

paid-up

ar ending 31

eir assigned

owever, those

t of

in '000

es on capital

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-

4,537

-

4,537

-

2,029,666

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Risk Adjusted

Value

13,537

-

-

295,223

4,583

13,894

327,237

40,033

-

18,157

-

6,947

25

24

65,186

392,423

-

23,088

23,088

415,511

488.47%

6: Rs.33.133

-------

06

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34. RISK MANAGEMENT

34.1 Credit Risk

Contingencies an

Advances (Gross Deposits Commitment34.2 Segments by class of busines Rupees Percent Rupees Percent Rupees Percent

in '000 in '000 in '000

Textile 71,169 25.33 - - 2,000 2.33Chemical and pharmaceuticals 3,483 1.24 17,839 3.88 11,744 13.70

Automobile and transportation equipmen 38,935 13.86 161 0.04 6,682 7.80Power (electricity), gas, water, sanitary - - 5,532 1.20 - -Wholesale and retail trade 4,498 1.60 - - - -Financial 89,266 31.77 2,100 0.46 - -Insurance - - 3,359 0.73 - -Services 1,259 0.45 8,975 1.95 7,830 9.13Individuals 26,129 9.30 162,299 35.29 150 0.17Agribusiness & food processin - - - - - -Wires and cables 16,281 5.80 - - 24,268 28.31Information technolog - - - - - -Health and education 1,111 0.40 3,116 0.68 - -Iron and steel 20,000 7.12 834 0.18 - -Electrical machinery and apparatus 6,515 2.32 14,004 3.04 6,618 7.72Packaging 2,302 0.82 1,929 0.42 - -PVC pipes - - - - 18,065 21.08Trust and funds - - 209,388 45.53 - -

Others - - 30,401 6.61 8,358 9.75280,948 100 459,937 100 85,715 100

Contingencies and

Advances (Gross) Deposits CommitmentSegments by class of busines Rupees Percent Rupees Percent Rupees Percent

in '000 in '000 in '000

Textile 67,782 17.46 91 0.01 2,051 2.03Chemical and pharmaceuticals 6,997 1.80 5,821 0.94 38,053 37.72Automobile and transportation equipmen 1,370 0.35 4,463 0.72 2,639 2.62Power (electricity), gas, water, sanitary - - 2,171 0.35 - -Wholesale and retail trade - - 27,490 4.45 14,412 14.28Financial 179,028 46.11 102,487 16.58 913 0.90Insurance - - 15,000 2.43 - -Services 20,000 5.15 6,730 1.09 - -Individuals 32,534 8.38 242,515 39.24 1,730 1.71Agribusiness & food processin - - 1,911 0.31 - -Wires and cables 40,010 10.30 - - 20,265 20.09Information technolog - - 10,121 1.64 - -Health and education 2,444 0.63 22,262 3.60 740 0.73Iron and steel 25,242 6.50 - - 692 0.69PVC Pipes - - - - 19,397 19.23Trust and funds - - 168,500 27.27 - -

Others 12,888 3.32 8,455 1.37 - -388,295 100 618,017 100 100,892 100

Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial

loss. The Bank attempts to control credit risk by monitoring credit exposures, limiting transactions with specific counterparties, and

continually assessing the creditworthiness of counterparties.

Concentration of credit risk arises 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. Concentrations of credit risk indicate the relative sensitivity of the Bank's performance

to developments affecting a particular industry or geographic location.

The Bank seeks to manage its credit exposure through diversification of its financing activities to avoid undue concentration of risk with

individuals or groups of customers in specific locations or businesses. It also obtains security when appropriate.

2006

2007

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Contingencies an

Advances (Gross Deposits Commitment34.3 Segment by secto Rupees Percent Rupees Percent Rupees Percent

in '000 in '000 in '000

Public / government - - 5,532 1.20 - -Private 280,948 100.00 454,405 98.80 85,715 100.00

280,948 100.00 459,937 100.00 85,715 100.00

Contingencies and

Advances (Gross) Deposits CommitmentSegment by secto Rupees Percent Rupees Percent Rupees Percent

in '000 in '000 in '000

Public / government - - 2,171 0.35 - -Private 388,295 100.00 615,846 99.65 100,892 100.00

388,295 100.00 618,017 100.00 100,892 100.00

34.4 Details of non-performing advances and specific provisions by class of business segme

Classified Specific Classified SpecificAdvances Provisions Advances Provisions

Held Held

Individuals 16,166 15,905 16,166 15,437Financial 40,000 40,000 - -

56,166 55,905 16,166 15,437

34.5 Details of non-performing advances and specific provisions by sect

Public / government - - - -Private 56,166 55,905 16,166 15,437

56,166 55,905 16,166 15,437

Loss before Total assets Net assets

taxation employed employed35. GEOGRAPHICAL SEGMENT ANALYSIS

Pakistan (91,867) 2,693,931 2,033,623

(91,867) 2,693,931 2,033,623 85,715

Total assets employed includes intra group items of Rs. 21.851 million.

