Cooperative and Agricultural Credit Bank

COOPERATIVE AND AGRICULTURAL CREDIT BANK
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2006
AND INDEPENDENT AUDITOR’S REPORT
FINANCIAL STATEMENTS
AND INDEPENDENT AUDITOR’S REPORT
TABLE OF CONTENTS
Page
1. Independent Auditor’s Report 1
2. Balance Sheet 2
3. Statement of Income 3
5. Statement of Cash Flows 4
6. Statement of Changes in Equity 6
7. Notes to the Financial Statements 7 - 38

INDEPENDENT AUDITOR’S REPORT
TO THE CHAIRMAN AND BOARD OF DIRECTORS

OF THE COOPERATIVE AND AGRICULTURAL CREDIT BANK
Report on the Financial Statements
We have audited the accompanying financial statements of the Cooperative and Agricultural Credit Bank (the
Bank), which comprise the balance sheet as at 31 December 2006, and the income statement, statement of
changes in equity and cash flow statement for the year then ended, and a summary of significant accounting
policies and other explanatory notes.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these 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 financial
statements that are free from material misstatement, whether due to fraud or error; selecting and applying
appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted
our audit in accordance with International Standards on Auditing. Those standards require that we comply
with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial
statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of
the risks of material misstatement of the financial statements, whether due to fraud or error. In making those
risk assessments, the auditor considers internal control relevant to the Bank’s preparation and fair
presentation of the 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 Bank’s internal
control. An audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by management, as well as evaluating the overall presentation
of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.
Opinion
In our opinion, the financial statements present fairly, in all material respects, the financial position of the
Cooperative and Agricultural Credit Bank as of 31 December 2006, and of its financial performance and its
cash flows for the year then ended in accordance with International Financial Reporting Standards.
Report on Other Legal and Regulatory Requirements
We further report that during the course of our audit, we have not become aware of any material violation of
the Commercial Banks Law No. (38) of 1998, the Corporative Agricultural Credit Bank Law No. (39) of
1982 and the instructions of the Central Bank of Yemen, which would have had a material effect on the
business of the Bank or on its financial position.
Deloitte Touche (M.E.) & Partner

Sana’a – Republic of Yemen
23 April 2007
BALANCE SHEET
AS OF 31 DECEMBER 2006
31 December 31 December
Notes 2006 2005
YER YER
ASSETS
Cash on hand and reserve balances with Central Bank 6 7,927,053,936 1,824,092,606
Due from banks 7 8,773,008,238 8,574,998,358
Certificates of deposit with Central Bank of Yemen 8 8,750,000,000 600,000,000
Treasury bills 9 7,640,991,265 1,396,751,390
Government bonds 10 4,460,866,408 -
Investments 11 57,000,000 57,000,000
Loans and advances to customers (net of provision) 12 15,398,775,497 13,818,103,264
Debit balances and other assets 13 829,281,479 350,238,353
Property and equipment 14 1,756,175,146 1,270,129,197
Total assets 55,593,151,969 27,891,313,168
LIABILITIES AND EQUITY

Liabilities
Due to banks 82,460,836 -
Customers’ deposits 15 48,426,392,155 21,783,315,356
Credit balances and other liabilities 16 1,578,360,770 677,403,954
Other provisions 17 289,563,842 192,345,736
Long-term debts 18 142,805,616 657,236,318
Total liabilities 50,519,583,219 23,310,301,364
Equity
Capital 19 4,875,769,692 4,523,221,077
Reserves 20 197,799,058 43,971,472
Accumulated profits - 13,819,255
Total equity 5,073,568,750 4,581,011,804
Total liabilities and equity 55,593,151,969 27,891,313,168
CONTINGENT LIABILITIES AND COMMITMENTS

Liabilities for documentary credits, letters of
guarantees and other commitments 21 31,147,228,332 21,733,834,060
These financial statements were approved by the Bank’s Board of Directors and authorised for issue on 23
April 2007, they were signed on its behalf by:
Naser Al-Marqab Ahmed Al-Medhwahi Yahay Al-Sabri Hafeidh Maiayd

Manager of Central Accounting Deputy General Manager Chairman
GM - Finance
The attached notes from 1 to 40 form an integrated part of these financial statements
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STATEMENT OF INCOME
Year Ended Year Ended

Notes 2006 2005
YER YER
Interest on loans and due from banks 22 2,278,429,888 1,309,816,238

Interest on certificates of deposit, treasury bills and
Government bonds 23 1,376,118,895 581,188,129
Cost of deposits and borrowings 24 (907,057,892) (485,420,620)
Net interest income 2,747,490,891 1,405,583,747
Income from commissions and fees on banking services 25 826,687,565 389,552,038

Profit on foreign currency transactions 26 328,327,675 219,453,316
Grants 27 60,000,000 60,000,000
Other income 28 50,041,132 84,571,694
4,012,547,263 2,159,160,795
General and administrative expenses and depreciation 29 (2,954,136,386) (1,807,567,546)

Provisions 30 (535,652,255) (344,593,249)
(3,489,788,641) (2,152,160,795)
Profit for the year before Zakat 522,758,622 7,000,000

Zakat (10,000,000) (7,000,000)
Net profit for the year 512,758,622 -
4
STATEMENT OF CASH FLOWS

2006 2005
YER YER
OPERATING ACTIVITIES
Profit for the year before Zakat 522,758,622 7,000,000
Adjustments for:
Depreciation 219,937,301 102,531,537
Provisions 535,652,255 344,593,249
Uncollected interest added during the year 365,258,678 429,283,530
Uncollected interest used during the year (56,909,688) (43,964,929)
Provisions written off (74,507) (11,591,240)
Employees annual leave provision - (2,428,163)
Zakat paid (10,000,000) (7,000,000)
Profit on sale of property and equipment (3,301,874) (627,978)
1,573,320,787 817,796,006
Net (increase) decrease in assets
Reserve balances with Central Bank (5,078,038,420) -
Treasury bills maturing after three months (18,082,293) (71,757,707)
Loans and advances (6,679,999,124) (8,600,619,640)
Debit balances and other assets (587,291,275) (25,233,132)
Net increase (decrease) in liabilities
Due to banks 82,460,836 -
Customers’ deposits 26,643,076,799 8,333,851,536
Credit balances and other liabilities 900,956,816 380,992,617
Net cash flows from operating activities 16,836,404,126 835,029,680
INVESTING ACTIVITIES
Acquisition of property and equipment (714,205,163) (596,014,598)
Adjustments on accumulated deprecation (286,564) (2,046,648)
Proceeds on sale of property and equipment 11,810,351 6,164,780
Available for sale investments - (57,000,000)
Net cash flows used in investing activities (702,681,376) (648,896,466)
5
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2006 - continued

2006 2005
FINANCING ACTIVITIES YER YER
(Decrease) increase in long-term debts (514,430,702) 31,113,989