Loss before Total assets Net assetstaxation employed employed

Pakistan (24,554) 2,762,626 2,025,129

(24,554) 2,762,626 2,025,129 100,892

Total assets employed includes intra group items of Rs. 29.593 million.

2006

2006

commitment

85,715

----------------------- Rupees in '000 ----------------------

Contingencies an

2007

2007

2007

------------- Rupees in '000 -------------

100,892

2006Contingencies and

commitments----------------------- Rupees in '000 ----------------------

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36. MARKET RISK

36.1 Foreign Exchange Risk

Pakistan rupee

United States dollar

Great Britain pound

Swiss Francs

Japanese yen

Euro

Pakistan rupee

United States dollar

Great Britain pound

Swiss Francs

Japanese yen

Euro

36.2 Interest Rate Risk

36.3 Equity Position Risk

As of the balance sheet date, the Bank is not exposed to equity position risk.

Market risk is the risk of loss arising from movements in market variables including observable variables such as interest

rates, exchange rates and equity indices, and others which may be only indirectly observable such as volatilities and

correlations. The Bank warehouses market risk for customer facilitation, and also positions itself in the financial markets for

proprietary trading. The Bank's policy is that all market risk taking activity is undertaken within approved market risk limits,

and that the Bank's standards / guiding principles are upheld at all times.

The Bank has adopted a comprehensive system for the measurement and management of foreign exchange risk. Part of this

risk management process involves managing the Banks exposure to fluctuations in foreign exchange rates in order to

minimize its exposure to currency and risk to acceptable levels as determined by management. The management sets limits

on the level of exposure by currency and in total for overnight positions. Positions are monitored on a daily basis and

hedging strategies are used to ensure positions are maintained within established limits.

Market Risk Management is an independent control function with clear segregation of duty and reporting line with the

business-line. It means responsibility is to ensure that the risk-taking units manage the Bank's market risk exposure within arobust market risk framework and within the Bank's risk appetite. The Bank standard systems are used to furnish senior

trading and Market Risk staff with risk exposures. All trading activities and any business proposal that commit or may

commit the Bank (legally or morally) to deliver risk sensitive products require approval by independent authorised risk

professionals or committees, prior to commitment.

37

597

2,033,623

-

-

-

61

-37

658

2,693,931

2007

------------------------------------------ Rupees in '000 ------------------------------------------

352,521 -

-

660,308

(264,577)

2,296,279

1,172

115

-

-

2,338,871

617,098

115 -

1,729

42,592

557

currency

exposureAssets

Off-balance

Liabilities sheet items

Net foreign

exposure

------------------------------------------ Rupees in '000 ------------------------------------------

486,246

2006

Net foreign

Off-balance currency

Assets Liabilities sheet items

675,149 (913) (189,816)

2,270,195 58,956 913 2,212,152

5,645 3,267 - 2,378

42 - - 42

59 - - 59

439 125 - 314

The Bank has clear objectives, strategies, and risk tolerance level in order to protect it from interest rate risk. To achieve thisobjective, the Bank matches the interest rate sensitivity of its assets and liabilities by placing them into various time buckets

according to the earlier of contractual re-pricing or maturity dates. The Bank is exposed to interest rate risk as a result of

mismatches or gaps in the amounts of assets and liabilities and off-balance sheet instruments that mature or re-price in a

given period. The Bank manages this risk by matching the re-pricing of assets and liabilities through risk management

strategies. The Bank has also a system in place to monitor the effectiveness of its policies and limits.

2,762,626 737,497 - 2,025,129

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37. MISMATCH OF INTEREST RATE SENSITIVE ASSETS AND LIABILITIES

Effective Non-interest

Yield / Over 1 Over 3 Over 6 Over 1 Over 2 Over 3 Over 5 bearing

Interest Upto 1 to 3 to 6 months to to 2 to 3 to 5 to 10 Over financial

rate Total month months months 1 year years years years years 10 years instruments

%

On-balance sheet financial

instruments

Assets

Cash and balances with

treasury banks 3.24 2,391,751 4,110 - - - - - - - - 2,387,641

Balances with other banks 5.49 42,807 42,108 - - - - - - - - 699

Lending to financial institutions - - - - - - - - - - - -

Investments - - - - - - - - - - - -

Advances 9.03 220,506 106,747 38,599 69,678 - - 716 704 - 4,062 -

Other assets - 14,212 - - - - - - - - - 14,212

2,669,276 152,965 38,599 69,678 - - 716 704 - 4,062 2,402,552

Liabilities

Bills payable - 2,754 - - - - - - - - - 2,754

Borrowings 8.35 178,000 150,000 28,000 - - - - - - - -

Deposits and other accounts 6.73 459,937 125,923 139,054 42,288 50,120 - - - - - 102,552

Sub-ordinated loans - - - - - - - - - - - -

Liabilities against assets subject to

finance lease - - - - - - - - - - - -

Other liabilities - 17,499 - - - - - - - - - 17,499

658,190 275,923 167,054 42,288 50,120 - - - - - 122,805

On-balance sheet gap 2,011,086 (122,958) (128,455) 27,390 (50,120) - 716 704 - 4,062 2,279,747

Off-balance sheet financial

instruments

Forward purchase of foreign exchange - - - - - - - - - - -

Forward sale of foreign exchange - - - - - - - - - - -

Off-balance sheet gap - - - - - - - - - - -

Total Yield / Interest Risk Sensitivity Gap (122,958) (128,455) (31,381) 8,651 - 716 704 - 4,062 2,279,747

Cu mu lat iv e Y iel d / In ter est Ris k Se ns it iv it y Ga p ( 12 2, 95 8) (251,413) (282,794) (274,143) (274,143) (273,427) (272,723) (272,723) (268,661) 2,011,086

Effective Non-interest

Yield / Over 1 Over 3 Over 6 Over 1 Over 2 Over 3 Over 5 bearing

Interest Upto 1 to 3 to 6 months to to 2 to 3 to 5 to 10 Over financial

rate Total month months months 1 year years years years years 10 years instruments

%

On-balance sheet financial

instruments

Assets


treasury banks 2.92 2,304,786 11,876 - - - - - - - - 2,292,910Balances with other banks 5.25 67,683 67,207 - - - - - - - - 476

Lending to financial institutions - - - - - - - - - - - -

Investments - - - - - - - - - - - -

Advances 9.76 368,321 28 211,685 35,000 5,000 105,000 - - 2,693 8,915 -

Other assets - 11,879 - - - - - - - - - 11,879

2,752,669 79,111 211,685 35,000 5,000 105,000 - - 2,693 8,915 2,305,265

Liabilities

Bills payable - 4,415 - - - - - - - - - 4,415

Borrowings 8.36 98,000 58,000 40,000 - - - - - - - -

Deposits and other accounts 6.07 618,017 215,071 101,079 27,776 152,122 - 1,800 - - - 120,169

Sub-ordinated loans - - - - - - - - - - - -


finance lease - - - - - - - - - - - -

Other liabilities - 15,205 - - - - - - - - - 15,205

735,637 273,071 141,079 27,776 152,122 - 1,800 - - - 139,789

On-balance sheet gap 2,017,032 (193,960) 70,606 7,224 (147,122) 105,000 (1,800) - 2,693 8,915 2,165,476

Off-balance sheet financial

instruments

Forward purchase of foreign exchange 7,002 - - - - - - - - - 7,002Forward sale of foreign exchange 6,089 - - - - - - - - - 6,089

Off-balance sheet gap 913 - - - - - - - - - 913

Total Yield / Interest Risk Sensitivity Gap (193,960) 70,606 7,224 (147,122) 105,000 (1,800) - 2,693 8,915 2,164,563

Cumulative Yield / Interest Risk Sensitivity Gap (193,960) (123,354) (116,130) (263,252) (158,252) (160,052) (160,052) (157,359) (148,444) 2,016,119

37.1

37.2

37.3

2006

Yield / interest rate sensitivity position for on balance sheet instruments is based on the earlier of contractual re-pricing and maturity date and for off-balance sheet

instruments is based on settlement date.