Increase in capital - 1,500,053,654
Dividends paid (20,201,676) (10,000,000)
Net cash flows(used in) from financing activities (534,632,378) 1,521,167,643
NET INCREASE IN CASH AND CASH EQUIVALENTS 15,599,090,372 1,707,300,857

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 12,324,084,647 10,616,783,790
CASH AND CASH EQUIVALENTS AT END OF YEAR 27,923,175,019 12,324,084,647
Cash and cash equivalents at end of year comprise of the following:
Cash on hand 2,849,015,516 1,824,092,606

Due from banks 8,773,008,238 8,574,998,358
Treasury bills due within three months 7,551,151,265 1,324,993,683
Certificates of deposits with Central Bank due within three months 8,750,000,000 600,000,000
27,923,175,019 12,324,084,647
6
STATEMENT OF CHANGES IN EQUITY
Statutory General Accumulated

2005 Capital Reserve Reserve Profits Total
YER YER YER YER YER
Balance at 1 January 3,023,167,423 41,958,575 2,012,897 23,819,255 3,090,958,150
Transfer to capital from agriculture
1,500,000,000 - - - 1,500,000,000
fund
Transfer to capital from the
collected 53,654 - - - 53,654
due instalments of fishing loans
Dividends paid - - - (10,000,000) (10,000,000)
Balance at 31 December 4,523,221,077 41,958,575 2,012,897 13,819,255 4,581,011,804
Statutory General Accumulated

2006 Capital Reserve Reserve Profits Total
YER YER YER YER YER
Balance at 1 January 4,523,221,077 41,958,575 2,012,897 13,819,255 4,581,011,804
Net profit for the year - - - 512,758,622 512,758,622
Transfer to statutory reserve
- - -
(note 20-1) 76,913,793 (76,913,793)
Transfer to general reserve
- - -
(note 20-2) 76,913,793 (76,913,793)
Increase in capital 352,548,615 - - (352,548,615) -
Dividends paid - - - (20,201,676) (20,201,676)
Balance at 31 December 4,875,769,692 118,872,368 78,926,690 - 5,073,568,750
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NOTES TO THE FINANCIAL STATEMENTS
1. GENERAL INFORMATION
The Cooperative and Agricultural Credit Bank (or Bank) was established in January 1982, as a result
of the merger of the Agricultural Credit Bank (ACB) (which was established in 1975) and the
National Co-operation Development Bank (NCDB), (which was established in 1979). The Bank
operates through its head office in Sana’a and 42 branches spread all over the governorates of Yemen.
As of 31 December 2006 the Bank employed 1460 staff (2005: 1175 staff).
2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS
The financial statements were prepared in accordance with International Financial Reporting
Standards (IFRS) issued by the International Accounting Standards Board (the IASB) and their
Interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC) of
the IASB and the applicable local rules and regulations. There are no significant differences between
the IFRS and the local rules and instructions issued by the Central Bank of Yemen except for the
following:
• The adoption of minimum fixed percentages for loans and advances provision in accordance
with Central Bank of Yemen circular No. 6 of 1996 and No. 5 of 1998, rather than applying the
related provisions of International Accounting Standard (39).
• The recording of provision for general risks calculated on performing loans under “loans
provision” and not under shareholders’ equity.
• The reversal of uncollected interest on non-performing loans and advances, for the three months
prior to classifying the loan as non-performing to the year end; from income to uncollected
interest.
The effect of these deviations is immaterial on the financial statements of the Bank as of
31 December 2006.
Amendments to Published Standards and Interpretations Effective 1 January 2006
The application of the amendments and interpretations listed below did not result in substantial
changes to the Bank’s accounting policies:
• IAS 19 Amendment – Actuarial Gains and Losses, Group Plans and Disclosures;
• IAS 21 Amendment – Net Investment in a Foreign Operation;
• IAS 39 Amendment – Cash Flow Hedge Accounting of Forecast Intra-group Transactions;
• IAS 39 Amendment – The Fair Value Option;
• IAS 39 and IFRS 4 Amendment – Financial Guarantee Contracts;
• IFRS 1 (Amendment) - First-time Adoption of International Financial Reporting Standards, and
8
FOR THE YEAR ENDED 31 DECEMBER 2006 – continued
• IFRS 6 (Amendment) - Exploration for and Evaluation of Mineral Resources;
• IFRIC 4 - Determining whether an Arrangement contains a Lease;
• IFRIC 5 - Rights to Interests arising from Decommissioning, Restoration and Environmental

Rehabilitation Funds; and
• IFRIC 6 - Liabilities arising from Participating in a Specific Market – Waste Electrical and
Electronic Equipment.
Standards and Interpretations Issued but not yet Effective
The Bank has chosen not to early adopt the following standards and interpretations that were issued
but not yet effective for accounting periods beginning on 1 January 2006:
IFRS 7 - Financial instruments: Disclosures (effective 1 January 2007);
IFRS 8 - Operating Segments (effective 1 January 2008);
IAS 1 (Amendment) - Capital disclosures (effective 1 January 2007);
IFRIC 7 - Applying the Restatement Approach under IAS 29 (effective 1 March 2006);
IFRIC 8 - Scope of IFRS 2 (effective 1 May 2006);
IFRIC 9 - Reassessment of embedded derivative (effective 1 June 2006);
IFRIC 10 - Interim Financial Reporting and Impairment (effective 1 November 2006);
IFRIC 11 - IFRS 2 – Group Treasury Share Transactions (effective 1 March 2007); and
IFRIC 12 - Service Concession Arrangements (effective 1 January 2009).
Management anticipates that, except for IFRS 7, which will require major additional disclosures
about the financial instruments and their related risk, the application of these new standards and
interpretations will not have a material impact on the Bank’s financial statements in the period of
initial application.
3. SIGNIFICANT ACCOUNTING POLICIES
The financial statements have been prepared based on the historical cost convention. The significant
accounting policies adopted by the Bank are set out below:
Management Estimates
The preparation of financial statements requires the management of the Bank to make estimates and
assumptions that affect the reported amounts of the financial assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates. The most significant estimates with regard to these
financial statements relate to the provisions for loans and advances.
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Settlement Date Accounting
All “regular way” purchases and sales of financial assets are recognised initially at cost, representing
the fair value plus cost of the transaction, on the settlement date.
Foreign Currencies
The Bank maintains its records in Yemeni Riyals. Transactions in foreign currencies are recorded at
the exchange rate prevailing on the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies are retranslated at the rate of exchange prevailing at the balance
sheet date. Gains and losses arising on exchange are taken to the statement of income.
Revenue Recognition
Revenue is recognized on accrual basis. To comply with the requirements of the Central Bank of
Yemen circular No. 6 of 1996, the Bank does not accrue interest income on non-performing loans
and advances. When an account is classified as non-performing, all uncollected interest relating to the
three months prior to classifying the loan as non-performing is reversed from income and recorded as
uncollected interest.
Commission and fee income are accounted for when earned.
Grants
Cash grants are recognised at their fair value in the statement of income statement when there is an
objective bases that the grants will be received and the Bank will comply with the conditions related
to the grants. Non-cash grants are recognised as deferred income, and amortized as per the useful life
of the related assets.
Treasury Bills
Treasury bills are presented in the balance sheet at their nominal value less any unearned discount
outstanding at the balance sheet date.
Government Bonds
Government bonds issued by the Ministry of Finance are presented in the balance sheet at their
nominal value. The accrued interest on these bonds is included under "debit balances and other
assets".
Deposits and Balances Due from Banks
Deposits and balances due from banks are presented at cost after deducting any amount that has been
written off and any impairment in their value.
10
FOR THE YEAR ENDED 31 DECEMBER 2006- continued
Investments
Investments are recognised initially cost, including transaction costs. At subsequent reporting dates,
investments in associates are amended by the increase or decrease in the Bank’s share of the equity of
the companies in which the Bank has investment. This movement is recorded in the statement of
income.
As of the financial statements date, investments classified as available for sale are recorded at fair
value. Investments for which fair values cannot be measured reliably are recognised at cost less any
impairment.
Certificates of Deposit with Central Bank
Certificates of deposit issued by the Central Bank of Yemen are presented at cost. The accrued
interest on certificates of deposit is included under "debit balances and other assets".
Provision for Loans and Advances and Contingent Liabilities
In compliance with the Central Bank of Yemen circulars No 6 of 1996 and No. 5 of 1998, provision is
made for specific loans and advances and contingent liabilities, in addition to a provision for general
risks calculated based on the total of other loans and contingent liabilities after deducting balances
secured by deposits, and bank guarantees issued by worthy banks.
The provision is determined, based on periodic comprehensive reviews of the loans and advances and
contingent liabilities, at the following rates:
Performing loans and advances and contingent liabilities 1%
Non-performing loans and advances and contingent liabilities:
- Substandard loans and advances and contingent liabilities 15%
- Doubtful loans and advances and contingent liabilities 45%
- Bad loans and advances and contingent liabilities 100%
Loans and advances appear net of provisions and uncollected Interest. These loans are written off if
procedures taken towards their collection prove useless, or if directed by the Central Bank of Yemen
upon its review of the Bank’s portfolio. Proceeds from loans and advances previously written off in
prior years are credited to "other income".
Contingent Liabilities and Commitments
Contingent liabilities and commitments, in which the Bank is a party, are presented off balance sheet
net of margins, under “contingent liabilities and commitments’’ as they do not represent actual assets
or liabilities at the balance sheet date.
11
Leasing
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the
risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
To date, all the leases entered into by the Bank are operating leases. Rentals payable under this lease
are charged to statement of income on a straight-line basis over the term of the relevant lease.
Cash and Cash Equivalents
For the purpose of preparing the statement of cash flows, cash and cash equivalents consist of cash on
hand, balances with the Central Bank of Yemen, balances due from banks, and investments in
certificates of deposit and treasury bills maturing within three months from the date of the balance
sheet.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation and any impairment.
Property and Equipment residual values, useful lives and turnover are reviewed at each balance sheet
date, in order to indicate any sign of impairment. The recoverable amount for the property and
equipment is estimated and compared to the residual value. The carrying amount is written down
immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated
recoverable amount. The recoverable amount is the higher of the asset’s fair value less costs to sell
or value in use, whichever is greater.
Impairment of Assets
The Bank assess at each reporting date whether there is an indication that an asset may be impaired.
If any indication exists, or when annual impairment testing for an asset is required, the Bank makes
an estimate of the asset’s recoverable amount.
An asset’s recoverable amount is the higher of an asset’s fair value less costs to sell or cash
generation unit’s fair value less costs to sell and its value in use and determined for an individual
assets, unless the asset does not generate cash inflows that are largely independent of those from
other assets or group of assets.
When the carrying amount of an asset exceeds its recoverable amount, the asset is considered
impaired and is written down to its recoverable amount. Impairment losses of continuing operations
are recognised in the statement of income consistent with the function of the impaired asset.
An assessment is made at each reporting date as to whether there is any indication that previously
recognised impairment losses may no longer exit or may have decreased. If such indication exits, the
recoverable amount is estimated.
A previously recognised impairment loss is reversed only if there has been a change in the estimates
used to determine the asset’s recoverable amount since the last impairment loss was recognised. If
that is the case the carrying amount of the asset is increased to its recoverable amount. That increased
12
amount can not exceed the carrying amount that would have been determined, net of depreciation,
had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the
statement of income unless asset is carried at revalued amount, in which case the reversal is treated as
a revaluation increase. After such a reversal, the depreciation charge is adjusted in future periods to
allocate the asset’s revised carrying amount, less any residual value, on a systemic basis over its
remaining useful life.
Long-Term Debts
Long-term debts are presented at their nominal value.
Employees’ End of Service Benefits
The Bank does not provide for end of service benefits since its employees are contributing the social
security scheme according to the Social Security Law.
Social Security Provision
The employees of the Bank are contributing to the social security scheme in accordance with the
Social Security Law.
Offsetting the financial assets and liabilities
Offsetting the financial assets and liabilities, to appear at net value in the balance sheet is only
applicable if there is statuary right, or when the Bank intends to reconcile on the basis of net value
basis or when agreed to recover the asset and settle the obligation at the same time.
Commercial and Industrial Profit Tax
In accordance to Article No. 21 of the Corporative and Agricultural Credit Bank Low No. 39 of 1982,
the Bank is exempted from commercial and industrial profit tax.
Zakat on Equity
The Bank pays Zakat on equity in accordance with the Zakat Law and based on the mutual
agreements with the Zakat Authority.
4. CRITICAL ACCOUNTING ASSUMPTIONS AND KEY SOURCES OF ESTIMATION OF