---------------------------------------------------------------------- Rupees in '000 ----------------------------------------------------------------------

Exposed to Yield / Interest risk

2007

The interest rate exposure taken by the Bank arises from investing in corporate, small medium ent erprises, consumer financing, investment banking and interbank activities

where variation in market interest rates may affect the profitability of the Bank. This risk is addressed by the management which reviews the interest rate dynamics at regular

intervals and decides repricing of assets and liabilities ensuring that the spread of the Bank remains at acceptable level.

Interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in the market interest rates. Sensitivity to interest rate risk arises from

mismatches of financial assets and liabilities that mature or reprice in a given period. The Bank manages these mismatches through risk management strategies where

significant changes in gap positions can be adjusted.

The advances and deposits of the Bank are repriced on a periodical basis based on the interest rates scenario.

Exposed to Yield / Interest risk

---------------------------------------------------------------------- Rupees in '000 ----------------------------------------------------------------------

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38. MATURITIES OF ASSETS AND LIABILITIES

Over 1 Over 3 Over 6 Over 1 Over 2 Over 3 Over 5

Upto 1 to 3 to 6 months to 1 to 2 to 3 to 5 to 10 Over

Total month months months year years years years years 10 years

Assets


treasury banks 2,391,751 102,534 - - - - - - - 2,289,217

Balances with other banks 42,807 42,807 - - - - - - - -

Lending to financial institutions - - - - - - - - - -

Investments - - - - - - - - - -

Advances 220,506 106,747 38,599 10,907 58,658 113 716 704 - 4,062

Operating fixed assets 5,646 - - 13 357 209 624 4,392 51 -

Deferred tax assets - - - - - - - - - -

Other assets 33,221 5,746 11,179 6,137 2,303 393 7,463 - - -

2,693,931 257,834 49,778 17,057 61,318 715 8,803 5,096 51 2,293,279

Liabilities

Bills payable 2,754 2,754 - - - - - - - -

Borrowings 178,000 150,000 28,000 - - - - - - -Deposits and other accounts 459,937 126,253 226,803 42,288 64,593 - - - - -

Sub-ordinated loans - - - - - - - - - -


finance lease - - - - - - - - - -

Deferred tax liabilities - - - - - - - - - -

Other liabilities 19,617 10,713 - - - - - - - 8,904

660,308 289,720 254,803 42,288 64,593 - - - - 8,904

Net assets 2,033,623 (31,886) (205,025) (25,231) (3,275) 715 8,803 5,096 51 2,284,375

Head office capital account 2,289,217

Accumulated loss (255,594)

2,033,623

Over 1 Over 3 Over 6 Over 1 Over 2 Over 3 Over 5

Upto 1 to 3 to 6 months to 1 to 2 to 3 to 5 to 10 Over

Total month months months year years years years years 10 years

Assets


treasury banks 2,304,786 115,930 - - - - - - - 2,188,856

Balances with other banks 67,683 67,683 - - - - - - - -

Lending to financial institutions - - - - - - - - - -

Investments - - - - - - - - - -

Advances 368,321 28 211,685 35,000 5,000 105,000 - - 2,693 8,915

Operating fixed assets 4,583 - 21 - 54 1,000 282 2,832 394 -

Deferred tax assets - - - - - - - - - -

Other assets 17,253 44 12,249 399 3,783 778 - - - -

2,762,626 183,685 223,955 35,399 8,837 106,778 282 2,832 3,087 2,197,771

Liabilities

Bills payable 4,415 4,415 - - - - - - - -

Borrowings 98,000 58,000 40,000 - - - - - - -

Deposits and other accounts 618,017 336,240 101,079 27,776 151,122 - 1,800 - - -Sub-ordinated loans - - - - - - - - - -


finance lease - - - - - - - - - -

Deferred tax liabilities - - - - - - - - - -

Other liabilities 17,065 8,161 - - - - - - - 8,904

737,497 406,816 141,079 27,776 151,122 - 1,800 - - 8,904

Net assets 2,025,129 (223,131) 82,876 7,623 (142,285) 106,778 (1,518) 2,832 3,087 2,188,867

Head office capital account 2,188,856

Accumulated loss (163,727)

2,025,129

38.1

-------------------------------------------------------- Rupees in '000 --------------------------------------------------------

Liquidity risk is the risk that the Bank will be unable to meet its net funding requirements. Liquidity risk can be caused by market destruction of credit downgrad

The table below summarises the maturity profile of the Bank's assets and liabilities. The contractual maturities of assets and liabilities at the year end have been

determined on the basis of the remaining period at the balance sheet date to the contractual maturity date and do not take account of the effective maturities as

indicated by the Bank's deposit retention history and the availability of liquid funds. Assets and liabilities not have a contractual maturity are assumed to mature on the

expected date on which the assets / liabilities will be realised / settled.