UNCERTAINTY
While applying the accounting assumptions policies as stated in Note 3, the management of the Bank
has made certain assumptions. These may have a significant effect on the carrying amounts in the
financial statements. The significant judgements made by the management are those relating to the
determination of the provisions for loans and advances. Note 3 to the financial statements details the
accounting policies adopted by the Bank to determine these provisions.
13
In addition to the above, the Bank takes into consideration the following factors when determining at
the provisions for loans and advances and contingent liabilities:
- The overall customer’s financial position.
- Risk percentage i.e. the ability of the customer to conduct profitable business activities and
collect enough money to pay the debt.
- Value of the collateral and possibility of transferring ownership to the Bank.
- Cost of settling the debt.
5. FINANCIAL INSTRUMENTS AND MANAGING THEIR RELATED RISKS
5.1. Financial Instruments
(a) The Bank’s financial instruments are represented in financial assets and liabilities. Financial
assets include cash balances, current accounts and deposits with banks including balances with
the Central Bank of Yemen, investments, certificates of deposit, treasury bills, government
bonds and loans and advances to customers. Financial liabilities include balances due to banks,
customers’ deposits and long-term debts. Financial instruments also include rights and
obligations stated in contingent liabilities and commitments.
Note 3 to the financial statements includes the significant accounting policies applied for
recording and measuring financial instruments and the recognition of their related revenues and
expenses.
(b) Based on the valuation of the Bank’s assets and liabilities stated in the notes to the financial
statements, the fair value of the financial instruments does not differ materially from their book
values at the balance sheet date.
5.2. Managing Financial Instrument Related Risks
(a) Interest Rate Risk
Interest rate risk arises from the possibility that changes in interest rates will affect the value of
financial instruments. The Bank performs a number of procedures to limit the effect of such
risk to the minimal level.
Significant procedures applied by the Bank are:
- Correlating interest rates on borrowing with interest rates on lending.
- Considering the discount rates for different currencies when determining interest rates.
- Controlling the matching of maturity dates of financial assets and liabilities.
Notes 31 and 32 to the financial statements state the maturity dates of the Bank’s financial
assets and liabilities and their related average interest rates prevailed during the year,
respectively.
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(b) Credit Risk
Loans and advances to customers, current accounts and deposits with banks and rights and
obligations due from others are considered financial assets exposed to credit risk. Credit risk
represents the inability of these parties to meet their obligations when they are due. In order to
comply with the Central Bank of Yemen circular No. 10 of 1997 relating to the management of
credit risk exposure, the Bank adheres to certain minimum standards in order to properly
manage its credit risk.
The procedures applied by the Bank to minimize the credit risk exposure consist of the
following:
- Studying the credit worthiness of customers and determining their related credit risks prior
to commencing transactions.
- Obtaining sufficient collaterals to minimize the credit risk exposure.
- Following up and carrying out periodical reviews of customers in order to evaluate their
financial positions.
- Making the required provision for non-performing loans and advances.
- Distributing credit portfolio and balances with banks over diversified sectors within certain
limits for each sector to minimize concentration of credit risk.
Notes 33 and 34 to the financial statements indicate the sartorial and geographical distribution
of the Bank’s assets, liabilities, contingent liabilities and commitments.
(c) Exchange Rate Risk

Due to the nature of its activity, the Bank deals in different foreign currencies, accordingly it is
exposed to foreign exchange rate risk. The Bank attempts to maintain a balanced foreign
currency position in compliance with the Central Bank of Yemen instructions and the
requirements of its circular No. 6 of 1998, which specifies that the individual foreign currency
position shall not exceed 15% of the Bank’s capital and reserves, and that the aggregated
positions for all foreign currencies shall not exceed 25% of the Bank’s capital and reserves.
Note 35 to the financial statements indicate the significant foreign currency positions at the
balance sheet date.
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6. CASH ON HAND AND RESERVE BALANCES WITH CENTRAL BANK
2006 2005
YER YER
Cash on hand
Local currency 1,324,711,533 869,732,492
Foreign currencies 1,524,303,983 954,360,114
2,849,015,516 1,824,092,606
Reserve balances with the Central Bank of Yemen
Local currency 4,196,257,000 -
Foreign currency 881,781,420 -
5,078,038,420 -
7,927,053,936 1,824,092,606
In accordance with the Central Bank of Yemen (CBY) instructions, the Bank is required to maintain
mandatory reserve deposits with the CBY at the rate of 20% and 10% of its customer deposits in
foreign currencies and local currency respectively. Reserve balances in local currency carry an
effective interest rate of 13% and the balances in foreign currency are non- interest bearing.
7. DUE FROM BANKS
2006 2005
YER YER
Current accounts with the Central Bank of Yemen
Local currency 3,260,838,499 431,007,923
Foreign currencies 465,174,092 2,184,759,479
3,726,012,591 2,615,767,402
Local Banks
Current accounts 2,225,830 2,638,046
Foreign Banks
Current accounts 3,633,529,644 2,279,748,700
Time deposits 1,411,240,173 3,676,844,210
5,044,769,817 5,956,592,910
8,773,008,238 8,574,998,358
Current accounts and time deposits with foreign banks carry variable interest rates while current
accounts with the Central Bank of Yemen and local banks do not carry any interest.
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8. CERTIFICATES OF DEPOSIT WITH CENTRAL BANK OF YEMEN

2006 2005
YER YER
Certificates of deposit due within 90 days 8,750,000,000 600,000,000

The certificates of deposit carry variable interest rates.
9. TREASURY BILLS
2006 2005
YER YER
Treasury bills due within 90 days 7,700,000,000 1,350,000,000

Treasury bills due within 180 days 89,840,000 71,757,707
7,789,840,000 1,421,757,707
Unearned discount (148,848,735) (25,006,317)
7,640,991,265 1,396,751,390
Treasury bills carry an average variable interest rate of 15.60% (2005: 15.21%).
10. GOVERNMENT BONDS

2006 2005
YER YER
Government bonds 4,460,866,408 -
Based on the Council of Ministers Resolution No. 145 of 2006, it was agreed that the Ministry of
Finance (the Ministry) should buy the agricultural loans portfolio of the Bank as of 31 December
2005. Based on this resolution, and according to the Agreement between the Bank and Ministry, the
Central Bank of Yemen issued government bonds on behalf of the Ministry maturing on 11 April
2016. These bonds carry an average interest rate that is applied on the three months maturing treasury
bills.
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11. INVESTMENTS
Percentage
of Interest 31 December 31 December
Industry
2006 2005
Sector
% YER YER
Investments in associated
company
Mareb Poultry Company Selling poultry and
(Note 11.1) %23.20 78,744,000 78,744,000 eggs
Available for sale investments
Yemen Financial Services
Financial services
Company (under establishment) %15.00 57,000,000 -
Investments in other companies
Various
(Note 11.2) 31,559,299 31,559,299
88,559,299 31,559,299
167,303,299 110,303,299
Impairment Provision (110,303,299) (60,450,940)
57,000,000 49,852,359
11.1. Mareb Poultry Company
The Bank holds 23.2% of the share capital of Mareb Poultry Company (the Company). The Company
has suffered losses and financial difficulties and facing many difficulties, which raise substantial
doubt about the Company’s ability to continue as a going concern. Therefore, a 100% impairment
provision was made for the investment value.
11.2. Investments in other companies

Investments in other companies represent the Bank’s investment in Yemen Marketing Company,
Yemen Hotels Company, Yemen British Company for Investments, Yemen Pumps Manufacturing
Company, and Tuhaita Dates Factory. A 100% impairment provision was made for these investments
since no profits were generated from these investments during the prior years.
18
12. LOANS AND ADVANCES TO CUSTOMERS (NET OF PROVISIONS)
2006 2005
YER YER
Agricultural loans
Short term 80,739,098 276,915,268
Medium term 131,273,004 1,996,674,274
Long term 4,838,174 922,787,249
Rural development and environment protection loans 30,799,880 260,611,041
Accrued due interest on agricultural loans - 1,629,144,495
247,650,156 5,086,132,327
Other loans and advances
Debit and overdraft accounts 12,886,690,416 8,189,548,626
Commercials loans 1,134,081,535 1,807,040,313
Personal loans 2,666,986,838 761,784,297
Employees loans 187,877,538 106,111,756
LCs financing 850,382,933 235,904,293
Purchased checks 431,984,912 -
18,158,004,172 11,100,389,285
Less:
Agricultural loans provisions (Note12.1) (2,476,502) -
Other loans and advances provisions (Note12.1) (2,266,769,809) (1,939,134,818)
Uncollected interest on other loans and advances (Note12.2) (737,632,520) (429,283,530)
(3,006,878,831) (2,368,418,348)
15,398,775,497 13,818,103,264
At 31 December 2006 non-performing loans and advances amounted to YER000’ 5,117,839 (2005:
YER’ 5,181,684).
19
12.1 LOANS AND ADVANCES PROVISION

31 December 2006
Agricultural Loans Provision Other Loans and Advances Provision
General Specific Total General Specific Total
YER YER YER YER YER YER
Balance at 1 January - - - 46,068,206 1,893,066,612 1,939,134,818

Provided during the year
(Note 30) 2,476,502 - 2,476,502 35,592,657 292,116,841 327,709,498
Provisions written of
during the year - - - - (74,507) (74,507)
Balance at 31 December 2,476,502 - 2,476,502 81,660,863 2,005,108,946 2,266,769,809
31 December 2005
Agricultural Loans Provision Other Loans and Advances Provision
General Specific Total General Specific Total
YER YER YER YER YER YER
Balance at 1 January 28,862,568 1,601,267,929 1,630,130,497 - - -

Transfer from
uncollected interest - - - - 227,248,356 227,248,356
Transfers (17,271,328) (1,601,267,929) (1,618,539,257) 17,271,328 1,601,267,929 1,618,539,257
Provided during the year
(Note 30) - - - 28,796,878 64,550,327 93,347,205
Provisions written of
during the year (11,591,240) - (11,591,240) - - -
Balance at 31 December - - - 46,068,206 1,893,066,612 1,939,134,818
In accordance with the Central Bank of Yemen (CBY) instructions, the loans and advances provisions
are classified to general and specific provisions. In accordance with these instructions the general
provision is equal 1% of performing loans and advances which are not subject to specific provisions
and without considering certain types of guarantees. In accordance with International Accounting
Standard No. 39, this provision should be provided only to face any specific impairment in loans and
advances future cash flows.
20
Based on the Council of Ministers Resolution No. 145 of 2006, it was agreed that the Ministry of
Finance (the Ministry) will buy the agricultural loans portfolio of the Bank that appear in the Bank's
financial statements as of 31 December 2005, amounting to YER 5,086,132,327. Accordingly, the
Ministry issued government bonds with interest rates and maturity dates agreed upon between the
Ministry and the Bank. The Bank will keep managing and following up the collection of these loans,
and will transfer amount collected to the Ministry. In addition, it was agreed that the foreign long-
term debts as of 31 December 2005, that was granted to the Bank through the Ministry will be
transferred to the Ministry as part of the settlement of the agricultural loans.
In addition to the above, during the year ended 31 December 2006, the Ministry issued a guarantee of
YER 1,243,433 thousand to the Bank for a loan granted to a public sector entity.
12.2 UNCOLLECTED INTEREST
2006 2005
YER YER
Balance at beginning of year 429,283,530 -

Used during the year (56,909,688) -
Additions during the year 365,258,678 429,283,530
737,632,520 429,283,530
21
13. DEBIT BALANCES AND OTHER ASSETS
2006 2005
YER YER
Interest receivable 142,611,876 31,821,161

Prepaid expenses 59,048,294 22,500,986
Insurances and advances 83,536,516 46,759,150
Inventory- for sale 91,995,302 55,048,399
Other inventory 32,803,199 18,995,063
Advances to purchase property and equipment 12,109,862 23,139,679
Work in progress projects 227,729,388 25,879,508
Other debit balances 296,743,140 135,142,356
946,577,577 359,286,302
Less: provision for other assets (Note 13.1 ) (117,296,098) (9,047,949)
829,281,479 350,238,353
13.1. Provision for other assets
2006 2005
YER YER
Balance at beginning of year 9,047,949 -

Provisions made during the year (Note 30) 108,248,149 9,047,949
Balance at end of year 117,296,098 9,047,949
22
14. PROPERTY AND EQUIPMENT

Furniture Machinery ATMs Improvements
and and Motor and Point on Leasehold
Land Buildings Fixture Equipment Vehicles of Sales Properties Total
YER YER YER YER YER YER YER YER
Cost
At 1 January 2005 55,365,273 564,736,593 160,141,726 115,572,780 175,346,072 - 4,840,710 1,076,003,154
Additions 5,926,832 51,892,648 90,471,770 178,100,637 5,744,290 198,521,253 65,357,168 596,014,598
Disposals - (40,000) (19,243,122) (18,151,760) (904,841) - - (38,339,723)
At 31 December 2005 61,292,105 616,589,241 231,370,374 275,521,657 180,185,521 198,521,253 70,197,878 1,633,678,029
Additions 16,800,000 32,372,278 92,243,306 214,863,802 92,638,052 145,839,243 119,448,482 714,205,163
Disposals (160,000) (325,000) (5,397,568) (1,904,701) (12,711,656) - - (20,498,925)
At 31 December 2006 77,932,105 648,636,519 318,216,112 488,480,758 260,111,917 344,360,496 189,646,360 2,327,384,267
Accumulated Depreciation
At 1 January 2005 - 64,053,547 56,363,780 51,178,179 122,862,653 - 1,408,705 295,866,864
Charge for the year - 13,401,414 12,394,597 29,966,828 14,831,352 10,174,410 21,762,936 102,531,537
Disposals - (3,666) (14,734,637) (17,162,268) (902,350) - - (32,802,921)
Adjustments - (803,384) - - (1,243,264) - - (2,046,648)
At 31 December 2005 - 76,647,911 54,023,740 63,982,739 135,548,391 10,174,410 23,171,641 363,548,832

Charge for the year - 14997096 20,873,616 64,435,243 22,262,774 42,112,899 55,255,673 219,937,301
Disposals - (53,365) (1,930,362) (1,889,029) (8,117,692) - - (11,990,448)
Adjustments - - - (38,217) - (248,347) - (286,564)
At 31 December 2006 - 91,591,642 72,966,994 126,490,736 149,693,473 52,038,962 78,427,314 571,209,121
Carrying Amount
At 31 December 2006 77,932,105 557,044,877 245,249,118 361,990,022 110,418,444 292,321,534 111,219,046 1,756,175,146
At 31 December 2005 61,292,105 539,941,330 177,346,634 211,538,918 44,637,130 188,346,843 47,026,237 1,270,129,197
The Bank's land and buildings were revalued as of 31 December 2005 by the Architecture Yemeni Group
(independent valuers). The fair value for the land was YER 1,073,588 thousand and for buildings YER 857,846
thousand.
23
Except for owned land, property and equipment are depreciated using the straight-line basis over their
expected useful lives in accordance with the following percentages:
Buildings and constructions 2.5% - 20%
Furniture and fixture 10% - 20%
Machinery and equipment 20%
Motor vehicles 20%
ATMs and points of sale 20%
Improvements on leasehold properties and branches are depreciated based on the lease period or the
useful life whichever is less.
15. CUSTOMERS’ DEPOSITS
2006 2005
YER YER
Time and demand deposits 13,121,245,261 4,387,318,318