-------------------------------------------------------- Rupees in '000 --------------------------------------------------------

2007

2006

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which may cause certain sources of fundings to become unavailable. To guard against this risk the Bank's assets are managed with liquidity in mind, maintaining a

healthy balance of cash, cash equivalents and readily marketable securities. The maturity profile is monitored to ensure adequate liquidity is maintained.

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39. OPERATIONAL RISK

40. ACCOUNTING ESTIMATES AND JUDGMENTS

Provision against non-performing loans and advances

Income taxes

Property and equipment

In making the estimates for income taxes currently payable by the Bank, the management looks at the curr

tax law and the decisions of appellate authorities on certain issues in the past.

During the year, a new schedule has been introduced for taxation of banks in Pakistan. The schedule is app

for the financial year ending 31 December 2008. The current and deferred tax calculations may require cha

on the revised schedule and transitory provisions, which are currently being discussed by Pakistan Banks

with Federal Board of Revenue.

The Bank reviews the rate of depreciation, useful life, residual value and value of assets for possible impai

an annual basis. Any change in the estimates in future years might effect the carrying amounts of the respe

items of property and equipments with a corresponding effect on the depreciation charge and impairment.

The Bank holds sufficient liquid assets to enable it to continue normal operations even in the unlikely eve

unable to obtain fresh resources from the money market for an extended period of time. The Banks policy

maintaining a minimum level of liquid asset at all times. Equally, the Banks policy permits the increase o

resources up to an operating level based on the undisbursed and irrevocable commitments to take advantag

cost funding opportunities as they arise.

The contractual maturities of assets and liabilities have been determined on the basis of the remaining peribalance sheet date to the contractual maturity date and do not take account of the effective maturities as in

the Banks deposit retention history and the availability of liquid funds. Management monitors the maturit

ensure that adequate liquidity is maintained.

The Bank has prepared itself against operational risk by devising well defined strategies and oversight by t

management, a strong operational risk culture and internal control culture (including, among other things,of responsibility and segregation of duties), effective internal reporting, and contingency planning. Over t

the Bank has introduced wide-ranging reforms intended not only to improve the efficiency with which the

executes its mandate, but also to strengthen the overall internal control environment. The Banks operatio

activities currently comprise improvements in the systems environment and process changes and are expec

include the implementation of an integrated control framework.

In accordance with SBP regulations, the Bank maintains a statutory cash reserve requirement (CRR) with

to weekly average of 7% (subject to daily minimum of 6%) of total Demand Liabilities (including Time D

with tenor of less than 1 year). In addition to that, the Bank maintains statutory liquidity requirement (SLR

(excluding CRR) of total Time and Demand Liabilities. The Bank have successfully manages its CRR and

re uirements.

The bank reviews its loan portfolios to assess amount of non-performing loans and advances and provisio

there against on a quarterly basis. The 'provision is made in accordance with the Prudential Regulations iss

State Bank of Pakistan.

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Intangible assets

Retirement benefits

41. GENERAL

42. DATE OF AUTHORIZATION

The bank has adopted certain actuarial assumptions as disclosed in note 28 to the financial stat

determining present value of defined obligations and fair value of plan assets, based on actuarial advice.

in assumptions from actual results would change the amount of unrecognised gain and losses for 2008.

These financial statements were authorized for issue on _________________ by the management of the B

The Bank reviews the rate of amortisation and value of intangible assets for possible impairment on an a

Any change in the estimates in future years might affect the carrying amounts of intangible ass

corresponding affect on the amortisation charge and impairment, if any.

Senior MCountry Manager

Captions, as prescribed by BSD Circular No. 04 of 2006 dated February 17, 2006 issued by the Sta

Pakistan, in respect of which there are no amounts, have not been reproduced in these financial statements,

the captions of the balance sheet and profit and loss account.

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nt income

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requires

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Documents

Oman Bank 2007.pdf