Current accounts 27,061,966,970 11,652,991,080
Savings accounts 457,023,825 120,563,809
LCs and LGs Margins 7,531,062,856 4,965,301,857
Other deposits 255,093,243 657,140,292
48,426,392,155 21,783,315,356
16. CREDIT BALANCES AND OTHER LIABILITIES
2006 2005
YER YER
Interest payable 106,095,931 36,310,044

Accrued expenses 145,555,728 115,905,051
Interest collected in advance 290,268,870 257,395,690
Due to Ministry of Finance - Agricultural loans collected 620,624,923 -
Accounts payable - tax authority 25,584,684 52,107,586
Miscellaneous payables 5,393,296 4,925,638
Other credit balances 384,837,338 210,759,945
1,578,360,770 677,403,954
24
17. OTHER PROVISIONS

2006 2005
YER YER
Provisions for contingent liabilities
Balance at 1 January 192,345,736 -
Provided during the year (Note 30) 97,218,106 192,345,736
Balance at 31 December 289,563,842 192,345,736
18. LONG-TERM DEBTS

2006 2005
YER YER
Arab Fund for Economic and Social Development - 30,918,580

International Fund for Agricultural Development (IFAD) - 570,710,492
Tehama Development Project - Third Phase 6,231,266 -
Raimah Development Project 8,490,000 -
Mahra Rural Development Project 28,084,350 -
Agricultural Promotion Fund 100,000,000 50,000,000
Instalments payable - 5,607,246
142,805,616 657,236,318
The Bank, the Ministry of Finance and the Central Bank of Yemen agreed on 15 May 2006, to
implement the Council of Ministers’ Resolution No. (145) of 2006, regarding the settlement of the
Bank’s agricultural loans, and to settle all the external long-term debts of the Bank as 31 December
2005, by the Ministry of Finance as part of settling the agricultural loans portfolio.
19. CAPITAL
According to the resolution of the Board of Directors dated 23 April 2007, and to the instructions of
the Ministry of Finance dated 3 March 2007, to increase the capital of the Bank out of the profits for
the year 2006 and the next years, until it reaches YER 6 billion, it was resolved to transfer the amount
remained from the net profit for the year, after deducting the transfers to reserves and the dividends
paid to the Government, to capital. Therefore, the paid capital was increased to YER 4,875,769,692
(2005: YER 4,523,221,077) owned by to the Government 99.08% and the General Agricultural
Confederation 0.92%.
25
20. RESERVES
20.1. STATUTORY RESERVE
In accordance with the provisions of the Yemeni Commercial Banks Law No. 38 of 1998, the Bank
should transfer 15% of the net profit for the year to the statutory reserve until the reserve equals two
times the paid up capital. The management of the Bank cannot use this reserve before getting a prior
approval from the Central Bank of Yemen.
20.2. GENERAL RESERVE
In accordance with Article No. 11 of the Corporative Agricultural Credit Bank Law No. (39) of 1982
and the provisions of the Public Corporations and Companies Law No. 35 of 1991, the Bank
transferred 15% of the net profit for the year to general reserve.
21. CONTINGENT LIABILITIES AND COMMITMENTS
2006 2005
YER YER
Letters of credit 15,269,985,879 13,318,157,149
Letters of guarantee 21,053,959,243 10,881,718,299
Other contingent liabilities 2,354,346,066 2,499,260,469
38,678,291,188 26,699,135,917
LCs and LGs margins (7,531,062,856) (4,965,301,857)
31,147,228,332 21,733,834,060
22. INTEREST ON LOANS AND DUE FROM BANKS

2006 2005
Interest on loans and advances YER YER
Interest on loans 569,588,841 585,925,390
Interest on advances 1,307,866,194 585,641,490
1,877,455,035 1,171,566,880
Interest on balances due from banks
Interest on reserve balances with Central Bank of Yemen 245,720,570 -
Interest on balance due from foreign banks 155,254,283 138,249,358
400,974,853 138,249,358
2,278,429,888 1,309,816,238
26
23. Interest on certificates of deposit, treasury bills and Government bonds

2006 2005
YER YER
Interest on certificates of deposit 180,762,839 63,423,288
Interest on treasury bills 688,331,536 517,764,841
Interest on government bonds 507,024,520 -
1,376,118,895 581,188,129
24. COST OF DEPOSITS AND BORROWINGS

2006 2005
YER YER
Interest on customers’ deposits
Interest on time and demand deposits 868,777,981 440,868,439
Interest on saving accounts 25,039,403 29,223,412
893,817,384 470,091,851
Interest on balances due to banks 12,256,082 12,526,325
Interest on long-term debts 984,426 2,802,444
907,057,892 485,420,620
25. INCOME FROM COMMISSIONS AND FEES ON BANKING SERVICES

2006 2005
YER YER
Commissions on letters of credit 203,734,273 134,077,984

Commissions on letters of guarantee 292,044,358 182,903,961
Commissions on transfers of funds 47,620,544 28,434,496
Commissions on collections 8,921,946 13,312,857
Other commissions 274,366,444 30,822,740
826,687,565 389,552,038
27
26. PROFIT ON FOREIGN CURRENCY TRANSACTIONS

2006 2005
YER YER
Profit on dealing in foreign currencies 168,340,907 95,736,034

Profit on revaluation of foreign currencies balances 159,986,768 123,717,282
328,327,675 219,453,316
27. GRANTS

2006 2005
YER YER
Agricultural Promotion Fund 60,000,000 60,000,000
60,000,000 60,000,000
The Bank has been granted an amount of YER 60,000,000 (2005: YER 60,000,000) from the
Agricultural Promotion Fund to support its agricultural financing activities.
28. OTHER INCOME

2006 2005
YER YER
Priors years income - 19,608,001
Priors years adjustments 45,411,204 2,087,224
Profit on disposal of property and equipment 3,301,874 627,978
Other income 1,328,054 62,248,491
50,041,132 84,571,694
28
29. GENERAL AND ADMINISTRATIVE EXPENSES AND DEPRECIATION

2006 2005
YER YER
Salaries and wages 1,769,094,058 1,150,425,603
Rent 69,025,604 32,055,643
Utilities 36,725,715 22,526,489
Insurance 22,785,854 11,206,221
Legal fees 5,296,371 4,350,030
Communications 54,757,642 26,439,531
Consultancy and professional fees 67,375,491 108,413,377
Maintenance 46,920,475 28,901,070
Printing and stationary 59,049,144 45,371,961
Entertainment 48,454,788 36,309,957
Transportation 147,735,681 98,455,589
Training 77,446,751 56,078,379
Advertisement and publicity 214,082,303 26,142,246
Prior years expenses 19,866,494 21,618,662
Other expenses 95,582,714 36,741,251
Depreciation of property and equipment 219,937,301 102,531,537
2,954,136,386 1,807,567,546
30. PROVISIONS

2006 2005
YER YER
Provision for impairment of investments (Note 11.1) - 49,852,359
Provision for loans and advances (Note 12.1) 330,186,000 93,347,205
Provision for other assets (Note 13.1) 108,248,149 9,047,949
Provision for contingent liabilities (Note 17) 97,218,106 192,345,736
535,652,255 344,593,249
29
31. MATURITIES OF ASSETS AND LIABILITIES

The maturity profile of the Bank’s financial assets and liabilities at 31 December 2006 is as follows:
Due
Due Due within
within within Three Six Months
Three to Six to One Due after
Months Months Year One Year Total
YER YER YER YER YER
Assets
Cash on hand and
reserve balances with
Central Bank 7,927,053,936 - - - 7,927,053,936
Due from banks 8,773,008,238 - - - 8,773,008,238
Certificates of deposit 8,750,000,000 - - - 8,750,000,000
Treasury bills 7,551,151,265 89,840,000 - - 7,640,991,265
Government bonds - - - 4,460,866,408 4,460,866,408
Investments - - - 57,000,000 57,000,000
Loans and advances to
customers (net of
provisions) 9,882,288,087 5,351,245,463 160,452,155 4,789,792 15,398,775,497
42,883,501,526 5,441,085,463 160,452,155 4,522,656,200 53,007,695,344
Liabilities
Due to Banks 82,460,836 - - - 82,460,836
Customers’ deposits 40,640,236,056 7,786,156,099 - - 48,426,392,155
Long -term debts - - - 142,805,616 142,805,616
40,722,696,892 7,786,156,099 - 142,805,616 48,651,658,607
Gap 2,160,804,634 (2,345,070,636) 160,452,155 4,379,850,584 4,356,036,737
30
The maturity profile of the Bank’s financial assets and liabilities at 31 December 2005 is as follows:
Due Due Due

within within Three within
Three to Six Six Months Due after
Months Months to One Year One Year Total
YER YER YER YER YER
Assets
Cash on hand 1,824,092,606 - - - 1,824,092,606
Due from banks 8,574,998,358 - - - 8,574,998,358
Certificates of deposit 600,000,000 - - - 600,000,000
Treasury bills 1,324,993,683 71,757,707 - - 1,396,751,390
Investments - - - 57,000,000 57,000,000
Loans and advances to
customers (net of
provisions) 16,669,047,74 413,866,507 1,925,971,957 4,809,217,059 13,818,103,264
18,993,132,388 485,624,214 1,925,971,957 4,866,217,059 26,270,945,618
Liabilities
Customers’ deposits 18,473,114,118 3,310,201,238 - - 21,783,315,356
Long -term debts - - - 657,236,318 657,236,318
18,473,114,118 3,310,201,238 - 657,236,318 22,440,551,674
Gap 520,018,270 (2,824,577,024) 1,925,971,957 4,208,980,741 3,830,393,944
31
32. AVERAGE INTEREST RATES APPLIED DURING THE YEAR

The average interest rates applied on the financial assets and liabilities during the year ended
31 December 2006 were as follows:
Yemeni Riyal US Dollar EURO

% % %
Assets
Due from banks
Time deposits - %5 -
Demand deposits accounts - %4 %2
Certificates of deposit %15.50 - -
Government bonds %15.60 - -
Treasury bills %15.60 - -
Loans and advances to customers
Agricultural loans %11 - -
Loans to customers %17.5 %8 -
Advances to customers %17.5 %8 -
Liabilities
Due to banks %15 %7 %2
Customer Deposits
Time deposits %14 %4.7 %1.5
Saving accounts %13 %3 -
Long-term debts %0 %3,5 -
32
The average interest rates applied on assets and liabilities during the year ended 31 December 2005
were as follows:
Yemeni Riyal US Dollar EURO

% % %
Assets
Due from banks
Time deposits - %4 -
Demand deposits accounts - %3.5 %2.5
Certificates of deposit %14.36 - -
Treasury bills %15.21 - -
Loans and advances to customers
Agricultural loans %11 - -
Loans to customers %18 %8 -
Advances to customers %19 %9 -
Liabilities
Customer Deposits
Time deposits %13 %2 -
Saving accounts %13 %2.5 -
Long-term debts %0 %3.5 -
33
33. DISTRIBUTION OF ASSETS, LIABILITIES, CONTINGENT LIABILITIES AND

COMMITMENTS – INDUSTRIAL SECTORS
The distribution of the financial assets, liabilities, contingent liabilities and commitments by industry
sector as of 31 December 2006 is as follows:
Building Trade,
Manufac and Export
Financial Agricultural -turing Construction Tourism and Import Others Total
Assets
Cash on hand
and reserve
balances with
Central Bank 7,927,053,936 - - - - - - 7,927,053,936
Due from
banks 8,773,008,238 - - - - - - 8,773,008,238
Certificates
of deposit 8,750,000,000 - - - - - - 8,750,000,000
Treasury bills 7,640,991,265 - - - - - - 7,640,991,265
Government
bonds - - - - - - 4,460,866,408 4,460,866,408
Investments 57,000,000 - - - - - - 57,000,000
Loans and
advances
to customers
(net of
provisions) - 245,173,654 733,200,851 777,267,262 1,394,526,457 1,984,464,468 10,264,142,805 15,398,775,497
33,148,053,439 245,173,654 733,200,851 777,267,262 1,394,526,457 1,984,464,468 14,725,009,213 53,007,695,344

Liabilities
Due to banks 82,460,836 - - - - - - 82,460,836
Customers’
deposits - 12,985,079,393 269,146,003 3,232,247,412 - 19,924,896,133 12,015,023,214 48,426,392,155
Long-term
debts 142,805,616 - - - - - - 142,805,616
225,266,452 12,985,079,393 269,146,003 3,232,247,412 - 19,924,896,133 12,015,023,214 48,651,658,607
Contingent
liabilities and
commitment - - - 12,395,098,171 - 15,170,385,851 3,581,744,310 31,147,228,332
34
The distribution of the financial assets, liabilities, contingent liabilities and commitments by industry
sector as of
31 December 2005 is as follows:
Manufac- Building and Trade, Export

Financial Agricultural turing Construction Tourism and Import Others Total
Assets
Cash on hand 1,824,092,606 - - - - - - 1,824,092,606
Due from banks 8,574,998,358 - - - - - - 8,574,998,358
Certificates of
deposit 600,000,000 - - - - - - 600,000,000
Treasury bills 1,396,751,390 - - - - - - 1,396,751,390

Investments 57,000,000 - - - - - - 57,000,000
Loans and
advances to
customers (net
of provisions) 3,623,948 5,086,132,327 841,232,542 105,544,276 1,404,272,079 5,591,757,175 785,540,917 13,818,103,264
12,456,466,302 5,086,132,327 841,232,542 105,544,276 1,404,272,079 5,591,757,175 785,540,917 26,270,945,618
Liabilities
Customers’
deposits - 5,840,990,145 121,068,120 1,453,939,919 - 8,962,680,815 5,404,636,357 21,783,315,356
Long-term
debts - - - - - - 657,236,318 657,236,318
- 5,840,990,145 121,068,120 1,453,939,919 - 8,962,680,815 6,061,872,675 22,440,551,674
Contingent
liabilities and
commitment - - - 8,649,020,193 - 10,585,553,398 2,499,260,469 21,733,834,060
35
34. DISTRIBUTION OF ASSETS, LIABILITIES, CONTINGENT LIABILITIES AND

COMMITMENTS – GEOGRAPHICAL Region
The distribution of the financial assets, liabilities, contingent liabilities and commitments by
geographical regions as at 31 December 2006 is as follows:
Contingent
Net Assets Liabilities and
Assets Liabilities (Liabilities) Commitments
YER YER YER YER
Yemen 47,962,925,527 48,569,197,771 (606,272,244) 15,877,242,453
Asia 2,386,304,258 - 2,386,304,258 7,731,134,773
Europe 831,887,988 82,460,836 749,427,152 4,157,131,397
USA 1,826,577,571 - 1,826,577,571 3,381,719,709
53,007,695,344 48,651,658,607 4,356,036,737 31,147,228,332
The distribution of the financial assets, liabilities, contingent liabilities and commitments by
geographical regions as at 31 December 2005 is as follows:
Contingent
Net Assets Liabilities and
Assets Liabilities (Liabilities) Commitments
YER YER YER YER
Yemen 20,314,352,708 22,440,551,674 (2,126,198,966) 8,415,676,911
Asia 3,648,227,543 - 3,648,227,543 8,124,075,861
Europe 1,760,604,000 - 1,760,604,000 3,995,447,145
USA 547,761,367 - 547,761,367 1,198,634,143
26,270,945,618 22,440,551,674 3,830,393,944 21,733,834,060
36
35. SIGNIFICANT FOREIGN CURRENCIES POSITION

To comply with the Central Bank of Yemen circular No. 6 of 1998, the Bank establishes limits of
15% and 25% of capital and reserves for positions in individual foreign currencies as well as an
aggregate limitation for all currencies, respectively. The following schedule reflects the Bank’s
significant foreign currencies positions as of the balance sheet date:
31 December 2006 31 December 2005

Percentage Percentage
of Capital of Capital
Surplus and Surplus and
(Deficit) Reserves (Deficit) Reserves
YER % YER %
US Dollar 1,489,201,078 29.35% 4,113,394,411 89.79%

Saudi Riyal 341,782,634 6.74% 514,174,307 11.22%
Euro 246,610,192 4.86% 359,922,013 7.86%
Dirham -UEA 295,975,330 5.83% 154,252,305 3.36%
Others 630,275,824 12.42% - -
3,003,845,057 59.21% 5,141,743,036 112.23%
36. RELATED PARTY TRANSACTIONS

Parties are considered related if they have the ability to control or exercise significant influence over
the Bank in making financial and operating decisions, The Bank deals with related parties on the same
basis applied with third parties in order to comply with the Commercial Banks Law No. (38) of 1998
and CBY circular No. (4) of 1999, which puts limits for credit transactions with related parties.
The following schedule shows balances of related parties as of the balance sheet date:
31December 31 December
2006 2005
YER YER
Government bonds 4,460,866,408 -

Loans and advances to customers (net of provisions) 6,753,051 1,071,340
Customers’ deposits 8,338,365,691 5,856,842,635
Due to Ministry of Finance - Agricultural loans collected 620,624,923 -
Long-term debts 100,000,000 50,000,000
Other contingent liabilities 2,346,574,400 2,471,681,316
37
37. CAPITAL ADEQUACY

The capital adequacy ratio is calculated in accordance with the guidelines of the Central Bank of
Yemen as follows:
2006 2005
YER YER
Capital base 5,447,269,957 4,719,425,746
Risk weighted assets 30,327,865,807 20,244,732,158
Capital adequacy ratio 18% 23%

The core capital consists of share capital, reserves and accumulated profits, while supplementary
capital consists of general provisions.
38. LEGAL CASES

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

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

YER
Buildings projects 16,250,000
40. PUBLIC OFFER OF CAPITAL

The Council of Ministers Resolved in its meeting dated 18 January 2006, to issue an amount of
YER 1,500,000,000 of the Bank's capital to the public offer.
38

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COOPERATIVE AND AGRICULTURAL CREDIT BANK

1. Independent Auditor’s Report 1

5. Statement of Cash Flows 4

6. Statement of Changes in Equity 6

7. Notes to the Financial Statements 7 - 38

TO THE CHAIRMAN AND BOARD OF DIRECTORS

Report on the Financial Statements

Management’s Responsibility for the Financial Statements

Report on Other Legal and Regulatory Requirements

Deloitte Touche (M.E.) & Partner

LIABILITIES AND EQUITY

CONTINGENT LIABILITIES AND COMMITMENTS

Naser Al-Marqab Ahmed Al-Medhwahi Yahay Al-Sabri Hafeidh Maiayd

Year Ended Year Ended

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

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

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

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

Year Ended Year Ended

Year Ended Year Ended

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

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

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

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

Statutory General Accumulated

Statutory General Accumulated

2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS

Amendments to Published Standards and Interpretations Effective 1 January 2006

• IAS 21 Amendment – Net Investment in a Foreign Operation;

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

• IAS 39 Amendment – The Fair Value Option;

• IAS 39 and IFRS 4 Amendment – Financial Guarantee Contracts;

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

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

• IFRIC 4 - Determining whether an Arrangement contains a Lease;

• IFRIC 5 - Rights to Interests arising from Decommissioning, Restoration and Environmental

Standards and Interpretations Issued but not yet Effective

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

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

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

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

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

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

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

3. SIGNIFICANT ACCOUNTING POLICIES

Settlement Date Accounting

Commission and fee income are accounted for when earned.

Deposits and Balances Due from Banks

Certificates of Deposit with Central Bank

Provision for Loans and Advances and Contingent Liabilities

Performing loans and advances and contingent liabilities 1%

Non-performing loans and advances and contingent liabilities:

- Substandard loans and advances and contingent liabilities 15%

- Doubtful loans and advances and contingent liabilities 45%

- Bad loans and advances and contingent liabilities 100%

Contingent Liabilities and Commitments

Cash and Cash Equivalents

Property and Equipment

Long-term debts are presented at their nominal value.

Employees’ End of Service Benefits

Social Security Provision

Offsetting the financial assets and liabilities